Q4 2019 Earnings Call
[music].
Greetings and welcome to the Vuzix Corporation fourth quarter and full year 2019 conference call.
'cause principally listen only mode. A question answer session will follow the formal presentation. If anyone is quite Robert assistance. During the conference. Please press Star Zero Wonder telephone Keypad. As reminder, this conference is being recorded just from a pleasure to introduce your host had Mcgregor. Please go ahead, good morning, everyone and welcome to music sports.
Order in full year 2019 financial results in business update conference call.
Yesterday or music CEO, Paul Travers and CFO Grant Russell.
Before I turn the color to pool I would like to remind you that on this call management's prepared remarks may contain forward looking statements, which are subject to risks and uncertainties imagine make additional forward looking statements. During the question answer session.
Therefore, the company claims the protection of the Safe Harbor forward looking statements that are contained in the private Securities Litigation Reform Act up 1995.
Actual results could differ materially from those contemplated by any forward looking statements as a result, a certain factors, including but not limited to general economic and business conditions competitive factors changes in business strategy or development plans.
Already to attract and retain qualified personnel as well as changes in legal and regulatory requirements.
In addition, any projections as to the company's future performance represent management's estimates as of today March 16th 2020.
Music's assumes no obligation to update these projections in the future as market conditions change.
This morning, the company issued a press release announcing its financial results involved it's 10-K with the FCC. So participants on this call may not have already done so may wish to look at those documents as the company will provide a summary of the results discussed on today's call.
Today's call May include non-GAAP financial measures.
When required reconciliation to the most directly comparable financial measures calculated and presented in accordance with gap can be found in the company's form 10-K annual filing edit Si Si Dot Gov, which is also available at www Vsix Dot com.
Well now turn the call over to music CEO, Paul Travers, who will give an overview of the company's operating results and business outlook.
Paul will then turn the call over to grant Russell music CFO will provide an overview of the company's fourth quarter and full year financial results.
Well then move on to Cuba, Nice session after which Paul will provide some closing remarks.
Paul.
Thank you Ed.
Hello, everyone and welcome to the views Ics Q4, and full year 2019 conference call.
2019 was a transitional year for Vuzix on many fronts. The changes in introductions, we went through during the year, where necessary and they are setting us up well for 2020 and beyond bringing up a new technology from R&D to production is never easy and waveguide production has proven to be no exception.
And 29 team, we finally successfully transitioned our waveguide manufacturing capabilities from research and development to cost effective volume manufacturing with consistent yielded over 85% now.
Six month period in the second half a 29 team we not only completed the transition of the M series Smart glasses manufacturing from China to out in West Henrietta manufacturing facility, but we successfully introduced in commenced volume production and shipments of the views X.M. 400, and blade smart glasses.
In 2019, we achieved ISO 9001, 2015 certification for our West Henrietta facility employing ISO certified quality controls and our expanded production facility is key to supplying larger OEM partners into producing quality products. How many certifications has opened the door further to supply waveguides and smart glasses.
Products to a growing number of OEM in defense customers around the world.
We greatly expanded the number of applications for our M series and blade smart glasses, both from our internal teams and our external software partners and developers we are successfully migrating and upselling. Many of our M 303 hundred XL customers each quarter to the M. 400, smart glasses platform.
The M. 400 mm 300 X L. Both being available we are now positioned to offer two distinct and competitive smart glasses solutions.
One for the higher end user and the other but the more budget conscious some of these transitions caused delays and our production.
Yes, some customer order deferrals and took time to realign with our business, which was part of a cause for overall revenue in 2019 to be down year over year compared to 2080.
We are entering 2020 with the completion of our product introduction of the M. 400, and the relocation of manufacturing of the views X M series Smart glasses to the U.S. and now with waveguide manufacturing in full and consistent production our OEM programs are accelerating.
But these challenges behind us were now in a better position to deliver meaningful new business growth and expect to achieve solid year over year revenue growth in 2020.
Assistant with previous comments, we expect this growth to be driven by three key segments M series Smart glasses for enterprise, primarily in remote support logistics Tele medicine and manufacturing.
Music's blade for enterprise security providers, and first responders and waveguide based OEM projects related to industrial consumer and defense opportunities.
On the enterprise Smart glasses sales front, we continue to see a growing up tick in interest to deploy these exmark glasses threw out our sales channels in North America, Europe, Japan, and the Asia Pacific region.
Since the launch of the M. 400 in late September we have seen interest for many end customers, both new and existing and our strategic partners. Many have done extensive testing to compare and 400 to the competition in hands down the import hundred continues to emerge as the best Smart glasses device in enterprise.
In fact, many resellers of competitive smart glasses products have reached out to views and expressed interest in recently the views X.M. 400.
We could spend hours going through each significant account and our potential sales pipeline, but let me just discuss a few key customers and development here to give you an idea of what we're seeing abuse acts on the sales front, especially since the introduction of the M. 400.
Our relationship with one of the larger retailers, we have discussed in the past continues to gain momentum.
And we believe this account will represent the beginnings of a great revenue opportunity for music in 2020.
This customer has a large retail store footprint in North America, and elsewhere and has multiple groups internally that are looking to deploy our smart glasses in different areas within their operations.
For one area. They have already qualified the M 300, XL and the M. 400 for deployment.
Another group you just see through solution and they were currently working with the views X.M. 4000 ahead of our product launch later this year, we're working hard to support this customer as they transition from the qualification to deployment of our smart glasses.
With the M. four hundreds performance being sold well received there are many new doors being open for Music's for example, we've started working with a global technology services company to married music Smart glasses technology to this partners cloud based solutions and services.
The business expectation is that we work together to leverage this partners cloud based technology, an extensive customer base across healthcare artificial intelligence and cloud computing and soon begin selling turnkey enterprise mobility solutions with smart glasses.
And again due to the performance of the M. 400, we have started working with new resellers and partners that are working with domestic and foreign governments, including their ministries of health to support new innovative solutions, such as telemedicine initiatives to provide first responders with new tools.
Well I care to patients and to also equipped thousands of hospital workers with music smart glasses to provide training and telemedicine.
We're also working through other partners to deploy remote support solutions for technicians to complete equipment and repair of communication lines.
These recent developments with new partners and resellers could represent significant revenue opportunities for Vuzix in 2020.
The over 4000 product development and tooling continues on track, we expect to ship in the second half of 2020 customer feedback we receive from CES 2020, and from select customer visits with the functional prototypes has been tremendous having see through optics allows many applications like warehouse picking to achieve significantly lower.
Pick error rates no longer does the pick your have to remember what they saw on a pick list and then pick from memory now the user season in the real world exactly what needs to be picked while looking at it.
Using the M. 4000, what the camera on is like playing Duncan and the early days of Nintendo.
Users simply needs to line up the cross hairs on a real world item and the glasses Scana barcode and confirmed the pick in milliseconds.
Regarding our intrinsically safe M series Smart glasses, we continue to work with our OEM partner, even crouse Hinds and are making progress towards the M. 400 solution, we will have more to share in the coming months and this effort.
Music Smart swim was introduced at CES 2020, and received two CES Innovation Awards, we're just getting started with its sales and marketing activities, but the feedback from athletes and avid swimmers to date has been very positive. We recently began shipping orders received from Amazon and the views ex web site.
The Corona virus outbreak has resulted in a jump and demand for smart glasses applications for remote support business continuity and education. This demand has become global with growth initially in Japan, and the Asia Pacific region, and most recently from Europe, and the U.S. more broadly we havent.
Number of partners working with the federal government here in the U.S., including the CDC as well as other foreign government agencies to develop and deploy wearables smart glasses solutions that it can assist with various preventative security initiatives.
Music's now has multiple partners offering remote support through their applications and we have released connectors presume and Skype for business that allow our smart glasses to join any standard video call on those platforms. Many schools around the globe are now sending their students home and teaching remotely.
It is important to note that the Zoom Corporation has made their app available to many schools for free over the next year, our smart glasses with the zoom connector are perfect to help support remote teaching.
Our offering the zoom and Scott connectors for free for a limited time with the purchase of our smart glasses, and we are offering a 20% discount to educational customers that need our glasses.
On the same front last week, we announced a hands free thermal imaging solution with LIBOR stream focused around RMB 400, smart glasses. This combined solution enables first responders, along with security and medical professionals to scan individuals within a crowd from a safe distance to rapidly measure human body temperatures for screening purposes.
We continue to see growing interest from the public sector to leverage music's technology, ranging from medical professionals to police and border patrols what is interesting, but not entirely surprising is that we have folks interested not only in the music blade, but also the m. four hundreds and 4000 you can imagine the efficiency.
As of setting up an operation using the 13 megapixel camera on the M. 400, or 4000 to scan faces or license plates at a distance and running the data against a database to deliver real time potential risks and people keep people say.
During the fourth quarter, we sold a record number of blades.
Manufacturing yields waveguides and blades have matured and we have finally being able to have adequate stock on hand to fulfill customer orders in a timely fashion. The gating factor for blade production has always been our waveguides and I can't stress enough. The importance of successfully transitioning our waveguide manufacturing capabilities from research and development to cost.
Active volume manufacturing, we're anticipating increasing production levels of waveguides and blades further in Q2 to fulfill customer demand from new programs going live.
During the fourth quarter. We also enhance the features of the Vuzix blade to incorporate the feedback received from our customers by mid 2020, a new enhanced version of the blade will be available, which incorporates embedded stereo audio as well as an improved autofocus camera.
The newest version of the blade will be better suited for enterprise deployments. In addition to being a great prosumer product.
Music's continues to build and expand our relationship with horizon, which began with the Verizon business group and has since expanded across horizons by GE Labs innovation centers executive briefing centers.
Public safety in Fiveg research first responders enterprise and consumer product strategy in mobile ads compute.
During Q4 Horizon purchased approximately 50 set of using smart glasses for innovation centers and the executive briefing centers XR development internal Verizon executive events and trade shows we anticipate that Verizon will soon introduced needed smart glasses to a number of a rise in business customers centered around retail and logistics beginning as early.
Yes, Q2, this year and we expect these programs will expand throughout 2020.
Since our inception music's has invested heavily to develop our intellectual property focus on there I displays our intellectual property portfolio now consist of over 150 patents and patents pending our leadership an in depth knowledge of not only in IRI displays, but designing developing and manufacturing a our smart.
Losses from the ground up puts of uses in the unique position to rapidly deliver new optical components and systems as well as innovative waveguide based smart products for our customers.
Both direct and users and Oems, our technology leadership production capabilities in the USA and the road map, we have laid out our making music a solution provider of choice for next generation waveguide based solutions on a custom OEM waveguide based program front the level of new business engagements at.
RF queues request for quotations for near eye display programs access has accelerated over the last six to nine months. In fact, just this last Friday, we announced one of these programs with a major U.S. defense supplier.
In terms of dollar amount the near term pipeline of request for quotes for energy programs as both promising and significant we're in various states from quoting to contract award with over 10 programs that could average over a million dollars in NRT each and in some cases discussions have already begun around supply contracts for fitness devices.
The programs are in broad market segments, including the defense sector.
The Asian sector industrial sector, and the consumer and automotive sectors. These OEM slash and R&D programs not only further the state of using technology, but are primarily pointed at ultimately production programs. In most cases, we expect either further NRT efforts to refine this solution or production orders.
Vuzix continues to work closely with numerous micro SD suppliers around the design of next generation displays and music's waveguides.
Our primary focus has been pushing the envelope on what is possible in terms of power consumption performance in size with micro display engines integrated with custom waveguides using unique grading structures higher index materials dinner substrates and monolithic designs. We're looking forward to unveiling more here on this front as we believe what we're working on his.
Well ahead of the competition that we know off.
We are making demonstrably breakthroughs and we're currently exploring various strategic partners that would put the company in a position to be a key supplier of next generation optical solutions to consumer smart glasses Oems to help build kingsman style smart glasses for the mass market, we look forward to sharing more on this as it unfolds during the year.
On the production front, the Corona virus impacted China difficult times with many companies just coming back from Chinese new year, and if we hadn't moved the production of our M series Smart glasses out of China, we could have been more negatively impacted.
That said, we do still source some parts out of China. So far the impact to date for Vuzix has been limited and we're exploring options to address potential impacts that could occur in the future.
On the production front manufacturing yields of waveguides and music's plays have matured and we are anticipating increased production levels here in Q2 to meet expected increased demand.
And 400 manufacturing yields remain robust our cost of goods after bringing back the M series manufacturing from China is more controlled and efficient in many respects and given our current volume needs is less costly than our prior Asian contract manufacturers.
Our operating goals for 2020 are straightforward, we plan to grow sales and the deployment size of orders for our existing M series Smart glasses.
We plan to commence shipments of our Emmc 4000, smart glasses in volume during the second half of this year.
We plan to further ramp production or blade smart glasses to support general sales and the rollout of multiple programs and the security in enterprise markets.
We plan to significantly expand the number of contracted OEM program engagements, which in most cases come with upfront cash payment interim billings and higher gross margins with the ultimate goal being volume production programs. We plan to continue to develop our next generation waveguide display engine technologies around micro studies.
Finally, vuzix is looking closely at our cost of operations and we will continue to trim costs, while focusing on revenue generating initiatives.
All of these objectives should increase music's net cash flow from operations. Our goal is to own the smart glasses for enterprise industry increased the top and bottom line and grow shareholder value.
I'd now like to pass the call over to grant. So he can walk through our fourth quarter and full year financial results.
Grant.
Thank you Paul before I begin I would like to encourage interested listeners to review our 10-K that we felt this am with the FCC for more detailed explanation on some of the annual year over year variances as there'll be highlighting just a few.
For the full year ended December 31st 29 team Music's reported 6.7 million in total revenues as compared to 8.1 million for the prior year, a decrease of 18% year over year.
Revenue decline was due to multiple factors, primarily customer deferrals related to the timing.
Of the production and delivery of our Emmc 400, Smart glasses last September and price reductions honor M 300, XL and views explained smart glasses.
For the full year total sales of our M series Smart glasses decreased by 44% Oems work last revenues were essentially flat abuse explained revenues increased by 244% in 2019 versus 2018.
Sales of engineering services for the full year increased 67% 2.7 million from point 4 million in 28 team.
For the three months ended December 30, Onest 2019, physics reported 2 million in total revenues versus 2 million in the prior years fourth quarter.
Sales of our M series, Smart glasses rose by 16% quarter over quarter and sales of our views explained smart glasses increased by 54% in Q4 2019 versus Q4 2018.
OEM products sales of smart glasses, and waveguides with display engines were nil in Q4 2019 versus point Threemillion in Q4 2018, when they were 16% of total revenues for that comparable period.
In total product sales were off 8% in Q4 19 over Q4 18 Engineering services revenues were up 58% in Q4 2019 versus Q4 2018.
For the full year ended December 31st 29 team there were going overall gross profit a point 2 million on product sales before at 4.6 million.
Inventory reserve for obsolescence provision that was recorded in the fourth quarter. The net gross loss was 4.4 million as compared to a gross profit of 1.8 million for the 2018 period.
In addition to our normal reserved for obsolescence provisions. The company made several reserve provisions as of December 30, Onest 2019.
Firstly, the company wrote down the net realizable value of its.
Ponant inventory parts related to with M. 300, and M 300, XL smart glass products, resulting from the decision to end their production in China.
We did this as we feel they are at a disadvantage selling position against our newer improved and 400.
That was introduced in the fall of 29 team.
The company also wrote down excess components related to the cessation.
Production in China. The M 300, see smart glasses for an OEM customer, which currently appears to designer no further production.
These two reserve revisions totaled 3.2 million. The company also recorded additional obsolescent provision of 1.4 million related to his legacy mm 300 finished goods on hand for a total of 4.6 million in reserve for obsolescence provisions as of December 31st 29 King.
These provisions were included in cost of sales on the consolidated statement of operations.
Other factors negatively impacting the gross loss included lower product sales to absorb overhead.
Higher manufacturing overhead costs in our west Henry of facility, but the movie production back from China, and lower margins earned after the price reductions on the M 300, XL Music's played smart glasses implemented midyear, partially due to.
Through new product introductions, and finally lower margins earned on our summer and 400 early adopter program.
Research and development expenses were 29 team declined 14% to 8.9 million as compared to 10.4 million for the 2018 period. The decrease in R&D expense was primarily driven by a year over year decrease of external consulting fees related to the music blade and its related software applications.
Sales and marketing cost for 2019.
Decreased 13% to 4.2 million from 4.8 million in 2018 with the decline primarily attributable to a drop in advertising and trade show costs and a decrease in salary and start.
Based compensation.
General and administrative expenses for the 2019 year declined 5% to 6.6 million as compared to 7 million for the 2018 period.
In this overall decrease were lower salary benefits and stock compensation costs and reduced travel expenses.
Which were partially offset by higher IR and shareholder related expenses higher legal fees and higher.
I T security assessment consulting fees.
Our expense control efforts in 2019 were fruitful has we realized over a year over year declines in all three of our operating expenses.
And we achieved almost two thirds of the previously stated 4 million dollar expense reduction goal for the year.
We'll continue to manage our expenses in 2020, including the further rightsizing of our operations salary freezes and decreasing trade show an external PR expenditures.
The R&D side, we are reducing the rate of new product introductions and leveraging existing platforms to reduce our new product development and engineering costs.
Of note. The M. 4000 is based mainly on the M. 400, smart glasses and includes our waveguide based Cobra do display engine.
Which will significantly reduce our cost in getting this new exciting product to market. This summer.
For the full year 2019, the net loss after the revision for accrued preferred dividends was 28.4 million or 94 cents per share as compared to 23.7 billion.
Or lost 87 cents per share for the full year of 28 team.
Now for the balance sheet highlights our cash position as of December 31st 29 team was 10.6 million, we had a net cash working capital position of 16.4 million.
Cash used in operations, excluding changes in our working capital totaled 17.9 million in 2019 as compared to 18 million in 2018.
That's compared to December 30, Onest 2018, our inventory level declined at December 31st 29 team by 1.6 million to 5.7 million.
This reduction is of course after our 4.6 million to our inventory reserve for obsolescence that was recorded as of December 31st 29 team.
Management over the next year, we'll be looking to recover as much cash as possible from the timely sale and disposal of as many of these products and components included in our inventory reserve for obsolescence.
And for 2020, we hope that with our final assembly of.
Of our manufactured product back from China, we can improve our inventory level management and avoid the larger finished good batch builds as is typically required by Asian contract manufacturers.
Cash used for investing activities and 29 team of 3.2 million the same amount invested as in the prior year.
Included in the 2019 amount was 1.9 million for the purchase of manufacturing equipment.
Product mold tooling and computer equipment, primarily related to the new waveguide manufacturing.
Facility.
And equipment and the remaining payments totaling <unk> point 8 million to reacquire certain sales and marketing rights related to the TPG Noncompete agreement Amendment concluded in October 2018.
Capex for 2018 is currently expected to be less than 29 team as we feel our recent waveguide menu manufacturing equipment additions can meet our goals for 2020 well.
For drilling investment on music branded products. Our expenditures will also be down as we are only expecting to tool up for the introduction of the M. 4000 in 2020.
Given our current cash position in our previous cash burn rate I like to spend a few minutes discussing how we intend to maximize our cash flow opportunities in 2020 and provide runway to both maintain or operation and fund our future growth.
Paul just mentioned, we intend to grow sales of both our existing an upcoming smart glass products. This year.
When combined with effective expense management should generally allow us to reduce our net cash burn as a year progresses.
We will also pursue sale of the M series products and components, we just wrote down which should add to our cash coffers. Additionally, we plan to increase our efforts to further promote our engineering services program, which could result in overall larger gross margins by absorbing some of our operating costs, a udall utilizing a sick.
<unk> portion of an internal engineering fixed salary costs as Paul highlighted these energy revenues could become substantial for this year in there.
Finally, we will continue to pursue licensing and strategic opportunities around our waveguide technology with potential Oems with ideally could include the receipt of upfront license from fees and supply agreements.
Some of these opportunities could also involve strategic investments with that I'd like to turn the call back over to Paul.
Thank you grant.
The seeds for the upcoming wave of enterprise growth in the adoption of smart glasses has been successfully planted and use it continues to show that it is establishing itself as one of the leaders in this market.
Our strategy in enterprise is proving itself to be correct by way of our products and software developer eco systems growing acceptance in the market.
With each new relationship we build we are increasingly positioned to deliver accelerating growth and technology leadership in 2020. The M. 400 is currently the most powerful monocular, a our smart glasses built for enterprise and we expect the in production by mid summer with the M. 4000, the revolutionary waveguide based sister product of the 400.
Our M series Smart glasses in combination with expanding music blade sales and substantial into Rebased OEM programs position music's to deliver significant growth.
I'd like to turn the call back over to the operator for Q when a now.
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One moment please poll for questions.
Our first question today's coming from Christian Slob from Craig Hallum. Please proceed with your question.
Great. Thank you. Thank you for all the detail and all the potential new customer ramps that could happen throughout the year.
But can you just give us an idea directionally you know the type of revenue magnitude you guys are talking about that we should expect.
To go through the second half for the year just trying to reconcile.
The fact that the cash burn will will decrease throughout the course of the year to it rather you'd never make sure. Our math is right. Thank you.
Yes, sure Christian good question.
The base business to use it.
Has been working to with the M. 400, and in 300 and the blade that's going to continue to grow as Weve expected and had some discussions with you. So.
You know we've seen it jumping right up until last year, where we've gone through this transition you're going to see it grow through this year, you should see a girl nicely through this year.
Theres added business now this OEM portion of our business at the beginning of the year, we put our single out on our website. If you look there's a technology section and over the last six months, we've been bidding on a lot of projects companies coming to US, saying can you help us on X y or Z problems the revenues from those kinds of.
Efforts are significant in the in the millions of dollars and potential for any given one of those engineering programs and they're not engineering for the sake of engineering. These folks are coming to views, it's because they're trying to solve a problem and build a product in the end. So you'll see you know engineering to the tune of millions of dollar.
It's worth of upfront engineering fees and our ease and then you will see those programs in many cases transition to production programs for devices that are in the defense space.
Early.
Significant cost per unit perspective, but mostly this year I think you're going to be seeing the engineering portion of it which could equal the kinds of revenues, so probably slightly less than the kinds of revenues, we were talking about form the perspective of our product lines themselves.
Okay, great. Thank you no other questions.
Thank you. My next question today is coming from Brian Kinstlinger from Alliance Global Partners. Your line is alive.
Great. Thanks, so much we're learning every day about Kogan 19.
Changes and obviously experts states can get worse before it gets better can you talk about what customers.
The last couple of weeks are saying given the recent scare does it sound like purchasing decisions are getting pushed to the right, especially for programs may be that aren't in the federal close to the finish line.
That's really good question.
In one sense.
It's accelerating the people that are trying to deal with the virus themselves. They have business continuity issues that they're all trying to deal with you know, it's really hard to send people out in the field today, especially when you know countries are actually shut down and so we're seeing an acceleration in the side of our business that has to deal with the remote support.
Kinds of applications telemedicine kinds of applications et cetera. The general business, you know day to day sales in the lights.
It's really hard to tell the impact just yet I mean.
There's some things that are going sideways, there's some things that are accelerating it it's such an unknown right now.
Honestly Brian.
But right now we just really don't know and I don't think anybody can predict what the next.
A couple of months will bring I can say, though that from the perspective of using being able to help the world with its recent issues related to the virus that part of our business seems to be accelerating.
And then maybe can you talk about.
Hey, I guess, it there's a limit business travel environment.
Can you talk about how that impacts your business and how your adapting to that current environment.
Yeah, well Vuzix is it's.
Restricting travel for for our employees I mean, if we don't need to go we're not going there's the rare case, where we have to I mean, you know couple of weeks ago three weeks of I guess, the mobile World can't was cancelled mobile World Congress.
Music some of the staff myself included did end up going to Europe bomb, but that was pretty much the end of us giving out on the road for the most part so it's it has curtailed some of our travel in the likes and we're all trying to follow the rules, we don't say cans in the building.
Customers do come to the office, but we bumped outposts now instead of the whole shaking hands in the likes.
Yep.
And then.
Has sorts new security solution, how is that advancing that on can you communicating that's going on there in terms of how that impacts your business. If it's slow down speeded up given what's going on.
There their goals have bent to be in production by the mid summer time for into June July timeframe. They seem to be on track for that they have as a derivative of one of the of the final solution. There were making they had built this thermal imaging system. It looks like that actually might be coming to market sooner and what's nice about it is it allows you to much like what we're doing.
But our friends at LIBOR stream you take this thermal camera you point it at a group of people going buying with some AI software on the likes it can pick out people that might have elevated temperatures and all I can actually might be coming to market you're pretty soon.
Interesting and then lastly, grant you talked about expenses being reduced recently and I couldn't tell should we expect the fourth quarter is a good baseline for the next few quarters or do you expect modest increases or decreases from those levels from the operating standpoint.
I'd say the fourth quarter isn't isn't.
Two bad as the basin, we hope to.
Got it reduced that a little from there that's our golf great great. That's helpful. Thank you.
Thank you. My next question today is coming from Jim from Bradley.
Yes.
Thank you and good morning.
Can you talk a little bit about what happened with the and 300 see why the customer is no longer.
Going forward that project.
Well, Jim we haven't seen follow on orders from that project.
I will say there was still continuing business on that front just this morning on linked and there's a.
And then event, it's not necessarily not moving forward. It's just we haven't seen orders from them and awhile.
And so because of that we sort of have made some assumptions that it's going to be slower than they thought it would be going forward.
Helpful. Thank you and the.
The the price.
Is there a price change on the I'm on the inventory that you wrote down.
In order to move that out.
Or.
No not at this stage.
Okay, and say we base between.
All right so the write it down to zero.
Like the M 300 down to zero. We've we've you know we're going to do our best to recover but.
As Paul said, the it'll be in 400, so much better and throughout what is from a net cash flow basis to the company if a customer get all could be convinced the buying them 400, we're going to make a lot more money than selling them a discounted M 300 overall, so that that's the challenge.
We have when we got to find people that are very price sensitive in markets, where they don't me you know.
The top performer model and they can still have a successful smart glasses, but at a.
A budget price.
Not cannibalize, our or premium product sales.
The balance we we hope chief.
Lets that most markets do support multiple stratus of price price products.
And we see folks it just couldn't afford the m. 400, beginning of the year, we've got a price increase even omnium 400 actually.
And so there's more separation between the 300 300, XL and 400, and we'll be doing some bundles and stuff that make the solution appealing for the lower end side of the market.
Okay. Thank you that's helpful.
And.
Lastly.
The the trajectory of revenues during the year it sounds like.
It builds as each quarter progress is.
And so the second half will be.
In terms of revenue will be larger than the first half is that.
Yes, absolutely to say, yes, exactly like 60, 40 70 30.
Or or.
I think you'll see it continue to grow.
Thanks, good quarter after quarter after quarter barring any impact of this virus stuff that's going on.
But it will it'll probably really start to accelerate towards to follow the year.
Maybe 60, the two thirds in the second half.
I mean, we're going to have them 4000 mill by then.
A few other good things on the go and these engineering services programs should many of them should be in high gear. So.
It will be the second half.
Okay.
Of course, we hope to do well in a in the first half, but I'm, just saying where even be better in the second now.
No I understand I understand.
Uh huh.
I think.
Yes, that's it for me Thanks, a lot and good luck with everyone.
Thanks, Jim.
Thank you we reach any of our question and answer session.
Going back over to management for any further closing comments.
Well I'd like to thank everyone for your interest and participation on today's call. We look forward to speaking with you again in May when we report our Q1 2020 results on a final note I wish all of our listeners shareholders and their families. Good helps and hope you all stay that way the world's facing some significant challenges around the cold void covance.
90 virus, please stay safe.
Thank you that does conclude today's teleconference. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.
Okay.