Q2 2020 QuickLogic Corp Earnings Call
Ladies and gentlemen, thank you for your patience our conference will begin shortly again, we thank you for your patience or conference will begin shortly.
[music].
The Lewke of Darrow associates.
Thank you. Please go ahead.
Thank you operator, and thanks to all of you for joining US today, our speakers, our Brian Faith, President and Chief Executive Officer, and Dr. <unk> Chief Financial Officer.
In line with social distancing practices management is doing this call from remote locations today.
A reminder, or some other comments quicklogic makes today are forward looking statements that involve risks and uncertainties, including but not limited stated expectations relating to revenue from new and mature products statements pertaining to quicklogics future stock performance design activity and its ability to convert new design opportunities into production shipment timing.
In market acceptance of its customers products schedule changes and projected production start dates that could impact the timing of shipments the company's future evaluation systems broadening that number up our ecosystem partners and expected results in financial expectations for revenue gross margin operating expenses profitability and cash.
Actual results or trends may differ materially from those discussed today at a for more detailed discussions the risks uncertainties assumptions that could result in those differences. Please refer to the risk factors disgusting Quicklogics. Most recently filed periodically reports for the FCC quick logic assumes no obligation to update any forward looking statements or information.
Which speak of their respective dates of any new information or future events and todays call. We will be reporting non-GAAP financial measures you may refer to the earnings release, we issued today for a detailed reconciliation of our GAAP to non-GAAP results and other financial statements. We also posted an updated financial table in our IR web page there.
Provides current and historical non-GAAP data.
Please note Quicklogic uses its website the company blog corporate Twitter account Facebook page and linked in page as channels of distribution of information about its business such information may be deemed material information and Quicklogic may use these channels to comply with its disclosure obligations under regulation FD a copy of the prepared remarks made on todays call.
All will be posted at Quicklogics fire web page shortly after the conclusion of todays earnings call I would now like to turn the call over to Brian.
Thank you Jim Good afternoon, everyone and thank you all for joining our second quarter fiscal 2020 financial results Conference call.
I would like to start recognizing the tireless efforts of our talented quicklogic team as we rapidly adopted in responded to a new working environment. During this covert 19 pandemic period.
This has been a challenging period for our team both personally and professionally and I appreciate their commitment.
With that as a starting point there were three key events that were announced in the second quarter. They will have positive implications on our business in the future.
First on June 16th we announced the Quicklogic opened Reconfigurable computing work work initiative.
This project, which was developed in collaboration with Google and Microsoft Broadens access to our Eos Sthree Esso C.R.S.P.G. technology, and yeah, PJ IP for all embedded systems developers.
We are the first programmable logic vendor to actively embrace they fully open source suite of development tools for its M.P. J devices and yet TJ technology.
Cork is an important milestone for us.
Many industry observers have commented in recent years, that's a programmable logic industry is that a transition point.
Well it remains multi billion dollars inside.
The growth is expected to be at a moderate pace of around 7% per year over the coming five years.
However, the open source risk five IP software tools market is predicted to grow at a nearly seven times that than to have PJ market right.
Given the changing landscape, we are aggressively redeploying our resources to make open source. The primary foundation of our business going forward.
The second significant event.
The announcement that sounds to me is collaborating with the consortium of companies University is an health organizations to help predict whether people are showing sometimes a covert 19 infection.
The goal the initiative is to get businesses government health care, another public facilities access to multi sensor pre diagnostic screening mechanisms to help slow the spread at the disease.
The consortium includes asymmetric return capital linear 86 Sky water technology.
At health and others.
We recently executed our first south agreement associated with this initiative.
Expect initial product launched before the 2020 flu season starts.
And to realize a more meaningful financial impact in Q4 this year.
The third significant event with the completion of our oversubscribed secondary which in total raised net proceeds of approximately $8.1 million.
We felt it was prudent to raise money. This time to make sure we had the financial strength to support our open source product plans and growth initiatives.
It was definitely a busy second quarter, one I believe will overtime you viewed as a pivotal moment in the transformation of Quicklogic.
With those important items as a primer I want to spend some additional time on the open source initiative.
Then review other items from the quarter.
[noise] the Quicklogic open Reconfigurable computing initiative.
Spoken about at a high level in recent months is expected to be a catalyst quicklogics future growth.
This initiative developed by Quicklogic in collaboration with good going out micro broadband access or embedded systems developers to use our best PJ technology and yet the Jackie [noise].
What are some background. The open source heartburn movement has established a solid all after multiple attempts to yielded only limited success even for processors.
[laughter] excuse me for one.
Please.
To that.
With demand for more customized hardware and a great deal to start us looking for to build accelerators and solutions highly Taylor for yeah.
Interest and other sort of hardware has been right [laughter]. In fact, there are now a growing number of new software as a softer backgrounds gravitating towards open source development, so including design teams at some of the largest companies in the electronics industry.
We are already seeing traction with the core initiative.
You May remember in recent earnings calls I really see initiatives being co developed with the Mega cap company.
Our disclosure reasons, there were not able to mention Google by name. So the June news release.
I started as a conversation with Google open source visionary transformed into an entire open source initiative.
Once we decide to move all in the open source, we knew we needed our efforts to address much more than just a year tools.
This was the thought process it led to the core initiative.
Our website contains additional background material if you're interested in learning more.
The rate of adoption is rather quickly in early July quick credit was launched with crowd supply one is a leading online companies the Washington fulfill demand for innovative open sort of Harvard It all my kids in just one month, we have already received doors to more than 100 kit and expect this pace to accelerate as we expand or never.
<unk> channel partners to ship more quick other debt gets into the market.
Based on this better than expected interest and Folly Road map, we haven't place I am confident we will achieve our goal is to get Lisa thousands of these tuck it into the market I just want to twice.
Overtime, we expect product lines, leveraging quick credit will drive more revenue opportunities for our U.S.S., three and sensible software [laughter].
That's where Jonathan the initial stages. This work is too early for me to quantify the near term revenue impact. This year. However, we are executing on a go to market plans is a multiple channels and could see future several million dollars and potential yos, that's three revenue and multiple yet TJ I feel licenses next year directly related to that.
Core condition.
To further demonstrate the breadth of opportunities our core can it should that can lead to our team recently engaged with a product team is developing a new range at home computing devices for their 2021 holiday launch.
Well it is very early to discuss any potential long term relationship there should be viewed as a sign of early market acceptance of the Cork initiative.
Other parts of our business are starting to settle after a challenging few months since the cover Nike and then next Oh.
Starting with our SASSA wall cover 19 initiative.
Previously announced consortiums is currently writing a health monitoring solution that includes a low cost body worn temperature sensor.
Smartphone day after combines a variety of biometric data in software.
The solution has also entered into a lot of integration with contact tracing applications such as the exposure notification apps available through the Apple and Google play off source.
We are talking with potential customers about using this application for a screening at public venues safe reopening of workplaces in health care test access.
In addition to the company 19 application Sensima has completed two major developments since our last conference call first the integration was asking Micros news sensor tile box development Kit is now complete. This will result in an expansion of the co marketing and co selling activities with one of the largest M.C. you companies in the world.
Second so I suppose releasing an update you it sounds a little analytics tool kit.
Support for Googles open source machine learning framework called Tensorflow like for Microcontrollers.
Together, so its them, all and tens or whole life for T. L complement each other by offering powerful Tfl now neural network algorithm execution, along with an established a our tool.
The openness flexibility of performance enabled by the suffered is important and valued by our if you cut partners and he was he device customers.
We'll be a key enabler for our SaaS related revenue growth in the coming quarters.
With an improving somewhat hit rate greater partner outreach and Google Tfl integration in place our focus remains on driving towards scalable growth.
In our new product segment supply chain delays and the challenges imposed by customer hardware teams working remotely had a significant impact on this part of our business.
We are seeing improvement in the global supply chain, but that is somewhat counterbalanced by the fact that do the disruptions earlier this year several product launches ever expected in the Q2 Q3 three timeframe had been moved to later this year for calendar 2020. Why this includes several voice enabled consumer products.
Within our smartphone business, yes, there I had a very strong quarter due to a combination of increased end market demand and their decision to build inventory from all suppliers to mitigate potential supply chain issues.
That's greater than expected surge increase startup costs in the quarter, which negatively impacted our gross margin performance in Q2.
We expect to see lower sales six years, there during the third quarter as they digest. This inventory for current models, how does the new phone launches anticipated later this year.
We are nearing completion of our next smartphone design and I remain confident we can see as many as six phones using our technology from three at the beginning of the year.
In the Hearables market, we are on track to achieve formal Amazon caveats certification this quarter and hope to see a new horrible product into the market before the end of the year and shipped several hundred thousand dollars of yes, that's three within 2020.
And our yet PJ IP business, we are delivering our final not with this week to one of our early engagements for a tape out their test chip if all goes well with their chip manufacturing validation, we could see our full year PPA IP license between Q4, 2020 and Q1 2021.
Last quarter I discussed how cold it related delays directly impacted a program with a well known in fast growing streaming and smarttv provider to get a voice activated remote control to market.
We were able to realign our efforts with a low power digital microphone cafe and are targeting to launching new reference design later this quarter.
While the volumes will be smaller than the prior program. The introduction of those reference design is another reminder, that the trend for greater adoption of hands free remote controls as accelerating.
Within our mature segment over 19 continues to have a significant impact on this part of our business ongoing manufacturing shutdowns in the reduction in consumer Air travel has caused a dramatic drop in the civilian aerospace market.
Based on customer forecasts received in the last two weeks, we expect to see mature revenue just again in the third quarter to a level similar to what we saw in Q3 of last year before growing in Q4 this year.
Because of this recent change were reducing our second half 2020 mature product revenue forecast by another $2 million from expectations discussed in the May conference call.
To summarize inspite of the many covered 19 related headwinds we faced this year I want to emphasize that I'm as optimistic as ever about our future. Just still 2020 has been more challenging than anyone could have imagined Bakken we held our February conference call. However, the positive signs we're already starting to see with our open source initiative.
And sensible Tfl initiatives with Google coupled with what our customers leave will be improving conditions by year end.
Gives me confidence that we now have a defined path through improved financial performance starting in the fourth quarter.
I'd now like to turn the call over to Sue for a discussion of a recent financial performance and full Q3 outlook. So.
Thank you Brian good afternoon, and thanks to everyone. Once you joining us.
Well the second quarter fiscal 2020, Romney was 2.2 million, which was one thing that updated guidance range up 2.3 million plus or minus 10% and what's included in our FTC falling on June 17.
This compares with Romany all the 2.1, you know in in the second quarter 2019.
Well they are Q2 revenue.
Sales of new product were 820000.
That's comparison with 711000 in the second of caught off last year.
Our mature product revenue was one point Fourmillion, which was the same as Q2 last year.
In the second quarter of 2020, we had three customers, who each accounted for 10% or greater off our fail.
Non-GAAP gross margin in Q2 was 47.1% compared with 49.
In the thing.
Well no that's about them lower gross margin in the second quarter was mainly due to additional pets calls to support the higher volume of a products shipped.
Our primary smartphone customer.
Non-GAAP operating expenses for Q2 worth approximately 3.2 million down more than 30% from 4.8 million in the second quarter last year.
<unk> she knew streamlining of our operation what believe operating expense as well trained lower through the remainder that's about 2020.
Within our Q2, the operating expenses R&D was approximately 1.7 million and see a name was approximately one point formula its compared with R&D MSG and they have 2.7 million and 2.1 million respectively in Q2.
Yeah.
The net total other income expenses on taxes in Q2, what the charge of 84000 compared with 100, a 1000 in a second quarter last year.
Non-GAAP net loss in Q2 declined to 2.2 million or 26 cents per share.
This compares with net loss of 3.8, new OEM or 64 cents per share in the second a corner philosophy here.
The per share calculation for both periods reflect about wonderful 14 reverse stock split that was executed last December.
The total cash at the end of Q2 was 26.4 million compared with the men Keno and at the end all from last quarter.
Q2 cash balance.
[laughter] net proceeds from the spark offering and the funding from the P.P.P. Love.
It does not include approximately 461000 net proceeds from the exercise on the overall almond that closed in July.
Our cash balance also includes [laughter] Kimi only draw on the revolving line of credit.
When factoring out all external funding that I just mentioned, our Q2 cash usage lots of 1.8 million.
Now moving to our forecast for the third quarter fiscal Corning, 20, which well and on September 27.
Our revenue guidance for the third quarter, it's a 2 million plus or minus.
Perfect.
As Brian discussed given the evolving condition due to cope with the 19 and they the impact our customers and suppliers were why that means a remedy range at that time.
At the midpoint, we believe in total revenue will be comprised off approximately 700000 up new product and a 1.3 now and mature product.
With that more diversified our product mix non-GAAP gross margin in the third quarter, well be approximately 65% plus or minus 5%.
That's a result of our continuous a cost control measures, we're forecasting non-GAAP operating expenses, well decline mother and be approximately 3.1 million plus or minus 300000.
We expect mix to be up no more life that level over the next few quarters.
At the midpoint of the Q3 range R&D should be 1.8 million and she and they are 1.3 nail it.
After interest makes sense the other income and access at the midpoint, we conduct their forecast <unk> non-GAAP net loss will be approximately one 2.1 million or net loss Oh man. He fad per share baseball approximately 11 million shares outstanding.
Most of the difference between our GAAP and non-GAAP results as our stock based compensation expense, what exactly are piece com to be in that range. So I'm 100000 for the next few quarters.
Finally in Q3, we expect cash usage to being a range up to 2.5 million anticipated a higher cash usage is it mostly due to the timing of working capital and the onetime transaction cost associated with stock offering.
To be paid in Q3.
We expect the cash usage to decline in Q4 at both revenue and gross margin improved.
With that I now turn the call back over to Brian fight for closing remarks.
Thank you Sue.
To add on to the guidance you gave for that for every quarter based on the current customer forecasts are annual outlook has declined another $3 million for the reasons I have discussed in our mature products segment.
The inventory absorption for smartphone customer and the push out of voice and able to Europe wells.
With this change we now expect our full year 2020 revenue will be approximately flat with fiscal 2019.
Well, we are disappointed with the near term outlook. We currently expect our Q4 product mix will have a heavier emphasis on software in IP related sales.
They should increase our Q4 gross margin back into the low to mid 60% range, which in turn should boost our fiscal 2020 gross margin to the high Fiftys.
Oh, it is clearly disrupted the path to profitability I laid out at the beginning of the year, but based on the factors I've described and with our significantly reduced operating expenses, our trajectory to profitability within 2021 looks promising [laughter] with the material progress and all of our new product lines I am confident.
We have a path to achieve operating income breakeven by the end of the first half of 2020.
In closing I would like to thank all of our stakeholders for their ongoing support. These are extraordinary times for all of us and we're doing everything possible to maintain a safe work environment. While also taking care of our customers who are facing their own challenges.
That completes our prepared remarks, operator, I'd now like to open the call for questions.
Thank you we will now be conducting the question answer session. If he would like to ask your question. Please press star one on your telephone keypad a confirmation tunnel indicate your line is in the question do you May press star to if he would like to remove your questions on the Q for participants using speaker equipment. It may be necessary to pick up your hands that before passing the starkey of one moment. Please.
While we poll for questions.
Our first question comes from one of record shot Shannon with Craig Hallum. Please proceed with your question.
Hi, Brian soon thanks for taking my questions.
And I guess first of all congratulation on the a Google and Microsoft Development Ah, We look forward to seeing how that ramps out overtime here I guess my first question for you. Brian is based on your prepared comments you talked about a I'm going to probably whats. Your the language used here, but can you engage with the large design team with a with a product for a kind of a whole computing.
So that they're targeting for next year or maybe you can kinda talk just more specifically about that are more generally about the engagements that you're seeing here with with Cork and Oh, what other opportunities you're seeing here and maybe the timeframe by which you would see that.
Yeah, I can do that Richard Firstly, I can't go into too much detail on that product.
PD, one just because for competitive reasons and I want to brand too much.
Basically that product wants some level of always on computing and that product team is a big believer that open source tools gives them the ability to innovate more freely and a and also to apply their own resources to improve things and use it as around so that's sort of a common theme.
They were sitting with a lot of these companies by virtue of missile initiative, we tied a lot of a you know probably what people on the cost seen in social media activity from the open source development Committee.
We did launch actually with crowd supply a development kit and we sold you know more than 100 and just over a month I think on that and that there's just a lot of momentum there where people are finally, appreciating <unk> an existing company in programmable logic is actually embracing and contributing to open source, whereas everybody else is like I say.
Gives them the stiff arm and the Heisman moves because people are not not to people doing open source development, but we're actually openly contributing to it and I think there's a lot of large companies that are starting to build we're just fine products around that and what I tried to alluded to as well as Richard in the opening remarks is that this is not just for yourself.
Three that's part of it.
But there is this whole now movement around the embedded that PJ and the fact that we have the open source tool support for that as well enough already opened up new opportunities that were pursuing so.
I'm kinda like how we laid out on the block. This is all about opening up to a new market. That's not topped yet and just in this last few months, we're starting to see a lot us a lot of movement in that area.
Okay helpful for help with respect to Brian. Thanks, My second question.
Looking at sensible seems like there's a few avenues here for growth customer additions seems like Cork is certainly one of them.
And maybe you can kind of give us some context about where you know what channels.
At approaches you're seeing that they do you hope to we're already seeing something but some acceleration here and sensible engagements I know you said you've been impacted by covert in terms of transitioning a potential customers or the full license, but maybe you can give us a sense of at least kind of starting the pipeline and and ER and how that's been transition over the last quarter.
Yes.
The theme that we're using within Quicklogic is you know everything has to have scale and we don't want to do custom work for people and so the way that we can scale sensible is to have more hardware companies more semiconductor companies marketing and selling the upsell of Sun small on top of their products. That's why you're getting this sq micro.
Report is so important for to be done because now the S.T. micro sales and marketing team can be out I'm pushing us to their sales force into their customer base.
We have the covered initiative that we talked about last time with respect to the cost detection and classification.
That that consortium of companies is moving forward I think later this month, who is going to be sample wearables out with the temperature sensor on that for the body temperature.
Layering in the after they're delivering on the smartphone side with the sensible Yeah software. So that's another avenue that we're using to get broader exposure without having to do custom work for folks.
And then lastly, this is where this new development kit strategy from from US comes into play so with with quick further we're selling it ourselves and thrown distribution channel. We also have now engaged crowd supply and they've gotten orders for this and what I alluded to in my prepared remarks was a roadmap for these types of products were not stopping.
Correct further we're gonna have several more of these types of development kits out in the while all of which will have sensible optimized and running on top so I'm, you'll probably start to see some type of promos for us where we're selling boards and then there's an option to upgrade on top of that with sensible and the benefit of doing it in that way as we just get the is really large.
Distributors or open source.
Missionary folks out selling our products and then basically sounds from August not free marketing, but they get or do they get a lot of attention in doing so.
So those are the strategies that were employing out to increase the top of the funnel for sensible and also how well we qualify the opportunities coming through and that's in addition to just the normal ongoing organic.
Sales that were doing with with sensible.
Okay, that's probably actually well Miss something that we got our first that's agreement revenue signed affiliated with the Cobot 19 initiatives. So you know doing things like that where you come out in their application focus I think it does resonate and it starts to bring in a more qualified leads.
Okay. It Brian as an aside your insensible I think it's been a couple of quarters. Since you mentioned, but how many fully paid licenses you have for sensible.
I think we've talked about.
Somewhat recently it was in the few dozen folks that have paid for some level of the south.
Okay. That's helpful.
My next question here is on the Hearables marketing Avi US what gives you the confidence you're going to see the certification happened and and to what degree does your your up your progress in a success you're durables depend on yes.
So I would say the success really does depend on because.
There's a there's the set of Wearables injectables that want to not use alexa, they're going to be sold overseas or in China and that will never touched Alexa.
Ecosystem, but for that the western countries Alexa is definitely something that people who wanted to integrate so he is very important what gives me confidence is the level of engagement, we have directly with Amazon Jvs team in the last quarter.
And also just seeing today in fact, even though we're all working remote I can see videos or whatever or engineering folks are doing I saw the working system in video today. So I know that that's going to be certainly getting into the Amazon labs for for a for finishing up what we need to do their ticket on their desk at page. So that's what gives me confidence seeing is believed.
[music].
Okay fair enough for the last question I'll jump on line here.
Looks like the Opex is a little bit a lower here that I think what you talked about last quarter, which is good to see lowers the burn rate or does this.
Help us lower the breakeven point here and when would you speculate we could could we see that obviously it seems like you're not going to happen in the fourth quarter, but its first quarter or soon thereafter, a a good timeframe to think about that Brent.
Yeah I'm in fact, we've been constantly looking at Opex and opportunities to to reduce that I think so this is very product mix driven at this point I don't see us taking opex down further from where we are now likes you mentioned in the prepared remarks. So now it's all a revenue and product mix game.
As we get more these since mill licenses and I T deals in place that's going to drive that higher gross margin and really the Opex now is that a point, where the breakeven point on revenue could be like as long as $5 million, maybe five to six somewhere in that range, which is substantially lower than it was if you remember just a year and a half ago is almost pushing $10 million to all the news it's happened there.
So yeah, I forget if you're like folks tomorrow. It on the call something like five and a half million mid fives range at the current gross margin to the Sop ex get us to that breakeven point and like I said in his prepared remarks, we're we're modeling it out to be a acute you event next year.
But again sort of the product mix is going to drive that if we can get more IP gills and not.
Maybe that come sooner.
Okay I appreciate the perspective, that's all from you guys. Thank you.
Thanks, Thank you.
Thank you as a reminder, ladies and gentlemen, if you would like to ask a question star one on your telephone keypad. Our next question comes from the line of Suji de Silva with Roth Capital. Please proceed with your question.
I see a quick financial a question just could you reiterate the gross margin guidance I wasn't sure if I heard 55 or 65, I think it was 55, but my check yeah.
Hi, C.G. and thanks for the question I'm the Guy you agree it's 55%.
So gross margin and we plus minus 5% Oh wait widen range a bit so basically between 50% to 60%.
Okay. Thank you then and then on the and some of the customer announcements or product announcement, maybe Brian we could start the remote control program you talked about aligning with the microphone vendor to help you get traction is that something you've done historically was that Neil and why did that help in this instance, I'm curious about that comment.
Yeah on the microphone inside.
We've never really hard are deeply with any microphone guy other than infinium on which we didn't see all integrated alarm system and that's an ongoing activity with with them in flextronics.
On the and that's really more on the industrial out to side on the consumer mobile side, we never really did.
And so basically Haas and as microphone player. We're going after that same opportunity that ended up getting canceled not sure referred to last call when it did it everybody.
So you know the CEO and I discussed you know how do we take this engineering work that we've put into this and actually roll this out to other other folks and so we're in the process of doing that benefiting that they know microphone technology really well, we know the processing technology really well and if we can go at these customers with you sort of can reference solutions.
Its going to have a higher likelihood of success, just because customers don't have to reinvent the wheel. So we're in the process is doing on now.
That's actually wrapping up from an engineering point of view.
And I think imminently, we'll be releasing not to to the field into customers that were already engaged with.
Okay. So that could talk at multiple customers overtime, certainly sounds like absolutely multiple customers and the whole value proposition to that by the way Suji is to think about these are these battery powered remote controls the hover in your house going always on no touching battery life of you know anywhere between four and six months.
Right, Okay, and then I think you touched on it from the county, and the <unk> prepared remarks, but the I would imagine the open source tools are really one of the things that could kind of break up in the floodgates for embedded that P.J. fabric on it on a chip the people designing because I would think one of the biggest hurdles was if we put up shave fabric on it.
Hi, how are we going to tweak it manipulated but this sounds like that can really make that happen is that overstating. The opportunity here or is this was that really one of the things in your mind that maybe kept you have TJ from becoming a widely adopted.
Now you hit is that on Siggi, it's a huge opener for FRE embedded Duffy Jay you know large companies they want to sorta Ono tool chain, because when they sell a chip to their customer they want to have one person just as a support flow and so that's basically allows them to take the open source tools integrated with her own and how that single package out to the customer if you're talking about a smaller customer.
They may not have that kind of resource available, but they know that as a smaller customer is the community is behind these open source all in a folks like Google or putting so much resource into it they're going to get better over time.
In fact, there may even be better than proprietary tools, and then or future and so they love that story and the fact that these big companies are absolutely behind this open source initiative. So yeah, you hit it right onto is definitely opens up a lot in new doors.
Okay, and then lastly, what's a good run rate to assume for mature products. After we have this sort of put take with the civil engineer a civil aviation that's going on what what's a good run rate to think about there.
Yes, so for like I said the scripts remarks. This this will take us back to Q3 last year. The revenue level I think Q3 to some extent has been soft historically, just because Europe tends to not order. So much during this period for vacation reasons, not because of dependent obviously I.
I think moving forward remodeling somewhere a higher than not like around 1.5, or so in certain of course quarters. It could be even higher than that if we get some of these large military deals coming in but I do think it's going to recover.
The civil aviation space part of that will probably be the longer part of it to recover and or would you ever the military folks that moved out of Q2. This year there out of Q3. This year for the obvious reasons because revenues over but we do expect them to come back because they're not subjected to the the consumer air travel industry ups and downs.
Okay, Alright, thanks, Brian Thanks.
Thank you.
Thank you we have no further questions at this time I'd like to turn the floor back over to Brian for closing comments.
Right well. Thank you for your participation in today's call and continued support we look forward to speaking with you again, when we report our fiscal third quarter results in November. So again, thank you very much and talk to them.
[noise]. This does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.