Q3 2020 Wireless Telecom Group Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the wireless Telecom group for Q3 earnings call at the.
This time, all participants have been placed on the listen only mode and the floor will be open for questions and comments after the presentation.
Now my pleasure to turn the floor of the to your host Mike Candela, Sir the floor is yours.
Thank you Kate and good morning, everyone and thank you for joining us on today's conference call to discuss wireless Telecom group's third quarter 2020 financial results with.
With me today are Tim Whalen, the company's CEO and Albert Rodriguez, our Chief revenue Officer.
Before we begin I would like to remind everyone on the call that our remarks today could include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
These statements can be identified by the fact that they do not relate strictly to historical or current facts the.
The company's forward looking statements are based on management's current <unk> current expectations and assumptions regarding the companys business and performance of the economy and other future conditions and forecasts of future events circumstances and results.
Forward looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could materially affect the actual results.
Important factors that could cause of the company's actual results to differ materially from those on its forward. Looking statements include those risk factors set forth in the company's 2019 annual report on form 10-K, and our 2020 quarterly reports on form 10-Q filed with the FCC.
The company does not undertake any obligation to update or revise any forward looking information to reflect changes in assumptions the occurrence of unanticipated events or otherwise.
Also we want to point out that in addition, the GAAP information.
We will provide information relating to certain non-GAAP measures, we believe that presenting these non-GAAP or adjusted measures provides additional meaningful information to investors, which reflect how management views the business.
Detailed reconciliations of non-GAAP measures to GAAP measures are set forth in a reconciliation table in our press release issued earlier today and furnished with form 8-K filed today with the SEC.
With that it's now my pleasure to turn the call over to Tim Whalen. Thank you Mike Good morning, everyone and thank you for joining us.
The first nine months of 2020, I've certainly seen its share of challenges globally.
I'm pleased to report the company has navigated through this difficult period.
Our global sales operations and engineering teams have all exercised incredible levels of energy commitment and creativity to work through these challenges.
Throughout all of this we have focused on employee safety with rigorous health and safety protocols as our top priority watts.
While at the same time executing on our core values and serving our customers.
I'm proud of our team's execution and delivery and this gives me great confidence as we face whatever challenges emerge in the quarters ahead.
Another important observation from these challenges is that our mission of delivering specialized solutions, which enable the development testing and deployment of.
Current and next generation wireless communications and technology has never been more important.
The essential nature of what we do is mission critical for enterprise military and government applications.
We are incredibly proud of how our employees for me the workplace adjustments needed to contribute to our mission and we are so thankful for the dedication.
Turning to our Q3 performance.
The headlines of our results include increased software and services revenues and increased test the measurement revenues, leading to a 740 basis point improvement the gross profit margin and over 600% improvement to non-GAAP adjusted EBITDA compared to the same period last year.
Partially offsetting the improvements in the RBS NTM product groups was the lower demand for RF components beyond our expectations.
We saw project delays and cancellations and distributor inventory adjustments due to COVID-19.
We expect this trend to continue until this pandemic is behind us.
That said our channel checks of indicated some optimism for demand to increase for RF components at some point next year as carriers are expected to activate the lead projects and startup period of anticipated higher investments for in building network Densification and venues, which are expected to see increased to 10.
Endurance as malls stadiums entertainment venues and large facilities we open.
These investments are expected to include bandwidth deployment acquired in the spectrum auctions for Crs in C band spectrum, which is important for their fiveg deployments and where we have continued to build out our product roadmaps to address the ultra wide band spectrum initiatives.
Our increases of software revenue from our RBS product solutions as well as increases in our test the measurement portfolio offset the revenue declines in RF components.
These increases also and importantly contributed to much higher gross margins and a higher gross profit.
Increasing our gross margins above 50% is an important milestone and is a key objective to our strategic goal of 15% annual EBITDA margins as a percentage of revenue.
I'm also pleased to report on momentum for increased software and services sales has continued.
And we signed a new software and services deal in the third quarter for approximately 1 million for Fourg satellite application.
In addition, we signed another software contract in October for approximately 400000.
Our year to date totals of our success driving our Fourg and Fiveg RBS software and services solutions includes the following.
We have signed up for new customers to software and services contracts to date totaling 2.4 million. This.
This includes two contracts in Q2 totaling approximately 1 million.
One contract in Q3 for approximately 1 million and one contract in October for approximately 400000.
We've recognized software and services revenue of approximately 600000 in Q2 and approximately 500000 in Q3.
Of the for deal signed on to our Fourg solutions and to our Fiveg solutions and one of the Fiveg solutions includes of the NXP platform.
And the deal signed include an LTV rail application of specialized small cell application of satellite application and a research labs focused on government work.
Additionally, as we highlighted in the press release, we are excited about other customer discussions and we expect the sign additional new contracts for software and services before the year is over as well as in the early part of next year based on current of late stage negotiations.
With regard to our Q3 order flow, we realize bookings for of approximately 11 million of consistent number with last years bookings for the quarter.
Our backlog at September 30 was 6.1 million consistent with our June 30 backlog of $6.2 million and compares to 7.6 million in year ago quarter.
The bookings for our current quarter and the backlog at September 30 include a higher percentage of higher margin TNM and RBS solutions.
So we continue to make progress with our strategic goals since the year began and we believe we are just starting to see the our success reflected in our financial results.
While the near term macro level uncertainties remain due to the COVID-19 crisis, we remain confident in our strategic focus on long term themes of growth, including network Densification Fiveg investment and satellite communications.
With that Im going to turn the call over to our new Chief revenue Officer, Alford Rodriguez to say a few words.
Thank you Tim good morning, everyone.
The drink wireless Telecom group in August 2020, after nearly 17 years of silence Xilinxs focus on wired and wireless telecommunications and the other industry verticals important to the BTT Mike.
My rules the Salix included multiple executive sales and marketing rules price that the direction for the $1 billion of communications business.
First of all just start by discussing what attracted me to wireless telecom for.
This was the company's kind of very specific plan and the specific goals and demonstrated milestones on the success. There was the vision and strategy and the long term view of the business.
The second the company has been transformed with organically through the investments there of making in R&D, the product roadmap and people as well as inorganically. The two very successful acquisitions third.
Third I was joining an incredibly talented executive team and the new rule I see on ROE with clear participation and empowerment as part of this executive team to drive the company to its next level of success.
And fourth and most exciting was at wireless Telecom group has positioned itself to participate in multiple long term growth seems in wireless communications satellite investments in Fiveg transformation the agree with them on long legacy of serving some of the largest most demanding blue chip in the prices in the world.
Clearly this was the company who punches above its weighted to participate in the transformational change of Fiveg investments.
What's the go to go for my first three months for the company, which has reinforced my early views and if anything I'm, even more excited three months into this role than when I was on day one.
During my first hundred days I've been assessing the sales and go to market strategy understanding or people and working directly with our customers.
I look for to working with Tim the rest of the management team and the board to continue to build upon the strength and foundation for growth position.
Some additional observations on the first under daves.
The really impressed with the level of skill.
And dedication of this company, there's an agile entrepreneurial spirit of innovation in energy to bring new specialized solutions to market.
I've been impressed with the strong culture of teamwork and service the executive teams dedication simply safety and health to navigate through the challenges of COVID-19 the.
The dedication to the core values of customer response of this peak performance and growth orientation is.
It is evident how in the past the company's product Roadmaps are specifically the sales RBS. The appear to have the leadership advantage of on certain Fiveg technology building blocks in the form of opportunity is deep growing and exciting across multiple applications the win.
Ends in Q2, Q3, and then October or just the start evident of what the future holds I'm excited to add and contribute to this what is most important to me is how we'll move on the company is in customer discussions on the potential for increased cross the opportunities as we leverage some critical of customer relationships.
Moving to bring my own custom relationships to bear to grow the even further and directly contribute to the growth opportunity ahead.
So fat on incentivized to drive top line growth and eager to continue the hardware could have and should be to the mission and meeting with the executive leadership team shoulder to shoulder to drive growth and shareholder value.
Turning the call over now to Mike to discuss the numbers.
Thank you offered good morning again, everyone.
As Tim mentioned, we continue to feel the impacts of the co. The 19 pandemic on revenue of specifically on the RF seat product group as well as the ongoing lack of sales of our digital signal processing hardware cards to our former largest customer the.
This was offset however by increased sales of software and services on the RBS product group and the top line contribution of our newest acquisition Holsworth.
The high margin profile of software licenses and the Holsworth product line contributed to higher gross profit margin in the quarter addition.
Additionally, we remain disciplined with regard to operating expenses, both of which contributed to improved non-GAAP adjusted EBITDA as compared to the prior year period.
Consolidated revenues for the third quarter 2020 were 10.9 million, which was flat for the year ago period for.
Taking this down by product line revenue in the RBS product group decreased 2 million due to the ongoing lack of sales of our digital signal processing hardware cars. This was offset partially by sales of our higher margin LTV software licenses and services on the quarter.
Revenue in the TNF product group increased 2.8 million due to the contribution from Holsworth, which was acquired on February 7th of this year.
Revenue on our other product groups and TNM were flat with the year ago period, as we're starting to see signs of recovery from the COVID-19 pandemic in these groups.
Revenue in the RFC product group decreased 767000 from the prior year period due to lower spending by carriers uncertainty caused by the COVID-19 pandemic.
Consolidated gross profit increased 829000 from the prior year period, due primarily to the contribution of Holtz worth in the quarter to the PNM product group.
Our consolidated gross profit margin increased 740 basis points for 44.6% in the prior year to 52% in the current year due to high margin software sales and Holsworth products, along with the impact of cost savings activities on overhead and other fixed costs.
Turning to operating expenses. Our Q3 2020 operating expenses include a full quarter of Holsworth expenses, which were offset by expense reduction initiatives that we implemented at the beginning of fiscal 2020 as well as additional cost savings we undertook during the year.
Consolidated R&D expenses increased 483000 due to the inclusion of Holsworth R&D expenses of 166000, an increase third party spend of 296000, primarily on our T. nm product line.
Consolidated sales and marketing expenses were flat with the prior year period as the inclusion of Holsworth sales and marketing expenses of 400000 were offset by decreases due to expense reductions. These expense reductions included headcount travel expenses and commissions.
General and administrative expenses were flat with the prior year period as the inclusion of Holsworth General and administrative expenses of 246000 were offset by lower merger and acquisition expenses and other discretionary expense reductions.
Overall consolidated operating expenses for the third quarter of 2020 were $6 million, which is an increase of approximately 500000 from the year ago period.
At a high level. This breaks down as follows Holsworth added approximately 800000 in operating expenses in the quarter and our increase in third party R&D spending was approximately 300000, which were both offset by reductions of approximately 600000 from the prior year period.
Other income and expense decrease the 151000 due to higher for next foreign exchange losses, and interest expense increased 196000 due to our new term loan facility used to finance the Holsworth acquisition.
The company recorded tax expense in the quarter of 128000 as compared to a tax benefit in the prior year period of 169000 per.
Primarily due to qualified PPP loan expenses that cannot be deducted for tax purposes. If the loan is expected to be for given.
The company, however is not the U.S. cash taxpayer due to our federal and state on the wells.
Our net loss for the quarter increased 300000 from the prior year period as lower GAAP operating loss was offset by higher foreign exchange losses, higher interest expense and higher tax expense.
Non-GAAP adjusted EBIT of however, improved 624000 over the prior year period due to our improved gross profit on we partially offset by higher non-GAAP operating expenses.
Turning to the balance sheet consolidated cash as of September Thirtyth was 2.2 million availability under our asset based revolver was 6.5 million and gross debt was 10.4 million.
Included in our gross debt is 2 million related to the paycheck protection programs on which we received on May for.
The 24 week covered period of the PPP low and has expired accordingly, the company will apply for forgiveness of the loan this quarter as of mid July all of the proceeds of the PPP loan of been spent on qualified expenses of as defined under the PPP program.
I'll now turn the call back over to Tim for some closing remarks, Thank you Mike.
We are very pleased with the strategic goals Weve accomplished in the first nine months of the year. Despite the numerous challenges in the market.
GAAP in 19 continues to cloud the outlook and creates a great deal of custom on certainty on the timing of projects and purchasing decisions, which creates challenges to provide guidance.
But with that said we are proud of the progress Weve made for brighter quarters ahead.
We have aggressively managed our cost base, we have added incredible talent with the new Chief revenue Officer.
We have signed for new customers for software and service deals totaling $2.4 million.
We have successfully acquired and integrated and increased sales of Holsworth solutions.
We have advanced our product roadmaps the recipe.
On your growth trends and launched eight new products to the markets and we've extended our channels and selling capabilities through our acceptance to the NFC and I W.R.P. consortium's.
Net we're highly excited about our strategic direction and future and the ability to drive growth over the next several quarters.
Our employees continue to be engaged the motivated and the leadership team is energized excited and empowered to drive success.
Thank you and Kate if you could please open the lines for questions.
Thank you ladies and gentlemen, the floor is now open for questions. If you will.
Have any questions or comments. Please press star one on your phone at this time. If your question is answered before you ask it you May press star two can lead the queue in order to answer as many participant questions as possible. We request that you limit yourself to no more than two questions at the time.
Additionally, we ask that will pose your question you. Please pick up your handset of listening on the speaker phone to provide optimum sound quality.
Please hold the moment, while we poll for questions.
And our first question today is coming from Mark listen Berger. Please announce your affiliation then pose your question.
Good morning. This is mark reason for her from B. Riley Securities. Thanks for taking my question.
Could you talk about the dynamics, you're seeing in the boot and the noise com end markets relative the relative to those of Holsworth and is there any reason why we shouldn't expect holzwarth to perform around these levels going forward.
Thank you Mark I appreciate you joining us this morning.
Yes, so the brands within boot and the noise com, which are the legacy brands of prior to Holsworth are geared more towards R&D of Benchtop lab instrumentation.
We're very excited about the smart noise sources that are embedded in being designed into other solutions. So quite pleased with that boot and is a little slower than it was last year and we just think of that that the spend for those products falls into more of the maintenance bucket than an investment bucket.
Within Holsworth.
The investments we are seeing there are.
Our line more towards semiconductor.
Automated test environments. They are related to defense space programs quantum computing and so I I believe those fall more into a bucket of investment dollars that has been less impacted by any kind of in 19 pull back. So we still feel good about all of our brands going forward.
And yes, we believe that the holsworth.
Improvements in increases will sustain themselves over the next few quarters and years.
Great. That's good to hear and May be just as my final question, how should we think about the level of activity of the activity and the margin profile next quarter relative to what we just saw in this quarter. Thank you.
Yeah, Mark that's it's a little challenging now with with the some of the software contracts that were working on because the timing of those contracts both being brought to completion could.
Could be at the very end of the quarter and they see those could push a few weeks of that that'll have a pretty big impact on the outcome of the quarter.
So it's a difficult right now to say with any kind of certainty what that quarter will look like.
We are enthusiastic about the conversations we're in.
We have confidence in the win but the ability to sign the contract delays.
Deliver either a software license or perform the services work on top of the software.
We have less certainty of timing here with just about six seven weeks left in the quarter.
Understood. Thank you.
Thank you Mark.
Thank you. Our next question today is coming from John of Roy Please announce your affiliation and pose your question.
Yeah. This is John already from water Tower research.
I had a question about your of 15% EBITDA margin is that something you guys. The is achievable.
For payment ends or is that really more of a look at the cobot, you're looking to at the end for us to do that.
Yeah, that's a that's a long term.
That's the long term target for us and so as we think about that.
In terms of a few years of work to get the that so I would say yeah. That's the sustainability of 15% EBITDA margins annually is something that's a postcode.
Post coven.
Great and on the back the kind of the gross margin for the question you asked for rather than just the next quarter on your expectations are obviously with more software on the gross.
Gross margins on a.
Continued to ramp up over the next couple of years.
I think there are two contributors to the improved margins both for both the software and services within the RBS product set but also the the greater contribution of the of the test and measurement solution set which also carries a heavier margin.
So those two the increases in those two solution sets and the growth there, yes, those will be the two primary drivers to improve gross margins going forward.
Great. Thank you so much great. Thanks, John.
Thank you. Our next question today is coming from Robert Larson. Please announce your affiliation and pose your question.
Robert Larson Penn capital Congratulations on the decent quarter guidance although.
Seems like holds where it was a pretty big chunk of it and the.
With hindsight turned out to be a pretty solid deal.
Could you comment on the other acquisition.
Which is doing much less well than it did a couple of years ago calm agility peaked at 15 16 million in revenue and the amount of revenue. This year is considerably down and we all know line that's been rehash. The over so we don't need to address that but as you look forward and to budgeting for.
For the RBS business for next year could you give us a sense I know, it's the lumpy business. It's a big deal maybe the deal no yes situation.
But can you at least give us the sense on the how you're looking at looking at budgeting for revenue for that division in calendar 2021.
Yes, Thank you Robert.
Yes, so as we think about the composition of the revenue and you called it out it's really the decline of the those hardware cards for of that significant customer at the end of 19 and throughout the year.
If you if you look at the margin profile of the hardware cards are on the low Fortys, where the software and services revenue is near 100% and so as we think about the trade off we were looking to cover about half of that in software and services, so getting to that seven or 8 million almost fully recovers the margin profile.
File that we had so that's that's one data point.
With regard to two lumpy quarters, I think to the extent there is a sale of a software license.
That is delivered with no other contingencies or services that could create some lumpiness, but some of these larger deals that we're working on are going to include the delivery of services and customization of specialization on top of the license and so that will be recognized over multiple costs.
Orders in periods of time and that actually could serve as a vehicle whereby we have a more predictable path and pattern of revenue recognition as we deliver that so we're we're actually quite enthused about that so you know our goal going forward is to make sure that we fully make up the the lost margin from the.
Those hardware cards and to go and to go beyond it and.
And so that's how we're thinking about 2021, and we're going through the of the planning stage now for 2021, that's already been kicked off in earnest and will conclude in the the end of December.
Could you give us some qualitative comments on the the funnel because you're saying the is broad it's deep and you're you're proud of it but we haven't seen a lot of revenue yet and.
Is there any way to compare the the backing of NXP generating leads for you versus the the college all of the people generating leads is it is it multiple times, how would we try to scale the net.
Prospect the opportunity with NXP, helping us.
I think I think the a a couple of comments we've made the past is that our funnel has increased the magnitude of four to five times.
Since late 19 to the current state so thats one color commentary.
The other commentary I'd make Robert is really just if you think about momentum and think about timing. We released the AR 15 software release was October of last year. The NXP partnership was announced in January of this year.
We signed two contracts in Q2, one in Q3, one in October and of those for only one was with NXP and two of the for we're on for Jim were for Fourg technology. So we do believe we're entering a stage where both theres greater invests.
Men in LTV.
And customize Ltd for specialized applications as well as investment growth within Fiveg and so.
You know.
As we think about just the last six months and really signing for contracts in six months, we are starting to see that funnel come to fruition.
About one third of the funnel our opportunities that have been brought to us through the NXP.
The affiliation and collaboration about one third of those opportunities are are those that we brought to NXP. So they came in through our own channels and about one third of those opportunities remain and the for GE and non NXP category. So we're quite enthusiastic that we're seeing investment for both.
The fourg and Fiveg and that the funnel has both NXP and non NXP opportunity.
And just excited as we think about the last six months, what's the next six months will bring.
Okay. Thank you and one final question on this area do you have opportunities globally. The does as it does NXP since they are a very large global companies do they expand the geographical breadth of your your ability to chase down prospects of.
Assume we're we're doing well in North America, and Europe for me, how majorities legacy, but does the as NXP help us expand the geography beyond those two regions.
Yeah, no absolutely our funnel is very global.
We see probably the strongest opportunity set out of North America.
Followed by Europe on but we have we have discussions happening in other parts of the world. So very much very much global opportunities yes.
Thank you.
Thank you Robert.
Thank you for our next question today is coming from Michael Potter. Please announce your affiliation and pose your question.
Hi, its Michael Potter from on our capital group.
Hi, guys congratulations on a good quarter and the another step forward for.
Very good think of Mike.
Just a couple of questions in there basically follow ups two of the prior a price.
Prior call or color on the RBS comp agility can you give us a little bit more detail on on the pipeline. The Tim you know of.
Military of versus the I guess I O T industrial size use of to some degree of.
On on some of the contracts that have been signed to date the for contracts that have been signed today and some of the ones that you're excited about that are that are currently in the pipeline.
Sure.
So so again as we as we mentioned the for deals that we've signed including LTE rail application.
Crudes in the government lab well it includes the lab the academic.
Academic labs focused on government research.
It includes a satellite application.
And and the fourth one is a specialized small cell. So we're we're we're happy with the deals that we've signed that were seeing an array of opportunity across of Fiveg investment and across the how we think about private network.
The deals in the late stages in front of US have the same characterization as the ones that we've signed.
There is a military of Fiveg trial opportunity.
There is.
An enterprise solution for.
On a government and law enforcement applications, and then a host of of others that again range from the.
Attention for specialized small sales not on small cells are the same.
All the way through to more of an industrial application.
And can you give us some sense of the size of some of these opportunities the.
Very similar to what we've signed you'll you'll see what we signed the there was one deal in Q3 that was seven figures.
On a deal on October that was a 400000 in size. The two deals in Q2. One was 600001 was 400000. So we're going to see an array of of I think the the sweet spot of the range as we think about the future will be everything between two.
Hundred 50000, all the way up to 2.5 million I think thats, probably the sweet spot of the range of deals that will be signing.
Thank you once again, ladies and gentlemen of you have any questions or comments. Please press star one now.
We do have a follow up question in queue from Robert Marson.
Your line is mine.
Thank you can you give us some of granularity on on the Holsworth on how it's playing out on the.
The integration of the revenue synergy potential and the.
Whether for this quarter.
Which you said is sustainable of the seems to be of very high run rate included any kind of one off large deals that that might not be recurring a almost.
The almost three $2.8 million quarters, a lot higher on and then our our basis than than we ever imagined.
Going into the transaction sure yes. So on the first point integration. That's that is largely complete Robert there as you know we are fully integrated across people organizational structure.
You know I T financial consolidation of the sales channel of the training has been rolled out we.
We have a unified sales force.
Our reps have embraced the product in of the contributed the some of that the that revenue growth and synergy. So we're really largely complete with the integration.
In terms of the Red.
Revenue synergy of detail so right. So in terms of the revenue synergy you know the sort of the company doing approximately $5 million of business annually and we have in just the first nine months of ownership or or less than it was the February deal were seeing close to $6 million about five and a half 5.7 year to date so.
So we feel good about that yes, there there are some lumpy deals in there.
But some of those deals are from from names that have a global installed base of instruments and so we feel we will get repeat order flow from some of these large customers that we have helped the win.
There are specific deals with in the revenue and the bookings which have come from.
Our channels and have come from our ability to book business as the in already qualified vendor and so we have taken orders in.
Here in Parsippany.
As a as an already approved vendor to large defense contractors that would've been a barrier to a win for the whole sort of team I think the other element is the completion of the ISO 9001 certification of certainly a stepped up their profile on and allowed them to bid on more.
RFP opportunities then the ordinary ordinarily would have without that certification.
So we feel good we feel good about the customer names.
That are buying their product we feel that some of these customer names have a global.
Base and getting into a single lab.
Allows us to go after you know the land and expand strategy is alford likes to say if you. If you can win a automated test environment in Texas, you should be going after every other one of those environments that the that company may have all around the world and all around the the U.S. so getting in a win in the.
The single location improves your chance of opportunity and success at other locations.
The do we have any guidance to the u. their business contacts and customer relationships globally for for the test and measurement of production businesses.
And bring our legacy test and measurement products into that environment, because it's a totally different environment. They focused on revenue.
Yeah, but once you get into the the answer is yes, Rob for once you get into a customer accounts.
So if you think about some of the largest.
The defense contractor of some of the largest semiconductor.
Manufacturers that that you absolutely have the ability to to to grow both ways I think the the opportunity set is larger for them to leverage our long term relationships across all our existing brands, but they certainly do have names and relationships of customers and even within common customers different relationship.
That that we would hope to leverage over time.
Okay.
Very good.
Thank you we do have a follow up coming from Michael Potter Your line is live.
Hey, Tim I was just the the middle of another question before we got cut off of the.
The.
Sorry, the RBS a contract that you signed on October 400000, I think you said was for $400000 per day.
Correct what was the application.
That was for a.
The academic lab focused on government research.
Okay, Okay and then the.
The question that I also had was a lot of these contracts that were that were signing at this point on.
Are they development contracts or these are kind of one and done.
Two I would say the two of the contracts of the for Weve signed.
Was the delivery of the software license and that.
That could be characterized as one and done although that's not really our approach I mean, what's done is our delivery of the license and our recognition of the the revenue.
We would hope though that in addition to the license we sold them. We can then sell them others. So if they only bought that fire license, we can sell them on different.
Additional raft of chain licenses as day advance their work or protocol licenses as they also continue the work. So we would hope that that license recognition, while it may be one and done for revenue recognition purposes that theres more opportunity for us to expand.
The other two of the for we've signed is the delivery of services and so in in one of those contracts revenue would be recognized I believe over three quarters.
Depending on the milestones of delivery completion acceptance payment and all of the criteria that goes into a more complex revenue recognition methodology.
So I think the <unk> and the rule of thumb is the larger of the contract typically the more that's involved in the longer the delivery cycle.
And I would say that most delivery cycles from the deals we've signed as well as the ones where we are in late stages have three to four quarters of delivery.
Associated with them.
Okay terrific. Thank you okay. Thank you Michael.
We have no further questions in queue at this time [noise] great.
Great. Okay. Thank you.
Thank you everyone for your continued confidence and faith in our direction. We wish you. All continued good health and we look forward to speaking with you again have a great day.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.