Q3 2022 Peraso Inc Earnings Call
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Good afternoon, and welcome to Horizon Inc's third quarter 2022 conference call. At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments after the presentation.
As a reminder, this conference is being recorded today Monday November 14, 2022, I would now like to turn the call over to <unk> CFO Jim Sullivan. Please go ahead.
Good afternoon, and thank you for joining today's conference call to discuss process third quarter 2022 financial results I'm, Jim Sullivan CFO process and joining me today is Ron <unk> our CEO .
This afternoon, we issued a press release and related form 8-K, which was filed with the Securities and Exchange Commission.
Press release and form 8-K are available on process website at Www Dot Perazzo, Inc. Dot com under the Investor Relations section.
There is also a slide presentation that we will be using in conjunction with today's call that may be accessed through the webcast link on the IR website.
As a reminder comments made during today's conference call May include forward looking statements.
All statements other than statements of historical fact could be deemed as forward looking.
Cross sell advises caution and reliance on forward looking statements.
These statements include without limitation.
Any projections of revenue.
<unk> expenses non-GAAP gross profit non-GAAP gross margin non-GAAP operating expenses adjusted EBITDA non-GAAP net loss cash flows or other financial items.
Also any statements concerning the expected development performance and market share or competitive performance of our products or technologies.
All forward looking statements are based on information available to cross sell on the date hereof.
These statements involve known and unknown risks uncertainties and other factors that may cause process actual results to differ materially from those implied by those forward looking statements.
Including unexpected changes in the Companys business more.
More detailed information about these risk factors and additional risk factors are set forth in process public filings with the Securities and Exchange Commission.
<unk> expressly disclaims any obligation to update or alter its forward looking statements, whether as a result of new information future events or otherwise.
Except as required by applicable law.
Additionally, the company's press release and management statements. During this conference call will include discussions of certain measures and financial information in terms of GAAP and non-GAAP .
Included in the company's press release are definitions and reconciliations of GAAP to non-GAAP items, which provide additional details.
For those of you unveil unable to listen to the entire call at this time, a recording will be available on the Investor Relations section process website.
Now I would like to turn the call over to our CEO long delivery for his prepared remarks.
Thank you Jim Good afternoon, and welcome to everyone joining us over the phone and via webcast as outlined in today's press release <unk> had a solid quarter with total revenue growing at 62, 63% year over year, although product revenue came in lower than what we had previously expected as a result of not being able to recognize revenue.
On certain order shipped in the quarter overall, we continue to experience strong customer demand for our millimeter wave solutions. We also achieved notable sequential improvement in our gross margin, which combined with lower opex due to the realized gain from the technology license of Intel contributed.
Two significantly contributed to significant improvement in our bottom line results for the third quarter.
One of the key contributions to our continued growth in the third quarter was the expected commencement of shipments to fulfill an initial portion of the previously announced purchase orders we received earlier this year.
As a reminder, these orders included a combination of prizes millimeter wave IC and module products for fixed wireless applications and we anticipate continued shipments in support of these orders through the first half of 2023.
More broadly fixed wireless access continues to demonstrate solid momentum with fixed wireless access services dominating subscription net ads among the top six broadband providers in the United States.
Yes.
Okay.
In spite of increased macroeconomic uncertainty the global adoption of millimeter wave has remained strong and increasingly strategic for carriers to maximize bandwidth limitations.
Previously highlighted multiple leading carriers that have announced millimeter wave deployments, including NTT docomo.
Softbank and rocketing.
Additional carriers, such as Nbn, Australia T mobile in North America, as well as carriers in India, and France are acknowledged initiatives to add millimeter wave based solutions to their existing networks.
During the quarter, we showcase demos of process, new <unk> millimeter wave product at both the European microwave weaken the land and mobile World Congress in Las Vegas.
Having personally attended M. WC I can tell you that we received significant interest in the millimeter wave technology from a series of existing and prospective customers and partners.
Further underpinning the very strong reception and interest in our highly integrated <unk> E beam former.
Is the devices extraordinary performance, which continues to exceed our internal targets. Although these engineering graphics are fairly technical I wanted to share them because they represent a few of the crucial kpis achieved by our fully integrated dual band antenna.
This unique dual band capability with a single antenna provides carriers and operators with numerous numerous benefits, including more flexible and lower cost deployment and lower cost deployment. However, using our internal customization resources. We can also provide an operator a version of our <unk> module with an antenna that's fully optimized for.
For a single band.
In either of these configurations the power consumption of our solution is highly competitive we're poised to expand sampling of Apache beam former over the coming in coming months and currently currently expect to achieve production silicon in the first quarter of next year.
Although perazzo has been in the business of developing and shipping millimeter wave solutions for more than 12 years.
We historically had been focused on a relatively small number of core customers.
In October we took an important step to begin expanding our commercial reach with the appointment of Mark Lunsford as Chief revenue Officer.
Mark brings a deep understanding of the bleeding edge technologies and has demonstrated success across companies at various stages various stages of growth, including side time Court NXP semiconductor micro semiconductor and pivotal technologies.
Highly applicable to Perazzo his.
His prior experience at emerging growth companies, where he has helped convert brown groundbreaking technology into large multimillion dollar sales pipelines. He has also led sales efforts with responsibility for global customer basis, and secured an impressive lineup of tier one customers at prior companies.
The addition of Mark to the management team will support our customer expansion efforts in both five G license.
And 60 gigahertz unlicensed segments of the marketplace.
Finally, acknowledgment of cross currents and weaker macro environment to date, we have not seen measurable impact on our business, we exited the quarter with record product backlog and very good visit visibility for the first half of 2023.
As previously mentioned, we're focused on driving expanded commercial engagements and targeting a broader group of prospective customers across a larger portion of our served markets.
They were actively pursuing engagements with large series of new customers and partners among those.
Our more than one tier one carrier a leading network system designers as well as our global Telecom software solutions company.
In addition to achieving increased market penetration whether existing products, we're consistently thinking about working to advance our future product and technology roadmap.
This activity includes current ongoing discussions with multiple companies on prospective and redevelopment projects targeting areas such as support designed for high frequency radio band and the development of next generation 10 gigabit baseband technology.
With that I'll pass the call back to our CFO , Jim Sullivan to review, the financial and provide guidance for the fourth quarter.
Thank you Ron and good afternoon, everyone.
It's great to be speaking with you again today.
During my comments I will make several references to non-GAAP numbers, unless otherwise indicated referenced amounts exclude stock based compensation expense amortization of reported intangible assets business combination transaction costs and the change in fair value of warrant liability.
These non-GAAP financial measures and a reconciliation of the differences between them and comparable GAAP measures are presented in our press release and related current report on form 8-K, which was filed with the SEC today.
Turning now to our third quarter 2022 results total revenue was $3 $3 million compared with $4 $3 million in the second quarter of 2022 and $2 million during the same quarter a year ago.
Product revenue from the sale of our integrated circuits and modules for $3 $1 million.
Paired with $4 1 million in the prior quarter and $1.4 million in the third quarter of 2021.
The sequential decrease in product sales was attributable to approximately $1 $1 million of product shipments late in the third quarter for which the company was unable to satisfy the revenue recognition criteria.
The growth in revenue year over year was primarily driven by increased demand in shipments of our memory IC products as the prior year included no sales of such memory products due to the timing of our December 2021 business combination.
Royalty and other revenue for the third quarter of 2022 with zero point $2 million and comprise nonrecurring engineering services and royalty revenues from licensees of our memory technology.
GAAP gross margin was 39, 3% in the third quarter compared with 34, 7% in the prior quarter and 54, 4% in the year ago quarter on a non-GAAP basis, excluding amortization of reported intangible assets gross margin for the third quarter was 52% compared with 43% in the second quarter of 2020.
Two and 54, 4% in the year ago quarter.
The increase in gross margin over the previous quarter.
Primarily reflected an increased mix of memory IC products, which generally carry higher gross margins than our millimeter wave products.
Product gross margin was 34, 6% in the third quarter.
Compared with 32, 1% in the prior quarter and 33, 8% in the third quarter of 2021, you sequential and year over year increases in product gross margin will also largely a function of revenue mix in the third quarter.
As we progress through 2000 22022 went into next year, our corporate gross margin target continues to approximate 50%.
We expect revenue growth will contribute to higher levels of scale and enable us to capture additional production cost reductions on a millimeter wave modules. While also realizing benefits from anticipated ongoing sales of our higher margin.
Memory IC products.
Operating expenses for the third quarter were $5 3 million and included $2 $6 million gain related to an exclusive license and asset sale accounted for as a reduction of operating expenses in accordance with GAAP.
For comparison operating expenses were $8 $5 million in the prior quarter and $4 $4 million in the year ago period.
Total operating expenses for the third quarter of 2020 to a non-GAAP basis, which excludes stock based compensation and amortization of reported intangible assets.
The $3 3 million compared with $6 $6 million in the prior quarter and.
And $3 $1 million in the same quarter a year ago.
GAAP net loss for the third quarter of 2022 was $4 million or loss of <unk> 20 per share compared with a net loss of $7 million or <unk> 36 per share in the prior quarter and a net loss of $3 8 million or a loss per share of <unk> 73 in the same quarter a year ago.
On a non-GAAP basis net loss for the third quarter of 2022 was $2 million or loss of 10 cents per share, which excludes stock based compensation and amortization of reported and tangibles.
This compared with non-GAAP net loss of $4 8 million or a loss per share of 23 cents in the prior quarter and a net loss of $2 $5 billion or loss per share <unk> 47 in the same quarter a year ago.
The weighted average number of basic and diluted shares outstanding for purposes of calculating both GAAP and non-GAAP EPS for the third quarter of 2022 was 20 million shares, which excludes $1 8 million shares of our common stock and exchangeable shares that are escrowed pursuant to the terms of an escrow agreement and subject to an earn out based on achievement of certain stock price.
Yes.
In terms of adjusted EBITDA, which we define as GAAP net income or losses reported.
Stock based compensation amortization of reported and intangibles interest expense depreciation and amortization and the provision for income taxes adjusted.
Adjusted EBITDA for the third quarter of 2022 was negative $1 8 million.
Compared with negative $4 $5 million in the prior quarter and negative $1.4 million in the prior year period.
We entered the fourth quarter with significant backlogs that extend well into the first half of 2023 and positions us for continued growth.
Specific to the fourth quarter of 2022, the company expects total net revenue to be in the range of $3 $8 million to $4 1 million.
Which excludes approximately $1.1 million in anticipated revenue recognition associated with previous product shipments to an existing customer.
This concludes our prepared remarks, and we will now open the call to questions. Operator, please initiate the Q&A session.
Certainly.
Ladies and gentlemen, the floor is now open for questions. If you have a question or comment. Please press star one on your tone on on your phone at this time, we ask that while posing your question you. Please pickup your handset if listing on speaker phone to provide optimal sound quality once again, ladies and gentlemen, that'll be star.
One on your telephone keypad at this time, if you would like to enter the queue to ask a question.
Hold a moment, while we poll for questions.
And the first question today is coming from Kevin Lu.
Kevin Your line is live please go ahead.
Hi, good afternoon guys.
Wanted to start first with the $1 1 million.
Product revenue that was recognized in Q3 here could you talk a little about why that actually wasn't recognized even though it was shipped.
And then just wanted to clarify it for Q4. It sounds like you didn't include that in your range, but they are you assuming that it does ultimately.
That you are able to recognize that revenue in addition to your guidance for the quarter.
Hi, Kevin let me start on a.
A LIFO basis on your question the.
The guidance for the quarter for the fourth quarter does exclude that revenue recognition of Mt.
We did keep that out of the number so that would be potential upside when.
When that is recognized so that answers the first question.
The second question.
There was a basically a collectability issue.
And given.
There was some extended payment terms on that sale.
When we looked at the requirements of ASC 606, and in particular with the focus right now.
Now the macroeconomic economic environment et cetera.
We just felt it was prudent to defer the revenue and.
Yeah, let that settle ideally in the fourth quarter.
I believe we said in the press release, we do expect to recognize that in the fourth quarter.
We did have additional revenue recognition from that customer during the third quarter.
But there was some facts and circumstances around it then happening late in the quarter.
That we just felt it was prudent to to defer that shipment.
Yeah understood and appreciate the color there and then just in terms of your backlog.
You just talk a little bit about whether that customer represents any significant portion of its kind of the product backlog youre carrying today and then more so beyond that you talked about you know a fairly strong backlog heading into Q4 in the first half of next year I'm just wondering.
How you see those revenues.
That waiting it looks currently does most of that come out within the fourth quarter or is it fairly evenly spread over the next few quarters.
I'll start off first and then let Lon add some color for.
For the fourth for the fourth quarter.
I will say that the.
The customer is a is a meaningful piece of backlog, but the revenue guidance I gave for the quarter does not include that customer.
So we were being specifically conservative in the guidance.
We wanted to be ultra conservative looking at the fourth quarter. So while that customer is not in the guidance there in our backlog.
Right now, we've obviously made a large shipment to them at the end of September .
We expect to start shipping to them again later this month early next but if we don't we're very comfortable with our guidance number and we would just kind of moving into Q1 I would say the backlog is like I said, we have Q4 covered and we have a substantial amount of Q1, you know kind of looking back to I guess time flies them. This week.
Go now we had announced.
A meaningful increase in orders and that's really kind of what's driving our visibility.
Particularly on those orders that came in one millimeter waves.
But since then we've really firmed up our backlog on the memory IC products as well so we feel.
Very good looking ahead. The next couple of quarters, Ron did you want to chime in and clarify anything else. Yeah. I think I think that covers it I mean, I think we should make it clear that you know.
This particular customer is getting a little diluted in terms of the percentage that you know of the backlog that they represent as we move into the as we move into the first half of 2023.
Okay, and then just wanted to touch on the hiring of Mike lunch right. As you keep that the officer can you talk a little bit about any sort of changes.
We plan to make in terms of your go to market or even yourselves organization.
And what we should be looking for in terms of kind of milestones over the next couple of quarters here.
To see progress on the sales front.
Well, Kevin so yeah. So mark has been onboard two weeks, so he's still really figuring things out, but I mean, I I can summarize.
In terms of in terms of you know kind of the Kpis have set out for Mark I mean, obviously you know today.
Unlicensed products, we're seeing there.
Very nice design win activity good growth. So so obviously from my perspective, the very short term revenue opportunity for him.
Two is to is to utilize this too is to really target that market.
You know I would say that specifically in that market you know without having someone like Mark we are.
You know we were pretty focused so you know really fundamentally from my perspective on the.
So you know initial kpis, it's really go after that.
With several customers in that space, we haven't really addressed yet so so that's going to be the really the first you know the first objective for March and I think that.
We will start to make that public over the over the coming quarters for sure in terms of some of those customers might be you know obviously, the second actually I feel stretched fortunate about this I mean on the second.
You know on the second leg of his strategy is five G. The.
Five or five G.
<unk> is has been very well received.
<unk> thrilled with the feedback we're getting in terms of again, just the the level of integration.
We've achieved.
But also the frequency range I mean, we probably the entire.
24 to 43 gigahertz by Jeep and so people are you know.
People are amazed that we can do that so I'm thrilled with the Bachelor markets coming in we're just at the right time to go after those.
You know to go after those opportunities and you know as you can see that.
Wireless carriers in the license banner has seen tremendous growth in fixed wireless so I feel that timing is terrific in terms of.
Addressing that market. So those are going to be the two primary objectives for market. The other thing, we're seeing actually like and I touched on this at the end of the presentation. Kevin as you know, we're seeing some very nice opportunities in terms of your own kind of non dilutive and.
Revenue. So just you know revenue and which frankly speaking of our customers.
Are willing to help us out in terms of our expenses. So we havent you know we have.
It really kind of discuss those in details, but we expect to be making those more public over the coming quarters in terms of our ability to actually get our customers to help us to pay for some of this development. So you know it's an area that we're quite focused on and we can do it now because we've got that you know baseline intellectual property that we can leverage into the customer base. So.
Mark So almost a third leg of monarch strategy is to bring in some of those non dilutive.
In our REIT deals that are that really helped us out in terms of in terms of the cash flow. So I would say those are the three primary objectives.
High level as you know existing unlicensed.
Aggressively going after five G designs and also non dilutive financing from from some of our customers.
Okay.
Yeah.
From.
In.
Another is that.
Mobile World Congress, that's what you touch on the interest in the five GB former product and where you think the early opportunities for you guys will be in terms of getting into production.
Well.
So we so I so what were fine. So just just to be clear to everyone on the call I mean, our beam former is very very true and so its very very targeted on the end user equipment side. So that is.
What goes in the consumer's home and we think most of our competition is really focused on the infrastructure side be it base stations or small cells.
So where where we're seeing I mean, I can tell you I guess geographically.
You know honestly.
Just respecting the confidential information, but no I think you might've seen in India is actually.
<unk> has provided licenses for millimeter wave a millimeter wave bands, particularly in the 26 gigahertz band.
Brazil is made millimeter wave available obviously in a market, where we're working with carriers in the market. So I think geographically, that's where our first interest is coming from but when you know point I'd really like to point out Kevin is that you know if you take the like the India opportunity for example.
You know, it's it's really focused on 26 gigabytes and we of course cover in Orange.
Our antenna design is it.
Astounding in terms of the breadth of bits of this frequency range, but we'll we'll spin.
You know our module specifically to address the India market for this opportunity and that's really a special capability that we have.
<unk> is our ability to customize their own tenants for specific market. So.
So really that's the beauty of having the ability to cover these wide swaths of frequencies when we get a very specific customer.
We can focus our efforts on that specific opportunity so that that really would summarize where we're at from a from a five G perspective.
Great well good luck as you execute execute against these opportunities and I. Appreciate you taking my question.
My pleasure Kevin.
Thanks, Kevin.
Thank you. Your next question is coming from David Williams from benchmark.
David Your line is live please go ahead.
Thanks, So much taking the question Ron Jim It's good to hear from you and congrats on the continued execution here.
Thanks, Dave.
So I guess one thing I've noticed more recently is just kind of the demand strength, we've seen on fixed wireless access coming from them.
U S carriers and it's been a very big area of growth, specifically for AT&T and T mobile and just kind of curious what youre seeing there. It seems like this could be reaching an inflection point.
Here in the near future and just am I thinking about that right. What do you think the hurdles are and and when would you guys see that.
Revenue Inflect you think.
Well, we so I guess to summarize where are we where are we seeing in the U S market in particular is like our whole business thesis is.
The concept of <unk>.
Capacity problems for the carriers and I think that you know we saw the rise of the mid band.
Offering from that from the carriers, but what we're frankly seen in really in the top 20 markets in the U S is it's quickly running out and coupled with that is we're seeing the.
You say growth of I mean.
920000, new fixed wireless adds just in Q3 for between T mobile and Verizon. So we're seeing two things happening one is.
You know that the networks. The network capacity is getting bogged down into fixed wireless is a very strong growth opportunity. So you know.
So so so we're right in the types of things I mean, we think so we think what's going to happen is that the carriers will start to migrate their mid band.
Mid band capability, Q2, mobile and really logically.
This is in dense urban environments not in rural environments, where millimeter wave has historically been but late in cities.
Is this too is to concentrate there there's the millimeter wave capacity on fixed wireless access.
That's the trend that we're seeing with you know with the capacity crunch that we shouldn't really see the carriers.
<unk> seen in the U S. So frankly speaking I mean, you know I mean, we would say outside of the U S. We're really shooting to try to have some production in 2023, which is which is for US frankly, maybe even potentially ahead of schedule you know realistically the first half of 2024.
As when we could see a.
Revenue in the U S. Just because frankly, the the lead times you know our our 12 to 18 months. So it would be stretching it to say like in a year from now but word but I think for the U S. First half of 'twenty 'twenty four is realistic but like what we.
We think the good news Dave is that we're really seeing this you know again this is high demand.
On the carrier networks, driven by you know frankly streaming services video apps or what we did here at mobile World Congress that 70% of the network traffic always videos and its increase and that's really what's driving the capacity crunch. So we think it's very very logical that we're starting to see the carriers really start to bring on more and more melamine.
No way for fixed wireless that well frankly for mobile, but we really see we really see the carriers embracing more of fixed wireless for all.
Our millimeter wave for fixed wireless access over the over the coming 18 months.
Yeah. Thanks for the color there and it seems like just from an infrastructure deployment or investment Capex investment.
Fixed wireless access would be substantially cheaper than deploying other cellular bands.
Is that a good way to think about it or am I, maybe maybe thinking something different.
Yeah. So I think there's two issues to address that I mean, the first issue is first of all the costs the spectrum costs for for for millimeter wave are substantially cheaper than other bands. So right off the bat I mean, you're right. The cost of deploying millimeter wave are substantially cheaper now there's an argument that says Oh, you need to put a lot more.
Small cells or base stations <unk> two to support millimeter wave, but again, if you are going after fixed wireless I would argue that you just don't need the because you're not really trying to support.
The dynamics of a mobile environment. If you really just focused on fixed wireless those costs are quite quite reasonable. So again now you've got the carriers who've got you know pretty inexpensive spectrum.
A capacity crunch on the other mid band.
And you know fixed wireless where really the the the support challenges is quite limited compared to mobility I really think you know the cost of deployment for the carriers for millimeter wave, it's substantially lower and yes, I agree with you in terms of in terms of what those metrics look like.
Okay fantastic.
And then maybe secondly, your another question from here is.
So you've got some pretty good order. It makes some good traction demand is good for.
From a capacity standpoint, what do you think the restrictions or if you saw a real inflection in revenue what are your hurdles or challenges I mean can you support a 50% increase in order flow and just kind of given the working capital requirements. In your resources you have available today, just anything just to help me understand how big the business could be at kind of <unk>.
<unk> footprint.
Yeah, I mean, we have our budget completely has built in capacity increase I mean, I would say the bottleneck right now is test.
So we've already built so what that implies is is is.
As revised test boards.
Where we go to dual site or even quad play test capability.
So that we really have realized that test is one of our main bottlenecks and we've already addressed that problem actually where we're implementing that so are we.
We should be going to dual site test over the next you know.
Quarter, or so and then into 2023.
If all goes well, we can get to quad site and the reality there is that that that is the real bottleneck in terms of the as you say just pick a number 50% increase in our revenue. So it's there's some capital, but it's not actually as a matter of fact believe it or not Dave.
You know in.
In terms of the cost of that test equipment. It has come down substantially there's really there's millimeter wave cash sockets that historically had been very very expensive. They have come down substantially in places and the reason is because.
Because if I G. A millimeter way people you know the test companies were saying, Oh, we need to lower our costs and sure enough.
The cost for the revised test equipment has come down substantially so as a matter of fact the capital.
You know too you know at least the capital for our capital equipment in our test strategy has come down and so we really expect two to solve those bottlenecks over the next couple of quarters.
And then broadly speaking I mean, obviously as our revenues go up the costs there will be capital requirements for that and so we expect to you know we expect to to raise the capital necessary to meet to meet those to meet those cash requirements, maybe Jim can speak to that.
As well.
Yeah, No I think that's I think that's that's.
Correct, one and certainly as we.
Execute our business plan.
Generate higher revenues higher margins and narrow our operating loss, which is R. You.
We don't plan on what we've been talking about.
They'll also be.
You know more readily.
Solutions for working capital are in lines against receivables things like that that you need to a company at our size and our current scale is tops.
The folks who do those want to see a smaller burn were certainly are putting the.
The plan in place and the bundle was down this quarter and.
Stay tuned on that front, but I think that'll be another avenue that.
We'll open up to us as well in addition to the on the financing front.
Okay, Okay, fantastic and I haven't had a chance to rental full model yet so forgive me if I'm wrong here, but it looks like the margins are on a non-GAAP basis were up.
Sequentially and just kind of curious if there's a if theres anything there thats, helping and how you expect that Ron or their modules that are beginning to help lift that margin or is it mix.
What are the levers and where can that go.
You know I think as we I'll go first and then Ron can chime in there as you know, we we want to be 50% or higher non-GAAP gross margins.
You know recognize the gap the gap piece, we take outs, we record some amortization.
From the intangibles from our business combination there so our non-GAAP , we pulled those out.
But our target is to be 50, 50% and higher.
Again at this size of any the numbers can move in the quarter. This quarter benefited from a higher percentage of our memory IC product sales, which carry can carry margins anywhere from 67 to 70, 70%.
So that certainly helps.
The other one on the module side, we've seen improvement in gross margins. We're targeting you know were pushed we want to push those towards 50%, but again at this early stage. We just started selling those you know about a year ago and it's obviously a more complex building just shipping shipping chips.
But we're pleased with the progress and as Ron kind of you know.
I think mentioned on the Capex side, making some modest improvements to improve throughput.
Quad side handlers things like that that can move.
Move them, but you know where we want to keep the margins yeah, we were above 50% for the quarter I think on the year we're in that.
Over 48% or so.
We are implementing some just as we're seeing from suppliers and everywhere else.
In our world today for all of Us price increases.
Yeah, we've got a path on and cover those so we feel very good about the plan too.
Certainly in 2023, you see those move north of.
50%.
Yes, I would.
I would I mean, I would just echo that I mean, where the company really recognizes margin is.
It is a room for improvement so there's really a comprehensive plan in place to get it above 50%, including price increases in and reduction in test time, and so the improvement in yield. So all of those are leavers day, but that we're actively working to get those margins above 50%.
Okay, all right very good. Thanks, so much for the time certainly appreciate it and best of luck on the quarter.
Thanks, David I appreciate your time.
Okay.
Thank you.
And there are no further questions in queue at this time ladies.
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.
Yeah.
Thank you.