Q4 2022 Peraso Inc Earnings Call
Yeah.
Okay.
Good afternoon, and welcome to Perazzo Inc's fourth quarter and full year financial results Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded today.
Wednesday March 22023, I would now like to turn the call over to <unk> CFO Jim Sullivan. Please go ahead.
Thank you.
Good afternoon, and thank you for joining today's conference call to discuss process fourth quarter and full year 'twenty two 2022 financial results I'm, Jim Sullivan CFO process and joining me today is Rhonda Goldberg our CEO.
Afternoon, we issued a press release and related form 8-K, which was filed with the SEC.
This release and form 8-K are available on process website at Www Dot <unk> dot com under the Investor Relations section. There was 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.
We're also 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 EBITA non-GAAP net loss cash flows or other financial items, including anticipated cost savings.
Also any statements concerning the expected development performance in 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 the forward looking statements, including unexpected changes in the Companys business more detailed information about these risk factors and additional risk factors are set forth in process public filings.
With the Securities and Exchange Commission.
We're also 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 are 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 unable to listen to the entire call at this time, a recording will be available on the Investor Relations section of our website.
Now I would like to turn the call over to our CEO Ron Goldberg for his prepared remarks right.
Thank you Jim Good afternoon, and welcome to everyone joining today on the phone and via webcast.
As outlined in today's press release, Perazzo achieved strong Roes for the fourth quarter and full year highlighted by a number of accomplishments across the business.
Both product and total revenue in the fourth quarter were up double digits sequentially and over 100% year over year.
Strong top line growth for the quarter and year was driven by robust demand and higher shipments of our millimeter wave Ics for fixed wireless access as well as the memory IC products. We also achieve meaningful improvement in our gross margins throughout the year.
Okay.
Reflecting back on 2022, I'm proud of the team's execution doing what was and continues to be a challenging environment. So not only the semiconductor industry and many industries across the globe.
All things considered we had a productive sole sourced year as a combined company. Following the completed merger transaction with most of this in late 2021.
Our strong year over year growth and expanded gross margin for the year are a testament to our differentiated technology and the team's ability to deliver against customer demand despite wide reaching supply chain challenges.
Total revenue for the quarter.
The full year increased 162% over 2021, and we expanded non-GAAP gross margins to nearly 50%.
Product revenue for 2022 grew 189% year over year, primarily reflecting a ramp in shipments from our millimeter wave and memory IC products.
We also achieved significant business and product milestones during the year, including the launch of our prospective product family for millimeter wave fixed wireless access and for Roger's introduction of the world's most integrated dual band <unk> millimeter wave beam former IC.
Also notable was the appointment of Mark lunch, where it is the company's first chief revenue officer in support of expanding crosses commercial lease I would also highlight the strategic technology license and patent agreement that we entered into with Intel Corporation, which added non dilutive cash to the balance sheet, while also contributing to a reduction in operating expenses.
Yes.
Hum.
Shifting to an update on our primary target target market, we've been very pleased with the increasing validation and growth of the fixed wireless access market over the past year.
This growth accelerated in 2022 as fixed wireless access continued to capture a growing share of the broadband market.
According to a recent report published by Leichtman Research group fixed wireless services represented 90%.
Of all broadband.
Of all broadband.
Net.
Net.
Net adds in 'twenty, two together T mobile and Verizon added nearly $3 2 million fixed wireless subscribers in 2022.
Uh huh.
Which compared to approximately 720000 net adds in 2021, representing year over year growth of more than 300%.
To put these numbers in context of the longer term market potential of T. Mobile's home Internet and Verizon's <unk> takes a lot of service are currently available to more than $40 million and roughly 30 million homes respectively.
The growing market momentum is derived from fixed wireless access being a natural extension of <unk> deployments as carriers and service providers seek to maximize available bandwidth capacity, while also delivering faster and lower latency connectivity to their customers.
Hum.
As I've discussed on previous calls there continues to be increased recognition across the industry. The millimeter wave technology will be required to address the challenges of continuously growing demand for wireless bandwidth.
In addition to the fundamental benefits of millimeter wave technology, including incremental wireless bandwidth SaaS multi gig gigabit access speeds and low latency service providers are also recognizing its ability to address uniquely challenging use cases, such as high congested environments.
One high profile.
Example of this was a state farm stadium in February for the Super Bowl, where there were nearly 68000 fans in attendance for <unk>.
Those of US that have attended large things sporting events or concerts in recent years, you've likely experienced the frustration of either limited or effectively no wireless connectivity due to the density of the crowd.
Specifically to the Super Bowl and estimated 60% of the fans was Verizon customers and they collectively used 47 terabytes of data, which was a 57% increase over Super Bowl 2022.
Although Verizon acknowledges deployed supplemental C band spectrum to bolster their service.
Horizons VP of device technology named millimeter wave as the star of the show in terms of enabling the staggering demand and data traffic.
The Superbowl is only one example, however, where there continues to be a growing number of similar proof points that further emphasize the need for millimeter wave technology.
Which remains at the core of Perazzo solution for both licensed.
And unlicensed 60 gigahertz spectrum.
A broader perspective on markets I wanted to share several takeaways from holding my recent attendance at mobile World Congress in Barcelona, as well as from our team's participation of wisdom Erika early this month.
At a high level one of the most striking observations as the millimeter wave has made significant strides in terms of acceptance.
Were really accepting the exponential wireless demand in the carrier market.
Specific to our own beam former solution. He was clear based on our conversations and serving other vendors out there. So that we offer the most highly integrated dual band device in the market.
To that end, we engaged in multiple productive discussions relating to addressing this five G consumer premise equipment or CPE and.
Appraisals <unk> millimeter wave solution can enable more cost effective and equipment as well as <unk> millimeter wave deployments.
We should remember that the cost of the CPE equipment is the crucial aspect of the such SaaS of millimeter wave and <unk> fixed wireless access.
In terms of carrier acceptance of millimeter wave technology, we believe millimeter wave will be eventually the go to technology for <unk> fixed wireless access.
One of the industry analysts, we spoke to indicated that the revenue per bit for mobile users in the carrier market is 20 times the revenue per bit of fixed wireless access, which we expect will inevitably inevitably make millimeter wave.
Go to solution for fixed wireless for fixed wireless access in the carrier market.
Over the last year, we further substantiated, our technology leadership through expanded customer orders and design wins as well as growing traction for both millimeter wave I see an integrated antenna solutions for fixed wireless access.
After meeting with a number of the leading players with America I'm, even more convinced the perazzo is establishing itself as a leading go to millimeter wave vendor for wireless Isps.
In fact, we are now evaluating multiple request and have accepted multiple requests for direct engagement to align on our respective product roadmaps.
With certain wireless Isps.
Another prominent takeaway was the recognition that one of the primary benefits of millimeter wave is minimal network interference.
More specifically industry participants are acknowledging that Wi Fi based connectivity is becoming increased increasingly difficult due to the scale to use some signal interference generated by the surge in number of connected Wi Fi devices.
Actually recognition of this issue in a commercial setting was recently provided by.
Our millimeter wave equipment suppliers named Intercom, who announced the deployment of 300000 millimeter wave subscribers in Italy, where they serve specifically subsided.
Cited immunity to interference as the primary benefit of this.
Of their system.
Finally, while acknowledging the current macroeconomic conditions and associated uncertainty we remain optimistic.
Our compelling value proposition in the marketplace and the ability to drive continued growth in 2023, we're particularly encouraged by expanding opportunities in the fixed wireless market, both domestically and abroad. As we further positioned <unk> to be a leading supplier of millimeter wave solutions across our licensed and unlicensed segments of the market.
Our main focus in 2023 is to further capitalize on our existing leadership position and 60 gigahertz, while also advancing our select targeted development projects with key prospective customers and partners.
The immediate term over the next 12 months to 18 months, we aim to leverage our current momentum in the wireless ISP market to penetrate the emerging millimeter wave of opportunity in the carrier market, which is anticipated to ramp later in 2023 and into the first half of 2024.
As part of our recently implemented cost reduction initiatives were emphasizing development projects with near term path to achieving return on investment even though we continue to closely monitor potential longer term opportunities.
These includes next generation millimeter wave applicable illumina of applications, such as AR VR connectivity.
As well as the interest industries.
Formal evaluation of according incorporating 60 gigahertz in future standards, such as Wi Fi eight.
Okay.
In closing I'm pleased with the momentum and expanding engagements that we've secured in 2022 and are extending into 2023 as we aim to build upon the strong first full year of combined operations.
The recent actions, we've taken to streamline the organization and reduce operating expenses.
It positioned us to achieve improved operating results as we drive continued top line growth over the coming year.
With that I'll turn the call back to Jim to review, the fourth quarter and full year financials and provide our outlook for first quarter of 2023, Jim.
Okay.
Thank you Ron.
It's great to be speaking with you all today during my comments I will make several references to non-GAAP numbers.
Unless otherwise indicated referenced amounts.
<unk> stock based compensation expense amortization of reported intangible asset impairments of goodwill 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 today with the SEC.
Turning now to our fourth quarter and full year 2022 results.
Total revenue in the fourth quarter increased to $3 9 million from $3 $3 million in the third quarter of 2022, and $1 9 million during the same quarter a year ago.
Full year 2022, total revenue increased over 160% to $14 9 million compared with $5 7 million in the prior year.
Product revenue from the sale of our integrated circuits and millimeter wave antenna solutions in the fourth quarter with $3 8 million compared with $3 1 million from the prior quarter and $1 $9 million in the fourth quarter of 2021.
For the full year 2022 product revenue was $14 2 million compared with $4 $9 million in the prior year.
The strong year over year growth of both fourth quarter and full year 2022 product revenue was primarily attributable to increased demand and shipments of our millimeter wave antenna products solutions and a full year of revenue contribution from our memory products.
Royalty and other revenue comprised of nonrecurring engineering services and royalty revenues from licenses of our memory technology and was zero point $1 million in the fourth quarter and zero point $7 million for the full year 2022.
GAAP gross margin was 44, 2% in the fourth quarter compared with 39, 3% in the prior quarter and 34% in the year ago quarter.
The full year 2022, GAAP gross margin was 40% compared with 42, 4% in the prior year.
On a non-GAAP basis, excluding amortization of acquired intangible assets gross margin for the fourth quarter was 53, 4% compared with 52% in the prior quarter and 34% in the fourth quarter of 2021.
The sequential and year over year improvements in gross margin for the fourth quarter was primarily the result of increased shipments of the Companys memory IC products.
As a reminder, the fourth quarter of 2021 included only two weeks of revenue contribution from our memory products. Following the closing of the business combination with most of the zinc, whereas the fourth quarter of 2022 reflected a full quarter of contribution from memory products.
For the full year 'twenty 2022, non-GAAP gross margin was 49, 7%.
non-GAAP product gross margin expanded to 40 to 52, 6% in the fourth quarter compared with 46, 3% in the prior quarter and 31, 4% in the fourth quarter of 2021.
For the full year of 2022, non-GAAP product gross margin expanded to 47, 3% from 33, 3% in the prior year.
The improvements in product gross margins for the fourth quarter and for full year 2022 was primarily due to the revenue contribution the memory IC products as well as increased shipments of our millimeter wave solutions.
As reflected by our fourth quarter and full year results.
We made considerable progress on driving expanded gross margin in 2022 for 2020. Three we continued to target corporate non-GAAP gross margin of approximately 50% through a combination of anticipated revenue growth and benefits from increased scale and reduce production costs on a millimeter millimeter wave antenna product solutions as well as the ongoing.
Contribution from sales of our higher margin memory IC products.
GAAP operating expenses for the fourth quarter of 2022 was $16 2 million.
Which included a $9 $9 million noncash charge for the impairment of goodwill.
This compared with $5 $3 million in the prior quarter, which included a $2 $6 million reduction associated with the gain related to a license to that asset sale and $5 $3 million in the fourth quarter of 2021 the.
The $9 $9 million noncash charge for the impairment of goodwill in the fourth quarter of 2022 was determined by performing an impairment test.
Of which are key factors the price of the Companys common stock and resultant market capitalization for.
For the full year 2022, GAAP operating expenses were $38 3 million compared with $18 $5 million in the prior year.
Totally operating expenses for the fourth quarter of 2022 on a non-GAAP basis, which excludes stock based compensation amortization of reported intangible assets and the aforementioned goodwill impairment charge were $4 8 million compared.
Compared with $3 $7 million in the prior quarter and $3 $7 million in the same quarter a year ago.
Full year 2022 operating expenses on a non-GAAP basis were $22 million compared with $12 3 million in the prior year.
In February 2023, we announced that we had implemented cost reduction initiatives to reduce operating losses and streamline operations as we further emphasized shorter term market opportunities.
We expect to decrease our operating expenses by approximately $5 million on an annualized basis, primarily from lower head count and targeted reductions in expenses for certain longer term research and development projects to date. These initiatives remain on track and we have begun to realize the cost reduction benefits.
GAAP net loss for the fourth quarter of 2022 was $14 $6 million or a loss of 71 per share compared with a net loss of $4 million or <unk> 20 per share in the prior quarter and compared with net income of $2 5 million or 28 cents per diluted share in the same quarter a year ago, the full year of 2020.
Two GAAP net loss was $32 4 million or a loss of $1 61 per share compared with a net loss of $10 $9 million or $1.86 per share in 2021.
On a non-GAAP basis net loss for the fourth quarter of 2022 was $2 8 million or a loss of <unk> 13 per share.
Which excluded stock based compensation amortization of acquired intangibles the change in fair value of warrant liability and the goodwill impairment charge.
This compared with a non-GAAP net loss of $2 million or <unk> 10 cents per share in the prior quarter and a net loss of $3 $9 million or a loss per share of 51 cents in the same quarter a year ago.
The full year 2022, non-GAAP net loss was $14 7 million or a loss of 73 per share compared with a net loss of $12 $8 million or $2 19 per share in the prior year.
The weighted average number of basic and diluted shares outstanding for purposes of calculating both GAAP and non-GAAP EPS for the fourth quarter of 2022 was $20 5 million shares, which excludes $1 8 million shares of our common stock and exchangeable shares that are escrow pursuant to the terms of an escrow agreement related to the December 2021 business.
The nation.
And is subject to earn out based on achievement of certain stock price targets.
Adjusted EBIDTA, which we define as GAAP net income or losses reported excluding stock based compensation amortization of reported intangibles change in fair value of warrant liability goodwill impairment charges interest expense depreciation and amortization and the provision for income taxes was negative $2 $5 million in the fourth quarter.
<unk> of $20 22, compared with negative $1 $8 million in the prior quarter and negative $2 $8 million in the prior year period.
For the full year 2022, adjusted EBITDA was negative $13 7 million compared with negative $8 $8 million in the prior year.
From a balance sheet perspective during the fourth quarter of 2022, we collected approximately $1 million of refundable Canadian tax credits.
In addition to date since September 30th 22022, we have collected approximately $2 $5 million from our lead customer.
Approximately $1 $5 million, representing a accounts receivable at September 30 of 2022, and the additional approximately one $1 million related to shipments in September 2022 for which the company had deferred revenue recognition.
The company expects to recognize the $1 million of revenue related to these shipments in the quarter ending March 31, 2023 as of today. The company has no past due amounts from this customer at.
At December 31, 2022, we had 23 million 376466 shares of common stock exchangeable shares outstanding.
Mt.
Includes the $1 8 million shares subject to escrow as noted previously.
Turning to our business outlook, we've entered the new year with a healthy order backlog from customers and a robust pipeline of new engagement opportunities, which we believe positions us for continued growth in 2023.
Specific to the first quarter of 2023, the company expects total net revenue to be in the range of $4 7 million to $5 million.
Which at the midpoint would represent sequential growth of approximately 25% and year over year growth more than 40%.
This concludes our prepared remarks, we will now open the call to questions. Operator, please initiate the Q&A session.
Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing.
The Star Keys, one moment, please while we poll for questions.
Our first question comes from David Williams with Benchmark Company. Please proceed.
Hey, good afternoon, gentlemen, and congrats on the progress it sounds like there is a lot of really exciting opportunities and it's good to.
See you guys capitalizing on that.
Thanks, Thanks, Dave.
Yes, so maybe Ron first to you just if you could.
Talk a little bit about what youre hearing from customers and you gave some good commentary about your your travels at mobile World Congress and with Americas. Just can you elaborate a little bit just kind of what youre hearing what youre customers are excited about and kind of how you think the market is developing overall just kind of based on your discussions with the industry.
Well to be quite Frank I mean, I would say the most exciting progress right now is on this on the on the fixed wireless market and 60 gig space.
And immune to that and I think I was.
We were a bit ambiguous in the conversation about engaging with wireless Isps for example, but now we've actually confirmed three separate meetings, where they are coming to our headquarters to sit down with our engineers and we're going to map out roadmaps together. So we really believe that we're going to become the dominant if not all.
Already the dominant players in that marketplace.
And you know people traveling here just kind of prove that to me and it's and I think.
We've got a lot of education to do in terms of making sure that the whiskey understand that.
The real benefits and frankly, the real benefit Dave is the bandwidth right, it's just really coming down to bandwidth.
And you know people theres kind of past.
I guess.
Almost expectations about millimeter wave with regards to rain and so on and I think what people are seeing note. It really really works. So that was the big takeaway for us over the last few weeks I think for five <unk> millimeter wave, but like it's kind of as I've been predicting over the last year or so which is okay. So 2022 for sure was.
Major major year for fixed wireless with the carriers, let's face it but it was really mostly in C band.
But let's face it over so so two things came out of that for me one is well, there's a really a demand for good Internet service.
So I mean I think.
Two two plus million at customer ads that's clear.
But the other is that I think with the carriers again, there their revenue per bit as power greater on mobile and we just see this broad shift.
Happening later this year and into 2024, two millimeter wave as just part of that overall solution for their for their network right.
And really as a function of growth and growth in demand. So probably by two big takeaways were in the unlicensed wisp market really I would say you know our goal. This year is to absolutely be the dominant player in that market I think engaging directly with those wireless Isps face to face to share our respective roadmaps as is.
Critical in that regard and on the on the carrier front really.
That shift over fixed wireless is clearly an important opportunity for them. The shift we see that shift over to millimeter wave later this year and into 2024.
Okay.
Alright.
He was on mute there Mike.
So what I thought I lost you sorry about that.
No no I was talking away and didn't want to cloud in the background. So.
There was there was a formal vote.
At the I T I Tripoli to actually study the use of six including 60 gigahertz in the next generation of Wi Fi. So it's by no means like said, but.
There is now a study group that's really formally looking at how that people can make that happen. So I would say theres two driving applications.
Again from a 100000 foot level what application is.
You know really the I guess historically 60 gig has been a technology that stays within rooms, a real problem for Wi Fi is an apartment complexes overlapping networks. I mean, you can literally have 100 overlapping networks, so what better way to solve that problem them with the technology that actually stays in room. So.
That's one.
One benefit the other is just <unk> I mean, we are just demands a lot of bandwidth, but not just bandwidth uninterrupted bandwidth and again this whole concept of interference.
It's really coming into play certainly in the fixed wireless market, but also certainly in the VR market and that is just again this concept of overlapping networks causes interference.
Of course, the other benefit of.
Millimeter wave technology, certainly what we do is beam, forming and narrow beams that really again give you a much more secure link so peripheral for applications such as VR.
Yeah.
Take up too much time here I just had a couple of other quick ones.
Jim maybe to you real quick on the cash burn.
Just you had some collections this quarter it sounds like you've got some nice cost savings coming in is that kind of run that through the model.
Got quite nicely in terms of that profitability or or reaching neutral or breakeven. How do you think about the momentum in terms of those cost reductions and how that plays out this year and then as we kind of think about what level of our opex should be kind of a floor for this year can you kind of give us a level set there to help out on the modeling side.
Yeah, you know, obviously on the cash burn where yeah.
You know in the fourth quarter collected the tax tax credits you know close to you know close to financing.
<unk> had an initial collection from that lead customer, albeit the majority of the collections have come here in the on.
In the first quarter, which you know.
Greatly helps our cash position we made them.
You know really kind of started with reductions in the fourth quarter on the expense wise fourth quarter of 2022 because.
Because we do use a number of consultants obviously to provide.
Flexibility and projects et cetera, and we started.
No kind of weaning back to us we did eliminate some employee positions.
Kind of mid February .
A little time with severance payments to get the benefits benefits of that.
We're obviously looking to drive the cash burn much lower than it was in the.
In 2022 to a combination of those expense reductions.
Revenue growth.
<unk> margin on the particularly on the millimeter wave.
<unk>.
And also looking at some and I'll reach and a re transactions and are re license transactions.
You know, where we can kind of monetize use of our technology and.
Ideally develop new product customers out of that.
From a kind of non talking about non-GAAP opex on a you know on a quarterly basis, we have some kind of swings related to you know.
When he any tape out related activity, but we're looking at hopefully keep that in a kind of for a $4 $7 million per quarter range.
Okay.
Very helpful.
And then just on the gross margin it was up nicely on a sequential basis I'm. Just wondering was that driven more by the just the revenue and the scale there or is there anything structural there that should be stickier.
You know the gross the gross margin was really driven by the memory products in the for.
For the fourth quarter.
And the year.
You don't want to say on the.
On the quarter memory was over 50% of the revenue.
Which was obviously a driver of the.
<unk>.
As well as on the on your memory was over 50% so that was a big big mover.
On the millimeter wave on the antenna product solutions you know, we just started shipping those kind of second half of 2021.
Obviously, you started to get into some volume in 2022.
Yeah, just it takes kind of more shipping more volume to get our efficiencies we bought some equipment.
Et cetera to kind of improve our processes constantly cutting test times.
Around the around the product so that's kind of a key focus point for 2022.
Okay Fantastic gentlemen, thanks, so much for the help and best of luck on the quarter.
Thank you David I appreciate it.
Hum.
And the next question is coming from Kevin Liu with K, Liu <unk> Company Kevin. Please proceed.
Hey, good afternoon, guys and congrats on getting back on track here with your large customer.
Great. Thanks, Kevin.
Wanted to ask you know now that they are kind of back on track in terms of payments and collections I'm curious on the outlook for growth with them as well as the other large customers.
Would you expect them to contribute meaningfully at the start of the girl or is that something that takes time to ramp back up in terms of that relationship.
I'll go first or you want to go ahead Ron.
Go ahead Jim.
Yeah I'll go first and then he can provide some color in.
In my model I basically don't have them starting the turned back on so the.
The second half of the year.
Because of the uncertainty you know and I kind of put the put them all in place now.
Our plan for the year, you know whatever a month or so ago.
Obviously, we're very pleased to have the of the payments in them.
Back on track and there's a lot of a lot of discussions and there are certainly very interested in one of our new products, but.
Right now the number I gave for the.
For the second quarter really doesn't Oh, I'm, sorry for the March quarter I'm already looking ahead a quarter.
Does not include anything from them. So I'm looking at it more tilted towards the second half and certainly it will be quite.
Quite pleased if they can start ordering sooner, but you know.
That was our position based on what we know at this time.
Thanks, that's helpful.
Jim You mentioned there was kind of.
North of 50% of our revenue in Q4 coming from memory products and how do you expect that mix shift to evolve kind of moving throughout 'twenty three here.
More specifically should we expect a pretty steady improvement in the gross margin here or are there going to be some puts and takes depending on.
The ebbs and flows on memory as well as kind of the timing of new customer ramp ups on the millimeter wave side.
Sure. So a couple of points as I said on the call, we're still kind of targeting a non-GAAP gross margin in the in.
In the 50% range.
And right now when you look back at 2020, 'twenty, two we had $14 2 million in product revenue.
Just under 700 K or so.
Royalty and all the others.
So kind of looking at on the product side, because obviously you're in a REIT transactions are.
Hard to predict we know we will continue to collect the.
The amount of 500, K core 500, K royalties from my memory licensees that keeps kind of rolling in to one day it doesn't.
Dan I'll read deals are always can can improve should or should be a big improvement to margin. If there's a license component et cetera.
But to your question I think the first quarter.
Hum.
We will start to see a shift towards them.
A higher higher percentage of millimeter wave.
Particularly with the revenue recognition from that customer in our other business.
Possibly there'll be about even but I think starting with the second quarter, we expect millimeter wave to take.
To be a larger for a larger percentage of the.
Quarterly revenue.
Understood.
Maybe this is for Ron but just you talked about a number of opportunities here, whether it's with the leading with maybe the carrier agg opportunity towards here.
What do you think is kind of the most significant potential revenue contributor over the course of fiscal 'twenty three here.
If you had to kind of rank some of these applications that are coming online.
Oh definitely.
The wireless the wireless Isp's I mean.
It's just basically.
Can I say, Kevin I mean that market is.
Is vibrant and shipping and it's starting to.
Really.
Every every month shipping more and more millimeter wave and getting more recognition. So our focus frankly is on that market in terms of and when we talk about short term ROI.
That's where we see the real growth for 2023, you know on the <unk> side of things, we've got a very very strong product.
We've got partnerships.
But you know the market is I would say, it's just less certain in terms of predictability. So we're really predicting very little revenue from five <unk> in 2023, because you.
From a from a carrier perspective.
We're just we haven't seen that transition yet, whereas in the wireless ISP market, we're really starting to see that heavy transition. So I think to answer your question for 2023, the wireless <unk> piece is going to be a major source of revenue for us.
Understood. That's helpful. And then last one for me just in terms of the $5 million in annualized cost reductions you guys talked about.
I wanted to clarify Q4 expenses already looked like they were coming down sequentially from Q3. So was any of this 5 million cost savings.
Already starting to be realized in the fourth quarter or all of these kind of incremental to where we thought you exit the year.
And headed into this year.
There was some benefit in the fourth quarter I think as I mentioned in responding the David.
On the millimeter wave side.
Traditionally been using consultants to provide flexibility.
Because obviously they are you know when the project is done or you can turn them on turn them off easier than having them.
Fulltime equivalent employees.
So we had begun some of those reductions in kind of tightening the belt in the fourth quarter.
But we really continue to come into the first and then made some.
Employee reductions kind of in February but there was some.
Some contribution I expect that.
Obviously, the you know the first quarter.
We will have some.
Should be kind of.
Obviously down versus fourth quarter.
Subject to the mix and timing you get some things like the audit.
Those fees hit in the first quarter.
Unemployment taxes in the U S turned back on.
Et cetera, but certainly looking to be flat to down quarter over quarter non-GAAP basis.
Alright, the culture for attending I really appreciate you taking the questions and good luck here in 'twenty three.
Thanks, a lot Kevin thank.
Thank you Kevin.
We have reached the end of the question and answer session and I will now turn the call over to management for closing remarks.
I think that's about it for today.
[laughter]. Thank you everyone.
Can you share the closing remarks.
Thank you goodbye. Thank you bye bye.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.