Q4 2024 Arteris Inc Earnings Call
Good afternoon, everyone, and welcome to the Arteries fourth quarter and full year 2024 earnings call. Please note this call is being recorded and simultaneously webcast.
Once involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated and you should not place undue reliance on forward looking statements.
Wish you all information regarding these risks uncertainties and factors that could cause results to differ appear in the press release are terrorists issued today and in the documents and reports filed Bioterrorists from time to time with the Securities and Exchange Commission.
Please note during this call we will cite certain non-GAAP measures, including non-GAAP net loss non-GAAP net loss per share and free cash flow, which are not measures prepared in accordance with U S. GAAP.
The non-GAAP measures are presented as we believe they provide investors with the means of evaluating and understanding how the company's management evaluates the company's operating performance. These.
These non-GAAP measures should not be considered in isolation from as substitutes for or superior to financial measures prepared in accordance with U S. GAAP.
A reconciliation of these non-GAAP measures to the nearest GAAP measure can be found in the press release for the quarter ended December 31 2024. In addition.
For a definition of certain of the key performance indicators used in this presentation such as annual contract value confirmed design starts active customers and remaining performance obligations. Please see the press release for the quarter ended December 31 2024.
Listeners, who do not have a copy of the press release for the quarter ended December 31, 2024 may obtain a copy by visiting the Investor Relations section of the company's website.
In addition management will be referring to the fourth.
Fourth quarter 2024 earnings presentation, which can be found in the Investor Relations section of the company's website under the events and presentations tab now I will turn the call over to Charlie.
Charlie: Thank you Erica and thanks to everyone for joining us on our call today.
Speaker Change: In the fourth quarter of 'twenty 'twenty four we achieved a record annual contract value plus royalties of $65 1 million as demand for our commercial semiconductor system IP products continues to grow.
Speaker Change: Our success during the quarter was fueled by increased adoption of AI, driven enterprise computing and automotive soc's.
Speaker Change: We also continue to generate growing momentum in other key verticals, including Microcontrollers or M. Skus.
Speaker Change: Business in the fourth quarter was driven by a mix of the addition of new customers, including several market leaders.
Speaker Change: Well as increased penetration of our current customer base, demonstrating the success of our land and expand strategic approach.
Speaker Change: For example, the largest win in the quarter came from our global top five technology company that expanded its use of the arcturus chronic portfolio complementing previous knock IP orders with the addition of Magill N CSR compiler Sophie integration automation software for their high end.
Speaker Change: AI associates for enterprise computing applications.
Speaker Change: Also a major automotive OEM.
Speaker Change: And the top five automotive semiconductor company expanded their use of our tourist products for several additional associates given the combination of superior performance power and area of efficiency as well as functional safety for their mission critical applications.
Speaker Change: Last quarter, we shared that we are strategically expanding into the microcontroller or MCU space, where designs have grown in complexity in recent years to benefit from low latency flexible power and area of fishing commercial knock Ips.
Speaker Change: We are pleased to report this strategic expansion has already started to bear fruit with infineon, the leading microcontroller manufacturer, becoming a new customer is standardizing on our terrorists Knox for automotive Mcu's.
Speaker Change: Which serves many of the worlds top automotive tier one vendors and Oems.
Speaker Change: We believe this strategic MCU win will help to accelerate our growing royalty stream.
Speaker Change: Another key customer win was giga device, where our tourists was selected by the microcontroller business unit as a result of our optimization and interconnect area and power consumption, while ensuring functional safety.
Speaker Change: We're also seeing increased adoption of our terrorists technology for triplets, particularly for high performance enterprise computing applications sophisticated autonomous driving and smart edge devices across market, leading companies midsized players and innovative startups.
Speaker Change: These customers are increasingly pursuing multi di strategy to expand compute power with our terrorists as the core interconnect IP for each triplet due to our technologies superior power performance and area or PPA.
Speaker Change: One such example was 10 started which expanded the deployment of our terrorists Nox for their next generation of Chip led based AI solutions for high performance energy efficient risk five computing for AI and HBC Datacenters.
Speaker Change: Similarly mentor deployed our tariffs for their edge IP chipboard to ensure better performance in area of efficiency for AI and Iot computing.
Speaker Change: As we look back on 2024, we witnessed accelerating industry demand for terrorist ethnology, which we believe was fueled by increased penetration of AI into not only high end data centers and autonomous driving but a wide range of new products, including edge devices.
Speaker Change: Complexity has and we believe we will continue to impact high end compute and traditional low end technologies, including Mcu's driving demand for efficiency that is enabled by a terrorist network on chip technology.
Speaker Change: This has resulted in additional 14 new customers.
Speaker Change: That increase wallet share luxurious products and customers ranging from top five technology companies down to new innovative startups without technology now being part of nearly 850 designs to date.
Speaker Change: Last year. We also saw increased adoption of the physically aware flex knock five which leverages advanced node and placement information to enable up to five X faster physical coverage, while supporting best in class PPA.
Speaker Change: We are happy to highlight that in the fourth quarter over 75% of <unk>.
Speaker Change: <unk> interconnect IP customers chose this more advanced version, which was introduced just a year and a half ago.
Speaker Change: Also noteworthy last year's addition of tiring and expanding mesh technology in flex not non core product lines, along with RMB nine support helps to advance our terrorists as the right partner to support the most innovative chip designs.
Speaker Change: Moreover, I'm very excited to announce today, our flex Gen smart knock IP.
Speaker Change: Which has the potential to revolutionize semiconductor designs by delivering up to <unk> engineering productivity and.
Speaker Change: And lowering power consumption and improving overall PPA.
Flagship builds upon the silicon proven and physically aware flex knock five IP to automate the creation of high performance network on chip lock designs.
Speaker Change: Supported by AI, driven automation flex Gen reduces manual iteration by over 90%, providing expert level knocked apologies in hours or days instead of weeks as demonstrated by green chip on the Adas associates as well as multiple other designs.
<unk> is now ready for production deployment and has been delivered for evaluations to over 10 companies some of which have been working with this technology for more than six months.
Speaker Change: So next Gen is the culmination of years of groundbreaking innovation and multiple patents with a goal of boosting productivity, while improving quality of results to overcome extreme design challenges.
Speaker Change: Semiconductor and system companies face when creating today's chips or chipsets, which often contain five to 20 docks each.
Speaker Change: We expect <unk> to have a positive impact on our customers and on our business going forward.
Speaker Change: Lastly, our long standing position as a neutral provider was illustrated in our continued success with arm based designs.
Speaker Change: <unk> using risk five and X 86, CPU IP architectures.
Speaker Change: To further support this expanding processor IP ecosystem last quarter, we announced a partnership with Mitch to provide a pre verified risk five reference platform to support mutual customers.
Speaker Change: The goal is to improve interoperability and shortened.
Speaker Change: LCD integration for chip designs for automotive enterprise computing and AI applications using our tariffs is there a central connectivity backbone.
Speaker Change: We believe that the scale and scope of our long term opportunity remains robust and is supported by our current products and strong product pipeline of new system might be technologies as well as growing our relationships with some of the largest and most advanced electronics companies in the world.
Speaker Change: Our customers continue to innovate in exciting high growth areas, such as Jeremy I autonomous driving using our terrorist technologies and global support.
Speaker Change: With that I'll turn it over to Nick to discuss our financial results in more detail.
Nick: Thank you Charlie and good afternoon, everyone.
Speaker Change: As I'll review, our first quarter results today. Please note I'll be referring to GAAP as well as non-GAAP metrics.
Nick: Installation of GAAP to non-GAAP is.
Speaker Change: <unk> is included in today's earnings release, which is available on our website.
Speaker Change: Also as a reminder, I'll be referring to <unk> 2024 earnings presentation, which can be found in the Investor Relations section of the Companys website under the events and presentations tab.
Speaker Change: Turning to slide five of the presentation total revenue for the fourth quarter was $15 $5 million up 24% year over year and above the midpoint of our guidance range.
Speaker Change: At the end of the fourth quarter annual contract value or ICD, plus royalties was $65 $1 million slightly above the midpoint of our guidance range.
Speaker Change: And a record high for the company.
Speaker Change: Remaining performance obligations or <unk> at the end of the fourth quarter were $88 $4 million.
Speaker Change: Presenting 22% year over year increase.
Speaker Change: And going to the highest level, we have ever reported.
Speaker Change: non-GAAP gross profit for the quarter was $14 2 million, representing a gross margin of 91%.
Speaker Change: Gross profit for the quarter was $13 9 million, representing a gross margin of 90%.
Speaker Change: For the full year non-GAAP gross profit was $52 7 million, representing a gross margin of 91%.
Gross profit was $51 $8 million, representing a gross margin of 90%.
Speaker Change: Now moving to slide six.
Speaker Change: non-GAAP operating expense in the quarter was $16 $9 million flat sequentially and 91% year over year.
Speaker Change: This reflects the team's continued focus on prudent management of our operating sites.
Speaker Change: Total GAAP operating expenses for the fourth quarter was $21 million, representing 4% year over year increase.
Speaker Change: For the full year non-GAAP operating expense was $6 to $7 6 million a decline of 2% from prior year.
Speaker Change: Total GAAP operating expenses of $83 $4 million slight declines in prior year.
Speaker Change: As we look to hedge we plan to continue to limit spending to strategically critical areas, while investing in profitable revenue growth.
Speaker Change: non-GAAP operating loss in the quarter was $2 $8 million, which came in above the top end of our guidance range.
Speaker Change: This represents a $2 $7 million improvement compared to a loss of $5 5 million in the prior year period.
Speaker Change: And as airports $6 million improvement sequentially.
Speaker Change: GAAP operating loss for the fourth quarter was $7 $1 million compared to a loss of $92 million in the prior year period.
Speaker Change: One $9 billion and with that filter.
Speaker Change: So the whole fiscal year non-GAAP operating loss was $14 8 million.
Speaker Change: Representing a $5 million compared to the prior year.
GAAP operating loss for the fourth quarter was $31 $6 million, representing an improvement of $3 $5 million from the prior year.
non-GAAP net loss in the quarter was $3 $9 million or diluted net loss per share of 10 sites based on approximately 42 million weighted average diluted shares outstanding.
Speaker Change: GAAP net loss for the quarter was $8 $2 million or diluted net loss per share of <unk>.
Speaker Change: For the full fiscal year non-GAAP net loss was $16 $9 million or diluted net loss per share of <unk> 43 cents based on approximately $38 9 million weighted average diluted shares outstanding.
Speaker Change: Net loss for the year was $33 $6 million or diluted net loss per share of <unk> 86 cents.
Speaker Change: Moving to slide seven and turning to the balance sheet and cash flow.
Speaker Change: We ended the quarter with Vista $2 $3 million in cash cash equivalents and investments and we have no financial debt.
Speaker Change: Free cash flow, which includes capital expenditure was negative $2 $7 million in the fourth quarter and negative 1.0 million the full year.
Speaker Change: This was below our guidance due to short term working capital timing changes at the end of the year.
Speaker Change: With some customer payments that were forecasted for the fourth quarter being received shortly after the fourth quarter claims.
Speaker Change: This along with strong order growth resulted in an increase in alright, thanks receivable balance of $11 $9 million from the prior quarter end.
Speaker Change: I would now like to turn to our outlook for the first quarter and the full year and refer now to slide eight.
Speaker Change: For the first quarter of 2025, we expect ACB, plus royalties of $65 $5 billion to $67 $5 million.
Speaker Change: Revenue of $15 7 million to $16 $1 million.
Speaker Change: With non-GAAP operating loss of $4 million to $3 million.
Speaker Change: non-GAAP free cash flow of negative $2 million to positive achievement of $1.
Speaker Change: For full year 2025, our guidance is as follows.
Speaker Change: ACB plus royalties to exit Chinese Gen eight five.
Speaker Change: $73 million to $77 million.
Speaker Change: Revenue of 66.0 million to.
Speaker Change: $70 million.
Speaker Change: non-GAAP operating loss of between $12 5 million to $8 $5 million.
Speaker Change: And non-GAAP free cash flow of positive $1 million.
Speaker Change: <unk> posted a $7 million.
Speaker Change: We are very encouraged by the strong deal flow exiting the year at an effective cost management that resulted in better than expected performance and non-GAAP operating income in 2024.
Speaker Change: And this positions us for further improvements in our key financial metrics in 2025.
Speaker Change: With that I will turn the operator.
Speaker Change: Operator.
Speaker Change: Thank you.
Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: Should you have a question. Please press star followed by the number one on your Touchtone phone you will hear a prompt that your hand has been raised.
Speaker Change: Should you wish to decline from the polling process. Please press star followed by the number too.
Speaker Change: If you are using a speaker phone please make sure to lift your handset before pressing any case.
Your first question comes from the line of Gus Richard from Northland. Please go ahead.
Gus Richard: Yes, thanks for taking my questions I guess, Nick first for you.
Speaker Change: By my calculation your bookings were over $30 million in the quarter.
Gus Richard: And that would kind of help explain the increase in deferred revenue.
Gus Richard: The balance in accounts receivable and mind the right Zip code.
Gus Richard: Hi, Gus.
Speaker Change: Welcome to Kohl's that speech again so.
Gus Richard: So as you know we don't actually.
Gus Richard: Specific to talk about bookings don't want have a.
Metrics that we publish.
Gus Richard: We have characterized the fourth quarter as a a strong deal flow quarter fourth quarter is always our strongest deals side quarter of the year.
Gus Richard: And this was no exception.
Gus Richard: Okay.
Charlie: And Charlie you just could you talk a little bit more about flex flex Gen.
Charlie: And attending X increase in productivity is a lot is that.
Charlie: Placement router or switch.
Charlie: Okay.
Charlie: Doing the Nox and just can you talk a little bit more about how the product works and how it's different from prior versions.
Speaker Change: You still there I wonder what I wonder about the Charlie might be on mute.
Charlie: Sure.
Charlie: Let me go he got it.
Charlie: Yes.
Charlie: Alright, I apologize I will go mute yes.
Charlie: So but.
Jen: Thanks, Jen is based on Flex night five so you have all of the manual editing capability that you had before.
Jen: But looks like shed does is you basically beat it.
Jen: Productivity map at least of all the connections locations of all the IP block exports in our floor plan.
Jen: It gives you.
Jen: Basically a knock knocked apology in minutes.
Jen: Two minutes, where Suez days.
Jen: And this has been validated by a large number of benchmarks.
Jen:
Jen: The productivity increase is huge but its not enough. So we have also been able to achieve.
Jen: Superior wireless so.
Jen: Sometimes depending on the benchmark it can be from a relatively modest for something like a small microcontroller all the way too.
Jen: 230%.
Jen: For up to 30% for very complex largest so fees.
Jen: And that gives you improvements in latency and gives you improvements in power. So we think that.
Jen: Beyond the three years of work that we have put into this is is generating some very good results and.
Jen: As we had in the script, we've basically shipped as to about 10 companies and I think three.
Jen: Three more in the last month and a half as well so I think we're up to 13 or so.
Jen: The take up of the product has been very strong.
Jen: And then the last one for me if I recall the uplift on this product is about a 3% increase in ASP is that right.
Jen: That's right.
Speaker Change: Okay, Let me jump back in the Cumulus somebody else to ask questions.
Speaker Change: Your next question comes from the line of Kevin Garrigan from Rosenblatt Securities. Please go ahead.
Speaker Change: Yeah, Hey, Charlene, Nick Congrats on the solid results and solid 2024.
Speaker Change: Hey, Charlie just kind of going off of <unk> last question can you just kind of talk about ASP trends for project. I think previously you were looking to hit kind of a $1 million in 2026, So you know where.
Speaker Change: Where did they kind of finished out for 2024 and is that 1 million asp's still kind of on track.
Speaker Change: Yes.
Speaker Change: It is.
Speaker Change: But.
Speaker Change: You asked a good question on the third quarter earnings call is.
Speaker Change: We've we've announced that we're going to enter the microcontroller business.
Speaker Change: And we've been able to demonstrate success with two customers infineon.
Speaker Change: And.
Speaker Change: Giga.
Speaker Change: And the you asked a good question is what's the ASP on the Microcontrollers and the answer is that while we're going after entire product lines in microcontrollers on an individual basis. The ASP there is going to be lower because those.
Speaker Change: Do not really need flex gen.
Speaker Change: They may or may not need physical awareness and the interconnects, while getting much more complex it simpler but for the complex <unk>, we're definitely on track for a $1 million.
Speaker Change: Asps on the average and we know this because we're getting $1 million per project deals now.
Speaker Change: Not necessarily the average and if you were to buy everything from us right now.
Speaker Change: We'll be looking at.
Speaker Change: And it.
Speaker Change: Kind of a reasonable industry described.
Speaker Change: $1 5 billion, if you were to buy everything from us So as we deliver these new products and as the.
Speaker Change: As the amount of system might be that's being used increases for project, where we are on track for that one of the one $6 million.
Speaker Change: I'm, sorry, one $1 million ASP.
Speaker Change: But the caveat is that.
Speaker Change: You have to exclude the microcontrollers.
Speaker Change: Okay got it that makes sense so that actually leads me into into my next question then.
Speaker Change: You Youre looking at complex designs in the MCU market, but maybe not as complex as you know those in an enterprise computing, our AI machine learning. So now that you kind of have infineon and gig under the belt is the time between design starts production is it similar to your typical average or is it kind of maybe.
Speaker Change: Accelerated because theyre not they may not need.
Speaker Change: As much.
Speaker Change: So.
Speaker Change: Our target is to essentially establish relationships with a large microcontroller vendors and they typically build.
Speaker Change:
Speaker Change: <unk> of Microcontrollers every three years.
Speaker Change: So from that perspective.
Speaker Change: The design start windows are longer however, once they start designing a generation of microcontrollers. They may designed fix.
To 10, maybe even more maybe up to 15.
Speaker Change: Microcontrollers for generation and so.
Speaker Change: The time between those design starts is actually very very short.
Speaker Change: So so what you have to do is you have to hit the tie where the customer is doing a new generation of Microcontrollers and then the design start window gets gets gets the relatively short well that particular generation of Microcontrollers.
Speaker Change: Is it pretty different dynamic than you see in the automotive or AI Soc space.
Speaker Change: Got it got it okay that makes sense I appreciate that color.
Speaker Change: Okay. That's all for me, thanks, guys and congrats on the results.
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen, just a reminder, if you would like to ask a question. Please press star followed by the number one on your Touchtone phone. If you would like to withdraw from the polling process. Please press star followed by the number two if you are using a speaker phone. Please make sure you lift your handset before pressing any keys.
Speaker Change: Your next question comes from the line of Ethan.
Speaker Change: <unk> from TD Cowen. Please go ahead.
Ethan: Yeah, Hi, guys. Congrats on the great results I wanted to kind of dig into.
Speaker Change: Licensing and royalty results.
Ethan:
Ethan: Considering the broader macro backdrop and particularly.
Ethan: What's occurring in the automotive space, So maybe to get some expanded thoughts there would be it would be helpful.
Speaker Change: Hey, David.
Speaker Change: Yes, Yes, you take this yes.
Speaker Change: The royalty King.
Speaker Change: Yeah, so yeah. So the.
Speaker Change: Observers among you will we'll have spotted that the the royalties on the other line.
Speaker Change: It was slightly lower year over year.
Speaker Change: The there's two two wheel causes for that one is that as you'll recall from previous calls we had some one time benefits, particularly around royalty audits set by the substantial in 2020.
Speaker Change: Three.
Speaker Change: And those were lighter in 2024, so we tend to look at variable royalties as a as a better.
Speaker Change: The trend guide.
Speaker Change: Variable royalties, which is the <unk>.
Speaker Change: Still the bulk of that total income line.
Speaker Change: We're 20% up year over year.
Speaker Change: Remember also that mobile I had a a sort of fairly major.
Speaker Change: Inventory correction.
Speaker Change: Beginning of 2024 as I'm sure you'll remember.
Speaker Change: And so if you exclude mobilized from that trend, which is quite a big royalty contributor.
Speaker Change: The overall variable royalty growth year over year it was.
Speaker Change: In excess of 30%.
Speaker Change: So we are seeing some.
Speaker Change: If you look at the concentration of royalties.
In 2020 full versus 2023.
Speaker Change: The proportion of total variable royalties came from automotive was of course, a little lower.
Speaker Change: And then it was in previous years.
Speaker Change: Because of the Bud light impact.
Speaker Change: So, but it's still around half of the total.
Speaker Change: Okay got it got it understood and then can you kind of just kind of piggyback on a prior question about pricing and the incorporation I guess.
Speaker Change: New products in the foray into MCU use.
Speaker Change: With flex spot flex on five carrying a higher ASP.
Speaker Change: Hmm, which is great to see but how should we think about.
Speaker Change: Kind of the profitability trajectory for this year and and.
Speaker Change: Perhaps the.
Speaker Change: The free cash flow.
Speaker Change: Positive target.
Speaker Change: This year.
Speaker Change: Got it exiting 2025, how are things going there.
Speaker Change: So let me take that one real quick so the.
Speaker Change: Just firstly on free cash flow.
Speaker Change: We're right at that point, where we're flipping from from negative to positive so are we.
Speaker Change: We will.
Speaker Change: We mentioned in the in the coal we had a small number of customers who just missed the cut off at the end of the year, a relatively minor impact, but tend to plus sign into a slightly minus sign very small either side. The reason, we're so confident about the full year is is that we're growing.
Speaker Change: The top line as you know in the high teens, low, 20% and that's basic WAF cash inflow number.
Speaker Change: Constraining, the opex and cost of revenue growth, which is essentially a cost base.
Speaker Change: At half of that so we are we naturally grow cash flow just automatically by our control of that metric in the opex being sent to the topline growth and the great top lines growing at high teens low 20%.
Speaker Change: Now one additional piece of color for you.
Speaker Change: On that.
Speaker Change: The.
Speaker Change: Uh huh.
Speaker Change: The free cash flow is always weighted towards the second half will generally speaking last quarter alone.
Speaker Change: The fourth quarter was was a bit of an anomaly because of this the small working capital sure.
Speaker Change: Shift.
Speaker Change: But generally speaking we received most of our cash inflow in the in.
Speaker Change: In the.
Speaker Change: Second half.
Speaker Change: And we have some <unk>.
Speaker Change: He is going to be substantial.
Speaker Change: So the non linear cash outflows, particularly around.
Speaker Change: Management bonuses for example, and and around the <unk>.
Speaker Change: The high commissions on the annual accelerators all happened in the first quarter. So the.
Speaker Change: There's a little bit of seasonality around that.
Speaker Change: <unk>.
Speaker Change: As most of the cash.
Speaker Change: <unk> into the second half and that's traditionally what we've seen year over year.
Phil: Does that give you good thank you Phil.
Speaker Change: Yes. Thank you so much.
Youre welcome.
Speaker Change: Your last question comes from the line of Gus Richard from Northland. Please go ahead.
Gus Richard: Yes, thanks for letting me ask more questions I appreciate it and you know.
Speaker Change: Great Great results guys.
Speaker Change: I'll just tell you mentioned.
Gus Richard: <unk>.
Gus Richard: Architecture agnostic risk arm X 86.
Gus Richard: And I'm kind of surprised to hear you list X 86 in <unk>.
Gus Richard: Can you talk about the reasons you might be involved with that particular architecture.
Gus Richard: PC chipsets.
Gus Richard: I'm, sorry say again.
Gus Richard: PC chipsets.
Gus Richard: Okay Joe.
Gus Richard: We're in something Ctrip said designs.
Gus Richard: Got it and then.
Gus Richard: You also mentioned multiple knocks per per design.
Gus Richard: Q all of the you know the fabric or the on chip has to be.
From the same vendor or can you mix and match Nox.
Gus Richard: For example, some of the exciting fixed guys have thrown fabrics.
Absolutely that's a great question so.
Gus Richard: Our products are designed for mix and match.
Gus Richard: I would say there are some designs, where our tariffs is 100% of all the interconnects.
Gus Richard: I would say majority of them at some other.
Gus Richard: Types of interconnect in them.
Gus Richard: Either because of legacy reasons.
Gus Richard: Or or other reasons right. So for example, one common reasonably common configuration would be the RMC them in cash.
Gus Richard: Cash coherent interconnect with flex got the non coherent one <unk>.
Gus Richard: So that would be fairly common.
Gus Richard: Another one would be an internal fabric with within core or flex Knoxville. So we are designed for mix and match and this is where frequently this frequently what occurs but of course over time, we would like.
Gus Richard: There has to be.
Gus Richard: More and more 100% of all the interconnects, but but were designed for mix and match.
Gus Richard: Got it and then.
Gus Richard: The last one for me.
Gus Richard: Yeah again, you mentioned the number of triplet designs.
Gus Richard: I'm just wondering if you could talk a little bit about.
Gus Richard: <unk>.
Gus Richard: People top up tips and use triplets, how does your opportunity and change in.
Gus Richard: How does that change the competitive landscape for you all.
Gus Richard: So it makes the interconnect a lot more complex right because now you're no longer you know just in the die.
Gus Richard: But you're sending data.
Gus Richard: Back and forth between different pieces of silicon so that raises the ESP.
Gus Richard: We're also finding out that in these chip with projects.
Gus Richard: Multiple there.
Gus Richard: Multiple companies involved so that involves multiple licenses.
Gus Richard: And of course, we treat each die as a separate project so.
Gus Richard: When when there were questions about.
Gus Richard: The million dollar ASP.
Kevin Garrigan: I think Kevin asked that.
Gus Richard: The.
Gus Richard: The triplets are going and I said, the Microcontrollers may lower the ASP, but the triplets are projects will increase it.
Gus Richard: Because there's multiple.
Gus Richard: Dies and even multiple companies involved in those in those projects.
Gus Richard: So that increases the revenue opportunity for our terrorists significantly.
Gus Richard: Got it and then there's you know.
Speaker Change: Uh huh.
Gus Richard: Alphabet of standards connecting kibbutz together.
Gus Richard: Does that have.
Any.
Gus Richard: Do you write on top of those or do they write on top of you how do those different protocols impact your opportunity does it make it more again add to complexity.
Gus Richard: And again sort of if you can help explain what layer you live in and what layers those live and sort of how they play together.
Gus Richard: So.
Gus Richard: There is multiple layers, but the layer.
Gus Richard: We're involved with as a data transport layer.
Gus Richard: And so we are we basically interface.
Gus Richard: Two to physical our physical layer Ips such as those made by Synopsys.
Gus Richard: And so we're kind of in a digital hub in.
Gus Richard: In the digital domain.
Gus Richard: And we right on top of the.
Gus Richard: The physical layers, which are heavily analogs.
Gus Richard: Got it got it very good.
Gus Richard: Yes.
Gus Richard: As far as the different protocols.
Gus Richard: It's a tradeoff right. We've we try to conform to protocols that are used by our major customers.
But standards are beneficial to the industry and so we're oh and somebody said that.
Gus Richard: Good thing about standard Theres, so many to choose from.
Gus Richard: What we're trying to do we're working with.
Gus Richard: Our partners in the ecosystem.
Gus Richard: To kind of create major major standards.
Gus Richard: That the industry can rally around and lower costs.
Gus Richard: Gotcha.
Gus Richard: Got it.
Gus Richard: You see I E.
Gus Richard: It would be.
Gus Richard: CH over you see I E.
Gus Richard: Yes.
Gus Richard: Those kinds of things so it's a.
Gus Richard: It's kind of a it's kind of a tradeoff and the more standards you have the higher your costs right. Because you have to do fairly expensive developments to conform to a large variety of standards.
Tim: Got it Super helpful. Tim.
Gus Richard: Uh huh.
Gus Richard: Compounded.
Gus Richard: The Q.
Charlie: There are no further questions at this time I would like to turn the call over to Charlie <unk> for closing remarks, Sir. Please go ahead.
Charlie: Yes. Thank you for your time and interest in our tariffs I think gives us a quite.
Charlie: Quite a positive quarter and end of year and we look forward to meeting with you at the upcoming Investor conferences, we're participating in during next couple of months and we look forward to updating you on all our business progress in the quarters to come. Thank you for your support.
Speaker Change: Ladies and gentlemen. This concludes today's conference call. Thank you very much for your participation you may now disconnect.
Speaker Change: Okay.
Speaker Change: Yeah.