Peraso Inc. (NASDAQ:PRSO) Q3 2022 Earnings Conference Call November 14, 2022 5:00 PM ET
Company Participants
Jim Sullivan – Chief Financial Officer
Ron Glibbery – Chief Executive Officer
Conference Call Participants
David Williams – Benchmark
Operator
Good afternoon and welcome to Peraso 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 call is being today Monday, November 14th, 2022.
I would now like to turn the call over to Peraso’s CFO, Jim Sullivan. Please go ahead.
Jim Sullivan
Good afternoon and thank you for joining today’s conference call to discuss Peraso’s third quarter 2022 financial results. I’m Jim Sullivan, CFO of Peraso. And joining me today is Ron Glibbery, our CEO.
This afternoon we issued a press release and related Form 8-K which was filed with the Securities and Exchange Commission. The press release and Form 8-K are available on Peraso’s website at www.perasoinc.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. Peraso advises caution and reliance on forward-looking statements.
These statements include, without limitation, any projections of revenue, margins, 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 Peraso on the date hereof. These statements involve known and unknown risks, uncertainties, and other factors that may cause Peraso’s actual results to differ materially from those implied by the forward-looking statements including unexpected changes in the company’s business.
More detailed information about these risk factors and additional risk factors are set forth in Peraso’s public filings with the Securities and Exchange Commission. Peraso 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’s 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 unable to listen to the entire call at this time, a recording will be available on the Investor Relations section of Peraso’s website.
Now, I would like to turn the call over to our CEO, Ron Glibbery, for his prepared remarks. Ron?
Ron Glibbery
Thank you, Jim. Good afternoon and welcome to everyone joining us over the phone and via webcast. As outlined in today’s press release, Peraso had a solid quarter with total revenue growing at 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 ships in the quarter, overall we continue to experience strong customer demand for our mmWave solutions.
We also achieved noted sequential improvement in our gross margin, which combined with lower OpEx due to the realized gain from the technology license to Intel 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 Peraso’s mmWave 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 adds among the top six broadband providers in the United States.
In spite of increased macroeconomic uncertainty, the global adoption of mmWave has remained strong and increasingly strategic for carriers to maximize bandwidth limitations. I previously highlighted multiple leading carriers that have announced mmWave deployments including NTT DOCOMO, KDDI, SoftBank and Rakuten. Additional carriers such as NBN Australia, T-Mobile in North America as well as carriers in India and France have acknowledged initiatives to add mmWave-based solutions to their existing networks.
During the quarter, we showcased demos at Peraso’s new 5G mmWave product at both the European Microwave Week in Milan and Mobile World Congress in Las Vegas. Having personally attended MWC, I can tell you that we received significant interest in our mmWave technology from a series of existing and prospective customers and partners. Further underpinning the very strong reception and interest in our highly integrated 5G beamformer is the device’s 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 benefits including more flexible and lower-cost deployment and lower cost deployment. However, using our antenna customization resources we can also provide an operator a version of our 5G module with an antenna that’s fully optimized 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 our 5G beamformer over the coming months and currently expect to achieve production silicon in the first quarter of next year. Although Peraso has been in the business of developing and shipping mmWave solutions for more than 12 years, we historically have 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 leading-edge technologies and has demonstrated success across companies at various stages of growth including SiTime Corp, NXP Semiconductor, Micrel Semiconductor and Pivotal Technologies.
Highly applicable to Peraso is his prior experience at emerging growth companies where he has helped convert groundbreaking technology into large multimillion dollar sales pipelines. He’s also led sales efforts with responsibility for global customer bases and secured an impressive lineup of Tier-1 customers at prior companies. The addition of Mark to the management team will support our customer expansion efforts in both 5G licensed 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 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.
Today, we’re actively pursuing engagements with large series of new customers and partners. Among those are more than one Tier 1 carrier, a leading network system designer as well as a global telecom software solutions company. In addition to achieving increased market penetration with the existing products, we’re consistently thinking about working to advance our future product and technology road map. This activity includes current ongoing discussions with multiple companies on prospective NRE development projects targeting areas such as support design for a 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 financials and provide guidance for the fourth quarter.
Jim Sullivan
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 the 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 was $3.1 million, compared 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 IT 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 was $0.2 million and comprised non-recurring 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 50.2%, compared with 43% in the second quarter of 2022 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 mmWave 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. The sequential and year-over-year increases in product gross margin were also largely a function of revenue mix in the third quarter. As we progress through 2022 and 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 our mmWave modules while also realizing benefits from anticipated, ongoing sales of our higher-margin memory IC products.
GAAP operating expenses for the third quarter were $5.3 million and included, a $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 2022 on a non-GAAP basis, which excludes stock-based compensation and amortization of reported intangible assets were $3.3 million compared with $6.6 million in the prior quarter and $3.1 million in the same quarter, a year ago.
GAAP net loss for the third quarter of 2022 was $4 million or a loss of $0.20 per share compared with a net loss of $7 million or $0.36 per share in the prior quarter and a net loss of $3.8 million or a loss per share of $0.73 in the same quarter, a year ago.
On a non-GAAP basis, net loss for the third quarter of 2022 was $2 million or a loss of $0.10 per share, which exclude stock-based compensation and amortization of reported intangibles. This compared with non-GAAP net loss of $4.8 million or a loss per share of $0.23 in the prior quarter and a net loss of $2.5 million or a loss per share of $0.47 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 earnout, based on achievements of certain stock price targets.
In terms of adjusted EBITDA, which we define as GAAP net income or losses reported excluding stock-based compensation, amortization of reported intangibles, interest expense, depreciation and amortization and the provision for the income taxes. 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 backlog that extends 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.
Question-and-Answer Session
Operator
Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] And the first question today is coming from Kevin Liu [ph]. Kevin, your line is live. Please go ahead.
Q – Unidentified Analyst
Hi, good afternoon, guys. I wanted to start first with the $1.1 million in product revenue that wasn’t recognized in Q3 here. Could you talk a little bit about, why that actually wasn’t recognized even though it was shipped? And then I just wanted to clarify for Q4, it sounds like you didn’t include that in your range, but are you assuming that it does ultimately — that you are able to recognize that revenue in addition to your guidance for the quarter?
Jim Sullivan
Hi, Kevin, let me start on a LIFO basis on your question. The guidance for the quarter – for the fourth quarter does exclude that revenue recognition amount. We did keep that out of the number. So that would be potential upside when that is recognized. So that answers the first question.
The second question there was basically a collectibility issue. And given there was some extended payment terms on that sale, when we looked at the requirements of ASC 606 and then particularly with the focus right now of the macroeconomic environment et cetera, we just felt it was prudent to defer the revenue and let that settle ideally in the fourth quarter.
As 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 were some facts and circumstances around it and happening late in the quarter that we just felt it was prudent to defer that shipment.
Unidentified Analyst
Yes. Understood. And I appreciate the color there. And then just in terms of your backlog, can you just talk a little bit about whether that customer represents any significant portion of kind of the product backlog you’re carrying today? And then more so beyond that you talked about a fairly strong backlog heading into Q4, and then the first half of next year. Just wondering, how you see those revenues or how is that weighting looks currently. Does that most of that come out within the fourth quarter, or is it fairly evenly spread over the next few quarters?
Jim Sullivan
Yes. I’ll start off first and then let Ron add some color. For the fourth quarter, I will say that the customer 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, they’re 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 or early next. But if we don’t, we’re very comfortable with our guidance number and we would just kind of move it into Q1.
I would say the backlog is like I said, we have Q4 covered and we had a substantial amount of Q1. Kind of looking back to I guess time flies with weeks ago, 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 on mmWave. But since then we’ve really firmed up our backlog on the memory IC products as well. So we feel kind of very good looking ahead the next couple of quarters? Ron, did you want to chime in and clarify anything as to whether…
Ron Glibbery
Yes I think that covers it. I mean I think we should make it clear that I would this particular customer is getting a little diluted in terms of the percentage of the backlog that they represent as we move into the first half of 2023.
Unidentified Analyst
Okay. And then just wanted to touch on the hiring of Mark Lunsford, as your Chief Revenue Officer. Can you talk a little bit about any sort of changes you plan to make in terms of your go-to-market or even your sales 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?
Ron Glibbery
Well, Kevin, so yes, so Mark has been on board two weeks, so he’s still really figuring things out. But I mean I can summarize in terms of kind of the KPIs I have set out for Mark. I mean, obviously, today on our unlicensed products, we’re seeing very nice design win activity, good growth. So obviously, from Mark’s perspective, the very short-term revenue opportunity for him is to utilize — is to really target that market.
I would say that, specifically in that market, without having someone like Mark, we were pretty focused. So, really fundamentally, from Mark’s perspective on the initial KPIs, it’s really go after — several customers in that space, we haven’t really addressed yet. So that’s going to be really the first objective for Mark. And I think that we’ll start to make that public over the coming quarters for sure in terms of, who some of those customers might be.
Obviously the second — and actually, I feel it’s fortunate about this. I mean on the second leg of his strategy is 5G. Our 5G product is being very well received. I’m pretty thrilled with the feedback we’re getting in terms of again just the level of integration that we’ve achieved. But also the frequency range, I mean we cover the entire 24 to 43 gigahertz 5G bands. So, people are amazed that we can do that.
So I’m thrilled with that some markets coming in here just at the right time to go after those opportunities. And as you can see, the wireless carriers in the license span are seeing tremendous growth in fixed wireless. So I feel our timing is terrific in terms of addressing that market. So those are going to be the two primary objectives for Mark.
The other thing we’re seeing actually and I touched on this at the end of the presentation Kevin is, we’re seeing some very nice opportunities in terms of non-dilutive engineering revenue. So, just revenue in which, frankly speaking, our customers are willing to help us out in terms of our expenses. So we haven’t really kind of discussed those in details, but we expect we’d 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, it’s an area that they’re quite focused on.
And we can do it now, because we’ve got that baseline intellectual property that we can leverage into the customer base. So, almost the third leg of Mark’s strategy is to bring in some of those non-dilutive NRE deals that really help us out in terms of our cash flow. So, I would say those are the three primary objectives for Mark. At a very high level is existing unlicensed aggressively going after 5G designs and also non-dilutive financing from some of our customers.
Unidentified Analyst
From customer side, and another event, the Mobile World Congress, I just wanted to touch on the interest in the 5G beamformer product, and where you think the early opportunities for you guys will be in terms of getting into production?
Ron Glibbery
Well, so we — so what we’re fine — so just to be clear to everyone on the call, I mean our beamformer is very, very — and so, it’s 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 infrastructure side, be it base stations or small cells.
So where we’re seeing — I mean, I can tell you, I guess geographically, obviously, just respecting the confidential information, but I think you might have seen that India is actually — has provided licenses for mmWave bands particularly in the 26 gigahertz band. Brazil has made mmWave available. Obviously in America we’re working with carriers in the market. So I think geographically that’s where our first interest is coming from.
But one point I’d really like to point out Kevin is that if you take the — like the India opportunity for example, it’s really focused on 26 gigahertz. And we, of course, cover our antenna design is a bit astounding in terms of the breadth of this frequency range. But we’ll spin our modules specifically to address the India market for this opportunity. And that’s really a special capability that we have at Peraso is our ability to customize our antennas for specific markets. So really that’s the beauty of having the ability to cover these wide swath of frequencies. When we get a very specific customer, we can focus our efforts on that specific opportunity. So that really would summarize where we’re at from a 5G perspective.
Unidentified Analyst
Great. Well, good luck as you execute against these opportunities and appreciate taking my question.
Ron Glibbery
Thanks a lot, Kevin.
Jim Sullivan
Thanks Kevin.
Operator
Thank you. Your next question is coming from David Williams from Benchmark. David, your line is live. Please go ahead.
David Williams
Thanks so much for taking question, Ron. Jim, it’s good to hear from you and congrats on the continued execution here.
Jim Sullivan
Thanks Dave.
David Williams
So I guess one thing I’ve noticed more recently is just the demand strength that we’ve seen on fixed wireless access coming from the US carriers, and it’s been a very big area of growth specifically for AT&T and T-Mobile. And just curious what you’re 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 when will you guys see that revenue inflect do you think?
Ron Glibbery
Well, we — so I guess to summarize where we see in the US market in particular is like our whole business thesis is the concept of capacity problems for the carriers. And I think that we saw the rise of the mid-band offering from the carriers. But what we’re frankly seeing really in the top 20 markets in the US is it’s quickly running out. And coupled with that is we’re seeing the — as you say growth — I mean 920,000 new fixed wireless adds just in Q3 between T-Mobile and Verizon.
So we’re seeing two things happening. One, is the network capacity is getting bogged down. And two, fixed wireless is a very strong growth opportunity. So we’re right in the thick of things. I mean, we think — so we think what’s going to happen is that the carriers will start to migrate their the mid-band capability to mobile and really logically — and this is intensive environment not in a rural environment where mmWave has historically been. But right in cities is to concentrate their mmWave capacity on fixed wireless access. That’s the trend that we’re seeing now with the capacity credits that we see the carriers experiencing in the US.
So frankly speaking, I mean, we would say outside of the US, we’re really suiting to try to have some production in 2023, which is for us frankly maybe even potentially ahead of schedule. Realistically, the first half of 2024 is when we could see revenue in the US, just because frankly the lead times are 12 months to 18 months. So we would be stretching it to say like in a year from now, but we’re – but I think for the US first half of 2024 is realistic.
But we think the good news Dave is that, we’re really seeing this – again, this high demand on the carrier networks driven by frankly streaming services video apps or – what we did here at Mobile World Congress is that 70% of the network traffic now is video, and it’s increased 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 mmWave for fixed wireless – well, frankly for mobile. But what else we really see the carriers embracing fixed wireless for mmWave for fixed wireless access over the coming 18 months.
David Williams
Yeah. Thanks for the color, there. And it seems like just from an infrastructure deployment or investment CapEx investment it seems like fixed witness access would be substantially cheaper than deploying other sailor bands. Is that a good way to think about it, or am I maybe think of something different?
Ron Glibbery
Well, yeah, so I think, there’s two issues to address there. I mean, the first issue is first of all, the cost – the spectrum cost for mmWave is substantially cheaper than other bands. So right off the bat, I mean, you’re right the cost to deploy mmWave is substantially cheaper. Now, there’s an argument that says, oh, we need to put a lot more small cells or base stations to support mmWave. But again, if you’re going after fixed wireless, I would argue that, you just don’t need, because you’re not really trying to support the dynamics of a mobile environment to be really just focused on fixed wireless, those costs are quite reasonable.
So again, now you’ve got the carriers, who’ve got pretty inexpensive spectrum, a capacity crunch on their mid-band, and fixed wireless where really the support challenge is quite limited compared to mobility. I really think, the cost of deployment for the carriers for mmWave is substantially lower. And yes, I agree with you in terms of what those metrics look like.
David Williams
Okay. Fantastic. And then maybe secondly, or another question for me here is, so you’ve got some pretty good orders and made some good traction demand is good. From a capacity standpoint, what do you think the restrictions are if you saw a real inflection revenue, what are your hurdles or challenges? And can you support a 50% increase in order flow. And just kind of given the working capital requirements and your resources you have available today just anything just help me understand how big the business could be at kind of the existing footprint.
Ron Glibbery
Yes. 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 revised test boards where we go to dual site or even quad site test capability. And so that — we really have realized that test is one of our main bottlenecks and we’ve already addressed that problem actually and we’re implementing that. So we should be going to dual site test over the next quarter or so. And then into 2023, if all goes well we can get to quad site.
And the reality there is that that is the real bottleneck in terms of our — 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 in terms of the cost of that test equipment it’s come down substantially. There’s really — there’s mmWave test sockets that historically have been very, very expensive that have come down substantially in price.
And the reason is because of 5G mmWave people are — the test companies they know we need to lower our cost and sure enough the cost for the revised test equipment has come down substantially. So as a matter of fact the capital to — at least the capital for capital equipment in our test strategy has come down. And so we really expect to solve those bottlenecks over the next couple of quarters
And then broadly speaking I mean obviously as our revenues go up the cost — there will be capital requirements for that. And we expect to raise the capital necessary to meet those cash requirements. And maybe Jim can speak to that as well.
Jim Sullivan
Yes. No I think that’s correct, Ron. And certainly as we execute our business plan, generate higher revenues higher margins and narrow our operating loss, which is our plan on what we’ve been talking about there’ll also be readily solutions for working capital i.e. lines against receivables things like that that you need to a company at our size and our current scale is tough. The folks who do those want to see a smaller burn. We certainly are putting the plan in place and the burn was down this quarter — and stay tuned on that front. But I think that will be another avenue that will open up to us as well in addition to the financing front.
David Williams
Okay. Okay. Fantastic. And I haven’t had a chance to read the full report yet so forgive me if I’m wrong here, but it looks like the margins on a non-GAAP basis were up sequentially. And just, kind of, curious if there’s anything there that’s helping and how you expect that to run? Are there modules that are beginning to help lift that margin, or is it mix? What are the levers? And where can that go?
Jim Sullivan
I think as we — I’ll go first and then Ron can chime in.
Ron Glibbery
Sure.
Jim Sullivan
We want to be 50% or higher non-GAAP gross margins, recognize the gap the GAAP piece we take out we record some amortization from the intangibles from our business combination there. So our non-GAAP we pull those out.
But our target is to be 50% higher, again, at this size 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 margin anywhere from 67%, 70%. So that certainly helps.
On the module side, we’ve seen improvement in gross margins. We’re targeting — we’re push — we want to push those towards 50%. But again, at this early stage, we just started selling those about a year ago.
And it’s obviously a more complex build than just shipping chips, but we’re pleased with the progress. And as Ron kind of I think mentioned on the CapEx side, making some modest improvements to improve throughput and quad site handlers, things like that that can move them. But we want to keep the margins.
We were above 50% for the quarter. I think on the year we’re in the just over 48% or so. We are implementing some, just as, we’re seeing from suppliers and every — we’re all seeing I think in our world today for all of us price increases, we’ve got to pass on and cover those. So we feel very good about the plan to certainly in 2023, you see those move north of 50%.
Ron Glibbery
Yeah. I would — I mean, I would just echo that. I mean, we’re — the company really recognizes margin as room for improvement. So there’s really a comprehensive time and place to get it above 50% including price increases and reduction in test time and so improvement in yields. So all of those are levers Dave that we’re actively working to get those margins above 50%.
David Williams
Okay. Got it. Very good. Thanks so much for the time. I certainly appreciate it and best of luck on the quarter.
Ron Glibbery
Thanks so much Dave.
Jim Sullivan
Thank you, Dave. Appreciate your time.
Operator
Thank you. And there are no further questions in queue at this time. 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.
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