DSP Group, Inc.
Q1 2016 Earnings Call Transcript

Published: 27 Apr 2016

[Operator:]

Good day, and welcome to Q1 2016 DSP Group Earnings Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Mr. Dror Levy, CFO. Please go ahead sir.

[Dror Levy:]

Thank you. Good morning ladies and gentlemen. I’m Dror Levy, Chief Financial Officer of DSP Group. Welcome to our first quarter 2016 earnings conference call. On today’s call, we also have with us Mr. Ofer Elyakim, Chief Executive Officer. Before we begin, I’d like to remind you that during this conference call we will be making forward-looking statements about our financial projections for the second quarter of 2016, including by segment and full-year 2016, anticipated gradual improvement of the cordless business, anticipated gross margin improvement, our ability to secure additional design wins, mass production timetables, optimism about our ULE and SparkPA technologies, general and market demand for products that incorporate our technologies in the market. We assume no obligation to update these forward-looking statements. For more information about the risks and factors that could affect these forward-looking statements we made, please refer to the risk factors discussed in our 2016 Form 10-K and other SEC reports that we’ve filed. Now, I’d like to turn the call over to Ofer Elyakim, our Chief Executive Officer. Ofer, the floor is yours.

[Ofer Elyakim:]

Thank you, Dror. Good morning, everyone, and thank you for joining us today. I hope that you have the opportunity to read our press release that we distributed earlier today. I would like to begin by reviewing our results for the first quarter, commenting on the progression of our business plan, and providing context on our outlook. In a short while, Dror will provide you with detailed comments on our financial results and outlook for the second quarter of 2016. While our results for the first quarter came in at the higher-end of our guidance range, we are not completely satisfied with the company’s financial performance. The first quarter reflected two diverging developments in our business. On the positive side, we achieved record revenues from our new product initiatives, led by a key accomplishment of meaningful revenues from HDClear, as well as growing market adoption for our voice and IoT products. However, softer demand for cordless phone SoCs while expected was in excess of the secular decline trend. First quarter revenues of approximately $27.7 million were down by 27% versus the first quarter of 2016, and by 18% on a sequential basis. While software demand for cordless phone SoCs was the basis of this decline, we anticipate the gradual improvement in demand starting in the second quarter, as the inventory correction cycle comes to an end. Moreover, non-GAAP gross margin expanded by 160 basis points year-over-year to 42.6%, driven by strong momentum achieved from new products, which carry higher margins compared with cordless phone business. We expect that the growth in new products will continue to support gross margin improvement during 2016. While we’re disappointed with the first quarter non-GAAP operating loss of approximately $1.9 million, we expect to resume operating profitability in the second quarter, led by our new product performance. We remain focused on this higher margin new product initiatives. Despite the top line weakness in the first quarter, we are optimistic that we are heading in the right direction as evidenced by the record revenue contributions from new products of $12.8 million, which grew by 43% year-over-year and by 14% sequentially and accounted for a record of 46% of total revenues. We also believe that the growth rate of our new product we further accelerate this year and that the gross margins expansion of 42.6%, we believe this can further improve during the course of this year, as our product mix shift in favor of new products. We remain optimistic regarding our business outlook for the short and long-term, as new product opportunities continues to drive growth and shape DSP Group as a vibrant and innovative technology company. Now, I’d like to provide specific updates about the progress in each segments, starting with the mobile. During the quarter, we generated $3.9 million from the sale of HDClear product, which has been integrated into two flagship products from the Tier 1 mobile OEM. Based on public information and product Tier down [ph] report, our HDClear product are shipped with Samsung Gear S2 Smartwatch and Samsung’s newly launched flagship smartphone model, the Galaxy S7. Moreover, during Mobile World Congress, we announced the availability of our DBMD4 HDClear product, which features the lowest power consumption and best-in-class performance for always-on voice and for voice enhancement features like acoustic echo cancellation, MDS noise-reduction with activity sensing and more. We continue to make solid progress with a number of design engagements with leading OEMs and expect these engagements to convert the design wins during this year. We expect momentum in the mobile business to continue in the second quarter with shipments of HDClear products growing on a sequential basis. As a result, we focused – we forecast mobile revenues in the range of $4 million to $5 million in the second quarter. Moving onto the VoIP and Office segment. We continue to leverage our unique expertise in voice and signal processing, utilizing our comprehensive product portfolio and demonstrating our long-term commitment in order to build a leadership position in the professional Voice over IP domain. During the quarter, we strengthened our design pipeline with a new leading Chinese OEM that selected our DVF99 SoC platform for its IPfone lineup. We also made progress with our two Tier 1 design engagements, which are expected to reach mass production phase in the coming months. Our first quarter Voice over IP revenues were $5.1 million, representing an increase of 38% year-over-year. We expect healthy demand for our VoIP products to continue in the second quarter and anticipate new Tier 1 product launches in both the second and third quarters. We currently project second quarter revenues in the range of $6 million to $7 million. We’re optimistic about the outlook for our VoIP business and believe this segment will position for a year of solid revenue growth. And now to an update about the Home segment, which includes Home Gateways IoT, SparkPA and cordless phones. And I would start with Home Gateways. First quarter revenues of $2.7 million reflected an increase of 4% in a sequential basis, but were down by 44% year-over-year. The decline is attributable to exceptionally robust demand for DECT and CAT-iq in the first quarter of 2016 from two large telecom operators. We expect second quarter home gateway revenues to be roughly flat on a sequential basis. However, we do expect the pickup in revenues during the second-half of 2016 coinciding with new product launches. During the first quarter a major European telecom service provider selected our DECT ULE product for its new home gateway devices. The underlying market trends behind the integration of DECT into gateways includes the growing adoption of high definition voice. And many service providers are operating their infrastructures and home gateway terminals to support high definition voice, which provides us with further potential for growth opportunities. Moreover, a growing number of telecom service providers are already leveraging their DECT enable home gateway infrastructure, as a boost to offer subscribers plug and play and out of the box IoT services at a much lower cost of ownership both with service provider and the end user. Now turning to IoT. During the first quarter, solid momentum around ULE technology continues. We have engaged with a number of new prospects, including service provider and home automation vendors covering a wide range of consumer product. We’re showing enormous interest in the key attributes of DECT and ULE. This benefit includes longer range, interference-free band, and voice and video support. Our efforts are bearing fruit, as evidenced by the growing number of certified ULE devices that significantly expanded during the first quarter and now includes nearly 30 devices from leading brands. Under the ULE Certification program, members submit the products for certification. And once devices are officially certified, vendors can place the ULE logo and their devices, thereby guaranteeing the quality, range, and seamless interoperability with other ULE devices. In the first quarter, we generated $1.1 million in revenues from IoT, representing the growth rate of 127% year-over-year. Looking forward, we see growing interest in ULE for new IoT application, such as video and data. Using ULE for such products offers homeowners the benefit of high stability, long range, and ultra low power consumption, allowing battery-operated systems to work for years, all at an affordable price point. More and more customers are evaluating ULE for video total solutions. Our recent design wins together with upcoming home gateway product launches and increased interest in ULE provide you IoT applications, underscores the progress made and the positive trajectory of our Home segment. Now to the SparkPA. In January of this year, we unveiled a new and highly innovated product category that leverages our decades of our CMOS design expertise. SparkPA is a 5 gigahertz Wi-Fi power amplifier, or PA, with the highest RF transmit power and the best linearity available in CMOS technology to-date. SparkPA also supports the 2 – the new Wave 2 and Wave 3 802.11ac access point requirements, and also multi-user MIMO at 4×4 and 8×8 topologies, as well as future 1024 QAM relation. The initial target market for this PA is the Wi-Fi 802.11ac 5 gigahertz and in particular access points. Wi-Fi access point product typically shift with four to eight power amplifiers and with, at least, 2 power amplifiers for access point in the very low end of the market. We believe that these markets present an initial revenue opportunity of approximately $100 million. During the quarter, we initiated engagement, we selected customers that are undergoing valuation phase, and we expect mixed progress during 2016 with a goal of much shipments in the year 2017. And now to an update on the cordless phone market. Please note that all the figures and comparison made in this section are for cordless phone SoCs only and exclude revenues for gateways and IoT. Our first quarter cordless revenues were disappointing, revenues declined by 49% year-over-year and by 34% on a sequential basis and accounted for 54% of revenue. The decline all though in line with our expectations exceeded the secular decline trend of 10% to 15%. The difference was mainly attributable to an inventory adjustment cycle in DECT found in both the North American and European end market. We believe that the inventory correction is that – is at its tail end, and based on our backlog and focus received from customers, we expect a gradual and sequential recovery starting in the second quarter. And now to an update on our outlook. Based on our expectation for continued momentum across our new product initiative and a sequential recovery in quarter’s revenue, we project an increase in second quarter revenues on a sequential basis. We expect revenues for the second quarter of 2016 to be in the range of $35 million to $37 million. In addition, we also expect to resume non-GAAP operating profitability. To summarize, during the first quarter, we successfully executed on our business objectives, which are primarily focused on driving accelerated growth in our new product initiatives by expanding the market adoption of our new product across Voice-over-IP in mobile, home gateway and IoT. However, our performance was offset by a weaker demand for cordless phones. We believe that the successful execution of our new product initiative is the basis for our long-term growth and provide confidence in our ability to achieve revenue growth for the full-year 2016 and beyond. We also remain on track to realize margin improvements for the full-year 2016 fulfilled by growth of the new initiatives. Now, I would like to turn the call over to Dror, our Chief Financial Officer. Dror, the floor is yours.

[Dror Levy:]

Thank you, Ofer. I will now review the income statement for the first quarter of 2016 from top to bottom. For each line item, I’ll provide the U.S. GAAP results, as well as the equity-based compensation expenses included in that line item and the expenses related to previous acquisitions. Our revenues for the first quarter of 2016 were $27.7 million. Gross margin for the quarter was 42.4%. Gross margin for the quarter included equity-based compensation expenses in the amount of $0.1 million. R&D expenses were $8.9 million, including equity-based compensation expenses in the amount of $0.4 million. Operating expenses for the quarter were $14.9 million, including equity-based compensation expenses in the amount of $0.9 million and amortization of acquired intangible assets in the amount of $0.3 million. Financial income for the quarter was $0.3 million. The income tax benefit for the quarter were $40,000 and included an income tax benefit resulting from the amortization of deferred tax liability related to intangible assets in the amount of $0.1 million. The net loss for the quarter was $2.9 million, including equity-based compensation expenses of $1 million, amortization of intangible assets of $0.3 million, and tax benefits resulting from the amortization of $0.1 million. Non-GAAP net loss excluding the item I’ve just described was $1.7 million. GAAP loss per share for the quarter was $0.13. The negative impact of equity-based compensation expenses on the loss per share was $0.05. The negative impact of the amortization of acquired intangible assets and the loss per share was $0.01, and the positive impact of a tax benefit resulting from the amortization of deferred tax liability on the loss per share was $0.01. Non-GAAP loss per share excluding these items I’ve just described was $0.08. Please see the current report on Form 8-K that we filed with the SEC this morning for a reconciliation of the non-GAAP presentation to the GAAP presentation. Now, turning to the balance sheet. Accounts receivable at the end of the first quarter of 2016 increased to $19.5 million compared to $19.2 million at the end of the fourth quarter of 2015, representing a level of 63 days of sales. Inventory increased from $11.5 million at the end of the fourth quarter 2015 to $13.5 million, representing a level of 76 days. Our cash and marketable securities decreased by $6.5 million during the first quarter and were at the level of $115.1 million as of March 31. Our cash and marketable securities position during the quarter was affected by the following

[Operator:]

Thank you. [Operator Instructions] We will now take our first question from Jaeson Schmidt from Lake Street Capital Markets. Please go ahead. Your line is now open.

[Jaeson Schmidt:]

Hey, guys. Thanks for taking my question. Just want to start on the mobile phone revenue and with your nice Q1 results and strong Q2 outlook. Does that change kind of the high single-digit low-teens range that you had initially thought for the year?

[Ofer Elyakim:]

Hi, Jaeson, and thank you very much for the question. Regarding mobiles always, as we did see the revenues for this quarter were ahead of what we expected of $2 million to $3 million and came in closer to $4 million. And also as we have indicated the guidance just sequentially grow. What we can say is that, we don’t really have a very clear picture about as to how the year we shape up a little bit will depend on kind of the real demand in the market and how exactly is that we translate to the quarterly demand for our products. So right now, yes, we do see that already first-half is that kind of the high single-digit and perhaps kind of low-teens to-date is on the more of a target, given that we still have six months well beyond the first-half. But I would say that right now we are not – we don’t really have a very kind of clear goal. I would say that probably right now kind of low-teens, they should be kind of the new target for the year.

[Jaeson Schmidt:]

Okay, perfect. And then looking at the cordless phone business, it sounds like it’s going to increase obviously in Q2. But can you talk about your visibility into that business in the back-half of this year?

[Ofer Elyakim:]

Yes, sure. So as we have said in our prepared comments, the cordless business did suffer in – fairly in deep downs during the first quarter as a result of both some weakness in the end market and top of that this inventory correction cycle that basically impacted both our U.S. or DECT fixed revenues and also the DECT through up in rest of the world apart. As we go into the second quarter, we start to see that this correction is coming to the tail end and we can see that we are expecting a sequential improvement. Regarding the visibility, our visibility has no change, which remains a fairly limited, I would say that, we see about eight weeks ahead. So basically, we see a – let’s say end of May at this – end of May, early June at this point in time. And this would be kind of, let’s say, our visibility for sure, we don’t like today have the visibility into the end of the second quarter and not to mention and think about the second-half. We do have from time-to-time some sales ships that are happening in our favor and sometimes not in this year, we believe that and we obviously it will be in our favor. So right now we don’t have the visibility, but we do believe that such an inventory cycle, which is operating in such weak environment for the chipset vendor like I said. It doesn’t happen more than, I would say, once there and typically you take a longer spectrum, it happens every ones in six quarters – six, seven quarters. And so we do believe that during this year and going forward, we should be more exposed to the general market demand. And we do think that this a declining category of about 10%, 15% a year. And I would say that we would want to see our kind of back-half be more related to that. And right now we don’t – we believe that as the inventory deficient cycle is over, we should see some replenishment. But all-in-all we should kind of stay with figures and front lines that are kind of more resembling the market trend.

[Jaeson Schmidt:]

Okay, that’s helpful. And the last one for me, and I’ll jump back into queue. Looking at operating expenses going forward beyond Q2, would we expect those just to grow with revenue? Are there any kind of one-time expenses related to any of these new products that we should be aware of in the back-half of the year?

[Dror Levy:]

So for the remainder of the year, we should not expect operating expenses as well. So the level that we have in the second quarter – what we had in the first and second should also be aligned with what we should see for the remainder of the year.

[Jaeson Schmidt:]

Okay. Thanks a lot, guys.

[Operator:]

Our next question comes from Matt Robison from Wunderlich. Please go ahead. Your line is now open.

[Matthew Robison:]

Thanks. Congratulations on your success and break into this big market and the outlook. Wanted just to maybe go through a little bit of the sales cycle dynamics and sale through dynamics for home gateways revenues pretty episodic for that without a great deal of sell-through it seems maybe I’m wrong about that, can you explain kind of what’s happened a bit on the positive side in the first-half of last year? And why it seems like these sell those by quite a bit of products? And then I’ll come back for long time if I have any?

[Ofer Elyakim:]

Yes, sure. So, thank you, Matt. And on home gateways, what we did see, we had an extraordinarily successful first-half last year with $4.8 million in the first quarter and then $4.2 million in the second quarter, and then to a low of about $2.3 million in the third quarter. And from that, it started to gradually grow. But as we said, the change in the quarterly run rate has to do with new home gateway product launches. And right now, we expect – we are expecting three new product launches to take place in the back-half, meaning, in the second-half of this year. And with that, I believe, we would like to – we will see a change or kind of a break from this kind of level of $2 million, $2.5 million, and this is indeed also kind of roughly the number that we expect in the second quarter of 2016. It will be of sound if that operators when they launch and we are not selling directly to the sales providers, operator is directly selling to the ODMs or the message that get engaged. There seems to be quite a big buildup of inventory in order to facilitate the demand that is necessary for the product launch. And thereafter, inventory gets depleted and the quantities are lower. All in all, we look at the home gateway category as a growth driver for us as a category that should grow by about 15% to 20% a year. This is a kind of long-term view. We have been able to get this year a number of very lucrative wins, including a North American service provider, which is expected to launch at the end of the third quarter, a major product. And to-date this is – this should be our biggest design win in the home gateway side and also two other European dealt with that are supposed to launch successful models in which we hope to have a much higher market share. And also complementing that with the design win that we announced today from another kind of Tier 1 and service provider in Europe that for the first time integrate our DECT in its home gateway. So all in all, their dynamics are good. What we need to see in order to break from the $2.5 million run rate is a new launch.

[Matthew Robison:]

That sounds good. They usually buy a years worth of product, or was it more like two quarters when they launch these?

[Ofer Elyakim:]

It rather depend on the operator. We have seen both cases for sure. There’s more of a kind of stacking in front of the launch and then kind of revenue depletion kind of six months later. But I’ll say this today kind of, I would say, the run rate that we see today in a way kind of represent a kind of the current need on the back-half of some excess inventory that perhaps deplete somewhere in good chain [ph]. As you can understand, we’re kind of very far away from understanding what the – what kind of like once the operators or the suppliers are sitting on it.

[Matthew Robison:]

You’re talking about the four customers, three Europe, one U.S., are there customers that have branded products with your components in the past?

[Ofer Elyakim:]

So the North American – this is the first time in which DECT is integrated in the home gateways. And we do hope that they’re following that launch as there will be a way to see more and more service providers, both on the cable side as well as from the Telco side embrace DECT and high definition voice, because I believe this is going to be the very important note where we launch. And on the European side two of the service providers that I mentioned already carry DECT, but not necessarily just on DSP Group. And hence we grew DECT here to see growth in our market share. The third European service provider, which is a new design, it did not carry our DECT in the past, but it did carry DECT of a competitor in some weak models, not across the board.

[Matthew Robison:]

You expect an office, did that represent a meaningful contribution from a new – the current new customer, or was it mostly more models from your existing customers?

[Ofer Elyakim:]

Q1 revenues were all based on existing customers. These were customers that we were shipping products to in the second-half of 2016. So I would say Q1, it does not include the additional Tier 1 OEMs that are supposed to launch product ensuring the second-half – the second-half – sorry, the second quarter and third quarter of this year. We expect one already to start shipping late in the second quarter and the second Tier 1 late in the third quarter. So then there we should see an increase in the Voice over IP revenue run rate.

[Matthew Robison:]

And are you – the ULE, you mentioned the first quarter volume, but you didn’t give guidance, so we just expect that to be sort of flattish for the second quarter?

[Ofer Elyakim:]

Yes, good question. So what we have said and kind of our thought process is for the IoT category to generate revenues in the area of $5 million this year. I would say kind of with stronger numbers in the second-half, and I would say, flattish in the second quarter.

[Matthew Robison:]

Okay, great. Thanks for all the detail.

[Ofer Elyakim:]

Thank you.

[Operator:]

[Operator Instructions] Our next question comes from Charlie Anderson from Dougherty & Company. Please go ahead. Your line is now open.

[Charlie Anderson:]

Yes, thanks for taking my questions. Ofer, you mentioned a couple of products that you aren’t for mobile and it’s driving these great near-term results. I wonder if you could speak to the design win pipeline how that looks for you the number of opportunities that are out there, the opportunities to broaden the customer base, how is that tracking from your perspective?

[Ofer Elyakim:]

Sure. Thank you, Charlie. The question was on kind of the mobile engagement side. So today, we are engaged in both with the OEMs that we are shifting to today and to address in more models, as well as with other OEMs, both from the mobile side smartwatch variable, as well as in the IoT arena. We are at various levels of engagement for mainly – for our new product D4, which is in – being well received by the market. And it does – they basically improve the power consumption in levels that are required for always on VoIP function RF, where in a way the microphone is becoming an intelligent microphone with the ability to do processing and achieve all of that without changing or reducing the user experience from the battery. So that is continuing. We do expect that these engagements will translate to design wins. And we try to be and I would say kind of more stringent on the details on exactly how these engagements are going just because it will occur due to the domain, so not necessarily the way we had perceived the status, it’s really kind of the objective way to see the status. So we try to be kind of a little bit more reserve in our comments. But I do expect that these engagements will translate to additional wins during this year, both from the existing OEM, as well as with the other OEMs that we are today in various levels of engagement.

[Charlie Anderson:]

Great. And then follow-up from me is on gross margins. It was interesting this quarter, you had a kind of a lower mix of legacy products and we saw what that gross margin is. Is that indicative of a long-term margin with new products becoming the larger part of the mix, or do you think gross margins to go even higher long-term as the mix changes?

[Dror Levy:]

Yes, sure. So on gross margin as you saw, despite an absolute lower top line of $27.7 million because of the non-GAAP gross margin is coming at the 42.6%. And we believe that the gross margin will continue and expand. And I think that this is also implied in our second quarter guidance that we believe that margins should expand from here and perhaps what we would see a sequential improvement in margins this year. So all-in-all, we do expect kind of margin expansion this year and to take place. And our long-term target is to be at the mid-40s range. And so I think that this year if all goes well and the product mix does stay in the way we are focusing, gross margin should come very close to that to the kind of the mid-40s, and perhaps, we will able to continue and expand that in the next two years and get – at the kind of the mid-40s, or let’s say, a little bit above that. In the first quarter and in every quarter, we have a certain percentage of our cost of goods, which is fixed. And this is why we did see that the first quarter gross margins also implied in our prior focus were kind of or lower number, because on a lower revenue base we have the fixed cost of goods, which is in a way kind of and taking kind of our margins lower and of course with a much higher revenue run rate and the fixed cost are low percent and this is why we believe that the run rates during this year margins would be at a much higher rate than the first quarter.

[Charlie Anderson:]

Perfect. Thank you so much.

[Dror Levy:]

Thank you.

[Operator:]

[Operator Instructions] Our next question comes from Scott Haugan from Tygh Capital. Please go ahead, the line is now open.

[Scott Haugan:]

Hey, can you guys hear me?

[Ofer Elyakim:]

Yes, we can hear you well.

[Scott Haugan:]

Can you guys hear me?

[Ofer Elyakim:]

Yes, Scott, we can hear you.

[Scott Haugan:]

Okay, sorry. Just visibility on the cordless phone market, do you have any data to attract end market sales or selling to the OEMs like how do you have any idea what that natural annual decline might be?

[Ofer Elyakim:]

So, thanks for the question regarding cordless visibility. As I said our visibility is about discreetly, so this is roughly kind of the level of a visibility that we have then it unfortunately has not changed in the last three years. The way we think about the market and the way we measure and from that kind of build what we believe is one of the secular rate of decline is by looking at the sale out figures I mean in kind of point of sale data in the two biggest end markets for these products, which includes the North America market and there are all market research company such as Entity that survey is North American market. And in Europe, which is the other continent or other market with the companies like UK that they are surveying that end market. And we do look at the trend both the monthly trend, the quarterly trend, the yearly trend to try and see what are kind of the yield today, any type of comparison to kind of better understand if there’s a shift that is taking place. What we can see that these markets that despite going through a secular decline are still very much, it goes through a consumer confidence to the level of real estate activities of the – a pretty good correlation with new home sales in both the Europe and the U.S. and all of that is going to drive in kind of the cyclical change is inside quarters. And on top of that of course, there are the supply chain efficiencies and by that I mean like do the excess inventory they’re combined to tie – is a kind of bundle growth and then we go through these depletion and replenishment cycle. So this is kind of how we look at the domain and if we look at the – a calendar year 2015 what we saw is that the U.S. market was down by about and I would say kind of the around 13% and down to 13 and minus 13 down, and while Europe was down by about 8%, 8% to 9%. So all-in-all it was on a low teen together and for this year as you know we’ll continue and today the market with was a pretty I think disappointing fourth quarter in the U.S. that in 2015 and better start this year, but of course that this is a very dynamic marketplace. So and I don’t think would be amount of launches we have today are indicative of any change. But we’re going to continue and then today, but for now as we said we believe that are in kind of secular decline rate that we are taking into our numbers is between 10% and 15%.

[Scott Haugan:]

Okay, I might follow-up on that and then just one other last question. Do you have any other DECT/CAT customer design wins for HDClear or is that primarily your existing model and lot other existing customers are?

[Ofer Elyakim:]

As we have indicated, we have it. They are running engagement with additional OEMs and for additional product. And I did let’s say in as an answer to one of the question that were asked earlier that, we’re kind of little bit kind of more stingy on exactly and what the design win means and when we get there just because we’re kind of newer to the domain. We’re not kind of the main SoC as we are in all of the other product categories that we’re in. And so if you kind of press harder to say and what is the real status of the design and I will say that after we kind of finish our first year of and being there and not the vendor and domain I think this our ability to sell one design from the other will improve and hopefully we’ll be able to kind of give a bit more details. But as I have said, we are today engaged with the number of OEMs on a number of products. The revenue that we’ve seen in the first quarter – in the second quarter are coming from this one OEM customer that we’re shipping products too, but we do offset we will expand the number of OEMs and also the number of products gradually throughout this year.

[Scott Haugan:]

Thank you.

[Ofer Elyakim:]

Okay.

[Operator:]

There are no further questions in the queue. I’d like now to turn the call to the presenters for any additional or closing remarks. Thank you.

[Ofer Elyakim:]

Thank you all for your participation. We look back talking you again. Thank you.

[Operator:]

Thank you. That will conclude today’s conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.