Resonant Inc.
Q1 2015 Earnings Call Transcript

Published: 6 May 2015

[Operator:]

Greetings and welcome to the Resonant Incorporated First Quarter 2015 Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ina McGuinness. Please go ahead, Ms. McGuinness.

[Ina McGuinness:]

Thank you, Jerry. Earlier this afternoon, Resonant released financial results for the first quarter ended March 31, 2015. If you did not receive the release, it’s available on the Investor Relations website at www.resonant.com. This call is being webcast and a replay will be available on the website for 60 days. Before we begin, we would like to remind you that some of the information contained in the news release and on this conference call contain forward-looking statements that involve risk, uncertainties and assumptions that are difficult to predict. Words of expression reflecting optimism, satisfaction with current prospects as well as words such as believe, intend, expect, plan and anticipate and similar variations identify forward-looking statements but their absence does not mean that the statement is not forward-looking. Such forward-looking statements are not a guarantee of performance and the company’s actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in Resonant’s most Form 10-K and 10-Q and subsequent filings with the SEC. These forward-looking statements speak only as of the date of this release and the company undertakes no obligation to publically update any forward-looking statements or supply new information regarding the circumstances after the date of this release. Participating on today’s call from the company is Chief Executive Officer and Co-Founder, Terry Lingren; and Chief Financial Officer, John Philpott. And with that, I’ll turn the call over to Terry.

[Terry Lingren:]

Thank you, Ina, and welcome to everyone joining us today for our quarterly update. I’m pleased to be here today to report to you on our progress on a number of fronts. I’ll be providing you with an update on our strategy working on designs for multiple products with different customers. And I’ll report to you on our progress toward the company’s previously stated goals. As many of you are aware, in late March, our first customer terminated our development agreement with them. This ended our contractual business relationship with them. It also left us free to market our Product 1 design to the broader RF front-end market. At the same time, they asked us and the filter manufacturer or fab whom we worked closely with over the course of developing this first product to enter into a business relationship with each other in order to market our design for Product 1 to them. As a result, we are now making a significant shift in our go-to market strategy for Product 1 for marketing our design to only a single customer to selling it to the broader market. We’re currently working with our fab and negotiating agreement with them. The fab continues to work directly with our initial customer to sell the product and they are exploring the market for other interested customers, as are we. And we’re finding interests from other customers. And we will be reporting progress on that front in future announcements. Our interest and the fab’s interest are now aligned on marketing this product to companies that have existing channels to the RF front-end market, whether they have their own fab capability or not. Over the course of our Product 1 development process, we have been submitting designs to the fab and they have fabricated them for us at our mutual customers’ expense. They are now continuing to fab our designs. Also, during this time, we have submitted our predicted performance simulations, our measured data and our finished duplexes to our first customer for evaluation and review. They provided significant and valuable feedback. We’re now no longer submitting these designs to that customer. The fab is doing these submissions. Our customer is now the fab. We are pleased to note that the fab has other existing established channels under the RF and front-end market that we hope to utilize for this product. We continue to believe that our performance for this product is competitive with other offerings in the market. In addition, our next generation design is also in process and we expect this design to have improved performance, be smaller in size and less expensive. With the recent release of exclusivity, we are now able to show performance data of our designs. We’re drafting a white paper to detail this performance and we’ll release this in the next few weeks. If you’d like to sign up to receive it, please go to our website and sign up for email alert and you will automatically receive a notice when the paper is posted to our website. This band is one of the major spectrum bands with 4G, LTE and will be in use well into the future with hundreds of millions of duplexer shipped in 2014. As the customer requirements for this band evolve over time, we believe our experience and tools will enable us to design the next generation more efficiently and competitively than others in the field. In March, we announced the signing of another developed partnership with a new customer, which is also a fab. Under this agreement, we are designing a production-ready SAW Duplexer for a traditionally broadband using Resonant’s ISN technology. This duplexer is for a different band then our first duplexer but it’s another one of the large worldwide bands. Due to competitive nature of the industry and the confidential aspects of development projects, we have not disclosed the company or the band. We expect this project to be completed in less than a year from our March 2015 start date. The goal of the project is to develop a new duplexer design that we and our customer plan to market to RF front-end manufacturers and mobile device OEMs. This is consistent with our plans to have multiple projects underway simultaneously with the goal of creating a robust licensing business with a diverse set of customers. We have chosen to keep the agreement non-binding because we feel it affords us the flexibility to retain the technology. If the customer decides to move forward with commercialization, we would then negotiate licensing terms. Turning to our progress on our tunable filter design, we remain on track to complete our prototype demonstration by yearend. As we have often stated, tunable designs form the heart of Resonant’s long-term vision for transforming RF front-ends for the mobile devices. These products would replace the functionality of multiple filters and switches with a single tunable design reducing both cost and size. This would allow the mobile device manufacturers to reduce the footprint of their RF front-end or to add more bands in the same footprint. We began developing this prototype, three bands, tune up filter in December based on discussion with several prospective customers and receive specifications from two of them. During the past quarter, we completed the first step in our ISN process, which involves evaluating polynomial representations and design piecability for the tunable filter. This first step is traditionally one of the more time-consuming since it involves analysis of multiple possible simulations against customer specifications. We were able to simulate filter responses with characteristics capable of meeting specifications and are now moving into generating potential circuit realizations. Our goal is to have as many as five or projects in development by yearend. The more product designs in development then the more potential future revenue streams. The expansion of our design team affords us the capacity and resources to accomplish this objective. Potential customers are also looking at Resonant’s capabilities for the more complex filter requirements, driven by the demands inherent in LTE and LTE Advanced such as Carrier Aggregation and MIMO. These requirements to provide increased data throughput at the expense of more complexity in the RF front-end. This growing RF complexity need plays directly to Resonant’s unique filter design capability which is flexible and systematic, enabling us to create solutions that optimize the entire RF front-end system. We believe that the improvements we have made in our tools and models over the course of our first project will greatly accelerate future designs and improve our efficiency to drive this increase of concurrent projects. Along those lines, we increased our development capacity significantly by adding four engineers to Resonant’s design team during the first quarter as well as another engineer in the last few weeks or second quarter. This brings us to - brings a number of technical staff and R&D as of 15 as of today. This is consistent with our stated milestone we established last year which is to double our technical staff to 20 by the end of 2015. We now have more than 70 issued and pending patents covering our methods in circuit design. As our RF filter developments have increased, we’re seeing an acceleration of valuable IP being generated. This also results from the cutting edge projects we’re being asked to undertake. And now, I will turn it over to John for the financials.

[John Philpott:]

Thank you, Terry. I’m going to summarize our financial results for the first quarter of 2015 compared to the first quarter of 2014 unless otherwise stated. Research and development expenses totaled approximately $1 million for the first quarter of 2015 compared to $435,000 in the quarter a year ago. The increase was primarily due to increased technical staff in the accelerated activity on our many filter designs under development this quarter, whereas we only had one design under development in 2014. General and administrative expenses totaled $1.1 million compared to $522,000 primarily due to the increased staffing related cost, non-cash, cash stock compensation and the cost to being a public reporting company. For the quarter ending March 31, 2015, we reported a net loss of approximately $2.2 million or $0.31 per fully diluted share. Included in that loss in non-cash expenses from stock compensation and depreciation and amortization totaling $550,000. In last year’s quarter, we reported a net loss of $4 million or $3.95 per fully diluted share based on $1 million shares outstanding. Included in that loss was non-cash expenses from the derivative in warrant liabilities of $2.3 million in the first financing cost of $700,000 as there were no stock compensation expenses and very minimal depreciation and amortization expenses in 2014. Working capital made up primarily of cash and investments totaled $11.2 million at March 31, 2015 compared to $13.2 million at December 31, 2014. This $2 million decrease is representative of our current cash burn which we believe will increase slightly throughout the year. Thus, we believe we have sufficient cash to support our planned operations into the first half of 2016 assuming no cash from revenues. And at this time, I’ll turn it back over to Terry.

[Terry Lingren:]

Thanks, John. We’re seeing more customer interest than ever. I’m pleased to report that showing industry competitive performance for our first product design has opened new doors. We look forward to translating this into new products and customers and fully expect to have multiple products underway later this year. With that, I’ll turn it over to the question-and-answer session.

[Operator:]

Thank you. We’ll now begin the question-and-answer session. [Operator Instructions] The first question is from Cody Acree, Ascendiant. Please go ahead.

[Cody Acree:]

Thanks. And Terry, thanks for taking my questions. Terry, on the last conference call you had regarding the Skyworks termination that you really were unable to give us much detail as to reasonings. Have you had conversation sense and your action sense that you might be able to share with us any further detail?

[Terry Lingren:]

Well, and I don’t like speculating about their decision-making. And they haven’t been forthcoming and the reason for the decision. It still stands, basically, they said then, they would like us to work directly with the filter manufacturers that they then have - are simply buying apart. Beyond that, we speculated tons [ph] internally. We’ve talked to folks outside. But I don’t think we’ve got anything new to add on that here.

[Cody Acree:]

And then maybe just the breadth of I guess interactions that you believe you’re now dealing with through your fab partner versus maybe what you’re dealing with before and how’s that may be changing either your cost structure, your expense structure, John talked about some additional stuff but now that you’re not dealing primarily with an individual but maybe a larger number.

[Terry Lingren:]

I think you’re asking about our interaction with the fab. Is that what you’re saying?

[Cody Acree:]

Well, I’m just wondering maybe the number of interactions you’re now having as you’re dealing with the fab directly and then they’re passing on your solution to a breadth of customers versus dealing directly with Skyworks.

[Terry Lingren:]

Sure, yes. We are dealing with a breadth of customers, both their own existing customers outside of the original customers as well as the ones that we’re bringing to the relationship. So there’s a lot of momentum to proceed. As I said in my remarks, we’re both now aligned on developing certainly this product for the general market as well as potentially other products in the future.

[Cody Acree:]

How many engagements are you dealing with today actively?

[Terry Lingren:]

Well, we have the first product design with this first fab. We’ve got the second one we announced with another fab. We have our tunable project underway. Those are the main developments that we’ve got going on right now. We have a number of different discussion in various stages with potentially new customers. So there’s a lot of activity. I get, personally, impatient because it always seems to take longer than I would like. But we see a lot of activity and a lot of interest in the general marketplace. I think also that this change has warmed things up amongst our potential customers. And we’re seeing a lot more interaction with them now than perhaps before.

[Cody Acree:]

And then I guess, as you mentioned, things always take longer, but when you look at your single-band and then your tunable efforts, what’s a best case scenario to a revenue ramp for each of those?

[Terry Lingren:]

Well, we’re not giving any guidance on revenues right now. So our first design is in fab right now. We have the next generation which is also in process. It’s, as I said, smaller, less expensive and actually has better performance in our simulations. So that’s in process which is helping to generate interest, too. I can’t remember where I was going with that thread. So we aren’t giving guidance on revenues but we’re actively marketing this design and others to the market at large.

[Cody Acree:]

Guys, thank you. Good luck.

[Terry Lingren:]

Thank you.

[Operator:]

[Operator Instructions] There are no further questions at this time. Excuse me, we do have some people registering for questions now. I have Lou Basenese from Disruptive Tech Research. Please go ahead.

[Terry Lingren:]

Lou, are you there?

[Lou Basenese:]

Yes. Hello?

[Terry Lingren:]

Hi, can you hear me?

[Lou Basenese:]

Hey, Terry. Yes, just a question on the - in the prepared remarks you said that you’re in the process of formalizing relationship with fab number 1. Can you just give us any more color around that in terms of maybe expectations, timelines and then as well any color around timelines of the other discussions you have underway with other potential customers?

[Terry Lingren:]

Yes. Like I said, these things don’t happen as fast as I would like. And it’s difficult to give exact timelines. With the first fab, though, we’ve been trading terms and are proceeding there. We’ve discussed everything from various responsibilities, royalty rates and so forth. So it’s getting pretty mature. Again, I hesitate to mention exact dates because I always tend to be more aggressive perhaps than reality proves to me. The other new customers we’re talking to, it’s more tentative. A couple of those have similar - we’re discussing terms and have gone back and forth a little bit. But they’re probably not as far long as with the first one.

[Lou Basenese:]

Okay. And then just one other question on the IP side. If my numbers are correct here, you’re up by about 20 patents in applications. Can you give us any color around whether those new applications and grants are for the tunable design, whether that’s for the SAW to BAW, any color on that?

[Terry Lingren:]

It’s all of the above. The tunable is still in the early stages. I think that we’ll see a lot more IP flowing out of that as we progress. It all depends. The patents - it just all depends on the stage of development. Sometimes the patents are - you get the very seminal patents early on but maybe not so many. And then later, you get the ones that may seem more to do with the practical realization but in the end can be some of the most valuable patents. So sometimes the pace accelerates as you get further into the development.

[Lou Basenese:]

Okay, thanks.

[Terry Lingren:]

Sure.

[Operator:]

Next question is from Bill Morrison, Oppenheimer. Please go ahead, sir.

[Bill Morrison:]

Hello, can you hear me?

[Terry Lingren:]

Yes.

[Bill Morrison:]

Good. Hi, Terry. The first question is you mentioned that there’s a potential customer that’s looking at you for more complex solution, customized the entire front-end, can you give me a little more color on that?

[Terry Lingren:]

Well, what I meant to say, if it didn’t come out that way, was that we are seeing two things really. One, we’re seeing the harder problems coming from most of our potential customers. The things that they struggle with, which is great for us because that’s what we’ve always kind of cut our teeth on and that’s where our tools and talent here in house differentiate it the most. The other is I think are talking about the way the market is proceeding. And if the market is tending towards more complexity, it’s difficult enough with some of these phones having 20 or 30 or more bands in the front-end and these huge switching matrices between them. But with carrier aggregation and some of the other requirements coming, the complexity of those front-ends is growing rapidly which plays right into what we do. We have a very flexible approach and our tools are suited to dealing with that kind of complexity. In addition, the scheme comes out of kind of general RF front-end areas as well as general filter solutions. So not just the acoustic wave filter designs that most of our customers are used to dealing with. So think that that flexibility in our design suite as well as the experience of our design team help us to win in this increasingly complex world.

[Bill Morrison:]

So just to understand, you’re not talking about going on on filters and switches?

[Terry Lingren:]

At this point, that’s correct, yes. Our two main product lines are the single-band filters which are kind of these BAW to SAW type filters that we’ve been doing up to this point. And then tunable pulls in the switching capability, may pull in some of the other things around the filters. But it’s still predominantly filters and switching elements at this point in the tunable. We are seeing in line with carrier aggregation, some of this increased complexity, we’re seeing interest around multiplexing where you have more than one duplexer on at the same time. And it’s not as simple as the explanation makes it sound.

[Bill Morrison:]

Okay, great. That’s helpful. And then looking at the revenue potential between your first generation and your second generation design, do you think it’s more highly likely that meaningful revenues come from your next generation design for the tunable SAW filter or is the first generation still somewhat likely to be deployed?

[Terry Lingren:]

Sure, yes. The first generation - these single-band designs are still very much our first product in the market. I believe that we’ll get revenues from them before we do tunable. That’s kind of always been our outlook. We’re not giving any specific guidance these says. But I have said, the tunable prototype won’t be done until the end of this year, in which case, we would hope to engage with a customer. Once we give them products and they go hard design, give parts. They can go out and do their own evaluations, measures performance, do cost analysis and so forth. So we expect to engage with one or more customers around the end of the year. Then it would probably another year of development before the product themselves are completed. So we always said, we don’t expect revenue from tunable before 2017.

[Bill Morrison:]

Great, I understand that. But just between the first and second design iterations for your SAW filter. Is there any like more - is it more likely to test [ph] your shrunken design with less power? Your customers wait for that or they’re still interested in the first design?

[Terry Lingren:]

Yes. There is interest in the first design still. The next iteration, next generation as we’ve been calling it is in the fab now and should generate interest. And then we’re creating - so for that first band, that first product we’re seeing a roadmap form for future potential products in there. And I expect that the second one will proceed the same way. And as we add new single-band designs, these all would start layering on top of one another.

[Bill Morrison:]

Okay, great. Yes. Thanks. I really appreciate it.

[Terry Lingren:]

Sure.

[Operator:]

The next question is from Brock Malky, Insight Capital. Please go ahead.

[Brock Malky:]

Hey, John.

[Terry Lingren:]

Hi, how are you?

[Brock Malky:]

Good, good. I missed the first half of the call so I apologize if this was already covered. There seems to be a little bit of confusion out there between this conference call and the last conference call. And the confusion specifically surrounds the transition from the Skyworks relationship to now the relationship with the fab. So the cut to the chase, the product that you developed for Skyworks which has now transitioned to the fab, can you definitively say that you believe that you will get customer orders from that product developed for Skyworks from fab customers? Or is it too soon to make that declaration?

[Terry Lingren:]

Well, this design has always been done with our first fab. The relationship used to be that both they and us were the vendors to our mutual customer.

[Brock Malky:]

Right.

[Terry Lingren:]

Now, we are working with them. They are our customer and then they in turn are selling the product both to our first customer and now released from exclusivity, we’re selling it to the market at large.

[Brock Malky:]

Right. So the confusion out there is when Skyworks released you from that exclusivity, apparently the market took that as the product didn’t meet the specs, we don’t want it, we’re moving on. Or at least that’s what the market looks like. The story that truly exists is this is just a transition from a Skyworks-specific engagement to a passing the baton to the fab who is now working on behalf of Skyworks and their other customers with your product, is that accurate?

[Terry Lingren:]

Yes. That’s basically it.

[Brock Malky:]

Okay.

[Terry Lingren:]

We are working with the fab now to sell this both to Skyworks and to others. And we’re seeing a lot of momentum that way. We have actually delivered parts. So now that we’re released from the exclusivity, we’re seeing lots of interest in this product from other customers. We’ve actually delivered parts to another customer for their evaluation and have shown performance dated [ph] through others. That’s what’s generated all the interest. We’ve already said we’ve got competitive performance. Released from exclusivity, now we’re drafting a whitepaper. So we’ll detail all our performance here in the next few weeks and everyone will be able to judge for themselves.

[Brock Malky:]

Right. Okay. I don’t know you guys’ personal, financial situations but given how poorly the stock has acted in the face of what seems to be not so horrible of news, do you think we might see some insider buying from the management or --?

[Terry Lingren:]

We certainly discussed that. Our hands are always so tied by regulations and so forth. It’s actually difficult for us to either buy or sell. It’s not under a 10b-5 plan.

[Brock Malky:]

Right. Okay. All right, I appreciate it.

[Terry Lingren:]

By the way, we did buy recently just about eight or nine months ago now. We all did buy. STI, the company that acquired an ownership stake in Resonant when we used the IP development from them. Basically, we spun out from them - it’s not really a spinout but they had a stake. We participated in the sale of their stock in September last year. So we have bought and we just - it’s more difficult now that we’re a public company.

[Brock Malky:]

Right. Okay. I appreciate your help to clear that up for me.

[Terry Lingren:]

Sure.

[Operator:]

We have a question from Jay Srivatsa, Chardan Capital. Please go ahead.

[Jay Srivatsa:]

Yes, thanks for taking my question. Terry, as you engage with some of the newer customers outside of Skyworks, what are some of the challenges that they’re facing in terms of transitioning from the existing topology to your filter design? What are the typical issues that come up and how easy or seamless is it for them to transition over?

[Terry Lingren:]

Each customer is unique and has their own ways that they’re looking to differentiate themselves in the market. As I mentioned on one of the earlier questions, one of the things we’re seeing are some of their more difficult problems, some of their sticking points and how they’re looking to go forward in this marketplace. So we’re working with them on some things typically that they can’t do. It involves both some of these harder bands, these first two designs or for - are SAW duplexer designs or bands that are traditionally BAW. In addition, we’re seeing some interests around multiplexing, having more than one band on at the same time which is a non-trivial problem in the RF world. And of course there’s a ton of interest in tenability. Everyone, myself included back when I first was introduced to what became Resonant, things that tenability - tunable designs are not feasible for mobile device front-ends. So everyone is - and yet, if you can do it, it is the game changer, the Holy Grail, some people call it. So everyone is interested in it. And everyone is skeptical about it. That’s why we’ve undertaken the prototype development to give them parts, to show what we can do. So those are the kinds of things that we’re seeing in these discussions with customers. They’re the harder problems, typically, that they’re stumbling over themselves.

[Jay Srivatsa:]

All right. And then in terms of manufacturing with your fab partner here, given the complexity of your product relative to what’s out there, have you got a sense on what the yields are going to be? Do you have a sense on how the manufacture ability of the product itself is? And if not, when do you expect to know that?

[Terry Lingren:]

Yes. I mean, the manufacturing margins all go into our design process. So we work with fabs to understand their yield concerns and what targets they have. I mean, it’s got to be a hand-in-hand relationship. We need them to sell these things at a price and a profit that makes their business plans work. That’s how we get paid. So we’re always working with them on margins and so forth. Complexity, our designs really aren’t more complex. We’re working on designs which are the same basic - if you were to look at it from a layout standpoint or number of components standpoint, it’s basically the same as what folks have been doing in the past. Our designs are done differently and so get different performance. Not really more complex, so to speak.

[Jay Srivatsa:]

Thank you. Good luck.

[Terry Lingren:]

Thanks.

[Operator:]

Next question is from John Grimley, TJW Capital. Please go ahead.

[Terry Lingren:]

John, can you hear us?

[John Grimley:]

Yes. Can you hear me?

[Terry Lingren:]

Yes.

[John Grimley:]

Hello? Can you hear me?

[Terry Lingren:]

Yes.

[John Grimley:]

Okay. I just want to follow-up on the other questions. So the fab for customer 1, have you guys signed a license agreement with that fab yet?

[Terry Lingren:]

That’s what we’re in the process of right now.

[John Grimley:]

Okay.

[Terry Lingren:]

That’s this thing [ph] we’re formalizing.

[John Grimley:]

That needs to happen before you can really market with that fab. I just want to make sure I understand that correctly. And then would there be any reason for them to sign a license agreement with you if they did not plan on marketing that design?

[Terry Lingren:]

I’ve never looked at that particular question. I don’t think so. I mean, if I were in their shoes, I wouldn’t waste the resources and energy to sign a licensing agreement. All the things we’ve seen is there’s a lot of momentum, a lot of interest in seeing this going forward. Skyworks is an example of a huge potential customer. And it’s most of their volume now. So they want to see this move forward, as do we.

[John Grimley:]

And then just kind of a big picture question. If you guys were a private company, on a scale of 1 to 10, how happy would you be with where you guys stand today versus 12 months ago when you started as far as your chances of success, meaning getting design wins in the next 12 to 18 months.

[Terry Lingren:]

I love our progress. We’ve said that before. What we see now, we’re so much more solid now than we were a year ago. We’ve done the development, our first development. We’ve improved our tools to the point where we can be more efficient and more accurate. I mean, our tools are one of the things that our customers really like. The way that our simulations match measured performance has been a real eye opener for some of our customers. In addition, we -

[John Grimley:]

And then -

[Terry Lingren:]

Go ahead.

[John Grimley:]

Sorry, go ahead. No, no, go ahead. Sorry.

[Terry Lingren:]

In addition, one of the things that we bring to market is the fact - so now, these very accurate tools allow us to do more and quicker turns in software and not make the physical parts - so the physical turns in a fab can be - are sometimes the long pole in the tent. We certainly found that out during our first design process, the design of this Product 1. So now our tools, time to market is one of the advantages some customers are seeing in what we bring to them.

[John Philpott:]

This is John Philpott. Also, we obviously have cash now. So a year ago, we were in a different boat financially. So we now have over years’ worth of cash to kind of work through our game plan. And I think we see more interest in this year, in 2015 from customers than we have prior to obviously a year ago. But even in third quarter. So now the interest has just gone crazy. So we’re pretty excited about that. And I think it proves what we’re doing is working.

[John Grimley:]

And is it safe to say the biggest lesson aside from a technical - I’m sure you learned a ton technically on how to design the products, but just from a corporate standpoint, has the biggest lesson been that from a workflow standpoint, your customer really should be the fab and not the semi companies given it doesn’t seem like a company like Skyworks wants to have an equipment supplier plus a fab? Has that been kind of a key lesson that will allow you guys to be more efficient moving forward in the market to really understand the model a little bit better? Am I thinking about that the right way?

[Terry Lingren:]

Yes. I think that we should be more aligned with the fabs. We’ve always thought that but, man, we had this one customer that wanted a lot from us. But, yes, I mean, being aligned with fab is really where we should be playing. It makes just so much more sense for us. They’re the ones doing the designs, fabricating the filters and duplexers. So, yes, I think it makes perfect sense that we’re aligned with the fabs. And now I think that we’re even more so in that direction after the termination of the development agreement. So, yes, I think this shift in strategy, if you will, makes perfect sense.

[John Grimley:]

Great. Thanks for the update and thanks for the time.

[Terry Lingren:]

Yes, thank you.

[Operator:]

Ms. McGuinness, gentlemen, there are no further questions.

[Terry Lingren:]

All right. Thanks.

[Operator:]

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your presentation.