QUIK - NASDAQ

Ladies and gentlemen, good afternoon. At this time, I'd like to welcome everyone to QuickLogic Corporation's Second Quarter Fiscal Year 2022 Earnings Results Conference Call. As a reminder, today's call is being recorded for replay purposes through August 23, 2022. I would now like to turn the conference over to Mr. Jim Fanucchi of Darrow Associates. Mr. Fanucchi, please go ahead.

Thank you, operator, and thanks to all of you for joining us. Our speakers today are Brian Faith, President and Chief Executive Officer; and Elias Nader, Senior Vice President and Chief Financial Officer. As a reminder, some of the comments QuickLogic makes today are forward-looking statements that involve risks and uncertainties, including, but not limited to stated expectations relating to revenue from new and mature products; statements pertaining to QuickLogic's future stock performance, design activity and its ability to convert new design opportunities into production shipments; timing and market acceptance of its customers' products; schedule changes and production start dates that could impact the timing of shipments; the company’s future evaluation systems; broadening the number of our ecosystem partners; and expected results and financial expectations for revenue, gross margin, operating expenses, profitability and cash. Actual results or trends may differ materially from those discussed today. For more detailed discussions of the risks, uncertainties and assumptions that could result in those differences, please refer to the risk factors discussed in QuickLogic’s most recently filed periodic reports with the SEC. QuickLogic assumes no obligation to update any forward-looking statements or information, which speak as of the respective dates of any new information or future events. In today’s call, we will be reporting non-GAAP financial measures. You may refer to the earnings release we issued today for a detailed reconciliation of our GAAP to non-GAAP results and other financial statements. We have also posted an updated financial table on our IR web page that provides current and historical non-GAAP data. Please note, QuickLogic uses its website, the company blog, corporate Twitter account, Facebook page, and LinkedIn page as channels of distribution of information about its business. Such information may be deemed material information, and QuickLogic may use these channels to comply with its disclosure obligations under Regulation FD. A copy of the prepared remarks made on today’s call will be posted at QuickLogic’s IR web page shortly after the conclusion of today’s earnings call. I would now like to turn the call over to Brian.

Thank you, Jim. Good afternoon, everyone, and thank you all for joining our second quarter fiscal 2022 financial results conference call. Our business momentum continued in Q2 as we achieved our best bottom line performance since 2010. Moreover, we have seen an increase in our sales funnel and large design wins currently approaching $100 million. We expect the pace to accelerate in the coming quarters and years, further boosting both our near term and long term growth trajectory as we drive the company to profitability. This has all been enabled by being the first commercial entity to market with a robust and comprehensive platform that blends open-source technology with our decades of product shipments and engineering know-how in the FPGA market. I believe a recent event marks a watershed moment for QuickLogic. As noted in the earnings release today, I am both honored and pleased to share that we have won by far our largest eFPGA related contract to-date, one that will start at approximately $7 million. The Company's deliverables will be due over the course of 12 months. In addition, subject to completion of such deliverables and at the option of the customer, the total contract value could increase to tens of millions of dollars. While we are contractually prohibited from sharing customer names or end market details on this most recent win, this development demonstrates how eFPGA-related opportunities are turning into multi-year substantially higher revenue design wins. We believe this is further proof that our strategy to develop eFPGA IP and related products will transform QuickLogic into a sustainably growing and profitable business for many years to come. Since July of last year, we have now closed firm eFPGA related contracts approaching $16 million with the aggregate potential approaching $100 million over time. There are several additional opportunities in our sales funnel that are expected to follow a similar path, starting as an eFPGA IP engagement and expanding to full FPGA-based device and/or chiplet developments, with the intention of QuickLogic being the storefront for the device once it is completed. Our Australis eFPGA IP Generator has been a substantial contributor to this pipeline of new opportunities. Companies of all sizes, including some very large and recognizable names are coming to QuickLogic because we can define and deliver customized eFPGA IP and/or devices in a highly automated way. Our standard cell design approach allows QuickLogic engineers to generate custom eFPGA IP in a matter of months, giving our customers a fast time to IP delivery and providing QuickLogic tremendous operating leverage from our R&D resources. The breadth of our active eFPGA customer engagements spans the world's largest semiconductor foundries, including TSMC, GlobalFoundries, Samsung, UMC and SkyWater Technologies. Now moving to our SensiML business. SensiML is having its best year ever. In our May earnings call, we shared that SensiML signed their first 6-digit win and the pipeline of opportunities is growing. In the June quarter, we saw a doubling of 6-digit opportunities, including a growing number of Fortune 500 companies. Our current expectation is we will close at least one of these deals by the next earnings call in November. Driving the SensiML engine is an expanding ecosystem of integrators. SensiML recently closed three new system integrators in Asia to add to the already publicly announced deal with Direct Insight. We are looking for these new additions to drive more six digit revenue new deals in the first year of representing the SensiML products. Since the start of the year, we have been asked to offer additional commentary on the emerging chiplets markets and specifically our chiplets program. Chiplets have been steadily taking market share from more traditional monolithic semiconductor devices. For manufacturers, using a chiplet based approach not only creates flexibility, but helps enhance yields and reduce costs, as each chiplet component has a smaller die size and hence higher yield than would a larger monolithic device encompassing all of the same combined functionality. That is why our June announcement with eTopus is so significant. We provide the eFPGA technology and they provide the special high performance low power interconnect that's critical for many of the applications our customers have in mind. Our current plan is to start with eFPGA based chiplet templates and then move forward with a Known Good Die approach commensurate with customer demand. The chiplet market is expected to grow significantly over the next decade. Industry research firm Transparency Market Research recently noted that the chiplet market is expected to exceed $47 billion by 2031, representing a CAGR exceeding 40%. We are under evaluation with lead customers to see how we might architect a chiplet that can be reused across multiple customers. I want to quickly touch on some of the other areas of our business. Display Bridge product sales and design-ins remained strong as we benefit from the continued global supply chain issues. We expect demand to remain strong into 2023 and have inventory to meet customer needs. In our mobile phone business, we believe we are being designed into several new models of phones that will ship well into 2024, giving us a good long term visibility. In the near term though, very muted consumer spending in recent months is negatively impacting our primary customer. Given the macro factors including ongoing supply chain issues, we believe the second half will remain weak for our mobile phone business with Q3 being a low point in demand. Finally, in our mature product segment, we are starting to see some stabilization in bookings for this quarter and the balance of this year. However, without good clarity on the macro economy, we currently believe mature revenue will be slightly down from 2021. Before turning the call to Elias, I want to provide our revenue outlook for Q3 and offer a look into Q4. Over the last two years, we have made significant progress building our software and IP-related business. During this transitionary period to a more software and IP centric company, I have noted that from time to time, there could be some lumpiness in our revenue recognition due to the timing of milestones in these agreements or delays in start dates. For Q3 in particular, we had originally expected the $7 million agreement I previously mentioned to start earlier in the third quarter. However, we were recently informed the project start date has been pushed to later this quarter. This push out in revenue coupled with a softening smartphone sales environment has caused us to reduce expectations for Q3 revenue by approximately $1.8 million. We expect a portion of this revenue to be realized in Q4 and into the first half of 2023. As a result, our current expectation is for revenue in Q3 to be approximately $3.4 million plus or minus 10%, which on a rolling 12 month basis still puts us in line with our targets. since it reflects the impact of timing in terms of signing new opportunities. I want to be very clear, in winning the large contract I mentioned earlier, I am convinced the third quarter revenue decrease is a mere blip in our growth trajectory, related to the start date of this new large contract and is not indicative of any barriers to continued growth and profitability. Even with the shift in the start date of this large contract and the smartphone weakness, we are on pace to increase fiscal 2022 revenue approximately 35% over fiscal 2021. To further support our confidence in the business, the early outlook for Q4 is shaping up nicely. With this fiscal year revenue outlook, and with current gross margin and operating expense levels, I believe we have a very good chance of reporting profitability in Q4. Let me now turn the call over to Elias for a review of the financial results. Elias, please go ahead.

Thank you, Brian, and good afternoon, everyone. Our performance in Q2 was very strong. Revenue of $4.5 million was the highest since the second quarter of 2015, further demonstrating the strength of our software and IP focused revenue model. The growing top line combined with a favorable gross margin and continued expense controls translated into a minimal non-GAAP net loss of just $47,000 which is close to our goal of breakeven. Let me now turn to the review of the results for the second quarter. GAAP revenue in Q2 was $4.5 million. This compares with $4.1 million in last quarter and $2.9 million in the second quarter of 2021. On a percentage basis, our Q2 revenue represented an increase of 11% compared with last quarter and was up 58% when compared with the second quarter of 2021. This improvement comes despite the pandemic supply chain shortages in the industry and volatile economic headwinds. Within our Q2 revenue, sales of new products were approximately $3.1 million. This compares with $3.5 million last quarter and $1.3 million in the second quarter a year ago. Mature product revenue was approximately $1.4 million compared with $0.7 million last quarter and $1.6 million in Q2 last year. In Q2, we had three customers that each accounted for 10% or more of our revenue, which is consistent with the prior quarter. Non GAAP gross margin in Q2 was 58.6% compared with 61.5% in the prior quarter and up from 51.5% in the same quarter of 2021. The decrease in gross margin quarter-over-quarter was due to increased expenses in eFPGA IP professional services, inclusive of non-recurring costs of specialized tooling. Improvement from the same quarter last year resulted from a product mix shift to more eFPGA IP professional services. Non GAAP operating expenses in Q2 were approximately $2.8 million. The OpEx for Q2 was lower than our forecast mainly due to reclassifications related to certain R&D expenses to eFPGA IP in support of eFPGA IP professional services. Q2 OpEx compares with operating expenses of $3.1 million last quarter and $3.3 million in the second quarter a year ago. Non GAAP net loss was $47,000 or a loss of zero cents per share based on 12.4 million shares. This compares with a net loss of $0.8 million or $0.06 per share last quarter and a net loss of $1.9 million or $0.16 per share in the second quarter of fiscal 2021. Total cash at the end of Q2 was $18.5 million compared with $20.1 million in the prior quarter. The continued investment to support the new design wins we have discussed accounted for a portion of the sequential decline. Additionally, timing issues related to cash receipts from customers also contributed to the lower cash position. Now moving to our guidance for this quarter of fiscal 2022, which will end on October 2, 2022. As Brian discussed, revenue guidance for Q3 is approximately $3.4 million plus or minus 10% due to the reasons he outlined. Revenue is expected to be mainly comprised of approximately $2.4 million of new products and $1 million of mature products. Based on this revenue mix, non-GAAP gross margin for the quarter will be approximately 64% plus or minus 5 percentage points. Our non-GAAP operating expenses will be approximately $3.5 million plus or minus 10% because longer term, we believe OpEx will remain in the low $3 million range with occasional increases to support new programs with new wins. After interest expense, other income and taxes, we currently forecast our non-GAAP net loss will be approximately $1.3 million to $1.7 million or a net loss of $0.11 to $0.14 per share based on roughly 12.4 million shares outstanding. The difference between our GAAP and non GAAP results is related to non-cash stock-based compensation expenses. In Q3, we expect this compensation will be approximately $425,000. As a reminder, there will be movement in our stock-based compensation during the year and may vary each quarter based on the timing of the grants. Moving to the balance sheet. Even with continued investment to support the new design wins that we have discussed, at the midpoint, we expect cash usage to be in the low to mid $1 million range. Finally, as part of good corporate housekeeping this week, we will be filing a universal shelf registration statement on Form S-3 for up to $125 million. This provides us the company, the option to quickly respond to opportunities similar to the strategic investments we have done in the past year. As Brian stated above with the new large design wins and overall momentum in our business and a lean operating structure, we are driving the company to profitability possibly as soon as Q4. Thank you. And with that, let me now turn the call back over to Brian for his closing remarks.

Thank you, Elias. QuickLogic is now in the third year of its transformation and the business is stronger than ever. We have a fast growing pipeline of larger eFPGA IP and software sales, an expanded distribution ecosystem to drive our products out to a significantly higher number of potential customers and a lean operating model that generates higher returns as revenue increases. During the past year, we have successfully closed multiple million dollar wins, the most recent of which being approximately $7 million. As our revenue growth resumes in Q4 and into 2023 on the strength of our largest eFPGA contract to date, I'm even more confident we are on the cusp of sustainable profitability. I would like to again thank our key stakeholders. including investors, customers, suppliers and most of all, the QuickLogic and SensiML teams for their continued support. That completes our prepared remarks. Operator, I would now like to open the call for questions.

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question is from Suji Desilva with ROTH Capital. Please proceed with your question.

Hi, Brian. Hi, Elias, and congratulations on the progress here. Sounds great.

Thank you.

Thank you.

Yeah. No problem. So maybe on the $7 million deal you just announced perhaps just sound some of the accounting, understanding the rev (ph) recognition understanding. It sounds like Brian just want to clarify you couldn't recognize what you wanted to in the third quarter, but the fourth quarter, part of it will get pushed out. Does that mean the four quarters gets all split to the right or does it mean it gets recognized in three quarters? Any color there would be helpful.

Yes. So for this, I'll take this one in particular. The $7 million deal think of it as recognizing it across the year and that the starting point is -- starting later -- much later this quarter than what we thought. So it's a shift in that. But once it starts, it's across 12 months. Again, with the potential to increase notably through our completion of milestones in the customer election to upsize it.

Understood. Great. Thanks Brian. And then can you talk about the number you quoted in the prepared remarks of $100 million. Can you give us some color around what that number is meant to cover and imply, and how you built up that number and any thoughts there as well?

Yes, I can. So I think, if you think about how we've been characterizing the embedded eFPGA IP space for us for the last couple of years, you can see that we've been steadily increasing the dollar value of these wins and now we're talking typically every time we announce, when it's $1 million plus, $3 million, now it's $7 million. These are typically across a year from the time that we signed the deal and something is delivered. But as we've been talking about the last couple of quarters, we have our eye on what I think is actually a pretty lucrative prize at the end of these development, so that can show up in terms of royalties. In the case of a pure IP deal, now it could start to transform into silicon sales after these developments are done in the sense of us being the storefront for the resulting product. So this $100 million sales funnel and categorization of our large design wins encompasses these upfront contracts that we have and starting to now incorporate some of the back end that we're starting to see now from these customers in terms of forecast and getting built into these contracts like we were just mentioning with this large one here such that would be the $100 million represents the upfront and then either the royalty or the device shipments at the end of it with the storefront notion. And I think from an investor point of view that is really important because sometimes we talk about just IP and people think, okay, that's upfront IP and maybe some residual royalty at the end. Now we're talking about, yeah, it's not just the royalty component, it could be selling devices at the end. And that's a huge jump up in top line potential. monetizing these designs that we're engaging with now in these contracts.

Okay. That's interesting, Brian. I would like to explore the storefront concept a little bit. So my perception is for example, a defense prime where somebody needed a chip done, you guys gave them the IP to help them with that and they would go use it for their own products. But when you talk about a storefront, it sounds like almost like a standard product you're helping somebody develop to sell to third-parties, perhaps an ecosystem a large ecosystem guy wants device people to adopt it. Is that, can you just give us a sense of what how the storefront plays out as a standard product, third-party sales versus selling to a customer?

Yeah. First of all, it doesn't necessarily have to be a standard product. It could be a device for a specific customer that they just don't have the supply chain expertise to work with the supply chain to build a finished product to a finished good. We've been doing that for 30 years, so we can do that for customers. So it could in essence be almost a custom product for the customer that we're being the storefront for. If they don't have the capability to run a semiconductor supply chain. On the other hand, like you just mentioned, it very well could be a storefront of a standard product that perhaps is invested in or funded by a customer, but maybe they don't want to cover the whole thing. And so, depending on the business terms of the arrangement, we could always end up being a storefront for that device or perhaps a derivative of that device in the future. But again, the nice thing here about if you just step back and look at our heritage has been on doing devices. And so we clearly have all the infrastructure and processes and relationships with the supply chain line up to do that. We can pivot deals either way be it just pure IP or moving into the software concept depending on what makes sense with the customer.

Essentially, something of a new model, the IP plus chip facilitation, fairly interesting. Lastly, the chiplet and I'll leave it, last question. The chiplets what end markets are you seeing the strongest, earliest interest in chiplets out of the gate? I’m curious on that.

That's a good question. I'm trying to figure out how I should characterize this. Let's say, high performance computing.

That's what I thought. All right. Thanks guys. Congrats again.

Thanks, Suji.

Thanks, Suji.

[Operator Instructions] Our next question is from Richard Shannon with Craig-Hallum. Please proceed with your question.

Hey, Brian, and Elias. Thanks for taking my questions.

Hey, Richard.

Hey, I'm going to follow-up on Suji’s last question here just very quickly on chiplets here. Yes, the end market. I'm going to ask when could this be a noticeable contributor to revenue? So I don't have a great sense of whether that's next year or the year after. How do we get a -- how can you give us a sense of when that can be a driver of top line?

Well, it could be a contributor to top line as early as Q4. In fact, if we think about these contracts where we're getting funded development from a customer. As far as the actual chiplet revenue itself, typically that would be usually a year later as these chiplets go through the production process and the packaging and the validation by the customer before they would move it out into the real world. And that's what we're looking right now with the ones in our opportunity funnel. That is the timing.

Okay. Fair enough. That's helpful. I want to jump back to the $7 million contract and ask a couple of different ways around this. Brian, you noted something very interesting that over the last few quarters you've noted an increasing value of these contracts. Maybe you can help us understand why is this just an increasing amount of customization involved and so it's essentially a lot of its professional services or is this in somewhat scaled to the, variable effect, the unit output of the design once it gets to market?

There's a lot of depending on what the need is of the customer, there will be professional services incorporated into that. And one of the nice things about our new automated approach is that we can't actually do IP ports and designs for customers in a more timely manner, which also means we can do a port with some uniqueness to it for a lower price And so that's what you're I think starting to see is we're starting to see more demand for things that are very interesting and unique from a customer point of view. They solve a critical use case or a critical thing that they have that is not available as a standard product that carries a value that carries a cost. And I think you're starting to see us get that finally. eFPGA market in general, you're seeing a lot of consolidation happening, you're seeing voids being created out in the market for certain types of programmable logic or certain instances of the product with unique features. And we can fill that void. And I think there's a value to that and I like to think that our sales team is pricing the value, not necessarily the cost and that's also helping drive up the value of these contracts.

Okay. As I think about both of those dynamics and as well as the dynamics you just describing around the store front, which I think I have a -- I think a vague grasp of at this point in time. But how translatable are these to other customers and other situations? Are this -- is this a one-off or could we see things like this? Are there things like that in the funnel today?

There are things like that in the funnel today and I've been making a conscious effort to not talk about new types of business models or products until I'm pretty darn sure that we're going to see not just the one-off or something out of right field but a repeatable business strategy. And I've been sort of dropping little breadcrumbs out there about chiplets and storefront for probably a few quarters now. And one of the reasons why we decided to come out on this call and be a little bit more articulate in that area, a little bit more detail is because we are starting to see things either far down the funnel or show up as wins, like in the case of this large new contract. So I don't think it's a one off short answer to your question. I think it's a business initiative that we can really rally around and again leverage a lot of the R&D that we're putting into these new ports on the eFPGA side.

Okay. Fair enough. One last question for me and I'll jump out of line here on SensiML. You talked about a pipeline that's improving here. Is this a direct relationship with some of the channel relationships? And is that what you expect to kind of drive some of these larger deals going forward or how should we think about these larger deals on SensiML.

Part of it is definitely from the channel expansion. Part of it is the fact that we're -- SensiML is continually signing up very large microcontroller sensor partners. So they're getting a little bit more brand recognition. I think one of the biggest contributors to it and I think, I was fairly public about this in the last quarter or so is really we've made a strategic decision with SensiML to really focus on go-to-market partners that matter. And really we're focusing on ones that can provide a fan out effect where we work with a large company and they can fan it out to sort of a brownfield of people that have already got installed hardware that we can then work with to deploy AI. That's a much more scalable business model than trying to chase every cat and dog and student doing a hacker project and claiming that we have high numbers. But the average revenue per user is low. Where it's starting to now focus very consciously on these six digit guys that can fan it out to five and six digit guys themselves. And I think we're starting to see the fruit of that decision now. And it's really only been like three or four months since we made that decision, but I think it was the right one and you'll start to see more of these sufficient deals being closed as a result.

Okay, perfect. That's great perspective. That's all for me, Brian. Thanks.

Thanks Richard.

Our next question is from Rick Neaton with Rivershore Investment Research. Please proceed with your question.

Thank you. Hi, Brian. Hi, Elias. Congratulations on nearly breakeven quarter.

Thank you.

My first question concerns your smartphone customer, we've noticed a lot of softness in the mid-range Android market. Is your particular customer giving you any longer term visibility into its order patterns and for calendar year 2023 now that we're getting into this -- well into the second half of 2022.

Yeah. In fact, I have periodic face to face meetings. I probably had more face to face meetings with that customer than any of our customers post-pandemic. We are getting good visibility firstly in new phone projects that they are intending to use us in or designing us into. We're getting good visibility on the volumes of those projects by phone. And then I wouldn't say for more than a year out, we know down to the month level what they're planning to do, but that's sort of the next level of near-term visibility is getting down to the month granularity of how much volume are each of these carriers going to take each of these models, right? It's not just one carrier, one model. It's multiple carriers, multiple models. So there's lot of variables out a bit to still down to a forecast. But I think we are getting good real time visibility from them. Starting again at the design end stage and then down to volume per phone per carrier. So that's why in the prepared remarks, I was saying we have -- I think reasonable visibility for 2023 and I see at least design in visibility for phones that would be shipping even in 2024. Of course, their forecast is going to change based on the macro economy. But the starting point is getting into the next generation of phones, and I clearly see that through 2024.

Okay. And that is firmed up since your last few conference calls. So in looking at the Q3 lumpiness here, is your smartphone customer, the largest or second largest contributor to your -- I think you said $1.8 million shortfall in your expectations.

It is not the number one contributor. The number one contributor by far is the slip and start date of this very large project we just announced in the earnings release and on the script today.

Okay. And you said that it's basically -- your start date is basically just a slide of X number of weeks of this large new contract and that the revenues will be a portioned as they are earned over the 12 month period. But there's no catch up anticipated in Q4 from that customer. Did I understand that correctly?

Yeah. Exactly. Just slide the start date, everything slides accordingly. And if you want to model it out, just model it as sort of equal parts across 12 months of that $7 million.

Okay. And this is in addition to the customer you announced earlier this year where it's providing about 250,000 a quarter of revenue to you approximately per quarter. [Multiple Speakers]

Brand new -- yeah, this is a brand new design, brand new customer.

Okay.

This new one.

Okay. So you've got about $2 million then of fairly locked in revenue coming out of these two big eFPGA contracts for the next four quarters at least.

That's a good way to look at it, right?

Okay. I'd like to talk about your Australis tool because you keep mentioning that for about the past three or four conference calls and calling out its importance. I'm curious given all the large dollar values that seem to be increasing from your deals, what do you think your leverage on your ROI on your investment into the Australis tool is at this point? And where do you see your leverage going on that tool, say, in the next 12 to 24 months, as you plot your long term growth?

But I think with any compelling product, it doesn't stay compelling unless you continue to invest in it, right? And so there's a lot of things that we're looking at from a continual investment into Australis to maintain the competitive moat that I think we've created so far. There's a lot of different ways that people are looking at programmable logic integration into their systems in the future. We've talked about chiplets. There's always going to be things that we'd like to change to Australis to make it more amenable to chiplet type development or heterogeneous development. So leverage is high and it's going to continue to get higher because I don't think we have to put as much into it as we're getting out of revenue now. But that's the nice thing. But it's not going to be a zero investment thing either. We need to continue investing in that especially as we see these new opportunities and just trying to make sure that that tool is allowing us to keep pace with the market.

Okay. Thank you, Brian. Thank you, Elias. [indiscernible].

Thank you.

Our next question is from Martin Yang with Oppenheimer. Please proceed with your question.

Hi, good afternoon. Thank you for taking my question. One question is, the large licensing contract you announced. With the timing coming later than you expected, would it change any of your OpEx assumptions regarding either R&D or SG&A for the year?

No. Mainly because we already had anticipated that if we did get the contract in pieces. We already had accounted for those tools that we were supposed to buy. So I think we're okay.

Got it. And also another question regarding OpEx. So with the first and most adoption, finally seeing more positive tractions in the market, what are your plans to or have you thought about maybe adding investments to boost since most adoption or marketing the software in a more aggressive way?

I think we are being very aggressive in a way we're marketing it. That's for sure. We don't particularly stay away from it. We are focusing on it for sure and investing where we think it makes sense. I would say, let's give it some time and see how sensible it turns out, but I believe that it's around the corner. You'll see certain good announcements from it. So the answer is, in my long answer -- my long winded answer is yes, we are investing in it and we are not shying away from investing in it further make it a better business for us.

Got it.

One thing I'd like to add to what Elias said is, I think we're showing good discipline in how we're marketing sensible. Like I said, we're not marketing it to the 10,000 people working out of their universities or we're marketing it to companies that matter that have an installed base already in place where we can go to that installed base through that partner, through that customer. and upsell AI into the brownfield immediately. And then also work on some of these new opportunities that we see that makes sense for AI. But you're definitely going to -- if you just step back and look at our marketing approach in general, you're going to see it's a lot less oriented for the masses and it's really focused around some of these big microcontroller companies and some of these large partners that we signed up worldwide over the last quarter or so.

Got it. Thank you, Brian. That's it for me.

We have reached the end of the question-and-answer session and now I’ll turn the call over to Brian Faith for closing remarks.

I want to thank you all for participating in today's call and for your continued support. We look forward to speaking with many of you again when we participate in upcoming investor events and when we report our third quarter fiscal year 2022 results in November. Have a great day.