Hello and welcome to the nLIGHT First Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there’ll be an opportunity to ask questions. [Operator Instructions] Please note, today's event is being recorded.

I would now like to turn the conference over to Jason Willey, Senior Director of IR. Mr. Willey please go ahead..

Thank you and good afternoon everyone. As the operator said I am Jason Willey, nLIGHT's Senior Director of Investor Relations and Corporate Development. Scott Keeney, Chief Executive Officer of nLIGHT; and Ran Bareket, Chief Financial Officer will be the speaker on today's call.

If you have any questions after the call, please direct them to me at 360-567-4890 or at jason.willey@nlight.net. In addition you can access an archived version of today's call from our website.

In today's call, our discussion will contain forward-looking statements including statements about financial projections, future business growth trends, and related factors, prospects for expanding and penetrating addressable markets, and our strategic focus and objectives.

Forward-looking statements are subject to risks and uncertainties many of which are beyond our control including the risks and uncertainties described from time-to-time in our SEC filings. Our results may differ materially from those projected on today's call. We undertake no obligation to update publicly any forward-looking statement.

Additionally, certain non-GAAP financial measures will be discussed on this call. We have provided reconciliations of these non-GAAP financial measures against the most directly comparable GAAP financial measures in our earnings release which can be found on the Investor Relations section of our website.

I will now turn the call over to Ran to go through the financials and outlook. Scott will then provide additional color on the business. We will then be glad to take your questions..

Thank you, Jason and good afternoon everyone. We delivered first quarter revenue gross margin and adjusted EBITDA in line with the outlook we provided in mid-February. Revenues for the first quarter were $14.9 million, down 1.4% year-over-year.

During Q1, sales to the industrial end markets were $18.1 million, representing 43% of total revenues and down 5.3% year-over-year. Sales to microfabrication end markets were $14.5 million or 75% of total revenues and down 7% year-over-year.

Aerospace and defense sales were $9.2 million or 22% of total revenues and grew 19% compared with the first quarter of 2018. On a geographic basis, sales to China were $13.7 million in the first quarter of 2019 or 73% of total revenues down 10% compared with Q1 2018.

Sales in North America were $15.8 million, representing 38% of total revenue and down 2.6% year-over-year. Rest of the world sales were $12.4 million, up 12% compared with the first quarter of 2018 and were 30% of total revenues. Gross margin was 32.3% in the first quarter a decrease of 240 basis points year-over-year.

Compared to the first quarter of 2018, gross margin in Q1 2019 was negatively impacted by U.S.-China tariff implemented in September 2018 and reduced pricing in the Chinese industrial end market. These headwinds were partially offset by cost reduction and positive mix towards high power fiber lasers.

The Chinese industrial end market represented approximately 20% of our overall revenue during the first quarter of 2019. Operating expenses were $14.6 million during the first quarter compared with $10.5 million in the first quarter of 2018.

Q1 '19 operating expenses include $1.7 million stock-based compensation, an increase of approximately $1.6 million year-over-year. Operating expenses reflect high run rate G&A expenses post our public offering in April 2018, an investment in R&D to position the business for long-term growth opportunity in high-power laser market.

First quarter operating loss of $1.1 million was negative 2.5% of revenues and compared with operating profit of $4.2 million or 9.9% of revenue in the first quarter of 2018. Our adjusted EBITDA for the first quarter was $3.1 million or 7.3% of revenues, this compared to $6.3 million or 14.9% of revenues in Q1 2018.

GAAP net loss for the first quarter of 2019 was negative $1.2 million compared with net income of $2.9 million in Q1 2018. GAAP EPS for the first quarter of 2019 was a loss of $0.03 per share compared with zero in the first quarter of 2018.

Non-GAAP EPS which exclude impact of stock-based compensation and assume the conversion of all outstanding preferred stock in the period to common stock was $0.02 per diluted share in Q1 2019 compared with $0.10 per share in Q1 2018. Turning to the balance sheet. We ended Q1 with total cash and cash equivalents of $142 million.

DSO for the first quarter of 2019 was 61 days. The higher receivable balance reflects timing of revenue and moving to more standard payment terms with some of our large customers. Inventory at the end of the quarter was $41 million representing 121 days in the inventory.

We build the inventory during Q1 to support anticipated ramp in volume in the second quarter. During Q1 we used $4.9 million of cash in operating activity reflects lower net income and continue working capital expenditure. Capital expenditure for the quarter were $2.7 million or 6.5% of revenues. Turning to the guidance for the second quarter of 2019.

We expect the revenue to be in a range of $46 million to $50 million. In the midpoint of this range, it implies revenues down approximately 7% compared with the second quarter of 2018 and up approximately 15% from previous quarter.

Based on our current expectation for product mix, we see gross margin for Q2 2019 in a range of 32% to 35%, which includes approximately $400,000 of stock-based compensation. Operating expenses for Q2 are expected to be approximately $15.5 million which includes approximately $2.1 million of stock-based compensation.

For the second quarter, we expect adjusted EBITDA in a range of $4 million to $6 million. We expect Q2 average basis share and average fully diluted share to be in a similar level with Q1. Looking at the full year of 2019, we continue to believe, we can deliver a moderate amount of revenue growth compared to 2018.

This reflects our expectation for increased revenue from new product as the year progress improved contribution for the microfabrication end market to the first quarter and continue the strength in aerospace and defense. I will now turn the call over to Scott..

Thank you, Ran. We began 2019 with first quarter financial results that met expectations we outlined back in February.

We continue to experience solid demand trends in the aerospace and defense end market with strength being offset by challenging conditions in the Chinese industrial end market and a slower quarter at some of our larger micro fabrication customers.

Taking a closer look at the industrial market, revenues declined 5% year-over-year in the first quarter with reductions in China and North America, partially offset by strong growth in the rest of the world. For the second consecutive quarter, we generated more than 50% of our industrial revenue outside of China.

Markets in Asia and parts of Europe saw strong growth during the quarter as we made inroads with several customers that have not historically purchased meaningful quantities from nLIGHT. These customers are embracing our differentiated technology such as Corona and the benefits of the serviceability of our lasers and focused customer support.

We are excited by the initial customer interest in our new product offerings. Corona played a key role in a number of opportunities during the quarter and we see programmability taking on growing importance as we expand our presence outside of China.

The programmability features enabled by Corona allow our customers to offer performance and flexibility that clearly differentiate their systems from their competitors. In the ultra-high power segment of the fiber laser market, we generated initial revenue from our 12-kilowatt fiber laser in Q1.

We expect volumes of this product to ramp as 2019 progresses. There is growing customer interest in higher power offerings in China a segment of the market where we see more limited competitive landscape. During Q1 approximately 24% of our fiber laser sales were at 6-kilowatt and above which is up 12% from the comparable period in 2018.

High-powered growth in China was even more favorable than these global trends. Sales in the 2 kilowatt to 5 kilowatt range were over 50% of our fiber laser sales in Q1 2019 down 8% from Q1 2018 levels. I will now provide a bit more color on the Chinese industrial market.

As a reminder China industrial revenues are approximately 20% of overall company revenues. Over the past several months, we have seen improved activity in China.

We believe this improvement reflects a combination of factors including positive seasonal trends exiting Chinese New Year, economic and tax stimulus from the Chinese government and expectations for a resolution to the trade disputes with the U.S..

While unit demand in China has improved from Q4 and Q1 lows, competitive pressure in the lower power segment is weighing on the overall market. Despite the current competitive and macro headwinds, we continue to see opportunity for nLIGHT in the Chinese industrial market.

We see this opportunity centered on a set of customers who are providing high-quality, highly reliable products to their end users. We are focused in China on supporting these customers and in penetrating the ultra high-power market.

The high-power segment continues to grow in units and revenue and we see limited competition from local vendors in this segment. In the microfabrication market revenues declined 7% year-over-year during the first quarter. We experienced slower activity at several large customers following strong purchases in the back half of 2018.

We believe the reduced activity is a temporary dynamic and we expect revenues in this end market to improve sequentially in the second quarter. Despite the temporary volume reductions at a few customers, we are encouraged by the broad trends across the microfabrication market.

Over the past several quarters, we have seen increases in the breadth of customers we are serving. We believe this broader set of customers positions us well for future growth in this market.

Our microfabrication customers serve a wide range of end applications and we see the improved cost and performance of diode pump solid-state lasers opening up new applications and enabling the replacement of legacy technologies. Finally in the aerospace and defense market we grew revenues 19% year-over-year in the first quarter.

This growth follows strong results in this end market through 2018. Results in Q1 benefited from higher activity at several long-term programs. We also continue to see opportunity to participate in government R&D projects.

While these projects remain a relatively modest portion of our A&D revenues they support the evolution of our core technology and provide important foundational work for larger -- longer-term opportunities such as directed energy.

In conclusion our results for the first quarter of 2019 met our expectations and showed progress across a number of areas despite challenges in the industrial end market in China. We are excited by the initial customer response to the new products we recently introduced and the continued momentum in the aerospace and defense market.

As 2019 progresses, we see further opportunity to improve our position with key industrial customers and expect more normalized buying trends from our leading microfabrication customers. In closing I would like to thank the entire nLIGHT team for their efforts during the first quarter. And with that we'll now hand it over to Q&A..

[Operator Instructions] And the first question comes from Jim Ricchiuti with Needham & Company..

Hi, good afternoon. I wanted to pursue the microfabrication business first. Little surprisingly the decline you saw there.

Can you talk about which verticals? And it appears that that was mainly in North America or was that also in Europe as well?.

Hi, Jim. Yeah, we saw a slight decline. Really globally I think consumer electronics might be the one area I would target. We see an expansion of our customers in that space. So that gives us -- it's an encouraging sign for continued growth over time, but that's probably the single driver for Q1..

Okay. And Scott, going back to the last call, it seemed like you were perhaps expecting a little bit more moderation in growth in the aerospace and defense. Is that tracking stronger? It seems to be consistent with what we're hearing from some other players in the market..

Indeed, Jim. Yeah. We've highlighted that as an ongoing area of growth, and we think longer term it will continue to be a strong area of growth. It will be lumpy. There'll be different projects they come up, but yeah, we remain optimistic about the long-term growth options there..

And if I could one last, I'll jump back in the queue.

Just overall pricing in China industrial, in terms of the pressure at the low end of the market and are you seeing it in the mid-range segment of the market?.

Yeah. It's a little hard to be too prescriptive there of the exact point of power where things change. But, let's just say we see limited competition as you get to the high-power segment. In the very low-power segment you see more intense competition in that space. We do think that as you go up in power, the technology gets far more difficult.

And so we continue to see more limited competition there..

Thanks. I'll jump back in the queue. Thank you..

Thank you. And the next question comes from Tom Diffely with D.A. Davidson..

Yeah. Good afternoon. Just following-up on the last question.

When you look at the consumer electronic softness, do you see historically a 1-year on, 1-year off type trend in that space? Or is it with your customer base a little tougher to the call?.

Yeah. No, I think it's more difficult to call that. We don't see the 1-year one-off. And we're seeing an expansion in the set of customers as we've noted and the expansion in applications of largely the diode pump solid-state lasers in that space.

So, no, I think consumer electronics was the driver of Q1 from what we can tell but, over the longer term we see an expansion in that space..

Okay. And then it seems like obviously the Corona driving a lot of interest.

In addition to just sales or interest, do you see that impacting either the pricing or the margin as well?.

Well, the way we think about Corona is it's a differentiated product that allows our customers to differentiate their systems and that's allowing us to grow with the larger players around the world. And certainly in that space, we see a different environment where it is more about high quality, high productivity.

And that's allowing us to win those design wins where the margins are better. So it's more about the design win aspect of differentiation..

Okay.

And do you find that it's more popular at the higher powers or the mid powers? Or what's the kind of the sweet spot for Corona?.

Good question, Tom. When we launched Corona, we saw it as a very differentiated product that would lead to adoption in certain segments and what we're seeing is the benefit across power levels. And so, we believe that programmability is going to be critical across a broad spectrum of power levels..

Okay.

And then finally, when you look at the aerospace and defense part of the market, are you selling complete systems there now? Or is this still mainly the semi-lasers and a lot of R&D projects?.

Yeah. We -- good. Today, we do not sell systems in that space. We sell -- largely it is at the component -- and there are some pretty advanced components in that space, but certainly we don't sell systems..

Okay. Thank you..

Thank you. And the next question comes from Andrew DeGasperi from Berenberg..

Andrew DeGasperi. Thanks.

I guess my first question on the microelectronics again sorry to follow-up, but the improvement that was lagging in 2Q is that going to be -- I'm assuming it's sequential on a year-over-year basis?.

Andrew it was a little hard at the end of the question there.

I think your question was around Q2 microfabrication? Can you repeat the last part of your question?.

Yes, the improvement that you're confident on is that on a -- I'm assuming that's on a sequential basis, is that right?.

Yes, that's correct..

Got it. And then just in terms of the weaknesses you saw in the quarter. Obviously, you have a pretty large customer in that space and they flagged being weaker in the call a few weeks ago.

Just wondering is it the improvement coming from other sources or other customers? Or is it generally broad-based?.

For the general weakness in Q1 that's your question?.

Yes..

Yes. Well I mean Q1 is generally weaker because of the Chinese New Year is a key driver of Q1. So that was -- someone amplified this year by just the uncertainties around the various trade issues. But generally Q1 in the industrial space is softer because of Chinese New Year..

Got it.

And then I apologize if you already answered this before in previous segments, but is there gross -- a relative say gross margin difference between your different segments? If you can maybe quantify?.

Yes, we will not quantify beagle, but yes, I think that we talked about it in the past. There is a mix between the different end markets and between the different products that we have i.e. semiconductor or laser versus fiber laser.

But the result of mix within the product -- and it mainly refer to a higher power in the fiber laser versus lower power in the fiber laser.

As Scott mentioned, the higher power in the fiber laser where we do gain momentum there, where we do increase our share there, the margin is higher due to lower competition as well as better technology that's coming with the higher margin obviously..

Right. And then in the aerospace and defense, obviously that's growing faster this year and last year versus your other segments.

So just wondering is there -- I know you don't disclose margin differences between those, but is it -- should we assume that that's the higher margin business relative to the others?.

Yes, we will not go to that level but -- yes we will not go to that level to disclose the different margin between the different end markets..

Okay. Understood. Thank you..

You're welcome..

Thank you. And the next question comes from David Ryzhik with Susquehanna Financial Group..

Thanks so much for taking the question.

Scott, can you just elaborate again on the interest you're seeing in the 12-kilowatt? Any way to size like the amount of customers that are in qualifications? And in that context actually how long are qualification cycles? And perhaps maybe, can you fill us in on 10-kilowatt? Is -- should we expect 12-kilowatt to be a bigger driver over the next few quarters than the 10-kilowatt? And I have a follow-up..

Okay, good. So as I highlighted the ultra-high power, the area where there's significant growth today is in China. And in China there are really only a small handful of customers that have the technology to use those ultra-high powers. And then likewise we see very limited competition on companies that can produce that 12-kilowatt.

So there's a handful of customers. There's a very strong demand interest, which therefore shortens that cycle to go from inquiry to design in. What's going on this space is as you go up in power for key end users their productivity goes up. They get paid based upon how many pieces they cut. And doing it faster means that they get paid more.

So there's keen interest there and we've been out meeting with end users many of them over the last few quarters. So we see strong interest there which is driving this market. There are limited companies that can do it and there are limited companies that obviously can provide the lasers.

So we do see it as an attractive market that will continue to expand over time..

Got it. And then Ran, you talked about building inventory to support a ramp in volume in 2Q. Is that mostly for 12-kilowatt or for Corona or a mix? I just would love a little more color on what products are in that inventory built. Thanks..

It's across the board. It's for the diodes. It's for fiber laser. It's for 12-kilowatt. It's for Corona. It's across the board..

Okay. And then as we talk about 12-kilowatt and Corona, is the expectation that both perhaps become more material and ramping by mid-year? Or I just wanted to understand the timing and maybe how we can think about the model..

Yeah. I think that in terms of the model yeah, mid-year it's the right way to look at that where we will ramp even more than what we are seeing right now..

Thanks so much. .

Welcome. .

Thank you. And the next question comes from Chris Palm with Craig-Hallum Capital Group..

Hi, guys. This is actually Danny on today for Greg.

I'm just kind of curious what kind of levels of tariffs are you are seeing right now? And how are you implementing those into your quarter two guidance?.

So, of course, they are part of our -- we took it into consideration when we provided guidance.

And we disclosed it in the past, we are seeing right now impact from the tariff that was implemented in September 2018, call it the incremental tariff that was implemented in September 2018 at roughly of $600,000, $700,000 or call it roughly 1.5% of the margin.

So if you look at the decline in the margin from Q1, 2018 to Q1 2019 more than half of it was a result of that additional tariff that was implemented again in September 2018..

Okay. That's great. And then I guess just moving to kind of the additive market.

How are you seeing your guy's current position in there? And what kind of end markets or geographies are you seeing strengths and weaknesses from there?.

Yeah. So, in additive, again, we remain quite -- have a strong perspective that we'll see continued growth in that space. We have seen some slowdown in the near-term in that space due to various factors at the various companies that play in that space.

There are few key players that have the technology there today, I'd say that sort of first-generation products. There's a long list of other companies that are coming out with the next-generation products. And that's -- we're really focused on the next-generation in that space.

And so, we don't have anything specific to report on that this quarter, but we do believe that this is a space that is a great example of where the performance characteristics of laser are critical and we've seen that in the engagements that we are working on..

And then I guess just following up on that one real quick.

Are you seeing trends where these additive systems are starting to use maybe the -- like multi-laser where you're getting into two lasers or four lasers or even eight?.

Absolutely. Yeah. No, I think it's all about throughput with these -- well, the quality and throughput with these systems. And so, certainly we're seeing multiple lasers. But also again even the performance of a single laser can be absolutely critical to increasing the throughput in this space..

All right. Thanks, guys. I will hope back in the queue..

Thank you. And the next question comes from Jed Dorsheimer with Canaccord Genuity..

Hi. Thanks. Just a follow-up on the tariffs. If I back out the tariffs on the 150 basis points, would the other 150 basis point sequential decline be mainly in pricing pressure or volumes, or is that kind of split evenly? And just a helpful understanding of that would be useful..

So, first of all, when you back out the tariff from 240 basis points year-over-year, you are getting less than 1% reduction year-over-year. And that 1% reduction there are many things that impact our margin. In one hand, yes, there is price impact there.

But that price impact as I mentioned in my opening remarks offset by -- first of all, by everything that basically improve our margin and I will go one by one. When we are going up in the power, in the fiber laser as we mentioned before, the margin is higher.

So the mix within the product that we are selling is a better mix for us in terms of the margin. And we are selling 12-kilowatt. We are getting better margin than when we are selling the three-kilowatt. So this is point number one.

Second point is introducing a new product to the market, again 12-kilowatt the Corona and other products, which their cost is lower than where we are today. So cost reduction is coming into the effect.

And lastly it's obviously investment in manufacturing processes and automation and other cost reduction internally in the company that help us to improve the margin. So, all of those factors offset the price reduction. And if you will, the overall impact was roughly a reduction of 1% year-over-year..

Got it.

So if you -- so we're basically looking at absent tariffs kind of that high watermark of the 36% that you saw in Q4?.

Yeah. If you will -- if you look at the guidance that we are giving for the next quarter, right 72% to 75% that assume again that first of all the volume will be higher right? Don't forget that the volume in Q1 was low.

So as we go back in the volume and this is basically -- definitely what we are planning to do in Q2 based on our guidance, so obviously the margin will be higher. But it's not just that. Again we are planning to grow high in the volume but in the area where the margin is higher again those 12-kilowatt Corona and everything else that I just mentioned.

So all of those things will impact a better -- will help us to improve the margin. Definitely if we will not have the tariff it will help us even further..

Got it. Two other questions for you, and then I'll jump back in the queue.

I was wondering on the component side, is all of the green still being split in terms of the -- or where are you I guess in the development of a pure green?.

Sorry?.

So, the green laser is it -- is all of that being split in -- at a component level? Is that still all being split in terms of splitting the red wavelength? Or I'm just curious in the development of solid state green laser where that is from -- either from your business or from an industry perspective?.

Yeah. To be honest where we see most of the growth in the diode pump solid-state laser market is in ultrashort pulses. And certainly picosecond femtosecond is where it gets really interesting, so using a really sharp pulse to in many cases athermally affect material.

In terms of the frequency conversion there we're typically seeing more of the UV wavelengths as a key market. We certainly support green lasers. I wouldn't highlight that as a key area of growth and we certainly are aware of continued improvement in that space.

We're certainly supporting continued improvement but it's not a key driver of the growth in that market..

Got it.

And the pico and femto is for the micro material processing?.

Yeah, we call it all micro. It's a really broad range of different applications. It is consumer and it is other things. It's medical. It's all kinds of different applications in that space. And we do believe that that market will continue to grow as the lasers continue to improve both in terms of price and performance..

Got you.

And one last one, Scott over -- so six kilowatts and over what percentage are Corona enabled?.

Well, we don't break it out. Let's just say this. We see benefits both in higher power and in Corona. And when you combine those you get even bigger benefits..

Okay. Thank you..

Thank you. And the next question comes from Patrick Ho with Stifel..

Thank you very much. Scott, maybe first off following up on the questions on the 12-kilowatt. You mentioned it's a limited customer base today, but at the same time this could be an opportunity for you to work with existing customers and have them kind of move up the power curve and enhance their productivity.

Can you give a little bit of color of the interest between new customers that you're focusing on with the ultra high-power lasers versus helping your existing customers kind of move up that power curve as well?.

Good question, Patrick. Yeah, I know. I think the first order it's about helping our existing customers who've grown very nicely and continue to improve and helping them continue to move up. That's really the first order driver of our growth in that space. There are some newer customers that are also very interested in our products.

But certainly initially it is our existing customers..

Great. Ran, just a follow-up and maybe to get a little bit of clarification. I think you mentioned OpEx in 2Q would be $15.5 million.

Can you just give a little color of where we're seeing the increase on a sequential basis? Is it more on R&D or is it more on the SG&A line?.

It will be probably half and half, half R&D and half SG&A roughly. Yeah, but you -- but what we will see is an incremental OpEx quarter-over-quarter when we are investing more in R&D for -- on those projects that we are working and some related to G&A.

Some of that will -- some of the incremental OpEx between Q1 to Q2 will be related to stock-based compensation..

Great. That’s all I have. Thank you very much..

Okay. Thank you..

Thank you. And the next question comes from Mark Miller with Benchmark Company..

Thank you for the question. Your other income of $820,000 that was up tenfold from a year ago. I'm just wondering what was driving that.

What should we expect in the coming quarters for this year for other income?.

The other income -- let's put it like this. Below the net -- below the operating income there are two lines. There are the interest income which -- that's the interest that we are getting from the cash that we have in other income. The majority of that $800,000 was due to exchange rates between China and the U.S..

Okay.

So it's exchange rate-driven?.

Mainly..

Okay.

In terms of the diode business, what are you expecting from your major semiconductor customers? Because they've been reporting and the recovery seems to be getting pushed out further that they were anticipating a quarter ago? Do you feel that you'll see improvements to diode sales in September, December quarter from your major semiconductor customers?.

Yeah, good, Mark. With respect to semiconductor, if you're talking about WFE, it's actually a pretty limited part of our exposure. So it's not a big driver to our micro fabrication business. So, no, I wouldn't factor in a big change plus or minus there..

Thank you..

Thank you. And the next question is a follow-up from Jim Ricchiuti with Needham and Company..

Ran, I wanted to just make sure I heard you correctly.

So you're assuming you are still in a position to show growth in the year as a whole?.

Yeah. Nothing on the overall for 2019. Again there are many assumptions there. But for 2019, the assumption that we had at the beginning of the year, didn't change..

Okay. Because if I take the low-end of your guidance for Q2, that's a pretty healthy sequential ramp in the second half over the first half. And so I'm trying to see what -- which areas you see feel a little bit more excited I guess, confident about aerospace and defense.

Are you that much more positive about the other areas?.

No, Justin. Let me tell you where we plan that growth will come from, and I will go one by one. So we'll start with micro fabrication, we had a lot of questions about that. Definitely we see that Q2 is as I mentioned at the beginning, will be higher than Q1. And we believe that there's going to be some recovery in the second half as well.

On industrial end market, outside of China, we do anticipate to see growth again Corona and everything else that we talked about. And within China, we will see a growth from the 12-kilowatt in the high power. So matter of fact, we just started to sell 12-kilowatt in Q1. We will see a much bigger ramp this quarter and definitely at the second half.

And lastly, as you mentioned aerospace and defense, it's another factor that will help us to grow the company. Listen I don't want to -- will not -- it's not that we anticipate to have a significant growth year-over-year, but nothing changed from the remark that we said at the beginning of the year..

Okay.

Anything we need to bear in mind about operating expenses we look out over the balance of the year?.

Yeah. So we talked about the OpEx for Q2. I think there is going to be a little bit incremental here in Q3, and in the second half nothing significant. If you look at the trend that we -- that you saw in the last few quarters that should be the trend going forward for the second half as we continue to expand the company..

Okay. Thanks very much..

Thank you, Jim..

Thank you. And as that was the last question, I would like to return the floor to Jason Willey for any closing comments..

I'd like to thank everyone for their participation today and continued interest in the company, and we look forward to talking with you over the coming weeks and months. Have a good rest of your day..

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines..