Peraso Inc (PRSO) 2005 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Q4, 2005 Monolithic System Technology Inc. Conference call. [OPERATOR INSTRUCTIONS]. I would now like to turn the call over to Ms. Beverly Twing of Shelton Investor Relations.

Thank you, Shamika. By now everyone should have received the press release. However, if you haven't, it is available at the MoSys web site at www.MoSys.com.

Before we begin the discussion of the fourth quarter's results I would like to remind you that this conference call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 which include, without limitation statements about the market for the MoSys technologies, benefits and performance expected from the 1T-SRAM technologies and embedded memory designs, licensees of 1T-SRAM technologies and their strategy, the development and production of products that use MoSys's licensed technology, license fees and royalties attributable to 1T-SRAM technologies, and the Company's anticipated or prospective financial performance. Forward-looking statements made during the call are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

Additional information concerning factors that could cause actual results to differ materially from any forward-looking statements made during this call are contained in the Company's most recent annual report on form 10-K, filed with the Securities and Exchange Commission. In particular in the section titled Risk Factors in the form 10-K and in other reports that the Company files from time to time with the Securities and Exchange Commission. MoSys undertakes no obligation to publicly update any forward-looking statement for any reason except as required by law, even if new information becomes available or other events occur in the future.

Thank you for your attention. I will now turn the call over to Chet Silvestri, Chief Executive Officer of MoSys.

Thank you, Beverly and good afternoon, everyone.

Welcome to MoSys' fourth quarter 2005 financial results conference call. I'll begin today's call with an overview of our business, including highlights of our fourth quarter and the full year of 2005. Following those remarks, I'll provide a more detailed review of the financial results for the fourth quarter and provide our business outlook for the first quarter and full year of 2006. At the end of my prepared remarks, I'll open the call up for a question and answer session.

So now to begin with the Q4 review. During the fourth quarter, we experienced strong overall bookings and secured significant new projects in the consumer multimedia and cellular handset market segment. The majority of the bookings were for our new 1T-SRAM classic macros. We believe the industry has reached an inflection point in its need for higher density memory solutions, which are more cost effective and consume less power than traditional 6T-SRAM or embedded DRAM. This need for higher density memory is due to the increased multimedia content and communications capability required in these new consumer devices.

We believe our classic macros and our ability to scale our technology to future process geometries will meet our customers' needs for power, speed, reliability and cost savings for these next generation designs. Our classic memory macros are silicon-proven, off the shelf high density macros that we began shipping in the fourth quarter of 2005 as part of our initiative to offer customers rapid integration of our memory solution into their system-on-chip design. The initial versions are targeted at the high volume consumer entertainment and wireless personal communications market. These preconfigured macros require minimal customization while providing large onboard memory blocks at higher speeds with more reliable performance, lower power consumption, and greater cost savings than any other on-board memory solution.

Additionally these off the shelf designs allow our customers to better meet the time-to-market constraints of the rapid consumer product life cycle. As an example, we have recently announced that during Q4 we signed a licensing agreement with Yamaha corporation for use in future mobile phone audio applications. We're pleased that companies such as Yamaha are adopting our memory solutions.

As a further endorsement of our classic macro products, we recently received the Design Vision award for our 1T-SRAM classic macros as the best semiconductor in IC intellectual property technology. This award was presented by the International Engineering Consortium at DesignCon 2006 and recognizes technologies, applications, products and services judged to be the most unique and beneficial to the industry. We thank the IEC for this award.

Currently the majority of our product and projects are delivered in the 0.13 micron logic process, which is expected to remain the largest portion of our royalty revenue for 2006. However, the industry is moving steadily towards 90 nanometer logic process, and with a forward migration further to 65 nanometers. We believe our technology is easily scalable to whatever geometry the customer requires, and expect to generate additional licensing revenues at 90 nanometers and eventually 65 nanometers as the transition to these geometries progresses. We currently have multiple projects at 90 nanometers, and we anticipate that we'll secure additional licensing agreements as the industry transitions to these smaller geometries.

Turning to recent additions to our management. During the fourth quarter, we added Hem Hingarh as our new Vice President of Engineering, working directly with our Executive Vice President and Chief Technical Officer, Wingyu Leung. Hem brings over 30 years of executive management experience to engineering and product line management to MoSys, and will manage the development and deployment of our current 1T-SRAM product. Wingyu will then be able to devote more time to productizing our 65 nanometer and 45 nanometer 1T-SRAM offering as well as other high density embedded memory solutions that we have under development, such as dual port memories.

Additionally during the quarter, we further strengthened our sales infrastructure and have effectively completed the restructuring and enhancement of this function. Under the direction of our new Vice President of Worldwide Sales and Business Development, Dhaval Ajmera, we've increased our sales presence in the U.S., Asia and Europe. One final remark regarding management additions. We continue to make progress in our search for a new Chief Financial Officer. We feel confident that we'll have a new CFO identified in the near future. Until that time, we can rely on our talented and seasoned financial staff to meet all of the Company's business needs and regulatory requirements.

Now I'd like to further review the financial results for the fourth quarter. Total net revenue was $2.4 million, which included licensing revenue of $1.3 million, and royalty revenue of $1.1 million. Total revenue was in line with our revised guidance of $2.3 to $2.5 million. As previously announced, more than $1 million of fourth quarter revenue related to bookings for our classic macros which deferred into subsequent quarters in 2006. We expected additional deferrals of classic macro revenue may occur until such time as we've developed shipment experience with this new product line.

At this time we are taking a conservative approach to the accounting for our classic macro licensing revenue. As we develop a track record with this product we will reassess our recognition accounting in order to determine whether we should recognize the majority of the classic macro revenue in the quarter in which the macros are shipped, instead of the current deferral approach. For the fourth quarter, our licensing revenue was $1.3 million compared to $118,000 in the fourth quarter of last year, and $3.2 million in the previous quarter. Licensing revenue was recognized from 15 different chip development projects this quarter, as compared to 16 chip development projects last quarter.

Royalty revenue in the fourth quarter of 2005 was $1.1 million, the same as in the fourth quarter of 2004. Royalty revenue was approximately $900,000 in the third quarter of 2005. Fourth quarter royalty revenue was earned from 17 different licensees, compared to 15 licensees in the prior quarter. This increased number of royalty payers comes as additional licensees move from the development phase to the production phase.

The gross margin percentage in the fourth quarter was 90% of net revenue, compared to 55% in the fourth quarter of 2004 and 84% in the prior quarter. The higher gross margins in the fourth quarter were due to the increased overall percentage of royalty and classic macro revenue, which is higher gross margin business than customization services. Operating expenses including research and development were $4.1 million in the fourth quarter. Operating expenses for the quarter exceeded our original guidance of $3.4 to $3.6 million primarily due to higher than expected UniRAM litigation costs and because we did less customization services due to the demand instead for our classic macro products.

During the quarter, approximately $340,000 in operating expenses was attributable to expenses incurred from the UniRAM litigation. As an update on our UniRAM litigation, we're still waiting for the ruling on the claims construction hearing that took place last October. We currently expect to hear in the March time frame. In any event, we remain confident that MoSys will prevail in this litigation.

Non-operating income including interest income totaled $794,000 for the quarter as compared to $679,000 in the third quarter. The net loss for the quarter was $1.1 million, or a loss of $0.04 per share compared to a net loss of $2.4 million or $0.08 per diluted share in the fourth quarter of 2004 and to a net income of $50,000, or roughly break even in the third quarter. Fourth quarter loss per share was computed using 30.698 million shares.

During the quarter, we recorded significant revenue from one licensee: NEC, which represented 30% of total revenues for the quarter. We expect significant royalty revenues from NEC to continue throughout 2006. With regard to full year revenue, we ended 2005 with a total revenue of $12.3 million, reflecting licensing and royalty revenue growth of 24% over the $9.9 million of equivalent licensing and royalty revenue in 2004.

During 2004 we also recorded approximately $1 million in revenue earned from the sale of discrete 1T-SRAM chips. Revenue from discrete chip sales in 2005 was negligible, as the Company completed its exit from this line of business during 2004. With respect to our balance sheet, we have positive net cash flow from operations of approximately $1 million in the fourth quarter due to high cash collection. Our cash, cash equivalents and both long and short term investments total approximately $86 million as of December 31, 2005.

And with regard to guidance for the first quarter of 2006, we expect revenue for the first quarter of 2006 to be in the range of 3 to $4 million. This guidance takes into consideration the typical seasonality experienced in the first quarter as well as our assumptions on revenue deferrals for our classic macro business. For the full year 2006, we remain very optimistic about our business prospects and outlook.

However, our visibility is influenced by several important factors. First is the ongoing deferral of revenue from our classic macros over the next few quarters. Second is the ability to predict when certain new products from licensees will occur in order for us to recognize a license royalty increase, and third, the timing of the industry's 65 nanometers which will drive stronger licensing growth. So taking these factors into account, we're targeting to achieve revenue of $20 million.

In conclusion, although our actual fourth quarter results were impacted by the deferral of revenue for our classic macros, overall we're pleased with the interest level we've had from our customers as well as the strong booking achieved during the quarter. Our strong sales initiatives have resulted in accelerated adoption of our 1T-SRAM technology. Additionally, we continue to support research and development efforts to continue to expand our leadership position in embedded memory solutions while improving our operating efficiencies in order to achieve our profitability goals.

So as we begin 2006, we remain confident in our ability to penetrate the high volume consumer electronics market, and believe it offers significant growth potential for MoSys. With the support of our enhanced infrastructure and operating efficiencies we now have the bandwidth to expand our customer reach and fuel profitable growth.

That concludes my prepared comments and I'm now ready to take questions. When introducing yourself, please state your name and your firm's name please. Thank you. Operator, we'll take questions now.

[OPERATOR INSTRUCTIONS]. One moment while we conduct Q and A. Our first question comes from the line of Nimal Vallipuram from Benchmark Company. Please proceed.

Yes. This is Nimal Vallipuram with Benchmark Capital. Hi, Chet.

Hi, Nimal.

Hi Beverly, how are you? I have a few questions here if time permits. Start with if -- I know that you have given quite a lot of details regarding your classic macro deferrals. Can you give us some idea as to -- I guess my question is that, are you -- do you like to see some milestone being passed within MoSys or with the customers in this product line before you start feeling more comfortable recognizing the revenue in the same quarter as it happens, to the extent if you can explain how that is going to -- what is going to determine how you're going to do it in the future and I have a few follow-up questions as well.

So for the first question in terms of our judgment on these deferrals there is no specific milestone that we're expecting to pass. It's more a question of having enough of the macros shipped, so it's a number of them that we gain experience and we understand the deliverables and what the ongoing, support for the customer requirements is, and in discussion with our auditors when we have the acceptable amount of market evidence on -- on this. So it's an open-ended thing right now, but recognizing that deferrals work both ways, so what's deferring into the quarter, some may be deferring in and some may be deferring out so eventually this will tend to normalize anyway.

Does this mean -- I just don't want to put words in your mouth, but I'm just trying to play the different scenarios. Does this mean that once you cross a certain qualitative line and you're qualified that you can start recognizing revenues on a -- on an ongoing basis, would we see kind of a lump sum increase in sales sometime in the future? Is that possible at all?

It's possible, because it is correct that some point in time we could make the transition to recognize in the current quarter those products -- substantially all the revenue from the products that we ship in the quarter. So they could potentially generate an additional revenue increase in that quarter, yes.

And you feel comfortable that given this and the other factors you indicated that -- I'm trying to find out that what gave you -- I mean, what prompted you to give us some sort of guidance, if not a specific guidance as to what the sales are going to be in 2006, I -- I don't want to come across as an analyst complaining to the Company about giving guidance, but I just want to understand a bit more in terms of how that -- that 20 million came about for 2006, I suppose.

How we came up with the number?

No, no. I didn't see -- I didn't mean the number. I just want to see that what prompted you to give that guidance at the beginning of the year, I suppose?

Well, we have to run our business to an operating plan, so we lay out our expense budget and our -- and it has to be based on a target revenue. So, in a sense, we're willing to share that. Because we believe in the plan we have.

And you --

But we did have to make some assumptions in terms of how we'll recognize revenue when the book -- and all of these assumptions are embedded in that number.

Without asking you to -- as to whether that is liberal or a conservative estimate what can you possibly happen where you can beat the number on the upside?

I think I highlighted three different factors that -- that affected -- that we had to use in making that judgment. Number one is when we're going to transition the deferral accounting. Right? Like we talked about.

Yes.

Number two, when certain large royalty pairs payers are expected to kick with new product shipments this year, and I won't be specific about what companies those are, but I think in the past these companies have been identified.

I understand.

And thirdly, there is an ongoing transition to 90 nanometers and 65 nanometers which will trigger a certain number of -- call them upgrade licenses from our existing licensees because we need to get a new set of macros that will run in these new geometries and so that will be a further acceleration to our licensing dollars. So all three of those things could be -- if all three come in as expected, then we're on track. If one comes in greater that -- or all come in greater, we could substantially increase. There's upsides and those are the areas.

Just a couple of clarifications before I go. Number one is that the NEC 30%, does that include the large game console customer over -- I guess the 30%, can you give us what is the largest application for the 30% is?

Well, NEC is a technology licensee. We know who their largest customer is, but here again, it doesn't reflect any new product shipments. Let me put it to you that way.

Okay. Finally, I have -- when I spoke to you last time, Chet, you indicated that a number of licensees will be a good indicator of how the royalty stream is going to turn out in the future and you gave -- you went from 15 to 17 licensees from third to the fourth quarter. Can you remind us what the numbers were in the first and second quarter of last year?

I just -- I don't know if I actually have that data here with me at this moment. Let me come back if later in the call I can come up with it I'll give it to you. I just don't have it with me right now.

Thanks for your time.

You bet.

Our next question comes from the line of Dan Scovel. Please proceed, sir.

Yes. Tokeneke Research. Chet, I was wondering again, at the risk of beating a dead horse here with the revenue recognition issue, now, where does that exactly show up on the balance sheet?

Well, it won't specifically. You -- you really can't reconstruct it, because of the accounting for deferred revenue or anything else. It just -- the answer is it doesn't. I'd have to give you some indication of how much it is.

So it's not the $1.3 million on the deferred revenue on the short term liabilities? That's not it?

No.

Oh, okay. Well, the reason I was asking was, obviously you've indicated over the next couple of quarters you would expect these deferrals to continue, I guess, to accumulate or to continue to roll and I was just wondering how it is that we track those. You had about a million kind of rollover this quarter. Would we expect another million to roll or is this million going to be a static number that rolls?

Well, I understand what you're saying. I'm -- I can't give you the exact answer for that now, but that's one thing we can indicate on an ongoing basis, what kind of deferral or some indication of how the deferrals are going, but I would expect that number to gradually decrease over time.

Okay. The -- for modelling purposes on the litigation costs, can we just kind of assume that's going to continue rolling on at current levels for lack of a better way of looking at it?

Yes, I think that's a reasonable assumption.

Okay. The -- the mix on your -- your 2006 revenue, we were kind of looking split about half and half, maybe a push to the royalties, again, for lack of a better way of looking at it?

Yeah, I mean, I don't think we have that granularity to talk about right now. I think the percentage of royalties as a percent of our overall revenues should continue to grow in 2006. Exactly how much, I haven't really finalized.

All right. Also, on the operating expense side, looked like R&D was a little bit up again. The numbers are small there. Is that kind of an [RBO-ition] on mass costs or is this kind of a new level that we should expect to continue?

No, what it is is a change in the mix. We -- we reserve a certain amount of engineering resource for customization services.

Oh, okay.

And if that resource is actually applied to that it shows up in cost of goods sold. So the way to look at the total R&D expense is really to look at engineering expense R&D, plus cost of goods sold. Because our cost of goods sold is literally the manpower.

So if we look at the sum of those two, that should be a relatively static level for the next few quarters?

Correct. And it's just the mix that changed a little bit.

So the level stays the same. Got it. A couple of more mundane questions. You have depreciation CapEx number at all for last quarter?

You're forcing me to dig into the sheets here. Let me come back to that.

It's either that or I ask you about revenue recognition.

That at least I can talk about. I got a note here. Let's see if we can figure that out during the call here.

Okay. The other thing, obviously you did well in terms of cash flow from operations. Would you expect to continue to be cash flow positive for the foreseeable future?

Yes, we do actually. For a couple of reasons. One, we're getting very good payment results from our licensees, but second, the deferrals actually help that because we tend to get the money before the revenue.

Good. That was another question I was going to ask. On the the NEC, is -- can you comment on the mix of that between the license and royalty or not?

I'd rather not, but I think as I said before, we haven't experienced significant new product shipments so the royalty increases -- this is steady state business basically, from a royalty point of view.

Okay. Okay. I'll get back in queue here. Thank you.

Your next question comes from Chris Chaney of Stanford Group. Please proceed.

Thank you. Good afternoon. I guess first to go back to the license deferral quickly, the -- I believe the amount that was deferred as a percent of total license for the fourth quarter was something like 75 to 80%. Do you expect that that same ratio will hold kind of going forward so that if I have a license revenue estimate I can sort of calculate what's going to be deferred to the following quarter each quarter?

I think it, it shouldn't be higher than that. But at the same -- and it should be gradually trending down.

All right. In the -- with the 15 license projects and 17 royalty payers in the quarter for Q4, what was the split in those between kind of communications products and I guess consumer electronics products?

You -- you send me digging very deep.

Well, I guess -- I mean, I don't have to have that down to the project by project. What I'm curious about is sort of what is -- is the trend indeed going towards the consumer electronics devices that are adopting the 1T-SRAM or is there still heavy adoption or heavy usage in the communications market as well.

So my quick glance here at the list looks like a 70/30 breakdown. 70% in consumer and 30% in communications.

So it's on the licensing and royalty streams?

That's royalty streams.

Royalty stream. Okay. In terms of your large customer NEC, so it looks -- I mean, it's logical to say that right now that revenue is coming in the form of licensing and I'm wondering if there's going to be a period between when the licensing might end and the -- and the royalties might begin due to production, if there could be sort of an air pocket there where -- I mean, do you expect that license stream to sort of cut off after Q2 or after Q1 of this year?

No.

So it will continue throughout the year at a relatively stable rate?

Yes. It -- so it's ongoing work. With these sort of strategic technology licensing customers, it -- there's always ongoing work.

I see. So even after they go into production you'll be continuing to work on future projects or tweaking the technology for them to the next process note or --

Yes.

Okay. Great. And -- on the Fujitsu contract, which was signed a while ago, I'm just wondering, will Fujitsu also help to resell the classic macros or since they have a technology license, I believe, will they try to do development work and sort of do custom projects on your behalf as well? I'm wondering if they're going to be involved in classic macros.

That's a very good question. It's an important question. Fujitsu, classic macros are those products which are tailored and delivered through foundries, independent [pure place] foundries, so coming like a Fujitsu like an IBM or an NEC as an technology licensee is not associated with classic macros at all. It's their own product. You consider it like custom products. I consider them also like a sales channel. They're doing their own design work for their customers under license from us.

I get you. Now, within the -- I guess the subset of customers you have that are technology licensees, like I believe UMC and TSMC are also in that category, do you expect that Fujitsu will be the most active this year, or are there others that are going to sort of resurface?

I -- I think it's a mix.

Okay. Which kind of is a segue into the chartered announcement from this morning, or maybe it was yesterday actually. The -- could you talk a little bit about the chartered announcement? It says that several customers are going into production. Are these in the consumer or communications IC space and sort of, what do you mean by significant production and what do you expect for them out of the year?

I mean, I'm not really prepared to give any kind of projection for the customer. We don't -- as you know, we're always reluctant to disclose anything that lets people triangulate too much into a customer's plan.

I understand.

But the charter announcement is one of these along the path that I described in my comments where the technology has to be refreshed. We have to continue to infuse new technology, either from geometry or from capability or targeting new segments like with the classic macros into our existing partnerships like charter, like TSMC, and others.

Okay.

So they're in some sense like Fujitsu where there's continuous work going on.

Okay. And then kind of moving into my final question, which is really just regarding some of the guidance metrics here. I'm wondering, what are you targeting for your break even point per quarter in terms of revenue in 2006? Not necessarily when it's going to happen, but what is sort of your break even target for revenue and also then following that, the -- what are your expectations for R&D and SG&A spending throughout the year? Do you expect to keep those levels at the same as a percent of sales or the same in a dollar value and will those be going up or how will those be trending? And also your tax rate expectation.

Okay. A lot of questions there. So our break even is -- I'm going to just say is -- it's around $4 million a quarter in revenue.

Okay. So that hasn't changed much.

Hasn't changed and that leads into the second question. We are not tracking our expenses to revenue growth. We're basically -- we're basically controlling and very -- very small increases based on specific requirements. So the expenses will tend to stay fairly flat for the year.

Okay. That's good news.

Tax rate is going to be fairly low. We're projecting 5% for the year.

Wow, okay. And then finally on the gross margin, you had 90% last quarter, more than I expected. It sounds like royalties helped and so did classic macros. Now, with classic macros I guess becoming a greater part of the mix in '06, do you expect that 90% margin will hold or will we see fluctuations around that?

I don't think we're going to see too much. Obviously, as you point out, the mix between custom macros and classics will have some effect but in general it should be a tight range of 88 to 90%.

Great. I appreciate that. Those are all my questions.

Okay. There was an earlier question on what our depreciation and CapEx expense was in Q4. That was $150,000 for those interested.

Our next question comes from the line of Kenneth Miller of Bonanza Capital. Please proceed.

Hi, Chet, how are you doing?

Good, Ken, good.

I have a couple of quick questions. First we saw your answer to that charter today, but I was wondering the process how it's coming -- characterizing your profit and volume product at the other major foundries.

So this is the 0.13 micron technology, and we are in volume production virtually everywhere with that going now, and that's going to be as I said in my prepared comments or my earlier comment,s we expect this process technology to be the majority of our royalty business, everything shipping in 2006.

Okay. Now, I was curious in your revenue guidance for the year, your revenue goal, I guess, not really guidance, does that contemplate any change in the accounting for the classic macros or does it stay constant with the same kind of deferral levels you're seeing now?

Our assumption that by the end of 2006 we'll be done with deferrals so whatever it is, it will be done by then.

Okay.

It's a question of timing throughout the year.

Okay. And I was just curious, based on products you're working on, what kind of visibility do you have on it?

On which --

On achieving the revenue goal.

Well, -- I would say we have gone through the normal process as we build our annual operating plan bottoms up from the sales pipeline and individual review of what's going on, looking at expenses, looking at the dynamics in the industry. So it's the best judgment we have at this point.

Yes. I was just curious how far in advance you get involved with a project before you have an idea of revenue or not.

Yeah, the average sales cycle these days on a license agreement with about 5 months.

Okay.

So we have visibility for a couple of quarters and then we have -- and then we have many -- we know that -- we have active deals under discussion for effectively the full year.

Okay. That's all I've got. Thank you very much.

You bet.

Our next question is a follow-up question from Nimal Vallipuram of Benchmark Company. Please proceed.

Yes, thank you. Chet, a couple of questions. I know that you can't talk much about how the litigation with UniRAM is going to turn out to be, but the expenses of $344,000 when we model going forward, do we -- can you give us some rough idea what the numbers should look like? Or any guidance on that?

Well, it depends on what happens. If we hear as a result of our claims construction hearing and we get the -- we get the judgment in March, and the second patent is effectively thrown out, we're done. If we don't, then we'll have to proceed in the normal court toward a trial at some future date down the road. And if that's the case, we'd anticipate kind of an ongoing expense similar to 2005, albeit a bit lower, but on a quarterly basis, probably around 250 K.

That's helpful. Finally, last question is that, in the last conference call, you indicated that you had made some changes, as far as your sales channel was concerned with the focus of trying to have more concentration in Asia in direct sales calling. Can you give us an idea how that is progressing so far?

Yeah, that's actually -- that's a great question. That's progressed very well. As I said previously, we really wanted to get not only more presence in Asia, but more direct presence, because we were using reps in a number of the areas and we have actually terminated and phased out all of the reps and we have direct people in Korea now, Japan, China and we hired a new director for Asia as well to be based here in California to coordinate everything with the factory. So we feel like we're now in a very efficient model and we're already beginning to see good results.

You're already seeing some returns on that in terms of your customer engagements?

Yes, absolutely.

Thanks, Chet. Thanks a lot.

You bet.

[OPERATOR INSTRUCTIONS]. Our next question is a follow-up question from Dan Scovel. Please proceed.

Yes. The -- you mentioned your licensees included 15 programs. How many different customers did that include?

I think that's 15 different customers that I was referring to. How many -- how many licensees we -- how many different companies paid us -- we had licensing engagements, meaning revenue in the fourth quarter was 15. 15 companies.

Okay. Okay. Yes, because you said it was programs. You'd done that in the past.

Sorry. It's programs and companies generally mean the same.

Okay. Also, with respect to, I guess, sort of your sales pipeline, could you characterize that? I mean, you mentioned it was doing quite well. Does it continue to increase or does it stay high or how can you describe that to us?

Our sales pipeline is getting stronger.

Good. Okay. Also with respect to 65 nanometers, I would assume you have work going on now regardless of the fact you may or may not have licensees?

Yes. Yeah, we have work going on, so we're -- so our capability is ready very soon and we have a number of conversations going on with potential licensees, because there are many companies looking at starting 65 nanometer designs as you know.

Also, in your -- your royalty stream, like I said, maybe get a better mixture, I was wondering if there's any particular standouts, and I'm going to pump you for applications like MP3 players or cell phones here.

I think you -- you've hit two of the three standouts for the year. Right? And then the third is games.

Okay.

I think the good news there is all of -- the companies that we have now that are -- have moved into the royalty paying phase are significant companies, and can -- in their own right generate substantial business, right, with their product success, so that number 17 is a good number anyway. It's a nice big number, but as it gets even bigger, we think we'll build a very good royalty foundation.

Finally with regards to share repurchase what -- did you do any of that last quarter and what's the current status there?

No, we didn't do any share repurchases in Q4 or even prior to that.

But you still have authorization?

Yes.

And do you remember what the open is on that or not?

It -- it's still around $20 million.

Okay. Okay. And also let me push you on the CFO issue there. How soon can you get somebody so we can beat him up on revenue recognition?

You don't like me? I think -- we're talking to some very good candidates and I think in the reasonable future we'll be able to close on this.

Okay. Thank you, Chet. Good luck.

You bet. Thank you.

There are no further questions in queue. I would now like to turn the call back over to Mr. Silvestri for closing remarks.

Well, thank you all for your participation in this call. I know it ran maybe a little bit longer than normal. We had a lot of things we wanted to say, and I encourage you to visit our web site to stay abreast of our activities, our press releases and our new product launches, as we do quite a number of new things this year, or to contact us directly if you need additional information. So thanks very much again and bye for now.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.