Quicklogic Corp (QUIK) 2020 Q2 法說會逐字稿

Ladies and gentlemen, good afternoon. At this time, I'd like to welcome everyone to QuickLogic Corporation's Second Quarter Fiscal Year 2020 Earnings Results Conference Call.

As a reminder, today's call is being recorded for replay purposes through August 12, 2020. 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 today. Our speakers are Brian Faith, President and Chief Executive Officer; and Dr. Sue Cheung, Chief Financial Officer. In line with social distancing practices, management is doing this call from remote locations today.

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 projected 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. And 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 recent filed periodic reports with the SEC. QuickLogic assumes no obligation to update any forward-looking statements or information, which speak of their 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 2020 financial results conference call. I would like to start by recognizing the tireless efforts of our talented QuickLogic team as we've rapidly adapted and responded to a new working environment during this COVID-19 pandemic period. This has been a challenging period for our team, both personally and professionally, and I appreciate their commitment.

With that as a starting point, there were 3 key events that were announced in the second quarter that will have positive implications on our business in the future. First, on June 16, we announced the QuickLogic Open Reconfigurable Computing, or QORC, initiative. This project, which was developed in collaboration with Google and Antmicro, broadens access to our EOS S3 SoC, our FPGA technology, and eFPGA IP for all embedded systems developers. We are the first programmable logic vendor to actively embrace a fully open source suite of development tools for its FPGA devices and eFPGA technology.

QORC is an important milestone for us. Many industry observers have commented in recent years that the programmable logic industry is at a transition point. While it remains multibillion dollars in size, the growth is expected to be at a moderate pace of around 7% per year over the coming 5 years. However, the open source RISC-V IP, software and tools market is predicted to grow at a nearly 7x that of the FPGA market rate. Given the changing landscape, we are aggressively redeploying our resources to make open source the primary foundation of our business going forward.

The second significant event is the announcement that SensiML is collaborating with a consortium of companies, universities and health organizations to help predict whether people are showing symptoms of COVID-19 infection. The goal of the initiative is to give businesses, governments, healthcare and other public facilities access to multi-sensor, prediagnostic screening mechanisms to help slow the spread of the disease. The consortium includes Asymmetric Return Capital, Linear ASICs, SkyWater Technology, Upward Health and others. We recently executed our first SaaS agreement associated with this initiative, expect the initial product launch before the 2020 flu season starts and to realize a more meaningful financial impact in Q4 of this year.

The third significant event was the completion of our oversubscribed secondary, which in total raised net proceeds of approximately $8.1 million. We felt it was prudent to raise money this time to make sure we had the financial strength to support our open source product plans and growth initiatives. It was definitely a busy second quarter, but one I believe will, over time, be viewed as a pivotal moment in the transformation of QuickLogic.

With those important items as a primer, I want to spend some additional time on the open source initiative and then review other items from the quarter. The QuickLogic Open Reconfigurable Computing initiative I have spoken about at a high level in recent months, is expected to be a catalyst for QuickLogic's future growth. This initiative developed by QuickLogic in collaboration with Google and Antmicro, broadens access for embedded systems developers to use our FPGA technology and eFPGA IP.

For some background, the open source harbor movement has established a solid foothold after multiple accounts that yielded only limited success even for processors. With demand for more customized hardware and a growing field of start-ups looking for -- to build accelerators and solutions highly tailored for AI/ML algorithms, interest in open source hardware has been rising. In fact, there are now a growing number of new developers with software backgrounds gravitating towards open source FPGA development tools, including design teams at some of the largest companies in the electronics industry.

We are already seeing traction with the QORC initiative. You may remember in recent earnings calls I alluded to the initiative being co-developed with a mega-cap company. For disclosure reasons, we were not able to mention Google by name until the June news release. What started as a conversation with a Google open source visionary, transformed into an entire open source initiative for QuickLogic. Once we decided to move all-in into open source, we knew we needed our efforts to address much more than just FPGA tools. This was the thought process that led to the QORC initiative. Our website contains additional background material if you are interested in learning more.

The rate of adoption is ramping quickly. In early July, QuickFeather was launched with Crowd Supply, one of the leading online companies to launch and fulfill demand for innovative open source harbor development kits. In just one month, we have already received orders for more than 100 kits and expect this pace to accelerate as we expand our network of channel partners to ship more QuickFeather dev kits into the market.

Based on this better-than-expected interest and following the roadmap we have in place, I am confident we will achieve our goal to get at least 1,000 of these dev kits into the market by the end of 2020. Over time, we expect product wins leveraging QuickFeather will drive more revenue opportunities for our EOS S3 and SensiML AI software. Since we are just in the initial stages of QORC, it is too early for me to quantify the near-term revenue impact this year. However, we are executing on a go-to-market plan using multiple channels and could see few to several million dollars in potential EOS S3 revenue and multiple eFPGA IP licenses next year directly related to the QORC initiative.

To further demonstrate the breadth of opportunities our QORC initiative can lead to, our team recently engaged with a product team that is developing a new range of home computing devices for their 2021 holiday launch. While it is very early to discuss any potential long-term relationship, this should be viewed as a sign of early market acceptance of the QORC initiative.

Other parts of our business are starting to settle after a challenging few months since the COVID-19 pandemic took hold. Starting with our SensiML COVID-19 initiative, the previously announced consortium is currently readying a health monitoring solution that includes a low-cost body-worn temperature sensor and smartphone-based app that combines a variety of biometric data and AI software. This solution is also intended to allow integration with contact tracing applications such as the exposure notification apps available through the Apple and Google Play app stores. We are talking with potential customers about using this application for screening at public venues, safe reopening of workplaces and healthcare test access.

In addition to the COVID-19 application, SensiML has completed 2 major developments since our last conference call. First, the integration with STMicro's new SensorTile.box development kit is now complete. This will result in an expansion of the co-marketing and co-selling activities with one of the largest MCU companies in the world.

Second, SensiML is releasing an update to its SensiML Analytics Toolkit that adds support for Google's open source machine learning framework called TensorFlow Lite for Microcontrollers. Together, SensiML and TensorFlow Lite or TFL, complement each other by offering powerful TFL neural network algorithm execution along with an established AI tool. The openness, flexibility and performance enabled by this effort is important and valued by our MCU partners and IoT device customers and will be a key enabler for our SaaS-related revenue growth in the coming quarters.

With an improving SensiML hit rate, greater partner outreach and Google TFL integration in place, our focus remains on driving towards scalable growth.

In our new product segment, supply chain delays and the challenges imposed by customer hardware teams working remotely had a significant impact on this part of our business. We are seeing improvement in the global supply chain, but that is somewhat counterbalanced by the fact that due to the disruptions earlier this year, several product launches that were expected in the Q2, Q3 time frame have been moved to later this year or calendar 2021. This includes several voice-enabled consumer products.

Within our smartphone business, Kyocera had a very strong quarter due to a combination of increased end market demand and their decision to build inventory from all suppliers to mitigate potential supply chain issues. This greater-than-expected surge increased our test costs in the quarter, which negatively impacted our gross margin performance in Q2. We expect to see lower sales to Kyocera during the third quarter as they digest this inventory for current models ahead of new phone launches anticipated later this year. We are nearing completion of our next smartphone design, and I remain confident we could see as many as 6 phones using our technology, up from 3 at the beginning of the year.

In the hearables market, we are on track to achieve formal Amazon AVS certification this quarter and hope to see a new hearable product enter the market before the end of the year and ship several hundred thousand dollars of EOS S3 within 2020.

In our eFPGA IP business, we are delivering our final net list this week to one of our early engagements for a tape-out of their test chip. If all goes well with their chip manufacturing and validation, we could see a full eFPGA IP license between Q4 2020 and Q1 2021.

Last quarter, I discussed how COVID-related delays directly impacted a program with a well-known and fast-growing streaming and smart TV provider to get a voice-activated remote control to market. We were able to realign our efforts with a low-power digital microphone company and are targeting to launch a new reference design later this quarter. While the volumes will be smaller than the prior program, the introduction of this reference design is another reminder that the trend for greater adoption of hands-free remote controls is accelerating.

Within our mature segment, COVID-19 continues to have a significant impact on this part of our business. Ongoing manufacturing shutdowns and the reduction in consumer air travel has caused a dramatic drop in the civilian aerospace market. Based on customer forecasts received in the last 2 weeks, we expect to see mature revenue dip again in the third quarter to a level similar to what we saw in Q3 of last year before growing in Q4 this year.

Because of this recent change, we are reducing our second half 2020 mature product revenue forecast by another $2 million from our expectations discussed in the May conference call.

To summarize, in spite of the many COVID-19-related headwinds we have faced this year, I want to emphasize that I am as optimistic as ever about our future. Fiscal 2020 has been more challenging than anyone could have imagined back when we held our February conference call. However, the positive signs we're already starting to see with our open source initiative and SensiML TFL initiatives with Google, coupled with what our customers believe will be improving conditions by year-end, gives me confidence that we now have a defined path to improve financial performance starting in the fourth quarter.

I would now like to turn the call over to Sue for a discussion of our recent financial performance and full Q3 outlook. Sue?

Thank you, Brian. Good afternoon, and thanks to everyone for joining us. For the second quarter of fiscal 2020, revenue was $2.2 million, which was within the updated guidance range of $2.3 million, plus or minus 10%, that was included in our SEC filing on June 17. This compares with revenue of $2.1 million in the second quarter of 2019.

Within our Q2 revenue, sales of new products were $820,000. This compares with $711,000 in the second quarter of last year. Our mature product revenue was $1.4 million, which was the same as Q2 last year.

In the second quarter of 2020, we had 3 customers who each accounted for 10% or greater of our sales. Non-GAAP gross margin in Q2 was 47.1% compared with 49.8% in the same quarter of fiscal 2019. The lower gross margin in the second quarter was mainly due to additional tax costs to support a higher volume of product shipped to our primary smartphone customer.

Non-GAAP operating expenses for Q2 were approximately $3.2 million, down more than 30% from $4.8 million in the second quarter of last year. Through a continued streamlining of our operations, we believe operating expenses will trend lower through the remainder of fiscal 2020.

Within our Q2 operating expenses, R&D was approximately $1.7 million and SG&A was approximately $1.4 million. This compares with R&D and SG&A of $2.7 million and $2.1 million, respectively, in Q2 last year. The net total for other income expenses and taxes in Q2 was a charge of $84,000 compared with $101,000 in the second quarter last year.

Non-GAAP net loss in Q2 declined to $2.2 million or $0.26 per share. This compares with a net loss of $3.8 million or $0.54 per share in the second quarter of last year. The per share calculation for both periods reflects that 1 for 14 reversal stock split that was executed last December.

The total cash at the end of Q2 was $26.4 million compared with $19 million at the end of last quarter. The Q2 cash balance includes the net proceeds from the stock offering and the funding from the PPP loan. It does not include the approximately $461,000 in net proceeds from the exercise of the over-allotment that closed may July. Our cash balance also includes the $15 million draw from the revolving line of credit. When factoring out all external funding that I just mentioned, our Q2 cash usage was $1.8 million.

Now moving to our forecast for the third quarter of fiscal 2020, which will end on September 27. Our revenue guidance for the third quarter is $2 million, plus or minus 15%. As Brian discussed, given the evolving conditions due to COVID-19 and its impact on our customers and the suppliers, we're widening the revenue range at this time. At the midpoint, we believe total revenue will be comprised of approximately $700,000 of new product and 1.3 million of mature product.

With a more diversified product mix, non-GAAP gross margin in the third quarter will be approximately 55%, plus or minus 5%. As a result of our continuous cost control measures, we're forecasting non-GAAP operating expenses will decline further and be approximately $3.1 million, plus or minus $300,000. We expect this to be a normalized level for the next few quarters. At the midpoint of the Q3 range, R&D should be $1.8 million and SG&A, $1.3 million.

After interest expense, other income and taxes at the midpoint, we currently forecast our non-GAAP net loss will be approximately $2.1 million or net loss of $0.19 per share based on approximately 11 million shares outstanding. Most of the difference between our GAAP and non-GAAP results is our stock-based compensation expense. We expect the stock-based comp to be in the range of $700,000 for the next few quarters.

Finally, in Q3, we expect the cash usage to be in the range of $2 million to $2.5 million. Anticipated a higher cash usage is mostly due to the timing of working capital and the onetime transaction costs associated with stock offerings to be paid in Q3. We expect the cash usage to decline in Q4 as both revenue and gross margin improve.

With that, let me now turn the call back over to Brian for his closing remarks.

Thank you, Sue. To add on to the guidance Sue gave for the third quarter, based on the current customer forecasts, our annual outlook has declined another $3 million for the reasons I have discussed in our mature product segment, plus the inventory absorption for our smartphone customer and the pushout of voice-enabled hearables. With this change, we now expect our full year 2020 revenue will be approximately flat with fiscal 2019. While we are disappointed with the near-term outlook, we currently expect our Q4 product mix will have a heavier emphasis on software and IP-related sales. This should increase our Q4 gross margin back into the low to mid-60% range, which in turn, should boost our fiscal 2020 gross margin to the high 50s.

COVID has clearly disrupted the path to profitability I laid out at the beginning of the year, but based on the factors I have described and with our significantly reduced operating expenses, our trajectory to profitability within 2021 looks promising. With the material progress in all of our new product lines, I am confident we have a path to achieve operating income breakeven by the end of the first half of 2020.

In closing, I would like to thank all of our stakeholders for their ongoing support. These are extraordinary times for all of us, and we are doing everything possible to maintain a safe work environment while also taking care of our customers who are facing their own challenges. That completes our prepared remarks. Operator, I'd now like to open the call for questions.

(Operator Instructions)

Our first question comes from the line of Richard Shannon with Craig-Hallum.

I guess, first of all, congratulations on the Google, Antmicro development. We look forward to seeing how that ramps out over time here. I guess my first question for you, Brian, is based on your prepared comments, you talked about a -- I'm going to probably butcher the language you used here, but you've engaged with a large design team with a product for kind of a home computing device that they're targeting for next year. Maybe you can kind of talk to us more specifically about that or more generally about the engagements that you're seeing here with QORC? And what other opportunities you're seeing here and maybe the time frame by which you would see that?

Yes, I can do you that, Richard. Firstly, I can't go into too much detail on that product, the home computing, just because for competitive reasons, I don't want to tip our hand too much. But basically, that product wants some level of always-on computing. And that product team is a big believer that open source tools gives them the ability to innovate more freely and also to apply their own resources to improve things and use it as their own. So that's sort of a common theme that we're seeing with a lot of these companies by virtue of this whole initiative. We've had a lot of -- probably what people on the call have seen as social media activity from the open source development community.

We did launch actually with Crowd Supply, a development kit, and we sold more than 100 and just over a month, I think, on that. And there's just a lot of momentum there where people are finally appreciating an existing company in programmable logic is actually embracing and contributing to open source, whereas everybody else is, like I say, gives them the stiff arm and the Heisman move because people may not sue people doing open source development, but we're actually openly contributing to it. And I think there's a lot of large companies that are starting to build or define products around that.

And what I tried to allude to as well, Richard, in the opening remarks is that this is not just for EOS S3. That's part of it. But there's this whole now movement around the embedded FPGA and the fact that we have the open source tool support for that as well. And that's already opened up new opportunities that we're pursuing. So kind of like how we laid out in the blog, this is all about opening up to a new market that's not tapped yet. And just in these last 2 months, we're starting to see a lot of movement in that area.

Okay, helpful. Helpful perspective, Brian.

My second question, looking at SensiML, it seems like there's a few avenues here for growth, customer additions. It seems like QORC is certainly one of them. And maybe you can kind of give us some context about where -- what channels and approaches you're seeing that you hope to or already seeing some acceleration here in SensiML engagements. I know you said you've been impacted by COVID in terms of transitioning potential customers with a full license, but maybe you can give us a sense of at least kind of starting the pipeline and how that's been transitioning over the last quarter?

Yes. So the theme that we're using within QuickLogic is everything has to have scale, and we don't want to do custom work for people. And so the way that we can scale SensiML is to have more hardware companies, more semiconductor companies marketing and selling the upsell of SensiML on top of their products. That's why getting this STMicro port is so important for it to be done. Because now the STMicro sales and marketing team can be out pushing this to their sales force and to their customer base.

We have the COVID initiative that we talked about last time with respect to the cost detection and classification. That consortium of companies is moving forward. I think later this month, there's going to be sample wearables out with the temperature sensor on that for the body temperature layering in, in the app that they're delivering on the smartphone side with the SensiML AI software. So that's another avenue that we're using to get broader exposure without having to do custom work for folks.

And then lastly, this is where this new development kit strategy from us comes into play. So with QuickFeather, we're selling it ourselves and through our own distribution channel, we also have now engaged Crowd Supply, and they've gotten orders for this. And what I alluded to in my prepared remarks was a roadmap for these types of products. We're not stopping at QuickFeather. We're going to have several more of these types of development kits out in the wild. All of which will have SensiML optimized and running on top. So you'll probably start to see some type of promos for us where we're selling boards, and then there's an option to upgrade on top of that with SensiML.

And the benefit of doing it in that way is we just get these really large distributors or open source visionary folks out selling our products and then basically SensiML gets, not free marketing, but they get a lot of attention in doing so.

So those are the strategies that we're employing now to increase the top of the funnel for SensiML, and also how well we qualify the opportunities coming through. And that's in addition to just the normal ongoing organic sales that we're doing with SensiML.

It's probably actually worth mentioning that we got our first SaaS agreement revenue signed affiliated with the COVID-19 initiative. So doing things like that, where you come out and narrow application focus, I think it does resonate, and it starts to bring in more qualified leads.

Okay. And Brian, as aside here on SensiML, I think it's been a couple of quarters since you mentioned this, but how many fully paid licenses do you have for SensiML today?

I think we've talked about that somewhat recently, it was in the few dozen folks that have paid for some level of this app.

Okay. That is helpful. My next question here is on the hearables market and AVS. What gives you the confidence you're going to see the certification happen? And to what degree does your progress and success here in hearables depend on AVS?

So I would say the success really does depend on it because there's the set of wearables and hearables that want to not use Alexa. They're going to be sold overseas, or in China, and they'll never touch the Alexa ecosystem. But for the western countries, Alexa is definitely something that people are wanting to integrate. So it is very important. What gives me confidence is the level of engagement we have directly with Amazon AVS team in the last quarter, and also just seeing today, in fact, even though we are working remote, I can see videos of what our engineering folks are doing, and I saw the working system in video today. So I know that, that's going to be shortly getting into the Amazon labs for finishing up what we need to do there to get on their dev kit pages. So that's what gives us the confidence. Seeing is believing.

Okay. Fair enough. And the last question, I'll jump on the line here. It looks like the OpEx is a little bit lower here than I think what you talked about last quarter, which is good to see, lowers the burn rate. Does this help us lower the breakeven point here? And when would you speculate we could -- could we see that? Obviously, it seems like not going to happen in the fourth quarter, but is first quarter or soon thereafter, a good time frame to think about that, Brian?

Yes. In fact, we've been constantly looking at OpEx and opportunities to reduce that. I think -- so this is very product-mix-driven at this point. I don't see us taking OpEx down further from where we are now, like Sue mentioned in the prepared remarks, so now it's all a revenue and product mix gain. As we get more of these SensiML licenses and IP deals in place, that's going to drive that higher gross margin. And really, the OpEx now is at a point where the breakeven point of revenue could be like as low as $5 million, maybe $5 million to $6 million, somewhere in that range, which is substantially lower than it was, if you remember, just 1.5 years ago, it was almost pushing $10 million still, that needed to happen there.

So yes, I guess if you're like folks to model it on the call, something like $5.5 million mid-size range at the current gross margin that this OpEx get us to that breakeven point. And like I said in the prepared remarks, we're modeling it out to be a Q2 event next year. But again, sort of the product mix is going to drive that. And if we can get more IP deals in that, maybe that comes sooner.

(Operator Instructions) Our next question comes from the line of Suji Desilva with ROTH Capital.

Sue, a quick financial question. Just could you reiterate the gross margin guidance? I wasn't sure if I heard 55% or 65%. I think it was 55%, but wanted to check.

Suji, thanks for the question. The guidance for Q3 is 55% for gross margin and we -- plus/minus 5%. So we widened range a bit, basically between 50% to 60% gross margin.

And then on the -- on some of the customer announcements or product announcements. Maybe, Brian, we can start with the remote control program. You talked about aligning with a microphone vendor to help you get traction. Is that something you've done historically? Was that new? And why did that help in this instance? I'm curious about that comment.

Yes. On the microphone side, we've never really partnered deeply with any microphone guy other than Infineon, which we did with the whole integrated alarm system. And that's an ongoing activity with them and Flextronics. On the -- and that's really more on the industrial IT side. On the consumer and mobile side, we never really did. And so basically, us and this microphone player, we're going after that same opportunity that ended up getting canceled after abruptly the last call when I updated everybody.

So the CEO and I discussed, how do we take this engineering work that we've put into this and actually roll this out to other folks? And so we're in the process of doing that, the benefit being that they know microphone technology really well. We know the processing technology really well. And if we can go at these customers with these sort of canned reference solutions, it's going to have a higher likelihood of success just because customers don't have to reinvent the wheel. So we're in the process of doing that now. That's actually wrapping up from an engineering point of view. And I think imminently, we'll be releasing that to the field and to customers that we're already engaged with.

Okay. So that could target multiple customers over time, certainly, it sounds like.

Absolutely. Multiple customers. And the whole value proposition of that, by the way, Suji, is to think about these battery-powered remote controls you have around your house going always on, no touching, battery life of anywhere between 4 and 6 months.

Right. Okay. And then you touched on this in the Q&A and the prepared remarks, but I would imagine the open source tools are really one of the things that could kind of break open the floodgates for embedded FPGA fabric on a chip that people are designing? Because I would think one of the biggest hurdles was, if we put an FPGA fabric on it or dye, how we going to tweak it and manipulate it, but this sounds like that could really make that happen. Is that overstating the opportunity here? Or is this -- was that really one of the things in your mind that maybe kept eFPGA from becoming widely adopted?

Now you hit it dead on, Suji. It's a huge opener for embedded FPGA. Large companies, they want to sort of own the whole tool chain because when they sell a chip to their customer, they want to have one person as a support flow. And so this basically allows them to take the open source tools, integrate it with their own, and have that single package out to the customer. If you're talking about a smaller customer, they may not have that kind of resource available. But they know that as a smaller customer, it's the community, is behind these open source tools. And if folks like Google are pouring so much resource into it, they're going to get better over time.

In fact, they may even be better than proprietary tools in the near future. And so they love that story and the fact that these big companies are absolutely behind this open source initiative. So yes, you hit it right on. This definitely opens up a lot of new doors.

Okay. And then lastly, what's a good run rate to assume for mature products after we have this sort of put and take with the civil engineer -- civil aviation that's going on? What's a good run rate to think about there?

Yes. So for -- like I said in the script remarks, this will take us back to Q3 of last year, at the revenue level. I think Q3 to some extent, has been soft historically just because Europe tends to not order so much during this period for vacation reasons, not because of the pandemic, obviously.

I think moving forward, we're modeling somewhere higher than that, like around $1.5 million or so in certain quarters, it could be even higher than that, if we get some of these larger military deals coming in. So I do think it's going to recover. The civil aviation space, part of that will probably be the longer part of it to recover, but we do have other military folks that moved out of Q2 this year throughout of Q3 this year for the obvious reasons because the revenue is lower, but we do expect them to come back because they're not subjected to the consumer air travel industry ups and downs.

We have no further questions at this time. I'd like to turn the floor back over to Brian for closing comments.

All right. Well, thank you for your participation in today's call and continued support. We look forward to speaking with you again when we report our fiscal third quarter results in November. Again, thank you very much, and talk to you then. Bye-bye.

This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.