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spk06: Good afternoon everyone and welcome to the Landtronics first quarter 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. And at this time, I would like to turn the floor over to Rob Adams. Sir, please go ahead.
spk00: Thank you, and good afternoon, and thanks for joining us for our first quarter of fiscal 2023 conference call. Joining us on the call today are Paul Pickle, our President and Chief Executive Officer, and Jeremy Whitaker, our Chief Financial Officer. A live and archived webcast of today's call will be available on the company's website, In addition, you can find the call-in details for the phone replay in today's earnings release. During this call, management may make forward-looking statements, which involve risks and uncertainties that could cause our results to differ materially from management's current expectations. We encourage you to review the cautionary statements and risk factors contained in the earnings release, which was furnished to the SEC today and is available on our website, as well as the company's SEC filings, such as 10-Ks and 10-Qs. Lentronics undertakes no obligation to revise or update publicly any forward-looking statements to reflect future events or circumstances. Please refer to the news release and the financial information in the investor relations section of our website for additional details that will supplement management's commentary. Furthermore, during the call, the company will discuss some non-GAAP financial measures. Today's earnings release, which is posted in the investor relations section of our website, describes the differences between our non-GAAP and GAAP reporting, and presents reconciliations for the non-GAAP financial measures that we use. With that, I will now turn the call over to Jeremy Whitaker, Chief Financial Officer.
spk02: Thank you, Rob. And welcome to everyone joining us for this afternoon's call. I'm going to provide the financial results as well as some of the business highlights for our first quarter of fiscal 2023 before I hand it over to Paul for his commentary. In September of 2022, we closed the acquisition of Uplogix for $8 million in cash consideration and an additional cash earn out of up to $4 million if certain revenue targets are met. We funded the acquisition with an increase of $5 million to our existing term loan and available cash. As a result, our first quarter of fiscal 2023 includes approximately two weeks of operating activity related to the Uplogix acquisition. Although not significant to our first quarter results, the acquisition was accretive to non-GAAP earnings and is expected to be accretive on a go-forward basis. For the first quarter of fiscal 2023, we reported revenue of $31.8 million, an increase of 15% when compared to $27.7 million for the first quarter of fiscal 2022. As expected, revenue was down sequentially as compared to $35.9 million reported in the fourth quarter of fiscal 2022. Our most recent acquisition contributed approximately $400,000 of revenue in the current quarter. GAAP gross margin was 44.1% for the first quarter of fiscal 2023 as compared with 41.9% in the prior quarter. The sequential improvement was related to lower supply chain costs in addition to improved product mix. Selling general and administrative expenses for the first quarter of fiscal 2023 were $9.2 million compared with $7.9 million for the first quarter of fiscal 2022 and $9.4 million for the fourth quarter of fiscal 2022. Research and development expenses for the first quarter of fiscal 2023 were $4.5 million, compared with $4 million for the first quarter of fiscal 2022 and $4.9 million for the fourth quarter of fiscal 2022. The year-on-year increases in SG&A and R&D were largely driven by the acquisition of the TN companies at the beginning of fiscal 2022. However, as a percentage of revenue, expenses were down from the year-ago period. Gap net loss was $1.7 million or $0.05 per share during the first quarter of fiscal 2023 compared to a gap net loss of $2.3 million or $0.08 per share during the first quarter of fiscal 2022. Non-gap net income was $2.7 million or $0.07 per share during the first quarter of fiscal 2023 compared to non-gap net income of $2.5 million or $0.08 per share during the first quarter of fiscal 2022. Now turning to the balance sheets. We ended the September 2022 quarter with cash and cash equivalents of $13.1 million, as compared to $17.2 million in the prior quarter. Working capital was $50.3 million as of September 30, 2022, as compared with $54.5 million as of June 30, 2022. Net inventories were $45.3 million as of September 30, 2022, compared with $37.7 million as of June 30, 2022. The sequential increase was primarily due to the assumption of inventories in the Uplogix acquisition and the purchase of components to support the Enel project, which is expected to ramp during the second half of the fiscal year. Now turning to our revised annual outlook. After adjusting for a recent acquisition of Uplogix, For fiscal 2023, we are increasing our target as follows. Revenue of 155 to 165 million and non-GAAP EPS in a range of 41 to 46 cents per share. We expect the revenue and earnings growth to be more heavily weighted in the second half of the fiscal year as our two largest design wins are expected to ramp into full production during the second half. I'll now turn the call over to Paul.
spk03: Thank you, Jeremy. While we expected a slower start to our fiscal 2023, I'm pleased to report we made good progress on a number of fronts in the quarter. Revenues grew 15 percent year-over-year. We saw some margin improvement thanks to lower logistics and supply chain costs, and we acquired a high-value-add systems business. We also laid the groundwork for the remainder of the fiscal year. We have a watchful eye on the economy, and while we do note some caution in booking patterns as some customers have begun to book orders in the later quarters, we entered the December quarter with starting backlog up versus September, and our total backlog is up as compared to last quarter. All in, we see a return to sequential growth in December, followed by accelerating growth in the second half as we ramp to volume production with two of our larger compute customers. Turning to our product discussion. Embedded IoT solutions totaled 15.1 million, down 18% sequentially, but up an impressive 22% year-over-year, representing 47% of total revenues. We saw strength in our NIC and SFP products, which benefited from seasonal strength at key federal customers, but this was offset by a fall-off in compute due to processor component supply constraints after a strong performance in our fiscal Q4 June quarter. We currently see embedded systems strengthening throughout the year, driven by our compute products. In Q3 and Q4, we plan to benefit from shipments to electric vehicle customer TAG, which just had the grand opening of its production facility in Turkey. TAG will begin taking shipments this quarter, and we expect to be in full swing by the March quarter. Turning to system solutions, revenues here totaled $14.6 million, or 46% of revenues, flat sequentially, and up 11% year-over-year. Within system solutions, switching products saw the strongest growth, benefiting from significant interest from our growing Smart City customer base. In addition, our growing Fed business resulted in us benefiting from a stronger Fed buying cycle for network interface products. This strength was offset by lower media converter solution sales, which slowed after a strong fiscal year-end quarter. For the remainder of fiscal 2023, we expect to see a rapid acceleration of our systems business, led by the ramp to volume production of the Smart Grid Quantum Edge Device, or QED, for our customer grid expertise. We received our first purchase order for the pilot run in the September quarter and will begin recognizing revenue in the current quarter. We expect to complete a purchase contract for ensuing production this quarter, and we currently expect to ramp to volume against our previously announced production awards in our fiscal Q3 and Q4. Within the systems business, we reported approximately $400,000 of revenue from our recent acquisition of out-of-band networking supplier, Uplogix, which closed in the middle of September. Uplogix is a key acquisition for us on a number of fronts. Number one, the Uplogix product offering augments our existing out-of-band solutions with high-end higher port count devices that offer a high degree of automation, control functionality, and security, which makes them especially valuable to federal and financial customers. These systems complement our existing portfolio, giving us a broader product offering to address data center applications with increased scale and synergies. Number two, this is a margin accretive transaction. The Uplogix product margins are in line with our own out-of-band solutions And our new portfolio brings with it a strong base of recurring software and support revenues. On the whole, this acquisition is expected to be nicely accretive to Landtronic's corporate margins. And lastly, this acquisition delivers engineering synergies and solidifies our product roadmap. Today's data center architectures are changing, and our product roadmap was due for a refresh. Acquiring Uplogix is expected to save us an estimated $3 million in and next-generation product development. And as we have demonstrated previously, the fragmented IoT market continues to offer value. We were able to acquire this high-margin system supplier at a discount to its last 12-month revenue of $9 million, paying $8 million in consideration. For the remainder of the fiscal year, we are expecting revenues to be over $5 million from this acquisition. Looking at software and services, revenues in Q1 accounted for 7% of total revenues, or approximately 2.1 million. Software and services revenue was down 28% sequentially following a record quarter in Q4, which was driven primarily by pre-production activity for compute customers, Gridspertise and TOG. We do expect some volatility in this line. In addition, after accounting for the acquisition of UPlogix, we exited Q1 with a high margin subscription ARR of greater than $5 million. In summary, while Q1 results showed a pause to our growth trend, we are confident in our prospects for the remainder of fiscal 2023. We expect to resume our growth trend in December, led by the resumption of compute revenues, and we expect that trend to accelerate in the second half of our fiscal year as we recognize volume shipments to Enel and TOG. Our backlog remains healthy. The supply chain is seeing improvement with more easing expected in the new year, and our acquisition of Uplogix will drive incremental revenues, much of which will come from customers new to Lantronics and to whom we can offer a more comprehensive IoT solutions product offering. That completes our prepared remarks for today, so I'll now turn it over to the operator to conduct our Q&A session.
spk06: Ladies and gentlemen, at this time, if you would like to ask a question, please press star and then one. So with all your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the numbers to ensure the best sound quality. Once again, that is star and then one to ask a question. Our first question today comes from Mike Walkley from Canaccord Genuity. Please go ahead with your question.
spk04: Great, thanks, and congrats on the solid start to the year. I guess, Paul, in previous quarters, you've talked about the supply chain and, you know, a metric of customer requested product that you couldn't ship during the quarter. Can you elaborate maybe on how supply might be improving and where that metric might be now?
spk03: Yeah, so the late to CRD shipment came down slightly in the quarter to 8.3 million, I believe. This was additional shipments requested in the quarter that we were not able to meet. Overall, the backlog is higher. Total backlog at the end of the quarter was higher than the previous quarter. So we're seeing some bookings taking place in the out-quarters. And so I think that explains a little bit of, you know, some of the economics that are going there. But in terms of supply chain, we've had some disappointment on the mixed signal side. I'd say largely, you know, some of the digital semiconductor components are more readily available today. Memory certainly is normalized. We're seeing some of those PPVs come down. They take a while to work through the P&L. But some mixed signal components in particular are still difficult to get. Analog is still difficult to get. So TI, ADI, NXP, Cypress, also we've been having some issues with some Cypress supply as well of late. But overall, I'd say, you know, it continues to improve. We've gotten some easing out of MuBlox, for instance, and some other suppliers. So I'd say the picture is still looking better, and as we enter this new year, I'd expect it to continue to improve.
spk04: Great. Thanks. And, you know, as a follow-up question, you know, gross margins were stronger than expected this quarter, and it sounds like Uplogic seems like a good fit, and that's margin accretive also. Any update on how we should think about gross margins? I know there's a lot of moving parts with different projects ramping in the year also.
spk03: Yeah, we still like the mid-40s model for gross margins. I think as we kind of take on more and more software revenue, we're going to see that rise. Certainly, and when we talk about an ARR number, once again, we're talking about 90-plus margin business, essentially. So, you know, that $5 million or so of ARR as it works into the P&L is certainly going to help bring things up. I'll also note that in terms of supply chain easing, we saw roughly just over $800,000 of savings on the component sourcing side this quarter. It takes, once again, it takes a while to work through the P&L because those PPVs kind of rack up and then you have to chew through the inventory. but it does bode well for an improving picture on a go-forward basis. We're not changing our model, per se, at this moment, but I think in terms of thinking about a longer-term model where gross margins begin with a five-handle, I think that's certainly on the horizon. Great.
spk04: And last question for me, and I'll pass it on. As far as Gridspertise and TOG, Are you going to have revenue for those in that December quarter, or is it really the second half of the year where you start to see the uplift from those two big projects? Thank you.
spk03: It's not significant revenue. So Gridspertise is a subsidiary, just as a reminder of Enel. They formed that subsidiary last September of last year, I should say. And so it is expected, GritSpertise is the customer, although a lot of the supply chain agreement is with Enel, the parent. We expect continued separation between those two over time, and that will be an extended opportunity as there will be both consumption internally at Enel and in the general marketplace for GritSpertise products. So if we In terms of the timing of that revenue, we will definitely recognize revenue this quarter, the beginning of revenue this quarter from TOG with the initial shipments of those SIP modules. And we've been recognizing services agreement revenue with TOG over the last year. But the ramp really doesn't start to take place until the March quarter. And the same thing holds true for gridspertise. We would expect to see some minor revenue this quarter, beginning in this December quarter, as we've guided before. But really, the lion's share of that revenue starts to take place in March with a stiff ramp through next calendar year. Great. Thank you. I'll jump back in the queue.
spk06: Thank you. And our next question comes from Christian Schwab from Craig Hallam Capital Group. Please go ahead with your question.
spk05: Hey, guys. Congrats on the solid quarter. Paul, can you tell us, you know, of your 155 to 165 guidance, you know, either by customer or together, you know, when we take a look at TOG and Neil, for lack of the real name. And then... Cause it sounds like it's just going to be a model, you know, start to ramp and those things can always happen. Um, not at the initial pace expected. So I'm just wondering how much revenue you guys are assuming from those two applications, you know, and then in contrast to that, um, you might have a lot better visibility, I would assume, uh, about what you would expect to ship and calendar 23, um, versus exactly what might be shipped. at the end of March and into the June quarter. So any clarity or color you could help us with would be really helpful.
spk03: Okay. So I think in terms of as we look beyond this fiscal year, you know, we guide the fiscal year, but I would expect us to continue to grow as these programs really just start to touch fiscal year 23. I think in terms of full year, full fiscal year impact in FY24, I would expect that growth trend to continue. I want to be cautious not to guide individual pieces of business, and at some point, at least with some of these programs, I need to be careful about putting out too much information just to be able to stay competitive. I think we'll see – we talked about TOG as being really a kind of $50 million opportunity over four years. It doesn't mean that it has to be that. I'm mindful of what my customers are asking for versus what I think can actually happen. And what we have done previously – what we've said previously is that, you know, a NEL would begin to affect us in the December quarter. In fact, that is happening. And, you know, with a $10 to $20 million impact in this fiscal year, fiscal year 23, and I think that still holds true. I will say that the customer's internal schedules are a bit more aggressive. They have not hit them for, you know, various reasons. Mostly they've been due to other suppliers not delivering on time. but with the visibility we have, it's starting to happen this quarter, and it's playing out exactly as we've been guided before in previous conference calls. I think where it goes is kind of a guess at this point because we're talking about next-generation design. We're negotiating an engagement on what that next-generation design looks like. Ultimately, how much volume... you know, do we get and what exactly does it look like still remains to be seen, which I think is a positive for us now that, you know, Gritspertise is still in engineering mode. So, to recap that, TOG, what we've said is $50 million over four years. It's going to be a ramp into really kind of post-second years where we get some meaningful volume. Initially this year, their production schedule is around 30,000 units to start, but as stated previously, that factory can support up to 167,000 or 165,000 cars a year. I don't know how many they're ultimately going to be able to run through that factory, so it's a little bit of a guess. And then Enel would like to get to 100,000 units a year, but when that happens, I would expect production to split be split between multiple suppliers.
spk05: Great. Great. Thank you for that. And if we kind of look at, you know, the core business, you know, X acquisitions and, you know, large new customer products, you know, what are you thinking about that remaining core business? What do you think that steady growth rate is, you know, on a go-forward basis?
spk03: Yeah, that's a great question. I think this past year we talked about that base business having really outperforming, better than it really should. And at some point in the June quarter or at mid-year, I kind of expected it to pull back to mid to high single digits. So that is kind of built into the guidance for this next fiscal year. We are thinking in terms of that base business pulling back to mid to high single digits growth. It's still clipping along nicely. We continue to introduce new products in that space, and they continue to get picked up. So that's an industrial-like business. It doesn't move, you know, fast up or down. That's in line, you know, mid to high single digits really is what it should do.
spk05: Great. And then one last question, if I may. You talked about, you know, the nice, you know, software-driven, you know, margins and the growth expectations for that to continue and an opportunity, you know, not just to have 45% gross margins, you know, as a target, but eventually in the not too distant future, I think were your words, you know, to be 50%. So, you know, with these large program wins, you know, that we just walked through earlier, can we ship a significant amount of revenue to those and still operate the company near a 50% gross margin? Is that what you were trying to say?
spk03: So I'm not saying that. What I'm saying is mid-40s definitely, I think the answer to the question is mid-40s, and then as software becomes a larger component, I think we can start to creep that gross margin down. it does take a couple of things. One, software traction. We still have our sights on getting to that hurdle of 10% of company revenues coming from software sales. When I say software sales, I'm talking about 90 plus percent margin again. And so as we kind of enter that stage, obviously we will refine the hardware portfolio to start extracting higher value dollars as well. And then I expect the benefit from supply chain easing costs. We got some benefit this quarter from freight as well coming back down. So a number of things kind of driving the company towards that five handle, but I think that you will see some bottom line profitability changes as well. And so I believe I said future, I didn't say not so distant future, but I'm thinking in terms of, you know, this fiscal year getting past it, operating at mid 40s, and then looking to see some margin expansion beyond that.
spk05: Fantastic. No other questions. Thank you.
spk06: And our next question comes from Scott Surley from Roth Capital. Please go ahead with your question.
spk01: Hey, good afternoon. Thanks for taking my questions. Nice job on the quarter. Hey, Paul, I apologize I got on the call a little bit late, but I was hoping to dive in on Uplogix. I heard you say $5 million contribution for the year. I'm not sure if there was any contribution in the September quarter. I was wondering if you could provide a little color there. also the number of employees that came on board as part of it. And as we kind of think about the gross margin mix going forward, I would think that that has an upward bias. But I'm kind of wondering now as we start to have Enel coming into the mix and Todd coming into the mix, you know, should we be expecting a little bit of a step backward before we start marching up into the mid-40s and higher?
spk03: Okay. So 400K contribution from Uplogix in the quarter. Kind of negligent. We did say it was immediately accretive or accretive in the core, but it's not significant. And then in terms of $5 million, it was over $5 million of revenue in this fiscal year. This is a business that did $9 million, trailing $12. And so we're picking it up partway through the fiscal year. And there is some seasonality to that business. Twenty-five employees was what was at the business when we acquired. We can expect as we integrate that number goes down a bit, but it's a very good, talented team. We're happy to see that to integrate that team into Lantronics proper and to leverage that group. I will say mostly an outsourced company in terms of hardware engineering, so we get the benefit of some of the resources we have here. as well as contract manufacturing, just looking at the bill of materials, we know immediately we can take 30% of cost out of the COGS line. So we're going to get a nice little pickup as we continue to take over that business. But there was a decent chunk of inventory that was attached to the asset, so we have to get through that first. In terms of overall margin profile, you know, one of the reasons why I'm saying mid-40s is we'll have pieces of business and software begins to take over or we get better traction in software. That's going to counter some of the lower margin, more aggressive opportunities that we have to chase. And I want to be cautious about guiding a particular piece of business and talking about that effect because I would – in net effect, start to negotiate with myself with public remarks. And I'm sure you can appreciate that I probably shouldn't do that. So just think in terms of totality. If we get aggressive on a hardware program that provides a nice lift to the top line, we are at the same time getting good traction in the high margin portion of the business. I think this fiscal year, that gives us a blend of mid-40s, unless we get some supply chain easing that happens a little bit faster. But beyond that, I think we can start to inch upward with better traction on the software and high-margin hardware business as well.
spk01: Gotcha. Very helpful. And, Paul, if I could just to dive in, I think on the guidance for this year, 155 to 165. You know, a quick back of the napkin kind of math implies that those gross margins are, you know, kind of in the mid to maybe, I'd say, like sub even 45%. Is that the right ballpark, or are you expecting to ramp up some sales and marketing and other R&D efforts a little bit more aggressively as we go into fiscal 23?
spk03: I will probably have some things to fund in the second half of the year, but given the revenue profile, I think I'd have a hard time bringing all that investment to bear. But, you know, fundamentally speaking, we're still thinking in terms of 10% EBITDA margin. You know, as we do have a number of good programs, if I look at the pipeline of opportunities that we have, we're chasing well over $200 million of new revenue growth, and some of that is going to require investment. Some of it's going to require, you know, partial customer buy-in. But, you know, things just look pretty good right now. And correct me if I misinterpreted your question on that one. Did I get it right?
spk01: That was perfect. But I guess to just kind of drive on the gross margin fund, it just sounds like you're being fairly conservative, right? While 50% is a target, that is certainly not built into the guidance that you're talking about today.
spk03: That is correct. So mid-40s this fiscal year, and, you know, we're starting to see some traction on the high margin side of the business. So I think we can start to think in terms of long-term chasing that five-handle on the gross margin and some increased profitability. We're not there yet, but we can see a pathway to get there.
spk01: Perfect. And lastly, you kind of hit on it in terms of some of the pipeline. I'm wondering if you could provide a little bit more color on that front. I think the tree we've gotten bioptically focused on, Enel and TOG, but there's a big pipeline out there that's building. I was wondering if you could provide a little bit more color on that front, and I guess as part of it, Edge compute, I think, is one of the areas where you had some severe supply constraints recently. How is that doing? And kind of how should we be thinking about that pipeline of business timelines that's deliverable, how you're seeing your win rates, you know, so we can kind of synthesize what that $200 million type of number looks like over the next couple of years. Thanks.
spk03: Okay. So, yeah, in, you know, in Q1, we definitely had – so Q4, we got some additional processors that came in. There was a Samsung fab issue that prevented us from backfilling that in the Q1 quarter, so we saw a subsequent boost to Q4 revenue, and then, you know, we weren't able to backfill in Q1, so that drove the number a little bit lower. So compute definitely hit us a little bit. As a result of the mix, you see a slightly better margin profile, so it kind of makes sense. In terms of pipeline, you know, I will say, you know, The IoT story really is a really nice secular trend right now. There's so many, I'll say silly opportunities, but opportunities that you don't necessarily or applications you don't necessarily think about where customers are trying to eliminate truck rolls. And truck rolls are just incredibly expensive. The labor shortage is begging for remote management. We had a customer come in with a custom project, and I picked a silly application, but being able to power reset commercial machines that are sitting in convenience stores, being able to do that remotely would save them close to a million dollars a year. So they're wanting to roll out a system that enables them to do that. But we've got some really eight-digit opportunities, both in smart cities, in DOT-type applications for municipalities, A telematics tracking business in the Middle East right now is eight digits. The out-of-band remote management opportunities continue to bear really well for us. It's a bit of a lumpy business, but we're looking at eight-digit, or I should say seven-digit opportunities with multiple players there, but some rather large ones. On the enterprise side, which the sales cycles tend to be a little bit shorter, those product life cycles. We are continuing to pick up audio-video conferencing applications. One rather large one has given us a verbal award, and we expect to start that engagement in terms of development work this next quarter, or this quarter, rather, I should say. That one also would provide good scale. We're talking eight digits attached to that. Our work on the automotive front continues to migrate to other EV-type platforms. And so just to, you know, I'm kind of. So really like the growth prospects of the company, we're still focused on garnering the scale. We're still marching as quickly as we can to $250 million. And this year will be a very good start for us in achieving that target.
spk01: Perfect. Thanks so much. Nice quarter.
spk03: Thank you.
spk06: Once again, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two. Our next question comes from Harry Wilmerding from Needham. Please go ahead with your question. Hey, how's it going? I'm just curious quickly if you can discuss the general market updates and dynamics of the market you're seeing, how any changes in macro affect your outlook for certain verticals or geographies.
spk03: Yeah, I'd say largely our markets are robust, fairly robust. You know, I do think, though, I would expect to see some pricing pressure. I'm a little bit concerned in EMEA in particular. You know, the erosion of the euro against the dollar has really kind of raised the cost of goods that that territory is seeing. So I'm expecting a little bit of trepidation there. out of there. That is the area where most of our growth is coming from, though, in the short term. You know, it helps to be in applications like Smart Grid. Just as Europe is entering an energy crisis, the need for upgraded infrastructure to maximize the power delivery and self-healing networks in particular on Smart Grid is really compelling. So that's driving the investment. So we're lucky or fortunate, I should say, to be involved in spaces that are infrastructure and are still being invested in. But I am a little bit nervous about the currency exchange with Europe in particular, and I'm expecting to see APAC pull back a little bit as well, although most of our revenue is generated out of US and North America, North America in particular, and EMEA. not really an overall impact. But aside from that, you know, we're still getting quite a few opportunities in terms of that automation. I think it's where people are trying to save dollars. They want less people touching something, and so they're looking to save costs other ways with technology. So I think it bodes well for us.
spk06: Great. Thank you so much. Appreciate it. And our next question is a follow-up from Christian Schwab from Craig Hallam. Please go ahead with your follow-up.
spk05: Hey, just a quick one. On our $250 million revenue multi-year target, it's safe to assume that you would like to be operating, you know, as we kind of think about earnings power of the company, you know, at or near the 50% gross margin range by that time frame. Is that fair? Yes. Great. No other questions. Thanks.
spk06: And, ladies and gentlemen, with that, we'll conclude today's question and answer session. I'd like to turn the floor back over to the management team for any closing remarks. Thank you for joining us today, and hope you have a great evening. And with that, ladies and gentlemen, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.
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