Arteris, Inc. (AIP) on Q3 2022 Results - Earnings Call Transcript
Operator: Good afternoon, everyone, and welcome to the Arteris Third Quarter 2022 Earnings Call. Please note that this call is being recorded and simultaneously webcast. All material contained in the webcast is the sole property and copyright of our Arteris, Inc. with all rights reserved. For opening remarks and introductions, I will now turn the call over to Erica Mannion at Sapphire Investor Relations. Please go ahead.
Erica Mannion: Thank you, and good afternoon. With me today from Arteris are Charlie Janac, Chief Executive Officer; and Nick Hawkins, Chief Financial Officer. Charlie will begin with a brief review of the business results for the third quarter ended September 30, 2022. Nick will then review the financial results for the third quarter followed by the company's outlook for the fourth quarter and full year of 2022. We will then open the call for questions. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to differ materially from those anticipated, and you should not place undue reliance on forward-looking statements. Additional information regarding these risks, uncertainties and factors that could cause results to differ appear in the press release Arteris issued today and in the documents and reports filed by Arteris from time to time, with the Securities and Exchange Commission. Please note, during this call, we will cite certain non-GAAP measures, including non-GAAP net loss, non-GAAP net loss per share and free cash flow, which are not measures prepared in accordance with U.S. GAAP. The non-GAAP measures are presented as we believe that they provide investors with the means of evaluating and understanding how the company's management evaluates the company's operating performance. These non-GAAP measures should not be considered in isolation from, as substitutes for or superior to financial measures prepared in accordance with U.S. GAAP. A reconciliation of these non-GAAP measures to the nearest GAAP measure can be found in the press release for the quarter ended September 30, 2022. In addition, for a definition of key performance indicators used in this presentation such as annual contract value, confirmed design starts, active customers and remaining performance obligations, please see the press release for the quarter ended September 30, 2022. Listeners who do not have a copy of the press release for the quarter ended September 30, 2022 may obtain one by visiting the Investor Relations section of the company's website. I will now turn the call over to Charlie.
Karel Janac: Thank you, Erica, and thanks to everyone for joining us on the call this afternoon. We're excited to report solid results for the third quarter with annual contract value plus trailing 12-month royalties of $53.2 million, up 17% year-over-year. This is despite HiSilicon's contract ending in Q2, which removed $3.3 million of annual contract value as previously announced. We achieved a major company milestone with over 3 billion systems shipped with SoCs connected by Arteris system IP since inception. Demonstrating market demand for our solution, we added 10 active customers in the quarter, a company record. Total confirmed design starts were 21 SoC projects in the third quarter. Deals in the third quarter were driven by strong demand for Arteris system IP and deployment software across our core markets, including multiple transactions in automotive, consumer electronics, enterprise data center communications, machine learning and industrial applications. We're also seeing increasing demand for space-oriented applications. We closed a direct automotive OEM licensing deal with a major new international electric car manufacturer. This customer selected Arteris because of our track record of successful completion of automated driving SoCs by multiple customers and our ability to provide flexible technology, enabling the potential for this customer to create differentiated value and to meet their project goals and safety compliance. Arteris also extended and expanded a long-term automotive semiconductor agreement and saw strong automotive electronic demand globally. Arteris was also selected for a major space-oriented program due to the combination of technology, performance and reliability. In addition, our resilient technology was a primary reason for Arteris being selected for this environmentally challenging application. Additionally, Arteris was chosen by a leading 5G communications OEM to deploy our network on-chip interconnect technology. SiMa.ai also highlighted the use of Arteris IP for flexibility and adaptability as part of their new machine learning system-on-chip platform for the embedded edge announced in August. Furthermore, Microchip entered into a multiyear agreement, licensing Arteris IP to enhance performance, security, configurability and power for the next generation of microcontrollers used for aerospace embedded vision, embedded computing and machine learning. Also, we expanded our partnership with Arm in the automotive space to leverage leading-edge Arm processor IP with Arteris system IP to enable best-in-class solutions for autonomous driving cockpit and infotainment, vision, RADAR and LIDAR, automotive communication and other automotive subsystems. The partnership delivers solutions that should accelerate our mutual customers' ability to realize SoCs with high performance and power efficiency for complex and demanding safety-critical tasks with different workloads while reducing project schedules and costs. Arteris and Arm expanded technical collaboration, including early access to next generation of automotive processor IP. TO ensure customer success, we are well aligned road maps, CMOS integration and optimize flows with the highest quality of results. This will, in turn, enable the more efficient creation of ISO 26262 compliant systems with the most rigorous automotive safety integrity levels to address today's and tomorrow's vehicle electronics design challenges. Lastly, as we recently announced, we are very excited to have strengthened our management team with the addition of Christel Mauffet-Smith as our new Executive Vice President of Global Sales. Christel comes to us with an extensive sales leadership background at Cadence and Synopsys. While there are macroeconomic uncertainties, including the latest U.S. commerce regulations with respect to China, we believe that Arteris is well positioned to make progress even in challenging economic environments. Despite potential headwinds, our customers are continuing to innovate in areas such as automotive, machine learning and 5G, driving the need for increased use of commercial system IP. With that, I'll turn it over to Nick to discuss our financial results in more detail.
Nicholas Hawkins: Thank you, Charlie. And good afternoon, everyone. As I review our third quarter results today, please note I'll be referring to non-GAAP metrics. A reconciliation of GAAP to non-GAAP financials is included in today's earnings release, which is available on our website. Total revenue from the third quarter was $12.6 million, up 41% year-over-year. At the end of the third quarter, ACV plus trailing 12-month royalties and other revenue was $53.2 million, up 17% year-over-year and up 3% quarter-over-quarter. Remaining performance obligations for RPO were $59.3 million, up 17% year-over-year as of September 30, 2022. We define RPO as the amount of contracted future revenue. Gross profit in the quarter was $11.7 million, representing a gross margin of 93% compared to $8.1 million or 90% in the prior year period. Non-GAAP gross profit in the quarter was $11.8 million, representing a gross margin of 94% compared to $8.1 million or 90% in the prior year period. Non-GAAP R&D expense for the third quarter was $9.1 million or 73% of revenue compared to $7.3 million in the prior year period. The increase was driven by continued investment in new and improved product offerings in our 5 R&D centers across our full portfolio. Non-GAAP sales and marketing expense for the third quarter was $3.7 million or 29% of revenue compared to $3.2 million in the year ago period. We intend to continue to invest in sales and marketing as we work to continue to drive awareness of the benefits of our solutions in the market and expand our sales and application engineering force and our marketing efforts to harness the significant potential opportunity in front of us. Non-GAAP G&A expense for the third quarter was $3.2 million or 25% of revenue compared to $1.6 million in the year ago period. G&A expense reflects a significant increase in directors and officers liability insurance expense and increased headcount associated with the transition to being a public company, partially offset by a decrease in professional services expenses. Operating loss for the third quarter was $7.8 million or 62% of revenue compared to a loss of $4.5 million in the year ago period. Non-GAAP operating loss was $4.1 million or 33% of revenue compared to a loss of $4.0 million in the year ago period. Net loss for this quarter was $7.7 million or diluted net loss per share of $0.23. Non-GAAP net loss for the quarter was $4.2 million or diluted net loss per share of $0.13 based on approximately 32.8 million weighted average diluted shares outstanding. Turning now to the balance sheet and cash flow. We ended the quarter with $68.2 million in cash and cash equivalents and $6.4 million in short- and long-term investments. Cash flow used in operations was approximately $5.2 million in the quarter. While free cash flow, which includes capital expenditure, was negative $5.7 million. I would now like to turn to our outlook for the fourth quarter and the full year 2022. For the fourth quarter, we expect ACV plus trailing 12-month royalties of $47.5 million to $51.5 million and revenue of $10.8 million to $11.8 million with non-GAAP operating loss margin of 50.2% to 70.2% and non-GAAP free cash flow margin of negative 13.1% to negative 47.1%. For the full year, we expect revenue of $50 million to $51 million, ACV plus trailing 12-month royalties to exit 2022 at $47.5 million to $51.5 million, non-GAAP operating loss margin of 31.6% to 36.1% and non-GAAP free cash flow margin of negative 16.6% to negative 24.6%. With that, I will turn the call over to the operator and open it up for questions. Operator?
Operator: . Our first question comes from the line of Mark Lipacis with Jefferies LLC.
Mark Lipacis: Sorry, talking to myself there. Charlie, what happens -- what do you think happens to your business? Or do you have enough data points to give us a sense of what happens to your business during either a mild recession or kind of a deeper recession? Is it -- do you find an increase in the number of projects because your customers are -- your payback becomes very compelling to them and then they want to outsource the interconnect capability to you guys more? Do you think is that what happens? Or do you -- would you find -- would you expect to see kind of a drop-off in the business? If you could give us any kind of data points or historical context there, I think that would be really helpful. And then I had a follow-up.
Karel Janac: Yes. So essentially in our experience, customers try to design their way out of recessions, right? So one piece of evidence is that our third quarter confirmed design starts have remained steady. Also, we went through the 2008 recession, which was much worse than what we're anticipating here. And the number of designs, even though we were a smaller company at the time, also remained steady. So we -- basically, manufacturing budgets get cut. R&D, engineering budgets, much less so. We also are seeing one of the effects of the cost cutting in one of the major semiconductor company or some of the major semiconductor companies, is that people are asking themselves, "Hey, should we be building system IP solutions internally? Or should we just go to Arteris and get a commercial solution?" Right? So I think that the number of designs is not affected. The only headwind we see from a recession is that you may see some lower shipment volumes by our customers, particularly in the consumer vertical, and so you may have a slight decline in royalties short term. But the growth of royalties in other verticals, particularly automotive and infrastructure and data center and industrial, I think will remain robust. So we do not feel particularly threatened by the recession. And we've -- a lot of the future market share wins are done by making the right moves actually during recessions.
Nicholas Hawkins: If I can add one more piece of color back plus some data points. That is quite an interesting one. So Charlie's point on people design their way out of recessions. The third quarter, interestingly, was the third highest number of confirmed design starts in our history. So we're certainly not seeing any slowdown in that.
Mark Lipacis: Got you. That's -- okay. That's a great data point, Nick. And then the recent increased focus of restrictions on China, has that impacted your pipeline at all? Is there anything that we should keep in mind with regards to that set of developments? And that's all I had.
Karel Janac: Yes. So Mark, I mean, obviously, we're spending a fair amount of time trying to assess the impact on our business, potential impact. So far, the analysis says that, basically, there is an impact on supercomputing applications, which were -- traditionally were not our strength and companies that use foundries in China in advanced sub 16-nanometer -- 60-nanometer and below process nodes. So that may impact a few companies. However, a lot of the -- our current customers and prospective customers use non-Chinese foundries, including those in South Korea and Taiwan. We also see there are automotive, consumer, industrial customers in China using non-Chinese foundries or Chinese foundries operating in less than advanced nodes should not be impacted. I should also mention that we have a significant part of our revenue stream coming from products that were originally built in France, so they're subject to French export rules rather than the U.S. exports rules. And so when we kind of look at it and try to be conservative, we believe that the kind of the worst case that all these factors together would reduce our overall growth rate by mid- to single-digit percent. But we kind of continue to look at it and try to assess the situation as it evolves, both from the U.S. side and the Chinese side.
Nicholas Hawkins: to qualify on that. Just to reemphasize in case anybody missed the point, it's talking about a reduction in the growth rate of up to mid-single digits percent, not reduction in revenue.
Operator: Our next question comes from the line of Hans Mosesmann with Rosenblatt Securities.
Hans Mosesmann: Yes. Good execution. Congrats. Can you guys give us a sense of how the quarter progressed in terms of its linearity, in terms of expectations? And also if you can give us a qualitative sense of how your customers have behaved as you look into Q4 and beyond.
Nicholas Hawkins: Do you want me to take that one?
Karel Janac: Yes. Go ahead.
Nicholas Hawkins: Yes. So linearity in Q3 was fairly normal, except Europe has probably no sense to have an extended vacation in July and August. So it was mostly September-oriented, but not just the European part, particularly the IP deployment software. As far as that rolled into Q4, it's a great question, and to an extent, impacts the free cash flow projection for the fourth quarter as well. It's why I bring it up. The fourth quarter, as you know, is -- there's a big impact, depending on the timing of bookings, whether that's front quarter loaded or end of quarter loaded. And we are seeing much more end quarter loading, which means that because we have a 45-day payment terms on average, those will tend to be more Q1 cash-oriented than Q4. And that's why you're seeing a slight downtick in terms of total year free cash flow projection, which would reverse in Q1 next year.
Hans Mosesmann: So Nick, what you're saying is that your customers -- so your customers, some of them are choosing to engage with you towards the end of the quarter -- of a given quarter?
Nicholas Hawkins: Yes, exactly. And again, that's really why we put a little bit of prudence around guiding ACV for the quarter because as the deals stack up towards the end of the quarter and here we are set in November and there's -- we're confident that they will close. But there are -- as you probably know, there are some administrative issues, particularly in China, where the shop's involved, where people to actually execute new licenses may drop into the beginning of the next quarter. So that's the result of the prudence on ACV and also to an extent of revenue in that that's impacting the business, and that's the point in time .
Hans Mosesmann: Okay. That's helpful. And as my last follow-up here, I promise. Just some clarity on the growth rate of your business at mid-single digits to high single digits. The growth rate, that's something that could potentially hit you, but it hasn't hit you yet. Is that the clarification here?
Karel Janac: Yes. So actually, we saw no impact in Q3. Obviously, the things are new. And there's -- right now, it's a rapidly changing macro environment, right? So there's some headwinds, such as the impact on the growth rate in China. There's also some tailwinds such as increased willingness to -- for major semiconductor companies to outsource their system IP development. So I think our sense is that these headwinds and tailwinds are sort of balancing out so that we should be able to maintain our traditional progress even given the current environment.
Operator: Our next question comes from the line of Matt Ramsay with Cowen and Co.
Ethan Potasnick: This is actually Ethan Potasnick on for Matt. I just -- I guess I wanted to drill down into the fourth quarter and full year outlook. I know you guys mentioned the impact of timing of deals. But given this is the -- given the current macro environment some of the softness we're seeing, I was wondering if you guys could qualitatively kind of go into perhaps where some of the weakness is within the business, considering this is kind of the second sequential quarter that the outlook has been kind of narrowed downwardly.
Karel Janac: Nick, you want to take this one?
Nicholas Hawkins: I'll take -- I'll take that one, Ethan, and good to catch up with you again. So yes, we -- as you know, we do tend to guide prudently. We want to be prudent and not get over our skis on the outlook for the end of the year. And really, it's -- we're not seeing any deals evaporate. We are seeing some deals closing towards the tail end of the quarter. If those end up falling into the beginning of the following quarter, i.e., Q1, then those -- if they're IPD deals, they don't appear in revenue. So there's a little downtick there of $0.5 million out of the $50 million of total guidance that's about 1% overall. And ACV is the same thing, except it's more exaggerated because that also then applies to our interconnect because interconnect is digital. It's either in at 31st of Jan or it's not in. So if an interconnect deal moves into the first week in Jan instead of the last week in December, then that would negatively impact ACV at the end of the year. So there's a very slight decrease in that. But both of those are sort of a temporary impact, let's say, because there is no actual -- we're not seeing any loss or erosion of business.
Ethan Potasnick: Okay. Understood, understood. And then separately, I want to kind of ask about the Arm partnership. Obviously, you guys are both partners and competitors on the IP side of things with, I guess, different core competencies but still some overlap on the Internet -- the interconnect IP. And given some of the activity in the ADAS automotive space, maybe can you discuss the announcement in more detail?
Karel Janac: Yes. So yes, so we're very excited about this development. And basically, it's got -- there's kind of 2 elements to it, right? One is that with the significant Arteris market share in automotive and also a lot of demands for enhancements by the automotive industry in terms of functional safety, performance, those kinds of things, we've essentially decided to partner with Arm on -- in the automotive area where Arm essentially will recommend the Arteris system IP to be used by Arm automotive customers, right? So we anticipate that, that will expand the revenue opportunity for Arteris, particularly in automotive. The other element of this is that we've -- Arm and Arteris have agreed for Arm to provide us a stream of automotive processors, advanced processors, so that we can emulate and make sure that we test the quality of the integration before it hits the customer base. And so that obviously helps us to tailor our interconnect technology to the advanced Arm processors as they come out, right? So we think that this is an agreement that is beneficial to both companies, and it sort of solidifies Arteris position in system -- automotive system IP and also helps Arm in terms of penetrating the automotive market segment, right? And I should also mention that this partnership is confined to automotive, right? There's other segments where we are sort of still being sort of a friendly "competitors," I guess, you would say. But in automotive, we decided to basically partner together. Ethan, does that answer the question?
Ethan Potasnick: Yes. Perfect.
Operator: . Our next question comes from the line of Ambrish Srivastava with BMO.
Ambrish Srivastava: I just wanted to come back to the China question that Mark had asked earlier. I'm a bit confused. I just want to make sure we are all on the same page. So even though you see a headwind from the efforts, you don't anticipate the mid- to high single digit having any impact on growth rate? If we look at next year, we should not go and trim our next year forecast based on that because you have -- you feel you have offsetting tailwind? So net-net, the tailwinds offset the China headwind? Is that the right to walk away from those comments?
Karel Janac: Yes. That's our current feeling, yes. I don't know, Nick, do you want to add some other comments for this?
Nicholas Hawkins: Yes. I mean the -- we are still feeling our way through this Ambrish as everybody in the space is. And so frankly, we don't 100% know yet. We know that there are, but we don't really have any applications in supercomputers, for example, which is one of the prime drives of that U.S. export regulation. We're not in the business of DRAM or NAND flash, which is another sort of technology element of it. There may be potentially some parts of our growth in China that could be in sub 16-nanometer China foundries, but we don't know until we know. And so right now, we don't see any immediately obvious sort of headwind, but we want to be a little bit prudent in terms of guiding you guys. And so there could be, we think, single-digit percent headwind to overall revenue growth for the company from those events. But as Charlie said, there are some other tailwind events or tailwind vectors that are very positive. But I think in the -- certainly in the short to medium term could be completely offsetting the timing of those 2 things. We just don't know. At the moment, we're not seeing any reduction in China business.
Ambrish Srivastava: No, I think that makes sense. That's a pretty balanced assessment. I think there's a lot of uncertainty. Another thing for you, Charlie. Something you highlighted is the direct auto OEM engagement. Can you just give us some sense of what this -- where was this a year ago in terms of how many customers you're engaged directly in the auto space, a year ago versus now? And then more importantly, how is the business trending in terms of your engagement directly with these customers? Obviously, the whole auto industry has gone through such a turmoil with all the shortages and whatnot, so any perspective would be very helpful.
Karel Janac: Yes. So it used to be that we could not even get a meeting with an automotive OEM, right? And when we tried, there was a question why are we talking to a interconnect or a system IP supplier. That has changed dramatically because, basically, the OEMs have realized that they need to gain control of their electronic architectures. And they can't have 200 little MCUs in their cars coming from the Tier 1s and accept -- and expect to compete against the likes of Tesla. So they have started designing chips. Some of them have gone quite deep into this. I think the mainstream model is that they define the architecture that is needed by their software and then they work with partners to develop those chips with the partners then being able to sell those chips on the open market. And so we wind up engaging with some of these OEMs now directly. We closed -- typically, so far this year, we closed one a quarter, basically one direct OEM relationship per quarter. At the moment, though, this is accelerating. And so there's nothing to announce, but we're engaged with several at a time right now. And so we anticipate that the -- that essentially every viable automotive OEM is going to have some kind of an SoC development program within their 2023, '24 budgets. So we anticipate that the interaction between Arteris IP and the OEMs and the ridesharing companies as well is going to accelerate going forward. That's one of the -- I would say one of the tailwinds of our business.
Ambrish Srivastava: So this should result in the TAM being -- potentially being larger than what you were thinking when you went public?
Karel Janac: Yes. One is the TAM becomes somewhat bigger. I mean the TAM was already pretty big. But it does certainly expand the SAM, the served available market. But what it also does is if the OEMs essentially standardize on Arteris, that also drives additional business in the supply base of those OEMs, right? So it's very much what happened with Arm and the phone makers when Arm started engaging directly with the companies that actually made the phones rather than just people who made the phone semiconductors, right? So it's a very similar strategy that we have. And there is, I would say, substantial evidence that it's working and it's successful and that the OEMs are happy with us. And in this particular case, initially, this OEM essentially use Arteris interconnect to a partner and on a subsequent project decided to do a direct license with us.
Operator: Our next question comes from the line of Gus Richard with Northland.
Auguste Richard: Charlie, I just want to -- see if I can trim this up long question. Are the oil guys moving more towards ASICs beyond what they used to do? And how is that impacting new and existing foundries in terms of IP reuse? And how do you see this all playing out? And where you position vis-a-vis these moving pieces?
Karel Janac: Yes. I mean the automotive business is going through just the biggest disruption since World War II because, basically, it's no longer the car business. It's the Internet of car business, right? So you now have connections to the data center, soon connections to the road infrastructure. Eventually, the cars will be talking to each other, right? So the car becomes an endpoint in basically a giant transportation network. So the car companies are seeing this, and so they are starting to design chips. But with a few exceptions, they really don't have the volume or the skill set. And so they're calling in semiconductor partners to essentially help them. But they are defining the architecture because the biggest investment in all of this is the software, and so basically instead of -- in the old days where Intel would put out a chip and people would program for it, now people make a very large investment in software, and they're building SoCs to run that software the most efficiently possible with the highest performance and the lowest power because of the constraints that are in the car, right? So it's a completely different paradigm. And so these companies are not interested in building their own network on chip or even processors, right? They're interested in getting an SoC that runs their software, and so this is a fairly substantial opportunity for commercial system or for commercial IP to be utilized in these designs. And it does expand the served available market for companies such as Arteris. And we're fortunate enough that we have a very, very strong position in automotive, and we're very committed to even expanding that position and working very hard with our customers and our partners to provide the technologies and the features that these people need to get the best SoCs available to run their very sophisticated software.
Auguste Richard: Okay. Got it. And then just, typically, you guys introduce a new product around the end of the year, and I think the next one is going to be based around loosely IP-XACT. I was just wondering if you could give us an update on sort of the new product momentum here.
Karel Janac: So we're very excited about our product pipeline. We're not ready to make any announcements or even to say what it is, but we would probably make some announcements, some early access deliveries probably sometime in the quarter and make announcements later on. So we're on track to meeting the one product per year commitment. And of course, the revenue impact will be 2023.
Operator: And we have a follow-up question from Mark Lipacis with Jefferies LLC.
Mark Lipacis: Great. Charlie, could you talk a little bit about the Microchip announcement from -- I think it was 5 days ago? It looks like this is for FlexNoC. And I'm wondering a couple of things. What's the opportunity here to expand into other IP that you're offering above and beyond FlexNoC? And in the press release, it looks like you said you're looking forward to working with additional design teams. And I wonder if you can share, is there any other -- what should we take away from that comment? Are you already starting that engagement process? Is there anything that we should think about like going forward?
Karel Janac: Yes. So we're not authorized to say what the initial application is. But the Microchip relationship is pretty much similar to others, where we sort of break in on the most complex, most difficult designs. And then over time, we expand into other teams doing perhaps less sophisticated-type designs. And so we're working to make that happen in Microchip as well as at other companies. So yes, it's a major relationship that has a start at a relatively focused application and then that we hope to expand from there.
Mark Lipacis: Got you. And is this something that -- I mean the announcement just came out. Is this something that you had been working on for a while and you got the okay to announce the customer? Or is this something that just happened and you got -- you can make the announcement right away?
Karel Janac: Yes. This one happened to have a relatively short design in cycle, right? So it's -- I would say it's an example of, I would say, a trend that the design win cycles are somewhat shortening compared to where they were a couple of years ago. As the sort of the reputation of the company expands and because of the IPO and others, we sort of wind up in some sense. Our goal is ultimately to be a standard for the system IP solutions.
Operator: We have a follow-up question from the line of Hans Mosesmann with Rosenblatt Securities.
Hans Mosesmann: Nick, on gross margins, the implied gross margin from your guidance is over 92%. Is that something that we should assume is sustainable into the following year?
Nicholas Hawkins: Hans, yes, so great question. The -- we've always said that we would have gross margins in the region of 90% to 95%, so this is right down the middle of a fairway. The main cost of revenue element is FAEs, field applications engineers. And that can fluctuate up and down a little bit depending on whether exactly how we account for it. So I think the 92.5% kind of midpoint of 90% to 95% is still what I would call a good long-term planning number, and that's pretty much where the quarter came in.
Operator: There are no further questions at this time. I will now turn the call over to Charlie Janac for closing remarks.
Karel Janac: Well, thank you. So thank you. We appreciate -- thank you for joining us today. We appreciate the great questions, and we look forward to keeping you up to date on future progress of Arteris IP. Thank you very much.
Operator: That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.
