Sequans Communications S.A. (SQNS) on Q1 2021 Results - Earnings Call Transcript
Operator: Greetings, and welcome to Sequans Communications First Quarter 2021 Financial Results. . I would now like to turn the conference over to your host, Kim Rogers, Acadian IR.
Kim Rogers : Thank you, Joe. Thank you to everyone participating in today's call. Joining me on the call from Sequence Communications are Gees Karam, Chairman and Chief Executive Officer; and Deborah Choate, Chief Financial Officer. Before I turn the call over to Gees, I would like to remind our participants of the following important information on behalf of Sequans. Sequans issued the press release this morning and was posted to the company's website at www.sequans.com/investors under the News section.
Georges Karam: Thank you, Kim. Good morning, ladies and gentlemen. Welcome to our first quarter 2021 financial results conference call. We hope everyone is healthy and safe. Sequans is cooperating globally with local regulations to ensure that all our people are safe. We continue to operate with efficiency and effectiveness despite the constraints we are facing because of the pandemic. Hopefully, soon this crisis will be behind us as the vaccination is expanding worldwide. First quarter revenue grew by 40% year-over-year, driven by significant gains in our Massive IoT business that offsets the decline in the mobile router business. At the same time, supply chain constraints that delayed approximately $2 million of Massive IoT product shipments impacted our first quarter revenue, resulting in a 2022 -- 22% sequential decline. Model shipments were the most affected because of the PCB shortages, a related lead time increase. As a result, we had higher percentage of chips sales in Q1, which lifted gross margin to 50.1%, up 500 basis points from the prior quarter.
Deborah Choate: Thank you, Georges. Good morning, everyone. I'll make some comments about the details of our first quarter 2021 results and other developments. Our revenue for the first quarter was $12.3 million, an increase of 40.5% versus Q1 of 2020. While this fell short of our revenue goal, the shortfall was primarily due to the delayed shipments resulting from the supply chain issues Georges discussed. Sequentially, revenue in the quarter declined 22%, primarily due to expected seasonality and lower portable router related revenue, but as well due to the shipment delays from the supply chain constraints. Revenue from Massive IoT in Q1 2021 doubled compared to the first quarter of 2020 and increased about 30% from Q4 2020. Both Cat 1 and Cat M/NB revenue increased in 2021, and Massive IoT accounted for over half of total revenue in the quarter. As expected, broadband IoT revenues decreased significantly from Q4, primarily due to lower revenue related to portable routers. The vertical category, which includes service revenue generated by our major 5G strategic deal, increased in Q1 2021 compared to both Q4 and Q1 2020. In the first quarter, we again had 3 greater than 10% customers. All are ODMs. Gross margin in Q1 2021 decreased slightly to 50.1% from 51.3% in Q1 2020 and increased from 45.1% in the fourth quarter of 2020 due to the revenue mix. We had a higher proportion of chip sales and license and service revenues in Q1 2021 compared to Q4 and a higher proportion of chip sales but much lower proportion of service revenues compared to Q1 2020. IFRS operating expenses were $12 million in Q1, down from $12.5 million in Q4, primarily due to higher capitalization of R&D as we began capitalizing 5G development costs, lower fees related to convertible debt conversions and a more favorable euro-dollar exchange rate compared to Q4, partially offset by higher staff costs. Non-IFRS operating expense, meaning without stock-based compensation expense, were $10.8 million in Q1 2021, down from $11.7 million in Q4. Our first quarter operating loss was $5.8 million compared to an operating loss of $5.4 million in the fourth quarter of 2020 and a $7.8 million loss in the first quarter of 2020. Our net loss in Q1 was $11.4 million or $0.33 per diluted ADS and included a noncash loss of $4.1 million on the revaluation of the embedded derivatives related to our convertible debt. This compares to a net loss of $11.3 million or $0.36 per diluted ADS in the fourth quarter of 2020, which included a noncash gain on the revaluation of the embedded derivatives of $111,000. And the net loss in the first quarter last year was $15.3 million or $0.64 per ADS, and that included a noncash loss on the revaluation of the embedded derivatives of $5.6 million. On a non-IFRS basis, our net loss for Q1 was $5.1 million or $0.15 per diluted ADS compared to a non-IFRS net loss of $8.5 million or $0.28 per diluted ADS in the fourth quarter and a net loss of $8.7 million, $0.36 per diluted ADS in the first quarter of 2020. In Q1 2021, we had a foreign exchange gain of almost $1.4 million or $0.04 per ADS, most of which was unrealized and noncash, related to the revaluation of euro-denominated net liabilities on the balance sheet. Investors should be aware that possible changes in foreign exchange rates related to balance sheet items and the marking to market of the embedded derivatives related to the convertible debt can cause significant differences in net income or loss from quarter-to-quarter. And while the impact of swings in the value of the embedded derivatives are excluded from our non-IFRS presentation, foreign exchange gains and losses, whether realized or unrealized, are not excluded. Cash flow generated by operations during Q1 was $9.2 million compared to $1.4 million used in operations in Q4 and $7.7 million used in operations in the first quarter of 2020. We received a substantial portion of the $5 million strategic deal with Renesas as an upfront payment in Q1. The cash related to the graph from the French government will be paid over 3 milestones with 25% upfront, which was received on April 1, and therefore, excluded from the cash balance at the end of March. On April 9, we closed a $50 million hybrid equity and convertible debt financing in a private transaction with an institutional investor, Lynrock Lake. Just under $19 million of these proceeds were used to repay the remaining amount of the existing convertible debt that was due on April 14 as well as prepayment of the venture debt that otherwise would have been paid down through April 2022. Taking into account the new sources of cash received in April and the repayment of debt, our cash and short-term deposits on a pro forma basis totaled approximately $46 million compared to $18.5 million at the end of Q1 2021 -- I'm sorry, compared to $13.5 million at the end of Q1 2021 and $18.5 million at the end of 2020. Turning to some other balance sheet items. Accounts receivable at March 31, 2021 decreased to $7.1 million from $17.3 million at the end of Q4, primarily reflecting the fact that most of our service and license revenues in the quarter were prepaid as well as an improvement in the on-time payment performance by customers buying products. Due to the prepayment of service and overall payment performance improvement, DSOs were 27 days compared to 73 days at the end of Q4. Inventories decreased to $4.6 million compared to $6.2 million at the end of Q4, reflecting lower finished goods and components due to the industry supply chain situation. Current trade payables decreased to $14.7 million versus $15.7 million at the end of Q4. Short-term debt from financing receivables decreased to $11 million from $14.2 million at the end of Q4. Our convertible debt, which is all classified as long-term under IFRS rules, decreased to $16.1 million from $26.1 million, reflecting the partial conversions in January and February of the convertible note issued in 2015. Turning to the outlook for Q2. Our pipeline and backlog continue to build, and despite the continued supply chain constraints and factoring the risk related to the portable router business, we are targeting an approximate 10% sequential increase in revenues. For those of you developing financial models, you can make your own top line assumptions, but to help you with your modeling will share some of our OpEx and financial expense assumptions. We continue to expect that non-IFRS operating expenses should average $11 million to $11.5 million per quarter in 2021, assuming a stable euro-dollar exchange rate. We expect non-IFRS financial expenses to be around $2.4 million in Q2, excluding any foreign exchange gain or loss. This takes into account the conversions and repayment of the previous convertible debt, the repayment of the venture debt with about $500,000 of remaining interest and the issuance of the new convertible debt was interest accrued at the PIK rate of 6%. Unless we exercised our option to pay the annual coupon on the new debt in cash to benefit from a lower rate of interest of just over 5%, we expect the quarterly cash payments and interest expense going forward will be minimal given the low rates of interest on our government debt and receivable financing. Finally, for modeling purposes, the number of ADS outstanding today is $37,275,000. Before I turn the call back to George, I have a few housekeeping items to cover. First, in connection with the private placement with Lynrock Lake, we agreed to grant registration rights. So we will be filing a Form S3 registration statement within the next 2 weeks to comply with this obligation. There will not be any sale of shares at this time nor any new equity issuance associated with this registration statement. I'd like to remind you that at the conclusion of this call, we will post a written version of our formal remarks in the Investor Relations section of our website on the Webcast and Presentations page. Of the same location where you can find the audio replay. Also, Georges and I will participate in the Needham Virtual Technology and Media Conference in May and the Ross Virtual London Conference in June. And we look forward to speaking with you sort of in-person if you plan to participate. So now I'll turn the call back to Georges.
Georges Karam: Thank you, Deborah. Operator, we are now ready to open the call for Q&A, please.
Operator: . Our first question is from Scott Searle from Roth Capital.
Scott Searle: Thank you for the detail, a lot in there, George and Deborah. Maybe just to start, some quick housekeeping. I just want to make sure I understand fully where the balance sheet is today on a pro forma basis. We have $40 million of the new converts, roughly $5 million of the August '22 converts, outstanding government debt or loans or grants with now cash on the balance sheet post the $50 million hybrid raise of $40-plus million in cash. Is that roughly where the balance sheet stands today?
Deborah Choate: Yes. And in the investor presentation that we'll be posting at the end of the call, we have a pro forma presentation as well that should help clarify things.
Scott Searle: Perfect. And Deborah, interest going forward on a quarterly basis, therefore, should be less than $1 million versus what we've seen in the past?
Deborah Choate: So interest expense includes a lot of different items. What we said is for Q2, we're expecting it to be $2.4 million. That includes a $500,000 cleanup with the venture debt. So it will be likely all in all to be $1.9 million on a non-IFRS basis.
Scott Searle: Okay. Great. And then looking forward into the second quarter, that 10%-ish sequential increase. What are you factoring in at the current time on the broadband front? I know there's been headwinds just in general in terms of normalization of the surge work from home demand. But on top of that, now we've had the Franklin battery issue. So are you factoring in any recovery there whatsoever? And just to clarify, Georges, I think you said $6 million potential impact from that, but being offset by demand in IoT. I want to make sure that you're seeing that Massive IoT demand is offsetting any of that potential annualized impact of $6 million related to broadband issues with Franklin.
Georges Karam: I mean it's got -- obviously, for the quarter, our assumption excludes any portable router. It will be -- I mean, honestly, we don't know. I mean, we don't have -- I cannot guarantee -- maybe there is a little bit of chance of getting some upside, but it's negligible, in my opinion, for the current quarter. So that's why we are assuming zero in the zero shipment in the portable router in Q2. Still a question mark for the second half. So this means the growth is coming. If we look to Q2, you could see like a decline in the broadband because even if we have the emerging and the CVRS, in Q1, we did a little bit of broadband, we did like more than $1 million for portable router that went to Franklin. And this will go away in Q2. And obviously, this means massive growth from massive IoT and more than 10% the growth in vertical as well quarter-to-quarter. So this is, I would say, for the picture in the fourth term. If you look for the full year, the $6 million is really the worst case, what I consider because we always said like we could be -- we are doing $8 million on a normal situation, which is like $2 million per quarter on portable router business. I mean, sometimes, we were a little bit below, but sometimes a little bit above. So on average, like $2 million So the $6 million reflects like $2 million times 3 quarters, assuming this will not see any recovery. But still, I'm hoping maybe in the second half, we could see some of the recovery, and maybe we'll not go to the worst-case situation with all those $6 million less in revenue. And obviously, the growth engine in massive IoT, as I said, we are extremely pleased, whether Cat 1 or Cat M. And this is really much more than 10% per quarter the growth was happening, and obviously, with the vertical going well. So all in all, we're able to offset this loss of portable router.
Scott Searle: And lastly, if I could, and then I'll jump back in the queue. But looking at the second half of this year, the pipeline is building really well. Conversions on that pipeline in terms of design wins up 20% in the first quarter. It sounds like you're incredibly positive in terms of what you're seeing going into the second half. You've given us a lot of the drivers. Can you talk a little bit about how you're managing some of the supply chain aspects of that? Because that seems like it's more of a gating factor than anything else from a demand standpoint or design win standpoint where you're winning the business. What you're able to do on that front. And the recent financing, how that's impacting your ability to really execute against that?
Georges Karam: Thanks, Scott. I mean, on the supply chain, obviously, the industry -- I mean, it's really a very critical situation in the whole industry. Not only Sequans is impacted. All our, I would say, even competitor. I'd have to say even from time to time, we see some upside because some of the customer realizing that they depend on some other competitor where their focus is not IoT, they come like second the list. And they realize that -- they grab Sequans, and they come back for us. So we're seeing some positive, I would say, from design win potential. It's very hard to quantify it. But we are seeing very positive feedback from customer coming from this angle. For us, the challenge is really on all angles, whether PCB, substrate, it was a major issue, and obviously, the foundry. What I was struggling with in the short-term was really PCB and substrate. And I mentioned that my challenge on the foundry is more in the second half. We're working daily with the TSMC to get a little bit of upside here and there as soon. As we see some free capacity, we take it. The gap is not that big on TSMC. And I'm moderately optimistic. I will say that I can -- I will not get all the, I would say, shortage, and maybe some of it will be recovered in the second half with TSMC. And regarding the substrate, it's really a major issue because lead time went to kind of 300 days or so overnight, and we had to address this with second source. So we worked all the item, all the chips where we have shortage and challenges, almost like 4 chips get impacted to the substrate. And we build second source for it. 3 of them are behind me in terms of problems and solved. Last one, I'm fixing this now, and I believe we should be fine based on the recent work we have done as a team. So the challenge is really shifting from quarter-to-quarter or managing the priority between customers. That's how we're dealing with this. We're not losing business. I tend to say, we are even gaining business because of the shortage because some customers realize that they need to bet on a company focusing 100% on IoT and can take them like top priority.
Operator: Our next question is from Mike Walkley from Canaccord Genuity.
Thomas Walkley: Just building on some of Scott's questions. For the kind of nonproduct revenue or the other revenue line item with that large satellite customer not winning the end business, how are you thinking about growth in that line item this year relative to what it might have been with that contract?
Georges Karam: Mike, yes, I mean, as we said, first of all, the vertical, what we can't underline, we are part of this -- it's included inside as well, the 5G strategic NRE deal. And this is alone is ensuring nice growth year-to-year, first of all. On top of this, obviously, we have a lot of opportunity in the vertical not going away. So -- and what I mentioned on the call, yes, this deal not happening, reducing our forecast from one angle. But on the other side, I mentioned that we closed the deal with EchoStar, and we are closing now another deal. It's not as large as the first one, but the impact for the year in terms of revenue is equal because it's happening at a shorter term, shorter period. So all in all, we believe the vertical business will be in line with our, I would say, 50% growth year-over-year at least.
Thomas Walkley: Okay. Great. That's helpful. And just a follow-up question, I'll pass line, on the supply chain issues. You talked about spillover demand from customers coming to you with a second source. Are you seeing because your customers can't get their own components, any kind of push out in orders? Or is it really just the order book staying pretty similar for the year?
Georges Karam: Yes. I mean, we're getting the order. We were receiving -- are staying the same. We're not seeing any push out, even people are pushing us to accelerate shipment. And as I said, we have -- the backlog is quite solid, and we see -- we have order -- placed order for even beginning of 2022 just to cover this. So again, it's a painful to supply chain in a sense like managing delay. We're not able to really -- even independent of the financial reporting, I will say, but even with customer, we until the last minute, we could have problem not shipping in the months. We need to ship second months. We have a delay of a couple of weeks here and there. But overall, I'm not in a panic mode. We fixed a lot of wishes so far with second source on the subtract, and TSMC is treating us fairly well. And I believe we can go through without any major, major impact.
Operator: Our next question is from Craig Ellis from B. Riley.
Craig Ellis: Yes. My first question is just a follow-up to the first quarter's strong gross margin performance. And the question is this, with the mix of business in the second quarter tilting significantly to massive IoT and with continued vertical strength, and with those trends seeming pretty predominant through the year, should we expect gross margins to remain there, 50%, as we proceed through the year? Or would there be some gives and takes in the back half of the year? And if so, Deborah, to what extent would we see then?
Deborah Choate: So I think for the time being, we're still sticking to what we had said, I think, at the last quarter, which is overall for the year, targeting at least a 48% gross margin. I think it's a little too soon to be sure we don't have other impacts in terms of mix or sort of side effects on the supply chain issues.
Craig Ellis: Got it. And then, sure, it's nice to see the CBRS business gaining traction. The question is, as you look out to the fourth quarter of this year, can you help us qualitatively or even quantitatively, scope how big you think that business could be? And as we think about calendar '22, does CBRS hit that a 50-ish percent growth level? Or would it be above that just given its base from calendar '21?
Georges Karam: Yes. Craig, well, I mean, obviously, we start shipping CBRS late last year. We had some shipment in Q3 and a little bit in Q4, I would say. But overall, the number were well below $1 million, I would say, for the year, last year, CBRS. And this year, I mean, we are -- I mentioned at some time that we should be able to hit more than $4 million for the year in CBRS. And we have good visibility on this. We are working as well -- we're seeing a lot of opportunity coming. I mentioned that during the quarter, we have another 2 customers. We have some opportunity as well with more and more application of the CBRS, and let us feel like this market has nice potential. We could have more than 4 this year, I'm hoping, if you want, that we can do -- we can beat this, maybe get on or $2 million more if things will convert. For the time being, I remain a little bit on my target. But next year should continue. And the growth, yes, I believe next year, maybe it has it should have more than 50% of the growth, the CBRS, I mean, because we are at the beginning. So the growth should be much more than 50% year-over-year because we are at the beginning of the potential of this market.
Craig Ellis: That's really helpful. And then my next question is related to some of the strength that you're seeing in the design win funnel, and it's great to see that move up so significantly through the first quarter. The question is this, to what extent is that being driven by things that are more on the Sequans side with the capabilities you've developed over the years? Or to what extent is it really driven by some of the newer ecosystem relationships that really came into the portfolio over the last 18 months with your distribution partnerships and with the MCU partnerships, with Renesas, Microchip and NXPI? Any color on the degree to which that broader ecosystem is helping would be really useful.
Georges Karam: I mean, obviously, it's a combination of the 2. We have great platform, first of all, I mean, with maturity of the first generation and second-generation really beating the competition and power consumption and other features that we provide that are unique and which is product-ready and moving there. But we should not neglect at all, what I would call it, the positioning of Sequans or the brand of Sequans getting far much better. Even if -- by the way, even if we are winning the deal alone, without even a partner like an MCU partner or a distributor, just only the brand and the positioning, the viability of the company is improving every day. And last year, I believe we -- with all those relationships helped us a lot. And definitely, in terms of new, I would say, acceleration of the pipe the go-to-market is a key element as well. Even if I look to the design win conversions, maybe I don't have the same ratio. But if I look to the pipe and the number of deals, a lot, a lot are coming through our partner, whether on the distribution or the MCU partners. And I believe we will have more and more conversion to design win in the near future. So the two factors are very important. But if you tell me a year ago, our product was great, I will say yes as well, but we were winning less. So I tend to favor like the positioning of the company was really instrumental, and the go-to-market was really a key change in the company since last year.
Craig Ellis: That's great. And then lastly for me before I jump back in the queue, a follow-up to Scott's question to Deborah. Deborah, I wasn't clear in the point on cash on a pro forma basis, right now $46 million. Does that include the $5 million payment that was agreed to with Renesas around the time of the Virtual Analyst Day? Or does the benefit of that payment come in sometime later? And if so, when?
Deborah Choate: The Renesas payment was predominantly Q1, so it's already in the balance at the end of March.
Georges Karam: But no government, no French government.
Operator: Our next question is from Tristan Gerra from Baird.
Tristan Gerra: Just a quick follow-up question on gross margin. Some companies have talked about their expectations for higher material prices that could impact margin in the second half and their plans to raise pricing. So the question is, how much visibility TSMC is giving you in terms of wafer cost for the second half? You've mentioned that, so far, you're still holding on your gross margin target for the year. But I'm assuming you have already some visibility for the second half. And what is your ability to pass along any type of wafer price increases with higher ASPs to customers?
Georges Karam: Tristan. I don't know if I should say this, but we appreciate a lot TSMC. I mean, to some extent, we don't see -- we have good visibility on the cost structure with TSMC, and we don't see this an issue at all. It's more the capacity where I would like a little bit more help from them than really on the visibility on the costs. However, we're seeing cost increase on other component because when you go with, call it, like more substrate, the relationship with those guys, it's not like as strategic as you can as we have with TSMC. So obviously, here, we're seeing all element, people waking up and saying, "If you want to get it now, then you pay that much more. I will give it you. Otherwise, you don't get it. You'll get in 3 months and so on." So we are buying sometimes some capacity, and there is some increase we're seeing as well in the module cost -- some cost increase related to some increase of the bill of material, for example, the memory. So we saw some component price increase, substrate challenges to repay for lead time, if you want, much less with DSMC, to be honest. And overall, obviously, this has some impact here and there on our cost structure that we are integrating, factoring in, in the target Deborah was giving, s the 48%, at least for the year. But also regarding your question, passing this to customer, it's possible. It's not like something -- obviously, it's part of the policy that we adopted to some customers. For those placing order with good visibility ahead of time and covering the year, we're respecting our engagement in pricing. For those coming late to place orders, we are reflecting some price increase, definitely. And we're passing some of it.
Tristan Gerra: Great. That's good color. And then going back to the Cat 1 opportunities, and you've mentioned connected speakers. Sorry if I missed it. Could you talk a little bit about the revenue potential that you see from Cat 1 for the year -- growth year-over-year? And also, how much of that higher bandwidth segments within Cat 1, such as connected speakers, is expected to contribute over the next few years?
Georges Karam: Yes. I mean, first of all, the Cat 1, I mean, it's growing nicely, I mean, and we will hit our more than 50% this year, year-over-year already with the existing business. In this -- for this year, the connected speaker element is not going to be that big. Maybe it will be like, what, I should say, maybe a few percent of our massive IoT, if you want globally, including Cat M, because the launch of the volume of this product is happening in the second half. And it's in the initial market. So still at the beginning. But this will continue next year. And I mentioned as well that we have a design win with another major company, making connected figure but using Calliope 2, and this will be next year. So in general, we believe this segment will develop. There is a question mark, obviously, about the size of the market because why do you need cellular on connected speaker, and what will be the customer perception, brand and so on. So we remain a little bit cautious. We don't want to be too bullish on this. But definitely, there is a demand happening there, and our product is ideal for this solution. And we see this helping the growth, what we are talking about, the 50% in average year-over-year. Some contribution is built for the Cat 1 as well there with this connected wearable, I would say, segment and hearable segment contributing to it as well.
Operator: Our next question is from Denis Pyatchanin from Needham & Company.
Denis Pyatchanin: Taking a question here for Raji Gill. So first question I have for you guys is can you just speak a little bit more about how much of the broadband and that Verizon Jetpack you're still seeing in Q1? Did I understand correctly that it's just $1 million in sales, and it's nothing to Verizon anymore? Is it just going to Franklin? Or did I misunderstand that?
Georges Karam: No. I mean, obviously, there is -- I mean, I don't want to confuse you. When we talk about the end market, which is Verizon, obviously, the portable router used by Verizon, this business is going to Franklin -- and by the way, not directly to Franklin, it's going to an ODM -- an EMS in Korea being the product and then going to France. So we are talking about the same business. And this business in Q1, we did $1 million, which was, by the way, in line with our expectation because we have some -- we ended the year with a little bit of inventory. So we expected Q1 to be low and start recovering in Q2, Q3, to go back to the normal level, which is, as I said, can reach around $2 million per quarter in average. And due to the recall, we're expecting zero in Q2 the current quarter, and then we'll see what will happen in the second half of the year.
Denis Pyatchanin: Got it. That's helpful. And then just a bit of a bigger question around CBRS opportunity in the private 5G networks. Could you just give a brief rundown of kind of what we can see over the next few quarters regarding either design wins or what's ramping up?
Georges Karam: CDRS, I have more than 15 customers already. All of them, they have product currently. All of them. I mean, they have product ready. We're just not -- so I believe here, what happened is that the market was well known, the people who are working on it. And we were waiting for the regulators to open the frequent events so people start shipping. And this is, as you know, get a little bit delayed last year and towards the end of the year in the -- towards Q4. Then regulatory open the ban, and people started shipping to this. And we're seeing products there, a lot of products around, as I said, providing a router capability, whether to campus, or I mentioned the situation of distance learning with the school district coverage. But we have a application, for example, for stadiums. We have connected speaker all working in the National League, by the way. The football league, they are using this product, and this product is combos there. So we have a lot of application like this. And it's all spending] by being high-speed connectivity like modem, could be download, could be router. But what we are seeing as well, a tablet -- a regularized tablet, again, for kind of application where we are in private networks, and they need a tablet connection or portable router. So these are the kind of applications we're seeing there. And obviously, today, it's all 4G, Cat 4 and Cat 6. And in the future, this can evolve to support 5G as well.
Denis Pyatchanin: Great. And then just lastly, could you please speak about maybe kind of your -- the competitive landscape and how you're positioned against some larger players like Qualcomm or Nordic or Altair, just kind of comparing product positioning?
Georges Karam: Yes. I mean, as we mentioned, we -- the only guy who can really compare in terms of coverage of portfolio, product portfolio is really Qualcomm because they have the -- they have all the family of products. When you go to Nordic and Altair, we compete with them only in Cat M, and they are on their first generation product and our Monarch 2 beat them, and they don't have Cat 1 either. Calliope is not there. So we don't compete with them. We compete more with the Qualcomm with Cat M and Calliope and 5G and Cat 4, Cat 6. And as you know, the differentiation there is Qualcomm not focusing on IoT, and they don't have the best product for IoT application quite often. And that's how we differentiate our products in front of them.
Deborah Choate: Unfortunately, I think we're going to have to wrap it up at this point.
Operator: Ladies and gentlemen, we have reached the end of the question-and-answer session. I'd like to turn the call back to Georges Karam for closing remarks.
Georges Karam: Okay. Thanks, operator. Thank you. Thank you, all of you again for joining the call today. We look forward to catching up with you and again on our second quarter earnings call. Thank you very much. Operator, you can end the call now.
Operator: This ends today's conference. Thank you very much for your participation. Have a great day.
Georges Karam: Thank you.
