Welcome to the Q1 2016 Financial Results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, instructions will be given at that time. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to Jordan Darrow. Please go ahead.

Thank you, and welcome to the Data I/O Corporation's first quarter 2016 financial results conference call. With me today are Anthony Ambrose, President and CEO of Data I/O Corporation; and Joel Hatlen, Vice President and Chief Financial Officer of Data I/O. Before we begin, I'd like to remind you that statements made in this conference call concerning future revenues, results from operations, financial position, economic conditions, product releases, and any other statements that may be construed as a prediction of future performance or events are forward-looking statements which involve known and unknown risks, uncertainties, and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. These factors include uncertainties as to the levels of orders, ability to record revenues based upon the timing of product deliveries and installations, market acceptance of new products, changes in economic conditions and market demand, pricing and other activities by competitors and other risks including those described from time-to-time in the company's filings on Form's 10-K and 10-Q with the Securities and Exchange Commission, press releases, and other communications. The accuracy and completeness of forward-looking statements should not be unduly relied upon. Data I/O is under no duty to update any of these forward-looking statements. I would like to turn over the call to Anthony Ambrose. President and CEO of Data I/O?

Thank you, very much, Jordan and welcome everybody. I would like to comment on our 2016 Q1 performance and then turn it over to Joel Hatlen for some more detail on our numbers. The 2016 first quarter highlights include Q1 bookings of $5.9 million which were the strongest Q1 we have had in five years. We saw straight across the automotive sector both in the OEM and programming center business. Recently this week, the NEPCON Shanghai Show, we won the SMT China Vision Award for our LumenX Programmer along with other industry awards this quarter. This is an additional recognition of our outstanding performance in managing secure programming with the LumenX system. In Q1 we also completed our office and factory move in China. We nearly doubled our manufacturing and engineering capacity at much lower per square foot charge. We had a very strong operational performance in Q1 as we managed this office move. With minimal operational impact and other factors. We also began our share repurchase program and purchased nearly $96,000 worth of shares at an average price of $2.26. In the February call we updated everyone on our outlook for the year and our views of the market and I don’t have any major changes from that to discuss today. But just to refresh everyone. Our fundamental strategy remains the same for Data I/O. First, we focus on our core business of programming, continuing to enhance and extend our core platforms and programming technologies. We market and sell our products globally. We continue to lower our total structure and we continue to enhance shareholder value through intelligent M&A and return of capital. The automotive electronics market and the Internet of Things are rapidly growing industries and they are the focus of our R&D and marketing activities. Our wins with our flagship product, the PSV7000 in the automotive electronics market, reinforces our believe that we are on the front-end of a wave of new and exciting automotive infotainment, instrument cluster applications and advanced driver assist systems that favor Data I/O's approach to programming. Our wins in the Internet of Things chip scale package market and wearable devices market, confirm the market opportunity in IoT. We have talked about this for a while and we believe we are in the very early stages of this IoT opportunity. We plan to service these markets directly through sales to OEMs as well as through their programming center and EMS partners. With that, I will turn the call over to Joel Hatlen for more detailed review of our numbers.

Thank you, Anthony. Good day to everyone. Revenues for the first quarter of 2016 were $4.6 million compared with $5.9 million for the first quarter of 2015, which primarily resulted from the impact of the lower backlog and deferred revenue levels coming into the quarter. International sales represented 78% of total sales for the first quarter of 2016, compared to 93% in the first quarter of 2015. On a regional basis revenues increased in the Americas 65% and declined in Europe 45% and Asia 26%, compared to the first quarter of 2015. With the growth in the Americas due to automotive electronics end market demand while the European business particularly reflected the impact of the lower beginning backlog in deferred revenue. On a product basis, the revenue decline reflected the decline in legacy equipment business and the lower beginning backlog of PSV7000 systems, partially offset by growth from our newest products, the PSV5000 and LumenX. Sales were strong in the automotive markets. Adapters and consumable declined 15% to $1.1 million. Order bookings were $5.9 million in the first quarter of 2016, compared to $5.2 million in the same period -- sorry, order bookings were $5.9 million in the first quarter of 2016 compared to $5.2 million in the same period of 2015. Again the variation in revenue percentages versus order percentage relate to the change in deferred revenues backlog and currency translation. Backlog at the end of the quarter was $2 million compared to $1.7 million on March 31, 2015 and $0.7 million on December 31, 2015. Deferred revenue at the end of the quarter was $1.2 million compared to $1 million at both March 31 and December 31, 2015. For the first quarter of 2016, gross margin as a percentage of sales was 54.8% compared to 48.4% in the…

Thank you, very much Joel. Before we open it up for questions, I would just like to remind everyone that we will be having our annual shareholders meeting here in Redmond, Washington on the 24 of May at 9:00 am Pacific and any shareholders in the area are more than welcome to come by and attend. We will also be presenting at the B. Riley Conference for investors on May 26 in Los Angeles and we will be issuing our press release shortly confirming our exact time for that event. With that I would like to turn it over to the operator to open the line to questions from our callers.

[Operator Instructions] We will go to David Kanen with Aegis Capital. Please go ahead.

Looks like with the order bookings, it looks like you guys are really on the verge of making Data I/O great again. Like we are going to start winning. Just kidding. First question is in regard to the moving expenses in China. What were the one-time expenses, if I back them out? I just want to...

Approximately $30,000.

Okay. So it wasn’t really that meaningful. And then what are the public company cost that don’t recur, that were in Q1?

So that’s the typical audit. It's the NASDAQ fees. It's printing cost for the proxy and 10-K. It's legal fees associated with that. Basically it's a little over $200,000.

I see.

Each other quarter typically has $20,000-$25,000 of review or other cost by the auditors and the like.

Okay. And then Joel, the gross margins for the quarter had a big jump. I know there was something anomalous in last year's Q1. Based on the backlog and bookings, assuming Q1 is up meaningfully on a sequential basis, meaning the revenues north of $6 million. Can we sustain that 55% gross margin level. Is it possible that it can 55%?

The answer is clearly, yes, it's possible. I think we had about 2 points more favorable variances that I wouldn’t typically anticipate. More along the lines of one time or reversing type pieces. So I think that we would expect it to be a little bit lower than where it's at now. But each quarter the mix changes, the channels change. The factory operates a little differently. But it's within a couple of points.

Okay. And what percent was LumenX of your orders in Q1?

Dave, we don’t break that out. We did a number of customers place orders for LumenX product in Q1.

One thing that we also would want to point out is that when we sell our handlers, the handlers, would have LumenX or a flash core in them and we wouldn’t break those out separately as LumenX sales. We would say those still have been overall handler sale.

And next we will go to the line of Marc Siegel. Please go ahead.

Question about the automotive business. Trying to handle on, because obviously we have just come off a record year in car sales so that’s probably not going to be sustained. On the other hand there is more electronic content in every car that’s built. How do those play off against each other for you? And maybe if you can, in a specific example, I mean let's say there were a certain number of chips that you program in the new Honda Accord. Does it matter how many Accords are sold as far as your revenue goes or is it -- you see my question?

Yes. Marc. It's a really good question and it's very easy for the average investor I think to miss the magnitude of what's going on here, unless you really dig in. And the good news there is a material on our Web site, we actually did a voice over PowerPoint of a speed I gave in Germany at the end of last year that highlights the magnitude of the opportunity in just one of those segments, that’s infotainment. The way I would like you to look at the market is to think about the total number of cars obviously matters. But what's happening is inside that 100 million or so [euro] [ph] market. You are finding a transformation of the technology. And the transformation of the technology is far more important than whether we have 3% or 4% growth in the auto industry next year. Because if you look at what's happening is dashboard computers are being replaced with, from very simple fundamental systems to now systems that are essentially video games or tablet computers built in your dashboard. You add navigation to that and you have a whole host of advanced driver assist systems that require sensors and computational capability. And you find there is a dramatic improvement or increase in the total programming demand in the car. In infotainment alone we estimate that you could have a 10,000 time increase in programming demand just from a switch, from a simple analog instrument cluster to a full digital computer. And again I refer you the materials we have on our Web site to go through how I get that calculation. So it's far more important that the technology is transforming. Then it is whatever happens to be the quarterly or annual fluctuation in unit volume of vehicles sold.

Okay. That’s a great answer. Thank you. Just to clarify part of my question. Do you make more money if more of a specific model is sold? I mean is it through consumables and your programming machines. I mean how you -- if the sell a 100,000 Hondas in a quarter or 200,000, how do you make more money if it's the same model either way?

Again, another really good question. So if you look at our model, people need to have a certain amount of capacity in place in their factories to build to anticipated demand and automotive manufacturers like to have a certain amount of buffer there. So they will do a model now for let's say 2018-2019 model year and they will say, I am going to need a certain number of programming systems to full fill the demand. And so then they will place an order for those systems usually well in advance of actually needing the capacity and then they will also need the typical consumables. They might need some software support from us. They will need adapters. They will probably be on a service contract. And so when you look at automotive, I would refer you to how again we break that down in our investor relations presentation. Last year we were about 65% CapEx, 25% consumables and about 10% software and service. And so I think that’s a pretty good model for your forecasting going forward on automotive. Realizing that there the very sophisticated customers, they plan far in advance of any of our other market segments.

[Operator Instructions] We will go to the line of [Art Vincent] [ph]. Please go ahead.

Tony, could you just give more detail and more explanation following the last question on what exactly were these $5 million of income orders in the first quarter. And can you break it down in any way, shape or form so that we can best understand that. And then give us insight as to how this is going to change, if it is going to change going forward. What's going to increase and what's not going to increase?

So I think for the $5.9 million of bookings, again, we said over half of the orders were in the automotive segment.

But what were you selling then?

Predominantly systems. I think it was at least as heavy towards CapEx as our standard model from last year. So minimum of two-thirds will be CapEx. I don’t have the exact figure off the top of my head.

And what would the CapEx sales and [indiscernible] cost would be exactly?

Okay. It would probably be a PSV7000 system and it would probably have a combination or a mix or one or the other of either flash core or LumenX programmers. And they typically want to have, it's all automated, so they will have an automated I/O system, whether that’s tape or tray and it varies from customer to customer. They also like to have, from a process control standpoint, they like to do as many of the steps as possible without additional handling. So they will bring in and add typically a laser marking and also 3D lead inspection capability. And we have integrated those capabilities into the PSV7000 system. So that would be what a typical automotive customer, whether they are OEM or programming center, might want to buy.

What exactly is the consumable that they are buying?

So each part has unique socket configuration. And so we have these products called adapters which essentially match the pin out of the device to the electrical and mechanical interface of our programming engine. And so those adapters wear overtime because the sockets wear out over time. And depending on the quality and the specific configuration of product, you can get 10,000 insertions per socket or up to a quarter million insertions per socket. And so those are the primary consumables that we sell with our product.

And it sounds to me like what you are selling to a non-automotive customer is more or less the same as what you are selling to an automotive customer. It sounds that way to me.

From a standpoint of programming engines, the handler, you are generally correct. The non-automotive customer typically may not want the 3D inspection capability and they may not need the same level of performance overall.

All right. Tony, would you anticipate growth in your non-automotive business in the next 18 to 24 months.

I think, [Art] [ph] what we have talked about is we see the growth coming from primarily automotive and Internet of Things. I think those are going to be the two growth areas that carry us forward. I highlighted that in our February call. I believe that’s absolutely where the growth in the industry is coming from the next -- this year and the next several years. And the reason is, well, we have talked about an automotive, it's just the whole transformation of cars towards autonomous driving. You can decide, you can debate when you think autonomous driving is going to happen. You know is it three years out, is it five years out, is it ten years out, is it twenty years out. I don’t think I know the answer to that. But what I do know is that all of the automotive electronics companies are taking steps towards realizing that vision today. And they are making huge investments in infotainment. Dashboard computers and advanced driver-assist systems that increases the total available market for programming. And so that’s automotive...

Would you anticipate a number of major customers becoming new customers in the automotive area in the next 18 to 24 months?

I think what I would anticipate is already have 8 of the top 9 automotive electronics customers as PSV7000 customers. We already have five of the top five automotive programming centers as PSV7000 customers. So in terms of adding new customers, it's going to be the people that aren't on top as "new customers". But I think there is opportunities for us to significantly expand our footprint within the accounts that already have at least one of our systems.

And the way you expand it is you get in -- one guy has a navigation system and he doesn’t have it so you go into his navigation system. Is that how you get the [expanded] business?

Yes. That would be one way or for example let's say, I won't use a specific customer name here, but I am an automotive electronics company and I have a design win on a four-door sedan for a North American company and I use Data I/O for that today. And they are happy with that so now I get a second design win in North America and I get three more in Europe and I get two more in Asia, not only in four door sedans but in minivans and in sports cars. And so now you can see that there are lot of ways to expand the business in automotive. What we have seen so far is the models that have moved most quickly to the new technology tend to be the high end name plates that you all know and western markets. Over time, that will expand downstream to all of the western markets as well as the more emerging markets. And it will happen up and down the product line.

I assume that you do a lot of the selling by yourself but what kind of a grade on A, B, C, D, E, F, would you give your marketing and sales team in penetrating your products into the customer. Good, better, indifferent?

Well, I would probably give them a tougher grade internally than I would comment on an earnings call.

Yes. Okay. So give them a higher inflated grade for...

Look, I think the grade for sales speaks for itself. We get the grade every quarter and we share it with you on our bookings.

But then still, I mean maybe there's certain regions that couldn’t do better than we would know about, that’s not a fair way to look at it.

I guess the other way to look at it is, where do you win in head to head jump all opportunities. Where are you gaining share versus the competitor that might have an installed base and an account. Have you lost any accounts to a competitor because of poor performance? In general, we are doing much better in the jump alls, we have had some opportunities where we want accounts that have been previously been for other suppliers. We have done that very significantly since the PSV7000 was introduced. And, knock on wood, we haven't lost accounts that I can name here because of poor performance. So...

I could be all wrong -- tell me if I am not right but my recollection and maybe it's from whether you -- so terrific. You are really good with the Europeans and it was mix with the Americans, as I remember.

So Art, you had a breakup there of about 5 seconds, so what I heard is...

Okay. What I remember is you got nowhere with the Koreans, not so good with the Japanese, very good with the Europeans and mixed in the United States. Is that what the deal is?

I wouldn’t characterize Korea that way. I think the eight of the top nine means you are heavily weighted to European and North American suppliers and some Japanese suppliers. So by the fact that we have eight of the top nine means we have done well with those customers. I think an emerging market is China. Right now a lot of the high-end electronics are MNC driven but we are continuing to work hard to come up with the new Chinese automotive companies. So then -- go ahead.

Would you say that the first quarter has a reasonable probability of being the lowest revenues and lowest incoming orders for this calendar year?

Well, I certainly hope it's our revenue low for the year and I think again the bookings of 5.9 were our strongest Q1 in five year. I don’t give guidance and forecast on the call because I can't give you a number, but I think it's certainly our plan to do better than 4.6 every quarter on revenue, I will tell you that.

And you haven't lost any major customers?

Correct.

We will go to the line of George Melas. Please go ahead.

A quick follow-up, one question follow up on Art's question. On the consumable side, I understand that you have introduced some consumables that are sort of much more robust or you can have a lot more insertions than previous one. But how do you sort of explain or understand sort of the decline in the adapter sale, given the fact that you have more and more systems out there on the market.

I think Art, it's a couple of areas, and Joel, you can clarify here if I don’t get them all right. I think first and foremost there is still some currency effects going on, number one. I think number two, the declines, to the extent that we can see it is probably due to the Asian wireless market. Just less use of certainly old manual programmers. And there maybe some specific timing effects in other regions. Joel, is there anything else you want to add on consumables?

I think that’s about right. I do think that you see a seasonal effect of Asia's, Chinese new year and slow start to the year and in particular, last fourth quarter we saw a slowdown in use. And when they don’t wear out, they are old adapters, they delay buying new ones. So it wasn’t unexpected in terms of the overall effect but it is one where I certainly hope it's a low for the year.

Okay. And so Joel, you sort of expect that, it's a low for the year. It's conceptually with more and more of your units being out there. Should that number grow or is it just going to remain flat, how do we think about it?

I think that as we sell more, particularly LumenX related ones, we will have much better sales of adapters and consumables than we traditionally have been able to have on the flash core because you had the ability to do different, I will call it things where you sorted on new sockets, you might have bought some boards somebody else duplicated on their behalf. So there is some leaky jewel, I will call it, there. And our LumenX is going to have a lot more security features that drive the continued use of our own consumables.

Okay. Great. And then just a question on the orders. If I look at over the last three years, sort of I look a trailing 12 months orders and they vary between 19.1 and 22.8. And so this last 12 months we are sort of right in the middle at 21. The PSV7000 was introduced, I think, a little bit more than two years ago. Can you talk about some of the changes in the composition of the orders both by vertical and also by product?

I think, George, the composition has shifted in the last two years. It's certainly much more heavily towards automotive. Again, we have talked about that growth. That’s happened steadily for the last three years.

Especially for the manual to automated conversions?

And then Joel talked about manual to automated conversions. Certainly we are selling a much higher percentage of the programmers are going out as automated handlers versus manual.

Okay. And if you look at during that period of -- this three year period of time. Do you think you have gained -- clearly you have gained share on the automated side, on the automated system. Overall, how do you see your market share during that three year period of time?

I think we talked about that a little bit in the call in February. But I think we have gained share in automated handling over the three year period.

Okay. And on the manual, have you lost share or is it just something that’s becoming -- that the overall market is getting smaller?

I think both are true. I think the overall market is getting smaller and I think we have probably lost share. And the lost share was really two factors. I don’t think we -- we didn’t want to invest too much in manual because we really believe the market has gone automated and we continue to see validation of that trend. But I mean to be fair, I think the market has declined but I think also our share position has declined in manual.

We will go to the line of [Jay Harris]. Please go ahead.

Anthony, do you define automotive strictly by automobile producers or does that include other transportation equipment?

The answer is we define it by automotive electronics companies or a business that we know is being to support automotive electronics companies. Yes, and I don’t know if we could break it out any -- I would assume that’s cars and light trucks, there might be other things that get done there but it's predominantly cars and light trucks.

What happens with 18 wheelers and other heavier duty equipment that’s run with internal combustion engines?

That’s a good question. I don’t think we track that separately. I think the people we sell to also sell to that market and there is probably some business in there but I don’t have any color for you on that.

All right. Turning to your balance sheet. You ended the quarter with a little less than $10 million in cash. I presume you are not going to buy back stock to consume all the cash that you generate this year. Can you give us a little guidance on where you think you balance sheet will end up in terms of cash at the end of the year, assuming you spend a million dollars?

Well, Joel, I mean why don’t you take that -- realize we wouldn’t give a balance sheet forecast because then that would be a revenue forecast buried in that. But why don’t you see if you can take care of that at a higher level.

Yes. I think that we have been operating here around the $9 million in cash level. When you look at what we earned last year, that was basically a million dollars and that basically what we are putting into the stock buyback plan. So in essence we are looking at having -- return to the shareholders one year of earnings. So my personal thinking is that we would stay somewhere in that just $9 million type neighborhood, $9 million to $10 million. It changes a lot as our working capital shifts around.

What kind of capital expenditures will you have this year?

We had our big piece which was related to our China office move and re-layout. There is always a little bit of IT type of equipment. Probably the biggest single capital expenditure that we have though is buying demonstration equipment for sales of our own internally produced goods and then after showing it around for awhile, we sell it.

We will go the line of David Kanen. Please go ahead.

In the prepared remarks and the press release, you referred to $500,000 in annual savings and cost of goods sold. Can you just elaborate on that a little bit?

Yes, Dave, we talked about that in February and that’s kind of the remaining amount from the three year plan to take a million dollars out of non-headcount cost in the business. And so that’s about what's left to achieve and we anticipate to take that out over the next couple of years.

Okay. So we should see a savings -- I want to make sure I understand it correctly, we should see a savings of about $0.5 million dollars per year but it's going to show up in cost of goods sold, not operating expenses. Is that correct?

So we have taken out the biggest chunk of all the rent and leasing real estate related ones this last year and half and there are mostly cost of goods sold, [indiscernible] type savings that we are targeting for this next set of actions for our initiative.

Okay. So it's $0.5 million a year in COGS not OpEx, is that correct?

That’s correct.

Okay. And then of your cash that you ended the quarter with, how much is in the U.S.?

$4.3 million.

Okay. So your U.S. cash was actually up sequentially. And then can you talk a little bit about new customers and then in particular, I am just curious about the PSV3000. I know it's a much lower price tag, but how did you do there, kind of in a general sense? I know you don’t want to give details on particular products, but whatever you can share with me is appreciated.

So, Dave, as you know, we introduced the PSV3000 to be targeted at people that wanted low cost quality programming that was automated. And overall we have been very happy with the 3000 rollout. We continue to do some business in Q1. That because it's Asia, I think Q2, Q3 tends to be the best, typically the best season for selling that because that’s where people tend to add capacity.

Okay. So this is a product in general that should replace the manual programming business. Do you think net net, there is a gain?

Absolutely.

Okay. And then new customers, is there anything you can share with us, during the quarter?

No, I think the -- we could look at new applications within customers. I guess is the best way to describe it. We had a major win at a customer that’s supporting the automotive industry. They have done business with us before but they had a transformative use of the PSV7000 and it was a big system win for us. That part of their business had previously been done by a competitor's system.

Okay. And the last question then I will let you go. In the press release you make reference to moving to this new facility in China where you have got much more capacity at a lower per square foot cost. So you are basically saying, we are expecting growth there. What can you tell me about that? Where is that coming from? What kind of products? Whatever details you can share and color is appreciated.

I think, Dave, we continue to like the opportunity to be much more competitive in Asia and China in particular. And you have seen with our recent introductions we are able to use supply chains both in the United States and China. And we want to make sure we have access to the best supply chains that give us the highest quality, most flexibility and lowest cost. And we didn’t really have as much capability to do that in our old office location, both from a space and location perspective. And now we are just much better prepared to do that in our China office.

Is this non-automotive or there is actually some automotive being done in China?

There is absolutely some automotive being done in China. But the mix in China, it's much more heavily automotive in Europe, for example, than it is in China. But there is absolutely automotive being done in China.

Okay. All right. It's very encouraging to see the big increase in orders and backlog and the moves that you are making in terms of reducing expenses and being more efficient and I appreciate you guys returning cash to shareholders with the buyback. So I look forward to next quarter's call thank you.

We will go to the line of [Eric Winston] [ph]. Please go ahead.

My question was answered from George, I got the answer, right.

Okay. We will go on to the line of George Melas. Please go ahead.

Can you guys talk a little bit about the opportunity in IoT? Is this a highly, highly fragmented space or are there sort of a few big ones that you guys have had in, maybe, I don’t really want to ask for numbers, but are you happy with the progress that you have done so far?

Yes. So, George, this is a really important question and I will answer it on the phone call but I think also we will probably continue to have more to say in our investor updates over time. But the Internet of Things market is a huge market. Depending on how you segment it, there are 13 verticals. I don’t want to go through all that today but for us what's interesting is, it really represents an opportunity in two big areas. Number one is the conversion of products that everybody uses today that previously did not need to get programmed that now do require programming. So this goes back to fitness bands replacing watches. Intelligent glasses replacing traditional eyeglasses. Intelligent electric sockets. Much more highly programmed thermostats. Things like that that because they now have intelligence and connectivity, the need for programming goes significantly up. We also have -- we are programming things like blenders and coffee machines now that we never needed to program before. So that opportunity permeates everything in the industrial and some of the consumer markets. So it's a very long term trend to just continuously upgrade and change the type of devices that are being manufactured and that is beneficial to Data I/O. Now where we are winning so far is where we have unique capability in small parts handling that has been validated and proven to be vastly superior to our competitors. Okay. And we have this feedback from one of our largest customers. We are able to program chip scale package devices at a much higher yield, at a much higher speed and with greater predictability than our competition. And this has resulted in multiple system orders to support this chip scale package need. The second area is, because the Internet of Things will require security solutions. Our whole vision for managed and secure programming around our LumenX programmer, around the type of software that goes into our systems, is really taking hold with people and looking at how they can use our entire product line to program their devices in a much more managed and secure way. And so that not only helps for these transformation of products you see every day but also for the creation of new types of products. Things that advance smart cities, smart factories, would probably be the two biggest areas.

Okay. And just in terms of your progress and the resources that you are devoting to the IoT space. Are you happy with the results that you had so far?

Yes. I am happy, George, so far. But I think we are in the very early stages of IoT. And the resources, I have indicated that I think automotive and IoT are where the growth will be, so that’s where our -- certainly our R&D resources are focused on those two areas. But I think automotive, everyone can see in front of them, what's going on with autonomous cars and the pathway there. I think IoT is much more fragmented but we are in an earlier stage of that ramp.

[Operator Instructions] There are no additional questions. Please continue.

All right, operator. Well, if there are no additional questions, I would like to thank everyone for participating on the call and we close it at this time. Thank you very much.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference Service. You may now disconnect.