PDF Solutions, Inc. (PDFS) Q2 2020 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the PDF Solutions, Inc. Conference Call to discuss the company's financial results for the Second Quarter Ended June 30, 2020. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the call over to Mr. Joe Diaz of Lytham Partners.

Thank you, Maria, and thanks all of you for participating on today's call. We appreciate your time and your ongoing interest in PDF Solutions. As the operator indicated, my name is Joe Diaz. I'm a Managing Partner at Lytham Partners. We are the Investor Relations consulting firm for PDF. If you have not received a copy of today's press release, it is available at the company's website at www.pdf.com. Some of the statements made during the course of this conference call will be forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding PDF's future financial results and performance, growth rates and demand for its solutions. PDF's actual results could differ materially. You should refer to the section entitled Risk Factors on PDF's annual report on Form 10-K for the fiscal year ended December 31, 2019, and similar disclosures in subsequent SEC filings. The forward-looking statements and risks stated on this conference call are based on information available to PDF today. The company assumes no obligation to update them. Now I'd like to introduce Mr. John Kibarian, PDF Solutions' President and Chief Executive Officer; who will be followed by Mr. Adnan Raza, Executive Vice President and Chief Financial Officer. John, please proceed.

Thank you for joining us on today's call. If you've not already seen our earnings press release, management report and 10-Q for the second quarter, please go to the Investors section of our website where each has been posted. We hope you and your families are staying safe, and we appreciate you taking time to join us today. With the continued impact of COVID-19, I will start with an update on how we have adjusted the business given the present governmental restrictions, then I will provide a commentary on Q2 highlights. Many of you have probably seen our announcement about our partnership with Advantest. I will use sometime today to provide more details and explain why we are excited about this development. I will conclude with our impressions of the semiconductor industry, before handing it over to Adnan for the financial update. The COVID-19 situation remains very dynamic globally, and the health and safety of our employees continues to be a top priority. We have been fortunate that our employees remain healthy and able to maintain a high level of productivity. In the U.S., employees are mostly working from home. Our teams in Asia have been able to, for the most part, returned to the office and traveled for customer visits. In the EU, employees are primarily working from home, but our customers are returning to their offices. Towards the end of the third quarter, we will assess whether our European employees can travel to visit customers. Overall, for planning purposes, we expect little travel across the oceans for the remainder of the year. Highlights for the second quarter validate our long-term strategy. While the second quarter bookings were lower than the exceptionally high Q1, they were meaningfully above Q2 of last year. Moreover, the booking strength was in analytics, driven by renewal contract for DFI, expanding characterization contract for a leading IDM and a number of Exensio contracts, including, again, customers moving to our cloud deployment. Overall, business activity as measured by bookings in the first half of this year was larger than all of 2019, even before including the Advantest contract booked in July. On top of the continued move in to Exensio in the cloud, in the quarter, we experienced meaningful demand and interest from fabless foundries and integrated device manufacturers that provide chips for high-performance computing, or HPC. Our engineering activity for that segment of the market was also high in the second quarter. We believe that this speaks to the fact that the challenges of manufacturing HPC chips and 7-nanometer, 5-nanometer and below silicon are felt across the industry. We anticipate that demand for – that we experienced in HPC in the second quarter will continue for the remainder of the year. In the second quarter and continuing into the third quarter, we achieved a number of important technical milestones for the lead DFI customer. We believe this, combined with growing technical need at the leading edge, particularly for HPC, will provide the tailwind to drive market adoption of DFI. During the second quarter and continuing this quarter, we have begun to provide webinars to highlight Exensio's capabilities for our customers. The first two events, one in Chinese and one in English were well received. Overall, we are very pleased with the progress achieved in the first half of the year, while working under COVID-19-based restrictions. On a year-over-year basis, we grew analytics revenue 21% in the first half of the year and 27% in Q2, met our technical objectives for DFI and other new products and migrated our marketing and selling online. Moving to discuss our partnership with Advantest, a copy of the press release is available on our website. At the top level, PDF Solutions and Advantest have entered into a five-year partnership agreement. This is a significant step for PDF Solutions, the Exensio analytics platform and our cloud offering. Some key points about this transaction. The direct revenue from Advantest for the deployment of Exensio on the cloud as well as supporting technologies is a minimum of $50 million over the five-year term of the agreement. Initial deployment is expected by the end of the year. We also added approximately $65 million to our balance sheet from the sale of common stock to Advantest. Combined with the already $100-plus million on the balance sheet, we are in a very strong position to accelerate our business investments. Advantest cloud powered by Exensio, will be the foundation of Advantest analytics and will be used by their customers as well as them internally. As the name implies, Advantest cloud is built on the Exensio platform. The partnership will accelerate PDF's deployment of hardware and software that we call DEX at the OSAT to facilitate Advantest ability to offer value-add software-based services for their fleet of tools. This expansion of DEX nodes will benefit PDF customers who can use the expanded network to improve their production. Initial deployments are expected to be within the next 12 months. The agreement allows Advantest to include Exensio software agents on any Advantest tools, making it much easier for us to engage with prospective customers. Before this contract, we reported Exensio connections to over 40,000 tools in the front-end fabs, test and assembly facilities. As the largest market share test equipment company in semiconductors, Advantest brings the potential of additional tens of thousands of tools – tool connections. Our customers value direct connections to their tools in their factories as well as their partners test and manufacturing facilities. The additional tool connections and DEX nodes in this contract help both Advantest and PDF better serve our customers. PDF Solutions and Advantest intend to jointly develop applications, which will result in additional revenue for both companies. And to be clear, PDF remains independent and will continue to support over 200 equipment vendors, including all major test vendors. The community of Exensio users tell us they value PDF's commitment to tight connections to tools across the entire supply chain. This has been a relationship that has been in development for quite a while. We have been working with Advantest for more than a year on the development of our first joint products. In the press release, Yoshida San, Advantest's CEO, made mention of the customer validation of this product. We believe this partnership validates the technical and marketing strategy we have set for Exensio, namely that company such as Advantest want to customize the platform for their needs. Yet they want to be on a standard platform like Exensio, so they can collaborate with their suppliers and customers, many of whom also use Exensio. We are thrilled that Advantest shares this vision. We believe other companies in the IC supply industry may be interested in leveraging Exensio in a similar fashion. Since Exensio spans all data types required to build wafers, test chips and assemble them, Exensio is becoming an important platform for the industry. And we are honored that Advantest selected Exensio. I would now like to turn to what we're seeing in the industry. Overall, there continues – the continued investment in the industry, despite the COVID-19 impact on the general economy. We believe that we see an accelerated interest in our products in the second half of the year. While the second quarter business activity was driven by fabless foundries and IDMs using leading-edge technology for HPC, we anticipate broader-based insights in our products during the second half of the year. We are pleased with the progress we made in the first half of the year and our relationship with Advantest, as we also spilled recurring revenue streams to provide greater visibility and predictability of our financial results. Finally, I want to thank our employees for nimbly moving from working in our offices to working from home, while still supporting our customers in the COVID-19 environment. Now I'd like to turn the call over to Adnan for a review of the financials, after which, we will open up the call for your questions. Adnan?

Thank you, John. Good afternoon, everyone, and nice to be speaking with you again. I hope all of you are keeping safe in the current environment. As I mentioned in the last call, we, at PDF, continue to operate in this period connected while apart with some of our offices around the globe reopening this quarter, while other employees continue to work from home, closing deals and growing the business. We will share some of that progress with you today. As John mentioned, we're – we announced a significant partnership last week with Advantest, the leading test equipment company in the semiconductor industry. We're very excited about the transaction and look forward to developing joint opportunities that will serve both companies and our customers in the coming years. Now turning to the financial results of the just completed second quarter of 2020. Please note that all of the financial results we discuss on today's call will be on a non-GAAP basis and the reconciliation to GAAP financials is provided in the materials on our website. We have posted our earnings release, a management report and the quarterly 10-Q filing in the Investor Relations section of our website. Starting with bookings. Our bookings for the second quarter came in at just under 2 times our bookings for Q2 of 2019. To reiterate John's comments, our bookings for the first six months of 2020 were more than our bookings for the entire calendar year of 2019. We believe this is a result of our focus and continued investment in the growing segment of our business and the strong recognition that the PDF Solutions name carries as a leading provider of differentiated data and analytics solutions. Turning to revenues. Total revenues for Q2 were $21.4 million, up 1% versus the prior quarter and 4% versus the same quarter last year. For the quarter, analytics revenue was $15.2 million and IYR revenue was $6.2 million. Analytics continues to be the focus of strategic growth and evolution for PDF Solutions. Analytics revenue for the second quarter grew 15% compared to Q1 of 2020 and grew 27% on a year-over-year basis compared to the second quarter of 2019. Within analytics, we firmly believe we are offering a differentiated portfolio of products and services to our customers. As John mentioned, we experienced strong demand for our analytics business during the quarter from customer contracts for CV and DFI systems. We are pleased with the growth in our analytics business for the second quarter and the first half of 2020 versus comparable periods in 2019, as they both exceeded our long-term analytics growth target of 20% per year. For Integrated Yield Ramp revenue, our revenue was $6.2 million, which was down $1.7 million on a sequential basis and down $2.4 million on a year-over-year basis, consistent with our focus of evolution towards an analytics business. For the second quarter of 2020, analytics represented 71% of our total revenues compared to 58% for calendar year 2019 and 63% for the first quarter of this year. Overall, the continued growth of analytics remained strong, while our quarter revenues may reflect IYR fluctuations and the impact from ASC 606 based accounting on our revenues. On the cost of sales and gross margins, consistent with what we mentioned on our last call, we continue to make investments to support the growth of our business. We made the choice to sacrifice short-term gross margins to drive long-term business growth. The increased cost of sales spend of $1 million this quarter versus prior year was primarily due to increased investments in cloud infrastructure, software and depreciation expenses. These investments support our customer wins, such as the significant partnership we recently announced in our third quarter with Advantest. Our non-GAAP gross margins for the quarter came in at 63%, the comparable period gross margin of last year was 67%. We continue to achieve – we continue to expect to achieve our long-term financial model target of 70% gross margins. Now let's take a look at our operating expenses, which were up approximately $0.1 million on a year-over-year basis. R&D was up $0.2 million versus the same period of prior year, primarily due to depreciation and software expenses. As John mentioned, we will continue to align our R&D technical resources with our product road map to create a differentiated position in the Industry 4.0 landscape. Our SG&A was down $0.1 million as a result of lower costs associated with presales activities and travel, offset by increased subcontractor and legal expenses, of which some of the increase was related to the recently announced Advantest partnership. We will continue to monitor expenses and increase or decrease resources as the business requires. In summary, for the P&L, we posted a non-GAAP net profit of $0.5 million and non-GAAP earnings per share of $0.01. On the balance sheet side, cash grew to $103 million at the end of Q2 versus $87 million for Q2 of 2019 or an increase of approximately $17 million on a year-over-year basis. Our strong balance sheet with no debt and $103 million of cash coupled with additional cash of $65 million from the securities purchase agreement with Advantest, provides us a very strong platform to invest in a variety of initiatives to broaden and deepen the portfolio of products we offer to our customers. Our goal is to be the leading provider of differentiated data and analytics solutions with a broad portfolio of software products and services. We do see potential in the marketplace for expansion into new offerings and new product areas and are pleased that we have the balance sheet strength to make such investments to enhance the value for our stockholders. Turning to the Advantest partnership. As John mentioned, we are excited about the transaction and look forward to developing joint opportunities that will serve both companies and our customers in the coming years. While product development for Advantest began over a year ago and cloud deployment started earlier this year, we expect to work through the remainder of the year to ramp up the Exensio cloud for Advantest. We anticipate revenue from Advantest to commence in the fourth quarter of this year then grow during the first half of next year to reach an eventual run rate of $10 million per year. As John mentioned, there are additional revenue opportunities for PDF from development projects for Advantest and license of combined solutions with Advantest. In summary, we are excited about our transition to analytics, the growth we have achieved thus far and the selection of PDF Exensio for the Advantest cloud. We believe these data points serve as validation of PDF as a leading provider of differentiated data and analytics solutions in the market today. At this time, let's open the call for your questions. Operator, please begin the Q&A portion of the call.

Okay. [Operator Instructions] Your first question comes from the line of Christian Schwab from Craig-Hallum. Your line is open.

Hi. Thanks. This is Tyler on behalf of Christian. Thanks a lot, a couple of questions. First question, I guess, the first part is a little bit of clarification on the Advantest partnership. The $50 million you expect over the next five years, is that just with the Exensio that's going to Advantest? Or is that including the Advantest – the license that is also going to Advantest customers?

Yes. Tyler that is just the minimum commitment of licenses to Advantest. There are joint products we're developing with Advantest that would be revenue on top of that.

So I guess the obvious follow-up then is just Advantest is $50 million, it would seem that the joint products that you're developed them to all of Advantest customers could be a very significant piece of business. Any framework on what that could look like?

It's a little early for us to say exactly how big it would be. But as we were working through this with Advantest, we both felt that the opportunity at the customer base and they always remind us as we were going through the terms of this contract. But the opportunity that this would create for PDF was much larger than this direct contract we would have with Advantest. And we certainly hope that to be the case, and we're working towards that. But yes, that's the intention.

Okay. Great. That sounds very exciting. Another question, shifting base a little bit. Intel has, I'm sure everybody's aware, announced their 7-nanometer process being moved out six months. I guess first, can you remind us what engagement you have with that customer? And then obviously, besides just indicating how challenging when these things are to ramp. Any direct benefit that has to you?

Yes. So it's a great question, Tyler. Unfortunately, we're never able to say customers – yield ramp customers, who is a customer and who is not. So I really have to refrain from talking about any specific customer. What is – I always jokingly say that when yield becomes an issue that's on the front page, there's really only one company you can call and that is PDF. We are probably the only place out there that you can get independent characterization capability for the industry. So obviously, in my prepared remarks, I tried to highlight the fact that while there's the stuff that's visible, it's in the news about yield challenges. Generally speaking, it's really not so much about a single company, typically, but really about the physics and the fundamentals of the limitation of the technology. The industry is shifting, where the driver for leading edge is high-performance computing from mobile. Mobile is still there, not as much of the driver as high-performance computing is becoming, and it is very challenging to get those parts to function on leading-edge silicon. We believe that problem will grow across many suppliers, IDMs, foundries and fabless. And that is a meaningful opportunity for PDF across the broad industry.

All right. Great. That’s helpful. That’s all for me. Thanks guys.

And our next question comes from Tom Diffely from D.A. Davidson. Your line is open.

Yes. Thank you and congratulations on the Advantest partnership. John, I'm curious, is there some reason or there some characteristics by Advantest became your first big customer here? Is it because of back-end, because of tests that made them more applicable? And then also curious what the other equipment OEMs are doing right now for this type of solution?

Yes. Thanks, Tom. Test generates a lot, a lot of data. And I think all of the test vendors sit there and see the opportunity to create applications and platforms that help customers make sense of that data. Understand whether that data is valid or not because you can combine sensors on the machines to say, okay, is the test data really valid or not valid because the machine is running a little hot or there's something a little bit unusual about the machine. So there's a lot of ways they can add value for the customers. But we see that opportunity, and we are engaged with other equipment vendors on other parts of the supply chain, where they're also creating a lot of data that the customers can use to make better decisions about product quality, about product yield, improve equipment efficiencies. And so particularly in the back end, where the back end is getting much more complex, the processing is becoming more sophisticated and historically, those tools have been less sophisticated than, let's say, an ASML lithography system. We see a lot of opportunity in up and down the supply chain here. Test was obvious because test is where you collect historically the most data, but we believe there's a broader opportunity, as I said in my prepared remarks.

Okay. And then when you look at test specifically, a lot of the OSATs have multiple testers from different vendors. The analytics you create with Advantest, is that going to be applicable to the other test companies as well?

We create a broad class of analytics and already support, I think, from over 50 tool types from many vendors in the test space, all the major test vendors. There is an Exensio agent that communicates with them, collects data and issues control commands. And applications we deliver for the test market, which we already have many, are applicable across all those platforms. There are some things we're doing specifically for Advantest as they're making additional signals available on the tools. That will make Advantest tools through some things because they have some unique capability they're working on. But those kinds of things are a small part of the overall Exensio test platform.

Okay. And then finally on this, can you give us a sense of what type of effort it takes on your side and whether or not you have the bandwidth to do another one of these deals any time soon?

Yes. That's a good question. There was a tremendous effort throughout the first and second quarter of this year as we were rolling up to this contract on demos and stuff we were doing in the early product development, et cetera. So it's meaningful, and we were able to absorb that while still putting up a very strong first half of the year as well. We anticipate that as we bring this up, so much of the value is in the Exensio platform and we are committing resources to work with them to make sure they get great use and great development out of it. We do believe we have the bandwidth over time to support others. The selling cycle is quite long on these things, Tom, so you can't really count on these things every quarter, but we do believe we can do more, and the market wants us to do more of these.

Great. Okay. And then just two more quick questions. First on the IYR business, a little lower than it has been. Is this the new baseline? And would you expect it to kind of trend down from here, albeit lumpy on a quarterly basis?

We do expect some lumpiness up as we sign new engagements that will pop up from time to time. There's only really one or two customers we're still engaged in this way for historical reasons. So it's – it may be safe to assume that that's what going to happen, but it won't be smoothly down. There'll be some bumps popping in, generally.

Okay. And then finally, when you look at the R&D, up a bit year-over-year, but it is down a bit from the last three quarters. Is that just lumpiness as well? Or is that – is it down at this level? Is this a good baseline going forward?

Yes. I mean it's been a little bit bumping around a bit. Tom, like a third-party R&D contracts that we have with suppliers that do some development for us on one thing or another. I think this – for now, it's reasonable. As we get through this year and into next year, we're going to reassess what our baseline on R&D will be. But for now, I think they will come into this year.

Okay. So the Advantest deal doesn't require you to staff up then or make significant changes?

There's some direct R&D we will do with them. That will be part of cost of goods sold as that would be funded work. We will continue to invest in the Exensio platform kind of naturally. We have been making a consistent shift of more R&D in Exensio and cutting R&D in other areas that we feel appropriate. So we will continue on that path, but the item test doesn't require us to make additional investment at an accelerated rate. We may choose to do that as we get through these next few quarters because we do see some opportunities, but it's not anything that's contractually required.

Okay. Well thanks for your time and congratulations on a nice partnership.

Thank you, Tom.

[Operator Instructions] Your next question comes from Jon Tanwanteng from CJS Securities. Your line is open.

Hey guys. Thank you for taking my questions, and congratulations on the deal. It seems to be a pretty big contract going forward. And really, I guess, the question I have is, does this open the door for new customers and relationships, maybe legitimize what you do in the eyes of potential customers who may not have picked up the phone before or been on the fence, bought test equipment, but didn't really see the value in Exensio, but now they're forced to do it because they have Advantest under the roof? Just a little color on the potential there for this to improve sales outside the contract.

Yes. Thank you, Jon. Yes, so I don't think any customers of ours is forced to do anything. They're very large and generally pretty – they always have a lot of choice. But that said when we built Exensio, we built – it started from a lot of point tools, a yield management point tool, a process control point tool, a test point tool. And we have competitors in test, in control and in yield management. We – starting way back around 2009, 2010, started saying we're going to build an integrated platform that integrates it all together. Because we saw the advantages of the database technologies that the Facebooks and Googles were using the consolidated database, we thought we could make a database that really scaled across end-to-end analytics for the industry. And we felt that the need was developing as manufacturing processes then primarily in the front end, we're getting more complex. We think with this Advantest – because Advantest could have looked and said, we want to just buy a platform that does test. And Advantest felt the connections up and down the supply chain were quite valuable for them to build solutions that leverage test, combining that data with other types of data for their customers. And what we think this contract says is that the industry is starting to validate the need of a platform that spans the entire manufacturing flow, so that chips can achieve higher – yield higher performance, factories can be more productive by sharing the data you need in order to be able to make the trade off. It's a very integrated – technically, a very integrated manufacturing process that builds a system and package, but it is a very disaggregated supply chain that builds the equipment, the consumables, the factories, runs the factories that make that chip possible. So we feel like the Advantest contract is a validation that this platform approach is needed and that working in a collaborative fashion is also needed. And we do believe that this means other customers will say, "Gee, if Advantest is behind us, we can get behind this, too." And it opens the door to much larger contracts across our customer base in the future.

Got it. And just to follow-up on that side and maybe one of the previous questions. Are you currently speaking to other equipment vendors who may want to be doing – want to do something similar at this scale?

We have a number of activities going on with other equipment vendors to use Exensio, to make value out of their data that they could then use internally to improve their customer support as well as offer solutions like what we're doing with Advantest to help customers get more value out of their data and their tools.

Okay. Fair enough. And then in terms of the run rate costs and ramp-up costs associated with ramping up the contract, can you give us just a ballpark, what is going to increase your OpEx or your [indiscernible]? Is it just a normal standard extensive deployment type margin? Or should we expect something different?

We – I think I'm not going to answer this, but we expect margins to be roughly in line with corporate margins.

Yes. I would say, kind of consistent with what we've been reporting last quarter, this quarter, somewhere between that. And our long-term gross margin is kind of the way to think about it. As John mentioned, we were careful in crafting the agreement as well to make sure that some of the costs are appropriately taking care of, the margin calculation that we did. But yes, thinking of something between this quarter, last quarter and our corporate gross margin, that would be appropriate.

Okay. Great. And then – and you're putting a lot of cash on the balance sheet, it's more than you would use in operations. What are the plans for that cash? You mentioned, I think, some investments in technology and acquisitions. But just what are the opportunities you're seeing out there?

Yes. Jon, we've kind of – maybe we're not so bright, but somewhere around the mid-2015 time frame, 2014/2015 time frame, you kind of woke up and say, wow, we're the only public company building a platform focused on semiconductor and a little bit more electronics and keep on acquiring these – we see a lot of things we can acquire that make this platform very rich. But once we got this end-to-end database, it made a lot of sense to acquire incremental companies who collect data or provide a unique control or unique pieces analytics for the customer base, but it would be a lot more valuable as part of a larger platform. And we see a number of little companies out there that either create unique data, analyze somethings very uniquely or integrates with parts of the supply chain that are very important for our customers. And they're all in that vein, right? We're very much sticking to our knitting, but that we think there's a lot of companies in that space that would add to the platform and mean that a customer that picked Exensio as their platform would get a richer and richer experience, both from our organic investments as well as inorganic.

Got it. Thank you. And just switching gears a little bit, there's been more chatter and more investment or potential investment in domestic semiconductor production. Just wondering what your thoughts are on potential investments in, say, global foundries or at Intel to increase capacity here locally and how that flows through to you?

Yes. I mean I think – yes, as you know, as someone who has loved semiconductor manufacturing since I was an undergrad in the early 1980, I'm very happy to see that the U.S. government is starting to realize the importance of domestic manufacturing. But I'm a little bit skeptical, but this in itself will be enough to make a difference for our manufacturing base has eroded over many years. And there's – there are structural issues in the way that the manufacturing bases start in the United States that having just first glance looked at this, I don't think it goes far enough to address. That said, it is a real – it will create more investment in the U.S. and things like the TSMC Foundry in Arizona and further investments in domestic suppliers, all create opportunities for PDF, for Exensio and characterization.

Got it. Thanks, guys.

[Operator Instructions] Your next question comes from Jeff Bernstein from Cowen. Your line is open.

Yes. Just a clarification. Before this deal with Advantest, was there base of tools that are out there sort of closed to you guys from connecting to Exensio, and this now opens that up? Or were they already – you had an interface to tools of theirs in the field?

Yes. Great point, Jeff. Yes. So just like every tester company, we have agents that communicate with those testers and have worked with their main – one of the most popular products is a 93K tester. We've interfaced with that tester for very many, many years. But like every equipment company, there are additional data sources that they don't make available to their customers, right, or to other software vendors like us. They know those other variables are very useful for customers to improve their use of the tools, productivity of the tool, the quality of the data that comes off the tool, et cetera. And they wanted to partner with someone who they could trust to make those data sources available so that together we could provide more value-added services. That's what this is really about. We still connect to all sorts of tools, including theirs, using all the standard data ports that everybody – anyone can write, code to.

Got you. And when you talk about other guys who are interested, again, it would be sort of opening up a deeper capability to get data out of their tools as well?

Yes. Exactly, Jeff. And they're saying we need to create ratable recurring revenue sources in ways that we can make our machine valuable to our customer, not just on a one-time sale. And that's what Exensio helps them do.

Understood. And once one really big guy does it, it's kind of hard to say, we're not going to allow that, right?

Right.

Okay. And then just one other question on DFI. You talked about hitting some benchmarks. I thought there was some rev rec on an eProbe 250 that was waiting on some – hitting some milestones or something. Where are we on that? Was there some rev rec in the quarter?

No. That's great question, Jeff. That was the first – in the second quarter, we hit the milestones that was what I was referring to.

So there was some rev rec there.

There was rev rec there. That's correct.

And there are no further questions at this time. I will turn the call back to Mr. John Kibarian for closing remarks.

Thank you for participating in our Q2 call. We look forward to talking with you again soon. Stay safe, and have a great day.