Chris Diorio: Yeah, Mike. Thank you. And I’m going to pause here a little bit because those are difficult questions for me to answer given that we’re going to think of it right now. I’ll say a few things, and then I’ll turn it back to you to follow-up, but I’ll answer what I can. In terms of the monetary award in California, the jury initially awarded us roughly $18 million in damages of lost products. The judge, went back and said, you know, there’s some foreign sales that shouldn’t be included [in there instructed] (ph) parties to get together. And discuss what the actual damages of lost products should be. And that came out to be roughly $13.1 million subject that still to on-going appeals, but that would be the amount in the California case.
Our California case was against NXP USA. It did not include the NXP, Dutch affiliate, which whose sales are much larger. So we have filed suit on the same patents against NXP Dutch affiliate. We do no longer — we don’t need to litigate the patents in that case anymore. We would just be litigating the damages and lost profits amounts coming to us. And that case has not been scheduled yet, but we look forward to it happening hopefully soon and getting awarded significantly additional damages and loss and profits. In terms of the settlements with NXP, I can’t really comment on anything at this time. Like I said, we’re going to think of it and anything I say could be construed one way or another or damaging. In terms of the overall market, we are obviously in discussion with our in light partners and service bureaus, I can’t speak for NXP, but I would imagine they are as well.
We obviously want to see the market continue to grow and go forward. At the same time, we feel it is very important to protect our intellectual property. And I will note that in California, one of the patents was sound to be locally entrenched. So, we’re in this delicate situation where we want to drive the market, yet at the same time we want NXP to respect our intellectual property. We are navigating that dynamic as best we can and navigating a resolution as best we can and confident in our case and confident in the eventual outcome. I’ll turn it back to you to see if you have a follow-up or if there’s anything I can answer a little bit more, but I’m not trying to go much further.
T. Michael Walkley: No, that’s very helpful — help us think about it. I’ll switch gears for my second question. Just, maybe for Cary or just the overall team. I know we’re in Q4 now, and it’s the time when you start to negotiate pricing and you have new products come in like the M800. Any thoughts on, you know, how we should think about end point pricing in 2024 versus 2023? Is it too early to tell?
Cary Baker: Hey, Mike. This is Cary. I can take a shot at that. So, historically, if you go back multiple years, we’ve seen ASPs decline annually, call it the low to mid-single digit range. Those declines have been accompanied by wafer cost downs. And that’s how we’ve been able to maintain and improve gross margin, over the years. Over the last couple of years, however, we’ve been in an inflationary environment. And as a result, our ASPs have actually gone up. We’re still in that inflationary environment as we’re not expecting a wafer cost down this year. You know, as we go into those conversations, which you know are happening, are not just happening now. They’re in constant dialogue with our partners. But as we go into those types of pricing discussion, our goal remains the same. We need to maintain the integrity of our margin model.
T. Michael Walkley: Great. That’s helpful. Thanks for taking my questions. I’ll pass the line.
Cary Baker: Thanks, Mike.
Operator: The next question comes from Scott Searle with ROTH MKM. Please go ahead.
Scott Searle: Hey, good afternoon. Thanks for taking my questions and congratulations on a nice job in a tough environment.
Cary Baker: Thank you.
Chris Diorio: Thank you, Scott.
Scott Searle: Hey, guys. Maybe to start, you know, digging a little bit on the green shoots starting to clear the decks for M800 adoption. I was wondering if you could dive in on that a little bit more, some more details in terms of what you’re seeing in terms of the interest level, the timing of the adoption cycle, and how that’s teeing up additional services, such as authenticity going forward.
Chris Diorio: Okay. So I’ll start here up here and I’ll let others jump in. So in terms of the M800 itself, there is very high excitement level about that product on the market. I had multiple of our partners, direct inlay partners and service peers talked to me about M800 and said, you guys have created an incredible chip. It has better sensitivity, better overall performance, better reliability, quality, just we’re really excited about this product. It’s not that we did badly in any of our prior ones. It’s just this one. I feel really good about where we are and in some ways, it’s not really that surprising because we did our first chip M700 in a 65 nanometre node. First chip in that node, every time you do something the first time you’re cautious.
So you don’t pull out all the stops. Then we turned to M800 and we pulled out all the stops. Our partners see it in terms of where we are in the market. Our leading partners have multiple inlay designs. Those inlay designs are in certification, both in US and at the University of Auburn, at their arc lab, at direct end customers and in Europe in the same, there is a lot of enthusiasm for that product. And, so the pace of adoption will be paced by how quickly those inlays get through certification and qualification at the end users, but as Cary noted, we expect to see a ramp, starting — significant ramp starting early next year. It’s a little bit early to cite the pace, but I’m guardedly optimistic that M800 will rapidly become our key volume.
In terms of the authentication opportunity that is our M775, which is, basically, our M700 series with an authentication engine built in. We have, multiple use cases right now in tax tracking, health care, and specialty food applications. We’ve seeded the market. We’ve shipped a significant number of chips into the market. That product will go kind of through the typical S curve of adoption where we see the market. The opportunities are there. And then it get — they get qualified in Houston and then it picks up. And so we’re in that seeding the market and getting going. We also see other opportunities out there in fashion apparel and footwear and pharmaceutical application and others. So I am excited for that product. That said, because it’s a completely new offering, really the first general purpose authentication I see I don’t think you should expect a super rapid pace of adoption because we’ve got to get in front of customers and we are now on our partner well to basically educate them in terms of what this thing is and what we’ve done for the market.
That’s going to a little bit of time. Just as a fun fact, I had last week, one a newest partner come to me and without citing any of the details, raised the opportunity again. Well, can’t you put this chip into currency? You know, to protect against counterfeit currency. Of course, that opportunity is way out in the future and we’re not prepared to do that. And, you know, the chip has to be made thinner and more, there’s a lot of things you have to do. But we’ve got partners who are thinking at that level that M775 with its authentication capability is a game changer, and that’s what I really like.
Scott Searle: Perfect. Very helpful. And as a follow-up, I think you indicated that this year, despite the headwinds, you’re still, anticipating endpoint. I see growth in the ballpark of a 29% CAGR, which has been in the historic range. Now as we look to 2024, you’ve got some other items that are coming on board, big customer in terms of general merchandise. I think logistics customer is starting to ramp up. I’m wondering if you could kind of give us some benchmarks in terms of how we should be thinking about 2024. Is it an inflection year that we start to see this start to accelerate beyond that historic rate? Thanks.
