Toshiya Hari: Thank you, and congrats.
Cary Baker: Thank you.
Jeff Dossett: Thank you.
Chris Diorio: Thank you, Toshiya.
Operator: Thank you. Your next question comes from Christopher Rolland with Susquehanna. Please go ahead.
Matt Myers: Hey guys, this is Matt Myers on for Chris. So first off, congrats on the quarter. But also just wanted to get some more clarity around the inventory dynamic you guys have been seeing. So is this largely over now for you? Do you still see much excess inventory on the endpoint IC side? Or is it on the reader side? And I know you mentioned smaller partners that still have some elevated inventory. How incremental is this? And is there any inventory still with your inlay partners?
Cary Baker: Hey, Matt, this is Carey. I think I could take a shot at that. In the fourth quarter, our inlay partners made further progress reducing their endpoint IC inventory, and the large partners exited the year relatively healthy. So they’re now able to ramp the M800 as production volumes increase. Think of our inlay business as an 80/20 rule with a handful, maybe six or so inlay partners driving the bulk of that volume. There are smaller partners whose inventory levels remain a little elevated. We’re not as concerned about that. Their demand has historically been project-based. And as that project-based demand comes back, they’ll get healthy again. But we’re feeling pretty good about where we are at this point. And we think in the first quarter, we’ll be shipping closer to demand, whereas, the last couple of quarters, we’ve been pulling down channel inventory and as a result, undershipping demand.
Chris Diorio: And I guess I’ll say it any bit more there. As you look at the overall market, we do see the retail inventory destocking at the end user level starting to taper. But sales out still exceeds imports. And so not clear how long that destocking is going to go on at some point absent. We’re seeing a tapering now and as that destocking ends and assuming demand stays healthy, then we expect to see accelerating retail demand on the other side.
Matt Myers: That’s great color. Thanks guys. And another quick follow-up to — I know you talked about your second logistics customer, but curious if there were any updates around your first customer here.
Chris Diorio: Matt, I don’t think we — there haven’t been any public comments from that customer, and I don’t think we’ve got anything that we can add at this point in time. Sorry about that.
Matt Myers: No problem. Thanks Chris.
Operator: Thank you. The next question is from Jim Ricchiuti with Needham and Company. Please go ahead.
Jim Ricchiuti: All right. Thanks. Good afternoon. I may have missed it, and I joined the call a little bit late, but can you elaborate just on some of the restructuring that you’re doing to what extent that’s impacting OpEx, Carry?
Chris Diorio: I think Cary and I are going to share this one a little bit. That’s part of sharpening our focus, and as Cary mentioned in answer to one of the prior questions, adjusting our spend and normalizing our spend in our reader and gateway channel business. We have reduced our headcount by about 10% and refocused our company along the lines of our silicon and enterprise solutions. We believe that refocusing will drive both our profitability and our success, kind of our focus going forward and the growth opportunities for the company. So although, it’s painful, very painful to go through a headcount reduction and it’s not something we take lightly or easily. It’s something that we felt we needed to do. And in refocusing the company, we’re going to be focusing on growth, on accelerating our growth even as we drive profitability.
So we’re aligning to our strategy, and I think you’ll see us tighten that alignment as we go forward, not in terms of further headcount reductions, just in terms of how we’re really focusing on the opportunity in pilots. Cary?
Cary Baker: Chris, I think you did a fine job answering it. Jim, I would just reiterate that this is the natural next step in our strategy. You’ve heard us talk about enterprise solutions for the last several quarters at this point. This is allowing us to do that in a better way, while also running our channel reader business in a more profitable fashion. As I think about OpEx in the first quarter. I still expect OpEx to step up, though not as much as you’ve seen in the last couple of years in Q1. We still have the annual payroll tax resets. We still have the bonus accrual reset, but muting that will be a little bit lighter on labor or wage related spending and a little bit lighter litigation spend.
Jim Ricchiuti: Got it. Thank you for that. My follow-up question, Cary, in the past, when you’ve given guidance, you’ve given a little bit more color around endpoint I see revenue growth. And I’m wondering, is this quarter a little bit more challenging to forecast it. What are some of the puts and takes as we think about the sequential growth that you’re anticipating in endpoint IC revenue? And is there any color as we think about the Q2?
Cary Baker: Jim, I think the color is about the same. Maybe I’ll provide a little more here. Q4 is seasonally our softest quarter as we typically ship in front of the holiday season. We bucked that seasonality this Q4, and we were able to deliver 11% sequential endpoint IC revenue growth, even as we took down more channel inventory in Q4 than we did in Q3. Looking to the first quarter, we again expect sequential endpoint IC revenue growth, now that our large in-lake partners, the inventory levels are relatively healthy. And our shipments, as I mentioned previously, are going to more closely match the underlying demand in the fourth quarter. We are very pleased that we are now modeling our third quarter in a row of sequential demand increase.
