Todd DeBonis: So when we do that, usually, our customers are booking orders out anywhere between 18 and 26 weeks lead time. So, when we start to roll out either new devices or new pricing on a [Technical Difficulty] it usually doesn’t take effect for a period of time. There’s a lag effect, right? Because they’ve already – it doesn’t affect the current backlog. And so, we have rolled out pricing for an extended period of time as it takes its traction with new orders, margins will improve from that pricing. Also, we have a road map of new devices as we introduce and production increases on those new devices, the margin profile on those devices is better than past devices. So, a combination of the two things are what provides us margin improvement. We do expect to see a gradual improvement over the next several quarters.
Nick Doyle: Thanks, Todd.
Todd DeBonis: Thanks, Nick.
Operator: Thank you. Our next question comes from Richard Shannon with Craig-Hallum. Pleas go ahead.
Richard Shannon: Hi, Todd. Thanks for the taking my question. I think I’ll start with the first question, similar to what the other 2 asked, which is Haley, your prepared remarks were very garbled. I didn’t catch your OpEx or your gross margin numbers either. So, could you repeat this for me, please?
Haley Aman: Okay. Yes. Sorry about that. So, guidance for the fourth quarter for gross margin is 44% to 46%. And OpEx guidance for the fourth quarter is $11.5 million, $12.5 million on a non-GAAP basis. And then I just pointed out that we do expect to have the final milestone achieved in our co-development agreement, so there will be a credit recognized in Q4, which is why it’s down from Q3.
Richard Shannon: Okay. I apologize, Haley, but it was garbled again. Did you say 11.5 to 12.5 OpEx?
Haley Aman: Yes. Wow, I’m sorry.
Richard Shannon: Okay. That one wasn’t garbled. So, no problem. Let’s see here. Going off the topic of financial structure here, I think for the first time in a while we could start talking about and thinking about a breakeven model for you guys. And so, I want to get your best sense of what that looks like. You talked about gross margins last quarter getting into the 50s. Maybe give us a sense of where that kind of baseline for OpEx goes? And then how do we get to a breakeven level here in the near term, please?
Todd DeBonis: I will take it, Haley. So, we are keeping tight on OpEx, right. We are trying to do a lot with a little. I mean if you look at what our game plan is, and I haven’t been super detailed and probably nor will I in the short-term on TrueCut. It is an ambitious plan. And it’s an ambitious plan with a very small core team. It is making headway. And I would suggest the same thing in mobile. Our plan with the IRX ecosystem, and we expect within a year from now to have upwards of 20 top-tier games in the mobile gaming community. Fully to our SDK, our family of processors, including we just introduced X7 Gen 2, there will be another flagship VPU launched [Technical Difficulty] quarter of next year, we will be sampling customers probably in Q2 of next year.
And so, when we go out and suggest that we want to ramp up upwards of 20 top-tier games and have that SDK work across [Technical Difficulty] the processors. So, that would be – there will be X7, X7 Gen 2, this new device and our older X5 Pro, which you will see the X5 Pro launched in some newer interesting models that are probably targeting a different demographic in the next year. So, what I am trying to articulate is it’s an ambitious plan with a small team. So, in both categories, and we are trying to hold tight on OpEx through that because we would like to get to breakeven and profitability sooner than later. So, a lot of variables. Do I feel the opportunity is too great, and we start spending more OpEx. Do I hold the line, okay. Are we able to get back to the mid-50s sooner than target or later and does revenue grow, with all of that in play, I would suggest as we approach $25 million, $26 million in revenue with all in the mix, we should be close to breakeven.
Richard Shannon: Okay. Great. That was very helpful color. Thanks for that. I guess touching on a few different topics within mobile here that really revolved around margins and pricing here. I think you have talked about increased pricing over the last few years and few generations of products with harder levels of features here. You seem to be alluding to that angle continuing, but it also seems like what you are alluding to is somehow improved cost structures or at least increase value, I guess. So, how do we see the progress of ASPs? And then whether you can quantify or characterize how do you expect that to go over the next year or more, Todd?
Todd DeBonis: Well, I can give you historical. Haley may have it on the tip of her tongue. I can give you a rough estimate. My guess is in general, if I go back over a 3-year period, and I – with the guidance we gave for Q4 2023, so this would be ‘21, ‘22 and ‘23, we probably average, if I look – if I add Soft Iris and a combination of all of our visual processors, we were probably in the mid [Technical Difficulty] ‘21, ASPs across all platforms, and we probably shipped 10 million to 12 million models. And a good chunk of them were software, not the majority, but a good chunk. In 2022, we probably shipped a couple of million [Technical Difficulty] probably flat on the software model. So, we grew hardware model, and we grew the hardware models on higher ASP devices.
So, we probably averaged low $2 ASPs, right. I mean we did $22 million. So, we did 12 million units, probably about two months, so, a little over, right. And we just finished off the year if we – once we close Q4, we and meet the guidance we gave, we will finish off the year, I don’t know, $30 million for mobile, somewhere around this range, slightly more units, but probably pushing upper $2 in the ASP across all software and then all visual processors. I would expect that 2024, you would continue to see at least that kind of growth in ASP and unit one, and probably more in the unit one.
Richard Shannon: Okay. Great. That’s a great perspective, Todd. Maybe one or two more questions, and I will jump on the line here. I think you talked about this last conference call as well, but some of your Tier 1s in China are now starting to introduce new phones in additional markets using your product. So, how big of an adder do you expect that to be versus more attach, more models coming from them in their domestic markets?
Todd DeBonis: Well, if you look at the – almost every model we have launched, there is an international version of that almost everyone. Not everyone, but – and what they offer to take our chip off the international version. And it’s not just the saving the money of our chip in the national version. Their challenge is mobile gaming is a very big deal in China. They understand how to market to that audience in China. They have struggled because when we say international, it’s multiple countries, right. And so, they have struggled with how do they go out and put a cohesive marketing plan for mobile gaming. They know they should. They know the demand is there. They have been challenged to how to do it. And if they put it down on the PCB and market it, they have to figure out how to market.
It’s not just this future, but really the whole mobile gaming value proposition. And so this is what we are trying to convince them to go do. I would say I have looked – I have asked almost every customer that has an international version. There are some OEMs that ship actually more internationally than they do domestically, but most of our customers ship more domestically than they do internationally. But you could – it’s a rough yes, if every model we were in, they chose to include us in the international version our business would dump.
