George Oliva: It should be after close market today.
Operator: Our next question will come from Ed Woo with Ascendiant Capital.
Ed Woo: As there is a glut in the channel in terms of inventory, have you seen reductions in input component costs as well as lead times?
George Oliva: I don’t — I have not seen reduction in cost, no — of components, no.
Brett Moyer: Yes. I mean, we have a pretty narrow set, Ed, right? I mean, the components we buy are just around our wireless modules. We don’t see the pricing action across all the components of products we go into.
George Oliva: I think most of the increase in cost is related to freight costs. I think freight costs increased during the pandemic and hasn’t come down yet.
Ed Woo: Okay. And then you guys mentioned that you are going to be reducing operating costs. Will you have to increase it as product revenue increases in the back half of this year?
Brett Moyer: No. The largest part of our operating cost is the — it is R&D and test. So the more flexible piece is the marketing, but there will be a bump in the marketing at Christmas. But there’ll be a corresponding bump in revenue.
Operator: Our next question will come from Jim McIlree with Dawson James.
James McIlree: Following up on the prior question about OpEx. So you lower OpEx in Q1 and that’s the new base. So it’s not further reductions from there. But that’s the new baseline that will — that you’ll use for the company and grow into the expenses from there. Is that right?
Brett Moyer: At that largest part, that’s right, but there’s still a series of expense control items that we’re working through. So we’re not looking at the engineering resources. But from a G&A and development, we still have some savings to achieve.
James McIlree: Okay. That’s helpful. The — I mean, just ballpark, it kind of sounds like revenue in the first half is maybe 30% to 35% of the total revenues you’re expecting for the year. Do I have that kind of right?
Brett Moyer: Well, that’s interesting. Of all the numbers I’ve looked at, Jim. All right, let me think about that. What was your percentage — third?
James McIlree: Yes. It’s just — I’m just trying to get a feel for how big of a ramp you’re expecting in the second half, that’s all.
Brett Moyer: I don’t think that’s — but I could refine it after the call.
James McIlree: Okay. Great. And then lastly, also on a prior question, you were asked about — or maybe in response to a prior question, you talked about finished goods inventory. Is there a risk of inventory write-downs? I mean, how do you feel about the valuation of that inventory if there’s any technological obsolescence or price declines that you need to account for? I’m just trying to get a better understanding about the value of the inventory.
Brett Moyer: Well, George can address it from a tech — an accounting viewpoint, but from a technology obsolescence some of these HT designs that have gone into production, they have a 3- or 4-year life, right? I mean the Pro Audio doesn’t redesign speakers every year. They do that every 4 years or 5 years or 3 years, right? So we don’t see a risk of obsolescence from a customer demand. And the speaker inventory is — so it’s just selling it. So I don’t — we haven’t taken any write-downs. I don’t think there’s a big risk currently.
Operator: Our next question will come from.
