Vuzix Corp

NASDAQ:VUZI

Greetings, and welcome to the Vuzix Fourth Quarter and Full Year ending December 31, 2023, Financial Results and Business Update Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

Now I would like to turn the call over to Ed McGregor, Director of Investor Relations at Vuzix. Mr. McGregor, you may begin.

Good afternoon, everyone, and welcome to the Vuzix Fourth Quarter and 2023 Full Year Ending December 31, Financial Results and Business Update Conference Call. With us today are Vuzix's CEO, Paul Travers; and our CFO, Grant Russell. Before I turn the call over to Paul, I would like to remind you that on this call, management's prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties and management make additional forward-looking statements during the question-and-answer session. Therefore, the company claims the protection of the safe harbor for forward-looking statements that are contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those contemplated by any forward-looking statements as a result of certain factors, including, but not limited to, general economic and business conditions, competitive factors, change in business strategy or development plans, the ability to attract and retain qualified personnel as well as changes in legal and regulatory requirements. In addition, any projections as to the company's future performance represent management's estimates as of today, April 15, 2024. Vuzix assumes no obligation to update these projections in the future as market conditions change.

This afternoon, the company issued a press release announcing its final 2023 financial results and filed its 10-K with the SEC. So participants in this call who may not have already done so may wish to look at those documents as the company will provide a summary of the results discussed on today's call.

Today's call may include certain non-GAAP financial measures. When required, reconciliation to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in the company's Form 10-K annual filing at sec.gov, which is also available at www.vuzix.com.

I will now turn the call over to Vuzix's CEO, Paul Travers, who will give an overview of the company's operating results and business outlook. Paul will then turn the call over to Grant Russell, Vuzix's CFO, who will provide an overview of the company's fourth quarter and full year financial results. Paul will then return to make some closing remarks, after which we will move on to the Q&A session. Paul?

Thank you, Ed.

Hello, everyone, and welcome to the Vuzix Q4 and Full Year 2023 Conference Call.

As disclosed in our January 17th press release, Vuzix instituted cost-cutting initiatives across our operations designed to streamline our operations and organizational structure to remove redundancy without sacrificing revenue generation or overall customer support. These measured reductions across sales, marketing and product development will extend our financial runway, improve our margins and allow the company to refocus resources aligned with the highest growth opportunities over the short to medium term.

Let me now get into a bit more about the state of the industry and the growth areas that Vuzix is positioned to benefit from. Although the Augmented Reality smart glasses market has developed slower than most expected over the past 5 years, there are increasing signs that adoption is finally starting to grow. Some of the largest players in the technology products and eyewear markets are just now entering this space with first-generation virtual reality and mixed reality and smart glasses products and continue their investments in this category.

Meta and Luxottica have seen a growing positive reception of their second product that now includes some audio-only AI-driven capabilities with their smart glasses carrying the Ray-Ban brand. Industry reports estimate over 300,000 units were sold in the first 12 months, and they don't even have displays in them yet, a key feature that many could argue questions the validity of the reference to even call them smart glasses. Apple also recently launched the Apple Vision Pro and sold out in even larger numbers at a much higher price point. And although our enterprise-based product revenue line has not shown it just yet, our inbound new business pipeline is expanding nicely on many fronts and should result in us achieving that growth very soon.

Vuzix has invested significant capital and other resources to create a foundation of key intellectual property that positions the company as one of the global leaders in the wearable computing and augmented reality smart glasses space. We have led much of the industry with the core technology development needed right through to addressing the enterprise markets in general. Our growing focus on offering OEM and ODM solutions of optics and display engine components for the enterprise, defense and broader consumer markets is readying us for the rapid growth we see coming with much of the investment and costs already realized. We are positioning to deliver to our customers and market in short order. The advancement of our core technologies is becoming more evident every day in our products, waveguides and microdisplay component solutions. Our Z100, which we introduced at CES this January 2024, is an innovative and unique AR smart gas solution within the industry. It demonstrates the art of the possible with actual displays in small, fashionable form factors, one that others have yet to replicate and deliver today to either enterprise users or the broader consumer markets. Our new waveguide mega factory, which was completed and became operational in late 2023 is a facility focused on high-volume manufacturing and the advancement of our waveguide technology. Again, the Wall Street Journal recently reported that roughly 300,000 Ray-Ban glasses were sold in 2023. Our plant floor could meet that volume demand today if by way of example, Meta selected Vuzix to provide their waveguide needs for a similar product to their new Meta Ray-Bans and wanted to offer a more premium AI product with actual displays. Vuzix and our partner, Atomistic, from whom we have exclusively licensed micro-LED technologies and invested in are on a good path that should result in achieving what we feel will be state-of-the-art breakthroughs related to micro-LED solutions. Atomistic's micro-LEDs have the potential to optimally deliver on the performance, size and costs required for augmented and mixed reality products that we feel will be able to ultimately achieve substantial success in the mass markets. That demand could be well beyond the potential of the Meta Ray-Bans, which today are simply audio enabled sunglasses with a built-in camera. Many believe they could ultimately match or exceed the number of smartphones used around the globe.

Supporting these solutions from Vuzix is a comprehensive patent portfolio of more than 375 patents and patents pending, including a significant collection of fundamental waveguide design patents and applications as well as extensive trade secrets regarding nano imprinting, processes, equipment and materials like polymers, adhesion promoters and release agents that are critical to how we can produce in volume and at low cost to support the broader markets. Lastly, movie and software, which has finally been successfully ported over to the Vuzix smart glasses, is now leveraging artificial intelligence for items scanning and picking and continues to gain traction in the back-end operations of warehouses and large manufacturing plants. According to Pluralsight, a leading technology workforce development company, by 2025, the top 3 transformative technologies for the global economy are going to be the ubiquitous Internet, artificial intelligence and augmented reality. The stage is set for AI-enabled AR smart glasses, and this is why almost every major tech firm has development programs happening in all 3 areas. The investments we have made in our core technologies and application ecosystems, we feel are critical to preparing the company for the next phase of growth coming from the augmented reality smart glasses industry. The Z100 running 48 hours on a single charge, packs industry-defining heads-up waveguide technology and a custom micro-LED display engine into a sleek fashionable form factor that weighs in at just 38 grams, the weight of a standard pair of eyeglasses. For enterprise users, they represent the first attractive functional bridge between AI platform tools and the user's external world, where situational guidance can streamline workflows for human workers who can reap the benefits of a truly connected workplace. In addition to a lightweight AI interface, the Z100 glasses can augment the data feed from wirelessly connected finger scanners, sensors, controllers and other equipment with minimal native user interfaces, making that data available in a new and highly accessible format. For the broader market, there is a transferable customer base that needs a better solution. There are 1.6 billion smartphones and 300 million smartwatches sold annually, and the biggest use cases are notifications, social media and soon mobile AI connected to the world around you. Products like the Z100 have the potential to provide heads-up, hands-free access to notifications, alerts and other location-aware information from language translation to close captioning, to directions, to health and workout status, to messaging and much more, and also to integrate the latest local and cloud-based AI engines coming from several of the larger known brands in the social media and streaming space.

The bottom line is the Z100 has enthusiastically been received and will be successful in advancing the industry and opening up new doors for Vuzix OEM and ODM opportunities with our reference designs and integration opportunities with some consumer-centric software companies, and we are planning to continue this theme with the broader markets into the fall of the year. The new Vuzix waveguide factory is a state-of-the-art manufacturing plant that accomplishes several specific max market requirements, including increasing our waveguide build capacity and lowering our manufacturing costs. It is also allowing us to utilize the more advanced processes needed for our latest waveguide designs. Our production capacity can now be quickly ramped to deliver up to 1 million units annually with very little further investment. The new facility also allows Vuzix to focus on the advancement of waveguides utilizing higher index materials, advanced glass substrate and unique waveguide configurations. Recently, Vuzix introduced incognito-enabled waveguides, which we believe is the first waveguide-based technology in the world to virtually eliminate forward eye glow when the displays are active. Eliminating eye glow is deemed by most to be a critical requirement for the broader consumer markets to accept smart classes. We have demonstrated use of INCOGNITO privately in dark rooms with the lights out to leading consumer brands and defense contractors much to their amazement and well-done statements. And of course, how the heck Vuzix INCOGNITO technology manages internal light reflections and forward light leakage within a waveguide which, besides the obvious of removing the annoying forward light, results in improved contrast of virtual images in the AR glasses.

INCOGNITO has been accomplished with no increase in our manufacturing cost per waveguide and will be targeted for introduction into certain of the company's defense, enterprise and, of course, ultimately broader consumer applications for both Vuzix products and our OEM offerings.

So we all know that when it comes to smart glasses, One has to also address the fact that more than 60% of the population wears prescription glasses and solving the challenges associated with delivering wave guides with integrated prescriptions is no small task. Vuzix is currently in the process of establishing the infrastructure to support the production of prescription-based waveguides with a road map for scaled production thereafter. Multiple patents and patent spending are already in place related to the system processes and prescription integrations. The prescription lens layer needs to be finished, trimmed and integrated with the smart glasses waveguides, all of which must be conducted in controlled environment and with our approach can utilize most of the existing industry infrastructure for high-volume prescription glasses. We expect our integrated solutions can support the vast majority of prescriptions needed, including bifocals and astigmatism. Our recently announced Ophthalmic Advisory Board is providing strategic input, guidance and recommendations regarding vision correction issues and how to better build products and services to meet customer vision requirements. Their efforts and contributions are helping Vuzix successfully do this. Again, these are all industry-leading developments and the waveguides resulting from them in terms of cost, scalability and features, we feel are unmatched in the industry. Waveguides, with all these features mentioned above, represent an essential component needed for widespread adoption of lightweight AI-enabled smart glasses and other wearables. The other essential component for AI-enabled AR smart glasses is micro-LEDs. As we've discussed in the past, micro-LEDs have the potential to be a driving force in providing the performance, size and costs needed for AR, MR and smart glasses to achieve success in the mass market. Micro-LEDs have the potential to be much more efficient, lower power to drive high brightness levels outdoors in the real world with the resolution and form factor to enable a family of next-generation small, lightweight fashion-forward smart classes. Over the past 24 plus months, Vuzix has invested approximately $30 million in developing advanced micro-LED display technologies, leveraging extensive Atomistic SAS intellectual properties for which we have the option to continue to own the exclusive license outright and acquire the company. The current AR display device technology approach to micro-LEDs by others today primarily consist of using gallium nitride and gallium arsenide material systems. It has had ongoing challenges related to higher build cost, complicated manufacturing scalability, less power efficiency and spectral performance when scaled to the micron sizes needed for smart glasses and other uses. Atomistic in contrast continues to make steady progress in the development of their unique micro-LED materials approach. This includes delivering against a number of preestablished development milestones in our exclusive license agreements, 6 out of 10 thus far. These milestones are related to the development and production of a singularly unique multi-chamber epitaxy machine used for both red, green and blue or RGB micro-LEDs, atomic level design and ultimately into production. Development of unique doping materials and processes, expanded development and patent-related documentation of multiple material stack approaches to optimize the atomic pixel structure for increased efficiencies for all 3 primary colors and work on multiple unique methods of pixel control. We expect this progress to accelerate over the coming months with increased production of test samples and refinement of initial designs. As we are making this progress, the ability to share more with third parties is now starting to crystallize, and we have been able to start engaging with select potential customers, investing partners and organizations that have a vested interest to see micro-LED technology finally commercialized, including U.S. and international defense organizations, numerous well-known brands and multinational commercialization and supply companies. The early feedback has been very positive thus far with nearly all parties intently interested in seeing and potentially supporting a practical solution for high brightness and high efficiency with an approach that is clearly scalable at a competitive cost. These early conversations regarding Atomistic's unique technical and production approach reconfirm the path we are on and the potential high return on our investment.

Our current enterprise smart glasses products are now being used around the clock in many warehouses to drive cost savings and efficiencies. In health care, Vuzix glasses are being used around the globe to teach and perform surgeries. Vuzix smart glasses are also being used during equipment repairs and remote maintenance service calls. The list of use cases keeps growing as the enterprise industry matures and, as we have expressed in the past, we continue to see much larger deployment opportunities on the horizon. This has not changed. We've entered 2024 with a solid pipeline of smart glasses and OEM sales opportunities. We feel this way because it is not concentrated across only a few customers, but instead, it is becoming more broad-based across industries, geographic regions and use cases. The Vuzix team is looking forward to executing and delivering on what we feel should be a significant number of growth catalysts throughout the remainder of 2024. One area of broad focus for the entire industry and, of course, for Vuzix is artificial intelligence for many applications, including as a personal assistant for work or life management and entertainment. We have multiple third-party ISVs in the enterprise space and Vuzix's own Moviynt team planning to enable their AI-enabled offerings ultimately through the use of smart glasses to leverage artificial intelligence for augmenting humans for picking, preventive maintenance, education, security and language processing. We believe artificial intelligence equipped smart glasses will also have a meaningful impact in defense and of course, with consumers. According to the survey, revolutionizing fulfilling operations with workforce augmentation, created by Incisive, one of the leading insights firms for digital transformation leaders, 94% of businesses report a commitment to evolving the role of human labor in areas like automated warehouses and last mile delivery. In this context, there's a growing focus on technology that enhance rather than replace human capabilities. Reflecting this sentiment, a strong 69% of those surveyed agreed that wearable AR solutions that broaden the capabilities of other workers with AI optimizations, improved accuracy and data-rich inputs will be central to warehouse operations in the coming years. Again, our core waveguide and microdisplay projector technology in optics continue to gain traction in these markets, both as products and as well related to potential OEM and OEM reference designs for consumer smart glasses and in the trenches with our defense customers. We remain in ongoing discussions with multiple industry leaders to ideally provide them components, subsystems and even full white label designs for their upcoming AR products. We believe our success with many of these firms is just a matter of time.

In November of last year, Vuzix also signed an agreement with Quanta, one of the world's largest ODM suppliers on the planet with over $40 billion in annual revenues to jointly supply these same components and with the goal to enable as many commercial customers as possible with AR finished goods solutions. This is an exciting new relationship for Vuzix and one that continues to evolve with initial glasses already being shown from Quanta using Vuzix waveguides and software to select key accounts. On the defense side, and I know we have been expressing this for quite some time, we expect at least one of our customers, which to date has invested millions of dollars in prior NREs with Vuzix to be rolling into production this year, and we feel there is a second customer right behind them. At the same time, our specialized waveguide R&D efforts are bearing new fruit and opening up new addressable markets in defense areas related to HUD for armored vehicles, aircraft and ultimately, even ground forces.

We believe the competitiveness of our products and technologies is opening other accretive opportunities also. Vuzix is now actively working with select U.S. agencies to secure development grants to support their needs to have Vuzix as a strategic U.S. supplier of advanced technologies focused on our waveguides and micro-LEDs. Concurrently, we have growing relationships with leading industry players that not only are interested in working with Vuzix around our key technologies but are potentially interested in investing to better secure their access to it. Grant will now take you through our numbers as well as provide some additional color regarding further organizational efficiencies and other matters. Grant?

Thank you, Paul. . As Ed mentioned, the 10-K we filed this afternoon with the SEC offers a detailed explanation of our annual financials. So I'm just going to provide you with a bit of color on some of the full year as well as quarterly numbers.

For the year ended December 31, 2023, Vuzix reported $12.1 million in total revenues as compared to $11.8 million for the prior year. Product sales increased by 2% year-over-year, driven by increased smart glasses revenues. Sales of engineering services for the year increased 3% to $1.4 million from $1.3 million. Please note, as disclosed in our 10-K, we have a $2.9 million worth of remaining performance obligations over the revenues already recognized under a current waveguide development project.

For the 3 months ended December 31, 2023, Vuzix reported $1.1 million in total revenues versus $2.9 million in the prior year's fourth quarter. The revenue decline was primarily due to reduced unit sales of our M400 Smart Glasses. Please note the Q4 2023 revenue total achieved was below the initially indicated amount in early January pursuant to our cost reduction press release update as one significant customer order had to be moved from [indiscernible] originally shipped in December 2023 into the 2024 revenue year due to shipment and delivery issues discovered later during formal closing procedures. For the full year ended December 31, 2023, there was an overall gross loss of $2.6 million as compared to a $1.5 million gross profit for 2022. Included in 2023's cost of sales was a $4.4 million inventory obsolescence reserve, well above the $0.3 million in obsolescence reserves accrued in our 2022 fiscal year. The large additional inventory reserve amount was related to expected surplus component parts and obsolescence in excess of currently planned existing future build -- product builds in 2024 and in early 2025 and all part of our planned transition to expected new smart glass models in 2025. No finished goods have been included in this reserve. And as the disposal value of these excess components that will not likely be used in future product models is unknown, 100% obsolescence provision was accrued. Research and development expenses for 2023 fell 3% to $12.3 million as compared to $12.7 million for the 2022 period. The decrease was largely due to a $0.9 million reduction in external development and consulting expenses, partially offset by an increase in salary and benefits related expenses and a $0.4 million accrual for severance related costs for staff reductions, which took place in early January 2024. Sales and marketing costs for all of 2023 rose 57% to $12.7 million from $8.1 million in 2022 with the most significant factors being a $2.1 million increase in salary, commissions and benefits related expenses driven by head count increases, a $0.4 million provision for staff reductions in this area, which took place in early January 2024 and an increased bad debt reserve allowance of $1.6 million, and a $0.6 million increase in advertising and trade show expenses. General and administrative expenses for 2023 decreased 12% to $18.6 million as compared to $21 million for the 2022 period. The decrease was largely due to a $2.5 million decrease in noncash stock-based compensation, primarily related to the company's 2021 long-term incentive plan. For the full year ended December 31, 2023, the net loss was $50.1 million or $0.79 per share as compared to a loss of $40.8 million or $0.64 per share for the full year of 2022. Now for some balance sheet highlights. Our cash position as of December 31, 2023, was $26.6 million and we had a net working capital position of $36.3 million. Net cash flows used in operating activities was $26.3 million for the year ended December 31, 2023, as compared to $24.5 million for the 2022 year, an increase of $1.8 million.

Cash used for investing activities in 2023 was $19.3 million down from $21.2 million in 2022. Both these amounts are well above our historical average for investments. The most significant components of this total investment were $10.5 million in cash payments on further technology development payments pursuant to our exclusive micro-LED technology license agreement with Atomistic and a $2.5 million investment in the preferred shares of Atomistic purchased from its founders, and $5.3 million for purchases of manufacturing equipment and leasehold improvement expenditures primarily related to our waveguide plant expansion project. We are presently envisioning spending significantly less on investments in 2024 as our new and expanded waveguide manufacturing facility was completed in late 2023. Looking forward to the balance of 2024, we are addressing certain operational challenges highlighted as follows: reducing our operating costs by further operating cost reductions and head count freezes to better rightsize our cost in relation to our planned revenues, delay or curtail discretionary and nonessential capital expenditures, not related to near-term new products and R&D. As mentioned in our 10-K filing, the probable implementation of a voluntary cash salary reduction program in exchange for equity instruments offered to all salaried employees and management. We are also actively pursuing licensing and strategic opportunities around waveguide technologies with potential OEMs, which include the receipt of upfront licensing fees and ongoing supply agreements, as Paul mentioned, some potential strategic investments. As most of you are aware, we are in the process of going effective with our new S-3 shelf registration statement with the SEC as Vuzix has found it prudent to have one in place over the past many years. The new S-3 includes a provision for an ATM or at-the-market offering with an investment banking firm to raise capital on the best terms if favorable market conditions develop.

And as pointed out in our recent 10-K, there is a cautionary going concern note to our financial statements that projecting our cash needs out over the next 12 months, there is possible financial uncertainty related to the full alleviation of all our current going concern risk. Vuzix's management is confident based on its plan and history of managing its operations and successful capital raises over the past 2 decades that it can fully alleviate those financial risks over the next 12 months. As a result, our financial statements have been prepared on a going concern basis. This presentation assumes that the company will continue normal business operations into the future.

However, as noted in our 10-K, the company's external auditors do not share the opinion that such financial risks are yet fully alleviated and have included a cautionary note in that regard in their audit report. This is an opinion that management does not agree with.

And before concluding, we would like to apologize to our stockholders for having to take advantage of the 15-day grace period for the filing of our 10-K for 2023 with the SEC. As it should be evident to most, there were a variety of issues, assumptions and extra efforts required to properly prepare our financial statements and complete our external audit to the satisfaction of all relevant parties. We expect this delay will not be repeated again in the near future. With that, I would like to turn the call back over to Paul.

Thank you, Grant.

With that, I would like to now turn the call back over to the operator for Q&A.

[Operator Instructions] Our first question comes from the line of Christian Schwab with Craig Hallum Capital.

This is Tyler Burmeister on behalf of Christian. So I guess, first, I guess, maybe just to kind of get to it. We're into April now. Q1, it's closed just a couple of weeks ago. I'm sure books aren't finalized, but any color you can give us so far and kind of how Q1 shakes out, maybe directionally what revenue looks like as well as a cash balance early view for Q1?

I don't know if Grant wants to get into cash balances and stuff. I can tell you that it will be an uptick from our Q4 numbers, we believe.

And on the cash side, it would generally sort of follow the last couple of quarters as far as net changes in cash balances minus the funds that were flowing out to Atomistic for the license support. So it's down a little, but should not be an unexpected amount.

No, fair enough. And then I guess maybe another for Grant, could you help maybe just level set us these cost-cutting efforts that you're making maybe you called out $8 million on an annual level you're looking to reduce previously. Maybe how far along are you into that? Or what's the baseline level you're thinking that that $8 million has come off of, just given some of these more onetime in nature expenses to a couple of moving pieces there, maybe help level set everyone.

I mean, we still stand by the $8 million sort of annualized target. I mean I am not saying Q1, some of the costs came in a little higher than we'd hoped because it takes time to slow down the tanker, but we're honestly looking at more cuts and we feel we can get our operating expenses under $20 million on an annual basis, and we'd love to get it closer to $15 million. So we're looking at potentially another 30% of cuts to operating expenses. We'd like to try to implement in the next quarter while we wait for our business to accelerate as fast as we're all expecting.

Okay. That's very helpful. I guess maybe last one here, Paul, you said at least 1, potentially 2 or another 1 closely behind aero defense firms for their OEM opportunities they've been working for a while that you expect to ramp this year. Any framework you can give us for what the potential financial terms that might look like? Or what numbers might look like around that, it all would be helpful.

Yes, I can help you there. There's actually 4 plus programs right now that are really active. There are 2 of them that are literally we're on the front end of delivering their very first production devices. The kinds of unit prices, it's in the -- anywhere from $2,500 to $5,000 system and the kinds of volumes that we're talking about are somewhere 2,500 to upwards of 10,000 pieces. That won't all be at once, of course, but we should knock on wood, see one, if not 2 of those programs start to roll this year. It's to the point where they're out showing customers and the likes. We're getting very positive feedback. So it's right on the cusp of kicking off.

Our next question comes from the line of Aaron Martin with AIGH Investment Partners.

I apologize. The [indiscernible] earlier on the call when we had the technical difficulty, but can you guys talk a little more on the waveguide the big facility in terms of -- at what level does it have -- you talked about being able to produce hundreds of thousands. At what level does it have to get to, to be at scale from a cost perspective?

Well, let me say, Aaron, that the facility right now is at the hundreds of thousands of level for production. And there's very little new investments that we need to make to graduate that up to 1 million plus units handling. I would also suggest that to get beyond that, it's not a big investment, and we don't need to expand the facility in the process to do it. We could probably, out of the facility that we're in right now, run 3x those kinds of numbers. So we're set. We're in a good spot to crank up production and the investments we think were well worth it.

We talked about this facility getting the waveguides out at a cost point dramatically lower than anyone else. My question is, at what level of build do you have to be out with your existing capacity to get the cost -- the per waveguide production cost down to the target levels.

Yes. So first of all, let me say that. I don't care who's out there trying to produce these right now. If they're making them in the 10,000-piece quantities, the prices are not going to be better than Vuzix. If they're making them out 100,000 and we're making them out 100,000, they're not going to be better than Vuzix. So wherever we are on the scale path that we're on, these other folks, for the most part, are so expensive, but honestly, I don't even know how products are going to be able to go into the marketplace with $200 to $500 kind of price points on waveguides. So even now, when we're only making small unit volumes, we're highly competitive. That said, even making 20,000 pieces, we can be in the really nicely scaled kinds of volume prices. We don't give -- I want to be careful how I say that because we're not sharing with everybody what those numbers are and how that all adds up because, of course, our margins aren't a lot of people's business. But it scales pretty easily, Aaron, to get to good price points.

Okay. And then on the cost-cutting measures, you talked about getting the operating expenses down to, say, $20 million. Is there a time frame for that rough...

Our goal would be to accomplish our next round of cuts in the next quarter. And I should stress that these are on a cash basis. So we do carry a pretty good burden of non-stock -- noncash stock compensation related to the LTIP. But I mean, on an annual basis, I think by July 1, we'll be there. And the team is going to work hard to make some difficult decisions to do that without sacrificing our future in doing so.

There are no further questions at this time. I'd like to turn the floor back over to Paul for closing comments.

Thank you, operator. I would like to thank everyone for your interest and participation on today's call. We will look forward to speaking with you again in May when we report our Q1 2024 quarterly results. Again, have a nice evening, everybody.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.