DSP Group, Inc.
Q2 2018 Earnings Call Transcript

Published: 30 Jul 2018

[Operator:]

Good day and welcome to the Q2 2018 DSP Group Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Daniel Amir. Please go ahead, sir.

[Daniel Amir:]

Good morning, ladies and gentlemen. I'm Daniel Amir, Corporate Vice President for Business Development at DSP Group. Welcome to our second quarter 2018 earnings conference call. On today's call, we also have with us Mr. Ofer Elyakim, Chief Executive Officer; and Mr. Dror Levy, Chief Financial Officer. Before we begin, I would like to remind you that during this conference call, we will be making forward-looking statements about our financial projections for the third quarter of 2018, optimism about our engagement pipeline, the ability of our growth initiative to drive revenue expansion, expected recovery in our SmartHome business in the fourth quarter, belief in our leadership position in voice user interface technology and benefits of ULE technology. We assume no obligation to update these forward-looking statements. For more information about the risks and factors that could affect the forward-looking statements made herein, please refer to the Risk Factors discussed in our 2017 Form 10-K and other SEC reports we have filed. Now, I would like to turn the call over to Ofer Elyakim, our Chief Executive Officer. Ofer, the floor is yours.

[Ofer Elyakim:]

Thank you, Daniel. Good morning, everyone, and thank you for joining us today. I hope that you had the opportunity to read our press release that we distributed earlier today. I would like to begin by reviewing our results for the second quarter commenting on the progression of our business plan, and providing context for our outlook. In a short while, Dror will provide you with detailed comments on our financial results and outlook for the third quarter of 2018. We achieved second quarter financial results that exceeded our guidance on most financial metrics. Moreover, during the second quarter we met an important milestone, revenues from our growth initiatives represented the majority of our revenues for the first time. Revenues from growth initiatives of $15.8 million accounted for 52% of sales, and represented a year-over-year increase of 7% and a sequential increase of 13%. Overall we ended the second quarter with total revenues of $30.7 million, representing a decrease of 2% versus the second quarter of 2017. Our performance reflects solid execution on the growth initiatives and our results demonstrate the success of these initiatives in building the baseline for revenue growth and driving revenue diversification, as evidenced by the solid year-over-year revenue growth of 14% in the Office/VoIP segment and 147% in the SmartVoice segment. Our differentiated technologies and better-than-expected product mix, coupled with operational efficiencies drove year-over-year non-GAAP gross margin improvement of 290 basis points to 49.5% and non-GAAP operating margin improvement of 100 basis points to 4.5%, both higher than our guidance. Moreover, we continue to successfully expand and diversify our engagement pipeline with leading OEMs and strategic customers. We are excited about the solid progress we have made during the quarter in each of our growth initiatives, namely Office/VoIP, SmartHome and SmartVoice, which will drive us through the inflection point and define our future and more than offset the secular decline in the cordless telephony market, thereby accelerating the company’s overall growth. Now, I'd like to provide you with specific updates about our progress in each segment. Starting with SmartVoice. During the quarter sales of SmartVoice products totaled $2.2 million, which were in line with our guidance and reflected an increase of 147% year-over-year and 40% sequentially. We're excited to share with you that during the quarter we have accomplished a major milestone, Amazon Alexa Voice Services certified our far-field 3-microphone development kit. This new development kit features our DBMD5 audio voice processor and our voice enhancement processing technology for far-field applications. We believe that the new kit is the lowest power solution for developers who want to quickly and easily build a range of high accuracy Alexa-enabled devices supporting far-field operation. Examples include smart speakers, wearable computing devices, SmartHome devices and remote controls. Amazon AVS certification is a strong vote of confidence from a market leader in this space and a testimony for the quality and the best in class performance of our SmartVoice technology. Working with Amazon AVS is a vital step forward in our steady expansion in the burgeoning Voice User Interface market. OEMs and ODMs can literally pick up our development kit, plug it in and start creating richly featured acoustic [front-ends] for Amazon AVS devices, while conserving precious both space and battery life. We believe this combination with play an instrumental role in the evolution of Voice User Interface and establishes DSP Group’s leadership position in this rapidly growing and evolving market. In addition, we continue to expand our SmartVoice engagement pipeline as evidenced by a number of noteworthy design wins accomplished during the quarter. They include a leading Korean mobile OEM that launched a series of smart phone models based on our SmartVoice SoC, and a Chinese smart phone OEM that selected our SmartVoice SoC for its new smart phone model. This quarter, we continue to invest on R&D efforts in addressing the next frontier in Voice User Interface and build an offering around artificial intelligence technologies focusing on VoIP and audio. We believe that in the coming years larger emphasis will be placed on running more artificial intelligence content in edge devices versus solely in the cloud, which will enhance the way people interact with their devices. We expect such technologies to reshape human device interaction into more intuitive dialogues, deriving voice biometrics, usage of environmental sensing, our artificial [ear] machine voice activated chat-box and more. Looking ahead to the third quarter, we anticipate a sequential increase in our SmartVoice business, based on an expected ramp up of new designs mainly for non-smart phone applications that are progressing to mass production phase. Therefore based on our assessment, we project third-quarter SmartVoice revenues to be in the range of $2.7 million to $3.3 million, representing solid growth both year-over-year and sequentially. Now to an update on the Office/VoIP segment. We are excited about the recent developments in the unified communications market and the demand for higher productivity in businesses with higher quality voice and video communication. These three groups is at the forefront of these technologies and is well-positioned to capitalize on such industry trends for a comprehensive SoC solutions for the unified communications market. This is also demonstrated by our growing design pipeline with Tier 1 OEMs, as well as other customers. In the second quarter, we achieved quarterly revenues of $9.8 million, exceeding the high-end of our guidance range, and representing an increase of 14% year-over-year and 17% sequentially. The better-than-expected results reflect a continued momentum in demand for our VoIP products from Tier 1 customers. In addition, during the quarter we had a number of noteworthy new product announcements, including Cisco that launched its wireless microphones for its flagship 8832 audio conferencing system incorporating three different DSPG associates DVF, DCX81 both in the base and DHX91 in the remote microphones. Second Audiocodes launched its new top-line IP phone, the 445HD, based on our DVF9919 SoC. We are confident that with our current pipeline of engagements we are well-positioned to see gradual revenue growth during the second half of the year and beyond. For the third quarter, we expect VoIP revenues to grow on a sequential basis and to be in the range of $10 million to $12 million. Now to an update on the Home segment, starting with SmartHome. Our SmartHome business is comprised of DECT/ULE product shipping primarily with IoT and home gateway products. Second quarter SmartHome revenues of $3.8 million were above the high-end of our guidance range. However, SmartHome revenues did decrease by 27% year-over-year and by 7% sequentially. SmartHome revenues were higher than our previous guidance mainly due to higher demand for home gateway product, which offset the anticipated weakness in demand for ULE sensors. Nevertheless, we expect SmartHome revenues to gradually recover in the second half of the year. During the quarter we had a number of noteworthy new product announcements by our customers, including a leading European OEM that launched a series of connected LED bulbs based on our ULE technology targeted for two leading European service providers, which have selected ULE to run their SmartHome offering. A leading Taiwanese ODM selected our DECT/ULE solution to run hands-free and high-definition voice calls in an innovative SmartSpeaker product. Moreover, a leading smart assistant device makers including Amazon and Google are adding a new skill to their smart assistant products. It is called handsfree calling and there is a growing interest in combining DECT/ULE to such products in order to introduce best in class high-fidelity, high-definition voice calling. Bottom line, the solid interest in DECT/ULE in the IoT market continues. DECT/ULE provides unique benefits including superior range, low power, natural to VoIP support and video streaming capabilities. While the cycle time in our SmartHome business is longer than in other segments we are encouraged by the pipeline and the opportunities that lie ahead. We are looking forward to the upcoming SmartHome service launch by a Tier 1 European service provider towards the year-end. Looking to the third quarter, we expect SmartHome revenues to be in the range of $3.5 million to $4.5 million. And now for an update on the cordless phone market. Our second quarter cordless revenues were in line with our guidance and accounted for 48% of the quarter’s total revenues. Cordless revenues increased by 6% on a sequential basis, while decreased by 10% year-over-year. And now to an update on our outlook. Based on our revenue expectation across our new product initiatives, we expect our third quarter 2018 revenues to be in the range of $32 million to $34 million, which at the midpoint of guidance suggests solid sequential growth. Looking ahead, we believe that we are in a strong position to capitalize on significant opportunities in new and emerging market areas of unified communication, voice user interface and IoT. We are optimistic about our business outlook for both the short and long-term period to drive revenue growth and gross margin expansion. Now, I'd like turn the call over to Dror, our Chief Financial Officer. Dror, the floor is yours.

[Dror Levy:]

Thank you, Ofer. I will now review the income statement for the second quarter of 2018 from top to bottom. For each line item I will provide the U.S. GAAP results, as well as the equity-based compensation expenses included in that line item and the expenses related to previous acquisition. Our revenues for the second quarter of 2018 were $30.7 million. Gross margin for the quarter was 49.1%. Gross margin for the quarter included equity-based compensation expenses in the amount of $0.1 million. R&D expenses were $8.9 million, including equity-based compensation expenses in the amount of $0.7 million. Operating expenses for the quarter were $15.7 million, including equity-based compensation expenses in the amount of $1.6 million and amortization of acquired intangible assets in the amount of $0.4 million. Financial income for the quarter was $0.4 million with no tax provision for the quarter on a U.S. GAAP basis. Income tax for the quarter included income tax benefit resulting from the amortization of deferred tax liability related to intangible assets and a tax benefit related to equity-based compensation expenses in the total amount of $0.2 million. Net loss was $0.3 million, including equity-based compensation expenses of $1.7 million, amortization of intangible assets of $0.4 million, and tax benefit of $0.2 million. Non-GAAP net income, excluding the items I just described was $1.6 million. GAAP loss per share for the quarter was $0.01. The negative impact of equity-based compensation expenses on the EPS was $0.07. The negative impact of the amortization of acquired intangible assets on the EPS was $0.02, and the positive impact of the tax benefit was $0.01. The non-GAAP income per share, excluding these items that I have just described was $0.07 for the second quarter. Please see the current report on Form 8-K that we filed with the SEC this morning for a full reconciliation of the non-GAAP presentation to the GAAP presentation. Now turning to the balance sheet. Accounts receivable at the end of the second quarter increased to $16.6 million compared to $15.9 million at the end of the first quarter, representing a level of 49 days of sales. Inventory remained at $8.4 million representing a level of 49 days. Our cash and marketable securities increased by $0.4 million during the second quarter and were at a level of $124 million as of June 30, 2018. Our cash and marketable securities position during the quarter was affected by the following, $5.4 million of cash was received from operations, $0.5 million of cash was used for purchase of property and equipment, $4.5 million was used for repurchase of 374,000 shares of our common stock at an average price of approximately $12 per share, $0.3 million were received from exercise of options by employees, and $0.3 million was the change in the market value in the amortization of the marketable securities. Now I would like to provide you with our projections for the third quarter of 2018. Our third quarter projections including the impact of equity-based compensation expenses and acquisition-related amortization expenses are as follows. Our revenues are expected to be in the range of $32 million to $34 million. We expect our gross margin to be in the range of 49% and 50%. R&D expenses are expected to be in the range of $9.5 million to $10.5 million; operating expenses are expected to be in the range of $16 million to $17.5 million; financial income is expected to be in the range of $400,000 to $500,000; and the provision for income tax in the third quarter is expected to be $0.2 million on a pro forma non-GAAP basis. Our shares outstanding are expected to be in the range of 23.5 million shares to 24.5 million shares. Our third quarter projections include $0.4 million of amortization of intangible assets, and include the following amount forecasted for equity-based compensation expenses. The cost of goods includes $12.1 million, R&D expenses include $0.7 million to $0.9 million, and the total operating expenses include $1.5 million to $1.8 million. Now, I would like to open up the line for questions and answers. Operator, please?

[Operator:]

Thank you. [Operator Instructions] We will now take our first question from Jaeson Schmidt from Lake Street Capital Markets. Please go ahead. Your line is open.

[Jaeson Schmidt:]

Hi guys. Thanks for taking my questions. Ofer, just want to start with the SmartVoice business, I know you mentioned that you expect non-smart phone applications to really be the driver in Q3, how should we think about that mix changing in 2019?

[Ofer Elyakim:]

Hi Jaeson. So thanks for the question. So in SmartVoice we did say that we are going to see a gradual increase in the third quarter mainly for a non-smart phone application. So I would say that we are seeing today a very nice demand coming from new product applications, including tablet IoT devices that are embracing Voice User Interface and we believe that we are going to see more of these as the year progresses. When we are focusing kind of more on the longer-term, I do believe that still smart phone will play a significant role. Kind of hard for me to say what exactly will be the mix, but roughly I would say probably 30% to 50% of our revenues will continue to be constitute through the smartphones and the rest to a other application. So roughly speaking and again we did not really provide any real color on a 2019, but I would say that the smartphone will continue to be an important category in the mix of our smartphone revenues.

[Jaeson Schmidt:]

Okay, that's helpful. And sticking with that business can you help us figure out how many customers you guys are currently engaged with compared to maybe a year ago or even six months ago? Just trying to get a sense of how the customer engagement pipeline is tracking.

[Ofer Elyakim:]

Right now we're shipping into well over 10 different OEMs and several OEMs are represented by a number of different products and so I would say that we are growing on a quarterly basis by several OEMs, so I would say that in the third quarter we started shipping to three new customers. So this is expanding gradually every quarter as more devices are being launched in the market.

[Jaeson Schmidt:]

Okay. And the last one for me and I'll jump back into queue. I know at the analyst day you outlined a range of 126 million to 130 million for this year. Has there been any change to that outlook?

[Ofer Elyakim:]

I would say that we are still in that range.

[Jaeson Schmidt:]

Okay. Thanks a lot guys.

[Operator:]

The next question comes from Rajvindra Gill from Needham and Company. Please go ahead. Your line is open.

[Rajvindra Gill:]

Yes. Thank you for taking my questions. Good job on the gross margin improvement. I wanted to talk a little bit about that going forward as the new products represent a higher percentage of revenue; how much contribution do you think that those new products will have to the overall gross margin? And I was wondering if you can maybe if there's any specifics of margins within the segment that you could talk about VoIP versus ULE versus SmartVoice.

[Ofer Elyakim:]

Hi Rajiv and thanks for the question. So with respect to gross margins I think that we have seen the contribution of the new products into kind of gross margin expansion for the last couple of years and as the mix does improve and skewed more favorably towards the new products is the margin mix should also improve. These new initiatives carry a higher gross margin than for instance our legacy cordless business and as the revenue mix shifts so does the gross margin improve and you can see from the guide for third quarter that we do expect in conjunction with the sequential increase in revenue and the expectation for a higher contribution coming from these growth initiatives to see also a pickup in our gross margin. With respect to the way gross margin is split between different growth initiatives I would say that right now they're all ahead of the 50% line, but kind of very hard for me to kind of give you kind of exact the figures for each of these products, but I would say they're tracking ahead of the corporate average.

[Rajvindra Gill:]

And last question, the Alexa qualification which I view as a significant development. Could you talk a little bit about when do you anticipate that this qualification will lead to particular design wins and also if you could talk about your audio sensory DBMD5 processor with its [wake on voice] functionality? How that perhaps competes with connections and some of the other devices, some of the other solutions that are out there in the market. Thank you.

[Ofer Elyakim:]

Yes. Absolutely. So AVS kit so indeed we also view this Amazon certification as a very important milestone and we believe that right now we have the solution that has the lowest power consumption among all is certified development kits that are available on the Amazon AVS website. Not only that, this is the only a development kit that was certified for three microphones; all the others are satisfied for four and above. So that means that we can achieve far-field certification with even just with three microphones as you know the more microphones you add the better performance should be and so we're very excited with this certification and what it means about is the quality of our HDClear algorithms. We believe that this is already helping us in securing additional design wins. As a matter of fact it already did and we've already secured a design with one leading customer as that will utilize the low-power functionality of our solution and we believe that this is propelled by that announcement. And so we're very excited and view it as a very important step forward. As we continue to expand in this market and go from just the low-power devices of wearable smartphones and go into the area of the smart speaker, smart assistant or devices that do require can a far field operation and we believe we are equipped with very comprehensive and strong offering ranging from a fairly advanced accessories that basically can cover from three microphones and above. We also have the capability to run our own HDClear algorithms and in addition to trained third-party type of algorithms all per what they are customers require. And so we're very excited with this development and we believe that we will play a more instrumental role in this field.

[Operator:]

We will now take our next question from Suji Desilva from ROTH Capital. Please go ahead. Your line is open.

[Suji Desilva:]

Hi Ofer. Hi Dror what kind of attach rate are you guys seeing for hands-free calling to the smart speaker products at this point and is your product kind of a nice to have there or need to have if you're going to add a voice calling on these speakers?

[Ofer Elyakim:]

Suji thank you for the question. So indeed and this is a very good point. So voice calling is now becoming a fairly important feature when new designs or new kind of product concepts are entertained and we do see the need for more kind of hands-free calling as a compliment to the voice user interface. So it's not just command of control it's also to communicate. It's also to complete let's say a certain query and in the two products that we alluded to with respect to IoT we are already and already this year we will ship products with not only do a voice user interface which based on the HDClear algorithm, but also conduct a hands-free calling and intercom calling. So basically the ability to do hands-free voice calls on our chipset using algorithms that are provided for this calling. And in addition from what I had in my prepared remarks we are also seeing a fairly significant role that our ULE connectivity can play in enabling a really portable battery-operated, great reliability, and quality at a very fairly long range basically serving an entire apartment, home, an office wherever you're utilizing that this accessory to conduct this high-quality, high-definition hands-free voice calling. So we believe that we're really at the sweet spot for offering a technology to equip with these devices with kind of superior performance and then capabilities.

[Suji Desilva:]

Okay. Great. And then on the IoT segment what are you seeing in the device area, the gateway seems okay, but what's driving the recovery there on the IoT side? Thanks.

[Ofer Elyakim:]

Yes. So the recovery on - the expected recovery on the SmartHome side as you know last year we had a major SmartHome launched by one of the Europe's largest service provider and in a way what we did see is a restocking that basically enabled them to serve their customer base and in a way kind of which ultimately resulted in a certain inventory build-up as this inventory gets depleted and on the [hills] of a new service provider that is expected to launch services towards the end of this year we believe that this will fuel recovery. In addition we do expect some additional customers to go to mass production from design stage level. So all of that is supposed to help to and contribute to this expected gradual improvement in our SmartHome business.

[Suji Desilva:]

Okay. Thanks guys.

[Operator:]

[Operator Instructions] Our next question comes from Charlie Anderson from Dougherty & Company. Please go ahead. Your line is open.

[Charlie Anderson:]

Yes. Thanks for taking my questions. I want to start on the SmartVoice segment. I think in the past you guys have had good penetration on a flagship device there and so many more recent wins of sort of in the mid range. I wonder just sort of your view on the outlook going forward if you think there's opportunities for flagship again and just sort of maybe generally what you're seeing in the pipeline on smartphone for SmartVoice. Thanks.

[Ofer Elyakim:]

Hi Charlie. Thanks. So our view is vis-à-vis the voices are interfacing in smartphone. So for sure we believe the future will become a more and more mandatory across the different kind of leading OEMs that are serving this market today. We believe that this feature is gradually kind of rolled into the mid tier and even I would say starting to hit also the low tier of the market. I think that the voices of interfaces is required feature today mainly coming from like the Android domain as well as every brand for itself is kind of creating its own private label, a smart assistant or smart services and we believe that we have solid opportunity and I would say that looking at next year we believe we have several opportunities to penetrate deeper and further into leading OEMs, mobile OEMs into kind of the smartphone segment. To tell you now whether what are the chances of kind of being selected for a flagship, I don't know but I do believe that we have very good probability in being integrated into new models of the leading OEMs product.

[Charlie Anderson:]

No then the office segment we're starting to see growth just slow a little bit there. I wonder how you're viewing that as sort of a large numbers dynamic playing out there or there going to be like video is an important product for you to sort of take share and the upper tier just kind of what you're seeing in terms of the trend lines there and I think there's opportunities for that to re-accelerate at some point. Thanks.

[Ofer Elyakim:]

Sure. So on office voice and I think I've also described this in the last call, I would not read anything into what appears to be slower growth in this segment. I believe that we have seen fairly steady growth of this segment for the last couple of years. I don't see that changing in the future. I think that we are still where we said we will be which is basically taking more market share and winning more designs at these leading OEMs and this is exactly what we are doing and executing on. The market doesn't necessarily kind of operate exactly as we do and designs do not get announced every quarter, etc. So there could be some lag between the time that we win a design to the time kind of it actually accounts in revenues, etc. This is why I don't think that we should read into kind of this slightly lower increase year-over-year in these revenue as something that is going to allude to heating or reaching a glass ceiling. On the contrary I believe there is plenty-plenty of growth ahead in this segment and I believe we are well equipped with all the right technology and the right product mix to compete and win in this market segment. And as I said we have new OEMs to go after. We have -- we can also win more products at existing customers and I think that this is exactly what we are doing and also what we mean when we say about our engagement pipeline or design pipeline with the customer base. So we believe it is robust. It's strong and it will continue to generate for us a growth and our position with it should continue to improve because we are indeed making a lot of investment in this domain and I would say that right now we're probably one of the only SoC vendors that have is such a focus on our customer base both in best in class voice engines as well as the most comprehensive SoC product line out there for this unified communication market.

[Charlie Anderson:]

Great. Thanks so much.

[Operator:]

Our next question comes from Matt Ramsey from Cowen. Please go ahead. Your line is open.

[Unidentified Analyst:]

Hi. this is George [indiscernible] on behalf of Matt. Thanks for taking my question. I was hoping you could talk a little more about the Alexa development kit announcement. Could you maybe talk about some of the initial engagements and feedback you've received since you've been public with this for about a month and then what kind of applications are in the three mics so strike zone versus five and one mic. Thank you.

[Ofer Elyakim:]

Hi Josh. Thanks for the question. So relating to the Amazon Alex voice services announcement so what we have announced is it's a new development kit that is available today on the AVS website. It is the only solution that [control the far field] certification that means this is voice activation from afar not from like near end or mid-range, but rather from a much lengthier distance of three meters or above. So we're the only solution that can achieve that today using three microphones. All the rest or using four microphones or more. The SoC that we are providing in this development kit also includes the algorithms, the HDClear algorithms that are provided with the noise suppression, [indiscernible] forming and barging capabilities. So this is all part of that certification and I would say that we view this announcement as fairly very strategic as well as important in increasing the traction and the interest in our product and also in the recognition of developers that are in the process of engaging in a project for developing Alexa Voice Services features in their third-party or in their own devices and this is a market that is growing and I think that Amazon is making sure that the market is developing in all kinds of areas and products not necessarily just devices that look as a cylinder but rather into a wider areas including the SmartHome, including other IoT devices, remote controls, etc. etc. So there's plenty of capabilities to add voices of interface into a variety of new products and we believe that with the certified experience, if you will, there is also now a way to build devices that are battery-operated using our low-power capabilities as well as the excellent performance these developers can today bring to market is fairly advanced products and what we believe that the fairly low-cost and also a very nice in power consumption for these battery operated devices and as I said we are already seeing the impact of this announcement and we're very happy with the results and with the new engagement that we want or that we are today engaging with that are way in a kind of following this announcement.

[Unidentified Analyst:]

This is very helpful. Thank you. And then in the home segment as we sort of back into that guidance is there anything in particular going on in the cordless market that we should know about or is it you're expecting it sort of in the 15% to 20% year-over-year decline range? Thank you.

[Ofer Elyakim:]

Yes. So Josh on the cordless market trend I think that cordless continues to be kind of more volatile especially when you look at kind of quarter-over-quarter. Right now our view has not really changed. We still believe it is in the decline of 15% plus or call it 15% to 20%. That has not changed. I think that this is also kind of what our kind of guidance suggests if you back out the new products from the total quarter revenues I think it also kind of says that we believe that cordless will decline at these kind of 15% or higher level. So this has not changed. But I think what is important is that our growth initiatives are growing. They're becoming the majority of the revenues and cordless is going to become less than 50% for the foreseeable future and that I think is a very important achievement that will enable us to resume a revenue growth for the company and this is kind of what we're focusing on and we believe that the revenues that are going to be brought by these new initiatives are going to generate more profits and as a result the P&L will improve. And so I think that we've set the bar on getting to the level where the majority of revenues are coming from these new initiatives and in Q2, 2018 we are there and we were looking forward to see that mix continue to change more favorably into these growth initiatives area.

[Unidentified Analyst:]

Great. Thank you.

[Operator:]

There are no further questions from the phone. I'll now turn the call back to your host for additional or closing remarks.

[Daniel Amir:]

Thank you. During the third quarter DSP Group will participate in the Jefferies Semiconductor, Hardware & Communications Infrastructure Summit on August 28 in Chicago. The Ideas conference on August 29 in Chicago and Dougherty Institutional Investor Conference on September 6 in Minneapolis. Thank you for dialing in for the call.

[Operator:]

That will conclude today's goals. Thank you for your participation. Ladies and gentlemen you may now disconnect.