Sierra Wireless, Inc.
Q1 2014 Earnings Call Transcript

Published: 2 May 2014

[Operator:]

Good afternoon. And welcome to the Sierra Wireless Q1 2014 Earnings Release Conference Call and Webcast. At this time, all lines are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time. I would like to remind everyone that this call is being recorded today, Thursday, May 1, 2014 at 5

[Dave McLennan:]

Thanks, Stephanie, and good afternoon, everybody. This is Dave McLennan talking. Thanks for joining today's conference call and webcast. With me today on the call is Jason Cohenour, our President and CEO; as well as David Climie, who recently joined us as Senior Director, Investor Relations. As a reminder, today's presentation is being webcast and will be available on the website following the call. Today's agenda is as follows. Firstly, Jason will provide a high level business view. I will then provide a more detailed overview of our first quarter financial results, as well as guidance for the second quarter. Then following that, Jason will provide a brief summary and then we will go to Q&A. Before we get started, I will reference the company's Safe Harbor statement. A summary of the Safe Harbor Statement can be found on page two of the webcast and is now being displayed. Today's presentation contains certain statements and information that are not based on historical facts and constitutes forward-looking statements. These statements include our financial guidance for the second quarter of 2014 and commentary regarding the longer term outlook for our business. Our forward-looking statements are based on a number of material assumptions including those listed on page two of the webcast presentation, which could prove to be significantly incorrect. Additionally, our forward-looking statements are subject to substantial known and unknown material risks and uncertainties. I draw your attention to a longer discussion of our risk factors in our annual information form and Management's Discussion and Analysis, which can be found on SEDAR and EDGAR, as well as in our other regulatory filings. This presentation should also be viewed in conjunction with our press release and with the supplementary information on our website. With that over to you Jason to provide highlights.

[Jason Cohenour:]

Thank you, Dave, and good afternoon, everyone. I’ll begin today’s call with some brief highlights on our first quarter of 2014. Revenue was strong in the first quarter at $121.2 million, representing growth of 19.5% over the same period in 2013. While we had a modest revenue contribution from the recently acquired AnyDATA and In Motion business operations during the quarter, most of the revenue increase was organic, posting year-over-year growth of 17%. Year-over-year profitability also continued to improve. Our strong revenue in the quarter drove adjusted EBITDA to $4.1 million, representing growth of over 100% compared with the first quarter of 2013. While driving strong operational results, we also closed the previously announced acquisition of In Motion Technology in March, bolstering our Enterprise Solutions business with high margin revenue from complementary products and segments. The integration of both In Motion and AnyDATA is now well underway. Let’s take a look at the two business segments. In our OEM Solutions segment, we saw strong revenue growth and a record number of new design wins. In Q1 2014 revenue grew by 19% year-over-year to $106.2 million, driven by improving sales of our 3G and 4G embedded modules. Consistent with previous quarters, we experienced strong revenue contribution from our key market segments, including automotive, energy, networking and mobile computing. Revenue contribution from AnyDATA during the quarter was modest with supply capacity somewhat constrained by factory transition issues related to the integration. Gross margin in the quarter was 28.8%, roughly flat to Q4 of 2013 and in-line with our expectations. A significant highlight in the quarter was our design win activity. During Q1 we secured a record number of new design wins with more than half of these representing new programs which we expect to ultimately drive truly incremental revenue in the future. Our record number of design wins also provides strong evidence of an overall increase in OEM customer activity as more companies contemplate connecting their machines. Our design win activity was also broad-based with solid contribution from each of our regions and several market segments, including automotive, networking, security and energy, including a very interesting win with a global leader in municipal lighting, a key element in many smart city deployments. We attribute our design wins surge to some key drivers, including growth and overall market activity, our own targeted investments in adding sale capacity in key markets and the increasing strength of our overall product position. Our clear leadership position in 3G and 4G is proving very beneficial as the market continues to evolve away from 2G technologies. In addition, our legacy smart products and in particular the SL family have done very well of late and our recently introduced HL line of essential products is capturing strong early market traction. Our recent success of smart SL products gives us confidence that the market is ready for and in need of powerful embedded application capability. It is our firm belief that such capability enables our customers to lower development costs, accelerate time-to-market and to optimize overall system costs. Hundreds of customers agree. Our successful SL family runs our legacy embedded application framework called OpenAT, which is now deployed in the market on many millions of are smart devices with million more in the customer design win pipeline. Based on this demonstrated success, the availability of new and more powerful semiconductor platforms and the power of the open source community of developers, we have invested significantly in the development of our next-generation embedded platform called Legato, which we introduced at the Mobile World Congress in February of this year. Musicians will know that Legato is a musical term meaning smooth and connected, which describes perfectly the experience we want to deliver to developers of connected solutions. Legato leverages all of our experience and success with OpenAT and takes our embedded application capability to a new level. Legato is based on Linux, it’s truly open, leverages established open-source tools and is highly portable to different hardware platforms. Legato will enable developers to get their application up and running fast, get to market more quickly and to leverage the power of multi-core platforms to run their entire application directly on our module thus leading to overall reduction in solution costs. Legato is currently being tested with a number of select Sierra Wireless customers and developers. Going forward, Legato will be pre-integrated on all new smart modules from Sierra Wireless starting with the AirPrime WP and AirPrime AR Series modules shipping later this year. For us, we believe that Legato adds compelling differentiation to our smart products which will enable us to capture share, protect margin and to drive AirVantage subscription growth. Moving to our Enterprise Solutions business segment, revenue growth was solid, improving by 23% year-over-year to $15 million, including a partial quarter contribution from the acquired In Motion Technology. Excluding In Motion, [organic] (ph) enterprise solutions growth was 13% year-over-year. Gross margin in this segment was a robust 53.8% in the quarter, consistent with Q4 of 2013 and in line with our expectations. During the quarter, we saw continued strength from our recently launched Airlink LS300 and GX440 gateway products, including another significant year-over-year increase in revenue from Europe. We also commenced initial commercial shipments of our recently announced ES440, a gateway product designed specifically for branch office business continuity applications. And this is the space that we view is having very interesting profitable growth prospects as well as opportunities to capture more of the solution value chain. We also continued to make solid progress with our AirVantage cloud services. In Q1, we added a record number of new AirVantage management services customers in connection with sales of Airlink gateways. Our larger OEM solutions team -- sales team also received extensive AirVantage training at the start of the year and is now rapidly building a large funnel of AirVantage opportunities with the support of experts from our enterprise solutions team. Over the long-term, we expect a growing number of our AirVantage customers and subscribers to come through our OEM solutions channel. We’ve also been busy cultivating new partners to help drive growth in our device to cloud solutions. During Q1, we executed a collaboration agreement with Tech Mahindra, a large global IT solutions integrator to work together in developing and deploying M2M solutions for customers worldwide. With that, I will now turn the call back over to Dave, who'll provide more detail on Q1 financial results and Q2 guidance.

[Dave McLennan:]

Thanks, Jason. Please note that we report our financial results on a U.S. GAAP basis. However, we also present non-GAAP results in order to provide a better understanding of our operating performance. We have presented our non-GAAP results with and without the impact of the acquisition of In Motion Technologies, which closed part way through the quarter on March 3rd and was not included in our guidance for the first quarter. Total revenue for the quarter was $121.2 million. The acquired In Motion business contributed $1.3 million of revenue in the quarter and was breakeven at the operating income level during the partial quarter that we own the business. Q1 was a very solid quarter for the company from a revenue perspective. Looking at non-GAAP results excluding the contribution from In Motion and comparative guidance, revenue was $119.9 million, which was in the upper half of our guidance range of $117 million to $121 million. Gross margins for the quarter was 31.8%, down slightly as expected from Q4, reflecting sales mix between our two business segments. And specifically in what is typically a seasonally low quarter, revenue on our higher margin enterprise solutions was down compared to Q4 as expected. Within each of the business segments, gross margin was stable compared to Q4. Non-GAAP operating expenses for the quarter were $37.4 million, up sequentially from Q4. This is mainly related to higher sales and marketing cost, reflecting the continued selective investments in go-to market capabilities as well as typically higher conference expenditures in Q1 compared to the other quarters. Our non-GAAP earnings from continuing operations were $700,000 within our guidance range and our non-GAAP net earnings from continuing operations were $500,000 or $0.02 a share, again within our guidance range. As a reminder, the reconciliation between our GAAP and non-GAAP results is provided in the press release, as well as in the Investor Relations section of our website. Non-GAAP results exclude the impact of stock-based compensation expense and related social taxes, acquisition and disposition costs, acquisition, amortization, asset impairments, integration costs, restructuring costs, foreign exchange gains or losses on the translation of balance sheet accounts and certain tax adjustments. I would also like to draw your attention to the segment and disclosure, which can be found on the last page of the press release. This provides segmented revenue and gross margin for each of our OEM and enterprise segments for the first quarter of ‘14 compared to 2013. Taking a more detailed look at Q, including the impact of the acquired In Motion business, total revenue of $121.2 million was up 19.5% year-over-year. Revenue from OEM solutions was $106.2 million, representing 19% year-over-year growth, driven by increasing sales of 3G and 4G modules. During the quarter, we had solid contributions from the automotive, energy, networking and mobile computing segments. Revenue from enterprise solutions was $15 million, up 23% year-over-year. This includes a $1.3 million contribution from the acquired In Motion business. And on an organic basis, enterprise solutions revenue was up 13% year-over-year. EBITDA during the quarter more than doubled to $4.1 million from $1.8 million a year earlier and we were mostly profitable at the operating level, with $700,000 of earnings from operations compared to a loss of $1.4 million a year ago. These results demonstrate solid growth in our business and improving profitability metrics, while at the same time we are integrating two recent transactions. Our balance sheet remains very strong with the cash balance of $151.3 million at the end of Q1, and puts us in an excellent financial position to execute on our organic growth and M&A strategy. We put some of our cash to work during the quarter. In total, we used $28.6 million of cash during the quarter, which includes $22.6 million for the purchase of In Motion. We also utilized $3.9 million on working capital and $2 million for capital expenditures. We ended the quarter with $151.3 million in cash. And subsequent to quarter end in early April, we received $13.8 million, representing the full amount held in escrow from the sale of AirCard a year ago. This amount is not included in the quarter end balance of $151.3 million. Moving on to guidance for the second quarter of 2014, which is provided on a non-GAAP basis. Q2 will be the first full quarter of contribution from In Motion, following the acquisition in March. Accordingly, we are including In Motion in our financial guidance for the second quarter. During Q2, we expect to realize continued solid revenue growth, with revenue in the range of $128 million to $131 million. At the midpoint of this range, this represents 18% growth on a year-over-year basis. This includes expected revenue of $3.5 million to $4 million from In Motion products. On an organic basis, excluding acquired revenue from In Motion, AnyDATA, we expect year-over-year revenue growth of approximately 13% in Q2. We expect a slight improvement in gross margin relative to Q1, reflecting a change in sales mix among our two business segments. Specifically, proportionally more sales from our higher margin enterprise solutions segment, including the contribution from In Motion. Operating expenses are expected to increase sequentially in Q2 to between $39 million and $40 million, primarily as a result of the addition of In Motion expenses for a full quarter. During Q2, we expect In Motion to be breakeven at the operating income level. Based on these expectations, these results in consolidated earnings from operations of between $2.7 million and $3.5 million and net earnings from continuing operations of between $1.9 million and $2.5 million or earnings per share of approximately $0.06 to $0.08. We expect our tax rate in Q2 to be approximately 30% of non-GAAP earnings and then drop to the 20% to 25% range in the second half of the year. With that I’ll hand it back to Jason to sum up.

[Jason Cohenour:]

Thank you, Dave. To summarize, our Q1 results and achievements represented an excellent start to 2014. We delivered record quarterly revenue and strong year-over-year growth. Our revenue performance drove a significant improvement in year-over-year profitability metrics, highlighting our focus on profitable growth. OEM design wins and new AirVantage customer ads both achieved record levels in Q1. I believe this offers important validation that our strategy and product offering is sound and gives us confidence that we will achieve our growth and profitability aspirations in 2014 and beyond. We’ve also successfully completed two acquisitions in the past two quarters. And both, AnyDATA and In Motion, have already started to contribute to the business in a meaningful way. We fully expect that both organizations will help us to drive growth and to create value in the very near future. We also entered the quarter in a strong cash position and have an expectation that we will bolster our cash balance during Q2. We remain focused on putting our balance sheet to work in acquiring great M2M companies that will help us further expand our position in the value chain, strengthen margins and drive growth. I believe our track record of doing this is proven. Since 2008, we've grown our M2M business organically and through acquisition from $158 million to LTM revenue of $462 million. We've done this while improving our margin profile and defensibility. Our aim is to extend this track record with the addition of more companies like AnyDATA and In Motion and in so doing to deliver a great return for our shareholders. Operator, this concludes our prepared remarks. You can now open the line for questions.

[Operator:]

Thank you. (Operator Instructions) Your first question comes from the line of Peter Misek with Jefferies. Your line is open.

[Peter Misek:]

Good afternoon, gentlemen. I guess, two parts question. Firstly your cash balance, congrats on that and the extra amount. Is it possible though that we could get some cash return as well given that, I think you commented in the past, you -- your share is undervalued. And then maybe if we can get into a little bit of discussion on gross margin, as we look out beyond our next quarter, how should we think about gross margin, puts and takes and mix. Is it that if you have big design wins, we should see gross margin initially detract as you invest in those new platform and then they scale after that or should we think of gross margins as more of a linear move? Thank you.

[Jason Cohenour:]

Sure. So I’ll take the first part of the question. I'm -- by the way, I’m not sure, Peter, that we’ve ever said that our shares were undervalued. With respect to the cash balance, like I said it’s strong at the end of the quarter. We’ve gotten the 100% of escrow that was held following the AirCard transaction of $13.8 million. So that is following the end of the quarter now on the balance sheet and safe to say we’re predisposed to positive cash flow also from the business during the quarter. But our strategy remains to put our, call it our surplus cash to work in acquisitions. We think that’s the stronger path to value creation at this point in time. However, we’re very open minded to our return of capitals by way of a buyback, should the M&A funnel not reap the value-creation rewards we’re currently expecting. So job one is to go acquire great companies. And if that doesn’t work out, then of course, return of capital to shareholders is another strong alternative. With respect to gross margin, as Dave commented we expect gross margin to trend up from Q1 to Q2. The biggest driver there is a mix shift between our two business segments. So we expect proportionally higher revenue coming from enterprise or our higher margin enterprise business than from OEM. And that’s pretty much. And for us there is kind of a story of a mix within mix. If you look in particular at OEM and in OEM if there is a higher contribution from high volume customers that will tend to depress gross margin percentage. And if it is more broad-based that will tend to bring gross margin percentage up a bit. I think it’s safe to say that in Q4, Q1 and in Q2, we expect that OEM -- our OEM mix to continue to favor high volume customers for the foreseeable future. And -- but over time, as our new programs come online, we’ll have a lot of diversification in the OEM business. And certainly we are focused on driving gross margin back to the 30% mark. In enterprise, we are pretty happy with the gross margin where it is. We can work that to the mid-50s. I think that’s a big win for us and a big win for shareholders.

[Peter Misek:]

Perfect. Thank you.

[Operator:]

Your next question comes from the line of Mike Walkley with Cannacord Genuity. Your line is open.

[Mike Walkley:]

Hi. Thank you. Jason, I wanted to follow up on your comments about record design activity. I remember last quarter you were talking about some very large deals in the pipeline. Can you comment how many of these large deals were closed in that record deal activity and could you also comment maybe on the pricing environment for those large deals?

[Jason Cohenour:]

Maybe I’ll comments on large deals and pricing environment first. It always intense. When deals are -- get into the millions of unit kinds of scale pricing, the pricing environment gets pretty intense. Now with respect to deals that we won in the first quarter, I would characterize at least some of those as high-volume deals. We had a pretty good mix. We did have wins in automotive. We did have winds in energy. And so -- but I would think about it as broad-based. Mike, I wouldn’t think about it as dramatically changing our mix one way or the other in terms of expected volume from each of those programs. So there are couple of bigs, couple of small ones and a lot in the middle. So we have to think about it.

[Mike Walkley:]

And maybe just [building on] (ph) Jason, with the strong organic growth to start the year. How do you see kind of the industry growing this year and do you think you are gaining share drawn faster than the industry given your current run rate?

[Jason Cohenour:]

I’m going to hesitate to say that we think we are gaining share. We are going to stand by we think we are growing in line with the market. At this point in time, I will say though that some of our new products that are in the market seem to be getting some really traction and perhaps tapping into certain areas of the market where we work doing quite as well in the last two years. And when I say that, I refer specifically to our HL, our new HL product line which seems to be very well received by the market. And that if there is a share gain opportunity, I would say that the HL product line probably has the highest probability of share gain possibilities.

[Mike Walkley:]

Great, thanks. One question for me and I will pass it on, I guess for Dave and Jason. Just I understand the strategy was ramping your sales force for the new opportunities, some of the interesting things, you have going on, but with the $39 million to $40 million in OpEx for Q2 with In Motion, should we think OpEx, should we model that continue to grow in the back half of the year as you expand your sales opportunities or do you think it maybe stable at these levels absent any acquisitions?

[Dave McLennan:]

Mike, its Dave. With respect to the selected investment, it’s certainly focused on things like backs to win regionally where we want to build some more capability from a geographic diversification perspective, and then also ensuing in some of the other regions, so that’s primarily the focus. Also a lot of focus on training for having the sales team, sales services, AirVantage services for instance, so that’s really the focus there. With respect to the yield, the run rate of OpEx, we are -- I have indicated 39 to 40 for Q2. You recognize that we are integrating the couple of acquisitions and within those numbers, and I think we are going to be very focused on managing our OpEx in the back half around that range.

[Mike Walkley:]

Thank you.

[Operator:]

Your next question comes from the line of Tim Quillin with Stephens Inc. Your line is open.

[Tim Quillin:]

Hey, good afternoon. Just on In Motion, what is the gross margin structure and have you figured out what level of intangibles, amortizations are going to be associated with the acquisition?

[Jason Cohenour:]

Take that one, Dave.

[Dave McLennan:]

The GM is in the low 50s, so it’s a similar business model to our existing AirLink devices. And it is in that part of the segmented results. And we are just working through the purchase price allocation right now, so I don’t have any specific amortization figure in mind. We are just looking through that right now.

[Tim Quillin:]

Okay. And then, if I my speak in a couple on my follow-up, but I was wondering if you could give a little bit more details around your lighting customer win, which sound kind of intriguing. And then on Legato, if -- I know you are in testing with customers right now where they are looking at and evaluating it. Are there specific projects that are tied to that process, in other words when they finish the testing process that they might start some kind of major initiatives using Legato? Thank you.

[Jason Cohenour:]

This is Jason. Thanks, Tim. Yes, on the lighting customer, we can’t provide -- we can’t disclose a lot of detail, but I think you will notice probably on the slide that the name Philips does show up, so that might give you a hint as to who the customer is. And without disclosing too much around architecture, I think it’s a very exciting win for us. We think that they have a -- they are number one in the world for municipal lighting and I believe that’s a great market opportunity as do they. And I think they have got a very interesting end-to-end solution offering that now incorporates Sierra Wireless devices. And in terms of opportunities, I think they are certainly looking globally, but we would expect Europe and North America to represent the bulk of the activity in the short term anyway. With respect toe Legato, we got about 35 plus customer/developers trialing Legato now. A large mix of them are developer from the open source developer community, so perhaps no specific large volume tied to that activity, but we do have some customers, large customers who have projects tied to their trialing of Legato. And assuming success on that trial, we would fully expect those customers to go commercial with Legato as their embedded platform.

[Tim Quillin:]

Understood. Thank you.

[Jason Cohenour:]

You bet.

[Operator:]

Our next question comes from the line of John Bright with Avondale Partners. Your line is open.

[John Bright:]

Thank you. Good afternoon. Jason, you made a big point talking about the design wins, talk about that as an indicator and also from a visibility standpoint what that provides to you?

[Jason Cohenour:]

That’s vital. It really -- the way we think about it, first of all there is different kinds of design wins, of course every design wins is snot created equally. So maybe we will start there. I mean, there are large design wins, small ones and medium size ones, so there is quite a blend. And then with respect to impact on the business, we think about them a few ways, one is wins with new customers for new programs, wins with existing customers for new programs, and those two buckets we view as incremental revenue to what we’re driving now. And then the third bucket we would call successor program, so that’s working with an existing customer on their next generation deployment. So I would view that as more revenue -- call it revenue continuity. So the thing that got I would say us most enthusiastic about the design win activity was not only the scale of the design win activity, but that more than half of that was focused on new programs. So those new programs we would fully expect to represent incremental revenue when those programs come to market.

[John Bright:]

Would it be useful to characterize the design wins in terms of OEMs versus enterprise?

[Jason Cohenour:]

Those are all OEM design wins.

[John Bright:]

Thank you.

[Jason Cohenour:]

Yes. Enterprise, we tend not to use the phraseology design win, the design win is very much an OEM sales concept.

[John Bright:]

Was the phraseology use for enterprise?

[Jason Cohenour:]

Customer win.

[John Bright:]

Any customer wins in the quarter, that are notable?

[Jason Cohenour:]

Lots of them, yes. We had good customer wins on the enterprise side as well. And on the enterprise side, again, I think the key highlight was a significant success selling AirVantage management services as part of an AirLink gateway sale. And in that area, we put up a record number of AirVantage customer wins.

[John Bright:]

And let me squeeze one more and just to make sure we are clear. I know you don’t like to give guidance throughout the year Dave, but you are saying you see better mix in Q2, that’s going to help the gross margin, and I think you’re implying looked, the gross margins were where you expect them. And was there any pricing issue in place? Are you thinking that mix improves throughout the year or can you help us with that thought?

[Dave McLennan:]

Yeah. I want to be careful not to (indiscernible) the guidance perhaps John but we are constantly focused on improving gross margin on whether it’s product cost or maybe you suggest, so I can’t give a things and many of little incremental steps.

[John Bright:]

Thank you.

[Operator:]

Your next question comes from the line of Todd Coupland with CIBC. Your line is open

[Todd Coupland:]

Good evening, everyone. I just wanted to ask you a little bit more on the design wins if I could. The visibility, would that act should be giving you visibility for the second half of this year in terms of those design wins starting to roll out, or is that several year of process to start to contribute?

[Jason Cohenour:]

Yes, I think that would be -- there maybe some small impact is the way I would characterize it, Todd. The growth that we expect in the back half of the year is really driven from design wins that happened before Q1. Cycle time from design win to revenue can be anywhere from fast as nine months and in the case of automotive, it can be a two year cycle, right. So this is the stuff of building a pipeline for later periods.

[Todd Coupland:]

And just on O2, I mean, technology changes so quickly, but yes, the automotive sector seems to implement very slowly. Do you see that shortening it all, or is it still going to be a mult-iyear process?

[Jason Cohenour:]

I don't think the cycle time will shorten. But certainly it’s our view that automotive OEMs are much more focused, active and aggressive in getting connectivity into their cars. Several, we've seen, go from start contemplating a 2G implementation and have -- would help work their way up to 3G and sometimes 4G implementation. So, I think they are more aggressive on the technology front, I would say than perhaps in past years. But cycle time is really -- it's really driven by their planned launches of different car models and that's not something you can really accelerate that much.

[Todd Coupland:]

Fair enough. That makes sense. Could I ask the contribution question from design wins a little bit differently? So if the business is growing organically, sort of the 13% or so, the design wins that you have, is that enough over the next two or three years to step up that growth rate to 15% or 20%, does that give you enough visibility to make that kind of comment about Sierra Wireless over a few years?

[Jason Cohenour:]

Well, I’m going to be careful not to get too far ahead of our self start. But I will say is in the first half and there is a couple of things of course, that drive revenue, not just the design wins but also the rate of success our customer have selling their solutions. And that is often directly related to how effective they are in macroeconomic factors and the like. I mean, automotive is a perfect example. As the automotive industry stabilizes and more cars get sold in Europe as an example, we benefit from that even though it’s not a new design win. That could be a design win that’s two years old. And we would benefit from a macroeconomic recovery and as our customers do and we do indirectly. So that said, looking at our first half, we’ve driven, implied in our Q2 guidance plus our Q1 result. We’ve driven organic growth at kind of a high end of the range we’ve been talking about. We’ve been talking about 10% to 15% organic growth. And certainly in the first half, we’ve been at the higher end of that range, even though we’ve had previously told investors to expect something closer to the lower end of the range. So, I sense activity picking up, I guess is what I'm trying to say. And as we look just to the back half of the year, I think we’re pretty comfortable that we should be comfortably in that 10% to 15% range. Now beyond that, do we have enough in the design win pipeline to drive higher growth rates, I would say absolutely, as long as our customers have success in their market and with their solutions. That’s a huge variable frankly that we don't control. So what we do control is getting the design win, that’s a great indicator of future revenue possibility and there’s really other factors that dictate the size of those design wins in the market.

[Todd Coupland:]

Okay. That’s helpful. Thanks very much, Jason.

[Jason Cohenour:]

You are welcome.

[Operator:]

(Operator Instructions) Your next question comes from the line of Paul Treiber with RBC Capital Markets. Your line is open.

[Paul Treiber:]

Thanks very much. When you look at the In Motion business, could you just elaborate on the near-term and near-term being probably 12 months or so, potential synergies and then any cost synergies that you see as part of your integration plan?

[David McLennan:]

Paul, it is Dave. I think your initial thoughts on synergies with In Motion are really focused at the product cost levels. As we bring In Motion on to the supply chain and manufacturing platform, we’re focused on that. And then, OpEx is always looking for opportunities, synergies there. But I think it’s going to be more focused on product cost.

[Jason Cohenour:]

And I would add sales synergies as well. We’ve added considerable scale Paul, to the enterprise solution sales team, particularly in North America, the products are complementary. And I think that equals a great opportunity to drive growth synergies.

[Paul Treiber:]

If you think about the timeline, is that sort of six month and nine month timeline in terms of the sales synergies?

[Jason Cohenour:]

I think, we’ll be stepping into it certainly over the balance of this year, Paul. And my gut feel is we may begin to nibble at that by the end of the year. But I would expect a stronger contribution from growth synergies starting in 2015 and beyond.

[Paul Treiber:]

Okay. I just want to move to AnyDATA. Could you just clarify what the impact was Q1 and then if you’re seeing any catch-up in Q2?

[Jason Cohenour:]

Maybe I’ll comment on that. So impact in Q1 was modest and I would say constrained. We had at a time speaking from a revenue standpoint, we are currently moving production of many of the products, AnyDATA products from AnyDATA owned manufacturing facility to our own -- to our Flextronics manufacturing facilities. So that’s caused I would say some constraints in supply. So we had -- I would say we had a stronger demand in Q1 than we were able to deliver on. And so I think that does correct here in Q2 and then while its small numbers, we certainly expect that revenue contribution from AnyDATA will be higher in Q2 than it was in Q1.

[Paul Treiber:]

Okay. And then just lastly, just on a competitive balance, with the pick up in the market, have you seen any changes in the competitive dynamics?

[Jason Cohenour:]

I would say, no material changes, Paul. I mean it looks pretty much the same to us, I mean it’s the Sierra, Gemalto and Telit as the primary competitors and a group of smaller players, including couple of Chinese players. But I don’t -- nothing’s change. We haven’t seen any new names come on the scene or anything like that. As I mentioned earlier, larger volume deals, the price competition is aggressive, that’s nothing new. And I think, to your point, I mean, what is perhaps, not so much new but seems to be gaining strength is the number of opportunities. And so forth that hasn’t attracted many new names. So we believe, we stand the benefit significantly from the level of activity around new opportunities.

[Paul Treiber:]

Okay. Thanks. I’ll pass the line.

[Operator:]

And I’m currently showing no further questions at this time. I’ll turn the back over to the presenters.

[Jason Cohenour:]

Great. Well, with that I'll thank everybody for joining today's call and for the questions as usual, management is available here at our Richmond office, should you have any follow-up questions. And with that Stephanie, I think we can terminate the call.

[Operator:]

This concludes today's conference call. You may now disconnect.