Aware Inc (AWRE) 2002 Q1 法說會逐字稿

Good day everyone and welcome to the Aware Inc first quarter earnings release conference call. This call is being recorded. At the time of this conference, I will turn the conference over to Mr. Richard Moberg, Chief Financial Officer for opening remarks. Go ahead sir. Please go ahead.

Welcome to Aware's first quarter 2002 earnings conference call. I am Richard Moberg, company's CFO. With me is Michael Tzannes, Aware's CEO. I will review financial results for the quarter. Next, Michael will talk about the business and then finally we will take questions. Our recording of this call will be available on our website at aware.com when it is completed. First, I would like to point out that various remarks that we may make about future expectations, plans, and prospects for the company in the DSO market constitute forward-looking statements for the purpose of the Safe Harbor Provisions under the Private Securities Litigation Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including those included in the section titled factors that may affect future results in our annual report on form 10-K for the year ended December 31, 2001, which is on file with the SEC.

Now turning to our financial results. Q1 results were in line with the guidance we provided in January. First quarter revenue was 3.6 million, which resulted in a loss of 11 cents per share. Last year in Q1 revenue was 8.2 million and we are in 9 cents with 4.1 million in last year's first quarter. Contract revenue was 2.1 million this quarter, which compares to a 1.8 million last quarter and 2.6 million a year ago. This sequential increase came from business with existing customers. Product revenue was 1 million dollars this quarter, which compares to 859 last quarter and 1.5 million a year ago. With the mostly due to an unusually large compression software sale in the first quarter of 2001. For the quarter, we had three 10 percent semiconductor customers, Analog Devices, Infineon, and Intel. These three customers accounted for 71 percent of revenue during the quarter. Q1 spending was 6.4 million, which compares to 6.1 million in last quarter and 5.6 million in last year's first quarter. The Q1 spending increased over both periods is mostly due to spending on engineering. Our balanced sheet remained strong. Cash and investments were 53.5 million. March receivables were 2.2 million in the quarter end, which translates into DSO to 57 and as usual our inventory levels were minimal. We have 167 full-time employees at the end of the quarter, which is up from 165 at the end of 2001. One hundred and thirty of these employees were engineers and they were 22.7 million shares outstanding at the end of the quarter.

Our financial guidance is as follows:

We estimate that second quarter revenue will be between 3.8 and 4.3 million dollars. We estimate that second quarter EPS will be a loss of 9 to 11 cents per share.

I will turn the call now to back over to Michael.

Okay. Thank you Rick.

I am going to start today's call with a brief review of ADSL deployments around the world in the recent past. We collect this data from in industry reports and we posted these numbers on our website as of last month. And to summarize, the rollout of broadband communication services based on ADSL has continued and appears poised to accelerate. There were over 17 million subscribers around the world at the end of the year and we are anticipating that this will grow on an additional 16 to 20 million new subscribers this year. And we have managed to gather some data from the recent quarter, the Q1 quarter that collaborates our current estimates for this year. Looking further out, the DSL form projects that there will be 200 million DSL users by 2005 and Internet access continues to be the primary driver growth so the constant and maintained subscriber growth around the world, we believe will cause a recovery in the DSL chip market. It is difficult to know at what point of nature, I mean what recovery it takes, but we see growth in the DSL market is causing a very healthy sign for the in the future. From a technology perspective, ADSL technology appears to have entered a new phase of development. First of all legacy ADSL, which is the ADSL that is being used in the deployments around the world today has adapted and matured to respond to the various commercial and technical specifics of each region. Each country has a different infrastructure requirements in many cases, different physical layer standards that are used. Many of these improvements and the things that have matured are being reflected in new standards that are being worked on by the ITU.

The second point is the technologies that improve line provisioning in maintenance of DSL are becoming mainstream. Aware has a technology in this area called Dr. DSL, which continues to gain market momentum. The purpose of this technology, in general, is to reduce the cost of turning on service and maintaining service and clearly to service providers around the world that is a valuable piece of technology.

And the third thing we are seeing are numerous new improvements to ADSL in the form of either longer reach or higher data rates, having a renewed interest by the industry. New standards are being proposed at the ITU, at T1E1, and at the IEEE that all essentially address new copper pair markets. They follow the general category of VDSL or Ethernet in the first mile and in general, apart of the trend that we are seeing that DSL technology is continuing to improve, mature, and expand the potential market that it addresses. Our machine at Aware is to continue to pioneer technology in this exciting industry.

Turning now to the ADSL semiconductor industry, we continue to gain confidence in a thesis that we failed for some time that next generation broadband modems will combine functionality from communications, entertainment, networking, and security markets. ADSL in our opinion will without question be a fundamental building block for this industry, and this trend is in simple words for more remote functions to be implemented on less and less silicon. This trend benefits from the availability of an easy-to-integrate high-performance ADSL solutions, and Aware has continued to invest in new and better intellectual property packages that support both legacy and new areas of standards and we think, we will benefit from this trend.

I would now like to review the status of our major customers. Analog Devices continues it's very strong presence in the international market and in particular in the far East with Samsung as its lead customer in Korea as well as in Taiwan probably the most significant deployment announcement this past quarter would be announcement by Chunghwa Telecom in Taiwan to deploy over 1.1 million new ADSL lines. This deployment uses equipment from Analog Devices' customers and in general, Analog Devices with strong offerings and several new chip level offerings on the CO and CPE sides are in a great position to grow their business this year. Infineon is a large and important customer of ours who is very well positioned in the Central office ADSL marketplace. They have announced design wins at Siemens who is a targeting European market, which is one of the rapidly growing areas of DSL deployment and they also recently announced a design win at a company called Occam who develops the digital loop carrier, piece of equipment that announcement was earlier this quarter. They developed a multiport Central office chip set and has reflected in the Occam when this solution is very well suited to digital loop carrier platforms and in general, digital loop carrier platforms appear to be a growth potential area in the United States. Today, digital loop carrier platforms in the US are not ADSL enabled. ADSL has not offered out digital loop carrier platforms and when that occurs, which we think it will occur in the future, we think the solution that Infineon has developed is particularly well suited to that market. Intel continues to be a large customer, and continues to hold great promise for us for the future. We continue to have a close and constructive engineering cooperation with them and we feel the presence that Intel can have in the CPE market could be very significant and remain confident that we will both benefit from our collaboration.

In summary, we had a very strong position with our largest customers to grow our revenues and in particular our royalty revenues as they came ground in the market. Aware has continued to invest in new and better intellectual property packages. These packages are positioned to allow semiconductor companies to offer ADSL as either a standalone solution or as part of system-on-a-chip solutions, and we continue to be cautiously optimistic that as the semiconductor market recovers and more chip companies will step forward and license our technology. Our strategy has not wavered; we believe there is a tremendous opportunity to be a key supplier of intellectual property for the semiconductor industry. Today, we lead the market in ADSL IT and we are poised to improve our business when that industry recovers. In addition, we continue to work on new technologies to expand our market reach with new flavors of ADSL whether they be new standards or higher speeds as well as other technologies such as SHDSL, wireless LAN technology, power line technology, and JPEG 2000 compression technology. In closing, we remain confident at the industry we are focused on and the technology that we are developing will return our company and our shareholders to better days.

With that we will open up to your questions.

Thank you. Today's question and answer session will be conducted electronically. If you would like to ask a question, please signal by pressing a star key followed by the number one on your touch-tone telephone. Once again, it is star one to ask a question. If you find your question has been asked and answered, you can move your pressing by the pound key. Once again, it is star one and we will pause. Just a moment to symbol our question thereafter.

We will go first to Paul Johnson of Robertson Stevens.

Michael, a couple of questions related to the you talked about. I guess you said you think the installed bases were roughly at the end of last year beginning this year, I think it was 17 million users.

Seventeen and half.

Ah fine. So you are more precised. And how many units were added in 2001?

About 11.7 million Paul.

Six million to or 17.5 million last year and then the current thought is that it could be as many as 17, I am sorry 16 to 20 million this year?

Right, new prescriber this year, yeah exactly.

Can you split that in two ways, one geography and then two marketshare by leading ?

Okay. Well a lot of this is partially, it's forecasting first of all so what we have done is, we can put together pretty accurate data looking backwards and we track announcements by phone companies and other industry reports to try and tally that data and I think the general range of about 17.5 million at the end of last year is pretty well agreed upon.

You started with 17.5 into that, by geography and by chip if you want.

No I am trying to go into 2002. Just wanted to set it up properly for content purposes. So when we look at 2002 right now we have got some data from carriers in the US and abroad but not all of it for Q1 and obviously it is only Q1, but I will give you some specific numbers that would add up to the 16 so the lower end of the range for 2002. What we are looking at in the United States is about 2.3 million new lines and I would say that most of those lines will be served by Alcatel Equipment and Alcatel Silicon with the potential of some digital loop carrier deployments taking place that may not be Alcatel or maybe Alcatel with other silicon, and in fact, in general there is a potential for Alcatel's box to start using silicon from other companies as you no doubt saw they sold their chip division recently. Canada is somewhere in the 600,000 or 700,000 new lines range and most of those are Alcatel based. In Western Europe, we have about 4.5 million new lines, most of them in Germany and Germany is divided between Alcatel, Siemens, and ECI. Siemens is currently using a TI chip and ECI is using an Analog Devices chip. In France, I think its primarily Alcatel and ECI although Lucent will at some point enter that market and they are in the 700,000 or so lines in this forecast. Germany was about 1.8 million, and then the rest of Europe is a combination of Alcatel, ECI, and Siemens. From our perspective, we think Infineon has a good opportunity to penetrate as Siemens does some of those European deployments. In Korea, we are forecasting about 1.5 million new lines and most of those are supplied by Samsung who is an Analog Devices' customer. In Japan, we are forecasting just over 3 million lines and most of those are supplied by either Centillium or Globespan. There are two types of deployments going on in Japan. NTT is deploying Anax C based equipment, which is using Centillium chip sets and Broadband is deploying Anax A based equipments, which is primarily Globespan although there are number of folks obviously going after that particular opportunity. Taiwan has about a million new lines, which was Chunghwa announcement, which is Analog Devices based and then the rest of Asia, which is primarily China is divided up between Analog Devices, Alcatel, TI, probably some Globespan and some Centillium.

I am impressed. Thank you.

What are you impressed by?

thank you.

Okay. You are welcome.

Thank you. We will go next to Ted Murray with RW Baird.

Good afternoon.

Hi Ted.

A couple of things may be first for you Mike, it is just on the market run knowledge. Just gave were there some significant ADSL pricing adjustment here in Europe with French Telecom, BT, and is that part of our forecast at the service offering level?

I know you asked me, but I may let Rick answer that question because he has been tracking this much more closer than I.

Ted, what we have learned is we tried to track all these phone company deployments around the world, where they have been experts of new deployments and lots of new subscribers have signed out. Usually there were some type of promotion that caused that spurt to happen, and when the promotion ends they . For example, in the United States, you know that Verizon in Q4 they had a promotion that did not extend in the Q1, their numbers fell off. Conversely, SPC did not have a promotion in Q4 but did have in Q1 and their numbers rose quite a bit. I think, we saw the same thing in Germany till the end of last year. Telecom had a big promotion on, I read some of that federal trade commission in Germany were starting to give them a hard time about their pricing so they had to take it up a lit bit in Q1 and the numbers went down accordingly. In France, I believe I think your question was a France question?

Right, in March that there were some adjustments as well as with .

I will repeat it I am pretty sure you France, their subsidiary called Wanado that handles their ISP and DSL subscriptions, I think that is correct, I don't remember about .

So these are, these may not necessarily be permanent pricing adjustments and may be part of a promotion and may or may not have sustained demand?

I don't think Q1 benefited from pricing promotions. So in Q4, we had total deployments of about 4.3 million lines worldwide. In Q1, new lines were about 3.5 million. I would say that there were probably more promotions in Q4 than there were in Q1.

I think these price adjustment schemes were initiated in March.

It is probably we didn't see this. You are talking about new promotions in March?

Right or at least you know from the notes I have to see in fact that price reductions were implemented, in your forecast.

In our forecast in Q2, we have got new lines going up to 3.8 million so yeah there is an element of some of those promotions in that, lack of promotions in certain other places that have had them in the past.

Rick since I have you here. Is it fair to, on the guidance that you have, can you provide a little more detail on gross margins and where you might be in R&D is it a breakdown on your guidance?

Well, I guess, the gross margins aren't particularly meaningful number for us but in terms of providing more guidance on spending side, what we are assuming on spending is about 6.5 million dollars, which gets you down to the 9-11 cent watch range. Of that 6.5 million dollars, 4.9 is R&D or engineering related spending a portion of which we will allocate the cost of contract and a portion of which we will allocate to R&D, but the vast majority of this spending will be engineering based spending and all the other spending is a kind of run-rate type of spending. Those remain fairly constant. You know, G&A, S&M, and costs to goods sold, poor product revenue.

And so are there aggressive product rollouts here or what's the reason for the R&D and engineering? I presume that is the case but I just.

Quarter over quarter there isn't much change, this quarter it was 6.44 6.5. From last year, we certainly have added a significant force on the engineering side and we have done that because we think that there is an opportunity to do invest now and the intellectual property we know how it developed and capitalized on that with the semiconductor market and telecom market recovery. So we are in a money-losing phase right now but the strategy is invest now, use the assets that we have managed to pull together over the last few years in terms of highly skilled engineering talent and develop better and better products for the market that we, I think understand pretty well and then capitalize when that market recovers.

Okay, fair enough. Thanks.

Thank you, Ted.

Thank you, we will go next to Charles from Stephens Inc.

Hi guys, it is actually Dave Pamizana for Charley. How are you guys doing?

Hi Dave.

I was wondering if we could get back to 17.5 million subs out there right now. Do you have any estimate to the number of serial ports that are out there?

Serial ports, no probably not. I think we tracked that for a while and I think I had a pretty good understanding of what that was towards the end of 2000. But when 2001 came along and there was just a tremendous amount of uncertainty in terms of chips that were sold versus ports that were actually deployed and then product that was either written off or returned by various equipment suppliers to various chip suppliers, it's become very difficult to know what the port situation looks like. I can speak generally about what we think is going on in various countries so when let me do that. I think in the US, there is quite a few more ports deployed then are turned on. If you look at Alcatel's announcements of how many these LAN ports they have shipped over the last couple of years and actually how many lines of service were turned on, it could as much as 2 or 3 to 1, the number of lines that are in service. Now that doesn't necessarily mean that they won't buy new chips for new lines for other reasons, but I think if you look and I am going back a little bit without new data, but I think that's probably a reasonable range. In Japan, and this is sort of second hand data that we have heard that many of these lines are being deployed ready to turn on, many more lines being turned on right away. There are actually in particular is interested in. It is sort of fully filling up these lines of capability rapidly and then turning on service over time. In Europe, we think there is a less of that going on and that port numbers and line turn-ons are pretty close to one-another but those are sort of general broad strokes.

Thank you. So as we see these 16 to 20 million new subs come on this year, you are not expecting to see a significant amount of port sold in the CO side.

No we are. I think, in particular, in the European and Asian markets perhaps outside of Japan, although the Japanese market is growing very, very rapidly. You will see pretty close to probably a little more than one-to-one in terms of ports per lines turned on because there has to be a bit of a lag before a service can turn on and imported there. So I think you will see more than two times the number of chips necessarily to turn on all these lines of service, because you have one on either side of the line. That makes sense?

Yeah, I got that.

I think the US market might be a little different, may be the Japanese market but I think most of the other markets are pretty close to tracking.

With respect to the US markets where would you see your best opportunity for penetrating it, would it be through the CPE side within Intel or on the CO side the DLC through Infineon.

I think those are the two opportunities.

Is there one that is sort of looking better than the other.

I would say that they are pretty close to one another. Alcatel has divested both their CPE business and now their chip business and made it pretty clear that that's not the things that they are interested in owning and that does open up the opportunity for CPE from others in the US. So I think Intel has got a good opportunity there. I think the digital loop carrier opportunity is probably a higher likelihood just because Infineon solution is so well targeted at digital loop carrier and whether that's Alcatel or somebody else I am not sure. What I mean is whether the equipment is supplied by Alcatel or somebody else. Obviously, Alcatel is going to be a lead supplier here. I think the big question on the digital loop carrier side, it remains regulatory or they may not be the relief that looking for and there will be less motivated turn on digital loop carriers, but I think one digital loop carrier cabinets are turned on for ADSL service, you have the potential of seeing change in the growth rate in the United States because digital loop carrier served homes are generally newer wires and they are closer to digital loop carrier and central office's are into homes so they are really well suited for ADSL service. So I think once that infrastructure opens up you got great potential for growth and I think we are extremely well positioned with Infineon to go after that infrastructure.

Okay just one more question now. Intel, what is keeping them from sort of entering the market? Is it they are waiting for these new standards to come out or is it you are just waiting for greater demand within for DSL or what is it?

I think the market has kind of twisted and turned on everybody. So I think it's fair to say that everyone's plans have not gone as they had hoped that it's certainly true for our business, but exactly why Intel will or will not announce their products is really difficult for us to say. I think, I can say with great confidence that Intel has made it very clear to us and pretty publicly that communication and in particular broadband communications are of strategic importance for them. They look at the combination in communications and computing as an area where Intel can bring a powerhouse to the market and I realize that is a little more macro looking forward .

That is okay. Thank you very much.

Thanks Dave.

Once again it is star one to ask a question on today's teleconference. And we will now go next to Friedman Billings and Ramsey.

Good afternoon and congratulations for the quarter. It is actually Carter for Elwin. Can we ask just start some of the questions on my competitors have already brought up and Globespan came out with decent quarter but had pretty poor guidance going forward, talking about two specific things, you know, they are basically 95% leverage in their IC business to ADSL. You talked about 2 things, first of all, the market opportunity for 2002 is you know trying to back into how much they quantify being lower with uneasy proposition, but they also talked about ASP declines being somewhat severe and if we kind of back into what Globespan as a mixed company just a straight revenue basis they probably ASP declines of 40% in 2001 and 2002. The fact that they had to highlight it during the quarter during the quarter and does not board well for this year. Help me understand whether its consolidation, why the ASP declines won't be severe this year obviously from the sub perspective. It is a lot easier to justify that but can we really back up instead of talking about what really needs to occur to you know galvanize the industry, and whether it is the US or international, I realize the difference in arenas but and I realize this is also a fairly an open-ended question, but help me understand you know Alcatel got this business like completely, they were one of the most successful vendors in the United States, I mean they said bye and left. Help me get some comfort with the fact that ASP is not going to roll over that we really are going see this huge amount of sub-growth this year.

Well, let me try and start with the sub-growth, which is really just based on looking at rollouts that now have multiple quarters behind them and projecting that they continue to grow or continue to at least stay where they are. So if you look at the US in 2001, added about 2 million new lines, for projecting they had about 2.3 million new lines, so it's basically a steady as you go year for US. When you look at Europe, there is more growth there but that's largely because you have new countries entering the market. It's same thing for Asia, you have a new country, Taiwan is entering the market in a big way this year. So I think the facts are that subscriber growth is going to be around what we are talking about. I think it is reasonably healthy and I think it's very realistic and I don't think there is any really stretches of leaps of faith here. You can look at probably 30 service providers that we tally up and piecemeal together what they did last quarter, and the quarter before, and quarter prior to that and what they have announced and you come up with a number that I think is right in that range and very possible. So what that means to the IC business in our growth span overhung themselves that is not really the industry's fault. So the way we tried to look a this as we look at the year ahead is how can we gain shares essentially or improve our customers revenue streams because those turn into revenue streams for us or where will that happen and we look at opportunities in the US because you are right up or get out of the DSL business, they didn't get out of the DSL equipment business, they get out of the DSL chip business, which to a large extent is an opportunity for all the chip suppliers.

It's also been something they have planning to do for sometime. They talked about sourcing chips from other suppliers as much as two years ago.

Why is the IC business, why did they view that so poorly in US?

I think they view it poorly period. They are an equipment company. If you have a healthy competitive chip supplier market like you now do in ADSL, it's much easier to get the various chips guys against one another and buy chips from people to support the entire chip organization. They benefited tremendously by having a vertically integrated chip organization during the early years of ADSL and created all kinds of great entry points into the market.

Would you agree though that the infrastructure side or you know which was CO has got a poor forecast for 2002 than CPE side.

I think the growth is poor. I think actually the ports are probably about the same, but the ports last year in the CPE market, which are going to track more of the subscriber numbers, were a lot smaller. So growth on the CPE is kind of taking off so that makes it look better, but in pure numbers it's probably about the same number this year.

You don't believe there is an imbalance in the ports existing in at least North America or most specifically the US?

Probably in the US, just because of retiring a little earlier and it is possible that Alcatel has actually deployed more ports than are necessary to turn on service for a little while. So, you know, we have already got these guided these plans sitting somewhere , not used ports, you don't need to sell more CO ports; however, if the digital carrier market opens up you can take a piece of at individual carrier. That's a new piece of equipment. So that does require new ports. I don't think a lot of the 2.3 million in the US; however, it is going to be digital loop carrier in 2002. I think there is a potential for that starting into 2002, but it's not going to be a significant part of that number, but I think generally around the world, you will see about the same number of CO and CPE ports. When we look at the market opportunities in Western Europe, which is one of the fastest growing markets, Siemens has made it very clear that they are going to be a big player in this market and Infineon we think has a great position within Siemens. They have actually publicized some of their design wins there. In Asia, Analog Devices has continued through multiple years now of equipment and service offerings to be a dominant supplier of chips. We think it has the potential of gaining share through Taiwan and potentially other parts of Korea. And then on the CPE side, the market is becoming more fragmented. From an existing customer base, we think it poses opportunities for Intel. We think there is a great chance for a brand name like Intel to enter this market and do very well. And then from a new design start, which is another part of our business, that is important that I know you would appreciate. We think that this opportunity is for lots of different chip companies from lots of walks of life to enter this broadband residential equipment market and if you are a Video Processor company, you should be looking at putting ADSL on your video processor, because video processor is more valuable and if you are a network processor company, you should be doing the same. If you are Wireless Local Area Network Company, a Chip company, you should be looking at integrating ADSL into that chip. So, we think there is a lot of opportunity in the semiconductor market for new design to start. I assume that there is some help in the market and the people are starting new designs. We are beginning to see signs of that as well.

Do you believe that the converged box that you talked about, where will that box sit?

I think it sits either in a cabinet downstairs, it depends on what it converges or it sits on your desktop. It combines Ethernet, Local WAN access, whether it's cable or DSL and then some sort of home network. And it's just one flavor; I think there are other flavors. It is really a rudimentary sort of system on a chip level you just have a USB or PCI plus ADSL, that's the simplest example of an SOC.

Thank you Michael. And may I have a just a couple of housekeeping questions?

Sure.

D&A and CAPEX for the quarter?

For Q2?

No, for this quarter.

For Q1?

For Q1. I missed it, I apologize.

CAPEX for the quarter was a little over 400,000, which is consistent with our normal CAPEX run-rate and we normally spend about a 1.6 to1.8 million CAPEX. And I am sorry I missed the other part of the question.

Just depreciation and amortization, so we would like to build a quarterly cash flow?

Depreciation for this quarter was 479,000 dollars. So depreciation and capital spending are pretty close to each other, it has recurrent normalized around us to 1.6 to 1.8 million a year CAPEX spending rate.

Is there actually any reported inventory balance?

I think we probably mentioned it in the press release. It was about 237,000 dollars per quarter.

Great, thank you gentleman.

Thank you. We are now going to Robert Douglas of Lord Abbott.

Hi, just a quick question based on market share here, I was trying to look at, just looked at the numbers that you threw about the US, Canada, Europe, etc. You mentioned that for the US most of the equipment in silicon is Alcatel and I was just wondering what happened to ADI, they kind of slipped a bit or?

Well ADI was never strong in the US. Alcatel has always been the primary supplier in the United States and to-date Alcatel has used Alcatel silicon although I think an opportunity for other people to sell silicon to Alcatel. There has always been an opportunity and Alcatel has always said they would be interested in second sourcing silicon. But now that they have sold their silicon divisions, it is probably more likely to play second source. But the general market in the US since the beginning was Alcatel based so it is not that Analog Devices lost any share. Unfortunately, Analog Devices and really no one other than Alcatel had any share.

Okay just to clarify the same sort of question, for Germany they mentioned Siemens is being served by TI, is that but, do you expect that Infineon could displace a bit of TI?

Yes, we do. That's a good possibility and we think that in fact it's not all Siemens TI, it is also ECI which is also called Enovia, which uses Analog Devices chips. So that market has been divided between Siemens, Alcatel a little bit, although a minority share at Alcatel, it's primarily between Siemens and ECI.

Okay thanks.

Welcome.

Thank you. This does conclude our question and answer session. And at this time I will turn the conference back over to Mr. Moberg for some closing comments.

Actually before the closing comments. We have a shareholder meeting on May 31st, proxy should have been received by our shareholders with details on that meeting by now and there is a big telecommunications trade show this quarter in Atlanta in early June called SuperCom. If you have the opportunity to attend please look for Aware's book.

Thank you very much. We will talk to you next quarter.

This does conclude today's conference call, you may disconnect at this time.