Digi International Inc (DGII) 2005 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Digi International third-quarter earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded Thursday, July 14, 2005.

And now, I'd like to turn the conference over to Mr. Kris Krishnan, Senior Vice President and Chief Executive Officer of Digi International. Please proceed, sir.

Good afternoon and thank you for joining us today. Before we start, I need to go over a few details.

First, if you do not have a copy of our earnings release, you may access it through the press release section of the Digi website at www.Digi.com.

Second, I would like to remind our listeners that our remarks may contain forward-looking statements that involve risks and uncertainties. These forward-looking statements are not a guarantee of the Company's future performance. Important factors that may cause actual results to differ materially include but are not limited to the following -- rapid changes in technologies that may displace products sold by Digi; the definitive industry in which Digi operates; Digi's reliance on distributors; declining prices of networking products; and changes in the Company's level of profitability.

Finally, certain of the financial information disclosed on this call includes non-GAAP measures. Information required to be disclosed about these measures, including reconciliation to the most comparable GAAP measures, are included in the Form 8-K that we filed before this call. The Form 8-K can be accessed through the SEC filing section of our investor relations website at www.Digi.com.

Now, I would like to introduce Mr. Joe Dunsmore, Chairman, President and CEO.

Thank you, Kris. Welcome to the call, everyone. Q3 was an eventful quarter for Digi, with the primary focus on concluding the Rabbit Semiconductor acquisition and beginning the integration process. I am extremely pleased with the Rabbit financial results for the quarter as well as the integration progress to date.

Overall, company results for the quarter were mixed. On the positive side, we grew revenues 6.7% over Q3 '04; achieved $0.11 EPS, which was at the high end of the guidance range; Rabbit contributed 2.9 million in revenues; and our growth product line showed significant growth year over year. On the negative side, the revenue of 30.2 million was 3.5% below the guidance range, driven primarily by continued weakness from the mature product lines. Our results for the quarter included 17.7% operating income, less amortization and in-process R&D, and 8.2% net income, which are indicative of strong performance that includes a continuing focus on effectively managing the expense side of the equation.

Now for some highlights of the quarter. As you know, we acquired Rabbit Semiconductor. We began the integration process. The integration process has gone very well, with no major unexpected issues arising to date. Rabbit performance for the quarter was better than expected, and we are very optimistic for the future. The highly complimentary product lines extend Digi's leadership position in commercial-grade device networking.

We launched the Watchport/V2, a next-generation high-performance commercial-grade USB camera. The new Watchport/V2 is an enhanced version of the Company's award-winning Watchport/V2 camera and includes features to boost performance and make it even easier to integrate into commercial applications. Combined with Digi's motion detection software, the Watchport/V2 can also be used as a cost-effective remote monitoring system.

In a major product introduction, we introduced the concept of PC-free retailing with the Digi ConnectPort. Inside point-of-sale checkout stations, kitchen displays in restaurants, kiosks and information signage, you'll often find a personal computer providing the necessary computing power. However, PCs are actually a pretty poor fit for these types of applications. The PC has a lot of baggage that comes along with it, such as taking up a lot of space, requiring a lot of power, generating significant support costs and being just plain expensive. Digi's ConnectPort is a next-generation display and peripheral connectivity product that provides the freedom of relocating or even removing PCs or thin clients at points of service. Retailers can dramatically reduce their space and power requirements, lower their up-front capital costs, improve reliability and lower ongoing support costs. We have interest in ConnectPort from some very large customers.

Next, I would like to speak in more detail about trends that we see in the business and the resulting guidance for fiscal Q4 '05. The network interface card or NIC product line, which we have consistently described as mature and on the decline side of its lifecycle, has experienced an accelerated decline as a result of our major OEMs migrating from NIC cards to software-only solutions. The decline in Q3 was driven by two of our major OEMs reducing their purchases. We expect this trend to continue as the OEMs complete that migration over the next two to three years.

The Async product line, the other significant mature product line, was up slightly over last quarter but significantly down year over year. We expect an increase driven by major customers in Q4 and a flat to downward trend going forward in 2006.

On the growth side of the equation, our USB terminal server and device server products performed very well in Q3, growing significantly year over year. We expect this trend to continue. Our cellular product line is not yet providing material revenues; however, the sales pipeline is extremely strong, with revenues expected to begin ramping in early 2006. Our chip and software product line, which is a growth line, was down this quarter; but we expect recovery beginning next quarter, with robust growth moving into 2006, fueled by several large customers who are beginning to ramp production. The Rabbit acquisition performed very well in Q3 and remains on schedule to fuel growth for the future.

Generally, the decline that we are seeing from our mature products is being offset by our growth products and acquisitions, creating greater leverage to grow the business on the growth side of our business for the future. As a result, we expect a fairly robust fourth quarter, with a revenue range of 34 to 37 million and EPS guidance ranging from $0.12 to $0.17 a share.

Now, I will hand it back to Kris for more details on our financial performance.

Thank you, Joe. Our revenue for the quarter was 30.2 million, an increase of 1.9 or 6.7% over third-quarter revenue a year ago. Combined revenue for the quarter of 30.2 was 1.1 million or 3.5% less than management previously announced guidance, inclusive of the guidance provided for Rabbit, primarily due to more rapid decline than expected in revenue associated with the mature network interface card product line traditionally sold in the office networking environment.

Third-quarter revenue from device networking products -- which includes NetSilicon branded products, Rabbit products and the device over product line -- was 12.5 million, including 2.9 million in revenue from Rabbit, compared to 9.5 million in the third quarter of the prior year or an increase of 31.5%. Revenue increases in the device server product lines offset the decline in the chips and software and the mature network interface card products. Revenue from the connectivity solution products was 17.7 million in the third quarter of fiscal 2005, compared to 18.8 million in the third quarter of fiscal 2004. This decline was primarily in the mature asynchronous product line, offset partially by higher sales of terminal server and USB products.

For the nine months ended June 30, 2005, device networking product sales were 32.7 million, greater than the same period a year ago by 5.4 million or an increase of 19.8%. Revenue from the device networking products, excluding Rabbit, was 29.8 million or an increase of 9.1% over the comparable period a year ago. Here again, the continued growth in the device server product lines more than offset the decline in chips and software and the mature network interface card products.

Sales of connectivity solution products were 56.3 million during the first nine months of fiscal 2005, compared to 54.7 million in the comparable period a year ago. Continued growth in the USB and the terminal server product lines, together with the introduction of the cellular product lines, more than offset the decline in the mature asynchronous products.

Gross profit margin for the quarter was 60.3%, compared to 61% in the third quarter of fiscal 2004. For the first nine months of fiscal 2005, our gross profit margin was 61.2%, compared to 60.9% during the same period in the prior year. Gross profit margin decreased in the third fiscal quarter of 2005, compared to the same quarter a year ago, primarily as a result of sales of Rabbit products with lower gross profit margins. We anticipate, going forward, our gross margins including Rabbit to be in the range of 58.5 to 59.5%.

Operating expenses for the quarter were 14.5 million, compared to 14 million in the third quarter of fiscal 2004. Operating expenses included an increase in acquisition-related amortization of 300,000 and a one-time charge for acquired in-process research and development associated with the Rabbit acquisition of 300,000. General and administrative expenses were higher than a year ago, primarily due to professional services fees. On a year-to-date basis, operating expenses were 42.5 million, compared to 41.9 million for the first nine months of the prior year.

We expect the operating expenses going forward will continue to approximate the expense level percentages for this quarter and year to date. Going forward, we expect intangible amortization, due to the FS Forth and Rabbit acquisitions, to increase by approximately 650,000 per quarter, and total intangible amortization will be approximately 1,850,000 per quarter.

Operating income for the quarter was 12.2% of net sales. Operating income includes intangible amortization and acquired in-process R&D, equating to 5.5% of net sales. Operating income before intangible amortization and acquired in-process R&D was 17.7% of net sales for the quarter. On a year-to-date basis, operating income was 13.5% of net sales. Operating income includes intangible amortization and acquired in-process R&D, equating to 4.7% of net sales. Operating income before intangible amortization and acquired in-process R&D was 18.2% of net sales.

Net income for the quarter was 2.5 million or $0.11 per diluted share, compared to 2.4 million or $0.11 per diluted share in the third quarter of fiscal 2004. Earnings per diluted share for the third quarter was the high end of the range of management guidance of $0.07 to $0.11, inclusive of the guidance provided for Rabbit. Rabbit generated breakeven earnings per share, which included a one-time charge for acquired in-process R&D of development of 300,000, while management's previously-announced guidance anticipated that the one-time expenses associated with the acquisition would reduce the earnings per diluted share by $0.04 to $0.06 for the third fiscal quarter of 2005. Net income per diluted share for the third quarter of fiscal 2005, excluding the charge for acquired in-process R&D, was $0.12.

For the nine-month period ended June 30, 2005, net income was 14.2 million or $0.61 per diluted share, compared to a net income of 5.8 million or $0.26 per diluted share for the nine months ended June 30, 2004. During the second quarter of fiscal 2005, as a result of the settlement with the Internal Revenue Service on an audit of prior fiscal years, Digi recorded a reversal of 5.7 million of previously-established tax reserve, equating to $0.24 per diluted share positive impact. Excluding the impact of the favorable tax settlement and the acquired in-process R&D charge associated with the Rabbit acquisition, Digi's earnings per diluted share for the nine months ended June 30th were $0.38 or an increase of 46.2% over the prior nine months comparable diluted earnings per share.

The effective tax rate for the first nine months of fiscal 2005 increased to 33.1% from 31% before the impact of the favorable tax settlement, compared to an effective tax rate of 29% recorded in the first nine months of fiscal 2004. The increase in the effective tax rate is the result of increased annualized pretax income and the acquired in-process R&D charge of 300,000, which is nondeductible. The increase in the annual effective tax rate increased the tax rate for the quarter to 37.7%.

Diluted weighted average shares outstanding at the end of the quarter were 23,296,049, compared to a previous quarter of 23,644,541 shares, a decrease of 348,492 shares.

Turning to our balance sheet and cash flow statements, our combined cash, cash equivalents and marketable securities less the short-term loan was 43.6 million. The Company determined it was more cost-effective to borrow on a short-term loan than to liquidate the marketable securities prematurely for the Rabbit acquisition. The Company had borrowed approximately $21 million for the Rabbit acquisition and currently has $5 million outstanding.

Cash provided by operating activities was 6.8 million. An additional 4.2 million of cash was provided by financing activities, resulting primarily from borrowings to finance the Rabbit acquisition and stock options and employee stock purchase plan transactions.

Digi invested 48.9 million in the acquisition of Rabbit Semiconductor on May 26, 2005.

Accounts receivable at June 30th was 15.8 million, compared to 13.2 million at the end of the prior quarter. Acquired receivables represented 3.5 million of the receivables at quarter end.

Our DSO for the third quarter was 34 days, compared to 32 days in the previous quarter. We anticipate our DSOs to be in the range of 32 to 34 days going forward.

Inventory levels at June 30th were 17.6 million, compared to 11.2 million at the end of prior quarter. Acquired inventories represented 6.1 million of the inventory levels at quarter end.

Now, I would like to take a few moments to provide you with some guidance for fiscal 2005 fourth quarter. For the fourth quarter, Digi expects revenue to be in the range of 34 to 37 million and anticipates earnings per diluted share to be in the range of $0.12 to $0.17. Digi continues to expect Rabbit to contribute in excess of 7 million in revenue for the fourth fiscal quarter of 2005 and to be accretive by $0.01 to $0.02 per diluted share in the fourth quarter of 2005.

For the full year, Digi anticipates fiscal 2005 revenues to increase in the range of $0.11 to $0.13 for fiscal 2004. Digi expects earnings per diluted share for fiscal 2005 to be in the range of $0.73 to $0.78, including the reversal of previously-established income tax reserve, equating to $0.24 per diluted share associated with the settlement of the audit of prior fiscal year. This is an increase of 87 to 100% compared to fiscal 2004. Excluding the impact of the favorable tax settlement of $0.24, we expect that earnings per diluted share will increased 26 to 38% compared to fiscal 2004.

As announced in our last conference call, Digi was previously required to adopt Statement of Financial Accounting Standards 123(R), Share-Based Payments, effective July 1, 2005. As a result of the deferment of the effective date, Digi will adopt the statement on October 1, 2005, which is the beginning of our fiscal year 2006. Our third-quarter 2005 financial statements do not include stock-based compensation expense, and there will be no impact on our financial statements for fiscal 2005. The Company is still in the process of determining the impact on the financial statement for fiscal 2006.

Now, I would like to open the call to questions.

(OPERATOR INSTRUCTIONS). William Becklean, Oppenheimer.

Joe, can you go over a little more slowly what is going on with the interface network card product line in the device networking product part of the business? And we saw some slowdown in the mature Async product line business in the previous quarter, and it appears to have extended into this quarter. And I would like a little bit of color, actually, for both of these product lines. How long are we looking at declines in these lines before we start to see some recovery?

I will answer the last part of your question first. We have always maintained that these are two product lines that are on the decline side of the product lifecycle curve, and that we would expect that to continue over time, over the long run. So that is something that we have always been aware of.

On the NIC product line, as I mentioned, we saw pretty significant slowdown as a result of fewer purchases from our key OEM customers and a much more dramatic slowdown this quarter than we expected. What that means is that these customers are beginning to more aggressively migrate from a NIC card solution to a software-only solution for the networking piece. And so, we expect to see that migration continue over time, and we expect that NIC business to continue to deteriorate over time. And we would expect to see continued shipments, although fewer shipments, to these customers continue into 2006 and 2007. But we would expect to see a continued decline in that product line.

The Async product line -- as you said, we saw a drop last quarter and then quarter to quarter this quarter it remained flat. So we are at that lower level, and we would expect to see a little bit of a bounce-back next quarter, based on what we are seeing in demand from our large customers. And then we would expect that to continue on its long-term path, which would be a flat to downward trend, given the fact, again, these are products that are on the decline side of their product lifecycle.

Does that answer your question, Bill?

Yes, but the other part of the question is, how fast can you add growth products to offset the decline, particularly in the device server business? That is where we are all counting on substantial growth for the Company.

Right, and so there's two aspects of that. One is we have got our current product line, the device server product line, which has been a consistent growth product line since we introduced the product. That continues, and we expect that to continue into the future. We have got the silicon and software product line that we saw a little bit of dip this quarter as a result of some of our key customers slowing their forecasts down a bit. However, we expect that to recover next quarter and we expect a long-term growth trend, fueled by a number of OEM customers, a host of them that are actually beginning to ramp production. So I would expect the growth trend to start next quarter and continue through 2006 and into the future.

And then, obviously, the Rabbit acquisition and our whole core module strategy is going to drive growth moving into the future. So the NIC business is obviously becoming a smaller and smaller part of that device networking number, and over time that creates leverage for us to drive growth.

How much exposure is there in the NIC business? What percentage of the device networking product line is that now?

We have never broken out revenues down to the product line level. If we did that, we would have a number of -- probably 10 or 11 product line breakouts and it would provide competitive information to our competitors out there. So that's something that we don't do.

Same thing with the Async line, Joe?

In terms of breaking it out?

Yes, in terms of the exposure you have for the declining Async product line.

You know, I'd say that the Async line is probably a much, much longer-term path, and I would say that the decline is going to be much slower. So I would expect Async -- like I said, we expect a recovery next quarter, and I would expect it to be flat to slightly down. And we are dealing with several years of continued revenues from the Async product line. So that is going to be a much slower decline.

Jay Meier, MJSK Equity Research.

I'm going to try and follow on a little bit from Bill's question about the device networking group. If Rabbit contributed 2.9 million, that shows that the traditional device networking area was flat year over year. Looking forward into Q4, can you give us an idea of where the old device networking group -- what would be the breakdown, in your opinion, between Connectware and the older device networking area, so we can get an idea of how quickly each group is decelerating?

We are not breaking out at that level. The level that we are providing guidance for the quarter is at the Company level, 34 to 37 million. I am trying to characterize general trends that we see, and you will note that at the Company level we are going with a little bit wider guidance range, because we were dealing with variability, high growth rates on the growth side of the business and some significant decline rates from the NIC business. But we feel very comfortable with that range, with that 34 to 37 range and $0.12 to $0.17 range for next quarter.

And just refresh my memory. Rabbit was not a customer of Digi International in the past?

No, I don't believe so. I am sure that they may have purchased a kit or a chip or something like that; but, no, they were never a major customer of any sort.

And if I remember correctly, when you had the conference call for the Rabbit acquisition, you suggested that there was very little overlap between these product lines?

Yes, that's correct. They are very complementary. They are very focused on -- with their module, 10 to 60 MHz kind of processing power range, and very focused on I/O capabilities and networking capabilities. They are very focused on the end device, providing networking for end devices and core modules for end devices. And we tend to be much more focused in the 50 to 200 MHz range for integration points and controllers and networks and some higher-end devices. So there's very little overlap.

That's fine. When, exactly, did you start to sense that the quarter was soft?

Well, we -- if you back up, our guidance for the year was 10% growth. Through the first half of the year we did about 9.5% growth. In the quarter, we were very focused on execution and very focused on the Rabbit acquisition, and we obviously executed like crazy till July 1st. July 1st, at the end of the quarter -- we knew we had come up short, so we did an assessment of where we were and what we were looking at for the year. And based on that, we're projecting that we will still achieve 11 to 13% growth, obviously not driven, as we had hoped early in the year, organically. But with an aggressive acquisition strategy, we still think we can achieve that 11 to 13% growth year over year.

I understand. My question is kind of trying to get an idea of when the quarter started to soften up, because this is a pretty rapid deceleration since May 26th. And I'm just curious to know -- you appear to have some visibility looking out into next year, relative to Async and other technologies. And yet you didn't seem to have the visibility with respect to the collapse of the NIC product as recently as May 26th. So I'm just a little curious how it is that that just showed up.

Well, we look at the quarter and we look at all of our products and we look at ranges as we move through the quarter. And so, as you can imagine, Jay, it's very hard in this environment to be able to nail it down. And I think maybe we have spoiled the street a little bit, because we had very tight ranges in the past. And we had met our guidance for about 14 quarters in a row. And so, we go through the quarter looking at these ranges, and throughout the quarter we have ranges that we believe we could still come in and come within our guidance range overall. And unfortunately, July 1st we took a look at it, and we came up about 3.5% short.

(OPERATOR INSTRUCTIONS). William Becklean, Oppenheimer.

One of the statistics that you have typically given in a quarter is some characterization of design wins at NetSilicon. And also, for Kris, tax rate going forward?

On the design wins, in terms of high-volume design wins of chips and software and our ME (ph) core module in the neighborhood again -- in, you know, a positive number in the above 25 kind of range. The leading verticals that we attacked this quarter and had success were medical was number one, which is indicative of the trend we are seeing in the marketplace, more and more opportunity within the medical vertical. IA and building controls were also key verticals.

To answer your question, Bill, it would be at about the 32% tax rate, 1% less than what we -- because of the IP R&D.

Jason Krawshaw (ph), Great Specialized Fund (ph).

Just a couple of quick questions. I guess Rabbit was 2.9 million for the quarter, and that was just over about a month's worth the business. I guess we might be kind of rough, but just to annualize, that's probably -- I don't know, what, about an $8 million sort of quarterly run rate in the most recent quarter. The question would be I think you have guided for a minimum of 7 million next quarter. Is that just being conservative for Rabbit? Am I reading too much into sort of taking five weeks' worth of business, or is there something going on in the business that would sort of lend to a $7 or $7.5 million quarter for Rabbit?

Well, the 2.9 million, I think as you characterized, is more than a month; it's a month and a couple days. And it's the third month in the quarter, and they typically -- they have shown over the last several quarters that they have ramped in the third month. So that is a part of a third month that is a little bit of a hockey stick, not a significant one. So that would be consistent with the guidance that we're giving. Obviously, we are very early in the relationship. Things are going very well. We're understanding the business much better, and we are trying to look at this in a realistic fashion. So there is certainly upside to the 7 million, but that's our guidance.

What sort of growth rate does Rabbit sort of exhibit on a year-on-year basis at the top line? And what is the general sort of trend growth rate for that company?

It's varied. A couple of years ago, it was really strong. I don't remember the exact number, but it was well into the double digits -- 20 to 25, maybe higher percent. This last year, it slowed down a bit, and we project next year -- on the Rabbit piece of the business, we gave a little bit of guidance in our last call that we would expect in the neighborhood of 10% or better growth year over year.

And then, you've well-documented some of the slowing product problems or issues with the two product lines. How would you characterize the overall end markets demand? Is this really a situation where you have had sort of two slowing (ph) products, or do you think that the overall end markets for all of your products are sort of mixed or weak? How would you characterize the end markets?

I would said that the overall economy in end markets has -- up until maybe, I don't know, three to six months ago was reasonably strong. And I would say that the overall market has weakened just a bit, but not significantly. I would say the more significant dynamic is that we are seeing this more precipitous decline in the NIC business, and we saw significant decline in the Async trendline, and then offsetting that with pretty significant growth rates on the growth side of our business.

So that is the more interesting dynamic right now. I think it boils down to execution more than market dynamics. I think the market is plenty healthy, and we just have to continue to drive execution. And I think we have got some leverage on the growth side of the equation to do that.

Jeff Evanson, Dougherty.

Could you give us a little bit of sense of what you are thinking about operating margins and expense growth in the next year?

We are right in the midst of our annual planning process for 2006. So that's a real-time activity for us, and so in three months or so, we plan to provide detailed guidance on next year. The general expectation, the general guidance that I have given in the past, is that we're going to continue to try to drive that EDAR (ph) and drive our operating margins. We have got a goal that I talked about for three to five years out to get to the 25% operating margins less amortization. So we're going to aggressively drive that. To the extent that we can drive the topline revenue growth, that is going to make that a lot easier. But we will give you a lot more detail on our 2006 plan and guidance in our next call.

Kris, could you quickly reiterate what you said about Q4 expenses, please?

Yes, I basically indicated that the operating expenses going forward will continue to approximate the expense level percentages for the quarter and year to date. Like, for example, if you look at the -- as a percentage of excluding amortization for the current quarter, we were approximately 42.6%. On a year-to-date basis we were 42.8%. So we will be in that range somewhere.

And any shift of mix at all?

There should not been any major shift of mix.

Jay Meier, MJSK Equity Research.

Which product group was the NIC card in, again?

(Multiple speakers). Device networking segment.

And you mentioned that you expect -- Joe, you said that the Async product group ought to fill out a little bit and maybe resume -- strengthen a little bit into Q4?

Yes, we believe that we're going to -- in the mature product area, which includes Async, we expect -- and Async itself, we expect a bit of a bounce, positive bounce next quarter. And then we would expect the general trendline -- not impacted by big customer opportunities that may pop in, we would expect the general long-term trendline to be flat to down. But we would expect a little bit of a bounce next quarter.

I understand. So would you expect Connectware in general to grow sequentially or be flat sequentially?

The connectivity solutions piece?

Yes.

You know, the reason that we don't get into -- I hate to do this, but the reason why we don't get into guidance at this next level is because, as I have said in the past, there tends to be a lot of volatility at the segment level. So what I try to do is help characterize some of the trends that we're seeing. Within that business, as I mentioned, we are seeing Async bounce back and then a more steady decline in the future. We're seeing USB growing robustly. Terminal server has been growing; it has been on a growth trendline. And then we have a new product line that we expect to begin to ramp revenues in early 2006, and we've got a significant pipeline with our cellular product line. So we are real optimistic about that. So those are some of the trends. Given the volatility, we don't give guidance at that level, but those are the trends that we see.

William Becklean, Oppenheimer.

Joe, my recollection was that you expected the Async business to bounce up a little bit in this quarter from the little decline it had last quarter. Aren't I correct?

Well, it was a significant decline last quarter, and it's flat to slightly up. It's actually maybe slightly up this quarter but essentially flat.

Kris, could you go over in a little more detail -- I didn't write it down fast enough -- about the operating cash flow for this quarter? I think the -- what was the number, 6.8 million or some -- 6.8 million in the cash area (ph)? (Multiple speakers). Can you just go over those numbers for me?

If you look at the cash flow (indiscernible) attached to the press release, the cash that was provided by operating activities was 6.8 million. And then an additional 4.2 million of cash was provided by financing activities, resulting primarily from borrowing to finance the Rabbit acquisition, stock option, employee stock purchase plan transaction. Then we invested 48.9 million in the acquisition of the Rabbit Semiconductor. So if you look at our cash flow statement, those are the primary large three components that we reflect.

And no further questions at this time.

Great. Thanks, everybody. Once again, we continue to be excited about the business. We are really excited about the Rabbit acquisition, the growth products, the cellular products, and look forward to talking to you in a few months. Thanks.

Thank you.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.