Digi International Inc (DGII) 2010 Q1 法說會逐字稿

Good day ladies and gentlemen, and welcome to the first quarter 2010 Digi International Inc. earnings conference call. My name is Louisa, and I will be your operator for today. At this time all protestants are in listen-only mode. We will conduct a question and answer session towards the end of this conference. (Operator Instructions).

I would now like to turn the call over to Mr. Kris Krishnan, Chief Financial Officer. Please go ahead sir.

Thank you. 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 financial releases section of our investor relations website at www.Digi.com.

Second, I would like to remind our listeners that some of the statements we make in this presentation may constitute forward-looking statements. These statements reflect management's expectation about future events and operating plan and performance and speak only as of today's date.

These forward-looking statements involve a number of risks and uncertainties. A list of factors that could cause actual results to be materially different from those expressed or implied by any of these forward-looking statements is detailed under the heading Forward-Looking Statements in our earnings release today and under the heading Risk Factors in our 2009 annual report on the Form 10-K already filed on file with the SEC.

We undertake no obligation to update publicly or revise these forward-looking statements for any reason.

Finally, certain of the financial information disclosed on this call includes non-GAAP measures. The information required we disclose about these measures, including reconciliation to the most comparable GAAP measures, are included in the earnings release or in the Form 8-K that we have filed before this call. The Form 8-K can also 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.

Welcome to the call everyone. I am very pleased with our results for the quarter. This is the 28th consecutive quarter of profitability for Digi in an environment that we believe is stabilizing and returning to growth. We exceeded the Street consensus for both revenue and profitability with the results within our guidance ranges.

Revenue for the quarter of $43 million was up 3.9% compared to the same quarter in the prior year, and 7.4% sequentially.

Net income for the quarter of $1.2 million was up 18% compared to the same quarter in the prior year, and 25% sequentially.

EBITDA for the quarter was up 28% compared to the same quarter in the prior year, and 26% sequentially.

All of these trends are positive and indicative of an upturn in the business and a stabilization of the external environment.

The most important indicator, however, is the increase in bookings that we saw in the quarter. Q1 was the highest bookings quarter at Digi for at least as far back as we have comparison data, which is eight years. As a result, we enter fiscal Q2 with a scheduled backlog that is much higher than that entering fiscal Q1.

Wireless product revenue for fiscal Q1 increased 12.5% quarter-over-quarter and was 35.2% of our total revenue, up from 32.5% in fiscal Q1 of 2009.

At the beginning of the credit crisis, I introduced five principles that Digi would focus on and report progress against quarterly. Today I will do a final report on Digi's execution against those principles, and then we will move on to a discussion of how we are going to drive revenue growth moving forward.

So first let's review our progress against these principles.

First, aggressive share gain through continued investment in wireless M2M. We continued to increase investment in wireless M2M through the downturn. As a result we continued to see strong growth from our wireless products. Our focus on the smart grid, fleet management, medical, and other wireless applications is adding significant momentum to our strategic shift from providing point products to providing wireless M2M solutions for our customers. This increases our competitive differentiation and will drive increases in our share position over time. Our wireless product offering grew 12.5% in Q1 2010 over Q1 2009. We believe this positive trend will continue, and we have targeted wireless products to be 40% of revenue for fiscal 2010 and at least 60% of revenue annually within the next three to five years.

Second, profitability. We made a commitment to maintain profitability through the downturn in a monumentally difficult environment. And we met that commitment. Fiscal first quarter of 2010 was Digi's 28th consecutive quarter of profitability. As I mentioned earlier, we improved earnings by 18% compared to a year ago comparable quarter, and 25% sequentially. This is indicative of the economy and our business stabilizing and returning to growth. Additionally we did this while increasing investment in higher growth wireless product lines.

Third, positive operating cash flow. We made a commitment to drive positive operating cash flow through the downturn, and we met that commitment. Digi's operating cash flow was $3.9 million for fiscal Q1 2010, continuing our trend of generating positive operating cash flow. Digi's EBITDA for fiscal Q1 was 10.3% of revenue, up from 8.4% of revenue in the same quarter a year earlier. We believe this to be a positive trend that we can continue as we drive topline revenue growth.

Fourth, aggressive supply-chain management. We met our commitment on supply-chain management. We focused -- the focus on inventory turns has reduced inventory levels from 35 million to 25 million over the past year. We continue to proactively manage our supply chain to ensure our key sources of supply are intact and that we have contingency plans in place. Additionally we are working very aggressively to maintain supplies of key components such as chips, as lead times are extending and increased demand over the past few months.

And finally, continued focus on acquisition. We fulfilled this commitment with a very strategic acquisition of satellite technology with the acquisition of MobiApps. We continued to increase our focus and energy on the identification and evaluation of these opportunities going forward and are well-positioned to execute.

Next let's talk about how Digi is driving revenue growth going forward. In 2009 we pivoted the organization to focus on providing wireless solutions to our customers. We introduced the iDigi platform, iDigi Energy and other iDigi offerings to accelerate this initiative. And as a result we saw high growth of our wireless product offering.

We've seen our wireless product offering grow from 15% of our revenue in 2007 to 25% in 2008 to 34% in 2009 and expect it to grow to 40% of our revenue base in 2010. We expect wireless to become over 60% of our revenue base within the next three to five years.

As such we continue our internal investment focus on markets and applications that will drive this growth. Fleet management, medical tank monitoring, and the smart grid are key arenas where we are focused. I fundamentally believe these markets will be growth markets for Digi regardless of the external environment. While the environment appears to be moving in a favorable direction in the short term, there are no long-term guarantees. So Digi will focus its energy on markets that will yield high-growth opportunity in normal market conditions and also will be insulated more than other markets in the event of unstable market conditions.

Fleet management is a very interesting market opportunity for Digi. The ConnectPort X5 telematics gateway thrust us into this market with its introduction in October of 2009, just four months ago. The X5 is unique because we integrate five wireless technologies, including the MobiApps satellite module, into a compact form factor with market-leading price performance.

Because we offer the most differentiated wireless gateways in the market combined with iDigi and wireless endpoints, we were able to convince one of the market leaders, Zeta, to leave the communication infrastructure piece to us. This way we can place -- they can place all of their focus on what they do best, the fleet management application. Our Spectrum Design services team is currently providing application migration services to Zeta, as we expect this very large opportunity to begin to deliver a revenue ramp at the end of fiscal 2010.

In addition to Zeta, we have been doing custom development for a large customer in the heavy equipment category over the past year and expect to begin revenue ramp in the second half of fiscal 2010.

We currently have product being evaluated by four of the top 10 players in the US fleet management market and beyond that have a very robust sales pipeline of large opportunities.

Medical is another important growth market for Digi. Digi began investing and developing in the medical vertical several years ago with a focus on medical device connectivity with our device server and terminal server product lines. We have seen consistent growth with major wins for both wireline and wireless products.

We've seen the most traction in two areas -- bedside connectivity and embedded device connectivity for medical diagnostic devices in hospital rooms, emergency rooms and hospital labs. For instance, we have a partnership agreement with one of the largest hospital information system providers, who has certified our products and actively promotes and recommends Digi products for bedside connectivity. We are the major supplier of connectivity solutions for one of the largest integrators of bedside conductivity solutions in the US and have a similar relationship with one of the leading players in Europe. Additionally have major embedded customers that generate significant volume in infusion pumps and blood analysis equipment.

We believe that we are at the beginning of a growth curve driven by the need to connect smart devices to non-proprietary networks to make the process of moving to accurate electronic medical records, EMR, happen faster and easier.

Certainly macro factors driving much more efficiency in health care will continue to fuel this market over the next several years. As a result we have recently increased our investment in business development resources to further develop this market.

Tank monitoring is another exciting opportunity and application that's common to many different industries. Due to the complex nature of the typical tank environment, a Digi wireless solution is a perfect fit. Companies are leveraging our technology to save time and money by optimizing the supply-chain activities and gaining new competitive efficiencies in delivery and billing.

In addition, the growing requirements of hazardous raw materials accountability compliance, especially during transport, is an important growth driver. Over the past year we've developed strategic partnerships with various leading sensor manufacturers and application providers, which have allowed us to ramp smart tank monitoring solutions for several large customers. These customers are deploying our wireless gateways, iDigi and tank sensors using Digi embedded technology.

We have active large customers in water treatment, agriculture, petroleum and expect revenue ramp -- to ramp significantly in 2010 and over the next three to five years as we look to continue to penetrate new industries with these solutions.

The smart grid opportunity is one of Digi's most interesting and exciting. The business environment is like the California Gold Rush -- exciting, high-growth, crowded, competitive, changing. We are at the beginning of a long-term growth cycle that will likely last 20 years. It is driven by macro factors such as climate change, energy independence, and the government regulatory and investment push.

Digi has engaged this opportunity over the past couple of years with an aggressive partnering strategy and a primary business development focus on demand response and the evolution of energy management services. We have partnership relationships with several key players in this space including Comverge, Itron, Elster, Silver Spring, and others that are not public at this time. We are aggressively working to build partnering relationships with other key players in demand response, AMI, and energy management application providers.

Digi is involved through our partners with utilities who recently won the largest four US government ARRA grants for smart grid deployments, including Duke Energy and Progress Energy, and nine of the top 15 grant recipients, including Pepco Holdings. In addition we are involved in several large grid deployments with utilities who have been working on the smart grid for some time now, including Florida Power & Light, and TXU.

We see design wins and traction in several application areas including demand response, energy management services, distribution automation, and renewable energy. These applications show the breadth of opportunity Digi has in the smart energy arena. We are actively increasing the investment in smart energy, hiring additional business development, product management and R&D professionals to fully pursue this opportunity. I expect to continue to discuss our progress in future calls.

So the net of all this is that I am very bullish about our growth opportunities for our wireless products and overall product growth. As a result of our bookings momentum and these growth opportunities, we will [be] (technical difficulty) providing guidance increases for the year, which Kris will discuss in his prepared remarks.

So to summarize, first Digi posted its 28th consecutive quarter of probability. Second, we grew revenue and earnings for the quarter both sequentially and year-over-year. Third, we have significant growth momentum with our wireless products and expect to reach 40% of revenues this year and 60% in three to five years. Fourth, we are increasing guidance.

Next I'll hand it back to Kris for his prepared remarks.

Thank you Joe. Revenue for the first fiscal quarter of 2010 was $43 million, an increase of $1.6 million or 3.9% over the first fiscal quarter revenue a year ago. Revenue increased sequentially from the fourth fiscal quarter of 2009 to the first fiscal quarter of 2010 by $3 million or 7.4%.

Revenue in North America was $25.5 million in the first fiscal quarter 2010 compared to $23.1 million in the comparable quarter last year, an increase of $2.4 million or 10.3%.

Revenue in EMEA, which is Europe, Middle East and Africa, was $11 million in the first fiscal quarter of 2010 compared to $13.3 million in the comparable quarter a year ago, a decrease of $2.3 million or 17.3%.

Revenue in Latin America was $1.1 million the first fiscal quarter compared to $1.1 million in the comparable quarter last year.

Revenue in Asia Pacific region was $5.3 million in the first fiscal quarter of 2010, including MobiApps revenue of $500,000, compared to $3.8 million in the first fiscal quarter of 2009, an increase of $1.5 million or 39.1%.

Revenue from the embedded products in the first fiscal quarter of 2010 was $18.1 million, including MobiApps revenue of $500,000, compared to $18 million in the first fiscal quarter of 2009, an increase of $100,000 or 0.3%.

Revenue from non-embedded products was $24.9 million in the first fiscal quarter of 2010 compared to $23.4 million in the first fiscal quarter of 2009, an increase of $1.5 million or 6.7%.

International revenue was $17.4 million or 40.6% of the total revenue in the first quarter of fiscal 2010 compared to $18.2 million or 44.0% of total revenue in the year-ago comparable quarter.

Wireless revenue was $15.1 million or 35.2% of the total revenue the first fiscal quarter of 2010 compared with $13.1 million or 32.7% of total revenue in the fourth fiscal quarter of 2009 and compared to $13.4 million or 32.5% of revenue in the first fiscal quarter of 2009.

Net sales in the first fiscal quarter of 2010 were favorably impacted by foreign currency translation of $400,000 when compared to the same period in the prior fiscal year, resulting from the weakening of the US dollar compared to the euro and the UK pound sterling.

The gross margin was 50.5% in the first fiscal quarter of 2010 compared to 51.4% in the first fiscal quarter of 2009. The gross margin was lower in the first fiscal quarter of 2010 than the comparable period a year ago due to unfavorable product mix primarily within the embedded product lines, partially offset by favorable manufacturing variances and other expenses. Gross margin has increased sequentially over the past three quarters as a result of the implementation of cost reduction during fiscal 2009, including the closing of our manufacturing facilities in Davis, California and the consolidation of manufacturing operations into our Minneapolis plant. We expect that gross margins will approximate current levels for the remainder of fiscal 2010.

Total operating expenses for the first fiscal quarter of 2010 was $19.9 million or 46.2% of revenue compared to $20.5 million or 49.5% of revenue in the first fiscal quarter of 2009. The decrease in operating expenses in the first fiscal quarter of 2010 compared to prior year comparable quarters is primarily due to savings resulting from the restructuring plan announced in the third fiscal quarter of 2009, partially offset by ongoing incremental operating expenses for MobiApps. The weakening of the US dollar compared to the euro and pound sterling had an unfavorable impact on the operating expenses of $400,000 in the first fiscal quarter of 2010 compared to that a year ago of comparable quarter. We expect that the total operating expense will be approximately 44% to 46% of revenue for the remainder of fiscal 2010.

Net income for the first fiscal quarter of 2010 was $1.2 million or $0.05 per diluted share compared to $1.0 million or $0.04 per diluted share in the first fiscal quarter of 2009, an increase of $200,000 or 18%. Earnings per diluted share in the first fiscal quarter of 2009 included a discrete tax benefit of $400,000 or $0.01 per diluted share, resulting from the extension of the research and development tax credit for two additional years beyond calendar 2007. This extension allowed Digi to record the research and development tax credits earned during the last three quarters of fiscal 2008 in the first quarter of fiscal 2009.

Digi's effective tax rate for the first fiscal quarter of 2010 was 34.6% compared to an effective rate of 0.9% in the first fiscal quarter of 2009. The effective tax rate for the first fiscal quarter of 2009 included the discrete tax benefit of $400,000 resulting from the extension of research and development tax credit. Digi expects its effective tax rate for the full fiscal year of 2010 to be in the range of 34% to 36%.

Diluted weighted average shares outstanding at the end of the quarter was 24,979,033 compared to a previous quarter of 24,981,381 shares, a decrease of 2,348 shares.

Turning to the balance sheet and cash flow statements, our combined cash, cash equivalents and marketable securities balance, including long-term marketable securities, was $78.5 million as of December 31, 2009, increasing by $2.7 million from the end of the prior fiscal year. Net cash provided by operating activities for the quarter was $3.9 million. Our current ratio is 7.2 to 1.0 compared to a current ratio of 7.4 to 1.0 at the end of prior fiscal year, and our DSOs, 38 days compared to 39 days in the previous quarter.

Now I would like to provide some guidance for fiscal 2010. Digi projects the revenue to be in the range of $43 million to $47 million for the second fiscal quarter of 2010, and then net income per diluted share in the range of $0.04 to $0.09. For the full fiscal year Digi projects revenue in the range of $170 million to $190 million, and we expect a most likely annual revenue of $180 million, an increase of $2 million from the most likely revenue of $178 million announced in our previous quarter's call. We anticipate that earnings per diluted share will be in the range of $0.18 to $0.42.

At this time I would like to open the call to questions. Operator?

(Operator Instructions). Mark Segal, Canaccord Adams.

Just wondering if you can talk a bit about how robust demand trends are within the smart grid space today versus six months or a year ago. And secondarily, are you seeing any new design wins from utility customers? And if so, in what areas?

For us, we are seeing an increase in the ramp, and I think part of it has to do with the fact that AMI networks and other networks from the utilities are beginning to ramp up. Certainly it's obviously finally getting a boost here in the last few months with the ARRA grants. And so that has something to do with it. But the other thing is just fundamentally the timing of our offering and the sales cycle. We've been focused on this for the last couple of years, and we are now getting to the point where we are starting to ramp up volumes. So it's a combination of both.

I mentioned a few of the design wins that we have seen out there. The way that works for us is we go in with partners, we partner with people like Comverge, filling out their solution, and Itron and Elster and others, and they are oftentimes the leader, the prime in an opportunity. And we see design wins through them for our home gateways, for -- in conjunction with AMI deployments, home gateways for demand response deployments today, migrating to energy management services in the future. So we are seeing more and more opportunity in this space.

We have, like I said, relationships with partners that are driving wins with people like TXU, Florida Power, Pepco, Duke, Progress and others. And we have many in the pipeline. We've got pilots and bids out working with these partners.

That's very helpful. And are you seeing stimulus award winners deploying funds quickly? Is that process -- are the deployment of funds still somewhat bottlenecked at the DOE level? Or are you -- are we finally beginning to see a lot of these deployments really hit the ground aggressively?

Well, we're just starting to see in the last few months, we think the funds are getting deployed, it's hard to say just how aggressively these networks are going to ramp up. We certainly are seeing some move into production, we are seeing some nice ramp with certain customers that are in production. We are seeing others that are using the funds and going down the path of doing -- some are doing small pilot deployments, some are doing very large pilot deployments. And they will go through that pilot process and then move to production.

So I would say it's still a little bit early to predict the pace of deployment. I think it's probably safe to say that the pace of deployment that we should see within the utilities on these programs should be faster than what we have seen in the past from the utilities. They want to take advantage of these funds, they want to get out there, they want to meet some of the regulatory requirements that are being placed out there over the last five years with the Energy Act of 2005 and 2007 and then the stimulus funds, 2009.

So I think -- my belief is that we'll see more aggressive deployment than we have seen in the past with utilities because they've typically moved so slow. But it's still early, it still yet to be determined.

Very helpful, thanks a lot.

(Operator Instructions). Jay Meier, Feltl [Incorporated].

Good quarter, guys. I appreciate the clarity on the call about some of your opportunities. I think you've given me anyway some insightful data that I was missing before. So I appreciate that.

Joe, the -- drilling down a little bit more on the smart grid, your partners are using any number of products from Digi. Some of them may only be using one. Is it possible that your partners are using more than one different product? Do you have customers or partners that are using both the gateway and ZigBee sensors and transmitters? And how frequently does that happen? And how frequently are they standardizing on your products?

All good questions. First of all the general answer is, yes, they are generally using multiple products. I'll go into a couple to give you a little bit more detail to help you kind of understand with a couple of our partners what's happening.

So for instance with Comverge, Comverge is a iDigi hosting partner, so they are using iDigi in conjunction with their Apollo platform. They are using iDigi, they are using our gateway, they have their iThermostat in their Apollo solution. It's a significant opportunity, a solution that's additionally demand response but will likely migrate to energy management services within homes with multiple utility customers.

We are deploying to TXU with Comverge and Pepco with Comverge, and others. We've got several pilots in process with Comverge, and we think there is an opportunity to extend the Comverge relationship. In fact we are actively working to extend it from residential to commercial. So that gives you a little bit of the nature of the Comverge relationship.

Another example of how we are working with partners would be Itron. The initial opportunity is more in the distribution automation space, providing a unique gateway, a unique customized gateway that we are working on in conjunction with their OpenWay network to provide wireless communications with that OpenWay platform. It's being actively bid with several utilities right now. And then in addition to that we are also looking at other opportunities within Itron, mostly gateway opportunities, to kind of extend into other offers with Itron. We think there's significant opportunity for us to do that.

With Elster, as an example -- and Elster is the second leading provider of meters -- we are designed into their neighborhood concentrator for cellular backhaul within their AMI network in the electric utility arena. We are also working on several other partnering opportunities, not just on the electricity side but on the water side and other areas. We've been with them on several utilities, and we think there's significant opportunity there.

With somebody like Silver Spring, there's -- right now it's more of a partnership that's a point product kind of relationship that doesn't involve iDigi at this point. But we could sell multiple products gateways, wall routers, smart plugs, those kind of things. And they can apply with other products supplied with other partners also. And we are actively working to expand that relationship.

So the answer is, yes, multiple products. I would say the core value proposition for us centers around our iDigi platform and our gateways. That's the turf that we -- where we think we are good and we think we've got the opportunity over time to be highly differentiated. We think that's where our core competence is, that's where our expertise is, and we think there are very, very difficult problems that need to be solved in providing connectivity into the home to provide enhanced energy services.

Well, that was a pretty good answer, I appreciate that. I couldn't keep up writing.

One little follow-on to that though. It's been suggested in the past that if a customer is utilizing a smart meter that they don't need a smart thermostat. But does the location of your transmitter really matter to you? You are involved in meters and smart thermostats and all different points along the transmission chain, aren't you?

What we focus on -- yes, our XBee modules are marketed into meters, they are marketed into thermostats and other devices. So we have an opportunity with our mesh networking ZigBee, smart energy enabled XBee modules. Where we think our most significant -- and that's a value proposition that's important to us. Where we think our most significant value proposition is, is with iDigi and our gateway into the home.

Today we are seeing opportunity for demand response applications, we think those applications -- and we are seeing pilots where they're being extended to enhance energy management services, oftentimes where no AMI network exists. Where an AMI network gets deployed, and we expect to see aggressive deployment over the next five years, but even after five years, in 2015, more than half of the US homes still won't be AMI, so we've got a long ways to go with AMI.

But one of the interesting opportunities within the AMI arena where you've got a smart meter now deployed and two-way communications to that meter, is that even then that AMI network fundamentally is a very low bandwidth network. It's -- right now it's about 75K bandwidth, which is very low bandwidth. It's like a 56K modem, just a little bit more than that. So it's a very low bandwidth network. Maybe we'll get to 150K. And it's not real optimized for real-time communications. So it's not high bandwidth, not real good at real-time communications.

With AMI networks they solve a lot of problems that they have today. Certainly it's much more efficient with the two-way communication to the meter to do what they really want to do well, which is ring the cash register. Think of the meter as their cash register. And so that's what they're focused on.

Certainly there's a lot of discussion of the model where you've got that two-way communication into the meter and then ZigBee communications into the home from the meter to provide these energy management services. But that becomes very difficult and complex from a real-time perspective and bandwidth perspective.

And we believe that there's a tremendous opportunity with these AMI networks to provide an adjunct gateway that provides much higher bandwidth, real-time communications to all the devices including the smart meter, the smart meter, thermostat, other smart devices, to provide enhanced management services, because what we're going to see is we are going to see a movement from what I will characterize today in the demand response and energy management service to the home arena as customer permission -- they allow you in to do just peak curtailment -- to customer engagement where you're provided with energy usage information but you have to do something with it, to customer collaboration, which is, there is an active relationship set up with the customer where their devices are -- in the home are connected and where they are connected and can actively engage in managing energy. And we believe there is a significant play over time for the gateway in that model.

I understand, that all sounds great. I just have a couple real quick questions. You mentioned that you had 10.3% EBITDA margin in the quarter. Can you remind us once again what your EBITDA margin target is over time?

Yes. We believe that we are back on a path of historically -- over a six-year time period before we hit the credit crisis, we were between 14.5% and 21.0%, and we believe that we can move it right back -- over time right back into that range. We believe that certainly 15% to 20% is a very reasonable target, and obviously to the extent we can create a highly differentiated solution, we would like to do better than that.

So when you think about that, the ways that you might want to think about it and model it would be that if you think about our [E to R's] today, fully loaded, including amortization and stock-based expense, our E to R is about 46%, which has improved year-over-year about 3%. If you back out intangible amortization, it's about 44%. And if you back out both stock-based compensation and amortization it's 42.4%. But if you base it off that 44% number and look at sales and marketing expense at 21.5%, we ought to be able to drive that down to 19% in the midterm and probably 18% long-term if we drive topline revenue growth the way we would like to.

R&D, which is at 15% today, we should be able to drive down to 12% in the midterm and 10% over the long run. G&A, which is at 8%, we ought to try to 7% in the midterm and then possibly even 6% in the long-term. So we believe that we have a real opportunity to drive back into that range and at least get into the 15% to 20% range.

That's great, thanks a lot. I'll back out.

Ross Strehlow, RBC Wealth Management.

Just a little bit further on Jay's question. If you could put your -- kind of what your goal for net income as a percentage of sales, what's your target?

Well, it will rise right with -- consistently with that EBITDA target. So I think historically, pre-credit crisis, we were up in the 8% to 10% range. Without the numbers in front of me, I think that would be a kind of reasonable midterm target, plus or minus a point. But obviously we would love to over the long-term get it up into double digit and hold it there.

Okay. Great. Do you guys normally have a seasonal slowdown in the fiscal Q2 for you, like a lot of tech companies do this time of the year?

That has not been a historical trend for us. The historical model for us, which obviously was violated this quarter, was that we would see our fiscal progression would be pretty consistent, first quarter being the lowest, progressing to the highest in our fourth fiscal quarter. And then the reason the first fiscal quarter typically is down is just fewer days. (multiple speakers) And we typically have seen historically pretty strong February and March. But these are unusual times, so this quarter we saw significant sequential bump-up.

Yes, which was great, congrats on that.

Can you comment at all on the bookings momentum so far that you have seen in this quarter?

Yes. I don't have all the data in front of me. Typically January is a -- is very -- is seasonally a slow start, and I would say that it's probably consistent with the bookings momentum that we have seen over the past few months, which is more positive than a typical January.

Great. And then my final question is, what was your percent earnings on -- your interest percentage earnings on your cash? Because you've got so much cash, and now with interest rates so low, I was just curious, what did you earn on that?

I think we earned approximately 1%.

Okay. Right around 1%. Okay. All right, thanks guys.

At this time we have no more questions in the queue. I would like to turn the call back over to Mr. Joe Dunsmore for any closing remarks. Sir?

Thank you everybody for attending. We are very excited about all the things we talked about, the wireless opportunity and the verticals that we're focused on. We think we've got great momentum. And I look forward to talking to you in three months. Thank you.

Thank you.

Thank you for your participation in today's conference, this concludes your presentation. You may now disconnect, and have a great day.