創力 (LTRX) 2007 Q1 法說會逐字稿

Good day ladies and gentlemen and welcome to the first-quarter 2007 Lantronix earnings conference call. My name is Jeremy and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will conduct a question and answer session toward the end of this conference. (OPERATOR INSTRUCTIONS).

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to [Kristen McNally], Investor Relations for Lantronix.

Good afternoon everyone and welcome to today's conference call. Before we begin, I would like to highlight that in an archived webcast of this call will be available on the Company's website at Lantronix.com and an audio playback will be available through November 27th. The number to call for the audio replay is 888-286-8010 with passcode 46643641.

Please be reminded that during the course of this conference call, management will be making forward-looking statements in their prepared remarks and in response to your questions concerning, among other matters, the future adoption of device networking M2M products; potential top- and bottom-line growth, expanded sales, marketing and R&D activities; the introduction of new products; continuing emphasis on unit growth in the device networking category and the launch of new business lines. These forward-looking statements are based on Lantronix's current expectations and are subject to a number of risks and uncertainties. Actual results could differ materially as a result of several factors. For a more detailed discussion of these and other risks and uncertainties, see the Company's filings with the Securities and Exchange Commission.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and the Company undertakes no obligation to update these forward-looking statement to reflect subsequent events or circumstances.

I would now like to introduce members of the Lantronix management team -- Marc Nussbaum, Chief Executive Officer and Jim Kerrigan, Chief Financial Officer. We will begin the call with an overview of Lantronix's financial and operating results, followed by a Q&A session. Marc Nussbaum will now start the call. Marc?

Thank you, Kristen, and welcome everyone to our earnings call covering the first quarter of fiscal year 2007.

Before I get started today, I would like to introduce our new Chief Financial Officer, Reagan Sakai. Reagan's start day with Lantronix was November 8, joining us from technology startup, HyPerformix. Previously, Reagan has served as the CFO of Crossroads Systems Corporation, a NASDAQ listed company, and has held senior financial executive roles at Exabyte, Maxtor, McDATA and StoregeTek. I am pleased to welcome Reagan to the Lantronix team.

Jim Kerrigan is currently transitioning his CFO responsibilities to Reagan. On behalf of our shareholders, employees and Board of Directors, I would like to publicly acknowledge our deep appreciation for Jim's leadership over the past 4.5 five years, and Jim, thank you personally for your accountant's contributions to Lantronix.

Since Jim supervised the financial closing of the first fiscal quarter, I have asked him to report our results today, with readings taking over the earnings call report beginning with fiscal Q2. Now I will turn to a review of our business and results for the quarter.

Over the past several years, we have to transitioned Lantronix away from certain legacy markets towards the newly emerging world of machine-machine, or M2M, device networking. Lantronix has been first and foremost the leader in enabling devices to be connected to networks or to the Internet. We do this using industry-wide standards first pioneered in the IT computing world, such as Ethernet and 802.11 Wi-Fi wireless.

As the enablement market grows, it creates the need for end-to-end device management solutions to securely configure, monitor and update the millions of freshly-minted network-enabled devices.

With this in mind, Lantronix has been investing in technology for a market we refer to as device management. Beginning this quarter, we began reporting under the three umbrellas of Device Enablement, Device Management and Non-core. The Device Enablement category includes our embedded offerings, such as XPort and YPort, our external commercial device servers and our external industrial hardened device servers. These Device Enablement products are sold to multiple industry verticals, including security, industrial automation, building automation, energy, medical, datacenter equipment and others, and generally serve to enable a single individual device onto the network.

In contrast, our Device Management products are used to connect and manage multiple devices. Offerings in this category include management appliances, console servers, multi-port device servers, gateways and other new product lines which we intend to announce later this year.

We estimate that with the products currently offered by Lantronix, we address a market of approximately 367 million devices shipped every year that can benefit from our technology. Further, we believe that in calendar year 2006, only about 3.3% of these devices will be network-enabled, leaving an enormous market opportunity ahead of us. In fiscal year 2005, our device networking enablement business grew 9%, and in fiscal year 2006, we doubled this growth rate to 18%. Device networking unit shipments grew 50% in fiscal 2006, reflecting significant acceleration compared to 38% unit growth in fiscal year 2005.

Turning to this past quarter, in fiscal Q1, we reported revenues of $12.5 million, an increase of 2% over the same quarter last year. We were not surprised by the general weakness of the quarter as fiscal Q1 has been traditionally the lowest for the year due in part to the seasonal slowdown in Europe and even in the US during the vacation months. First quarter revenues were also impacted our transition away from certain products that can no longer be sold under the European Union's new Restriction on Hazardous Substances, or RoHS environmental regulations, that went into effect at the beginning of the quarter. Due to this, we stopped selling many of our Non-core products in Europe and experienced a drop in Non-core sales of 21% compared to fiscal Q4. This represents a sequential drop of about $400,000 in fiscal Q1. We do not plan to introduce RoHS-compliant versions of any products in our Non-core lines and intend to invest R&D only in our core product categories of M2M.

Revenues in fiscal Q1 were additionally impacted by a supply shortage of a particular chip used in our high-volume device servers. The chip supplier experience difficulty in their manufacturing line, and as a result, we missed about a month's worth of shipments of these products. The problem has since been corrected and the flow of these chips has resumed.

Next, I will briefly comment on each of our core product categories. In fiscal Q1 two years ago, revenues from Device Enablement contributed 56% of sales. Last year, it reached 68% of sales, and this fiscal Q1, Device Enablement reached a record 72% of sales. The Device Enablement category grew 9% compared to the same period last year. As already discussed, this growth would have been higher if we had not experienced a parts shortage during the quarter.

This past quarter, the Device Management category contributed 14% of total revenues and was down slightly by about $150,000 compared to a year ago. This market can be divided into several segments, including data centers, branch offices, small to medium businesses and others and addresses applications as diverse as managing IT equipment for the data center or managing remote medical devices, such as defibrillators. Recently, we've been focusing our efforts in this category to include products outside the traditional data center and believe ongoing investment in these emerging opportunities is central to our long-term strategy in M2M.

We ended the first quarter about flat in terms of our cash balance as compared to the prior quarter. We had planned on generating a small amount of cash in fiscal Q1 and reporting a small profit, but this did not happen in part because we did not close on the sale of our remaining interest in Xanboo until after the cutoff of fiscal Q1. Although we had a written agreement with the purchaser to execute the close and deliver $700,000 of cash in September, they were unable to meet their obligations until October 18th. We have now completed this transaction and have disposed of our interest in Xanboo, Inc. We will recognize the income on the sale of the remaining Xanboo shares in the second fiscal quarter.

With that, I will now turn the call over to Jim who will review our financial results in greater detail. Jim?

Thank you, Marc, and good afternoon everyone. Net revenues for the first quarter increased 2% to $12.5 million compared to $12.2 million for the year-ago quarter. Looking at the composition of revenues, Device Enablement revenues increased 9% to $9 million, or 72% of total net revenues compared to $8.3 million, or 6.68% of total net revenues for the first fiscal quarter of 2006. First quarter Device Management revenues decreased 8% to $1.7 million, or 14% of total net revenues, compared to $1.9 million, or 15% of total net revenues for the same period last year. Non-core revenues were $1.8 million, a decrease of 15%, compared to $2.1 million for the first fiscal quarter of 2006 as we continued to deemphasize older legacy products.

In terms of geographic mix, sales in the Americas accounted for 61% of first quarter revenues and international sales were 39%. This compares to 67% and 33%, respectively, for the first quarter of fiscal 2006.

Gross profit margin increased to 52.8% for the first fiscal quarter, compared with 50.0% for the same period a year ago primarily as a result of the decline in amortization of purchased intangible assets and a reduction in manufacturing overhead.

Total operating expenses were $7.2 million for the quarter compared to $7.4 million for the first fiscal quarter of fiscal 2006.

Selling, general and administrative expenses decreased 10% to $5.5 million from $6.1 million in the year-ago period. In part, this decrease is due to a reduction in legal fees because we settled most of our outstanding litigation towards the end of fiscal 2006.

Research and development expense increased 23% to $1.7 million from $1.4 million in the year-ago period, in line with our planned increase in R&D investment to support product and market development initiatives.

We reported a net loss for the first fiscal quarter of $651,000, or $0.01 per share, basic and diluted share, compared to a net loss of $1.3 million, or $0.02 per basic and diluted share for the same period last year.

On September 30th, 2006, our balance of cash, cash equivalents and marketable securities was $7.8 million, approximately equivalent to the balance on June 30th, 2006.

Inventories net were $9.2 million on September 30th, 2006 compared to $8.1 again on June 30th. Our accounts receivable DSOs were 21 days in the first quarter compared to 16 days in the preceding quarter.

Other than capital leases recorded on our consolidated balance sheets, we have no debt and we have no borrowings on our bank credit facility.

As Marc stated, this is my final earnings call for Lantronix, and once again, I want to express my deepest thanks to the Lantronix team, all the shareholders and financial community who have made my term at the Company so fulfilling. I wish Reagan Sakai great success going forward.

With that, I will turn the call back to Marc.

Thank you very much, Jim. As the megatrend of connecting devices to business systems evolves, device networking technology is becoming a standard feature in countless applications across virtually every industry, but this is just the beginning. As a leading M2M innovator and the inventor of the embedded Web server module, we intend to remain ahead of the curve through ongoing R&D investments and industry-leading animation. In fiscal 2007, R&D expenditures will increase approximately 25% compared to fiscal year 2006.

Lantronix today serves at least 12 distinct vertical industry sectors, with our three largest being security applications, IT applications and industrial automation applications. As I mentioned on our last call, we have been focusing resources on several very important new product initiatives with an emphasis on these top three verticals.

As part of this strategy, we recently announced a new line of industrial networking products and an expanded channel support program to address the growing need for industrial hardened solutions. Lantronix industrial-ready device servers were able to operate under extreme temperatures and resist exposure to electrical shock, vibration and physical abuse. These new products accelerate our penetration into segments of the market where adoption of M2M is particularly strong, such as industrial and factory automation, building automation, energy utilities, transportation and manufacturing.

As an example of the growth potential in just one of these markets, according to industry analysts, the use of device networking in industrial automation is expected to grow 44% in each of the next five years. To date, our industrial products have been used by a wide range of the companies, such as Bosch Corporation, Rockwell Automation, Honeywell, Invensys, Siemens and Johnson Controls.

I'm also pleased to be able to announce that we have recently reached an expanded agreement with ACAL Semiconductors, one of our key distributors in Europe, to sell the Lantronix product line throughout all of their major European offices. This agreement expands our reach with this new sales partner from the United Kingdom and the Netherlands into a total of 12 countries and 19 locations. We've been working with ACAL for over a year on training an early rollout, and this move represents a significant strategic commitment and endorsement of Lantronix and near-term potential of the device networking market.

As evidenced by our 9% growth in Q1 Device Enablement revenues, our XPort and WiPort product families continue to grow nicely. Last year, we experienced high demand for our embedded evaluation kits with over 300 units sold. Sales of our wireless embedded products reached 5% of total revenues last quarter and we continued to experience a strong design-in activity for wireless products across the board. We expect sales of our wireless products to more than double over the next 12 months.

Recently, we launched our newest version of the award-winning WiBox wireless device server and an industrial hardened version of the product to serve our customers' increasing demand for WiFi connectivity at the external box level. We also initiated our second annual wireless design contest. With more categories and larger cash prices this year, our contest challenges engineers worldwide to wirelessly network enable a machine or device using the WiPort. This contest is a great catalyst to drive design creativity and we received a significant amount of industry attention and press coverage as a result. Contest winners will be announced at the Embedded Systems Conference in San Jose this April.

As a preview of fiscal Q2, orders for our products have picked up substantially during the month of October and have remained strong throughout the first half of November compared to fiscal Q1 and also compared to the same period last year. Looking towards the remainder of fiscal year 2007, we have reiterated our outlook for the combination of Device Enablement and Device Management to deliver year-over-year growth of approximately 20%, compared to growth of 13% for the same product set in fiscal year 2006. Again, this 20% target is for the product categories that represent 86% of our fiscal Q1 revenues.

With an expected decline of about 20% in noncore product sales in fiscal 2007, we continue to target total revenues in the range of $58 million to $60 million for the fiscal year, representing overall growth of 12% to 15%, compared to the 7% growth we achieved in fiscal 2006.

Upside to this outlook could be driven by several factors, including healthier than modeled pickup in Device Management, particularly in our data center products, or incremental Device Enablement adoption in response to our demand generation and new product initiatives.

For the remainder of fiscal 2007, we expect to deliver positive cash balances each quarter and overall profitability for the year.

To sum up, Lantronix continues to strengthen his position in the M2M market through innovative product development and positions its strength in key verticals. We address a $10-billion-plus market that is 97% underserved. Major high-growth applications are driving accelerated market adoption with an outlook of strong upside potential to current demand. With one of the highest concentrations of M2M business in our space, Lantronix's expertise and technology leadership provide a solid opportunity for profitable growth as the industry enters its next phase of expansion.

Thank you, everyone, for participating in today's call. And with that, I will ask the operator to open the line for questions. Jeremy?

[Jed Besser], Manchester Management.

My first question is, can you quantify at all for us how much revenues you think you lost in this quarter resulting from the shortage of the chip?

Probably somewhere between $300,000 and $400,000. Some of that we'll make up in this quarter, but not all of it, because a lot of it is a simple turns business, and unfortunately goes to our competitor when we don't have the product available. But we will make up some of that this quarter.

Can you go into any more detail as to what caused this and how you have gotten confidence that this won't happen again?

We've done a couple of things to address it. The thing that caused it literally was a wafer fab bust at our wafer foundry, which is one of the largest world's largest wafer foundries, by the way. It's a very class act and it was very unfortunate that they had this problem.

But at any rate, supply has resumed. We have units in stock and we have increased our stocking requirements in-house on this device so that we have several quarters worth of stock in hand, so we've buffered ourselves from any kind of future problems they might have.

As far as what you are saying for guidance in terms of fiscal Q2, what -- can you give us any kind of a percentage range as to -- is this quarter going to grow in line roughly with your guidance for the year, and we're going to see further acceleration throughout the rest of the fiscal year? Or, is this going to be a quarter of outperformance, and then you might see seasonal slowness in Q1, or calendar Q1?

Well, the less couple of years, certainly last year, we saw incremental revenues in Q2, then again in Q3, then again in Q4. Sequentially, we incremented each of those three quarters, and I would expect that pattern to repeat itself this year.

Having said that, I also think that Q2 compared to Q1 will be a substantial increase. And if you run the numbers, you'll come to a conclusion pretty quickly than, on the average, the Company has to do somewhat north of $15 million on average in each of the next three quarters. So I do expect significant increase in revenues in Q2, and then some incremental beyond that in each of Q3 and Q4.

Can you speak to the competitive environment in Device Enablement? Has anything changed?

The competitive environment hasn't changed. We see still a lot more accounts and customer opportunities than there are customers out there. It's still a highly fragmented market. Our list prices remain very strong. We have some ASP degradation as a result of customers taking higher volume and getting higher volume discount. But, that's not really a competitive dimension, it's just the nature of the business as we grow volumes.

Can you gave us an update on your feelings on what the penetration level is now with the devices since you've talked about this acceleration point in the past?

We haven't had a chance to quantify that. That takes some triangulation between industry data and our own internal research. We'll probably do that somewhere after the December quarter is over, because it tends to be an annual event for us.

David Soetebier, JM Dutton.

One real quick one on R&D. You talked about kicking that up for the year, and so the level we saw in Q1, is that the quarterly run rate we can expect to the rest of the year?

I think we'll probably have a small increment beyond that as we add additional headcount, but nothing dramatic. There shouldn't be much more than a few hundred thousand dollars by the end of the fiscal year added to R&D beyond where we are today. (MULTIPLE SPEAKERS).

The second point on -- so, Q1 first quarter came in a little bit light, but you maintained your guidance, so that tells me you're actually more confident. So I was wondering if you could comment on why you're more confident, and then maybe just give us a little update on maybe some of the design wins that we might want to focus on?

I don't want to get into specific design wins per se for competitive reasons, but to answer your question, our bookings this quarter so far, both October and November as I mentioned, are extremely strong compared to both last quarter, and more importantly, compared to last year during this period. Our sell-through as well has been very strong. So we see the signs of a significant pickup in the business, which is as we had predicted going into the fiscal year. We did expect Q1 to be a little bit higher than it was basically due to that shortfall of the parts that we had, but we didn't expect Q1 to be an outstanding quarter. We expected it to be down.

(OPERATOR INSTRUCTIONS). [Mark Newman], Atlanta Investment Company.

If you exclude the $700,000 that you're getting from the sale of that stock, will the third or fourth quarter be operationally profitable?

Hold on just one second, Mark. So the answer to that question, Mark, we wanted to confer here for just a moment. I would anticipate that, yes, it would be profitable from operations for the quarter.

Okay. And then as we look into fiscal '08, do you feel that with the R&D that you've put in place so far, that the R&D will stay flat or will continue to accelerate in fiscal '08?

That's a good question. We haven't really done our planning for fiscal '08. My intention is to take R&D up as a proportion as revenue grows, and take it somewhere around 10% to 12% of total revenues. So depending upon what our outlook winds up being for fiscal '08, and from a revenue standpoint, it may go up a little bit. But we will keep it in that range of 10% to 12% of total revenues.

Okay. SG&A -- will that increase proportionately with sales in '08, or would your headcount this year basically facilitate staying roughly the same next year?

Yes. We anticipate staying roughly flat in SG&A. We have all of the pieces that we need from a support standpoint, from a sales and marketing standpoint in place to support probably about twice the revenues that we're doing currently today. So I don't expect a whole lot of increase or potentially any in fiscal '08 in SG&A.

And the last question is, are we getting close over the next six to 12 months where we're at the inflection point where sales can ramp up as fast or faster than they have been ramping, that you're expecting them to ramp this year?

Again you're asking for an outlook in the fiscal '08 time frame and we haven't gotten there yet. I do expect fiscal '08 to be stronger growth than fiscal '07. But whether I would call that the inflection point of adoption or not, I think we're too early to make that call.

[Henry Glasheen], Brookstreet Securities.

Two questions quickly. Can you give me some indication of what the percentage contribution of the top customers are?

Our largest customer makes up less than 3% of our revenue. So we have a very diverse base of customers. Many of them still, we were designed, for example, into one of their products, not all of their product lines because they haven't taken device networking across all of their product lines. And as such, that gives us a very stable base we've spread between a lot of customers. For instance, like lose a customer (Inaudible - background noise) win a customer, it tends to not be a dramatic change in the business. But that's the nature of the market right now.

So as a follow-on to that, in the last several conference calls that we have been hearing about how this is a multibillion-dollar market that's about 90% underaddressed. And I'm trying to get some sense of a sense, and this is kind of similar to the question, your second question. I'm trying to get a better idea of how it is you guys come about your revenue expectations. I'm not even concerned about earnings right this second, but your revenue expectations for year-end. Given that we had roughly a 9% decrease in revenues quarter-over-quarter in total and another 5.25% just in device networking quarter-over-quarter, how is it that with that sort of -- and you describe them as turn markets -- how do we get to some level where we can predict accurately where your run rate is going to be for year end? Not even with '08. That would be an '07 question.

First of all, you cannot look at the sequential numbers, you have to look at it on a year-over-year basis. And year-over-year, the device networking part of our business, the Enablement part, (inaudible) 9%. So that's one number and one indicator, and I have an outlook of the combined number of (MULTIPLE SPEAKERS).

Let me stop you for a quick second Marc. Why is it that you feel like it's only appropriate to look at that in year-over-year numbers? Is there that dramatic of a seasonality in this business, given the fact that we're at least somewhere in the growth ramp of the business?

Sure. Historically, there has been a significant seasonality where the summer quarter is extremely slow, and we have observed that for the last five years in a row now.

So being that the circumstances of the growth of the market are fairly substantially different from even what we were talking about a year ago, how is it that you have the level of comfort that you have to put out a number in that $58 million to $60 million range? How do you come to it?

Sure. Two things. Number one is, we have some visibility from our OEMs as to what their intention in terms of growth is for the year. So I factor that into it. And then we also have just our past trends. So if I look at individual product lines, where they have come from and what our outlook is for growth in those product lines just by looking at historical trends, I can extrapolate that going forward, and I of course offset it with the products that we're exiting. So it's a combination of trend analysis, but we also have visibility from OEMs into what their plans are over the next 12 months.

So you can predict with relevant comfort what you're looking at, at least for next quarter? Because according to your year-end expectations, you're looking at a revenue run rate that's going to be in excess of $15 million. And if you're looking at operational profitability, ex the sale of Xanboo, that's going to be a pretty big revenue jump for the quarter. And you feel like you can see that in the current business?

Let's be careful. First of all, a lot of our business is actually business that's placed and ordered during the quarter. So while I can predict it today that this quarter looks pretty strong, it's difficult -- it would be difficult for me to have said that a month or two ago. What we are seeing this quarter is that our orders that have been placed in October and the first half of November are particularly strong compared to the same period last year. We look at the number of order days and factor all of that into effect, and I have so far this quarter significantly improved orders compared to the same period last year. Now if that all of a sudden does not hold and there's a slowdown in the rest of the quarter, then I won't make my prediction. But if the order rate keeps up at its current rate, which we do expect, and that's typical for the quarter, we should do very well.

I'm sure you have other questions and I don't want you to get on -- I'm still try to get to a little bit of a better understanding of how it is that if you are looking at order rates and you're in turned markets that you can see anything more than 30 to 60 days ahead given what you have and that you could actually come to an estimate. Because, that $60 million or somewhere thereabouts, this is profitable and this is growing at a reasonable pace. At substantially less than that, it's not, or even a small amount less than that, it's not. So there is a big distinction there. And I think just on behalf of everybody, it would be better to understand how it is that you come to that kind of a conclusion, given the business that you're in. And if you want to answer that, that's fine; if you don't, I can get back in the queue and ask it a different way.

Henry, that's not going to help me. I tell you what, Henry, that's something we can to a little bit of work on and maybe discuss on our next call. And we will talk about our forecasting methodology.

(OPERATOR INSTRUCTIONS). Bill Kitchel, Millrace. Bill seems to have dropped the line. [Carol Pass-Parker].

My questions were about the parts shortage. The wafer foundry -- where is that located?

We have not identified the supplier. They make this in the US, [Brian], do you know? We're not sure right now. I'm sorry.

If it's located in the United States, then Sarbanes-Oxley would demand that they have a disaster recovery situation. And if they are not located in the United States, they of course not bound by that. But I wanted to know if the foundry has put in place any sort of disaster recovery, and also if any of your R&D is going to depend on the same wafer foundry for future development, and if you have even shopped around for a second foundry for our disaster recovery for Lantronix?

Sure, let me answer that. What we have actually done is we have since designed in a second source part that essentially takes the place of this part, and now I have two foundries building essentially the same part for me.

Bill Kitchel, Millrace.

First, all of the best to you, Jim. You've done a great job getting the cost structure in line over the last couple of years. You've had a lot of challenges. My hat's off to you, and all of the best.

Thank you.

Marc, I wonder if you could sort of getting at a prior gentleman's question about your visibility, and maybe one way that you could help us is walk back from the 50% unit growth rate that you saw in the Device Enablement and Device Management this year to the ultimate revenue contribution, help us with the mix that worked against the unit growth rate coming through to the revenue line and the ASP issues that have worked against that and kind of where those dynamics are looking forward and when can we get closer to approximating the unit growth or at least closer to it in the top line?

The 50% unit growth number is in the Device Enablement part of the business, which I believe grew 18% in revenues that year. So that is the gap that we're talking about. A lot of that gap has got to do with the fact that there are older box-level products and also board-level products that we transitioned away from. If you get into the product line specifically, there is a product family called the MSS, and the MSS average selling price was several hundred dollars, and that was replaced with a product that sells for less than $100. So I had customers transitioning from the MSS product line to what we call the UDS product line.

The second thing we had was customers went from the old microboards, which were $100-plus embedded board-level products to the export. And, again, there, they went from $100 to, say, around $30 in ASP. So the decline in ASPs through those two basic products are what offset our unit growth last year. Does that help?

That helps a lot. That helps a lot. Given your outlook on the current quarter, it must reflect a different complexion of order activity. Is there anything you can share with us on sort of size of quotes that are being put out and size of orders that may be different? Anything more on prospects or customers that have sampled and are nearing a different run rate of activity with you? Any color you can help us there with?

I didn't have anything specific, but I can give you some color for that. I would say that the number of customers that are taking between 10 and 30,000 units from us a year has probably doubled over the last year, but those numbers, the number of customers taking that is still relatively small. But that is probably where our growth is coming from. It is where our growth is coming from.

So the number of customers that are taking in that range of volume has grown quite a bit. But I still don't have a blockbuster customer. There's no one out there that's taking 50 or 100,000 units a year from me yet. There are several customers I have that can grow to that level, and we have some active programs in place to grow them to that level right now, what I call the 100% attach rate project that the sales guys are executing on, but that I cannot report those kinds of blockbuster volumes yet. It's still in front of us.

At this time, I'd like to turn the call back to Marc Nussbaum for any closing remarks.

Well thank you everyone for participating in the conference call today. Reagan and I look forward to seeing some of you at our annual shareholder meeting on Tuesday, November 28th at 9 o'clock here in Irvine. We also intend to schedule some investor meetings, particularly in New York, in the January time frame and look forward to meeting many of you then. And thank you again for participating in today's call and have a great evening. Bye.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.