Good afternoon, and welcome to MACOM's First Fiscal Quarter 2020 Conference Call. This conference call is being recorded today Tuesday, January 28, 2020. At this time, all participants are in a listen-only mode.I will now turn the call over to Mr. Steve Ferranti, MACOM's Vice President of Investor Relations. Mr. Ferranti, please go ahead..

Thank you, Catherine.

Good afternoon, and welcome to MACOM's first fiscal quarter 2020 earnings conference call.I would like to remind everyone that our discussion today will contain forward-looking statements, which are subject to certain risks and uncertainties as defined in the Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those discussed today. For more detailed discussions of the risks and uncertainties that could result in those differences, we refer you to MACOM's filings with the SEC.Management's statements during this call will include discussions of certain adjusted non-GAAP financial information.

A reconciliation of GAAP to adjusted non-GAAP results are provided in the company's press release and related Form 8-K, which was filed with the SEC today.With that, I'll turn over the call to Steve Daly, President and CEO of MACOM..

Telecom was $45.6 million, Industrial & Defense was $50.5 million and Data Center was $23 million. All markets performed well with sequential growth of 15%, 1% and 2%, respectively.

On a geographic basis 45% of our first quarter revenue was from domestic customers and 55% from international customers similar to prior quarters.Our book-to-bill ratio was 1.1:1 and our churns business or business booked and shipped within the quarter was approximately 25% of our total revenue.

We experienced solid bookings across all three end markets. And generally speaking, demand for our products was strong in the first fiscal quarter.The sequential growth in our Telecom end market was primarily driven by demand for our 5G products and to a lesser degree by an increase in 2.5 GPON following multiple quarters of decline.

As a reminder, our 5G portfolio today consists of receive side RF Front-End Modules, control products for base stations, high-performance analog ICs for 5G front-haul and high-performance coherent driver and TIA products for mid-haul.We view 5G as a key driver for MACOM revenue in the years ahead.

And in the coming quarters, we anticipate expanding our current 5G portfolio by launching complementary new products including more optical components, more discrete RF components and more high-performance analog and mixed signal ICs.Our Industrial and Defense end market revenue was driven by various U.S.

defense programs SATCOM applications and increased sales to our tested measurement customers.

Going forward, we plan to expand our efforts to win market share with our existing products and we will target satellite and defense OEMs with our high reliability components.Our Data Center end market revenue continues to show improving trends driven largely by our 100G product portfolio.

Today we service this market with high-speed analog products.The inventory in our sales distribution channel is relatively low compared to historical levels and we believe our largest high-volume customers are carrying relatively low levels of inventory.

This has and we expect that it will continue to support near-term incremental revenue growth.The revenue growth in our three core markets will also be driven by our ability to design and bring new products to market quickly and win market share.

We are confident the changes made in our engineering management and broader organization in September as well as the updates to our product development process will allow us to improve MACOM's competitiveness and time to market.Along these lines during the quarter, we launched 13 new products.

This exceeded the pace of the last several quarters and we expect this rate to continue to increase throughout 2020.

Simply put, we are increasing the efficiency of our R&D spending by streamlining the product launch process.I would like to highlight three notable product releases from the first quarter which illustrate the diversity of our technology.

First, we expanded our microwave MMIC portfolio with two new gallium arsenide mixer products covering 6 gigahertz to 26 gigahertz and 15 gigahertz to 45 gigahertz. In addition to having broad bandwidth, these up and down converters feature high linearity, a key differentiator and a requirement for high-performance microwave systems.

We offer these products as bare die or in low-cost surface mount packages and they will target point-to-point microwave radios, test and measurement and other high-frequency applications.Second, during the quarter, we released to production a silicon germanium 28-gigabaud linear EML laser driver targeting 5G backhaul applications.

This device supports 100G, 200G and 400G data rates using PAM4 modulation. And third, we launched a 12.5 watt 50 Volt GaN-on-Silicon surface mount wideband power amplifier. This product is notable for its wideband performance and 56% drain efficiency at 2.5 gigahertz.

Applications for this product include secure communications, avionics and ISM infrastructure. These three products highlight the breadth of technology we have as well as the diverse end markets, which we serve.Today, we sell hundreds of differentiated products to thousands of customers.

We have relatively low direct customer concentration and low product revenue concentration.

Our existing product portfolio and our recently released products established the foundation of MACOM and should provide us the opportunity for revenue and profit growth in the near term.At the same time, we are focused on completing R&D on technology, which will help drive MACOM's growth over the longer term.

These include new technologies like next-generation GaN-on-Silicon, DSPs, lasers L-PIC assemblies in silicon photonics. We recognize that these technologies have the potential to generate significant revenues and profits in the years ahead.During the quarter, we made progress on various key technology developments.

As an example, our laser diode development team implemented a variety of wafer processing changes to improve our products' performance as well as improve our test and burn in yields.In the coming weeks and months, we will verify that these changes meet our reliability requirements as well as the long-term reliability requirements of the Telcordia standards for optical components.

These results will provide us the opportunity to enter the 5G front-haul market with a 25G laser solution that services up to 10-kilometer applications, enabling new design wins and new revenue.

This is just one of many laser reengineering efforts underway.Our laser technology supports over 15 unique laser configurations, most of which use our patented etch-faceted technology.

Our laser technology will target data rates from 100G to 400G and applications in the Data Center, 5G front-haul and mid-haul and various other high volume markets.I can provide a few general updates related to our RF power product and development activities.

First, our design team is doing a great job executing their new product plan, which now includes adding GaN-on-Silicon Carbide products to our portfolio. Second, our efforts to transition our GaN-on-Silicon technology to ST's 6-inch fab continue.

Capital equipment planning procurement and installation which is necessary to complete the process development all continue to progress.I would like to highlight that ST and MACOM still have a significant amount of work in front of us to complete the GaN-on-Silicon development.

And for this reason, we will announce the associated schedules and product introductions when we are further along in the project.

And third, using our existing 4-inch GaN supplier, we have made incremental progress on our 5G GaN-on-Silicon massive MIMO amplifier design and product performance.Our current 6 watt, 8 watt and 10 watt product performance is achieving improved results and is becoming increasingly competitive to LDMOS and GaN-on-Silicon Carbide.

Over the past six months, we have been reengineering the packaging, device matching and optimizing amplifier performance by developing new digital pre distortion or DPD test techniques.

Our goal is to finish these product designs and intersect the market with a compelling product at a compelling price.We believe the demand for massive MIMO amplifier products will grow in the years ahead. MACOM has a diverse business and customer base.

We stand in front of a multibillion-dollar SAM or serviceable addressable market with a unique and proprietary technology portfolio.

We recognize our revenues are small relative to our SAM and for this reason, we believe we have a tremendous opportunity to increase revenues, profitability and stockholder value in the years ahead.Our operations team continues to execute well on meeting customer commitments.

In fiscal 2020, the team will be focused on improving key metrics and performance of our wafer fab as we see opportunities to improve cycle times, lower scrap levels and improved inventory planning.During the quarter, operations kicked off a major SIOP or sales inventory operations and planning project with a long-term goal of improving the cross-functional planning of our inventory management and ultimately lowering our E&O.

These process improvements are expected to reduce inventory waste and we believe that the associated savings will drop right to our bottom line.

We expect to see benefits of these efforts in our fiscal 2021.In summary, we continue to improve all aspects of our business, including technology roadmaps, company positioning within the core three markets, and operational improvements.

I am pleased with the results to date, and we expect to continue improved performance as we move ahead.I'll note that we'll be attending the Optical Fiber Conference or OFC in San Diego in March during our fiscal Q2.

We will have some additional new products to introduce with the conference as well as some great product demonstrations at our booth.Jack will now provide a more detailed review of our Q1 financial results..

Thanks, Steve and good afternoon, everyone. Our fiscal Q1 results were another tangible step toward improving MACOM's overall profitability and cash flow. Most notably, we posted sequential improvements in revenue, adjusted earnings per share, and free cash flow.

This has been a company-wide effort, and I would also like to thank all of the MACOM employees who have been working hard to help achieve this.Revenue in the first fiscal quarter of 2020 was $119.1 million, up 6% sequentially.

The sequential improvement was driven by positive trends across our end markets, including growth from early 5G deployments in Telecom, healthy demand in industrial and defense as well as increases in Data Center.On a year-over-year basis revenue was down 21% from $150.7 million in fiscal first quarter of 2019.

Adjusted gross profit in fiscal Q1 was $63.7 million or 53.5% of revenue. Adjusted gross margin was up 50 basis points sequentially.

Gross margin improvement remains a key focal point for us.As Steve noted, we have a number of ongoing internal initiatives aimed at cycle time improvement, scrap reduction and operational efficiencies that we believe will result in incremental gains in gross margin for the course of fiscal 2020 and beyond.

Total adjusted operating expense was $50.7 million, consisting of R&D expense of $31.6 million and SG&A expense of $19.1 million.Operating expenses were down more than $300,000 sequentially. We incurred $1.2 million of restructuring charges in the first fiscal quarter associated with the restructuring plan we announced back in June 2019.

We anticipate approximately $2 million of additional restructuring expense remaining over the course of fiscal 2020 as we complete these actions.As I have previously noted, there are a few remaining items related to our June 2019 restructuring plan that we expect will provide additional OpEx reductions later in fiscal 2020.I would also like to note that from time-to-time our R&D expenses may include large expenditures associated with certain development programs.

We will continue to invest in new product opportunities while also aggressively managing our discretionary spending.Adjusted operating income in the first quarter was $13 million translating into 10.9% adjusted operating margin.

We see ample operating leverage in our business model for the remainder of fiscal 2020 as we expect revenue growth to continue and operating expenses to remain relatively stable.Depreciation expense for fiscal Q1 was $7.4 million and adjusted EBITDA was $20.4 million.

Fiscal Q1 adjusted net interest expense was approximately $7.6 million, down slightly from the fiscal fourth quarter of 2019.Our non-GAAP adjusted income tax rate in fiscal Q1 continued at 8% and resulted in an expense of approximately $400,000.

Fiscal Q1 adjusted net income was $4.9 million, translating into $0.07 of adjusted earnings per fully diluted share, utilizing a share count of 67.5 million fully diluted shares.Now, moving on to cash flow and balance sheet items, cash flow from operations was a highlight for our fiscal Q1 coming in at $37.7 million.

A primary factor behind the improved cash generation was lower working capital levels, led by an $18 million reduction in our accounts receivable balance.This is a direct result of our efforts to improve revenue linearity throughout the quarter which has allowed us to collect more accounts receivable within the quarter.

We feel this continued focus on monthly linearity will have other benefits and operational efficiencies such as reduced cycle times, lower expedited freight costs, improved production visibility and better inventory management.Q1 was a transitional quarter for us, and we do expect the trend of improved revenue linearity and working capital management to continue.

However, during Q2 we do not believe we will be able to generate operating cash flow at the same level we did here in fiscal Q1.We have taken numerous steps throughout the organization to continue to drive healthier cash flow, including focused capital spending, tight operating expense management and further working capital improvements.During fiscal Q1 capital expenditures totaled $4.2 million or 3.6% of revenue.

We anticipate CapEx in fiscal Q2 will be up from Q1 levels as a result of the timing of payments for certain capital investments.

We expect overall capital expenditures in fiscal 2020 to be below fiscal 2019 levels, and we continue to remain focused on achieving appropriate returns on capital that we deploy.Fiscal Q1 free cash flow was a positive $33.4 million as compared to a negative $13.6 million in Q4 driven by the combination of higher Q1 cash flow from operations and lower capital expenditures as previously discussed.Inventories were $106.9 million at quarter end down approximately $1 million sequentially.

Inventory turns were roughly flat to two times during the fiscal quarter. Inventory management remains an area of emphasis and we see opportunities for continued improvement in our inventory metrics going forward.Cash, cash equivalents and short-term investments were $210 million, up $33 million from $177 million at the end of fiscal Q4.

As a reminder, our short-term investments are comprised of corporate bonds and commercial paper and are classified as held for sale.Total long-term debt was $693 million, inclusive of finance leases. Our long-term debt of $655 million is covenant light it has minimal annual principal payments until its maturity in May 2024.

We also have an undrawn $160 million credit line available through November 2021.I want to note that fiscal Q1 was the first quarter in which we implemented FASB's new standard on lease accounting ASC 842. The adoption of this new accounting standard resulted in an increase in our assets and liabilities of approximately $38 million.

In summary, we are pleased with our financial progress in the first fiscal quarter of 2020. While there's still much more work for us to do in order to achieve our longer term objectives, we believe that we're off to a good start with positive momentum across the business.I will now turn the discussion back over to Steve..

Thank you, Jack. MACOM expects net revenue in Q2 fiscal 2020 ending March 27, 2020 to be in the range of $122 million to $126 million.

Adjusted gross margin is expected to be in the range of 53% to 55% and adjusted earnings per share is expected to be between $0.09 and $0.13 per share based on 68 million fully diluted shares.Our Q2 revenue projections include expectations that Telecom and Data Center end market revenues will be up and Industrial & Defense end market revenues will be flat to slightly down.

We are excited about the multiple opportunities in front of us and we are focused on execution and planning.I would now like to ask our operator to invite our listeners to ask any questions..

Thank you. [Operator Instructions] And our first question comes from Harsh Kumar with Piper Sandler. Your line is open..

Yeah. Hey, guys. First of all congratulations, solid execution. Good to see that positive free cash flow. A couple of the other companies are talking about Data Center getting better. We didn't see that in the December quarter in a meaningful way, but I think your guidance implies that it will be up in March.

I was curious, if you can give some color maybe why it didn't move the December quarter? And then perhaps what you're thinking specifically for that end market? And then I have a follow-up..

Yeah. I think that our – what we're seeing in the Data Center market is in line with industry. We are seeing a positive momentum in terms of booking activity and demand. Most of our exposure in the Data Center is on our 100G analog solutions that are generally for short-reach type applications. As we look into Q2, we see continued strength.

We think our sequential growth in the Data Center will be low, well, I'll say like above 10% sort of a low-teens type of sequential growth. But generally that end market behaved well to us. We're seeing the demand for our 100G products and we think there's some significant growth in front of us to come..

Our next question comes from Quinn Bolton with Needham & Company. Your line is open..

Hey. Let me echo my congratulations on the nice results and especially on the nice cash generation in the quarter. Steve, I wanted to come back. You had mentioned some new products I think it was GaN on Silicon the 68 to 10 watt.

And I'm just trying to get a sense of the applications for that and how those products may differ from what you're doing with STMicro for GaN on Silicon?.

Right. So just to remind everybody, we have a fairly robust power business. Most of it revolves around legacy bipolar transistor business, where you're talking about 50-watt and above type power levels. And we see that that's a stable market. It's typically in avionics defense type end applications test and measurement even.

And so part of our strategy in terms of product development is to make sure that as the new technologies come forward, such as GaN on Silicon or even GaN on Silicon Carbide that we address those same markets with a more relevant technology or a newer technology.So our strategy over the next year or two will be to build out our general power transistor as well as power amplifier business for this multi-market category.What we like about this market is the ASPs are high; the margins are generally very strong typically above our corporate average.

It's a low medium volume, high mix type of a product area. And its additive to the strategy that revolves around 5G and ST.But it's very, very different.

So, as you know the ST strategy is really taking our existing GaN-on-Silicon process and transitioning it to a 6-inch low-cost high-volume fab, specifically to address markets like massive MIMO and 5G..

Got it so, it's a different application. Thank you. The other question I had is you guys seem to be reporting strength on the Telecom side of the business driven by 5G. I think front mid-haul.Yet when we listen to Texas instruments and Xilinx reported here after the close. Both companies have talked about seeing slower activity on 5G.

Just wondering, if you might be able to help us reconcile, the strength you're seeing versus perhaps some of the weakness some of the larger players, in the space are seeing?.

Well, I think, a few things. Number one, we're very small relative to the size of the market. Remember, we're in front of a multibillion-dollar SAM. So our incremental growth in any period isn't necessarily representative of the market.

That's the first point I'd make.The second is, our Telecom end market is actually a large catch all for a variety of different submarkets. So 5G is one of them. But we have other submarkets that drive growth.

For example GPON, and I think I mentioned in the script that that was an area that was showing strength.But with that said, we are seeing new revenue, from new products in the 5G front haul market.

And we believe we're in a strong position with some of our products, some of our analog products to support that market.So, I guess I'll leave my comments at that, other than we are seeing the strength. We think that that strength will continue. We have a lot of different products that go into Telecom.

We talked about the high-power switches in the past, front-end modules of course for 5G radios. And then, the access market which is the GPON market.So, Telecom for MACOM is a very broad market. As we look into Q2, we think we'll see high single-digit sequential growth, coming from all these things I just talked about..

Thank you..

Thank you. [Operator Instructions] Our next question comes from Tore Svanberg with Stifel. Your line is open..

Yes. Thank you and congratulations on the strong results.

Steve, I apologize for making this comparison, but the previous management team at MACOM seemed to be really aggressive on GaN-on-Silicon.You just mentioned that perhaps with GaN-on-Silicon carbide, at least to me it appears that you're going to have a -- the more of a balanced approach when it comes to the different flavors of GaN.Is that the right way to think of it, or is there any other reason why you are starting to make more investments in GaN-on-Silicon Carbide?.

Rights, so I look at our business from a portfolio point of view. And we will have products that will run through our internal fab.

And we'll have products that we will go to the market and we'll use external fabs.And so, when we think about GaN-on-Silicon or GaN-on-Silicon Carbide or any other process whether it's high-power pHEMT or HBT or even bipolar, our strategy is simple.

We want to make sure our chip designers have access to the best technology, for the applications that they're focused on.About $50 million of revenue today is in Industrial & Defense. This is an end market that we sit in or contribute to that wants the best technologies.

And so, when we compare certain applications to the different GaN process technologies, there are many instances where GaN-on-Silicon Carbide will provide a superior solution.And so we want to provide our designers access to that process. So, I look at the opening up of the aperture of our GaN strategy as additive.

We're certainly not backing away from our goals regarding GaN-on-Silicon and developing a high-volume solution for a variety of markets including massive MIMO.There are some compelling attributes of GaN-on-Silicon in terms of ease of use for example in certain applications. So we're continuing to develop that.

We see it as a long-term activity as I pointed out. But I don't think you should interpret these actions as a strategy change, where we're replacing GaN-on-Silicon with GaN-on-Silicon Carbide..

That's really helpful. And my follow-up question is perhaps for both of you, as it relates to gross margin.

So you said you're taking some actions internally operationally to try and improve yields scrap and so on and so forth.Should we think about those initiatives kind of getting the company beyond the immediate goal of 60% gross margin, or is that kind of part of the march towards that long-term target?.

Tore, it's Jack. Those initiatives are getting us in line with that march towards improving margins. We know we had margins in the high 50s going back the past couple of years or so. So we're taking many of these initiatives to try and get us back in line there.We have posted sequential increases in our gross margins over the past couple of quarters.

And the expectation is that will continue. It's going to take some time as we work our way through it.

And once again as revenue recovers we think we've got more of an opportunity to expand from a gross margin perspective as well.I think the other area just to note is in addition to gross margin expansion from an operating margin point of view, we feel we've got sufficient leverage just based on our current OpEx structure and where we're going to have that really contribute to the bottom line..

Thank you. And our next question comes from Tom Diffely with D.A. Davidson. Your line is open..

Yes, good afternoon.

When you look at the fairly impressive outlook for high single low double-digit growth, is most of that coming from how you would describe as a market recovery versus the new products, or are the new products starting to have a meaningful impact on that?.

Yes. I think it's a little bit of both. And just to be clear on our guidance I think at the midpoint it's around 4% aggregate sequential growth. Some of the submarkets, so our smaller markets are growing faster right now such as Data Center and Telecom.

But I think it's – it really is a combination of both.There are pockets where there's market recovery such as in the Data Center. But there's other areas where we're winning market share.

And some of that's due to the great work the company has been doing over the past few years including developing products for long haul, adding to that product set for example, linear TIAs, modulator drivers that are running at higher data rates.So our goal as a business is to more rapidly introduce products to capture the market opportunity.

And so what Jack and I and the team are doing are really focusing on, how do we move products out the door at a faster rate, whether it be a gallium arsenide MIMIC that we run in our foundry, whether it's a laser diode that we want to sell into the Data Center or whether it's a massive MIMO amplifier for 5G.So I think the theme around MACOM's growth will at least in the next year or two will be centered around our ability to launch products for these very large markets that are demanding the products now..

Okay great.

And then when you look at the ramping level of new product release, are there certain – is there a certain end market where you're initially focused higher margin markets, or is this truly across the board?.

So we – back in September we actually reorganized our engineering organization into six different groups which were primarily aligned by technology. Those technologies in some instances are very focused on one market. In some instances they serve many markets.

And so each one of these engineering organizations has a product development plan.And I would say generally speaking there's a continuum of products that have lower margins and products that have higher margins depending on the performance of the product and the end application.

And so over the long term as a part of our strategic planning, we do want to increase the gross margins of the company.And while we can work on making improvements with the operation of the business and whether it be yields and production or better designs that have more margin during production that will get us so far.

Then the next step is really launching products that command higher gross margins because the customer's willing to pay a higher price.

And so we are going back to our strategy and we are reviewing the end markets that we're in, we're reviewing the markets that we're not in and we're asking ourselves the question, how do we get our margins above 60%? And the answer will really be coming from what products we choose to design.Now with that said, as Jack highlighted here just a moment ago, one thing that's tremendous strength for MACOM is we have incredible manufacturing power and leverage.

And you saw a glimpse of that really looking from the fourth quarter to the first quarter, where we just had maybe 6% revenue growth but we had a 50% increase in EPS, 56% in that range.And so part of what we want to do as a management team is to make sure that we capture the opportunities that drive shareholder value, which ultimately means driving earnings up.

And so there's lots of different ways to do that. It can be by launching more high-margin parts but it can also be a result of launching say lower or – lower than let's say corporate average margin parts but the revenue stream associated with that is tremendous.

And so we will certainly look at all of these strategies and you can be sure that our underlying theme will be to drive shareholder value which means driving earnings up..

Thank you. Your next question comes from Tim Savageaux with Northland Capital. Your line is open..

Hi, good afternoon and congrats on the results. Wanted to focus in on your Telecom growth in the quarter. And to the extent that's somewhat on driven sounds like mostly 5G driven and within that probably mostly front-haul, mid-haul. But if you have a kind of comment on that I'd like to hear it.

To what extent, are you able to ascertain kind of what sort of end markets are driving that growth? I assume China is a significant one there. And I wonder if you can give us an update on kind of where you're standing with Huawei these days in that regard? And then I'd like to follow-up..

Yes. Well, your initial comments are accurate and correct regarding what you believe the growth is coming from. It is primarily coming from basically 5G front-haul in the chips associated with that end application. It's primarily a China end market.

Although there is a small contribution coming from other overseas markets that are outside of China.Regarding Huawei. You know Huawei as everybody knows went on the entity list back in May. Prior to that, our revenue at Huawei had been ramping up. They had not in recent years achieved a 10% revenue level, but they were climbing up to that point.

And then in the middle of May that changed. And since then we've seen well number one a vast majority of the products that we we're selling to Huawei we're no longer selling to Huawei because of the export restrictions. But there is a small subset that we are allowed to sell to them and we've been doing that.

And I would say, over the past seven months, the revenues to Huawei have effectively been declining or flat.And so when we do our AOP planning and we look at our future activities, we sort of take the associated revenues out of our modeling and consider that upside. But the general trend has been flat really over the last two quarters, but declining.

And so again, when I look at that and think about our business at large, I would say clearly Huawei is a key player in the Telecom space, but our strategy has to be -- to grow beyond Huawei and make sure that if we lose a key customer that we're still strong enough to be profitable and to grow.

And that's where the diversity of our business comes into play.We have thousands of customers. We have hundreds of product lines. We don't have a lot of customer concentration relative to our peers and so, we think this is a strength. But we are certainly keeping an eye on Huawei.

We're not really engaged with them at this stage other than selling a very small subset of what we were previously selling them. And all of our forward-looking planning is sort of ex-Huawei until things change..

Got it. And a follow-up on the front-haul side. You made some comments around 25-gig lasers into that application though. I'm not sure, I caught the timing.

Assuming your kind of front-haul revenues today are more HPA driven, what could the laser part add to that? And when might you expect that to ramp?.

So you're right. It could be very additive. We didn't specifically talk about the timing of that other than to say that we've just gone through a process update and now we're going through a qualification phase. So, the best thing to do at this stage is to wait for updates on this -- on the timeline.

I can say that it's going to take at least a quarter or two to get to the point where we're comfortable talking about ramps or product introductions or things like that. We still have a fair amount of work to do internally, so no 25G laser revenue for front-haul in the near term..

Thank you. And our next question comes from Harsh Kumar with Piper Sandler. Your line is open..

Thanks for follow-up question. Jack, I was curious if you could talk about how we should think about OpEx. Your OpEx was actually kind of held and then actually went down a little bit, while you grew your revenues. And I think you made some comments that you're going to be reigning it in or sort of holding it pretty tight.

Is that in context to absolute dollar terms, or is that in as a percentage of sales for the rest of the year?.

Yes, we're focused on managing all the operating expenses, Harsh. There can be some ups and downs depending on some R&D expenditures as I had noted earlier. We're focused on the dollars as we work our way through. And we'll continue to do that and aggressively manage it..

Thanks..

Thank you. And I'm showing no further questions at this time. I'd like to turn the call back to Mr. Steve Daly for any closing remarks..

Thank you. In closing, Jack and I would like to thank our employees for their efforts throughout the past quarter. Have a good evening..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day..