PCTEL, Inc. Q4 2008 Earnings Call Transcript

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 |  About: PCTEL, Inc. (PCTI)
by: SA Transcripts

PCTEL, Inc. (NASDAQ:PCTI)

Q4 2008 Earnings Call Transcript

February 26, 2009 at 5:15 pm ET

Executives

Marty Singer - Chairman and CEO

Jack Seller - Director of Marketing

John Schoen - CFO

Robert Suastegui - President, General Manager, Global Sales

Analysts

Matthew Robinson - Pacific Growth Equities

Mike Crawford - B. Riley & Company

Patrick Morrell - Robert W. Baird & Co. Inc.

Robert Katz - Senvest

Operator

Ladies and Gentlemen, thank you for standing by and welcome to the PCTEL fourth quarter 2008 conference call. (Operator’s Instructions) As a reminder this conference call is being recorded for replay purposes.

I would like to turn the call over to the Jack Seller, Director of Marketing.

Jack Seller

Thank you for joining us today, February 26, 2009 for the PCTEL’s financial result conference call for the fourth quarter 2008

On today’s call will be Marty Singer, Chairman and CEO and John Schoen, Chief Financial Officer and Bob Suastegui, Vice President of Sales.

Today's call will contain forward-looking statements within the meaning of the Federal Securities Laws. Comments concerning our future financial performance and expectations regarding the future growth of our wireless product business are forward-looking statements within the meaning of the Safe Harbor.

Actual results may differ materially from those projected as a result of risks and uncertainties, including the ability to successfully grow our wireless product business, implement new technologies and obtain protection for the related IP.

Additional discussion of these and other factors affecting the Company’s business and prospects is contained in our periodic SEC filings. These statements are made only as of today and we disclaim any obligation to update information to reflect subsequent events.

I would now like to turn the conference call over to Marty Singer.

Marty Singer

Thank you, Jack, and good afternoon to all of you. For those of you who have not had a chance to read our press release, I would like to recap some of the non-GAAP highlights from the quarter on a continuing operation’s basis.

We achieved revenue of $18.3 million. Gross profit margin was 47%. Non-GAAP operating margin was 12%. Non-GAAP net income was $568,000 or $0.03 per diluted share. Cash and Investments were $78 million. I would also like to add that in January PCTEL made another small strategic acquisition. We acquired Wi-Sys Communications, a Canadian-based company specializing in GPS antenna and receiver technology. I will discuss that acquisition later in the call.

At this point I would like to turn the call over to John Schoen, our CFO, who will discuss our financial performance in some detail. Later, I will comment on our progress over the past quarter and what we see in the future. John?

John Schoen

Thank your Marty, good afternoon or evening to everyone. Our investors will note that the Company presents non-GAAP financial information in its earnings releases. The Company believes that the presentation of operating profit and net income excluding restructuring charges, non-cash based expense including stock and stock option based compensation, amortization, impairment of intangible assets and goodwill related to the Company's acquisitions, gains or losses on sale of product lines and non-cash-based income tax expense provide meaningful supplemental information to both management and investors.

The non-GAAP financial analysis reflects the Company's core results and facilitates comparisons across reporting periods. For more information on our non-GAAP financial results and reconciliation to GAAP measures, please refer to our earnings release that has been filed under Form 8-K with the SEC. The release can also be found on our website at www.pctel.com under Investor Relations. My discussion of the results will be based on our non-GAAP financial results.

As a reminder, the Company closed the sale of its Mobility Solutions Software Group, or MSG, to Smith Micro on January 4 of 2008. The Company's financial statements have been revised to reflect MSG as a discontinued operation. My discussion of the financial results will address continuing operations.

Let us turn to revenue. Fourth quarter 2008 revenue from continuing operations was $18.3 million, compared to $19.1 million in the fourth quarter of 2007, a decrease of approximately 5%. Revenue was lower for both scanning receivers and the antenna products.

Scanning receiver revenue was lower on reduced carrier capital expenditure levels worldwide. Antenna revenue was lower in both the distribution and OEM channel.

Non-GAAP gross margin from continuing operations for the fourth quarter was 47% versus 49% in the same period last year. Both scanning receiver products and antenna products experienced decline in margins versus the same period last year as a result of less favorable product mix and lower volume over fixed costs.

With regards to our operating expenses, fourth quarter non-GAAP Research & Development and SG&A from continuing operations were $6.6 million, down $200,000 from the same quarter last year. Research & Development expense was higher by $300,000 on engineering investments in both scanning receivers and antennas. For example, this is the first full quarter of expenses related to our new antenna design team in China.

SG&A expense is $500,000 lower through efficiencies resulting from our decision to divest our software business, and better control of our sales and marketing expenses. The connection royalty of $200,000 was lower than last year by $50,000, as the contractual quarterly cap is lower in 2008.

Non-GAAP operating income from continuing operations in the fourth quarter was $2.1 million, or 12% of revenue, compared to $2.9 million, or 15% of revenue, in the same period last year. The results reflect lower gross profit margin on lower revenue partially offset by lower operating expenses.

Let us turn to other income. Other income and expense was an expense $1.5 million in the fourth quarter, compared to income $200,000 a year ago. There are two factors contributing to the significant decline. As I will outline in more detail in the balance sheet review, we are heavily invested in Federal Government agency paper and pre-refunded municipal notes for safety. The yields on that move to safety are very low compared to the commercial paper we were invested in a year ago before the credit market turmoil.

Secondly, the Company recorded a $1.7 million mark-to-market loss in the quarter, from the Company's remaining investment in the Columbia Strategic Asset Portfolio, an enhanced cash funds sponsored by Banc of America. I will discuss the Columbia fund in more detail during my review of the balance sheet and income statement guidance.

With regard to the income taxes, the non-GAAP income tax rate is 17% and we expect it to remain at that level in 2009. Non-GAAP net income from continuing operations for the fourth quarter 2008 was $568,000, or $0.03 per diluted share compared to non-GAAP net income of $3.1 million or $0.15 per diluted share in the fourth quarter of 2007.

To summarize the differences, net income from continuing operations was lower from decreased gross profit on lower revenue that was partially offset by lower operating costs. In addition we recorded a non-operating mark-to-market loss on our investments.

Now let us turn to the balance sheet. Cash and investments ended the quarter at $78 million, of which $15 million is classified as long-term. This is a sequential decrease of $2 million from the third quarter this year. The largest contributing factor to the change was the Company's repurchase of 497,000 shares of its common stock during the quarter for approximately $4.5 million, a $1.5 million loss on investments net of interest earned which was partially offset by $4 million of cash generated from all other sources.

Of the roughly $78 million of cash and investments on hand at the end of the fourth quarter, the Company had approximately $1 million in operating bank accounts, $44 million in AAA money market funds that are in turn invested 100% in short-term US Federal Government agency securities, or bank repo agreements collateralized by the same, $24 million in tax-exempt pre-refunded municipal notes, and $8.6 million in the Columbia Strategic Cash Portfolio Fund. The Columbia Fund is in the process of liquidation. Since yearend, we have received an additional liquidation payment from Columbia and the current balance stands at $7.2 million.

Now we would like to discuss the guidance for the first quarter 2009. Marty will discuss guidance as well in his prepared remarks.

We anticipate revenue for the first quarter to be in the range of $14 million to $15.5 million. The Company is seeing weaker order booking rates due to the global economic environment specifically from our major antenna distributors. We are also postponement or delay of some important OEM entire projects.

Non-GAAP gross profit percent for the first quarter is expected to be in a range of 45% to 47%, as a result of less fixed leverage at lower volumes.

Non-GAAP, Research & Development, and SG&A from continuing operations are expected to be between $7.1 million and $7.3 million for the first quarter off sequentially from the fourth quarter due to Wi-Sys acquisition, anticipated trade show expense and a slight increase in R&D spending. The connection royalty is expected to be 200,000, unchanged from the fourth quarter 2008.

Other income is expected to range between income of $200,000 and $400,000 in the first quarter. Before any potential mark-to-market losses from our investment in the Columbia Strategic Asset Fund. The quarter to date mark-to-market loss due today on our Columbia investment is immaterial.

As I mentioned before, the non-GAAP effective income tax rate remains unchanged at 17%. That concludes the financial review. I would like to turn the call over to Marty for his summary comments.

Marty Singer

Thank you, John. John’s review of our financial turbulence sends a story of PCTEL in this environment. Although there was such an add in the impacted revenue growth there is still exciting growth prospects in several markets and we have been pro-active with respect to operational effectiveness, cutting OpEx in 2008 and getting to a cost structure that permits us to deliver profits in the challenging environment.

The $78 million in cash and investments that we have maintained in our balance sheet also distinguishes PCTEL from other companies that are dealing with the global recession.

Let me address the cost structure. During 2008 we have reduced G&A from 2007 levels as a percent of revenue by 3% from 13.3 to 10.5. During the same period we have reduced sales and marketing costs by 1.6% from 14.5% to 12.9% of revenue while maintaining our gross margins in the 46% to 48% range.

We continue to closely manage our expenses. In 2009 my executive team and all significant managers will be accepting either a reduction in pay or a salary freeze. It is likely that the wage freeze will extend to a broader employed population. We have identified areas that we can operate with fewer resources and we have taken limited focused actions in the first quarter.

Although the current recession creates challenges we believe that there are outstanding opportunities for PCTEL in this environment. As previously announced we acquired Wi-Sys, a Canadian based provider of GPS antennas for $2.1 million. Wi-Sys which will be fully integrated into PCTEL operations has 10 significant customers that should be interested in PCTEL’s broad antenna portfolio. There are opportunities in defense, agriculture, and asset tracking that we can exploit as we focus on expanding our footprint in key GPS markets. We have been pleased with our progress to date in achieving our revenue targets with this new product line.

Our cash and investments position currently $78 million with no debt puts us in an enviable position to navigate through this recession and to identify and acquire additional technology and product assets. We are working actively with our investment bankers to identify companies whose future could brighten with adequate capitalization and help us to expand our market penetration and footprint. We are looking at both antenna and scanning receiver companies and hope to make at least one additional acquisition in 2009.

We are bullish on our organic opportunities as well. It is easy to lose sight of our sales accomplishments under the shroud of recessionary gloom, but we are excited about several developments. For example, in the fourth quarter, we made a significant sale of scanning receivers to China Telecom and signed an OEM agreement with significant infrastructure vendors in that contract. This progress should yield great benefit as China’s cellular market continues to expand and become increasingly complex with multiple technologies and congestion.

Our scanning receiver business launched the new CDMA, EVDO version of its flagship SeeGull EX scanning receiver which immediately gained traction in the United States and in Latin America. We recorded other important wins with CALA based Nextel Partners and we made a clarified sale in Chile.

We continue to sell insight solutions. The software associated with our scanning receiver products and in this past quarter, we penetrated both Thailand and Indonesia with our solutions. Antenna products group also posted major sales accomplishments in the fourth quarter. We shipped over 3,500 WiMAX antennas in the international markets, including Russia, leveraging our relationship with both Alvarion and Motorola. We landed a major GPS contract in China for network timing and another for defense applications.

Surprisingly, given the litany of discouraging news, we achieved rapid sales to Motorola in the fourth quarter and was just 18 months ago that we invested in a Director of Global Accounts and we believe that these results were flat on the wisdom of that investment.

There is also some evidence suggesting that our PCTEL MAXRAD and Bluewave antenna brands continue to gain recognition. We added five new distributors and nine new OEMs in the fourth quarter and Bluewave Yagi antenna product line displays the key competitors that OEM and systems integrators. We have been satisfied with our progress in integrating and expanding our Bluewave product line since our acquisition last at April.

With respect to development, for those of you who attended the GSMA, Mobile World Congress in Barcelona, you know that we unveiled several new programs but notably our LTE scanning receiver and our new RAP technology for WiMAX and Wi-Fi and our expanded GPS antenna product line.

The new LTE scanning receiver has already been integrated into the testing measurements solution provided by one of our key OEMs and we have great expectations for this industry leading product. All of our new products were well received and should position PCTEL for strong performance as the economy recovers.

As John already mentioned, the economy uncertainty and the state of Telecom market makes it extremely difficult to offer year end guidance. We will continue to guide the revenue and gross margin results in one quarter out and currently project stable gross margins and revenues as John already mentioned up $14 million to $15.5 million. This forecast reflects what we see as a 15% to 25% deploy in distributor demand for antennas as well as some collateral weakness associated with certain OEMs experiencing delays in new technology and network rollouts.

Although we believe that the industry is experiencing a broad decline, our OEM antenna business remains strong with key customers and our scanning receiver business continues to gain market share. The decline in the distributor sales reflects almost exclusively. The decline in government purchases at local state and federal levels as their budgets are strained.

Recent earnings announcements from other industry participants suggest that we are not alone in experiencing downturn revenue. These are challenging times for sure but no more so than the post bubble environment of late 2001 to 2003. We have successfully navigated to a number of economic and competitive challenges and well this is certainly more challenging than anything we have seen in awhile, we believe that our strong product lines, good market coverage and excellent cash position, we are well positioned to weather the current economic challenges and at the same time build our business to acquisition with strong organic programs.

We are prepared, experienced, and positioned favorably navigate to these challenges. It is important in these times to manage to a long range horizon with a strong sense of mission and commitment to our technology leadership and market expansion. We will manage through but the not to near term limitations. We have set aside 30 minutes for your questions. Operator?

Question-and-Answer Session

Operator

(Operators Instructions) Your first question comes from the line of Matthew Robison - Pacific Growth Equities.

Matthew Robison - Pacific Growth Equities

First, Marty, you mentioned the state and local government, you did not really say much about the outlook for RFS although you described the wins. How you see the business for scanning receivers in the few months?

Martin Singer

Well, first, thanks for joining the call Matt and also thanks for the invitation to speak at your conference in March at Red Bush in New York.

What we see is continued strength in that business. We doubt if it will be a growth year for us, but the first quarter is going along reasonably well in scanning receivers and as we have discussed before on these calls there are certain aspects of a recession that are not necessarily bad for scanning receivers. In other words, if the CapEx budgets are for major operators decline during a period of financial pressure then the engineering teams for those carriers are put in a position of trying to get more out of less or more of the same. They try to optimize the performance of the existing cellular networks, and when they do that they need tools, and those tools are the types of test equipment sold by a Knight and SwithQual and [TEMs] and others and we provide scanning receivers to those vendors.

Matthew Robison - Pacific Growth Equities

Okay. You mentioned the Motorola sales have been so strong in the fourth quarter. Should we expect that to continue or would we likely see some weaknesses associated with what you are seeing for this season with state and local government?

Martin Singer

It is a little bit different. For example, one of the areas of strength in the fourth quarter was Canopy and then we also get some Motorola Israel business and that has to do with their projects for different companies with intelligent devices on tracks and so on at communication systems, LMR systems for those purposes.

Canopy has been a beneficiary of the delay in WiMAX, and while there are economic pressures on those types of operators, we will see more Canopies throughout the rest of the year. One thing I will tell you is that there were some projects that were delayed. For example, we talk last year about Axtel where it rolled out initially as sort of data only network and then had to be refreshed as a data and voice network. We see those issues getting resolved and we think that networks like Axtel that were in that situation will start to deploy and utilize the antennas.

Matthew Robison - Pacific Growth Equities

Those are WiMAX networks I guess.

Martin Singer

Right, so, but, you have to remember when we are talking vendors like Motorola and Alvarion. We are not talking about cellular. We are talking broadband wireless and there are different dynamics there.

Matthew Robison - Pacific Growth Equities

Okay. John, can you comment on operating cash flow and CapEx? It looks like your operating cash flow is pretty strong but there was also pretty substantial increase in taxes payable and accounts payable. Can you comment on those items and how you see cash for the current quarter?

John Schoen

Yes, I would expect cash to be plus or minus a million of $78 million. What we are doing is as the revenue comes down; we were already seeing a decrease in our receivables bringing cash in, but as of today I am sitting at $77.5 million in cash versus the $78 million I ended with. So, plus/minus zero is where I expect to end the quarter.

Matthew Robison - Pacific Growth Equities

Plus/minus one.

John Schoen

I am sorry, yes. Plus/minus one is with very little change during the quarter.

Matthew Robison - Pacific Growth Equities

Yes. I know you are very good at managing cash but that is a lot of precision.

Martin Singer

It is good I am here to help John out with those math questions.

Matthew Robison - Pacific Growth Equities

So, what were the operating cash flow and the CapEx?

John Schoen

CapEx, plus or minus a couple of tenths runs about 4% of revenue in any given quarter, and what was the other question?

Matthew Robison - Pacific Growth Equities

Operating cash flow.

John Schoen

On operating cash flow, I did not work out all of it but it is pretty close to that $4 million. We did a pretty good job of mining the working capital balance sheet with the sequential decline from Q3 and Q4 and then they will drop right in operating cash flow.

Matthew Robinson - Pacific Growth Equities

Okay, alright. That is it for me for now.

Marty Singer

We look forward to seeing you in New York.

Matthew Robinson - Pacific Growth Equities

Glad you are going to make it. You are on March 12, right?

Marty Singer

Yes, I am, the 12th.

Operator

Your next question comes from the line of Mike Crawford - B. Riley & Company.

Mike Crawford - B. Riley & Company

You mentioned the scanner receiver contract with China Telecom, are you working with the other two major carriers in China?

Marty Singer

We are active in all of the bids there but we will prefer not to talk about our progress in either one of those. It is a highly competitive situation.

Mike Crawford - B. Riley & Company

When are those bids expected to be determined?

Marty Singer

There are bids for different aspects of network tools going out all the time. Bob, do you want to comment at all?

Robert Suastegui

My understanding is that the tenders are out there and that the expectation is that within the next 60 to 90 days that they are going to come back with further request but other than that, they have been very, very quiet to specifics on the timing.

Mike Crawford - B. Riley & Company

Maybe further if you were to win some of these, whether you expect that to be meaningful boost of revenues in the back half of the year?

Marty Singer

Could be.

Mike Crawford - B. Riley & Company

Okay and kind of a related question. I know you are only guiding up to one quarter at a time but what does the bottom look like in this business? Do you think you will know when it is occurring or if it is occurring now or are you expecting things to get worse?

Marty Singer

I personally do not expect things to get worse. I think that during our first quarter, we are feeling the full brunt declining tax revenues and that in turn is being felt by the large distributors particularly in the US and I think there is also been a decline in visibility for some major projects I think will start, I hate to give in to the same business as everybody in Congress and administration about forecasting the end or the bottom or whatever but I do believe that we have some pretty good opportunities that will helpful in the second half of the year.

Robert Suastegui

This is Bob Suastegui. These are challenging times, no doubt but let me assure you that we do have a very robust sales funnel that the sales organization and the product organizations are working on. We fully expect to be able to convert many of those sales funnel opportunities within the next 9 to 12 to 15 months.

Mike Crawford - B. Riley & Company

Okay and so with, just turning back to the guidance, I think if you take the low end of your guidance, you are coming up to about $500,000 to $1 million in EBITDA. So you said, you did mention that operating expenses are going to be up this quarter. I mean is there a room to cut much further into your fix cost now to get rid of those if there is a kind of a new reality, a new revenue reality?

Marty Singer

We have taken action and we are taking additional action and we have some alternatives for the second quarter if this continues and I think that if you followed us for a while, you know that that is a management team that has been able to find ways to cut cost when business condition require reductions.

Mike Crawford - B. Riley & Company

Okay, great and then final question is with the share repurchase early in the quarter, that part of your diluted countdown the $17.5 million, if your price were to stay around here, where would you expect your diluted share account be in Q1?

John Schoen

Given that we do our annual grants of equity in the March timeframe, it will creep up maybe 200,000 shares, 77 maybe.

Operator

Your next question comes from the line of Ken Muth - Robert W. Baird & Co.

Patrick Morrell - Robert W. Baird & Co. Inc.

This is Patrick Morrell in for Ken. I am just kind of interested; you talked about some weakness in public sector antennas. Do you see any hope that maybe the stimulus package might give a boost to that sector?

Marty Singer

Absolutely. As a matter of fact, one of the things that were specifically called out in the president's stimulus package was to focus on smart meters as an example. Part of utility reading meters, part of SCATA applications that could be an advantage. I also think that the general shot in the arm into state and local budgets from the stimulus package should give some relieve and should result in some confidence in spending by state and local entities. So, we are hopeful that that will make a difference in the later part of the year.

Patrick Morrell - Robert W. Baird & Co. Inc.

Okay and then just, we all know it is fairly difficult out there. I am just kind of interested if you could give a little tip of how your orders trended over the quarter. Did you see them continue to deteriorate or is there some stabilization there?

Marty Singer

We saw weakness from the distributors from the beginning of the calendar year and it has remained weak. Everything else has been in the category of okay. It really is the major North American distributors, little bit in South America that has been the big disappointment.

Operator

(Operator's instruction) Your next question comes from the line of Robert Katz - Senvest.

Robert Katz - Senvest

I have a question, how did revenue breakout between scanners and antennas this quarter versus last?

John Schoen

Well, we speak to relative changes. We typically do not breakout that because it is killer competitive information but as I said before, they both showed declines year-over-year but I do not want to get into specifics because people can back in into those numbers and most of our competitors are private companies that do not have to tell us what there is.

Marty Singer

I will say that in our scanning business, Robert, in the past our really strong quarter has been the third or fourth quarter. This year, our really strong quarter was the second quarter. We get wimpy orders and so although scanners were down in the fourth quarter year over year, the overall year was huge increase year-over-year and we had an outstanding year in that area.

Robert Katz - Senvest

Right and the weakness in Q1 is coming more from antennas and scanners?

Marty Singer

Yes and specifically…

Robert Katz - Senvest

The LMR.

Marty Singer

The distributors and LMR.

Robert Katz - Senvest

And do you think that your sales into distributors is slower than sales relatively in Q1?

Marty Singer

Say that again, you broke up a little bit there.

Robert Katz - Senvest

Do you think that are under shipping the real and demand in Q1?

Marty Singer

No, not at all. We get access to the sell-through data from our close distributors and it is clear that they are challenged as well.

Robert Katz - Senvest

Okay. So, the inventory in the channels is not really coming down that.

Marty Singer

That is one of the issues as inventory in the channels.

Robert Katz - Senvest

Right. So the Q1 does not solve that issue.

Marty Singer

Correct.

Robert Katz - Senvest

And how much did you spend in your acquisition and how much revenue, what size of company was this?

Marty Singer

We spent $2 million and then $2.1 million all in with the expenses and so on and we could do anywhere, I think we gave a general range of $2, $3 or so and it could be better than that but this is an exciting area for us not just because of the absolute revenue but for two other reasons. GPS tends to have higher gross margins than our other antenna products and with this acquisition of Wi-Sys, we really developed the opportunity to build a strong product family and specialization in GPS and GPS is going to continue to be one of our focus areas. We are looking for other acquisitions in that space.

Robert Katz - Senvest

So you said that is about $2.3 million revenues?

Marty Singer

Throughout, yes that is reasonable.

Robert Katz - Senvest

Okay and at what point does LTE impact your business or..?

Marty Singer

It could impact this year. As we said earlier in the call, we demonstrated at mobile world congress our LTE scanning receiver and we talked to a few of the LTE operators who may have a need for that this year. When you deploy a network and you still do not have mobile devices, you need scanning receivers so the base stations can talk to something and the engineers can get feedback on how the network is performing so we are hoping to get some positive financial returns from our LTE investment this year. We also think longer term but not likely this year the remote electrical tilt antenna that we have designed with this innovative phase shifter for WiMAX will be something that we can apply to LTE but in the early stages of deployment, having the full round with cell sites either through tilt or azimuth is not going to be much of a requirement.

Robert Katz - Senvest

Okay and WiMAX seems to be doing okay for you.

Marty Singer

WiMAX is doing okay in the area of point to point and point to multipoint. So, point to point would be all year back haul applications; point to multipoint would be dominantly the last mile application where WiMAX is the substitute for cable but I think as we all know from companies that are discussed in the newspapers a lot and from knowledge of deployments by major infrastructure providers that mobile versions, fully mobile versions of WiMAX have been very slow to take off. You still see some flux in the 16e standard and right now, that is a distant third application.

Robert Katz - Senvest

Do you foresee LTE becoming a much more meaningful business for you than mobile WiMAX?

Marty Singer

Well, I would say oh-oh in terms of mobile WiMAX. I would have to say yes, I mean LTE will look more like cellular. WiMAX will look like something different.

Robert Katz - Senvest

But again that is more of a 2010 story on the LTE being meaningful?

Marty Singer

Well I think that you will see LTE scanning business being immediately important whereas there is not a, you do not really need scanning receivers for fix networks. In your point to point, there is limited demand. Now, there is some demand, there are some applications that are important but the applications for scanning receivers are far greater when you have a fully mobile network and LTE is going to really come out of the blocks as a fully mobile network and they will need to begin the testing of that in trial networks this year.

Robert Katz - Senvest

Okay, when you reference the 3500 WiMAX, was that antennas?

Marty Singer

Yes. With scanning receivers, we will report a different revenue line, Robert, yes that would be antennas.

Robert Katz - Senvest

Antennas, and do you have LTE antenna opportunity?

Marty Singer

Not really, not in the near future. As I have said, ultimately when there is demand for a remote electrical tilt, we may hop into that but we will leave the base station/cellular antennas largely to others. Now, I will tell you there is an LTE opportunity for us but it is in GTS and opportunity is for timing antennas.

Operator

You have a follow up question from the line of Matt Robinson - Pacific Growth Equities.

Matthew Robinson - Pacific Growth Equities

Did you say interest income $200,000 to $400,000 this quarter?

John Schoen

I did.

Matthew Robinson - Pacific Growth Equities

You think you can sustain that level this year?

John Schoen

It all depends on the mark-to-market adjustments that we get out with Columbia.

Marty Singer

I think what John said was $200,000 to $400,000 without knowing yet what the mark-to-market adjustments will be from Columbia.

John Schoen

Right now, quarter to date plus or minus $20,000, I am actually up a little bit but that number can move $100,000 a day.

Matthew Robinson - Pacific Growth Equities

Yes. What do you think you are going to pay any taxes this year?

John Schoen

Well, whatever we, I have feeling from a tax return basis, we will be very close to zero. That is the previous guidance number we had given and then what I see for the Wall Street analysts in revenue. So what I would do is if I do end up with a GAAP example a GAAP loss or a non-GAAP, this should continue, I will get a full tax credit because I will be able to carry it back to 2008. So, that is 17% tax rate we will hold whether I make money or loss money on a non-GAAP basis, either it is a credit or an expense.

Operator

We have no further questions at this time. I would now like to turn the call back over to Marty Singer.

Marty Singer

Thank you, Nicole. Well, I want to thank all of you for joining us on this call and webcast. We are planning to attend the Wedbush-Morgan Management Access Conference for Micro-Small-Mid-Cap Companies in New York on March 12 and also the B. Riley 10th Annual Las Vegas Investor Conference March 18th and we hope to see many of you at those events. Thank you and we look forward to updating you on our next earnings call.

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