Executives
JoAnn Horne - Investor Relations - Market Street Partners
Guy Gecht - Chief Executive Officer
John Ritchie - Chief Financial Officer
Analysts
Shannon Cross - Cross Research
Richard Gardner - Citigroup
Keith Bachman - BMO
Electronics for Imaging, Inc. (EFII) Q1 2009 Earnings Call April 29, 2009 5:00 PM ET
Operator
Good afternoon, my name is Tim and I'll be your conference operator today. At this time I'd like to welcome everyone to the EFI First Quarter 2009 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there'll be a question-and-answer session. (Operator Instructions).
I'll now turn the call over to Miss Horne, Investor Relations for EFI.
JoAnn Horne
Thank you operator and good afternoon everyone. I have with me here today Guy Gecht, EFI's CEO and John Ritchie, our CFO.
Before we begin the prepared remarks let me review the Safe Harbor statement. Please note that during the call and during the question-and-answer session that follows the company will be making many forward-looking statements. Each of which involves a number of risks and uncertainties. Statements other than statements that are historical facts including words such as anticipate, believe, estimate, expect, consider and plan and statements in future tense are forward-looking statements.
The statements that could be deemed forward-looking statements include but are not necessarily limited to, statements regarding our cost reduction effort, steps to be taken to mitigate the impact of the current environment, GAAP net-income estimates, statements that are non-GAAP net income, statements about our non-GAAP net income and adjustments, our target operating expenses and our expectations related to our business segments and products.
Past performance is not necessarily indicative of future results. Forward-looking statements are subject to certain risks and uncertainties that could cause our actual future results to differ materially or cause a material adverse impact on our results. For further information please refer to the risk factors discussed in EFI's SEC filings; including but not limited to the Annual Report on Form 10-K as amended, the quarterly report on Form 10-Q, a Form 8-K filed with the SEC today and the attached press releases.
The company recommends that you read these documents in conjunction with the review of our financial statements. For your convenience the company has posted slides on the website on the IR section at www.EFI.com giving an overview of much of the information the company will cover today. We undertake no obligation to update any forward-looking statements or information discussed today.
I'll now like to turn the call over to our Chief Executive Officer, Guy Gecht. Guy.
Guy Gecht
Good afternoon. Our first quarter 2009 performance was in line with preliminary results we provided a few weeks ago. Revenues were $96 million with a non-GAAP net loss of $ 0.08 per share.
Our first quarter is always a seasonally low period, but as anticipated this was exaggerated by the ongoing global economic slowdown. We saw the same trends we reported in the Q4, the weakness in retail, marketing and advertising is directly impacting our customers. This is compounded by the difficulties in obtaining credit to finance equipments purchased by those customers who do want to buy new equipment.
As committed, we took steps to extend the cost cutting to respond to the weaker than anticipated revenues. Our operating expenses for Q1 were $59.4 million, which was significantly below the guidance we provided. Additionally for the second quarter, we were targeting operating expenses approximately 20% lower than the same period last year. Reducing cost to this level was very challenging process. But we have been very strategic to ensure it will not significantly hurt our ability to develop market sales and support innovative new products and maintain our strong market position.
Let me turn to the specific business segments. Our inkjet business has been the most severally impacted by the economic slowdown. Continuing the trends, we saw in Q4 the segment of our business was down 40% year-over-year. The same three issues hurt the results. The big ticket nature of the equipment makes it especially economically sensitive.
Our customers have had great difficultly in obtaining financing, especially in Europe and many of our end customers are in the business of printing for the retail industry, which has been disproportionately impacted by the global recession. On a positive note, we aggressively reduced inkjet inventory level 8% on a sequential basis. Selling through some of all those old equipment and used equipment, which negatively impacted margins, but improved our position going forward.
Our long-term confidence in the future of our inkjet business is reinforced by the very favorable feedback to our new VUTEk UV product lineup. This quarter we introduced the GS3200 and the GS5000r to very positive reviews. We believe these two new products will revolutionize super wide printing. The GS3200 productivity is about 2.5 times faster than our current top of the line UV based printer, and has overachieved even our own expectation.
This is allowing the GS3200 to effectively address a segment of the market we had originally identified for the ultra high-end GS printer. Given the current limited market opportunity for printers priced about $1 million and to most effectively utilize our resources we had decide to re-engineer that the GS product that we previously announced and plan to differ the ultra high-end product introduction to the second half of next year.
In addition to the GS product we recently announced and previewed at the ISA Trade Show in Las Vegas, our first 5-meter UV Printer the GS5000. We received a very positive response to the quality and performance of this new printer and believe it will help us to compete more effectively for customers that demand a 5-meter UV printer, a segment of the market we did not address before.
We are very exited about our strong VUTEk product line up, which positions us well even in an uncertain economic environment. The GS3200 is expected to shipped over the end of the current quarter and the new 5-meter printer during the third quarter. And I mentioned the re-engineered DS is expected to begin shipping during the second half of next year.
As we have stated previously one of the key goal of initiatives is to expand total available market for inkjet business. We are rapidly building our printer line up under the Raster brand to address the opportunity for lower end signage printers. By the end of the year we expect to have four printers marketed under Raster, ranging in price from $70,000 to $130,000. Significantly lower than the least expensive VUTEk printers at $180,000.
We believe successfully penetrating this market is particularly important in this current environment. In other area, where we are making good progress is the Jetrion brand of printers targeting the label printer market which is estimated to be a $30 billion market. The label industry is just beginning to transition from analog to digital printing technology. Despite the weak environment, we will be placing more units this year and we and are aggressively expanding of distribution network.
We are expecting Jetrion sales through coming off a small base, to add to our increased inkjet level in Q2. We introduced all of these new UV printers at the large International Sign Association show a few weeks ago and received a very positive response, as well as initial orders and a significant amount of leads.
One of the leading industry analyst firms IT strategy said and I'm quoting; if it can be said that anything in company out run the others in quality and strategic focus on innovation it would have to be EFI. We also looked for our ink business particularly our UV product to benefit from our new product lineup. While ink sales were weak this quarter we saw a slight uptick for ink demand late in the quarter. May be an early sign that end customers are beginning to see increased orders for printed products, leading to expanded utilization of the current ink store base.
Turning to our Fiery business; our disappointing Q1 results down 28% from Q1 of last year generally tracked inline was the hardware sales by our OEM partners. However we are estimating that the OEM is still carrying an 8 to $9 million excess inventory mostly driven by their forecasted sales in Q4 that ultimately turned to be too aggressive. We see an aggressive effort by our OEM partners to cleanup excess inventory in the current quarter, and expect this will impact our Fiery selling results during the second quarter.
The highlight of the Fiery business in the quarter was the introduction of the new Command WorkStation 5.0, which raised the bar for productivity, efficiency and ease of digital printing production management. This new Fiery application is expected to ship in the next new few weeks. We are very excited about the feedback from all beta sites (ph) and believe this new software will significantly increase EFI market share and in the professional print market.
Another milestone, worth noting is introduction of the Fiery for the iGen4; that until now didn't have a Fiery option in the market. We made a strategic decision last year to take time to market hit to reengineer the Fiery for iGen to no longer being dependent on the Xerox internal controller and to be directly connected to the iGen engine. This resulted in a significant reduction to the overall cost of the Fiery for iGen as well as tremendous improvement in performance.
Our applications was -- business was not immune to the overall market demands, but we were pleased that it was flat to last year despite the overall market weakness. This business is leveraging from the benefit of having over 50% of the revenue recurring in nature. We expect the ops segment of the business to be roughly flat sequentially and up a little during the quarter.
Expanding more on the cost cutting, we took so far this year. Our action reflect a balance of long term structural change, to streamline our cost structure along with the short term measures to respond to the current economy. These steps include an additional cost of over 5% in full time employees, contractual terminations, five to 15% salary cuts across the board, suspending our 401(k) match as well as operational cuts. The long term benefit become more apparent when the business begin to recover from those depressed level and the cost cutting provides tremendous leverage to our business model.
In addition, with the benefit of our $30 million accelerated shares and purchase program, we have reduced our share comp by approximately 25% over the past seven quarters which will significantly impact our earnings per share when the economy turns.
Finally, while we're seeing signs that the business isn't getting worse the lack of visibility again makes us very make it difficult to provide specific guidance for future. To summarize, the priorities I outlined last quarter have no changed. One, to optimize cash utilization while beginning to regain or restore its own cash generation. Two, gain share our three business lines and three, position EFI to made (ph) stronger from this period.
Despite, the environment we're confident that we're making progress. On the financial side we have the significant rationalization of our cost structure and the leverage provided by our small share counts.
On the products side, we have an increasingly robust and competitive product line which grows through one -- through the year with the products I discussed. The new UV printer of VUTEk, expanding the addressable market with Raster, Jetrion printers for label, new innovations for our Fiery platforms leave us well positioned to gain share and to take full advantage from any up turn in the economy.
Now I will turn the call over to John. So, he can provide more financial details for the quarter.
John Ritchie
Thanks, Guy. I'll now go over the detailed financial results for the first quarter of 2009. Revenues were $96.1 million, down 29% sequentially and down 30% on a year-over-year basis. The non-GAAP loss for Q1 was $0.08 per share compared to non-GAAP income of $0.13 in Q4 and $0.20 in the year-over-year period.
A reconciliation to our GAAP and our non-GAAP results is posted on the new Investor Relations portion of our website, so I won't be going through that with you today.
Before I go through the quarter in detail, I want the highlights and key data points. Recurring revenues for the quarter equaled 25% of total revenues. As a reminder, our recurring revenues primarily consist of inks related to our inkjet businesses as well as software maintenance contracts.
In response to a tough economic environment, we aggressively focused on cost reduction activities. As a result, our non-GAAP operating expenses are 59.4 million, were down 12.2% sequentially and 13.7% on the year-over-year basis. This is the lowest quarterly spending level in almost four years. The decreased spending level was driven by lower compensation expense a company wide reduction of force, mandatory shut down days and reductions in variable compensation levels.
For Q2, we also expect a year-over-year decline in the order of 20%. Our controller group posted record gross margins for the quarter of 68.5%. This was despite a very challenging revenue environment in the quarter. The Jetrion group recorded 30% year-over-year revenue growth. We completed the sale of our excess real estate for $137.5 million. We received all by $500,000 of the amount escrowed of the $50.5 million on that escrow as part of that deal
We have received 2.8 million shares related to our accelerated stock repurchase program. The expected completion date of this program is in the third quarter of 2009. This quarter I'll not go through the original details regarding our revenue information, but we have also posted this information on the investor relation's portion of our website.
Moving onto our product line results. Fiery revenues were 49.1 million down 30% from Q4 and down 28% on the year-over-year basis. Fiery revenues were 51%, of total revenues for the quarter down slightly from 52% in the prior quarter. As we anticipated, we continue to see our OEMs focus on managing down there inventory levels.
As Guy mentioned, we believe the OEMs are still digesting excess inventory purchases from Q4. We are estimating that their inventory levels are too high to the extent of about 8 to $9 million. This will result in a sequential decline in the Q2 controller revenues as the OEMs more closely align selling-in with sell-through.
We also expect that this will mark the low point for the controller business in 2009. For the first quarter of '09 our inkjet products contributed 33% of revenues or 32.1 million compared to 35% of revenues or 47.8 million in the fourth quarter of '08. A sequential decrease of 33%. Year-over-year revenues were down 40%, driven by lower printer volumes.
As we noted in our January conference call, we expected to see a seasonal decline in Q1'09 compounded by a very tough economic climate. Ink volumes were also negatively impacted in Q1'09 albeit at -- much less than printers. As our customers are experiencing less end market demand for their products.
Despite a clearly challenging macro environment we expect to see sequential increase in our inkjet revenues primarily driven by our recently introduced UV inkjet products. During the first quarter the apps category contributed 60% of total revenues or 14.9 million up marginally on a year-over-year basis, and seasonally down 40% on the sequential basis. We expect overall revenues in Q2 to be roughly inline with those of Q1. In an effort to provide more insight and transparency into each of our businesses we'll be providing specific gross margin results for each of our product lines.
Overall non-GAAP gross margins for the first quarter were 55.3% down from 56.6% in the fourth quarter of '08 and down from 57.2% in Q1 of '08. The decline in gross margins was driven by lower margins in our inkjet business which came in at 29.1%. This was a result of low print volumes going through our factory and increased sales of used and solvent (ph) products in the quarter.
The sales -- the increase sale of used and solvent (ph) products in the quarter was part of our previously discuss efforts to reduce our inventory levels in the inkjet business. The lower inkjet gross margins were partially offset by record gross margins of 68.5% in our controller business. We expect a small decline in controller gross margins in Q2, driven by lower expected volumes. Apps gross margins came in at 68.1% for the quarter. In Q2 we expect to see a decline in overall gross margins driven by continued mix shift towards our inkjet revenues.
Now turning to expenses, R&D expenses for the quarter were 28 million down 3.8 million or 11.9% from the fourth quarter and down 4.6 million or 14.1% on the year-over-year basis. In the first quarter R&D expenses represented 29.1% of revenue up from 23.5% in Q4. The decrease in R&D spend was driven by lower compensation costs and tight controls over discretionary spending.
Sales and marketing costs were 23.5 million, down $4 million or 14.7% when compared to the 27.5, in the fourth quarter of 2008. And down 3.4 million or 12.5% on the year-over-year basis. The decrease in sales and marketing expense was driven by lower compensation expense, including lower variable compensation expenses by reduced spending on discretionary items. Sales and marketing expenses represented 24.4% of revenue, up from 20.4% in the prior quarter.
G&A costs were $7.8 million, down 400,000 or 5.3% in the fourth quarter of '08 and down 1.5 or 15.7% on a year-over-year basis. The lower G&A spending was primarily attributable to lower competition costs and lower legal costs for the quarter.
For the first quarter, G&A expenses represented 8.2% of revenue, compared to 6.1 in fourth quarter of '08. Our total non GAAP expenses, excluding the amortization of identified intangibles, stock based compensation charges, restructuring and asset impairment charges were down 8.2 million or 12.2% to 59.4 million in the first quarter compared to 67.6 million in fourth quarter of ''08.
As we've mentioned last quarter we have taken decisive actions focused on lowering our overall cost structure on a more permanent basis; such as facility closures, head count reductions, in addition we've instituted a number of temporary measures to respond more immediately to the economic environment such as travel restrictions, freezes on salary bonus and hiring.
On our Q4 call we also committed to taking additional actions on the cost front if we do not see improvements in the top line. We've taken these further steps and we expect operating expenses in Q2 to be down approximately 20 % on a year-over-year basis.
Now moving on to the other income line; we had a $0.5 million loss in other income which was $200,000 lower than the prior quarter and this was primarily driven by foreign exchange losses, as well as recognized losses from minority investments. We expect other income in Q2 to be roughly in line with that of Q1. Rounding up to P&L, the tax rate for the first quarter was 35%; this was driven by lower levels of profitability in our in low tax jurisdictions.
Moving onto headcount; at the end of Q1 full time headcount was 1,921 or a 100 heads lower than Q4 of '08; the decreased headcount was primarily driven by the reduction of force activities we previously talked about.
Turning to the balance sheet; we ended the first quarter with 287.4 million in cash, cash equivalents and short term investments; an increase of approximately 98 million compared to the 189.3 million in December 31. The higher cash balances as of March 31 are due to the sale of the excess real estate, offset by the $30 million accelerated repurchase program. Excluding these two events, our net cash used for operations for the quarter was $7 million. The $7 million includes 2.2 million used for restructuring activities.
Our net inventory balance was 46.2 million at the end of the quarter; a decrease of 2.6 from Q4 levels. Q1 '09 inventory turns were 3.6 times compared to 4.9 times in Q4 of '08. The reduction in inventory was driven by focused efforts in reducing our inkjet inventory levels. We plan to continue these efforts for the balance of the year.
Account receivable decreased to $68.6 million compared to 97.3 at the end of Q4 of '08. The decrease in AR is primarily driven by decline in quarter-over-quarter revenues and focus on aggressive collection activities. Overall DSOs decreased by two days to 64 days compared to 66 in the prior quarter. We expect DSOs to increase in Q2 due to the revenue mix shift towards the inkjet product line.
Now moving onto Q2; although we are not providing specific guidance for the quarter, we expect revenue results to be roughly inline with Q1 combined with a marginal decline in profitability due a mix shift towards our inkjet product line. This will be partially offset by a reduction in our operating expenses. Now with that I will be happy to take your questions.
JoAnn Horne
Operator we'll go ahead and take questions please.
Question-and-Answer Session
Operator
(Operator Instructions). Your first question comes from Shannon Cross with Cross Research.
Shannon Cross - Cross Research
Hi, good afternoon.
John Ritchie
Hi Shannon.
Shannon Cross - Cross Research
Can you first talk a little bit about what you're seeing in the marketplace. I know you said things aren't getting worse -- maybe they're not getting better. But just anything you can -- anymore detail you can give -- possible linearity in the quarter or what you're hearing from your partners. Because obviously this is a huge question for investors and then also, if you can talk a little bit about some of the impacts from the IKON, Ricoh transaction. Just what's sort of out there that we should be aware of?
Guy Gecht
Okay. I think the kind of the general line as what you said, it's not getting worst, not getting better. It was a very tough quarter for our partners as well as our self. Hardware sale in the printing industry is difficult you see, it was without the people and I'd say and we're following these right. And the higher-end device the more cash involve, so it's more difficult to sell
Financing in Europe specially is still an issue to get, so for customers they want to move forward with new devices. Its in many cases is tough for them to get financing or its take long, it take months until they get approval.
Having said that, we saw the ink improving in the second half of the quarter, slightly not something tremendous remember, we said the ink UVE was down 7% year-over-year and that was something that was going 25%, 30% just few couple of quarters ago, just three quarters ago.
So, that was a good sign, we certainly see interest, our estimated inkjet business will grow sequentially its mostly based on new products in VUTEk in Raster they continue grow for Jetrion and not necessarily any uptake in any demand. And I think our OEMs are seeing similar things to what we're seeing it's probably easier to sell to enterprise wholesale this is easier compared easier not easy compared to selling to Graphic Art at this point, which having a tougher balance sheet tougher time to gain any financing.
So, that's going fund from that front. The OEMs are also seeing a good traction on the relatively better traction on the entry point production compared to the full grown production better in color than black and white I think you know all that.
IKON, Canon, Ricoh I think its kind of almost people already forgot that IKON was an independent as part of Ricoh focusing a production market. We're doing okay with we're happy with the Ricoh business on the high-end when they decided in IDPPM (ph) obviously its impacting them as well.
The economic conditions and the lack of financing and the lack of desirable people to buy more expensive devices but we're certainly happy with the engineering introduction and so. Overall, I would say and you know Canon is... I'm not going to talk about their business I'll stop there, but in general.
Shannon Cross - Cross Research
Ahead a mile.
Guy Gecht
Yeah, exactly, but in general look we've a very good share with those guys on the high end. We are very pleased with the relationship. The demand is nowhere near what we wanted to do. The Fiery in fact is 28% down is I think reflection of the market that we are in being about the same down over hill.
Shannon Cross - Cross Research
Okay. And any thoughts on inventory levels at your OEM partners, where they are at versus where they were a year ago and do you think there's an opportunity of things to pickup first or may be restocking of inventory?
Guy Gecht
Yes. It's a good point. When we reported Q4 when Fiery was $70 million of business, we did say that there is a small bubble of inventory. The OEMs were the more than they ended up selling because they fought Q4 and end up better for them. And we expected them to correct it during Q1 which they tried but their sales in Q1 was worse than Q4 and worse than they expected. So they ended up again buying at the level of sales Q1 but not correcting the inventory down.
And talking to all the significant OEMs I know that they're going to be very aggressive in Q2 lowering their inventory levels. So while we're not expecting the Fiery sales through run rate in the field would be different between the two quarters based on the focus they are giving us. We're expecting Fiery revenue to be down as I said $8 to $9 million revenue... inventory corrections because they are trying to reduce inventory very low.
Obviously as things start to pickup they are not going to be as focus and as rigid on inventory. Right now they are really, really focus on that.
Shannon Cross - Cross Research
Okay great. And then one question for John on the cash flow side. Can you kind of talk about your opportunities on the working capital side positive and how far can you take this and just any other places you're looking to squeeze cash flow from?
John Ritchie
Sure. The two places we're looking to squeeze cash flow are specifically AR and inventory. We expect to see at least the same level of reduction inventory in Q2 that we saw in Q1. It won't be easy to get cash flow out of our AR because we expect the revenue make shift towards inkjet and inkjet customer profile is a longer-term profiles in our OEM customer, but there is still some opportunities to squeeze something out of the AR side as well.
Shannon Cross - Cross Research
Okay. Great, thank you.
Guy Gecht
Thanks.
John Ritchie
Thank you.
Operator
And your next question comes from Richard Gardner with Citigroup.
Richard Gardner - Citigroup
Thanks, John and Guy for taking the question. I wanted to ask about owned inventories, you talked last quarter about that being a priority and they were down a little bit sequentially, but the days were up pretty dramatically to around a 100 days or something in that neighborhood.
Can you talk about the risk of write-downs to that inventory and how quickly you think you can get that back down and may be just educate people a little bit on the rate of instance for your inventory across the various different product lines? And what product lines the inventory specifically relates to. Thanks.
John Ritchie
I'll take that one. 80% of the inventory is on our inkjet product line and although we saw a decline in terms and to your point in terms of days inventory on hand we saw that go up. What we focused on in the quarter was the inventory that will provide us the biggest exposure so that we'll use and refurbish equipment and solid based equipment leaving the quality of inventory we have left much better than it was going into the quarter.
Does that provide you enough color? Rich?
Richard Gardner - Citigroup
It does help. So we really shouldn't be concerned about inventory write-downs going into the second quarter then?
John Ritchie
No. We think right now our inventory exposure is mostly in the inkjet business, mostly focused on current products. So, if we see an uptick in revenues that we expect, we should see an improvement in the inventory turns in that specific business.
Richard Gardner - Citigroup
Okay. And then I just wanted to ask the question regarding AR ageing John, your experience there and what you're seeing in terms of customers and where you expect bad debt reserves to do in the next quarter or two?
John Ritchie
So, we expect bad -- realized bad debt not the reserves to go up. We're fairly conservative in terms of our reserve provisions. We expect to stay conservative if not get a little more conservative. We -- again inkjet customers as where we have the risk, we analyze that risk pretty carefully on a deal-by-deal basis and we think we're taking the appropriate reserve levels. I think that is where the biggest risk is, in the inkjet part of the business.
Richard Gardner - Citigroup
Okay. All right, thank you.
John Ritchie
Thanks Rich.
Operator
And your next quarter comes from Keith Bachman from Bank of Montreal.
Keith Bachman - BMO
Hey guys. I had two to follow-up from Shannon and Rich. Focusing on the controller business for a second, I think you mentioned, you thought the June quarter would be the bottom of that business.
How does mix play out in that context even if demand may reach a bottom, we're still hearing across all of our sectors that customers continue to mix down, that is to say by lower level products to just adequately meet current needs. How do you think mix plays out on the controller business as it relates to your share?
Guy Gecht
Certainly, we are seeing the same things. And when Xerox or Canon sell a lower engine to the extent it's going with Fiery, it tend to got with lower end Fiery. So we certainly see a bigger return on the server side, on a standalone and with more mix there with non-servers embedded in chipset and we think that will continue.
Having said that, with a lot of work into the cost and causes of the Fiery, so despite being 28% down on revenue and substantially down in volume, you can see a very strong gross margin in the segment; the gross margin was 68.5% on essentially all the business.
So we did a lot of work, a lot of renegotiating, a lot of shifting redoing the manufacturing strategies and so on to protect the gross margin and to protect from this mix shift. So, I would say we're more tied right to revenues than the mix shift because the mix shift already happened.
Keith Bachman - BMO
Okay. And just to push on that one before I go to my second question. Do you think mix continues to prove to be a challenge? In other words, do you think you guys will end up losing share in the March and June quarter in that home grown solutions may take increasing size of the pie?
Guy Gecht
So, to the extent that people going to buy an engine that doesn't have a fire controller because its too lost cost and provide a Fiery for that, instead of engine that go with Fiery Apollo (ph). I think that there is certainly a down side -- there is certainly an issue there, I think this is probably impacting out. Having said that its probably impacting our office results because even in the production we are on all the production engines of Xerox, all the production engine of Canon, all the production engine of Ricoh, all the production engine of KEM (ph), so that's just a mix view from our perspective. And that's is which is much smaller portion of our business.
Keith Bachman - BMO
Okay.
John Ritchie
Have this mix view at both side of the file (ph) Leo (ph) that can be an issue (ph) as you mentioned.
Keith Bachman - BMO
Okay. Let me take one for John and also one for John Lennard (ph); in terms of the inkjet side of the business you guys have obviously a strong balance sheet here and most of your customers don't. How do you think about using the weakness, how do you think about using the balance sheet that you have to continue to extend financing as the economy continues to show little signs of recovery. Will you guys continue to try to offer financing over the next couple of quarters, what's the strategy there?
John Ritchie
So we are offering some extended terms to certain customers, but we're being more aggressive in terms of partnering with the financing firms. We we're think we do a good job of looking at credit but we're clearly not going to do as good a job as a bank will do. So we'll take a somewhat limited risk. I think we mentioned a number in the kind of low million dollar range, a couple of quarters ago that will continue down that path. I don't think at this point we intend to extend beyond that.
Keith Bachman - BMO
Okay. Fair enough, okay that's it for me guys.
John Ritchie
Thank you
Guy Gecht
Thank you.
Operator
And that's concludes the Q&A session. I'll turn the call back over to Mr. Gecht for the closing remarks.
Guy Gecht
Thank you. I would like to thank our shareholders, customers and employees for their support especially during this difficult economic period. We look forward to speaking with you next quarter. Thanks.
John Ritchie
Thank you
Operator
This concludes today's conference call. You may now disconnect.
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