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Micrel, Incorporated (NASDAQ:MCRL)

Q1 2013 Earnings Conference Call

April 25, 2013 16:30 ET

Executives

Ray Zinn - President and Chief Executive Officer

Ray Wallin - Chief Financial Officer

Mansour Izadinia - Senior Vice President

Analysts

Tore Svanberg - Stifel Nicolaus

Christopher Longiaru - Sidoti & Company

Bill Dezellem - Tieton Capital Management

Rob Crystal - Goldman Sachs Asset Management

Operator

Ladies and gentleman, hello and welcome to the Micrel Semiconductor Earnings Call Q1 2013. Please note that all lines are in a listen-only mode and there will be a question-and-answer session at the end of the presentation. And now to start off our conference I would like to welcome and turn the call over to Mr. Ray Zinn, President and CEO. Please go ahead.

Ray Zinn - President and Chief Executive Officer

Well thank you. I look forward to our presentation today with me is Ray Wallin who is our Chief Financial Officer and also Mansour Izadinia who is our Senior Vice President. So we’re happy to – to give you our Q1, 2013 conference call results so with that I’d like to turn the time over to Ray to give you the prepared remarks. Go ahead Ray?

Ray Wallin - Chief Financial Officer

Well thanks, Ray. In conjunction with this conference call a number of supplemental charts were made available on Micrel’s website during the following prepared remark. And to access these charts please go to Micrel’s website and click on the link that will take you to the first quarter 2013 conference call slides. We will begin today’s call with a Legal Disclaimer and the Safe Harbor statement.

All material contained in the webcast is a sole property and copyright of Micrel Incorporated with all rights reserved. Our certain statements in this conference call which are not historical facts may be considered forward-looking statements that involved risks and uncertainties. In forward-looking statements includes statements regarding future business results, future levels of sales and profitability, product and technology development, future customer demand, inventory levels and economic and industry projections. And those factors could cause actual results to differ materially from what is set forth in such forward-looking statements.

Some of the factors that could affect the company’s results had been set forth on our press release dated April 25, 2013 and are also described in detail in the company’s SEC filing including but not limited to, our Annual Report on Form 10-K for the year ended December, 31, 2012. And listeners who do not have a copy of our first quarter 2013 earnings press release you may view the press release on the company’s website.

We will first review our recent new product releases and then discuss the financial results for the first quarter ended March 31, 2013 and our outlook for the second quarter of 2013. Our prepared remarks will be followed by a question-and-answer session with the financial community.

First we would like to let you know about several of our recently introduced product demonstrating our commitment to Micrel’s new product strategy. Micrel’s Linear and Power Solutions Group develops product for the high-performance segment of the Power Management market and this product group introduced several highly integrated product that meet our customer’s power conversion need. For example, we unveiled several Synchronous Buck Regulators ranging from single output to triple output all designed to improve power efficiency while still maintain in small footprint.

Our System Power designers continuously stride to reduce power lock by improving the efficiency of the power delivered to the system and Micrel’s new high-performance Power Management products deliver unprecedented power efficiency in the lowest board (inaudible) we also introduced a dual buck – Dual-Output Buck Regulator which benefits from our HyperLight Load technology and offers up to 93% peak efficiency in PWM mode as well as Ultra-Fast responses to sudden load variation.

We also rolled out our latest generation SuperSwitcher II family of integrated MOSFET buck regulators optimized for the 12 volt rails with 6 A/9A/ and 12 A output current capability. This new family of cost effective products is comprised of 6 common footprint DC/DC buck regulators that levering both our Hyper Speed Control and HyperLight Load architectures. Most recently the company introduced two triple-output, high-efficiency synchronous buck regulators both regulators operate at 3 MHZ in PWM mode for providing superior light-load efficiency.

In our Timing and Communications Group we released the Flex 2 infusion product families these Flex 2 infusion products are customizable clocking solution which integrated multiple clocking components thereby enhancing system performance while reducing build materials needed and shorting the time to market. These products have been gaining market acceptance within the high end computing, server, telecom and networking markets fueled by the ever growing need for bandwidth and application such as cloud computing, video streaming and telecommunication. Overall we are focusing our product development efforts on market where customers require a high performance and where we can expand growth margins.

Let’s now turn to an overview of Micrel’s 2013 first quarter financial and operational highlight. Overall we are very pleased with our financial and operational results for the quarter especially given the current economic environments faced by the industry. First quarter revenue of 59.7 million was down from the fourth quarter due to continued softness in the computing and communications end market. This was partially offset by growth in sale for the consumer and auto-end markets where revenues increased significantly on a sequential quarterly basis.

Bookings were followed in the quarter with a book to bill ratio of one-to-one driven by strength in the industrial end market. We are executing operationally as evidenced by an improved gross margin of 52% for the quarter up sequentially from 50.3% and we remain keenly focused on expense management are nearly $1.8 million sequential quarter reduction in operating expenses help to expand operating margins compared to the prior quarter.

And Micrel continues to operate from a position of financial strength cash flow from operating activities was 7.7 million in the first quarter or approximately 13% of revenue. At the quarter end our cash, cash equivalent and short term investments balance was approximately 11.7 million or $1.89 per diluted share and our strong balance sheet continue to provide Micrel with significant financial flexibility to invest in our business. Micrel’s Board of Directors authorized a quarterly dividend of $4.25 per share of common stock to shareholders record as of May 8th 2013 and the payment of this dividend will be made on May 22nd 2013 reflecting a dividend yield of approximately 1.6% now since the dividend program began in 2007 we have paid out approximately $55 million in dividend to shareholders record.

So let’s now take a closer look at Micrel’s first quarter financial details. As noted we recorded revenues in the first quarter of 59.7 million down 2.6 million from 62.3 million in the fourth quarter of 2012 and in compared with the same period last year revenues were lower by 1.4 million or approximately 2%. Standard product sale accounted for 97% of total first quarter revenue was custom and foundry sales comprising the remaining 3%. Our first quarter sales mix by product area was linear power solution 56%, timing and communication 20%, LAN 21% and the other businesses 3%. OEM turn still for the quarter was inline with the fourth quarter of 2012 and Micrel sales remain widely diversified with our top 10 direct customers accounting for 17% of sales for the first quarter down slightly form our three year average of 20%.

Revenue by end market for the first quarter was as follows communications 16%, compared to 18% in the previous quarter, wireless at 13% the same as in the fourth quarter of 2012, computing 14% compared to 16% in Q4 2012 industrial 53% compared to 51% in the previous quarter and custom another 4% compared to 2% in the fourth quarter. First quarter sales by region were as follows North America approximately 31% compared to 24% in the prior quarter, Asia 56% compared to 63% last quarter and Europe 13% consistent with the fourth quarter 2012.

Continuing with our income statement SG&A spending for the first quarter was $11.9 million or 19.9% revenues down from $12.8 million in the fourth quarter of 2012 or 20.6% of revenue. The decrease in SG&A is primarily due to lower consulting and stock compensation expenses. Research and development expenses were $13.8 million or 23.1% of revenue down from $14.6 million or 23.4% of revenue in the prior quarter. A decrease in research and development was also primarily due to lower consulting and stock-compensation expenses.

Operating income for the first quarter was $5.4 million or 9.1% of revenues compared to operating income of $3.9 million or 6.3% of revenues for the fourth quarter of 2012. The effective tax rate for the quarter was 4.3% significantly lower than the statutory rate due to realization and the concrete of the full year 2012 research and development tax credit benefit.

And during 2012 the federal research and development tax credit provision was suspended but the company was unable to record any tax and benefit associated with it. And this R&D provision was retroactively restated in the first quarter this year. GAAP net income was $5.2 million or $0.09 per basic and diluted share. And this compares to a fourth quarter GAAP net loss of $4.5 million or a loss of $0.08 per basic and diluted share.

Now, turning to the balance sheet, our liquidity position remains strong cash and short-term investment were $111.7 million at the end of the first quarter compared to a $103.6 million at the end of the fourth quarter and a $137.3 million at the end of the prior year period. Cash flow from operations for the quarter was $7.7 million compared to $5.8 million in the prior quarter and $8.9 million for the first quarter of 2012. Capital expenditures totaled $1.6 million in the first quarter down from $2.6 million in the previous quarter and down from $2.1 million in the year ago period.

In the previous quarters the company purchased additional backend testing equipment to provide for the anticipated unit volume product ramp in 2013. And we expect capital expenditures to be in the 1 million per quarter range for the next several quarters. Accounts receivable balances increased by $3.8 million in the first quarter to $31.4 million primarily due to the timing and collection.

As a result, days sales outstanding were 47 days at the end of the first quarter compared to 41 days at the end of the prior quarter. The company does not have any significant collection issues. Net inventory decrease approximately $0.5 million during the first quarter to $41.8 million while first quarter days of inventory on hand increased to 131 days from 126 days in the fourth quarter of 2012 due to the reduction in revenue compared to the prior quarter. At the end of the first quarter total channel inventory weeks of supply were up just slightly from the last quarter but inline with normal levels.

And first quarter depreciation and amortization was $3.4 million up slightly from $3.1 million recorded in the fourth quarter of 2012. Now let’s turn to our outlook. In order to help the investment community understand the complex and changing dynamics of the semiconductor industry Micrel frequently provide the data relevant to industry economic conditions and outlook but we want to remind everyone that the following information is not specific to our company.

It is with this backdrop with we once again provide our industry view and outlook. So let’s look at chart number one which is Micrel semiconductor parameter. We have included the first quarter of 2014 in this updated chart. We expect that the second quarter of 2013 will show moderate improvement over the first quarter with the overall global economy remain weak and especially with the continuing sluggish economy in the United States. We believe overall end market demand growth will be remain muted. We anticipate that a slow growth environment will allow the industry to continue to a under ship in the near term as semiconductor customers rely on shortly timed at the lower inventory as oppose they are growing their inventories back to more normal levels.

We expect lead times to continue remain very short at least through the second quarter of 2013. We expect some recovery are build at the inventory levels in the third quarter and preparation for the normal seasonal build for the holiday. Now looking further out we do not expect any significant change and demand that would cause the first quarter of 2014 to be significantly different than normal seasonal trends. And in other words we believe the first quarter of 2014 will be flat to down relative to the fourth quarter of 2013.

Now, turning to chart number two, which is our industry cycle chart we believe that the growth of the semiconductor industry is currently highly correlated to world economic growth and you will know them slight that we have circled the time period October 2009 to the present. We have looked at the least square feet of this time period and note that the growth has been 2.5% over this time period and this compares to the 10 year growth trend of approximately 10%. The reason that we are calling attention to this is because the industry’s growth has slowed dramatically over the last three and one and a half years and we like to reiterate our observation that historically semiconductor industry growth seems to have a multiplier track once the U.S GDP exceed approximately 4% and the U.S GDP has not exceeded 4% for the last several years and the industry’s growth rate has slowed significant more or less tracking GDP on a one to one ratio.

Because of the slow start industry experience in the first quarter we are now revising our 2013 growth projection for the industry to be in the range of 8% to 10% assuming we have a strong second half in 2013. Even this revised projection is highly dependant on a strong second half based on some increase in the semiconductor customer inventories. Now we are currently projecting that the strength of the industry’s near-term growth will come from a rebound in communication and strengthening and industrial end market. We also see automotive has a strong hold for growth as more and more electronics are being integrated in to automobile.

Before I discuss some of our second quarter financial guidance we like to quickly provide some color on our business focus areas. Micrel has four product groups the largest group is the Linear and Power Solutions Group and our strategy for this business is to develop high performance analog and mix signal products that are highly differentiated and incorporate significant intellectual property.

Micrel is not only attempting differentially itself in terms of design IP but also in process technology know how. We have developed some significant process technology that we expect to enable some of the highest performance per unit area of any analog semiconductor product in the industry today. Anticipated benefits include the ability to provide small size well at the same time achieving some of the best in the industry in addition our roadmap includes the capability to provide power management solutions with input voltages ranging from 5 volts to an excess of 100 volts. Our new Timing and Communications group previously referred to as our High Bandwidth group provides industry leading timing and fiber optic products and these products provide industry leading better performance for the industrial and communication market. Now our Timing and Communication product yield some of the highest margin in longest product life in our portfolio.

Our LAN Solutions group previously known as Ethernet Group provides unique and differentiated product for standard based Ethernet. Micrel was one of the first companies to offer Ethernet products tailored to the automotive industry. Our LAN Solutions automotive business is one of the fastest growing product lines at Micrel. With our 1-wire technology Micrel has been able to garner a significant foothold in the automotive market for engine diagnostics and other requirement utilizing the Ethernet protocol. There are significant synergies between our LAN Group and our Linear and Power Solutions Group as well as out Timing and Communications Group.

A new business unit that we have formed and so which we have high hope, is our MEMS Products and Foundry Group, Micrel has now positioned itself as one of the leading MEM suppliers. We believe that our widely diversified products enables Micrel to become a major player in many of the growing markets for semiconductor products. We also believe that our diversified approach enables Micrel to be more recession resistant and less pronged to demand fluctuation in any one particular market and we believe that Micrel has one of the broadest product portfolios for our side in the industry.

Now let’s turn to Micrel’s financial guidance for the second quarter of 2013. We are pleased with our financial management and our success and stabilizing gross margins. We are also encouraged by the improvements we have seen in our industrial, auto and consumer end market. We believe that Micrel is executing at a high level from an operational perspective and we will continue to be highly focused on expense management. We are excited about the new product that we are introducing and we believe that they will be drivers of the growth for Micrel in the years to come.

Now based upon current inventory levels and demand estimate, the company projects second quarter 2013 revenue growth will be in a range of plus 2% to 6% on a sequential basis. However, we are in a short lead-time environment and what seems to be the early stages of recovery, where visibility I think remains limited. Gross profit margin is expected to be in the range of 51% to 52% and in addition, the company estimates that second quarter 2013 GAAP net income will be approximately $0.07 to $0.09 per diluted share.

And that concludes our prepared remarks and we will now go to the question-and-answer session of our call.

Question-and-Answer Session

Operator

Thank you. At this time we’ll open it up for questions. (Operator Instructions) And our first question comes form Tore Svanberg with Stifle Nicolaus.

Tore Svanberg - Stifel Nicolaus

Yes and thank you a few questions so first of all Ray, can you call in a little bit on bookings linearity and may be also talking a little bit about you know how your customers are viewing this recovery at this point?

Ray Zinn

Okay so the linearity I would say is – was strong in the beginning of – of the quarter just prior to the – to the Chinese New Year and then it slowed down as we came out of Chinese New Year and going into March – March as that picked up quite nicely and subsequently as we have entered into Q2 that the bookings have been very strong so we’ve had very strong bookings probably for the last four weeks. And we’re significantly above 1 in our book-to-bill for the – for the second quarter. But backlog you know started a little later than we have liked that given the Q2 is one of the strongest quarters. So but the back – the backlog is building nicely now as orders have strengthened. So what our customers are saying of course is – is pretty much what Ray covered on the conference call or on the prepared remarks and that are our lead-times are short and they are basically taking advantage of that and so there are lot of effort to – to pull in their orders and so we’re seeing good turns right now. So again the visibility still remains short and light and but I'm very encouraged by the – by the level of bookings that we’re seeing that we’ve been seeing like the past four weeks. So that’s pretty much I think what I'm saying Tore.

Tore Svanberg - Stifel Nicolaus

Very good then. You mentioned lead-times will probably remain quite short in Q2 but you know may be like Q2 will start to see some improvement there can you elaborate on that a little bit I mean is that since and because and the manual strength and seasonally or are there any supply chain and dynamics that will – that will cause that to happen?

Ray Zinn

Well you know the supply chain still remains pretty well balanced even though we’re under shipping demand that industry anyways under shipping demand our customer still believe lead-times are short because they’re able to get supply in a very short period of time. So that as you know precipitated them continuing to just book very, very near-term. Now as long as the bookings don’t get two grade other words if they book heavily on through now let’s say June they – they will still remain short but based on the level of bookings we’re seeing that has to have an effect on lead-times. So that’s why I'm projecting the lead-times are going to build our increase because we are expecting a stronger second half in fact this isn’t happened of course and it will still be a short lead times.

Tore Svanberg - Stifel Nicolaus

Very good. And just some housekeeping ones for Ray Wallin, Ray, what should we model for OpEx in Q2?

Ray Wallin

I would model it Tore about flat.

Tore Svanberg - Stifel Nicolaus

And what about the tax rate now after the third it was implemented in Q1. Do you deploy there?

Ray Wallin

Full year, full year tax rate we are looking at about 30%.

Tore Svanberg - Stifel Nicolaus

Very good. Nice stuff guys. Thank you so much.

Ray Zinn

Thanks Tore.

Operator

(Operator Instructions) Our next question is from Christopher Longiaru with Sidoti & Company. Please go ahead.

Christopher Longiaru - Sidoti & Company

Hey guys. Congrats on the cost reductions.

Ray Zinn

Well I think we did pretty good overall but anyway.

Ray Wallin

Yeah.

Christopher Longiaru - Sidoti & Company

I think you did get a ramp of the cost reductions are much more impressive than I think any answer. My question is has to do with the gross margin. So you are your gross margins were up to 52% a big sequential jump in December. Can you explain how much of that was mixed how much of that was utilization and how that translates to your June guidance?

Ray Zinn

Well I think the gross margin can be attributed to some degree to mix because we are shipping more into industrial markets. So with that with industrial up that helps our margins and we should see that in Q2 also. So we are modeling pretty conservative at 51 to 52 is because we are not sure exactly what the mix is going to look like and we do see some increasing business in our mobile space. So that had tends to have a little lower margin to our product line. So I think, I think that 51 to 52 is conservative as far as fab utilization I don’t think it’s going to it just not going to help because we are still trying to control inventories and we are not trying to let him to grow in Q2. So we are constraining our build just to keep.

Christopher Longiaru - Sidoti & Company

Okay.

Ray Zinn

Our inventory level and try to bring it down actually.

Christopher Longiaru - Sidoti & Company

So basically what you are saying is that regards to margin improvement wasn’t pretty much entirely mixing as if you are right about the second half of the year there will be a ramping demand basically that the utilization should also help to continue to influence those gross margins and push them up?

Ray Zinn

Yes, absolutely.

Christopher Longiaru - Sidoti & Company

Okay. Alright. And then just looking at expenses I mean going forward I think Tore asked the questions about guidance but do you in the absence of something changing do you think you’ll be staying at this operating expense level for the foreseeable future let’s say 2013 around that with the exception of your higher sales leading up to more SG&A cost or do you see kind of a ramp up in expenses going forward?

Ray Zinn

Well we are trying to hold the Op expenses pretty closely as you pointed out when you first took the call or the question was great congrats on the Op expense control and so we are going to do that. So we are going to control expenses at what happened was back in 2011. I told the street that we are going to increase our R&D expenditure by $0.05 of share and we did that and we acquired PhaseLink and the revenue for 2012 didn’t try to be a great and so we were stuck with little higher expense on R&D. So what we are not going to do is not going to grow that now we’re going to try to control that expense and not let it get it to get us off for our model. So we expect to be absolutely back on our model by Q3, Q4 the latest and that means I have to control Op expense through the rest of the year. Now you are going to get some SG&A increase because selling expense will go up with revenue. So…

Christopher Longiaru - Sidoti & Company

Okay.

Ray Zinn

There is going to be some increase there but I don’t I’m not expecting any significant change in R&D or SG&A other than the commissions on just increase revenue.

Christopher Longiaru - Sidoti & Company

Great I’ll jump out thank you guys.

Ray Zinn

You’re welcome.

Ray Wallin

Thanks, Chris.

Operator

Our next question is from Bill Dezellem with Tieton Capital Management.

Bill Dezellem - Tieton Capital Management

Thank you. In the opening remark you referenced a number of new products that sounds like you’re hopeful for gaining some real attraction when should we anticipate seeing a noticeable impact to revenue externally?

Ray Zinn

What do you call a noticeable impact Bill, what’s – how much percentage are you talking about? We’re seeing it now so I don’t know what do you mean by noticeable.

Bill Dezellem - Tieton Capital Management

Well you like to see something in the neighborhood of 5% to 10% growth on a sequential basis and maybe like you say that's what you guided here right now?

Ray Zinn

Yeah some like per quarter 5% to 10% per quarter that, we are seeing the benefit of those products now and they will only continue to ramp and we do expect with some products that we currently in a pipeline that have been qualified that could change that significantly within next 12 months. So, we do have some products that are coming out that are that could yield some very, very significant increases in that revenue.

Bill Dezellem - Tieton Capital Management

So if I am hearing you correctly we’re seeing the early, the early benefits here in the second quarter maybe it was a little bit in the first quarter but really the second quarter is where we start to see the early benefits and then they simply get stronger from this point forward and it's the few things that you we’ve could happen in the future but they’re not done deals yet if those things do happen then a year from now you could see some very significant and I am talking over 10% sort of – over 10% sequential growth.

Ray Zinn

Precisely.

Bill Dezellem - Tieton Capital Management

Great, thank you.

Ray Zinn

You’re welcome.

Operator

(Operator Instruction) Our next question is from Rob Crystal with Goldman Sachs Asset Management.

Rob Crystal - Goldman Sachs Asset Management

My question was answered. Thank you though.

Operator

Okay thank you Rob. Our next question is from Bill Dezellem with Tieton Capital Management.

Bill Dezellem - Tieton Capital Management

Hi thanks I’d actually like to circle back around relative to the things that you think could happen and as you see in the future but that are not done yet. What needs to happen for those to materialize into real business?

Ray Zinn

Well when I say it is not done I mean we don’t have orders form yet. I think that back we do have orders coming in on one of them yes some significant order. So, I take back so some of it's already beginning to happen that will scale up into Q3 the two of them are currently being evaluated by our customers and so it takes six to nine months to get them designed in and get them to production but those are going to be some big some big what we call home runners if they pan out like we believe.

Bill Dezellem - Tieton Capital Management

And industries if they are…

Ray Zinn

Mansour want to make a comment I’ll let you.

Mansour Izadinia

Yeah so I like to make a comment about this. We have focused our product there was different R&D as you know more on the higher engineering content higher IT kind of product for – more people are communication and industrial market segment. So, what Ray is referring to is that we have introduced some product but to be honest in the product side of giving a part from concept to revenue it is a good portion of time that we actually spend after we introduce the product and that time expands with the customer as we are helping them out in designing in the product and taking their systems into production.

So, and these systems are complex and they take time so these are communication based systems that they, the deployment of those things could take time and that's what we are referring to. Some of the product that we refer to in our earnings call, these are targeted early at the communication segment and those things don’t jump up quickly. However some of the other products that we have introduced for portable consumer market those are coming in so those are early indications of our success so I think that the early indicators are more on the portable side that the laggers are going to be on the communication and they will have this just leading through this how this of course we numerate that some of them in our earnings call but it’s a matter of working with our customers to ramp up those production?

Ray Zinn

So the good news is that the laggers he calls and which are not laggers I would like to refer him as but they have a high potential but longer lead design time that our designing time by the customer. So we have high higher margins and longer product lives whereas the mobile space tends to have quick designing time but huge volumes but short lives. So and so we have a combination of those we would like to look at ourselves as being opportunistic and so we don’t want to put all of our eggs into the mobile bucket as you could but spread that out to have a more less risk type.

So my goal has been and for some times to be a low risk company with decent growth and so what’s happening is that since Mansour has come with his team is we have been able to develop some very significant products with some great IP and that’s going to start panning out over the next year or two. So you’re just trying to think the leading edge so some of the stuff that Mansour and his group have been doing. It’s really panning out good the stuff and timing and communications that’s going to be some exciting products that we’ve got coming out of that group which are good margins, good product lives but they do ramp slower. So I don’t want you to think that all of a sudden we are going to turn that the company around and do a 20% or 30% compounded growth rate. It’s what we do is we get have some solid ongoing quarter by quarter growth.

Bill Dezellem - Tieton Capital Management

That’s helpful. And specifically some of the products that you had in mind that you mentioned could be a home run and maybe we would see the results of that a year from now. What needs to happen between now and then for the home run actually to happen?

Ray Zinn

Well we believe the products are significant. So we are not worried about the technology or the acceptability of the product. We have to have our customers get those introduced into their systems. So that we can control. We have the great, we have a great product or actually these two products would be are great products are just the customer has to be able to get them into his system and then he has to get the revenue built off of those products. So we are somewhat constrained by our customer success also. Now these had multiple customers so it’s not like we have only one but it’s still takes you to guys well to get him introduced into their systems and get the sales from that. So it’s not an over night thing Bill this is my point was that you are going to see more steady, steady, steady type improvement from Micrel than you have in the past that’s three or four years.

Bill Dezellem - Tieton Capital Management

And so you are really driving your own success a little bit more than historically the last three or four years which you’ve really been driven just by the ups and downs of the industry?

Ray Zinn

That’s correct. That’s exactly right.

Bill Dezellem - Tieton Capital Management

Great. Thank you.

Ray Zinn

That’s we are still counting on.

Bill Dezellem - Tieton Capital Management

Great. Thank you again.

Ray Zinn

You’re welcome Bill.

Operator

(Operator Instructions) And we have no further questions in queue. So I would like to now turn the call over to Mr. Zinn for closing remarks.

Ray Zinn - President and Chief Executive Officer

Well, thank you. We appreciate you joining us on our call today. I think the main focus all of you have been on is our good cost control which we’re very excited about it and we believe that’s going to continue as we now get back on our model. And then secondly of course is these great products now that we are finally beginning to see them being introduced and are going to receive great acceptance we hope anyway in the marketplace and should result in our more steady growth going forward. So, thank you for being with us today and we’ll be happy to see you again or join with you again in July for our Q2 call.

Operator

Thank you ladies and gentlemen. That concludes this conference.

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