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Hittite Microwave Corp. (NASDAQ:HITT)

Q2 2013 Earnings Conference Call

July 25, 2013; 05:00 p.m. ET

Executives

Rick Hess - President & Chief Executive Officer

William Boecke - Vice President & Chief Financial Officer

Analysts

Tore Svanberg - Stifel Nicolaus

Mark Delaney - Goldman Sachs

Tom Diffely - Davidson & Co.

Jiwon Lee - Sidoti & Company

Quinn Bolton - Needham and Company

Amit Chanda - Wells Fargo

Operator

Good afternoon ladies and gentlemen. Thank you for standing by. Welcome to the Hittite Microwave Corporation, second quarter 2013 conference call.

During today’s presentation all participants will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator Instructions). This conference is being recorded today, Thursday, July 25, 2013.

At this time I’d like to turn the conference over to William Boecke, Vice President and Chief Financial Officer. Please go ahead sir.

William Boecke

Thank you. Ladies and gentlemen, good afternoon and welcome to Hittite Microwave Corporation, second quarter 2013 conference call.

Before we begin the discussion, I’d like to review the Safe Harbor statement. Please note that statements made in this conference call about Hittite’s future expectations, plans and prospects constitute forward-looking statements for the purpose of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors. For information about these factors, I refer you to the earnings release that we issued earlier today and to our most recent Form 10-K and 10-Q filed with the Securities and Exchange Commission.

The earnings release along with other financial and statistical data that we may discuss on the call and copies of our SEC reports are available in the Investor Relations section of our website at www.hittite.com. You may also obtain copies of our SEC reports and a copy of our press release furnished under Form 8-K from the SEC’s website at www.sec.gov.

I would now like to turn the discussion over to Rick Hess.

Rick Hess

Thank you Bill and good evening to everyone. I will review our Q2 performance and give some highlights to the quarter, followed by an update of my first 90 days with the company. Bill will then go through the details of the financials for Q2 and I will end with a discussion of Q3.

In the second quarter our revenue was $68.6 million, representing a 4.9% increase over the second quarter of 2012. Net income was $18.0 million, representing a 5.1% increase over Q2 of 2012. Earnings were $0.56 per diluted share. Our revenue, net income and earning per share were all slightly above our guidance.

On a geographic basis 44% of our second quarter revenue was from domestic customers and 56% was from international customers. Domestic revenue was down 1.1% year-on-year and 0.2% sequentially, while international revenues were up 10.2% year-on-year and 2.6% quarter-over-quarter, as we saw the strength in both Asia and Europe.

In the second quarter three of our eight markets accounted for approximately 73.4% of our total revenue, which is down from last quarter. These markets are military, microwave & millimeter wave communications, and test & measurement. The remaining markets, cellular infrastructure, automotive, broadband, fiber optics and space accounted for 26.6% of our revenue.

In Q2 revenues in fiber optics, cellular infrastructure, space, microwave, automotive and broadband markets, all showed sequential growth. Our test & measurement, and millimeter wave market, military markets were down sequentially.

Gross margin for the quarter was 72.4% compared with 73.7% in Q1 of 2013. A portion of this decline was driven by increased military development programs that will benefit our long-term growth. We continue to see good opportunities in the defense market for growth through integration and module programs.

Our R&D declined 3.7% sequentially, due primary to the timing of material cost. Sales and marketing was up slightly, G&A was down 9% on a sequential basis due to one-time expense that occurred in Q1. Overall operating margins were flat at 40.1%.

We had several highlights in Q2 and I’d like to mention a few of them. During the second quarter we received a production award from the military sub-systems manufacturer to supply components into the next generation frequency channel program. This program is expected to continue into 2014, with various production scheduled leases in the further.

Several new satellite communication programs ramped up during Q2. We started shipping products in both indoor and outdoor platforms with broadband satellite communication applications. The breath of products range from our family of microwave amplifiers, frequency conversion and generation products within the outdoor units, down to analog direct modulators, PLL sympathizers, ADCs and ultra low noise voltage regulators within the indoor customer premise units.

Hittite offers to complete signal change solution to enable our customers to achieve the high data rate requirements, for high frequency satellite communication applications.

We mapped several new products during the IEEE MTT conference held in Seattle between June 4 and June 6. One of the products, which changed a lot of traction since its announcement, is the HMC7150LP3DE, a new family of electro-absorption modulated laser drivers know as EMLs.

This product serves the fiber optic markets segment. This product supports data-rates up to 28.3Gbps meeting the 100Gbps Ethernet system requirements. We have been successful in supporting and leading fiber optic OEMs in a new platform system design with this new EML driver product.

We released our HMC7229LS6 product with 38 GHz 1W PA with integrated power detector. This is an excellent product targeting the 38 GHz millimeter wave radio marketplace. We also reached HMC1082LP4E 5.5-18 GHz driver amp with integrated power detector. This is a general-purpose driver amplifier for microwave radio, test & measurement, military and space markets.

I would now like to update you on my progress towards my 90-day plan that I shared with you last quarter. I reviewed and I’m comfortable with the organization and operation of the company. I visited most of the design centers and operating locations, including Ireland, Norway and Turkey.

I participated in the design center business reviews where we examined the new product developments currently happening in the company. I’m very excited about the great new products that we will be introducing in the next six months, many of which are best in class in the industry. These new products will driver revenue growth in 2014 and beyond with our current, as well as new customers.

We also held our biannual sales meeting in June, where we reviewed all customer and market activity around the world and that continues to be a great deal of exciting developments and potential for growth at all of our customers.

As I mentioned in the past, I am very impressed with our sales team and their process. I’ve met with most of our top customers and I’m encouraged by how they Hittite as their strategic partners to their business. I’ve also met with many of our major shareholders to understand how they view Hittite and its value. It is good to hear that many of our shareholders have been with the company since the IPL and are confidant in the future value that the company can create.

The next stage of my process, which began this quarter, will be to work with the management team to review our long-term strategy. In this process we will example our current and potential markets, products and business approach and determine how we can improve and increase the company value.

I would now like to turn the call over to Bill Boecke, our Chief Financial Officer, to give you a brief review of the Q2 financial performance.

Bill Boecke

Thank you, Rick. The key financial highlights for this quarter are revenue of $68.6 million, an increase of 1.3% sequentially and 4.9% year-over-year. The gross profit margin of 72.4% fell down 130 basis points from the prior quarter.

Operating profit margin of 40.1%. Net income of $18 million or $0.58 per diluted share, a 2.6% increase sequentially and a 5.1% increase year-over-year. Positive cash flow of $8.8 million and an ending cash balance, including short-term investments of $438 million, and a return on capital employed of 48% on an annual basis.

In the second quarter of 2013 our revenue was $68.6 million, an increase of $912,000 or 1.3% from the prior quarter Q1, 2013 and an increase of $3.2 million, 4.9% over the prior year Q2, 2012.

As Rick mentioned, this was due primarily to strength in the microwave communications, cellular, infrastructure and broadband markets, offset by soft demand in our test & measurement and military markets.

The quarterly revenue was slightly higher than our guidance. Gross profit and margin for the quarter was $49.7 million and 72.4% respectively, compared with 73.7% in the prior quarter and 74.5% in the prior year. The sequential 130 basis point decline in gross margin was attributable to unfavorable pricing and mix, offset slightly by favorable cost.

As Rick noted, the gross profit and margin in the quarter was slightly and negatively impacted by some of our new military development contracts. The gross margin was slightly below our guidance, but within our normal operating range.

R&D expense for the quarter was $12.7 million or 18.6% of revenue, compared with $13.2 million in the prior quarter and $12.4 million in the prior year. The decrease in cost sequentially is attributable primarily to decrease in R&D material cost. The R&D cost represents our continued investment in the development of new products and product lines, a principal long-term growth driver for the company.

Sales and marketing expense in the quarter was $6 million, 8.7% of revenue, compared with $5.8 million in the prior quarter and $6 million in the prior year. General and administrative expense in the quarter was $3.4 million, 5% of revenue, compared with $3.8 million in the prior quarter and $4.1 million in the prior year.

The result in operating income and margin in the second quarter was $27.5 million or 40.1%, compared to 40.1% in both the quarter, prior quarter and prior year. Operating income for this quarter included equity compensation expense of $3.4 million and intangible asset amortization of $680,000. We have been able to maintain our operating profit and margin, despite the changes in growth across many of our different markets.

The provision for income tax in the quarter was $9.6 million, an effective tax rate of 34.8%. This Q2 provision includes a small benefit as we adjusted our estimate of the effective tax rate for the full year 2013 to approximately 36%.

Net income in the second quarter was $18 million or $0.58 a share, a 2.6% increase compared with $17.6 million, $0.57 in the prior quarter and a 5.1% increase compared with $17.2 million or $0.56 in the prior year. The net earnings were marginally above our guidance.

In review of our financial position at June 30, 2013, our total assets were $620 million, a net increase of $18 million from the prior quarter Q1, 2013. The increase in total assets in the quarter was primarily cash and investments, as well as other working capital.

A closer analysis of our financial position, total cash and short-term investments at June 30 was $438.2 million, an increase of $8.8 million from the prior quarter. The increase in cash is comprised primarily of $12.3 million of positive cash flow from operations, offset by $3 million of capital expenditures and $0.5 million in net tax payments related to equity compensation and other.

The total accounts receivable was $35.7 million, an increase of $0.4 million from the prior quarter, and represents approximately 47 day sales outstanding. Net inventory was $76.5 million, an increase of $4.5 million from the prior quarter.

The increase in inventory is primarily attributable to the support of our fab transition project. Inventory turns for Q2 were approximately 1.0 times on an annual basis comparable with the prior quarter. Excluding the advanced buy inventory, our turns would have been 2.1 times. As we begin to work this inventory level down, we expect to see our turns ratio return to our former model.

Capital expenditures were $3 million in the quarter and total net fixed assets at June 30 were $36.7 million.

From the perspective of financial returns during this quarter, our return on assets and return on equity were both approximately 12% on an annual basis. Our return on capital employed this quarter was 48% on an annual basis, compared with 49% in the prior quarter and below our normal or corporate target.

Shareholders have asked, how we intend to allocate and deploy our financial capital, currently held in cash and investment. Our total cash and investments has grown to $438 million.

Our process to allocate capital efficiently is first to invest this cash internally in our technology and our product development. This again is our primary growth driver. Additionally we consider external strategic investments, acquisitions to expand our growth further. Historically we’ve acquired small prevailing companies and technologies.

Generally we find that cash is the preferred currency in most M&A transactions, which is why we keep more cash than necessary to run our business. In the event that we identify capital beyond our strategic requirements or options, we would of course seek to return capital to shareholders in the most efficient manner. Rick.

Rick Hess

Thank you Bill. Hittite Microwave Corporation expects net revenue in the third quarter ending September 30, 2013 to be in the range of $66.5 million to $68.5 million and net income to be between $16.7 million and $17.7 million or $0.54 to $0.57 per diluted share.

Our Q3 revenue guidance is flat sequentially. Our Q3 forecasted net income is based on a few important factors. First an estimated gross profit margin in the range of 72.5%; second in Q3 we expect operating expenses to be flat; and third as Bill pointed out, a tax rate of approximately 36%.

In Q3 we expect our defense module program business to remain relatively constant. We see continued tightness in the defense turns business, with some program delays due to the uncertainty and the short-term budget. Despite the difficulties this market faces, we’ve been through these situations before and believe that we are well positioned to take market share in this environment.

The test & measurement market is projected to be flat, as we expected this market to return to a more normal state after the significant growth seen in the last year and specifically in Q1 2013.

The important question is what happens in the wireless infrastructure markets, including LTU rollouts and microwave backhaul. We continue to hear positive things about the strengthening of this market as the year progresses, but the exact timing of the growth is still not clear to us. With this uncertainty, we are not confident enough to build this growth into our guidance for Q3 at this point.

To be clear, we are excited about our design and positions and all the segments and customers in these markets and are poised to take advantage of the growth in this market when it materializes. We are still confident that growth will occur in this market as the demand for more data and the rollout of new wireless platforms clearly will require new infrastructure to be put in place, but the timing remains uncertain.

I would now like to invite our listeners to ask questions.

Question-and-Answer Session

Operator

Thank you sir. (Operator Instructions). Your first question is from the line of Tore Svanberg with Stifel Nicolaus. Please go ahead.

Tore Svanberg - Stifel Nicolaus

Yes, thank you. Maybe I can start with the last topic there, which is the wireless infrastructure market. You said the timing is still uncertain. Would that be consistent across all geographies?

Rick Hess

Yes, it’s more in Asia probably. We still see some opportunity in the U.S. continuing, but in Asia certainly there’s still a lot of uncertainty about exactly when it’s going to happen, especially in China with the LTE rollout.

Tore Svanberg - Stifel Nicolaus

And on that part if I recall correctly, Hittait was somewhat related to China. So is it fair to say that the LTE rollout in China specifically would be very important for the company?

Rick Hess

It is clearly important to the company. Again, we think we have a very strong design and position in that market. But again, have not seen the turn up yet in that market.

Tore Svanberg - Stifel Nicolaus

Okay, good. You also mentioned the turns business and defense seemed to be a little bit tight anyway, so stock out, there maybe some delays there. Could you elaborate a little bit more on what’s going on and certainly your visibility into both the business?

Rick Hess

As we’ve talked about before, in the program business, we have long term contracts there and that’s pretty solid. In the turns business we have much less visibility, so its more short-term basis, and again, we can identify exactly what is causing some of the tightness in the market.

Again, obviously there is some uncertainty in the military and defense market these days. So we don’t know how much, if it was specifically related to this cluster or whether its just seasonality or questions in what the funding is going to be going forward for some of the programs. But we’re seeing, again not drastic, but some delays and some softness in that marketplace.

Tore Svanberg - Stifel Nicolaus

Very good. One market that I know you started penetrating, not the one that goes in the networking market. Have you started to see some more revenues there or is it all in the design-in stage.

Rick Hess

We are seeing some revenues there. Again, it’s still early; its still a smaller market, but we are seeing some significant buying design and opportunities. But I would expect significant revenues to start in 2014 in that market.

Tore Svanberg - Stifel Nicolaus

Well, then just moving onto some questions for Bill. Bill, what was the turns performing – I mean, the actual turns in the quarter?

Rick Hess

Approximately 50%, which is in line with prior quarters.

Tore Svanberg - Stifel Nicolaus

Very good. And on the inventory program or the finer translation program, is the inventory increases going to be potentially here in the second half or is that all one track.

Rick Hess

We have a little bit that we expect to receive in the third quarter and then there is some small amount scheduled for the fourth quarter, and then I think that should be the peak.

Tore Svanberg - Stifel Nicolaus

Okay, and the last question. You mentioned 36% tax rate for Q3. Should we hold that up as the level for Q4 as well?

William Boecke

Yes.

Tore Svanberg - Stifel Nicolaus

Great. Thank you very much.

Operator

Thank you. Our next question is from the line of Mark Delaney, Goldman Sachs.

Mark Delaney - Goldman Sachs

Yes, thanks very much for talking the question. I was hoping you guys could talk a little bit more on the gross margin. I understand what drove the decline in the second quarter.

As you guys think about the longer-term guidance for gross margin to trend into the 68% to 72% range, how do you think you got there? Is 72.5% the level you expect to stay out for the foreseeable future or do you think it will start to move down toward that longer-term guidance.

William Boecke

I think for the foreseeable future, which will be the next 12 months or so, probably closer to 72.5 plus or minus 100 or 200 basis points. I don’t see the lower end of the range in the next six to 12 months, but I do believe that we could experience that, as we look further out.

Mark Delaney - Goldman Sachs

Understood. And I know Bill and Rick, you guys talk about pricing and pressure being a normal part of the semiconductor industry in your business and you mentioned again this quarter. Is there anything unusual in the pricing behavior or it’s typically.

William Boecke

No, I think its typically. I don’t think there’s anything unusual we are seeing. Just continued pressure and competition, which we always see.

Mark Delaney - Goldman Sachs

Okay, and then in terms of the – you mentioned some strong space bookings, which I believe is a very strong gross margin area. When do expect those to turn to revenue.

William Boecke

Those are usually long-term programs, so anywhere in the next six to nine months we’ll start to see some of those start to come into play.

Mark Delaney - Goldman Sachs

Okay and lastly from me, the data converter business, I know that’s a new markets for Hittite and you have been making some progress penetrating in that area. Now what’s your expectation for timing on more meaningful revenue from data converters?

Rick Hess

It continues and we are starting in the market. We have gotten some nice bookings, but significant growth won’t occur until sometime in 2014 and we’ll start to see that; that’s when it will really become significant.

Mark Delaney - Goldman Sachs

Thank you very much.

Rick Hess

Thanks a lot.

Operator

Thank you. Our next question is from the line of Tom Diffely with D.A. Davidson & Co. Please go ahead.

Tom Diffely - Davidson & Co.

Yes, good afternoon. Thanks for taking my call. So just a couple of follow-ups. I mean first on the 50% of turns business, was that just the military segment you were talking about or is that the entire company.

Rick Hess

The entire company.

Tom Diffely - Davidson & Co.

Okay. What is the turns in the military, the slow part of the business.

Rick Hess

Typically about the same, about 50%.

Tom Diffely - Davidson & Co.

Okay, great. And then you mentioned the tax rate of 56% for this year. Do you have a long-term goal for the tax rate that’s different than 56% at this point?

William Boecke

Yes, we do. We think that the tax rate will come down over the next few years. We put a program in place where we are moving most of our international business out of the United States. So if that level of business holds up, we should see a lower tax rate as time goes on.

Tom Diffely - Davidson & Co.

Okay, and the order of a couple of hundred basis points over that accretive time then or is it more significant than that.

William Boecke

Its hot, but for the next year for instance we might see a couple of 100 basis points down to maybe 34%, something line that. And then it should continue to decline as we go further out into ‘15 and ‘16.

Tom Diffely - Davidson & Co.

Okay, thanks. And then if the wireless business, if the circuit business does turn on, how quickly can you respond? Is it going to be turns business or is it a quarter two before you get ramped up.

William Boecke

I’d say its turns business. We have it lined up in our inventory and we have pretty quick access to that. So it does turn pretty quickly, so that’s one of the difficulties we have that we won’t really see it until its already there. Because our cycle times are fairly short and our customers are aware of that. So it does happen pretty quickly once the market turns on.

Tom Diffely - Davidson & Co.

Okay you mentioned earlier that that was not in the guidance, an increase in that business at this point.

William Boecke

Right, we are not forecasting that in the Q3 guidance.

Tom Diffely - Davidson & Co.

Okay, good. And then just finally the price and the mix this year hit the gross margins in the quarter. Do you think those are isolated or is that just part of business where every once in a while your competitor gets really aggressive and you have to respond.

William Boecke

No, this is more normal. Pricing is generally unfavorable. Mix is back and forth between favorable and unfavorable and costs are generally unfavorable.

Tom Diffely - Davidson & Co.

Okay. Thanks for your time today.

William Boecke

Thank you.

Operator

Thank you. Our next question is from the line of Jiwon Lee, Sidoti & Company.

Jiwon Lee - Sidoti & Company

Thank you. Just wanted to see if you have quantified the new military development contract side?

Rick Hess

We don’t really quantify those program-by-program, but they can be – they will be significant. But again as I’m sure you are aware, they are several years out and then they become real production volume.

Jiwon Lee - Sidoti & Company

Okay, fair enough. And I was wondering how the fiber optics networking and other newish markets, including in silicon and whatnot. How could if play into your mid term growth goal?

Rick Hess

We expect them to play significantly in our near term growth. So as we’ve talked about before, fiber optics is certainly one of our newer markets and more exciting markets where we continue to get really exiting design activity that again will show up in the mid term and help drive our growth.

So we are very excited about that and again, it is a new market for us and relatively small compared to some of our other markets today. But we do expect in the long term to see some nice growth in that market.

Jiwon Lee - Sidoti & Company

And did I understand correctly; for example like fiber optics and I think in the past maybe test & measurement trading to that. Perhaps will carry a little better profit for the company.

Rick Hess

It depends on the product, which product line and which application, and I think you’ll see the distribution of margins across that as pretty comparable to our revenue product lines.

Jiwon Lee - Sidoti & Company

And lastly for me, give us a little more thought about the acquisition front if you could please. Has any merged more towards the full front or how could we be thinking about how the acquisitions could be and what’s different there; what you have done in the past or what not.

Rick Hess

Jiwon, I don’t think that our acquisition strategy is not changed. We’ve always had a pretty open mind to all acquisitions and looked at several different acquisitions. The ones we have gone ahead with have been the smaller more technology related acquisitions, but I wouldn’t expect – that’s not a limitation that we put on acquisitions we look at.

We look at a broad base of acquisitions and we go ahead with the ones that are modeled and passed through the gates that we put out for our acquisition. So we are looking at all types of different acquisition, but again, fairy conservative as to how we approach them and I expect to continue that process.

Jiwon Lee - Sidoti & Company

I understand and that’s true. Thank you.

Rick Hess

Thanks.

Operator

Thank you. Our next question is from the line of Quinn Bolton, Needham and Company.

Quinn Bolton - Needham and Company

Hi Rick, hi Bill; thanks for taking my question. I apologize, I missed Rick your prepared script. So I apologize if you addressed this, but it sounded like in the gross margin one of the factors was lower margin on a new military contract business and I just wanted to – was that sort of in response to a competitive situation or did it just have to do with the specifics of the design and level of integration and not necessarily something that was a factor of competition.

Rick Hess

That wasn’t a factor of competition and its actually several programs and these are development programs. So these are not in the production phase yet, these are in the development phase, and those programs in the development phase tend to not carry the same margins as our traditional business would.

Quinn Bolton - Needham and Company

So this is your development contact, NRE type revenue, not so if your module business at this point.

Rick Hess

That’s correct.

Quinn Bolton - Needham and Company

Yes, okay, thanks for that clarification. The second question I had is, you sort of talked about the wireless business and seen some waiting for the business in Asia, particularly China to ramp up.

I guess my question is, can you see a different cycle in the microwave business or will both tend to pickup at the same time. If China starts to deploy TDLTE, does that try both cellular and microwave or are there opportunities in other emerging markets or geographies that the microwave business might not require the TDLTE spending in China to pick up to see a recovery in the business.

Rick Hess

I think you are right in your second analysis, but clearly there is some independence between the two. We think the China LTE rollout will drive some microwave business, but we do think there’s other markets in developing countries; certainly, India, Africa, South America that will drive the microwave business and we are seeing and hearing discussions about opportunities there that we think could drive that independent of the LTE rollout in China.

Quinn Bolton - Needham and Company

Okay, great. And then just last question on the test & measurement business. I think some of the growth over the last year or two is really driven been LTE equipment spending. It sounds like its going to normalize here over the next couple of quarters.

What’s the next big sort of upgrade cycle for test equipment? Would that be LTE Advanced or carrier aggregation or are there other segments of the test & measurement business, say semiconductor test equipment that could kick in and get that business back on a growth path of the intermediate term.

Rick Hess

Quinn, your great at answering your own questions. It clearly would be LTE Advance. We believe its going to be kind of the next state, as well as some higher speed DUM markets that we are seeing, some opportunities in. So there’s several different drivers, but I think LTE Advanced is probably the biggest program and that involves the carrier aggregation that will drive the infrastructure development for the next generation platform.

Quinn Bolton - Needham and Company

And is that something that you see sort of starting to king off late this year or is that more of a 2014 where you see that there’s investment in carrier aggregation equipment.

Rick Hess

Yes, I think its probably 2014. I think that it probably is too ambitious to think that that will really kickoff and in a size in 2013.

Quinn Bolton - Needham and Company

Great. Okay, thank you very much Rick.

Rick Hess

Thanks Quinn.

Operator

Thank you. (Operator Instructions). Our next question is from the line of Amit Chanda with Wells Fargo. Please go ahead.

Amit Chanda - Wells Fargo

Hi, good afternoon gentlemen. Thanks for taking my question. Rick, can you remind us which DOD programs Hittite is most exposed to with respect to your quick turns to the science business. Is it sort of new and emerging applications like electronic warfare, cyber security, unmanned vehicles or is it something else.

Rick Hess

Its really all the above. Again, in the turns business we supply to a very large number of customers, both Tier 1 and Tier 2 suppliers to the defense and military industry. Its really very broad based and it goes everywhere from UAVs, Communication, Rader, EW. So its very broad based and again, I think that’s why in general that business tends to be pretty solid and doesn’t move around a lot.

And again, we are seeing some tightness in it, but we still see some really strong areas that continue to grow. So it is very broad based and again in general sense, kind of balance out. But I think this is one of those kind of unusual cycles that plays a little more uncertainty.

On the other side of the equation at I mentioned, we are seeing in this environment people looking for us to integrate more and put more together and look to lower cost solution. So it is a broad mix of things that we are seeing going on in this market and again in the long term, we still see this as a good market for us.

Amit Chanda - Wells Fargo

Okay, great. Thank you and then as a follow up, can you maybe talk about Hittite’s opportunities in the Gallium Nitride market. Are you only focused on power amps there or is there some other products that you are focused on.

Rick Hess

Initially its related to power amps and again our first announcements, we announced four products last quarter and four more this quarter and we’re continuing to roll out of our Gallium Nitride product line. The next generation of product will be switches that we will introduce from Gallium Nitride, but again the first products we will be introducing this year are all focused on power amplifiers.

Amit Chanda - Wells Fargo

Okay, great. Thank you very much gentlemen.

Operator

Thank you. Our next question is from the line of (inaudible). Please go ahead.

Unidentified Participant

Hi, thanks for taking my call. Rick, I appreciate you coming on board and also the 90-day assessment and a summery of that was very helpful. Regarding the previous callers questions of acquisitions and your use of access capital, is there any plans to potentially have you know dividend or share buyback in the future.

Rick Hess

That’s something we clearly look at, the broad often discusses this. We constantly evaluate the options of what to with our cash and we will continue to evaluate that.

As we go though the strategic options and look at what potential there is for acquisitions and what size they maybe and how much cash we would potentially need for those. We will re-evaluate that and deicide to Bill’s point in the prepared remarks, that if we do find we have access cash we will look at possibly a share buyback program or a dividend program to return that cash.

But its pretty mature. We haven’t made those decisions yet, but clearly is part of the strategic look at the business. We will continue to ask those questions and evaluate that and make those decisions.

Unidentified Participant

All right. Thanks.

Operator

Thank you. (Operator Instructors). And I’m showing no further questions at this time. Gentlemen, I’ll turn the conference back over to you for any closing remarks.

Rick Hess

Okay. Thanks very much Prince. In closing I’d like to thank the employees of the company for their support and for delivering another solid quarter, as well as setting the stage for our future success with all our new product developments. So thank you very much.

Operator

Thank you sir. Ladies and gentlemen, that does conclude our conference for today. Thank you very much for your participation. At this time you may now disconnect.

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Source: Hittite Microwave Corp (HITT) CEO Discusses Q2 2013 Results - Earnings Call Transcript

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