Novatel Wireless Inc (NVTL) Q4 2013 Results Earnings Conference Call March 6, 2014 5:00 PM ET
Matthew Hunt - Blueshirt Group Investor Relations
Peter Leparulo - Chairman and CEO
Ken Leddon - Chief Financial Officer
Bryan Prohm - Cowen & Company
Billy Kim - Jefferies
Good afternoon. And welcome to the Novatel Wireless Fourth Quarter and Fiscal Year 2013 Earnings Call. All participants will be in a listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.
I would now like to turn the conference over to Matthew Hunt, the Blueshirt Group for Investor Relations. Please go ahead.
Good afternoon. And thank you for joining us on our fourth quarter and fiscal year 2013 conference call. We will begin with a brief business overview and outlook from Chairman and CEO, Peter Leparulo followed by a financial overview and guidance from Chief Financial Officer, Ken Leddon. We’ll then open the call for questions.
As a reminder, this conference call is being broadcast on Thursday, March 06, 2014 over the phone and Internet to all interested parties. The information shared in this call is effective as of today’s date and will not be updated.
During this call, non-GAAP financial measures will be discussed. The reconciliation to the most directly comparable GAAP financial measures is included in the earnings release, which is available on the investors’ section of our website. An audio replay of this call will also be archived there.
Please also be advised that today’s discussion will contain forward-looking statements. These forward-looking are not historical facts, but rather are based on the company’s current expectations and beliefs. For a discussion of factors that could cause actual results to differ materially from expectations, please refer to the risk factors described in our Forms 10-K, 10-Q and other SEC filings which are available on our website.
Now I would like to introduce Peter Leparulo, Chairman and Chief Executive Officer of Novatel Wireless.
Thanks Matt. Good afternoon and thank you for joining our call today. I’d like to take a little longer than usual today so that I can set forth in detail how we are transitioning our business. First, I will go through the growth and development of our M2M pipeline and our strategy in this business. I will then provide an update on the steps we described on our last call for how we are transforming mobile computing to a more profitable approach. And for each of these areas, we’ll spend some time providing our specific plans and expectations as we move into 2014.
Before we get started on that discussion, I’d first like to discuss the significant progress we have made on substantially streamlining our entire operations, as we simultaneously reshape the company and execute on our transition plan.
We announced our restructuring initiatives in September and have been implementing them as quickly as possible. In the fourth quarter, we substantially reduced our non-GAAP operating expenses by $8.9 million or 34% year-over-year and we reduced our headcount by 31% year-over-year. The restructuring initiatives we are undertaking are aimed to align our expenses to revenue and opportunities. Importantly, they are also consistent with the skill sets and longer term business model we are targeting as part of this strategic refocusing of the company.
With that, a quick overview of our financials, we closed the full year with total revenue of $335 million of which M2M represented $37.6 million going 18% over the prior year. In the fourth quarter, revenue was $65.3 million and EBITDA was a loss of $3.4 million.
In our M2M business, during the year, we made key progress in developing new products along with our targeted vertical markets, integrating with and on boarding major partners in our targeted verticals and further advancing our go-to-market strategy to directly address and approach customers.
As a result of that work we believe we have a strong pipeline and are at the leading edge of seeing the results. We will provide specific details today on why we believe that is the case. In M2M we have a targeted vertical strategy where we offer bundle solutions of turnkey hard work plus enabling software.
We are focused on certain vertical markets that we see is offering significant growth and profit potential. For each of these specific vertical markets, we have developed deep domain expertise and have optimized the technical and functional capabilities of our products to the end customer requirements.
As we have discussed over the past few quarters and as we have experienced, many projects M2M take time to ramp. There is a long front-end sales cycle [often] with expanded evaluation periods varying time for integration of our products with our customer’s vertical end applications and there are often extended customer approval processes.
However, once our devices are implemented into our customers’ end applications, there is greater stickiness, higher barriers to entry, higher visibility into our customers and hopefully accelerated revenue growth as vertical customers consolidate around a few market leaders who have the domain knowledge and credentials in those vertical markets. We have a number of customers that are on the back-tail of this ramp process coming to fruition in 2014.
With some variation like vertical, our target markets in M2M are growing primarily in the range of the mid 20s according to ABI Research. Given our robust pipeline, our internal target is to grow above those market rates at or above 30% for the upcoming year.
While there will likely be some lumpiness with these deals as implementation time for new business and M2M can vary significantly and some of these verticals and customer programs are relatively new, we have several points of confidence for achieving this target growth rate.
First, we are at the heart if we believe or the M2M verticals with solid growth projections. Second, we're engaged on tangible opportunities which who we see as the growth players in those verticals. And third, we currently have revenue, sales orders and contractual commitments for 2014 and beyond totaling approximately $30 million, about half of which comes from customers we did not have in Q1 of 2013. These factors put us in a substantially different position versus where we were at this time last year. And we're guiding for a significant sequential increase for M2M revenue in Q1 2014.
Before we dive in to this specific vertical update, as a quick overview of our customer ordering patterns within the context of our incremental opportunities in mind, our M2M sales come in a variety of forms. Some customers make single purchases often only for upgrade, others purchase under long-term agreements and so others purchase products on a rolling basis as their need [dictates].
I’d like to now provide insight into the visit activities that we are seeing in some of our target verticals. First, Commercial Telematics, our customer base is becoming broad and diverse in this fast growing vertical. In 2013 AVI Research estimated that unit shipments in Commercial Telematics had a CAGR of approximately 23% between 2011 and 2018. Last quarter we announced that we have been selected by Teleges as a telematics device provider for their fleet management offering. Teleges provides a SaaS-based offering focused on delivering mission critical, actionable information for companies with mobile workforces. Their enterprise solution support rapid large scale deployment helping customers reduce operating and maintenance costs and improve productivity and safety. AVI Research named Teleges one of the top companies in the commercial vehicle telematics market. We have been jointly integrating Teleges’s fleet management location intelligence platform with our advanced SA 2100 telematics device and expect to begin commercial shipments of this custom integrated device to Teleges in near future.
During the fourth quarter, we also signed a long-term supply agreement with DigiCore. DigiCore is recognized as a world leading provider of advanced M2M telematic solutions through its Ctrack service platform. We’re currently integrating their platform into our telematics devices and are targeting a mid 2014 launch date. With these 2 new customers we now have 3 of the top 12 commercial telematics companies that AVI reports by market share, FleetMatics, Teleges and DigiCore. We’re also engaged in parts of the sales cycle with 6 others in the top 12.
In terms of more recent developments just last week we announced we were selected by vehicle tracking solutions a premier fleet management systems provider to deliver MT 4100 and MT 3050 devices to support the VTS silent passenger application. We already have significant purchase order from BTS and look forward to they are being a solid customer going forward.
Diversifying our geographic exposure in regions where our targeted verticals are also growing is another key part of our M2M strategy with our near-term expansion efforts targeting Latin America and Western Europe. The investments we have made to expand our M2M footprint internationally are gaining traction. Specifically we are enthusiastic about two new opportunities that we have been working on in Latin America for some time both with leading fleet management companies in the region.
We have been selected as a development partner with each of these programs and believe these could become significant opportunities. Most of the partnerships in commercial telematics that I have discussed are with new customers and are incremental to our current customers.
Turning now to aftermarket telematics, as a reminder this vertical includes insurance telematics, pay as you drive and vehicle recovery and is a very expansive ecosystem, including telematic service providers, automotive suppliers, aftermarket service providers and applications service providers.
ABI Research estimates that unit shipments in aftermarket telematics would increase at a CAGR of approximately 27% between 2011 and 2018. During the quarter we continued to ramp our MT 3060 device with RAC Motoring Services under the supply agreement that we announced last August. With over 7 million members RAC provides road side assistance, insurance, vehicle inspections and checks and up to the mini traffic and travel information.
RAC targets its members, insurance clients and corporate fleet customers with its telematics services. Our MT 3060 device has been customized for vehicle diagnostics and telematics applications in the RAC channel. We are also actively engaged with numerous other insurance telematics platform providers. Just such we announced our partnership with Hymax to jointly address UBI applications.
Hymax is a leading provider of UBI and smart fleet management platforms. Together we are actively integrating our MT 3060 telematic devices with the Hymax 3D world platform. Hymax has already been selected by some of the largest insurance companies in the United States for deployment of its UBI platform.
Our devices here are supported by our advanced diagnostic capabilities, which provide access to comprehensive vehicle information that help us set status and operational characteristics. Our family of MT 3060 devices has also been selected by MODIS, a leading full service provider of insurance telematics solutions for integration with MODIS’with platform. MODIS provides a full service UBI solution including logistics, integration, application development, data warehousing and support services, enabling automobile insurance companies to reduce the complexity of large scale deployments. We expect our first quarter results to include the first meaningful quarterly revenue contributions from insurance telematics products, and we are enthusiastic by revenue in this vertical in 2014.
Another area of our vertical approach in telematics that we also want to highlight is the strategic value of our technology ownership and know how. As we capitalized on our domain expertise, we are developing a data base of meaningful intelligence for these markets. As this one example each vehicle OEM has specific parameters and commands for collecting and processing diagnostics information about the vehicle, including areas such as (inaudible) service intervals, ignition information and many others. Our deep focus in this area is enabling us to create a wide database for mapping these vehicle specific parameters, across a large number of vehicle OEMs. The database is hosted on our N4A cloud solution and sold to customers under our licensing model. And the more broadly our devices are deployed, the greater the value propositions our turnkey solutions provide to our customers.
As we shorten our time to market with our integration and customize our devices to the features that make up their service offerings. As you might imagine this know how is critical to large scale M2M telematics deployment. And as we go to market with new customers we're benefiting from the value of this intelligence and continue to build upon it in a virtual cycle.
Moving to [RME’s AC] security and home automation. These verticals we're providing solutions for mission critical applications, where there is a high impact of the customer, which place our competitive strengths of technology expertise and high levels of support. We have all the major touch points in-house at Novatel Wireless for fully supported mission critical applications from RF development and from our ownership to intended design certification and device management.
Within these verticals we recently signed a long term supply agreement with a tier I customer. The contract provides for an initial order quantity of $8.2 million. We currently are targeting launch of the product and intern driving meaningful revenue from it, beginning in the middle of 2014.
Turning to our software, our M2M cloud offering is an important component of our value proposition for our vertical markets, since it is critical to the integration process for our customers’ application offerings. We’re increasingly seeing this as a key component of our hardware sales.
Our N4A software platform only begins with enabling our customers to remotely activate, manage and provision their assets in the field for large scale deployments. Taking this a step further, our software platform also interacts with the assets being monitored and intelligently extracts information, processes it and transmits it to the particular cloud application being offered by our customers. What this adds up to is that we are able to provide customers with functionality that in turn is critical to their service offering whether it is a fleet management, asset management or insurance telematics offering. Ultimately this provides us with tighter customer relationships and a competitive advantage on new opportunities. Many of our integrated solution deals increasingly include bundled solutions of our hardware devices with optionality for a separate license for our enabling software. From a business model perspective, these software license services are typically an annual subscription that begin upon activation of our devices and the associated revenue for us is high margin.
Lastly, we recently received network approval by AT&T to deliver advanced vehicle telematics, telemetry and embedded solutions over their network. Through our substantial R&D investments, we have now done the heavy lifting to offer a wide portfolio of M2M solutions to customers, covering all air interfaces from CDMA to HSPA and devices from simple trackers to advanced M2M routers with telematics capabilities.
To summarize on M2M, we have a very active pipeline and solid growth prospects as we enter 2014. We have a great product portfolio in place and the more customers we bring on board, we are shortening our time to market, improving our sales effectiveness and leveraging the deep domain expertise that we continue to build upon. All of this differentiates us from broader focus M2M companies, creating competitive advantages, and setting us up for a strong 2014.
In mobile computing, revenue for the quarter in our mobile computing business was $57 million, though this segment was about breakeven on an EBITDA basis following our cost reductions. As we discussed last quarter, we are very focused on retrenching our mobile computing business to a more targeted approach. As we also discussed last quarter, achieving a return on product investments has become increasingly challenging as replacement cycles of the carriers remain aggressive, pricing has been compressed, and products with multiple network access bands require heavy development cost.
Accordingly, we are now focusing our development on products that have a very high probability of realizing volumes and margins that will provide adequate returns on our development investments. We will begin using a more variable structure for portions of our development activity. And we expect to realize more synergies between our mobile computing and M2M R&D efforts which we will be able to leverage across both of our business units.
Those changes said, we continue to have close and valuable relationships with Tier 1 carrier and distribution partners. These are extremely important relationships and we continue to work closely as their development partner.
With dual sourcing and fast replacement cycles, our targeted strategy means there will be gaps in transition cycles as certain of our legacy products come to the end of their life cycle in some channels before migration to the next generation Novatel Wireless product. However, under our targeted strategy, we have design wins and target channels on next generation mobile computing products that meet our standards on investment returns.
We also continue to see long term opportunities in mobile computing as the operators continue to promote wireless data with new and more efficient protocols and move into adjacent markets such as the connected home, connected vehicles and IP based voice and data solutions.
Toward that end, we currently expect to launch our first carrier aggregation product in 2014. We also recently pioneered a new product category with the MiFi home, which we believe is leading traditional successful endeavors. And we remain the innovation leader in the mobile computing space. Ultimately, we believe this operating and go to market strategy will improve the performance of our mobile computing business.
And with that, I will now turn the call over to Ken for a discussion of our financial results and our outlook.
Thank you, Peter. I will begin with the financial overview of the fourth quarter and then will provide details regarding our outlook. For the fourth quarter, revenue was $65.3 million. Breaking that revenue performance down by business segment, our mobile computing revenue in the quarter was $57 million. This includes $50.7 million of MiFi revenues, $1.5 million of USB modems combination card and related products and $4.8 million from our PC OEM business.
Our M2M products and solutions revenue totaled $8.3 million and were up 23% from the same quarter last year. From a geographic perspective, sales in North America accounted for approximately 95% of total revenue. Net operating loss for the fourth quarter was $21.4 million and our net loss was $21.3 million or $0.63 loss per share. GAAP operating loss in the quarter includes a contingent loss for litigation of $14.3 million and $893,000 in restructuring charges. From here on, I will discuss our results on a non-GAAP basis unless otherwise noted.
Please see our earnings release for a reconciliation of our GAAP to non-GAAP fourth quarter and fiscal year results. The non-GAAP adjustment for the fourth quarter totaled $15.7 million and included the recognition of a contingent loss and litigation, restructuring charges, share based compensation expense, and amortization of acquired intangible assets.
Non-GAAP gross margin in the fourth quarter was 18.6% and includes inventory write-down and price for tax and charges related to legacy products that impacted the gross margin by 450 basis points this quarter. Non-GAAP operating expenses totaled $17.5 million, down from $21.7 million in the prior quarter and $26.4 million in the same quarter last year.
This reduction was driven primarily by our restructuring efforts which we began in September. Looking at operating expenses by category, R&D expenses were $8.8 million compared to the prior quarter of $12.1 million.
Sales and marketing expenses were $4.1 million compared to $4.9 million in the prior quarter. Our G&A expenses were $4.7 million, roughly flat with the prior quarter. Our non-GAAP operating loss in the fourth quarter was $5.4 million and net loss was $5.6 million or $0.17 loss per share. Adjusted EBITDA in the fourth quarter was a loss of $3.4 million. Weighted average shares for the quarter were $34.1 million.
Now turning to fiscal year 2013, revenue for the year was $335 million, our GAAP operating loss was $43.2 million and our net loss for the full fiscal year was $43.4 million and a loss of $1.28 per share.
Non-GAAP adjustments for the fiscal year 2013 totaled $22.5 million. For the year non-GAAP operating loss was $20.6 million and our non-GAAP net loss for the year was $20.9 million or a loss of $0.62 per share. Adjusted EBITDA for the year was $12.5 million loss.
Now turning to the balance sheet, we closed the year with cash and marketable securities including restricted cash and restricted marketable securities of $25.5 million, down from $47.9 million last quarter. This cash reduction was primarily due to $22.1 million pay down on accounts payable which closed at $24.5 million, down from $46.5 million last quarter. Accounts receivable at quarter-end were $40 million and compared to $47.5 million last quarter. Inventory totaled $27.8 million, up slightly from last quarter. Fourth quarter capital expenditures were $106,000.
Now turning to our outlook, expanding on what Peter discussed, we are in the midst of a major transition as we focus our efforts on growing M2M and taking a more targeted approach to mobile computing. Accordingly we want to provide you with our financial outlook associated with our M2M pipeline as we look into 2014, as well as provide some assumptions around mobile computing.
In M2M we’re targeting to grow at or above 30% for the fiscal year 2014 and are planning to exit the year at a $60 million annual run rate. [Implicit] in this guidance is some momentum in the second half of the year as new customer wins begin to contribute meaningful revenue.
Our objective is to have our M2M business exit 2014 at a positive contributor to EBITDA on a run rate basis. Looking at the first quarter for the entire business, we expect total revenues to be in the range of $50 million to $54 million. We estimate that this will include $39 million to $42 million of mobile computing revenue and $11 million to $12 million of M2M revenue.
We expect non-GAAP gross margins for the consolidated business in the first quarter will be in the range of 21% to 22% of sales. And we expect non-GAAP income to be in the range of $0.22 to $0.15 loss per share, these estimates are based on approximately 34.2 million shares outstanding.
As Peter noted earlier, and as we move through the year in mobile computing, we expect that have some transition gaps in our channel participation. That said, we have products planned for launch in the back half of 2014. As these mobile computing products come to market and M2M scales, we expect to exit the year with a significantly improved operating performance on a consolidated basis and we are targeting a return of profitability as we exit 2014. This performance outlook is also supported by the substantial changes we have made to our operating structure. We are focused on the opportunities in front of us and we will continue to balance expenses with those opportunities and revenues.
With that, we will now be happy to take your questions.
Thank you. At this time we will now begin the question-and-answer session. (Operator Instructions) And our first question will come from Mike Walkley of Canaccord Genuity.
Hi thanks. This is (inaudible) on for Michael Walkley. And thanks for taking my questions. A quick question on your guidance, basically soft mobile computing guidance for Q1 and then you talked about stronger back half of the year. I guess, I mean just looking at the business in general, I mean, do you think this whole mobile computing space, especially the MiFi particularly declining business now as hotspot capabilities into smartphones and tablet, eat away a good potential and then the competition in dual sourcing essentially eating away your share gains. I mean how do you get this business to grow versus in 2014 essentially, I mean this has been flat for the last two years as for now?
Sure, this is Peter. In terms of the smartphone and the mobile hotspots, we believe that essentially coexisting. There are certainly some people who use our smartphone functionality, but as we’ve gone over on a couple of times on prior calls because of the power consumption issues, user experience, there is a strong segment in the market that does not go that way, as well as [lead time] mode and operational just motivational behavior to have a separate subscription, which has significantly higher ARPU than user (inaudible) handset.
So we are rafting it right now being the smartphones and again we believe that segment of population will go that way, but a segment will continue. So there is a product category is here for long-term in our view.
The challenge and in it is the dual sourcing. As you suggest that there are short replacement cycles and with dual sourcing there is also high term low tier. And so dual sourcing overlaying that means that the product replacement cycles are even faster. So we think the underlying market is still dwelling, the operators certainly are promoting wireless data heavily into the future. And the challenge that we had is picking the products where we are getting our ROI. And that’s what we're going to do going forward in this space.
Okay, thanks. And then just one for Ken, obviously decline in the cash, Ken, is there a minimum cash level that you’re comfortable with or you’re targeting? I mean what are the long-term plans and timeframes to get this business basically cash flow positive?
Well, I think we said in our comments that we believe what the growth rate we expect to see in M2M and a recovery of the mobile computing business with the launch of new products at the end of year that by the end of the year things will be back at a profitable level given what we see today.
So I don’t think we have any specific number of minimum cash balance, I think we have enough cash to get, to complete the transition of the company and to get to the other side of the restructuring and return to profitability. And I know that cash drop that we saw this quarter was really driven by a 22,000, I mean the $22 million pay down on accounts payable that we did for operational reason that gave us a significant cost benefit and that’s the pattern that we don’t think will be repeated in the past.
So we don’t think there is any issue right now with cash balances or cash adequacy. We think we’ve had plenty to get give us to other side of this restructuring and to the point where we have seen significant in M2M business.
Okay, thanks and just one last one from me, Peter on the Insurance Telematics have solid deal wins with [RST] and then now with Telematics and (inaudible) as you pointed and are there any other design wins in the pipeline other designs that are looking promising? And then just overall this is a pretty mason market, but a very compelling market I mean U.S. market itself is about $150 million in short passenger vehicles.
I mean is there -- how do you look at this business maybe in a year or two from now and is there a particular market share that you’re tracking for the UBI or for the Insurance Telematics market?
Sure. So we’re addressing Insurance Telematics market essentially dealing with the application service providers. And there are a lot of those. And there is and as you might have seen some at least Interplay between them where there is a certain level of consolidation among them right now which we believe actually will play our benefit. Within the application service providers, we are targeting just having a dominant market share; we think we have absolutely the right products. We have high levels of vehicle compliance. We spent the last 6 to 8 months ensuring that our products are optimized for the Insurance Telematics market essentially how the application service providers is the features that they use to generate ARPU, as well as to mitigate risk for insurance policies then our products are optimized to meet the end customer requirements for that.
So we think that plays a better barrier entry and gives us a competitive advantage in that space. Market share is difficult because it is a fairly new space that has a high CAGR, but albeit as you suggest of low base right now because it’s just beginning.
So we think we’re in the large deals. We think we’re in with the right application service providers who in turn have downstream direct insurance accompany design wins and the market share will really follow the design wins that they have downstream. Does that answer your question?
It does Peter. Thanks for taking my questions; I will pass the line for now.
(Operator Instructions) And our next question will come from Bryan Prohm of Cowen & Company.
Bryan Prohm - Cowen & Company
Hey good afternoon. I am sorry I am little bit late guys. I am in a couple of places at the same time this afternoon. So just to follow up on the MiFi trajectory this is a flat business for last two years, the outlook suggests that if you grow the business by teens sequentially for a few quarters it might get to that point again where the revenue is 250 to 275 but realistically it feels like with some new product introductions you might have some challenges to get there. I was more intrigued that the commentary in the prepared remarks, it’s basically a breakeven business at the $57 million run rate in the quarter that just went by that correct it I have that right?
Yes. Bryan, if we divide the business two segments and we looked at the EBITDA on mobile computing for this quarter, it was pretty close to about a breakeven situation. And so what you are seeing here that breakeven number is to come down significantly as we have reduced our operating expenses and we have brought that business -- I guess we transfer it to some degree to ensure a greater probability of recovery of our development ROI. And so that’s what we’ve seen this quarter.
So therefore the EBITDA loss in the quarter somewhat it was driven by the M2M business which we are investing happy to investing pretty heavily in the last few quarters and now we are up to the point where we start to see the return and the benefit of all that as you see Verizon.
Bryan Prohm - Cowen & Company
All right. But that business could even into contract by 15% or so until the breakeven on annually. So what then is the breakeven run rate, revenue run rate on a quarterly basis for the M2M business for M2M products and solutions? It sounds like you are talking first quarter return to perform breakeven and with the run rate in the $60 million annualized run rate in the fourth quarter?
Yes, that is correct.
Bryan Prohm - Cowen & Company
Okay. So I got the math straight in my head. So help me to understand; what exactly is the weakness that’s pressuring MiFi, is this a competitive situation. I understand that there is a separate market for smartphones and hotspots in differentiated consumer mobile devices and maybe this is more of a strict enterprise play. Is that a replacement cycle, what are the more new ones puts and takes that I might be missing to try to see how the market is going to reaccelerate in the back half?
I think, it’s predominantly you are seeing the impact of dual sourcing of the operators, which causes channel positions, they haven’t flow. And we have to show the channel in those places. I will say again the targeted strategy that we have is to compete with those swaps where we believe we will have the highest probability of getting our ROI dollars. And within that context, you will see us launch our next generation products towards the middle and back half of the year, that meet those requirements for returns, but in the short term you will see the impact of dual sourcing.
Bryan Prohm - Cowen & Company
Okay, great, thanks guys.
And the next question is from Peter Misek of Jefferies.
Billy Kim - Jefferies
Hi guys. This is Billy Kim filling in for Peter.
Billy Kim - Jefferies
Just in terms of the total OpEx level, how comfortable are you guys with the current levels and how should we think about it going for the rest of the year?
We’re going to continue to obviously monitor our OpEx. We think we’re in a good place where we are right now. And we’re constantly monitoring that, our OpEx resources and making sure that’s in line with the business activity we see in front us. So, a lot of it will be driven by our design wins and level of those design wins that we have going forward, but we keep an eye on it.
I think we’re pretty much in optimized place right now where we license some synergies between the M2M and mobile computing business as well. So I think we’ll kind of leave it at that.
Billy Kim - Jefferies
Got it. And one other piece, just in terms of the accounts payable, pay down, was there anything unique there in the quarter?
Is there anything what?
Billy Kim - Jefferies
Was there anything unique there in the quarter and how should we think about kind of base…?
Yes, there was something unique. We did that for an operational reason to save this significant amount of money by doing that, but it’s kind of a one-time event, we don’t expect that pattern to repeat. We expect that to get more back in line with our typical days payable outstanding which is significant better than what we had at the end of this quarter and therefore not be the draining cash this quarter.
Billy Kim - Jefferies
Got, it thanks guys.
And this concludes our question-and-answer session. I would like to turn the conference back over to Peter Leparulo; I apologize, for any closing remarks.
That happens every day, operator. No problem. Well everybody, thank you very much for your time and attention and indulging me as I really try to be as transparent as possible as to what our strategy was. And we look forward very much updating you on the progress next quarter. Thanks again.
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