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Powerwave Technologies Inc. (NASDAQ:PWAV)

Q1 2012 Results Earnings Call

May 03, 2012 5:00 PM ET

Executives

Tom Spaeth – Treasurer

Ron Buschur – President and CEO

Kevin Michaels – Chief Financial Officer

Analysts

Mike Walkley – Canaccord

Jason North – Jefferies

Amir Tiwana – BRT Capital

Randy Laufman – Imperial Capital

Arun Seshadri – Credit Suisse

Operator

Good day, ladies and gentlemen. And welcome to the First Quarter 2012 Powerwave Technologies Earnings Conference Call. My name is Lisa, and I’ll be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today Mr. Tom Spaeth, Treasurer. Please proceed, sir.

Tom Spaeth

Thank you. Good afternoon. And welcome to Powerwave Technologies first quarter 2012 financial results conference call. I’m Tom Spaeth, Powerwave’s Treasurer. Joining us on today’s call will be Ron Buschur, President and Chief Executive Officer; and Kevin Michaels, Chief Financial Officer.

Before starting, I would like to point out that various remarks we make about future expectations, plans and prospects for Powerwave, including but not limited to anticipated revenues and revenue growth rates, improvements in sales, the split between operator and OEM sales, operating margins, gross profit margins, earnings per share levels, operating expense targets, cash flow projections, revenue composition, supply chain constraints and shortages, manufacturing levels, the benefits of the Tatfook transaction, the timing and closing of the Tatfook transaction, improvements in cost structure, future cost savings related to our cost reduction activities, the timing of restructuring actions and associated cost savings, our ability to reduce our use of cash, availability of cash resources, demand levels for the company’s product lines including demand for the company’s advanced technology products in government markets, success and qualifying new products with customers, projected growth in various markets including government, public safety, and defense, trends in the wireless infrastructure market, including adoption of 4G capabilities and increases in spending by North American operators on their networks, the timing of product deliveries and future orders, the company’s ability to grow its core wireless business and enter into and compete in vertical markets for its products such as government and defense markets, common stock prices, the company’s ability to resolve new product production issues, debt purchases, the company’s ability to refinance its debt, the success of new products and market acceptance in new vertical markets, expense levels, capital expenditure rates, inventory turns, tax rates and days sales outstanding are all forward-looking statements, which are intended to qualify for the Safe Harbor from liability established by the Private Securities Reform Act of 1995.

The statements are subject to numerous risks and uncertainties that could cause Powerwave’s actual results to be materially different from those projected or implied. Some of the risks and uncertainties include our ability to accurately forecast and anticipate customer orders, our ability to increase sales and conserve cash, our reliance on a limited number of customers, our ability to control operating costs and conserve cash, our ability to realize anticipated cost savings and synergies, execute restructuring activities in a timely fashion without negatively impacting our business, the negative impact on demand for our products due to the macro-economic environment, reduced demand due to industry consolidation among our major customers, day -- delays or cancellations of wireless network capacity expansions and buildouts for both existing networks and new 4G networks, fluctuations in foreign currencies, ability to accurately forecast cash flows and credit collections, the ability to refinance debt, the ability to enter into new markets for our products and solution, the impact of competitive products and pricing, economic and political conditions, the loss of one or more significant customer accounts, delays in the closing of the Tatfook transaction, any difficulty in transitioning China manufacturing operations to Tatfook and the possibility of disruptions in the supply of our products.

Please refer to our press release, Powerwave’s annual report on Form 10-K for the fiscal year ended January 1, 2012, and other filings which were unfilled with the Securities and Exchange Commission for additional information on factors which could cause our actual results to be different from those projected or implied.

In addition, on this call we will discuss non-GAAP financial information, reconciliation of the non-GAAP financial information to our financial statements as prepared under GAAP is included in our press release dated today, which can be find -- found at our website at powerwave.com and on business square. The press release also has detailed information concerning several of the significant items impacting our results and we urge you to review that information.

Now, I’m going to turn the call over to Kevin Michaels, Powerwave’s Chief Financial Officer.

Kevin Michaels

Thank you, Tom. With all of these risk factors in mind, I’d like to start reviewing our financial results, which we are also summarized in our press release. Net sales for the first quarter of 2012 were $43.3 million and we reported a GAAP net loss of $57.9 million, which equates a basic loss per share of $1.83.

This includes the total of $1.3 million of non-cash debt interest accretion expense related to certain of our outstanding convertible notes, $800,000 of non-cash pre tax stock-based compensation expense, an $8.8 million of restructuring expense in the quarter. All these charges and amortization totaled approximately $10.9 million for the first quarter.

On a pro forma basis excluding the restructuring charges, the debt related charges and the stock-based compensation expenses for the quarter our pro forma net loss was $39.5 million, which equates to pro forma net loss of $1.25 per share.

Now looking at our revenues on a geographic basis, our total Americas revenues for the first quarter was approximately $20.7 million or 48% of revenue. Our total Asia-Pacific sales were approximately $7.7 million or 18% of revenue, and total European and other international revenues were $14.9 million or approximately 34% of revenue.

In the first quarter antenna systems product group sales totaled $20.8 million or 48% of total revenue, base station subsystem sales totaled $10.2 million or 24% of revenue and coverage solution sales totaled $12.3 million or 28% of revenue.

Our total 2G and 2.5G related sales were approximately $23.3 million or 54% of revenue. 3G related sales were approximately $13.5 million or 31% of revenue, and our 4G sales which includes LTE were approximately $6.5 million or 15% of revenue.

In terms of our customer profile in the fourth quarter, total OEM sales account for approximately 32% of our total revenues, and direct and operator sales account for approximately 68%.

Moving on to gross margins, on a GAAP basis our total consolidated gross profit margin was a loss of 38.1% in the first quarter. In our press release on page three, there is a table with a reconciliation of the various factors impacting our gross margin for the quarter.

On a pro forma basis excluding stock compensation expense was totaled approximately $100,000 and restructuring and impairment charges was totaled $5.6 million, our pro forma gross profit margin was a negative 24.9%

On a GAAP basis, our total cost of goods includes additional inventory related charges totaling approximately $9.7 million. This amount represents approximately 22.4% of gross margin for the quarter. Our gross margin was impacted by the lower revenues in the first quarters, as well as the additional charges incurred in the quarter.

Next, I’ll review our operating expenses for the first quarter. Our sales and marketing expenses were $7.8 million, research and development expenses were $13 million and G&A expenses were $10.3 million.

Our total operating expenses, excluding $700,000 of stock compensation expense and $3.2 million of restructuring and impairment charges were $34.3 million for the quarter.

On a pro forma basis, excluding restructuring charges and the stock compensation expense, our total operating expenses equaled approximately $30.4 million. In conjunction with our restructuring activities, we expect to see sequential reductions in our operating expenses proceed through this year.

In terms of other income and expense, we recorded a total of approximately $4 million of other expense in the first quarter of 2012. Included in other expense of approximately $1.3 million of non-cash debt interest accretion associated with our two and three quarter’s convertible senior subordinated notes due 2041.

In addition, during the quarter we recognized a net foreign currency translation loss of approximately $400,000. This loss is also included in other expense. On a pro forma basis, excluding the debt-related interest accretion for the quarter, our net other expense was $2.7 million.

For the first quarter, we incurred a tax provision of approximately $3.1 million, which includes a $2.9 million expense related to the write-off of deferred tax assets in China and Finland. But we continue to evaluate our future tax rate based upon diverse international operations.

We currently estimate that our effective worldwide tax rate will be between approximately 10% to 15% for 2012. I want to stress that this estimate will fluctuate based upon our actual results

Next, I’ll review our balance sheet. Total cash at April 1, 2012 was approximately $43.9 million, of which $6.2 million is restricted cash. For the first quarter, our cash flow from operations was the use of approximately $31.7 million and our total capital spending was approximately $700,000 in the quarter.

At the end of the first quarter, we completed the sale of our Finnish facility for $5.3 million which is included in our earning cash balance. For the first quarter, our net inventory was $83 million and our total net accounts receivable was $69.7 million.

We are continuing to move forward with our restructuring plan and are well on our way in implementation. One of the significant actions we are taking is our recently announced definitive agreement to sell our China manufacturing operations to Shenzhen Tatfook Technology Company Limited.

Under the agreement, Tatfook will acquire selective assets of our Chinese manufacturing operations and will provide us with a long-term manufacturing and supply agreement. They will be purchasing certain assets for $12.5 million, which will be fully paid to Powerwave upon closing.

We expect to close this transaction prior to the end of the current quarter. This transaction includes the assumption of our facility leases in China, the purchase of certain equipment, inventory and offers of employment to our employees located in our China manufacturing operations.

Tatfook will utilize our existing facility and workforce to manufacture products that we have identified, so that we know changes for our customers. Additionally, we were licensed Tatfook to manufacture and sell selected antenna and tower mounted amplifier products within the China market under a license and manufacturing agreement.

Tatfook will pay an upfront license fee of $5 million upon closing of the license and manufacturing agreement as well as ongoing royalty fees on future product sales. We are also entering into a strategic supply agreement to enable us to benefit from their low cost structure and strategic manufacturing capabilities.

Now, I’d like to turn the call over to Ron Buschur, Powerwave’s President and Chief Executive Officer.

Ron Buschur

Thank you, Kevin. I would like to first state that we are focused on returning the long-term value that our shareholders deserve as well as provide superior wireless connectivity solutions with our comprehensive intellectual property portfolio of over 700 patterns approved and 300 pending.

Our customers are in the process of qualifying our new solutions. And we are seeing new wireless opportunities that we can address with our antenna products, our advanced radio technology as well as our new Picocell technologies.

These new customer activities are positive sign of renewed strength of future planning for the current wireless industry overall. I’m very disappointed with the results in the first quarter. And we are taking the steps necessary to both drive future revenue and ensure that we maintain the appropriate cost structure during this difficult global economic environment.

We believe that we have the cash resources available to us to enable us to manage through this restructuring period. The customers and vendors are very supportive and confident in Powerwave’s future, during these challenging times.

Our customer are engaging the teams and challenging requirements that they have for their networks to leverage our expertise and capabilities they need for the current, as well as future solutions used in the next-generation of wireless networks. Our customers continue to design our products and solutions into their network and have Powerwave to design advance solutions for the next generation needs.

Our employees are focused and working hard to develop, design, manufacturing, and install the most advanced technology in the industry. I want to thank both our customers and our employees for their unwavering support during this period of time, as well as their dedication.

Our business continues to be impacted by several factors including slow spending in most of the markets including the Americas, Western and Eastern Europe, as well as the Middle East. We do believe that the North American market will continue to rebound and we do see some of the major network operated customers saying that they are going to begin to moving forward with a more aggressive development plans and site buildouts.

In most markets, our customers continue to be impacted by the current economic environment, which is causing them to reduce or postpone their spending in their near term or evaluate and reevaluate the macro economic pressures in their individual markets.

In order to protect your investment in Powerwave and ensure that we are well positioned to compete, we have continued to implement the restructuring plan as we’ve outlined last quarter. Our plan is to collectively reduce the manufacturing cost structure in order to reduce the significant variance and absorption issues that you can see in our results.

We continue to move forward with our restructuring plans as well as implementing additional cost savings measures. One significant action that we have taken in our recently announced agreement is to sell our China manufacturing operation to Tatfook Technology.

Under this agreement, Tatfook will acquire selective assets of our Chinese manufacturing operation and will provide us with a long-term manufacturing and supply agreement. This agreement will help drive additional operating expense reductions and drive more cost-effective operating model for Powerwave going forward. And we can expect this will increase and generate additional cash as our business rebounds.

Additionally, we have licensed Tatfook to manufacture and sell selective antenna and tower-mounted products within the China market under our licensing and manufacturing agreement. We currently expect this restructuring plan will be completed over the next two quarters as we previously stated.

Our operating expenses we are targeting to get to the quarterly rate of around the low 20s, excluding non-cash compensation expenses by the end of this year. We are taking these actions to ensure that we will be positioned and capitalized upon the growth of our business, once our customer start driving the improvements to coverage and capacity in the wireless networks.

I want to note we have a very strong technology portfolio and products and solutions that we believe were the best in the industry. With our expertise, our solutions, our advanced superior technology to what is being currently use and developed in these market by our competitors, our success is near.

We have already had some success in the new market segments such as we’ve recorded initial sales of our RMDUs to the Department of Defense. We have received an annual order contract for our advanced Picocell products with a major government integrator and with the agencies of the government.

In summary, I continue to be very excited about the prospects of our business over the next two years. We believe that we are targeting the right few vertical markets that will offer the best long-term potential basis for our shareholders and will allow us to leverage the industry’s best technology and solutions.

In the near-term, we have taken the steps and we continue to take the necessary actions to rightsize the company in order to significantly reduce our breakeven targets and restructure Powerwave to be positioned to generate future profits on a lower revenue base.

Now, I’d like to turn the call over to the operator and address any questions you may have.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Mike Walkley with Canaccord. Please proceed.

Mike Walkley – Canaccord

Well, thank you. Ron and Kevin, is the target breakeven levels still around $70 million or how we should think about it? I’ll start with that question.

Ron Buschur

Mike, I think yeah the targets still in that $70 million to $80 million range in that range there. Obviously that’s and we are looking to hopefully get there by the end of the year.

Mike Walkley – Canaccord

Okay. Great. And maybe just in Q1 if you could talk about the -- maybe the linearity in the quarter and how we should think about seasonal patterns for Q2? I know it’s tough to forecast, but how should we think about the trajectory of maybe getting back to those levels exiting the year about $70 million to $80 million?

Kevin Michaels

Yeah. Mike, we’d certainly hope to see some improvement in Q1 and as I think you know and others have already reported, we didn’t quite see the rebound across the industry as all of us had hope to see. And we did caution that Q1 is typically a little slower, but we’d hope to see a little bit of a rebound.

The linearity of the flow was very, very choppy obviously, and as we look here in Q2, we do see a little bit better improvement in the linearity of the orders that we have on hand. But it’s still, I don’t think the growth is back into the space as we all had hoped yet, I think it’s a little slower yet.

Mike Walkley – Canaccord

Okay. So maybe more of a stronger back half getting closer to the 70, 80 then rebound in Q2 is a fairway to look at things?

Ron Buschur

I think if you will see some improvements in Q2, but yeah, I think that’s a safer assumption when you look at the macro-economic environment.

Mike Walkley – Canaccord

Okay. Great. And Ron, just a question on the regions. You had mentioned some weakness in Europe and U.S., but you didn’t mention Asia, but that area was down, is there anything in Asia that you could comment on in that region’s business?

Ron Buschur

Well, actually if you look at and when we look at the breakout as I do, Asia was down as a percent, but a lot of has depended on the OEM business as you know Mike and...

Mike Walkley – Canaccord

Yeah.

Ron Buschur

I think some of the OEMs have announced a little bit of slowness that they had seen there the direct operator business. We were somewhat pleased with what the performance we’ve seen in the APAC region direct.

Mike Walkley – Canaccord

Okay. Great. That’s helpful. Thanks for taking my question I’ll pass it on.

Operator

Your next question comes from the line of Peter Misek with Jefferies. Please proceed.

Jason North – Jefferies

Hi. This is Jason North for Peter. My question is about the visibility here mainly in North America and again, you’ll (inaudible) looking at for the second half ramp there. And is that mainly going to be Q3, I think or more Q4 any kind of commentary there that would be helpful?

Ron Buschur

Yeah. We’re really focusing on seeing some rebound and we believe we’ll see some rebound in Q3, but primarily the focus that we’re hearing and the plans are build on seeing Q4 as a pretty healthy quarter across most of the carriers because some other network design plans are going to be released that they are currently developing. So we are targeting to have ourselves prepared and right-sized in position for that growth and the Q3 timeframe is starting to really ramp in Q4.

Jason North – Jefferies

And how do you feel your share position is with some of those customers. Have they got any concerns about financial difficulties and such?

Ron Buschur

No. As I said, our customers have been very supportive and they’ve been designing us into the next generation of products. And the next generation of solutions that they are trying to deploy on your network, so we feel very good about that in the market share and as many or some of our competitors who have visibility to have indicated things are slow there as well. I’m certain that the competitors always would like to kick you when you are down and certainly, we’re in a position to where we want to demonstrate that we are here and we will be here for the long-term.

Jason North – Jefferies

Okay. As we look into Q2, how should we think about gross margins?

Kevin Michaels

Well, I think we all should see some improvement. We had additional charges going through here in the first quarter and obviously very poor absorption. So we definitely see improvement, but we’re not studying a firm. We’re not obviously giving guidance in this situation. So, we don’t refer number but we should see a path to improvement over the course of the year, especially the issue, a lot of our savings will be driven by our manufacturing consolidation that will be completed toward the end of this quarter. So the full benefits don’t come till later in the year.

Jason North – Jefferies

Okay. Thank you.

Operator

Your next question comes from the line of [Amir Tiwana] with BRT Capital. Please proceed.

Amir Tiwana – BRT Capital

Hi, guys. I have a question regarding, what kind of sources do you have in terms of assets? I know you have done some deals in order to raise liquidity. You have about $44 million in cash. It seems – what’s available on your revolving credit facility and I know you’re expecting some money from the Chinese deal coming in. Is that really all the source for this cash that we are looking at or are there other deals that are in the pipeline?

Kevin Michaels

Well, I think, we obviously that the Chinese – our transaction there will provide some definitive cash, additional cash to the company, in total there is about $17.5 million of cash initially and then improve strategic supply agreement, there is other opportunities down the road there. So that’s there, in terms of asset sales and stuff, we’re not – we think we have a core group, so we are now looking for that. We clearly we’ll continue to look at financing options and those types of things and availability and alternative financing options.

So that’s part of thing that we will look at. And obviously, we have, in terms of an asset base that is on the balance sheet, we have a very strong IT portfolio and we’ll continue to try to gain value from that as well.

Amir Tiwana – BRT Capital

Would that be from selling of IP or potentially licensing of IP? I mean, can you comment on that?

Ron Buschur

It could be a combination of both.

Amir Tiwana – BRT Capital

Okay. I’m not that familiar with your Chinese operations. Could you comment on what this deal really is in terms of your handing over the manufacturing or and do you have any other operations in china? What percentage of revenue do you think is now going off as part of the deal? Can you give us some color?

Ron Buschur

Well. The other entity or other manufacturing sites that we have are not in China. First-off all, they are in Thailand and those were entities facilities that we own there. What’s going to occur is yes, they are going to be manufacturing our products. There are large manufacturing company that has great vertical integration capabilities, they do a lot of their housings, they have PCBA capabilities, they have a very comprehensive products around cables, connectors.

They can do a lot of the integration in work and they have the supply chain capability that we currently utilized externally. So that brings to one drive some synergies for the combined company. It’s going to help us with a shorting our lead-times in our supply and it gives us some cost benefits that we currently do not have.

The real advantage for Powerwave and for Tatfook is, they have a very good customer reach within the China market. They will be able to take advantage of that technology that Powerwave has and being a Chinese local company, I think they will have a little more success than any American company would have in the China market. They’re very successful today and we envision that our sales of our technology around antennas and tower-mounted amplifiers will grow there, which equates to good market share and use and utilization of that factory as well as royalty is coming back to Powerwave.

Amir Tiwana – BRT Capital

Understood. Thank you very much.

Operator

Your next question comes from the line of Randy Laufman with Imperial Capital. Please proceed.

Randy Laufman – Imperial Capital

Hi. Thanks for taking my questions. Just wanted to ask about the cost restructuring, specifically related to the initiatives you’ve announced last quarter. I’m wondering if there was any delay or holdup in some of those initiatives. It doesn’t look like SG&A came down in all this quarter and it indicated you’re well on the path to realizing those cost reduction last quarter. So I’m wondering if there was a hold up in some of those reductions?

Kevin Michaels

No. I think we did have some reductions there. We did suffer some additional expenses in sales and marketing that normally are higher in the first quarter. There is some trade show expenses there and we had some bad debt expense.

So we -- and also a lot of the reductions were international so notices were given. So some of the -- something happens towards the end of the quarter. So we really didn’t see the full impact.

But in terms of our schedule and our plan, we are pretty close to the plan. So we -- as we stated, we should see sequential reductions here. And clearly, the Chinese operations, while it’s obviously in cost of goods sold, there’s also a significant portion in operating expenses that will benefit. And you will see a lot of that hitting us for the third quarter.

Randy Laufman – Imperial Capital

Okay. And just touching on the Chinese operations, can you give us any idea of what the royalty structure would be like whether is a simple percentage of revenue. It’s just a flat percentage, et cetera.

Kevin Michaels

It’s a percentage of revenue and we’ll just live it at that.

Randy Laufman – Imperial Capital

Okay. And then you mentioned that part of the sale includes, the sale of inventory. I was wondering if you could may be quantify how much of the sale is includes the inventory and what kind of inventory reduction you might see as a result of the sale of those assets?

Kevin Michaels

What it involves is obviously, they are taking over our manufacturing operation there. So there is material there in inventory. As they take it over, they are taking over the facilities maintaining manufacturing same operation.

So they will be procuring from us the inventory that we have on hand or brought in the raw materials and they will procure those as they build the products from us. So, the exact amount I don’t have handy, but it will be additional over and above the initial payment amounts.

Randy Laufman – Imperial Capital

Okay. And then just finally on this transaction, are there are any risks to the closing of it, is it pending any sort of approval or financing any risk for closing?

Ron Buschur

No. There is no pending in financial needs from any outside banks. They have the funding internally, they do this transaction. There is no government approval needed to be done on this entity. It’s a matter of us executing and getting everyone completed on the due diligence necessary to transfer the technology, as well as the manufacturing capabilities in a timely manner.

Kevin Michaels

And they’ve already made a significant down payment on the purchase price, right.

Randy Laufman – Imperial Capital

Okay. Thanks a lot, guys.

Kevin Michaels

Thank you.

Operator

Your next question comes from the line of Arun Seshadri with Credit Suisse. Please proceed.

Arun Seshadri – Credit Suisse

Hello, guys. Thanks for taking my questions. First, is I wanted to get a sense for cost of goods sold line, pro forma for this sale to manufacturing facilities in China. Can you give us any idea of what type of cost of goods sold or gross margin benefit that alone represents?

Kevin Michaels

Well, it is hard. I mean I would say that should allow us these revenues levels in the lower ranges of $70 million, it should allow us once the sale is complete to see margins in the mid to high 20s. It should clear out a lot of overhead poor absorption, and obviously that improves where we drive revenues back to some more historical levels.

Arun Seshadri – Credit Suisse

Okay. So at the $70 million revenue level or mid 70s revenue level gross margin in this mid to high 20 you said?

Kevin Michaels

Yeah. I mean, mix is always going to have an impact, but not kind of ranges where we think we’ll eventually get to.

Arun Seshadri – Credit Suisse

Okay. And but that is just from this transaction, correct?

Kevin Michaels

Right. And it’s a big focus of this transaction and the actions that we’re taking leaning up to this, we’ve been simplifying our structure streamlining cost we’re making reductions as part of our restructuring effort.

So become -- but the manufacturing consolidate is the single biggest piece, here some other actions we’ve been doing as well that are contributing to it, but this is the significant big piece.

Arun Seshadri – Credit Suisse

Okay. Appreciate that. And then as far as OpEx goes your current OpEx run rate is sort of around $30 million, $31 million, could you give us some idea for how that should trend towards your opening target any…

Kevin Michaels

No. We think, as we stated previously, we think -- we should get down to the low 20s by the end of the year. So I think you will see some -- you’re going to – you’re definitely going to see sequential declines as we go through here.

Those actions that we’ve already taken that will further show up here in the second quarter. And also its part of the manufacturing operation, there is a subsequent amount of operating expenses associated with that as well, that also come out once that transaction is completed.

So over the next couple of quarters, you’ll see step downs in those numbers. So, and we’ve taken actions, we’ve a lot of it takes them while there would be -- to before we implemented, but those are well on their way.

Arun Seshadri – Credit Suisse

Okay. So, generally, roughly linear reduction in OpEx through the end of the year.

Kevin Michaels

It’s not a linear, I would say, it’s more kind of a step functions. It’s not a straight linear line. But it is -- there are some step functions.

Arun Seshadri – Credit Suisse

Okay. Any color all you can tell us in terms of like how much OpEx will be done in the first quarter, second quarter, third quarter that level of precision or no?

Kevin Michaels

I really don’t want to get that level precision. I mean, I think well I just stick with that how you are going to see some sequential reductions there.

Arun Seshadri – Credit Suisse

Okay. I appreciate. And then finally, as far as your cash position goes, assuming revenue does not pick up appreciably from current levels. It feels like you will still burn over $20 million of cash in the second quarter.

So I guess one of the overarching question is from a restructuring standpoint, do you expect that your revenue very quickly recovers to $70 million or above range, or do you have additional restructuring plan contemplated, if you don’t see a recovery because it doesn’t look like you have more than -- a couple of quarters before your cash becomes the problem.

Ron Buschur

No. We’re absolutely think that, there is improvements that you’ll see from a sales perspective. And we have plans in place if we don’t see sales improving that will further reduce our operating expenses on an ongoing basis. But I guess, maybe your analysis isn’t quite as same as ours on the -- on the cash flow burn going forward.

Arun Seshadri – Credit Suisse

Okay. So you expect less than the $20 million cash burn in Q2, is that fair?

Ron Buschur

Well, what I said is, we certainly believe that the sales coming in and the opportunities that we have should allow us to do better than the type of projections that you have in your model.

Arun Seshadri – Credit Suisse

Okay. Appreciate that. And as far as visibility into Q2 goes any color you can give us in terms of what you’ve seen so far the first four weeks of the quarter, what type of cadence there is in the bookings so far?

Ron Buschur

Well, we are in much better shape for seeing better bookings and what we had obviously in Q1 at this time. And we believe that hopefully we will continue as we go through the quarter.

Arun Seshadri – Credit Suisse

Okay. Appreciated. Appreciated the time, guys.

Ron Buschur

Thank you.

Kevin Michaels

Thank you.

Operator

Thank you. I will now turn the conference back over to management for closing remarks.

Ron Buschur

I want to thank everyone for joining us today and your continued interest and support in Powerwave Technologies. We look forward to sharing with you our results for the second quarter of 2012.

Operator

Thank you. This concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.

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