Data I/O Corporation (DAIO) CEO Anthony Ambrose on Q2 2021 Results - Earnings Call Transcript

Data I/O Corporation (DAIO) Q2 2021 Earnings Conference Call July 29, 2021 5:00 PM ET

Company Participants

Jordan Darrow - Darrow Associates, Investor Relations

Anthony Ambrose - President & Chief Executive Officer

Joel Hatlen - Vice President, Chief Operating Officer & Chief Financial Officer

Conference Call Participants

Jaeson Schmidt - Lake Street

Orin Hirschman - AIGH Investment Partners

Dave Kanen - Kanen Wealth Management

Operator

Good afternoon and welcome to the Data I/O Corporation Second Quarter 2021 Financial Results. All participants will be in a listen-only mode. [Operator Instructions] Please note, that this event is being recorded.

I'd now like to turn the conference over to Jordan Darrow, Investor Relations. Please go ahead.

Jordan Darrow

Thank you and welcome everyone. This is the Data I/O Corporation second quarter 2021 financial results conference call. With me today are Anthony Ambrose, President and Chief Executive Officer of Data I/O Corporation and Joel Hatlen, Chief Operating Officer and Chief Financial Officer of Data I/O.

Before we begin, I'd like to remind you that statements made in this conference call concerning COVID-19, future revenues, results from operations, financial position, markets, economic conditions, estimated impact of tax reform, product releases, new industry partnerships and any other statements that may be construed as a prediction of future performance or events are forward-looking statements, which involve known and unknown risks, uncertainties and other factors which may cause actual results to differ materially from those expressed or implied by such statements.

These factors include uncertainties as to the impact from the COVID-19 pandemic, along with continued reopening and recovery efforts within the supply chain and among our customer base, levels of orders for the company and the activity level of the automotive and semiconductor industry overall, ability to record revenues based upon the timing of product deliveries and installations, market acceptance of new products, changes in economic conditions and market demand, pricing and other activities by competitors and other risks, including those described from time to time in the company's filings on Forms 10-K and 10-Q with the Securities and Exchange Commission, press releases and other communications. The accuracy and completeness of forward-looking statements should not be unduly relied upon. Data I/O is under no duty to update any of these forward-looking statements.

Now I would like to turn over the call to Anthony Ambrose, President and CEO of Data I/O.

Anthony Ambrose

Well, thank you very much, Jordan. I'll begin my formal remarks by addressing our 2021 second quarter financial and operational performance and then I'll turn it over to Joel Hatlen for more detailed discussion of the numbers.

2021 Q2 adds to the momentum we began experiencing in the first quarter. We achieved the highest performance in years for a number of key metrics, and also reported several significant milestones on our technology platforms. In Q2, we had a surge in bookings and revenue growth. Bookings were $8.9 million, the highest level in nearly four years and up 79% from the same period last year. Revenues were 6.7 million, up 45% from the same period last year and 12% sequentially. We also ended the quarter with a backlog of $5 million.

Automotive electronics were about 56% of our total and when you look at everything, 2Q is our strongest quarter in two years and continues the upward trend in automotive and industrial electronics demand that we've been seeing since the bottom Q2 a year ago. When you break it down, we're seeing excellent performance in all sales regions worldwide. We're seeing strength the new customer acquisition and new location wins, as well as repeat business for capacity additions at existing customers. Our ongoing recovery globally in the installed base is also driving a significant expansion and recurring revenue growth, with Q2 having the largest consumables quarter in recent memory.

Within the quarter, we again won six new customers following the same number of new wins we had in the first quarter. Our internal sales metric show us gaining market share in 2021. This could be due to our supply chain performance, our financial strength, our product capabilities, our excellent global service and support, or a combination of all these factors. Together they support our conclusion that Data I/O is increasingly the secure programming innovator of choice worldwide.

Looking at our SentriX security platform, we had a very significant quarter. Our whole strategy of simplifying and scaling the platform is showing additional progress. In Q2, we had our first booking of a SentriX capital equipment sale for an artificial intelligence application in the EMEA sales region. This is a breakthrough win for us on the SentriX platform. In the second quarter we also qualified the PSV5000 platform for field upgrades to SentriX and completed our first PSV7000 conversion to SentriX at a programming center partner in Asia. We've also demonstrated we can upgrade our PSV5000 and 7000 in the field, and are extending the reach of SentriX to new and exciting applications and channels.

While Q2 is outstanding, we continue to believe in our long-term growth drivers. This is double-digit semiconductor growth in the automotive market over the next decade. We also see strong market growth in 5G, artificial intelligence and industrial IoT. This is consistent with others in our industry in the semiconductor test industry are also reporting. We're also believe we're on track to continue to increase our recurring revenue in absolute and percentage terms, as adapters and services business grow across a very growing and large installed base.

Moving over to our operations performance and our resilient supply chain, we're seeing some of the most demanding conditions in supply chain in at least 20 years. This is not a Data I/O unique issue and cuts across multiple markets, regions and companies. We're also seeing challenges in freight movement, predictability and cost. Our strategy was to get in front of an expected upturn late in Q4 last year by extending our purchase commitments on key components and assemblies. This has been very successful and helping us meet our customer demand across the PSV family of handlers and programmers and our associated adapters.

We are experiencing some modest delays on custom orders and specialty items where we could not prepare the supply chain well in advance. Chip shortages may actually be contributing to revenue growth in some cases, as customers order adapters and new device supports, as they qualify second sources and new designs in reaction to supply chain challenges. Despite all the challenges, we had an excellent quarter and we're on track to ship the vast majority of the $5 million backlog we have entering Q3.

Finally, talking about COVID compliance and other items, our staff is safe and our facilities are fully operational. Over 94% of the Redmond team is fully vaccinated against the COVID-19 virus. Our strategy for maintaining our workforce without layoffs in the depths of COVID a year ago, is paying off now in our rapid turnaround. Because we maintain our talented and experienced workforce across our functions, we've been able to step on the gas pedal and support the surge that you're seeing today.

Moving forward, Data I/O will be formally converting to a hybrid work model in the Redmond office with more permanent fully and partially remote positions as we bring back more people into the office. We've discussed this with our team members over the past several months and think we've developed the right balance. We expect to implement this model starting in September, assuming COVID-19 restrictions are not re-imposed by local governments.

Moving forward to the rest of the outlook, we bounced back from the depths of COVID one year ago and increased orders by approximately 79% year-on-year. We're very excited for the first half progress where we booked over $14 million of business and enter Q3 with very good backlog. We have been and continue to be ready to deliver this backlog. As a bounce back from COVID sales settles out, we look forward to longer-term growth trends of double-digit growth, more security and growing share globally. Data remains extremely well-positioned to deliver disproportionate improvement in profitability and cash flow, as we continue our cyclical recovery within this framework of a long-term growth market and our two-key performance really helped us advance toward this goal.

With that, I'll turn it over to Joel Hatlen. Joel?

Joel Hatlen

Thank you, Anthony, and good day to everyone. As our financial performance clearly has advanced with growth in revenues, bookings and backlog, it's a good time to review our financial model. While we do not give revenue guidance, we try to provide information helpful in modeling our business. On the gross margin side, we believe mid-to-upper 50 range is what will be maintained, although the margin profile may improve depending on the product mix, and channel mix. Operating expenses will be fairly consistent for the balance of the year with variances largely pegged to sales commissions. R&D should be remaining at approximately 1.7 million per quarter, since we intend to continue to invest towards extending our lead as an industry innovator. Taxes are expected to consist of foreign income taxes with no US taxes expected due to US NOLs and carry forward.

Turning to our second quarter results. Net sales in the second quarter of 2021 were 6.7 million, up 12% sequentially from 6 million in Q1 of this year and up 45% from 4.7 million in the second quarter of 2020. We had the highest level of revenue in 10 quarters. The increase in the prior period reflects primarily the higher overall demand for equipment and compares to Q2 of 2020 reduced business activity amid the COVID conditions. Revenue growth has also benefited from higher adapter sales associated with increased usage, our growing installed base of machines throughout the world, and customers addressing the semiconductor supply chain challenges, as Anthony just discussed. On a geographic basis, international sales represented 93% of net sales for the second quarter compared with 94% in the 2020 period.

Second quarter of 2021 bookings were 8.9 million, up 65% from 5.4 million in the first quarter and up 79% from the 5 million in the second quarter of the prior year. Adapter bookings for the second quarter of 2021 of 2.2 million reached the highest quarterly amount in over a decade. Backlog at June 30 of 2021 was 5 million, up from 3 million at March 31 of 2021 and 3.9 million at December 31 of 2020 as well as up from 2.3 million at March 31 of 2020. We entered the third quarter with a higher than typical backlog and have a strong sales funnel as well. Gross margin, as a percentage of sales, in the second quarter of 2021 was 57% as compared with 52.4% in the prior year period. The difference is due primarily to greater factory floor efficiencies on the higher capital equipment sales.

Operating expenses were 3.7 million in the second quarter of 2021 as compared with 3.3 million in the earlier year period. For comparisons between 2020 and the current year, our COVID actions, including executive and board pay cuts, vacation mandates and foreign government assistance with furloughs or benefits lowered costs by approximately 200,000 in the second quarter of 2020. Within operating expenses this year, selling, general, administrative expense in the second quarter increased by approximately 350,000 from the prior year period, primarily due to the higher sales commissions associated with the higher demand for programming equipment and the recording of performance-based incentive compensation, as the company returned to an operating profit. R&D expenses remained stable between 1.6 million to 1.7 million in each quarter.

In accordance with Generally Accepted Accounting Principles GAAP netting loss was for the first quarter of - actually, I'm sorry, net loss in the second quarter of 2021 was 29,000 or zero cents per share and reflects our continued efforts to control expenses, as our revenue climbed back.

Moving on to the balance sheet, day sales outstanding or DSO, a receivables collection measure, at June 30 of 2021 was below our target measure at 59 days. Net working capital at June 30, 2021 edged up slightly to 18.2 million from 18.1 million at the end of the first quarter. Inventory of 5.6 million at June 30, 2021 was approximately 478,000 higher than at the end of March, preparing for the fulfillment of the $5 million backlog. Deferred revenue at the end of the second quarter was 1.4 million, up from 1.3 million at the end of March.

Data I/O's financial condition remained strong with cash of 13 million at June 30 of 2021, which is down from 13.6 million at the end of the first quarter, primarily to funding the receivables, growth in inventory associated with our much higher backlog going into the third quarter. Overall we remain very strong financially which has positioned us to be part of our customers resilient supply chain and allowed us to invest in our business during the downturn, and now finance that resumption of growth. The company continues to have no debt. Finally, we had shares outstanding of 8,619,522 as of June 30, 2021.

That concludes my remarks. I will turn the call back to the operator to begin the question and answer segment. Operator, will you please start the Q&A process?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Jaeson Schmidt with Lake Street. Please go ahead.

Jaeson Schmidt

Hey, guys, thanks for taking my questions. I just want to start with the supply chain. It sounds like in your prepared remarks you guys did not see any significant impact. Just curious if that was truly the case and if you're expecting any sort of impact here in Q3.

Anthony Ambrose

Jaeson, thanks for the question. I think your assessment is correct. We haven't seen any substantial impact. The impact we have seen is the amount of effort it's taken from the operations team to keep the machine running, the baby sitting of the supply chain, the babysitting of freight forwarders, things like that. We took some very proactive steps right at the beginning of the year to make sure that we had key components lined up because we were expecting a bounce back. I don't think we're expecting quite as large a bounce back. So we were protected in that sense. But it's just a lot of effort going in, a lot of work under the covers to keep the well-oiled machine going.

Jaeson Schmidt

Okay, that's helpful. And I know, you mentioned your expedited freight costs, but just curious, in general, if you're seeing other sort of inflationary pressures and if so, if you're passing along those increased costs to customers?

Anthony Ambrose

Yeah, we're starting to see some price increases in the supply chain. And we evaluate that and we do price increases from time to time as the costs go up. And we'll keep that tight eye on that.

Jaeson Schmidt

Okay. And the last one for me and I'll jump back into queue. Really nice accomplishment with that first SentriX system. Just curious how long you had been engaged with this customer, from kind of initial conversations to them formally, kind of going with the system?

Anthony Ambrose

I'd say it's probably been, from the time we started talking to the time we got the purchase order, I'd say it's on the order of two quarters, maybe a little bit less, maybe a little bit more, but that's about it.

Jaeson Schmidt

Okay, thanks a lot, guys.

Anthony Ambrose

Thank you.

Operator

[Operator Instructions] The next question is from Jeff Thompson with Aston Capital [ph]. Please go ahead.

Unidentified Participant

Thanks, Anthony and Joel, guys, for taking my questions. Please walk us through your financial model. I believe you have really strong operating leverage, so want to see how that can come through.

Joel Hatlen

Yeah, we expect, as I started with the conversation on my section to have gross margins stay in the mid-to-upper 50% range. And we actually think that that could be better than that, depending on our mix of channel and product during the quarter. I think our operating expenses will be pretty much in line with where we've been this quarter, with the exception of what the selling commission amounts will be relative to the higher sales volume. R&D, we expect to really be pretty stable at around the 1.7 million range. We don't forecast ever any positive or negative foreign currency piece and that was an unfortunate item this quarter but we do think that our income taxes will be again consisting entirely a foreign taxes with no US taxes because of NOLs. So that's really the basics of it.

Unidentified Participant

Thank you. That's helpful. When you start generating excess profits and cash flows you did during your last run up and around 2017, you implemented a share buyback What can we expect this time around and have you given any thought as to what cash level you want to have or what is the stock price you would repurchase share?

Anthony Ambrose

Sure. For those of you who might be relatively new, the company has a history of buybacks going back eight or nine years. I think we bought back just a little over $8 million to date in the last decade. In a cyclical business, as you generate, I'm not sure if the excess profits or cash, but you may end up with cash that's exceeding what we think we need to run the business effectively, across a normal cycle with some safety buffer. And obviously being a little bit conservative on cash helped us out quite a bit during the past year with COVID. There are a number of other factors to consider not just total cash, but where the cash resides. But we get to that point where we have what we believe is a surplus of cash. I'm sure that's a discussion we'll have with the board.

Unidentified Participant

Okay. And what is different in how you're running the business now, as opposed to 2017 when you had at a run out back then? Is there anything you learned from since that time that positions you to perform better or that would prolong your growth period?

Anthony Ambrose

That's a good question. I think one of the things we did really well in 2017, we're also doing well right now and that's having the operational excellence that our manufacturing and service teams, here in Redmond and also in our Shanghai office, have demonstrated. One of the things we learned, I guess, had to do with COVID and the semiconductor shortages, we learned how to operate much more remotely, which I think will give us a little more leverage in our standard operating procedure in multiple functions in the company. As we go forward, I don't think we'll be traveling as much. We'll be investing more in IT tools and infrastructure to enable that flexibility and pulling back, as I mentioned, on the travel. But perhaps the most interesting thing for the investment community comparing now to 2017 was the profile of our revenue is geared much more towards recurring revenue now than it was back then.

Joel, help me out here, but I think in 2017, we had about 29% of our revenue from recurring revenue and 31% [ph] CapEx.

Joel Hatlen

That's correct.

Anthony Ambrose

And, right now, we're about 44% recurring revenue and 56% CapEx. So the larger recurring revenue gives us a little bit less volatile earnings profile and that'll be helpful as we go through the business cycle.

Joel Hatlen

One thing I'd probably add to that is, we've strengthened our manufacturing operations so that we have the ability to produce some of our equipment in both our Shanghai factory and our Redmond factory, so that helps us manage tariffs, it helps us with flexibility for where the demand is, and it gives us some supply chain extra resilience with having local sources for both of our factories.

Unidentified Participant

Great. That's helpful. Thanks and then one last question. Back in 2017, you were funding SentriX as a startup, and how is the security provisioning platform evolved since that time? And does the market now seem more receptive or in need of this solution, as compared to when you were initially funding it?

Anthony Ambrose

Well, that's a great question, Jeff, and it's important to the company's future. In general, as we develop the product and engage with customers and learn more about the market, we've kept two major goals in mind, simplify and scale. And we learned that our early product was too complicated, it really didn't allow for easy upgrades to the installed base and our customers told us, make it easier to use and make it - so that we can leverage that large installed base of PSV equipment. We did that in the second generation product that we're supporting now.

We simplified the tools, we simplified the overall system, we simplified the customer experience and we've demonstrated now that we can successfully upgrade existing PSV systems in the field to SentriX capability. This will help us grow the business within the current programming center channel and also gives us an expanded opportunity outside of programming centers with OEMs and EMF suppliers where we only saw one or two SentriX opportunities early on. That and I think winning a big deal in artificial intelligence will be game changing for us as it shows our additional applications where SentriX is appropriate and a great fit.

Unidentified Participant

Thanks. And that is all our questions at this time.

Anthony Ambrose

Thank you, Jeff.

Operator

The next question is from Orin Hirschman with AIGH Investment Partners. Please go ahead.

Orin Hirschman

Hi, how are you? So on SentriX, is this turning point to feel, finally, we're really beginning to get traction. And I also noticed you mentioned in your recurring - you actually mentioned SentriX as part of the recurring thing, it's first time, you never really mentioned that because it was so tiny. That mean, the recording is actually becoming more notable. It's still tiny and you just wanted us to begin to be focused on?

Anthony Ambrose

Hi, Orin. If I emitted SentriX from the recurring revenue, it's just simplicity. But to get back to your first question we think it's a big win for us, because we were able to engage directly with an end customer, a very demanding end customer, again, in the artificial intelligence space, we don't have permission to use their name. But they understood the benefits of SentriX very, very quickly. We're able to work with them on tailoring the product to exactly meet their needs and their very specific application. And they had a unique model where it was better off for us to actually sell them a system and create a license rather than the historic pay-per-use model that we've had with other customers and so we're able to work with them on that as well. So I think, it opened our eyes to applications. Go ahead.

Orin Hirschman

Sorry, finish your idea of thoughts.

Anthony Ambrose

Orin, did you have an additional question or clarification there?

Orin Hirschman

Well, yeah, again, I apologize, I didn't want to throw up the idea but just - does that mean that they're not going to be paying a recurring, this particular customer?

Anthony Ambrose

There's a recurring element to it but it's more around a licensing than a pay-per-use model.

Orin Hirschman

Okay. Is that because of the magnitude of the size that they want to?

Anthony Ambrose

I don't want to get into too many details but that's basically what the customer insisted upon and we were able to come to something that worked for both of us.

Orin Hirschman

Okay. And just going back to the basic question, in terms of what was it specifically about SentriX that you want, and what type of competition we were facing for this customer.

Anthony Ambrose

In broadest possible terms, the way we compete with SentriX is, is as we compete on the data business. People can inject data and security information at a number of different points in the supply chain; you can do it at a semiconductor back end assembly test operation, you can do it when the product is completely manufactured at the end of the line and you can do it with pre-programming technology, as we have with SentriX, where you have access to the component, prior to placement on an SMT line. The benefits are, it's a little bit more secure, when you're able to make sure the chip is fully secured, before it's even put on a manufacturing line.

Less of a concern if you own the factory, but it's a much more secure method than waiting till the end of the line because you have a much larger threat surface if you wait until everything is done through the SMT process. And you can always do it at the semiconductor house, they tend to have challenges with lower volumes and some customers don't want to have anyone else have access to their code. And so in this particular case, I think the benefits were, we had a very flexible solution, we could tailor the product to meet their needs and it met their needs to have control over all their intellectual property within their own factory, so it was a great win for all concerned.

Orin Hirschman

Okay. Again, just to reiterate, in terms of where SentriX plays, is it only in that pre-programming before SMT or you could also play in the post manufacturing semi itself in the factory, the semi factory itself, are they're really one and the same.

Anthony Ambrose

I think we've always - the Data I/O technology that we have has always been a pre-programming technology on the data side and also on the SentriX side. Over time, it's possible that SentriX could evolve outside of that. The capabilities for SentriX are substantially broader from a security management perspective than the data programming engine. But right now, the SentriX technology, as our PSV technology does, supports the pre-programming model

Orin Hirschman

Is this win, [indiscernible], not even this win, per se, but just what's going on for you, do you see other - do you see a bigger pipe of SentriX because it's been a long time in coming and obviously this win is a big deal for you? Have you seen the pipeline begin to break open at all for SentriX besides this win?

Anthony Ambrose

Yeah, the pipeline in the first half of the year has been much stronger than it was last year. I think for some of the smaller customers, they've actually - they're interested but they've been held back a little bit by the supply chain, just simply getting parts. So I think when the supply chain breaks loose, I think that'll actually be a net positive for SentriX with some of our potential new customers. But yeah, in overall the interest is there. Again, the product is better, it's easier to use, it's more straightforward and hopefully we get a little momentum out of this win.

Orin Hirschman

Okay. And just shifting to the base distance for a minute, the bookings obviously were pretty amazing. Has the bookings momentum continued? You made some illusion like that in the prepared remarks.

Anthony Ambrose

Yeah, I think the bookings momentum, to get a Q3 exactly like Q2 I think would be a challenge. We just saw people on a tear from pretty much the 1st of March through the entire second quarter. Q3 historically is one where it tends to be more back-end loaded anyway, you have vacations and things like that and that's modeled into our forecast. So I think we've got a good funnel for Q3 and we were excited about the prospects but I think Q3 is always a different beast than Q2.

Orin Hirschman

Okay. Great. Thank you.

Operator

The next question is from Dave Kanen with Kanen Wealth Management. Please go ahead.

Dave Kanen

Hi, guys. Congratulations. Nice progress.

Anthony Ambrose

Thank you, Dave.

Dave Kanen

So, first question, some of them have actually been answered, so I'm going to keep it brief. What percent of your PSV installed base, do you think is a “high likelihood candidate” for SentriX upgrade, if you could quantify that?

Anthony Ambrose

So right now we have north of 370 or so PSV family systems deployed globally and I would say about half of those are probably candidates for SentriX upgrade at one point or another. And I arrive at that number by looking at all of our automotive business and a fraction of the programming center business and also a fraction of the EMS business.

Dave Kanen

Okay. So about 185, if I split in-house [ph]. And then what is the ASP on SentriX? And then if you could just speak to like the margin profile of a new SentriX sale versus traditional PSV?

Anthony Ambrose

Yeah, Dave, we haven't disclosed the average selling price on the SentriX for competitive reasons, because we have a lot of competitors on this call. I'd like to wish them all very well. And then on the - sorry, your second question.

Dave Kanen

The margin profile on it.

Anthony Ambrose

Sorry, margin profile.

Dave Kanen

Is it better?

Anthony Ambrose

Yeah, you should assume that the margin profile on the SentriX business is a little bit better than the base business.

Dave Kanen

Okay, like 10 points.

Anthony Ambrose

We'll just go as it is a little bit better for now.

Dave Kanen

Okay. And then have you guys run through the exercise of does SentriX expand your total addressable market and if so, by how much? Does it get you into doors that he wouldn't have gotten into ordinarily, if you could share a little bit on that?

Anthony Ambrose

Sure. I think it clearly has expanded our TAM because just we're able to program devices that we weren't able to program before, like security, secure elements and secure microcontrollers. And increasingly, there's a new category emerging of secure memory devices. Now, what you're going to see - so that's a TAM expansion. And as I've indicated on the call before we also see the whole market moving to embrace security. We talked about that as, in 10 years, we don't think there'll be a microcontroller market without security. We're starting to see a lot of the memory suppliers come out with secure memories and there's some interesting things they're trying to do there in very high volume verticals where we play that, I think, will be interesting business opportunities as we go forward. So there's an immediate TAM expansion now. And then I think as the market evolves, the shape of the market will become much more security oriented over time.

Dave Kanen

Okay. So I mean, traditionally, your core market has been relatively small. How would you quantify the expansion with SentriX? Is it a 25% expansion, 50%, if you could just take a guesstimate as to what the incremental opportunity is with SentriX?

Anthony Ambrose

You know what, rather than shoot from the hip on this one, Dave, I'll follow up with you and the rest of the investors on that one.

Dave Kanen

Okay. And then, did I hear correctly, like in terms of the backlog $5 million, did Joel say that you expect the majority of that to be shipped during Q3?

Anthony Ambrose

That's correct.

Dave Kanen

Okay. And then, I mean, I know Europe is a good chunk of business, things kind of shut down in the summer, as everyone quote goes on holiday. From your experience - I mean, I understand how like the pace of orders in Q1, it's not possible it could follow through into July with vacations and so forth. But when does it typically - when does the flip - the switch gets flipped, so to speak when people come back, and all of a sudden you see the order pace pick up in a typical Q3, if you will?

Anthony Ambrose

Well, I think Q3 is a lot like Q1 in the sense that you tend to make the quarter in the last month. Most of our business - nearly half of our business, I should say, typically comes in the last month of the quarter anyway, when you average it out over years and years and quarters and quarters. And I think Q1 and Q3 tend to be more exaggerated in that regard.

Dave Kanen

Okay. All right. Congratulations and good luck and I'll tune in next quarter. Thank you.

Anthony Ambrose

Thanks, Dave.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Mr. Ambrose for any closing remarks.

Anthony Ambrose

Operator, thank you very much. Since there are no further questions, I'd like to conclude the call at this time and thank everyone for joining us.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.