Q1 2021 Data I/O Corp Earnings Call
And.
And.
[music].
Good day and welcome to the data Io Corporation first quarter 2021 financial results all participants will be in a listen only mode should you need assistance. Please signal conference specialist by person Mr. Key followed by zero.
After todays presentation, there will be and opportunity to ask questions. So I'll ask a question you May Press Star then one. Please note that this event is being recorded I would now.
I'd like to turn the conference over to Jordan Darrow Investor Relations. Please go ahead.
Thank you and welcome to the data Io Corporation first quarter, 2020, One financial results Conference call with me today are Anthony Ambrose President and CEO with data Io Corporation, and Youll Holland, Chief operating officer, and Chief Financial Officer of data Io.
Before we begin I'd like to remind you that statements made in this conference call concerning COVID-19, and future revenues results from operations.
And to position.
Markets economic conditions estimated impact of tax reform.
And releases new industry partnerships and any other statements that may be construed as a prediction of future performance or events from 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 on 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 and the company's filing.
And on forms 10-K, and 10-Q with the Securities and Exchange Commission.
Our press releases and other communications the accuracy and completeness of forward looking statements should not be unduly relied upon data I always under no duty to update any of these forward looking statements.
And now I would like to turn over the call to Anthony Ambrose President and CEO and Io.
Well. Thank you very much Jordan I'll begin my formal remarks by addressing our 2021 first quarter financial and operational performance and then I'll turn it over to Joel for a more detailed discussion of the numbers.
2021, first quarter was our strongest revenue quarter and two years and continues the upward trend and automotive and industrial electronics demand that we're seeing since the bottom in Q2, a year ago, we're coming out of the COVID-19 recession, very well and seeing a surge in business in March and April of this year, we believe the <unk>.
Positive growth themes that we discussed recently and our year end conference call are accelerating.
Well theyre very well documented short term supply disruptions caused by sharp increases in automotive electronics demand supply chain interruptions and the.
Semiconductor supply chain and other factors the long term secular growth for automotive electronics remains intact with industry analysts and customers projecting a compounded annual growth rate of 10% to 15% for the next decade.
Clearly additional capacity is going to be needed throughout the supply chain to support this demand and we're seeing that as key semiconductor companies continue to announce record spending and the tens of billions of dollars for wafer fab and backend capacity.
Data Io is also answering this call with our most advanced technology supporting all growth areas and automotive, including electrification infotainment advanced driver assist systems security and connectivity and this is across flash memory products Microcontrollers.
And security devices as well.
We're very excited about the business performance and the quarter. During Q1, we won six new.
Customers in Asia across all markets.
This illustrates our global strengths and the desire of customers to partner with the market leader during these challenging times.
We also substantially added to our sales pipeline and Q1 with new prospects from our repeat customers alike. This is in both our traditional business and the centric business as well.
Overall, we see Asia Pacific and Americas regions, leading the recovery with the Europe Middle East and Africa region. Following about one to two quarters behind.
During the overall downturn in the past couple of years data Io has remained committed to our strategy of investing in our key technologies and our platforms R&D continues to be a critical and sustainable competitive advantage for the company.
In addition to that COVID-19 disruption also shows the value of a resilient supply chain.
And data Io is the only programming supplier and our industry with two manufacturing locations.
And fires and a semiconductor fab and environmental induced issues and Texas illustrate the need for a resilient supply chain and our automotive customers clearly value.
That capability.
Regarding centrex, we all had a very nice quarter and Q1 as well one of our very first centric automotive electronics customer through a partner and Q1.
We also deployed our first field upgrade of a PSV 7000 and system upgrade to a centric system for multinational customers Asia factory.
We're also seeing increased customer activity from both partners and direct engagements on centrex.
As we look ahead, we become even more encouraged by the global economic recovery and the demand from our key vertical markets with strong operating leverage data remains very well positioned to deliver disproportionate improvement and profitability and cash flow as we continue our cyclical recovery within the framework on the long term strong.
Growing market.
With that I'll turn it over to Joel Heartland Joel.
Anthony and good day to everyone.
Net sales and the first quarter of 2021 were $6 million, the highest level of revenue and eight quarters and up 26% as compared with $4 8 million and the first quarter 2020.
The increase in the price from the prior period, primarily reflects higher overall demand for equipment.
Revenue growth also benefited from higher adapter sales associated with the increased usage and growing installed base and machines throughout the world.
Recurring and consumable revenues, which includes adapter sales, representing $2 7 million or 44% of total revenues for the first quarter of 2021 as opposed to $2 2 million 40, and 46% of the lower first quarter of 2020 total.
Adapter sales for the first quarter of 2021 were the highest quarterly sales since the second quarter of 2017.
First quarter of 2021 bookings were $5 4 million up 26% from $4 3 million in the first quarter of the prior year.
Backlog at March 31, 2021 was $3 million down from $3 9 million at the end of December.
2020, but up 30% from $2 3 million at the end of the first quarter of 2020.
We go into the second quarter with a higher than typical backlog.
A strong sales funnel additions in March and a strong start in April orders.
On a geographic basis international sales represented approximately 95% of net sales for the first quarter of 2021 compared with 94% in the 2023.
Gross margin as a percentage of sales and the first quarter of 2021 was 55, 5% as compared with 58, 2% in the prior year period.
The difference is due primarily to less favorable variances as well as channel and product mix.
The gross margin percentage guidance continues to be in the mid to upper <unk>.
Operating expenses were $3 7 million in the first quarter of 2021.
First quarter operating expenses are generally higher than any other quarters.
Of the year due to the inclusion of seasonal costs, such as the majority of audit and public company related costs for the year.
Seasonal amount in the first quarter of 2021 was approximately 250.
Within operating expenses, selling general and administrative expense and the first quarter of 2021 increased by approximately 251000 and from the prior year period, primarily due to higher sales commissions associated with the higher demand for programming equipment.
<unk> expenses remained stable at approximately $1 6 billion and each quarter and that is the first quarter of this year and last year as well as the fourth quarter of 2020.
We are focused on maintaining if not extending our technological lead in the automated programming and security deployment and market.
In accordance with generally accepted accounting principles GAAP.
Net loss and the first quarter of 2021 was 333000 or <unk> <unk> per share.
This is our smallest net loss since the second quarter of 2019 and reflects our continued efforts to control expenses as our revenues climb back.
Moving on to the balance sheet day sales outstanding or DSO, a collection and receivables collection measure at March 31 was below our target measure at 49 days, even as receivables increased from the and get the fourth quarter.
And as our sales grew 22% on a sequential basis.
Net working capital at March 31, 2021 remained consistent at $18 1 million from the end of the fourth quarter.
Inventory of $5 1 million at March 31, 2021 was approximately 138000 and lower than December.
Data <unk> financial condition remains strong with cash of $13 6 million at March 31, 2021 day.
<unk> financial strength has allowed us to continue to invest in our business during the downturn and now finance the resumption of growth.
And we continue to have no debt. Finally, we had shares outstanding of $8 million 421599 as of March 31 2021.
That concludes my remarks, I will turn the call back to the operator to begin the Q&A segment operating would you. Please start the Q&A process.
And we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
And if youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two and after.
This time, we will pause momentarily to assemble the roster.
And our first question today will come from Jason Smith with Lake Street. Please go ahead.
Hey, guys. Thanks for taking my questions. Anthony just wanted to follow up on your comments in the on the search and business starting in March and April was that pretty broad based or was it concentrated amongst a few customers.
Good question, Jason as I indicated in my remarks, I think we're seeing most of our strength in Asia and the Americas.
As I mentioned, we had a number of new customers and new locations.
<unk>.
And I'd say, it's a combination of.
Some new customers from repeat customers a couple of multiple system orders and there as well.
But pretty broad based.
Okay and within that are you seeing signs of life from the programming centers.
A little bit I think remember the programming centers.
Have a fairly broad capacity and they they support and <unk>.
Number of customers, including smaller customers I think it's pretty clear the smaller customers are taking it on the chin right now from any of the supply chain issues.
Obviously, some of the big ones have as well but.
Bigger companies tend to throw their weight around more when there's a supply shortage. So.
I think our programming center revenue has been pretty flat at about 14% for a while and I think that's a.
You know pretty consistent also a lot of our programming center revenue tends to come from Europe.
And on balance.
Okay. No. That's that's helpful. And then just the last one from me it sounds like there were some nice traction with centric.
The automotive customer and I know you mentioned you won that design.
And through a partner, but how long are they evaluating the system.
As Youre, probably aware, Jason the security sale is a longer sale than a normal data programming sale for a couple of reasons number one the technology is newer and number two obviously with security and secrets and keys and certificates and people are very concerned about who gets to know.
About that whole process and also we have to explain it to them and show it to them. So it is a longer sales cycle.
Having said that the more customers talk to data I O. The more you see the lightbulb going off that <unk> is a great solution for a number of customers and the market.
And the volume flexibility they can work through a partner a programming center. We've had some customers say you mean now I can just upgrade my PSV 7000, and add the security capabilities I need it and of course, we say, yes, that's exactly what you can do so it's a longer sales cycle as we've talked earlier, we're trying to continuously to make it simpler.
And easier and.
And that's our goal going forward.
Okay. Thanks, a lot.
Thank you.
And our next question will come from Jeff Peterson with Austin and capital. Please go ahead.
Hey, Thanks, guys for taking my questions, but the supply chain shortages, including the weight per pad limitations.
What does this mean for equipment makers like data Io and.
Where do you fit into this and what should we expect the impact to be.
Well, Jeff Thanks for the question.
You know the there's a lot that's been said about it clearly a number of our end customers automotive nameplates and electronics companies had been impacted by the shortage I think there were some remarks made earlier this week by a major U S based automotive company, indicating that it's costing and billions.
Or dollars.
We might be seeing it, but we really haven't seen it in the bookings or the backlog, we do see some customers coming to us for I'll call. It accelerated support so they can qualify alternate silicon.
So if they are facing a shortage of component a they'll come to us seeking programming support for component B.
And so they can have an alternate supply arrangement.
Probably the biggest single impact.
As I said big customers are probably faring better overall, we have seen some of the smaller customers are getting.
Getting roughed up a bit with the supply chain.
And that's just what happens when these things occur.
That's helpful. Thanks, along the lines of the chip shortages issue are you driving benefits and the form on sale of consumable items such as adapters.
What we are seeing and adapters again, we mentioned last quarter and it continued this quarter one of the early indications are coming out of a recession as customers using the equipment. They already have at a higher level of utilization and thats typically reflected in some of the consumable purchase trends and that's what we're seeing.
Okay, great. Thanks.
You discussed the.
And <unk> wins in Asia, including whether they are and our new or existing customers through which channels.
Where would the sales booked and any other information you can share including and this do you believe that these sales are the result of Asia, India and emerging from COVID-19 and with economic development resuming there.
Yes, let me start with that clearly there is some regions of the world that have been less impacted or have come out of the COVID-19.
Induced recession faster.
And I think China is clearly one of those areas, we had a number of wins in China, but we also had a number of wins outside of China and Asia amongst those new wins.
They were fairly broadly dispersed I think most of them were automotive we had some industrial.
Some programming centers and there as well, so again very broad and and I think it reflects.
You know a number of trends when when customers are selecting a new partner for programming.
And they look at US obviously, they look at our competitors and and <unk>.
Asia, we do extremely well, even though most of our competition is domiciled in the Asia Pacific region.
So again, the customers that value the quality the resilient supply chain.
On the global capability and value data Io.
Yeah.
That's helpful. Thanks.
And what's the status of your proxy with respect to the advisory firm recommendations.
So we did.
Just Scott.
Our proxy advisory recommendations I think this week and.
And right now it looks like.
There is a sort of a split recommendation and we're trying to figure out why that is.
As many of you know after we prepare and file our proxy statements reviewed and opinions are rendered by proxy advisory firms glass Lewis and ISS on.
On Tuesday, we figured out that ISS was recommending.
Support for the board, but not recommending support for our stock plan extension, we dug in and determined that we think they might have missed something on on an incorrect assumption about the plan and we're working with them.
And we'll see where that goes on.
Glass Lewis on the other hand did not have any issues with either the board recommendations of the stock plan.
We believe at this time, so as I said, we'll dig in and we'll figure out what's going on and we'll update you accordingly.
That's all my questions at this time and thanks.
Thank you.
And our next question will come from Dave Cannon with Cannon wealth management. Please go ahead.
Hi, guys. Thanks for taking my questions.
First of all day is.
Hi.
First question is in regards to which end markets showed the most strength in terms of.
Orders.
Yes.
Well I think we indicated Joel was about 56% and the orders were automotive and.
30% industrial so David was pretty consistent with our overall mix. So I think again, it's you know.
Reasonably strong by end market across the board again with a strong regional component and I think Asia is clearly ahead of <unk>.
Europe for example.
Okay, and then what percent of your revenue was centric.
We don't disclose centric separately, it's in the software services and Centrex and saw what was the number for that for the quarter. It was 31% of our business.
I'm, sorry, 13% above 13%.
After.
13th Okay. So 13% was centered on 13% was maintenance contracts and software.
Service.
Ladder, it's inclusive.
I see so so it's really at this point center, it's a de Minimis percentage of your overall revenue.
Yes, just to take a step back and then look at our expense structure.
On playing Devil's advocate for a moment as a public company, we have to ask what's the ROI on.
On the investments that we're making so.
And your Opex has been elevated if I go back to several years ago.
You were.
So 3 million per quarter in total opex, even at times during recessions even below two five. So my question is how much of your SG&A total opex relates to the Centrex initiative and.
And does it make sense potentially.
Two.
Cut some on the fat.
So.
It will take a question and sort of one at a time.
<unk>.
When you look at the overall expense remember security is where the market is going for the microcontroller industry.
It's not a distinct category its not something out there thats different and what we do.
If you look at all of the major semiconductor product line announcements from microcontroller families. They all have a security component.
So to be ahead in security has to be ahead, where the 30 billion unit microcontroller market is going.
And so that's just a strategic play that we have to have now within that of course, we evaluate how much we spend from time to time.
And we had and elevate the spending a bit to get our second generation architecture out for the benefits that we described and frankly you know we're seeing some of the fruits of that and Q1. So if you're saying are we keeping an eye on things and making sure we're spending the right amount and it's evaluated absolutely.
Okay. I mean is there an opportunity to get back to the $3 million quarterly run rate and operating expenses.
And that Saturday on property.
No.
And I don't see that.
I see.
Okay and.
When do you expect I mean.
And it's encouraging that you guys saw things turn up in March and April.
When do you expect to be GAAP EPS profitable.
As soon as possible as always the goal we don't give forward guidance I mean, it's always challenging without guidance, but.
That's something we clearly pay a lot of attention to and are working hard to get there as soon as possible.
Okay. Good luck. Thank you.
Thanks, a lot Dave.
And our next question will come from Orin Hirschman with AI GH It doesn't and partners. Please go ahead hi.
Hi, how are you.
Hi, Noah and Howard.
Okay.
Couple of quick questions.
And if I look on day, one so maybe want to comment on terms of searching on the facts, we look at the sequential bookings.
They are actually down slightly.
Right so from correctly.
Could you just kind of put that all together with the commentary maybe sure.
In Q1, we always have to deal with the Chinese new year, which if most of the businesses and Asia. It tends to take away about two weeks of the quarter and then you also very few people buy anything in the first week back from the.
The calendar new year, so Q1 tends to be for all intents and purposes, a tougher quarter to get orders done because.
Not everyone is home all 13 weeks of the quarter and.
And you know coming out of Chinese new year.
Great sales funnel.
It's always a challenge to understand how much of it will actually close in March and we saw very good closures in March and then also it continued in April we don't usually talk about the April bookings, but we anticipated your point and wanted to make sure people understood that.
We see good bookings momentum and the company.
Okay.
Can we assume that that means Sydney up sequentially from June.
It's not only all day long seasonality.
What's going on from a macro level.
Yeah, again, I don't want to get into the forward guidance, but.
You know.
Joel do you want to comment on that yeah, No I, just think that with the backlog we have the strength of the sales funnel and the I'll say the early sales.
And have taken place so far and April I think we should be looking at a better quarter well. There you go from Joel sense. So let it be let it be done.
Hi.
How fast can you turn around.
And at the beginning of the quarter, meaning and April quarter still ship on April orders still ship shipped and the June quarter, and whats neat Oh, yes, absolutely.
We quota standard lead time, it's you know and this six to eight weeks neighborhood.
And we try and do better than that.
We've I think we've done a very good job trying to stay ahead of these component shortages.
Theres no doubt you can turn April orders at least some of them into revenue for the current quarter.
As you get later in the quarter, they tend to probably flow into the subsequent quarter.
And just general rule, our backlog generally represents about one month worth of sales so that.
And that means each each quarter, we have to hustle for the other two months.
Right.
Got it.
Centric.
So and then.
A long long time and.
And it seems like from a little bit of break and the logjam and right now can you.
You give us more.
No.
And the automotive win.
What are they using it for that Youre seeing it from Microcontrollers why did what they go with you or are there other ops and how long have you been doing test with them give us a little bit more color.
Yes, so we don't have.
The.
The ability to use a customer name.
But most people would understand who it is.
The specific application, we're working with them on a T. P M trusted platform module application for.
And for a very secure component.
And the reason they come with US as we announced in Q4 support for the Infineon T. P M.
Nice thing about Tpm's is it's a pretty established market. They are well known products people have been working with them for a long time and again with centric. So you get the ability to have your unique.
Cryptographic and security information and provisions into the chip, where you wanted in the supply chain.
So you don't have to do it too soon and you don't have to.
You can do it exactly where you want it and I think the customer valued number one our relationship with the chip supplier and number two are frankly detailed understanding of the T P M and and how to work with it.
Now typically David from.
And the equipment sale path.
Some plenty royalty on a per chip.
That's the case here as well.
Yes, I remember with Centrex, we have programming center partners that can provision the devices, we've talked about the general business model, including our pay per use component.
For things like upgrades of equipment, and the field or or new system purchases by Oems there may be additional revenue sources, but in general yeah. That's the model.
Okay, and meaning there's no reason why you shouldn't get some type of albeit minute royalty.
Particular customer, but there will be a per chip.
Loyalty.
Yeah again, we've indicated in the past and I'm pretty clear on Centrex Theres a per part component to the revenue stream.
Alright.
Automotive customer here that themselves.
And although OEM or it's a design house.
And for the OEM.
What type of Oh, let me incentives for the auto.
We've been working with the partner and also the and customer directly which is pretty typical for centrex.
Wherever you are.
Phil.
Still have to work with the customer directly because they they just need to know.
And we need to help them out on you know how to work with the crypto information and things like that.
The actual the programming done pilot and the automotive OEM and what have you done by one of their partners.
And we work this deal through a partner.
Okay.
Okay.
And second of all of the field upgrades centric per.
Question on Angel can you say what industry and thank you for that question and that they are appropriate.
Well, it's a programming center customer they had a 7000.
We did and upgrade turned it around and a day they are extremely happy.
And was it the first set of customer demand and customer and yet for their use of it.
And so they centric assets.
Yeah, I think it would be fair to say that customer wanted to deployment and Asia, because they had customer demand.
Okay did you what did you work with the end customer at the end of the chain chemo and window or.
Yes, and we said this was a programming center customer.
And then okay fine and then saying their customer at the very end of the chain from the program and cut their whoever that is that they're programming for did you work with that customer at the end of the.
And of the chain.
Yes.
Okay.
And then the last thing.
It is still a pay per use situation for us.
Okay, Great that's very nice I mean keep keeping in line with tiny today, but.
And what's next and indicated and then I'll, let other people ask you indicated that there is.
And there's more interest and centric and the text and.
And karla.
And I mean is it finally, beginning to gain net income.
Yes.
Well I think we're very encouraged by the.
Interest and the and the product line in Q1, it was substantially above what we saw coming out of last year, but I think it's more a couple of things we've been very consistent on centrex that we needed to simplify and scale centrex okay.
There is no doubt we were early on.
But at the end of the day, we continue to learn and continue to simplify continue to make it easier and that's our virtuous cycle for acquiring new customers and getting them into the market.
Okay.
It's a it's a marathon not a sprint and and we still believe that.
And I'll reiterate my earlier comment the the microcontroller industry is going to a secure microcontroller industry, that's where all the business will be it.
It might be five years out it might be 10 years out it might be sooner than that but thats, where all of the business and microcontrollers will be will be eventually.
The other part that I Wanna indicators, we're starting to have what I'll call more strategic conversations with customers.
Everyone was hunkered down last year with COVID-19.
But we're starting to have a lot more meaningful conversations on how we can help customers across a broad range of our technologies.
Which would include us doing things for them that may be unique.
And and data Io, becoming more integrated into their overall supply chain and are in a much more broader and strategic way.
So I'm encouraged by that overall.
You know these things take time, obviously to develop but.
This to me is again one of the indicators that we're coming out of the COVID-19 freeze.
People want to talk about you know what they can do to become an even greater company and how data Io can help them out.
Okay excellent.
One quick follow up on it.
On a modem costs for that Patrick.
Customers.
And I think Europe Asia and.
One other quick question like that.
It's a north America based.
Okay and.
And final.
And final quick question and talk to the secular trends and auto is there something new going on and that's really.
Core thing, but the tailwind and auto business for you for example, a day.
So, it's something where we're being more.
And then in the past and close it.
It makes sense on that specific new applications.
And I think.
And just moving to hate it and in some of the earlier calls and we've had a strong position and infotainment for a while that continues to be strong with second generation.
And third generation of products I think electrification is probably the new interesting thing.
In terms of demand picking up.
Everybody is talking about electrification advanced.
Advanced driver assist is obviously still very big.
Connectivity security.
And.
And everything and automotive is pointing towards a massive increase and semiconductor content. We've been talking about that for a couple of years and I think the shock of COVID-19 and then you know the automotive industry going down cancelling orders and struggling to get supply chain back it just highlights how important and <unk>.
<unk> to automobiles.
And it's not a short term thing, it's a very long term.
Secular trend where.
Also getting the benefit of a secular and cyclical rebound right now, but we're bullish over the long term.
And is there any one auto applications that's new.
Drive revenue.
And again, if I had to pick one I would say electrification, but I don't want to pick one and I want to pick them off.
Got it.
Okay, and with other people ask and getting really appreciate it.
And you up to questions. Thanks Oren.
And once again, if you'd like to ask a question. Please press Star then one our next question will come from having associated with long cast advisors. Please go ahead.
Hey, Anthony one aspect of chip again and.
Quote unquote shaping out and does that and risks.
And a diversions away from auto chips automakers canceled order long lead items.
And the chips, one elsewhere and.
And I'm curious can you talk about your ability to pivot and non auto markets or are we really.
On a day tied.
And going forward to audit.
Well I think you raise a good point Avi debt.
<unk>.
And the chips are increasingly used and everything.
You know we program.
Chips for Easter and crafts.
On the Marlboro Man has gone digital.
Okay.
It's just they're used and everything now.
Now a lot of our business is automotive because that's been a vertical that we're familiar with they know data Io.
They have certain demands that fit our business very well you know the global quality support network etcetera, etcetera, but our industrial market has been growing pretty nicely as well.
A lot of the centric opportunities continue to be in which you would call internet of things, which are not just automotive, but smart meters smart buildings smart cities.
Things like that.
So.
You know yeah semiconductor chips are growing and they're growing by leaps and bounds and everything but I think the it gets a lot of attention and automotive because thats something now that.
As the trend has been going on for years and I think a lot of people are just realizing it and because automotive is a very significant industry in and of itself.
Well I guess I mean, if I read the transcripts out of and filling on our Nx team and it seems like they're guiding and in the automotive sector, 20% growth over 2019, not even over 2020.
So I guess on.
Curious about your ability to grow.
Are you on your growth rates at all tied to their growth rates are.
And kind of related to that I observed.
Is that your recurring revenue component is really driving the growth and sales and that equipment sales have been kind of flat over the last few quarters. So I'm trying to get a sense of your ability to sell new units.
And at what rate relative to the chipmakers.
Yes, So I think Joel we grew by 26% and Q1, yes.
So yeah.
Yeah, what we said was we thought that the automotive industry would be a good proxy for our growth and and we stand by that.
Also I'll be we indicated I think earlier on this call that the adapter growth happens in advance of the system's growth right people use the capital they already have deployed at a higher level of utilization first and then when they hit their limit they order new stuff and you know that's a pretty typical pattern coming out of a downturn.
And are we seeing that I mean are you seeing that through at least the first month in April.
I mean, we clearly saw it in Q1 and I think the orders in April are strong for both adapters and capital.
Can you break out just yet so I don't have all the percentages at my fingertips. So I guess this looks good.
Do you still breakout the automated programming systems around from the equipment sales.
We break out capital adapters, and software and services and I think Joel we also break out automated and manual right. We do break that out internally, we've restocked because the manual piece has gotten to be two smaller deal to actually be piece of it.
A concern there you go and so.
So the bulk of it on the equipment sales now primarily and automated program itself.
That's correct.
Okay.
Hi.
And then I just going to ask the same question and a few others aspect and a different way.
And regarding the R&D I Wonder if you can break out some of the R&D and sustaining and some of it is investment related.
And I Wonder if you can just sort of give a sense of how much and the R&D and sustaining and how much is for the growth.
And if you can elaborate now that you've changed the way you are selling centric.
Have you changed your expectations in terms of returns on that investment.
So on the engineering side, we internally track a number of different buckets. If you will on R&D. As you described we don't disclose those internally they can move around a little bit.
But the overall spend has been pretty flat and I think within the buckets, it's been reasonably flat as well.
And then on Centrex again, our goals are pretty clear.
By simplifying and scaling will get more customers that will grow the revenue and that's the plan.
[laughter].
I guess the last one you said on expectations, you Didnt quite meet and say you're holding your cards a little closer at this time.
No it just it.
I don't know how many different ways to say we.
Have updated the technology, we've learned a lot about how to market and sell to customers to make it easy for them to make it easy for our partners. We now have an ability to take and installed base. So when a customer has a security need and they maybe have one part.
We can say, yes, as opposed to saying you know, it's gonna be real expensive to upgrade and so again I think we just get smarter every quarter.
Everyone wants us to get smarter faster, including ourselves.
But.
That's just the plant.
You will seem like a genius someday I hope thank you. Thanks.
Thanks Avi.
And this will conclude our question and answer session I would like to turn the conference back over to Anthony Ambrose for any closing remarks.
Alright, Thank you very much operator, I'd like to thank everyone for participating today and before we close the call just to remind everyone. We will be at the Needham Conference I believe that's may 18th and then also our annual shareholders' meeting will be on May 20th. So thank you very much everyone and have a good evening this closes the call.
Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation and at this time you may disconnect your lines.
Okay.
Yes.
And.
Thanks.
And I think.
Yes.
Moving on.
Okay.
And.
And <unk>.
And then.
And then.
Okay.
[music].
Net.
Net.
And these filings with cash.
And then.
On average.
Good day.
And.
And.
And.
And.
No.
And.
Uh huh.
And.
And.
And.
And in line.
<unk>.
And.