Q2 2025 Aviat Networks Inc Earnings Call
Peter Gray, Michael Conaway, Andrew Fredrickson, Peter Smith
Thank you for watching. Bye-bye.
Speaker Change: Hello, and welcome to Avion Network's fiscal Q2 2025 earnings conference call.
At this time, all participants are in a listen-only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session.
Speaker Change: To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.
To withdraw your question, please press star 11 again.
Speaker Change: I would now like to turn the conference over to Andrew Fredrickson. Sir, you may begin.
Andrew Fredrickson: Thank you and welcome to Aviat Network's second quarter fiscal 2025 results conference call and webcast.
Andrew Fredrickson: You can find our press release and updated investor presentation in the IR section of our website at www.avianetworks.com, along with a replay of today's call.
Speaker Change: With me today are Pete Smith, Aviat's President and CEO, who will begin with opening remarks on the company's fiscal quarter, followed by Michael Conaway, our CFO, who will review the financial results for the quarter.
Andrew Fredrickson: Pete will then provide closing remarks on Aviat's strategy and outlook, followed by Q&A.
Andrew Fredrickson: These and other forward-looking statements reflect the company's opinions only as of the date of this call and webcast, and involve assumptions, risks, and uncertainties that could cause actual results to differ materially from those statements.
Andrew Fredrickson: The company undertakes no obligation to revise or make public any revision of these forward-looking statements in light of new information or future events.
Andrew Fredrickson: Additionally, during today's call and webcast, management will reference both GAAP and non-GAAP financial measures.
Andrew Fredrickson: Please refer to our press release, which is available in the IR section of our website at www.aviannetworks.com, and financial tables therein, which include a gap to non-gap reconciliation and other supplemental financial information.
Speaker Change: At this time, I would like to turn the call over to Aviat's President and CEO, Pete Smith. Pete?
Pete Smith: Thanks, Andrew, and good afternoon. We are pleased to report a strong quarter of financial and operational performance for Aviat Networks.
Pete Smith: Let's discuss the highlights of our second quarter of fiscal year 2025. Total revenue of $118 million, up 26% versus the same period a year ago. Non-GAAP gross margin of 35.3%.
Pete Smith: Adjusted EBITDA of $14.8 million, up 22% versus the year-ago period.
Non-GAAP EPS of 82 cents.
Pete Smith: Let's recognize that the whole Aviat team delivered for our customers, suppliers, partners, and shareholders.
Pete Smith: The dedication to continuous improvement and customer focus resulted in the highest quarterly revenue the company has had in over a decade and record quarterly adjusted EBITDA.
Pete Smith: We benefited from operating leverage this quarter. Gross margin returned to levels comparable to recent quarters.
Pete Smith: Profitability at the adjusted EBITDA and non-GAAP net income level were strong thanks to a higher level of revenue and margin, as well as disciplined spending on operating expenses.
Pete Smith: These factors, in addition to an intense focus on working capital, aided the company in generating positive cash from operations in the quarter.
Pete Smith: While we still have much work to do, I see this quarter as a strong indicator of what can be accomplished following our strategy.
Pete Smith: Let's talk a little more about each of our end markets.
Pete Smith: With mobile service providers, our results were strong, thanks to a robust quarter from the PathLink products and services, improved margins in the India business versus the first quarter, and improving business in the EMEA and Latin America regions.
Pete Smith: Revenues in the quarter related to Pass-a-Link were just shy of the $35 million level. This is the annual contribution rate that we expect the Pass-a-Link acquisition to have by the end of fiscal year 2025.
Pete Smith: At this scale, we are generating meaningful earnings contribution from the acquisition.
Pete Smith: We are pleased with the progress we have made. Encouragingly, our Paso Link orders for the last three quarters have averaged $35 million.
Pete Smith: Setting us up for continued growth from Pasoling and giving us confidence we will meet our $140 million run rate target by the end of the fiscal year.
Pete Smith: We have shipped our first Paso Link radio from our contract manufacturer in Thailand during the second quarter. This is a major achievement by the team.
Pete Smith: Although we still have more to do in the quarters ahead, we believe that once completed, this move will improve product lead times for customers and lead to better margins for our shareholders.
Pete Smith: Regarding the Tier 1 environment in the U.S., while we still expect near-term demand to remain muted compared to last year, Q2 saw a sequential increase versus Q1.
Pete Smith: This reinforces our belief that the headwinds we are currently facing are timing related rather than the result of large capex shifts.
Pete Smith: Moving to private networks. We had a strong quarter from our private networks business. In public safety, we continue to serve our large statewide networks that we have won over the last several quarters, in addition to numerous other public safety networks.
Pete Smith: The spending environment in this segment remains healthy, and we continue to look for areas of shared gain opportunity.
Pete Smith: In the rural broadband space, Aviat continues to hold its place as the share of demand leader for microwave backhaul with wireless internet service providers.
Pete Smith: Although we do not expect to have revenue in fiscal 2025 related to the $42 billion broadband equity access and deployment program, or BEAD, I would like to answer some questions that have been on top of many investors' minds since November.
Pete Smith: First, there continues to be growing recognition of the importance of wireless broadband alternatives in the PEED program to make funding go as far as possible.
Pete Smith: Some states, such as Utah and Arizona, have defined the upper cost threshold for a fiber connection before turning to an alternative technology. We expect this sentiment to continue to grow, which bodes well for wireless applications.
Secondly,
Pete Smith: We are asked about Low Earth Orbit, or LEO, satellite internet companies, and BEAT. Well, LEO satellite internet has a value proposition for very remote or difficult-to-reach locations.
Pete Smith: Wireless Internet Service Providers can provide better performance and reliability at a lower monthly cost to their customers than what is currently available from the LEO Internet Services.
Pete Smith: We will see what, if any, changes occur to the BEAD program with the new administration.
Speaker Change: Aviat stands at the ready to assist state broadband offices and internet service providers with their backhaul needs, thanks to our U.S. footprint and our Build America, Buy America compliant products.
Regarding our products, we have made a few recent announcements.
Speaker Change: We strengthen our software cybersecurity offering by enhancing our secure software development lifecycle process and software vulnerability alert service. Our software and firmware development continues pace with the latest cybersecurity requirements.
Speaker Change: Given the nature of the critical communication networks we are part of, we believe it is extremely important to remain up-to-date on cybersecurity measures to help keep our customers safe from such threats.
Speaker Change: Additionally, we are introducing a new product solution, multiband mats or MB mats.
Microwave and millimeter wave.
Speaker Change: MB Max enables more capacity over longer distances with better reliability.
Speaker Change: using fewer and smaller antennas than competing solutions, resulting in a lower total cost of ownership for our customer. We expect to begin shipping MVMAX in the coming months, and we'll have more details to share with customers soon. I would like to now turn the call over to Michael to review the financial results of the quarter before coming back for some closing remarks.
Michael Conaway: Thank you very much, Pete, and good afternoon, everyone. I'll review some of the key fiscal 2025 second quarter results.
Michael Conaway: Please note that our detailed financials can be found in our press release, and all comparisons discussed are between the second quarter of fiscal year 2025 and the second quarter of fiscal year 2024, unless otherwise noted.
Michael Conaway: For the second quarter, we reported total revenues of $118.2 million, as compared with $93.7 million for the same period last year.
Michael Conaway: an increase of $24.5 million, or 26.2% year-over-year. North America, which comprised 49% of our total revenues for the quarter, was $58 million.
Michael Conaway: an increase of 7.3 million or 15% from the same period last year due to good execution and private networks.
Michael Conaway: International revenue was $60.2 million for the quarter, an increase of $17.2 million, or 40% from the same period last year. This growth was driven primarily by the addition of revenues from the Pasolink acquisition.
Michael Conaway: Our trailing 12-month book to bill was over 1 in the quarter. Gross margins in 2Q were 34.6% on a gap basis and 35.3% on a non-gap basis.
Michael Conaway: This compares to 38.8% gap and 38.8% non-gap in the prior year.
Michael Conaway: Gross margins were impacted by the addition of Pasolink, product mix in the quarter, and comping against a record level of gross margin profitability in 2Q2024.
Second quarter GAAP operating expenses were $32.9 million.
flat versus the prior year.
non-GAAP operating expenses, which exclude the impact of restructuring charges,
share-based compensation and deal costs.
Michael Conaway: were $29.1 million, an increase of $3.7 million versus the prior year. This increase is due to the additions of the PASA Link and 4-RF acquisitions.
Michael Conaway: Second quarter operating income was $8 million on a GAAP basis and $12.6 million on a non-GAAP basis.
Michael Conaway: This compares to 3.4 million gap and 11 million non-gap in the year-ago period.
The second quarter tax provision was $1.6 million.
Michael Conaway: As a reminder, the company has approximately $450 million of net operating losses, or NOLs, that will continue to generate shareholder value via minimal cash tax payments for the foreseeable future.
Michael Conaway: Second quarter gap net income was $4.5 million and non-gap net income which excludes restructuring charges, share base compensation, M&A related and other non-recurring expenses.
and the non-cash tax provision was $10.5 million.
Michael Conaway: Second quarter non-GAAP earnings per share came in at 82 cents on a fully diluted basis.
Michael Conaway: Adjusted EBITDA for the second quarter was $14.8 million or 12.6% of revenues.
an increase of 2.7 million or 22% versus last year.
Pete Smith: As Pete mentioned, this marks a record quarterly adjusted EBITDA for AVIA.
Moving on to the balance sheet.
Pete Smith: Our cash and marketable securities at the end of the second quarter were $52.6 million.
Pete Smith: Our outstanding debt was $74.9 million, bringing our net debt position to $22.3 million, an improvement of $10 million versus the first quarter of fiscal 2025.
Pete Smith: We generated cash from operating activities of $20.8 million in the quarter, thanks to profitable results and improvements in our working capital position.
Pete Smith: This is Aviat's best cash-from-operating-activities result in at least seven years.
Pete Smith: Additionally, during the second quarter, we deployed capital to repurchase 34,600 Aviat shares.
Pete Smith: With that, I'll turn it back to Pete for some final comments. Pete?
Pete Smith: Thanks, Michael. We are pleased with the results posted in the second quarter.
Pete Smith: In reflection on the company's performance over the last several quarters, we have made some changes to the team to drive scale and growth in the years ahead. We have brought in a new EMEA commercial leader and a new leader for our global operations and supply chain.
Pete Smith: We are encouraged by their impact thus far. In addition, we have strengthened the board and audit function.
Please refer to the recent announcement of Scott Alladay
We are leaving our guidance as previously stated.
Pete Smith: Please see the Seasonality Chart in the Investor Deck for Modeling Purposes, slide 21. With that, Operator, let's open up for questions.
Speaker Change: Thank you. Ladies and gentlemen, as a reminder to ask a question, please press star 1-1 on your telephone, then wait for your name to be announced.
Speaker Change: To withdraw your questions, please press start 1-1 again. Please stand by while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Jason Schmidt with Lake Street. Your line is open.
Jason Schmidt: Hey guys, thanks for taking my questions and congrats on the strong results. I mean, just want to start with the results and curious if you could just lay out what the one or two businesses or customers that really drove that strong outperformance in the December quarter.
Thank you.
Jason Schmidt: Yeah, maybe I'll just start with, you know, how we did on bookings and then, you know, start with good performance from the PathLink business, as Pete alluded to.
Jason Schmidt: 4F business as well, and that was helpful from a year-over-year standpoint in North America. So it was really good to see those two recent purchases performing above the plan. And then just from from a booking standpoint,
We talked about it.
Jason Schmidt: A little bit in my remarks, but the third quarter in a row where the book-to-bill was greater than one, and just from a mathematical or numerical standpoint in the quarter, book-to-bill was 1.08.
Jason Schmidt: So those commercial dynamites are just kind of a smattering of
What went well in the quarter?
Speaker Change: Okay, no, that's really helpful and just want to make sure I fully understand your comments surrounding the U.S. Tier 1. I know you noted it was up sequentially in Q2, but have your expectations changed at all for Fiscal 25 in that market?
Speaker Change: I think the U.S. Tier 1 we have factored into our guidance, and a faster recovery would be a benefit, Jason, so that's the best way to think about it.
Speaker Change: Gotcha, and then just the last one from me and I'll jump back into Q. You noted kind of the first radio from your CM in Thailand on the Paso Link business. Just curious if you could help us understand where Paso Link gross margins are and how we should think about those scaling the rest of this fiscal year.
Speaker Change: better performance in in Pasolink. We think that over the second half of the year as we complete the manufacturing
Speaker Change: that we were in in the second quarter but pass-a-link both revenues and gross margins really good story
All right, perfect. Thanks a lot, guys.
Thank you.
Please stand by for our next question.
Thank you for watching!
Speaker Change: Our next question comes from the line of Scott Surley with Ross Capital Partners. Your line is open.
Scott Surley: Hey, good afternoon. Thanks for taking my questions. Great job on the quarter, guys. Really impressive to see the quick snapback.
Maybe to dive in, just from a...
Speaker Change: From a global supply chain standpoint, Mike, Pete, could you take us through your current exposures, what risks you've got, if any, in the current rapidly evolving tariff environment? And could you also address a little bit more in detail some of the working capital improvements, it sounds like?
Scott Surley: We had a great quarter this quarter, but if I look at the inventory turns and DSOs, it looks like there's more room for improvement. So how should we be thinking about that over the next couple of quarters?
All right, so I'll do the supply chain.
and Inventory, and then Michael can do the...
the working capital. So in COVID, AVIAD distinguished itself.
via supply chain management.
The environment with respect to tariffs coming, tariffs going is
Scott Surley: is challenging. It's likely to produce some ripples in the supply chain. So we've dusted off the COVID playbook and we're going to use that learning to deal with any potential supply chain interruptions, right? I would say in the last week we've had
Discussions with three Fortune 500
U.S.-based companies about supply chain. Those three companies are really
are very happy that we have a U.S.
Scott Surley: basis and are pretty well positioned to deal with what the supply chain interruptions that the tariffs may deal may
Thank you.
where you confront us with.
Scott Surley: And then on inventory, I would say, you know, we are gearing up for the Paso Link transition to the contract manufacturer. So, you know, we have, you know, we...
Speaker Change: We'll probably have peak inventory this quarter as we complete our bridge build. And so I would say Q4 and beyond, we'll start to turn some of that inventory into cash. And let me turn it over to Michael on the working capital.
Yeah, no, so, um...
Michael Conaway: Weaving the working capital into cash overall, the CFOA that we printed was $21 million, which was, as we said, a record for the company.
Michael Conaway: If you look back at both Q2 of 2023 and Q2 of 2024, the two most recent comparable periods, CFOA for Aviat,
Michael Conaway: was negative in both of those other quarters. So the improved results in 2025 were driven because we achieved our first quarter of material working capital reductions.
Michael Conaway: since we've owned Pass-a-Link sequentially, and that looks even more impressive when you consider that we did it on roughly $30 million more revenues versus Q1. So all in all, really pleased with how cash finished in Q.
Scott Surley: But you alluded to it, Scott, and you're right. There's more to do on it. And Pete kind of underlined it. Q3.
Scott Surley: you know, inventory probably doesn't get much better. Pete said peak inventories. You know, he and I are of course on the same page, but that unlock will materialize itself likely more in Q4 and
are included too a little bit for our fiscal 2026.
Speaker Change: Great. Very, very helpful. And maybe quickly, kind of shifting gears to some of the key end markets.
Scott Surley: It sounds like private networks, and I looked at the North American sales number, were covered pretty nicely. I wonder if you could provide a little bit more color on that front. And then geographically, from a service provider standpoint, I think at a high level, we're hearing stabilization, right, from other telco.
Scott Surley: vendors out there across the broader macro landscape, whether it's Europe, North America, Latin America. I wonder if you could talk a little about what you're seeing from a geographic standpoint, engagement with those carriers, and kind of how that's given you comfort when you look at fiscal 25 and beyond.
Good.
Scott Surley: The public safety market is continuing to perform. If you want a proxy for that, look at, you know, look at the leader in the public safety space, Motorola. If...
on our second biggest application set is utilities.
Scott Surley: Utilities have been underinvested for 40 years, and if you look at the industrial companies that sell into the utility space, all the analysts in that industrial utility space are bullish, and we would say that we're bullish.
Scott Surley: as well. On the, uh, I think, you know, on the U.S. Tier 1, it is, uh, it's, uh, stable. It's at a lower level than we would like, but we've, we've already factored that in. And then, uh, outside of the U.S.,
Scott Surley: There are some folks that are growing their networks, we would say Southeast Asia, Latin America, Eastern Europe are all areas of strength.
Speaker Change: Great, very helpful. And lastly, if I could, 4-RF, you mentioned that in your opening remarks. It sounds like that's off to a good start. I'm wondering if you could just provide a little bit of color in terms of applications and geographies where you're seeing that adoption. Thanks.
So, the number one application is utilities.
Speaker Change: There's going to be cross-selling opportunities, so we're really excited about that. And, you know, 4-RF was a relatively small company with...
Speaker Change: with a sales footprint in the U.S. but outside the U.S.
Speaker Change: It was very limited, and we're starting to see some traction outside the U.S., particularly Europe, the Middle East, and a little bit in Asia-back, so it's good.
Speaker Change: Hey Pete, maybe one last one quickly and then I'll get back in the queue but it's still a pretty broad range for the guidance for this year of 430 to 470. I'm wondering real quickly just what are the swing factors you know from the lower end of that range to the higher end of that range? Thanks and congrats on the quarter again.
I think
Speaker Change: performance in rural broadband, faster conversion of private network projects, those would be two. And, you know, global, global spending on, on
Speaker Change: Network upgrades in the mobile network operators. That would be the swing factors. Thanks, Scott.
Thank you. Great quarter.
Thank you.
Please stand by for our next question.
Speaker Change: Our next question comes from the line of Theodore O'Neill with Richfield Hills Research. Your line is open.
Theodore O'Neill: Yes, and congratulations on the quarter. I was wondering, on the margin improvement, is it a mix issue? Is it a utilization issue? Is it something to do with PassaLink? I was wondering if you could give us a little more detail on that.
Yeah, no, um...
Theodore O'Neill: Great question. I'd say that our gross profits obviously rebounded really nicely in the quarter versus Q1 levels.
and you hit it, it was really improved revenue mix.
Theodore O'Neill: mostly into critical nodes of performance. One, our geographic dispersion of our revenues as North America improved.
significantly versus 1Q.
Theodore O'Neill: And then our product mix and software sales as well was better in Q2 than in Q1. And I'll just say one other thing.
just because Scott had the question on.
Theodore O'Neill: for our RAP, which we call internally our APRISA business, but that business in particular had a really nice quarter for us on revenues.
Theodore O'Neill: And that's an incremental boost to our mix, too, since it trades at more favorable gross margins than Aviat's historical averages. So all of those things were additive from a mix standpoint in Q2 versus Q1.
Speaker Change: Thank you, and I was wondering if you had any 10% or more customers in the quarter if you could talk about that
Speaker Change: Yeah, so over the last two quarters, our largest customer has been different. Q1 versus Q2, and neither of them tripped the 6% level. So the way we have very little, we have high customer diversification and very little customer concentration risk.
Speaker Change: Okay, and I just want to compliment you on the seasonality slide, slide 21. That's very helpful.
Yeah, thanks. Thanks very much.
Thank you.
Please stand by for our next question.
Speaker Change: Our next question comes from a line of Dave Kang with B Rally. Your line is open.
Dave Kang: Thank you, good afternoon, and nice quarter guys. First question is regarding North America Tier 1 SP service providers, I guess
Speaker Change: Still muted despite very strong revenue. So a couple of questions there. Is it because of excess inventories they still have? And if so, you know, what's the timeline as far as, you know, working down those inventories?
It's not inventory related, it's there for basically between projects.
Speaker Change: Oh, so it's more of a timing issue then? Yes, yes.
Speaker Change: and so March quarter is that going to be still that you know still going to be muted or how should we think about the trajectory?
Speaker Change: Look, I think, you know, their run rate is factored into our overall guidance, and, you know, if they decide to turn the projects...
Speaker Change: On, then we'll have upside, and if not, I think it'll materialize in Q1 FY26.
Speaker Change: Got it. And then last quarter you also talked about Africa, you know, a couple of Africa customers being, we just update there with those customers.
Yeah, I would say we still see some weakness.
Speaker Change: in Africa, and that's largely driven by currencies and their ability to pay, and with the interest rates on the dollar and the euro being elevated, I would say that Africa will remain at that level for the foreseeable future.
Got it. So, probably not this calendar year then, or...
Speaker Change: Well, look, I'm not in the business of predicting interest rates, so let's say that for this calendar year, I think Africa demand will be relatively modest.
Speaker Change: And just, you know, how should we expect Europe to do this year, given, you know, I guess like Germany and other countries, you know, dealing with recession and geopolitical situations. So.
Any color or your expectation on Europe?
in Europe, so.
Speaker Change: There's been some legislation around the Chinese vendors, which could be some encouragement for us. So we see Europe as being...
Speaker Change: I think there's some recognition of the aviat value proposition which could or could turn into growth for us.
Got it. Thank you.
Speaker Change: Thank you. Ladies and gentlemen, as a reminder, that's star 11 to ask the question.
Please stand by for our next question.
Speaker Change: Our next question comes from the line of Tim with Northland Capital Markets. Your line is open.
Thank you. Thank you. Thank you.
Yep, Tim here.
I'm going to go back to the seasonality slide.
and maybe in combination with some of the...
Speaker Change: commentary on the guidance range but you know I guess I'll boil it down into this one question
Speaker Change: Would you expect Q2 to be the peak revenue quarter for the year, I guess, given what you're saying about seasonality?
Speaker Change: And I understand you got some downward seasonality in the March quarter, typically. But given your bookings and backlog commentary...
Speaker Change: that would seem to be fairly conservative, although that's what's implied at the low end of your range.
Speaker Change: that Q2 is likely to peak. So I'd love to get you to respond to that and then follow up.
Speaker Change: Yeah, look, I mean, we put that chart in there for a reason, so I'm glad that some folks had kind of alluded to it. And, you know, the setup on the year is fairly...
Speaker Change: plays out. So, you know, the persistence of a little bit less revenues in Q3 versus Q2, that is what we think will occur as it relates to 2025.
Speaker Change: It's a relatively persistent trend. It gets even more pronounced if you were to adjust 2024 and normalize out the effect of Pasolink. But then in Q4, which is our June quarter, revenues typically...
Speaker Change: And if the bookings that we've seen in Q4, Q1, Q2, all three quarters of which have been greater than a book to go greater than one, if those bookings persist in Q3, then there's no reason that Q4 shouldn't be.
potentially even a bigger revenue outcome than Q2.
Speaker Change: So that's kind of the setup in our minds as we're thinking about the second half of the year.
Speaker Change: I have a little bit to add on this, Tim. So some of the March quarter is affected by weather. The installs of private networks. And if the weather is challenging, those
Speaker Change: Those installs will be done the first two weeks of April so we want to be conservative with respect to the March quarter and You know, I think Michael answered out his gave his perspective on on the June quarter
Speaker Change: Okay, great. And if I want to follow up on the range question, Pete, you mentioned some factors that could drive things to the upside. I wonder if I could...
Get it out!
to talk more about what...
Speaker Change: what would have to happen to get the lower end of the range? First, we'll start that on revenue, and I think it becomes even a more difficult question on EBITDA given how strong your margins were in Q2, but that's good, we'll get to that in a moment.
Let's start on the top line.
Speaker Change: Well, look, we talked earlier about supply chain ripples, and if there's a supply chain ripple that's tariff-induced, I could see that having a negative consequence, right?
If there's push-outs or project delays...
That could be another negative. Thirdly,
Speaker Change: We have good backlog. How fast do we take that backlog, design, configure the network, and get it shipped? If our customers are slower on...
Speaker Change: on that part of the conversion cycle, those could all be, you know, have an impact where we'd wind up at the lower end of the range.
Speaker Change: Okay, but you're kind of seeing the opposite of that right now. So something material would need to change.
Speaker Change: to the downside to get us to the low end. Is that fair to say?
Speaker Change: Look, we've just been through a very difficult time, and I am not going to take, I don't want to give anyone the idea that things are better than they are. I think we, rather than...
Speaker Change: Tweak the the model. We'd like to just have the opportunity to prove ourselves again and again
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Right.
Fair enough.
Speaker Change: I thought I had one more here. Oh, on the EBITDA side. So maybe a similar discussion, but even kind of more pronounced. Are there any factors or were there in Q2?
Speaker Change: that are, you know, on the gross margin side or elsewhere that are maybe non-recurring where, you know, you could see
Speaker Change: either some deterioration in gross margin or increases in OPEX that would...
Speaker Change: kind of take you off your current EBITDA margin run rate.
Speaker Change: No, I wouldn't say anything non-recurring in nature like that, Tim, in the quarter.
Okay, thanks very much.
Thank you.
Speaker Change: Ladies and gentlemen, I am showing no further questions in the queue. I would now like to turn the call back over to Pete for closing remarks.
Thanks again. Talk to you soon.
Speaker Change: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.