Question-and-Answer Session
Operator
(Operator Instructions) Your first call comes from Brian Alexander – Raymond James.
Brian Alexander – Raymond James
If you guys could just spend a couple minutes going through the linearity particularly in the SMB and MMB segments. How’d the quarter start? How did it end? And what have you seen so far in July from a demand standpoint? And then I have a couple followups.
Frank F. Khulusi
We had stated, Brian, in the conference call for the last quarter that we had seen some margin pressures starting to develop from a pricing perspective and a competitive perspective on the SMB side and we are pleased to say that there’s a little bit of a return to rational behavior so we’ve seen some of these margin pressures subside. From a demand perspective going into the second quarter, with the margin pressures in SMB subsiding we see an overall demand scenario from a consolidated company-wide basis that is consistent with the first quarter.
Brian Alexander – Raymond James
If I could just ask a question on the balance sheet. It looks like your DSOs were up quite a bit year-on-year. I guess I was trying to tie that to the linearity question to see if the quarter ended on strength but perhaps there’s another explanation for why the receivables were up as much as they were.
Frank F. Khulusi
The quarter did end on strength and we also had an increase in sales. Brandon, do you want to talk about that, on the public sector side?
Brandon H. LaVerne
Yes, we did have a lift. It’s public sector in Q2 you’ll tend to see a little bit of a lift in your DSOs and we did see a lift in the MME business which lifted their receivables toward the end of the quarter as well.
Frank F. Khulusi
But there is a definitely an end-of-quarter hockey stick.
Brian Alexander – Raymond James
More than normal? Or I’m trying to get a sense for what was so different about this quarter relative to prior Q2s.
Frank F. Khulusi
We do believe it was more than normal. The end of quarter lift, which also included a Sarcom accounts receivable, that also tend to be more end-of-quarter hockey stick-ish.
Brian Alexander – Raymond James
On MME, in terms of the service mix, I think you mentioned, maybe Kris mentioned that the service mix was 20% this year versus 7% a year ago and I think a lot of that is through Sarcom. Just with that driving the gross margins up as much as they did in the MME segment, I’m just trying to get a sense for whether you view that kind of service mix as sustainable. Do you view the gross margins in MME that you achieved this quarter as sustainable? And if you could remind us of what the service gross margins are for that segment.
- To read the full transcript on Seeking Alpha, click here »
