Question-and-Answer Session
Operator
Thank you. (Operator instructions) Our first question comes from Tavis McCourt.
Tavis McCourt – Morgan Keegan
Hi guys, nice quarter. A couple of questions on the financials. Although the product gross margins were a huge improvement year-over-year, they were down a little bit sequentially. Was that largely just due to the seasonal factor of a lower revenue base, or was that generally kind of the gross margin you had been anticipating for this quarter?
Lanny Michael
Gross margin – two-fold, Tavis, to your point. To some extent product mix and also just with the lower revenue base. But it still implies from our perspective a good progress towards continued improvement in our gross profit goal of quarter-over-quarter improvement in margins.
Tavis McCourt – Morgan Keegan
In terms of the SG&A totals, and I guess OpEx total in aggregate, how should we view the ramp through the year? It's up a little bit year-over-year, is that a similar growth rate you would expect throughout the year or are you going to try to hold it more steady at this run rate here to get the operating leverage?
Lanny Michael
Yes, good question. The way I would respond to that is two-fold. We believe that operating expenses will potentially increase some, particularly dependent on higher revenue levels in the latter half of the year. And as you know, in the fourth quarter typically we do see seasonally high revenues and things like selling commission expenses do ramp up with revenue basis. We also might see some fluctuation, depending on our level of investment from quarter-to-quarter and the timing of investments and things like research and development and/or marketing programs. And then lastly, as we saw in the first quarter, we have seen pressure from foreign exchange conversion impact on, particularly our European operation expenses. So to answer your question with those as sort of a backdrop, we would anticipate that the second-quarter levels would probably be a good proxy for the outer [ph] quarters, but with some fluctuation from the outer quarters on those items I just mentioned.
Tavis McCourt – Morgan Keegan
Got you. And in terms of the revenue guidance for Q2, it looks like it's towards the lower end of what you guys have done seasonally the last few years from Q1 to Q2. Is that largely because you have had some pretty poor Q1s the last couple of years, or are you just building in some conservatism?
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