Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Bill Choi – Jefferies & Co.
Bill Choi – Jefferies & Co.
Just a few questions, first on the fiber optics turning cash flow positive here in the last two months, can you talk about what the gross margins sort of look like and what would be key to keeping that to a more positive cash flow in the current quarter? Is it largely just the quarter’s coming back or is there some additional actions that you’re taking specifically on that division? Then, I have a couple more questions.
John M. Markovich
A significant contributor towards the business being positive cash flow for the last two months Bill was the management of the working capital. So, most of that contribution was from changes in the balance sheet.
Bill Choi – Jefferies & Co.
What kind of pro form gross margins are you seeing in the last two months or did that not change materially?
Hong Q. Hou, Ph.D.
Within the three months of the quarter, the first month the gross margin was the worse because of the unabsorbed overhead in the beginning was negative the first month of the quarter. But, the second and third month, the gross margin was improving to the positive territory and continued to improvement. But, as John said, the positive cash flow was primarily from the balance sheet move, basically the monetization of the working capital and the inventory.
John M. Markovich
Bill, we did experience sequential month-to-month improvements over the course of the quarter at the gross margin line.
Bill Choi – Jefferies & Co.
Are you able to talk about a range at least for Q2 where you think cash flow can go? I know a lot of it still depends on working capital but, some level of orders coming back from stabilization in gross margins, are you able to talk a range at all?
John M. Markovich
The guidance that we’re providing Bill is limited to the top line in terms of revenue.
Hong Q. Hou, Ph.D.
But, you have seen the trend, the December quarter we consumed roughly $22 million cash, the last quarter we consumed about $10 million cash. On top of that we paid down significant liability on accounts payable. The reduction on accounts payable was almost $17 million so, going forward it’s hard to predict and we will give the guidance at this point only on the top line.
- To read the full transcript on Seeking Alpha, click here »
