Question-and-Answer Session
Operator
(Operator instructions) Our first question is from Shyam Patil with Raymond James and Associates. Please go ahead with your question.
Varun Chadha – Raymond James
Good afternoon guys. Congrats on the quarter.
Kathy Griggs
Thank you.
Hemi Zucker
Thank you.
Varun Chadha – Raymond James
This is Varun actually in for Shyam.
Hemi Zucker
Well, I thought. Go ahead.
Varun Chadha – Raymond James
Obviously operating margins were very strong in the quarter. I'm just wondering if you can provide some color on how we should think about expenses and margins as we progress through the year.
Scott Turicchi
I think for the balance of the year given that we are not anticipating any significant material bounce in the economy. As a result, the operations will be as you have seen them over the last several quarters. These margins should be in the range of being repeatable. Now the one cautionary note that I have would be in the sales and marketing area, relative to say a year ago that is pulled in by a couple of hundred basis points. Part of that has been that advertising has just become cheaper in a weak economy, and part of it is that we have proactively some of the weaker producing spend that we think would be not economically viable in a weak economy.
It is our goal, hope and intention that as the economy improves we will spend more marketing dollars. So you have got over time probably a 200 basis point potential for increase in sales and marketing, all of that being with third-party vendors. So our sales and marketing line item has two pieces. There is the internal piece of our employees, and there is the external piece with our vendors. What has come in over the last four quarters is the external piece, and we would hope to be able to expand that again over time, although under our view, and sense of what is going on in the economy that would be unlikely to occur in the short time frame of a quarter or two.
Hemi Zucker
Let me also add to Scott, on our operational side, on our engineering and network and other areas of operation, we have started initiatives that will end up saving money and those will roll as we continue into the quarters. So I think that maintaining our margins, you know, besides the comment that Scott made on advertising and promotion, I would still expect improvement due to the other actions we have taken on the other fields.
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