HSTX Conference Call Transcript
This seems like a great service. They provide free transcripts of earnings conference calls... something I've laboriously done myself at times in the past. Also, they have a reasonably generous copyright policy: You can freely quote/copy up to 400 words as long as you provide a link back to them.
Here is the link:
seekingalpha.com
My only concern is whether (how long) they keep the link up. Anyway, here's the last part of the Q&A where they talk about moving much more into the higher-margin IP radio market... more specifically, they get 28% of their revenue now from IP radios and expect that to go to 70% of their revenue over the next 2 years... and IP radios have an extra 1500 basis points in Gross Margin. At least, that's how I understood this Q&A exchange.
Rob
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Greg Weaver – Invicta Capital Management
Hi, thanks for taking my question. Could you give us a sense of the ASP erosion, on an apples-to-apples basis year-over-year, if you took the given product what's happened to the price?
Sally Dudash
So in general we have talked about 10% to 12% on average year-over-year price erosion in our market and that’s pretty consistent with what we see. It’s not equal across all the products in all geography but that is the average that we anticipate, as we think about our product cost reduction and other initiatives required.
Greg Weaver – Invicta Capital Management
Okay and what -- Harald you mentioned about the high Cap market being a higher growth segment. What percent of your total revenue would you put in that bucket?
Harald Braun
On the higher gross sector percent -- what’s it from a product point of view…
Sally Dudash
So, I can -- from a product point of view we've talked about SDH radios as 60% of our product sales
Greg Weaver – Invicta Capital Management
Also PDH?
Sally Dudash
PDH is 40% and then the new -- statistically we are able to get for this call, was that over the last trailing 12 months we’ve had 28% of our products that are actually IP radios are being sold and of course those would be in multiple capacities.
Harald Braun
And I asked the team to give me that number, the 28%. I think that was -- I reported against that in my statement; that of course is very important to see how this transition takes place in the rest of the world and also in the US or North America. I expect that really to grow and that we transition from TDM to IP and of course the product mix -- thanks very much Sally, that’s the 60:40 mix low end and high end. I don’t know what the abbreviation meant, but I told you I measure myself against the 28%, that’s what I am now working on to transition towards IP and I think I did that again, I had a track record for doing that and that is one of the strategies.
Greg Weaver – Invicta Capital Management
And to clarify that 28% is of your total revenue, you've talked about it under the guides of international, but it's a total business, 20% of IP?
Sally Dudash
From a product revenue.
Greg Weaver – Invicta Capital Management
Okay and where do you see that on a go-forward basis; how do you see that trending out?
Harald Braun
I think -- so what is in my mind of course to get something from the 28 again on the product size without service and etc and all that, no doubt we have nothing that was also the case -- I would like to transition that the other way around over the next 2 to 2.5 year. So, I think we are going to go from the 28 to the 50’s so that we have a 50:50 mix and then going to the 60:70 percent ranges within two years. That's my guess, that's my gut feel.
Greg Weaver – Invicta Capital Management
Okay and one last question as follow on to that. What difference is there in gross margin as we transition to the year IP radio?
Harald Braun
What I see so far I think it’s 15 points.
Greg Weaver – Invicta Capital Management
Well. Okay. That's pretty significant. I think that…
Harald Braun
Yes, yes therefore you will understand my number or why I had asked the team to give me the number where we are now and then of course we have to define the strategy with my officers when we sit in the workshops and how we get there, right and how we improve that trend -- the transition trend from TDM to IP. |
