Kaleyra, Inc.

Jim Fanucchi - Darrow Associates, IR Dr. Avi Katz - Chairman and CEO Darren Ma - Chief Financial Officer

Ted Moreau - Barrington Research Richard Shannon - Craig-Hallum Dave Kang - B. Riley Krishna Shankar - ROTH Capital

Thank you, Operator, and thanks to all of you for joining us. Our speakers today are Dr.

Avi Katz, Chairman and CEO; and Darren Ma, CFO of GigOptix. After the market closed today, GigOptix issued a press release discussing its financial results for the first quarter of fiscal year 2015.

The release is currently available in the Investors section of the company’s website. Please be advised that the matters discussed in this call contain forward-looking statements or projections regarding future results or events.

We caution you that such statements are in fact predictions that are subject to risks and uncertainties that could cause actual events or results to differ materially. Actual results may differ materially from our statements or projections.

Additional risks, uncertainties and factors that could cause actual events or results to differ materially from these forward-looking statements maybe found in the company’s filings with the Securities and Exchange Commission. Forward-looking statements are based on the company’s beliefs as of today, Monday, April 27, 2015.

GigOptix undertakes no obligation or responsibility to publicly update any forward-looking statements for any reason except as is required by law even if new information becomes available or other events occur in the future. In addition, today we will be discussing non-GAAP financial measures.

These non-GAAP financial measures are not prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A table that outlines the reconciliation between the non-GAAP financial measures to GAAP financial measures is included in our earnings release, which we have filed with the SEC and I refer investors to this document.

I will now turn the call over to Avi.

Thank you, Jim. And welcome everyone to our first quarter fiscal 2015 conference call.

Today, I’ll review our recent performance and other important events and discuss our outlook for the second quarter and the entire year. We had a very successful start for fiscal 2015.

First, we increased our revenues sequentially in what is historically a weaker quarter due to the industrial seasonality. This better than forecasted revenue contributed to the, first, so this is being the first quarter with the highest profitability for any first quarter in the company’s history, for non-GAAP net income and adjusted EBITDA.

The first quarter also resulted in a significant reduction in our GAAP net loss, which declined about 45%, compared with the previous quarter and about 70% compared with the first quarter a year ago, down from $1.9 million loss to about $600,000. With continues financial improvements we are approaching our next milestone target of GAAP profitability.

Driving the strong than expected results was a 6% increase in product revenue over the previous quarter and a significant 28% year-over-year increase in product revenue over the first quarter of 2014. The increase came primarily from the fast growing areas within our High-Speed Communications business driven by the continuous strong demand for our 40 gigabit per second and 100 gigabit per second RF for optical communications application devices for the newly installed Web 2.0 data centers and the new telecom 100 gigabit per second linear coherent systems.

This level of growing business over the last two years is not expected to slowdown. While we are very pleased with the better than originally forecasted first quarter results, we are also confident that the growth trends will continue over the second quarter and the remainder of fiscal year 2015.

Based on our current backlog, today we reiterate our expected annual revenue growth of approximately 14% in 2015 as we discussed in our last call in February. I would like now to review the financial highlights of the first quarter.

Revenue in the quarter was up for the fourth straight quarter to $9.1 million. Non-GAAP gross margin remained above the 60% threshold, coming in at 62% in the first quarter.

Non-GAAP net income was more than $700,000 or net income of $0.02 earnings per diluted share, representing the fourth consecutive quarter of positive net income. Adjusted EBITDA of $1.4 million, representing the 15th consecutive quarter of positive adjusted EBITDA.

Cash balances were $17.7 million, with zero debt and we maintained a very high balance sheet quick ratio of 5. I will now shift to discuss and review our product line performance.

As we discussed in our call last quarter, beginning this fiscal year, we are now breaking out our financial results into just two segments, the High-Speed Communications product line and the Industrial ASIC product line. This is all in order to align with how we report our results in our SEC filing.

Revenue from our High-Speed Communications business which included our telecom, datacom and wireless segments was $6.2 million, up 3% from our prior quarter and 17% up from the same quarter a year ago. This business represents 68% of our total revenue, up from 66% last quarter.

Then our High-Speed Communications product line, devices for used in the Optical Communications segment remained the fastest growing piece of our business during the fiscal first quarter and we project this area will continue to grow through the balance of 2015. Steady growing demand for new generation of active optical cables and transceivers that are based on the QSFP+ 40 gigabit per second technology, which are becoming the standard in all the newly installed data centers by the Web 2.0 OS continue to drive large volume commercialization market opportunities for us.

Remarkably, through the first quarter we’ve shipped about 1 million devices to support this installation, almost half of the entire volume that we shipped during the entire 2014 year. This type of growing demand for our devices is line with recent market research report suggesting that the optics for the interconnectivity and connecting of data centers, these others and into the core network is one of the fastest growing areas of the optical market.

One research firm, estimated sales of optical network equipments for this application reaches $400 million in 2014 and are projected to exceed $4 billion in the next five years through 2020. We are very pleased with our domination merchant providing starters with fourth gear of second generation of devices currently being installed in all of the Web 2.0 data centers.

At the same time, we are making major strides to maintain disposition as a support our current large phase customers to other definitions and qualifications of their next generation of data center optical connectivity, comprised of four channel of 28 megabit per second to establish the 100 gigabit per second platforms for their QSFP28 technology. Last month, we announced our third-generation chipset to 100 gigabit per second Ethernet data centers and cloud computing applications.

The 28 gigabit per second fourth channel VCSEL driver and the Trans-impedance Amplifier receiver arrays enabled the next generation of lower power 100-gigabit per second Ethernet SR4 and LR4 module in active optical cable solutions. Few of the major market analyst firms forecasted the growth in the next few years to be at the 100 gigabit per second Ethernet chipset for the datacom Ethernet market which is expected to increase at 60% compounded annual growth starting in 2016.

And as I said many times, we have a unique and compelling market position as being the sole merchant provider of the devices for these generations and for the newly and rapidly deployed applications. With this growing market opportunities and our expanding product portfolio including recent tape-out of a new devices such as the DML driver for the LR4 100 gigabit per second applications which should be available for our customers starting in the third quarter of 2016.

We believe that we are in an excellent position to continue benefiting from these positive trends in the datacom market for years to come. Now, in our telecom business, as we discussed in our last call, we continue to enjoy increased shipment of our 100 gigabit per second linear coherent devices, during the first quarter, in which we have shipped total more devices than in any quarter before.

Our 100 gigabit per second linear devices related sales now exceeded our previous generation shipment of the 100 gigabit per second limiting devices. We are excited to see the commercial deployment of this product with our legacy customer as well as with new global customers for both long-haul and metro markets.

If the industry evolves from using the 100 gigabit per second limiting to the linear technology especially for metro telecom applications, we will continue to be offered even more opportunities to expand and grow our market presence. To elaborate more on this point, in late 2014, we introduced our first generation of 100 gigabit per second linear drivers for the metro market, which are currently under qualification by several companies.

Based on the feedback, we have received from our industry sources, the 100-gigabit per second metro buildup in the U.S. market is likely to start in late 2015 or early 2016 and will represent a promising new market opportunity for GigOptix.

I would like to make now a short comment regarding our Brazilian joint venture, Brazil Photonics or BrPhotonics, also is part of our expansion of 100 gigabit per second portfolio of products. At the recent OFC show, Brazil Photonics demonstrated a TOSA Reference Platform for CFP2 transceivers based on the TFPS polymer modulator chip which is being tested now at the market and could generate through GigOptix, an additional revenue opportunities during 2016.

And finally, in our high-speed communication segment, our backhaul point-to-points RF wireless business remain the source of future potential growth. For example, that the E-Band frequencies of 70 and 80 gigahertz, we currently expect increased deployment during the late part of 2015.

For some historical perspective, in 2014, we saw the first wave in RF revenues as global customers started evaluating our devices before deciding whether they move into the full production with our devices. This evaluation will be ongoing through the second quarter of this year.

And based on the feedback we have received so far, we currently hope that we will see some of these customers moving into initial qualification of this product towards the end of this year and for successful completion of qualification moving to production deployment during early 2016. Also related to our high-speed communication business, we have received few questions recently about the potential impact of the recent announced Nokia acquisition of Alcatel-Lucent.

The news was not surprising to us as this potential deal has been talked about for some time. Share combination which we’re seeing could take a year to sought out as long-term positive for GigOptix.

The merger operations -- the merger operation will evaluate and eventually address a large flight base which we believe will open up greatest set of opportunities into various new business units within the merged organization including telecom, datacom, wireless and maybe others. Moving now to our Industrial ASIC product line, revenue in the quarter was $2.9 million, up 36% from the first quarter of 2014.

The improvement revenue performance is the results from fine trends with some of our current customers have been moving into smaller geometries over time as well as a new customers that came on recently with new expanded trends and applications. To further extend our industrial product offering, we recently announced the launch of a new mix single ASIC product to address high-end applications in the automotive industry.

This is part of our initiative to win RF and optical ASIC new device designs and should open up new opportunities in what is well and very good established and stable and provide a high profitability segment of our business. Looking ahead for our strategic enhanced growth and as I mentioned in our previous calls, we remain proactive in searching for opportunities to increase the size and profitability of GigOptix through the potential acquisitions.

We continue to evaluate opportunities to put us in position to enter our just markets where our technology is complementary or new growth markets where we can farther leverage our technologies for new products and boost our business size. Regardless of the nature of the acquisition, we will execute -- we will stick to our strict criteria that any potential acquisition must be accretive shortly after the deal closes.

In summary, we had an excellent quarter which was a most profitable first quarter in our company’s history. And we are off to a great start in 2015.

We have an increasing confidence that our financial performance this year will result in record annual revenue, non-GAAP profitability and EBITDA performance while at the same getting us closer to achieving our next goal of delivering GAAP profitability likely, not before too long. In closure, I want to thank our stakeholders, in particular, our dedicated employees as well as our partners, suppliers, customers and of course our investors for their continued support and trust in GigOptix.

Let me now turn the call over to Darren for detailed review of our first quarter financial results. Darren, please go ahead.

Thank you, Avi. Good afternoon everyone.

As noted earlier, we had a very strong Q1 and are off to a good start for 2015. Before discussing our second quarter outlook, here is the summary of the Q1 financial results.

Revenue in the first quarter of 2015 was $9.1 million, ahead of the most recent guidance we gave in the February call and in line with our preannouncement on March 31st. This revenue was up from the fourth quarter of 2014 and also represents a 23% increase from the first quarter a year ago.

On a percentage basis, our High-Speed Communications revenue accounted for 68% of our total revenue, with Industrial accounting for the remaining 32%. Included in the slide presentation, we posted on our website are last five quarter of trended revenue results for these two segments.

Our joint development program or JDP revenue in Q1 2015 was approximately $0.5 million, down from approximately $0.9 million in the fourth quarter. As a reminder, joint development programs augment long-term product delivery opportunities.

JDP revenue is generally at 100% gross margin due to the complicated nature of these projects. Non-GAAP gross margin was 62%, maintaining the 62% from last quarter and up from 60% in the first quarter a year ago.

During the second quarter of 2015, we expect our gross margin to be approximately 60%. Non-GAAP operating expenses in the first quarter of 2015 were $4.9 million, up from $4.7 million last quarter and down from $5.1 million in the first quarter a year ago.

The increase was primarily driven by higher payroll taxes at the beginning of the year, normal year-end audit fees and industry tradeshow expenses. We expect total operating expenses in the second quarter to be slightly down.

On a GAAP basis, net loss in Q1 2015 was $0.6 million, or a loss of $0.02 per share. This compares with a GAAP net loss of $1.1 million, or a loss of $0.03 per share in Q4 of 2014 and a GAAP net loss of $1.9 million, or loss of $0.06 per share in the first quarter a year ago.

Q1 2015 non-GAAP net income was approximately $0.7 million or $0.02 per diluted share and represents the fourth straight quarter of positive net income. This compares with non-GAAP net income of $0.9 million or $0.03 per diluted share in the fourth quarter of 2014.

And a non-GAAP net loss of $0.7 million or $0.02 loss per share in the first quarter a year ago. Also during the first quarter, we achieved a positive adjusted EBITDA of approximately $1.4 million; representing a 15th straight quarter of positive adjusted EBITDA.

Now turning to our balance sheet, our cash and investments balance at the end of quarter one 2015 was approximately $17.7 million, compared with $18.4 million at the end of Q4. Our inventory increased sequentially to $6 million from $5.1 million.

This change was driven by an inventory built for High-Speed Communications business and accounts for the change in cash from prior quarter. Day sales outstanding in Q1 was 80 days, flat from prior quarters.

In Q1, we spent approximate $0.4 million on property, plant and equipment including production assets. In Q2 2015, we expect to spend approximately $0.5 million.

Now turning to the guidance, we currently believe second quarter revenue will increase to $9.3 million to $9.5 million, representing an approximately 3% to 5% increase from Q1 2015 and an approximately 16% to 18% increase from Q2 of 2014. To summarize our financial results, we had the most profitable first quarter in the company's history from a GAAP net income, non-GAAP net income and adjusted EBITDA standpoint.

This was a result of higher revenue growth, continued strong margins and continuous cost control. With that, I will turn the call back to the operator for questions.

Thank you very much and congrats guys on a great quarter. C or B, your Q1 numbers and now you are guiding ahead of street for Q2.

So what’s, I guess holding you back from raising full year guidance from the $37 million to $38 million in revenue?

Hi, Ted. Good to have you on board and thanks for launching coverage for GigOptix.

We definitely appreciate your efforts. Ted, we would like to stick to our historical tradition of reviewing the year trends at the end of the first half of the year, before we provide adjusted guidance or updated guidance for the second half of the entire year.

In this industry, we have a very short visibility into a lot of the businesses. I’d say that about 70% of the revenue are transit for the quarter and we believe that in the next call in July time when we report in second quarter, we will be in a position to reiterate or adjust our forecast and our guidance for this year.

Okay. That’s fair enough.

I mean, to some extent, is it -- just needed to make sure that the metro markets come through and start to expand likely everybody is anticipating for the second half of this year. I’m assuming that plays a significant role and I’m just kind of waiting on that.

Right. So it’s a great point.

I think if you look where we are, it’s sort of a very interesting inflection point in the entire High Speed Communication business and to some extent it can be positive perfect storm. But we have to be caution about it.

Four elements are driving the -- if you will, this knee points in the growth. One of which is exactly as you mentioned, the upcoming metro deployments in 100 gigabit per second linear.

Second thing is the trends in the long haul, in moving into a high speed avenue. First, 200 gigabit per second then into the 400 gigabit per second, which give optics, in most cases are very active with some of our major private telecom customers.

The third trend is the very fast optics and deployment of the 40 gigabit per second HSC plus in the Web 2.0 data centers, which is going I think faster than what’s projected last year. The fourth element is the rate of deployment of potential future generations in the data centers, including but not limited to new astonishing, the 40 gigabit per second, as well as moving into some deployment of the 100 gigabit per second.

So there are lot of moving parts in the High Speed Communication optical business that are having and will have a major impact on how this markets moves into the second half of the year.

That’s very helpful. And then on the 40 gigabits, the 40 gigabit per second strengths, are you shipping directly to the Web 2.0 players or, are you deploying or you shipping to the optical OEMs and then they are deploying with the Web 2.0 guys?

How do those dynamics work?

Right. No, this is a very good point, Ted.

I think as the market develops itself over the last couple years, today, we are shipping -- let's put this way, today, the Web 2.0 players are pulling the transceivers and the active optical cables from integrators. So, we sell our devices, which are as I said the sole merchant devices for 40 gigabit per second, VCSEL drivers and TIAs to the integrators that are putting together the transceivers and the active optical cable will set up into the OEMs, 2.0 OEMs.

That being said, obviously, we have direct contact with all the 2.0 Web players and we are seeing the holding patterns, which will be diminished by those players to provide their devices directly will work them.

Okay. And then, Darren, just quite -- I didn’t quite touch it or I kind of missed it, did you say OpEx would be down sequentially?

Yes. We expect OpEx to be slightly down from Q1 to Q2, as some of these expenses in their earlier part of the year start to roll off, but I do want to reiterate that we will be making continuous investments in the R&D side.

Okay. All right.

Thanks. I will pass it on.

Thank you, Ted.

Hi, guys. Thank you for taking my questions.

Congratulations on some nice numbers here. I guess my first question.

Avi, it seemed we had some 10% customers in the past. Is Alcatel-Lucent still on that category?

And if so, can you tell us how big they were?

Yes. So, Richard, I mean, we’d like to report on this 10% customers in -- through our annual.

I think prudent to say that Alcatel-Lucent maintained good position with GigOptix and is a key Lighthouse customer for the telecom business.

Okay. Fair enough.

I guess [indiscernible] on that. Second question on your 100 gig coherent drivers, I know you mentioned this last quarter, but can you refresh our memory on how many customers until you’re shipping those products to?

And, Richard, I assume that you’re talking about the telecom side?

Yes. Specifically on the coherent side, yes?

So it’s prudent to say that today we are shipping to about half a dozen customers.

Are those in production volume?

Some of them are in production. Some of them are in early stage.

Generally, if you know, if you track the dynamics of the market, as you know the lead technology provider of anyone of the new generation is usually Alcatel-Lucent in the market and it’s followed by Japanese, other European, and Chinese players. So I think the large deployment of 100 gigabit per second Linear Telecom today is Alcatel-Lucent.

And I think that where we are going to see a major take off in the market, in the production market not for all the suppliers will be as the metro deployment takes place.

Okay. That sounds good.

You mentioned and I think we talked about this when I met with you at OFC, you mentioned the 100 gig TIA that you are sampling here I think by the end of this quarter, how long do the qualification stake and how many customers are you sampling with here?

Right. So that’s a very good question.

TIA, centric TIA, as you mentioned, requires a bit of a longer process because it goes all the way through the OEM. It’s TIA, replacement of TIA, it’s not only a function of performance and dropping and being compatible but rather adjustment to software and the OEM system support.

It’s prudent to say that quality TIA is going to be -- can be designed in within I would say six months from introduction. So 10 gig pending the good performance of TIA and the successful sampling.

When gigabits look to a potential revenue coming from a TIA products, it’s probably at the end of the later part of this year.

Okay. All right.

Have you included any of that in your revenue forecast, your $37 million to $38 million for this year?

It’s a good question. I have to think about it, but I think that the $37 million to $38 million I gave as a guidance for this year include all the product that are viable for delivery this year by GigOptix.

And in the similar way, Avi, I think you mentioned in your prepared remarks that you certainly had in your press release regarding having 100 gig datacom and 400 gig telecom. I was actually trying to find the specific language in the press release here, but looking for products in those areas to contribute to growth this year, again if you included revenues from those products in that $37 million to $38 million goal for this year?

So Richard this is great question. And as we are sitting here today, I think the $37 million to $38 million represent where our confidence is on the total basket of products will be shipped this year.

And again as I mentioned earlier in my answer to Ted, we will reiterate our guidance by then quarter two. We are sitting still here because a lot of the strength in this market in terms of growing faster or growing slower depends on the dynamics or deployment of those new generation devices.

So again just to reiterate, it depends on the pay some introduction of the 100 G to the metro, pay some introduction of the 200 G to the long haul, depends on the introduction, on the dynamic growth of the 40 G datacenter to the zero, and obviously depend on the pace of introduction of the 100 gigabit you said to the datacenter. So to summarize the numbers we guided last time, last quarter the numbers that we reiterated today are what we believe is our business ability to our overall business this year.

Okay. I appreciate the perspectives.

I think I will jump back into line. Thanks again.

Thank you so much, Richard.

Thank you. Good afternoon.

First of all, I was wondering if you can get the mix between telecom and datacom?

Dave, as we discussed last time for SEC reporting and for competitive reasons, we wouldn’t rather not break it.

Okay. Fair enough.

And then, well, can we get any updates on BrPhotonics? Can we get some revenues?

Is this still maybe late this year or 2016 event?

Right. So as I mentioned in my prepared comments, the pace of incoming and sampling the 100 G CFP2 TOSA also depend a lot on the market dynamics.

Short of it is that -- short answer here that potential revenue based on the market situation is projected to 2016. So it’s an event of next year if you’re looking to advance those revenue.

But please remember that where we are enjoying the revenue from Brazil Photonics is these are PR arrangement as sales agent for Brazil Photonics is going to be commission based. TDR is running their own P&L and has nothing to do with GigOptix.

Got it. I was wondering if you are not going to break it out telecom, datacom, what’s your assumptions regarding the second quarter revenue guide as far as high-speed comm versus ASIC or industrial?

Sure. By the way if you take our last projections when we still broke it out, you can see the dynamics, you can see that the datacom is getting to be very strong, strong than telecom.

And as we look into quarter two, between the high-speed comm and industrial we expect to see basically very similar contributions. When you are looking into increase of revenues, as we projected prudent to believe that it is going to contribute equally.

Just to remind you for quarter one, 68% of the revenue was came from the high-speed communications, 32% came from the industrial or in numbers, about $6.2 million from the high-speed and about $2.9 million from the industrial.

So it sounds like equal growth between those two segment sounds like.

Can you repeat this for me? I’m sorry.

So both communications and industrial are expected to increase in the second quarter.

If you want to extrapolate now, I think we mentioned that both of them increased pretty significantly from last year to this year.

Right.

So I believe one of them then to slow down.

Got it. And lastly on the wireless E-band, it sounds like from your prepared remarks perhaps it’s going to be a 2016 event and we shouldn’t expect much revenue from event this year?

Right. So, I mean, we’re talking obviously and I relate back to Richard’s comments, we are talking about guiding you with production revenues rather than evaluation qualification revenue.

Yes.

So if you look to the market dynamics for example, I think that they all talk about small sale being a 2016 event.

Got it. And lastly, can you just talk about especially telecom.

I know you guys go through the annual price adjustment, how was it, it was a kind of a normal or anything extraordinary?

It’s like asking how do you feel when you [indiscernible] go to college, but it’s painful right, but thankfully this is behind us and I can reiterate to delight that we managed to year after to maintain our very, very good relation for our key customers, inspire the negotiation with our previous search even, sir. And support our customer needs in terms of cost adjustments while continue supporting the GigOptix business model is reflected some of the revenue growth and from the gross margin maintenance and so forth.

Got it. Thank you.

Thank you so much, Dave.

Yes. Avi and Darren, congratulations on some good results and guidance.

In the datacenter, can you talk about sort of the -- qualitatively can you give us sort of the mix between 10 G and 40 G laser drivers in TIA? And as you move to 40 G for the bulk of revenues than to datacenter, is there a significant ASP uplift for you go to 40 G drivers in TIAs?

Right. So I think -- this is a very good question.

I think with general GigOptix revenue and deliveries are mimicking the analyst the views of what’s happening in the data center. As I mentioned, we shipped this quarter about a 1 million devices which is basically almost half of the entire shipment of last year, which represent the sizable growth there, remarkable sizable growth of the shipments in this business.

Surprisingly enough, GigOptix has started shipping the QSFP+ 4x14 devices. So we actually started our journey in the data center by ship by -- by leapfrogging, if you will, this generation and starting by shipping LR and SR 40 gigabit per second devices.

Its only I believe delivered by a quarter ago when maybe even a late last year that we announced the released of our single channel 10 gigabit per second, 6101 device, which was adopted and endorsed pretty successful in the market. So I would say rough and tough today.

Again, if I look to what the market analysts tell us about the breaking of 10 gigabit and the 40 gigabit per second, I think that the market is moving away from the 10 into the 40 gigabit per second. And it will be prudent to say that the 10 gigs sort of only the very short distance cables today.

I would say maybe 30% of this data center business, all the rest of it is a, if you read reports correctly, to the 40 gigabit per second.

Okay. And then in telecom, it’s interesting that, I guess, you’ve seen some good growth in your 100g telecom drivers?

Have you’d seen some other semiconductor companies like Altera and Xilinx what about weakness in the telecom areas. So in your case is it start us depending on the strong dominant customer like Alcatel-Lucent or is it your linear 100g telecom drivers that allows you to outperform the market?

It’s an interesting question. I am listening to you and I am trying to think how to answer it.

So I’ll start by mentioning and I think we’ve talked about it before, we are representing this very small fraction of this business. We are dealing merely with the sophisticated 100g module drivers for those technologies.

And again from where we see the world its very small piece of the overall 100 gigabit per second markets. So I think what I mentioned in my prepared comments that, coincidently quarter one shipments of drivers were the highest ever quarter shipments in the GigOptix history in this type of business.

So obviously we are not seeing slowdown but rather a continuously grow. And I think that -- I also mentioned in my prepared comments that we are delighted to see the increase in the demand for 100 gigabits per second linear core entries to the new generation.

So I think that if you put them together, those two comments together for one, we are representing small business, a small portion of the 100G business and for two, we are really driving our revenue growth but the cutting edge devices which are 100G and 200G coherent and linear, so I think this is where we have seen our growth.

Okay. Great.

And then on the industrial ASIC business, you’ve had some new product introductions recently. Can you sort of talk about that the power management products you’ve introduced?

And also the automotive products that lead to an acceleration of somewhat mature business this year?

Right. So we -- and obviously for years, we are developing the business on the backend on the legacy of the technology we -- especially legacy of the proprietary technology we inherited through the acquisition of company called ChipEx like six years ago, seven years ago.

As of recently we -- as we matured in our relation with our ASIC customers as well as with some of our RF and optical customers, we realize that we are in a unique position where under one roof we have expertise on ASIC as well as expertise on RF and optics which allow us to combine and make a new offering and mix signal RF and optical ASIC. And we started to explore those opportunities.

And I am delighted to see that now we have initial track on those technologies. So we obviously hope this would be continuous growth business that will support a very profitable and very successful ASIC business we have developed over the last few years.

Great. And finally Darren, the gross margin outlook for Q2 60% somewhat less than Q1, is that mix related?

Can you talk about gross margin trends in Q2 in the second half of the year? Where we should be targeting?

Sure. So we’ve got that approximately 60% in the Q2 outlook primarily driven by -- there’s a number of things that could happen with price erosion in this industry and mix could also impact it as well.

And we continue to also in addition in making investments in R&D as product commercialize, we continue to make investments into our production of assets as well. So that's what’s -- that's what’s driving their gross margin model for 60%, which is still on the higher end of our 55% to 60% model.

Okay. Good.

Thank you and congratulations again.

Thank you so much. Thanks for Krishna.

Hi. Avi, just one question from me.

There was a question earlier regarding your datacom business and asking about a profile there. And you talked about some of the integrators there.

Wondering if you have any insights, especially if you know about them, I just hope can you share about the end customers for these integrators, i.e. the data centers, you’ve seen where they going profile geographically or any other way can you help us think about that, please?

Sure. I’ll tell you.

I mean, please classify my comments to you as merely personal in your perspective. I think my knowledge is good as your knowledge in the sense.

I’m hearing from the open source that the biggest installation data out there -- the data centers are going to end the year to those new players, namely Google of the world. But I think Google, Amazon, Cisco, maybe Facebook.

But those are the names that I’m reading in the open reviews. I mean, I think that at the end of the day if I look at the volume and I try to triangulate it and see who is putting it all, it makes sense to me that those devices, to our integrators goes to, mainly to those four, five players.

Okay. But just to be clear, Avi, it sounds like you’re saying you are not -- you don’t have any direct knowledge of that.

You are just guessing based on information you are piecing together from multiple sources then?

I think the way we are triangulating information is prudent to say that our -- the answer maybe educational to some extent.

Okay. I appreciate that perspective.

Thanks, Avi. That’s all from me.

Thank you. Thank you, Richard.

Okay. Operator, thank you.

And thanks everybody for joining us. We look forward to speaking with you again, when we report our second quarter of fiscal 25 -- 2015 financial results.