Good afternoon. My name is Atisia and I will be your conference operator today. At this time, I'd like to welcome everyone to the Second Quarter 2019 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers we Thank you.
I would now like to turn the call over to Rhesh David Pasqualeh as Global IR Partners. Sir, you may begin.
Thank you, operator. Welcome everyone to Lattice Semiconductor's second quarter 2019 results conference call. Joining us today from the company are Mr. Jim Anderson, Lattice's President and CEO and Ms. Sherry Luther, Lattice's CFO.
Both executives will be available for Q and A after the prepared comments. If you have not yet received a copy of today's results release, please email Global IR Partners using lsccglobalirpartners.com, or you can get a copy of the press release off of the Investor Relations section of semiconductor's website. Before we begin the formal remarks, I'll review the safe harbor statement. It is our intention that this call will comply with the requirements of SEC Regulation FD. This call includes and constitutes the company's official guidance for the third quarter of 2019.
If at any time to this call, we communicate any material changes to this guidance. We intend that such updates will be done using a public forum, such as a press release or publicly announced conference call. The matters that we discuss performance and other performance expectations. Investors are cautioned that forward looking statements are neither promises nor guarantees They involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward looking statements. Some of those risks and uncertainties are detailed in our filings with the Securities And Exchange Commission, including our Form 10 K for the fiscal year ended December 29, 2018, and our quarterly reports on Form 10 Q.
The company disclaims any obligation publicly update or revise any such forward looking statements to reflect events or circumstances that occur after this call. Our prepared remarks will also be presented within the requirements of SEC Regulation G regarding Generally Accepted Accounting Principles or GAAP. Some financial information presented by us during the call will be provided on both a GAAP and on a non GAAP basis. By disclosing certain non GAAP information, management intends to provide investors with additional information to prevent further analysis of the company's performance and underlying trends. Management uses non GAAP measures to better assess operating performance and to establish operational goals.
Non GAAP information should not be viewed by investors as a substitute for data prepared in accordance with GAAP. At this time, I'd like to now the call over to Lattice Semiconductor's President and CEO, Mr. Jim Anderson. Please go ahead, sir.
Thank you, David, and thank you everyone for joining us on our call today. I'm pleased with the strong results we had in Q2 of 20 19. We achieved the company's highest profitability level in over a decade, with a company record high and operating income percentage and significant improvement across key metrics. While we're encouraged with the progress to date, we have more work to do as we continue to drive to the financial targets we outlined at our Investor Day this past May. Highlights from the 2nd quarter included sequential revenue growth of 4% driven primarily by our communications, computing and industrial markets, gross margin increase of 40 basis points sequentially to 59% on a non GAAP basis.
Operating profit was the company's highest in over a decade in 24% of revenue and we achieved non GAAP EPS expansion of 43% on a sequential basis us. Let me now provide an overview of our business by end market. In the communications and computing market, revenue was up 12% sequentially in Q2. In computing, we continue to benefit from growth in our products that are used in both server and client computing platforms. We have a strong foot end across a number of different OEM server platforms.
And as our customers continue to ramp the current generation of servers, we benefit from for client computing platforms factors. In the communications market, we're benefiting from early 5G infrastructure deployments. We expect 5G to become a more material contributor to our revenue in the second half Turning We continue to benefit from design win, ramps, and industrial and automotive applications. We believe this segment will continue to remain a long term growth factor for us as factory automation continues and more electronic content is oriented to automobiles. Turning now to the consumer market, Revenue to providing product and our sensai 2.0 software.
Our MOCX-three d product is the 1st control PLD that has security features, which allow it to be used as a platform root of trust. It's typically the first device turned on in the system and the last device to be turned off. Providing secure protection through the entire operation platforms. We're also excited about our new sense AI 2.0 software stack for artificial intelligence inferencing at the edge of the network. SinceAI just won its 5th major industry award and the broad recognition this solution has received reflects the high level of interest we are seeing from our customers as well.
Before turning the call over to Sherry, I want to comment briefly on Huawei. In mid May, we stopped shipments to Huawei when the government order was given. However, we resumed shipments to Huawei in late Q2 of those products that we determined to be in compliance with export restrictions. In summary, we're pleased with our continued progress We're well positioned moving forward with multiple growth factors in server and client computing, 5G infrastructure build out, industrial automation, and automotive electronics. We remain focused on execution and driving further improvement as we unlock the full potential of Lattice I'll now turn the call over to
We are sequentially from the first quarter. Product revenue growth in Communications And Computing as well as in Industrial And Automotive offset a sequential today. We expect the mix will continue to shift to higher margin markets as we successfully execute on our strategy. Gross margin on a GAAP basis was 58.7% compared to 58.8% in the first quarter. Our non GAAP gross margin expanded to 59% from 58.6% in the prior quarter due primarily to benefits of the strategic pricing optimization and product cost reduction strategies that we initiated in Q4.
Of the 180 basis point improvement we achieved in Q1 and further demonstrates the margin expansion strategies we discussed at our Investor Day. As Jim noted earlier, expanding gross margin over the quarter. As a percentage of revenue, OpEx declined 7% in Q1 on a non GAAP basis. SG and A was the largest contributor of the sequential reduction as we continue to execute on our target model of reducing SG and A sequentially in Q3. As we noted at our Investor Day, expenses were $45,700,000 compared to $45,200,000 for the first quarter.
Our GAAP net income for the second quarter was eight point $1,000,000 or $0.06 per basic and diluted share compared to a net income of $7,400,000 or 0 point 06 dollars per basic and $0.05 per diluted share in the first quarter. On a non GAAP basis, 2nd quarter net income was $21,100,000 or $0.16 per basic and $0.15 per diluted share as compared to $14,600,000 or $0.11 per basic and diluted share in a diluted basis. We also made significant improvements to cash generation in Q2. We generated 44.7 accounts receivable and inventory. We announced at our Investor Day that we refinanced our debt, which reduced our interest rate by 250 basis points, and extended the maturity by 3 sheet.
During Q2, we made $40,000,000 in discretionary debt payments as a result, our non GAAP debt leverage ratio, as defined in the credit agreement, is now below 2. This is down from 4.2 a year ago. In addition, the for a total reduction of 2.75 basis points. We expect to continue to de lever through discretionary payments moving forward Finally, we ended Q2 with a cash balance of $122,600,000 compared to 130,400,000 at the end of Q1 This is after the $40,000,000 discretionary debt payment that we made during the quarter. And our focus quarter of 2019 to be 59% plus or minus 1% on a non GAAP basis.
Total operating expenses for the 3rd quarter are expected to be between our priorities and focus are unchanged. We remain committed to increasing our profitability, de levering our balance sheet and building additional value for Lattice and our shareholders.
And our first question comes from the line of Matt Ramsay at Cowen.
Thank you very much. Good afternoon, Jim and Sherry. Congratulations on really strong results and what I was a bit of a turbulent period with Huawei. Jim, I wanted to ask, you had mentioned that you guys had suspended shipment to Huawei and then resumed it at the end of the order. There's been various companies that have said they've resumed full shipment.
There's some that have said they've excluded it from Q3. One of your FPGA competitors, Xilinx said they're shipping partial products going forward. Maybe you could add a little bit of context. I know it was supposed to be mid single digits for the year. And I'm just trying to understand how is in or out and we can gauge, I guess, the relative magnitude of the strength of the rest of the business.
Thanks.
Yes, sure. Thanks, Matt. Let me start with Q2 and then I'll give a little color in Q3 as well. So for Q2, first just to reiterate, so clearly we stopped shipments in mid May when we got the government order. And then, we worked with our internal legal team and external legal counsel to do a pretty detailed analysis to examine which products we believed were compliant with export restrictions.
And so near the end of Q2, we started shipping those products that we determined were compliant with export restrictions. And so, and that we restarted shipments roughly in the last couple of weeks of Q2. But if I look at kind of where we ended up with Huawei revenue in Q2 versus what we had kind of originally assumed as part of our original Q2 guidance, it was roughly the same. So we kind of ended up where we had expected with respect to Huawei revenue. And then moving forward into Q3, I'd say our Q3 guidance reflects the current demand outlook that we have from Huawei.
Again, for those products that we've already deemed compliant with the export restrictions. So that's factored into our into our Q3 guidance. So hopefully that's helpful, Matt.
Thank you very much for that, Jim. I guess, as a follow-up, a little bit unrelated, but I think it's pretty clear to see some of the strength that you guys are having in the server data center portfolio. I wonder if you might give a little more color into the momentum you're seeing in that business. I know that AMD is now ramping some server product. There's obviously data center product going on from a number of vendors besides Intel and a little bit of movement lately on the 10 nanometer roadmap at Intel.
So if you could lay out for us how you're thinking about the content expansion there, if anything's changed since Analyst Day because it seems like the revenue is stronger there than maybe we anticipated this soon. Thank you.
Yeah, so that's in our comms or communications and compute segment. And so we did see nice sequential growth from Q1 to Q2 of about 12%. And this is in a segment that's been a pretty strong performer for us over the recent quarters. And a few different things going on within that segment. First of all, we're seeing just really nice growth in our product that are used in both server and client computing platforms.
And the example that we gave at our Investor Day in mid May was around server servers going into data center. And one of the nice things that we're seeing right now is in the current generation of servers that are ramping up this year. We're seeing a very good expansion in both our attach rate and our ASPs relative to the prior generation. So about about a tripling of our attach rate and a doubling of our ASPs from prior generation to current generation. And so that's driving some nice growth for us.
This year. We're also pleased with our growth in progress in client computing platforms. And then maybe the other thing to mention is did get a nice contribution 5G infrastructure. We started seeing initial flow of revenue late last year, Q4 of last year. And then that incrementally grew Q4 to Q1.
We saw another nice contribution in Q2. And so that's also been a contributor looking forward on 5G, we're still expecting to see that become a more material contributor in the back half of this year and into 2020. So in general, for comms and compute, it's been a good performer. We see it as a long term growth factor for the company as well.
Thanks very much. I'll get back in the queue. Appreciate it.
Thanks, Pam.
And our next question comes from the line of Tristan Gerra from Baird.
Alan, it's for gross margin. Did gross margin also benefit from mix? And I can think of Huawei and does the ramp of 5G that you expect in the second half have any impact on gross margin. Is the pricing optimization benefit continuing in the second half? Or is gross margin going to be more exposed to mix alone after Q3?
Yes. Thanks Tristan. The very first part of your question got cut off a little bit, but I think it was the first part was asking about Q2 gross margin. And then I think the second part was asking about just forward looking in the back half of this year. So, let me start with a Q2 gross margin.
We did see a nice, sequential benefit of about 40 basis points from Q1 to Q2 in terms of non GAAP gross margin expansion. We'll note that, our IP revenue actually declined from Q1 to Q2. And so if you look at our product revenue only, we saw a really nice gross margin expansion sequentially from Q1 to Q2. Now that's from a number of different factors. I'd say probably 3, 3 factors.
Number 1, our pricing optimization strategy, which we We planned that out in Q4 of last year. We began to implement that in Q1 of this year. We saw some initial benefit in Q1. We saw some more benefit in Q2. So that was nice contributor in product cost reductions for us.
And then another factor in Q2 was a mix across the segments with comps and compute in industrial and auto segments being up sequentially, that helped contribute to gross margin as well. So, yeah, we're pleased with the progress on gross margin in to it. Now looking forward to Q3, or just in general and beyond, if you remember from our Investor Day, In mid May, we put out a long term target of 62% for gross margin. We're certainly committed to continuing to make progress against that goal. Again, that'll be in 3 sort of, categories that we drive improvement.
Those three categories of, pricing optimization, product costs were in mix. In Q3, the midpoint of our guidance is roughly flat with Q2. What's going on there is in Q3, We do expect to see sequential improvement due to pricing optimization and product cost reduction, but that's offset by mix in Q3. We are seeing a mix headwind in one particular segment within our consumer segment. Actually, that's offsetting some of the progression we're expecting in pricing and product cost.
But we view that as a short term temporary headwind that would go away. So in general, look, we're very committed to continuing to expand margin and driving to our long term target of 62% or higher.
Great. And then as a follow-up, any color you could provide in terms of direction of what you buy segments for Q3 and the second has?
Yes. For Q3, if you look at the midpoint of our revenue guidance, it's up up slightly from Q2 to Q3. I would say at this point, kind of all segments reflect that at this point, all segments reflect just a slight increase in revenue sequentially from Q2 to Q3.
Great. Thank you very much.
Thanks Tristan.
And our next question comes from the line of Charlie Anderson from Dougherty and Company.
Yes, good afternoon. Thanks for taking my questions and my congrats on great results. Specific shout out on the DSO improvement. That's just excellent.
That. She cares a lot about DSOs, so she appreciates that.
Thank you. Great. So a question on OpEx to start. So seem to be tracking well ahead of schedule here on SG And A as a percent of revenue, in terms of where you want to go. I wonder maybe you could just articulate us kind of where you are, what you did to reduce SG and A, how much headroom is left to, to have more efficiency there.
And then you did mention 20% as a place to be on R&D. We're below that now. So to the degree that there's incremental investment, if you could maybe talk to what that incremental would be? And then I've got a follow-up.
Yes, thanks, Charlie. So, first of all, in SG and A, yes, we had put out a long term target of percent of revenue. We made some nice progress on that from Q1 to Q2. In fact, that we made a bit faster progress than Sherry or I had anticipated. And so that was good.
We have a number of actions in place that we actually started to drive in Q1 in terms of actions to reduce SG and A expenses. I wouldn't point to any one particular factor. It's just a number of different things that we're driving within that category. And there were a couple of those actions that yielded benefit quicker than we had originally anticipated. So that's good to see.
We remain committed to getting SG and A to that 15% level. That'll take that'll take time. It'll be a combination of direct cost reductions, but also scaling into our revenue as revenue grows. We'll scale into it. And so it's a combination of both, but we expect to continue to make incremental progress towards that 15% goal.
And now on R and D, our target is 20%. That's our long term target. We are running underneath 20% right now. The way I would characterize that is, if you look over the last few quarters, certainly since I started last year late last year, And when our new head of R&D and new head of marketing came on in the back half of last year, One of our areas that we focused on right away was in driving just what I would call better efficiency within R&D or better productivity, just making sure that, our existing R and D spend was optimized for the best ROI. And so that was our initial focus, because before we add on additional spending to R and D.
We want to be convinced that the spending that we have is fully optimized. And so we went through a lot of work over the prior quarters to trim out projects that we thought were low ROI and, reinvest that that investment back into projects that are high ROI. And so that's really been our focus over the last 2 to 3 quarters. And now that we're were through with that. I would expect now R and D to start to incrementally grow from here.
And we'll do that very judiciously and carefully, but we would expect the R and D to tick back up, for instance, from Q2 to Q3. And as we continue to invest in the roadmap and ensure that we've got a steady beat rate of new innovation and new products for our customers, Hopefully, that's helpful, Charlie. And I think you had a follow-up.
Yes, absolutely. So just real quick. Industrial, it was really nice to see an uptick there. Been a few quarters since we'd seen that. I think you had called out in your script that maybe there were some new wins there and new opportunities.
I wonder maybe you could just expand on what's going on in an industrial near Thanks.
Yes. Industrial is a very, diversified, also sort of fragmented segment. There's a lot of customer in that segment. And so it's never one particular thing. What we're seeing is, just really good design win ramps across a number of different customers in a number of different applications.
Examples would be just in general industrial automation, but robotics is a great example, you know, motor, you know, precision motor control within robotic arms, for instance, which are used in factory automation. So it's just a number of places where look, lattice devices given their small size, programmability, low power, great power efficiency, just a great solution for industrial automation. And so we're seeing some nice just nice growth in some of those new design wins that we've secured.
And our next question comes from the line of Christopher Rolling from SIG.
Hey guys, congrats on the strong results and guidance here nice to see the progress.
Thanks. Appreciate it.
So, Jim, for you, I'm sorry if I missed this. I didn't quite catch what you were saying about resuming fuller partial shipments to Huawei. And the reason I asked is because, was obviously a nice the 3Q guide, no one's complaining there. But if you had no Huawei in 2Q and then you're coming on full for 3Q and they were a 5% customer and the bumps just up, call it, a 1,000,000 sequential how are we supposed to think about that? Is it because it's a partial shipment or are there other puts and takes in there if so, maybe you can walk us through it.
Yes, Chris, maybe I'll walk you through a couple of points I made earlier. So let's start with Q2. So if you look at Q2, So we were shipping to Huawei through the first half of Q2. And it was mid May, when the government order came out seize shipments at that time, did our legal analysis and then resume shipments for the components that were that we deemed compliant with export restrictions. We resumed that in the last couple of weeks of Q2 when I look at where we ended up for Huawei revenue in Q2 versus what we had originally assumed in early Q2 as part of our guidance that we gave in Q2.
It's roughly similar. It was pretty close. So we kind of ended up where we expected with Huawei for Q2 revenue, as compared to our original forecast. And then Q3, our guidance reflects, Huawei's latest demand forecast that we have from them for the products again that are that we've deemed compliant with, export restrictions.
Okay. And I don't know if there's any other color there in terms of are you shipping maybe half of what they would ultimately want? I don't know if you judge that or not. I don't know, any other color?
Yes, I can't really break it down at the product level, but just to say that, look, we did a pretty detailed analysis of those products that are compliant with export restrictions and those are the ones that we're shipping at this time.
Okay. And then, pricing optimization, perhaps talk about how far along you are at this point and whether there are any other optimizations like manufacturing, for example, I guess there's probably one more for Sherry there. Are there some optimizations as you move to FD SOI or something like that or you might be able to get a little bit extra?
Yes, I think, Chris, when you think about the target that we put out there as part of our Investor Day in mid May, the target that we put out to get gross margins at 62% or higher. What I would say is that, that was a long term plan to drive kind of continuous improvement in pricing optimization, product cost reductions and then mix improvement over that time. So I view us as we're progressing along that improvement plan. I think we're making reasonable progress, but we have a lot more work to do. I believe we have a lot more work to do on pricing optimization, product cost improvements.
And then the 3rd component is, the business, we are expecting the business to shift to be a higher percentage of comms compute, industrial and auto over time. And that mix shift benefits our gross margins as well. So we're committed to that long term, 62% gross margin target and driving all the right actions to get there over time.
Thanks guys. Congrats
our next question comes from the line of Richard Shannon from Craig Hallum.
Hi, Jim and Sherry. Thanks for taking my questions as well. I think I had a question in the comms and computing segment. I've done my numbers here correctly for the 2nd quarter. You grew at about 35% year on year.
It never really split up, how much is from comms versus computing? I'm assuming based on your commentary today and at the analyst event that the computing part is probably growing a little bit faster. But relative to your comments, you made today as well as the analyst event where you're tripling your content or tripling your attach rate doubling your ASPs, seems like computing should be growing quite a bit faster. Seems like we could be seeing growth numbers even faster than that going forward. So I wanted to test that assumption out.
And then maybe if you can add to that, when you might expect that from a year on year basis to peak up?
Yeah, thanks, Richard. So, yeah, certainly comes in compute. It's been a great, growth segment for us. The 12% sequential growth in Q1 from Q1 Q2, we're pleased with that. A number of different things going on within that segment, as I mentioned, growth in server is 1, which I had touched on earlier.
So those are our products used in the server platforms, but also growth in products used in client computing platforms. And then, communications also is something that we're expecting to be a long term growth factor for us as 5G infrastructure build outs continue to accelerate into second half of this year and into 2020 and beyond. And so a number of different growth engines on neither. We believe comps in compute as we talked about at our Investor Day in mid May will be a long term growth opportunity for the company.
Okay. Fair enough. My follow-up question on the industrial side, for the companies who have already announced earnings this quarter, we've seen kind of a smattering of some that are surviving and doing well. Industrial and some are seeing some impact from the trade situation and other things. Sounds like you're expecting to see some amount of improvement in this third quarter.
I wonder if you can kind of qualitatively talk about what you're seeing in the industrial space. The extent to which you're seeing any effects from trade or other things going on?
Yes, I would say in terms of general end market, Certainly, the Industrial And Auto segment has seen some softness in end market demand due to macroeconomic trade tensions at etcetera. And as a broad based, us as a broad based supplier, we have 9000 active customers, no customers above 10%. We're highly diversified. We're certainly subject to any broad based macroeconomic fluctuations. But what I would say is also in that industrial segment is, look, our products are really well positioned with respect to power efficiency size and some of the artificial intelligence inferencing capabilities that we can bring to the market.
And we're seeing, in, for instance, from Q2, from Q1 to Q2. We saw about 7% growth. We're just seeing a really nice healthy ramp in a number of different applications in the industrial segment. And then automotive, which is a small portion of that segment, we expect that to be a more of a long term growth contributor. So as we had mentioned in the Investor Day in May, just like Conn's in compute, we also expect on automotive to be a long term growth category for the company.
Okay, fair enough. Appreciate the detail guys. Thank you.
Thanks, Richard.
And our next question comes from the line of Hans Motesman from Rosenblatt. Securities.
Hi guys, this is Kevin Garrigan on for Hans. Thanks for taking my question and congrats on the great quarter.
I was just
kind of wondering if you could give us kind of your perspective on the competitive dynamic against other PGA players.
Yes, sure. I don't think there's been any significant change in the competitive landscape from our perspective. Our traditional competitors are, certainly Xilinx and Intel Alterra. Look, we look at our product portfolio versus our competitors, we have, I think, a great competitive position. We really focus on small sized FPGA very power efficient, easy to program, easy to use.
We think we're unique in the marketplace in terms of where we're focused, where we focus our innovation and our R and D. And then, that's kind of current product portfolio. And as I look forward to the roadmap that we have lined up in front of us over, the next 12 months or next 3 to 5 years. I'm pretty excited about the products that I see on the roadmap. In the innovation that's in front of us.
We're very determined to deliver innovation on a regular cadence, regular B rate to our customers and excited about some of the products we've got coming out over the next, especially over the next 12 to 24 months.
Great. Thanks guys.
Our next question comes from the line of David Duley from Stillhead Securities.
Good afternoon and congratulations on excellent results. I was wondering, most of my in market questions have been answered, but if you could just talk about how we should think about seasonality of your business as we move into the back half of this year and into early next year. And then a clarification, what should the interest expense dollars per quarter going forward now that you've paid down the debt and into the lower interest rate?
Yes. Thanks, David. I'll take the first question and I'll let Sherry take the interest expense question. On seasonality, as our business has shifted more and more to industrial auto, comps and compute, our business has been had less, less of a seasonality pattern. I would say the, we still, our consumer segment still exhibit seasonality, which would be typically Q1 would be a relatively low seasonal quarter.
And then Q2, Q3 would be a stronger seasonal quarter in Consumer. But the other segments, which is where roughly 70% to 80 percent of our revenue comes from now, don't have any really strong seasonality patterns. And then maybe Sherry, do you want to answer the interest expense question?
Sure. So we ended the quarter with a debt of $191,500,000 Q2. And our interest rate, after paying down, to the next lowest interest rate tier is LIBOR plus 100 and 50 basis points. And so what I would do is calculate it based on that, but I'd also like to note that our during the quarter, we made a $25,000,000 during Q3. We made a $25,000,000 discretionary debt payment.
So you'll see that when we file our Q But you can factor that into your calculation. That's the way I would answer that question.
Okay. And then you, at the Analyst Day, you talked about your next generation FPGA products or platform coming out. I guess that's early next year. I guess first question is, are you on track for the release dates that you've talked about? And then could you just remind us about what sort of performance increases or power consumption decreases that you might have with this new platform?
Yes. Thanks, David, and thanks for asking. Yes, it's we're really excited about that NextGen product platform. So it's a new architecture that we've developed with new features, new capabilities, then it's also on new semiconductor technology. So it's on 28 nanometer FDSY technology from Samsung.
We're really excited about that. We do have first silicon back. It looks very healthy and so we are definitely on track for day in mid May. So I would say we're tracking very well to those dates. And with respect to the some of the capabilities on power efficiency.
One of the really nice things that FDSO brings is, sort of a built in power efficiency advantage. If you compare FDSOI to sort of standard bulk CMOS technology. There's around a 50% power power improvement or power savings relative to bulk CMOS. So that's a nice advantage for us on that platform. And when you couple that with some of the architectural benefits that we're bringing in terms of new capabilities, new features, etcetera, we're very excited about that that new product generation.
You'll hear us talk more about that as we get closer to sampling in the first half of next year. But again, really excited about our progress there.
And just as a point of reference, the current FPGA platform, is it at 40 nanometers or 65 nanometers, what sort of process technology is used currently?
Yes, we have products on both 6540.
Okay, thank you.
Thanks.
CEO's CEO, Jim Anderson, for further comments.
All right. Thank you, operator, and thanks everybody for joining us on the call today. We appreciate it. So in summary in Q2, we demonstrated the leverage in our operating model with solid improvement across key metrics We achieved a record high operating profit as a percentage of revenue. And on the product side, we had a couple major product launches in Q2 that will help us drive long term growth for the company.
Overall, I think we're well positioned to benefit from multiple long term growth, growth factors. So we appreciate your support and look forward to continuing to update you on our progress moving forward. Operator, that concludes today's call.
Yes, sir. This does conclude today's conference call. You may now disconnect.