Q3 2019 Earnings Call
Sovereign Center I hope you.
I would like to drill four guenter earnings call.
Got it may have her name please.
First name David last name Brown.
Thank you would compare you right David.
Hi era.
Thank you so much please standby.
Greetings and welcome to Gen film incorporated third quarter 2019 earnings Conference call.
This time, all participants are in listen only mode a.
A question answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press Star then zero on your telephone keypad.
Please note. This conference is being recorded I will now turn the conference I bet you your host if using Bernard.
Best Relations. Please go ahead.
Thank you see Anne and good morning, everyone. Thank you for joining US today Gemstones earnings results were released earlier this morning, and a copy of the release is available at Genzyme Dot Com. Additionally, a webcast replay of today's call will be available later today on the Investor Relations Sir.
Action of just Dumbs web site.
During this call we may make forward looking statements within the meaning of federal security laws.
Statements reflect our current views with respect to future events and financial performance.
We undertake no obligation to update them and actual results may differ materially.
Please see gen thumbs FCC filings, including the latest 10-K and subsequent reports what discussions of various risk factors and uncertainties underlining such forward looking statement.
During the call we may discuss non-GAAP financial measures I was defined by S. easy regulation G.
Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release.
On the call with me today are still eiler, President and Chief Executive Officer, and Mattel and versa, Chief Financial Officer.
Please note that during their comments, so and Mattel, we'll be referring to a presentation deck that we have made available our website at John some dot com slash event.
In addition, they will refer to performance, excluding divested assets and assets held for sale as our core business, which include automotive and just a medical.
After their prepared remarks, we will be pleased to take your questions.
Before I turn to call to Phil I would like to remind you about certain adjustments related to a reclassification of amortization of customer relationships last year, which Mattel discussed our one Q earnings call.
These adjustments continued to impact some of our previously reported third quarter 2018 financial items.
This resulted in 2.6 million being reclassified from a contra revenue item into SGN, a for the third quarter of 2018.
Which impacted revenue for other automotive as well as revenue for each of our industrial businesses.
As Mattel pointed out our one Q earnings call. The annual impact for 2018 was 10.2 million increase in both product revenue and EPS DNA.
As a result, the gross margin rate and EBITDA margin rate were also impacted by 70 basis points and 10 basis points, respectively for full year 2018.
Now I'd like to turn the call over to so [noise].
Thank you James Good morning, everyone and thank you for joining us today.
During the third quarter, the challenging macroeconomic and automotive industry conditions continued.
As we move to the year actual light vehicle production levels have fallen well short of industry estimates every quarter.
The strike a general motors, our largest customer magnified the impact of the shrinking production volume.
Nonetheless, we were still able to deliver strong operating performance in the quarter, despite revenues being below our expectations.
First we were able to continue to outperform in automotive versus the key markets that we serve.
Excluding the impact of foreign currency translation, and the GM strike, our 1.5% decline inorganic automotive revenue compares to a decline of approximately 3% and global vehicle production.
And our core automotive product lines, which excludes cables and non automotive electronics, we saw growth of nearly 1% in the quarter year over year.
With the addition of 270 million in awards during the quarter. We've now secured 2.5 billion in automotive awards since the beginning of 2018.
Our pipeline of potential awards for the balance of 2019 gives us confidence in our continued ability to outperform the automotive market even in light of the reduced or delayed level of award activity that we're seeing by Oems in the near term.
Year to date, we saw double digit growth in medical as a result of growth from many of our existing products such as Blake control as well as the addition of steel or products to our portfolio.
On the cost front, we continue to make progress on our fit for growth activities through purchasing excellence and rigorous cost controls.
In addition, we took proactive steps to right size, our factories for lower volumes earlier in the year when the slowdown in automotive production volume became apparent.
This allowed us to achieve our highest gross margin rate and nine quarters.
We continued our momentum in reducing operating expenses, which declined 9% in the quarter.
After a just adjusting for restructuring costs operating expenses declined 16%.
As a result, we delivered quarterly adjusted EBITDA of approximately 41 million or 17% of revenues. This is the highest quarterly adjusted EBITDA since the first quarter of 2017.
In late September we announced plans to rationalize our global manufacturing footprint to improve productivity.
We will consolidate and relocate certain existing automotive manufacturing and as a result reduce the number of plants by too.
We expect to complete the plant consolidations by the end of 2021 and reduce our annual cost structure by $12 million to $14 million from the current levels.
We are pursuing communications with our customers and employees in the coming months and we will provide more detail overtime.
Tail will provide more details about our financial results in a few minutes.
Finally, we repurchased approximately $25 million of our shares during the third quarter and continue to repurchase more in October pursuant to a tenbfive one plan.
As of this week, we've repurchased a total of 215 million in share since launching our share repurchase program and we have $85 million remaining in our current authorization.
We will continue to evaluate and opportunistically deploy capital towards share repurchases, depending on market conditions.
Before I get into a few highlights from the quarter I'd like to share with you a recent update on climate sense Gen. Therms unique personalize thermal management system of the future.
As I previously discussed we've been working with select Oems on climate since development projects and I'm very excited to share that one of these is with our largest customer general motors.
A couple of weeks ago, GM and Genthree jointly presented the new climate since development project results at the society of automotive Engineers thermal management systems Symposium.
A key objective of the project was to achieve a significant reduction in energy consumption, while still delivering best in class Okcupid comfort in comparison to the existing central HVAC system of a Chevrolet bolt electric vehicle.
To address this challenge agenda and developed a personalized microclimate system utilizing advanced thermal delivery methods.
Integrated electronics, and most importantly, our innovative thermal physiology based control algorithm.
In addition, we introduced and utilize the novel human centric comfort measurement methodology to measure passenger comfort.
We were very happy with the results and they have exceeded our customers' expectations.
Climate sense delivered between 50% to 69% energy savings in cold weather testing and 34% energy savings in hot weather testing.
While Oems are increasingly focused on improving energy savings and range extension the need to provide customers with superior thermal comfort remains a critical target.
Our work with GM and others demonstrates that Gen terms innovative approach to occupy thermal comfort in climate sense is a strong and very relevant solution.
Now, let's turn to automotive highlights on slide five.
In the third quarter, we launched our automotive solutions on 32 different vehicles across 18 Oems.
Including BMW.
Feed W. VW.
General Motors, Hyundai Kia and FDIC.
We continue to see momentum for our Ccs product and launched on the Ford F 250, Lincoln MKX see Subaru legacy and Subaru Outback.
Jaguar land Rover continues to highly value Gen Therms industry, leading Ccs solutions and this is evidenced by our incremental Ccs active launched on the new land Rover defender in the quarter.
This is both in the first and second row seats.
In China, we started production on our multi function electronic control unit with integrated electronics and software for climate memory seat and mirror control on the chart on C. S 75.
Our ability to flexibly integrate hardware and software is proving to be a strong competitive advantage.
Also noteworthy noteworthy in the quarter and battery thermal management, we launched our very first sell connecting technology on the BMW mini full electric.
This is another important milestone for us in BTM.
If you recall, we're focused on four primary product lines.
Thermo electric active battery thermal management.
Air cooling BTM battery sell heating and now sell connecting technology.
Now onto slide six.
Where you can see that we continue to win new business at a pace that sets a solid foundation for future growth.
In the third quarter, we secured 270 million in New program awards across 18 different customers.
Bringing us to 930 million in cumulative New program awards year to date.
We won multiple Ccs awards, including platform wins with the Buick enclave, Hi, Undying, Starbucks Qia, Optima and the Mercedes AMG SL and GT.
We receive steering wheel heater awards across six Oems, including the BMW five series and in sport series.
The Ford Mustang Mark.
Gee see ion and the Mercedes S L. five.
While we have seen production headwinds impacting our steering wheel heater revenues in 2019, Our award momentum in this product line positions us well to return to revenue growth in steering wheel heaters over the near term.
I'm also very excited to share that over 40% of awards, we secured in the quarter or with Oems in Asia, including GA C.
Get wall, Hyundai and Kia.
While there are significant headwinds in the automotive industry in Asia, especially in China in the near term Asia is a fast growing market for automotive thermal management solutions.
For this reason im pleased to announce.
That we have.
Helen sure has joined us to lead Gen Therms overall growth and operations in China, and our global electronics business.
She will be responsible for growing the electronics portfolio, developing and launching new products and driving profitability.
She will also oversee the growth strategy and execution of operations for Gen Therms business in China.
Helen comes to Genthree them from Infinium technologies semiconductor solutions company, where she has been the head of automotive division for China, mainland Hong Kong and Taiwan region.
Prior to Infinium, she held positions at entered the international automotive components or AC.
And Lear.
Combined with Thomas stock are coming onboard at the beginning of September to lead our climate comfort and VTM businesses from Germany, We now have a strong and truly global executive leadership team.
Now, let's turn to slide seven for a discussion of our industrial segment.
Engender medical product revenues in the quarter were below our expectations due to timing shifts of equipment orders from the third quarter to the fourth quarter.
However, we continue to expect strong double digit growth in medical for the full year.
During the quarter, we secured awards for blankets roll our liquid based patient thermal management solution from several large use hospital systems, including the state University of New York Medical Center, Northwestern University Medical Center, and Boston Medical Center to name a few.
In addition, initial customer feedback has been overwhelmingly positive on our new cardiovascular heat cool system with integrated you V Disinfection technology as we shipped initial orders of our Youve trio in the quarter.
We continue to make progress on new product development as we integrate disinfection technology to next generation products.
We continue to leverage our deep understanding of human thermal physiology through our medical business to further develop innovations like our climate since solution for the automotive market.
Lastly, im pleased to share with you that we successfully divested GPE on October Onest.
With that we now completed all the exits and divestitures under our focus growth strategy.
Positioning us enter in the core markets, where we want to compete.
Let me summarize the global automotive industry and the macroeconomic environment continue to present challenges.
However, I'm very pleased with the team's ability to deliver improved profitability.
To highlight this point our year to date operating income increased 10.3 million nearly 20%. This despite a 6.5% decline in revenue.
We continue to take proactive steps to help mitigate the challenges. We currently face as we work towards our longer term objectives for focused growth.
I remain proud of the hard work and commitment of the talented giant global to interim team to deliver on our plans.
With that ill turn the call over to material for a little more color on the financial results.
Thanks, Phil and thank you to everyone joining the call today.
I was kind of now on slide eight and focus on the items that most significantly impacted our third quarter.
For the quarter part of the revenues declined by 8.2% compared with the same period of last year.
Automotive revenues declined 4.4% after adjusting for the impact of foreign exchange automotive revenues declined 2.8% outpacing the global automotive production.
The industrial segment declined approximately 48% primarily due to the disposition of this year Xendesktop chamber business.
Excluding the assets held for sale and the impact of effects, our overall revenue declined by 2.8%.
The 2.8% year over year decline in the automotive segment was the result of the headwinds in global vehicle production as well as the GM strike, which impacted our automotive revenues by 1.3%.
However, we slightly outperformed the global production the third quarter.
According to Hs latest data global light vehicle production in the took quarter declined 3.2% year over year.
Our automotive business outpaced the market is that is out of the continued strength in our BTM product line, where revenue increased by 59% primarily due to the pace award winning BTM solution that we discussed in prior quarters.
In addition, we saw a slight increasing seaters and other automotive new launches in seat heaters more than offset the continued revenue decline at Lowe's Fagen.
Automotive increased almost 15% is that is out of strong take rate of thermal cup holders with BMW.
Ccs revenue declined 9.7% actually 8.2%, if we exclude effects.
Primarily due to the GM strike lowered automotive production level.
New platform changeover and effects as well as vehicle cancellation.
This was partially offset by several new launches and growth when new customers.
Exceeding will heaters revenue declined by 8%, primarily due to the lower vehicle production staff CA.
Additionally, automotive cables declined 18% due to the continued decrease in orders from our largest cables customer Walsh.
Electronics revenue was also down 7%, primarily due to continued slow down in the RV industry, partially offset by the newly launched multi function electronic control units with Ford.
If we move to industrial.
Thats the revenue declined to 48% compared to a third quarter of last year.
The decline unit revenue was primarily due to the absence of revenue from this year's Xendesktop Chamber business, which will show up in February as well as the lower sales from GPP, which has been disposed as of October onest.
Medical revenues declined by 1% compared to a third quarter of last year.
If we exclude the impact of the standard acquisition revenue in medical declined by 17% and this decline is mostly due to the timing of equipment order shipments that shifted turn to third to fourth quarter.
At this point, we're still expecting our medical business to grow double digit for the full year of 2019 is the result of a strong fourth quarter.
If we move to gross margin.
Gross margin for the third quarter was 31.1% an increase of 220 basis points compared to the year ago quarter.
This year over year, increasing gross margin was primarily driven by labor productivity at the factories supplier cost reductions the positive impact of our feet for growth actions as well as a one time benefits from improved cost of quality.
These improvements were partially offset by the annual price reductions wage inflation as well as the negative fixed cost leverage from the lower unit volume.
Now as Phil mentioned earlier, the labor productivity improvements in the quarter was achieved by right sizing our factories to the lower volume levels.
These actions as you may recall were proactively taken earlier year when does slow down in the automotive production volume became apparent and as a result, our manufacturing headcount decreased by approximately 13% since the beginning of the year.
Additionally, better efficiencies allowed us to minimize premium freight compared to last year, particularly out of our factories in Mexico.
Regarding cost of quality, we continue to see or reduction in the manufacturing these could operate which positively impacted our gross margin this quarter.
Additionally, we had a one time reduction of warranty expense by approximately 1 million due to deter solution over previous quality issue.
On China tariffs the negative impact in the quarter was approximately $800000, which is pretty much in line with prior quarters and this amount was only slightly higher than what was incurred in the third quarter of last year.
If we move to operating expenses.
Operating expenses in the quarter were 54.4 million now this amount included 8.7 million over restructuring charges, mostly related to the initial actions over the restructuring plan that we announced in late September .
As we entered the factory Rightsizing that I mentioned earlier.
We adjust for the restructuring charges in both periods operating expenses were 45.7 million down from 54.2 million inter quarter of last year.
This year over year decline of 16% was primarily driven by the impact of defeat for growth cost reduction initiatives lower incentive compensation costs.
The sales of the CZ index or chamber business as well as lower cost in GPP.
Additionally, we had a 3.3 million mark to market charge for cash settled options in last year's third quarter did not repeat this year.
These effects were partially offset by lower R&D reimbursements compares to the unusually high reimbursement level that we had in the prior year period.
Also during the quarter as we continuously evaluate the fair value of our assets held for sale. We recorded an 800000 dollar impairment charge related to our GBT business.
Adjusting for the non deductible impact of this impairment charge.
The effective tax rate in the quarter was 28.8%.
And for the first nine months of 2019, adjusting for the 21 million impairment charges related to the GBT business effective tax rate was 28.5%.
Finally, I want adjusted EPS in the quarter was 16 cents a share compared to 54 cents a share in the third quarter of last year.
Now before we move to slide nine I would point out one item for the fourth quarter.
As we previously mentioned, we divested GPD earlier this month.
And as a result will be recording an approximate 6 million pre tax loss on sale in the fourth quarter, which is primarily related to the release of previously fared foreign currency translation losses.
Moving to slide nine on the balance sheet.
Our cash position in the quarter was 47.7 million, including two and a half million over restricted cash coming from the disposition of this year's industrial chamber business.
Our cash position increased sequentially by 11, and a half million inter quarter versus the second.
We generated 43.6 million in cash from operating activities during the quarter compared to 38 million in the year ago quarter.
And actually year to date, we generated 84 million in cash from operating activities compared to 70.5 million in the same periods of last year.
Actually very proud of the team for generating 19% more operating cash despite our revenue decline.
Additionally, in the quarter, we had approximate approximately 25 million of cash outlay for our share repurchase program.
And is that result, our net debt decreased by 19 million from 71 million IDN into second quarter 252 million I'd entered a third.
As of the ended the third quarter. The total debt stands at approximately 100 million and as you may recall during the second quarter. We also announced that we amended our credit agreement.
This amended agreement provides our company with a new 475 million secured revolving credit facility, which will provide genco them with ample liquidity in an uncertain macro economic environment as well is actually lower interest expenses.
And as a result of the new credit facility, our revolving line of credit availability at the end of September is approximately $385 million.
We move to slide 10 on guidance.
Based on our third quarter results, the continued challenging macroeconomic environment as well as the impact of the strike at General Motors.
We are reducing our 2019 guidance for revenue.
We now expect revenue decline approximately 3% in 2019 compared to 2018 for our core business and excluding the impact of foreign exchange.
This compares to our prior guidance of zero to 2% growth.
We are expecting gross margin rate to be approximately 29.5%.
Operating expenses as a percentage of revenue is now expected to be approximately 20.5% just slightly higher than our previous range of 19% to 20% due to the reduction in revenue.
However.
As a result of our continued progress on cost reduction activities, we are maintaining the profitability guidance. Despite the revenue decline with adjusted EBITDA margin expected to come in at approximately 14%.
In summary, I will say that our third quarter results demonstrate once again the steps that we continue to take to aggressively manage our cost structure and deliver solid bottom line performance, despite a challenging quarter on the topline.
And with that I'll turn the call back to CMS to begin the QNX session.
Tim.
Thank you at this time movie, we will be conducting a question and answer session. Thank.
If you would like to ask a question. Please press Star then one on your telephone keypad.
Information time indicate your line is in the question Q.
May press Star then too if he would like to related to your question from the Q.
For participants using speaker quitman, it may be necessary to pick up your handset assault pressel Mr. Keith.
One moment please poll for questions.
Your first question comes from Gary Prestopino, Unbanked and Raysat. Please go ahead.
Hi, good morning, everyone.
I want to Gary Gary Good morning.
Just.
Looking at the gross margin and you factor back in that warranty expense. It looks like the gross margin was running at about 30.7% given your fit for growth initiatives that and then what you're doing with the plants consolidation. Phil do you think you that that is kind of the high watermark that that the company or on our.
A level the company can maintain going forward.
Somewhere in that 30% range.
Yes, Gary I do I think obviously somewhat going to be rope.
Relative to the volume levels on a quarterly basis, but certainly if you look at the volume level that we operated in this quarter, we feel very good about 30% plus being.
Kind of our run rate for the good pipeline of continued cost improvements that will help us offset future.
Price downs from our customers.
So we're feeling really good about this range of 30% to 32% that weve.
That we've been guiding towards longer term.
Okay, and then the what you're doing with the factories that that's already unit that's.
The.
Expense capture that you're getting there from consolidating two plants that's already in the number that use total for fit for growth initiatives that you're targeting.
It is part of our fit for growth that we're targeting yes, we won't see the cost benefit from that start to kick in until 2021 and the completion of those projects won't be done until the end of 2021, so you'll see the full effect of those really in 2022 going going forward.
Okay, and then to two other quick ones on the.
The Ccs seats I think the tail you mentioned that a lot of that was due to GM is that correct, where the where the.
Revenues were down almost 10% a lot of that was due I know GE ends of the client there, but I just want to make sure I got that right.
Now, let me grab that when to Gary the.
GM strike was a significant part of our decline in Ccs, but.
They are handful of other things to the talked.
Last quarter about the GM truck transition from the old model to the new model that continued to have.
Some impact in the quarter in Q3.
And if you look year over year certainly.
Combination of vehicle cancellations. So if you look at sedans across especially the U.S. customers.
That was a pretty significant hit compared to last year. Many cars just disappeared.
And then market decline you look at customers like VW Honda Nissan they've all seen significant sales decline year over year in the quarter.
We offset that we did have some nice offset though we had new vehicles and new customers come online in the quarter as few examples of those are.
Especially in Japan in the quarter, Mazda and Subaru saw some nice nice increases in the quarter, but that kind of give you a feel for the net impact we continue to still still be very competent and Ccs going forward just as a.
No we in the quarter or actually year to date, we've won 90% of our Ccs acquisition targets.
Still very very high hit rate on Ccs.
Okay, and then and then just lastly, the new revenue growth that you given the decline actually declined this year, that's pegged off of core revenues.
That's just new core revenue right automotive engender medical right.
That's correct.
Okay. Thank you.
Thank you. Your next question comes from Chris Van Horn from B. Riley.
Please go ahead.
Good morning, Thanks for taking the call and congrats on the execution, despite a challenging environment.
Thanks, Chris.
So just really quick on the guidance.
The adjustment on the topline would you be able to quantify what what effect. The GM strike had on that adjustment and what it might what it might have been X GM strike.
Yes, let me break that down little bit in terms of the overall impact there.
The strike was over half of that decline.
In terms of the guidance last period versus this period.
30% or so is continued market deterioration not have not necessary correlates to GM.
If you look at the overall market.
Bakken for let's just look at the second half as an example.
Between July and October we've seen about a 3.9% deterioration in the market take DM out of that equation about 3.5% and we're definitely seeing that across our other customers. That's about a 30% impact of the the change.
Also seeing some very specific headwinds.
Mostly market related but in some of the specific areas. We play outside of the let's call it standard automotive product lines.
So cables continues to be a headwind.
Well keep keep running into the declining revenue from Bosch.
Most of that related to oxygen sensors on.
IC vehicles in the specialty diesels.
We also see continued declines in our forecast from customers related to non automotive electronics.
And we think Thats, a really tied to RV more than anything.
We do have one discrete item related to that we expect to see in Q4, which is a decline in order orders from Daimler on their 48 volt El Cubo system.
Of which are BTM to BTM solution is integral.
This is we believe this is an end of year.
Production correction for them than we expect the recovery to come in the next year.
Okay got it. Thank you so much for that color.
The activity of.
The award activity level, you know just continues to to be impressive in my view so.
Active cool you've seen a number wins here are you starting to see you starting to see a little bit more activity on that on the active side.
And you think you mentioned its first and second row, and maybe some the dynamics around what what Oems are thinking there as well.
Definitely we're seeing more interest last quarter, we announced the BMW Seven series Award this quarter will we announced the launch on the land Rover.
And.
Many more discussions happening with other Oems around adding active cool to to systems.
And I think that becomes even more relevant with ease and there seems to be a lot more interest around it as part of incremental solutions going forward on some foreign a form of electrified vehicle. So we're pretty optimistic there we're going to see that part of Ccs gradually increase.
Now, let's say following the 2021 year as these new award start rolling in.
Got it and then and then forgot to ask on the land Rover and the BMW or those global programs.
The BMW is yes, landrover I believe is yes, okay.
And then on the B and the BV sell connecting technology, just remind us of of maybe what that does in any detail you can give around that product in.
And the opportunity set there.
So this product is the device that literally connex every sale on the the battery pack network in this BMW mini EDI and the high complex. This system happens to be a high complex.
Copper wire based system.
That has as you can imagine exceedingly high.
Performance and reliability standards.
We're really happy about this one this this gives us a ton of credibility.
Not only with BMW, but in the market.
On the heels of that we have some some very innovative sell connecting technologies that are garnering a lot of interest by Oems. So we really think the cell connecting technology will be a big part of our our growth and the electrification space.
Okay got it and then last one for me.
With the new higher.
It seems like you know you're starting to get a little bit more aggressive on the Asian front and and I. Just wanted to just get an update on how you see that expanding and specifically in China. How you see that biz business growing in terms of percent of revenue and is there any margin difference relative to some of your other regions.
Yes, I mean, obviously that the one of the major objectives.
For us to accelerate growth in China.
Think we're still very underserved in that market across all of our product platforms.
If you look our business that's about right now 7% for the year.
Which is just too low and most of our business there.
Is our let's call it more traditional product. So we're really going to get aggressive with electronics, obviously, Helen has quite a background in high tech product lines, especially in electronics. So we'll look at that as as a key opportunity as well as.
Pushing to drive battery thermal management opportunities as well as more than that.
Climate, the comfort solutions, but we'll also look real strategic water opportunities to partner in China are there.
Specific product lines and solutions that might be unique in China and.
We're really looking for that share of our total total revenue to grow dramatically over the coming years.
In terms of your margin question, we operate at about the same margin right now in China as we do otherwise worldwide.
Okay got it thanks again for the time.
Thank you Chris.
Thank you.
Next question comes from.
From Craig Hallum. Please go ahead.
Thank you good morning.
A lot of might have been answered I guess, just as you look at the New Auto award you've touched on in a little bit they've been a little a little softer the last two quarters versus the five six quarters before the new third referenced in your prepared remarks, some some delays and reductions could you give a little bit more color there to the degree the.
You are willing to what you're seeing there.
Sure sure, yes, we've definitely seen some delays and reductions in the year.
The majority of it is appears to be kind of delayed decision, making by the Oems on how they want to architect their vehicles and ill make decisions on suppliers.
We do have a nice pipeline, though that we're tracking.
I would expect this year to be somewhere between our results of 2017 in 2018.
So I still think it's going to its going to close out in a solid manner.
But last year was certainly a banner year and.
As a lot of activity last year.
Got it Okay, and then just jumping over to the Cu business that that business came on really really strongly last year and it's sort of been a run rate flat to down a little bit since that is that is that sort of a function of the program were programs that it's on the doing particularly driving that I noticed you had a new win in the quarter.
And then sort of how do you see that business in the future.
Sure and most of the you businesses related to the after Tech acquisition.
That took place back in late 2017 ad.
And Thats, where were seeing most of the decline is that is that what I call non automotive business and I love RV into that.
So RV revenue is is down significantly.
Over the last couple couple of years.
That's had a big impact.
That said, we are launching new product, we announced that song on product we.
I would now had a full quarter of production for the platform. The first platform for our board multi function su.
Just as a reminder, that that as an integrated device that.
That controls memory module and.
Yes for Ford vehicles.
So pretty excited about that and obviously, we're aggressively pursuing other opportunities to grow that side of the business, but certainly it's been it's been a.
Run for non automotive electronics.
Got it Okay and then last one for me can you just remind me I know.
One point, you had a little bit longer term guidance out there and Havent suddenly say more recently, obviously a lot is changing day to day in the in the auto industry, but.
This year sort of can you remind us sort of the targets or how you're thinking about the next year too.
Yeah, we're obviously.
One thing we announced last quarter was given the dynamics situation in the market, we made a decision to stop giving quarterly.
Updates on our 2021 and beyond estimates with the caveat that we plan on early next year, giving some general direction on on our future performance, let's call that beyond 2021.
So we'll come back in line with that obviously.
Market conditions since June of 2018 have been dramatically.
Pressure downward so.
Thats an area, we'll have to look closely at I will say that we're ahead of schedule on our margin expansion activities.
So when you look at the the profitability.
Direction that we've given.
All along we still feel very strong that we're in we're in good shape there.
Alright, thank you.
Thank you.
Once again, if you wish to ask a question. Please register by pressing Star then one on your telephone keypad.
Your next question comes from Scott Stember.
Please go ahead.
Good morning, and thanks for taking my questions.
Hi, Scott Corning most of my questions have been answered as well, but couple of items I. Appreciate obviously last year was a banner year for New awards and it sounds like there are some delays, but can you just maybe talk about the level of.
Quotation activity or bidding that you're doing just to I guess assure people that.
There's a lot of stuff in the pipeline that could come through next year that was delayed this year.
Okay.
Yes, no eyes and there is.
I think a very nice pipeline of opportunities that we're tracking over the next 18 months.
As I said I think Q4 is going to be solid I think we've we've got a good track on them.
So pretty exciting opportunities there and that will flow into next year, we're seeing more.
More RF queues come in for.
Type product, whether thats battery heating or sell connecting devices. Those two product lines, we see a nice flow.
And then still Ccs.
Continues we continue to see more RF cues for new vehicles, and new customers related to Ccs and our other core core products.
On top of that obviously, we're we've got a nice innovation pipeline that we continue to grow.
I believe we're well positioned to grow through these these innovations within our focus growth strategy.
Got it and last one for me going to VTM that you touched on that.
I guess early this year, you've given some targets or exit run rates.
For this year and potentially I think for 2020 as well.
Can you maybe just touch on those particularly now that you have this new I guess this fourth leg to the so.
There will be helping you out.
Yes, I mean, most of those new products that we're adding on are going to obviously launch in outer years, our first let's call. It new product line will launch in 2020 and Thats the.
Yes.
The sale.
Leading device.
So.
Most of the exit rate that we talked about was related to BTM.
And most of that as it related to Daimler and FDA.
Unfortunately on acute in Q4, we've seen declines in orders from.
From FDA and then we're seeing an adjustment order from Daimler in Q4, which we expect to come back in Q1 four to use the run rate based on those declines were probably close to the 30 million run rate.
As opposed to the 50 million, but we expect that to pickup in 2020.
Got it that's all I have thank you.
Okay. Thank you.
Thank you.
We have reached the I'm just a question answer session and I will hand over to Mr.
So I look for closing remarks.
Okay.
Thanks, everyone for joining our call today.
As I've consistently shared in the past, we remain very focused on execution innovation and cost improvement.
I'm extremely proud of our team's ability to take Swift operating action in light of the current challenges in the macroeconomic environment and with global automotive production levels.
I continue to be confident that our efforts will allow us to deliver significant shareholder value in the future.
Our innovation pipeline continues to grow and we're well positioned to grow through our focus growth strategy.
We appreciate your interest and support and look forward to keeping you apprised of our progress.
This concludes today's conference.
Hey, Matt disconnect your lines at this time, thank you for your participation.
[noise].
Wow.
Wow.
Why.
[noise] why.
Wow.
Wow.
Right.
One.
What.
One.
Oh.
One.
One.
[noise].
Oh.
Yeah.
What.
[noise] [noise].
[noise] [noise].
What.