Q3 2020 Earnings Call
Please standby.
[music] welcome to the Mets owed electronics fiscal year, 2023rd quarter conference call for.
For this quarterly conference call. The company has prepared a powerpoint presentation entitled to fiscal 2022nd quarter earnings, which can be found at meso dot com and the Investor Relations section.
As a reminder, this conference is being recorded.
This conference call does contain forward looking statement.
What should reflect management's expectations regarding future events and operation operating performances and speaks only as of the date here.
These forward looking statements are subject to a safe Harbor protection provided under the Securities law.
That's out undertakes no duty to update any forward looking statements to conform these statements to actual results or changes in methods expectations on a quarterly basis or otherwise.
Forward looking statements in this conference call involve a number of risks and uncertainties. The factors that caused these actual results to differ materially from our expectations are detailed and met those filings with the securities and Exchange Commission.
Such as our annual and quarterly reports such factors may include without limitation the following.
Dependence on a small number of large customers, including two large automotive customers dependence on automotive appliance commercial vehicle computer and communications industries.
International trade disputes, resulting in tariffs and our ability to mitigate tariffs but.
Potential impact from Corona virus outbreak.
I mean quality and cost of new program launches.
Ability to withstand price pressure, including pricing reductions ability to successfully.
Market in cell dabir surfaces products.
Currency fluctuations fluctuations customary risks related to conducting global operation.
Ability to withstand business interruptions recognition of goodwill impairment chain charges ability to successfully benefit from acquisitions and divestitures.
Investment in programs prior to the recognition of revenue.
Dependence on the ability and price of materials.
<unk> in our gross margins.
And then on our supply chain.
Income tax rate fluctuations ability to keep pace with rapid technology changes.
Breaches in our information technology systems.
The ability to avoid design are manufactured mean defects ability to compete effectively ability to protect our intellectual property.
Six success and great con or our ability to implement and profit from new applications of the acquired technology.
Significant adjustments to expense based on the probability of meeting certain performance levels in our long term incentive plan.
Ability to manage our debt levels and any restrictions there under and cost and expenses due to regulation I'm sorry regulations regarding conflict minerals at this time I'd like to turn the conference over to Mr., Don do the President and CEO, Sir the floor is yours.
Thank you Tom and good morning, everyone. Thank you Virginia's today for our fiscal 2023rd quarter financial results Conference call.
I'm joined today by around some as our Chief Financial Officer.
Right and I have comments and afterwards, we will take your questions.
Before I comment I would like to know that our fiscal third quarter accounting period.
Well, it's 14 weeks versus 13 weeks for the same period of fiscal 2019, and 40 weeks in the nine month accounting period, ending February 1st 2020 versus 39 weeks for the same period of fiscal 2019.
Also for fiscal 2020 year to date third quarter results include nine months of great kind of activity as compared to foreign have lots of great activity in fiscal 2019 year to date results.
To start please turn to slide four.
But those year to date revenue increased 10.8%.
Our net income increased 35.2%.
And our diluted earnings per share increased 35% Imams ended February 1st of this fiscal year.
On a non-GAAP basis, our adjusted net income increased 4.5% in adjusted diluted earnings per share is up 4.3%.
These values exclude expenses for initiatives to reduce overall cost and improve operational profitability.
Acquisition related costs, including purchase accounting adjustments and long term incentive plan accrual adjustment in the applicable curious.
As you can see on slide five our year to date revenue performance, which includes the adverse effect from the UAE W. labor strike at GM that occurred in our second quarter.
Year to date performance benefited from an extra for example is a great kind of activity.
Benefited from our new program launches in higher sales volume with sensors, and switches, which offset the customer delayed launch in our 10 cents or even as well as a negative effects.
Currency exchange.
Our performance today in our anticipated lower consolidated tax rate allows us to reaffirm our physical your guidance numbers as reported during the second quarter fiscal year 2020 earnings call and as shown on slide six.
During the third quarter, new business wins and business development efforts in the automotive and industrial segments continue to capitalize important vehicle trends, including electrification illegal lighting and incorporation of sensors to augment safety.
We're very pleased with our bookings of approximately $105 million, a new annual business, thus far this fiscal year.
Referring to slide seven in the quarter, that's always been awarded torque sensor and complex in certain molded products for the power steering system, Although all terrain sport recreation available was 12 million anyway.
Our sensor to taxi efforts. The driver is exerting well is staring with staring vehicle and allows us system to adjust its power steering systems to real time.
We have secured additional steering angle sensor business, a little automotive OEM for $4 million annually.
Our LCD lighting solutions business continues to grow several program wins, including overhead Council lambs, Proto labs and license plate lambs for automotive and strip lighting system for the interior lighting for a bus manufacturer.
But those power solutions group continues to electric vehicles, and hybrid electric vehicle business as well as New awards and the data center equipment space.
Moving on I want to comment on the latest automotive trend of the center display increasing in size and moving to smart services with more control functions being integrated into the to sleep itself.
It is infotainment.
We anticipate in the future there will be fewer interior designs using traditional buttons and jobs.
Perhaps more importantly, we expect the straddle result, and much lower average selling prices for any integrated center somebody that has awarded.
As it would be inappropriate for me to speculate about any of our customer specific plans for the future platforms.
And why we expect no effect on our business in the near term, we want to mention them based on our multiyear planning at this point, we expect this transition will indeed occur and expect it'll be less integrated centers documents in our business mix over the next five years.
However, as we've done successfully in the past nothing has evolved as business with new technology and products such as our unique sensors interior and exterior and delighting our power solutions for electric vehicles, and we will continue to develop innovative user interfaces, such as overhead councils digital clusters et cetera.
Thus, we feel that going forward or higher margin product lines were more than offset any potential buying an operating income from what we must now consider legacy product.
I believe the aforementioned year to date bookings demonstrates our success in these areas.
Turning to slide eight I'm excited dimension that our new Engineering center located in Bangalore, India has been completed and our personnel moving from a previous location and settle them.
We constructed the 50000 square foot stay the our facility for our 165 associates, adding testing capabilities as well as having space to how the additional personnel as metals engineering needs expand with our business growth.
Moving to slide nine sensor group continues with its development and commercialization of Totalone sensor systems base I meant those Magneto elastic technology.
Some key engineering systems are now complete and we expect a supply engineering samples to customers on the next few months.
As noted previously we are targeting light truck and commercial Oems to implement the benefits. It can be derived from the sensor when driving vehicles with trailers.
In the quarter at the beer, we added eight new customers to complete and six hospital valuations and they have three valuations and process with several planned for the next quarter.
Also our battery upgrade of Gen. Two controller should be available by the end of this fiscal year.
As many of you are aware our Hetronic business units has been in litigation with a former reseller of electronics products.
A jury trial conducted in Oklahoma City, where Itrons International headquarters are located.
Earlier this week jury decided in our favor in order to compensatory and punitive damages of approximately $114 million.
Obviously, the jury verdict is a great development that we are excited about.
Well the amount of the verdict is substantial judgment is in final and we don't know whether it will be any adjustments the amounts awarded by the jury as part of the final judgment or how long it will take for final judgment be under.
In addition, defendants and appeal after the final judgment is entered.
Once we have final judgment, we will work with council to implement the verdict and begin collection efforts. So I caution there is no guarantee that the company will be able to collect or when particularly in light. The fact that all of the defendants are located outside the United States.
Moving on and to conclude given the global macro environment and significant headwinds faced by nothing throughout this fiscal year I am pleased that our third quarter performance largely based on organic growth fueled by new program launches and a sensor business.
Led to solid financial performance and aided by excellent cash generation, we continue to de leverage reducing debt by over 100 million dollar since the great kind of acquisition.
That said, we remain cautious and mindful of that is labor situation.
At this point I'll turn the call it would around a little more detailed in our financial results.
Thank you Donna good morning, everyone.
As was mentioned in both the 10-Q and the press release fiscal year 23rd quarter results include 14 weeks of activity as opposed to 13 weeks in the third quarter fiscal my team and.
In fiscal year to date.
23rd quarter results include 40 weeks of activity as opposed to 39 weeks in the fiscal 19.
Year to date third quarter figures.
Also fiscal year 20 year to date third quarter results include nine nine months of great connectivity as compared to four and a half months fiscal 19 year to date results.
Please turn to slide 10.
[noise] third quarter sales increased 15.8% or $39 million to 285.9 million in fiscal 20 from 246.9 million in fiscal 19.
Sales in the third quarter benefited from higher sales in the automotive segment.
Foreign currency exchange continued to be a headwind as both the euro and RMB exchange rates were weaker than the prior year, reducing net sales in the quarter by $2.2 million.
On a GAAP basis third quarter net income increased 10.5 million to 41.2 million or $1.90 cents per share from 30.7 million or 82 cents per share the same period last year.
Third quarter GAAP net income benefited from higher gross profit lower interest and amortization expense offset by higher income tax expense.
In addition, we realized benefits from initiatives to reduce cost and improve profitability taken in fiscal 2019, which included lower expense for those actions in the current fiscal year versus last fiscal year.
Moving to margins on slide 11.
Third quarter GAAP gross margins were higher but non-GAAP adjusted gross margins were flat year over year in fiscal 20.
Third quarter GAAP gross margins benefited from increased automotive and sensor sales were negatively impacted by foreign currency translation and lower radio remote control and appliance product sales.
Non-GAAP adjusted gross margins exclude expensive for initiatives to reduce cost and improve profitability and purchase accounting adjustments in the applicable periods.
Third quarter, GAAP, selling and administrative expenses as a percentage of sales decreased 180 basis points year over year.
Never really impacted by lower expense for operational improvements the benefit of those operational improvements lower acquisition cost and lower stock based compensation expense.
Non-GAAP selling and administrative expenses as a percentage of sales, which exclude acquisition related costs expense for operational improvements and related costs. The applicable periods decreased 120 basis points year over year in the third quarter fiscal 20.
Moving to year to date margins on slide 12.
Year to date GAAP gross margins improved by 90 basis points, but non-GAAP adjusted gross margins declined 20 basis points year over year.
Gross margins were impacted by the way W. labor strike yet GM.
The negative impact of foreign currency translation, and lower radio remote control and appliance product sales.
These items were partially offset by the benefit for the full year of Greek on sales and increased sensor sales.
Non-GAAP adjusted gross margins exclude expenses for initiatives to reduce cost and improve profitability and purchase accounting adjustments in the applicable periods.
Year to date gap, selling and administrative expenses as a percentage of sales decreased 290 basis points year over year.
Positively impacted by the lower expense for operational improvements the benefit of those operational improvements lower acquisition cost.
Lower stock based compensation expense and by selling and administrative expense attributable to Greg can which is lower as a percentage of sales than method as a whole.
Non-GAAP selling and administrative expenses as a percentage of sales, which excludes acquisition related costs expense for operational improvements and stock based compensation adjustments slightly decreased by 30 basis points on a year to date basis.
Shifting to EBITDA on slide 30.
The company generated 58.7 million in the first in fiscal 2000, <unk> third quarter versus 43.1 million in the same period last year.
Adjusting for expenses for initiatives to reduce overall costs and improve operational.
That ability and acquisition related cost in the applicable periods.
Third quarter fiscal 19, adjusted EBITDA was 49.5 million compared to 59.8 million in the current period.
The increase is primarily attributable to higher gross profit during the period.
Moving to year to date EBITDA on slide 14, the company generated 152.6 million in fiscal 2008 versus 109.1 million in the same period last year.
Adjusting for expenses for initiatives to reduce overall costs and improve operational profitability.
Acquisition related costs and stock based compensation accrual adjustments in the applicable periods.
Fiscal 19, adjusted EBITDA was 137.6 million compared to 154.2 million in the current year period.
The improvement is primarily attributable to higher EBITDA from great can nine months of activity versus four and a half months and new product launches.
Partially offset by the adverse impact from the way W. labor straight at GM.
A few other financial items to review.
Year over year intangible asset amortization expense in fiscal 2000 increased 3.2 million or 28.8% to.
To 14.3 million due to amortization expense related to the great kind of acquisition, partially offset by lower amortization in the interface segments.
In physical 20, we invested approximately 35 million and capital expenditures mailing to support programs in launches in North America in Europe.
And our facility expansion in India.
Year to date depreciation expense for fiscal 20 was what 21.7 million.
Our year to date tax rate of 14.1% benefited from the favorable adjustments due to use tax reform from IRS regulations that were issue in December 2000 cheating.
Excluding this impact our year to date tax rate would have been approximately 17%.
We anticipate the tax rate for the fiscal year to be approximately 16% assuming no additional discrete items in the fourth quarter.
Let's move to slide 15.
Free cash flow for physical 20 was 94.4 million.
As shown on slide 16, we view some of our free cash flow to pay down debt.
We paid down nearly 36 million in debt since the beginning of the fiscal year and since the acquisition of great and we've reduced our gross debt by $101 million. We ended the quarter with 80 million in cash and our debt to EBITDA ratio, which is used for our bank covenants stands at approximately 1.3.
Please move to slide 17 to look at our key drivers to our anticipated EBITDA performance for fiscal 20.
Looking at the EBITDA based on our 155 million of EBITDA in fiscal 19.
In adding the EBITDA from a full year agree can which is approximately 25 million.
Adding EBITDA from new automotive in laundry program launches of about 16 million.
Adding back the onetime costs, we incurred in fiscal 19 for initiatives to reduce cost and improve profitability of about 11 million.
Adding back the onetime costs, we incurred in fiscal 19 for acquisitions and restructuring of about 29 million.
And increasing our anticipated government grant income by 4 million.
And subtracting the net impact from the way W. labor strike at GM up approximately 7 million and subtracting the impact of the loss of EBITDA on reduce passenger car sales and other items, which we estimate to be around 12 million.
At this juncture, we believe there are more headwinds and tailwinds in the fourth quarter fiscal 20, including the potential impact of Corona buyers.
In conclusion, I'll finish up my remarks with guidance.
Please turn back to slide six.
As a reminder, the guidance ranges for fiscal 20 are based upon managements expectations regarding a variety of factors and involve a number of risks and uncertainties, which had been detailed in this mornings release form 10-Q, and our fiscal 19 form 10-K.
As we announced this morning, we reaffirm fiscal 2000 sales guidance in the range of 1.1 to 1.13 billion.
The tax income in the range of 150.32 164.3 million and earnings per share in a range of $3.25 per share to $3.55 per share.
For fiscal 2008, we are estimated capital investment to be in the 45 to 50 million dollar age and depreciation and amortization to be be between 49 in 50 million.
Finally, we expect fiscal 20 free cash flow is defined as net income plus depreciation and amortization less capital expenditures to be between 122 in 136 million.
Don that concludes my comments.
Thank you very much time, we are ready for questions.
Thank you, Sir and ladies and gentlemen, the question answer session will be conducted electronically if you'd like to ask a question. Please do so by pressing the star key follow the coupon on your telephone keypad, if you're using a speaker phone we ask the while posing your question you pick up your handset to provide favorable sound quality again, ladies and gentlemen.
If you do have a question or comment please press star one on your Touchtone telephone at this time.
Please hold while would pull for your questions.
We'll take our first question from David Leiker with Baird.
Good morning. This is Erin Wilson back on for David.
Hi, good morning, Aaron.
My first question earlier too.
You know just thinking about the cadence of the platform change over that one of your key customers is seen.
I realize that you're likely going to hit more in Canada fiscal 2021 time frame, but basically just wondering if you can kind of help us walk through what the quarterly flow might look like given there are likely to be some large fluctuation.
So that changeover.
Hello.
Generally we don't comment on the customers rollout because we'd be.
The closing there all their plans I can't say a lot about them.
We're not forecasting any choppiness other than the normal quarterly.
Trends, you'll see into in the holiday quarter, and so we're not forecasting.
Oh.
Any unusual.
Dennis or spikes.
Okay.
It's helpful and then just on your comments about.
Being bullish on being able to replace that that center snacks business. I guess can you just kind of talk about what.
Product categories Youre excited about maybe what products you haven't development in any.
Traction on some of those new business wins, I can point to concrete evidence of being able to start to build that pipeline.
Oh.
As I said in the prepared remarks.
We booked a $105 million new annual business.
And so far this year when we're not done yet and those are in those areas I talked about sensors and.
Ladies.
Interpretation.
That gives me great.
Great comfort that.
Our strategy there as those have begun to pay off and you know in auto.
There.
For the lifecycle to products. So years ago, we made a lot of money by being on wheels, which was and.
Multifunction switches and moved over to set accounts over the as the.
We'll switch is going very oh.
[music].
So price on some of that way.
Southern councils allow were we moved into overheads.
I think we're up to eight and programs on amount now sensors, which has taken a long time to develop a but had a domino effect.
This quarter and then what's under development is our Magneto elastic sensor or calling total loan to assist the driver or whether it be oh light truck or.
Class eight truck and Tony trailer, so all I feel amount that was done what it does best in that and that is to apply technology.
Letter customer solutions.
Okay. That's helpful. And then just my final question is with respect to the interface segment can you talk about.
How that launch at the laundry program is going it sounds like that may have been pushed a little bit on the timing standpoint, but obviously your commentary in your full year guidance is that you expect that to launch as previously communicated volumes. So just any.
Additional perspective there.
I think all we can say the launching slower than than planned.
But we expect that it will get Ontrack again.
A slower launch than we ever or are slower launched only than than we anticipated I think again I really want to uncommon.
Oh.
Our customers launches, but again its and its been slower.
Alright, Thanks for taking my question. Thank.
Thank you.
Well take our next question from Chris Van Horn with Friedman Billings Ramsey.
Good morning, Thanks for taking my call.
Good morning.
So.
First on Corona virus, you know just any update you you know your your supply chain or your customers over in Asia, and then have you have you put any of those impacts if they're material into your guidance.
Any effect that.
We've seen and expect to see everywhere.
On the two months.
In in the.
Quarter now.
He has built in we've had some.
[music].
Air shipments, but have been offset bye bye.
Other corrective actions that we've taken so we feel for the quarter our own pretty good shape.
Some of the things that.
We monitor.
Our workforce, we're up to 80% attendance in Shanghai, now and I think that was down to 60% at one one point.
And then in the great capability, along one at 75%. So we view that as a as a good sign.
We had several weeks ago grey card material on the water.
[music].
You can view that maybe six weeks of oversupply, but then there's still time to get that into the to the pipeline and the U.S.R. and Europe. So we have.
A little bit of cushion there.
[music].
And we've taken all the normal actions of the company's of.
Basically band travel.
So really limited domestic travel obviously in China on blows in lives and mass and so on and we are monitoring.
Temperature of the work as every four hours and we've isolated.
From cell to cell it with the screen. So what we've done a lot to too.
Curtailing effect and our supply chain.
We've had minimal interruptions at all I've got to.
Caution that that.
If this gets considerably worse will at some point it was going to have an effect and probably not in year end the craft brands and our first quarter and we'll we'll talk about that.
Sorry, the time.
Okay, Yes.
Thank you for that color.
I just want touch on orders and specifically you know this torque sensor award.
You know is this was this a competitive win was this a new technology to this eightv power system, a power steering system and then how where are you on like what's the what's the Tam potentially for for that market. If this is our successful.
Well the Tam probably hard one good the new really need to look at.
All terrain vehicles.
But the market is for that I would I would call it.
Well style.
Sort of calling it a niche.
But in a very specific application we've had those before we're on the.
Spider motorcycle I'll have been since its inception.
[music].
So basically the same technology being used for another another vehicle.
[music].
It's competitive wise, there's probably isn't any any competition really shouldn't say that but I don't think all others. We've seen we've seen some things on E bikes, but nothing that performs as well as Magneto.
Elastic.
[music] elastic and it doesn't generally the total market.
It is application specific we've talked for years about.
Transmissions, all my leg and that's been years and years and years ago development, we still don't really.
A platform there but.
It is the same technology that is being used.
Electric bikes.
And now.
Again the Spider.
Okay got it and then you don't you know what are the themes, obviously in autos around a electrification and I think you have some.
Significant elect electric vehicle customers.
You know in your customer list and I'm just.
Getting a sense is there a jason season, and other products, you're working on for that market and how do you see that market evolving for you.
And it's evolving but.
Probably a little slower than them them every one would think there's on there's a lot of startups.
And.
But all I went through into the.
Similar electronics. So there are there was a lot of Oh.
Displaying talk on electric electrification.
So there's a growing area for us, but thats not something that.
Oh.
As gum Transformers overnight those let's put it that way, we are well positioned with a busbar products.
Most people that would require a bus busbar.
For the battery bank will own contact us.
We've talked about so in all the major.
I want to use the name of the major.
In the manufacture were on all all of their own platforms.
Going forward beyond the bus bars.
Battery distribution modules, we are working on those for customers as a logical extension of our technology and our capabilities.
And.
No.
We are in the LCD lighting and no. If you look at the power consumption in the Navy want to keep that as long as possible. So so things that we are doing in lighting.
I'll say from a lending standpoint, reducing the number of Ltds helps us secure the business because of again, we're supplying the busbar, we understand the well technology in the SMB.
And can help them a save energy.
[music].
Okay. Okay. So it sounds like it sounds like the timing it just depends on adoption of of ease in your do you do have some new products for that category.
And.
I don't want up.
Say that is not growing we can we can outpace growth by as he said new products. The more we do that the larger than segment will become was.
Okay.
And you've cited gray con is as a good tailwind to margins here. You know is that is that the mix of the products is it some of the synergies you know the cost controls that you were able to push through because the acquisition I'm is it volume related what's kind of driving that.
Probably the biggest well first of all that is a higher margin business than the model. That's one of the reason we were very interested in acquiring it.
But I have to.
Give our Shanghai.
Team wins, which manages the implant and.
Great and land on long.
Oh, all sorts of grow them take them out millions of dollars Oh expenses, just by doing what again were level does well is.
Management factory, so that's improving our margins and then why we can't point to anything large yet.
Bringing the medical technology into the Grey card customers has been well is even we'll have to work through the product cycles and all the normal.
Element.
Protocols, but that will help us on long term now we've seen a reduction is because of the class eight oh.
Usage.
We anticipate that will.
The relatively short lived and any any really decline and that is probably going to be offset by our our new products in our margin improvements.
Okay great.
Last one for me you know, it's nice to hear that the electronic trial might be.
Coming to a close.
You any sense for the timing of the resolution of how you get paid and when you get paid on those damages.
Sure.
It's almost impossible to tell right now I'm not filling out the deposit slip yet.
[laughter].
But.
Obviously, we're going to pursue that.
No that lawsuit was.
Well as expensive as necessary to preserve the business, which is what we've done and now we'll work to implement the verdict and collect their money, but the timing I.
Very difficult.
I wouldn't want to speculate on Oh autonomy.
Oh I can I can answer there yeah. Okay. Thank you so much for the color hand.
Congrats on a solid execution.
Thank you.
We'll take our next question from Brian signal with Craig Hallum.
Hey, guys congrats on the really strong quarter and being able to maintain the guidance in this challenging environment.
Thank you.
Maybe to start just on the guidance I mean, it seems like global auto production forecasts have been weakening almost by the day plus you have corona virus impacts. So I guess it seems like several material negative versus the last quarter. When you gave guidance. So what are the can you. Please explain the positive surprise I guess over the last couple of months in <unk>.
What the opposite.
Well as I was talking about what Chris we've had.
Very good success, well taken costs don't breakout factory.
Which.
I would say exceeded our expectations, maybe six months ago.
On a.
Class eight decline.
Not as great as we think as those some forecasted.
And.
Yes volumes are down in auto book, our new launches, which we plan to I think all year.
No the majority of those would start to.
The ramping in the third and fourth quarters, and we've seen that.
Rather I have couple a couple of things that to the margin expansion as well compared to last year consolidated margins are up.
Year to date almost a percent.
Auto margins are headed have maintained well in spite of you know the challenges in auto.
Our industrial grew margins have gone up quite a bit so all of those things together.
And then the a couple of the other things as you know obviously with our ethanol that we our tax rate is a little lower than we you know we thought it might have been when we came out last June.
Nice job mitigating tear ups and you start adding all of those things together increased sensor sales that product has increased year over year pretty significantly at higher margin lot to know how lot of IP. So you add all those things together and they make a cumulative impact that is there.
Very favorable to the company operating in a difficult environment.
No I would also have the no mission requirements and you're probably one is negative.
As Ellington they have them so that that's been helpful.
Great I appreciate the color.
And then switching over can you elaborate on I guess why you guys think center stack business will decline and its legacy product I mean, you're still in the process of ramping Gmps nexgen kind of truck and SCB platform. So it seems like there would be five plus years of platform life at least there on your primary award as well as others.
Uh huh.
We've been asked the question on by investors and with as.
None of the do it does get on the record what we think the trend is and.
Maybe not so much.
The center consoles.
As buttons.
Again, I want to the consumer electronics show and Ivan.
On a number of years, we've always had people goal, but reported back but.
If you look at.
The new am G.'s were the instrument clusters really a couple display them glass rose almost over to the to the passenger along very few buttons.
So that there's more of a trend and then as you.
Take discrete functions I'd say, the radio more and more of those getting integrated into the.
Oh center or into into into the display and we will make the displaying or do we intend to do so.
The average selling prices going down and.
That's a trend we wanted to.
Get out in the on in the market.
I don't know there's.
No I was saying, we're still launching and you're right.
What is something we're saying.
Hi, good.
Yes.
Is there a mega.
Award out there.
No because they haven't some prices going down in the screen manufacturers like LG our Oh.
Really taking over the though does.
The display we make our money when we integrate and there's a change.
Oh happening over the next five years again nothing.
I think tomorrow.
Yeah, that's maybe a good segue I mean, well you continue to bid and focused resources on winning in keeping future generations with existing customers I realize that's five plus years away or is it better does shift those resources and focus now on some of those other kind of higher margin higher growth.
Product categories that you mentioned earlier.
Well.
Okay give me both sides of that we certainly are going to bid.
We have our margin.
Rules, and Wyndham and when it falls below that.
Although our beep beep, because if you said the resources, we're better off in certain instances taken those resources and put into electrification or in the sensors and we've done that all the why I mentioned earlier, we got out of multi funds and switches.
They just got to price sensitive well.
The displays that we Omega.
Its hard to as opposed to make the margins that we want it but again if.
We're feeling a bit on.
The.
I'm not saying, we're getting out of it I'm just saying it is.
Getting commodity like him and I, probably put it down there in the legacy categories.
And then maybe last question on this then I'll leave it but is there any I mean, you have your touch sensor technology I mean, it seems like screens and going away from NAPW and switches could you could benefit there is there way to integrate that and leverage that technology and then secondly, you called out in digital cluster display.
Last quarter, I'm, which seemed like kind of the new and improved center stack in future.
Product I guess is there opportunity there and how do you think about kind of those technologies.
So that one for is very definitely there's opportunity there.
Now we are up against the screen manufacturers.
But in certain instances the OEM wants an integrator, we make our money when when we bring technology that together for the for the customer.
But the customer certainly can go directly to screen manufacturer, who own themselves and we've seen seen some oh.
Oh that.
Andrew.
First question.
So in terms of there.
No because it's tough sensor is very discreet application. So one bunch in one bought.
So that doesn't really have applied to to the.
The displays and vehicle that's not a technology that.
The applicable for through the those chip.
Actually not just leases and for the most part of that it's built into the well. It is now built into those the screen Oh, Jeff.
Great. Thanks, guys and good luck that's it for me thanks very much yet.
And at this time there no further questions Mr. due to I'd like to turn the call over to you for any closing comments.
Thank you Tom will thank everybody for listening and have a good day.
Ladies and gentlemen, this does conclude todays teleconference. We appreciate your participation you may disconnect. Your lines at this time and have a great day.
[music].