Q3 2020 Earnings Call

Ladies and gentlemen year on hold for third quarter fiscal year 2020 Key Tronic Corporation conference call. At this time, we are suddenly in today's audience and Randy Binner. Shortly we do appreciate your patience infusion minimal.

[music].

Ladies and gentlemen, please standby we're about to begin.

Good day and welcome to the third quarter fiscal year 2020 Key Tronic Corporation Conference call. Today's conference is being recorded at this time I'd like to turn the conference over to Mr. Brett Larsen. Please go ahead Sir.

Good afternoon, everyone I am Brett Larsen Chief Financial Officer keep trying.

I'd like to thank everyone for joining us today for Investor Conference calls.

Joining me here in the Spokane Valley headquarters is Craig Gates, President and Chief Executive Officer.

As always I would like to remind you that during the course of this call we might make projections or other forward looking statements regarding future events for the company's future financial performance.

Please remember that such statements are only predictions actual events or results may differ materially.

For more information you May review the risk factors outlined in the documents. The company has filed with the FCC specific you specifically.

It is 10-K quarterly take QC rate case.

Please note that on this call, we will discuss historical financial and other statistical information regarding our business and operations. Some of this information is included in todays press release. It every quarter version of this call will be available on our website.

I hope all of you and your families are healthy Sage and before we start for normal quarterly results review I was first like to church and time or to Craig to talk about the topic on everybody's mind, which is the coke, making pandemic and its impact on key tronic.

Okay. Thanks, Brett.

Do you guys precedent in challenging times and this pandemic affects all of us.

I've been humbled by the Starwood dedication to key tronic employees as we work to manage through this crisis.

Our first focus a key tronic continues to be doing sure as best we can.

And our employees and your family stay safe.

Within the constraints are worth is to keep everyone you keep trying to Kelsey.

They're doing their best to maintain production in all of our facilities.

We have been taking it will continue to take the cautionary measures to limit their risk.

All the most vulnerable in many of our nowadays actually employees now look for the whole thing travels restricted.

We have implemented all recommended safety measures in a manufacturing facilities.

Includes full time wearing a face masks and face shields.

Workstation arrangements to provide social distancing temperature monitoring enhance works like this infections spacing in catheters and break ears.

Contact management and more.

Last week, we experienced a temporary shut down affecting our Mexico facilities, but due to successfully petitioning the Mexican government this past weekend.

Again reopening our facilities today, we expect to have operations back to near normal by the end of this week.

However, we expect additional challenges that absenteeism, keeping vulnerable employees at home.

Transportation complexities and disruptions to our supply chain that we need to managing the candidates.

Some of our suppliers have experienced simply folgers, resulting from governmental locked down and shelter in place orders.

At this stage, we have either been able to work around these temporary disruptions workovers had been resolved.

We are managing risk alternative sourcing airfreight Barclays lanes and ultimate component qualifications.

We're closely monitoring the status of will use safety stocks as much as possible to ensure minimum interruptions.

At this point in time, we've been able to find solutions for most of these challenges.

Regarding customer demand.

Four wheel of health care products has seen an unprecedented upside.

While our gaming customers have seen unprecedented decrease.

So far the net effect of all the puts and takes has been positive of course, the drastic changes in demand kind of whats wrong challenges.

I'll discuss more on this later after Brexit reviews, its third quarter results Brett. Thanks.

Thanks, Craig.

Today, we released our results for the quarter ended March 28 2020.

For the for for the third quarter fiscal year 2020, we reported total revenue of 111.5 million up from 108 million in the same period Osisko Your 2019.

So the first nine months in fiscal year 2020, total revenue was 330 $333.5 million compared to $358.5 million in the same period of fiscal year 2019.

As previously announced the lower than anticipated revenue and earnings for the third quarter fiscal 2020 is primarily a result, the disruptions to supply chains in saying that caused by the Covidien 18 crisis, which delayed the arrival of key components.

We have seen most of these China suppliers come back online for production in the recent weeks.

Despite the anticipated revenue shortfall.

Margins increased for the full for the third quarter fiscal year 2020, gross margin was 8.3% in operating or margin was 1.6% up from gross margin of 6.3% and an operating loss of 11.6% in the same period of fiscal year 2018.

Okay.

As we've discussed previously we've made significant improvements in our operating efficiencies in recent quarters.

Through investments in new equipment. Several of these investments were made in the metals area and during the third quarter. These investments began to pay off.

The new equipment combined with the completion <unk> production ramps several new metals programs, let us do you expect our margins to improve in the coming periods.

For the third quarter fiscal year 2020, net income was point 9 million was eight cents per share up from a net loss of 12 million.

Loss of $1.11 per share for the same period of fiscal year 2018.

For the first nine months for fiscal year 2020, net income was $3.3 million.30 per share up from a net loss of 8.8 million, where losses 82 cents per share for the same period at fiscal year 2019.

Note that the earnings in the third quarter of 2020.

Impacted actually the note that the in earnings in the third quarter 2020 were impacted by write down <unk> point Sixmillion.

$600000 of receivables from a customer that was target negatively impacted by the pandemic decreasing our reported earnings per share by approximately four cents per share.

Excluding the goodwill and intangible write down during the third quarter fiscal year 2019, the company would have been breakeven for the third quarter fiscal year 2019.

Reported net income of 3.1 million were 29 cents per share through the first nine months of fiscal year 2018.

Turning to the balance sheet, we continued to maintain a strong financial position as a result of the component component shortages and production delays in the third quarter and the continued ramp and transfers of new programs. We did see a sequential increase you know inventory, including revenue recognition contract assets.

$4.5 million, the 3.6% from the prior quarter.

In future quarters, we expect to see our best inventory levels impacted as we respond to dramatic shifts in demand.

Although we have a healthy balance sheet as well as flexibility and available bad debts. We feel it is prudent to preserve cash where possible should the time then it continue to for an extended period of time.

Not just for our own operations, but also in order to be able to support our suppliers as best we can then these extra ordinary circumstances.

The next like we have increased our bank line of credit to $65 million and are pursuing additional debt capacity that should close by the end of this fiscal year.

To give us more flexibility to ramp up production.

How many months.

At the ended the third quarter trade receivables were up $7.1 million from the prior period.

Reflecting that we no longer are factoring receivables due to the increased loan capacity.

And Dsos increased to about 60 days.

Total capital expenditures in the third quarter fiscal year 2020 were approximately <unk> point $6 million will continue to invest in production facility.

She equipment as sheet metal and plastic molding capabilities as well improvements in our facilities just as a slower pace than originally forecasted. So we plan to make a total of approximately $7.5 million capital expenditures during fiscal year 2020.

Well, there's a significant demand across much of our customer base. We've lost at least 10 days of production during the fourth quarter as we ramp of wireless facilities back up after the temporary closure.

Given the rapidly changing cobot 13 environment, including uncertainty over the possibility of potential facility closures.

Thank you will supply chain destruction disruptions and predicting customer demand and associated costs following health care guidelines I.

Unable to provide specific claims for the fourth quarter at this time.

In summary, while the cold and banking crisis cause disruptions to our supply chain inventory in the third quarter and remains or risk in future periods. We remain encouraged by our prospects for future growth over the longer term.

The overtime overall point its financial health of the company is strong we believe that we are well positioned to a new vms programs continue to profitably expanding business over the longer term.

That's it for me correct.

Okay. Thanks, Brett.

Let me first comment on how our business was progressing in the third quarter before commenting on the current uncertainty into fourth quarter.

Despite the coal with crisis, our demand for many customers remain strong in third quarter and some customers have even significantly increase Superman lean programs for home consumer products health care and home exercise.

So we also have new programs producing personal respirators and we're in discussions with potential programs for weather later manufacturing driven by the growing global need for these critical health care products.

Furthermore, as a result of the Pandemics impact on China production, as well as uncertainty or tariffs and trade tension between us and China.

A growing number of existing and new customers appear to be accelerating it plans to transition from China facilities to our expanding facilities in Mexico Vietnam in U.S.

As we've discussed before we see it as a very positive trend any longer term.

During third quarter and number of customers were experiencing a positive transition of your business outer chain facilities, which was facilitated by our centralized command and control.

Decentralization drastically reduces the risk in time associated with the transfer to our North American you Vietnam sites and that's allow some leeway to respond to the rapidly changing political health landscape.

While we were carefully managing our expenses, we've been preparing for growth in coming periods during fiscal 2020.

We have continued to invest in their facilities, including expansion of S&P sheet metal and plastic molding capabilities in Mexico and the U.S.

With respect to integrate electronics in sheet metal centric programs, we see very strong growth and feel few real competitors of our sites in North America.

We also deployed innovative new manufacturing equipment in each of our facilities, which has improved efficiencies and has made our production less labor intensive results of this effort has been decreased manufacturing and operating expenses of approximately 3 million annually.

This investment has made us increasingly well positioned for the returning tied in North American based customers as they appropriately analyze a total costs for overseas production and as a result push production back into both Mexico and states.

Additionally, we are continuing to ramp production in EMEA, and 86000 square foot manufacturing facility in Vietnam, augment our Asian footprint and reduced production costs as well as providing additional hedge against uncertainty with respect to cold related disruptions to China production as well as lingering or future trade wars with Chad.

Our marketplace remains very competitive we continue to win significant new business, both from CMS competitors and existing customers.

During the third quarter fiscal 2021, new program and evolving consumer products personal safety equipment and home exercise equipment.

All of which will fully ramped is anticipated to contribute 100 million an annual revenue beginning production in the next few weeks.

Our broader and more diversified customer base lowers the potential future impact it will slow down but anyone customer.

Our pipeline of new business opportunities continues to be boosted by our unmatched level of vertical integration or multi country footprint in the excellence manufacturing sites in comparison to other you've asked competitiveness of our size.

As Oems face an increasingly uncertain geopolitical landscape, we are uniquely equipped to offer risk mitigation with a vertical integration and manufacturing facilities located in Mexico, Vietnam in the states.

While the third quarter was very promising there's a lot of uncertainty about the fourth quarter.

While we were extremely pleased that are health care products are experiencing an unprecedented level demand.

Costs in risks associated with meeting that demand or region.

Additionally, the business opportunities, resulting from our new customers come with the normal challenges of drastic ralph's, which become far more challenging than normal when they're forced into it goes in 18 environment.

Finally.

Well, we are only slightly exposed to the oil exploration market that market downturn, along with gaming presents inventory instead in issues that are more or less business as usual until the effects of close to 19 are factored into the equation.

Currently our Chinese facilities appears to be returning to full operation in the supply chain disruptions have been abating.

Facilities more as our resuming operations and our facilities and yes in Vietnam continue to operate normally with a focus on protecting the health of our employees sharing to current health guidelines in all facilities.

We continue to invest some new capacity and remain optimistic, but our long term opportunities for growth.

Nevertheless, as Bret noted.

Secondly, changing play would environment makes it impossible to provide 80 clear guidance for the fourth quarter right now.

We will try to update you as soon as possible.

In closing I want to thank all of our great employees for their hard work dedication during these challenging times in for hearing to our strict safety health guidelines in other recommended precautions during the pandemic.

Let me assure you that we will continue to make protecting the health of our employees our highest priority.

I also want to wish you and your family's health in safe passage during the pandemic.

This concludes the formal portion of our presentation, Brett I will now be pleased to answer your questions.

And ladies and gentlemen, if you wish to ask your question. Please signal by pressing star one on your telephone keypad.

We're using speakerphone. Please make sure your mute function is turned off.

Okay.

I came out of Star one we'll pause for just a moment.

And we'll go first to build is all in with Titan capital.

Thank you Oliver I'll start with my normal a first question.

Would you please walk through the size of each of the three new customers in the order that you've listed on there and the press release.

Oh and older University system six personal 56.

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6 million 8 billion in 100 million.

Talk about the 100 million Oh.

Oh, what what insights can you share there.

In terms of quite you were chosen and a and then also it seems as though the ramp this is happening much sooner than would be typical if it was one here in this quarter and ramping in the next few weeks, we talk to your dynamically.

Okay, then in discussions with this new customer for over a year.

They chose us for a number of results first of all the fact that we have metals.

And assembly.

In Mexico toys.

Second we that we have oil production in Mexico, and the states, we're actually going to be in probably run for the first nine to 12 months.

Corn, Mississippi facility.

And then as a second generation following.

The bottom line.

Actually go probably.

Theater or design capabilities, we're heavily involved during the cold process.

And we actually did a more or less complete redesign of the product during the cold process.

Okay.

Generation is costing strain so we need to it.

So those are the three babies.

That's helpful. Craig Thank you so.

The Mississippi facility is where the product is going to start.

What would you anticipate let's just take the or the December quarter, Oh, what would you anticipate revenues to roughly be ramp schedule goes according to a according to plan and I recognize that in this environment.

He goes according to plan and things.

Yeah, and including the fact that you plan on answering that question [laughter]. So.

I'm going to say no color on that because your way too many unknowns.

I can't say, it's going to be very setting ramp.

That I don't want to make any commitments your members.

All right. That's that's fair so Craig why is this customer ramping so quickly compared to others and maybe it's the obvious answer that with people home.

They want to get cool.

Exercise equipment on the market quickly, but cocker, if you want.

Well the Abbvies answers right.

They were already running at.

I'd say I don't know two thirds of that rate.

It's currently and have demand that they were unable to fulfill.

So the ramp is made more urgent by the fact that their market is of course exploded.

People have stuck in women that able to go to the Jim.

Are they keeping their existing farmer production and adding new or are you, replacing or the current.

Production.

I'm going to no comment that entity.

Well like I said not nothing is going according to Commodore thing, that's something I feel that price [laughter] [laughter].

[laughter] sorry, [laughter], that's that's all right no problem so.

Let me move on if I may.

What are you seeing in terms of Uh huh.

A new customers, making decisions.

I guess I had a lot of different thoughtful what could be happening, but I'd love to hear what what you're experiencing.

I'd say on the whole.

A lot of programs that have been hanging fire and suddenly made the decision to come with us.

A lot of people that were.

Feeling that you know GE our production situation today, it's kinda risky and we should be looking around.

Have said they come to conclusion that deer production situation is really risky and we need to make a move now before we get tank.

We got a couple of people use existing whose existing.

Manufacturing partners.

Basically shut down and kick them out.

We've had other people who try likes it just had dramatic increases in demand and that makes the question no should they have a to source stable manufactures be boot, it's clear that need to habits.

So.

It's kind of a two part answer your question because everything that we had in the worse.

And then quoted was said we'd seen the people.

Seems to be going faster.

But.

Putting new opportunities.

End of the pipeline is going a lot slower because nobody's, making visits and nobody's no.

Taking part in the normal sales process.

So it's a split answering your question to stuff that was at least in the follows a lot faster.

But there is a lot less new products and new opportunities coming into the final than it was before.

Oh, sorry, if you don't need many many new opportunities coming with 100 million dollar piece of business are falling and.

Let me, let me hit with a couple of other questions tied to your answer one you've mentioned that some our oh.

Prospective customers that are coming to you have had their production shut down is that because oh governmental regulations.

Their location, where they were producing or is that a function of lease acquire going out of business and no longer no longer and I guess that.

So.

At least along we'll do it doesn't that well shut down in California.

Others have been due to supply chain disruptions.

And others have been to due to government for shutdowns in four countries.

I understood.

And.

Relative to supply chain disruptions, what what should or would your revenues have done this quarter had you had normal component availability.

Probably evolve.

And 15 116 set out that yeah.

Great. Thank you I had a few other questions I'll, let others ask and I'll come back.

Okay.

And again, ladies and gentlemen that a star one for your questions. At this time Star one well go next to Mike Hughes with S.G.F. capital.

Good afternoon, Thanks for taking my questions.

I kind of 100 million dollar a piece of business can you just talk about the startup costs associated with.

Ramping that will they be higher than your typical project kind of ramp so quickly.

It's actually right now looking like it would be lower than our typical fracturing.

It's a it should be a pretty quick RAF raising any inventing that we have to do.

Which is normally where the money ends up being spent.

And it's not hugely labor intensive so all three of those things we used to believe it should be reasonably rather than outrageous.

So it fits within our current capacity.

So do you think it'll have a positive contribution margin in the June quarter.

Slightly.

Okay, and given it's a larger piece of business should we assume the gross margins are a little bit lower than off the target that you've talked about historically.

Oh I'm sure our new customers listening and I went into your margins are also and.

They traded down below the situation [laughter].

Well, how important most price and wanting to there's enough.

Price is very important and forced a significant redesign effort from web design team in order to get to that price.

Uh huh.

And I understand you're not giving guidance at this 0.3 weeks ago, you provided arrange the June quarter 120 million 430 million at that time did not include this 100 million dollar went.

Hey.

Did you say no.

I said, no Oh Wow okay.

I'm process.

Next question the peso I think something in the right way for you now what's the impact and just maybe if you could just talk about your hedging in place.

Sure, we typically run with about three years worth of heads.

Teachers on ER.

Hedge contracts against the peso, but we're typically only about 60% hedged.

So the weakness of the take or pay so definitely will help us in coming quarters.

Hedges that were in play of course was limited amount of team.

I apologize, what what would limit, but again I apologize.

The fact that we already had hedges in place all right right right. Thank you.

And then can you just talk about what you've experienced as far as they are collections over just the last few weeks.

Oh, there have been a few customers.

Josh slowed down the payment process as I mentioned earlier, we did write off.

$600000 in last quarter related to a customer we've been trying to collect for some time, but.

Other than just.

A few minor a few of our supplier slowing down their payment process customers.

Customer sorry.

There hasn't been a whole lot of.

Concerning to me.

And remind me what was your experience.

79, and time did you have much in a way about that.

No.

Okay.

And then.

Just a question on vertical exposure do you have any exposure to automotive.

Or aerospace.

We have known to automotive.

We have known to commercial aerospace, which I'm assuming is your question you have some in growing to a private.

Aerospace and that's actually doing really well right now.

Oh, well when you say private aerospace can you just define what that means.

Yeah, private aviation gay side right under assessments.

Okay, I would assume that that will soften over the next next few quarter, what's your exposure there.

Its limited it's limited big no okay. Okay.

All right. So when you gave the guidance midpoint was 125 that excluded the 25 million.

From the new program, which would take you too.

One.

50.

What are the cyclical pieces of business that you are concerned about that.

Back over the next few quarters I'm, just trying to think out a few quarters, what the revenue could look like and I know you're not giving guidance.

Well.

That's a big portion that Rosie forecast is due to the fact that the health care products are.

Really really strong demand right now.

So if there is a hope this is right if there's a sudden cure to close a virus I would see the beginning to drop again.

I don't think it'll be a sudden drop if it does happen because we've done such a hole in the.

They have customers inventory position that it would take us much to refill inventories to others. They want them to be act.

We have other customers that arc in health care.

In gaming.

Our in I guess, you would call it.

Wisely diverse.

The.

Commercial customers that we can't really predict which way they're going to go which is why we're not giving guidance. So.

For example, some over H.B.C. you guys are.

Cutting guidance right now.

Some of our industrial lighting guys or.

Cutting their guidance or a server farm guys.

Our cutting guidance a little bit.

And it just goes longer and 100 on its its its you can't really make any general conclusion, you buy which is why we don't feel we could make any kind of projection.

Okay. So last question for you and I know this guidance.

It's what you gave on a few weeks here the 120 to 130 the.

Putting aside the big hundred million dollar win.

The dialogue with the customers since you put that number out has been negative on hall, where where that number what does that potentially lower or or is that correct.

Well I think you're kind of play in 20 questions with me like Bill does [laughter] and that really smart, but in sport and I've got to answer that one.

Okay I appreciate your time I'll leave it to go.

Okay. Thanks.

No well take a far from does all in one Titan capital.

Like lymphoma.

No that's an honor bill [laughter] [laughter] I got it wrong again [laughter] so.

Maybe I'll pick up where oh right or left off just just too I have some fine with it.

What's different to go then when you get that Q4 guidance or earlier and and maybe you just highlighted it without list of customers and that's starting to pull and their forecast with you but.

Drastic.

A little more head on what's different today.

Lets different today versus a two and half three weeks ago.

Is mainly that we see that higher.

Higher degree of variability in all of our customers forecasts.

And from quarters that net quarters, but from directions that we didnt expect so.

Customer that we thought was pretty rock solid.

Suddenly has got issues with demand and because of all these.

2 million year 2 million, they're pretty soon you're not.

On 25, you're not 130.

And the other and Oh.

Yes people call and saying, Hey, I will take everything you could build me and.

And finally parts and we don't know if we're going to be able to find parts. So.

Yeah.

Standard deviation of.

Each revenue forecast out of each customer has increased dramatically over the last three and half weeks.

At plus you have the downtime in Mexico, which you did not anticipate.

Yeah.

Yep.

How much of the or the 100 million dollar customer what level of revenue, where you currently anticipating and this quarter.

In this quarter and very little order.

Well just barely begun then started.

Okay got that so that's helpful.

So I'm going to try to uphold my reputation here.

So if we were to think about broadening the range or from that 120 to one third of them at 10 million Bucks I decide to say 110 to 140.

I grew up quickly with in that realm.

Oh.

That whiten variability that you're thinking as is possible or even beyond that.

No comment bill.

Reputation upheld.

Yeah [laughter].

Okay, I do want to actually in all seriousness pick up on something that I think at bracket. You had mentioned in your opening remarks, and and I just want to make sure you heard you correctly that you do expect margin improvement in the coming quarters.

That is that what you said and if so does that apply to up to this quarter.

Yeah. There was a result in coming quarters as we definitely see a mid to long term it's tough to.

To come up for a finite number for this fourth quarter just due to all the different yes, we've already talked about.

Yeah, sorry, just the issue is it Craig and I ever dismantling about are going to affect that.

Favorably or unfavorably.

Well that we were just talking about revenue on the cost side, there's a lot of uncertainty also.

We don't know.

What type of attendance, we're going to have in facilities. We didn't know what kinda overtime, we're going have to pay to try to catch up for that we missed during this 10 days down.

We don't know how many buses were going after contract is that we get every person than a bus six food away from the next person.

Much more air freight much more air freight we're gonna have to pay.

We didn't know what the air freight guys, you're going to continue to rapists on its up to three times, what they were charging for container before.

It's just everywhere you look the world is.

Kind of unpredictable.

And to what degree with the yeah, increasing costs.

There was absorbed by your customer.

And how much do we need to absorb or is that in negotiation with each customer.

Yeah, we'd like to call under negotiation 'cause it live in the civil as real but that's now when it feels like.

And then.

I guess one one additional question if I know the our tax rate.

It was a bit lower than what you had originally anticipated what went into that.

I think it was just basically some some too upset the.

Research and development credits that.

We anticipate for this year.

Over the longer term, we're still expecting summer, 2015% to 20% effective tax rate.

Alright, Thank you both and congratulations on.

Pretty solid quarter considering that.

Or the dynamic situation, we're in and well look forward to hearing.

Guidance when you have it actually I do have one additional question if I if I may the.

Down in Mexico that you did have is correct assumption right. It is better that it happened early in the quarter moving in the first month as a corridor and had it happened later in the quarter.

Yes, you are entirely correct.

Okay, great. Thank you again.

And stuff.

And again, ladies and gentlemen that a star one of this time star one for your questions, we'll pause for just a moment.

Well go next to Mike Hughes with a shift Apple.

Just a few follow up questions for you.

Just on the potential.

On a wider program.

Is the complexity of that Oh product and issue or their products right now that you manufacture the just as complex or if not more so.

Oh the second.

It's it's more question no demand.

Many days complexity.

Okay you.

If you if you look at all the press its a.

Everything and all the politicians have said.

And then you read deeper into it and.

We do it Mr Tomas as.

Nobody went without.

Yeah, right look at work at the current situation with.

The hospital sitting at the in many places as far as we can tell.

The shortage of ventilators was more panic that effect.

And then when you add in there the fact that the government pay motive guys to build another I forget what the members 50 60000.

I think this is all.

Basically just a critical.

Hi, there.

Okay, Okay, and then I've run a little bit of a the press out of Mexico.

Some of the workers or don't want to come back not specific you're supposed to get worried about their personal safety. So can you just oh. When did you did is it open back up as of today, just talk about that thought that issue and not thought process.

Sure. The I guess first of all the frame it properly.

The closure had nothing to do with our employees being concerned about their safety. It had to do with the state of Chihuahua interpreting your degree.

I guess somewhat differently than the other states, which is the same thing that happens in U.S.

And.

A lot of discussions about whether the products we made.

Not whether the products, we made were essential whether they ended up in Mexico.

And that was what caused the closure.

To date, we've had a.

To confirm cases out of employee base of 3600 people in Mexico in Mexico.

So.

Yes, the closure wasn't based on any concerns our employees and it was based on a on a degree.

Our employees are concerned we are concerned.

We have taken great pains to go above and beyond the recommended safety procedures for manufacturing sites.

We even redsun data that says that the virus half life on a unanimous surface is dramatically decreased addict elevated temperatures net breakover point is about 70 677 degrees.

So we turned up the temperature and the factories were running them at the close to 80.

We are working for their employees anytime there's a safety issue that comes up the move to remedy it.

And I mean, that's about all I can say, it's scary, it's scary everywhere numbers anymore as though.

Compared to New Yorker, another hotspot or small I think the total number is 200 infections right now.

Total in a city is about a million 60 million eight.

Okay. So it sounds like you've done a very good job there I just wasn't refer your company I've just seen similar companies were having issues with workers.

I do not anticipate any issues as far as staffing that facility, you're saying you're workers are well protected they didn't have any specific issues staffing should not be in issues that it's a fair.

No that's not what I said.

I do not think that I can say I don't anticipate issues. Okay. What what I said is that we've taken every passes the caution in men's and to help ensure that we don't have issues, but I can't guarantee that we're not going to have issues.

Okay, a big part of what's happening in war is that a company had a.

Team from.

Germany funny inducing engineering work in the factory for and half of the cases in more as came from that one factory.

Okay, but again I can't.

I can't say that I don't anticipate any issues because just let anything can happen bad is happening.

I understand you're doing <unk>.

All right enough.

The answer right one on one last question.

How many customers are currently.

Utilizing your facility in China.

In China, it's probably too.

And yeah, yeah, I tend to that.

Kind of consistent with the the December quarter.

It's actually grown back up and it's been surprising that there have been.

There's been a.

[noise], let's say.

[noise] fit of logic has been happening amongst our customer base.

Where products that end up being sold and most of North America or being moves to production in North America.

Products that are being consumed in China are being moved to production in China.

And all Chinese facility.

It's always really worried about a couple of quarters ago is still in the black and actually adding customers. So we're pretty happy about that.

Okay, that's good to hear.

What about just too.

What about the Vietnam for what it does generate more revenue in the March quarter than the December quarter.

Yeah, we continue to ramp the cornerstone customer.

Of that facility and that is an example of unfortunately, it was talking to bill earlier about the.

The hobbling out of the fall into the funnel for new business there or.

Must be six or seven.

Trips to Vietnam with customers plant and so either the last elects to last fourth in the sequence of things that happened when they had a customer.

And those trips have all been put on hold so Vietnam is going to reach a plateau with their cornerstone customer then sit there for awhile.

Until we can resume the normal business travel that you have to have that people and is the city.

Okay I'd read.

Not specific to your BYOD, rather auto manufacturers.

After manufacturing facilities in Vietnam, often with Chinese labor is that the case with your facility.

No.

Okay. Good I appreciate all your helping answers good luck to you.

Right. Thank you.

And with no further questions in queue I'd like to turn it back to management for any additional or closing remarks.

Okay. Thank you everyone for participating in today's call what I will follow the speaking with you again in better days. Thank you.

Ladies and gentlemen, this does conclude today's conference. We thank you for your participation you may now disconnect.

Uh huh.

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[noise] Oh.

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