Q1 2020 Earnings Call
[music].
With me today are Dr. Paul.
The shakes.
President and Chief Executive Officer, and Lori, among our executive Vice President and Chief Financial Officer.
As usual we start today's call fearful, who will review the shapes first quarter Ptwenty five key financial results.
Dr. Gerald Paul will then give an overview of our business and discount operational performance as well at segment results in more detail.
Finally, well reserved time for questions.
Sure.
This call is being webcast from exacerbation section our website at <unk>, our dog <unk> cat.
And we tripled its color would be publicly available for approximately 30 good.
You should be aware that in today's conference call, we won't be making certain forward looking statement that the cats future events.
These statements are subject to risks and uncertainties.
Could cause actual results to differ from the forward looking statements.
Well discussion on factors that could cause results to differ please see todays press release, <unk> form 10-K, and form 10-Q filings.
The Securities and Exchange Commission.
In addition, during this call we may refer to adjusted or I've got financial measure.
But I know the tech according to generally accepted accounting principle.
We use non-GAAP measures because we believe it provides useful information about the operating performance of our businesses.
And should be considered buying that's true in conjunction with GAAP measures that we also provide.
This morning, we filed a form 8-K that outlines the variance variables.
Impacted diluted earnings per share computation.
On the Investor Relations section of our website you can find presentation off the first quarter Twentytwenty financially shoot.
Getting some of the operational metrics Dr., Paul will be discussing.
Now I turn the call all work to Chief Financial Officer, Lauren that's coming.
Thank you Peter good morning, everyone.
Good morning, Peter [laughter]. Thank you Peter Good morning, everyone I'm sure that most of you have had a chance to review our earnings press release.
Well focus on some highlights in key metrics.
We see reported revenues for Q1 of 613 million.
<unk> was 19 cents for the quarter.
Adjusted <unk> was 21 cents for the quarter.
We've identified certain cope with 19 related charges net of certain subsidies, which are incremental to and separable from normal operations.
Approximately 3.1 million of these costs are included in cost of goods. So.
And the zero point Threemillion. These costs are included in selling general and administrative expenses.
These items and their related tax effects are added back when calculating our non-GAAP adjusted EPS.
Also during the quarter, we repurchased 14.3 million, Chris one of them out of our convertible debentures.
And recognized a U.S. GAAP loss on extinguishment.
I will elaborate on these transactions.
Yeah.
Cobiz 19 has had an impact on our business.
Some other facilities had been or temporarily closed and some are operating that level, that's less than full capacity.
For Q1, the impact on our financial results has generally been limited as most of our manufacturing facilities have been able to continue upgrading.
As I stated in the introduction, we have identified certain cobot 19 related charges incurred net of certain subsidies, which are incremental to inseparable from normal operations.
This includes wages paid to manufacturing employees during govern the mandated shut down.
Additional wages and hardship allowances for working during locked down period.
Cost of cleaning and disinfecting facilities.
Cost of additional safety equipment for employees and temporary housing for employees due to travel restrictions.
The quantified cobot impacts I. Just described only include costs directly attributable to the outbreak and exclude indirect impacts such as higher shipping costs due to reduced shipping capacity and estimated missing revenues during the crisis.
Dr. Paul will elaborate further on the impact of cobot 19 on or operations and our expectations for future results in a few moments.
[noise] revenues in the quarter were 613 million.
Five 0.5% from previous quarter.
Down by 17.8 per cent compared to prior year.
Gross margin was 24.0 christen.
Adjusted gross margin being the cold and cough 24.5 person.
Adjusted margin.
Operating margin was 7.7% adjusted operating margin, excluding corporate costs with 8.3%.
[noise] EPS was 19 cents.
Adjusted bps was 21 cents.
He be Donald is 84 million.
Were 13.8%.
Adjusted EBIDA, but 91 million or 14.8%.
[noise] reconciling versus prior quarter adjusted operating income Q1 2020.
Compared to adjusted operating income for prior quarter.
Based on 3 million higher sales were 4 million excluding extreme impacts.
Operating income increased by 10 million.
51 million in Q1 2020.
I'm 41 million in Q4 2019.
The main elements where.
Average selling prices had a negative impact of 7 million.
But for 17 and 1.1% U.S.P. decline.
Volume increased with the positive impact of 7 million.
Within 21.6% increase in volume.
Variable cost decreased with a positive impact of 8 million.
Primarily due to normal manufacturing efficiencies.
Cost reduction and lower material prices, which more than offset increased labor costs and them Chris.
Fixed costs increased with the negative impact of 7 million.
Primarily due to higher personnel costs related to the cycling of incentive compensation.
Looking days in Q1.
And wage increases partially offset by lower travel huh.
Inventory impacts had a positive effect of 8 million.
[noise] reconciling versus prior year.
Adjusted operating income Q1, 2020 compared to operating income.
Q1 2019.
Based on 132 million lower sales.
For 126 million lower excluding exchange rate impact.
Adjusted operating income decreased by 57 million.
To 51 million in Q1 2020.
From 108 million in Q1 2019.
You may know limits were.
Selling prices had a negative impact of 18 million.
Sending a 2.9% it's Pete uptime.
Volume decreased with a negative impact of 47 million.
Presenting a 15.2% decrease.
Variable cost decreased for the pathogen cost 2 million.
Increases in labor costs, and metal prices for more than offset by cost reduction and lower material prices.
Fixed costs decreased for the public Forum.
Slightly higher personnel costs in total were more than offset by lower travel repair and maintenance costs and other individually material costs.
Inventory impacts had a positive impact of Korea.
Selling general and admin administrative expenses for the quarter were 100 million.
We.
Includes 2.3 million of identified could cost.
It's DNA, excluding kobin was lower than expectations expectations, primarily due to reduced travel costs.
For Q2, 2020 or expectations are approximately 94 million SGN expenses.
And approximately 380 million for the full here at constant exchange rate.
The company did not repeat any additional cash to the U.S. during Q1.
Recall that well, such a mouse or no longer subject to U.S. federal taxes due to U.S. tax reform.
They're subject to foreign withholding and other Texas and some state income taxes.
We expect to repatriate about 100 million during Q2, which were complete this program that we initiated in response to this tactic one.
We had total liquidity of 1.4 billion at quarter end.
Cash and short term investments comprised 821 million and usable capacity on the credit facility approximately 619 billion.
[noise] during the quarter, we were able to repurchase 14.3 million principal amount of our outstanding convertible debt instruments.
Part of the programs, we have undertaken over the past few years to retire the convertible debentures, which have certain Texas attributes, which are no longer decision after U.S. tax reform.
Oh, the 575 million principal amount the convertible dench debentures that was outstanding at the beginning of 2018, only 3 million were less than 1% remain outstanding at the end of Q1 2020.
We continue to be authorized by our board of directors to we purchased the remaining convertible debentures subject to market in business conditions legal requirements and other factors.
[noise], the carrying value of our debt 552 million.
None of the unamortized unamortized issuance cost 16 million and include 54 million outstanding on our credit facility.
514 million a convertible debt instruments.
The principal amount, we're face value of the converts total 603 million.
600 million related to the convertible notes due in 2025.
And the remaining convertible debentures due in 2040 and 41.
No principal payments are due until the expiration of the revolving credit facility in June 2024.
Hi, U.S. GAAP tax rate for Q1 was approximately 24%.
Our GAAP tax rate includes the unusual tax benefit related to the settlement and was a convertible debentures.
Our normalized effective tax rate, which excludes these unusual tax items and the tax effects of the cool good color and early extinguishment of debt with approximately 27% for the quarter.
We expect our normalized effective tax rate for 2020 to be between 28, 29%.
We continue to evaluate the provisions of the U.S. textile, particularly aspects of the guilty and be Texas.
Generally at lower levels of pre tax income guilty NB have a larger proportional effect and does increase our effective tax rate.
Our consolidated effective tax rate based on an assumed level in mix of income among the various taxing jurisdictions.
Shifting income could result in significantly different results.
[noise] total shares outstanding at quarter end 145 million.
The expected share count <unk> 's purposes for the second quarter 2020 is approximately 145 million.
For full explanation about <unk> share count and variables that impact the calculation. Please refer to the 8-K you filed this morning.
Cash flow from operations for the quarter was 34 million.
Capital expenditures for the quarter were 24 million.
Free cash for the quarter was 10 million.
For the trailing 12 month cash from operations was 251 million.
Capital expenditures were 145 million.
But approximately for expansion 90 million.
Cost reduction 10 million.
For maintenance of business 45 million.
Proceeds from sales of property and equipment for the trailing 12 month were less than 1 million.
Free cash generation for the trailing 12 month period was 107 million.
Okay. The trailing 12 month period includes 53 million cash taxes paid related to cash free P.A. repatriation 38 million and U.S. tax reform 15 million.
He has consistently generated an excess 100 million cash flows from operations and each of the past 25 years.
And greater than 200 million because the last 18 years.
Backlog at the end of quarter, one was that 1.005 billion or 4.9 months of sales.
Inventories increased quarter over quarter by 27 million, excluding exchange rate impacts.
These of inventory outstanding were 87 days.
Due to sales outstanding for the quarter were 48 days.
These payables outstanding for the quarter were 32 days.
Resulting in a cash conversion cycle of 103 days.
Now I'll turn the call over to our Chief Executive Officer, Dr. Gerald Paul.
Thank you Laurie and good morning, everyone.
As expected the first quota is proven to be the quartiles would beginning recovery.
All my father depress the second half of 2019.
Despite impose plant shutdowns, mainly in China into context of.
And then make be achieved sales close and profits better than expectations.
Strong orders in particular from global distribution from Asia.
<unk> is continues to be normalizing inventories into supply chain competed the British open economic turns around you know industry.
Vichy into fiscal <unk> achieved good gross much in 24.2 cents of sales adjusted gross margin of 24.5%.
Sales gift treating matching of 7.7 person sales.
Adjusted operating margin of 8.3 person feels.
<unk> 19 cents and adjusted <unk> 21 cents.
We can to quote a chain that they do the same median free cash.
Let me talk about economic environment.
The development wells, the global economy for electronic components into fiscal <unk>.
<unk> and people didn't feelings.
On the one hand strong autos in general a strong rebound <unk> Asia into widely normalized supply chain.
On the other hand that other week automotive sector and growing concerns for the mid term due to the knockdown <unk> economies around to build driven by epidemic.
Backlogs and lead times, if normalize digital.
The price decline did he means.
At least on quite normal lives.
Some temporary did liberty problems due to planned shutdowns existing in existence, but no real shortages.
Oops.
But some nervousness exists of customers after cool 19 started to pick manufacturing in China.
Let me come to teach ins Americas.
You have seen a strong <unk> in telecom spend is computing segments.
Partially driven by cool driven by the demand for working from home.
There was weakness in oil and gas avionics and partially all Cindy industrial markets.
We have seen distributors studying to do you still.
In Europe. This a continued weakness due to will too sick to.
That the Mt holds in telecom, maybe crew and indeed industrial markets.
You have seen it's really it's in America disti studying to restock, but also the increase of safety stocks at some Oems.
In Asia I see a Asia is ready for the strong rebound after it was different to be ready for the strong rebound after the <unk> 2019.
<unk> is a delayed by quota.
But I believe that as soon as Scooby 19, really subside Asia is going to lead Bluff too.
Coming to distribution.
Global distribution started to recover into fiscal <unk> by thrills to since this is probably a quota, but still 5% below prior year.
We have seen a strong Pos increased supposed to say a quote into medicus by 18% into Europe by 16%.
This was also up in Asia, but four person despite the <unk>.
The inventory levels continue to normalize noticeably.
A reduction of 63 million into first quarter.
The reduction of 37 billion in Q4 in 36 million in Q3.
In Q1 inventory turns and distribution increased to 2.9 from 2.4 quota for.
In 2.7.
Yes.
In the Americas inventory turns with 1.8 of to 1.4 in quarter four and 1.7.
Yeah.
In Asia the turns for the 3.8 after 3.3 and 3.1.
In Europe.
For incentive enough to 2.94 and 3.5.
Yes.
Coming to the industry sequence first of all automotive.
We believe system when a crisis multiplies the problem so for the weekend automotive market.
We do expect <unk> decline between 20% to 25% into production flights vehicles that cannot be offset.
20 content increases.
The market acceptance.
Electric vehicles remains limited.
Industrial.
He mixed picture.
Yes, very weak oil and gas sickness, so transportation quite strong deal the hand, and promising industrial automation.
Concerning computing.
The remote learning.
Needs should help lip toping pretty for the treatment.
Several markets.
So any communication fixed any comes up supported by needs to be willing to put on a crisis again five cheap progress is what slowly.
Consumer white goods grow up to go do not in China has subsided Tvs of snow.
Maybe could continues to be good to getting.
Maybe I missed in military military remain strong based on existing and new programs commercial avionics systems also due to a major reduction.
That's true.
Coming to be she's business development.
What a one sales excluding exchange picks came in slightly below the midpoint of guidance achieved zero 613 million versus 610 million in prior quarter and 745 million in prior year.
Excluding exchange defect sales in Q1 up by 4 billion <unk>, 0.7%. This is probably a quota.
Down versus prior year by 126 million was 17%.
Book to Bill into first quarter recovered to one point in 17.
From point 94, it into fourth quarter, mainly driven by distribution Sami's and Asia.
In some detail a.
Book to be was one point city, all food distribution of <unk> 0.9, due for the fourth quarter.
It was 1.44 Oems have to point 95.
Was 1.3 to seven for series of to point 95 into fourth quarter.
Was 1.8 foot passives after point 94.
Before.
In one point <unk> book to Bill for the Americas After 1.3 in Q4.
1.39, <unk> Asia.
After point 96 in quarter four.
One point so team for you don't have to point to eat into fourth quarter.
The backlog into first quarter increased to 4.9 months from 4.5 months 5.3 months since Emmys and 4.5 months in passives.
It's the you fixed off an increase of safety stocks to an extent.
Yes.
Is now a normal level of with the kids nations.
The price decline in total.
I think it's more or less normally it's minus 1.1, because since this is probably a quota minus 2.9% versus prior year.
So let me say in this case to place decline is somewhat accelerating a minus 1.3 person to us is playing a quota and minus 5%. This is probably a year.
Passive so not normal level of price decline minus 1% a this is probably a quote to minus 0.9%.
Right.
Let me come to the highlights of our operations.
The first quarter <unk> more than offset the norm and negative impact on the country pretty much in its expected plans after phase of it the patient to lower volumes regained denom efficiency levels Massey is expected.
It's unique crossed into first quarter came into its 100 million.
Slightly below expectations when excluding accessories.
Yes.
Manufacturing fixed costs into fiscal <unk> came in it. It's 128 million also below expectations again have been excluding exchange it impacts.
Total employment to to be she at the end of the first quarter was 22081 to four and 4.1 0.4 person down from prior quarter.
We had 22400 duties.
Excluding exchange exchange rate impact inventories into quota increased by 27 billion raw materials by each bunion and vipin finished goods by 19 million.
Inventory turns into fiscal <unk> and doing a good Lynn.
4.2 trends versus 4.3 in prior quarter.
Capital spending in the first quarter was 24 billion.
This is 36 million in prior year.
19 million for expansion.
<unk> billion for cost reduction in 4 billion for maintenance business.
For the year 2020, we expect Capex of approximately 110 billion in accordance with requirements.
Concerning cash flow.
We generated cash from operations to 51 million a on a trailing 12 months basis, including 38 million Kish, Texas for cash repatriation.
And we generated free cash of one of those 7 billion on a trailing 12 months basis again, including Susie medium cash taxes for cash repatriation.
Coming to our.
Product lines.
First of all 20 systems.
We do systems to be enjoy a very strong positioning deal to industrial and medical market segments entry to offer virtually causes to technologies.
Vishays traditional then since many years steadily growing business recovered from grow volumes due to recent inventory corrections into supply chain.
Sales in the in quarter, one would be a 159 billion.
Up by 13 million when 9% persist play a quota in down by 23 million was 13% versus prior year obese excluding exchange it impacts.
Book to Bill in the quota was 1.5 after point 95 in prior quarters.
Thank you look into quota decreased slightly from 4.7 to 4.4 month.
Steel.
Gross margin into quota come keeping that 28% of sales up to 24% in prior quarter, which was negatively impacted by low volume and inefficiencies.
We see the potentially fulfilled the improvements Ofi systems based on board.
<unk>.
Inventory turns into fiscal <unk> remained it would live <unk>, it's a good liberal footprint to after 4.1 into fourth quarter.
We see 46 this modest price decline on a normal levels minus 0.6%. This is probably a quota and minus 1.2 person to assist yeah.
Well, it's a good there'll be continued to see significant opportunities to further expand.
<unk> business.
Coming to inductance.
The business consists of power it doesn't make matrix.
Exploiting the growing need for inductors in general we should developed a platform of robust deficient power inductors.
And leads the market.
With mechanics.
Very well positioned in specialty businesses, demonstrating steady growth since years.
Oh since she is fast growing business, we see inductance just since one of the creates a success story. So if we see.
It recently experiences a temporary slowdown of growth due to the weakness of the auto sector.
Sales of Conductus into first quarter was 74 million.
Down by 3 million or 4% vistas play a quota, but up to us is probably a year by 3 million what by 4% again, excluding exchange rate impact.
Book to Bill for the one was point 98 after 1.25 in prior quarter.
Backlog.
Remains at a high level 4.8 month beauty tools to probably a quota which was at 4.7 months.
It was much into quarter horse, it's 31% of seals somewhat down from a quite exceptional fourth quarter, it's 34%.
Inventory turns into quarter 4.6 up to 4.8 in Q4.
He sees some increasing price pressure when doctors minus 2.6% versus prior quarter minus 2.7% versus prior year.
In fact, this continued to carry our highest confidence for gross into passive splits.
Coming to capacitors.
Our business. This compares to this is based on a broad range of technology used to be the strong position in American and European market niches.
We continue to enjoy increasing opportunities into field of power transmission into Felix through cross, namely in Asia, especially in China.
Sales into first quarter at 93 million, one person below prior quarter and 21% below prior year.
Which excludes extreme exceeds 56.
Book to Bill.
Capacitors increased into quarter, two a strong level of 1.2 after point 84 into fourth quarter.
Backlogs increased to a high level of 4.6 month up from 4.1 month.
Q4.
Gross margin in Q1 increased to 22% of seals after no 18% in prior quarter.
A more normal <unk> mix in summer infant <unk> to help to do so synthesis.
The fourth.
Inventory turns into quota remained at an acceptable levels could you put six is compared to 3.7 in Q4.
Stable prices and capacitors by this 0.6%.
But and plus 8% versus prior year.
We continue to benefit in capacitors from strong really markets and from the ongoing need of critics pensions, mainly in China.
Coming to opto products.
Vishays business to be up to products consists of infrared emitters receivers census, encompass it's realism facilities for automotive applications.
Sales in the quarter by 54 million, 6% above prior quarter, but 10% below prior year, which excludes exceed impacts.
[noise] book to Bill into first quarter was 1.4 of the one point delivered in play a quota principally indicating a strong turned around the business. After a very pro permit <unk> 2019.
We like to see gross the especially in specialty products like consensus.
Recently extended lead times influenced by plant shutdowns in Asia.
Backlog said, the very high level of 4.65 0.6 months excuse me after 4.7 month the fourth quarter.
Gross margin in the quarter was set to 27% of sales after a disappointing 20% into fourth quarter.
We had better efficiencies onboard go move product mix and some inventory build all that helped returned to a more normal profitability level.
Influence inventory turns are very high it's 5.7 into first quarter is compared to even higher 6.04th quarter.
Price decline was normal for up to products.
In this 0.8% versus prior quarter minus 2.2% RECIST criteria.
We are confident that going forward that opto products again, we contribute noticeably to our growth.
Yeah into process to modernize and expand behind from fit in Germany.
Styles.
Diodes, Vichy pretty pretty since abroad commodity business, we have the other dodge supplier worldwide.
We should office virtually all technologies is thrilled as the most complete product portfolio.
The business is a very strong position in the automotive and industrial market segments and keeps growing steadily and profitably since years.
After two record years volume in diodes. During 2019 suffered the most of all divisions from inventory reductions into supply chain.
Q1 to a degree has still been impacted by that.
Sales into caught up in 115 billion down by 6% this player quota and by 31% below prior year, which excludes exchange defects again.
[noise] book to Bill.
In the first quarter was one point 36.
After point 88 in Q4, which principally indicates a turnaround.
Backlog increased a very high level of six months from 4.7 months in transmission.
This was influenced also by temporary plant shutdowns in China.
The first much enough diodes in Q1 remains on the low level of 17% of sales as compared to 16% in Q4.
Higher volumes to division because out any doubt really to into higher profitability levels.
Inventory turns remained at a quick liberal or 4.1 after 4.44.
He is p. decline currently runs above two additional levels minus 2.5 person to assist player quoting minus 5.6 person to this is probably a year.
But we do expect normalization again and of course and for market recovery.
Last but not east the most fits.
We see continues to be one of them I could lead to see most fits and systems. Most fits with the last year's developed to strong and growing positioning automotive, which will provide to six axis from future for this product line.
Most fits into first quarter still have experienced some impact of to de stocking activities right.
So you'll see the quota to 117 billion, 0.7% above prior quarter, but 15% below prior year be south exchange impacts.
Book to Bill the shoe in the quarter was 1.3 wells.
After point 94 in Q4.
Backlogs remain high.
At 4.5 months as compared to 4.2 month fourth quarter.
Gross margin in the quarter was a 24% of sales on the liver off prior quarter.
Inventory turns in Q4, it except it was 3.6 as compared to 3.7 in Q4.
Price decline was normal.
I just point to person versus prior quarter minus 5.8%.
This play here.
We believe to Mosfets continue to be keys for a vicious growth going forward.
Let me summarize.
The first quarter for B C. Hes been operationally fairly successful despite quite severe headwinds for our plants in China.
The expected turnaround of the business after the normalization of to supply chain, principally became discipline for all product lines.
We would be the position to exploit it.
Unfortunately, our into see like so many others not always confronted with a completely unknown challenge a global pandemic that leads to unforeseeable looked down so if entire economies.
Triton's peoples personally.
The end of the problem realistically cannot be forecasted at this point.
Vishays answer to the prison children shoes. Nevertheless, it's the same is it his spinning pretty good times before.
Our plants will react quickly and professionally to changes in demand trying to minimize inefficiencies and inventory built.
Doing so be naturally take all necessary steps to safeguard health and safety.
He said around to build.
We will watch tightly on fixed costs and kept picks without jeopardizing Oh are you since long terms 30 cheese.
We in general we focus on free cash generation, even more than we normally and quite successfully I believe.
Vishays financially very solid and after all electronics speak TV de electronic components foot to admit into long term, it's a good place to be.
For the second quarter, we despite substantial uncertainties of course guy to a seeds ranged between.
540, 580 billion at the gross margin of between 21 and 22%.
Thank you Peter.
Thank you Dr., Paul we'll now open the call question.
Again, it seems to take the first question.
You asked a question please press star one on or telephone keypad.
Your first question based on the line Ruplu.
Sorry out with bank of America.
Hi, Thank for taking my questions Dr., Paul the first question at a high level, you're guiding a pretty detailed for calendar. Two Q3 revenue range is still 40 million, which you've used in the past couple of quarters as well the gross margin range is a little bit higher at 90 minutes plus minus.
So <unk> at a high level can you just talk about what is giving you confidence to give guidance for calendar two Cuba, given all the uncertainty that that there isn't the macroeconomic environment. Thank you festival already we didn't DSIC what have you have some picture for the second quarter and I think treat if he could indeed.
Certainties to an extent automotive <unk>, especially weak this quarter.
Really likely be couple afterwards, so we I think we have included most of defects be no. So we believe to be can still Steve is our.
Plus minus 22 point.
Concerning the very but much of the concerning to gross much in split it's a little more it's you ups if properly it's a little broader than we normally do because its such low levels you hit to them to see Pete it's very low volume some impact on <unk> on the country produce much in person that means at very low volume, it's very difficult to keep.
Efficiency completely up so this is why we our spirit is somewhat.
Just to answer your question, yes. Thanks, Thanks for that for the second question I'd like to ask about raw material prices. A you know price a base metals has come down, but some things like palladium are still high and we're also hearing about tend on prices starting to rise up so how do you see these raw material prices.
His varying and how do you think they impacted margins in calendar, one Q and how do you think they're going to impact going forward.
We analyzed it in Q1 divorce or to get on materials absolute practically no impact to be so every quarter for practically no change and also going forward, but we don't see major changes there is some ups and some down to the materials, but if you take our mix taking also the contracts. We here we don't expect.
Major changes going forward for the next time at least.
Okay and my last question I'd like to ask about inventory in the distribution channel for the last couple of quarters, you've given us some estimate of how much excess inventory there has been a V shape inventory in the channel do you think that has normalized or do you think there's still excess inventory in the channel that needs to be worked off.
Honestly I'm, even powder literally I went forecasting effect it happens like forecasted in fact, we have to do since the beginning something like one city billion and this was the number if you couldn't recall, which I sit from the beginning is too much.
Leaving that in so many versed at <unk> pick two quick on.
Okay. Thank you for all the details.
Your next question on the line of Karl Ackerman with Cowen.
You know.
Karl Ackerman, Yes Chinese.
Yes, sorry, I had on mute apologize eight morning, everyone.
Maybe just going back to the last question on distribution.
You referenced that it's had a quote normal level today, but do you think there was double ordering at distribution this quarter caused by uncertainty related to kill the 19, because while it's it's great. It's certainly great to see backlog improved about 100 million sequentially. What are your outlook seems that bid at odds with.
Some of the bookings and backlog.
You can never exclude that there was this a said they have done distribution in chenzhou trite, but in a modest form I seem to be stock because you don't if everything on stuff what you need.
So a part of that he's push with related to inventory increase it distribution, whether or not this was stopped ordering we never found the markets or hooked into first quarter was that I never sold he is shortages of course, there were a plant closures seasons here and competition because suffered from the same so they have this summer.
Some are kind of nervousness to be soon to be seen that some bias, but nevertheless, I think overall I do not believe in abroad.
<unk>.
Got it.
That's helpful up.
Just on your second quarter outlook.
I guess, how are you thinking about the relative positioning of the end markets you serve in Q2, and clearly automotive production is being impacted but I guess, how was a bit surprised to hear in your prepared comments or that several markets are slowing that networking infrastructure is slow they used to expand on what you're seeing in those two.
Markets, particularly as it relates to Q2 things I think will soon be misunderstanding at least I didn't want to say that I hope you.
Anyway, we believe not a major change doesn't make it easier no.
Got it okay and in fact in fact, if we do continue to be relatively strong given to special needs of the situation around could went up.
Got it right. She I said, Oh baby to supposed to be somebody standing I said, five cheap develops but slowly but this is effect.
Perfect all I'll see the for thank you.
Okay.
Your next question. Please open the lineup, Matt Sheerin with Stifel.
Yes, Thank you and good morning Dr. Paul.
Just another question if I can report regarding a there's a booking trends and they're very strong a book to Bill you saw not just in distribution, but in other markets could you tell us what the book to Bill levels relatively art today versus actually ended the quarter.
April was at one one put no.
So.
It doesn't flows back it was not such a.
Pretty situation in quarter, one, which again was part of it goes restocking picky for what is 40 stocking. So does this continued but it's one still April just one right at parity, Okay, and and then as as you look at your order book now are you starting to see cancellations and push out [laughter].
In reality cancellations, which we are quite high see half a year ago nine months ago very high.
Which we expected to happen given all the additional water speak look before or in the meantime, cancellations are quite normal absolutely not we watched it obviously.
Okay, and I know that you don't have much visibility.
Beyond the next couple of months, but as you look to the September quarter, given the big slowdown in auto production with all the geographic geography is being affected I mean would you expect a bit of a spike in orders a in in the September quarter or is there a concern.
About just send demand being weak and production coming back at a at a much slower pace.
Well when you listen to your automotive customers and again, there was no tell us differently from from from competition I believe that.
They expect the low point of the development you know to motifs would be equal to two.
After that the basically indicated that if you count on dome more normal volume. So we would expect what does from automotive to D stat.
I was reading into too so you can see what what how it could therefore cacis, but it was a very distinct statement not only by one customer.
Okay, and just lastly, if you look at your margin outlook that it basically reflects your normal 45% to 50% margin contribution.
And you haven't does it sound like you've implemented any incremental cost cutting programs is that because you do things that things will recover in the second half in is there.
A plan to implement additional cost cutting if if things don't rebound.
It's obviously a speed done in the past met you know US is if things really turned sour there'll be additional cost cutting in the fixed cost area.
On the other him to be very careful.
Not to destroy our plants not to destroy dot to damage.
Most important projects, but we have done that in the past, we always react on fixed costs, but they always ways to do it without destroying your structure and people for sure.
Okay. Thank you.
Thank you.
Again to ask a question. Please press star one on your telephone keypad again that is start line.
Your next question is on the line of David O'connor with the P. M B.
E N P pair abbas.
Great. Good morning, and thanks for letting me asking the question, maybe a one or two from my side.
And Paul you mentioned through April the book to Bill was asset Pars yet 1.2.
Can you give us the breakdown on the geographical trend. There have you started to see the recovery coming through in China already and maybe if you can give us the at the book to bills for the U.S. and.
Europe as well.
Unfortunately don't have to split the available, but it's obvious that Asia puts the economy at the moment, it's quite obvious that the strong input of quarter, one and this may not be a different picture in April came from Asia Europe is relatively the weakest limits, but thinking that don't have to numbers precise.
Okay, No problem thing sort of that and maybe then on the Miss server market you talked on the server market. That's it was slow I think from your prepared remarks, when we look at some chip makers, they're reporting strength in that area and given the a the working from home trends.
Can you talk small bit of how you reconcile lessen some people talking is stronger or is that your positioning within the the server supply chain.
I think was a misunderstanding I said it before I, even said it was strong because of these needs could do not driven I said it was kind of misunderstood or what is relatively slow but.
I said its effect is the development of Fiveg.
It go slowly, but the remainder is relatively strong because of the exactly the reasons you. What you were mentioning so maybe it was a misunderstanding I correct before.
Okay got it. Thank you for that maybe as a last question on the inventory sides. I said distributors do you think coming out of the Corona crisis, that's something that's.
Distributors will start to hold structurally more inventory or do you think this that was this crisis, possibly will return to normal ordering patterns and inventory levels. Thank you.
Well after any crisis I've seen in my relatively long career, there was always an unexpectedly fast and strong recovery and distribution what does the always leading dosing. So I would expect to seem to have make enough to corlanor, depending how fast it since kind of but I think you would see a steep recovery of citigroup.
But the equivalent of crisis.
Very helpful. Thank you.
Yes.
There are no further questions.
[noise] are there any closing remarks.
This concludes our first quarter conference call. Thank you for you and shade antenna technology.
This concludes todays earnings conference call. Thank you for your participation you may now disconnect.
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