Q1 2020 Earnings Call
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Getting during this session you'll need to press star one on your telephone keypad. Please be advised today's conference is being recorded.
I would now like to hand, today's conference to Jeff Jones, Chief Financial Officer. Please go ahead Sir.
Good afternoon, and welcome to our conference call to discuss code use first quarter results and second quarter 2020 outlook.
I'm joined today by our President and CEO Luis Mueller.
You need a copy of our earnings release, you may access it from our website. So your dot com.
Or by contacting code you Investor Relations.
It's also a slide presentation in conjunction with today's call that may be accessed uncalled Hughes website in the Investor Relations section.
Replays of this call will be available via the same page after the call concludes.
Now to the Safe Harbor.
During today's call, we will make forward looking statements, reflecting management's current expectations concerning coherus future business. These statements are based on current information that we have assessed the which by its nature is subject to rapid and even abrupt changes.
We encourage you to review of the forward looking statements section of the slide presentation and the earnings release.
As well as Cohus filings with the FCC, including the most recently filed form 10-K and form 10-Q.
Our comments speak only as of today.
May five 2020, Cohu assumes no obligation to update these statements for developments occurring after this call.
Finally during the call we will discuss certain non-GAAP financial measures.
Please refer to our earnings release in slide presentation for reconciliations to the most comparable GAAP measures.
Now I'd like to turn the call over to Luis Mueller Co., He was president and CEO Luis.
Hello, everyone and thanks for joining us.
Today I'll describe how cool Hughes responding to the code at 19 pandemic discuss some of our accomplishments in the first quarter.
Then I'll provide some perspectives on Q2 and what we expect for the rest of the year.
Jeff will later discuss financial results and provide guidance for the second quarter.
First and foremost.
Got you is committed to the health and wellbeing of our partners, including our employees customers and vendors.
And as such we have implemented a strict set of policies that are global sites to safeguard our partners.
The code at 19 pandemic has had some impact to our supply chain in southeast Asia into our operations in Malaysia, and the Philippines.
Sales in the first quarter, where approximately 139 million and about six and a half million lower than expected due to the movement control restrictions imposed during the second half of March in these countries, where most of our products are manufactured.
Despite these challenges I'm proud of how we have pulled together globally to ensure business continuity. During this unprecedented set of events.
Now onto more details on our business results.
Q1 marked the second consecutive quarter of record bookings.
Mostly driven by mobility customers accelerating the adoption of Fiveg test solutions for RF front end devices.
First quarter orders for our death semi test or business was up 70% year over year validating our strategy for high performance measurement instruments at an affordable cost.
We're being recognized for enabling our customers choose successfully deployed fiveg desk capability in volume production, while optimizing their cost model.
At the same time, our handler business is benefiting from our broad product line, we have high volume third and pick and place system sales both for our App as well as mobile processor test for code Hughes proprietary thermal technology is a key enabler.
With book to Bill close to 1.3 and backlog at record level overall orders were split 52% systems and 48% recurring and mobility represented one third of our system bookings.
Computing and network were also strong in the quarter and although 14% of system orders. It represented the largest barsh portion of our recurring revenue.
As previously stated we experienced an uptick in automotive semiconductor business in late fourth quarter that continued into the first half of Q1 close in the quarter at 14% of system orders.
Our PCB test business has remained strong at 14% of orders and mostly driven by server and network equipment as well as telecommunications segments.
Late into the first quarter several of our customers started placing handler and contact or orders for testing semiconductor devices used in medical applications that include ventilators respirators pacemakers in X Ray machines.
We categorized ease in the industrial and medical semiconductor segment that came in at 11% of system orders.
Now turning to second quarter, we expect that supply chain and government imposed operating constrains at Cohu factories will continue through mid quarter with manufacturing progressively increasing to normal output by end of June.
Near term product costs will be higher as we increased outsourcing to compensate for coated 19 limited production output from our internal operations, particularly in the contactor business.
Although this will impact our performance near term, we completed the manufacturing consolidation from the et cetera acquisition reduce the cost structure of our products and expect to see benefits in future quarter performance inline with our financial model.
We forecast end market demand to remain strong in computing and network, we datacenter growing in 2020 as enterprises add bandwidth and balanced and networks to support higher traffic in new applications related to work from home.
In mobility five degree Fiveg, driven semiconductor content should continue growing phones, but we expect customers to take a pause to gauge the impact of coated 19 pandemic on consumer spending.
While medical applications are expected to be strong in Q2. These represent a small portion of total semi spend in capital equipment and are not likely to compensate for a decline in industrial driven segment demand.
Automotive did experience experiencing the greatest negative impact falling plant closures by all major auto manufacturers worldwide.
We are unable to predict the rest of the year at this time, but expect computing and network applications to remain strong.
Some growth driven by new gaming consoles later this year.
Continued weakness in automotive for the balance of 2020.
In a pickup in demand for Fiveg that should accelerate into 2020 Onest countries fight you control the communication black bone up the expanded digital economy.
Well, we answer the second quarter of approximately 172 million in cash and a strong backlog.
We continue impacted the cobot 19 pandemic on short term semiconductor test and inspection demand remains uncertain.
As a result, we are proactively managing cash flow and took steps to reduce operating expenses and capture rate cap capital expenditures.
We implemented a temporary 20% salary reduction to the CEO and 15% reduction to other executive officers and proportionately lower reductions to all employees worldwide.
Our board of directors is participating with a temporary 20% reduction cash compensation.
The call you Board also authorized suspending our quarterly cash dividends. This will result in approximately $10 million of annualized cash savings, which we expect utilized for deleveraging and strengthening our balance sheet.
Whether be challenges ahead in the second half of this year I'm very excited and confident about our future.
Could you is well positioned in mobility computing and network semiconductor and PCB test segments.
While automotive and industrial or weak for now we.
We are the handler and contactor leader in these segments and should emerge stronger again, and an eventual 2021 market recovery.
This is simply a delay in our path and although our prices as always painful. It also creates an opportunity for the company should become leaner and faster.
Well you have delivered a strong 21% compounded annual growth rate since 2015, and our strategy remains focused on outperforming the industry growth rate.
Now I would like to turn it over to Jeff to review first quarter results and provide second quarter guidance.
Okay. Thanks, Luis as noted earlier, our priorities are the safety and well being of our employees customers and suppliers as we work through this challenging an uncertain environment.
While we cannot predict how long this pandemic will last we enter Q2 with a strong backlog in cash positions and improved financial flexibility.
As a result of previously completing the 40 million dollar cost synergies from the Xcerra acquisition.
Further reducing operating expenses by approximately 3 million per quarter through temporary salary reductions.
Limiting capital expenditures to critical and strategic projects.
And suspending our cash dividend, which preserves approximately 2.5 million per quarter to further strengthen the balance sheet.
Before I walk through Q1 results in the Q2 guidance.
Let me talk about our GAAP to non-GAAP adjustments.
Please note that my comments that follow all refer to non-GAAP figures for GAAP to non-GAAP reconciliations and disclosures see the accompanying earnings release in Investor presentation for Q1, the GAAP to non-GAAP adjustments include approximately 3.6 million of stock based compensation expense.
The GAAP to GAAP excuse me GAAP to non-GAAP adjustments, primarily driven by the Xcerra acquisition include $9.5 million purchased intangible amortization expense and $2.1 million of restructuring costs.
The Q1 2020 net cash impact.
Of the Xcerra acquisition related restructuring was approximately 1.4 million due to employee severance.
The Q1 GAAP to non-GAAP adjustments also include a 3.9 million impairment charge related to in process R&D assets from the Xcerra acquisition. This is a noncash charge caused by cobot 19 induced delays in our customers adoption of products currently in development.
Now turning to Q1 results revenue was 138.9 million and approximately 7 million lower than the midpoint of guidance due to cobot 19 related government restrictions in mid March in countries, where we manufacture most of our products.
In Q1, two customers each accounted for more than 10% of sales in the quarter. One customer is in the computing and network segment and the second customer is in the mobility segment.
Yes.
In Q1.
I will use gross margin was 41.7% and inline with sales operating expenses came in approximately 1 million lower than forecast.
And first quarter non-GAAP operating income was approximately 4% of sales and adjusted EBITDA was 6% of sales.
Consistent with prior quarters Cogenerate a loss in the us during Q1 and profit from operations outside the us.
The tax provision is not reduced by us losses due to our deferred tax asset valuation and as a result, the Q1 non-GAAP tax provision was approximately 1 million, resulting in a breakeven EPS for the quarter.
Now turning to the business model.
As of the end of fiscal 2019, we completed the actions required required to achieve the $40 million of acquisition cost synergies.
As we announced earlier, we have implemented temporary salary reductions, which further reduce operating expenses by approximately 3 million per quarter.
Adding approximately five cents EPS to our model.
The temporary cost reductions further structure, our expenses to support positive cash flow during periods of low market demand and allow for continued investment in strategic projects, while retaining the ability to quickly ramp production in an up cycle.
Moving to the balance sheet, our cash balance increased to 172 million due to strong cash from operations during Q1 of 17.8 million.
Free cash flow in the quarter was 16.2 million.
Combining recent cost reduction and cash preservation actions, we've lowered our EBITDA breakeven revenue to approximately 110 million per quarter and cash required to run the business has been reduced to approximately 80 million.
For the second quarter, we're guiding sales to be between 130 million and 155 million.
We've widened the revenue range to reflect the level of volatility and uncertainty that exist within forecasts in this environment and based on our current understanding of government imposed restrictions.
Gross margin for Q2 is expected to be between 39% to 42% and reflects higher outsourcing costs related to cobot 19 factory constraints.
Operating expenses are projected to be approximately 49 million and about 3 million lower than Q1 due to temporary salary reductions.
We expect Q2 adjusted EBITDA at the midpoint of guidance to be approximately 8%.
Similar to previous quarters, the tax provision rate will be abnormally high the Q2 forecasted non-GAAP tax rate is approximately 38% at the midpoint of guidance for modeling purposes, we expect a normalized effective tax rate of approximately 222%.
On revenue of 170 million or more and profits inline with the business model.
The diluted share count for Q2 is expected to be approximately 42.4 million shares.
And although there is more volatility and uncertainty in the market. Our current view for third quarter revenue is to be about 5% to 10% down from the midpoint of Q2 guidance.
That concludes our prepared remarks, and now we'll open the call to your questions.
Thank you as a reminder, she would like to ask a question. Please press Star then one on your telephone keypad again star one for questions.
Our first question is going to come from the line that Craig Ellis.
We can b. Riley.
Yes, thanks for taking a question you guys congratulations.
Tuning in a tough environment.
Jeff I might have missed it but at the midpoint of guidance, what's the degree of allowance.
Sure.
That could impact of that business clearly in the deck, you're showing that there are some meaningful manufacturing impact through the quarter that but since the quarter.
Can you just quantify what what that nets out to on the topline.
Yes, the Q2 speaking about the Q2 forecast Greg Q2, yes. Thank you.
For Q2, we're expecting that the.
The factories in the Philippines, and Malaysia, ultimately get back to sort of normal operations by the end of the quarter. So as you can see on part of the IR deck that we've published that by the end of the quarter, we expect to be back up to full production. So it's it's theres really no.
Sort of.
Provision if you will like we did in Q1. So we we created the Q2 forecast based on the assumptions that the constraints in the in the factories.
Well essentially be lifted.
Okay, and then just to better understand that endpoints of the range and it's.
Comment for companies to widen the branch out you know surprise, there, but what would differentiate the performance of the business at the low end of the range versus say the highest arrange for twoq.
There's a there's a certain degree of book and Bill orders in the quarter.
And so those are typically carry a higher risk.
Of course.
Thats sort of the quarter over quarter.
Instance.
In this particular quarter theres still uncertainty in supply chain.
So in addition to book and Bill for the quarter. There is continued uncertainty.
Some of our key suppliers.
Okay. So so just turn sort of variability and then supply side issues, which we've been saying.
Ill.
Take my last question for court hop back into queue, maybe a little bit further out than that I think I heard you can pay but the third calendar quarter sales could be down 5% to 10% from the visibility that you have now to back quarter.
Would account for about the decreasing and is there anything that you see in the business and with the backlog that you have.
That would be driving sequential growth quarter on quarter three Q.
Craig So as we mentioned we had strong orders in Q1 and Q2.
As MCU foreign Q1.
That led to a.
Healthy backlog as we enter Q2, both but what we're seeing is we're seeing some customer push outs of shipments and so that's having a sort of muting of the.
Of the revenue if you will in Q2 as well as into Q3, so there's still quite quite a bit of uncertainty not.
Not only in the Q2.
Forecast and therefore, the wide wide range, but also as we move further out.
There's definitely more volatility and uncertainty.
And the SAP movement occurring in particular vertical shaft like auto or perhaps industrial outside of medical or is that just across the board all year.
Let's.
Yes, Hi, Craig says Louise paving a lot of that Hey, it's LR. This is auto as I as I said in my prepared remarks.
Auto is actually going to be.
Down this year significantly relative to the original expectations, but as I also said, we do expect that the mobile segment customers, who will take a pause.
Engage.
Try to gauge the the covenant gene impact on consumer demand before before they move forward again so.
I think thats going to compound a little bit on the towards the third quarter.
Yes, Thats certainly makes sense from all the things that we're saying weve guys. Thanks, so much for the helping congratulations on the good first quarter execution.
Thank you Craig Thanks, Greg.
Thank you and our next question will come from the line of Krish Sankar, when Cowen and company.
Hi, Thanks for taking my question I had a couple of them.
So Jeff from kind of little confused so you are guiding to Q3 I.
I understand it's uncertain environment.
Your breakeven is getting lowered and yet you suspending the guidance I'm just trying to figure out what are the puts and takes on the Q3 comfort level for the revenue and at what point would data over the dividend come back.
Well I'll talk to the.
Into the Q.
Q3 forecast.
So yeah, obviously, there's a lot of uncertainty related to that.
Chris and as we just talked about with.
Craig.
We've seen customers pushing orders out and.
It's our best view at the moment right understanding the sort of the constraints that we see in where we expect the factories to be as well as current view of orders in Q2.
And then how backlog feathers throughout the Q3 and Q4 time frames, Chris Let me, let me take the dividend part of the question here.
Reality is I can't provide any date.
Or assurance at this point about when the future dividends about future dividend payments right ultimately.
And it's going to be.
Reassessment in decision by our board.
To what you do long term.
Clearly here in the current environment. We believe we believed it's just the.
The best interest of our shareholders to prioritize our cash towards paying down debt.
And also for product future product development and for making other strategic investment so.
That's the status as of today.
Got it probably lose and then final question for my and you kind of broke out.
Ability that roughly sort of fill orders as innovate to foster Don further and see how much a field bookings or revenue is coming from Fiveg.
I mean, I could not that I have it handy to answer it to you right now I can I can tell you it's.
The much.
More than half of it was fiveg related.
Because a lot of it was associated with RF I see test.
And we had a really strong demand for our testers going to that we also had a very strong demand for turret handlers.
That go along for RF Pricey test.
But conversely on the side there was also.
Thermal subsystems and.
Handlers pick and place handlers going into mobile processor test and I can't I cant fight.
The side the fine if those were five you are not.
But I can tell you.
More than half of the orders would have been fiveg related.
Got it thanks Louise Thanks, you.
Thanks, Chris.
Thank you.
Thank you.
And our next question will come from the line as Brian Chin with Stifel.
Hi, Hi, excuse me good afternoon, I'm glad to hear you all seem to be doing well and thank you for later I was asked a few questions.
And maybe first just okay for a moment going back to the reference booking strength in Q1.
I guess, how much of that were strength has a threeq you or second half shipment date associated with it which gives you some level of visibilty, perhaps in Q3 as yours as you're discussing right now and you also just make kind of the timing on the on those orders or worse to some degree influenced by by sort of your production constraints in terms of the timing and perhaps even.
Magnitude.
In terms of the in terms of the orders and the and the percent that applies to future quarters.
Hi, there was probably closer to.
60, 50% to 60% of the order book, where 80% typically would be over the next three months.
Brian.
We're seeing that increase.
I think closer to 50%.
Is.
Is the range.
Got it okay. That's helpful.
And just quickly in terms of just shipment linearity for.
Just one year to date.
Typical Q2 versus what's not typical Q2 for you this year.
Curious I'm sure it's reflected in your guidance, but how how backend skewed might shipments the this quarter.
Relative to what might be normal.
Yes, that's a good question and we are more back ended the quarter skew. This time around and we are because of supply chain constrains as you can look at the supply chain and internal operations strain. So you can look into the IR deck here, we've talked about estimated manufacturing output from our Asia factories in Q2 and it's it's.
Wrapping up from April to June so as you can imagine we have more revenue towards the end of the quarter than we have in the beginning in the quarters, we managed through the.
The reopening process basically in these countries, where most of our manufacturing most of our products are manufactured.
Mhm.
Okay.
And.
It seems like given your.
Well, you think production will be relative to where it was in the month of June.
So that reflects a little bit outsourcing also I guess sort of the trajectory you see in places like Malaysia, where they seem to.
Apps or mid month.
Quote unquote reopening dates.
Yeah militia has already reopened.
Brian and they had restrictions from the middle of March.
Through the end of April.
Actually two different levels are restrictions and then as of last week the announced their reopening.
Now Nevertheless, even though we have a reopened and we have to have the supply chain catch up to our demand in feed our factories. So.
With that in mind, we did model a.
Still sub 100% in fact about 80%, 85% output out of our Asia factories in May and then normalizing to 95 plus percent in June and a lot of this is now based on supply chain catching up with backlog of our orders tourists from our supplies.
Okay. Thank you maybe one question on sort of recurring revenue.
Can you help us quantified the impact on the current revenue in Twoq, you and perhaps Threeq you.
Extended source and visibility there as well as more of your direct semi customers, particularly in the automotive markets idled production as they look to realign with their and customers vehicle plant shutdowns you can give a sense of what that maybe that revenue impact that you're contemplating is.
So our recurring revenue from from just a couple of quarters ago from Q3.
Three of 2018.
We're down.
About 14 or $15 million per quarter.
About.
Okay.
Three.
Hello.
We're seeing the same level of recurring revenue.
And.
Huh.
Okay.
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Hello, everyone and thanks for joining.
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Some perspective Q2, and what we expect for the rest of the here.
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Indeed countries, where most of our product starting manufactured.
Despite these challenges.
I'm proud of how we have quote you got there globally to ensure [laughter] nobody is doing this unprecedented status.
Oh I can share more details our business results.
Q1, more [laughter] or record bookings.
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Section that Matt remains uncertain.
That was resolved.
We are proactively managing cash flow and took steps to reduce operating expenses in capturing.
Capital expenditures.
We implemented a temporary 20% salary reduction should the CEO.
And 15% reduction to other executive officers.
Yeah, proportionately lower right.
Sure all employees worldwide.
Our board of directors scripted.
Great temporary 20% reduction should their cash compensation.
Oh are you more hours, so I'll provide its expanding our quarterly cash dividend.
This will result in approximately $10 million.
Annualized cash savings.
We expect utilize for de leveraging and strengthening our balance sheet.
Well, there would be challenges and the second half of this year.
I'm very excited and confident about our future.
Oh, you is well positioned the mobility computing.
And that work semiconductor yep.
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We are now.
We are the handler contactor leader in these segments.
I would have emerged stronger again, and I know that drove 2021 market recovery.
This is definitely no later than our data and.
Brian This is always painful.
Great.
For the company should become leaner and faster.
Well you ahead of the lever at a strong 21% compound annual growth rate since 2015.
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Okay.
Now I'd like turn it over it shouldn't yeah sure if your first quarter results and provide second part of that.
Okay.
Thanks, Louise as noted earlier, our priorities or safety and well be double our employees customers and suppliers.
As we work through this challenging uncertain environment.
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Yeah, how long this pad data like well that.
We entered Q2 with a strong backlog <unk> cash position and improve financial flexibility.
Result.
Previously completed theme that $40 million <unk> synergies from Dextera acquisition.
Further reducing operating expenses by approximately Green valley, Adam per quarter through temporary salary reductions.
Limiting capital expenditures to critical assets could eat chicken projects.
Yes, it's bad either a cash dividend, which preserves approximately 2.5 million per quarter.
To further strengthen the balance sheet.
Yeah.
Before I walk through the Q1 results at like Q2 guidance.
Let me talk about aren't gap to the <unk> GAAP adjustment.
Please note that like.
That follow already occurred.
GAAP figures.
Yeah, and non-GAAP reconciliations as the quota shares.
The company early in Chile, and Investor presentation.
For Q1.
They got a GAAP adjustments include approximately 3.6 mentally enough stock based compensation expense.
Yeah, Yeah, excuse me, yeah, <unk> GAAP adjustments, primarily driven by the Xcerra acquisition.
Included 9.5 million a purchase intangible amortization expense.
And 2.1 of them out to get up restructuring costs.
Q1, 28.8 net cash impact.
Oh, the Xcerra acquisition related restructuring was approximately 1.4 million.
Due to employees SAB right.
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Impairment charge related to end process R&D assets.
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138.9 billion at approximately 7 million below or.
<unk> guidance due to cope with 19 related government restrictions and then mark.
In countries, where we manufacture most of our products.
In Q1, two numbers each accounted for more than 10% of sales ended the quarter.
Quite got everywhere.
That computing and that Worksite wet.
And the second customer is in the mobility segment.
In Q1.
<unk> gross margin was 41.7% and wireless sales.
Operating expenses came at approximately 1 billion lower than for cash.
But first quarter non-GAAP operating income was approximately 4% of sales and adjusted EBITDA was 6%.
Good [laughter] prior quarter's coal you generated losses that you asked during Q1 net profit from operations outside the <unk>.
The tax provision not reduced by U.S. losses, due to our deferred tax asset valuation and as a result kilowatts.
GAAP tax provision was approximately 1 billion.
Resulting in a break even the yes for the quarter.
That's right to the business model.
I Love the added that fiscal 2019, we completed the actions were quite required to achieve the $40 million up acquisition cost synergies.
As we had asked earlier.
Yeah, that's a mad temporary.
Salary reductions, which further reduced operating expenses.
Proximately.
<unk> corridor.
Adding approximately five cents a b P S to our model.
The temporary cost reductions further structure, our expenses to support positive cash flow.
During the period.
Low market bad at all for continued investment in a strategic projects as.
While retaining the ability to quickly ramped production could end up cycle.
Moving to the balance sheet, our cash balance increased 272 million due to strong cash from operations during Q1.
17.8, no yet.
Free cash flow order was 16.2 about it.
[noise], combining <unk> cost reduction cash preservation actions.
Hello.
Our EBITDA breakeven revenue.
Smelly out hundreds of 10 million <unk> core.
Hey, cash required to run the business has been reduced to approximately eight email yet.
For this.
Corridor.
Sales to be between.
30 belly and.
55 million.
We wide rapidly rising.
The level of volatility.
Certainly that exists within four cats in this environment.
And they are right understanding of government imposed restrictions.
Gross margin for Q2 is expected to be between 39% to 42%.
I don't reflect higher outsourcing costs related to cope with 19 factory constraints.
Operating expenses.
Projected to be approximately 14 lie.
Hello.
Q1, due to temporary salary reduction.
What do you expect Q2, adjusted EBITDA midpoint guidance to be approximately 8%.
Similar to previous quarter's the tax cribbage general rate will be abnormally high the Q2 for <unk>.
GAAP tax rate.
It was approximately 38% at the midpoint of guidance.
For modeling purposes.
Back to normalized effective tax rate of approximately 222%.
On a rabbit.
In 17 billion or more.
Profit in line with the business model.
[noise] diluted share count for Q2 is expected to be approximately 42.4 million shares.
[noise] and although there are more volatility and uncertainty and lumbar kit.
Our view.
Do you <unk> third quarter revenue is to be.
5% to 10% data from the mid point of Q2 guidance.
That concludes our prepared remarks, and then well open the call theater question.
[noise] kids apparel buying character they'd like to question. Please press Star then one that tell us that will keep that.
Hi, Ken.
Our first.
Yes.
It's going to come from the line that Craig outlet.
With B. Riley.
Yeah. Thanks for taking my question.
Brad Chalet.
Got it.
Right.
Hi.
Jeff.
But.
Hi, guys.
What degree a ball out ones, but yeah.
Or.
Oh I am I.
Yes, clearly in the back you're showing that there.
All right here.
<unk>.
Quarter.
Good order.
But.
<unk> <unk>.
Oh.
<unk>.
Yeah.
Yeah. The Q2 I am speaking about the Q2 forecast Craig Shere yeah. Thank you.
Uh huh.
Yeah for Q2, you know we're expecting that the.
[laughter] factories in the Philippines, and Malaysia also really get back to sort of normal operations by the end of a corridor. So as you can see.
Part of the IR deck that we've been published.
By the end of the corridor, we expect to be.
Back up to full production so.
Yeah, that's good there's really no.
Sorry.
Provision if you will like we did in Q1.
So we.
We created in Q2 work acetate study of southern shows that that constraint so they.
And the factory.
Well I said shortly be lifted.
Okay, and then I would just to better understand that and why.
<unk>.
Uh huh.
All right.
HM widen that branch out into a surprise there but.
Well.
Ranch gay back performance.
But low range, Shane I am branch purchase.
Ah you know there's a there's a certain degree a book to bill or is that a corridor.
Got it.
Those are.
Typically carry a higher risk.
Uh huh.
Oh.
Of course.
That's sort of a.
Quarter over quarter.
Instead.
Yeah, This particular quarter, there's still uncertainty and supply chain.
So in addition to book and Bill for the quarter there.
Continued uncertainty what died so our key suppliers.
Okay. So just trying to Jordan buried go out there yet.
<unk>.
Switch creep.
Oh Oh.
Take my last question <unk> attended to maybe as well.
Further out.
Thank you.
You can pay.
But third calendar quarter itself could be down.
10%.
[noise], if they happen to back quarter.
What what account or <unk>.
<unk> decreased Chang and.
It's fair to <unk> in.
The backlog, but yeah.
Yep.
Yeah, the driving <unk> onshore court rights for Richard.
Uh huh.
Craig so its when bad shouldn't you know he had a strong order is going to war.
And.
Two.
Excuse me Q4 Q1.
That led to.
Oh, the backlog as we enter Q2, but what we're seeing is pursuing.
There were a push out the ship Matt.
So that's.
Hey, Dave.
You mean.
Other rapidly well in Q2 as well as had to Q3 so there.
Still quite quite a good about sure the bad.
Not only like Q2.
For a cat so therefore, the wide wide range.
But also you know I hadn't moved further out.
There's definitely more volatility a certain either.
<unk> and Canada Cat.
Yeah, particular, Berger, well shop, like Idaho, or perhaps in the past trail off topic radical.
That's true crop work, but all year.
Or <unk>.
Yeah, Hi, Craig to its Louise.
Hi, it's a lot of this oh I'm sorry.
On my prepared remarks auto is inside.
Yeah.
Down this year.
Significantly relative to the original expectation.
I also said that we do expect more books <unk> customers.
Well David.
<unk>.
Uh huh.
Page tried to gauge the.
And then king impacts.
And before before they move forward again so.
I think that's kinda compound, although a bit on the towards the third quarter.
Yeah, sure you're right sounds wallet.
Hey, guys. Thanks.
Congratulations Tom first quarter or confusion.
Thank you Craig Thanks, Craig.
Thank you.
[laughter] mine.
Great. Thank car with Cowen <unk> company.
Right.
[laughter] debt.
Uh huh.
Jeff.
Yes, so you.
I think Q3.
[laughter].
Your breakeven.
So.
Yes, yes.
Hi, I'm just trying to figure.
Well.
On the do you see conflict.
[laughter] alright.
Good day.
If it doesn't come back.
Well I'll talk to the.
[noise] to the Q.
Q3 forecast.
[noise]. So yeah, obviously, there's a lot of uncertainty related to that.
Chris.
And as we just talked about with.
Correct.
Yeah.
Seeing customers push chain.
Orders out.
And.
You know, it's our best deal at the moment right.
We're standing.
The square.
Constraints that we see had where we expect the factories to be.
Well.
Current view.
Orders.
Q2.
And that helped backlog that others throughout the.
Q3 at Q4 timeframe.
Chris Let me, let me take the dividend part of the watching here.
Ladies and you know I can't provide indeed <unk>.
Uh huh.
Org chart.
And about Wednesday.
<unk> about future payments right.
<unk>.
Yeah, it's going to be.
Ria and then decision by our board.
Oh, sure who watched long term.
Clearly here in the current environment, we believe.
We believe did yeah.
The best interests sort of our shareholders too right.
Our cash towards paying down debt.
And also for prior future product development and for make strategic.
So.
The status as of today.
Got it.
No, but somebody and you kind of broke.
Well.
For the Oh.
Oh.
[laughter] <unk> dawn.
Yeah I'll mature.
Right I mean, it's coming from quite cheap.
I mean, I could not that I had.
And did you ask <unk> right now I can't I can tell you it so much.
You know more than that out sort of bid by sheer related.
<unk>.
A lot of it.
Oh, it it with our car T Das.
And we had really strong demand for our yeah, there's going to that.
They had a very strong demand for correct yeah floaters.
That go along.
Our out price.
Oh, firstly on the side there is also.
No so.
And just.
Handlers placed hamburgers.
Sure no process for cash then I can.
Yeah right.
The side you know that's fine it though the square fiveg here or not.
I can tell you.
More than outside the orders.
Five year related.
Got it.
Hi.
Thanks you.
Thanks, Chris.
Sure.
Thanks, Kevin.
Our next.
[laughter] book.
That's fine that's briant champion what people.
Hi, [laughter] excuse me.
And I'm glad to hear you all.
Well.
Thank you for like outside <unk>.
[laughter] okay.
Going back to reference book, but in Q1.
How much of that straight out of date, Threeq, you or second half shipment date associated with which you know get yourself.
Okay.
Perhaps in Q3.
I just got right now.
[laughter] autos or.
Or worse to some degree in sports Bye bye sort of your production constraints and started.
Yeah, crab too I guess.
In terms of the instrument so the order the.
For sad that flies too.
Future quarters.
And that was probably closer to.
60, 50% to 60% of the order.
Where 80% typically wouldn't be all over the next three months.
Right and.
We're seeing that increase.
Yeah, I think closer to 50%.
Uh huh.
It's the range.
Got it okay. That's helpful.
And just quickly in terms of just [noise].
Let me Aridi or.
Just like the air tea.
Yeah.
Q2 versus you know what.
Q2 for you this year.
I'm just curious I'm sure it's reflective.
I Oh, how backend.
You might shipment the this quarter.
Relative to what might be at all.
Yeah.
And then we are more back ended the quarter skewed this time around in it we are because of the supply chain constrained. So you can look at the supply chain in internal operational trains. So do you can look given the IR deck you talked about.
Made it manufacturing output from our.
Asia factories in Q2.
And it eats rafi.
From a prudent you cheers.
So as you can imagine we have more rapidly each word you know that water than we haven't been began a quarter as we manage through the.
They're really opening process basically in each country, where most of our manufacturing.
Products our manufacturing.
HM.
<unk>.
Yeah.
Yeah, It seems like given your.
You know what do you take production will be Ralph.
It was.
There's a month the June.
There are like so little bit outsourcings off so I.
I guess sort of the trajectory you see in places like Malaysia seem to.
Yes, absolutely.
Quote unquote reopening.
Yeah, Malaysia has already are pretty open.
Right and that they had restriction.
From the middle of March.
Through the end of April.
Actually.
Hi, there from those are restrictions and then.
Last week the announced their reopening.
Now Nevertheless, even though we have a real when we had shoot.
Like machine shop two.
All right good man and feed our factories so.
With that in my name.
We did model a.
Oh, sorry, 100% in fact about 80% 85% output.
Rubber Asia Pac crews in May.
And then normalizing shoes 95 plus percent in June.
And now lot of this is now based on supply chain catching up with.
Plot, the orders to true or from our supply.
Okay.
Maybe wait questionandanswer quite rapidly.
Can you.
On slide intact.
Wrapping you shoot you perhaps re queue.
Got it sort of the ability there.
[noise] luckier direct customers, particularly in the automotive markets idled production.
Well.
<unk> their customers.
Cool ranch.
Given the size of what that maybe I'd rather good.
Yeah.
[noise], so our recurring rabbit.
Uh huh.
Yes.
A couple of quarters. It goes from Q3 of 2019.
Or Dallas.
Oh about 14 or $15 billion per quarter.
That's about.
You know 15% to 20%.
Decline from Q3.
What do we look at Q2, Oh, we're seeing the same level of recurring revenue.
And.
The story right now is a similar to be.
[laughter] Big players.
Yes, you see a several quarters ago, you're you're already got it down.
Or [laughter] value on a run rate basis.
You're kind of saying that sort of.
So stable to Q.
Perhaps with a three Q <unk>, yes, that's right.
Okay.
Our.
Thanks appreciate it.
[laughter] <unk>.
I'm lying.
[laughter] plainly [laughter].
Yes.
I guess first talking about yeah, that's fine.
She started to warm here.
[laughter].
Impacted more by that I mean the release.
Chief.
The project did.
But cheap.
The driver behind that pod.
I had gone.
Well, we see is that our customers have gone through a ramp.
The first floor, there and everything but it is actually going pretty well or.
Great and then the original projection or Fiveg.
<unk>.
You know frankly.
I think a in general terms that were heading towards the 200 and it seems selling and yet in Swiss fiveg problems in years.
19 did.
Oh.
Gee that trajectory it did and I think our customers are expansion say Oh, sorry.
Yeah the market demand.
Before continuing to ramp so I wouldnt rigs back.
Yeah.
Action.
Caused a <unk> three months to potentially.
Delay.
For the business.
He was on with.
No capacity for Fiveg and they will.
So there for a more towards the end the year I think Q.
For or timeframe is where I'm.
Should pick up the line.
Can you give the ramp.
Okay. So you [laughter] C.
Yeah networking computer stuff strong today.
Believe type <unk> kinda back and the air and industrial company attack sometime next year.
That's right that's right yeah, and there are some of the medical application.
<unk> sales happening now that are accelerating but as I made a comment.
Matt I quoted deal a small portion of the.
Total industry trend medical segment you will.
Probably not.
The decrease in Dallas.
<unk>.
Okay.
[laughter].
<unk> dividend.
It seems like like your cash balance.
Sure.
Our need for cash.
You had a couple of years worth of yeah.
Extra cash.
I'm curious.
The decision.
But David first yeah.
Yeah, just kinda tighten down not there either.
Uh huh.
As I mentioned, we where we're being.
Conservative and probably you're probably going to cash management side, we have.
They can.
Several staff <unk>.
Operating expenses.
Okay Alpine call.
Yeah.
In addition should that it would be the right thing should do.
[music].
But more attention on gas reserve base.
And.
Our decision of cash for debt repayment.
Uh huh.
You don't for me eating product developments that are necessary for <unk>.
<unk> <unk> ROE public company so.
But those are the reason behind.
Dave Yeah.
Okay.
And then.
If you look at tier tubes in the field.
Give a sense of what utilization rates are today versus where they were share a quarter ago.
Yes.
Really.
I don't think their current.
Matt.
Right, Okay because.
We had a certain customers, particularly when the month April.
There were some strain operational straying from a government imposed restrictions, particularly in Malaysia.
Also in the Philippines.
And so.
Those customers weren't able to staff.
Or.
Shoe <unk>, what they needed so I don't think that utilization right now for the moment or big drop.
Would've been a.
Good where presentation reality, we're looking forward to more me June.
Elucidation naturally just to see.
Where the industry really can.
I don't really.
You know I think reaction, we waited a little bit of yours, you get up to get calls on that.
Okay make sense.
Finally.
Yeah. Despite so the.
Hello, Dan.
I mean, they keep progress.
Contactor business.
Eric games.
Oh, we're still working much of what we haven't described a core Roe.
It is focusing on.
Gaining some share and Qt and that work segment for Contactors.
But.
Right on.
This glass or Addus and.
Quite a bit of attached to not only from us, but also even our customers on that.
I'm getting the operations.
Back in July and support right in the market demand for even our customer and reality it has.
Put a bit pause a sense, though arch and through most of April.
Qualification and people products.
Life is.
In general starting in <unk>.
Now on that front and the amount for from a floor.
Great contacted qualifications.
Okay I make sense.
Good day.
Thanks, Tom.
<unk>.
Okay.
Hi, crush satellite data.
Oh, great right in that area [laughter].
Question.
The little bit they ask.
[laughter] your attitude.
And then [laughter] [noise].
[noise] control its supply chain.
And your guidance.
For the June quarter.
[laughter] record backlog.
Okay.
But there is no but.
[laughter].
No.
Even in challenging environment, if there were no.
Control.
Right Okay.
Oh.
Issue.
Well that that would be the top end range crescendo would be the 155.
[laughter].
A lot of 30 reflect you know if it she is.
Hello, and good question, then and supply chain.
Okay.
I don't have any other questions. Thanks.
Thank you once again, that's quite [laughter] Caroline.
[noise] somewhere.
[laughter] claim counts from Sidney Ho with Deutsche Bank.
Hi, there.
Right.
Hey.
Sure any visibility.
Correct.
So.
Right.
Yes.
First attack, but you should build buffer.
<unk>.
<unk>.
Yes, a little bit.
Part of your watch, but but as far the.
The man.
I.
I think he the reality is medium for numbers are catching up.
Sure there market demand.
We have several customers their rating.
Both.
Uh huh.
And.
Fabry as well is in Malaysia, and so looking.
Late March and April so.
If any are customers.
And really hard pressed to get it means that live through.
To date and.
Gosh I'm sure there to live Bruce you probably heard somewhat those earnings release now last couple of weeks.
Well.
Major semiconductor manufacturers.
Oh, you need to get 19, 95% there.
There are there that would mean no time.
Which means there were 5% <unk> on schedule in certain cases.
So I don't I don't think at this time, it's been in.
Sorry offering.
More so playing catch up.
Great. Thank you Andy.
Well, what do you look at your outlook for Q3 right.
It also fresh sure.
Pretty much demand side yeah.
With that supply chain issues.
Most things worked out by them.
Yeah, I think that's a fair statement yes.
<unk>.
Actually the expectations are that you know with respect to the factories, where.
Back to 100% by the end of the corridor and.
Similarly with.
Supply chain by the end of the corridor.
Great. Thank you.
[laughter].
Okay.
I'd say, thank you for joining todays call and we look forward to speaking with you.
[laughter].
Thank you might get moved I can't Thank you for apart [laughter] kinda like Incorporated's press quicker data into money.
<unk> results conference call.
[laughter].