Q4 2020 LightPath Technologies Inc Earnings Call
Physical fourth quarter and year and 2020 financial results Conference call.
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I will not pass the call off the <unk>, Don retreat, Chief Financial Officer of Lightpath Technologies. Please go ahead.
Good afternoon.
Before we get started I would like to remind you that during the course this conference call. The company won't be making a number of forward looking state of minutes that are based on current expectation on it all <unk> and uncertain says that are discussed and this periodically C C fun.
Although the company believes that the assumptions on the line. These statements are reasonable any of them can prove to be inaccurate and therefore.
It can be no assurance that the results with you realize.
In addition, references maybe maybe certain generally accepted accounting principles or none <unk> measures, but would you should refer to the appropriate disclaimers on <unk> and the company's C. C filings press release it.
Oh like management discussion they won't be a formal Q&A session open to participants Nicole.
Oh, not like the burnt a conference or what's the sound Rubin like pass President and Chief Executive Okay. So yeah. Please go ahead.
Thank you and good afternoon, welcome to lights off the intelligence physical 2024th quarter financial Adults conference Cool cool.
Oh, a financial resolved personally issued after the box close today and it posted to Ah what corporate cause like.
Halloween like the box I went CFO Donald would reach when it comes or have you. What's her natural adults and provide won't perspective T areas.
We will then conduct a Q&A session.
Now onto my remarks.
Oh, a physical 2024th quarter and <unk>, yeah, because the <unk> full year of adults reflect consistent and continuing improvement and Grove.
Well at the same time navigating the dynamic and changing conditions.
Cause I, usually go with 19th <unk>, it's not.
Our customers and what's supply chain.
Classified as an essential.
[noise] remainder open and the ultimate I think that extends possible.
We continued to take all precaution and shorts it that way employees remains safe and said that what business relations continue.
[noise] crucial we're very encouraged have ended the year by delivering girlfriend and revenue backlog gross margin goes puppet income give me the and the cash bad.
While reducing with tofu and financial leaked.
And improving our <unk> structure with a reduction and all crazy expensive.
All of this was achieved despite nearly six months physical yeah being impacted by cobin 19th.
Similar to what with all the previous quarters, our fourth what the results continued to show consistent improving yeah, that'll be yeah, and consistent adults well our fiscal year.
The gross margin pull the quota ended up 13, 90% I'm 32 per cent and 242019.
While the EBITA hodgen grilled too 19th upset.
Mm Hmm negative free time period, the previous here.
[noise] [noise] pizza adult reflects savings from things situation of the iced tea expedition and the other efficiency related activities as well as a favorable public snakes, and what P. M O business.
Additionally, I went back log grilled 219.1 billion up from 17.1 million and a physical 2019.
But the down from 20 million previous quota.
The sequential decline in backlog is attributed primarily to the annual blanket order from our largest customer which typically when you you know what's the school second afford the ending December 31st.
Well, the 4% girlfriend revenue yeah, it'll be you definitely a positive outcome our actual shipment during the quota how it compares to plaid due to unexpected rescheduling request like some customers.
Consequence of the impact of Kobe 19.
Cause we had mentioned earlier communications over the last few Muslims, we have been capacity constraint some thoughts about what this since February primarily due to demand from five G infrastructure employment.
And the B C continuing.
We have been addressing those capacity constraints could be used him overtime, who acceleration of investments and production equipment and too careful scheduling and planning of our production capacity to address all say a soda.
I'll say them told us requiring a very focused.
On both of <unk> internal and external like chain.
However, you with a coke with 19, some customers have experience you got fluctuating demand or some unexpected impact does that operations or other parts of the supply chain.
Given the meat nature of the amount of fracturing perfect and added complexity being capacity constraints.
I wouldn't matter of fact drinks scheduled cannot always a just a coffee.
Two such unexpected changes, leading temporary increase and I waited until he.
Seen in our inventory level was going to eight point Tonight.
While we strive to be a child and they just quickly changes in demand we expect for the whole thing for vacations to continue and coming them up.
Until demand and supply chain built onto a city state.
[noise] in parallel to navigating ZIP code with 19 impacted economy and supply chain. Our team has worked on developing a new strategic direction I liked.
That was the initiated following my appointment that C O March 2020.
This strategy has now been developed and this <unk>.
Is one based on that what strengths and that would call capabilities to address the largest and fastest growing trend in our industry visible and didn't pull that off of it.
I'd never like to discuss some key element of this strategy.
First interesting the board diversified photonics small kit, we're going to leave the efforts capitalized on optics, then enabling technology.
<unk>, that's opportunity for optics and optical assemblies has changed over the past several years now optics or more generally sputniks, an obstacle technologies, all increasingly invasive cause industries and <unk>.
Optics, there's not an industry brcko and itself.
And a neat blinks technology, which spans industry is well beyond telecommunications cause like so which with seemingly note.
Optics to the key technology industry from automotive defend medical.
Surveillance industrial equipment telecommunication and consumer products, just the name a few all of which are industry we already.
Touch the market opportunity for what we do with light golf is enormous and global and just constantly expanding there's other.
<unk> find applications Baltics since I've products and industry.
Second we're going to be focusing on our competitive ankles, including our differentiated design capabilities Molting L U P.
T as in manufacturing technologies, and local vertically integrated globally global manufacturing.
We will prioritized I would've put some home to differentiation we brings to the market.
And our customers and others that others cannot awesome.
We will constantly seek to add to those capabilities needed.
Could we will be centered around continuous improvement through operational excellent leading to margin and profitability up to my station and strengthening overall financial position.
That's willing to encompass oops short term and longterm initiatives throughout the organization and beat supported by a culture, which values with salt and accountability.
Cool, we will make investments that improved capacity and factory floor efficient engineering expertise and leverage our human capital.
We will make the necessary investments to know what people to enable our strategy with world class optical design and engineering tennis, including a sales force that can focus prioritized customer opportunities.
Which support our strategic goals.
Finally, and perhaps most important theatrics directive.
Is to mobilize the balance of integrated solution orientation for high patio customer.
So we will leverage <unk> to focus on clients opportunities. It's all in line with that when you strategic direction and ultimately improve our financial performance.
We will leverage hour unique capability using your wife's 13th an obstacle diamond manufacturing to create solutions for customers lava component.
Over time this will promote a ritual business model supported by longer term partnership with our customers.
And the coming weeks, we will begin a comprehensive alignment of the organization. So have a new strategic direction, including a review of pet would keep relative structure processes and all other aspects required by our team to be positions to extra cute just direction.
Some of those opportunities for improvement and the operation of extra then have already been identified shortly after I joined the company and we began executing a pumpkin immediately.
One such area. For example includes in with cash management, where food the implementation let it pass. This is in control we have been able to increase our cash position to $5.4 million.
While at the same time continuing to invest in <unk> capacity expansion, while utilizing our line of credit for financial flexibility.
And where do you think that would total debt and what's the waiting list complications.
Strategic priorities the bold and this is the beginning of the toughest like off world changed operation and execution culture to be best in class and we will choose the highest value of William customers and business opportunities to invest in.
They enhanced approach will provide even more value our customers great opportunities to our employees and better financially turns I wish I hope it.
As we continue to implement situation or improvements flew out our organization and fully extra cute on the outcome of our comprehensive strategic review, we expect both need to and long term impacts towards improving pulling our growth and P financial indicators young.
What we have achieved date.
Now I'll pop the cold over to our CFO wanted to treat to provide more details on the other aspects. Several 4474, yeah 2020 fine actually.
Thank you so [noise].
First I would like some mentioned I'm remind all of them that much of all the information. We're discussing during this call is also included in fresh release. It should earlier today onion authenticate filed a a D. A C C.
I encourage you to visit our website Lightpath dot com on specifically section titles Investor Relations.
Oh onto my remarks, we're painting to the fourth quarter on here and physical 20th 20th.
Sounds, Vermont covered some of our financial performance along with key elements strategic direction, So I won't be specifically discussing key financial areas.
Revenue for the first order of fiscal 20th 20th was approximately 9.1 million up from eight 7 million and both third quarter on Fourthquarter 2019 third quarters, 20th 20th sorry, and fourth 2019.
For the year revenues worth 35 million up.
From 33 7 million in fiscal 20th 19.
<unk> Avenue was for 8 million in Q4, 2020 or 53% of total revenue.
Up from four $3 million or 50 per cent and a third quota 20th 24 7 million or 54% of the total in a prior year period.
Visual position visible precision more of an outage or P. M. All products revenue in fourth quarter 20th.
It was three 9 million or 43% of the total same mustard quarter, 20th 20th or 44% of the total in third order of 2020.
Three 5 million of 40% of the total and the fourth quarter 2019.
40, Yeah, IR product revenues were 18 $1 million, 52% of the total of 5% from about 17 2 million or 51% of the total then the physical 2019.
Yeah, more revenues were 14.6 million or 42 per cent of the total and physicals 20th 20th.
And a 4% from about 14 million or 42% off the total Friday or.
The mountains of our revenue for the fourth quarter, a full year and respected viewers or from a shelter products specialty products and nonrecurring engineering projects, which vary greatly from quarter to quarter borough substantially small contributors to the consolidated revenue.
With respect to a margin profile.
Generally speaking Guillermo products, a small on almost entirely more of it.
So we have faster turnaround times higher volume up with decisions are more automated processing.
These products are also a general really law in price.
Historically have had Margaret zain margins, averaging in the 14th.
250 per cent range. This group represents about 42% of a total revenue in fiscal 20th 20th.
You can see it out of the two primary segments P. M O as a small group with the higher margin.
Yeah, your product group represents a larger and fastest growing market opportunity.
IR margins of historically been in the 20th to 35 per cent range.
New molded IR lenses, which usual <unk> Arnold and develop D V. Six material on the top side, if not able to go Ohio with efficiencies.
I was part of our gross margin improvement strategies, we haven't been aggressively working marketing new products targeting new customers using line of innovative B D. Six while attempting to convert existing customers to the extent possible from using or germanium lenses dog E D six lenses.
Moving gross margin in the fourth quarter of fiscal 20th 20 was 3.5 million.
An increase of 24% as compared to approximately 2.8 million and the same quarter prior fiscal year.
Total cost a sales was five 6 million for the fourth quarter 2020 down from five 9 million in a prior year.
Blow total cost a sales is meaningful when you consider that a total sales increased 4%.
Gross margin and there's a percentage of revenue was 39% for the fourth quarter, 20th 20th as compared to 32 per cent and the fourth quarter of 2019.
The increasing gross margin and now as a percentage of revenues and primarily.
Is primarily driven by the increase in sales and an improved cost structure, along with elimination of elevated calls in bruning labor manufacturing.
<unk> and increase overhead expenses associated with the relocation of on for a New York facility into prior year period.
For a year gross margin for fiscal appointed joining will start eight $8 million.
An increase of 11% 12.5 million and fiscal 2019.
The total cost a sales was approximately 21 $1 million in fiscal 20th 20th slightly lower than 21.2 million into prior year.
Gross margin as a percentage of revenue was 40 per cent for the 20th 20th compared to 37 for fiscal 2019.
Increase in gross margin reflects the changes store cost structure as well as improvements made in a second third and fourth quarters of fiscal 20th toilet. After several factors negatively impacted the first order a fish called 20th 20th.
As in the physical third quarter and men in aggregate have been straw.
Although their packets of weakness that emerge as followed from Kobe 19, which includes a sound mentioned the delivery on processing challenges.
We continued to enjoy strong demand from secular a long term market applications, including five G.
For this product we believe we could've had large order flow if we had not been capacity concentrate.
No capacity has been added and weird exhilarating certain buildups.
Our production volumes are growing.
And the fourth quarter 2020, we produce 1.2 million lenses up from 904000 lenses.
Two three of 2020.
868000 lenses made in second quarter, 20th 20th.
Unit volume sold in the fourth quarter of 20th 20th was up 62% of compared to the fourth quarter of fiscal 2019.
41% year on year.
The total units sold and 20th through her name was three six married.
From two 6 million last year.
During the fourth quarter of fiscal 20th 20th total operating expenses was approximately two 9 million a decrease up a million or.
Nearly 26% as compared to three $9 million in the same period of the fryer fiscal year.
The largest reduction came from S. Gona.
Which decrease from about 900000, a new product development, which decreased.
Hundred and 17000.
The changed from a prior year reflects the elimination of nonrecurrent expenses from last year, which are related to relocation of the New York facility as well as other reduced personnel an overhead costs from synergies.
M. A lesser extent limited travel on marketing expenses from cold with 19 restrictions.
Product development X men variation reflects shifting of personnel newly created product management function, which is also you know selling general and administrative expenses.
A full year total operating expenses and 20th 20th was the lemon $7 million now 2 million or about 15% from $37 million and 2019.
S. A G N N was down 1.5 million on product development were down 300000 for reasons similar to the changes in the fourth floor.
It should also be noted that expenses and a dark aura was reduced by games on disposal of equipment, approximately 136000, which is mask and someone to savings when compared to total 20th 20th expenses.
All consolidated corporate income tax in the U S. As shields by a net operating lost correct forward benefits of approximately 784 million at June 30th 2020.
But we do have to pay income tax at a country's a certain foreign subsidiary.
Income tax expense for the fourth quarter of physical 20th 19 included the reversal of 406000 of income tax benefits recorded and at first half of fiscal with 2019 due to the change in companies estimated utilization of U S. NATO operating laws carryforward benefits for 20th.
19.
During the fourth quarter of fiscal 20th joining the California recorded income tax expensive 90000, compared to 496000 and the same period of the prior fiscal year.
During the fiscal 20th joining the company recorded income tax expenses of 706 to $4000 primarily related to the income tax of operations in China, and Chinese withholding tax associated with the and the company dividend.
With their higher revenues strong margin management of expenses on lower income tax net income for the fourth order of fiscal 20th 20th was six or $7000 compared to a net loss of one $8 million for the fourth quarter of physical 2019, which was negatively impact.
Alright elevated calls, including labor cost manufacturing inefficiencies and increase overhead.
This is associated with the relocation.
<unk> New York facilities.
We're operating far more efficiently unprofitably, having completed that transition improved or cost structure and increased revenue margins.
[noise] income for a year was 867000 miles up from a net loss to $7 million.
Moving to the balance sheets and cash flow related items capital expenditures, including equipment Finance true nieces was $938000 in the fourth quarter 20th 20th.
Two $4 million for a year up from $326000 and $2.5 million, respectively and the prior periods.
Given that we have been running at near capacity, we intend to continue to invest similarly in 2021.
Meanwhile, net cash provided by operation was three $7 million for fiscal 20th 20th.
From $411000 in prior year.
Fourth quarter, 20th 20th contributing one $8 million for about 49% a full year amount.
Total debt, including finance leases was reduced by approximately $650000 or 10% and fiscal 2020 from June 30th 2019 or cash balance of June 30th 2020, and it was $5.4 million up from four 6 million at June 30th.
2019.
As of June 30th 2020, Lightpath 12 months backlog was $19 $1 million, an increase of 11% from $17 $1 million as of June 30th 2019.
It shouldn't be noted that this is natural for.
It is natural fall back like the fluctuate during the year as a result of the timing of such bookings of large orders and annual renewals.
The company is also undisclosed backlog beyond 12 months.
And our final no.
Putting increase of all share price on market value. We're pleased to have been added to the resale Microcap index <unk> with the animal reconstitution on June 29th 2020.
With this review of for financial highlights in recent developments concluded our turn to call or what did your operator sort of me may begin with question and answer session.
Thank you we will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If you were using a speaker phone we ask you. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then too.
At this time, we will pause momentarily to assemble a roster.
Our first question comes from Mark Wheezing Burger with be Riley FBR. Please go ahead.
Yeah. Thank you good afternoon, very nice execution in the corner.
Currently I. Thank you have capacity to produce around 3 million molded lenses per year can you talk about the growth trajectory around the molded capacity and where you'd expect to deploy that capacity from a geographic perspective.
Okay.
Yeah, our capacity has definitely been growing and the last few months as we've been investing in accelerating some of the upstate investment in our manufacturing equipment.
The reminds <unk> in the previous quarter.
Stated that we're going to expedite that won't goons investment, which we have and which have come into effect during the last quarter and towards the end of the quota that's evident in the growth of our small the lenses, where we produced one 2 million and the last quarter, which is.
33% drove compared to the quota before that first quarter.
Some of the investment of those Maulding machines and equipment, all I know with China facilitate some of them are in our U S. Passivity other part of the investment.
The target of where we make the investments and where we need to expand capacity changes over time. Some of those investments are going to be an hour facility and Vega as well as additional investments and T U S.
Great. Thank you.
Can you talk a little bit more about the progress beady six adoption from new customers substitution from existing customers your goals for beady six and from your product portfolio and then the resulting financial implications, we should C. N F Y 21.
Definitely.
From this transition to be the sixth of very encouraging because we spend right now.
By nature that type of orders for beating sick germanium altogether fulfill imaging.
Such that take a long time to mature and to go from designed to prototyping to actual adoption.
One example, as a large contracts that we announced a few months ago and that only in the near future. We're going to start shipping on that contract and that contract alone is spelled taken quite a while to reach we have a strong pipeline of opportunities someone was living as a quoting potthast many of them in the design.
And which we work very closely with the customer.
And some of them in the prototyping process. We believes that we have some significant witnessed coming down to vote.
Most of them will stop shipping within six months. So after we get the ordered some of them might be shorter someone's there might be locked out.
Sure you've talked about solid five G demands from from China. What other Geography's are you seeing that or maybe starting to accelerate and have deployments and can you talk about these other markets outside of China.
Yeah, we provide five G lenses and Tuesday at transceiver manufacturers and transformed the manufacturers.
Most of them all in Asia, and by the nature of it and the structure of the supply chain.
Except for a Chinese manufacturers', where we no one's I'd say a vertically integrated didn't when we settled the limited to them, we know that they makes and equipment with other customers. We do not always know where the transceivers and in terms of geographical distribution <unk>.
We do know that we supplied the lenses into multiple.
Manufacturers of five G equipment and obstacle transceivers.
In such a <unk>.
No that will definitely not concentrated in one country or another in terms of the deployment fight G.
Do not have the full information as to the geographical deployment.
Sure I understood and then last one for me I think you've talked about the emerging use cases for optics and photonics will require supplementary technologies.
Can you talk about how lightpath position to meet those additional demands.
Thank you absolutely and part of the organization alignment that we're getting to do first of all now, but really it's an ongoing efforts that will happen over the next few years.
It's going to meet with them continuously look at such opportunities and see what.
Mental product or technology is Darryl capabilities, we need in order to support.
This could be a situation, where a customer buying our length and all the customers working with some of that complete solution. Linzess solution. Also include say a scanning mirror, which is the electronic component.
That moves a beam around and we could be integrated with that it could be much something much closer to home, which we've already done a couple of times integrating the detector and actively aligning entire optical system to deliver really a complete clothes and home medically sealed even obstacle system.
Customer.
By nature of a bit optics being going into so many different application. So many places.
The type of other components of of technology that the needed would very drastically from one customer to another and as we go along with getting to see which ones makes sense forest way can we create real value to customers.
Great. Thank you very much.
The next question is from Jean anger with anger letter Dotcom. Please go ahead.
Hi, Sam and Dom congratulations on navigating through the pandemic so far.
I'm, keeping the company constantly operating and forgive my sore throat, but I'll try to after a couple of questions that Riley didn't touch on.
Basically covered it's ma'am bye.
Dressing expanding beyond what's unbeliever relatively low margin.
Commodity lenses, although you've already increase the margin bombed out so good job with that you just mentioned a moment it oh.
You just match and integrated optics, which caused me to think of your colleagues the neighbors over at lemon or I don't know that they're going public affect you directly.
Bam.
Do you foresee expanded relationship or would you rather not talk about potential colleagues their customers.
Thank you Jeanne it's good to hear your voice and thank you for the question at first of all of a subway congratulating our neighbors luminal full going public.
Joining up the ladder like it's always nice to have neighbors in the neighborhood share with us Okay change.
We have a good relationship with many customers and we have many customers.
Explore what type of value can we create to them.
Where is it that we can do more for them and what else. They need we cannot comment on specific customers supposed to most spot, but we definitely look closely at the light though.
<unk> place and work with multiple companies developing different light of solutions.
Many different levels.
Some of them, we discussed assemblies some of them, we discussed individual components with it's obvious that light.
Going to become a major application for optics in the future, we cannot no and tell which company.
Waiting to light all right. So the best thing we can do is work with as many confidence as we can and support them by creating some value for them Eva through our knowledge of optical engineering.
By creating individual components of assemblies that will enhance their products.
That is.
That's gonna have you met by integrated optic and I was really a little bit excited to look forward to many of these things that are leather that are forthcoming I also wanted a dog.
I wanted to do require with regard to China.
You're subsidiary there are all we all the word I think in the past there was a large.
Shanghai Pudong, there was an investor I'm, assuming that is now retired M. The Chinese government does not have a problem with your operating as a a wholly owned operation.
Okay.
That's correct. We have we both companies are wholly owned valley us 100%.
We have 100% control of hours, we do not we're not limited by any regulatory requirements related our Chinese subsidiary by any of the country or any of the site.
Does that.
And this is based similar to the experience I had into six years I spent in China setting up an building from scratch.
A large company there a wolf fee of that's called a wholly owned for an entity is completely owned and controlled by the fallen.
While the company and that's exactly it in a place like off with I went to subsidiaries, though.
Well I'm glad to hear that could you also expand lately there is more tension between China and India.
Companies like Ceragon, which is Israeli with wireless backhaul has benefited and.
[noise] because they do a lot of business and everything out with Vodafone and I'm, just wondering whether India.
Barring Huawei because of the tension between them actually ordered to your benefit with vertical integration in China.
So much of what you're making China is sold to Huawei or other networking companies in the country.
Yeah, we don't have much direct sales into India and.
Mentioned in the previous comment we often do not know the end use of our products since with some clients to a free layers instead of a moved from the end product.
So in this case bold the only in place I might have it is really know insights in a sense of none of our business has been affected by any of that to our knowledge and we don't see an impact from that.
Glad to hear that and my last question I would just B C. N N C E. L. A couple of weeks back when they made their number for the second quarter, but he gave pretty sloppy guy who's going forward any talked about many of their customers.
Tommy.
<unk> is one I think you deal with some of those customers know that may be with your reflecting when you're saying your customer of rescheduling delivery, but it sounds like there was a lot of orders that aren't cancel buttons separately pushed into the future so isn't that giving an impression.
Oh, that's things are looking.
Favorable as we adjusted the new normal and migrate into the third and fourth quarter.
Yeah, we definitely men exactly.
Orders of being pushed out due to most of his time logistical constraints and if I would give one example, we have one customer at that has production line in three different facilities and one facility has to close down. So it was avenue facilities cannot pick up the entire capacity and hence one third of.
The deliver it to them would get delayed until that facilitate me open and that one. One example, so most of those are similar to that then.
Although unexpected the factors affecting the supply chain of the observations and we're being golf to delay or hold off on the shipment. If it's with enough noticed we can help production and.
Moves that can update the use something else if it's not we hope that the name of Italy.
Well it sounds promising and if anything you had a good quarter that you, but I was great and you did this despite these impediment with the pandemic. So I'm looking forward to good growth and welcome your leadership and I'm, hoping to go well.
Thank you I appreciate that G I have a good day.
Again, if you do have a question. Please press Star then one at this time.
Our next question is from Chris Witowski, a private investor. Please go ahead.
Hello, Good afternoon, congratulations on a great quarter.
Thank you.
So.
Regarding the the.
Five two visible optics molded lenses.
I'm not sure if I purchased statements correctly, but.
It seems like you're saying that there's.
There's pending tomorrow.
Side of your bank clock that is if you so your customers.
The holding back some orders and if you tell them that you have more capacity, you'll get moral doctor is that correct.
Yes.
Understood correctly.
Alright, that's that's good to hear.
And about both those glances again to five G lenses.
You know as.
Data rates increase the optics kept to be more precise and are you getting sick of the price increases on your answers does that cause.
And the girls Martin.
Cause the price and going.
Do you want them.
Okay.
Prices.
In general yes.
However.
Aw.
Or formula in the past has been to give discounts on high volume because we had different reasons, obviously know at full capacity.
Those those levels that level of adults. So there won't be any great price decreases aside from what the market is demanding so we do not for C.
<unk> road erosion of the price.
PMO lenses.
To affect those are more in the next door three quarters.
Alright, that's a great to hear and Uh huh.
Thank you strategically alignment.
It should be looking forward to.
Noticeably kind of issue that costs because of that in the future.
Yeah, that's a great question and we've been very disciplined and though fellow.
I would go from the expenses on new capabilities, the new manpower.
Well.
Well.
Capital investments, where we need discipline to finance all of that so our own cash flow generated.
And being aware of profit margins or total EBITDA margins as we.
Who owns a business and we intend to continue.
And.
As much as possible in line with what we've been doing it until now.
That might be required here in that.
Individual.
Expenses on adding one or two specific skills by a form of people.
Or some unique equipment that might be a bit different and take a somewhat longer to see the return, but we did not expect the significantly difference.
Alright, that's a good to hear and it's it's about time, we started smoking somebody'll profits here.
Huh.
Yeah. Another question.
So what those pepper push Charles.
Can you just give us a few as to what's your experience $6 with August.
Pepper.
Is that.
Okay, let's protected doubt you're worried though.
First quarter.
I'd say.
It's still ongoing as a noted in my remarks, and we continue we believe it will continue to be somewhat ongoing until think stabilize.
In most cases, it moved I'd say sort of between one customer and beloved.
One specific customer that keeps pushing galton, so on except for maybe one or two tasteless.
But for the most puppets, we see instead of the transitioning between different geographical areas, where it's happened.
Customers in different industries.
And different periods, we try as I mentioned to be a bad joyless possible to be on top of it.
Given that we're running at capacity or capacity constrained at least in in the molding part of the business.
And sometimes that supply chain and the time to turn around order as long.
Sometimes not much we can do about it and we just end up with having a bit more inventories and we careful.
Okay, I understand that well that's it for me.
Okay. Good luck.
Thank you. Thank you.
We show no additional questions at this time, so I'd like to turn the conference back over to Mister Rubin for any closing remarks.
Thank you for participating in debate call before we conclude I wanted to thank Jim gain.
So for the 13 years of service at the CEO would like of.
And extend our best wishes the gym and his family on his retirement.
We look forward to speaking with your next quarter of some films and we will be participating <unk>.
<unk> and company fall virtual investor confidence on September 23rd and have been invited to speak at that Microcap clubs virtual leadership summit on September 25th.
Thank you again and goodbye.
The conference is now concluded. Thank you for attending today's presentation you may know disconnect.
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