Q4 2020 Benchmark Electronics Inc Earnings Call
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Good evening and welcome to the Benchmark Electronics, Inc. Fourth quarter, 'twenty and 'twenty earnings call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask the question. You May Press Star then one on of Touchtone phone to withdraw your question. Please press Star then two per.
Please note this event is being recorded.
I'd now like to turn the conference over to Lisa weeks. Please go ahead.
Thank you operator, and thanks to everyone for joining us today for benchmark fourth quarter and full year 'twenty and 'twenty earnings call. Joining me. This afternoon are Jeff Bank, CEO, and President and route block of Rajiv CFO.
On the market close today, we issued an earnings release, highlighting our financial performance for the fourth quarter and for 2020, and we've prepared a presentation that we will reference on this call.
The press release and presentation are available online under the Investor Relations section of our website at Www Dot bench Dot com.
This call is being webcast live and a replay will be available online following the call.
The company has provided a reconciliation of our GAAP to non-GAAP measures and the earnings release as well as in the appendix of the presentation.
Please take a moment to review the forward looking statements advice on slide two and the presentation during.
During our call we will discuss forward looking information as a reminder, any of today's remarks that are not statements of historical fact are forward looking statements, which involve risks and uncertainties as described in our press releases and SEC filings.
Actual results may differ materially from these statements most notably from the ongoing impact of the COVID-19, pandemic and benchmark undertakes no obligation to update any forward looking statements.
For today's call, Jeff will begin by covering a summary of our fourth quarter results and the summary of initiatives progress and 2020 Roop will then discuss our detailed fourth quarter and 2020 result, including of cash and balance sheet summary, and first quarter 2021 guidance.
Jeff will wrap up with and outlook by market sector, and an update on our strategic initiatives for the year 2021, including ESG and sustainability. We will then conclude the call with Q&A.
If you will please turn to slide three I will turn the call over to our CEO, Jeff Burbank.
Thank you Lisa.
Good afternoon, and thanks to everyone for joining our call today we.
And we hope all of you are remaining safe and healthy during these times.
And Q4, we delivered revenue of $521 million, which was at the midpoint of our guidance for the quarter with improving higher value sector revenue mix and better operational efficiency, we achieved non-GAAP gross margins of nine 6%, which was above our target of 9%.
Even with slightly higher SG&A expenses in the quarter due to higher variable compensation and higher than anticipated COVID-19 related expenses of one 6 million or about <unk> <unk> per share the resulting non-GAAP operating margin was three 4% and non-GAAP earn.
<unk> was <unk> 34 per share.
Our team's effort to bring down inventory and better manage working capital are bearing fruit with cash conversion cycles coming in at 71 days, which enabled $84 million of free cash flow for the quarter.
We delivered these results and the fourth quarter and missed.
Continued challenges, including the increase in Covid and infection rates and our communities around the world, particularly impacting on North America operations.
Our employees operations leadership and Covid Task force are continuing to do everything possible to provide a safe work environment our sites around the world.
I cannot say, thank you enough to our team for all of their hard work to deliver for our customers.
Please turn to slide four.
Our go to market team continues to do a great job and we had another strong quarter of bookings across all business areas of benchmark.
When I joined the company, we set a goal of consistently achieving over $200 million of new bookings per quarter.
And I'm proud to report that even in the face of the global pandemic, we achieved over $800 million and new bookings for the 2020 calendar year.
As I've shared before many elements contribute to driving revenue growth.
As reducing regrettable losses, and our business, which we also made progress on in 2020.
More importantly, this achievement of new bookings bodes well for our future growth when coupled with our high customer satisfaction and progress on our other go to market initiatives.
And the medical sector, we were awarded new manufacturing programs for the state of the art DNA sequencing analyzer and surgical devices of electronics.
We were also awarded design services for a low temperature pharmaceutical storage freezer for which we expect to compete and win future manufacturing revenue.
And the A&D sector, we were awarded new programs for soldier training systems and flight control of electronics.
I want to briefly highlight the flight control system win referenced on this slide.
We competed with the largest companies and our peer group for this program.
We were successful because of our technical depth and aerospace technologies and our innovative approach to solving their most advanced the engineering challenges.
Similar to what I have shared previously we offered the customer of solution that included differentiated product engineering services, coupled with the robust global manufacturing proposal.
Our successful plan to scale with the commitment to of one benchmark solution provided the winning formula.
And industrials, we were awarded new outsource programs from power controls electronics destined for a low cost manufacturing solution in North America.
And of full system box build for a lidar control box application.
And computing and telco, we were awarded new fixed broadband products and new programs for our benchmark solutions technology team.
Similar to last quarter, our new business pipeline continues to be strong across our targeted sectors and subsectors and we remain very encouraged about the prospects for continued wins, where the outsourcing environment for both engineering and manufacturing projects remains favorable.
If you'll please turn to slide five.
Despite all of the challenges associated with 2020, we made steady progress on our key strategic initiatives that we laid out for the year.
We exited the year with customer satisfaction and an all time high as a result of our customer focused initiatives.
We also made progress on making it easier to do business with benchmark, along with improvements and deepening our strategic relationships and growing our position with existing accounts.
Our regrettable loss measure has improved significantly and the last 18 months.
While we have room to improve customer satisfaction and further I'm pleased with the positive trends and the impact this is having on increasing business with our customer base.
This customer centric approach is an important foundation and growing our business as part of our sector strategies, we align processes to invest and technology to increase win rates.
As previously mentioned, we had a record year of new bookings and which we sold the full breadth of services to our customers.
We are focused on ensuring bookings convert to revenue to the.
That and we experienced the annual revenue growth of more than 33% and semi cap and 11% and medical sector.
Turning to enterprise efficiencies, we made solid progress on this initiative and the past year.
We continue working on optimizing our global footprint, including completing the previously announced closures and some locations and ramping up new capabilities and others.
We had announced in Q3 of last year, our intent to close our aerospace turbine and machining facility given the lack of alignment with our long term strategy and the downturn and the market.
Ultimately and Fortunately for our customers and employees, we were able to divest of these assets versus shutting down the site and we transferred the majority of personnel and assets to the acquiring company.
In parallel we have been working on the Angleton site closure and executing the transition plans, which remains on target.
In addition, we maintained our focus on expense management.
Through improved processes G&A centralization of activities and investment prioritization, we manage our SG&A expense to $122 million for the year, which was lower than forecasted.
Lastly, improving margins and effective working capital management allowed us to exceed our cash flow targets for the year.
Finally, as I will reference and our ESG update later in the call, we have made strides and engaging talent and shifting our culture.
As I've shared previously benchmark is of great partnership attitude engages with integrity and all endeavors and of foundation centered on our customers.
We've continued to invest and new diverse skills and talent across our organization.
Our ongoing commitment to advancing diversity and inclusion efforts at all levels and the company through our ESG processes will make benchmark of more technically technologically rich and innovative organization.
Now I will turn the call over to Ruth to discuss fourth quarter financial results.
Thank you, Jeff and good afternoon, I hope, everyone and their families continue to be safe and healthy.
Please turn to slide seven from a revenue by market sector.
Total benchmark revenue was $521 million and Q4, which was in line with the midpoint of our Q4 guidance and similar to our Q3 revenue of $526 million as expected increased revenues from stronger demand and new programs and industrial defense and semi cap offset declines and medical.
Medical revenues for the fourth quarter were down sequentially from continued lower demand for products involved and COVID-19 therapies, such as ventilators X rays, and ultrasound devices and overall softer demand related to elective surgeries and trauma devices, which have yet to returns of pre COVID-19 demand levels.
Semi cap revenues were up 2% and the fourth quarter and up 24% year over year from continued strength for wafer fab equipment to support growth and DRAM and logic demand across our semi cap customers.
<unk> revenues for the fourth quarter increased 6% sequentially due to strong revenue from radar communications and land based vehicles.
Conversely, commercial aerospace demand, which was.
25% from 2020 revenues remained muted and continue to decline on certain platforms during the quarter.
Industrial revenues for the fourth quarter were up due to seasonality from infrastructure and transportation markets and the increase in engineering services.
Demand from customers exposed to the oil and gas market remained soft.
Overall, the higher value markets represented 81% of our fourth quarter revenue.
Traditional market revenue comprised of computing and telco was flat quarter over quarter.
New program ramps and high performance and secure computing and and broadband network components were offset by lower demand and commercial satellite and data center products.
And our traditional markets represented 19% of fourth quarter revenue, our top 10 customers represented 38% of sales and the fourth quarter. Please.
Please turn to slide eight.
Our GAAP earnings per share for the quarter was 21.
Our GAAP results included restructuring and other onetime costs totaling $4 4 million related to reduction in force and other restructuring activities around our network of sites.
Our Q4 for Q4, our non-GAAP gross margin was nine 6% a 90 basis point sequential increase during.
During the quarter gross margin was positively impacted by overall sector mix improved absorption and a number of customer recoveries, which represented 30 basis points of the 90 basis point increase.
We estimate that we incurred approximately $1 6 million of approximately <unk> <unk> per share of COVID-19 costs, and the quarter versus $1 3 million in Q3.
Our SG&A was $32 4 million and increase of $2 7 million sequentially and $8 $2 million year over year. The sequential increase are primarily due to the reinstatement of salaries and benefits and higher variable compensation and the year over year increase is related to higher variable compensation.
<unk> and our it infrastructure and other expenses.
Non-GAAP operating margin was three 4% and increased from 3% and Q3 due to the increased gross margin.
In Q4, 2020, our non-GAAP effective tax rate was 17, 5%, which was lower as the result of the mix of profits between the U S and foreign jurisdictions.
Non-GAAP EPS was <unk> 34 for the quarter and non-GAAP ROIC was six 2%.
Our non-GAAP EPS improved sequentially, primarily from improved operational performance.
Please turn to slide nine and for our revenues by market sector for the full year of 2020 versus 2019.
Total benchmark revenue for 2020 was $2 1 billion a decrease from $2 3 billion and 2019 from lower demand from pandemic impacted customers and commercial aerospace oil and gas and elective medical subsectors.
For the full year higher value markets were up 3%, primarily from semi cap and medical which increased 33% and 11% respectively year over year.
Semi cap strength was led by increased demand for DRAM, and logic tools and increasing market share with existing programs across our customer base.
Overall, the A&D sector declined slightly from 2019 revenues due to the deterioration on the commercial aerospace sub sector. As a reminder, for the 24 2020, the A&D sector was approximately 75% defense and security related and 25% commercial aerospace and defense demand.
Maine's strong throughout the year with increases across a number of new and existing programs.
Overall medical revenues grew 11% from new and existing programs.
Industrial revenues were down 18% year over year, primarily from softness and the oil and gas industry with additional impacts from the commercial and building infrastructure markets, where investments and many large projects remain delayed.
Overall, the higher value markets represented 81% of our 2020 revenue compared to 71% and 2019.
Okay.
Revenues in the traditional markets were down 41% from 2019, primarily from our exit of the legacy computing contract and Q3, 2019 and program transitions and telco.
Our traditional markets represented 19% of 2020 revenues compared to 29% and 2019.
Our top 10 customers represented 41% of sales for the full year 2020, we had one customer supplied materials that was greater than 10% of revenue for the full year.
If youll, please turn to slide 10.
Our GAAP earnings per share for fiscal year 2020 was 38.
Our GAAP results included restructuring and other onetime costs totaling approximately $19 million. These.
These costs included $13 million of costs related to the site consolidation efforts reduction and work.
Workforce activities and other restructuring type of activity around our network approximately $7 million and asset impairments offset by a $1 million and net.
Insurance proceeds.
Our 2020 non-GAAP gross margin was eight 4% a 20 basis point sequential increase.
We achieved this increase even with the operational disruptions caused by the COVID-19 pandemic.
Estimate that we incurred approximately $7 million of net COVID-19 costs and 2020.
Our non-GAAP SG&A for 2020 was $122 million and increase of $3 8 million from 2019, the increase was primarily due to higher variable compensation and it infrastructure investments.
Non-GAAP operating margin for the year was two 5% a decrease from 3% and 2019 due primarily to the effects of the pandemic on our operational efficiencies and the incurrence of Covid specific costs.
And 2020, our non-GAAP effective tax rate was 19, 4%.
Non-GAAP EPS in 2020 was 95.
And non-GAAP ROIC was six 2%.
Please turn to slide 11 to review of our cash conversion cycle performance.
Our cash conversion cycle days were <unk> 71, and the fourth quarter and improvement of 10 days from the third quarter.
And our fiscal year 2020, and in general we continue to be focused on effective working capital management. This has resulted in the inventory and contract assets improving by six days and advanced payments from customers improving five days in Q4.
Turning to slide 12 for an update on cash flow and the summary of our cash and debt balance sheet items our.
Of our cash balance was $396 million at December 31, with $189 million available and the U S. We continue to have a strong capital structure and our liquidity position provides flexibility to manage our business and best for the future and return capital to shareholders and.
At December 31, 2020, we had $137 million outstanding on our term loan with no borrowings outstanding on our available revolver.
Slide 13 shows our cash generation, we generated $95 million and cash flow from operations and Q4 and generated $120 million for the full year of 2020, our free cash flow was $84 million and Q4 and $81 million for the full year 2020.
Slide 14 shows our capital allocation activity.
In Q4, we paid cash dividends of $5 8 million and repurchase shares of $5 9 million.
In fiscal year, 2020, we repurchased $25 2 million, which represented approximately of 1 million shares as of December 31, 2020, we had approximately $204 million remaining on our share repurchase authorization.
And at a minimum we will continue to repurchase shares to offset our annual equity dilution beyond that we'll evaluate share repurchases opportunistically, while considering market conditions.
From 2018 to 2020, we executed $359 million and share repurchases and paid $67 million and dividends to our shareholders.
Turning to slide 15 for a review of our first quarter of 2021 guidance.
We expect revenue to range from $480 million to $520 million, which reflects normal normal seasonality for some sectors.
We have had a number of inquiries regarding the supply chain environment, we can confirm that lead times of extending for some components of the supply chain, including semiconductors and certain passes we aren't experiencing any near term impacts beyond our normal expectations, but we will continue to work proactively with our suppliers and customers.
And to secure supply to fill future demand.
We expect that our gross margins will be eight 1% to eight 3% for Q1 and SG&A.
And will range between 29% and $31 million the sequential drop in gross margins and is expected due to lower revenues and the ramp of new programs. We do expect that as we continue throughout fiscal year 2021, gross margins will increase and we expect gross margins for the full year to be at least 9% and.
Implied in our guidance of $2, 2% to 4% non-GAAP operating margin range from modeling purposes.
The guidance provided does exclude the impact of amortization of intangible assets and estimated restructuring and other costs we.
And we expect to incur restructuring and other nonrecurring costs in Q1 of approximately $1 million to $2 million.
Our non-GAAP diluted earnings per share is expected to be and the range of 18% to 22.
Or a midpoint of 20.
We estimate that we will generate approximately $60 million to $80 million of cash flow from operations for fiscal year 2021.
And capex for the year will be approximately $45 million to $50 million as we prioritize investments to support new customers and expand our production capacity from revenue growth.
Other expenses net is expected to be $2 5 million, which is primarily interest expense related to our outstanding debt. We expect that for Q1, our non-GAAP effective tax rate will be between 19, and 21% because of the distribution of income around our global network. The.
The expected weighted average shares for Q1 2021 of our $36 $3 million.
And this guidance takes into consideration of all known constraints for the quarter and assumes no further significant interruptions to our supply base operations of our customers'.
The guidance also assumes no material changes to and market conditions due to COVID-19.
And with that back to you Jeff.
Thanks for that update.
Following <unk> comments on our guidance for the first quarter I wanted to provide some additional color on our view of demand by sector for 2021 on slide 17.
For the first quarter, we expect revenue slightly declined sequentially from some seasonality and sector specific dynamics <unk>.
Strong demand for semi cap and the new <unk> program ramp and computing are offset by continued softness and some of our medical sector products, our industrial sector oil and gas products and further weakness in our commercial aerospace business.
From this Q1 base, we expect the sequential revenue growth throughout the remainder of the year supported primarily from new programs and industrials medical and computing.
And the medical sector, we're experiencing revenue.
And we're expecting revenue to remain relatively flat and the first half as demand started to slow for COVID-19 related therapy devices in the <unk> and elective surgery products have yet to recover however.
However, we're in flight on a large number of new program ramps for diagnostic and ultrasound products that will benefit second half revenues.
With our deep expertise and design and manufacturing for complex medical products and our recent program wins, we have confidence that 'twenty, one 'twenty and 'twenty, one will be another growth year for the medical sector.
And semi cap demand remains strong for semiconductor capital equipment, and Q1, which we expect to continue throughout all of 2021, driven by the deployment of <unk> and cloud computing demand created by work from home and school from home trends as well as growth and E Commerce.
We remain well positioned in the sector with both of our advanced precision machining and electronics manufacturing services and now expect revenues to grow greater than 10% over 2020 levels.
Moving to the A&D sector outlook, we expect sector revenues to be flat to potentially down in 2021.
Expected gains from new programs and our strong defense business are offset by further declines and persistent weakness with our commercial aerospace customers.
Customers and commercial aerospace have not provided visibility into a timeline for demand improvements.
Conversely, we are seeing further improvements and military programs supporting advanced communications radar applications and ground based systems.
And industrials, we expect strong year over year of growth from our new programs that will ramp and first second half 2021.
At present, we suspect that our oil and gas business will begin to recover starting in Asia and the back half of the year.
Independent of this recovery, our new sector leader and business development teams have made significant strides in growing both existing and new accounts and.
In fact, the industrial sector had the highest value of bookings in 2020.
And these new programs and support our confidence and full year growth even against the softer near term demand outlook.
For the full year, we also expect growth and the traditional markets and the telco market, where we remain highly selective and our engagements. We expect the overall stable revenue underscored by demand strength and satellite and broadband communication programs.
And computing, we expect strong revenue contribution from high performance computing projects with expected ramps and late Q1 through mid year 2021.
Let's now turn to slide 18, where I will share some broader perspectives on the new year.
Now there were in 2021, we are becoming increasingly bullish on our ability to achieve mid single digit growth over 2020.
We're expecting continued growth and the medical and semi cap markets with incremental contributions from industrial and high performance computing.
Our higher value markets are expected to grow for the full year, we expect the higher value markets to again represent over 80% of our total annual revenue.
We are targeting gross margins for the full year to be at least 9% as we offset headwinds from continued COVID-19 costs.
And the number of new program ramps with benefits from our operational excellence programs.
We are also targeting SG&A for the full year to be below 6% from effective expense management and continued progress with shared services consolidation.
We remain committed to growing shareholder value and providing incremental returns to shareholders through quarterly dividends and with our share buyback program.
If youll turn to slides 19 and 20.
I wanted to provide and update on our commitment to supporting ESG and sustainability, which is the strategic imperative for benchmark.
At present, the five tenants of our ESG strategy.
Our environmental responsibility our people our community governance and the ongoing COVID-19 response.
Under the oversight of the board our internal ESG Council is comprised of an enterprise wide cross functional team tasked with defining and implementing key projects and investments that will advance these priority initiatives.
We have further supplemented this team by partnering with like minded customers and by engaging with third party consultants, who have specific ESG experience to further accelerate our strategy.
For your information, we have been monitoring and tracking energy reduction programs for almost 10 years and supported the environment.
On the governance front, we are of diverse corporate board with 22% of directors represented by women.
And we can and will do more.
We have plans and in flight to expand racial diversity on our board of directors and overall plans and the company to strengthen our diversity and inclusion platform through strategy training and.
And our focus recruiting plan.
We have conducted a peer analysis and our mapping current material ESG programs to SaaS <unk> standards, which we will publish this quarter.
We will also provide further updates and the ESG sections of our upcoming annual report and proxy in Q2.
We expect to release the stand alone sustainability report in 2022.
Future reports from benchmark will include both qualitative and quantitative measures, reflecting updates and improvements as we advance our overall ESG strategy.
I want to wrap up our call today with a summary of our three strategic initiatives for 2021.
On slide 21.
Growing revenue is a top priority of benchmark.
As I referenced earlier, we have spent a considerable amount of time over the past couple of years optimizing the customer experience through recurring feedback mechanisms and enhancing our strategic relationships.
Our account management processes are improving and we are focused on increasing the attach rate of design engagements to manufacturing wins through selling the full breadth of services and capabilities to our customers.
Once we successfully win new programs. We are then laser focused on supporting new program ramps, which are forecasted to be at record levels in 2021.
In order to achieve our financial targets, we must also invest in the sustainable infrastructure and talent needed to scale our business.
And as I discussed earlier, ESG sustainability initiatives and advancing diversity and inclusion of <unk>.
And then these foundational effort.
This also involves creating an efficient and scalable infrastructure to streamline the global delivery of our shared services.
We have rationalized, our investments and corporate infrastructure, including our HR.
Finance and other shared services and centralized these groups to achieve scale, while concurrently managing SG&A expense in support of our midterm model, which we introduced late last year.
Ultimately our model reflects that we expect to grow earnings faster than revenue rec.
Revenue growth and our model enables higher utilization to better leverage our fixed costs.
But not all revenue dollars are created equally we.
We are targeting a portfolio of customers with the right sector mix the value of our advanced technologies and Leverages the breadth of our services through.
Through these targeted higher margin customer engagements and ongoing operational excellence efforts, we will expand margins and.
ROIC through.
Through 2021 and into the coming years.
I remain excited about our teams ability to capitalize on the growth opportunities and our diverse end markets, where our deal pipeline and win rate is increasing and we remain focused on executing our ongoing initiatives to increase value for our customers employees and shareholders.
I look forward to 2021 with optimism knowing that our strategic investments and the business to drive differentiated value and sustainability have solidified the path to achieve revenue margin and earnings growth and 2021.
And with that I'll turn the call over to the operator to conduct our Q&A.
Okay.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
And if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Okay.
The first question comes from Jim and liquidity with Needham and company. Please go ahead.
Thank you good afternoon.
Hello, everyone.
Jeff Thanks.
For the color on the.
How are you thinking about 'twenty 'twenty, one and that's helpful.
And I wanted to go back and gross margins because I'm looking at the at the Q4 gross margins looking at the revenue levels that you were at.
And being able to demonstrate those kind of gross margins.
You highlighted mix were there some other factors and and maybe if you could I may have missed it but did you break out the impact of Covid on gross margins in the quarter.
So Jim this is roop I appreciate the question and we didn't break out the gross margin effect, but in effect of about 30 basis points of.
The COVID-19 costs and net gross margin roughly although not all of that and I guess and a little bit less than that because there's a little bit of SG&A as well, but the.
Get to the heart of your question part of this is taken out the one time recoveries that we had in Q4. So 96 comes down to about 93, but then you look at the revenue difference and most importantly within that revenue difference is the nature of the revenue rate, we got lower higher value market revenue in Q1 and.
We've got increased traditional market revenue in Q1, and then the other part of that is so from an absorption standpoint that has an effect. The other part of that then is where the revenue is within our sights overall, where it also have some further absorption issues potentially or challenges. If you will than the final piece is obviously there are some additional costs that you tend to have and Q1.
And from <unk>.
Employee expenses payroll taxes, the sort of things that are factored into that as well the other piece of it.
Remind you of Jim through our comments as we talk about having margins expand through the year and at the end of the day for 'twenty. One we we think getting to a 9% gross margin for the full year or at least 9% is very reasonable and and and what we expect.
Okay and.
It sounds like and a couple of instances of couple of other verticals.
We're anticipating a pretty healthy second half ramp and I think medical being one that you called out is do you guys have a pretty good line of sight on some of these new programs in terms of.
Because there is always the risk that some of this can slide and I'm just wondering how confident you are about that yes.
Yep.
I, probably have higher confidence then and in the past the little bit because for some of these programs. We're in we're in the thick of it right and even saw some of those programs get qualified and in.
In the fourth quarter and and so we're we're off we're off running on a number of new things. It does take time and it does take sometimes multiple quarters to really see it ramp up but we're in the past we might have said, okay. We've got to win and there's still engineering to go on and it's going to take time I think our line of sight, particularly and medical is that there is a number.
<unk> of things that are that we're actually investing and it's actually cost us a little bit on the cost side of things early on but I would say, we have pretty high confidence and both medical and industrial debt.
A lot of wins over the last two years and in fact, increasing in 2020, which won't all of impact us in 'twenty, one, but pretty bullish and in those two segments in particular.
Which you probably picked up.
Got it okay, well, thanks very much.
Sure. Thanks, Jim.
As a reminder, if you have a question. Please press star then one to be joining the queue.
The next question comes from on Jeff.
With the Dow team. Please go ahead.
Hi, Thank you for taking my question and good evening and I first wanted to ask about the industrial AC catching the index.
Infrastructure and.
And expectation in the oil and gas can you just remind us how big the oil and gas of the.
Hi.
And around 20% and all of.
Of that segment, obviously with some of the decline it's a smaller piece kind of going forward that we see there.
But some of the strength just to kind of pick up on where test and measurement is still is a pretty big category for us and we do some test and measurement of oil and gas, but beyond that right the things like silver scopes and things on a more broadly used.
All of our important element of that of the group and we've got some new wins there.
Beyond that we also.
Have some lidar activity that is.
We've been investing and for quite some time and and see some of those programs come into production and.
The coming year. So those are of a couple of areas, where we see.
Strength in the industrial and and pretty excited about the potential there because I think if you remember on you last year about a year ago. We felt like we were under participating there, we're doing better and factory automation and warehousing and some of those other segments as well but.
Those are a few touch points for the for 'twenty one.
Okay Yeah.
Hi, my follow up.
And that's our strength.
Those pockets of strength and could be pretty.
Good day, and so and oil and gas and and the infrastructure and and.
And that presentation comes from.
That'd be pretty powerful.
So on you broke up a little bit there, but obviously with that strength and once the oil and gas does recover I think it's an open question as to the timing of what that recovery looks like or how the vaccine rollout affects infrastructure projects and the sort of things. So yes, you're right there could be some some <unk>.
The strength that we could see as we get to the latter part of 'twenty, one and and hopefully into 'twenty two.
Okay. Thank you and then.
I think you participated in some testing and.
The testing and the U K.
Is that something you see and.
And Julien.
S S.
And so this may be expanded testing.
And to open up the economy, Michigan.
Oh, yes.
We have a we have a customer and the and.
Europe debt.
And is building a.
And we're building for them a rapid COVID-19 test device switch pretty exciting technology.
It is truly just amazing debt you can get of resolve point of care and.
Les and an hour.
And basically you swipe, this and and you're able to quickly get a result, and there is quite a bit of the UK government is leveraging that too.
To deploy that around Europe, and they're obviously they have designs that go beyond that so all comments too much on the cost on the customer but.
But pretty exciting about the technology and and we're probably most excited because this set of applications beyond just COVID-19, it's not COVID-19 specific and the sense that you.
Do you think about other <unk>.
<unk> or other things, but also the DNA level capabilities. So you know.
It's pretty amazing where the technology can go but we've been a phenomenal.
Phenomenal customer great partner and work jointly together to ramp this and and hope for it to contribute meaningfully in 2021.
As we started producing volume in the fourth quarter.
Okay. Thank you that will fall from me.
Thanks Sonya.
This concludes our Q&A session I would like to turn the conference back over to Lisa.
Any closing remarks.
Thank you again for joining our call today and you have any follow up questions regarding our earnings release, please don't hesitate to reach out and I'll be happy to follow up I also wanted to putting the reminder, the benchmark will be supporting the Sidoti Spring Conference on March 26, and we look forward to engaging with you at the Suzanne Please have a great afternoon, and we look for.
And to sharing our first quarter results with you on our April earnings call and good afternoon. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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