Q4 2021 FARO Technologies Inc Earnings Call
Program was about Beacon.
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Good afternoon, everyone and welcome to the Faro technologies fourth quarter 2021 earnings call.
For opening remarks, and introductions I will now turn the call over to Michael Funari at Sapphire Investor Relations. Please go ahead.
Thank you and good afternoon with me today from Faro are Michael Burger, Chief Executive Officer, and Allen <unk> Chief Financial Officer.
Today after market close the company released its financial results for the fourth quarter and full year of 2021.
Related press release and Form 10-K are available on Faros website at Www Dot Ferro Dot com.
Please note certain statements in this conference call, which are not historical facts may be considered forward looking statements that involve risks and uncertainties and include statements regarding future business results product and technology development customer demand inventory levels economic and industry projections or subsequent events various factors could cause actual result.
To differ materially.
Some of these factors have been set forth in today's press release and are described at length in our annual and quarterly SEC filings forward looking statements reflect our views only as of today.
Except as required by law, we undertake no obligation to update or revise them.
Today's conference call management will discuss certain financial measures that are not presented in accordance with U S. Generally accepted accounting principles or non-GAAP financial measures in the press release, you will find additional disclosures regarding these non-GAAP measures, including reconciliations to comparable GAAP measures.
While not recognized under GAAP management believes these non-GAAP financial measures provide investors with relevant period to period comparisons of core operations. However, this should not be considered in isolation or as a substitute for a measure of financial performance prepared in accordance with GAAP.
Now I'd like to turn the call over to Michael.
Thank you Mike.
Afternoon, welcome to our call.
Our fourth quarter demand continued to improve throughout the quarter, which enabled reported revenue to grow 27% sequentially.
8% year over year to approximately $100 million.
Despite a strong dollar exchange rate and supply chain challenges, which muted our overall revenue level for the quarter.
We remain encouraged by our demand recovery with strong market acceptance of our next generation quantum Max scan arm and the traction we're seeing in our hollow builder software application.
Targeted at construction and facilities management.
In addition in the fourth quarter, we're pleased to have demonstrated the operating leverage that's been built into our business over the last two years.
Our reported 14% fourth quarter EBITDA margin is nearly twice our historical profitability on similar revenue levels.
We expect to see additional profit upside as demand continues to recover.
And we approach our stated success model of 20% EBITDA margin on roughly $110 million of quarterly revenue.
Since our launch in July of 2021, we have continued to receive extremely positive customer feedback and why the acceptance of our new quantum Max scan arm across nearly every geography.
As a result fourth quarter volumes increased 43% sequentially as customers realize greater value from the speed accuracy and versatility of the quantum Max which dramatically increases their productivity and metrology grade scanning applications.
We are seeing signs of accelerated legacy tool replacement as well as customers new apparel embracing our differentiated solution.
We view this as a positive indicator and validates our strategy of nearly.
Early customer engagement to better understand their needs, leading to differentiated solutions that generate higher customer value and additional product demand.
Also in the fourth quarter, we continued to see strong demand for our photogrammetry based solution, which we acquired through the hollow builder acquisition in June of 2021.
Hello builders unique unique workflow, which combines hardware agnostic image capture.
Artificial intelligence based tax task automation, along with an easy to use time phase image viewer.
Delivered the SaaS business model has a wide ranging applications across a broad set of markets.
We are initially focusing on construction and facilities management markets, but expect to broaden our focus capabilities in this area continues to expand and mature.
We continue to believe there is a large untapped market potential per barrels technology that combines our long held high accuracy laser scanning expertise along with hollow builders easy to use photogrammetry based solution.
Bringing these capabilities together into the barrels sphere or soon to be released cloud based platform.
It's an area, where we are placing increased levels of focus and investment as we believe together with our other software applications form the tip of the spear for Burroughs broad digital reality offering into the meta versus.
The market potential for digitizing the physical world is enormous and we're excited our technology and expertise position us well over the long term.
Illustrating the potential for this solution in the fourth quarter, we signed a mid six figure annual recurring revenue deal with one of the world's largest retailers, who is deploying hollow builder across all U S stores as a part of our new space management initiatives.
As a frame of reference the single recurring revenue deal with a three year term as barrels largest single transaction in the last three plus years.
Even more exciting is the magnitude of the potential applications. We are just beginning to explore.
Last quarter, we ended with.
Indicated our first set of capabilities with apparel sphere have begun customer beta testing.
Those tests continue to go well and we expect to have formal product announcements in the second quarter of 2022.
Yeah.
We believe our strategic transition to developing differentiated solutions through a deeper understanding of our customers' workflows.
At the same time, adjusting our operating structure to generate leverage is paying off.
We are encouraged by the underlying market demand for our products and while we expect to experienced typical seasonal softness in the first quarter. We believe the combination of new product introductions and the launch of barrels sphere will strengthen demand as we move through 2022.
Before Alan provides an overview of our fourth quarter financials, Let me provide a brief update on our manufacturing outsource initiative with our partner Sanmina.
Our two teams have been working exceptionally well together and the foundation is set for the manufacturing transition to be complete by the end of the first half of 2022.
We continue to believe in the long term financial and operational benefits, we previously outlined and expect to realize $12 million in annualized savings primarily.
Primarily from supply chain changes.
That said today's unprecedented supply chain environment has resulted in short term material cost headwinds and delayed long term savings.
With that I'll turn the call over to Allen for an overview of our fourth quarter financial results.
Thank you Michael and good afternoon, everyone.
Before I discuss the first quarter.
Fourth quarter results in greater detail I'd like to take a moment to highlight two new metrics, we are introducing this quarter.
As we continue to emphasize our current software and solutions offerings and expand our platform capabilities with both organic and inorganic investments. We believe both software revenue and recurring revenue will become increasingly important investor in metrics.
As such beginning this quarter, we will report both software and recurring revenue.
Ladder of which includes software subscription and software maintenance revenue as well as the recurring portion of our hardware repair contracts.
For fiscal year 2021 software revenue was $45 1 million or 13% of total revenue and recurring revenue was $64 1 million or 19% of total revenue.
While as a percentage software and recurring revenue may increase or decrease from quarter to quarter due to the seasonality of our hardware revenue on an absolute dollar basis, we expect bulk revenue types to continue to grow at accelerated rates over time.
Turning to the fourth quarter revenue of $100 2 million grew 8% when compared to the fourth quarter of 2020 as a result of continuing market demand improvement compared to last year's market softness caused by the pandemic.
On a year over year basis hardware revenue of $64 7 million was up 8% software revenue of $13 7 million was up 14% and service revenue of $21 8 million was up 3%.
<unk> revenue of $16 5 million was up 10% when compared to Q4 of 2020.
Partially muting our revenue performance was a strong U S dollar as well as limited material availability that prevented us from shipping all of the three D metrology demand customers placed on us.
GAAP gross margin was 55, 6% and non-GAAP gross margin was 55, 8% for the fourth quarter of 2021.
Gross margin increased year over year, largely due to volume increases with prior periods.
From prior periods that was somewhat offset by material cost increases, resulting from today's inflationary pressures.
Given the ongoing impact of inflationary pressures on material costs. We continue to expect to operate near the lower end of our stated success model of 55% to 60% gross margin with some quarters, depending upon revenue levels dipping below the low end of the range.
GAAP operating expenses were $51 8 million and included approximately $4 million in acquisition related intangible amortization and stock compensation expenses and $3 7 million in restructuring costs.
non-GAAP operating expense of $44 2 million was $1 $3 million higher than Q4 of 2020 as we continue to increase our software investments both as a result of our hollow builder acquisition as well as our organic initiatives and a portion of the travel related expense savings realized during the pandemic return.
GAAP operating income was $3 9 million in the fourth quarter of 2021, compared with an operating income of $2 7 million in the fourth quarter of 2020.
Primarily due to fourth quarter 2021 revenue growth.
non-GAAP operating income was $11 7 million in the fourth quarter of 2021 compared to $8 1 million in the fourth quarter of 2020.
Fourth quarter, adjusted EBITDA was $14 2 million or approximately 14, 2% of revenue.
Our GAAP net loss was $31 7 million or $1 74 per share, which included $27 million of income tax expense that resulted from the creation of a valuation allowance against deferred tax assets that was required given our three year cumulative U S loss position that resulted from historical restructure.
<unk> charges.
Our non-GAAP net income was $8 7 million or <unk> 48 per share for the fourth quarter of 2021 compared to $6 3 million or <unk> 35 per share in Q4 2020.
We continue to maintain a strong capital structure with a cash balance of $122 million and no debt.
Our accounts receivable balance increased nearly $20 million sequentially compared to last quarter.
In closing, we're pleased with our fourth quarter financial performance. We returned to 2019 Q4 revenue levels when adjusted for currency and material availability challenges and we have nearly doubled our underlying profitability on similar historical revenue levels.
The initial commercial success of our quantum Max has exceeded our expectations and we've made significant progress on our vision for leveraging ferrous differentiated technology to capitalize on the enormous potential of the digital reality market.
We closed a meaningful holo holo builder deal with a large retailer customer.
This proof point of the broad applicability of the solution into the meta versus positions as well to double hull builder revenue over the next 12 months.
We are providing investors greater transparency in our performance by reporting both software and recurring revenue levels.
And finally those of you looking carefully at the press release, we will note the inclusion of first quarter guidance.
In the spirit of providing greater transparency to not only past performance that future performance as well this quarter, we will begin providing quarterly guidance on revenue and profitability.
In the first quarter of 2022, we expect revenue of between 80 and $88 million.
And non-GAAP earnings per share between negative <unk> <unk> and.
And positive <unk>.
Note that included in our first quarter expectations are approximately 200 basis points of unfavorable material cost that are adversely affecting gross margins.
While we do not intend to provide annual guidance, we do continue to expect our revenue seasonality to approximate historical patterns.
This concludes our prepared remarks and at this time, we'd be pleased to take any of your questions.
Yes.
At this time, if you would.
Like to ask a question. Please press the star and one on your Touchtone phone.
You may withdraw your question at any time by pressing the pound key.
And once again for your questions that is star one.
We will take our first question from Greg Palm with Craig Hallum. Please go ahead.
Alright, Thanks, good afternoon, everyone I wanted to.
Hey.
Wanted to start with Q4.
Mentioned supply chain impacts the book to Bill wasn't.
That far off of one and it was actually quite a bit lower than kind of your long term average in Q4. So I just wanted to kind of better understand your comment of maybe inability to ship some products in the quarter.
We we.
We had back we basically had backlog we couldnt ship, primarily due to the fact that mix had changed throughout the quarter.
We felt like as you know we had some backlog pushing into Q1 or pushing into Q4 from Q3. So we were able to ship that but we had upside associated with.
Yeah.
At the end of the quarter, and we Werent able to actually capitalize on it not all of it was booked in the quarter, because we couldnt ship. It wasn't booked all in the same quarter, but now actually since booked and reshaped. It. So it was a timing issue Greg.
Got it okay that makes more sense and as you kind of think back on the quarter I guess, what stood out to us maybe from a geographic standpoint was it looks like.
EMEA or Europe look pretty weak again relative to the other geographies. What are you sort of I guess, maybe broader what are you seeing geographically and what are you seeing from like an end market perspective.
The effect that we've seen in EMEA was.
Largely due to one market segment, which was AUC.
Many of the construction, maybe many of the gcs that we're doing business with in Europe have.
Basically you had issues in terms of coming back to work et cetera. So the AUC.
C market in Europe was really what drove that Miss in Europe also when you compare it back to last year at the same time.
Europe had a killer quarter. So I think it's a mix of both but frankly, it's primarily driven by the weakness of the AUC market in Europe .
North America has recovered very nicely and actually all three market segments in Asia as we've talked about last last quarter is just continuing to just war. So we're very excited by that.
We've got signs that Europe's recovering and we're hopeful.
We still got we still got very close to our numbers. Despite the weakness and that was driven and offset by that by the strength in China and the strength and recovery of the <unk> market in North America.
The other thing I would add Greg is the comment around the strong U S. Dollar would have primarily the EMEA market as well so that's another contributor too.
Some of the optics there.
Yes, no. That's good point and then Alan on the gross margin comment just to be clear is the 200 basis points off of what you did in Q4 off of what you would normally do on a seasonally lower quarter and should we expect that impact.
To mostly come in Q1 or will that linger on into future quarters.
It's a comment that as an absolute number so it's what we expect on an absolute basis not relative to what we just delivered in the fourth quarter I E read between the lines. There is a little bit included in there is.
A reasonable amount of that also included in the fourth quarter and it's more meant to help guide you relative to that 55% to 60% range because that did not include any of that material headwind.
Okay and is it going to linger on past Q1.
Yes, sorry.
We've not seen it.
We've kind of dodged a bullet I would think for 2020 and most of 2021.
It kind of bit isn't in Q4 of 2021.
I think it's getting worse I don't think it's getting better and it's very much like whack a mole when we'd have a problem in a particular commodity we ended up.
Working it out, but we continue to be surprised by by new shortages in commodities that we thought we recovered.
So our supply chain team the ops team coupled with the Sanmina team have done a phenomenal job to keep us cut a hole to this point, but.
I've never seen it this bad grid, it's very concerning and I. Thank him, hence our R. R cautious guide associated with that.
Yes.
It makes sense, Okay I'll hop back in the queue. Good luck. Thanks.
Thanks, Rick.
And our next question from Jim Ricchiuti with Needham <unk> Company. Please go ahead.
Hi, Thanks, good afternoon.
Just add Jamie on that last point.
Michael or Alan are you.
As you look at.
The material costs coming up are you taking any pricing actions have you taken any are you considering.
We have taken pricing actions as it relates to some of the new products that we've introduced.
We are considering.
Revisiting, particularly based on what's happened to us in Q4. So we are looking at it seriously looking at how do we actually.
Offset some of those price increase through pricing increase that we're seeing from those quite chain to our customers.
We'll say.
On cost I'm cautious about it because frankly.
We've got a lot of growth opportunities and I would rather take share.
And.
And thats been kind of our guiding principle through 2021, but.
But the rate at which these prices are coming at US now we may not have a choice we may end up having to pass it on and so we regret.
Grudgingly, we are looking at it.
Are you seeing any pricing actions from your major competitor as a result of.
Some of the pressures that are out there, they're saying the same thing.
It's spotty I wouldn't say that we've seen one of our larger distributor or larger competitors kind of wholesale just raise prices, we've seen them on certain deals and particularly through different channels.
So.
No we've not seen it kind of a wholesale move and I think thats, probably a prudent way to do it as well there are some markets that can.
Except to change better than others.
And particularly based on certain products in certain applications.
The process that we're in right now is reviewing that.
I wanted to turn to the.
The win that you hi.
Highlighting with hollow builder congratulations on that is there any color. Thank you provide.
In terms of either.
One the type of retailer and whats the sales cycle like in a deal like this this is.
Presumably I may have missed some of the commentary.
Clearly new customer.
It's an entirely new customer customer that Faro has never done business with traditionally.
It is a large retailer and I can't really I'm not allowed to divulge, whom the application is they are looking at all of their U S facilities.
They've got different facilities in different stages of.
Of use and Theyre looking at either re laying out remodeling or building completely new and they are using hollow builders a methodology of one.
Taking a status of what the current facilities are and so hollow builders are very easy easy to use almost intuitive.
Software package that allows you to document what you currently have.
And then.
Through the software enhancements that have been made also allows you to track the progress of the changes that you decided to make within that facility.
So the sales cycle for an enterprise company like this is relatively long and it is probably nine months to a year in terms of.
Pilots and trials et cetera that said as an individual we could get you up and running on a hollow builder application in the span of two and a half hours. So as an individual it's very quick but as you can imagine for a large enterprise company. That's using this as kind of a standard for all of their facilities, it's a longer sales cycle.
Did that answer your question Joe.
Good.
When you mentioned facilities.
It's not clear we talking about.
Distribution centers or stores it sounds like you're talking about it sounds like youre talking about distributions.
If I may just no no no.
No we're talking about in this situation stores.
Got it.
Is this is there a pipeline that you might be able to develop and leverage off of this win.
Absolutely.
Sure.
Why do we bring it up and we don't normally talk about it in this level of specificity, but I think the.
<unk>.
The market is I think very ripe for the operational and maintenance side of the world to embrace this digital technology and we've got some new competitors in this space companies like matter for companies like NAV is.
The market is massive and many companies have not really made the switch to a digital management cloud based management of their facilities.
Digitally and I think we're really I don't believe the market has hit a tipping point, but I think we're well positioned and we do believe that we need to develop both a construction construction management pipeline for hollow builder as well as the ownership.
Operation and maintenance side of it so.
We're very excited about I think it's early days for US we are expanding the team we're expanding the development resources behind the team.
We are working diligently to get our current the legacy.
<unk> selling organization up to speed on how to actually.
Sell the product. So so it's a lot of activity and early wins, it's encouraging.
Got it thanks, and thanks for all the additional information including the.
The quarterly outlook I appreciate it.
You've been bugging us for years. So there you go.
Yeah.
And we'll take our next question from Andrew de Gasperi with Baring Bank. Please go ahead.
Okay.
Hello.
Just.
One of them maybe quickly ask on.
Yes firstly.
Hello, Bill there you've mentioned earlier that you were thinking of expanding to new areas.
I'm wondering is how do you think like manufacture three D metrology area space or do you think theres areas beyond.
Yes, Thats your the three that you normally involved in.
No well I do believe the O&M space is an area, where we have not participated in apparel when I say not in the context of apparel traditional.
So.
The building ownership.
The property owners.
And the amazing tool for them too.
One.
Timestamp changes that are happening in their facility.
Great way to do inventory, great way to actually.
Good.
Put into a digital format of virtual view of their building all of that is new and I think we've not participated in that space at all and Thats why we highlighted the win that we did because as an example of that.
Are there other areas that we're looking at we're exploring hollow builder and public safety, because we think that there are it's a great way to document.
And timestamp.
Changes in both crime scenes changes in terms of.
Facilities in terms of.
Preparedness. So we think that there are some applications in public safety.
The digital twin market, particularly in the <unk> metrology market I believe is right for this for us to be able to do a very high ultra high definition scan with our with our laser.
Scanners, and then to be able to overlay. These photogrammetry images as a way of actually.
Documenting changes to the facility.
That's done.
Both on top of a bend, drawing as well as on top of the high definition scam no one can really do that.
I think we are uniquely positioned to do that.
That's great and then just on the quarterly guidance.
Obviously, Jim was housing for it but I guess the question.
Yeah.
Has visibility improved to a degree they now feel comfortable providing and what's changed is that the fact that you guys have the recurring.
Base of recurring revenue, which gives you that comfort or is there something else that kind of gave you that.
Yes, exactly that comfort to issue that guidance.
Well I don't I don't think visibility has changed much I think we still start a quarter with not a great deal of backlog that said if you. If you look at our track record as it relates to how we've been able to forecast our business and in <unk>.
Thank.
It ends up basically being relatively predictable certainly there is a plus or minus 10 spread based on 10% spread based on what's happening in the market and certainly nobody saw COVID-19 coming in we certainly did.
That said I think when you look historically at our seasonality, particularly in the hardware side of it.
<unk>.
We're feeling comfortable that we directionally can tell you where it's going to be.
As reoccurring revenue continues to grow obviously that gives us more and more confidence, particularly as it relates to what we're starting the quarter with its early days for US as you can tell from the numbers that Alan talked about but but we promised that as we get close to launching sphere will be much more transparent about our software our recurring <unk>.
Revenue et cetera, and this is a persistent issue.
I don't think we can be more transparent without giving guidance.
Right and that helps them.
Maybe just to follow up on Alan on the on the guidance.
And the metrics you gave and I guess, you talked about before that the exiting 'twenty two with 25% recurring level.
The software growth if I remember if I remember correctly, you said it was 13%.
I'm just wondering is.
I assume if sphere launches, we should expect some acceleration or was there something in Q4 that we shouldnt.
Assume as a trend line at this point in other words is this kind of it was this just to make a really excellent quarter.
Or was it some.
Potentially like your base like loan growth is that.
Part of the revenue grows in size.
So I think twofold, one is that I think youre absolutely right. When sphere comes line, we absolutely expect the knee in the curve from a software and recurring revenue growth perspective at the same time, Michael spend a lot of time talking about hollow builder I think we expect the hollow builder.
Revenue to continue to grow at a meaningful level as we make some of the investments that <unk>.
That he referred to and I think those are those are again those are the two points that I think we would point to there was nothing extraordinary about the fourth quarter in terms of <unk>.
Software content or recurring revenue content and and so that's a good base from which.
For us to grow from given those two those two vectors.
Excellent. Thank you.
Yeah.
Thank you.
And our next question from Rob Mason with Baird. Please go ahead.
Yes, good afternoon.
Hey, Michael Allen.
One clarification around the guidance.
Low end of your revenue guidance, the $80 million would be.
Directionally down seasonally but maybe at a steeper rate.
Does that would that assume primarily.
Supply chain challenges or.
I'm just curious maybe what your thoughts around book to Bill would be at an $80 million.
Level.
Well, we don't we don't typically forecast publicly our book to Bill I would expect our book to Bill.
To be positive, even certainly that it but.
I would expect it to be positive for the quarter.
I think the.
Supply chain it affects us certainly in our ability to to to generate revenue, but it also.
It Hasnt, many cases affected our customers' willingness to buy capital because as they are growing through supply chain.
Supply chain issues that also meets their revenue and so this conservative approach from our customers around.
Them buying discretionary capital has had an effect in fact I think it was the primary effect.
Through the Covid situation so.
It's kind of a double whammy certainly it affects us.
Ex us on our own ability to actually generate revenue, but it also affects our customers confidence around placing capital bias and we still are very much from a hardware perspective, a discretionary capital.
Spend and so we are.
We're just having to deal with that.
As I said for us personally.
Q4 was probably the worst quarter that we've had to endure through since COVID-19 in terms of supply chain issues and they are not over and they continue to kind of move in terms of commodities I believe our customers are battling with that same effect.
Is that kind of feeds into my next question Michael I, just wanted to get maybe some clarification it sounded like though.
I think of that dynamic that you spoke of being more pronounced in your three D metrology business at least from the customer perspective, but it also sounded like you were very pleased with the performance there.
Obviously, new products help but.
Would you rate the.
Just the overall backdrop, there as well as in your other two verticals I know you mentioned AUC in Europe , but <unk>.
Randy as well.
I think from a parts shortage perspective, <unk> metrology customers.
Manufacturing customer base would probably be hit first and hardest and as you know that's our largest market segment.
See there has been shortage, but primarily the issue that we're hearing, particularly in Europe around shortage has been around labor and their ability to to to hire for the jobs at hand, and that's been a big issue for many of our gcs and in Europe public safety is less impacted.
And frankly, we're seeing really nice traction.
In public safety, both in North America and Europe .
North America, and Asia excuse me so yes.
Yes, I think I think the manufacturing side of the house, which is where our <unk> metrology applications are will be hit hardest.
We are pleased we are pleased just to finish.
We are pleased with quantum Max and I do believe that because of the value that it brings compared to what's available in the market. We've seen actually as we said I think in our script we were.
It's exceeded our expectations, which is fantastic.
But as you know I think three D. Metrology, specifically was hit the hardest during the COVID-19 situation and so on.
I'm cautiously optimistic that what we saw in Q4.
We will continue throughout 2022, but it really took us by surprise. It was it was a very positive experience.
Okay.
Alan you mentioned the <unk>.
Savings around the same sanmina transition would be pushed out any.
Any thoughts on when you can get to the $12 million.
Right.
I think it's a hard thing to predict simply because of the uncertainty in the supply chain environment and I think that.
As we've commented on earlier.
There will be some savings theyre coming from a higher level and we're trying to net all of that out into some of the numbers that we're providing and so again when will we get to the level that we had anticipated will depend a lot of a lot on the environment and thats pretty uncertain at this point in time.
Very good.
I'll pass it back thank you.
Thank you.
And once again for your questions that is star Anne Klein.
Amit.
Okay.
Yes.
And.
Next to Ben Rose Battle Road Research. Please go ahead.
Thank you and good.
Good evening.
Alan and Michael.
Hey, Michael.
Question for you regarding the commercial aerospace market.
There's been a lot of discussion around the great space race.
Specifically.
Projects that are ongoing at various manufacturers.
How much is this segment.
A contributor to the.
Bounce back.
On the on the arm side.
Quite a bit quite a bit we're actually very pleased to see it coming back actually.
It's come back stronger than we anticipated which is positive.
And I think in many cases some of the subcontractors are at production capacity.
Capacity so.
We're helping them out with.
Expanding capacity, which is a great opportunity for us, but yes, it's been really positive and it looks like it's wrong right now both in North America and in Europe .
Okay great.
You had made a comment I guess, a couple of quarters back with respect to the automotive sector.
You were seeing a lot of.
Investment in terms of.
Capacity expansion line expansion, but not so much on the.
Offline in terms of offline inspection or are you seeing that.
Pick up a little bit.
In the automotive sector.
It's.
I think it's still muted from where it was in 2019.
It is not as robust as what what we just talked about in terms of commercial aerospace, but but there are a lot of expansion plans.
All read about them.
I think that bodes well.
Any of them have not started yet in our plan for the end of 2022. So we're hopeful that we'll get our unfair share of that particularly based on some of our new product offerings. So we're we're cautiously optimistic but we haven't actually seen it yet it was not a huge part of the Q4 recovery.
Okay, Great and then just a quick question for Al and since you are opening up so much on guidance switches.
Nice to see.
[laughter].
Unprecedented for Ferro, but definitely definitely great to see any any thoughts on tax rate for 2022 for modeling purposes on a non-GAAP basis, we still expect to be in that $20 to 22% range.
Okay great.
Okay. Thanks, a lot.
Thanks Ben.
And it does appear there are no further questions at this time I will now turn it back to Michael Burger to close this out.
Thank you very much we appreciate everyone's attention and we're excited about.
Given you updates next quarter.
Thank you.
Okay.
This does conclude today's program. Thank you for your participation you may disconnect at any time and have a wonderful evening.
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