Q1 2022 Sierra Wireless Inc Earnings Call
Payments include our strategy goals objectives expectations and commentary regarding the outlook for our business are forward looking statements are based on a number of material assumptions, which could prove to be significantly incorrect. Additionally forward looking statements are based on our management's current expectations and we caution investors that forward looking statements, particularly those that relate to longer.
Periods of time are subject to substantial known and unknown material risks and uncertainties that could cause actual events or results to differ significantly from those expressed or implied by our forward looking statements.
All your attention to a longer discussion of our risk factors in our annual information form and management's discussion and analysis, which can be found on SEDAR and Edgar as well as other regulatory filings. This presentation should also be viewed in conjunction with our quarterly earnings release with that I'll now turn the call over to Phil for his quarterly update.
Thanks, David and thanks, everyone for joining us on the call today.
We had a strong start to the year with total revenue of 173 million.
In the first quarter.
Q1 revenue grew 60% year over year, and 15% sequentially well ahead of our guidance for the quarter.
In the first quarter, we generated $8 6 million in adjusted earnings from continuing operations and $15 8 million in adjusted EBITDA, our most profitable quarter in more than three years.
Our strong revenue and profit growth in Q1 were the result of solid customer demand.
Proved execution in manufacturing and operations.
And our expanded product offerings, especially in <unk> modules and routers starting to ramp.
We are seeing continued momentum in key Iot markets, including industrial enterprise energy and first responder as more companies are collecting business critical data from the edge of the network.
The COVID-19 pandemic has accelerated industry toward auto.
Customers are wanting to manage their equipment in the field to avoid costly downtime monitor performance and to important preventative maintenance.
In Q1, our product revenue, which includes both modules and routers was up 86% compared to last year.
And modules, we had a strong increase in <unk> shipments in the first quarter and our <unk> devices are continuing to ramp.
Q1, we announced the availability of our next Gen. <unk> module, the <unk> 92, which enables high speed low latency connectivity for demanding industrial enterprise networking use cases.
We've optimized the RF design.
68 bands for truly global coverage with just a single SKU.
With our low power wide area modules are getting solid traction in areas, including smart meters public lighting and asset management.
And our airlift business sales of our rugged RV series routers improved year over year and sequentially. We saw our <unk> XR series shipping into key markets, including utilities, and first responders and higher volume.
We are expecting the XR series to be our fastest ramping product line in our history. As these routers get certified on more global carrier networks, including the emergency services network in the U K.
In the first quarter, we closed a number of new XR deals with major utilities, and leading industrial manufacturers and we continue to build on our leadership position in the public sector and first responder market with new state and County Wells.
We are especially proud that a growing number of police fire ambulance responders select airline credits for the ruggedness and reliability.
And our connectivity business, we are expanding our network access in Q1 partnered with Orange wholesale to strengthen our European coverage and global reach.
We also extended our partnership with T mobile in the U S to increase <unk> and PWA coverage in that market.
And our APAC connectivity business continues to grow, especially in Australia, and New Zealand.
I believe that we are starting a decade of growth is incredibly exciting for the wireless Iot industry.
We're just beginning a multiyear <unk> rollout that will introduce new high speed applications and accelerate machine learning and AI.
Leading industrial enterprise customers are digitizing their assets. So they can collect data from a remote equipment control endpoints and run important analytics.
Many of these customers are looking for a trusted western supplier that can provide them with both Iot devices with two way data connectivity.
All these trends play right into our strengths.
Before I turn the call over to Sam to provide more details on the first quarter.
I'd like to provide an update on your manufacturing capacity in the comps.
And then I'll make some brief comments on the sale of the Omnia launch.
Regarding manufacturing, we continue to ramp up capacity in Q1 in Mexico for production of routers and gateways.
This will help us in Q2, as we build and ship more products, especially our newer RV and XR series routers.
With multi factory production now in place.
We have flexibility, while keeping a sharp eye on costs and cost reduction opportunities.
Regarding with tight supply chain, our procurement team continues to have great job with our partners and suppliers, who are using our strong balance sheet to continue to secure raw materials.
We are continuing to secure orders from our customers for the out quarters, and we expect the supply chain to remain tight throughout 2022 and into 2023, particularly for semiconductor components.
Regarding our offender monitoring business on April 18th we announced that we signed and closed the sale of <unk> to <unk> advantage for $37 6 million in cash.
The equivalent of two nine times 2020.
We continue to value Sentinel is an important and growing customer and we're providing them with our connectivity.
Sounded modules come forward.
Regarding our home security monitoring business.
We have reviewed our strategic options and decided not to develop additional products for this business, which has resulted in obsolete inventory and impairment charge in the first quarter of this year.
We are taking a very disciplined approach to our business portfolio and focusing our efforts and investment dollars for <unk>.
Value for our customers and the best return for our shareholders.
In summary, I would like to thank our employees customers and suppliers once again.
We collectively work through the challenges of tight global supply chain environment.
COVID-19 pandemic.
We're off to a good start in Q1, and we expect 2022 to be a robust year for Sierra wireless.
With that I'll turn the call over to Sam for his comments on <unk>.
Thank you Phil good afternoon, everyone.
Although we report our financial results in U S dollars and on a U S GAAP basis.
We also present non-GAAP results.
I had a better understanding of our operating performance.
Reconciliation between our GAAP and non-GAAP results is available on our website.
Total revenue in the first quarter was $173.0 million an increase of 61%.
Compared to a $108 1 million the same period last year.
Looking at our two reporting segments.
Iot solutions revenue was $133 7 million in Q1 up seven.
79, 3% year over year.
Enterprise solutions revenue was $39 2 million, an increase of 17, 2% year over year.
The first quarter product revenue grew by 85, 6% year over year to $138 1 million.
Activity software and services revenue was higher by three 7% to $34 9 million compared to Q1 the prior year.
Increase in connectivity software and services revenue included growth in our core connectivity area, including smart connectivity, which was partially offset by decreases in our legacy <unk> European business and our home security business.
Improved performance in the first quarter was primarily the result of our investments in working capital to meet strong demand from our customers.
Crude sourcing of parts and components for our products.
Please manufacturing capacity he brought on during the <unk>.
For last year.
Revenue in the first quarter of 2021 was also negatively impacted by the previously disclosed ransomware incident.
Gross profit in the first quarter was $55 1 million up 46% year over year.
non-GAAP gross margin improved sequentially to 32, 5% in Q1 compared to non-GAAP gross margin of 32, 1%.
In the fourth quarter last year.
GAAP basis gross margin was 31, 8% compared to 34, 9% in the first quarter last year, primarily due to the obsolete inventory in our home security business and expedited freight related to Covid shutdowns.
non-GAAP operating expenses in the first quarter were $45 1 million down $1 4 million compared to Q1 last year and down sequentially. We.
We will continue to manage our opex and capex tightly across all areas of the business.
In Q1 adjusted earnings from continued operations was $8 6 million compared to a loss of $9 6 million in the first quarter of 2021.
And $1 1 million and adjusted earnings in Q4.
Adjusted EBITDA was $15 8 million or nine 1% of revenue.
To negative adjusted EBITDA of $4 4 million in Q1 last year, and $7 3 million and adjusted EBITDA in Q4.
So it's good to see improvement in both year over year and sequential and financial performance.
Moving to the balance sheet.
We ended the first quarter of 2022 with $97 4 million of cash.
Cash flow used in operations was $23 7 million in Q1, primarily due to our investments in inventory, including prepaid inventory advances.
This investment has allowed us to both deliver strong results in Q1 and provide strong Q2 guidance.
Capital spending in the first quarter was $3 1 million.
Starting guidance for the second quarter the impact of COVID-19 on our global business continues to remain uncertain.
Continued to experience and evaluate the effects on our business. The overall severity and duration of adverse impacts related to COVID-19 on our business financial condition cash flow and operating results for the remainder of 2022 and beyond cannot be reasonably estimated at this time.
As Phil mentioned global demand for our products remains strong given this environment. We are guiding a revenue range in the second quarter of the year of $160 million to $175 million with a midpoint of $167 5 million.
That I will now turn the call over to questions. Operator, Please open the lines.
Thank you speakers participants we will now begin the question and answer session. As a reminder, you May press the star key followed by the number one.
Ask a question over the phone.
Draw your request you May press the pound key.
Again, Thats star one to ask a question or the pound key to withdraw your request.
Here's your first question is from the line of Anthony Stoss of Craig Hallum. Your line is now open.
Thank you hi, guys, Congrats just awesome execution.
I know youre guiding for for the next quarter, but is it fair to think based on your backlog or order book that each quarter will be up sequentially throughout the year for <unk>.
Also Phil are saying, we'd love to hear your thoughts kind of on gross margins through the remainder of the year then I had one other follow up after that.
Hi, Toni it's Phil I'll take that kind of a demand question. Sam you can kind of comment on that gross margin question.
Yes look right now I mean, where the demand for our products is incredibly strong our backlog is far in excess of what we can ship.
And right now, it's really about just kind of getting the parts optimizing the supply chain and getting the getting things in place. So we're not really guiding for the second half of the year at this point and it remains.
We're just going to do it a quarter at a time, but I think it's fair to say that demand for our products was strong for US right now, it's just about execution quarter on quarter.
Yes, Thanks Bill.
Yeah, I think I mentioned last quarter.
We're not providing guidance on gross margin, but I didn't say that we expect a small sequential improvements in gross margin I think we've seen it here on a non-GAAP basis, and I expect that to continue for the rest of the year.
Okay, and then Tim just following up what do you expect for <unk>.
Opex for the June quarter or is it kind of flattish down a little after the sale of the business unit I'm just curious to your thoughts on just where opex might be.
Yeah I appreciate the question.
Does that mean opex of the managing that pretty tightly it's down year over year down sequentially.
Going forward well.
Continue to manage it tightly and it's not going up I'll put it that way so.
I think that answers your question.
Got it.
One last question for you Phil just demand picture are your customers willing to.
Placed orders even for next year just to guarantee supply also if youre going to get caught with additional component shortages is it more likely on the module side of the business or the router side.
Yes.
Two parts of your question, Yes, we are seeing demand customers are placing orders into 2023.
At this point.
So which gives us better visibility into the demand environment, probably than we've ever had before.
In terms of component shortages.
<unk>.
So it's a mixed bag, but I will say just given the number of components. The enterprise product lines are tend to be a little more affected by that just because we have more components in them and we tend to use some of the semiconductor opponents that tend to be more highly constrained. So let's say the enterprise business is more affected by supply chain shortages modules at this point.
Got it that's all my questions great job guys. Thank you.
Thank you.
Your next question is from the line of Mike Walkley of Canaccord Genuity. Your line is now open.
Great. Thanks.
So congratulations to you and the team on securing components.
I guess I'm, just trying to get a little more more color on how you are able to deliver upside in six current components and so many of your competitors are continuing to struggle to prepare supplied even meet their guidance credit care team and maybe you can provide some color and within that what it might mean to near term gross margins as you.
Maybe expedite shipments.
Continue to outperform.
In the supply environment out there.
Yeah. Thanks, Mike I think one of the thing to remind you when we were back in the depths of the real challenges, we had third quarter last year, we kind of put a five point action plan in place to kind of get ourselves out of it and one of the points time was look we were using our balance sheet to play offense. We did we continued to.
To work closely with our key suppliers and continue to frankly place orders and work with them.
And you May remember, we are working capital went up inventory what happening.
We achieved in Q1.
It was really the foundation laid by some of the investments and the actions we took kind of in the prior quarters to let us up to that and and continuously as we look forward.
That remains to be to be seen we've also done I think I'm proud of the team that did a good job managing some of that.
Challenges with respect to some of our.
The COVID-19 impacts, particularly in China, we've got multiple factories up and running now thats enabled us to get a little more resilient than we had been previously so.
Combination of some decisions made prior to play offense with our balance sheet, our solid execution and kind of having a multi sided manufacturing strategy in place at this point.
Okay, just a follow up to that question just on Iot solutions, Canada, 30% gross margin haven't seen a number like that in a long time, but that mix or is that because of playing offense.
Are you able to pass on cost to your customers and maybe you can discuss just the competitive environment in that area. Because it seems like you guys are once again outperforming your peers, maybe with telecom private and some other changes in the dynamics.
30% level sustainable going forward.
Well I mean, I guess I would say that the multistate theres, a multifaceted answer and you can kind of done.
Specifics right I mean, when we look at the gross margin performance.
One of the factors is mix, we've certainly seen a good a good uptake on some of our higher end higher performance modules, which was helpful. Helpful. Scale also helps right. We're producing a lot more product now so we're able to kind of amortize them.
What cost.
Cost, we have we're able to amortize them over.
More volume.
Our routers have.
Have been been constrained a little bit so that kind of.
That makes makes a bit of an impact and with respect to price increases we are in an inflationary environment and we have been working to.
Pass some of our pricing along keeping in mind, we're in a competitive environment right and I think the message that I'm, giving to my team and we just got to work closer to their customers customers will remember how we behave in this environment.
And we're working really hard to make sure that we're getting them on the products we need.
But also doing things right for our business as well and the customers that they can understand that they are dealing with the same situations themselves. So.
That's helpful.
And last question for me and I'll pass the line just just on the <unk>.
Disposition of the army linked business, what what is the timing for that sale.
And I think you threw out a metric I missed this what is the annual contribution and what kind of.
Impact might it have to that division's gross margins as it comes out.
Andy I'll take that.
Yes, sure so I mean.
It closed in April so there.
There won't be much.
In our Q2 numbers.
The exciting part about this is that you know.
It's not going to have an impact on our profitability.
So we get to have Sentinel was a valued customer both in modules and connectivity going forward.
And therefore, no impact to our profitability in 2022, which I think is a very important point now of course, there will be an adjustment in our CFS and Thats revenue I think we disclosed $13 million or so in 2021 was that revenue.
There will be a top line adjustment, but no impact on profitability and sorry was there another question kind of in there.
Yes that would have just look and looking for those metrics. So yeah.
Okay.
Okay. Thanks, Yeah, we're really happy with that at close to three times revenue good price win win for both parties.
Got you.
Your next question is from the line of Dan OS Ms. Choppiness of BMO capital. Your line is now open.
Hi, good afternoon, I'll Echo the congrats on the strong execution in the quarter.
Just following up on <unk>.
Dispositions, so that $13 million should we think of that as being sort of the gross revenue and then some of that comes back in terms of connectivity revenue.
Yes, you can think of a $13 million of that was our total recurring revenue piece of the whole piece out within the SMS.
In 2021, and then yes, we will get a portion of that revenue back in 2022 based on our connectivity agreement.
With sense about what the buyer and then obviously, we'll get some module revenue because theyre going to be a module customer as well, but there will be an adjustments to the <unk> revenue right I mean, our connectivity revenue from Sentinel won't won't be at that at those levels.
Great.
Okay.
Ill.
I heard you say that Mexico is still ramping so as that continues to ramp.
What might be the incremental benefits that we will see in subsequent quarters from getting Mexico.
Thank you.
Well look I think we've assumed that we got a certain level of ramp going into Q2, that's reflected in the strong guidance I mean really the biggest thing we're trying to manage the areas.
Kind of a transition of our products from our our newer products to our newer products, which are the XR series <unk> routers, we are trying to basically accelerate the movement, there and ramp that up as fast as we can for two reasons one.
It's a better product for us and for our customers second half, we have fared better availability and third some of our older products for Mg and other series are tend to be very highly constrained. So.
The ramp up of Mexico is kind of included in our guidance and it really underneath the covers there its around kind of migrating some of our.
Some of our newer products.
From a working capital perspective inventory went up 6 million sequentially, which isn't all that bad at all given the revenue uptick.
So how should we think about that kind of going forward, maybe a bit of a modest increase or is it kind of hard to call just sticking on parts.
Yeah, Let me let me jump in there. So when you look at inventory you kind of also have to look at our prepaid to kind of get it.
Cancel them because some of it in prepaid.
In terms of how we work with our with our contract manufacturers.
We did have an investment in working capital.
In the quarter right and that is again Q2 basically.
That's in that higher revenue base in that growing higher revenue basically made that investment.
Going forward, we expect our working capital to normalize at those higher revenue level and we don't expect.
<unk> continued to make investments in that level right I mean, it's.
It's been made and we're happy with that.
Okay.
And then finally on the <unk> and the ramp there.
I think typically as new products ramp there is a temporary impact on margins I mean is that something to think about or in the grand scheme of things not material impact, Brazil, plus he takes on the margin side.
Yes, I'll give you a high level.
Okay.
Now you can comment.
Yes, sure I mean, yes, it's not really material to be honest, it's sort of baked into the cake. That's what I talked about earlier that we expect.
Small sequential increases in gross margins going forward for all the reasons we've talked about.
Price increases mix recovery from 2021 Covid related shutdowns.
All of those things you know more volume and scale. So we do expect to have small sequential increases in gross margin in the near term.
And that's sort of baked into the cake, a small impact from some new product releases.
Alright, Thanks, guys I'll pass along.
Next question is from the line of Josh Nichols of B.
Your line is now open.
Yes, Thanks for taking my question and great to see the type of execution here in the second quarter, where a lot of competitors have tended to be pretty.
Challenging just I wanted to ask if you could provide a little bit more detail I mean, such strength from the Iot solutions business.
Are there any particular pockets of strength regarding industries and markets that are driving the growth, mostly or is it spread fairly evenly across your end markets.
It's a good question. This is Phil I mean, we're seeing very strong uptake in our <unk> products, particularly as some of our products in.
Smart meters industrial lighting at the control very.
Very strong demand there with some of our new <unk> modules are also getting really good pick up in industrial networking.
And public safety.
I must say as well so.
Our new products are getting are getting great reviews from our Iot solutions perspective, it's really.
I'd say very strong in industrial smart meters.
Energy oil and gas those kind of markets public safety really very strong momentum there.
That's great and then just thinking about how things are likely to play out for the remainder.
Of the year the company has clearly invested heavily in the.
Inventory balance over the last several quarters.
And thats paid off pretty well for the company, but what's your expectation going forward is that previous investment likely to become a significant source.
Cash flow is online and the working capital improves or is it likely to kind of maintain around these levels.
I think I'll make a simple answer and then sandy can comment look I think Dan kind of mentioned, we do expect.
Our inventory levels to kind of peak here in the first quarter. Sam commented. The fact, we made the investment in working capital and we are going to contain our expenses closely so it's our expectation that.
We start turning this into cash.
Want to comment anymore.
Yes, I mean listen cash will be up in Q2, right. We have the divestiture of Army link, which obviously helps a lot right, but looking back we chose to invest in working capital to support our higher revenue base right and on a free cash flow basis, we do expect that working capital to normalize at those higher levels.
Therefore, looking ahead free cash flow into Q2, you can expect that to flatten out and then for sure. When you when you run it through the model Youre going to be looking at a positive in the second half of the year.
So just directionally I.
I hope that helps.
No. Thanks Thats. Good color, then just sort of like the revenue trajectory in the first half.
Ben.
Quite strong and thinking about.
Second half is there any regarding seasonality trends our order flows that youre getting and you have some stuff going into 'twenty. Three is the second half we expect to be kind of relatively comparable to the first half based on your what youre seeing on the backlog here or up or down a bit.
I just think from a demand environment. It is.
So difficult to say what is quote unquote normal and what is seasonal because there's so much noise in the system with respect to the supply environment is not even just our supply it's our customers right. So even if they are able to get stuff from us. So they are able to get the rest of what they need to put stuff into the market.
I think what we see and kind of whats comprehend in our guidance as you know our <unk>.
Backlog.
Foreign excess of what we're able to ship we are starting to secure orders into 2023, and we expect to remain supply constrained.
Certainly throughout 2022, and probably into 2023 as well that's what we see right now.
Great that's it for me thanks.
Okay.
Because your next question is from the line of Paul Treiber of RBC Capital. Your line is now open.
Thanks, so much and good afternoon, congratulations on the quarter as well.
Just wanted to hone in a couple of comments on you made on Covid in China, you mentioned good job managing the Covid impact in China can you elaborate on that and exactly how you mitigated potential challenges there.
Yeah, I mean, when we when we gave guidance I mean, both soochow and Shanghai had been affected by Covid in the past.
Certain times and.
US and our along with our manufacturing partners that we're able to do a pretty good job of managing those situations, so that didnt impact the financial results.
So we were able to kind of move some stuff around in the end and frankly, I'll, probably get a pretty good job of helping manage some of that as well so.
That's about all I can say.
Is that all execution within China, you Werent moving it.
To your other facilities like Mexico or Vietnam.
Most of what's the what's built.
In China. These days is modules and so we kind of flex back and forth between.
China and Vietnam.
Okay. Thank you and then the.
There was a comment in the prepared remarks, just around Covid uncertainty in general for the remainder of the year makes it difficult to forecast is that a fairly like boilerplate comment or is there anything specific that that concerns you.
You may have picked up.
In your supply chain or or elsewhere.
There's nothing unique.
Yes.
Yeah go ahead.
Yes, there is nothing unique to us is boilerplate in a way, but I mean, the pandemic is ongoing there are shutdowns in China. The supply chain is impacted and it continues to cause.
Yes.
Interesting things to Apple like like the shutdown in China in the in the first quarter.
When we were guiding.
So.
Is that going to go away soon we hope and there's good indication that that's getting a lot better but I don't think its time to remove that risk language app.
And last one for me you mentioned the orders going out to 2023 can you put that into perspective in terms of like the lead times that you normally have and then if with these these orders that are out. So so far are you able to get additional commitments from your customers in either contractually or other terms.
And those agreements.
Yeah, I mean look I think that it's fair to say that that this is probably the longest lead time that we've seen from our customers.
It goes back historian, but a long long time, it could be the longest ever and some of it is.
I think just the new realization the new world that customers recognize that they need to give us and give their other suppliers as well more visibility from that side and yes. In some cases. We are we are working through noncancelable non cancellation kind of provisions and some of those orders, particularly for orders that have.
Very long lead time or unique components that are difficult to move around so the short answer is I think the visibility.
As good or as soon as the best we've ever seen and yes. In some cases, we are working through through.
Some some special terms that gives us some protection on the downside.
Great. Thanks for taking my questions.
Okay.
Next question is from the line of Scott Shirley of Roth Capital. Your line is now open.
Thanks for taking my questions, absolutely phenomenal job on the quarter guys.
So maybe you could just jump in on the services side of the equation, that's one area, where there hasnt been a lot of growth. There has been some fixing that you need to do there I was wondering if you could talk a little bit about what youre doing on that front from a gross margin standpoint from a pricing or a connectivity standpoint, and how we should be thinking about that business in terms of.
Where gross margins can get to and at what level of scale do you need for that segment to be profitable.
Yeah, a lot of questions in there. So let me try on that so I don't want to be.
If you just kind of look underneath that I think I've talked about that there are a number of sub kind of constituents and that portion of the business.
The major big portion we're focused on is what I'll call. Our core connectivity business. This has enhanced carrier connectivity and smart connectivity. Both of these businesses are continuing to grow we've got some some pockets of strength certainly in APAC and in other words the growth. So those businesses are growing we also have some other businesses that I'll call them legacy businesses noncash.
Core businesses you saw when we divested one of them the prisoner tracking business, we talked about the home security business that we are starting to harvest and frankly I, probably got some more work to do in their gross margins from that point of view.
Look I think there are some public compares out there and and.
I think our goal is to kind of get get near there I mean, I think our goal is to get it should be in the fifties for that kind of business.
Okay, perfect and maybe switching gears over to the enterprise side of the equation just want to clarify a couple of things you had obsolete inventory written off in their costs and 900 basis points. So when you think about the normalization of that it's still below where it's been so just wanted to clarify it sounds like there is still some component availability issues on that front do we expect the gross margins there.
To bounce back a little bit or are there some other mix issues going on with new products like the <unk> solutions.
Hey, let me jump in and take that one yeah, yeah. So there's a few things.
Correct, there was the sort of obsolete inventory related to the decision around harvesting the home security business, which you also saw in impairments.
GAAP numbers for that.
There was also some freight expedited freight in there that's onetime in nature and getting Mexico ramped up as we were.
Sort of shut down.
I'm with Covid. So there were some Russian happening there.
Yeah.
And a little bit of mix like like the like the new product introduction.
Small impact there as well.
With a new five G.
Product, but nothing material on that front, so again as we sort of move forward in that mix improves with one time items.
The pace will see improvements in the gross margins got you very helpfully.
And maybe if I could follow up on their services component to that are you starting to see the ability for a higher attach rate or cradle point like models to go along with the enterprise business Phil.
Yes, that's an area of key focus for US an area I don't think we focused as much on that as a company and I think it's early to say with.
That Scott, but I think rest assured we are clearly focused on driving that that kind of attach rate up it's a key part of our our products going forward, Okay and last one I'll put it in the unfair category as you know I'd like to ask but.
As we look at the world today.
The first quarter results are where we expected it would be maybe four to six quarters out. So it's an absolutely phenomenal job on that front.
When you think about a normalized level of of operations, maybe if we call. It the second quarter still supply constrained I'm trying to get my hands around what the growth rates are as we're thinking about 'twenty three in a normalized environment for modules. The enterprise side and then the services side, thanks, and great job again.
I think ultimately it's fair.
For us to comment on what's going on in 2023 at this point other than we've got and continue to build the order books in there and we continue to have super strong demand the customers are loving our new products and we continue to make more traction so with that we're just going to be one quarter at a time and continue.
Continue to focus on delivering profitable growth.
Fair enough nice job thanks, Phil.
Thank you participants I'll now turn the call back over to.
Panel for final remarks.
Great I just want to thank everybody for joining us on the call today.
I appreciate the support I would once again like to thank our customers suppliers and employees for helping and working through difficult situations. It's been a strong start to the year and we look forward to continuing them on EMS and some into 2022. Thank you.
This concludes today's conference call. Thank you all for joining you may now disconnect.