Q1 2022 nLIGHT Inc Earnings Call
[music].
Good day and welcome to the NN life first quarter 2022 earnings conference 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 a question you May Press Star then one on a touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Joe Corso and life Chief Financial Officer. Please go ahead Sir.
Thank you and good afternoon, everyone I'm, Joe Corso and Mike <unk>, Chief Financial Officer with me today is Scott <unk>, Chairman and CEO .
Today's discussion will contain forward looking statements, including financial projections and plans for our business forward looking statements are subject to risks and uncertainties many of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings. Our results may differ materially from those projected on today's call and we undertake no obligation.
To update publicly any forward looking statements, except as required by law.
During the call we will be discussing certain non-GAAP financial measures. We have provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures in our earnings release, which can be found on the Investor Relations section of our website I will now turn the call over to Scott.
Thank you Joe starting on slide three.
Q1 was a good start to the year for enlighten. Despite a highly dynamic global manufacturing environment that was exacerbated by the start of the Covid Lockdown in Shanghai, we met or exceeded guidance and made important progress in all of our key growth opportunities.
Turning to slide four.
We generated $64 5 million of revenue, which was above the midpoint of our guidance range.
First quarter revenue reflects the continued transition in the geographic focus of our business.
Revenue from customers outside of China grew by 25% year over year to approximately $57 million or approximately 89% of total revenue.
Overall revenue increased 5% year over year.
Each of our top 10 customers during the quarter were from regions outside of China, and a favorable mix of business enabled us to exceed the high end of our gross margin and adjusted EBITDA guidance.
Operationally, we continue to navigate a highly challenging global manufacturing environment, while our global supply chain and manufacturing team has done an outstanding job satisfying our customers' demand we continue to see significant constraints in the supply chain.
They need material prices component shortages, and increasing freight and logistics costs.
These issues were significantly exacerbated by the unexpected COVID-19 lockdowns in Shanghai and other cities in China.
In Q1, the impact of these lockdowns to our business was relatively minimal although it <unk> preclude us from shipping and receiving material and we were unable to recognize suburb several million dollars of revenue during the quarter.
The inventory investments, we've been making have enabled us to support our customers. During these lockdowns, but fulfillment of current and projected near term customer demand requires productive capacity from our facility in Shanghai.
As we've discussed in prior quarters, we continued to add automated capacity to our U S facilities in Q1, we completed the installation of the equipment required for the first phase of our automated manufacturing ramp and remain on track for our internal automation goals.
Turning to slides five and six where I will discuss revenue by end market.
In micro fabrication, we had a strong first quarter revenue increased 14% year over year to $17 3 million, representing approximately 27% of total revenue.
Demand during the quarter was stable and our continued strong performance in this market demonstrates the importance of our high power high brightness semiconductor lasers to our customers.
We continue to develop and release innovative products that enable our customers to differentiate their solutions. For example, this quarter, we released an update to our element family of semiconductor lasers that provides up to 30% improvement in output power in the same package, enabling our customers to rapidly scale power and reduce system costs.
We also continue to expand our product portfolio and access new markets.
In April we launched a new fiber laser that leverages, our core semiconductor laser technology and fiber laser manufacturing scale to produce the two micron wavelength laser.
This technology is important applications in all of our end markets with initial focus on the medical market.
We went several design wins and our lasers are being used to dramatically improve outcomes in the treatment of kidney stones and other urology applications.
In aerospace and defence first quarter revenue declined 6% year over year to $23 1 million, representing 36% of total sales despite.
Despite lower revenue, we made significant progress in this market as we continue to demonstrate the performance and scalability of our high energy laser technology.
Our leading performance at every level of vertical integration and directed energy offers us multiple opportunities for both near and long term revenue growth.
Our low swap diodes, and fiber <unk> first deliver high power brightness reliability in small lightweight packages.
In addition to our leadership position in diode technology. We've also developed fiber amplifiers that we believe offer the most compelling power to weight ratio available today.
Our vertical integration with U S manufacturing enables us to engage with customers and multiple product levels, putting diodes fiber amplifiers.
And being combined lasers.
By significantly increasing our overall market opportunity and directed energy.
As an example during the quarter our fiber employers we're designed in at a key department of defense Prime contractor.
We've been successful in engaging with customers in the U S and abroad, and our full technology stack enables us to develop high power lasers that are effective against a wide range of threats.
During Q1, we also saw continued news that reinforces the importance of this technology and a changing global landscape.
There were several important directed energy demonstrations that further validate the importance of directed energy and a newly released EOD budget contemplates continued growth in directed energy laser spending in the coming year.
Finally, turning to the industrial end market revenue grew 12% year over year in the first quarter to $24 million, representing 37% of total sales.
More importantly, industrial revenues from customers outside of China increased 77% year over year to a record $20 7 million.
On a percentage of revenue basis, Q1, industrial revenue from customers outside of China increased to 86% versus 54% in the same period in 2021.
Industrial growth outside of China has come from strategic customers, where we continue to increase our share of spend.
In several cases, we have been selected as our customers exclusive laser provider.
We view our customers as partners and we focus on supporting them with innovative solutions that enable them to differentiate their products. We continue to see opportunities to expand based on our differentiated programmable beam shaping technologies in additive manufacturing cutting and welding.
I will now turn the call over to Joe to discuss <unk> first quarter financial results.
Thank you Scott and good afternoon to everyone beginning on slide eight.
Total revenue for the first quarter of 2022 was $64 5 million, an increase of $3 1 million or 5% compared to the first quarter of the prior year and above the midpoint of our guidance range product revenue for the first quarter of 2022 was $51 1 million, an increase of $3 7 million or 8% compared to the <unk>.
First quarter of the prior year the increase in product revenue year over year was driven by higher sales to strategic customers outside of China in both industrial and micro fabrication, which was partially offset by a decrease in sales to customers in China.
Development revenue for the first quarter of 2022 was $13 4 million, a decrease of 600000 or 4% compared to the first quarter of the prior year. The decrease in development revenue was attributable to the timing of project based work we perform in the defense market.
Turning to slide nine.
Overall gross margin for the first quarter of 2022 was 25, 1% compared to 28, 8% for the first quarter of the prior year, but above the top end of our guidance range.
Product gross margin for the first quarter of 2022 was 30% compared to 35, 8% for the first quarter of the prior year, but above the top end of our guidance range.
The year over year decrease in product gross margin was driven by sales mix and as discussed last quarter decreased capacity utilization of our Shanghai manufacturing facility increased investments in U S based manufacturing and continued increases in production and freight costs.
Turning to slide 10, non-GAAP operating expenses for the first quarter of 2022 were $18 2 million or 28% of revenue compared to $15 1 million or 25% of revenue for the first quarter of the prior year. The majority of the year over year increase was related to higher R&D investments to support.
Our product roadmap and long term growth opportunities.
Turning to slide 11.
non-GAAP net loss for the first quarter of 2022 was $1 6 million or <unk> <unk> per diluted share compared to non-GAAP net income of $2 6 million or six cents per diluted share for the first quarter of the prior year.
The year over year decrease in non-GAAP profitability was driven by a combination of the decrease in product gross profit and increase in R&D spending on.
On a GAAP basis net loss for the first quarter of 2022 was $8 6 million or <unk> 20 per diluted share compared to $6 1 million or <unk> 15 per diluted share for the first quarter of the prior year.
Adjusted EBITDA for the first quarter of 2022 was $2 million compared with $6 million for the first quarter of the prior year, but well above our guidance range.
Net cash used by operating activities was $7 million for the first quarter of 2022 compared to net cash provided by operating activities of $4 1 million for the first quarter of 2021.
The decrease in operating cash is being driven by working capital while the primary driver of working capital. This quarter is due to the timing of payments and receipts and we continue to make investments in inventory to mitigate supply chain disruptions.
Our capital expenditures for the first quarter of 2022 were $5 million compared to $3 1 million for the first quarter of the prior year.
We continue to invest in directed energy for the defense market and to automate our U S facilities to serve our customers outside of China.
Turning to slide 12.
We ended the first quarter with cash and cash equivalents of approximately $135 million and no debt.
DSO for the first quarter of 2022 was 55 days and we had 141 days of inventory.
Turning to slide 13 for our outlook for the second quarter as Scott mentioned earlier, the restrictions imposed by the Chinese government that required us to temporarily close our manufacturing facility in Shanghai and citywide limitations on transportation and logistics have continued to impact our business in the second quarter, We have limited staff in our facility today, but they are in.
Courage and signs that operating conditions in the Shanghai region, and China are improving but the situation remains dynamic and unpredictable.
Today, we can meet a significant portion of our U S and non China customer demand by utilizing inventory, we had strategically put in place as part of our supply chain risk mitigation strategy and through U S production capacity, but ongoing COVID-19 related lockdowns and further disruptions to the supply chain have created significant uncertainty our operating activities, making.
More challenging than typical to predict our business in the second quarter.
Based on the information available today, which includes our expected production ramp in Shanghai, We expect Q2 revenue to be in the range of 59 million to $67 million at the midpoint of $63 million. This includes approximately $48 million of product sales and approximately $15 million of development sales turning to gross margin Q2 product gross.
<unk> is expected to be in the range of 26% to 30% and development gross margin to be approximately six 5%, resulting in an overall gross margin range of 21% to 25%.
For the second quarter, we expect adjusted EBITDA to be between negative $2 million and positive $1 million. We expect Q2 average basic shares to be approximately $45 2 million and non-GAAP diluted shares to be approximately $47 9 million.
Before turning the call back over to the operator, I would like to take a moment to thank our employees in China for their continued efforts during an extraordinarily challenging time and our customers and suppliers for working collaboratively with us with that I will turn the call over to the operator for questions.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys.
Dig into that a little bit if you could thanks.
Yeah sure. Greg This is Joe happy to take that question. So the short answer is yes. There is some capacity ramp and productive capacity ramp that we need that we assume that happens over the course of the next the next two months and it does so so our ability and we've we've looked at.
R Q2 guidance with assumptions that we don't ever get back to full production during the quarter, but we certainly ramp through the quarter and there's a lot of factors that go into that in terms of the next portion of your question where will we be with respect to the reliance on Shanghai you know.
Over the next coming quarters, and and overtime. So over the next couple of quarters, certainly Shanghai is going to remain an important part of our productive capacity and as we kind of move through that by the end of the year just to try to put a little bit of a finer point on that by the time, we move through the end of the year our assumption is that.
We're looking at probably two thirds of our fiber laser pumping capacity comes out of our facilities here in the U S. And then over time, we will be in a better position to.
Optimize what we're doing out of the U S. What we're doing out of out of Shanghai, but current plans aren't a full exit of the Shanghai facility just to be clear.
Okay, that's helpful and relative to normal seasonality trends I guess that delta between what your guide into and what you normally would see in Q2 do you sort of consider those as as lost sales is there a potential for maybe a catch up and in terms of.
Of more pronounced seasonality to the upside in the second half hour you're looking at that.
Yeah. Good question, Greg Scott's prepared remarks, he talked about us having several million dollars of revenue that effectively we did not recognize during the first quarter and then as we look at our guidance. It's not an exact science because we are looking at you know the timing of of of when customer needs broad.
When we were gonna deliver them, we certainly think will recover some of that lost revenue, but we won't recover we won't recover all of it during the you know during during the next the next couple of quarters.
Okay.
And then last one in terms of the growth outside of China, which has continued to be.
You know really encouraging you know how much of that is driven by.
You know new logos, and just sort of notice up to over the last few quarters. The the mix of low power laser has been steadily increasing so curious if that's a byproduct of that maybe that's use cases outside of traditional cutting what's what's driving that shift.
Yeah, Gregory Scott here, So I think to answer the second part of your question first Yeah, I think you're you're you're noting it that low power is growing nicely and that's due to growth outside of the traditional cutting market, notably additive manufacturing we've had some very nice design wins there and.
And really helping to transform that market where.
Customers are using both more lasers and more effective lasers with our beam control to significantly reduce the cost of parts made with additive manufacturing. So it's an exciting space and we were making good progress there and that leads to the first part of your question, which is yeah I suppose.
New customers and and existing customers, where we're expanding so seeing as you saw on the numbers nice growth outside of China, and the industrial market.
Okay. Good alright, I'll leave it there are best luck going forward. Thanks.
Thanks for a great.
Our next question will come from Patrick Hope with Stifel. Please go ahead.
Thank you very much and I also wanted to make you guys for executing a extremely challenging environment, maybe for either you Scott or Joe.
You know, it's always hard that many variables going on with the supply chain Covid Lockdowns increase inflationary input costs.
Qualified first which is the biggest impact that you're going to see <unk> what are the lockdowns the biggest issue.
Issue and Navy secondly on top of that can you quantify in terms of how much that effect will have on the bull smoggy like how how many basis point impact is that thank you.
Yeah sure Patrick So for sure probably the biggest impact on our queue to results in our queue to guidance is the uncertainty around Shanghai right. We have <unk> you know some visibility and we have plans, but it's such a uncertain environment in terms of.
What portions of what city are gonna be open at what time and what the ability is will be to ship and received both materials and finished goods that we did our best to you know gauge what's happening in the quarter. What I will tell you is that demand has been very good. So as we look to work with our <unk>.
Customers across across the globe, we haven't really seen any major changes to the demand that we've seen in our business really what what's gonna swing. Our results. This quarter is just our ability one you know to get people back into the factory and over what period of time, and then to just to be able to move material in and out of.
Our facilities and around the world. So I would say that is that is the biggest the biggest piece of Q2 at the same time I think you've heard it from other companies as well our our freight costs are rising labor costs arising. We're still you know clearly in a rising cost environment. So all of that we took into consideration.
When we were looking at our our our gross margins.
To address your question more specifically, what we've modeled in our gross margins for the second quarter due to the the lockdowns in and the uncertainty in China right. Now is really a couple of hundred basis points. So the other way to think about that is and I had we been running at at at full production capacity through the quarter.
The way that the business has continued to shift and the mix of business within with within the geographical focus our gross margins, we've actually been pretty pleased with the way that they've they've moved sequentially.
Right that is my second part of your question that I didn't answer that.
That was that maybe it's my follow up question for Scott you gave a little bit of color on some of the industrial Ah kidney broke into diversification there on the Microfabrication side of things. We're also saw good expansion.
Over the last couple of years in short both again in Q1.
Again, maybe a two part question of one are you seeing any expansion in new market.
Locations or are they still the same ones that are that have given you a quote and maybe second we are you see new customer adoption or are they existing customer adoption just buying more.
Yeah, Patrick It really I think all three factors the plane apart one there is a recovery from a sneaky recall some.
You know inventory bills that were used as a coupla years ago. So there's some recovery there with existing customers with existing applications second we are seen an expansion of applications as our customers use their high performance short pulse lasers.
In new areas and and we believe that those markets will continue to proliferate and continue to drive.
Demand and.
And then finally, we are seeing an expansion into you know new markets for us too and we noted the the release of the medical product in the quarter.
And that's an exciting new market course, we've always had a relatively small exposure medical and we anticipate continued growth in that market also.
Alright, Thank you very much.
Thanks better thank.
Thank you.
Our next question will come from Brian <unk> guess Folly with Raymond James. Please go ahead.
Hey, good evening and thanks for taking my questions I want to focus on the defense business with with my first one since we think that can be high eight or nine figures of EBITDA in a few years could you maybe help us there's a bunch of milestone was later this year for 300 kilowatt laser according to the department of defense.
Can you talk about how we like to think of the cadence of development revenue and supportive those milestones.
Sure, Brian I think first.
Just would like to highlight the fact that we are seeing continued good progress around the world indirectly or do you think there's been some good news in the corner around demonstrations both in the U S and Israel and elsewhere.
That further validates the use of lasers in these new application areas.
And that is both driving increased demand for us for the products that we sell in the space, but it is also certainly reinforcing the development revenue in the development opportunities that we see ahead.
You know there's there's nothing we can publicly report on that today, but we certainly are seen continued support for these programs and D that that healthy program for the 300 kilowatt laser remains one of the most important programs in the U S.
And.
Certainly anticipate more news on that over the coming quarters.
Great. That's helpful. And then I wanted to maybe talk about your non D. E defense products, we've seen in the industry for much of the first quarter. We were under a continuing resolution if things were kind of moving through contracting officers slowly can you talk maybe how we might think about that business, taking up with a defense budget and certainly the incremental.
<unk> that we've seen globally.
Yeah, It's it's always complex because it's unclear with the specific programs, where they can say that we are seen opportunities to expand outside of D. Directed energy. So that is something that is ongoing and we.
With the changes in the geopolitical global environment, certainly, let me see more pressure there with a specific programs that is a legacy programs for us.
<unk> matter a lot more so I think it's a little harder to comment on those but I think everything else being equal certainly you know, including the continuing resolution that was a good thing. It released you know some demand for us, but there isn't really a summary way to think about that for the current programs.
I'm, saying that we do anticipate expansion beyond directed energy also.
Okay Fantastic and then if I could just sneak one last one in I just wanted to follow up on some of the discussions and disclosures you guys head around Shanghai.
Thinking about that costing a couple of million dollars of revenue I'd I would expect that that would run through the micro fat line and then given that it's microfarad that tends to be a fairly profitable unit for you is that why we see the a couple of hundred basis point kind of headwind too gross profits as we moved through the second quarter.
Yeah, that's that that that's that's right, Brian that's exactly right.
Okay perfect. Thanks, so much guys I appreciate it.
Sure. Thanks Man.
Our next question will come from hands Chung, but the a Davidson. Please go ahead.
Taking my question, so I want to follow up on the.
<unk>, so I'm, sorry, if I <unk> I think you mentioned.
A few million dollar not recognizing.
About the same.
Can you quantify that and then.
Oh, so if I look at it.
Lynch.
Hi Angel.
Assumption.
Guarding.
[noise], Shanghai Knights situation, well, what what kind of things like make the guidance and the <unk>.
I think I've got part of your question. So let me try the first part for so the Q1, the Q1 numbers you're right. We referenced several million dollars of revenue that we didn't ship in Q1 some of that will ship in the queue to we expect to ship.
In queue to and then certainly when you look at our guidance Ah revenue guidance range, it's a little wider than what we would typically provide at this point in the quarter, but we've.
We haven't quantified specifically, what the impact will be what I can tell you is that directionally without the impact of Shanghai, If everything was running at full capacity and we were in a more normal operating environment. When I mean, more normal I mean kind of pre China.
Covid related Lockdown I expect that we would have guided up sequentially. Rachel hopefully that helps and then the second part of your question I'm, sorry, I couldn't quite hear your audio got cut off. So if you would if you. Please ask again.
Yeah, taking part is is that.
What kind of scenario regarding this from high situations like two.
Ready to the low end and high end guidance, let's say.
For example, low and does that assume.
The the the showdown and will continue to all the quarter and the high is that okay, maybe it's gonna be the the needs.
May or even earlier everything gone to normalize cause yeah just.
Kind of want to.
C. D E is any scenario <unk> on the line.
<unk>.
Yeah sure <unk>. So the scenario that we have for the Q2 guidance range really is dependent on two factors you know the timing when we can ramp back up to a more normalised level of production as I said earlier.
We're not assuming that we get to 100 per cent production and then the second piece of it is how quickly and how efficiently based on the lifting of regulations that we're not totally not totally clear yet you know how efficient that we can be when our factory is back up at the <unk>.
Reduction levels that we are assuming so really that's what we're talking about we're not talking about modeling a scenario, where there is a protracted period of time, where we are not operating in an optimal way in our Shanghai facility.
Got it Okay and then.
Next question just uhm.
Regarding the <unk> alrighty, and that's very very strong and <unk>.
<unk> authenticate, 7% a year in Osaka sequential so.
Alright.
More on the <unk> the underlying driver here in the house or anything about <unk> I'm going for maybe two hours yeah.
This is Scott here I think you know what we're seeing globally is uhm continued adoption of lasers across all of the industrial markets cutting welding additive manufacturing and other applications.
And that's being driven by a whole host of factors macro factors around companies that are pursuing new supply chain sprayed or automation, but then also just the continued secular adoption of lasers as we displace legacy technologies, we continue.
You too launch products that are driving significant improvements whether it be an even legacy cutting applications with our programmable things that allows customers to.
Uhm have a much more flexible and more productive approach to cutting a wide range of different metal thicknesses too as I mentioned, the additive products, where it's really it's a significant change in the economics of three D printing metal parts going from.
What was before niche really specialty parts and an aerospace to a broader range of of opportunities that are in there. So we're playing an important role there.
I think we've got a a position to continue to drive new products that continue to drive continued expansion of both new customers and expansion with existing customers.
Got it and.
Quick fall off.
<unk> the manufacturing that.
Bright spot for the <unk>.
So what kind of a pet.
Does the cycle.
Nine and then what would you think the states need to be saving the medium term maybe two two years now.
Yeah, Hi, this is Joe to answer the question I think additive has been a bright spot for us as we've talked about we think as you look at the different applications that we serve cutting primarily cutting welding and additive we believe that that the highest growth.
<unk> potential for us as <unk> as we see it here today is in is in the additive space. So that is being driven there was an earlier question by you know whether they're new logos or it's it's greater you know share with some of these customers and for US. It has been it has been both and so I think over the.
Longterm, we expect the additives business to be among the the higher growing businesses in our portfolio and inside of our industrial fiber laser business.
Got it thank you.
You're welcome.
Our next question will come from <unk> with need him. Please go ahead.
Hi, good afternoon, and thanks for taking the questions rest rest of the world growth was was very healthy during the quarter, what any color on which regions in particular drove that and if you're seeing any change in demand in Europe in light of the conflict.
Yeah, Chris Thanks.
You know for US we're not seen changes to answer the second part of your question first not seen changes in demand in Europe , but you know look if there's there's a lag here. So we just finished our our big trade show in Europe , and and it wasn't in front and center topic, but I think certainly there's an expectation that.
You know.
Macro environment in Europe will be challenging undoubtedly and so the.
More fundamental questions just in terms of growth outside of and the rest of the world. We are seeing it broadly across all geographies.
I suppose some some.
Really good strength in the U S, but we do see strength and all of our G O as in that space.
And to the extent that <unk> and component costs remain elevated what.
What.
Ability do you have to take pricing action or have you have you contemplated taking any pricing action.
We have and we've taken some but I think that in lasers, there's a a secular trend to continue to improve improve both price and performance and we continued to drive dramatically improved productivity.
Converting electrons into photons to be useful in these applications and so that is a that's an ongoing trend that continues and so the opportunities to raise prices are fairly limited we have an <unk> cases, but but generally we're seeing opportunities to continue.
To drive costs down despite changes in in some of the component costs.
Great. Thanks very much.
Our next question will come from <unk> Misra with Bahrenburg capital markets. Please go ahead.
Thanks for taking my question.
<unk> <unk> <unk> <unk> <unk> can you give us any sense well what is typical <unk> just a cause for you maybe as a percentage of sales and.
How much about that typical average arrange or you're currently paying.
Yeah, <unk> I don't think we want to get into that level of detail in terms in terms of what the freight logistics costs are as a percentage of sales what I would tell you directionally as we this this past quarter, while the sales remained elevated there probably wasn't as much of an increase as.
We had seen in prior quarter. So when we're thinking about the business and we're thinking about the guidance. We provided in Q2 and beyond these elevated cost we don't expect to to abate I think if you looked at it historically right. It's it's you know cost US you know.
A little bit on on gross margin right 100 basis points or two right depending on how you look at what period what products I mean, it it really does depend on on on mix and we location to the customer but.
That that's kind of where we are today with respect to frame logistics.
Got it that that's useful color.
And then regarding capital allocation, how much capex are you targeting for this year and any any comment on appetite for Eminem this market.
Sure. So our our capital allocation remains consistent with where it has been really over I would say the last 18 months, which is we look at the business and we've got a significant amount of organic growth potential. So we evaluate everything we're doing around.
What we feel like we've got the most control over which is our own ability to drive new products and and we have an existing products with customers as we've talked about in the past the number one priority for our cash is to invest.
Invest in automation, primarily for our our U S facility. So this quarter Capex was around $5 million historically, we've been lower than that I think going forward the sort of seven 8% of of of revenue is probably a reasonably good range.
Always you know a lot of the equipment that that we've ordered or we are ordering there's as you can imagine when the current supply chain. There's long lead time, so that can move a little bit either way, but but I will tell you that the that that is the priority for our business business right now.
Thanks, very clear and the last one for me regarding your industrial business. So I guess just based on your order book or other demanding indicators.
Do you expect that industrial business to have a stronger second happened first half or just giving them. Some of the moving parts you describe Europe and whatnot, maybe it's not entirely care.
Ah Ah Ah. It's good good question <unk> I would I would say this it's certainly less clear today than it was even a couple of months ago. We do expect the industrial business as we said over the longterm too to grow I think as you look at the quarterly trajectory.
Three of our our business right. We've we had some very good growth in industrial last year, we expect that on balance to to continue this year I would not highlight 77% is it the quarterly year over year growth target, but I think over time, we expect again.
The industrial business to be among the the faster growing areas of our business.
Got it thanks, guys. That's all I had.
Thanks for your time.
Again, if you have a question. Please press Star then one our next question will come from Mark Miller with the Benchmark Company. Please go ahead.
Thanks for the question I believe you've estimated last quarter that long touristic headwinds, including tripping caution Packer margins my approximately 280 basis points.
December quarter do you have an estimate what was the impact on the March quarter.
Yeah, the Mark there wasn't a significant difference in terms of the impact of a freight and logistics this quarter versus last quarter. It was actually you know you look at the the the overall revenue level right what wasn't dissimilar. So I think the overall impact of gross margin this quarter.
<unk> well you know what.
Wasn't materially different or at least not worth getting into any level of real detail.
So we always talk about the trend of increasing dsos in days of inventory you've seen over the last several quarters.
Sure I think I'll take those two I'll take those two separately really on the the D. S. O side, that's just timing right. We don't really have any any challenges from you know <unk>.
Collections perspective, you sort of you know the.
The business in terms of when we're selling product and what time of the quarter typically has the biggest impact on our DSO. So I don't think there's a whole lot to read into on the on the changes of of DSO on the inventory side. However, it has been much more strategic I think one of the things that that we've invested.
And really in order to make sure that we are able to build the products for the existing demand that we have in whichever all of our customers. The success that they're having in the market and given the position that we have in many instances as a sole source supplier to some of these customers we want to be able to make sure we deliver.
So we have strategically invested in in our inventory exactly for some of the reasons that we are seeing today to mitigate some of the supply chain risks that we're all living through today.
Okay that makes sense.
Thank you for the questions. Thank.
Thank you Mark.
This concludes our question and answer session I would like to turn the conference back over to Joh Corso for any closing remarks.
Yeah. Thank you everyone for joining us this quarter and we look forward to talking to you throughout the quarter in our next cough. Thanks again.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.