Q2 2023 Proto Labs Inc Earnings Call
Greetings and welcome to the Proto Labs Q2 fiscal year 2023 earnings call.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Mr. Jason Franklin VP and corporate controller. Thank you Mr. Franklin you may begin.
Thank you Camilla and welcome everyone to Proto Labs' second quarter 2023 earnings conference call.
I'm joined today by Rob the door, Proto Labs, President and Chief Executive Officer, and Dan Schumacher Chief Financial Officer.
This morning, Proto labs issued a press release announcing its financial results for the second quarter ended June 32023 of the release is available on the company's website.
In addition, a prepared slide presentation is available online at the web address provided in our press release.
Our discussion today will include statements relating to future performance and expectations that are or may be considered forward looking statements and subject to many risks and uncertainties that could cause actual results to differ materially from expectations. Please refer to our earnings press release, and recent SEC filings, including our annual report.
And on Form 10-K for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward looking statements made today.
The results and guidance, we will discuss include non-GAAP financial measures consistent with our past practice. Please refer to our press release and the accompanying slide presentation at the Investor Relations section of our company website for a complete reconciliation of GAAP to non-GAAP results now I will turn the call over to rapid or Rob.
Thanks, Jason.
Morning, everyone and thank you for joining our second quarter earnings call.
This morning, we reported revenue and earnings within our guidance range.
While economic conditions are challenging amplified by the continued contraction of global manufacturing are uniquely broad customer offering fulfilled through the combination of our internal digital factories and network manufacturing partners allow us to offer our customers a differentiated value proposition and serve their various needs. Despite the economic press.
Our customers are facing.
Our lower priced longer lead time offers to the factory and network see particularly high demand in the current softer economic conditions are.
A quick turn offers tend to be in highest demand and strong growth economies alongside continued demand for longer lead time offers to meet customers' production needs.
As we discussed in prior quarters, we're operating in a challenging and uncertain manufacturing environment with both U S and eurozone manufacturing indices reporting three year lows in June .
Similar to what we saw in the first quarter.
Driven by the macro climate.
And for a longer lead time or priced offerings has continued to outpace demand for our quick turn offerings.
Notably our network revenue grew 80% year over year in the quarter.
The network offer has significantly expanded our addressable market with a wider envelope of manufacturing capabilities.
Broad range of lead time and pricing options.
As a result continues to gain traction with customers and share in the market.
Okay.
While our quick turn offers saw continued slower demand in the quarter. We anticipated. This overall demand mix and despite this headwind improved our consolidated gross and operating margins sequentially.
We also continue to generate positive cash flows that are best in class in our sector.
As global manufacturing conditions improve we expect growth in both network and factory office.
In order to continue to drive growth and maintain or improve our profitability in this challenging environment. We are focusing on items we control.
We will continue to drive growth in our longer lead time lower priced offerings through both the humps not working in the factory.
Network revenue against surpassed our expectations in the quarter and in the first half of 2023 grew 75% over the first half of 2022.
Our network offer continues to thrive as customers gravitate towards expanded manufacturing capabilities and more economic options for custom prototypes and low volume production parts.
Next we continue to invest to innovate and expand our customer offer through research and development initiatives.
Our industry, leading profitability and positive cash flow generation enable us to invest for future growth.
Most recently, we launched accelerated analyzing and chromate play and our digital factory CNC machining service.
This is a very commonly requested secondary offer for machine parts.
Our new offer combines proto labs unmatched speed at scale with traditional finishing processes a first for the industry.
Proto labs customer can now have fully anodize related CNC machine parts on their desk within a few days of placing an order.
Previously, we only offered finishing for the network.
But as part of building out the most comprehensive custom CNC offer we.
Now offer finishing through the factory at lead times that no other manufacturer can match.
Aside from expanding our offers we're also ensuring that our costs continue to flex with sales volumes.
We are controlling factory costs, while maintaining the world's fastest lead times.
At the end of the second quarter, our factory manufacturing head count was down 9% year over year commensurate with our volumes.
We will continue to align staffing levels with volumes in our manufacturing facilities, while continuing to invest in growth.
Including our high growth network offer.
As economic conditions and manufacturing demand recover we anticipate our factory performance will improve as customer preferences and need shift and more customers take advantage of our world class lead times, consistent quality and high on time reliability.
In addition, if the factory longer lead time business becomes material to our overall factory offer who will provide an offset to any pressure to the quick turn business.
We also expect strong network growth to continue in any macro climate driven by its wide range of capabilities and lead time.
Yeah.
The combination of factories and network is what the problem is.
It's what allows for labs to serve all customer use cases in any economic climate.
Because we acquired hubs in 2021 and now offer the combination of both.
Film and happened as our current business performance is stronger than if we had only provided quick turn offers to customers.
The network offer continues to gain traction with customers with the expanded envelope capabilities that broader range of lead time and pricing actions.
The number of customers utilizing both factory network services continues to grow well, we are realizing the value of the hubs acquisition and our expanded customer offer and we're still in the early stages of capturing the total opportunity in the market that our strategy unlocks.
<unk> has the broadest fulfillment capabilities, our industry, allowing us to serve our customers and grow profitably in any economic conditions.
Now for a quick update on our 2023 priorities halfway through the year.
As a reminder, our priorities are first.
To drive revenue growth, particularly in our largest services injection molding and CNC machining and.
And second to increase shareholder value through expanding profitability and the factory in the network.
Okay.
One investment we're making in revenue growth is an investment in sales leadership talent.
We recently hired a new vice president of sales to lead the Americas and also strengthened our sales management in Europe .
Injection molding revenue in the second quarter was down sequentially.
As we've discussed in prior calls injection molding is highly impacted by macro conditions due to its higher proportion of production use cases.
We continued to pursue various go to market strategies and other service line improvements to drive growth. We have seen solid performance in injection molding orders fulfilled through the combination of our internal factories and manufacturing partners. We are winning more orders that leverage our combined factory network injection molding offer as evidenced by our recent project completed.
For an automotive lighting solutions provider.
Working with one supplier was important for this automotive customer this.
This customer came to Proto labs in search of a custom manufacturing partner that can support program from prototyping to production the customer benefited from the speed of our digital factory service to rapidly prototype their designs and then moved into production with our network evidence of Proto labs.
Serving multiple use cases across the product lifecycle for our customers.
The customer required large and complex injection molded parts, which are outside of our digital factory capabilities and in the past we will not have one this program.
Because of our digital network offers expanded injection molding capabilities fertilize won the business when we matched manufactured on molten parts of this customer through bulk fulfillment happens.
The combined factory network offer unlocked significant value for this customer, allowing them to get to production quickly with validated and tested designs all from a single manufacturer.
Our next priority growth area CNC machining is performing well.
With growth in the second quarter, largely driven by our network off.
We continue to innovate on our digital factory capabilities and expand our customer offer most recently launching accelerated advertising in place.
Proto labs offers unmatched breadth in CNC machining and as a customer preferences shift and expand we are well positioned to be a single source supplier for all our customers CNC machines.
We have tangible evidence that customers value one single partner for their custom CNC parts.
One specific customer Airbus recently turned to Proto labs for help with a new transportation project in development.
Airbus needed a manufacturing partner that can move very quickly from prototyping to production and the Proto labs combined offer made us the perfect candidate.
We deliver quick turn prototype parts through the factory and Airbus then transition to our digital network to manufacture higher production volumes.
Our factory in network combination eliminated the need for Airbus to request multiple quotes from multiple manufacturers simplifying and accelerating their supply chain.
Another example of the power of Proto Labs combined factory network.
The next priority for 2023 is to increase shareholder value through expanding profitability and the factory ended the network, we surpassed our expectations for earnings in the second quarter.
We achieved this despite the shift in the mix of our business toward a longer lead time, lower priced offerings and the accompanying pressure on margins we.
We accomplished this through improved automation and productivity that enabled us to reduce overall head count.
Overtime and reduced reliance on contract labor.
Given customer preferences for lower priced offerings in this economic cycle. We expect continued pressure on operating margin improvements throughout 2023.
And we will continue to focus on operating efficiencies as we have throughout this year.
Our focus on operating efficiencies and our customers secured is two pieces of external recognition in the quarter highlighting our leadership in digital manufacturing.
First Proto labs was awarded company of the year for digital manufacturing by Frost, and Sullivan, who commended our visionary innovation performance and customer impact.
Okay.
In addition for labs was honored with the manufacturing leadership Counsels manufacturing leadership award in the digital supply chain category.
The LLC highlighted our combined factory network offering.
We will continue to focus on serving our customers with the most comprehensive digital manufacturing offer in the world.
And receiving external awards like this is a strong endorsement of our continued industry leadership.
Okay.
In summary, we have little control over macro conditions and end market demand, but these short term challenges should not cloud the advantages of our business model. The combination of our factory network offers has allowed us to perform better than peers in the current environment and we believe it will allow us to outgrow the market longer term.
Particularly as our factory offer becomes less relying on the quick turn business that is sensitive to economic conditions. Let me once again highlight that our network offer continues to take market share with 80% growth in the quarter.
We are well positioned to weather economic volatility due to Proto labs best in class profitability and strong cash flow generation.
This also enables us to continue to invest in innovation to expand our customer offer and expand additional share of wallet.
Through any economic climate, we are a great long term strategic partner for our customers and believe we will deliver value for shareholders over the long term.
I'd like to thank every proto labs employees for their contributions in the first half of 2023.
Although we are operating in a difficult environment the efforts and commitment of our employees enable us to continue to perform and grow profitably.
Dan will now cover our second quarter financials in depth and provide our outlook for the third quarter of 2023.
Thanks, Rob and good morning, everyone. Our financial results begin on page nine of the slide presentation.
Second quarter revenue of $122 3 million within our guidance range and down 1% year over year in constant currencies and excluding Japan.
<unk> had another record quarter generating $20 2 million of revenue in the second quarter, representing year over year growth of 79, 7% in constant currencies. Our hubs network offer continues to resonate with customers driven by a broad range of capabilities and lead time options changes in foreign currencies representing.
The 500000 unfavorable impact to revenue in the second quarter in line with our expectations.
Second quarter revenue by region as summarized on slide 13.
In the Americas, our largest region revenue declined four 3% year over year as strong network growth was offset by a decline in the factory business.
In Europe second quarter revenue grew 13, 1% year over year in constant currencies, driven by strong network offer growth.
Transitioning to revenue by service.
Second quarter injection molding revenue declined approximately 6% year over year in constant currencies and excluding Japan, we saw weaker demand for our factory offer sequentially, especially in our medical computer electronics and manufacturing end markets Europe saw a larger sequential decline than the Americas.
CNC machining revenue grew three 5% year over year in constant currencies, and excluding Japan, driven by very strong network growth.
Second quarter three D printing revenue grew 6% year over year in constant currencies driven by growth in the network and in all geographies both in the factory in the network.
Sheet metal revenue declined 24% year over year in constant currencies in the quarter. As a reminder, we furloughed, 25% of our sheet metal workforce in the second quarter in an effort to align cost levels with current demand.
We serve 23377 unique product developers in the second quarter, a decrease of two 8% year over year.
Turning to slide 17, and our detailed income statement.
Overall second quarter non-GAAP gross margin increased 70 basis points sequentially to 44, 1%.
Consolidated margin expansion was driven by a higher network business gross margin gross margin slightly offset by the impact of the mix shift to lower margin offers even with the lower volume we were able to maintain similar factory gross margins quarter over quarter due to cost reduction initiatives network gross.
Margin in the second quarter increased to 31, 2% from 22, 2% in the first quarter of 2023, our long term target for network gross margin is still between 25% and 30% in the second quarter, we benefited from improvements to our sourcing algorithm and pricing efficiencies.
Total non-GAAP operating expenses were $43 1 million in the quarter or 35, 2% of revenue compared to $45 5 million or 36, 2% of revenue in the first quarter of 2023.
We gained operating efficiencies sequentially due to focused efforts to control costs as well as lower incentive compensation.
As we continue to work through the exit of our Japan operation, we incurred non operating expenses of $4 million in the second quarter, primarily due to the release of a $3 9 million of cumulative foreign currency translation adjustment from other comprehensive income on the balance sheet.
This adjustment is included in our non-GAAP financial adjustments.
Moving to taxes.
Our non-GAAP effective tax rate in the second quarter was 25, 2% compared to 23, 2% in the first quarter.
The sequential increase in the non-GAAP effective tax rate was primarily due to a slightly lower R&D credits in the quarter.
Second quarter non-GAAP diluted net income per share was <unk> 33.
Compared to 30 in the first quarter of 2023.
The sequential earnings per share improvement was driven primarily by network growth and gross margin expansion as well as operating expense efficiencies.
These sequential improvements were partially offset by the continued mix shift towards longer lead times lower priced offerings.
Turning to cash flow and balance sheet highlights on slide 18.
We generated $9 $3 million of cash from operations in the quarter.
Our business exists exhibits a very strong cash flow generation, enabling us to weather challenging economic climates, better than peers and continue to invest in future growth.
We repurchased $8 9 million of common shares during the second quarter, we will continue to purchase opportunistically going forward.
Our balance sheet is still very strong on June 32023, we had $102 8 million of cash and investments on our balance sheet.
And zero debt.
Turning to third quarter guidance as outlined on slide 20.
We expect to generate revenue between 118 and $126 million in the third quarter at the midpoint. This implies flat revenue year over year in constant currencies and excluding Japan.
The closure of our Japan operations is expected to have a $1 3 million negative year over year impact on our revenue growth.
We expect foreign currency to have between one five and $2 million favorable impact on revenue compared to the third quarter of 2022.
Moving to earnings guidance, we anticipate non-GAAP add backs in the third quarter to include stock based compensation expense of approximately $4 6 million and amortization expense of $1 $5 million.
We currently estimate our third quarter non-GAAP effective tax rate will be 24% plus or minus 50 basis points.
Considering this we expect third quarter non-GAAP earnings per share between 26 and 34.
Now back to Rob for closing comments.
Thanks Jack.
<unk> is the most profitable and cash flow positive digital manufacturing company.
Longest to withstand challenging environments, while investing in the future.
Our best in class unique combined offer is gaining significant traction in the market.
In the second half of the year, we will continue to improve on the things we can control and make progress on our focused 2023 priorities, which will enable long term profitable growth and shareholder value creation.
Yes.
Thank you for your time today that concludes our prepared remarks, Dan and I will now take questions.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
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One moment, please while we poll for questions.
Thank you.
And our first question comes from the line of Jim Ricchiuti with Needham <unk> Company. Please.
Please proceed with your question.
Hi, Thank you good morning.
First question is.
On the quarter current quarter, yes seasonally Q3.
Weaker just two summer months, obviously, but I'm wondering.
If you have any kind of read through.
And either the U S or Europe , Yeah. That's just me and inform you just any changes in demand trends.
Is it as you exited Q2.
Yes, what I would tell you Jim as well what we found as we've gone through Covid and post Covid in terms of the supply chain disruption.
Abnormal seasonality ends up being normal seasonality.
Hard to predict in this environment.
Seasonally how things are coming and this comes from a couple of factors right.
We've seen in past periods around Covid, where normal months in which people were taking a lot of vacation. They ended up not and you ended up seeing some different type of seasonality pattern than you normally did so.
We set the guide as we normally do we looked at what our current demand was in July and we looked at.
What our upload rates are and so forth and then did our best to project out from there.
What the guidance is I don't have any better information than that Jeff.
Fair enough.
You guys showed some nice improvement in the in their network gross margins in the current quarter I'm just wondering.
How how we should be looking at that just relative to the goal you have out there and maybe more broadly just in general how you're thinking about gross margins in the current quarter.
Yeah, Thanks, Jim for recognizing that we're we're quite.
Quite happy with that improvement in our network gross margins.
And it comes from improvements that we made we have a machine learning based pricing algorithm and we've continued to.
Tests.
And validate different pricing paradigms within that and we've seen some nice improvement, which we're happy with and then also.
We improved kind of how we are.
Sourcing our opportunities to our manufacturing partners to make sure that we're really providing them with the best fit and that's also helping us expand our margins there.
You asked about the target we've communicated a target of 25% to 30% gross margin for the network and we're still holding to that at this point because we want to continue to tap.
Test and learn as we as we continue to go forward, but yes, very pleased with the performance in the quarter.
And then just broadly.
Margins in this current environment across.
Across the services are you seeing.
Any any any pricing pressure or things like that that we need to at least consider for the current quarter gross margins.
Okay.
Yes.
I think we expect things to be fairly consistent going into the next quarter.
For sure there is.
More pressure within the factory business on volume, but we've been successful in managing our variable cost as it relates to the plants.
Our overall head count in our plants is down 9%. So we're adjusting as as we go it as as we see how this economy plays out.
Got it thanks, thanks very much.
Thank you.
Thank you and our next question comes from the line of Brian Drab with William Blair. Please proceed with your question.
Good morning, Dan Good morning, Rob.
This is blake on for Brian .
Just wanted to quickly ask.
What drove the decline in product developers I noticed a slight decline, but wasn't any was it broad based across all your markets or was it anything specific in any additional color there would be great.
Yes.
It was in general consistent with revenue, but I would say one caveat to that.
Part of our growth in.
Our network business is not just the growth in customers, which is very very healthy.
But our sales team within our <unk> business is very focused on larger and larger projects and you can see from the 80% growth rate. They are very successful at that and so.
That's the only difference I think in terms of when you look at product developer declined versus versus our decline in revenue in constant currencies, excluding Japan.
Got it and then you guys mentioned as longer lead time offerings grow it should help offset any flonase and quick turn out.
<unk> replied and gets to the size of a quick the quick turn business in the factory.
How close are you guys of that milestone I think that that was an important Thomas.
Yes so.
<unk>.
We've expanded our as we talked about our comprehensive offering.
We've expanded our lead time off shins, both by offerings and network options, which tend to have longer lead times and also by introducing longer lead time auctions.
Filled through the factory we've done that.
In our CNC business in our <unk> printing business.
And the injection molding as well.
In CMC, we at one point, we talked about it as flexible lead times, that's kind of the.
The name we talked about when we launched it.
So those are in place.
They are continuing to gain traction.
Understood and then just lastly.
For me on your capital allocation strategy I know you guys mentioned.
You mentioned, Keith or take shares.
What does your M&A pipeline look have you seen anything there where you have to add on to either I'm sorry here in factory offerings.
Yes.
We're primarily focused on the.
The acquisition of Hudson, making it successful you can kind of see that in the results of hubs, we've been very focused on cross selling.
And on improving the E com experience that integrates both the factory and the network that is our primary focus right now.
Understood I'll pass it along thank you.
Thank you.
Okay.
Thank you.
Our next question comes from the line of Greg Palm with Craig Hallum Capital Group. Please proceed with your question.
Hey, Thanks, guys. Good morning, Thanks for taking the questions I wanted to start with.
A question just about the demand environment, but maybe I'm going to ask it in a little bit different way I'm just.
Kind of curious if youre seeing any change in customer behavior, whether it's customers ordering more.
More parts or whether they're doing more expedited any change in behavior that gives you some indication of any underlying change in the macro you've seen any of that or is it is it pretty steady relative to what you've been kind of seen year to date.
I think year to date, there hasn't been that much change quarter on quarter, but I would say overall, we're seeing and then we talked about this a little bit in the script right.
We're seeing customers have a tendency to be less in a hurry and.
Utilizing our longer lead time options more.
I think the other thing Greg that we saw maybe this is specifically for our factory business in Europe , because we did see larger projects that we talked about in the first quarter earnings call.
We're not seeing.
As many of those in the second quarter and on some of those larger projects.
We're having customers upload, but are being indecisive and longer in terms of making decisions on those.
And I think we called it out a bit Greg and my commentary in injection molding I think we're seeing particular softness in medical and consumer electronics.
Okay. That's helpful.
On gross margin just just a follow up was there anything you know sort of nonrecurring or one time I know, we've been talking about 25% to 30% hubs you were a little bit below that in Q1, but yeah. It really nicely outperformed it in Q2, so but I think you reiterated do you still expect 25%.
30%, so just kind of curious whether there was.
Anything unusual that drove the upside specifically in the quarter.
So two things.
We've talked about this Greg I don't remember us talking about this maybe last year and the year prior.
For the hubs business in terms of where the <unk> are sourced Chinese new year does have an impact.
In Q1 and ends up being pressure on our margin. So I would say Q1 was well below the average right. So so it's part of the pick up was there.
I would say the second thing is we did make.
Changes too.
Our model that were quite successful in some of those changes are on the demand sourcing side and some of those changes are.
Optimizing the pricing for different types of geometries and materials. So we.
We did implement changes we had been working on in the quarter as well.
Were the two primary drivers.
And just to be clear those were not just one quarter type changes, that's something that will affect the go forward.
Correct.
And so you will see but.
But we will see how successful those things are.
Letting three months kind of dictate where that is going to be Gregg before adjusting the longer term model of the 25% to 30%.
Yeah Okay.
That's fair and then just I guess my last question.
Operating expenses took another sort of ticked down in Q2, so you're you're clearly managing costs pretty well, what's what's the expectation going forward is this kind of a good sort of level a good run rate or are you going to continue to sort of manage that pretty tightly.
I think as you can see from our guidance.
We're expecting to be flattish at the mid point quarter over quarter. So.
We would hold where they are now but this is a dynamic environment.
So.
Pending on it if the revenue goes up or down we're going to need to.
Be flexible right and continue to find ways to be more efficient.
Got it okay I will leave it there thanks.
Thank you.
And our next question comes from the line of Ben Rose with Battle Road Research. Please proceed with your question.
Thank you and good morning.
And the customer examples that you've cited.
It does seem like there is a growing number of customers that are.
Taking advantage of both the factory in the network services can you comment either quantitatively or qualitatively the percent of.
Hi, there customers or developers that are at this point.
Knowing upon both services.
Yes, I think yes, certainly good morning, Ben Thank you.
I think as you look at.
Growth that we've had in the network.
70% last quarter, 80% in the first quarter, 8% in the second quarter, you can see that.
I think we've been quite successful with our sales team.
And exposing our broader offerings in both the combination of the network in the factory to our customers.
And driving them to those solutions as well as the ones that theyre finding on their own through using our website and so we're definitely seeing a nice healthy uptick in customers who are using us in this much more holistic way.
<unk> has been quite satisfied with that.
Okay.
And.
How critical is it for some of these larger customers that some of the network partners, particularly as it pertains to volume production that these partners are located.
Outside the U S.
So that varies.
Depending upon the customer and what their needs are.
And we've got network partners that are in regions. Both in the U S and in Europe , and then we've got them globally as well.
And so we make the match depending upon what the needs are for the customer obviously, if they needed to be domestic.
And then we will partner accordingly.
Okay.
A question on sourcing of sourcing of materials.
I'm wondering if.
Some of the improvement for example in hubs gross margin might be traceable to your ability to obtain.
Lower priced.
Lower price commodities in this market is.
Prices have adjusted post Covid.
Yes, you had mentioned hubs. So just as a reminder, Ben in the network business were not procuring the material for the MPS okay.
Either procuring.
Material.
No.
In terms of.
Were kind of outside the.
We feel were outside of the supply chain constraints right, we're able to procure materials now.
<unk>.
That's not an issue with in terms of our on time delivery or gross margins now.
Okay.
Guess, what I really meant to say.
Excuse me I meant to ask in terms of the price.
Yeah.
Is that the manufacturing partner is accepting at this point is that do you think that there are more.
Likely to accept a quote from you when you know knowing that knowing that commodity prices have stabilized.
Yeah.
Yes, I think that in general we've seen the worst of the supply chain.
Price impacts normalize so that's benefited us as Dan said it also benefits our manufacturing partners.
And that factors into the.
The prices.
They require in order to take the business.
Okay, and then finally in terms of end markets I know you mentioned, some softness in medical and consumer.
Electronics.
The first question is.
You know looking out.
Over the next few months do you think that that business has the ability to.
Has the ability to come back and then also can you comment a little bit on what's happening in terms of EV prototyping and potentially low volume production there.
Yeah in terms of the softness we're seeing in medical and consumer electronics I think.
Part of what we're seeing is we're seeing people upload and then us having.
Talk with the customers and then.
Pushing off in terms of projects. So we think the value. We believe the volume is that right to be had once we are past whatever economic cycle. We're in so.
Just as a reminder, I mean in an injection molding, we offer a service nobody else can right in terms of the speed that we can get injection molded parts to it so so yeah.
Yes, we believe in the second half.
If we see improvement.
From a macro perspective that that demand will pick up Rob do you want to take the easy question, yes, absolutely. So.
Yes, thank you for that.
Automotive first of all this was strong for us in the quarter.
<unk>.
Electric vehicles is definitely a very strong subsegment for us within automotive.
Generally.
Within the industries that the sub sectors that do best for US are those that are new.
And where there's a lot of innovation going on it certainly.
Is that the very forefront of that for automotive and so that's absolutely a strong business for us.
Okay. Thanks, a lot.
Thank you.
Thank you.
Reached the end of our question and answer session and with that this concludes today's teleconference.
You may disconnect your lines at this time.
You for your participation.
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