Q1 2024 Rogers Corp Earnings Call
Operator: Good afternoon. My name is Alicia, and I will be your conference operator today. At this time, I would like to welcome everyone to Rogers Corporation's first quarter 2024 earnings conference call. I will now turn the call over to your host, Mr. Steve Haymore, Director of Investor Relations. Mr. Haymore, you may begin.
Good afternoon. My name is Alicia and I will be your conference operator today at this time I would like to welcome everyone to Rogers Corporation first quarter 'twenty 'twenty four earnings conference call.
I will now turn the call over to your host Mr. Steve Haymore director of Investor Relations.
Stephen Haymore: Mr. Haymore, you may begin.
Stephen Haymore: Good afternoon, everyone, and welcome to the Rogers Corporation First Quarter 2024 Earnings Conference Call. The slides for today's call can be found on the Investor section of our website, along with the news release that was issued earlier today. Please turn to slide two. Before we begin, I would like to note that statements in this conference call that are not strictly historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and should be considered as subject to the many uncertainties that exist in Rogers' operations and environment.
Stephen Haymore: Good afternoon, everyone and welcome to the Rogers Corporation first quarter 'twenty 'twenty four earnings conference call.
Alicia: The slides for today's call can be found on the investors section of our website along with the news release that was issued earlier today.
Stephen Haymore: Please turn to slide two.
Alicia: Before we begin I would like to note that statements in this conference call that are not strictly historical are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
And should be considered as subject to the many uncertainties that exist in rogers' operations and environment. These.
Stephen Haymore: These uncertainties include economic conditions, market demands, and competitive factors. Such factors could cause actual results to differ materially from those in any forward-looking statement made today. Please turn to slide three. The discussions during this conference call will also reference certain financial measures that were not prepared in accordance with U.S. generally accepted accounting principles. A reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the slide deck for today's call, which is available on our Investor Relations website.
Stephen Haymore: These uncertainties include economic conditions market demands and competitive factors such factors could cause actual results to differ materially from those in any forward looking statement made today.
Stephen Haymore: Please turn to slide three.
Stephen Haymore: The discussions during this conference call will also reference certain financial measures that were not prepared in accordance with U S. Generally accepted accounting principles are.
Stephen Haymore: A reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the slide deck for today's call, which are available on our Investor Relations website.
Stephen Haymore: Turning to slide four, with me today is Colin Gouveia, President and Chief Executive Officer, Ram Mayampurath, Senior Vice President and Chief Financial Officer, and Griffin Gappert, Vice President and Chief Technology Officer. I will now turn the call over to Colin.
Stephen Haymore: Turning to slide four with me today is Colin Gouveia, President and Chief Executive Officer, Rob My important senior Vice President and Chief Financial Officer, and Griffin Gafford, Vice President and Chief Technology Officer, I will now turn the call over to Colin.
Randall Colin Gouveia: Thanks, Steve. Good afternoon to everyone, and thank you for joining us today.
Randall Colin Gouveia: Thanks, Steve Good afternoon to everyone and thank you for joining us today I'll begin with the key messages for the quarter and outlook on slide five overall.
Randall Colin Gouveia: I'll begin with the key messages for the quarter and outlook on slide 5. Overall, we are encouraged by the improving end market demand that we saw in the first quarter. Sales were near the high end of our guidance expectations, which led to adjusted EPS above the midpoint of the range. The markets where we saw the most growth were aerospace and defense, wireless infrastructure, and industrial. The improved industrial demand is significant, as it is both our largest end market and was hit hardest by the prolonged cyclical downturn in manufacturing activity.
Stephen Haymore: Overall, we are encouraged by the improving end market demand that we saw in the first quarter sales were near the high end of our guidance expectations, which led to adjusted EPS above the midpoint of the range the markets, where we saw the most growth where aerospace and defense wireless infrastructure and industrial the improved industrial demand is significant.
Stephen Haymore: As it is both our largest end market and was hit hardest by the prolonged cyclical downturn in manufacturing activity.
Randall Colin Gouveia: It appears that demand in many of these industrial markets has hit bottom, and a gradual market recovery is beginning to take hold. The improving outlook for industrial demand adds to the likelihood that Q1 sales will be the low point for the year and that sales should continue to improve into the second half of 2024. Other signs that point to a stronger second half of the year include improving manufacturing PMI data, input from customers, and the typical seasonality in our portable electronics business.
It appears that demand in many of these industrial markets has hit bottom and the gradual market recovery is beginning to take hold.
Stephen Haymore: The improving outlook for industrial demand adds to the likelihood that Q1 sales will be the low point for the year and that sales should continue to improve into the second half of 2024.
Stephen Haymore: Other signs to point to a stronger second half of the year include improving manufacturing PMI data input from customers and the typical seasonality in our portable electronics business.
Randall Colin Gouveia: Returning to Q1, excess inventory at the customer level remains a challenge for certain product lines. For example, our Keramic Power Substrate business, which had a record year in 2023, had several high-profile customers push out orders in late February due to inventory levels. The sales outlook for power modules used in industrial, renewable energy, and EVHEV inverter applications is very dynamic right now, and we are closely watching for better indications regarding demand levels in the second half of the year.
Stephen Haymore: Returning to Q1 excess inventory at the customer level remains a challenge for certain product lines or Keramic power substrate business, which had a record year in 2023 had several high profile customers push out orders in late February due to inventory levels.
Stephen Haymore: The sales outlook for power modules used in industrial renewable energy and EV HEV Inver applications is very dynamic right now and we are closely watching for better indications regarding demand levels in the second half of the year.
Randall Colin Gouveia: We do expect this headwind to continue into Q2 based on customer feedback. As we continue to drive improvement in our top line, we are also taking steps to improve profitability and cash flow. These actions include adjusting manufacturing costs and startup expenses for specific product lines to match lower near-term demand levels. In some cases, we are taking out more costs where the recovery may be further away and carrying some costs where we see demand returning sooner.
Stephen Haymore: We do expect this headwind to continue into Q2 based on customer feedback.
Stephen Haymore: As we continue to drive improvement in our top line. We are also taking steps to improve profitability and cash flow. These actions include adjusting manufacturing costs and startup expenses for specific product lines to match lower near term demand levels. In some cases, we are taking out more cost where the recovery may be further away.
Stephen Haymore: And carrying some cost where we see demand returning sooner.
Stephen Haymore: As we manage through the very dynamic near term environment. We remain firmly focused on executing on our strategic growth plans. This includes continuing to fund, our R&D and innovation initiatives and investing in capacity and capabilities to support this growth.
Randall Colin Gouveia: As we manage through this very dynamic near-term environment, we remain firmly focused on executing on our strategic growth plans. This includes continuing to fund our R&D and innovation initiatives and investing in capacity and capabilities to support this growth. We continue to take a measured approach to capacity investments and will adjust the timing of spend to align with demand levels. We are working to strike the right balance between readiness to capitalize on growth opportunities while actively improving margin and cash flow. In terms of our innovation, we have a rich opportunity pipeline that we anticipate will help drive our future growth. I'll now turn it over to Griffin to discuss more of our innovation and technology development efforts.
Stephen Haymore: We continue to take a measured approach to capacity investments and we'll adjust the timing of spend to align with demand levels. We are working to strike the right balance between readiness to capitalize on growth opportunities, while actively improving margin and cash flow.
Stephen Haymore: In terms of our innovation, we have a rich opportunity pipeline do we anticipate will help drive our future growth.
Stephen Haymore: I will now turn it over to Griffin to discuss more about our innovation and technology development efforts.
Griffin Gappert: Thank you, Colin. I'm very excited to share our strategy to accelerate innovation at Rogers and the exciting opportunities we have ahead. I'll begin on slide 6.
Griffin Gafford: Thank you Colin I am very excited to share our strategy to accelerate innovation at Rogers and the exciting opportunities. We have ahead I'll begin on slide six.
Griffin Gappert: Rogers has a rich history of innovation, and over the past nine months, I've observed firsthand the unique skill sets and capabilities that have established Rogers as an innovator. These capabilities include our deep material science and applications experts, which fuels the development of highly engineered and differentiated This has enabled us to establish technology leadership positions in sector growth markets and is why customers repeatedly turn to Rogers for solutions to their most complex materials challenges.
Griffin Gafford: Rogers has a rich history of innovation and over the past nine months I've observed firsthand the unique skill sets and capabilities that are established Rogers as an innovation leader.
Stephen Haymore: These capabilities include our deep material science and applications expertise, which fuels the development of highly engineered and differentiated solutions. This has enabled us to establish technology leadership positions and secular growth markets and it's why customers repeatedly turned to Rogers for solutions to their most complex materials challenges.
Griffin Gappert: Some examples of the types of innovative solutions we have developed in recent years include advanced power substrates, which have helped enable the growth of silicon carbide in electric vehicles and renewable energy markets; battery compression pads for EV batteries that enable improved range and lower total cost of ownership for OEM; and Miniaturized Antenna Solutions for the Defense Market. Our new innovative platform enables a reduction of antenna size by 75% to support evolving communication.
Stephen Haymore: Some examples of the types of innovative solutions, we have developed in recent years include <unk>.
Stephen Haymore: Advanced power substrates, which have helped enable the growth of silicon carbide in electric vehicles and renewable energy markets.
Stephen Haymore: Battery compression pads for EV batteries that enable improved range and lower total cost of ownership for Oems.
Stephen Haymore: And miniaturized antenna solutions for the defense market.
Stephen Haymore: Our new innovative platform enables reduction of antenna size by 75% to support evolving communication needs.
Griffin Gappert: The strengths I've outlined will continue to be the foundation of our innovation strategy as we move forward with continuous improvement initiatives targeted to accelerate and scale our development process. The first of these initiatives is focused on strengthening our innovation operating model; we are placing increased emphasis on a One Rogers Model to drive greater process consistency and improved execution capabilities across all of our R&D and innovation functions. This will help us accelerate our development cycles and make the innovation function more scalable as we grow.
Stephen Haymore: The strength I have outlined will continue to be the foundation of our innovation strategy as we move forward with continuous improvement initiatives targeted to accelerate and scale our development processes.
Stephen Haymore: First of these initiatives is focused on strengthening our innovation operating model.
Stephen Haymore: We are placing increased emphasis on our one Rogers model to drive greater process consistency and improved execution capabilities across all of our R&D and innovation functions.
Stephen Haymore: This will help us accelerate our development cycles and make the innovation function more scalable as we grow.
Griffin Gappert: In addition, we are taking a portfolio approach with how we allocate resources and invest in opportunities over multiple innovation horizons. For Horizon One Innovations, we are prioritizing key near-term projects focused on extending our core business. For Horizon 2, the focus is on developing capabilities needed to capitalize on technologies and applications adjacent to our core. And with Horizon 3, we focus on the exploration of nascent technologies, which have longer timelines but high potential for disruptive solutions.
Stephen Haymore: In addition, we are taking a portfolio approach with how we allocate resources and invest in opportunities over multiple innovation horizons.
Stephen Haymore: For Horizon, one innovations we are prioritizing key near term projects focused on extending our core businesses.
Stephen Haymore: For horizon to the focus is on developing capabilities needed to capitalize on technologies and applications adjacent to our core.
Stephen Haymore: And with Horizon, three we focus on the exploration of nascent technologies, which have longer timelines, but high potential for disruptive solutions.
Stephen Haymore: With this portfolio approach, we are investing resources across multiple time horizons to make sure. We continue to support the growth of the business today and into the future.
Griffin Gappert: With this portfolio approach, we are investing resources across multiple time horizons to make sure we continue to support the growth of the business today and into the future. We are also placing a greater emphasis on leveraging technology such as digital modeling and machine learning to innovate faster and with better outcomes. We also continue to leverage our innovation ecosystem partnerships, including relationships with academic and government institutions, suppliers, and startups. We expect these best-in-class techniques to drive improved results that will help accelerate the growth of the business through future innovation.
Stephen Haymore: We are also placing a greater emphasis on leveraging technology, such as digital modeling and machine learning to innovate faster and with better outcomes.
Stephen Haymore: Also continue to leverage our innovation ecosystem partnerships, including relationships with academic and government institutions suppliers and startups.
Stephen Haymore: We expect these best in class techniques to drive improved results that will help accelerate the growth of the business with future innovations.
Stephen Haymore: Some examples include process innovations in both our Aes and EMS business units. One example, in our <unk> business as a process improvement that further enhances the quality and reliability of our A&P substrates.
Griffin Gappert: Some examples include process innovations in both our AES and EMS business. One example in our ceramics business is a process improvement that further enhances the quality and reliability of our A and B substrates. Next-generation automotive radar technology, which can increase detection range by 40 percent while lowering the total cost of the radar system by 20 percent, and multiple engagements with key OEMs and battery manufacturers on emerging EV batteries, where our polyurethane and silicon materials can solve pressure management and other needs. We're very excited about the opportunities in our innovation pipeline and the improvements we are making to further strengthen our innovation and technology leadership. I'll now pass it back to Colin.
Stephen Haymore: Next generation automotive radar technology, which can increase detection range by 40%, while lowering the total cost the radar system by 20%.
Stephen Haymore: And multiple engagements with key Oems and battery manufacturers on emerging EV batteries, where our polyurethane and silicone materials can solve pressure management and other needs.
Stephen Haymore: We're very excited about the opportunities in our innovation pipeline and the improvements we're making to further strengthen our innovation and technology leadership positions.
Stephen Haymore: I will now pass it back to Colin.
Randall Colin Gouveia: Thanks Griffin.
Randall Colin Gouveia: Turning to slide seven I'll next provide more detail on our first quarter results say.
Randall Colin Gouveia: Sales of $213 million increased approximately 4% from the prior quarter and were near the top end of our guidance led by higher aerospace and defense and industrial markets. As mentioned, we are seeing indications of further sales improvement head.
Randall Colin Gouveia: Gross margin was at the low end of our range, primarily resulting from unfavorable product mix. We carefully managed operating expenses to achieve adjusted EPS above the midpoint of our guidance.
Randall Colin Gouveia: Turning to slide 7, I'll next provide more detail on our first quarter results. Sales of $213 million increased approximately 4% from the prior quarter and were near the top end of our guidance, led by higher aerospace and defense and industrial markets. As mentioned, we are seeing indications of further sales improvement ahead. Gross margin was at the low end of our range, primarily resulting from an unfavorable product mix.
Randall Colin Gouveia: Touching on our gross margin results of 32% in Q1, we expect significant improvement in coming quarters with higher volumes and the structural cost improvements. We've made we could see margins above 35% later this year as inventories in volume stabilize the work we have done in operations supply chain procurement and <unk>.
Randall Colin Gouveia: <unk> will enable margins to grow towards our long term financial targets.
Randall Colin Gouveia: I'll next provide some more color on each of our major end markets starting with the ATV segment, our significant growth category total EV HEV sales declined in Q1 with lower Aes sales offsetting strong growth in our EMS business unit.
Randall Colin Gouveia: We carefully managed operating expenses to achieve adjusted EPS above the midpoint of our guidance. Touching on our gross margin results of 32% in Q1, we expect significant improvement in the coming quarters. With higher volumes and the structural cost improvements we've made, we could see margins above 35% later this year. As inventories and volumes stabilize, the work we have done in operations, supply chain procurement, and pricing will enable margins to grow towards our long-term financial target.
Randall Colin Gouveia: Dms EV sales reached a new quarterly record in Q1 on improved demand for EV battery solutions from our global customer base sales increased at one key OEM customer beginning to achieve more substantial production volumes following supply chain challenges in 2023, we expect EMS EV sales to increase further in.
Randall Colin Gouveia: Q2.
Randall Colin Gouveia: As I touched on earlier, our <unk> sales declined versus the fourth quarter as our power substrate customers managed inventory levels due to softer end market demand. This decline was consistent across most of our customer base.
Randall Colin Gouveia: I'll next provide some more color on each of our major end markets, starting with the EV HEV segment, our significant growth category. Total EV HEV sales declined in Q1 due to lower AES sales, offsetting strong growth in our EMS business unit.
Randall Colin Gouveia: Based on indications from our customers, we expect that power substrate sales will continue at similar levels in Q2 before strengthening in the second half of the year.
Randall Colin Gouveia: EMS EV sales reached a new quarterly record in Q1 on improved demand for EV battery solutions from our global customer base. Sales increased at one key OEM customer, beginning to achieve more substantial production volumes following supply chain challenges in 2023. We expect EMS EV sales to increase further in Q2. As I touched on earlier, our ceramic sales declined versus the fourth quarter as our power substrate customers managed inventory levels due to softer end market demand. This decline was consistent across most of our customer base.
Randall Colin Gouveia: In our high growth markets A&D sales were strong in the Es business driven by demand for our high frequency circuit materials for defense applications.
Randall Colin Gouveia: <unk> sales also increased versus the fourth quarter from stronger commercial aerospace sales.
Randall Colin Gouveia: Renewable energy revenues increased from lower Q4 levels and a das decreased slightly.
Randall Colin Gouveia: As expected portable electronics demand declined from the prior quarter due to normal seasonality.
Randall Colin Gouveia: In our core markets, we saw improvement in both industrial and wireless infrastructure sales industrial sales improved at a high single digit rate led by our EMS business. As mentioned, we are seeing encouraging signs of less customer inventory destocking as well as improving order patterns.
Randall Colin Gouveia: Based on indications from our customers, we expect that power substrate sales will continue at similar levels in Q2 before strengthening in the second half of the year. In our high-growth markets, A&D sales were strong in the AES business, driven by demand for our high-frequency circuit materials for defense applications. EMS sales also increased versus the fourth quarter due to stronger commercial aerospace sales. Renewable energy revenues increased from lower Q4 levels, and ADAS decreased slightly. As expected, portable electronics demand declined from the prior quarter due to normal seasonality.
Randall Colin Gouveia: Wireless infrastructure sales improved from stronger demand in India.
Randall Colin Gouveia: Which we expect will continue into Q3.
Randall Colin Gouveia: Lastly, I'll touch on some of the recent wins, we have secured as we continued to see good design in activity across our business.
Randall Colin Gouveia: First we secured two wins with our <unk> advanced substrate technology in the EV space a customer in Asia designed our high performance substrates into their silicon carbide power module solution for electric vehicles, and the renewable energy market. Our substrates were selected by a leading U S power module manufacturer for new solar and wind programs.
Randall Colin Gouveia: In our core markets, we saw improvement in both industrial and wireless infrastructure sales. Industrial sales improved at a high single-digit rate, led by our EMS business. As mentioned, we are seeing encouraging signs of less customer inventory destocking, as well as improving order patterns. Wireless infrastructure sales improved from stronger demand in India, which we expect will continue into Q3. Lastly, I'll touch on some of the recent wins we have secured as we continue to see good design and activity across our business. First, we secure two ends with our Keramic Advanced Substrate technology.
Randall Colin Gouveia: And Ms are highly engineered poor on polyurethane foams were selected to be used in the latest smartphone models by two leading Asian Oems or battery cover Pat solution will provide advanced vibration management and impact protection in these devices.
Randall Colin Gouveia: In closing I'll recap today's key messages, we have navigated through some challenging markets over the past several quarters and are now encouraged with the signs of recovery that are emerging in our industrial markets. There are still challenges, which is evident in certain segments of the EV HEV market, where inventory and softening demand will likely limit sales for at least another quarter.
Randall Colin Gouveia: In the EV space, a customer in Asia designed our high-performance substrates into their silicon carbide power module solution for electric vehicles. In the renewable energy market, our substrates were selected by a leading U.S. power module manufacturer for new solar and wind programs. In EMS, our highly engineered poron polyurethane foams were selected to be used in the latest smartphone models by two leading Asian OEMs. Our battery cover pad solution will provide advanced vibration management and impact protection in these devices.
Randall Colin Gouveia: Longer term, we continue to feel very confident in our strategy and growth opportunities. We believe the electrification will be a very strong growth area for us and will be complemented by our high growth in core markets. We are focused on growth, but also taking the necessary steps to improve margins more rapidly.
Randall Colin Gouveia: We are also carefully managing costs capex investments and managing our strong balance sheet to maximize cash flow.
Randall Colin Gouveia: Now I'll turn it over to Ron to discuss our Q1 financial performance and Q2 outlook.
Randall Colin Gouveia: In closing, I'll recap today's key messages. We have navigated through some challenging markets over the past several quarters and are now encouraged by the signs of recovery that are emerging in our industrial markets. There are still challenges, which is evident in certain segments of the EV-HEV market, where inventory and softening demand will likely limit sales for at least another quarter. However, longer term, we continue to feel very confident in our strategy and growth opportunities.
Ron: Thanks, Paul I'll begin on slide eight with highlights of our results for Q1, our results for the quarter were in line with the guidance. We provided in our earnings call sales for any of the top end of our guidance range and adjusted EPS above the midpoint as Colin touched on we saw some encouraging signs.
Ron: And the market such as A&D industrial and wireless infrastructure at the same time, there are still some markets, where our customers are managing inventory levels and demand has been softer.
Ron: The demand environment remains uneven, but we see it trending up beginning in Q2 with further improvements expected in Q3.
Randall Colin Gouveia: We believe that electrification will be a very strong growth area for us and will be complemented by our high growth and core markets. We are focused on growth, but also taking the necessary steps to improve margins more rapidly. We are also carefully managing costs, CapEx investments, and managing our strong balance sheet to maximize cash flow. Now, I'll turn it over to Ram to discuss our Q1 financial performance and Q2 outlook.
Ron: We remain committed to improving our gross margin and managing our operating expenses, while ensuring readiness to capitalize on the strong demand as it returns.
Ron: On slide nine I'll discuss our Q1 results in more detail net sales of $213 million increased 4%.
Ron: Since the prior quarter due to higher volumes of approximately $7 million and favorable foreign currency fluctuations of close to $2 million.
Ramakumar Mayampurath: Thanks, Colin. I'll begin on slide eight with highlights of our results for Q1. Our results for the quarter were in line with the guidance we provided in our earnings call. Sales were near the top end of our guidance range, and adjusted EPS was above the midpoint. As Colin touched on, we saw some encouraging signs in the market, such as A&E, industrial, and wireless infrastructure.
Ron: On a reportable segment basis, EES revenues increase from the prior quarter by four 1% to $122 million.
Ron: Sales improved in the aerospace and defense wireless infrastructure industrial and renewable energy markets. This was partially offset by lower EV HEV and <unk> sales.
Ron: Lower EV HEV sales are a symptom of near term inventory management by our <unk> power module customers and not a reflection of the very compelling growth opportunities in this market as demand recovers.
Ramakumar Mayampurath: At the same time, there are still some markets where customers are managing inventory levels, and demand has been softer. The demand environment remains uneven, but we see it trending up beginning in Q2 with further improvements expected in Q3. We remain committed to improving our gross margin and managing our operating expenses while ensuring readiness to capitalize on the strong demand as it returns. On slide 9, I'll discuss our Q1 results in more detail.
Ron: <unk> revenues increased by 3% to $86 million, resulting from higher general industrial and commercial aerospace demand.
Ron: <unk> in our materials for EV batteries also increased from stronger demand from some of our OEM customers.
Ron: Portable electronics sales were lower and in line with normal seasonality.
Ron: Turning to slide 10-Q, one gross margins were 32% and declined from the fourth quarter, primarily due to weaker product mix, including seasonally lower portable electronic sales.
Ramakumar Mayampurath: Net sales of $213 million increased 4% versus the prior quarter due to higher volumes of approximately $7 million and favorable foreign currency fluctuations of close to $2 million. On a reportable segment basis, AES revenues increased from the prior quarter by 4.1% to $122 million. Sales improved in the aerospace and defense, wireless infrastructure, industrial, and renewable energy markets, although this was partially offset by lower EVHEV and ADAS sales. The lower EV HEV sales are a symptom of near-term inventory management by our ceramic power module customers and not a reflection of the very compelling growth opportunities in this market as demand recovers. EMS revenues increased by 3% to $86 million, resulting from higher general industrial and commercial aerospace demand.
Ron: Lower volume and unfavorable product mix have impacted our gross margins in the recent quarters looking over a multi quarter horizon. The high point of our gross margin was the third quarter of 2023, when we achieved 35, 1% to 300 basis points change from Ben to Q1 2024.
Ron: It was primarily due to these two factors.
Ron: During the same timeframe margins were also reduced by 150 basis points of under absorbed costs. However, this was offset by operational excellence and procurement savings actions.
Ron: To address.
Ron: Under absorbed costs in Q1, which resulted from inventory adjustments by our customers. We have taken actions to better match aes cost to demand. These actions are in part contributing to the higher gross margin and our guidance outlook.
Ramakumar Mayampurath: Sales in our materials for EV batteries also increased from stronger demand from some of our OEM customers; portable electronic sales were lower and in line with normal seasonality. Turning to slide 10, Q1 gross margins were 32% and declined from the fourth quarter primarily due to a weaker product mix, including seasonally lower portable electronic sales. Lower volume and an unfavorable product mix have impacted our gross margins in recent quarters. Looking over a multi-quarter horizon, the high point of our gross margin was the third quarter of 2023, when we achieved 35.1%.
Ron: In some parts of our business, we will continue to carry a small amount of excess cost as we see demand returning in a shorter timeframe and we want to ensure that the that we have the ability to respond.
Ron: Let me emphasize that improving gross margins is among our highest priorities and that we have made the structural cost changes needed to improve gross margins over 35% by Q3 of this year, assuming sales greater than $230 million.
Ron: Q1, adjusted net income decreased slightly to just under $11 million Q1 adjusted earnings per share was <unk> 58, compared to <unk> 60 in the prior quarter.
Ramakumar Mayampurath: The 300 basis points change from then to Q1 2024 was primarily due to these two factors. During this same time frame, margins were also reduced by 150 basis points of under-absorbed costs. However, this was offset by operational excellence and procurement savings actions.
Ron: The decrease in Q1 adjusted net income was primarily a result of higher income tax expenses in the quarter, which more than offset higher growth.
Ron: Profit.
Ron: Lower adjusted operating expenses and lower interest expenses.
Ron: Continuing to slide 11, ending cash at March 31 was approximately $117 million a decrease of $15 million from the end of 2023.
Ramakumar Mayampurath: To address under-absorbed costs in Q1, which resulted from inventory adjustments by our ceramic customers, we have taken actions to better match AES cost to demand. These actions are, in part, contributing to the higher gross margin in our guidance outlook. In some parts of our business, we will continue to carry a small amount of excess cost as we see demand returning in a shorter time frame, and we want to ensure that we have the ability to respond.
Ron: We generated an operating cash flow of $28 million in Q1 and had capital expenditures of $9 million in the quarter.
Ron: As Colin referenced given our current view of demand in certain markets. We are adjusting the timing of our capital expenditure to better match anticipated demand.
Ron: Now, we expect capex to be in the range of $60 million to $70 million for the year.
Ron: With our solid cash position, we elected to pay down the remaining $30 million of our revolving credit facility.
Ramakumar Mayampurath: Let me emphasize that improving gross margins is among our highest priorities and that we have made the structural cost changes needed to improve gross margins over 35% by Q3 of this year, assuming sales greater than $230 million. Q1 adjusted net income decreased slightly to just under 11 million. Q1 adjusted earnings per share was 58 cents compared to 60 cents in the prior quarter. The decrease in Q1 adjusted net income was primarily a result of higher income tax expenses in the quarter, which more than offset higher gross... revenue.
Ron: As we look ahead, the first priority of our capital allocation strategy will remain funding organic growth.
Ron: We will be measured and any investments ensuring sufficient visibility to demand.
Ron: With no outstanding debt, we are in a strong position to execute on the right strategic M&A opportunity.
Ron: As always we are looking at targets that are the right fit and meet our financial return requirements.
Ron: Returning cash to shareholders will remain a priority and will continue and we will continue to look at this opportunistically.
Ramakumar Mayampurath: Lower adjusted operating expenses and lower interest expenses. Continuing to slide 11, ending cash at March 31st was approximately $117 million, a decrease of $15 million from the end of 2023. We generated an operating cash flow of $28 million in Q1 and had capital expenditures of $9 million in the quarter. As Colin referenced, given our current view of demand in certain markets, we are adjusting the timing of our capital expenditures to better match anticipated demand. We now expect CAPEX to be in the range of $60 to $70 million for the year. With our sound cash position, we elected to pay down the remaining $30 million of our evolving credit facility.
Ron: We have been repurchasing some shares in the recent weeks and this will remain a key priority going forward.
Ron: Next on slide 12, I will discuss our guidance for the second quarter.
Ron: Net sales are expected to range between $2 10 and $220 million.
Ron: Point of this range is slightly higher than Q1, primarily related to growth expected from EMS and the EV HEV and general industrial markets.
Ron: We are guiding gross margin in the range of $32 five to 33, 5% for Q2 with improvements coming from cost reductions actions in our EES business higher volumes and better product mix.
Ron: As mentioned earlier, we will be carrying a small.
Ron: The amount of excess cost in anticipation of stronger demand in the coming quarters.
Ramakumar Mayampurath: As we look ahead, the first priority of our capital allocation strategy will remain funding organic growth. We will be measured on any investments, ensuring sufficient visibility into demand. With no outstanding debt, we are in a strong position to execute on the right strategic M&A opportunity.
Ron: Similar to adjustments mentioned earlier on capital expenditure.
Ron: Also adjusting the timing of our startup expenses startup costs are projected to be between one and $2 million in Q2.
Ron: Depending on how demand levels evolve these startup costs may be adjusted further.
Ramakumar Mayampurath: As always, we are looking at targets that are the right fit and meet our financial return requirements. Returning cash to shareholders will remain a priority, and we will continue to look at this opportunistically. We have been repurchasing some shares in recent weeks, and this will remain a key priority going forward. Next, on slide 12, I will discuss our guidance for the second quarter. Net sales are expected to range between $210 million and $220 million.
Ron: Earnings per share is expected to range from 34 to <unk> 50 <unk>.
Ron: And adjusted EPS from 50 to 70.
Ron: We project, our full year tax rate to be around 26%.
Ron: In conclusion, our sales have been impacted by challenging market conditions in the past several quarters. However, we have taken actions to lower our cost and manage our profitability.
Ron: As stated earlier, we believe that we are on a path to exceed 35% by Q3, assuming certain revenue range.
Ramakumar Mayampurath: The midpoint of this range is slightly higher than Q1, primarily related to growth expected from EMS in the EV, HEV, and general industrial markets. We are guiding gross margin in the range of 32.5 to 33.5 for Q2, with improvements coming from cost reduction actions in our AES business, higher volumes, and better product mix. As mentioned earlier, we will be carrying a small amount of excess cost in anticipation of stronger demand in the coming quarters.
Ron: Also we have set a strong <unk>.
Ron: <unk> of cost control and financial discipline that will enable us to focus our resources and continue our investments in an efficient way.
Ron: We remain committed to our long term financial objectives.
Speaker Change: With that I will now turn the call back to the operator for questions.
Speaker Change: Thank you we will now be conducting a question and answer session.
Speaker Change: I'd like to ask a question. Please press star one on your telephone keypad.
Ron: Confirmation.
Ron: Kate Your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.
Ron: For participants using speaker equipment it may be.
Ron: So sorry to pick up your handset before pressing the star keys.
Ron: So that we may address questions from as many participants as possible. We ask that you limit yourself to one question and one follow up if you have additional questions you may re queue and time permitting those questions will be answered.
Ron: One moment, please while we poll for questions.
Speaker Change: Thank you.
Ron: Question comes from the line of Craig Ellis with B Riley Securities. Please proceed with your question.
Ramakumar Mayampurath: Similar to the adjustments mentioned earlier on capital expenditure, we are also adjusting the timing of our startup expenses. Startup costs are projected to be between one and two million in Q2. Depending on how demand levels evolve, these startup costs may be adjusted further. Earnings per share is expected to range from $0.34 to $0.54, and adjusted EPS from $0.50 to $0.70. We project our full-year tax rate to be around 26 percent. In conclusion, our sales have been impacted by challenging market conditions in the past several quarters.
Craig Andrew Ellis: Yes, thanks for taking the question Tom.
Craig Andrew Ellis: Appreciate all the color guys and Griffin nice tapped me on the call.
Craig Andrew Ellis: Colin I wanted to start just by.
Craig Andrew Ellis: Stitching together two things one can you provide some further color on your comments on the industrial market recovery, where are you seeing which geographies. For example that that is more pronounced for my therapy, some issues and nice to see the design wins on the personal electronics side.
Craig Andrew Ellis: With.
Craig Andrew Ellis: Tuition Oems I think this time of year, you would typically have optics into <unk>.
Craig Andrew Ellis: Content gain potential for late year U S smartphone model releases any color there.
Ramakumar Mayampurath: However, we have taken actions to lower our costs and manage our profitability. As stated earlier, we believe that we are on a path to exceed 35% by Q3, assuming certain revenue ranges. Also, we have set a strong foundation of cost control and financial discipline that will enable us to focus our resources and continue our investments in an efficient way. We remain committed to our
Speaker Change: Yes, Hi, Craig I'll start with a portable electronics that remains a very important high growth area for our company and we have had a long history of designing a high performing technology with our poor on polyurethane foam in our Cisco Silicon technologies that go into that space.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Craig Andrew Ellis: Last year part of electronics overall was at a 10 year low but in talking to our customers. This year, we're anticipating a rebound from that not only from the general market, but we have some very good design wins with Chinese Oems.
Craig Andrew Ellis: Very proud of that we've also been able to secure a good design in wins with other Oems. So we have a lot of content in place this year and that's why we anticipate sales for our company getting better in the second half of the year as we benefit from that seasonality in Q3 from portable electronics.
Operator: So that we may address questions from as many participants as possible, we ask that you limit yourself to one question and one follow-up. If you have additional questions, you may requeue, and time permitting, those will be answered. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Craig Ellis with B. Riley Securities. Please proceed with your question.
Craig Andrew Ellis: From the industrial yes.
Speaker Change: Yes, I'd be happy to elaborate on that a bit more.
Speaker Change: We're thinking about it in two different ways. So there is the industrial piece that goes along with our power electronics business and Thats, our sales of <unk> technology going into companies that are making the power modules and so on so we see that piece of the industrial space still being a bit slow.
Craig Andrew Ellis: Yeah, thanks for taking the question. I appreciate all the color guys, and Griffin, nice to have you on the call. Colin, I wanted to start by stitching together two things.
Speaker Change: In particular for the first half of the year and Thats, mostly related to the inventory.
Craig Andrew Ellis: That we see built up in the power module companies as well as maybe some softening of demand.
Craig Andrew Ellis: In terms of the industrial.
Craig Andrew Ellis: One, can you provide some further color on your comments on the industrial market recovery? Where are you seeing which geographies, for example, that that is more pronounced? Where might there be some issues? And nice to see the design wins on the personal electronics side with tuition OEMs. I think this time of year you would typically have optics into content gain potential for late-year U.S. smartphone model releases, any color there?
Craig Andrew Ellis: Serviced by our EMS business, that's really made up of probably 15 to 20 different end market segments, and where we've seen recovery.
Craig Andrew Ellis: A general comment would be we see a lot more inventory correction, reaching the right point for our customers in that space. So that would be the first thing I would mention that has been a positive for us as compared to a lot of excess inventory. We saw carried last year and then to get a little more particular in terms of where we see an uptick.
Randall Colin Gouveia: Yeah, hi Craig, I'll start with portable electronics. That remains a very important and high-growth area for our company. And we have had a long history of designing high-performance technology with our polyurethane foam and our visco silicone technologies to go into that space. Last year, Portable Electronics overall was at a 10-year low, but in talking to our customers this year, you know, we're anticipating a rebound from that. Not only from the general market, but we have some very good design wins with Chinese OEMs. We're very proud of that.
Craig Andrew Ellis: It's primarily in the U S. We've had PMI indices in the U S above 50 for the first time in many many months, although we see a flash.
Craig Andrew Ellis: Index in April may be trending a bit down and in China. We're just we see a little bit of an uptick there also I would say Europe still remains somewhat challenged in terms of the overall economy from our perspective, but then if you get into some of the specific end markets. We did see a recovery in semiconductor.
Randall Colin Gouveia: We've also been able to secure good design wins with other OEMs. So we have a lot of content in place this year from the industrial side. Yes, I'd be happy to elaborate on that a bit more. We're thinking about it in two different ways.
Craig Andrew Ellis: We also saw increased sales into end applications, such as lighting HVAC.
Craig Andrew Ellis: <unk> appliances, so those have some and then medical.
Craig Andrew Ellis: Is also a good area for us in the industrial space. So that would be my comments in terms of specific geographies and also end markets.
Randall Colin Gouveia: So there is the industrial piece that goes along with our power electronics business, and that's our sales of ceramic technology to companies that are making the power modules and so on. So we see that piece of the industrial space still being a bit slow, in particular for the first half of the year. And that's mostly related to the inventory that we see built up in the power module companies, as well as maybe some softening of demand.
Speaker Change: That's really helpful color Colin and so for my second question I'll flip it over to Rob from very interesting point that you made around the potential for 35% gross margins at $230 million in sales in the third quarter I know youre not providing guidance, but can you help us understand.
Randall Colin Gouveia: In terms of the industrial that's serviced by our EMS business, that's really made up of probably 15 to 20 different end market segments. And where we've seen recovery, a general comment would be, we see a lot more inventory correction reaching the right point for our customers in that space. So that would be the first thing I would mention that has been a positive for us, as compared to a lot of excess inventory we saw carried last year.
Rob My: Some of the things that might contribute to that degree of sales, which I think would imply about a 7% quarter on quarter gained.
Rob My: And two to what extent just the gross margin improvement coming from mix a particular.
Rob My: Mixed shift towards personal electronics, which I think is above well above corporate versus just further harvesting up all of the self help initiatives that have been underway.
Randall Colin Gouveia: And then to get a little more particular in terms of where we see an uptick, it's primarily in the U.S. We've had PMI indices in the U.S. above 50 for the first time in many, many months, although we see a flash PMI index in April maybe trending a bit down. And in China, where we see a little bit of an uptick there also, I would say Europe still remains somewhat challenged in terms of the overall economy from our perspective.
Rob My: Flourish team.
Speaker Change: Yes, sure Greg I think.
Speaker Change: As you know the lower volume and to some extent the unfavorable mix has impacted our gross margin for several quarters now.
Speaker Change: And.
Flourish team: We have offset a good portion of that with the cost improvement actions that we have done mostly in manufacturing excellence and in procurement savings.
Randall Colin Gouveia: But then if you get into some of the specific end markets, we did see recovery in semiconductors. We also saw increased sales into end applications such as lighting, HVAC, and appliances. So those are some, and then medical is also a good area for us in the industrial space. So those would be my comments in terms of specific geographies and also end markets.
Flourish team: That combined with some of the actions we are further taking in Q1 to adjust for the.
Flourish team: Correcting our cost versus demand in certain areas of the business will help us.
Flourish team: Get to that 35%, but to your point, there's also certainly some mix coming from seasonality.
Craig Andrew Ellis: That's really helpful, Colin. And so for my second question, I'll flip it over to Ram. Ram, a very interesting point that you made on the potential for a 35% gross margin at $230 million in sales in the third quarter. I know you're not providing guidance, but can you help us understand some of the things that might contribute to, one, that degree of sales, which I think would imply about a 7% quarter-on-quarter gain, and two, to what extent is the gross margin improvement coming from a particular makeshift toward personal electronics, which I think is above to well above corporate versus just further harvesting of all the self-help initiatives that have been underway with Larry'
Flourish team: Overall volume increase that will help us so we feel pretty good about.
Flourish team: Although we are not guiding for Q3, we feel pretty good about the path to get to a 35% plus.
Flourish team: Plus margin at certain volume levels.
Speaker Change: And if I could just do a follow up there.
Speaker Change: Can you just talk about your confidence that that 35% would be sustainable beyond the third quarter, what would be things you should look out beyond the third quarter that would be of course is driving gross margins higher and it's there.
Speaker Change: Denny restraining force for example.
Speaker Change: New manufacturing facility build outs like.
Speaker Change: Has been planned for China et cetera that we should be aware of thank you.
Ramakumar Mayampurath: Yeah, sure, Greg, I think, as you know, the lower volume and, to some extent, favorable mix have impacted our gross margin for several quarters now. We've offset a good portion of that with the cost improvement actions that we have done, mostly in manufacturing excellence and in procurement. That combined with some of the actions we are further taking in Q1 to adjust for the, correcting our cost versus demand in certain areas of the business will help us get to that 35%.
Speaker Change: Yes, no no good question.
Speaker Change: So first of all I will say that the corrections to costs, we have made.
Speaker Change: Our.
Speaker Change: Our foundational and they are and we have actions continuing to improve that.
Speaker Change: But.
Speaker Change: Those are permanent and we feel pretty confident about that.
Speaker Change: The the top level showing up at 230 or a bow this workflow.
Ramakumar Mayampurath: But to your point, there's also certainly some mix coming from seasonality and overall volume increase that will help us. So we feel pretty good about, although we are not guiding for Q3, we feel pretty good about the path to get to a 35% plus margin at certain volume levels.
Speaker Change: Give us a lot more confidence in getting to 35% or more.
Speaker Change: So so again the cost corrections things that we control we are confident about we need the sales to get back to a certain levels that we've seen in the last year.
Speaker Change: With regard to your.
Craig Andrew Ellis: And if I could just do a follow-up there, Ram, can you just talk about your confidence that that 35 percent would be sustainable beyond the third quarter? What would be things, as you look out beyond the third quarter, that would be forces driving gross margins higher, and is there any restraining force, for example, new manufacturing facility build-outs like what has been planned for China, et cetera, that we should be aware of
Speaker Change: Spansion programs most of the startup costs.
Speaker Change: Our flowing through Opex that will give us a slightly higher opex. This year as we have reported before it won't impact the gross margin this year.
Speaker Change: Got it.
Speaker Change: Thanks for that guys I'll hop back in the queue.
Speaker Change: Thanks, Greg.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of David Silver with CL King.
David Silver: Please proceed with your question.
Speaker Change: Yes.
David Silver: Yes, hi, thank you very much.
David Silver: I think I'd like to maybe just start with some a question or two about maybe the <unk>.
Operator: Thank you. Yeah
Ramakumar Mayampurath: No, no, good question. So first of all, I'll say that the corrections to cost we've made are foundational, and they are, and we have actions continuing to improve them. But those are permanent, and we feel pretty confident about that. The top level showing up at 230 or above is what will give us a lot more confidence in getting to 35% or more. So again, the cost corrections, things that we can control, we are confident about.
David Silver: Differences and the positioning of your two segments. So.
Speaker Change: <unk> I mean, they both sell into the same end markets and a lot of cases.
Speaker Change: I'm just wondering based on.
Speaker Change: Kind of the uneven near term outlook that you cited some strength, but some.
Speaker Change: Some delays.
Speaker Change: Would it be reasonable to expect both of your segments to kind of grow more or less in unison or might there be a difference in an end market or a customer that that might cause.
Ramakumar Mayampurath: We need the sales to get back to certain levels that we've seen in the past. With regard to your expansion programs, most of the startup costs are flowing through OPEX. That will give us a slightly higher OPEX this year, as we have reported before, but it won't impact the gross margin. Got it, thanks for that, guys.
Speaker Change: Meaningful divergence in other words one of your.
Speaker Change: Segments gets on.
Speaker Change: Stronger growth path earlier than than the other.
Craig Andrew Ellis: Got it. Thanks for that, guys. I'll hop back in the queue.
Speaker Change: Yes.
Speaker Change: Hi, David It's Colin here, maybe I'll take your question to start and we might have some other.
David Silver: Our next question comes from the line of David Silver with C.L. King & Associates. Please proceed with your question.
Randall Colin Gouveia: Commentary from some of the other folks here, but what I would say is that.
Randall Colin Gouveia: A general comment would be.
Randall Colin Gouveia: We're participating in the same industries with all of our technologies and it wouldn't be unreasonable to assume when things normalize that we could grow at a similar rate.
David Silver: Yeah, hi, thank you very much. I think I'd like to maybe just start with a question or two about maybe the differences in the positioning of your two segments. So, you know, AES or EMS, they both sell into the same end markets in a lot of cases. I'm just wondering, based on, you know, the uneven near-term outlook that you cited, some strengths but some delays, would it be reasonable to expect, you know, both of your segments to kind of grow more or less in unison? Or might there be a difference in an end market or a customer that might cause a meaningful divergence? In other words, one of your segments gets on a stronger growth path earlier than the other.
Speaker Change: The issue that we face at this moment is that there is still a bit of a disconnect from some of the different value chains that feed into the same industry. An example would be EV HEV, where our EMS had a record quarter and that would be related to.
Randall Colin Gouveia: Specific customer mix, where we're participating with certain end market customers, who are starting to grow over our growing or in one case, a major OEM have had significant now who had.
Randall Colin Gouveia: Challenges with supply chain and now thats been overcome and we see volumes ramping there.
Randall Colin Gouveia: Hi David, it's Colin here. Maybe I'll take your question to start, and we might have some other commentary from some of the other folks here. But what I would say is that a general comment would be... We're participating in the same industries with all of our technology, and it wouldn't be unreasonable to assume when things normalize that we could grow at a similar rate. The issue that we face at this moment is that there's still a bit of a disconnect from some of the different value chains that feed into the same industry.
Randall Colin Gouveia: Last year in our <unk> substrate business, where a large portion of that business comes into EV HEV. It was a record year.
Randall Colin Gouveia: But this year, it's come up against probably a inventory issue from the downstream value chain very specific to power module production.
Randall Colin Gouveia: So that business is facing several quarters of Destocking before it would return to its normal growth trajectory.
Randall Colin Gouveia: These inventory issues I think are related in part to the fact that EV HEV is a nascent industry.
Randall Colin Gouveia: An example would be EVHEV, where our EMS had a record quarter, and that would be related to specific customer mix, where we're participating with certain end market customers who are starting to grow or are growing, or in one case, a major OEM who had significant challenges with supply, and now that's been overcome, and we see volumes ramping there. Last year, in our keramic substrate business, where a large portion of that business But this year it's probably come up against an inventory issue from the downstream value chain, very specific to power module production.
Randall Colin Gouveia: And there are startups that havent been in business for a while these are new products. There is customer demand, which has been fluctuating and we believe it will take a bit of time for this particular industry to get things sorted out and get to a normal cadence. So when we talk about growth in the EV HEV space.
Randall Colin Gouveia: We believe it will be over the medium and long term, 15% to 20% CAGR per year, but that won't be linear as companies are really working to get in place working supply chains that are more consistent in terms of order patterns.
Randall Colin Gouveia: So that business is facing, you know, several quarters of de-stocking before it returns to its normal growth trajectory. These inventory issues, I think, are related in part to the fact that EVHEV is a nascent industry, and there are startups that haven't been in business for a while. These are new products, and there is customer demand which has been fluctuating, and we believe it will take a bit of time for this particular industry to get things sorted out and get back to a normal pace.
Speaker Change: So I'll pause here to see if that answered your question or if you'd like me to elaborate a bit more.
Speaker Change: No that's great color. Thank you if I could just follow up a little bit on your overall comments about the demand progression through.
Speaker Change: The first quarter.
Speaker Change: I think certain parts of your business are.
Speaker Change: Have bottomed and are starting to recover but you did mention.
Speaker Change: The high profile I think keramic orders that got pushed out a little bit.
Randall Colin Gouveia: So when we talk about growth in the EVHEV space, we believe it will be, over the medium and long term, 15 to 20% CAGR per year, but that won't be linear as companies are really working to get in place working supply chains that are more consistent in terms of order. So I'll pause here to see if that answered your question or if you'd like me to elaborate a bit.
Speaker Change: If you were thinking of how you felt January one and then how youre thinking not in our March 30, <unk> store today.
Speaker Change: Is there a noticeable underlying acceleration in let's say consumption for your products absent I guess inventory shifts or would you say that.
David Silver: No, that's a great color. Thank you. If I could just follow up a little bit on your overall comments about the demand progression through the first quarter, you know, I think certain parts of your business have bottomed out and are starting to recover, but you did mention that. The high-profile ones, I think, Keramic Orders that got pushed out a little bit. If you were thinking of how you felt on January 1st and then how you're thinking, I don't know, March 31st or today, you know, is there a noticeable, you know, underlying acceleration in, let's say, consumption for your products, you know, absent, I guess, inventory shift? Or would you say that the end market softness that you saw is more, I don't know, organic or more fundamental and not necessarily related to past purchasing patterns?
Speaker Change: The end market softness that you saw is more I don't know organic are more fundamental and not related necessarily to past purchasing patterns.
Speaker Change: What we would say is.
Speaker Change: And again I'll start.
Speaker Change: Is that.
Speaker Change: We feel confident in terms of our existing customers and design wins, and we pay close attention to.
Speaker Change: Share gain and potential share loss and we see not a lot of share loss, we have locked in design wins.
Speaker Change: And we feel like some of these end markets that we discussed and industrial are coming up and we feel optimistic about how our sales will go into the portable electronic space and Thats the end market that really starts to pull.
Speaker Change: From us and from suppliers into that space at the end of Q2 and through Q3.
Speaker Change: The one the one difference that we have David from January one to today is the real slowdown.
Randall Colin Gouveia: What we would say is And again, I'll start, is that we feel confident in terms of our existing customers and design way, and we pay close attention to share gain and potential share loss. And we see not a lot of share loss. We have locked in design wins.
Speaker Change: In the power module space, which <unk> is a major product line of ours that goes into that area and really the end markets that go through that our EV HEV renewable energy and then industrial but that would be inverters for things like appliances et cetera, and thats. The one thing that has changed.
Randall Colin Gouveia: And, you know, some of these end markets that we discussed and Industrial are coming up, and we feel optimistic about how our sales will go into the portable electronic space. And that's the end market that really starts to pull from us and from suppliers into that space at the end of Q2 and through Q3. The one difference that we have, David, from January 1st to today is the real slowdown in the power module space, which Kramic is a major product line of ours that goes into that area.
Speaker Change: <unk> I think quite significantly from January one to now in that most of all of those players most of the companies in that space have all come out with similar comments around inventory and slowing markets around EV in general.
Speaker Change: And that's the one headwind for us with our <unk> business.
Speaker Change: Okay, a cash flow question, but.
Speaker Change: And looking at your cash flows over the past several years.
Speaker Change: I would say theres been a considerable net usage of working capital. So the last several lines of the top section of the cash flow statement is what I am focusing on but.
Randall Colin Gouveia: And really, the end markets that go through that are EV, HEV, renewable energy, and then industrial. But that would be inverters for things like appliances, et cetera. And that's the one thing that has changed, I think, quite significantly from January 1st to now, in that most of all those players, most of the companies in that space, have all come out with similar comments around inventory and slowing markets around EV in general. And that's the one headwind for us with our Kramic.
Speaker Change: By my model there was a significant usage in 2021, a larger usage in 'twenty.
Speaker Change: <unk> 2022 and.
Speaker Change: A small release I guess net in 2023.
Speaker Change: Maybe if you could just comment on that and maybe the potential for further.
David Silver: Okay, a cash flow question, but you know, in looking at your cash flows over the past several years, I would say there's been a considerable net usage of working capital. So, you know, the last several lines of the top section of the cash flow statement are what I'm focusing on. But by my model, there was a significant usage in 2021, a larger usage in 2020 and 2022, and a small release, I guess net, in 2023. Maybe if you could just comment on that and maybe the potential for a further..., significant release, I guess, of the buildup in working capital that occurred, I guess, during much of the pandemic.
Speaker Change: And if we can release I guess of the buildup in working capital that occurred I guess during much of the pandemic. Thank you.
Speaker Change: Yeah sure let me take that David this is from.
Speaker Change: We did have if you remember going through the supply chain challenges and shortages we did have.
Speaker Change: A buildup of inventory in 'twenty, one and 'twenty two we were stocking up what we could find and the inflation of raw material inflation that led to an early part of 'twenty. Two also drove up our inventory value.
Speaker Change: We have been managing that we have brought it down like you said some in 'twenty three and it remains a key focus in 2004 to get that down to the right levels. It is a part of our cash operating cash flow strategy to manage our inventory to the right levels.
Ramakumar Mayampurath: Yeah, sure. Let me take that, David.
Ramakumar Mayampurath: This is from You know, we did have, if you remember going through the supply chain challenges and shortages, we did have a buildup of inventory in 21 and 22. We were stocking up on what we could find, and the inflation, raw material inflation that led in the early part of 22 also drove up our inventory value. We have been managing that. We have brought it down, like you said, some in 23, and it remains a key focus in 24 to get that down to the right levels.
Speaker Change: The rice.
Speaker Change: The increase you saw in 'twenty, one 'twenty two relates to <unk>.
Speaker Change: Some of the challenges we were facing back then for on the procurement side and the inventory buildup that followed.
Speaker Change: Okay, Great and then one more question, perhaps for Griffin, and then I'll get back in queue.
Speaker Change: But griffin you've been in position there for a little while now.
Griffin Gafford: And I'm, just wondering maybe and you did highlight shorter term medium term and longer term initiatives I'm. Just wondering maybe since the year has started has there been any.
Griffin Gafford: Notable shift in your priorities or.
Griffin Gafford: Focus and I'll just throw out a couple of things that the EPA in recent weeks did did put out some.
Ramakumar Mayampurath: It is a part of our cash operating cash flow strategy to manage our inventory to the right levels. But the rise, the increase you saw in 21, 22 relates to some of the challenges we were facing back then on the procurement side and the inventory buildup that followed.
Griffin Gafford: Regulations, limiting PFS content and.
Griffin Gafford: Not necessarily your biggest business, but material science I mean are you may be working a little bit harder on.
Speaker Change: Don't know alter.
Speaker Change: Alternatives or replacements for some of your PTFE applications and.
David Silver: Okay, great. And then one more question, perhaps, for Griffin, and then I'll get back on the queue. But, you know, Griffin, you've been in position there for a little while now, and I'm just wondering, maybe, and you did highlight shorter term, medium term, and longer term initiatives. I'm just wondering, maybe, since the year started, has there been any notable shift in your priorities or focus? And I'll just throw out a couple of things.
Speaker Change: Of course, there has been a lot of shifts in other markets, including EV HEV, but how would you say your focus or your resource allocation either dollars or manpower how might that have shifted over the last let's say three to six months.
Speaker Change: David calling here I'll start and then turn it to Griffin, but I've been focusing quite heavily on the <unk> issue. So it's an area that we take quite seriously.
David Silver: But you know, the EPA in recent weeks did put out some regulations limiting PFAS content, and not necessarily your biggest business, but material science. I mean, are you maybe working a little bit harder on, I don't know, alternatives or replacements for some of your PTFE applications? And of course, there have been a lot of shifts in other markets, including EV and HEV. But how would you say your focus or your resource allocation, either dollars or manpower, how might that have shifted over the last, let's say, three to six months?
Griffin Gafford: We've been engaged from the beginning back from what happened in Europe, and now of course paying close attention to how things are evolving in the United States and we're working very closely with our customers and with our suppliers to make sure. We understand the landscape and are doing everything possible to make sure. We can continue to produce our products safely and efficiently.
Griffin Gafford: <unk>.
Griffin Gafford: In the particular case of <unk>, it's really the two particular surfactant technologies that are the issue.
Griffin Gafford: And we don't utilize any of those in our manufacturing facilities, but we're working with our suppliers to make sure we understand everything in terms of the value chain of these products, but we see happening is something that will take an awful long time to develop.
Randall Colin Gouveia: David, Colin here. I'll start and then turn it over to Griffin, but I've been focusing quite heavily on the PFAS issue. So it's an area that we take quite seriously. We've been engaged from the beginning, back from what happened in Europe, and now, of course, paying close attention to how things are evolving in the United States.
Griffin Gafford: But we're acting now to make sure. We stay ahead of any regulatory changes that could happen.
Randall Colin Gouveia: And we're working very closely with our customers and with our suppliers to make sure we understand the landscape and are doing everything possible to make sure we can continue to produce our products safely and efficiently. And in the particular case of PFAS, it's really the two particular surfactant technologies that are the issue. And, you know, we don't utilize any of those in our manufacturing facilities, but we're working with our suppliers to make sure we understand everything in terms of the value chain of these products.
Griffin Gafford: Our customers are very well aware of what we're doing and are working closely with us on this.
Griffin Gafford: And of course, we do have technologies that are non PTFE.
Griffin Gafford: That's the products that we typically use in some of our products that's a polymer of low concern.
Griffin Gafford: But it's still under the <unk> umbrella. So we want to make sure we keep people informed.
Griffin Gafford: Exactly how we participate.
Griffin Gafford: And what technologies, we have that are non PTFE or technologies that we're developing so maybe from here I can turn it over to Griffin.
Randall Colin Gouveia: What we see happening is something that will take an awful long time to develop, but we're acting now to make sure we stay ahead of any regulatory changes that could happen. Our customers are very well aware of what we're doing and are working closely with us. And, you know, of course, we do have technologies that are non-PTFE. That's the product that we typically use in some of our products. That's a polymer of low concern, but it's still under the PFAS umbrella.
Griffin Gafford: Yes, Thanks, Colin I think.
Griffin Gafford: High level looking at your question what has changed since this year in terms of our strategy and portfolio as I said, we we focus on our portfolio with short medium and long term projects. So we have a balanced kind of flow of Av technology and occasionally external environment change.
Speaker Change: <unk> will accelerate or bring focus to certain projects, which we have the ability to accelerate or pivot into.
Randall Colin Gouveia: So we want to make sure we keep people informed, exactly how we participate, and what technologies we have that are non-PTFE or technologies that we're developing. So maybe from here, I can turn it over to Griff. Yeah, thanks, Colin.
Speaker Change: We also look at projects that have impact on internal processes innovation around materials and new applications. So I think.
Griffin Gappert: Yeah, thanks, Cullen. I think, you know, high-level looking at your question, you know, what has changed since this year in terms of our strategy and portfolio? As I said, we focus on a portfolio of short, medium, and long-term projects, so we have a balanced kind of flow of technology. And occasionally, external environment changes will accelerate or bring focus to certain projects, which we have the ability to accelerate or pivot into. We also look at projects that have an impact on internal processes, innovation around materials, and new applications.
Speaker Change: On balance I don't think we've seen a major shift in strategy and since I've joined.
Speaker Change: Been very impressed with the diversification of the technology and the portfolio that we have when when we get news either from regulatory agencies or from customers, we certainly react.
Speaker Change: But I think as I said, we have a pretty good balance of projects addressing a number of different trends and from that point of view I don't see major changes at the beginning of the year.
Speaker Change: Okay, great. Thank you very much for all the color much appreciated.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Dan Moore with CJS.
Daniel Joseph Moore: Js Securities. Please proceed with your question.
Daniel Joseph Moore: Thank you thanks again for all the color.
Daniel Joseph Moore: Maybe start with and appreciate obviously Q3, not being guidance, but just to talk about the seasonality.
Griffin Gappert: So, on balance, I don't think we've seen a major shift in strategy. And since I joined, I've been very impressed with the diversification of the technology in the portfolio that we have. When we get news, either from regulatory agencies or from customers, we certainly react. But I think, as I said, we have a pretty good balance of projects addressing a number of different trends, and from that point of view, I don't see major changes.
Daniel Joseph Moore: You mentioned previously Q1 will be the low point.
Daniel Joseph Moore: Q3 is typically one of the higher points, along with Q2, given how things are maybe building and some of these.
Daniel Joseph Moore: Supply chains.
Daniel Joseph Moore: The supply chain challenges at least in some areas dissipating do you see you see.
Daniel Joseph Moore: Potential to hold that kind of 35% level and into Q4 or how should we be thinking about more.
David Silver: Okay, great. Thank you very much for all the color. It's much appreciated.
Daniel Joseph Moore: Typical seasonality, obviously, it's a crystal ball question, but just wondering how you kind of see this year playing out from a.
Daniel Joseph Moore: Our next question comes from the line of Dan Moore with CJS Securities. Please proceed with your question.
Daniel Joseph Moore: Thank you. Thanks again for all the color.
Daniel Joseph Moore: Seasonality perspective relative to what a normal year would look like.
Daniel Joseph Moore: Maybe start with, I'd appreciate it, obviously Q3 isn't guidance, but just to talk about the seasonality. You mentioned previously that Q1 would be the low point. Q3 is typically, you know, one of the higher points along with Q2.
Speaker Change: Hi, Dan let me take that I'll start with that and calling might want to add comments to this if you have a follow up.
Daniel Joseph Moore: In about Q3 Q3 is a mixed bag.
Daniel Joseph Moore: The parameter power electronics slowdown we talked about.
Daniel Joseph Moore: You know, given how things are maybe building and some of these, you know, supply chains, the supply chain challenges, at least in some areas, are dissipating. Do you see the potential to hold that kind of 35% level into Q4 or, you know, should we be thinking about more, you know, kind of typical seasonality? Obviously, it's a crystal ball question, but, you know, just wondering how you kind of see this year playing out from a, you know, seasonality perspective relative to what a normal year would look like.
Daniel Joseph Moore: Will will will impact us in the second half of the year that that was more recent development. However, we do see growth in other areas, we do see the seasonality coming through.
Daniel Joseph Moore: With portable electronics that we usually see.
Daniel Joseph Moore: And.
Daniel Joseph Moore: With the changes we've made to the product cost structure.
Speaker Change: We feel good about the 35% plus guide.
Speaker Change: 35% plus estimates we have provided assuming a certain level of top line of sales range.
Speaker Change: Getting into Q4, you're right when we have seen some fluctuations in Q4 and Thats also mostly related to the top line. If you look at Q4 of last year.
Ramakumar Mayampurath: Hi Dan, let me take that.
Ramakumar Mayampurath: I'll start with that, and Colin might want to add comments to this, if you have a follow-up. Talking about Q3, Q3 is a mixed bag. We know the karmic power electronic slowdown we talked about will impact us in the second half of the year. However, we do see growth in other areas. We do see the seasonality coming through with portable electronics that we usually see.
Speaker Change: Very steep drop which we even guided it lower but we the actuals were lower than our guidance, we're expecting some drop there.
Speaker Change: So once again.
Speaker Change: The revenue top line levels remain at that 230 plus level.
Daniel Joseph Moore: We feel good about staying at a 35% level for gross margin.
Ramakumar Mayampurath: And, with the changes we have made to the product cost structure, we feel good about the 35% plus guide, you know, the 35% plus estimates we have provided, assuming a certain level of the top line of the sales range. Getting into Q4, you're right; we have seen some fluctuations in Q4, and that's also mostly related to the top line. If you look at Q4 of last year, we had a very steep drop, which we even guided lower, but the actuals were lower than our guidance. We were expecting some drop. So, once again, if the revenue top-line levels remain at that $230 plus level, we feel good about staying at a 35% level for gross margin.
Speaker Change: Dan Collyn I'll, just add from a higher level perspective that.
Daniel Joseph Moore: Normalizing the fluctuations in gross margin, how they cycled up and down this first <unk>.
Daniel Joseph Moore: 15 months is one of our key objectives, and we know that its volume throughput, which helps takeaway some of the absorption headwinds we face when volumes decrease.
Daniel Joseph Moore: But we have done a lot of work on operational execution, but there is more to go there and we think that will also make a big difference. So when you look at how we've worked down our backlog how we've improved our on time delivery to performance or excuse me to promise or to request and then our improvements in scrap and yield.
Daniel Joseph Moore: It's been impressive, but there's more we can do there and I would say that that will also help us get more I think stability into the system and it's a key goal from the beginning when we started this journey recovering from.
Randall Colin Gouveia: Dan Collin, I'll just add from a higher level perspective that normalizing the fluctuations in gross margin, how they've cycled up and down this first 15 months, is one of our key objectives, and we know that it's volume throughput, which helps take away some of the absorption headwinds we face when volumes decrease. We have done a lot of work on operational execution, but there is more to go there. And we think that will also make a big difference.
Daniel Joseph Moore: The end of the Dupont deal and we've made a lot of progress, but there's still more we can do on that type on that side of things beyond just the volume coming back I just wanted to put that out there so that was clear.
Speaker Change: No that's really helpful.
Daniel Joseph Moore: And we covered a lot of ground already so just maybe a big picture.
Randall Colin Gouveia: So when you look at how we've worked down our backlog, how we've improved our on-time delivery to performance, or excuse me, to promise or to request, and then our improvements in scrap and yield, it's been impressive, but there's more we can do there. And I would say that that will also help us get more, I think, stability into the system. And it's been a key goal from the beginning when we started this journey recovering from the end of the DuPont deal.
Daniel Joseph Moore: By all accounts the <unk> adoption.
Daniel Joseph Moore: Has slowed and consumers are opting for a TV alternatives at least for now, but maybe just can you tell us about the size of the opportunity.
Daniel Joseph Moore: In <unk> relative to EV, whether it be in content terms or tam or growth rates.
Daniel Joseph Moore: If that trend continues over the next three to five years, how should we think about kind of the relative scale or size of the opportunities.
Randall Colin Gouveia: And we've made a lot of progress, but there's still more we can do on that type, on that side of things beyond just, you know, the volume coming back. I just wanted to put that out there so that was clear.
Daniel Joseph Moore: So we've had a lot of requests in terms of could we share more on content.
Daniel Joseph Moore: And we haven't done that well.
Daniel Joseph Moore: Look at ways to share better going forward on that but at this moment, a general comment would be.
Daniel Joseph Moore: Really helpful. And we covered a lot of ground already, so just maybe a big picture. You know, by all accounts, the pace of EV adoption has slowed, and consumers are opting for HEV alternatives, at least for now. But, you know, maybe just tell us about the size of the opportunity for HEVs relative to EVs, whether it be in content terms or TAM or growth rates. You know, if that trend continues over the next three to five years, how should we think about the relative scale or size of the opportunity?
Daniel Joseph Moore: In terms of EV, we would have the most content in that vehicle across all of our product lines.
Daniel Joseph Moore: And for hybrid electric vehicles, we also have a good amount of content as well, but it wouldn't be as much they still use inverters they would still need pressure management for the battery.
Daniel Joseph Moore: Typically for lower voltage usages, you would not use a rolling power interconnect business that business excels, when it's high voltage and you need.
Daniel Joseph Moore: High performance so.
Daniel Joseph Moore: When we see that shift to plug in hybrids versus EV. It does impact content level, but we still see a very good growth level for those types of vehicles. There are certain Oems that are out there where hybrids have doubled and we see that pull through so it's a balance of our content which may be.
Randall Colin Gouveia: So we've had a lot of requests in terms of whether we can share more content, and we haven't done that, but we'll look at ways to share better going forward on that. But, at this moment, a general comment would be...
Randall Colin Gouveia: In terms of EV, we would have the most content in that vehicle across all of our product lines. And for hybrid electric vehicles, we also have a good amount of content as well, but it wouldn't be as much. They still use inverters, so they would still need pressure management for the battery. Typically, for lower voltage usages, you would not use Rolling's power interconnect business. That business excels when it's high voltage and you need high performance.
Daniel Joseph Moore: A bit less versus full EV, but the growth rates are still quite substantial in well north of 10%. So we don't see much of a falloff should more growth happened in the plug in hybrid segment versus pure EV.
Speaker Change: Really helpful.
Speaker Change: And I guess lastly, you touched on it but in terms of capital allocation pay down last year outstanding debt.
Speaker Change: You gave us the update on internal investments in terms of just priorities for incremental capital allocation, what's the M&A pipeline look like.
Randall Colin Gouveia: When we see that shift to plug-in hybrids versus electric vehicles, it does impact content levels, but we still see very good growth levels for those types of vehicles. There are certain OEMs that are out there where hybrids have doubled, and we see that pull through. So it's a balance of our content, which may be a bit less versus full EV, but the growth rates are still quite substantial and well north of $10 billion. So we don't see much of a fall off should more growth happen in the plug-in hybrid segment versus pure EV.
Speaker Change: I would assume no major changes quarter to quarter, but any any level any more dialogues there and barring that.
Speaker Change: Your own stock looks pretty attractive relative to what the yes.
Speaker Change: I know you don't have 25 goals, but certainly with the kind of longer term expectations are so.
Speaker Change: This planned default to continue to Opportunistically buy back stock like you have the last few weeks. Thanks again for the color.
Daniel Joseph Moore: Really helpful. And I guess the last you touched on it, but in terms of capital allocation, you know, paid down the last of your outstanding debt. You gave us the update on internal investments. In terms of just priorities for incremental capital allocation, what does the M&A pipeline look like? You know, I assume no major changes quarter to quarter, but any level, any more dialogues there? And barring that, your own stock looks pretty attractive relative to what the, I know you don't have the 25 goals, but certainly what the kind of longer-term expectations are. So is it planned default to continue to opportunistically buy back stock like you have done the last few weeks? Thanks again for the color.
Speaker Change: Yes, I can start on M&A. So we're.
Speaker Change: We're really pleased that our debt has been eliminated. So we have a very strong balance sheet and M&A remains one of the four key pillars of our strategy and we haven't had an acquisition since civil engineering, which was quite a ways to go and Thats still going very well for us, but we are actively in the market we've got.
Speaker Change: A very rich pipeline of very interesting properties that would fit very well.
Speaker Change: They would become part of Rogers, it's still as we said earlier not necessarily a buyer's market people are still waiting for things to turn around a bit more before they would go to market, but we're actively engaged with several targets that would be.
Randall Colin Gouveia: Yeah, I can start on M&A. We're really pleased that our debt has been eliminated, so we have a very strong balance sheet. And M&A remains one of the four key pillars of our strategy. And we haven't had an acquisition since Scylla Engineering, which was quite a ways ago. And that's still going very well for us.
Speaker Change: Great addition to Rogers and we plan on moving as fast as we can in that space just nothing further in that area to report at this moment and then in terms of capital allocation regarding share buyback I think rahm, we'd like to jump in and give his perspective.
Randall Colin Gouveia: But we are actively in the market. We've got a very rich pipeline of very interesting properties that would fit very well if they became part of Rogers. It's still, as we've said earlier, not necessarily a buyer's market. People are still waiting for things to turn around a bit more before they would go to market. But we're actively engaged, targets that would be a great addition to Rogers, and we plan on moving as fast as we can in that space. There is nothing further in that area to report at this moment. And then, in terms of capital allocation regarding share buyback, I think Ram would like to jump in and give his perspective.
rahm: Sure I can comment on that so you are right going forward.
rahm: Our focus will shift to an organic growth and opportunistic share buyback.
Speaker Change: At the end of Q1 2024, we had 24 million remaining from our.
rahm: Current repurchase authorization.
rahm: We have bought back shares in the last few weeks and we will continue to do so opportunistically going forward.
Speaker Change: Very helpful. Thank you again.
Speaker Change: Thank you.
rahm: Our next question comes from the line of Craig Ellis with B Riley Securities. Please proceed with your question.
Craig Andrew Ellis: Yes, thanks for taking the follow ups, Dan got the one I wanted to ask about EV and HEV trends in content implications, but the other <unk>.
Ramakumar Mayampurath: Sure, I can comment on that. Dan, you're right. Going forward, our focus will shift to inorganic growth and opportunistic share buyback. At the end of Q1 2024, we had $24 million remaining from our current repurchase authorization. We have bought back shares in the last few weeks, and we'll continue to do so opportunistically going forward.
Craig Andrew Ellis: Follow up I had was more on your side Ron So there were a number of references to cost management.
Craig Andrew Ellis: My inference was that a lot of that was related to Cogs, but in the last four months is there anything new with respect to cost management initiatives in the middle of the income statement.
Daniel Joseph Moore: Very helpful. Thank you again.
Craig Andrew Ellis: Thank you. Our next question comes from the line of Craig Ellis with B. Riley Securities. Please proceed with your question.
Craig Andrew Ellis: SG&A and as we look out over the course of this year.
Speaker Change: Beyond the 1 million that we have for startup expenses is there anything plus or minus.
Craig Andrew Ellis: Yeah, thanks for taking the follow-ups. Dan got the one I wanted to ask about EV and HEV trends and content implications, but the other follow-up I had was more on your side, Ram. So, there were a number of references to cost management, and my inference was that a lot of that was related to COGS, but in the last four months, is there anything new with respect to cost management initiatives in the middle of the income statement, SG&A, and as we look out over the course of this year, beyond the $1 million that we have for startup expenses, is there anything plus or minus that is notable that we should expect? Thank you
Speaker Change: It's notable that we should expect thank you.
Speaker Change: Yes sure. So so if you look at our Opex from 23 compared to 22, Greg our Opex in dollars is lower in 2003 compared to 22. So we have been watching our opex carefully and I remember it was a year of high inflation as well.
Speaker Change: And going forward like you said, we will have some.
Speaker Change: Startup costs running through Opex, we have a little bit of seasonality that impacts us in the first half of the year second half opex will be lower than first half opex.
Ramakumar Mayampurath: Yeah, sure. So if you look at our OPEX from 23 compared to 22, Greg, our OPEX in dollars is lower in 23 compared to 22. So we have been watching our OPEX carefully. And remember, it was a year of high inflation as well.
Speaker Change: And we are watching our costs very carefully.
Speaker Change: Given the top line.
Speaker Change: Build back.
Speaker Change: And our long term goal remains at 20% Opex and there is no change to that.
Ramakumar Mayampurath: And going forward, like you said, we will have some startup costs running through OPEX. We have a little bit of seasonality that impacts us in the first half of the year. Second half OPEX will be lower than first half OPEX. And we are watching our costs very carefully, given the top line build back, and our long-term goal remains at 20% OPEX, and there's no change.
Speaker Change: Thank you Ron.
Ron: Thank you there are no further questions at this time I would like to turn the floor back over to Colleen for closing comments.
Colleen: With no further questions I'd, just like to say thanks, everyone for joining and we look forward to talking to several of you with call backs over the next several weeks.
Colleen: Thank you.
Colleen: Yes.
Speaker Change: This concludes.
Speaker Change: Todays teleconference. You may disconnect your lines at this time, thank you for your participation.
Operator: Thank you. If there are no further questions at this time, I'd like to turn the floor back over to Colleen for closing comments.
Speaker Change: Okay.
Ron: Okay.
Ron: [music].
Ron: Yeah.
Ron: [music].
Ron: Yeah.
Ron: [music].
Randall Colin Gouveia: With no further questions, I'd just like to say thank you to everyone for joining, and we look forward to talking to several of you through callbacks over the next several weeks. Thank you.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: Okay.
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