Q2 2025 Daktronics Inc Earnings Call
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Okay.
Good day, ladies and gentlemen, and thank you for standing by welcome to the deck Tronic second quarter fiscal year 2025 financial results Conference call. At this time, all participants are in a listen only mode.
The speaker's presentation, there will be a question and answer session to ask a question at that time, you will need to press star one one I get telephone keypad.
Yeah.
Speaker Change: At this time I would like to turn the conference over to MS. Karla Gatzke Moskovsky you may begin.
Speaker Change: Thank you.
Speaker Change: Morning, everyone.
Speaker Change: Thank you for participating in our second quarter earnings Conference call.
Speaker Change: I'd like to review our disclosure.
Speaker Change: And participants that in addition to statements of historical facts, we will be discussing forward looking statements, reflecting our expectations and plans about our future financial performance and future business opportunities.
Speaker Change: These forward looking statements reflect the company's expectations or beliefs concerning future events. All forward looking statements involve risks.
Speaker Change: Certainties, which could cause actual results to differ materially from our expectations.
Speaker Change: Such risks include but are not limited to changes in economic and market conditions management of growth timing and magnitude of future contracts and orders fluctuations in margins the introduction of new products and technology availability and cost of raw materials components and shipping services.
Political and governmental actions and other important factors.
These identified factors could cause actual results to differ materially from those discussed in this call in the company's second quarter 2025 quarterly earnings release and its most recent annual report on Form 10-K.
Second quarter 2025 earnings release contains certain non-GAAP financial measures and was furnished to the SEC Securities and Exchange Commission.
Speaker Change: On a form 8-K this morning.
Speaker Change: We also made slides available for today's call. All these documents are available on the investors section at Tektronix website, Www Dot dot dot com.
Speaker Change: I'll turn the call over to our CEO Reece Kurtenbach. Thank you Carlos good morning, everyone.
Reece Kurtenbach: Appreciate all you joining us today, we demonstrated our continued strong execution towards driving growth and returns above our cost of capital again this quarter.
Reece Kurtenbach: We achieved sales growth in the first half of our fiscal year typically the highest seasonal period and a record quarter for cash generation, which illustrates our disciplined management of working capital on the quarter sales growth and further strengthens our balance sheet positioning us well.
Reece Kurtenbach: Well as we look into the future.
Reece Kurtenbach: As you can see on our slide presentation on page three fiscal second quarter of 2025 highlights.
Reece Kurtenbach: We delivered great value to our customers with tight efficiencies and cost reductions in our manufacturing areas and consistently beating project deadlines during the quarter, all while driving forward, our strategic and digital transformations.
Reece Kurtenbach: During the quarter, we completed innovative and visually striking installations at the La Clippers Intuit dome.
Reece Kurtenbach: The Miami Heat Kasia Center, numerous college and high school sporting facilities and upgraded many commercial locations to the latest digital technologies.
Reece Kurtenbach: Our sales growth in careful working capital.
Reece Kurtenbach: Management drove cash flows from operations of $43 $3 million for the fiscal second quarter and $62 $8 million for the first half of the year.
Reece Kurtenbach: Additionally, we made strong progress along our stated digital transformation roadmap.
Reece Kurtenbach: With work toward the launch of our enterprise performance management tools and upgrades of our service and systems maintenance solutions set to go live as planned in the second half of the fiscal year.
Reece Kurtenbach: In addition, we are working to enhance and add new show control capabilities are show controls software solution provides dynamic seamless and fully immersive game day and event production.
Reece Kurtenbach: It is really exciting to see the first ever flame ball center hung installation at the Miami heat Bill.
Reece Kurtenbach: Building first of its kind creations using led technology is something that drives our company forward and excites our employees bring.
Reece Kurtenbach: Bringing this iconic sculpsure to life for the Miami Heat <unk> center and their audiences is a great engineering feat that we're proud to have accomplished we look forward to providing other customer similar types of creations to amaze their fans and audiences.
Reece Kurtenbach: In addition to the record generation of cash we delivered a solid quarter.
Reece Kurtenbach: Quarter, and first half year of financial performance growing revenue four 5% to $208 million.
Reece Kurtenbach: At 26, 8% gross margins and earning a nine 2% adjusted operating margin for the quarter.
Reece Kurtenbach: Backlog is at $236 million declining as planned as we move into our seasonally lower volume third quarter.
Reece Kurtenbach: You will recall, our third quarter is historically lower because fall sports installations have been completed there is a natural slowdown of outdoor construction projects and we have two major holidays in the period, reducing the overall days of production.
Reece Kurtenbach: Because of these dynamics and the reality many of our costs are more fixed in the near term.
Reece Kurtenbach: Operating margins are often lower in our fiscal third quarter.
Reece Kurtenbach: Management team activate the different mitigation strategies to reduce costs. During this time such as reduction in shifts and utilizes capacity to focus teams on revenue generation and overall improvement activities Sheila.
Reece Kurtenbach: Sheila will further discuss financial results later in the call.
Speaker Change: But first please turn to slide four market vertical Q2 review for more details.
Speaker Change: You might have events. In addition to the installation has already highlighted we completed delivery for several large projects, which included center home video ribbon boards and other cutting edge displays to provide innovative.
Speaker Change: Innovative great game day experiences and various arenas and stadiums Custer.
Speaker Change: Customers and trusting Tektronix included University of Connecticut University of Kansas, The La Lakers Crypto Dot Com Arena Van Andel, Boston Convention Centre, Philadelphia Phillies, Baylor University, and the AAA Charlotte nights.
Speaker Change: Our outlook for this segment remains similar to our last call. We expect live events demand to remain strong as venues enhanced facilities to entertain fans and attract athletes orders in this market are large and installations can be lengthy and complex and therefore creates variability in period to period order and say.
Speaker Change: <unk> volumes.
Speaker Change: As we plan each for each season, we likely needs to a graduating class with each year, having a certain number of new systems and potential upgrades or replacements. Some class sizes are larger or smaller with individual owners or customers determining when their projects will move forward.
Speaker Change: As we evaluate the current class of available projects in the near term. We now expect spring baseball project orders to be a smaller class as a number of potential upgrades have moved out to future seasons.
Speaker Change: As we look ahead, we continue to expect healthy demand for in the bowl applications and expansion into outside of the bowl as more focus is being placed on entertainment areas.
Speaker Change: <unk> like entry ways, Atriums, concourses and adjacent entertainment zones.
Speaker Change: Our narrow pixel pitch line of products matches the needs of customers for many of these locations and continues to be in demand.
Speaker Change: Our commercial business, primarily consists of sales through resellers, mainly signed companies to many types of customers and applications, including military utilities transportation NASA national retailers quick serve restaurants casinos shopping centers cruise ships commercial building owners.
Speaker Change: Petroleum retailers and other not on premise customers.
Speaker Change: Also included in this segment, our out of home advertising companies and larger advertising displays called spectacular.
Speaker Change: Orders can vary in this market also because of the larger size orders in these two segments.
Speaker Change: During the quarter, we secured a large project for the center, formerly known as the CNN Center in Atlanta, which drove the order volume increases. In addition out of home orders increased as a result of our continued strategy to promote two independent out of home operators and serve the large.
Speaker Change: National out of home advertisers, winning us additional orders.
Speaker Change: Our focus for this market is to grow our core areas and continue to build out our AAV integrator network to market, our narrow pixel pitch product lines, especially in control room applications used by military utility and transportation agencies.
Speaker Change: As an example during the quarter, we were successful in a sale of an MPP product through an AAV channel for use at the George HW Bush Library.
Speaker Change: This slide also includes a picture of an installation at Quantico Marine base, a testament to our focus on the military channel and the use of NPP products for multiple applications.
Speaker Change: In our transportation market variability in orders versus prior periods is natural in this segment, which is a large project business and therefore lumpy.
Speaker Change: Despite the down order comparison of our financial performance for this segment was solid as we fulfilled our backlog of orders from long time repeat customers, including one at our Sioux Falls Regional Airport, we continue to see a trend in upgrades in and around airports for digital signage.
Our teams are focused on winning projects for intelligent transportation systems, including traffic management centers airport projects and other mass transit system projects.
Speaker Change: The outlook for this segment remains solid and is poised to take advantage of selling our full line of video display systems from our NPP products to our pre qualified and trusted Ats systems used by state and city governments.
Speaker Change: The international during the quarter, we were awarded a number of contracts in the out of home space in Saudi Arabia and Australia.
Orders continue to be slowest compared to prior years, which we believe continues to reflect economic and geopolitical uncertainty. We are actively quoting opportunities to additional out of home customers and for several mid sized sports products and continue to see signs of converting more quotes into orders.
Speaker Change: With our existing customer base and our focus on these types of new orders from our broad way array of customers. We are laying the groundwork for future repeat and upgrade types of orders in the future.
Speaker Change: The picture displayed on this slide is for an MPP product installation in Singapore.
Speaker Change: In addition customers value our product designs tailored specifically to their unique needs as evidenced by a strong response to our eco smart energy savings product, which is desired by our energy sensitive customers.
Speaker Change: And high schools the market continues to convert to full video usage, which drove the increase in orders for the quarter.
We began deliveries of our new higher margin product to not only support our customers, but further bolster our contribution margin for this segment.
Speaker Change: Pictured installation at Warren Hardy and high School in Ohio is one example of the number of high schools upgrading outdoor to upgrading.
Speaker Change: Upgrading outdoor installations to video displays.
Speaker Change: And increasingly demand has grown for full video usage indoors as well.
Speaker Change: As mentioned a moment ago with respect to our show control software, we continue to make progress on.
Our major enhancements of control systems to enhance the live event experience and improve workflow efficiencies. These enhancements will empower our customers to deliver dynamic presentations using cutting edge, scoring and timing software <unk> data visualizations real time rent.
Speaker Change: <unk> and integrated data through sports specific applications.
Speaker Change: The addressable market for our newest solution has broad, including any one supporting live events entertainment and sports, even if theyre not using tektronix displays and is slated for release by fiscal year end.
Additionally, we are introducing cloud access, allowing customers to schedule store and manage their content and data sources from anywhere.
Speaker Change: The work that we're doing here sets us up nicely to increase our recurring revenue streams, which we intend to be a driver for gross margin expansion over time.
Speaker Change: As Sheila will detail in a moment during the second half of the year. We are set for two major internal technology launches at the core of our digital transformation roadmap. These.
Speaker Change: These launches are the building blocks of the future Foundation for which we will service our customers measure our performance and manage the overall business. We have also continued to develop our overall comprehensive transformation efforts through the rest of the fiscal year refining our transfer transformation initiatives and making selected <unk>.
Speaker Change: <unk> and transformational actions designed to drive future Years' revenue growth profitability and sustainable returns in the mid to upper teens for ROIC.
I will discuss this more after a bit but first for additional details on the financial results for the quarter and the year I'll turn it over to Sheila.
Speaker Change: Thank you Reed I invite you to turn to slide five and six titled fiscal quarter, two and year to date fiscal 2025 financial highlights to follow the second quarter and first half of the year's financial outcome.
Speaker Change: The quarter over quarter comparisons on the slide and related discussion are as of and for the quarters ended October 26, 2024 July 27, 2024, and October 28, 2023, unless otherwise stated.
Speaker Change: Order volume for the quarter declined primarily due to the order decreases in live events transportation and international business units.
Speaker Change: Variability in orders comparatively is natural and these large project business areas and the time of year for sports projects.
These declines were offset by large project bookings in a spectacular area and end of calendar year calendar year purchases by our out of home customers in the commercial business unit and were offset by solid growth in the high school parks and recreation business unit because of the market adoption towards the use of video displays.
Speaker Change: Orders for the first half of the year increased three 3%.
Speaker Change: Based on our strong return to more normal seasonal trends as compared to prior years product backlog level at $236 million at the end of the quarter.
Quoting activity remains active across all segments.
Speaker Change: The quarter sales increase was a result of comparatively higher volumes in live events and transportation business units offset by lower sales levels in the international business unit sales in our commercial and high School Park and recreation business units are relatively flat.
Speaker Change: This next difference as a result, the variability of orders as described with.
Speaker Change: But the higher level of sales in Q2 2025, we generated similar sales to last year's record level on a year to date comparison.
Speaker Change: Gross profit percentage.
Speaker Change: Percentage of net sales decreased slightly to 26, 8% for the second quarter of fiscal 2025, as compared to 27, 2% a year ago.
Speaker Change: This solid gross profit level as a reflection of volume mix, some price improvement and careful management of manufacturing and service fulfillment costs.
Speaker Change: On a year to date basis gross profit of 26, 6% as compared to 29% is attributable to the sales mix differences between periods.
Speaker Change: We continue to generate operating operating income consistently.
Speaker Change: Through the last five quarters in the high single digits operating income was seven 6% of sales in Q2 and as adjusted for onetime consulting related expenses was nine 2% on.
Speaker Change: On a year to date basis was eight 8% or nine 8% as adjusted.
Speaker Change: Operating expense increases reflected the investments in staffing to support our digital transformation and future sales growth initiatives and salary and wages increases.
During the second quarter, we also incurred three points.
Speaker Change: $2 million in nonrecurring consulting services to help us implement and accelerate our strategies to grow and drive efficiencies and consistent profitability levels.
Speaker Change: We expect to invest up to $5 million to $6 million more during fiscal 2025 for the business and digital transformation initiatives.
Speaker Change: Our sales growth in careful working capital management drove record cash flows from operations of $43 $3 million for the second quarter and $62 $8 million for the first half of the year cash restricted cash and marketable securities totaled totaled $134 $4 million at the end of the quarter.
Speaker Change: And our working capital grew to $243 $7 million with a working capital ratio of two three to one.
Speaker Change: Management's focus remains on maintaining the strong balance sheet and on managing working capital through the expected growth of the company.
Speaker Change: As previously announced we have delivered also Fox the notice the conversion of the initial $7 million in face value of the $25 million senior secured line.
Speaker Change: Promissory notes on November 11, 2024, with a conversion date of yesterday December <unk> 2024.
Speaker Change: We intend to convert the remainder of the convertible notes over the next several months and tranches of up to $7 million in face value every 30 days as provided for in the convertible note.
Speaker Change: The company will deliver shares when <unk> certifies the delivery of shares will not cause its ownership to exceed the maximum percentage currently at 3% and will increase to $14, 99% in late January the conversion when completed will save $5 $4 million of interest over the remaining term.
Speaker Change: The offset the share dilution that will result from the current version of this notes into common stock, we intend to execute on our existing share repurchase authorization as soon as practical.
Speaker Change: Given our financial performance, our view of market growth and our strong positioning in the market.
Speaker Change: And with the strategic initiatives, we're undertaking we are well positioned to drive profitability and cash flow generation through the remainder of fiscal 2025 and beyond.
Speaker Change: Now please turn to slide seven titled fiscal year, 2025, digital transformation and strategic priorities.
Speaker Change: On the digital transformation front as we previously discussed we're investing in foundational enterprise performance management tool that will strengthen our management systems and improve data availability to guide capital allocation decisions and focus our investments in the most profitable business areas.
Speaker Change: We are on track for our phased implementation of these integrated business planning tools and processes and to achieve the value of these tools provide.
Speaker Change: First up is our consolidation and reporting tools implementation testing and training has started in addition, we made progress on design and data collection of information needed for integrated business planning. This configuration data gathering and testing is that to be completed by the end of the fiscal year and utilized beginning fiscal 'twenty six.
To better align our strategic operational and financial planning.
Speaker Change: We also made substantial progress in testing in creating deployment plans for the launch of our modernized service systems and management tools.
Speaker Change: These tools will both improve our internal operations and customer experiences as we expect this application to go live by the end of our fiscal year.
Speaker Change: We started planning for the automation in our front end quoting and sales processes, which we plan to launch in phases, beginning in fiscal 'twenty six.
Speaker Change: These investments in digital transformation are expected to improve customer experiences drive operational excellence and help us leverage our operations as we grow the business and grow our profitability.
Speaker Change: With that I'll turn it back to <unk> to provide an overview for the other areas of strategic focus thank.
Reece Kurtenbach: Thank you Sheila we're also making investments to drive profitable growth and accelerate the lowering of our overall structural and product cost to increase market competitiveness.
Do we see the digital transformation efforts is foundational to lowering our structural costs, but we're also investing in people capabilities and working with consultants to accelerate those strategies.
Reece Kurtenbach: Finally, we continue to execute on strategies to both grow and capture a greater share of our Sam These.
Reece Kurtenbach: These strategies include advancing our control system capabilities as I previously mentioned and adding professional services and other content to drive MLR, ensuring we are delivering and enhance returns as we help our customers achieve success in their investment offerings.
Reece Kurtenbach: Turning to slide eight titled FY, 2025 strategic priorities.
Reece Kurtenbach: We continue to execute on our business transformation plan.
Reece Kurtenbach: The goal of which is to grow revenue faster than the company's addressable market expand operating margins and generate returns on capital in the mid to high teens and consistently above the company's cost of capital.
Reece Kurtenbach: During the quarter, we made significant progress on a number of areas, including new show control capabilities Enterprise management tools and upgrades to the service and system maintenance solutions, which are set to go live in the second half of the fiscal year.
Reece Kurtenbach: Key components of this program include executing on our digital transformation initiatives carefully allocating resources to end market segments prioritizing investments in areas, which tektronix has clear advantages and opportunities for market for above market growth at acceptable margins.
Reece Kurtenbach: Aligning product delivery with differing customer needs through a tiered product offering strategy with pricing aligned with the value delivered.
Reece Kurtenbach: Achieving higher profit by reducing product input costs and focusing on efficiency improvements in manufacturing and other operations.
Reece Kurtenbach: Maximizing balance sheet efficiencies.
Reece Kurtenbach: And refining are critical.
Reece Kurtenbach: Critical business and financial management practices, including product pricing business planning and incentive compensation to fully support our performance objectives.
Reece Kurtenbach: In terms of our process during the first quarter, we conducted a data driven analysis to identify numerous actionable opportunities to accelerate our profitable growth in.
In the second quarter, we launched a deeper initiative to further analyze plan prioritize and roadmap specific initiatives.
Reece Kurtenbach: We are nearing the conclusion of this planning and this planning and choosing phase and can highlight some early learnings and initiatives.
Reece Kurtenbach: To date, we have gained insights on our customer relationships and perceptions in the market.
Reece Kurtenbach: These insights confirmed we are aligning to the trends and needs of customers with our concentration on quality service on quality service and control system capabilities, we will continue to identify and adapt to market trends and buying behaviors and product needs to focus on product quality and reliability served.
Reece Kurtenbach: Mrs and support and control system capabilities. We have also found areas of opportunity for improved performance and are planning to reinvigorate our lean management practices and supplier management, we have identified.
Reece Kurtenbach: <unk> opportunities in portfolio and management approaches approaches to the market pricing strategies product and production costs. Our teams are examining the breadth and complexity of our offerings and are evaluating ways to reduce cost to produce an install.
Reece Kurtenbach: Our teams are doing a great job in using data driven strategy and proven methodologies to plan and prioritize value enabling initiatives.
Reece Kurtenbach: We will continue our digital transformation initiatives, including our enterprise performance management system implementation and modernized service tools and will begin executing our backend and customer facing roadmap during the back half of the fiscal year.
These initiatives are expected to add more resilience to our operations and reacting to changing operating environment and will result in above sand revenue growth and mid to high teens return on capital.
Reece Kurtenbach: We're refining our forward looking plans with the intention to report on actions no later than our Q3 call.
Reece Kurtenbach: We expect to capture the quickly realized benefit of this effort in the second half of FY 2025, with additional benefits to be realized as we complete implementation by the end of FY 2026.
In conclusion, our summary on slide eight recaps, our key highlights our consistent performance serves as evidence we are on a sustainable trajectory of growth and increasing profitability, our multiyear transformational strategies and near term progress on these goals demonstrates our commitment to improve and consistently earn returns above.
The cost of capital and then the top range of our industry we.
Reece Kurtenbach: We are focused on the right allocation of resources, and capturing growth and existing profitable Sam and developing growth in additional areas.
Reece Kurtenbach: We are focused on accelerating digital transformation and other initiatives to lower structural and product cost. We are a global industry leader and best in class video communication displays and control systems, and we continue to focus on bringing value to our customers.
Reece Kurtenbach: Are the only U S manufacturer of scale with a global footprint servicing by geographic market and consistently demonstrate world, leading technology leadership high quality solutions and World Class service.
Speaker Change: With that I would ask the operator to please open the line for any questions.
Yes, Sir ladies and gentlemen, once again, if you have a question or comment at this time. Please press star one one on your telephone keypad.
Speaker Change: If your question has been answered or you wish to remove yourself from the queue simply press star one again.
Speaker Change: Once again, if you have a question or comment please press star one one on Europe.
Speaker Change: Okay telephone keypad, please standby, while we compile the Q&A roster.
Yes.
Speaker Change: Our first question or comment comes from the line line of Anja Soderstrom from Sidoti.
Speaker Change: Your line is open.
Speaker Change: Hi, and thank you for taking my question and congrats on a great quarter here.
Speaker Change: And given.
Speaker Change: Given that the second quarter was better than we had expected in Europe given your prior commentary about you're expecting to be in line with consensus on the full year.
Speaker Change: Do you expect a more steeper decline in revenue for the second half that we had before.
Speaker Change: How should we think about that seasonality.
Speaker Change: Once again Andre we have a large project business. So revenue can be lumpy from quarter to quarter, but we do expect overall for the fiscal year that our orders and sales.
Speaker Change: Beyond par exceed last year's.
Speaker Change: Okay. Thank you and in terms of.
Speaker Change: The gross margins.
Speaker Change: They have held up pretty nicely over the last couple of quarters understand now when we go into more softer season in the second half.
Speaker Change: I see it coming down, but how should we think about those gross margins for next year.
Speaker Change: I think we're winning.
Speaker Change: Our fair share of orders and so the at the pricing that we've cited in the marketplace. So I think in third quarter, it's more of a volume situation then.
This compression on certain projects.
Speaker Change: Okay. Thank you Andy also mentioned the E.
Sales channel that you have launched.
Speaker Change: How do you see that trending and how do you expect that to affect margins.
Speaker Change: Asset growth.
Speaker Change: Yes, that's a great question, we have continued to grow our E sales channel, but it's really on small standard very standard types of orders you might think of shot clock setter in a high school basketball facility and we intend to continue to grow that.
Speaker Change: The back half of this fiscal year as well as in future fiscal years that should bring.
Speaker Change: The selling costs down on every one of those orders and allow the sales teams that we have to focus on higher value more complex sales. So we believe that overall revenue will continue to grow the gross margins on those products will be able to maintain those and the selling cost.
Overall for.
Speaker Change: A unit like that should become more efficient.
Speaker Change: Okay. Thank you and it seems like your operating expenses a bit inflated this year by the consulting fees you're spending on the digital transformation are thus do you expect to contain paying consulting fees in next year should we expect margins maybe to have a positive effect from that falling off.
Speaker Change: We have two major initiatives of business transformation initiative, and a digital transformation the business transformation.
Speaker Change: Should be contained to this year and much of our digital transformation will be in this year, but some of the initiatives such as our configure price quoting and sales efficiency initiatives. We believe will start in fiscal 2006, Q1 and continue through fiscal 2006, possibly even India.
Speaker Change: 27.
Speaker Change: And those might have some consulting fees and.
Speaker Change: <unk>.
Other costs associated with them as we work through those really exciting but can be challenging initiatives.
Speaker Change: Okay. Thank you and last one from me before I get back into queue.
Speaker Change: Your administration coming and they're sort of approach to the Paris, how do you think that might affect tektronix.
Well, that's a great question I wish I had better insight into what the new administration is going to do but obviously, we source a lot of semiconductors and a lot of semiconductors in.
Speaker Change: And related materials, such as printed circuit cards are sourced outside the U S and we bring into either our U S. Factories are one of our factories outside the U S. And then bring the finished product in and so tariffs will impact those products.
Speaker Change: How much depends on the specific actions taken and it is difficult to predict.
Okay I understand thank you that was all for me.
Speaker Change: Okay well. Thank you I appreciate you on the call today.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question or comment comes from the line of Matt first from singular research Mr. <unk>. Your line is open.
Mac first: Thank you. This is Mac first with singular research congratulations on the quarter.
Mac first: And thank you for taking my question.
Speaker Change: No worries I appreciate you on the call today.
Speaker Change: Yeah, so with the New administration, taking office in January.
What other.
Speaker Change: Do you expect taller than kind of the question that the previous.
Speaker Change: Right.
Speaker Change: Yes, once again lots of.
Speaker Change: Activity in that front right now it appears that.
Speaker Change: There'll be changes in the tariffs potentially in different regulations or the regulation environment or the regulatory environment, but.
Speaker Change: Too soon to really predict or two.
Speaker Change: Mako.
Speaker Change: Estimate on what what we might change in our operations to account for that.
Speaker Change: Yes.
Speaker Change: You produce in China.
Speaker Change: So.
From China.
Speaker Change: So it.
Maybe even.
Speaker Change: On anything coming out of China.
Speaker Change: That would obviously be.
That's right is that a fair statement.
Speaker Change: I think I understood. Most of you broke up a little bit there Max but let me let me try.
Speaker Change: We do have a factory in Shanghai, China, and we produce really some nice products, there some of which come into the U S, but much of which goes to countries outside the U S. We also have another factory in Ireland, where we produce products that sometimes come to the U S and once again too many <unk>.
Speaker Change: <unk> outside the U S and we have our major production in kind of the South Dakota Central Minnesota area of the U S.
Speaker Change: Which we source many semiconductor items like.
Speaker Change: Leds.
Speaker Change: <unk>.
Speaker Change: Ics to turn those Leds on and off power supplies and other components and we source some of those through China and some from other companies outside of China, but China is a huge player in the semiconductor market and so there is they have some influence on the overall pricing and availability of many.
Speaker Change: Components and those will be impacted by tariffs.
Speaker Change: Certainly from China, and possibly from other countries, depending on how broadly tariffs are applied by the next administration.
Speaker Change: Yes. Thank you very much. Thank you thanks for answering my questions.
Speaker Change: I may point out Max that most of our competition producers outside the U S and <unk>.
Speaker Change: China, the south southern China, so it won't be necessarily a competitive disadvantage because they will they will be on the same sort of environment and we do have an advantage that we can bring in components and add value in the U S.
Speaker Change: Which is unusual in our industry, we have the largest and really the biggest manufacturing facility in the U S.
Speaker Change: Okay.
Speaker Change: Can you provide any let up thank you very much. Thank you.
Speaker Change: Thanks Mac.
Speaker Change: Again, congratulations on the quarter.
Speaker Change: Okay appreciate that.
Thank you I'm showing no additional questions in the queue at this time I would like to turn the conference back over to management for any closing remarks.
I appreciate everybody attending today's call and the nice words from Machen Andre about the quarter, we do have investor outreach activities planned for the next quarter.
Speaker Change: Including.
Speaker Change: Here in December there is a benchmark discovery conference and a singular conference and we will be attending both of those and.
Speaker Change: We will also of course host our next earnings call at the end of our Q3, when we release results.
Speaker Change: I appreciate all you joining us today I hope you have a great holiday season, and I look forward to seeing you in February thanks, everyone.
Speaker Change: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day.
Speaker Change: Okay.
Speaker Change: Thanks.
Speaker Change: Okay.
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Speaker Change: Yes.
Okay.
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