Q3 2025 Knowles Corp Earnings Call

Speaker #3: Thank you for standing by . My name is Eric , and I will be your conference operator today . At this time , I would like to welcome everyone to the Q3 2025 Knowles Corporation Earnings Conference call .

Speaker #3: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.

Speaker #3: If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad.

Speaker #3: If you would like to withdraw your question , press star one again . Thank you . I'd now like to turn the call over to Sarah Cook , please go ahead .

Speaker #4: Thank you, and welcome to our third quarter 2020 earnings call. I'm Sarah Cook, Vice President of Investor Relations, and presenting with me today is Jeffrey Niew, our President and CEO.

Speaker #4: And John Anderson , our senior vice president . And CFO . Our call today will include remarks about future expectations , plans and prospects for Knowles , which constitute forward looking statements for purposes of the safe harbor provisions under applicable federal securities laws .

Speaker #4: Forward looking statements in this call will include comments about demand for company products , anticipated trends in company sales , expenses and profits , and involve a number of risks and uncertainties that could cause actual results to differ materially from current expectations .

Speaker #4: The company urges investors to review the risks and uncertainties in the company's SEC filings, including but not limited to the Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Speaker #4: For periodic reports filed from time to time with the SEC and the risks and uncertainties identified in today's earnings release. All forward-looking statements are made as of the date of this call, and Knowles disclaims any duty to update such statements except as required by law.

Speaker #4: In addition, pursuant to Reg G, any non-GAAP financial measures referenced during today's conference call can be found in our press release posted on our website at Knowles.

Speaker #4: Com and in our current report on Form 8-K filed today with the SEC. This will include a reconciliation to the most directly comparable GAAP measure.

Speaker #4: All financial references on this call will be on a non-GAAP continuing operations basis, with the exception of cash from operations or unless otherwise indicated.

Speaker #4: We have made selected financial information available in webcast slides, which can be found in the Investor Relations section of our website. With that, let me turn the call over to Jeff, who will provide details on our results.

Speaker #4: Jeff .

Speaker #5: Thanks , Sarah , and thanks to all of you for joining us today . As we continue to execute our strategy of leveraging our unique technologies to design custom engineered solutions and then deliver them at scale for customers and markets that value our solutions , we achieved strong results in the third quarter of 2025 .

Speaker #5: Revenue was up $153 million, an increase of 7% year over year. EPS was $0.33, up 22% year over year, and cash from operations was $29 million.

Speaker #5: All of which were above the midpoint of our guided range. I believe our results continue to demonstrate that our focus on the markets and products where we have significant competitive advantage is paying dividends and positions us well for future growth.

Speaker #5: Now, turning to the segment results in Q3, Medtech and Specialty Audio revenue was $65 million, up 2% year over year.

Speaker #5: Our continued operational excellence sustained success of new product adoption and cutting edge technology is evidenced with our strong gross margins . I expect that medtech and specialty audio will have revenue growth within the range of 2 to 4% over the year end 2025 , and we are optimistic about our future growth opportunities .

Speaker #5: We detailed at our Investor Day in the Precision Device segment. Q3 revenue was $88 million, up 12% year over year. We saw revenue growth across all our end markets.

Speaker #5: MedTech , defense , industrial and EV and energy . Our strong intimacy with our customers applications has led to accelerating design wins , coupled with robust secular trends .

Speaker #5: In our end markets, I am confident in our ability to continue to grow revenue in the fourth quarter and beyond. While we are seeing growth across all our end markets, I would like to highlight the defense market, as it was particularly strong, with design wins in bookings outpacing other end markets.

Speaker #5: Our capacitors and RF microwave solutions serve a wide variety of military applications. We have a compelling product offering of RF filters being used in the next generation of defense systems, serving a broad base of applications from radar detection and jamming to ground communications, ensuring reliable and secure military communications.

Speaker #5: Our capacitors provide the electrical energy source needed for extremely harsh applications like munitions and detonation devices. Defense spending is increasing and shifting toward spending on electronic warfare, where our products are in high demand.

Speaker #5: In Q3, bookings in the PD segment remained strong, particularly in defense and with our distribution partners. We continue to believe that channel inventories are now at normalized levels, as they are now matching orders to end market demand.

Speaker #5: We continue to collaborate with our customers, leading to a robust pipeline of new design wins as our customers continue to choose our innovative and differentiated solutions across all the markets we serve.

Speaker #5: We are positioned well for organic growth, and I expect the Precision Device segment will grow at the high end of our stated growth range of 6% to 8% in 2025.

Speaker #5: I would like to reiterate the strategy we are executing across both of our business units . We are leveraging our unique technologies , creating custom products through our customer application , intimacy , and then scaling into production with our world class operational capabilities for end markets with strong secular growth trends .

Speaker #5: It is proving to be a winning combination , leading to year to date revenue growth of 5% and EPs growth of 15% on a year over year basis .

Speaker #5: John will go through our Q4 guidance shortly, but as we stated in previous calls, we are expecting to finish the year strong, with revenue and EPS growth accelerating in the second half of 2025.

Speaker #5: As we look to next year, with new design wins ramping in a very healthy backlog of existing orders, we expect to see organic growth rates at the high end of our stated range of 4% to 6% for the total company.

Speaker #5: This is an increase from historical levels, supported by strong secular growth trends in our end markets and new initiatives, such as the expansion of our specialty film production coming online.

Speaker #5: Cash generation from operations continued to be robust in the third quarter, allowing Knowles to purchase $20 million in shares and reduce outstanding bank borrowings by $15 million.

Speaker #5: We have a very strong balance sheet that will continue to support our growth as we pursue synergistic acquisitions. Buying back shares will continue to keep our debt at very manageable levels.

Speaker #5: In summary, as I said last quarter, I am excited by the momentum and strength the business demonstrated and the growth opportunities that we have in front of us, both in the near and longer term.

Speaker #5: Our design wins continue to be strong across our product portfolio. This is driving increased demand for our products, which gives me confidence that we have entered a period of accelerated organic growth from historical levels.

Speaker #5: We are laser-focused on what we do best: designing custom engineered products and delivering them at scale for customers and markets that value our solution, positioning us well for growth in 2025 and beyond.

Speaker #5: Now, let me turn the call over to John Anderson to detail our quarterly results and provide guidance for Q4. Thanks, Jeff.

Speaker #5: We reported third-quarter revenues of $153 million, up 7%.

Speaker #6: From the year ago period . And at the high end of our guidance range , EPs was $0.33 in the quarter , up $0.06 , or 22% from the year ago period .

Speaker #6: And also at the high end of our guidance range . Cash generated by operating activities was 29 million at the high end of our guidance range , driven by lower than expected net working capital in the medtech and specialty audio segment , Q3 revenue was 65 million , up 2% compared with the year ago period , driven by increased demand in the specialty audio market .

Speaker #6: Q3 gross margins were 53% flat versus the year ago period . As expected , segment gross margins in the third quarter improved more than 200 basis points sequentially , and we expect gross margins to be above 50% for the full year 2025 .

Speaker #6: The precision Devices segment delivered third quarter revenues of 88 million , up 12% from the year ago period . Segment gross margins were 41.5% , up 150 basis points from the third quarter of 2020 .

Speaker #6: As higher-end market demand and production volumes in our ceramic capacitors and RF microwave product lines resulted in increased factory capacity utilization.

Speaker #6: These improvements were partially offset by higher production costs and lower-than-expected yields associated with the ramp-up of the specialty film product line.

Speaker #6: It's worth noting that specialty film output trends within the quarter were positive, and as we exited Q3, we are well positioned for both sequential growth and gross margin improvement.

Speaker #6: In the fourth quarter . On a total company basis , R&D expense in the quarter was 9 million flat , with Q3 2024 levels and expenses were 26 million , up 2 million from prior year levels , driven primarily by annual merit increases and higher incentive compensation costs .

Speaker #6: Interest expense was 2 million in the quarter , and down 2 million from the year ago period . As we continue to reduce our debt levels .

Speaker #6: Now I'll turn to our cash flow and balance sheet. In the third quarter, we generated $29 million in cash from operating activities.

Speaker #6: Capital spending was $8 million in the quarter. We continue to expect to generate operating cash flow of 16% to 20% of revenues for the full year 2025.

Speaker #6: During the third quarter , we purchased 940,000 shares at a total cost of 20 million . We exited the quarter with cash of 93 million and 176 million of debt , which includes borrowings under our revolving credit facility and an interest free seller note issued in connection with the Cornell acquisition .

Speaker #6: The remaining balance of the seller note matures next month, and we expect to fund this payment with a combination of cash on hand and revolving revolver borrowings.

Speaker #6: Lastly, our net leverage ratio based on trailing 12 months adjusted EBITDA was 0.6 times, and we have liquidity of more than $350 million, as measured by cash plus unused capacity under our revolver.

Speaker #6: Before turning to the fourth quarter guidance, I want to give a brief update on the tariff situation as it relates to Knowles.

Speaker #6: While the situation remains fluid, we continue to believe our exposure to tariffs is less than 5% of revenue and 3% of cost of goods sold.

Speaker #6: We've had success in passing these additional costs onto our customers, and our expectation is to continue to do so without loss of business.

Speaker #6: Moving to our guidance for the fourth quarter of 2025. Revenues are expected to be between $151 million and $161 million, up 9% at the midpoint year over year.

Speaker #6: R&D expenses are expected to be between $8 million and $10 million. Selling and administrative expenses are expected to be within the range of $26 million to $28 million.

Speaker #6: We're projecting adjusted EBIT margin for the quarter to be within the range of 22% to 24%. Interest expense in Q4 is estimated at $2 million and includes non-cash imputed interest.

Speaker #6: We expect an effective tax rate of 7% to 11% as we move forward. I expect the tax rate to increase in 2026 to the range of 15% to 19%.

Speaker #6: We're projecting EPS to be within a range of $0.33 to $0.37 per share. This assumes weighted average shares outstanding during the quarter of 87.2 million on a fully diluted basis.

Speaker #6: We're projecting cash generated by operating activities to be within the range of $30 million to $40 million. Capital spending is expected to be $12 million.

Speaker #6: And we expect full year capital . Capital spending to be approximately 5% of revenues . As we've increased investments associated with capacity expansion related to our specialty film line .

Speaker #6: In conclusion , our year over year revenue and earnings growth were strong in the third quarter . And with a backlog and increased order activity , we expect to continue to deliver both sequential and year over year revenue and earnings growth in the fourth quarter of 2025 .

Speaker #6: I'll now turn the call back over to the operator for the questions and answers portion of our call. Operator.

Speaker #3: As a reminder, if you'd like to ask a question, please press star, followed by the number one on your telephone keypad.

Speaker #3: Your first question comes from the line of Christopher Rowland with Susquehanna. Please go ahead.

Speaker #7: Hi , guys . Congrats and thanks for the question . So I guess my first is going to be on specialty film . If you guys could just remind us on current capacity , your plans or even update us on your plans for capacity additions .

Speaker #7: And you know how from a demand standpoint, you guys see revenue now into next year, and whether you have high confidence on high volume, additional customer opportunities for this product in particular.

Speaker #7: Thanks .

Speaker #5: Yeah , Chris , let me separate that into two pieces of specialty film . Let me answer the first , which is a little bit easier , which is , you know , back to that energy order .

Speaker #5: We received in Q1. So first, I think we're on track to start really in the second quarter, but really fully ramping up at the end of the second quarter.

Speaker #5: That energy will start to be delivered in the back half in full, but starting in Q2, around $25 million or so, that’s what we expect in that business.

Speaker #5: You know , I think the other portion of the specialty film business , you know , right now we have a backlog that's not counting , again , the energy order that's in excess of 25 million , close to $30 million backlog .

Speaker #5: That's to deliver on. And we see more orders coming, so we feel pretty comfortable as we look into next year that the specialty film line probably is going to be in the $25 to $30 million range this year.

Speaker #5: You know, if you add the 25, it should be at least $55 million or $60 million next year. And we're expanding the capacity to fulfill those orders.

Speaker #7: Excellent . Thanks , Jeff . And then perhaps we can talk about , I think , in the press release , you talked about design activity .

Speaker #7: I was wondering what you were alluding to and what underpins your high end of your target growth range. And just as we kind of think about medtech or precision devices or any subsegment, what would you expect to be above and beyond?

Speaker #8: Yeah, so if you divide it that way.

Speaker #5: You know , I think if I , if I were to sit there right now , I would probably look at the , the , the medtech and specialty audio business in 26 .

Speaker #5: Being in that 2 to 4% range for growth next year , I would sit there and say the precision device , which is now a business which is now obviously larger than the medtech , you know , at the high end to maybe even slightly above the high end of of the 6 to 8% that we provide for organic growth at the Investor Day , the underpinning of this I wish I could point to and say beyond that energy order which we highlight , that it's like one customer or one application , we are just having a tremendous amount of success .

Speaker #5: And I would sit there and say , I really commend the teams within Knowles Chris , in terms of execution , it's taking our unique technologies and then customizing them for specific applications across med , industrial defense and then delivering them in scale with a world class operation .

Speaker #5: And we're just having a tremendous amount of design win activity across the board . And that's why , you know , I think we feel comfortable right now when you look at the growth rates , coupled with that energy order , we'll start to deliver that .

Speaker #5: All our markets are up . You know , I was even looking you know , I think like even this year , you know , we're we're kind of having quite a bit of success this year in EV .

Speaker #5: That's in 25 which you know , which obviously a lot of people aren't . And that's all about very specialized design wins in EV , where we're having , you know , obviously very unique and differentiated products .

Speaker #7: Great. Thank you, guys.

Speaker #3: Your next question comes from the line of Bob Lavik with CJS Securities. Please go ahead.

Speaker #9: Good afternoon. Congratulations! I want to offer my congratulations as well on a strong performance.

Speaker #8: Thanks, Bob. Bob.

Speaker #9: Yeah, so I just wanted to follow up on the kind of specialty film. There's obviously lots of excitement going on in the capacitors.

Speaker #9: You've talked about the energy order coming on next year and then , you know , the other specialty being , I guess I think you said medical and defense and any way you can elaborate on some of the , you know , the products that these are going into or the ability for follow on , you know , orders in the , in , in the , the non-big energy one and how that could progress over time .

Speaker #8: Yeah , I .

Speaker #5: Think I talked about a couple of them that , you know , we've talked about before , but you know , they're growing pretty rapidly and doing well for us .

Speaker #5: But it all, especially film, really focuses around pulse power applications. It's applications where the capacitor is not being used in a traditional sense.

Speaker #5: You know, as a building block of an electronic circuit, it's actually being used to store a significant amount of energy that needs to be released at a very rapid pace in order to power something.

Speaker #5: And we've talked about before about defibs. We've talked about the railgun application. We've talked about more recently. Radiotherapy is a great application for us.

Speaker #5: So there's a lot of applications that are merging that that are coming . I wouldn't , you know , beyond the energy order , which is very unique in terms of the size , we have a lot of unique applications that are coming to market .

Speaker #5: And we continue to be called upon on a weekly and daily basis. We seem to be in a very unique position.

Speaker #5: Bob . Relative to the technology and the capability to deliver the solutions . And of course , it doesn't help to be US based and manufacturing in the US as well .

Speaker #9: Yeah , it sounds like these are new applications solving problems . You know , maybe better than before . You know , in kind of existing markets .

Speaker #9: But taking share from older technologies is that.

Speaker #5: I would say taking share. I would say this is like new applications that didn't exist before, which are requiring a significant amount of power to be delivered in a very rapid period of time in order to power the device.

Speaker #5: You know , I think one of the ones that we alluded to , which is coming , is , is downhole . And that's another application that , you know , quite frankly , we're taking prototype orders for right now .

Speaker #5: But we can see down the road with all the work that we've been doing that these downhole applications where our capacitors would , you be in high heat environments have to be taken downhole in order to be involved in the in fracking and , and cleaning of drill bits ?

Speaker #5: There's a whole bunch of different applications here that we've been working on for like a year or two . And we're in the prototype phase right now , but everything indicates like that one is another application that would require pulse power .

Speaker #9: Got it. Very exciting. And shifting gears, obviously the balance sheet is in good shape. You're buying back stock. If you know about M&A in the past, just give us an update on the M&A environment.

Speaker #9: I don't know if, like, you know, with tariffs it slowed down. Has it, like, reopened up a little bit or what's the opportunity?

Speaker #9: Or are you even focused?

Speaker #5: Yeah we're definitely focused on this . We're definitely focused on this . I just think , you know , where we are today as a company is we have a great organic plan .

Speaker #5: And , you know , I think we want to make sure that if we do a acquisition , it becomes it's very obvious to our analysts , our , our , our shareholders why we did it .

Speaker #5: And so , you know , we're laser focused on on still on acquisitions . But I think , you know , we're in a position now where we're we're trying to be picky and making sure we're going to do something that makes sense .

Speaker #5: And that's really one plus one equals three . I still am hopeful , you know , we'll get something done , you know , over the next year or two .

Speaker #5: But, we want to make sure it's the right thing. I don't know, John, if you have any comments.

Speaker #6: I think that the environment has improved from a quarter ago. You know, there are more assets out there, and interest rate expectations are coming down.

Speaker #6: So again , we've got a good pipeline . But it's difficult to say , you know , when we're going to be able to complete .

Speaker #6: And as Jeff said, we're being disciplined.

Speaker #9: Okay. Super. Thanks very much.

Speaker #3: Your next question comes from the line of Anthony Stoss with Craig-Hallum. Please go ahead.

Speaker #10: Good afternoon guys . John , probably the first question for you . I'm curious if you can share the book to Bill and now and where it was maybe a quarter ago , and then palladium prices are up about 30% in the last 30 days .

Speaker #10: I know this impacted you guys early in 2022. I'm curious, at what price of palladium do you think it would have a negative effect on your gross margins?

Speaker #5: So, I'm going to let John take the Palladium question first, and then I want to just cover the book to Bill.

Speaker #6: Yeah , Tony you're right . The palladium costs have increased . I will say , you know , we're pretty good in terms of we've got prebys .

Speaker #6: We have a pretty good position, at least through the first half of next year, where we're kind of locked in at prices below today's market price.

Speaker #6: If they continue to elevate . I know , you know , you're looking back 12 , 18 months ago , they got over $2,000 a Troy ounce .

Speaker #6: As you mentioned , they're 1500 again . You know , we're we're monitoring this closely . If there are opportunities to pre-buy even beyond the second half of next quarter , you know , sorry , 2026 , we'll do that .

Speaker #6: But I don't see this impacting our gross margins in a negative way at this point.

Speaker #5: I mean , we've had a , you know , kind of a when we went through this once before , obviously , we we were able to raise prices .

Speaker #5: But I think one of the things that we've done is we've kind of fixed the price, as John said, through the middle of next year.

Speaker #5: So we're not subject to like big swings and volatility over a short period of time . And I would also add that , you know , if we get to the back half of next year and and prices remain the same , you know , I think we'll probably be , you know , having discussions with our customers about it .

Speaker #5: I mean, I don't think it's a big deal at this point in the book to bill our book to bill within PD was one for the quarter.

Speaker #5: Now just it's worth a little color here . It was the second largest order quarter in the last four quarters . I think what you're starting to see is , is , you know , quite frankly , that one is the revenue is up significantly .

Speaker #5: And so , you know , it's getting a little bit more difficult to produce those crazy book to bills that we had in the first half .

Speaker #5: But we're starting to deliver on those . But I will say this is we had a very strong again , bookings quarter when I said it's the second largest bookings quarter , we've had in the last 12 months , I would also I , I would also just say that , you know , the backlog is is quite high as well .

Speaker #5: And that's why , you know , we put so many orders in the last three quarters . And again , not even counting the energy order .

Speaker #5: And so I think we feel very comfortable about how bookings are . I did look just yesterday at where the bookings were month to date , and it appears we're having another strong bookings month in , in , in in October .

Speaker #5: So I think the trends continue . It was , as I said in the prepared remarks , it was particularly strong . The bookings in defense and then in our with our distribution partners , we had a well above one on our distribution partners and in the defense market .

Speaker #10: Thanks , Jeff , for that . But if I could sneak in one more for John . You said it's good to hear that the thin film you're making improvements in Q4 on the gross margin side , how much or how many more quarters do you think that'll last ?

Speaker #10: And what kind of impacts is it at now?

Speaker #6: You know, Tony, I mean, in terms of you're talking about the specialty film line specifically.

Speaker #10: Yes .

Speaker #6: I mean , margins . I'll I'll say in , in Q3 , were , you know , we had a great quarter overall , but that was an area of opportunity to improvement .

Speaker #6: Margins were well below the total company and the PD average. As I said, it's really a question of we're adding costs both.

Speaker #6: Fixed overhead. We're incurring higher normal scrap costs. We're seeing, within the quarter, some positive trends within Q3. We saw some positive trends.

Speaker #6: So August was better than July , September was much better than August . So coming out of that , we're kind of trajectory is right .

Speaker #5: But I think the question . Just I think you're not going to really see the full benefit of what we think the gross margin we can get to until probably late Q2 , when the energy order starts to fully ramp , because just remember , what's going on is we're hiring people .

Speaker #5: Equipment is starting to run . You know , we're we're putting overhead in place to deliver this energy order . But we're not actually delivering a lot of units yet or producing a lot of units .

Speaker #5: So, it is impacting gross margin, and that's really not going to go away fully until mid to late Q2.

Speaker #6: But I do again see sequential improvement from Q3 to Q4 in gross margins due to improved output and capacity utilization. Yeah.

Speaker #10: Very good. Thanks, guys.

Speaker #3: Your next question comes from the line of Tristan Guerra with Baird. Please go ahead.

Speaker #11: Hi . Good afternoon . Could you give us a sense of the gross margin leverage on incremental utilization rates . And where utilization rates are currently and also as a follow up to the the prior question , what is the gross margin impact from the ramp in specialty film in Q3 and assuming that it impacts , as you said , disappears by mid next year ?

Speaker #11: Is it kind of a linear decline, or is it more of a decline that happens mostly when you start ramping in Q2 of next year?

Speaker #6: Yeah , a lot of a lot of questions . Unpack there . Tristan , I would say , you know , the first thing with respect to the gross margin utilization and capacity , you really have to look at it on a product line by product line basis .

Speaker #6: You know, we have some product lines that are running close to full capacity within the ceramic capacitor business, and others that we've got some capacity.

Speaker #6: So it's really difficult to kind of go and give you a blanket estimate on what our capacity utilization is.

Speaker #5: But generally speaking , like our drop through on incremental on incremental revenue .

Speaker #6: I would say , you know , if that question is easier to answer on average , again , it depends on product line .

Speaker #6: But overall, you can think of 35% to 40% dropping to the bottom line on every dollar of sales. You know, our variable contract, you can see our gross margin is called 45%.

Speaker #6: Our very variable contribution margin is higher than that . Obviously . And and we don't have a lot of incremental operating expenses . So if I was modeling this yeah , every dollar of sales kind of think of it as that 35 to 40 .

Speaker #6: Obviously, if it's MSA, it's going to be a little higher than that. And certain areas within PD can be a little lower.

Speaker #6: But overall, kind of use that 35 to 40. Maybe, John, you'll.

Speaker #5: Agree . But I think what you're going to see is some linear improvement in Q4 . Q1 . And into Q2 . And when you're going to see probably a bigger jump up in Q3 , once we're fully running the production .

Speaker #5: So, it's going to kind of be linear and then jump up.

Speaker #6: Yeah. The only thing I would say is sometimes Q1 has a little seasonality where in some of.

Speaker #5: What I'm talking about, specialty films specifically.

Speaker #6: Though , especially .

Speaker #5: Especially films specifically .

Speaker #6: You will see a linear improvement.

Speaker #5: , sequential improvement , Q3 , Q4 , Q4 to Q1 , Q1 to Q2 , and then a big jump up as we get into Q3 .

Speaker #6: But in some of our other business , like MSA , typically Q4 is a really good Q3 , Q4 , a good quarters , and then we see a little dip down in Q1 .

Speaker #6: Yeah, okay. That's.

Speaker #5: I think the overall overall theme , Tristan , is this you know , I still think , you know , that , you know , a number of our businesses , specifically , you know , the specialty film product category still has upside gross margin .

Speaker #5: That should be helped . The overall company continue to continue to raise you know , EBITDA margins over time .

Speaker #6: Yeah , I would just last point on this . You know , if we're going to finish somewhere 44 to 45% in 2025 , there is opportunity to go higher in 2026 , really driven by the in the back half of 26 , driven by that ramp up in the specialty film line .

Speaker #11: Okay . That's very useful . And then from a second one , your exposure to distribution and industrial within PD is that still around 40% .

Speaker #11: And and you've mentioned that inventory levels are back to normal . Is that the case for industrial and distribution as well . And you've mentioned , you know , a very nice ramp in industrial .

Speaker #11: So should we assume that even in that segment, inventory levels have normalized? And if not, when do you think that happens?

Speaker #5: I would say , you know , generally speaking , a big portion of what we categorize in our distribution business is industrial . And that business is up .

Speaker #5: Now , here's what I would just say is , is I a little opaque yet to answer the question on industrial growth year over year , because you're taking into account inventory burndown .

Speaker #5: But I can definitely say if you look at the growth in distribution , we're going to have some pretty nice growth in our distribution business .

Speaker #5: And when we see their there POS reports , they're seeing nice growth as well . And a big portion that's industrial . Now again , it's hard to actually say how much industrial is growing .

Speaker #5: But I can tell you, as the inventories are for sure out, we're definitely seeing ordering trends that indicate that orders are lining up with demand, as opposed to us burning down inventory.

Speaker #5: We don't really need that much to order that much from you.

Speaker #11: Great . Thanks again . Very useful .

Speaker #3: There are no further questions at this time . Ladies and gentlemen , this concludes today's call . Thank you all for joining . And you may now disconnect .