Q2 2019 Earnings Call
Tells a 19th financial results conference call.
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I would now like to turn the conference over to your host Mr., Jeff Jones, Chief Financial Officer, you may begin.
I'm joined today by our President and CEO Luis Mueller.
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There's also a slide presentation in conjunction with todays call that may be accessed through the webcast link I co Hughes website. There's also posted as a PDF <unk> in the Investor Relations section.
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Between now and our next earnings call well be participating in the Jefferies semiconductor hardware summit in Chicago on Tuesday August 27th.
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Now to the Safe Harbor.
During today's call, we will make forward looking statements, reflecting managements current expectations concerning co use future business.
These statements are based on current information that we have assessed but which by its nature is subject to rapid and even abrupt changes.
We encourage you to review the forward looking statement section of the slide presentation and the earnings release as well as Cohus filings with the Securities and Exchange Commission.
Including the most recently filed Form 10-K and Form 10-Q .
Our comments speak only as of today August five 2019.
Cohu assumes no obligation to update these statements for developments occurring after this call.
Finally during this call we will discuss certain non-GAAP financial measures. Please refer to our earnings release and slide presentation for reconciliations to the most comparable GAAP measures.
Now I'd like to turn the call over to Luis Mueller, Co. Hughes, President and CEO .
Good afternoon.
Today I plan on discussing second quarter dynamics sic code or you and sharing our perspective on the current business environment.
Jeff will then cover the detailed financial results in Q3 guidance.
Our internal measure of tests, our utilization, which started improving in late first quarter supporting an initial recovery in the mobility market.
Dropped three points in May and June to 77% at the end of the quarter.
Second quarter orders were 42% systems and 58% recurring.
With the mix continuing to indicate soft business conditions in the near term.
Second quarter sales of 150 million, we're at the low end of guidance due to the impact of export restrictions to walk away on our customers and continued softness in mobility.
Although our direct business grew high silicon well way affiliated company is less than 2% of annual sales.
Some of our U.S. customers that are part of the hallway supply chain abruptly lowered their forecast after mid may when the export restrictions were imposed.
In parallel well, we announced the sharp reduction in smartphone unit sales forecast for the second half of this year.
It is unclear whether this is a direct consequence of the export restrictions are more of a reflection of lower GDP growth in the region and globally.
The compounded effect was a late quarter reduction in RF and flat panel display driver tester sales with some business pivoting to subcontractors in China and other customers pushing out the forecasts true later quarters.
Mobility was still our largest segment comprising 29% of system orders.
We received and shipped a volume order for thermal handlers does T. Mobile processors also third handlers in testers for RF devices.
Still in mobility, we recently qualified and sold multiple units of a next generation vision inspection platform featuring extended process integration capabilities that include infrared and Microscale defect detection.
Although the automotive semiconductor market remains weak.
We continue to benefit from the sale of thermal handlers and testers for the production of power management IC.
Well, our customers' forecasts are muted in the near term the fundamentals remain strong for increasing vehicle electrification rofin automotive Adas industrial automation and Moreover, the deployment of Fiveg communications that will have a significant positive impact on these markets.
On this last point.
The highlight of the second quarter was the initial shipment of a complete solution for testing next generation RF devices used in a global satellite network.
Got you is delivering the value of cross functional expertise for complex applications that supports customers needs for rapid volume ramps.
We forecast some business in the second half of this year and rampion volume in 2020, not only in satellites, but also with the higher volume units for the ground infrastructure.
Our testers are deployed in volume for Fourg, RF power amplifiers and being utilized for initial project production of Fiveg devices coming out a new mobile products.
Customers, who require a test solution optimized for high performance RF see the value in core Hughes unique differentiation that enables them to upgrade our large installed base of RF testers to five year requirements, well integrating our high performance contactors to ensure signal fidelity across the device interface.
Got you is well positioned to maintain leadership in RF power amplifier test, we see early production sales this year and expect Fiveg volume to grow substantially as he transitions from infrastructure build to the production ramp of mobile products starting in the second half of 2020.
Our PCB test business continues to see strong demand from customers in China, supporting server network equipment, and telecommunications applications and soft conditions across automotive and industrial customers mainly in Europe .
We made good progress integrating recently acquired et cetera.
Reaching an agreement with the local works Council should downsize and consolidate the handler operation with the coffee business in Germany.
Completing the transfer or handler manufacturing to our Malaysia factory and on track to finalize the transition of Contactors and device kits to our Philippines operation This quarter.
You know delivering 17 million of annualized run rate cost synergies in the second quarter and on track to exit this year at approximately 40 million.
In light of the soft market environment for semiconductor volume manufacturing, we're taking additional actions to reduce expenses and improve profitability, while maintaining critical investments that will drive growth in our test contactor and equipment businesses.
With that I remain optimistic about our future that we're well positioned to capitalize on the fiveg opportunity as it transitions from early device characterization the infrastructure build to high volume products. Additionally, we will continue to enjoy strong business in automotive and industrial markets when our customers resume their growth.
Now I would like to turn it over to Jeff to review, our second quarter results and provide third quarter guidance.
Okay. Thanks, Louise I'll start by reviewing our Q2 results, which delivered revenue at the low end of our guidance, but with non-GAAP profitability higher than anticipated.
Supporting the strength of our financial model, including the realization of acquisition related cost synergies.
I will also review our progress in accelerating our planned synergies from the acquisition of Xcerra and comment on our business model for 2020, and beyond which includes estimated non-GAAP EPS amounts at different revenue levels. Finally ill provide our third quarter guidance.
Please also note that my comments that follow all refer to non-GAAP figures for GAAP to non-GAAP reconciliations and disclosures see the accompanying earnings release and Investor presentation.
For Q2, the GAAP to non-GAAP adjustments include approximately 3.7 million of stock based compensation expense.
GAAP to non-GAAP adjustments, primarily driven by the Xcerra acquisition include $10 million of purchased intangible amortization expense $1.3 million of property plant equipment step up costs.
And $7.3 million of restructuring costs.
The Q2 net cash impact of these items is approximately 2 million related primarily to employee severance.
Q2 revenue of $150 million was at the low end of our range and impacted by the export restrictions to well weigh on our customers and continued softness in mobility.
One customer and data center cloud in AI accounted for 12% of sales in Q2, no other customer accounted for 10% or more sales in the quarter.
In Q2, we generated gross margin of 41.3%, which is a 130 basis points higher than guidance due to a better than expected contribution from recurring revenue.
Operating expenses came in lower than forecast as a result, a tight control on labor costs and discretionary spending.
During the quarter, we realized approximately $4.3 million of acquisition cost synergies, which is in line with the forecast.
In the second quarter, we generated non-GAAP operating income of 8.9 million or approximately 6% of sales.
After interest expense foreign currency loss of about 500000 and the tax provision.
Carl you had non-GAAP EPS of two cents.
Adjusted EBITDA in the quarter was $11.8 million or 7.9% of sales.
As I stated on our prior earnings call. The effective tax rate is not meaningful at pre tax levels near breakeven as a reminder, most of co Hughes operations and related profits are generated and taxed outside of the U.S.
Additionally, when the U.S. operation generates a loss as it did in Q2, there is no tax benefits offset the foreign tax expense because of our deferred tax asset valuation allowance.
As a result in Q2, we recorded tax expense on for profits without any benefit from the U.S. loss, resulting in a high and not meaningful effective tax rate.
Now turning to cost synergies and our business model.
As announced on our Q1 earnings call. We've taken action that results in pulling forward approximately 20 million of cost synergies into 2019.
Ahead of the original target of three to five years.
The result is that by the end of this calendar year, we expect to deliver 40 million in annual run rate cost synergies that will favorably impact the business model going into 2020.
The annual cost synergy split is approximately $20 million in cost of goods sold and 20 million in operating expense savings.
Our business model is inclusive of the impact of the 40 million cost synergies.
That we expect to achieve when exiting this calendar year and provides anticipated profitability, including estimated non-GAAP EPS at various revenue levels.
As a point of reference the pro forma 2018 revenue.
For Cohu combined with Exxaro was approximately $778 million.
Or about a 194 million per quarter.
The business model shows opportunity for strong profit and cash generation at this level.
Once all synergy savings are in place.
Our long term capital allocation strategy continues to be use excess cash to pay down the debt of 356 million and de lever the company subject to business conditions and the cash required to achieve the synergies and support an eventual business ramp for the balance of 2019, we are projecting cash payments of approximately 13 million in order to achieve the targeted synergies.
During Q2 co. He used approximately $9.5 million of cash from operations and our cash balance was approximately 144 at the end of the quarter.
Go use board of directors approved a quarterly cash dividend of six cents per share payable on October 18th 2019 to shareholders of record on August 20, Threerd 2019.
For third quarter 2019 guidance, we're expecting sales to be approximately a 143 million.
Revenue distribution is expected to be 92% semiconductor test and expect and inspection.
An 8% PCB test.
Gross margin is expected to be approximately 41% operating expenses are expected to be approximately 51 million.
Cost synergies of approximately 7 million or about 28 million on an annualized basis are included in the Q3 guidance.
We're also taking measures in addition to the acquisition cost synergies to further reduce operating expenses with a forecasted Q3 benefit of approximately 1 million.
We expect adjusted EBITDA in the third quarter to be approximately 8%.
We're projecting the Q3 non-GAAP tax provision to be similar in total to the nod to the Q2 non-GAAP amount.
For modeling purposes, we expect a normalized effective tax rate of approximately 22% on revenue of 170 million or more and profits in line with the business model.
The diluted share count for Q3 is expected to be approximately 41.7 million shares.
And that concludes our prepared remarks, and now we'll open the call to questions.
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Your first question comes from the line of Brian Chin from Stifel. Your line is now open.
Hi, good afternoon, thanks for letting us ask a few questions.
Maybe first question just to focus a little bit honing in on the near term a little bit and your Q3 outlook on your guidance sales down.
A little bit sequential kind of curious looking at your your order trends by end markets. The system bookings they were not strong overall in Q2, but I think the mobility orders, maybe were a little bit better than I would've thought maybe data center aiotv, a little bit softer so.
Just curious maybe from a market perspective, where are you seeing more weakness quarter to quarter into the third quarter in terms of your revenue outlook.
Hi, Brian This is Louise.
Just one point here on the.
Slide that talks about Q2 and markets that is system only orders.
As we have mentioned in the past, we do have a strong recurring business on datacenter cloud in AI. So from a systems perspective, you're right, maybe a little weaker than you would expect but it is still a strong recurring business for us.
On a quarter to quarter basis mobility is the one that we expected.
You have taken a stronger and.
For various reasons I think that we talk here during the call.
Well in particular, we created created sort of a drop.
Quarter on quarter automotive continues to be a soft.
The automotive market continues to be soft and so those the industrial.
Pretty much also weighing negatively on the third quarter guidance.
Okay. Thanks for the color Luis maybe.
Perhaps Jeff here, but.
Talking about seasonality and sort of when you expect to be fully in your cost model.
Yeah. This year is more fluid the most probably but we think about normal if you want to call that weaker seasonality, which tends to kind of hit late in the calendar year into early next year.
Do you have first any way of calibrating, what the impact of this could be on your business as we move into the December and March quarters and secondly.
In terms of where you think your EPS and EBITDA breakeven levels from a revenue standpoint might be.
Starting in the March quarter.
Brian Your last part of that starting in March of next year is that where you are.
Yes, just when you're when you're when you have the full realization of the cost synergies.
I think what were at what revenue level do you think you breakeven on an EPS basis and also from the EBITDA basis.
Right.
So let me just I'll just start with that.
Breakeven once all synergies are included in the PNM will be down about 125 million.
At that revenue level with.
Gross margin in a 40% to 43% 42% range.
Now what are your other question with regards to seasonality and how that's impacting perhaps Q3 and Q4.
I mean, that's tough to say right. We've given guidance for Q3, we see it at about 143 million.
You're right.
The Q4 would tend to be a little weaker.
Q1, as well until we get past Chinese new year. So I mean at this point we're expecting.
We're expecting that to hold as it has.
In the past this is a very difficult year to talk about seasonality, especially with so much changing on a macro level and impacting.
In fracking the semiconductor supply chain.
Yeah. That's fair maybe one last question is to walk this out a little bit further.
I was curious if we think about test contactor market as sort of a 650 700 million ish market yet growing.
Can you remind us how large the RF portion of the market is today, perhaps how large it could be several years from now, especially as the millimeter wave era is ushered in and then maybe Luis and even if you want to find out little bit brought broader because you did talk about sort of these full.
Test cell solutions, so maybe that sort of.
Obviously, a larger dollar opportunity for you. So you is you want to expand upon that more thanks.
Sure.
Yes, Brian so the.
No bundle actually both the RF and the precision analog which is kind of the high performance signal.
Part of the contactor market is on at about $90 million to $100 million a year.
To broaden up a little bit since you asked we have had a record.
Quarter for sale of high performance RF contact during Q1, I announced that a quarter ago and that was mostly for.
Engineering lab characterization or new IC products now we have had follow on orders for that in Q2 for initial device production in one more customer that we got design in for characterization, but all we know.
We expect.
Volume sales for RF Contactors to really take off with when Fiveg takes off in mobile devices, which is really not project that into second half of <unk>.
2020, now outside of the RF market.
We also gained some really good traction with the key to pins key to be in the pin business. We acquired in Japan, beginning of 2017. So the implementation of key depends in our Contactors and as I mentioned before we we try to track is what's the attachment rate of our Contactors and our install base of handlers.
A little bit more difficult now in a down cycle market. Because obviously there are fewer equipment is getting out the door, but we're estimating were at about a 33% approximately a 33% attachment rate of Contactors sure handlers in with that the opportunity is to get it up to about 100%, which does create a.
Approximately $175 million incremental revenue opportunity that we we want to capture over the next five years.
All right. Thank you.
Thank you next question.
Comes from the line of Tom Defelice from D.A. Davidson Your line is now.
Yes. Good afternoon first question is on the additional cost cutting measures you've taken a post last quarter, you announced you're going to pull in all 40 million to this year or is that just a discretionary spending over the next couple of quarters that you've slowed down on are there additions to that 40 million that so that would entail.
No its aside from the 40 million Tom.
It has to do with labor, particularly sort of delaying replacement of particular positions.
As well as the discretionary spending that you mentioned things like travel and so forth.
Okay and so.
I guess big picture that you view those more as delayed spending then as opposed to long term spending cuts that would create a new model.
Yeah at this point at this point, they're not in the models are not long term they are temporary.
Until business conditions improve.
Okay that makes sense.
Alright, and then I'm looking at your two bigger markets the automotive in handsets or mobility what.
And if you get a crystal ball, which of those do you think is poised to recover quicker.
Or is there any kind of difference you can point to between the two end markets as far as relative strength.
Well that I phone. This is Louise that's a perfect Crystal ball question to answer.
[laughter] you, we both know here that.
Auto is auto is weaker right now.
And it is our six it is our largest business right I mean coal Hughes exposure to combination of auto and industrial market, then that should be the largest segments for you historically predominantly for handler sales right.
In automotive is down about 30% year over year right now and this comes with a decline in vehicle sales at the largest in the larger markets right there will be the U.S.
Europe in China.
Now in the midst of all of this and as I mentioned in the prepared remarks here, we do see.
Still activity for power management semiconductors that really aligns more so with electrification of vehicles.
We are also.
Have seen progress on for thermal handlers testing aid das automated driver assist.
Processors and these are processors that dissipate energy during test. So overall, we're pretty well aligned on the electrification aid to ask but we need volume of automotives growing so that it compounds on top of the.
Greater adoption of semiconductors, like I said electrification and aid asking particularly on the mobile side.
I really think much of the mobile is going to be tied in right now waiting for Fiveg deployment.
Fiveg is deploying right now for.
Telecom networks, so it's essentially the starting part of the infrastructure build.
Most of the semiconductors in this today.
Our.
Digital with some RF, our high end digital which is not exactly where cohu testers are aligned to.
And then down the road will come.
The majority of the mobility or or smartphones. If you will that's going to drive a large content of RF power amplifiers, we believe that's going to happen starting in the second half of 2020 based on.
All the predictions and forecast we're seeing from our customers now naturally there will be some early volumes ahead of that but really volume was going to start second half of 2020 and will go on for a few years before it.
Surpasses smartphones with Fourg fourg capability.
Now you put it all together and we just say which market comes first I don't know I think I think the Fiveg has a more well defined path right. Now then the automotive but that could change quickly.
Okay.
Make sense.
Maybe switching gears a it's been six months now since the acquisitions been finalized just wonder if you've got any success stories on the contactor business you can talk to perhaps you didnt for future growth.
Yes, we have quite a few actually.
Tom we had.
We have both a lot of traction getting the key to pins that I was answering the prior question the key to pins in our Contactors. These are in our digital mixed signal contactors.
That has been gaining.
Quite a bit of quite a bit of volume.
We had really a great quarter in Q1.
Deploying was sort of a record quarter for our millimeter wave contactor called the next wave.
For for high end RF applications as I said before this is this was early early launch of the product characterization labs.
Now, it's going through the work and expecting to see volume.
Towards the end of the year beginning of next year as Fiveg starts rolling out.
And.
One of the big highlights of second quarter.
Was winning.
We need an application, where we are selling the tester. The contactor and then we're able to pull in the handler as well for this.
Satellite network and right. There you can see the tester in the context are really sort of the the pair that solves the signal fidelity all the way to the device under test and we're seeing more and more of those cases, particularly with Fiveg. The early stages of Fiveg right now like I said, it's not really volume production, but early stage of the fiveg the contact or in the test or are critical to ensuring signal performance.
Okay. So it sounds like you're still comfortable with.
The potential growth and Contactors over the next few years.
Yes.
Okay, and finally, you talked about how walk away or high silicon was less than 2% of your business, but do you have a number for us that describes it through your customers as a customer wallet what your indirect exposure is to the wall waste.
We're still working.
We have more of the direct exposure than the indirect exposure. So we have less than 2% of our business is direct sales to hallway or its affiliated companies right, but as you pointed out and nevertheless, we do have several of our tests are customers in the mobility market that supply chain hallway, it's hard to triangulate. What's the exposure is on the indirect side right and this is really impacting.
Not only the RF power amplifier business for us, but also the display driver.
Customers because.
From one side you can talk about the export restrictions and the other side you talked about most importantly, I think is the decline.
In forecast, we've always forecasted smartphone sales in the second half of the year and the net net of this is that we're seeing a push out in both RF and display driver IC frankly, we quantified it to the tune of about $5 million in the second quarter.
Okay.
Great. Thanks for your time today.
Thank you.
Thank you next question come from the line of Craig Ellis from B. Riley.
You May now ask your question.
Yes. Thanks for taking the question just to follow up on a couple of items Luis nice to see some successes with with contactor attach and getting key to Pinsent Coahuila solutions My question for the.
For the opportunity to drive higher attach rates that 175 million dollar opportunity from from what you can see today and how much of that gap do you think you could close in 2020 in 2021, what's the slope of the trajectory that it looks like we're on here.
We're looking at Hi, Craig we're looking at.
Sort of a mid teen growth rate.
That's our plan right now a mid teen growth rate and the contactor business over the next few years.
And so that includes both your share gain in just the natural sales that would come out of that recurring part of the business.
That's right that's right.
Okay.
And then I wanted to go back to one of the.
One of the wins that you had talked about you talked about RF test for global satellite network and it sounded like that was pretty material can you scope put the financial opportunity for that when would be for next year.
Yeah, well first of all we started shipping that in late Q2. So it was not really a Q2 material for that matter and the expectation is this is this could generate.
Color on the order of $15 million or so next year.
Im sorry, one five.
One five correct yeah, great. Thank you and then.
Just a couple of more items, we've obviously seen a number of things change geopolitically just within the last week.
Just so we all understand how the company is approaching guidance given given the abrupt change in in.
Tariff tone, if you will.
Since late last week, how does the company incorporate that into guidance what does that what does that mean for the guidance that we see today for the third quarter.
Yes, Craig Jeff here.
So our visibility isn't isn't fantastic doesn't go out more than about three months and so we base it on.
We base, our our forecast as we always do on backlog was scheduled to ship and then in the in the near term.
The the orders that we expect to book and Bill in the quarter based on immediate feedback from the customer and so.
We do have a lot of noise.
Within the geopolitical landscape as you noted.
However, our approach is similar and just try to get as as close to the customer as possible to get the best information. Most recent information customers. As you know have shortened lead times. They wait till the last minute to ensure that they have.
Demand for the equipment.
So.
That's how we've we've approached it and certainly the numbers have been impacted from it.
A 140 threes.
It was.
Lower than I think any of us would have expected two or three quarters ago.
So it's definitely impacted and that's really the process. We go through is to stay as close to the customer as possible.
Thanks for that and then my last question is a follow up on something that I think Tom touched on so in the end market split the split shows 23% automotive and 29% mobility and there is no question that.
That there's a year on your unit growth headwind in both of those businesses, but underneath that in both cases and I think as you mentioned well Luis Theres. Some technology transitions are secular drivers that are favorable. The question is in areas like automotive where there. There's work that has stronger growth in things like eight mastery be can you distinguish.
In your order book, when a customers ordering for that type of application versus more of a legacy application.
And if so is it possible to aggregate how significant the businesses are across those two end markets right now that that are related to secular drivers whether it be fiveg or.
Or eight ask anything.
Yeah, we actually can segregate we have seen over the last six months.
When automotive has been weak.
That the majority, yes, I guess you could say the majority of the orders have been easy related or power management IC fees for easier for potentially hybrid, but certainly power management IC and.
Not as much a das over the last six months is more of a forecast that eight ounces coming up alive in the coming quarters, and so we see a lot of activity.
Both both from an evaluation of new devices and our handlers.
As well as forecasting that have more adas related here for like I said for the balance of this year. So yes, we can see them, we can see them both.
Okay Thats helpful and then perhaps last from me.
You mentioned it.
Fiveg a number of times.
As we look at the early part of this next air interface transition and if we were to compare it to Fourg and Threeg co Q from what you can see now how significant could five GB BCP those two other.
Air interface transitions that we've been through.
So let me I'll talk about the Fiveg, but remember the fiveg exposure for us come in the form of the Excelsior acquisition more so than.
Sort of former coal you have exposure to threeg or Fourg right I mean, fiveg today for US is really aligned with testing of RF power amplifiers, which are the xcerra testers and this is where.
Those products the Sarah testers to acquire started the leader in this approximately $60 million segment of the market Okay.
These RF amplifiers are really used in greater quantities in smartphones and to a lesser degree in the network infrastructure, which is where fiveg cycle is today really working on networks right. So we don't really have testers that are suited for.
Network crises, which required.
Greater digital smaller RF test content on the other hand.
We do have the largest installed base today and we believe the most economical solution for testing.
Focused RF semiconductors that are that are using these will be deployed in these new fiveg phones.
So.
When these things are come out I mean, they're still in low volume.
We do know that some of these phones from from published tear downs that they're using devices that have run.
Or the Fiveg amplifiers have been tested on arc testers and is these these initial fiveg phones are still sort of in that sub six gigahertz frequency with a roadmap of developing millimeter frequencies over.
Over the next few quarters actually coming out soon.
Now put it all together in terms of significance, we do believe that the.
The market size, the $60 million market that we're talking about for RF PA days RF power amplifiers is bound to grow about 40% to 50%.
When fiveg phones.
Our produced in volume, which again won't happen.
This year they should start ramping.
On the second half of next year, and then into 2021 and so on right. It will take a couple of years for that volume to surpass.
Fourg smartphones out there, but the opportunity is there and I think it is going to drive not only in the test or sales, but it is going to drive.
Quite a bit of context or sales in this case is more of an attachment rate to testers into handlers per se.
That's real helpful. Thanks Louise.
Thank you next question coming from the line of David Lee from Steelhead Securities. Your line is now open.
Yes, just one clarification I think Luis you mentioned the size of the Wawa impact or the estimated size the impact in the quarter just reported could you repeat that again.
Hi, Yes, Dave I mentioned that we triangulated the both the direct and indirect in the indirect being harder one should just frankly here impact of walkaway on our Q2 sales too.
Been about $5 million, so a five out of $5 million, the Cline and what we would otherwise have expected in future.
Okay.
And.
In your presentation you have all these different revenue levels and the the metrics for your business at each different revenue level and you also mentioned I think that the you know the 2018 quarterly run rate was like a 195 million a quarter or so is there any reason to think that you can't get back to that level of revenue.
When the markets recover has there been any share losses or anything that might impact the business getting back to those.
Quarterly run rate.
No there hasn't been any any customer changes over the last six nine months other than.
Some traction that we gain in the contactor front.
You know as I mentioned, the RF contacts or the next wave, where we had a record quarter in Q1.
The integration of key depends in our contact us for digital mixed signal applications, but from a from an equipment side.
Really hasn't been no no change in the market.
Okay.
And you.
I think that there was a couple of programs that you initially expected to be strong in the second half of this calendar year and I think one or two of them were pushed into next year.
Could you just give us an update about.
Those programs and and what you expect now.
Sure Yeah, starting with the positive one actually was the satellite communication business that I just mentioned.
That was a there was a program that we've been working on since the acquisition and it's finally, starting to bear fruits here.
Which the initial ship in late second quarter into third quarter.
The other two programs head should do one with.
With Fiveg RF for Fiveg, which you've really got.
Got pushed out since the mid May.
The new export restrictions on Wawa in mid May that actually change the dynamics a little bit.
And the third one was.
Penetration in the flat panel display market, which will be doing actually this is one of the from an execution perspective, we're doing really well, but a decline in.
Forecast for smartphones in the second half of the year is really impacting demand in was ines such the projection that we would see.
Increasing revenues here starting in the third quarter that also got pushed out.
And on the flat panel display you're referring to you've picked up for the customers that they just stopped buying.
Right. That's right. Okay. Thank you that was all my questions.
Alright, Thanks, David.
Thank you I am showing no further questions at this time I would like to turn the conference back to our speakers.
Okay. Thank you for joining us on todays call and we look forward to speaking with you soon.
Thank you ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful the you may all disconnect.