Fabrinet (FN) Q1 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Fabrinet First Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. And now I'll turn it over to Paul Kalivas, Chief Administrative Officer and General Counsel. Please begin.

Thank you, operator, and good afternoon, everyone. Thank you for joining us on today's conference call to discuss Fabrinet's financial and operating results for the first quarter of fiscal year 2013, which ended September 28, 2012. With us on the call today are Tom Mitchell, Chief Executive Officer and Chairman of the Board of Directors of Fabrinet; TS Ng, our Chief Financial Officer; and John Marchetti, our Chief Strategy Officer. This call is being webcast and a replay will be available on the Investors section of our website located at investor.fabrinet.com. Please refer to our website for important information, including our earnings press release and our non-GAAP to GAAP reconciliation. I would like to remind you that today's discussion may contain forward-looking statements about growth and revenue opportunities in the markets in which we compete, our future manufacturing capacity at Pinehurst and the revenue we may generate from that facility, and the future financial performance of the company. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from management's current expectations. These statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise them in light of new information or future events, except as required by law. For a description of the risk factors that may affect our results, please refer to our SEC filings, in particular, the section captioned Risk Factors in our Form 10-K filed on August 28, 2012. We will begin the call with brief remarks by Tom, John and TS followed by time for questions. I would now like to turn the call over to Fabrinet's CEO and Chairman, Tom Mitchell.

Thank you, Paul, and good afternoon, everyone. I'm pleased with the results that Fabrinet delivered in the first quarter. Despite the challenging global economy, Fabrinet delivered growth across all of our key financial goals, revenue, gross margin, earnings per share and operating cash flow. We continued to work closely with our new and existing customers to provide world-class manufacturing services to meet current and future production needs. I want to thank our customers for their continued support of Fabrinet. We are encouraged by another strong quarter in optical communications, lasers, sensors and other segments of our business, and we'll aggressively pursue opportunities to further diversify our revenue. In summary, fiscal 2013 is off to a solid start, with our first quarter results setting the stage for a year of profitable growth. I will now turn the call over to John Marchetti, Chief Strategy Officer, for a further perspective of the markets we serve. John?

Thanks, Tom, and thanks, everyone, for joining us today. I'll start with a quick update on our production capacity and then spend a few minutes on our perspective of the markets that we serve. As many of you already know, we ceased production permanently at our Chokchai campus last year as a result of the damage from flooding. April 2012, we completed construction of Pinehurst Building 6, adding 300,000 square feet to our footprint. This facility, which has approximately 180,000 square feet of manufacturing space, is more than sufficient to house production displaced from Chokchai, while leaving us with additional capacity to ramp wins from new and existing customers through fiscal 2013. Today, buildings 3, 4, 5 and 6 represent about 900,000 total square feet, 456,000 of which is manufacturing space. Building 6 continues to fill up, with more than 45% of the available manufacturing space now accounted for, while the entire campus utilization stands at a little more than 70%. We believe our current footprint, once fully occupied, will enable us to generate revenue close to, if not in excess of, $1 billion annually. On a related note, we continue to explore options both inside and outside of Thailand for the location of our next manufacturing facility. We continue to make progress on this initiative and will announce a decision once we have reached a conclusion. Moving to overall demand trends, little has changed from a quarter ago. We continue to see a measure of stability in the orders from the majority of our customers, but have not yet seen signs of any significant increase into calendar year end. Demand in our laser and sensor segment remains solid with some variation by application. The laser market appears to be lumpy with some of the government and research markets slowing, while the data of China remains solidly mixed. However, we continue to believe that the overall laser market is in the early stages of outsourcing, similar to where we were in optical 4 to 5 years ago and believe the move to outsourcing for this customer set should continue. In sensors, we have had several quarters of strong growth from our automotive customers. And we are encouraged that signs point to this continuing. We have won some key accounts in this segment and are excited about the opportunities for growth in the coming quarters. Overall, we remain confident that our laser and sensor segment will be a critical driver of our top line growth for the next several years. In optical communications, demand levels remain relatively stable, but we have not seen an uptick in orders to suggest that overall carrier demand will be above seasonal norms going into calendar year end. We did see some improvement in some of the more advanced components and modules such as tunable XFP, ROADMs and WSS, which is encouraging and we are hopeful that these trends will continue. So demand may still be below where we had hoped it would be back at the beginning of the year, but believe we are well positioned through our customers to benefit from the 100 gig upgrade cycle even as the timing of that cycle remains somewhat unclear. With that, I would now like to turn the call over to TS, our CFO, for a report on the financial results. TS?

Thanks, John. I would like to start with an update on the insurance recovery status, review the results for the first quarter and then end with our outlook for the December quarter. We continue to expect our financial results to be impacted for multiple quarters, due to the timings of approval and payment of insurance proceeds. We have submitted claims for all losses related to equipment, inventory, property and business interruptions for losses incurred through the end of fiscal 2012. In the first quarter, we received a payment of approximately $79,000 in full and final settlement of our claims for damages to the Pinehurst property. And we also received an interim statement toward our business interruption claim in the amount of approximately $4.8 million. These payments represent a first significant proceeds that we have received since starting our claims, and we will continue to aggressively pursue the balance of our claims and will disclose additional information on the timing and payments of our insurance claims as it becomes available. Now to review the result for the first quarter. Please note that all numbers are GAAP, unless stated otherwise. Our total revenue for the first quarter of fiscal 2013 was $158.6 million, an increase of 11% sequentially and a decrease of 15% compared to the first quarter of fiscal 2012. On an end-market basis, revenue from optical communications was $110 million, or 69% of total revenue for the quarter, while lasers, sensors and other revenue was $49 million, the remaining 31%. We are pleased with the continued diversifications of our revenue. This quarter's non-optical communications revenue was among the highest in the company's history. As Tom indicated, we will continue to look for ways to further diversify our revenue base. Our share-based compensation expenses for the quarter were $1.25 million, of which roughly $900,000 was included in SG&A. This compares to share-based compensation of $718,000 last quarter and $1 million in the September quarter last year. The increase was a result of our annual incentive equity grants to eligible staff. Our flood-related items for the quarter was incomes of $4.8 million, which represent an insurance payments of our business interruption claim, as well as the settlement of Pinehurst building claims. These amounts are included in our results as other income and are excluded from our non-GAAP results. We intend to book the gains on insurance proceeds in future periods, as those amount become reasonably certain. Our effective tax rate for the first quarter was 6.1%, including the effect of flood-related insurance recoveries. In the near-term, there may continue to be some fluctuation in our effective tax rate, due to the size and timings of future payments related to insurance recoveries. Excluding those items, we expect our effective tax rate going forward, to be between 5% to 6%. On a non-GAAP basis, net income totaled $12.8 million for the quarter, or $0.36 per share, calculated from a base of roughly 35 million fully diluted share. Non-GAAP net income grew 20% sequentially, compared to non-GAAP net incomes of $10.7 million last quarter and declined 23% compared to non-GAAP net incomes of $16.6 million in the same period last year. On a GAAP basis, including flood-related income and share-base compensation expenses, our net income was $16 million or $0.46 per share. In the near-term, we expect that our GAAP results may continue to fluctuate due to the size and timings of future insurance recoveries. Moving on to the balance sheet and cash flow statement. We ended the quarter with a cash balance of $115 million, flat with the previous quarter. During the quarter, major uses of cash were for PP&E and working capital. I would now like to discuss guidance for next quarter. We expect revenues of between $159 million and $163 million. We anticipate non-GAAP net income of $0.35 to $0.37 per share, based on a fully diluted basis of 35 million shares. We anticipate GAAP net incomes of $0.32 to $0.34, although we know that GAAP net income remains subject to the timings of insurance recovery. That concludes our prepared remarks. At this point, I would like to turn the call over for questions. Operator?

[Operator Instructions] First question is from Troy Jensen of Piper Jaffray.

So I'd just be curious to know, what drove the outperformance this quarter? If you kind of look at the optical competitors, I would assume your optical customers, it seems like guidance has been a little bit shaky and maybe 3 months ago we thought you guys kind of weren't keeping in pace with the optics, and now it seems like you're outperforming. So if you could just touch on what the difference is between you guys' results and kind of what your competitors -- or what your customers are seeing?

Troy, this is TS. If you look at revenue, up $16 million from previous quarter, and I would say maybe a majority of this are flood recovery, as we mentioned in the previous quarter. Now we are having a difficult time to predict when the flood recovery becomes a 100% complete in terms of revenue, but if you look at last quarter the order -- macro economy is down, everybody guided down outperformance mostly comes from the flood recoveries.

Yes, I think, Troy, we've been saying for a little while that we wouldn't be necessarily completely aligned with these customers as we came back and we are waiting for a little bit of catch-up on some of this business and I think, for us, we got even a little bit more than we had previously anticipated coming into this quarter. And I think for us now, if you look at the guidance we're giving for next quarter, I think we're pretty well aligned with where we are with these guys. I think now, pretty much everything we're doing is building directly to the demand levels that the customers are giving us depending on what they're seeing out in the marketplace.

All right, that's fair. How about just a quick follow-up question here in gross margins. Just be curious what you guys are expecting for gross margins next quarter, probably flat to up slightly given the revenue growth, but then more importantly, what revenue level do you guys need now to get back to the 12% to 12.5% gross margin range?

Troy, that's a good observation. If you look at the previous quarter, we talked about, when we get the full capacity on Building 6 and it will be in the range of about $190 million to $200 million. And at that point, we are very comfortable that we will sustain the 12% to 12.5% gross margin. Although we don't guide gross margin on a short-term basis, but looking at the long-term, once the revenue gets up there, we should be there on a gross margin.

Your next question is from Sherri Scribner of Deutsche Bank.

I know that you guys are ramping a number of new customers, and I was curious how much of the revenue upside this quarter was driven by new customer wins?

Yes, Sherri, really very little if at all. In any given quarter we might have a little bit of revenue that comes from some of these new programs. But essentially, we're still not at a point of maturity with those new customers yet where they're really moving the needle in a very meaningful way.

Okay. So mostly it's upside from the recovery, okay. And then just thinking about auto market, which is where you have the sensor exposure. We've heard from a number of other companies that the auto market may be slowing to some extent. Are you concerned about that? Are you seeing that with your end customers, or does it still look pretty healthy to you?

Where we sit today, it certainly still seems pretty healthy to us. I mean, again, the fortunate thing for us is I think we're still in the relatively early stages with a lot of these customers and it took us, quite frankly, a number of years just to get to a point where we're now designed in across multiple product sets with these guys. So I think for us it's more of finally reaching a little bit of critical mass and being able to grow it from here than it is being completely dependent on end market demand. That said, we'll see what the next few quarters look like. But I think, if we sit here today, we still feel pretty comfortable with that business.

Your next question is from Patrick Newton of Stifel, Nicolaus.

First one is for either TS or John. You're starting to see some -- or I guess receive some insurance proceeds. And I guess could you update us on the amount of business interruption insurance that you are still seeking? Any thoughts you have on timing, and then any other proceeds from the insurance front that you'd be willing to discuss or do you expect to come in over the next 12 months or so?

So, Patrick, we have basically filed most of the claims, except we had 3 more months to go on a business interruption. We have a policy. We are entitled to 1 years of losses and so on. So we intend to file the last 3 months for the business interruption, actually, tomorrow. So once that's done, all the claims are filed. As to when the timings of the proceeds, it's hard to tell. Because as you know, insurance companies has been having a hard time paying out all these proceeds, insurance claims from Thailand. So we will continue to work with our foreign sales accountant, loss adjuster and the insurance company agent to get the claim. But as to the timing, very difficult for me to predict here.

Okay. And I guess on the insurance front as far as your annual expenditures for insurance now that we're about a year removed from flooding and memories are perhaps starting to fade. When you come up for your annual renewal -- and I guess we're still a ways from that -- but do you anticipate that you could see a decline in that cost when the renewal is up next year?

Yes. Certainly, we hope that we'll see a decline, but again it's all market-driven. It depends on the capacity out there for the insurance company, how much the capacity to offer. But rest assured that we are actively working to get the next year insurance premium and policy renewed with a lower premium. As you know, we spent a lot of money to protect the facility and those will be counted towards the premium reduction.

Okay. And I guess just one more, if I may, for John. As far as of the sequential uptick in revenue that you're guiding for in 1Q, it sounds like you expect optical to kind of trend back in line with the broader industry has seen. Should we interpret that to mean that on a sequential basis the laser sensors and other portion of your business should see better sequential growth, assuming you're coming at the midpoint?

I mean I don't know that I would say that specifically. I mean, I think, obviously, for us coming off the smaller base that business certainly has the opportunity to grow a little bit faster, at least on a percentage basis, Patrick. But right now, I think we've got an expectation that both of those businesses are flattish to slightly up and then we'll just see as the customer orders sort of shake out through the quarter, where that really winds up.

Our next question is from Subu Subrahmanyan of TheJudaGroup.

I had 2 questions on the pricing and competitive impact of the [indiscernible]. Can you talk about what you've seen in terms of share shifts or your requirement to be [indiscernible] a larger discounts to your customers. Have you seen some of that happen? And then John, you mentioned some numbers on percentage of Building 6 being occupied and [indiscernible] that and talk about what the timeline and motivation for new building is given you still have capacity in your existing buildings.

Sure. I think, if you take a look at the competitive landscape right now, at the very high level not a whole lot has changed. We're still seeing the same competitors out there that we saw pre-flood, the one exception is probably Venture, with the deal that they've made with one of our customers it's still I think somewhat unclear exactly what they'll look like when all of this is said and done, but it is one that I think we're certainly keeping a much closer eye on today than we did 12 months ago. But ultimately, we've not seen a huge, huge change in the competitive landscape. I can certainly say from a pricing standpoint -- pricing is always a challenge with customers and maybe I'll have Tom weigh in here in a second on this, but I don't think the flood necessarily caused any real change in the customer behavior that we had. Certainly not in the way we go about pricing the contracts. All this is still predicated on yields and all the things that we've talked about in the past, about how we set pricing on a quarterly basis with our customers. Tom, I don't know if you want to add anything on either the competitive front, or on the pricing side?

Well, I think that you're exactly -- you hit it right on the head. And that is that the -- from a pricing standpoint, the flood really had no effect on us. It was just business as normal for the pricing. And I think that we've gone through a period of time with our customers that they have totally supported us in every way to recover from the flood situation we had, and we're so close, from a capacity standpoint, we're there, and from a revenue standpoint, we're well on our way to close on them.

And then, Subu, your question on the capacity or the facilities. I think that we're still probably at least 18 if not 24 months away from needing a new facility just based on where we think Building 6 could be in terms of filling up over that time period. Again, we're continuing to explore a few different options. But probably over the next 6 to 9 months, we'll have to nail that down just so we can get a new building up and ready for us within that sort of outside window of 18 to 24 months.

Just to clarify, did you say John, that you didn't think you'd lost any share given any change in your customers, when you spoke to competitors?

Not in a meaningful way. I mean I'm sure there's a little bit that's moved around here and there, but not to the extent that I'm overly concerned about what we're going to look like over the next 12, 18, 24 months, Subu.

Your next question is from Paul Coster of JPMorgan.

I've only got 2. The first one is you've talked about diversifying your customer base product line and also the locations from which you manufacture. To what extent should we be concerned that any of the above might lead to a temporary setback in terms of operating margins, as you kind of market or build into these new markets or geographies?

I don't think there should be a lot of concern there, Paul, to be fair. And I'll have TS comment on this as well. But for us, any new market we enter into or new vertical that we're looking at a, we're going to look for some very similar characteristics to what we're doing now. So I don't see us changing the operational model at all as we look to further diversify and b, and I think probably more importantly, we're trying to stay true as well to the same way we go about pricing contracts with customers we have today having them be customized sort of builds so that the equipment and things like that sort of remains the same in terms of customers providing it and things like that. So while we're certainly keen to diversify the revenue stream, to offer us and our shareholders a little bit more protection from some of the cyclical natures of the customer base, I don't think we are certainly sitting here expecting to change the operational model as we continue to go forward.

When you talk of manufacturing from a new location, is it within Thailand, or is it in a new geography completely?

I mean, we haven't made that determination yet. But within Thailand is certainly one of the locations that we're looking at.

Okay. And then my other question was to what extent can you share with us the percentage of revenue in the lasers and the sensors business that is originating with the auto end market?

I'm sorry, Paul, I didn't understand what you said. I apologize, I didn't hear you...

What percentage of laser and sensor revenue originates with the auto end market?

I think, Paul, in the bank [ph] script, we say about 31% of our revenue is non ops comm, non-telecom.

And is that largely auto?

And typically, we don't break down. We just do it into ops comm and non-ops comm.

And our next question is from Alex Henderson of Needham.

I've been using a cut at following these companies in the optical space based on the portion of their business that's going into the coherent market as opposed to into the legacy 10 gig segments of the market. I was wondering -- I know you don't like to break out segmentation to that level of granularity, but can you give us any way to gauge how to evaluate your participation in that portion of the market, which is the highest growth segment of the market? And what exposure you have to the legacy side?

Yes. I don't think we have the numbers here in front of us, Alex, and I'm not sure that I know, quite frankly, right off the top of my head how much is coherent versus non-coherent. I'd have to go back and actually comb through the customer base and do it by line item for each one of the customers. I think that when we look at where we are with these customers on the tunable XFP side, on the ROADM side, WSS. So some of the -- certainly some of the more critical pieces of those builds, I would say we feel pretty good about where we are with them today. We do have exposure to some of the 10 gig markets to non-coherent stuff and I certainly don't want to pretend that we don't, but I think in general, we're very well positioned with most of these customers for their newer products that they're looking to bring to market over the next 12 to 24 months. So I do think we got very healthy exposure to those end markets. But like I said, I don't have the numbers right here in front of me.

Okay. Second question, if I could, on the pricing side, Oclaro's just held their analysts' call and there's talk about "at the upper end of the pricing band in terms of price pressure and slowing conditions driving pricing down." And I'm wondering 2 things: One, if you saw any change in the linearity of your demand over the course of the quarter and they specifically quoted slowing conditions over the last 4 weeks; and two, whether the increase in pricing pressure that they're experiencing gets passed on to you and then what timeframe might that happen if it does?

Sure. I'll take the first part of that question, Alex, and then I'll let TS talk a little bit more about the pricing stuff. The linearity in the quarter is -- I don't know that we saw anything terribly different over this last quarter than we saw in the previous quarter. Orders were fairly steady for us. We didn't see big, big variations and I think for us, the nice thing was we caught up a little bit, quite frankly, which is why I think we had some of the nice revenue upside as TS alluded to. On the pricing front -- and again TS can get into this in a little bit more detail, I mean all of our customers go through some pretty tough price negotiations with their customers on an annual or semiannual basis. And we talk pricing with our customers every quarter. I don't think that there's been anything recently, just like there wasn't anything back earlier this year with some others, where we've seen a big, big change in the way those conversations go with our customers. TS, I don't know if you have anything to add there.

Yes, I will add a little bit here. Alex, this is TS. If you look at us as a CM, we are the service provider, unlike with our customer, they launch product, they have the new design and [indiscernible] maybe a gross margin from quarter-to-quarter. We are just providing services and most of our pricings are cost driven, we come off from the cost flat model. So we continue to work with the customer to reduce the cost, take the cost out of our process and again obviously we get request for price reductions almost every quarter and it's a routine thing we work with a customer. So we have not only seen a lot of price erosion because we we're able to take some of the cost out of -- from our process.

Our next question is from Ehud Gelblum of Morgan Stanley.

It's Ehud. A couple of questions. First of all, TS, you may have gone through some of this, but I wanted to get -- can you just walk us through all the flood recoveries and insurance payments you've applied for and how much you've received so far. I heard 2 payments you said today, but I'm not sure if you've received some in the past. So I just want to kind of create a ledger of you've applied for these numbers and I think both you and Mark Schwartz have given those numbers in the past, and then how much you've received and how much you expect to receive. I understand you don't know if you're going to receive the expected payments or not. But can you just walk that out and give us a schedule?

Sure. I'd like to. So if you look at our financial, we report the loss due to flood, about $97 million. That is booked into other expenses related to flood. You can see from our P&L. So, so far we booked $97.3 million. Obviously, we claim more than that because some of which are business interruption, which I call them opportunities lost -- you don't book that into the P&L, okay? So we claim more than $97.3 million. Now as to what the insurance company will pay, a lot depends on the policy. Some of the policy is straightforward. There is no contentions on how the way we value our assets, or value our loss. So both are straightforward. Some you have some complications. And also we have customer equipment and inventory entrusted to as, which we have, there is a loss and those need to be valued as to how much claim and how much customer wants. So if you look at in a nutshell here, we booked $97.3 million and we have a huge claim out there, we believe that with all the claims we filed, we should be able to get enough insurance proceeds to pay our customer. So if you look at the balance sheet here, I accrue a $61 million as a potential liability to my customer. And obviously, I have also my own -- own asset, own inventory loss, property loss and so on. So the timing of the insurance proceed is difficult to predict, but rest assured that we continue to work with the insurance company to get the next check.

Is that $61 million part of the $97.3 million, or is it separate?

Yes, the $61 million is part of the $97.3 million. That's correct.

Okay. So $97.3 million is what you booked, meaning your liability to customers, as well as your own loss of inventory and equipment.

That's correct.

And then you applied for more than that. Can you tell us what you've applied for?

We claimed more than because some of which are business interruptions. So...

Correct, but can you tell us what the total you have claimed?

Yes.

Can you tell us what you've claimed for?

We don't normally -- I don't think we disclose that.

How much have you received?

We received 2 checks. One for $79,000 on the Pinehurst property...

Why such a low number?

Why such a small number...

Because Pinehurst really didn't flood. It was Chokchai that flooded. But Pinehurst didn't really flood.

I had property in Pinehurst that was damaged, okay? So in terms of property, the building is not really flooded, yes.

It was just the parking lot and the cars and things like that?

Yes, exactly.

Okay. So and then you received, I think, $4.8 million on the other?

On the business interruption, that's related to the business interruption.

So you could -- you're still -- you've basically gotten $5 million out of the $97 million that you've booked. And you're hoping to get...

Shy of $5 million, right, exactly.

That's helpful that you gave a scope on that. Your new gross margin target of 12%, 12.5%, is about 1 point higher than where you are right now at 11.2%. So should we take that to mean that operating margin basically gets 1 point higher to 7% -- to 8.5% from the 7.5% you just did and kind of that's what we should be modeling going forward when you get to those run rates?

Yes, I mean, we've said for a while, Ehud, that if we can back to the 12%, 12.5%, we should be able to get back to 9% to 9.5% on the operating line. So probably a little bit more expansion there.

Okay. So you can actually get to 9.5%, back to where you were. And do you have a timeframe on when you can get to those -- that revenue run rate and when you do, do you expect it to be that 190 to 200? Do you expect that to be evenly balanced between optical communications and lasers and sensors? Or do you think it's more lasers and sensors that get you there, from this level?

I think from the level we're at right now, it's going to be a little of both to be fair, Ehud. But, I mean, the timing, quite frankly, is going to depend on how quickly the optical market comes back a little bit and quite frankly to make sure that some of the other macro concerns that are out there at least stabilize enough that customers on all aspects of our business feel better about things.

What are your lasers and sensors customers telling you? We sort of know what the optical communications guys are telling us, but your lasers and sensors guys are they impacted more from the macro than anything else? Or are they -- seem to be doing okay?

I mean I think they're absolutely impacted. I mean, the European market, end market -- as an end market, it's still not healthy for, I think, any business segment, never mind whether you're talking comms or somebody else. So they're certainly feeling the impact of that. I think the China market has been somewhat mixed for those guys, especially on the industrial side. And I think like any election year, there is some concerns around budgets and things like that in the government and research market. So I think they are certainly a bit softer than they had hoped to be if you had talked to them 6 months ago.

And finally following up on Mr. Coster's question, I thought was a really good one earlier, can you give us some breakout on sensors and lasers? If it's not automotive can you just maybe list the other verticals and do your best to kind of put them in order, or at least just give us a list of the other major verticals that we should be kind of paying attention to?

To be fair -- right. To be fair in that, Ehud, I mean the 2 biggest pieces of that, by far, are laser and sensor. And laser is larger than sensor. Again, we've never broken it out completely.

But John, that's not end market. I mean, automotive end's market...

The 2 of them essentially make up the whole other segment.

Automotive is part of sensor -- is a vertical of sensor, right?

Correct, it is a piece of that.

Right. So, if we're looking at the end market -- it's a big piece of sensor?

It is a very big piece of sensor, yes.

And can you give us a sense, is sensor 1/3 of the total and laser the other 2/3? So now we can kind of size automotive?

We haven't done that in the past. I'll tell you that, again, I think laser is the biggest piece of that other segment. And the sensor business, which again is primarily automotive, is the second biggest and there's really not too much else in there.

Yes, but you can't -- I mean, maybe next time you can give the breakout...

I'm not giving it to you, Ehud, is what I'm trying to say to you. I'm not going to give you the percentage.

[Operator Instructions] We have a follow-up from Sherri Scribner of Deutsche Bank.

Sherri, are you there?

We'll move to the next question. Next question is -- Sherri, are you still online? I'm showing no further questions in the queue. I would like to turn the call over to management for any closing remarks.

Thank you very much, everybody, for joining us today. We look forward to talking to you over the next few weeks.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Have a wonderful day.