Sanmina Corporation (SANM) Q2 2013 Earnings Report, Transcript and Summary

Good afternoon. My name is Candace, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sanmina Second Quarter Fiscal Year 2013 Earnings Conference Call. [Operator Instructions] Ms. Paige Bombino, Director of Investor Relations, you may begin your conference.

Thank you, Candace. Good afternoon, ladies and gentlemen, and welcome to Sanmina's Second Quarter Fiscal 2013 Earnings Call. A copy of today's release is available on our website in the Investor Relations section. You can follow along with our prepared remarks in the slides posted on our website. Please turn to Page 2, the Safe Harbor statement. During this conference call, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We caution you that such statements are just projections. The company's actual results of operation may differ significantly as a result of various factors, including the state of the global economy, economic conditions in the electronics industry, changes in customer requirements and sales volume, competition and technological change. We refer you to our quarterly and annual reports filed with the Securities and Exchange Commission. These documents contain risk factors that could cause actual results to differ materially from our projections or forward-looking statements. You'll note in our press release and slides issued today that we are providing you with the statement of operations for the 3 months and 6 months ended March 30, 2013, on a GAAP basis, as well as certain non-GAAP financial information. A reconciliation between the GAAP and non-GAAP financial information is available and provided in our press release and slides posted on the website. In general, our non-GAAP information excludes restructuring costs, acquisition, integration costs, noncash stock-based compensation expense, amortization expense and other infrequent or unusual items to the extent material. Any comments we make on this call, as they relate to the income statement measures, will be directed at our non-GAAP financial results. Accordingly, unless otherwise stated in this conference call, when we refer to our gross profit, gross margin, operating income, operating margin, taxes, net income and earnings per share, we are referring to our non-GAAP information. I would now like to turn the call over to Jure Sola, Chairman and Chief Executive Officer.

Thanks, Paige. Good afternoon, ladies and gentlemen. Welcome. Thank you all for being here with us today. With me on this conference call is Bob Eulau, our CFO.

Hello, everyone.

On agenda, we have that Bob will review our financial results for the second quarter, then I will follow-up with comments relative to Sanmina-SCI results and future goals. Then Bob and I will open for question and answers. And now, I'll turn this call over to Bob. Bob?

Thanks, Jure. Please turn to Slide 3. As we expected, the second quarter was challenging from a revenue and an earnings per share perspective, the cash generation was excellent again. Revenue of $1.43 billion was down 4.5% on a sequential basis and down 2.4% from the second quarter last year. Non-GAAP EPS was $0.30. This was based on 84.7 million shares outstanding on a fully diluted basis. Cash generation was outstanding this quarter with cash flow from operations at $65 million and free cash flow at $69 million. I'll discuss cash in more detail in a few minutes. Please turn to Slide 4. Revenue was down 4.5% or $67 million from Q1 to $1,428,000,000. From a GAAP perspective, we reported net income of approximately $21 million, which results in earnings per share of $0.25. Restructuring charges for the quarter were $6.9 million. The restructuring is moving forward on the 2 facilities that we mentioned last year. We have finished production in both facilities as of the end of the second quarter. We are expecting restructuring of $4 million to $6 million in the third quarter. My remaining comments will focus on the non-GAAP financials for the second quarter. At $102 million, gross profit was up $600,000 from the prior quarter. Gross margin was 7.1%, which was 30 basis points above the previous quarter. Operating expenses were up $2 million for the quarter at $61.9 million. This represents a 30 basis point increase in operating expenses as a percent of revenue. The increase was primarily related to increased spending in sales and engineering. At $40 million, operating income decreased by 3.4% from the prior quarter. Operating margin was 2.8%, which was the same as last quarter. Other income and expense was at $10.2 million. The tax rate for the quarter was…

Thanks, Bob. Ladies and gentlemen, I will also review business environment for second quarter, talk about short-term business environment, mainly what's going in our June quarter, then I'll talk to you about outlook for the third quarter and the rest of the calendar year 2013. So let me recap second quarter. Our second quarter results were in line with our expectations, as Bob mentioned. But in this macroeconomic environment, it was challenging for some of our key customers and forecasting demand during the quarter was also challenging for us. But we also accomplished a lot of good things during the quarter, working with our customers in new opportunities and positioning for the future as these new projects are coming to the market. Overall, a respectable quarter to continue to build on. Now please turn to Slide 12. Now let me talk to you about the second quarter revenue by end markets. First, top 10 customers were 50.3% of our revenue. We had one customer at 10% plus of our revenue. Now let me make a few comments what happened during the quarter on market segments groups. If you look at communication networks, beginning of the quarter, we did tell you that overall communication networks is going to be down for a quarter. Actually, we came up by 0.05%. Demand during the quarter did stabilize with a nice growth from our new projects. Computing and storage segment, we did forecast to be down. That came down 15.8%, more than we forecasted internally. We basically had a weaker demand across whole market segment. Defense, industrial and medical, we did forecast to be up. Actually, they came in 2.9% growth. Defense and medical was basically, what I would say, roughly flat. Industrial segment was up. That's what basically drove the growth in this…

[Operator Instructions] And your first question comes from Sean Hannan with Needham & Company. Sean K.F. Hannan - Needham & Company, LLC, Research Division: I was looking to see if, perhaps, Jure or Bob, if you want to chime in as well, if you could elaborate a little bit around what gives you the confidence of those second half ramps. Is it the nature of the product and markets that where you're getting some better forecast from your customers? Is this the nature of really, the incremental ramps that are coming in here? And are there any markets that really stand out in your mind that should drive some of that better performance as we move forward?

Yes, Sean, let me make additional comments. I just talked about outlook that we have by market segments. Communication networks, as you know, is approximately 50% of our revenue in last quarter and probably going to be very similar percentage this coming quarter. We see a lot more positive forecast there, especially in the networking side and wireless side of infrastructure. As you know, that business, for us, was kind of slow in last couple of quarters. We see a lot more action there. Also, some of the new programs that we had there, we won during the year. As I mentioned, even in the last quarter, we saw some positive upside and that continues to be more positive in the third quarter. And I expect this segment to continue to improve for the rest of the calendar year. Enterprise and computing, again, that's been a disappointment for us, especially last quarter. We expect -- we knew it was going to be down, we expected to be a little bit better than what it was. But overall, if you really analyze that customer by customer and projects by projects, we basically had a weaker demand across most of these programs. As we look for third quarter, we see more positive forecast there. And I believe that based on the projects that we are working on, most of these are new opportunities that we expect also that segment to improve. On our other -- third segment, defense, industrial, medical, as I mentioned in my prepared statement, industrial did a little bit better than what we expected the last quarter. Defense, we had some programs that got pushed out. Hopefully, those programs will come in this quarter and continue, at least, in a stronger level to the rest of the year than what we saw in the second quarter. Medical, medical for us, we have a lot of activities in medical. I think we won during the year some good programs, and just getting these programs moving and starting shipments is a little bit behind. But as we look the rest of the year, we also see some upside there. So my summary, Sean, is -- and also, the multimedia -- typically, seasonally for us, second quarter is the weaker quarter. I think they're starting to stabilize there and we expect that to see some improvement. So overall, we are more positive with what we have in front of us, and I think the new programs also should help us drive the growth definitely in this quarter, but also rest of the calendar year. Bob?

Yes, I don't have a lot to add. I mean, I agree with Jure. I mean, so much of the company is driven by communications, and it looks promising for the rest of the year based on what we're getting in terms of forecast from our customers. And the other area that looks pretty promising for us is industrial, getting a lot of good indications from customers there as well. Sean K.F. Hannan - Needham & Company, LLC, Research Division: That's great, okay. And then second question, when you look at the new program win environment, how would you characterize the environment today? Do you feel the wins that you had in the quarter ago or even a year ago were kind of similar dollar levels in terms of what you secured? Or in other words, we saw some acceleration, I think, for a number of periods through '12 that occurred in your business. I'm trying to understand whether that acceleration continued for you or has it normalized a little bit more in the near term?

Yes, Sean, I think in the near term -- first of all, we've been really focused in the last couple of years, to focus on quality of the growth, quality of the earnings, so what we call internally sustainable customer base that will allow us to make a little bit of money long term. So we've been a lot more pickier. We've been working a lot of new opportunities. I think on the positive side, if I look across, majority of our revenue is being driven by the, what I say, newer programs for our customer base. These programs are a lot more exciting for our customers because it's really the future for most of our customers. So we're really fortunate that most of our revenue going forward is actually coming from the programs that we won in last year or 2.

And your next question comes from Brian Alexander with Raymond James. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: Just a follow-up on that, Jure, in terms of the higher level of confidence versus a quarter ago. When we look at the communication segment, how much is the improvement there that you cited in networking and wireless? And then also, on the enterprise computing side, how much of the improvement is a function of better demand from your customers and improved forecast going forward from existing customers versus the new program ramps and new customer wins? I'm really trying to isolate the underlying demand picture and how much better you think that's gotten.

Yes. Brian, first of all, on communication networks, definitely, we're having a stronger demand on the networking side and the wireless infrastructure, including LTE projects that they are starting to pick up and so on. So these are the programs, as I mentioned earlier, that we won in last year, 1.5 years. So we're starting to see stronger demand, and I believe that based everything I see today, that should continue to move in the right direction. On enterprise, computing and storage, our new programs that we're working on, not been growing as fast as what we expected in, let's say, 6 months ago. So but what we saw in second quarter, we just had a, what I call, poor demand from across the segment there. As we look to the third quarter, we see a stronger demand across that segment. And also, some of these new programs that we're working on, we should start seeing more revenue going out in short term, and hopefully, more in the longer term. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: Okay. And then just a follow-up, Bob, based on your guidance for June, it seems like the revenue is going to be down year-over-year, but gross and operating margins and profit dollars should be up. I just want to confirm that's how you're thinking about the business. And do you think that, that's sustainable in September as well based on all the commentary you've given us about a better demand environment? In other words, do you think we've hit bottom on margins as we look forward on a year-over-year basis, even if revenue is still not growing?

Yes, our best estimate is that second quarter is the bottom in terms of both revenue and on an operating or a gross profit standpoint. So I think things will get better in Q3. I agree with your observations on Q3 relative to a year ago if you look at the guidance that I gave you. And remember, we took actions late last year in order to improve our cost structure this year. And as I've mentioned in the last couple of calls, we expect to be fully realizing those benefits by the time we get to the September quarter. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: And I guess, the spirit of the question, as you look to the September quarter and realizing you're not giving guidance for that yet, but if what you're seeing now continues, do you think that will be another quarter where margins will be up on a year-over-year basis?

Yes. I don't want to comment specifically year-over-year, but we do think we're going to see margin improvement sequentially as we move forward from here. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: And then just finally on the buyback, it doesn't sound like that's embedded in your share count forecast for June. So when are you thinking of being active on the buyback and how aggressive do you think you might be?

Yes. So let me broaden that question to one we often get, which is what are our plans in terms of use of all this cash we're generating. And our priorities remain the same, which is, first, make sure that we've got the cash we need to grow the business. And we are expecting to be growing, as Jure mentioned, over the remainder of the year. So we need to make sure that we've got the cash for that. We did, as we -- as I said in my remarks, took out about 100 -- I think, it was $154 million in total debt, $161 million in long-term debt. So we paid -- we used quite a bit of cash this past quarter in terms of bringing down the debt structure. We'll continue to look at small M&A transactions that are fit with what we're doing strategically. And then it's really a question going forward of going through analysis at any given point in time in terms of we're better off continuing to de-lever the company or we're better off repurchasing equity. And so fortunately, we're now in a state where we can make that decision and we aren't constrained by any of our existing debt.

And your next question comes from Wamsi Mohan with Bank of America Merrill Lynch.

Can you, perhaps, comment on the strength in the component margins at 10.5%? This was one of the strongest we've seen a while. And you noted in your prepared commentary that you realized some of the benefits of restructuring in the PCB business. Can you size that for us and how sustainable do you think the margins here are?

Yes. I'll take that question, Wamsi. The -- you're right, in my remarks, we definitely talked about the fact that the Components, Products and Services margins went up by about 90 basis points. Frankly, I think the aberration was last quarter, where we took some one time hits in our Kuching facility as we were winding it down. You may recall -- I don't remember the numbers precisely, but I think I said at the time, we had an extra $2 million to $2.5 million of costs in the first quarter. So we don't have that one-time hit here in the second quarter. We still had headwinds in this segment. Obviously, revenue was down across the board in this segment. And so what we really have to do is start to get a little bit of tailwind, get the restructuring completed that we've started. And I think there's plenty of headroom in terms of what we can do on margin expansion for that segment.

Okay, great. And then as a quick follow-up, your Communications was actually better-than-expected. How did that improvement play out through the course of the quarter? And more broadly, how was linearity in the quarter?

Well, first of all, I'll make a comment on the shipments here. And linearity, Bob, you can help me on that one. First of all, I think, as I mentioned there, Wamsi, that we had a fair amount of new programs that helped us move the needle in the right direction. The good thing about these programs, these other programs that are the future revenue for key players or key customers of ours. So that was very positive. We see a continued strong forecast on those in a place right now, and we expect this to be more than just a one quarter scenario. Bob?

Yes. So from a linearity stand point, I'd say the quarter was fairly typical. We're disappointed by the results, but in reality, they're pretty close to what we had guided for this quarter. So it's not a big surprise. Linearity is always such that the third month is, by far, the most significant month.

And your next question comes from Christian Schwab with Craig-Hallum Capital.

I missed the beginning of the call, unfortunately, and it sounds like you guys talked about -- so I don't want you to spend too much more time on it, but I guess, simplistically, is your visibility in the last 90 days and your forecast for the second half of the year, is that better than it was 90 days ago?

Well, yes. As I said in prepared statement, based on our customer forecast, we feel a lot more comfortable about the third quarter, guiding up a little bit in the third quarter. And we also said that based on what we see today, demand should continue to improve for rest of the calendar year. So answer is yes.

And your next question comes from Osten Bernardez with Cross Research.

To begin, would you be able to comment on the enterprise computing demand you saw during the quarter? Would you say -- were there any sort of competitor pressures there with respect to your products? And then as a follow on to that, because I believe most of the -- most of what you do there is the Newisys project, would you be able to comment on the profitability of Newisys and also, Viking, as it stands?

Yes. Well, first of all, if you look at this business, for us, Osten, in the second quarter, as I mentioned earlier, we had a weaker demand across all the products that we have been building, most of them, let's put it, say, all the big ones, which includes our standard enterprise computing, storage product, including all the [indiscernible] we do through Newisys. And Viking does some of the storage product because they also ship to the other markets. But -- so if you really look at it across the board, it was weaker than what we expected. Our -- both Newisys, and of course, Viking, their products produced a higher revenue for -- I mean, better margins for us. But we don't break those down into pieces.

Okay. And when you referenced the increased outlook from some of your customers, is that -- could you comment on sort of which served markets? And I'll assume, obviously, communications, but any other served areas?

No, no. We -- I mentioned, really, as I -- on the first question that Sean asked, I talked about communication networks. We are -- we have a better forecast. We also talked about enterprise computing and storage that we expect a better demand in this market segment across the segment that was down in second quarter. And we -- as we look at the -- and further out, seems like these programs look positive. And we also believe that the new programs that we have in enterprise computing and storage should help us drive the growth. Also, we made a comment on defense, industrial, medical. The defense and industrial should -- the forecast should continue to be better in the third quarter. And we called medical to be flat, slightly up, and multimedia was slightly down.

And your next question comes from Richard Todaro with Kennedy.

All my questions have been answered. I would just urge you to probably put a little bit towards buyback sooner. It'd just be nice to see the shareholders get something back by year-end. So that's it.

Thanks, Richard, for your support.

Yes, thanks, Rich.

And your next question comes from Jim Suva with Citi.

As we look at the outlook, it's been a long time since we had kind of normal seasonality. Are you seeing actually your end demand in your guidance to be stronger than normal or kind of more normal? Because I believe this quarter that we just printed on is kind of a little bit originally disappointing on that outlook. So I want to say the base came down a little more. So I'm just trying to differentiate normal seasonality, or you're actually seeing much stronger than normal seasonality in your outlook and commentary?

Well, first of all, Jim, first of all, thanks for your comments. It's been -- in this industry, especially in the hardware industry lately, it's not been easy, but I think we've been working a lot of positive things in our company. And in a tough environment, you always focus on things you control, which is working with your customers and new opportunities, helping each other to take the product to the market, and hopefully, each of us will make a little bit of money. So we've been working very closely with our customers, and that's why we're getting more positive results, especially if we look at the rest of the calendar year. I think if you look at the third quarter, which is our June quarter, I think there's -- some of it is normal seasonality that we are improving, and some of it is driven by the -- we've been improving the mix of our business, mix of our customer base. And we believe in our mix of our customer base and the mix of the business that we have in there, as the time goes, should help us because we believe we have a lot better mix with the new programs as these new programs and new customers get to the level they're going to be making an impact. So yes, seasonal, but plus, there's a lot of work that we've been putting into it. So it's a different world this year than last year, and we're just going to take small steps but what I would call stable, strong steps in the right direction.

So I guess just to circle back, definitely seasonality helps. Are you saying it's better than seasonality or kind of in line with seasonality?

I would say it's better as I look at the rest of the year based on the programs that we are working on.

Okay. And then last quarter, I believe that you had some customers that had some financial difficulties with some -- whether the inventory writeoffs or accounts receivables write-offs. Were you able to collect on any of those or benefit from any of that catching up? Or -- on the other hand have you identified any others that are struggling that we should be aware of about any charges or reversals of charges?

Yes, Jim, this is Bob. There was a customer that we did take a significant charge for last quarter, I think, you're referring to, and that's working its way through the bankruptcy proceedings. We don't really know how that's going to play out at this point. We assessed our reserves and decided to leave them unchanged this quarter. And I guess for your broader question, there are always customers on our watch list and we manage that as proactively as we can. I don't anticipate significant things like we saw last quarter, but you never know for sure.

Okay. And my last question, Jure, you mentioned growth during a part of the year. I assume you're referring to sequential here, quarter-over-quarter as opposed to year-over-year. Can you just verify that?

Yes, everything that I'm talking is quarter-over-quarter, Jim, I think, that -- to make sure that is -- because really, there's nothing we can do about 2012. Our customer base is, in some cases, has a different project. So it's a different year for us. We're really focused on today, and more importantly, tomorrow.

And your next question comes from Joe Wittine with Longbow Research.

Just a question on gross margins, first off, Bob. Within the guidance for the June quarter, 7% to 7.4%, does that include all the restructuring savings from the facility closures on an absolute basis?

Well, what we've said, and I still believe is true, is we don't think we'll fully realize all the savings until we get to the September quarter. But we will begin to have some of those in the June quarter, and I think just as we transitioned through, we had fewer surprises even in the March quarter.

Any way you can give an idea of the magnitude of the savings still to come, post the June quarter guidance? Is it 5, 10 bps or higher than that?

Yes. I think -- I'm trying to remember what we said when we announced the restructuring. I think we said the benefits would be $3 million to $5 million a quarter.

Okay. And maybe a quick follow-up also, Bob, just in your guidance for guiding interest expense, $40 million for the full year. Is that a full number that includes your "other" category, too?

Yes, that's other income and expense. So it's, obviously, interest expense. We have a little bit of interest income and then we also book other things like foreign exchange in there as well.

And your next question comes from Sherri Scribner with Deutsche Bank.

I was curious if you could give us a little bit of detail on the strength in the industrials segment, maybe some specifics on end markets, where you're seeing strength? And also, you guided to stronger results there, just a little more detail?

Yes. Well, industrial market, for us, has been a market that we've been developing for a long time, and it's a market that we have lot of value both through our components side, precision machining, precision frames, fabrication of the metal, plastics, and then integrating that with the special electronical -- electronics operational systems and so on. We have really been involved in it. So I would say even the semiconductor equipment is starting to pick up for us a little bit. And we have been putting negative on that, the industry, for almost last 6 quarters. So when you really look at it, the whole across industrial segment of our business is moving in the right direction. Most importantly, we're able to widen the customer base. And I believe this customer base is a lot more sustainable for us for many years to come. Because it takes a long time to develop these type of customers, but at the same time, I think opportunities are more sustainable and lot more predictable longer-term. So that's why we are optimistic about that, and we're starting to pick up some fruits right now.

Okay. So semi-cap is doing a bit better. Are there any other end markets that you've focused on or is it generally just industrial across the board? I mean heavy machinery or anything.

So it's industrial across the board. This can be heavy equipment, transportation and so on and so on. Clean power and anything that is -- and anything that is industrial, what we call internally, a little bit of grease there, we've been working with.

Okay. So semi-cap is doing a bit better, and industrial, you're seeing strength. And then just wanted to touch on the defense piece. I guess I am a bit surprised to hear that defense was okay and that you expect it to be up next quarter. Are you seeing any concern from your customers about sequestration? Are you -- you're not seeing any cuts? Just maybe if you'd give us some more detail on what your customers are telling you about their expectations.

Yes. I would consider our business -- we grow in this business. We have some unique Sanmina products that we sell directly to government. These are unique products and those continue to be moving in the right direction. And not as high as we like it to be or the way it was 3, 4 years ago, but if you compare to quarter-to-quarter, I'm saying that we see some positive, and we expect to see some a positive in the third quarter and we think that should continue for rest of the calendar year. So we also offer, I think, in this tougher environment, better solution for this industry. I think we offer a lot more technology and lot of -- we can save these companies, really, a fair amount of money if they utilize Sanmina models. So we're very excited as we look at the defense and aerospace. But to us, this is a more growing market for us than contracting market.

And your next question comes from Amit Daryanani with RBC Capital Markets.

Just a couple of questions. One, just what do you think steady state OpEx run rate should be for the company? Is $64 million, $65 million a fair number to think about or are there some investments you expect to make throughout 2013 that would take it higher in the back half?

Yes, if you look at our OpEx probably over the last 3 years, I think there is one quarter, perhaps, that was an exception. But we've run in the $60 million to $64 million range. Now in general, I think that's what you can expect for the second half. If we're successful and if we have some pleasant upside surprises, we might see higher OpEx. But right now, I think it's likely to be in that range.

But we'll be spending a lot more R&D in those numbers. So we've been really actually delivering a lot more value at this level than we did in the past because we're spending a lot more in R&D now.

Fair enough. And then I just have a question just looking at the guidance, and you guys sound fairly positive about the June quarter expectation and for the back half as well, I think both from an end demand and the new ramps perspective. The problem is sort of [indiscernible]. If I look at your 3% sequential growth guidance for June quarter, that's lower than the 5-year historical average of 5% growth you dipped [ph] within June. So looks like, to me, you're guiding sub-seasonal versus a 5-year average at least, but you guys sound fairly positive. So I'm just trying to -- we can follow delta, are you being conservative? Are there offsets that maybe you should be thinking about? Any help there would be helpful.

Amit, in this business, if you're not positive, you'll quit and run away. First of all, I don't -- you can't really focus on what happened last year. I think we are building a different company that is going to focus more on quality of the customer and sustainable profitability. So it's really what we go from here. Yes, it's not a huge growth quarter-to-quarter, but we expect it to move in the right direction and we feel comfortable that we can move this in the right direction based on what we have in front of us.

And your last question comes from Sean Hannan with Needham & Company. Sean K.F. Hannan - Needham & Company, LLC, Research Division: So just wanted to follow up around some of the comments you made on the Newisys business, and I think, you alluded to a little bit on the Viking business. Trying to get an understanding. I realize you still consider this somewhat earlier stage, but can you discuss the magnitude of any programs or customers you've been winning there, incremental qualifications in the recent quarter? I don't know if part of that optimism that you have within computing and storage is a good bit driven by, perhaps, incremental business that you've won tied to Newisys. I just want to get a sense of how this business or these businesses are contributing to you today and theoretically in coming quarters? And is there any real change in momentum here?

Yes. Sean, let me try to simplify an answer here. Number one, enterprise, computing and storage, for us, in the second quarter, was very weak quarter. It was below our expectation and it was below our customers' forecast. So from the beginning of the quarter to the end of the quarter, demand with some of our key customers went down. So that was the biggest impact in the second quarter. The second impact was some of the new programs, which we've been winning fair amount of new programs through -- both directly through our customers and through our engineering services, including Newisys, those type of programs did not basically grow as fast as what we thought or what the customers were telling us at beginning. As we look at the third quarter, and as I mentioned earlier, I believe that existing customer base that we have, that was slower in the second quarter, what we see today, we're going to see a little bit more shipment in the third quarter. And based on the forecast, we expect that to continue. Addition to that, I believe some of these new programs that we won should have a little bit higher shipment in the third quarter, and that should continue rest of the year. How much, it's hard to predict, but we expect it to move in the right direction. So that's kind of why -- overall, if I summarize when we compare the last quarter to this quarter, because it was so weak in the second quarter, we expect it to be stronger in the third quarter and then go from there in the right direction. Well, listen, that's all I have. I hope we have answered the question, Sean. If not, please give us a call. Ladies and gentlemen, at this time, again, we want to thank for your time you've spent with us today and your support. If you have any questions, please get back to us and we'll make sure that we answer any questions that you might have. Thanks again.

Yes, thanks, everyone. Have a nice evening.

Bye-bye.

And this concludes today's conference call. You may now disconnect.