TTM Technologies, Inc. (TTMI) Q1 2012 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the TTM Technologies' First Quarter 2012 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, May 1, 2012. I'd now like to turn the conference over to Ms. Diane Weiglin. Please go ahead.

During the course of this call, the company will make forward-looking statements that relate to future events or performance. These statements reflect the company's current expectations, and the company does not undertake to update or revise these forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied in this or other company statements will not be realized. Furthermore, we wish to caution you that these statements involve risks and uncertainties, any of which are beyond the company's control, which could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties include, but are not limited to, the company's dependence upon the electronics industry, contemplated significant capital expenditures and related financing requirements, the company's dependence upon a small number of customers, the unpredictability of and potential fluctuation in future revenues and operating results and other risk factors set forth in the company's most recent SEC filings. The company also will present non-GAAP financial information in this call. For a reconciliation of TTM's non-GAAP financial information to the equivalent measures under GAAP, please refer to the company's press release, which was filed with the SEC and which is posted on TTM's website. Participating on today's call are TTM's President and Chief Executive Officer, Kent Alder; TTM's CFO, Steve Richards; and Canice Chung, President of Asia Pacific. I would now like to turn the call over to Mr. Alder. Please go ahead, Kent.

Okay. Thanks, Diane. Good afternoon, and thanks for joining us for our first quarter 2012 conference call. I will begin with a review of our business, and Steve will follow up with a discussion of our financial performance, and then we'll open the call to your questions. Let's start with a review of highlights from the first quarter. Net sales were $300.5 million. GAAP net income attributable to stockholders was $12.6 million or $0.15 per diluted share. Non-GAAP net income was $18.8 million or $0.23 per diluted share. Gross margin was 18.8%. We achieved gross margin and net income in line with our guidance despite lower-than-expected revenue. Ordinarily, the associated lower operating leverage would have dampened margins. However, the more favorable product mix and consistent execution resulted in solid margins for the first quarter. Although demand for conventional printed circuit boards in Asia Pacific remained soft, advanced HDI products continued to represent an expanding part of our overall mix, comprising approximately 26% of our Asia Pacific's revenue in the first quarter, an increase from 23% in the fourth quarter. I'd now like to quickly comment on the results of our operating segments for the first quarter, and Steve will add more details later on in the call. The Asia Pacific segment had sales of $171.8 million in the first quarter, down from $218.4 million in the fourth quarter. Gross margin for the Asia Pacific segment was 17.4% in the first quarter compared to 18.5% in the fourth quarter. The decline in gross margin was primarily due to the lower absorption and lower production in our facilities that manufacture conventional printed circuit boards. While we had lower utilization rates in our conventional printed circuit board facilities, we ran at near full capacity in our advanced HDI facilities during the first quarter. North American segment recorded first quarter sales of $130 million, down from $144.1 million in the fourth quarter. Gross margin for this segment was 20.4% compared to 21.6% in the fourth quarter. Gross margin decline primarily reflects lower facility utilization. Our capacity utilization percentage in North America was approximately 80% in the first quarter compared to about 83% in the fourth quarter. On a year-over-year basis, first quarter sales in Asia Pacific declined 15.2% from $202.5 million in 2011. In North America, sales decreased 8.6% to $142.3 million in 2011. Now moving on to our end markets. Networking/communications is our largest end market. Sales in this end market were 32% of first quarter sales compared to 33% in the fourth quarter. We continue to experience solid demand for advanced technology routers, with some softness in unit price [ph] networking equipment, and then sales to our telecom infrastructure customers remained weak. However, we expect some modest improvement in this end market in the second quarter. On a longer-term basis, we anticipate that we will benefit from our diverse participation across the enterprise service provider and Internet and telecom infrastructure markets. Computing, storage and peripherals is our second largest end market. Sales in this end market represented 24% of first quarter sales, an increase from 20% in the fourth quarter due to strong sales from a key customer. We expect sales to this end market to be down slightly in the second quarter. Aerospace and defense end market represented 17% of first quarter sales compared with 15% in the fourth quarter. We experienced continued solid sales to commercial aerospace customers during the quarter. Our sales to defense customers were mixed and declined slightly overall. Going forward, we expect sales in this end market to remain steady in the second quarter. In the cellphone end market, sales declined to 10% of total sales from 14% in the fourth quarter. Sales seasonally declined in this end market, following strong sales in the fourth quarter in advance of Chinese New Year. We expect sales in this end market to increase in the second quarter. The medical/industrial instrumentation end market represented 10% of sales in the first quarter, up from 8% in the fourth quarter. We expect this end market to be relatively stable as a percent of sales in the second quarter. Sales in the other end market decreased to 7% of sales in the first quarter from 10% in the fourth quarter. The decrease in sales was due to minimal e-reader production following strong holiday demand from a key customer during the fourth quarter. We expect this end market to increase in the second quarter. Our top 5 customers accounted for 34% of sales in the first quarter. In alphabetical order, our top 5 OEM customers are Apple, Cisco, Huawei, Juniper and ZTE. We had one customer who accounted for more than 10% of sales during the quarter. Lead times for both our segments were unchanged at 4 to 6 weeks, which reflects normal lead times in Asia Pacific and North America. Our mix shift toward more advanced technology products resulted in ASPs increasing approximately 7% in Asia Pacific and 3% in North America during the first quarter. Now before I wrap up my discussion, I would like to talk about some of the changes on how we will be managing our labor force in China. In addition to the annual government mandated pay increase, we are increasing wages to improve retention of our production staff as we reduce employees' opportunities to work overtime hours in order to satisfy overtime reduction mandates from some global customers. In conjunction with these changes, we anticipate hiring approximately 800 additional employees. For the second quarter, we expect these changes to reduce gross margins in our Asia Pacific segment by approximately 150 to 200 basis points, which we expect to partially offset through greater absorption and higher revenue levels. To improve our operations and margins longer term, we will focus on improving our productivity and driving efficiencies with best practices throughout the company, as well as continuing to increase our high-margin, advanced HDI, flex and rigid-flex production. We will also continue to move towards increasing automation in our facilities. We have been successful in the past in improving our efficiency and fully expect to be successful in the future. I'd like to provide an update on the maintenance work we are performing on our SYE plant located in Dongguan, China. The refurbishment of this facility is underway and progressing well. We expect to spend approximately $5 million on this project, most of which should be capitalized. We expect production at the SYE facility to resume during the third quarter of 2012. In summary, we expect demand for advanced HDI work to continue to increase over the long term. And although the softness in demand for conventional printed circuit boards in Asia Pacific is continuing into the second quarter as expected, we are seeing some modest signs of improvement. As this year progresses, we expect increased revenue contributions from our advanced HDI, flex and rigid-flex business, the touchpad tablets, smartphones and e-readers. Additionally, in the second half of the year, we should begin to see demand improving from the telecom infrastructure customers as they work through their inventory and as the need for greater bandwidth continues to increase. Monthly bookings increased in the month of March in North America, in large part driven by improving commercial aerospace business and selected large U.S. defense programs. This also increases our confidence in our outlook for 2012. Based on our qualification work that we are doing for customers in Asia Pacific, we continue to believe our prospects for the second half of 2012 are strong. As previously noted, our CapEx program focuses on technology enhancements, bottleneck areas and maintenance. We plan to invest $120 million to $135 million in 2012 as we expand our manufacturing capabilities, primarily in advanced HDI, both of them the fastest-growing and highest-margin portion of our business. Now Steve will review our financial performance for the first quarter.

Thanks, Kent, and good afternoon, everyone. First quarter net sales of $300.5 million decreased $61 million or 16.9% from fourth quarter net sales of $361.5 million. Gross margin was 18.8% in the first quarter compared to 19.7% in the fourth quarter. Selling and marketing expense was $8.6 million in the first quarter compared to $9.9 million in the fourth quarter. As a percentage of net sales, selling and marketing expense in the first quarter was 2.9%, up from 2.7% from the prior quarter. First quarter G&A expense decreased to $22.1 million or 7.4% of net sales compared to G&A expense of $24.2 million or 6.7% of net sales in the fourth quarter. Amortization of intangibles was $3.9 million in the first quarter compared to $4.5 million in the fourth quarter. Operating income, which includes amortization of intangibles, for the first quarter was $21.8 million compared to operating income for the fourth quarter of $17.6 million. Included in operating results for the fourth quarter of 2011 is a noncash goodwill impairment charge of $15.2 million for the company's backplane assembly plant in Shanghai, China. Excluding this goodwill impairment charge in the fourth quarter, operating income would've been $32.8 million. The Asia Pacific segment's first quarter operating income before amortization of intangibles was $12.8 million compared to operating income of $20.1 million in the fourth quarter. North American segment's operating income for the first quarter before amortization of intangibles was $12.9 million compared to $2.1 million in the fourth quarter. Excluding the goodwill impairment charge in the fourth quarter, the segment's operating income would've been $17.2 million. Interest expense was $6.4 million in the first quarter compared to $6.8 million in the fourth quarter. Our effective tax rate in the first quarter was 27%, an increase from the fourth quarter effective tax rate of 10%. The fourth quarter rate was lower due primarily to onetime items. Without these items, the effective tax rate in the fourth quarter would have been approximately 23%. Net income attributable to stockholders for the first quarter was $12.6 million or $0.15 per diluted share compared to net income in the fourth quarter of $11.2 million or $0.14 per diluted share. The goodwill impairment charge recorded in the fourth quarter negatively impacted net income attributable to stockholders at $12.6 million or $0.15 per diluted share. Excluding the goodwill impairment charge, GAAP EPS for the fourth quarter would have been $0.29. First quarter non-GAAP net income attributable to stockholders was $18.8 million or $0.23 per diluted share. This compares to the fourth quarter non-GAAP net income attributable to stockholders of $31.2 million or $0.38 per diluted share. Non-GAAP net income attributable to stockholders adds back amortization of intangibles, stock-based compensation expense, noncash interest expense, asset impairments, restructuring and other charges, as well as the income tax effects related to these expenses. Adjusted EBITDA for the first quarter was $46.4 million or 15.4% of net sales compared to the fourth quarter adjusted EBITDA of $60.2 million or 16.6% of net sales. Cash and cash equivalents at the end of the first quarter totaled $223.8 million, an increase of $27.7 million from $196.1 million at the end of the fourth quarter. Net debt was $306.9 million at the end of the first quarter, down from $317.2 million in the fourth quarter. Cash flow from operations in the first quarter was approximately $34 million. Capital expenditures in the first quarter were approximately $26.6 million. This reflects approximately $23.3 million for Asia Pacific and $3.3 million for North America. Depreciation for the first quarter was $19.1 million. In the second quarter, we expect revenue to be in the range of $320 million to $340 million. We expect GAAP earnings attributable to stockholders in the range from $0.10 to $0.19 per diluted share and non-GAAP earnings attributable to stockholders in the range of $0.18 to $0.27 per diluted share. This was based on a diluted share count in the second quarter of approximately 83 million shares. We expect that SG&A expense will be about 10% of revenue in the second quarter. We record amortization of intangible expense of about $4.1 million. We expect our blended tax rate to be approximately 27% in the second quarter and approximately 24% in the second half of 2012. Before we address questions, I'd like to mention that we'll be presenting at the JPMorgan 40th Annual Technology Media and Telecom Conference on May 15 in Boston. We will provide further details in an upcoming press release. With that, let's open the call to your questions.

[Operator Instructions] The first question comes from the line of Shawn Harrison with Longbow Research.

I guess 2 questions. First off, just wanted to touch on the qualification process that was highlighted. I know last quarter and even this quarter, it was alluded to the fact that you're making potentially greater inroads into smartphones. Maybe if you could just talk about the inroads there. And then, the second question just has to do with the labor inflation in China. I think we all knew it was coming. This was maybe a little more than anticipated. Does this mitigate some future inflation maybe in 2013?

Shawn, good questions. First part of that question, on the qualifications, we don't talk about any specific customers, but certainly, our qualifications are with programs related to smartphones, tablets, e-readers and so forth. And we're in very good shape for those qualification programs. A challenge that we might have as Windows programs kick in, we anticipate that, that could be kicking in the end of the second quarter, but more likely into the third and fourth quarter. And this is why we always talk about kind of the strong second half of the year. With regards to the second question regarding wage increases in China, there's kind of 2 parts to that, and the first part is just the annual government demand increase in wages. And then, the second part is how we've had to adjust our labor force to reduce the overtime, which is kind of, I, guess, demanded by some of our larger customers. And so you've got 2 parts coming in as we reduce the overtime and hire new employees; that certainly has some impact on our cost structure. And that's why we're looking at 150 to 200 basis points. And longer term, that could have a positive impact, if turnover goes down and so forth, or it could have some maybe additional negative turnout [ph]. We're not quite sure where that goes at this point in time, but it is something that we are doing to comply with the demands from several of our larger customers. As far as -- we'll know how that plays out as we go through the second quarter here. And maybe, Canice, you're a little closer to that; do you want to add any comments to what I've just said?

I think, Kent, there's a couple -- majority of the situation regarding the new programs we have on hand, we are running almost to the final stage of the sample build. Like Kent has been mentioning, we are not sure about the exact timing yet. And regarding the wages, the general minimum wage requirement by the government, indeed we are lowering the net of 211 already. But then if we can work on these overtime requirement again and successfully, okay, through the campaign they are running and then we don't expect we will have these types of significant increase once again to be happening in the near future years.

Okay. Just I guess as a follow-up to Asia, I think last call maybe you mentioned the potential forward growth in Asia for the year, maybe second half versus the first half. Do you have any updates on kind of the growth potential out of Asia this year?

Shawn, this is Kent. I still think we're right in line with what we have felt throughout the year and still forecasting. I mean, Asia Pacific, when you look at growth through the year, we're, I think, 5% to 10%. 5% to 8% is probably more realistic, but there is a very outside chance we could get a 10% growth rate in Asia Pacific.

And that's year-over-year?

Yes, that's year-over-year compared 2011 to 2012, with most of that growth obviously coming in the second half of the year as these projects and qualification orders that we're working on come to fruition in the third and fourth quarter.

And our next question comes from the line of Matt Sheerin with Stifel, Nicolaus.

I missed the first part of the first question regarding the increased labor rates and then also the additional employee hiring. I understand it's because of the requirements from customers, and you said that was about a 170 basis point negative impact on gross margins. Was that correct, for Asia?

Matt, we -- there's 2 parts to that. There's the annual government raise that takes place, and then we're adjusting overtime with our employees, which actually reduces the opportunity for overtime. So therefore, we have to hire -- we're anticipating about 800 additional employees, and that should have 150 to 200 basis points impact in our gross margins.

And why are customers asking you to do this?

Well, I think if you see in the news some of the publicity that has been out there, that's kind of the driving force behind what customers don't want to be involved with. And so they are very interested in having that -- any situation not impact them, so they're pushing some overtime requirements down on us. And we are complying with our customers' demands. I might add, I think our employees are happy with the overtime that they were getting. And certainly, we were fine with the government. It's the impetus for this is certainly coming from our larger customers, and we're complying.

Okay. And I'm just trying to figure out why then that, if you're basically paying the same wage rate across your employee base, you just have more employees working fewer hours, are there sort of onetime all-in costs that are associated with an employee that bring up those costs for you?

I think there are some adjustments in the overtime and how that overtime is computed and so forth to, I think, help maintain our employees. One of the things that we are looking at is how do we make sure employees, even though they work fewer hours, still receive a pay that they are happy with so that we can keep our turnover down. So, Matt, it's kind of a complicated formula, but it's in line with paying the overtime, computing overtime and so forth, that actually helps drive the costs up.

Okay. But have you gone to customers and asked for some price concessions or sort of a reverse concession where they would pay you more to compensate for that?

We have talked about that, but with not too much success.

When you say one -- I mean, this is several customers, not just for one big customer.

Right.

Okay. And so with the lower gross margin, does that mean that Asia margins -- and then it looks like the Asia gross margins now are trending below North America, which hadn't been the case. I mean, is that a permanent issue or as you ramp the production with the new capacity on the HDI -- advanced HDI and you implement some of these productivity and efficiency programs that you'll get that back? And how long? And I know you've talked about at your analyst day about kind of a 22% sort of gross margin target. Sort of near term -- well maybe long term, what should we think about the gross margin targets at various revenue levels at this point?

I think, Matt -- this is Kent again. I think that we're still I guess holding to our targets on gross margin of about 22%, 23% in there. Several things that we're doing, though, to get there that I think are important, and of course, the first one is as we move towards a higher mix of this advanced HDI product, that carries a higher gross margin. So as the mix continues to move towards a higher percentage of HDI, that certainly helps. I mentioned earlier it is becoming more efficient and productive, and I think it's probably time that we really strapped our boots on and looked at that closely. Again, just the top line growth, there's a lot of leverage in the top line, so you got top line, you got mix, you got efficiency. And then, the other thing that's been a little bit of a drag on our margins has been the underutilization in our conventional printed circuit board facilities, and that kind of corresponds to some slowness in China, along with the telecom infrastructure build-out being pretty weak right now. So as that comes back, and we think we'll have some improvement in the third and fourth quarter, all of those things will help drive those gross margins up. So we're still looking into the second half of the year as being the strong point of 2012, and we're seeing some minor signs of improvement here in the second quarter. So we're pretty confident that, that will happen. And when we talk about investment in HDI and going through qualification programs, pricing exercises, allocation, allotment exercises again, I mean, we're -- this isn't something we're pie in the sky on. These are all real and imminent opportunities here that will take place in the third and fourth quarter.

Okay. And just lastly, as you look at that capacity add that's in the works, could you just remind us what kind of revenue capacity incrementally is coming on in the second half? And as you look at opportunities with customers on the smartphone side, are you able to ensure that there's x amount of capacity so that you can satisfy those orders if they do come through?

Yes, I mean, you'll see, our CapEx is $120 million to $135 million, and for 2012, about 3/4 of that all is going to this expansion in HDI -- advanced HDI products. And we went through the numbers again last week on how much revenue we get through that, and we're still at $1.50 for every $1 invested in that expansion CapEx. So we are looking at the opportunities, sitting down and working closely with customers to plan out the CapEx and the expansion in capacity. And when we look at Asia Pacific right now, we're running at about 70% utilization in our conventional facilities, and then you get to the advanced HDI, and we're near full capacity, so right around 100%. So those opportunities are there. And I might ask Canice to -- Canice, do you want to add any details to what I said there, might help.

I think Kent has exactly explained the situation in the Asia Pacific. In terms of margin, I think it's not -- it is 2 trends that are driving, one is, of course, the utilization. And then another thing is that we are working also on the same direction that to increase the high margin as well as the high value add of the advanced HDI business there. With our CapEx to spend, our capacity will be increased by at least about 10% to 15%, okay, but pure on advanced HDI. If you look into the ASP on the first quarter, okay, that we have been able to drive it up by almost 7%, and this has long been our direction. And it is not a one-off that we are seeing also our margin, okay, up and down sometimes even before the acquisition. But that's all brought up by all the utilization, as well as some kind of the cost impact suddenly increase up, given our longer directions and also the strategy focus on high-value added, as well as best practices, okay, to be shared between the AP and North America, I think we still will be targeting to be achieving that into the 20%, up 20% -- the above 20%, okay, soon, okay, after the utilization and also the advanced HDI business that are coming in.

And our next question comes from the line of Jiwon Lee with Sidoti & Company.

Kent, you highlighted on your outlook and called for [ph] telecom infrastructure side, and I wonder if you could comment a little bit on the networking side specifically as far as you're willing to venture out to.

Yes, on the networking side, when you look at the high technology routers, the core routers and the edge routers, I mean that business has been pretty good for us. And that's strong, and we continue to see strength with those edge routers. When you get down to kind of the service provider and some of the switches and so forth, that's a little bit soft. So when you look at it, that end market, you got core and edge routers strong, the switches, a little bit soft, and then you got the telecom part weak.

Okay, that's very helpful. And the cellphone side, the reason why you're anticipating sequential revenue uptick is because of some of the qualifications programs are beginning to kick in?

Yes.

Okay. So that's the majority of why you expect the revenue to be up?

Yes, that's almost all of the reason.

Okay, terrific. Could -- did you talk about or could you talk about how many qualifications or how many customers you're working on?

We probably won't talk about specifics with customers, but it's clearly with tablets and smartphones and some e-readers, and I think that covers the majority of our qualifications.

And obviously, a lot of your capital spending this year is going through the HDI world. But outside of the smartphones, tablets and e-readers, are there any other revenue stream that you expect, at least in 2012? Or are those 3 products the main reason for that?

Yes, I think most of our revenue will be driven by the areas that you mentioned, the smartphone, tablets and e-readers. But I think what we're starting to see is our advanced HDI technology, and to some degree, interface is there and the components starting to spread out to other end markets. So when you look at our business longer term, I think there'll be quite a few opportunities besides just those products for our use of our advanced HDI capabilities. And then, the other side is, as we've been so soft with this telecom in our conventional facilities, and you look at the Internet demands and bandwidth expansion that's been taking place and will continue to take place, that we're fairly, I guess, positive or optimistic that the second half of the year will have some of that come back to us, also. Like I mentioned in our prepared comments, that will really help our conventional printed circuit board facilities that are underutilized right now. And I might mention, too, while I'm on the topic, that when we're talking about our CapEx, and about 3/4 of that goes into advanced HDI, there's another big chunk that's going into facilities and environmental, with water recycling and so forth, and we're not doing anything with our conventional printed circuit boards. I mean, anything might be a little stretch, but we're not expanding our conventional capacity in printed circuit boards.

[Operator Instructions] Our next question comes from the line of Paul Coster with JPMorgan.

It's Mark Strouse on for Paul. To follow up to Shawn's earlier question, you've provided an update on the unofficial guidance, if you will, for your fiscal '12 in APAC. But in North America, do you still expect that to be, I believe you said flat to slightly down from last quarter?

Yes, thanks for the question. And yes, in North America, we're looking to a situation where -- it's interesting. Actually last quarter, the aerospace and defense business was our strongest portion of our business. Conventional business was down. So as we look out to the rest of the year in 2012, we're anticipating North America to be relatively flat with 2011 numbers. Chance it could be a little bit better. But right now we're looking at pretty much a flat situation.

Okay, that's helpful. And then, I think I might've missed this, but the SYE plant coming back on board, you said 3Q, is that -- can we get more granularity there? Is it earlier in the quarter or has it flipped a bit later?

Well, we're looking at the third quarter, and we believe that it will be ready in the end of September, October time frame. We're in a position here where the timing of that coming back online maybe has some margins there, so we're watching that pretty closely. But we're moving ahead to get that repaired, and we're, I guess, looking at it on a -- when we bring that back online depends on kind of the market conditions exactly. And Canice, do you want to add to the SYE facility, I think we're...

I think renovation there was on track, that we should be able to almost finish it by the August time frame -- sorry, September time frame there. And we've all in line [ph] to be test on or whatever, we're expecting it. We will be resume the operations by the second half of the Q3 there.

And our next question comes from the line of Steven Fox with Cross Research.

First question, can you just talk a little bit about the inventory build during the quarter on the absorption rates and the gross margin, and then how does that inventory -- projected inventory trending in the next quarter affect those dynamic -- those metrics rather?

I can handle that question, Steve. So our overall inventory increased just a little bit, about $4 million, from the end of the year to the end of the first quarter. Most of that came from Asia, and that's mostly in keeping with our expected about 12% revenue increase in the second quarter over the first quarter. Overall, raw materials are down a little bit, but wick [ph] was up, which is a sign of a work in process moving to the plant. So I think that's a good sign for our revenue's strength in Q2. I think how the quarter will play out is a bit uncertain in terms of inventory because it's possible, depending on the timing of the orders we're talking about, that can give us some confidence in the back half of the year, if those orders come in, in the next month or so, we might actually ship some of that stuff during the second quarter, and see probably not a very strong level of inventory coming out of the quarter. But if those orders come in kind of later in the quarter, it might be more of a build for Q3, and we might see inventories rise at the end of the quarter. It's still too soon to say.

Great, that's helpful. And then secondly, is it safe to assume the advanced HDI percentage is going to increase for pretty much every quarter for the rest of this calendar year? And any kind of color around what kind of increases we could be looking at.

Yes, it's safe to say that it will increase, particularly in the second half of the year. I don't have a particular percentage in mind. I haven't run through those numbers exactly. I know historically, if you go back to the first quarter of 2011, our HDI was about 19% of sales. Now we're up to 26% of sales. And the opportunities that we have in the second half of the year will certainly drive that percentage much higher. Most of our growth in the second half of the year is going to come from the advanced HDI technology products.

And then, I'm sorry, one last question, can you give the percentage of sales from your largest customer?

Yes, it's 13% of sales.

And there are no further questions. I'd like to turn it back over to management.

Okay, thank you. I just wanted to thank everyone for joining us today. We're on track for our program for the second half of the year. And historically, the second half of the year has been much stronger than the first half of the year. And I think even in 2012, it's even more exaggerated with our program qualification timing and wins and so forth. So we're looking forward to a very strong second half of the year, and the second quarter is obviously going to be up over the first quarter. So thanks for your time. We'll look forward to seeing you next quarter. Thank you very much.

Thank you.

Ladies and gentlemen, that does conclude the TTM Technologies' First Quarter 2012 Earnings Conference Call. If you'd like to listen to today's replay, the phone number is 1 (800) 406-7325, access ID 4532620. Thank you for your participation. You may now disconnect.