Sanmina Corporation

Ladies and gentlemen, thank you for standing by and welcome to the San Meno Corporation's fourth quarter and fiscal 2020 year-end earnings conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to Paige Melching. Thank you. Please go ahead, ma'am.

Paige Melching Thank you, Erica. Good afternoon, ladies and gentlemen, and welcome to Sandmina's fourth quarter and full year fiscal 2020 earnings call. A copy of our press release and slides for today's discussion are available on our website at sandmina.com in the investor relations section. Joining me on today's call is Yuri Sola, Chairman and Chief Executive Officer.

Good afternoon.

And Kurt Edzima, Executive Vice President and Chief Financial Officer.

Good afternoon.

Before we discuss the results of the quarter, let me remind everyone that today's call is being webcasted and recorded and will be available on our website. You can follow along with our prepared remarks in the slides provided on our website. Please turn to slide three of the presentation or the press release 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 could differ materially from those projections in these statements as a result of number of factors set forth in the company's annual and quarterly reports filed with the Securities and Exchange Commission. The company is under no obligation to and expressly disclaims any such obligation to update or alter any of the forward-looking statements made in this earnings release their earnings presentation, the conference call, or the investor relations section of our website, whether as a result of new information, future events, or otherwise, unless otherwise required by law. You'll note in our press release and slides issued today that we have provided you with statements of operations for the quarter and fiscal year ended October 3rd, 2020 on a GAAP basis, as well as certain non-GAAP financial information. A reconciliation between the GAAP and non-GAAP financial information is also provided in the press release and slides posted on our website. In general, our non-GAAP information excludes restructuring costs, acquisition and integration costs, non-cash stock-based compensation expense, amortization expense, and other unusual or unfrequent items. Any comments we make on this call as it relates 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 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 Yuri.

Thanks, Paige. Good afternoon, ladies and gentlemen, and welcome again. Thank you all for being here with us today. First of all, this is our 40th year. We just finished the 40th, right, Paige? So it was a challenging year, but also I think we accomplished a lot. The most important, I am very proud of our leadership team and our employees for all that they have accomplished in fiscal year 2020. Despite all these challenges, we delivered strong results for the fourth quarter. For agenda, I have a critical review the details about financial results with you. I will follow up with additional comments about Samina's results and the future goals. Then Kurt and I will open for questions and answers. And now I'll turn this call over to Kurt.

Thanks, Yuri. Given the continued challenges and uncertainty associated with COVID-19 and the macroeconomic environment, we remain focused on the optimization and continuous improvement of our business, the leveraging of existing manufacturing capacity, and cash generation. I'm very pleased to report the impact of these efforts were once again evident in our results. Please turn to slide six. Q4 revenue of 1.875 billion was up 13.3% sequentially and exceeded our outlook of 1.73 to 1.83 billion we provided in July. Q4 non-GAAP gross margin improved from 8.1 to 8.3%. This was primarily the result of management's focus on driving efficiencies and higher revenue levels with a favorable product mix. Q4 non-GAAP operating expenses of $61.4 million were higher relative to Q3, primarily as a result of the extra week in the quarter. Q4 non-GAAP operating margins also improved from 4.6 percent to 5.1 percent. Q4 non-GAAP other expenses were approximately 5.6 million, approximately 1.1 higher relative to Q3. This was primarily due to a gain of approximately 2.5 million related to deferred compensation assets as the result of the appreciation of the stock market and other financial assets in Q4 compared to a gain of 3.6 in Q3. Just as a reminder, gains or losses related to deferred compensation have no net impact on the EPS, as they are equally offset with corresponding increases or decreases in manufacturing and operating expenses. Finally, I'm pleased to report Q4 non-GAAP fully diluted EPS improved from 86 cents to $1.10. as a result of management's focus on driving efficiencies and higher revenue levels, and this exceeded our prior outlook of 73 to 83 provided back in July. Now please turn to slide seven. Here you can see the details related to Q4 and the associated comparisons, as well as a comparison of FY20 relative to FY19. FY20 revenues were $7 billion compared to 8.2 in FY19, primarily due to the impact of COVID in the macroeconomic environment. Non-GAAP gross margin in FY20 improved from 7.3 to 7.7%, primarily driven by management's actions to drive efficiencies. Non-GAAP operating margin in fiscal 2020 improved from 4.1 to 4.2%. Finally, non-GAAP earnings per share was $3.05 in FY20 compared to $3.40 in FY19. Again, this is primarily the result of lower revenue levels due to COVID, partially offset by management's actions to drive efficiencies. Now, if you'd please turn to slide eight. IMS revenue grew approximately 14% and non-GAAP gross margins for IMS improved from 7 to 7.2%. Also, components, products, and services revenues grew approximately 9%, and non-GAAP gross margin improved from 12 to 12.4%. If you turn to slide 9, you can see the quarterly progression of our financial results. Again, we delivered improved non-GAAP gross margins and operating margins, as well as improved EPS in the fourth quarter. If you turn to slide 10, this slide shows the annual progression of our financial results. Again, we delivered improved non-GAAP operating margins in FY20, despite the challenges associated with COVID and the macroeconomic environment. Please turn to slide 11. Again, here you'll see our balance sheet continues to remain strong. Cash and cash equivalents were approximately $481 million at the end of Q4. During the quarter, we paid off approximately the remaining $650 million on our $700 million revolver. Just as a reminder, we drew down the $650 million of our $700 million revolver back in March, given the uncertainty around COVID-19. Again, we subsequently never needed to use any of that cash given our strong internal cash generation. The balance on our term loan at the end of Q4 was $348 million. This loan matures in November 2023. Please turn to slide 12. Here you can see we continue to maintain a low debt-to-cash ratio of 0.7. Between the cash and the availability under our revolver, we have approximately 1.2 billion of liquidity available to us. If you turn to slide 13, you'll see inventory went down approximately 23 million, and inventory turns improved to 7.3 during the quarter. Cash and cash cycle days were 53.6. Non-GAAP pre-tax return on invested capital again improved from 24.3% to 28.3%. Please turn to slide 14. Again, our strong focus on cash generation continues to pay off. In Q4, we generated approximately $80 million of cash from operations and approximately $69 million of free cash flow. For the full fiscal year, we generated $301 million of cash from operations and approximately $236 million of free cash flow. Over the past five years, we continue to reinvest in the business, spending about 36% of our cash utilization on capital expenditures. In addition, over the past five years, we have used approximately 60% of our cash utilization on debt repayment and share repurchases. For FY20 in particular, we spent 23% of our cash utilization on capital expenditures and 77% on debt repayment and share repurchases. We will continue to manage the use of cash closely for the betterment of the business and for our shareholders. Now please turn to slide 15. Samina takes a very disciplined approach to capital expenditures and focuses on leveraging our existing manufacturing capacity. During Q4, we spent $10.5 million on net capital expenditures. For the full fiscal year, we spent approximately $64 million. Please turn to slide 16. During Q4, we repurchased approximately 3 million shares for approximately $78 million at an average price of $26.13. For the full fiscal year, we repurchased approximately 6.4 million shares for approximately $166 million at an average price of approximately $25.94. Again, we'll continue to take an opportunistic approach to share repurchases as we optimize our capital structure. At the end of Q4, we had approximately $135 million of authorization remaining under our current program. Now, if you please turn to slide 17, we'll talk a little bit about the first quarter outlook. The impact of COVID-19 in the macroeconomic environment will continue to evolve. As a management team, we will remain focused on the optimization and continuous improvement of our business the leveraging of existing manufacturing capacity, and cash generation. As we think about the outlook, it should be noted that Q1 will again have 13 weeks versus 14 weeks in the prior quarter. Our outlook for Q1 will be in the range of 1.7 to 1.8 billion for revenues. Overall customer demand is expected to be relatively stable in all of our end markets after adjusting for the one last week. We expect non-GAAP gross margins to be in the range of 7.4 to 8%. Non-GAAP operating expenses to be approximately 59 to 61 million. We expect non-GAAP operating margin to be in the range of 4 to 4.6%. We expect non-GAAP other expenses to be approximately 8 million. Our non-GAAP tax rate is expected to be around 19%. We expect non-GAAP fully diluted share count to be approximately 67.5 million shares. And when you take all this together, our outlook for non-GAAP diluted earnings per share for the quarter is in the range of 75 to 85 cents. We expect capital expenditures to be around $15 million and depreciation and amortization to be around $29 million. I believe our team working closely with our customers has navigated well through the impact of COVID-19 in the macroeconomic environment to date, and we are positioning ourselves well with our customers in our key markets to benefit from the ultimate recovery. And for now, I'll turn it back to Yuri for additional comments. Thanks, Kurt.

Ladies and gentlemen, let me tell you more about business environment for the fourth quarter, the outlook for the first quarter and fiscal year 2021. And also, we will talk to you about what are we doing to maximize the shareholder value at Semina. Managing around the global health crisis has been challenging. but we're adapting well to a new business environment as we are learning how to work with COVID-19. I can tell you that our manufacturing facilities in 21 countries on six continents are operating and supporting our customer requirements daily. Sanmina's number one priority is the safety of our employees and doing the right thing for our customer. Again, I can report to you that we are doing well. Some key highlights for the fourth quarter and fiscal year 2020. As you heard from Kurt, Sanmina delivered strong financial results for the fourth quarter. By exiting fourth quarter at operating margin of 5.1%, it's a good goal for the future. And also, as he mentioned, we delivered non-GAAP EPS of $1.10. For fiscal year 2020 was a good year despite challenges with COVID-19. We are learning a lot. We are keeping it simple, what I call internally, back to basics. Primary focus for management is on the four key things that drives our success. Number one, safety of our employees. Number two, customer satisfaction. Number three, operating margin improvements. And number four, continue to generate free cash flow. Samina has a strong foundation in place, and it can operate in any economic environment. Please turn to slide 19. Let me now give you some more highlights of revenue for the fourth quarter and end markets. We had a good demand across majority of our end markets and good mix of business. Industrial, medical, defense, automotive, and communication networks had a strong growth. Cloud solution was down, some push outs from couple customer, but basically just timing. Overall, we delivered strong growth of 13.3% for a quarter, and top 10 customer represented 57.1% of our revenue. Book to build for a fourth quarter was positive, and book to bill for fiscal year 20 was also positive. And also in the quarter, we continue to diversify revenue and expand the customer base in this environment. During COVID-19, we have earned better partnerships with our customers by delivering strong performance for them. Please turn to slide 20. Now I'd like to talk to you about revenue outlook by market segments for the first quarter 2021. For the first quarter, today we can tell you is that we are seeing a good, stable demand. For industrial, medical, defense, and communication networks, we are well positioned in this market. So for industrial, we expect to continue to do well, and we see stable demand. Similar thing for medical. Stable demand. For defense, What we're seeing today is very strong demand. Automotive continues to recover with forecasting stable demand. Again, for communication networks, which includes networking products, IP routing, optical products, are also doing well, and we are forecasting stable demand. For mobile and 5G networks, we are starting to see nice improvements. Again, for cloud solution, which for us includes high-end computing and storage, stable demand. Sanmina has continued to expand and grow stronger presence with its industry leaders in a mission-critical, high-complexity, and heavy-regulated market. This is a market that we're well-positioned, and most importantly, we have a great customer base. Let me make a few more comments about the business environment for fiscal year 21. With COVID-19, global economy is very hard to predict at this time. But overall, our customer base is still positive about calendar year 2021. And we have a pipeline of existing and new opportunities that looks good for a calendar year 21, as we are continuing to expand our customer base in this environment. Based on our visibility and the forecast, we feel optimistic that fiscal year 2021 will be a good year for Sanmina, and we expect to come out of this year a stronger company for the future. As I said earlier, management will be focused on quality of the growth and margin improvements. Back to basics. A lot of work left, but we're also having fun doing it. Please turn to slide 21 now. We have been reviewing all Semina businesses and capabilities. The goal is to unlock the value of Semina and provide greater visibility of each business group. So please turn to slide 22. On this slide, you see Semina current segments. On the left, you see integrated manufacturing solution, revenue in the fourth quarter, was $1.54 billion with a gross margin of 7.2%. Components, products, services on the right side, revenue of $365 million and gross margin of 12.4%. We expect to grow all our businesses in this segment, but we are planning to put more focus to grow components, products, and services. And let me show you how we're going to do it. So please turn to slide 23. To align with Sanmina's vision of maximizing shareholders' value, we are planning to organize Sanmina's business into three key focus groups. To deliver best value to our customers, drive growth and profitability for each group. Integrated manufacturing solution group will have product system build, global services, optical modules, and Wiking Enterprise. For us, that's basically a product for data center. Under component technology, we have interconnect circuit boards, which is advanced circuit boards for us, advanced backplans, and optical connector systems. Precision machining systems, which also includes precision plastics. And then in a third group, SEI defense product. SEI has been in the product since early 60s, mainly focusing on military. So we'll focus on SEI's products, military and space technology for product and system build. And now please turn to slide 24. What we are planning to do is to realign our management so that I'll have three presidents running our operations and sales, one for each group. Two of these individuals are already inside of the company, and one of them will take our integrated manufacturing solution, and the other one will take over SCI defense products. For components technology, we are in the midst of bringing individuals in the near future for that job. So what's the advantage to this new structure? Number one, focused leadership and to be able to compete better in each of these business groups. Number two, maximizing operating leverage in each business group. Number three, growth and margin expansion. Number four, more flexibility, speed to market, and better execution. Also, we believe this structure will be a lot more efficient and more cost-effective. So this management structure gives us a solid foundation and flexibility to drive long-term, sustainable growth. Please turn to slide 25. So here are the management priorities. Sustainable and profitable revenue growth, as we've been talking about already. But here we're going to focus on our customers in a mission critical, high complexity and markets. Continue to take care of the customers we have and as we continue to add customers in these markets. Grow with the market leaders in these key markets and drive profitable growth for each business group. Sanmina today provides leading technology to our customers. We have lean and flexible global structure in place. The key advantage, how do we provide end-to-end services, technology, components, and products? This competitive advantage will support attractive margin regardless of business environment. Continue our ability to generate strong cash flow will give us flexibility to invest in right business and optimize our capital structure. And of course, our goal is to really maximize shareholders' value. To do that, we have to unlock the total value of Sanmina capabilities, as we've just been talking to you about. Also, I can tell you that there's a lot of leverage in Sanmina's business model. Please turn to slide 26. In summary, we remain positive on a long-term outlook for our key markets. As you see now, fourth quarter came pretty strong. I'm not going to go over this, but really good numbers. For fiscal year 20, this was a challenging year, but we're still able to improve operating margin, and we delivered a strong free cash flow of $236 million. So where do we go from here? As I said, we just finished 40 years of our existence, so this is a new year for us. We believe that 21 years should be A good year based on what we've seen from our customers today, but we'll take one quarter at a time. As Kurt mentioned, our revenue outlook is solid, 1.7 to 1.8. Non-GAAP diluted EPS outlook of 75 to 85 cents. We still have continued uncertainties around the pandemic as global conditions change daily. I have a lot of confidence in Sanmina's management, and we will focus on fundamentals of our business, and we'll work very hard to maximize total shareholder's value. As I said earlier, I'm going to say it again, Sanmina is adopting to market change as well, and goal is to come out of this a stronger company. So ladies and gentlemen, now I would like to again say thank you for all your time and support that you spent with us. Operator, we're now ready to open the lines for questions and answers. Thank you again.

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. And your first question is from Rupa Vasacharya with Bank of America.

Hi, thank you for taking my questions and congrats on the strong quarter and also on the strong guide. Yuri, I wanted to see if you could delve a little bit deeper into the communications network segment. You had guided for revenues to be sequentially up, but obviously you had quite a good quarter. So maybe can you just talk about what you saw in the optical side as well as networking and wireless and how you're thinking about the December quarter in that segment?

Yeah. As I mentioned, Rupu, in my prepared statement, we have a diversified customer base in that segment. We are involved in all new systems and products. So if I look at the optical side, that looks pretty good. and also part of the networking side, IP routing, that also looks good. And I mentioned also that our 5G networks are starting to improve. So overall, what we see today is stable. We'll see how mix goes during the quarter, but demand, what we see today, is pretty stable based on our forecast.

Okay, thanks for that. Maybe for my second question, I want to ask you on the defense business, the SCI business. You're trying to unlock value and you've created this new structure where you're going to have a separate president for that business. In the long term, what's your thought or what's your view on that business? Is this something you want to grow organically or is this something you would want to monetize maybe as a separate company or as a separate business? So just your thoughts on how you see that business trending over time and your thoughts on the portfolio with respect to that business.

Yeah. If you just look at the Samina businesses today, especially now as we're going to these three focus groups and three strong managers to really grow this business for us, Our goal is to be successful on this model, and I think we're going to unlock a lot of value. Yes, we need economy to cooperate, but there's also a lot of work that we are working on today, and we're positioning the company so when things turn around and we see, you know, global health crisis go away and we're strictly focusing on building things, I think there's a lot of excitement here. But back to SCI, you know, SCI, you know, basically builds everything for military that's mainly in defense as much as I think 90 plus percent of their business is defense and, you know, space, mainly satellites. We have our own products there. We also get heavily involved in a, you know, in a, as a, As a partner of General Contracts, they're there. So we're well positioned. We have a name, military name in that industry. We can take any government contract on. And if you really look at that business, it's pretty profitable. I think it can be even more profitable in the future. Today, we're not getting the right valuation. I don't think our investors see everything. So we're trying to create more visibility in the future. Most importantly, better results. And we'll see how things go. We definitely will grow that business, both organically, and we're going to look at some strategic acquisitions that can, you know, help us grow it. But we are focused to SEI. SEI has a lot of upside. We've got a beautiful campus down in Huntsville. And I'm personally excited, especially in the environment today, Rupu, where things are different and challenging. We're putting a very strong team there, and with a few more players, I think the future will be bright for us.

Okay, thanks for the details there on SCI, Yuri. I also wanted to ask you on the industrial medical defense automotive side. I mean, again, you had the guided for sequential improvement, but that segment grew, I think, 19% sequentially, so you saw pretty strong growth. Was there anything that surprised you in that segment? I mean, I know there are a lot of end markets there, but was anyone in market the driver for that outsized growth, or did things play out as you had expected?

Well, first of all, with COVID-19, every day is a different day, both for our customers and for us. I think we adopted and we created enough flexibility that we're able to to help our customer fill the orders that they needed. We really, our management really did a terrific job last quarter helping our customers do that. When it comes to defense and medical, we are well positioned in both of those markets in a really critical product, including a product for COVID and medical side. And we're able to fill extra orders there just to meet the demand from our customers. from our customers. So, yeah, maybe we, if you want to call it a surprise, I would say the demand came in stronger than what we anticipated at the beginning of the quarter. But I can also say that our team executed really well and, you know, worked with our customers very close to deliver the numbers that we did.

Okay. Thanks for taking my questions. Congrats again on the strong quarter and congrats on the strong execution and congratulations and I look forward to the next quarter. So thanks and congrats.

Yeah, thanks, Rupal. Thank you.

Your next question is from Jim Subba with Citigroup.

Thank you very much and for the details. I have two questions and I'll ask them at the same time just so you can determine how you want to answer them or in which order. The first is on the results, it looks like the cloud was down year over year, and I think you expected it to be kind of stable. Kind of what's going on there? Were there deferments of orders or deferments of deliveries or change of architectural systems or anything you can think about? Because your cloud has been, you know, quite strong in the past, and this time it looked like a little bit of a slowdown. And maybe it's COVID-related. I'm not sure. And then my second question is, Yuri, with the CEO change, you made some comments of, hey, it's time, you know, to make some changes for the company. But it looks like these results and outlooks are quite, you know, respectable and stellar. So I'm wondering, have you already implemented those changes, or are the changes still yet to come? How should we think about, you know, your desire for change, yet the results and outlook look very strong? Thank you.

Jim, two good questions. So first, let me answer the one around cloud computing, which for us includes enterprise computing. As I said in my prepared statement, Jim, I think we're down about 8%, 7.9 or something, approximately $20 million from last quarter. We had some push-out with a couple of customers, which in this case was mainly about the timing and to be able to deliver certain products in certain countries. So there was some delay there. Eventually that product will ship, but there's some delay. I would say for us on the whole enterprise, If I looked at the last year, there were some bigger opportunities that got delayed. I don't know if they got delayed because of COVID, but I would say it's probably 50-50. Some of it COVID, and some of it was just the market dynamics that changed for a couple of our customers. But going forward, we believe that that business for us will do well. We continue to invest in enterprise storage products ourselves internally, and we've got some good opportunities that we're working on, and we'll see how those things shake up. Also, I forgot to mention, going forward, we're going to report communication networks and cloud solution, which is basically... computing business we're going to combine together because it's very hard for us to figure out you know what is a community you know let's say optical network system and sometimes it goes in a big data center and what is the storage product so you know based on our internal input we felt is best way to call it communication and cloud networks so hopefully it will be easier for me to explain to you in the future. But, yeah, we're still committed, and we think if you look at that business for us, it's a couple billion-dollar business a year, and I think we should be able to grow it. Again, back to the CEO changes and better. So, yeah, we're doing good today. I think that we're tuning things up, Jim. The changes that I'm making is really putting a better focus on these businesses, bringing one more outside player to help us. So we have three individuals that these two of these three are already here. They've been involved. You know, we just kind of give them more freedom, more flexibility. And I am in my background, you know, I'm around customers and I'm getting back involved in our customers. I would just say we want to do things better. This company has a lot of upside, a lot of leverage. and let's see what we can do in next few years but personally we are very excited what's in front of us i just hope this covet goes away so that we can go and travel and and see our customers but no matter what we have to focus what's in front of us today which in which is improving the company continue to improve in these segments that that we have competitive advantage and i can tell you that our relationship today with our customers, especially in COVID in the last, you know, two quarters, what we're able to accomplish for our customers is that our relationships are best ever because we're able to do, you know, in these circumstances that I didn't think we could even do it ourselves. So we're doing well. Thanks for asking.

Thank you so much for the details.

As a reminder, ladies and gentlemen, if you would like to ask a question at this time, simply press star, then the number one on your telephone keypad. Your next question is from Christian Swab with Craig Hallam.

Hey, Yuri, congrats on another good quarter. You talked about earlier a strong pipeline of new opportunities. Can you give us some color about where you guys are seeing new opportunities? Is that expansion, you know, with existing customers or is that new customers that are helping you?

With medical, you know, I would say both. We got some really good customers that we opened up in the last three, four years. You know, medical sometimes takes a little bit longer time. I see some, with existing programs, some solid demand. You know, we also have a few customers that have a weak demand and, you know, what happened with COVID. But, again, we have, you know, a few customers that are involved in a COVID lab, test equipment, et cetera. That continues to be very strong, and then we're adding a few more. Defense business for us has been strong, especially in our circuit board business, high technology printed circuit boards, and, of course, SEI products and services. That continues strong. We've got some really good programs that we won in the last six months, and we expect that to give us some stability during the year.

Great. And then the strength that you guys called out in the 5G networks, is that predominantly from your historically large customers there, or is that expanding out? Can you give us any color about that? you know, the type of applications, you know, and products and the number of customers that you're dealing with in that area?

Well, we have just a building of 5G networks here. We have multiple customers that are involved in it. But when it comes to the pure 5G, you know, radius and products of that, it's our existing customers. We're working on some newer customers and that. But overall, we expect that business to continue to grow.

Okay, great. And then my last question, again, you know, it's two quarters in a row of extremely strong gross margins and a kind of a lack of visibility and challenging environment. I'm sure lots of changes interquarter with your customer base. Can you just remind us exactly... you know, how you've been able to do that and, you know, why that wouldn't be more sustainable in a better visibility environment?

First of all, it's going to continue to be challenging. You know, we, because, you know, as I mentioned in my prepared statement, there's still a lot of uncertainties when it comes around the COVID, things are changing. Again, I give a lot of credit to our people on the floor, able to really put the systems in place, Well, we, you know, these things have to be monitored, you know, because the most important in this scenario with this virus around is making sure that our people are safe and working. And we're able to accomplish that so far. So we expect that to continue. And then, of course, you know, it all depends on our customers' demand. And so far in certain products, you know, demand has been stable. We expect it to be stable at least, you know, one quarter of the time. And we'll let you know 90 days from now. But, you know, and there's a lot of work. And I'll turn that over to Kurt. He can give you more from financial side. There was a lot of hard work that goes in. Kurt?

Yeah, thanks, Yuri. Yeah, as I said in the prepared remarks, you know, we spend a lot of time and we're spending a lot of time optimizing and continuously improving our Our manufacturing operations, again, I think our ops team has done a great job in a challenging environment doing that. I think also, you know, we've made a lot of investment in the business over the last couple of years, and so we're spending a lot of time trying to leverage just the existing manufacturing infrastructure. I think we've done a good job, you know, CapEx being a relatively low level, but only doing those things where we're going to get their ROIC, so I think we're doing a good job there. I think, you know, and then finally, I think this last quarter, obviously, we had some benefit from the higher revenue, favorable mix, and candidly, some leverage as a result of the 14-week. So I think all those things added together have helped us, but we're taking one quarter at a time, and we'll continue to focus on this margin improvement.

Great. Thank you. No other questions. Okay, thanks, Christian. Just to add a few more things, you know, as Kurt said, I think there's a lot of work, and we'll continue to work on what we said, on our margin improvements and the growth. But before I let you go, I just want to let you know that we'll continue what works for us. As I say, continue to focus on safety of our people. taking care of our customers. I think we have a lot of opportunities. We will continue to develop and expand it to more profitable business. That's the focus. So whatever we do in next, let's say this year or next six, say, next six months to nine months. It's really all about how do we improve the mix of our business so that we can continue to deliver sustainable and predictable results. So you have a commitment that, hey, we're going to work hard and have some fun. So with that, I want to thank you very much. And if you have any more questions, please give us a call. Thank you very much. Thank you. Bye-bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.