TTM Technologies, Inc.

Q4 2020 Earnings Conference Call


spk_0: that afternoon ladies and gentlemen thanks for sending for hi and welcome to the tpm technologies fourth quarter twenty twenty financial result conference call during today's presentation or parties will be analysts and only mode elena the presentation the conference will be open for questions you may first start on if you have a question of reminder this conflict has been recorded today february third twenty twenty one i'm here to fight it again senior director of corporate development investor relations will now review to t and disclosure statement
spk_1: alright thank you forget started i would like to remind everyone that today's park and trains bored looking statements within the meaning of the private securities litigation format and ninety nine by including statement related to pigeons your business our actual results could differ materially from these bored looking statements to the one or more risks and uncertainties including the factors explain your most recent and report on one can carry and other filings with the securities and exchange commission before looking statements are based on marriage with expectations and to add to the date of his presentation tt and is not undertake any obligation to publicly update or revise any of these statements weather as a result of new information future events or other circumstances except as required by law please refer to the gorgeous line the with that i'm a package yeah this be found and reports on them can carry ten que ha registration statement up one as for and the company's other effigy tired
spk_2: we will also this gotham is called certain not gap financial measures such as a job the either such measures should not be considered as a substitute poor the measures prepared and presented in accordance with gap and direct directly reconciliation a bond yeah to get measures included in the company's press release which is filed with the ftc as a go on teaching of website at www dot e d n dot com we've also posted on it's website it slide deck which will we will refer to during the call i will now are term the pall over to tom adnan pts chief executive officer please go ahead top thank you for mayor good afternoon and thank you for joining us for our fourth quarter twenty twenty conference call you continue to be challenging times and i hope it all of you and your families as very unhealthy i'll begin with or a new of our business strategy then an update on how to other nineteen has impacted our business followed by highlights from the quarter and a discussion of our fourth quarter results god show largely a bomb will power with an overview of our keyboard twenty twenty financial performance and argue one twenty twenty guidance you will then opened the called your questions i'm pleased to report that in the fourth quarter of twenty twenty bpm generated revenue the does the midpoint of guidance and non gap about the guided range all and market performed better than guidance why year on year growth in the automotive and authentic and market was offset by weakness in the medical industrial and a gym invasion and networking and telecom and margins in addition continued strong operational execution overcame production of inefficiently and extra cause you to call the nineteen the coded nineteen pandemic and created operational difficulties macro economic uncertainty and employee concerns i am extremely proud of how tdm and leave of work to deliver excellent performance despite the formidable and unprecedented challenges of have this environment i'd also like the highlight that in queue to are we we period and settled argue hundred and fifty million dollar convertible bonds with no delusions of shareholders solid casual from operate and job our net that either coverage here to one point four at the end of june for finally we announce the one hundred million dollars share repurchase program as an additional pool been include shareholder value following the strengthening of our balance sheet with a four year twenty twenty excluding the vested and close businesses tpm group three percent with solid profitability despite had went from covered nineteen and the dragon and chinese currency full year cash welcome operations was two hundred and eighty seven point two million dollars and along with the sale of the mobility business enabled us to repay debt and reduce leverage putting up in a strong position for the future next i would like to provide an update on our long term strategy please he ended on a journey to transform our business to be less sick ago and more differentiated we believe over time investors will be rewarded with more stable growth strong casual performance and improving margins a key part of that strategy will be bad capability and products that are complimentary to our current offerings both internally and through acquisition looking forward card balance sheet isn't a drug usage and to prove to pursue further acquisition as well as to support our organic in that means i would also like to update you on the their situation for the majority of twenty twenty we managed through covered nineteen with relatively minor impact the like reduction currently the combination of colder weather in north america and the return holiday feed them has created a surge in encoded cases since many of these interactions are occurring in regions where our manufacturing locations or plants are located we have also seen an increase of covert cases with within our employee population in north america and respected condition to continue into twenty twenty one while many of those that were infected return to work after being cleared following testing and quarantine protocols we kill have a number of employees in quarantine which is causing some production inefficiencies we continue to conduct rapid casting contact rate thing and to quarantine individuals who are in close contact with infected team members in addition to deep cleaning affected working and we also continue other measures flattered extensive internal communication baskin temperature checks and proper get something in our facilities worldwide because of the stringent preventative measures in place and our culture of transparency in communications leave events and have less impact on our operations the night of in the cage without these precautions now i'd like to review our and markets all historical and market disclosures exclude the mobility there this unit and the to yeah that was the topic production in december we're more detail than and market disclosures please refer to our fourth quarter earnings press really and cages four and five of our earnings presentation both of which i posted on our website the aerospace and defense and market represented thirty eight percent of total fourth quarter sales compared with thirty seven percent of keyboard he thousand and nineteen sales and thirty seven percent of sales and you to each one twenty we expect fails and you want to your and market to represent about thirty percent of our total sales we thought flower girl in our in each segment with you for revenues up to protect your are near to a record high and in a in the record program backlog of six hundred and eighty seven million dollars compared to six hundred million dollars in the year ago quarter strengthen defense more than offset weakness in the commercial aerospace and market growth in the defense market is a result of are strong strategic program alignment and keep looking for ongoing translates programs we thought significant bookings in the quarter for a youtube radar systems for rethought read the army navy transportable surveillance radar to protect against benefit nothing lockheed five seven a variant of the u s l r d our program for the f one hand spanish forget as well as northrop upgrade of f sixteen fighter jets your scale about agile been radar with the full year therapy and defend increased seven percent and reached a record high as he had benefited from increase defense spending and demand for multiple new programs you are needed to be the twenty twenty one and the a passed into law was by artisan support which he get the defense budget could stayed table at a high level going forward even are solid program alignment you would expect to outperform lot defense budget growth in twenty twenty one we expect growth be in line with market projections of to the board with that driven by the defense side of our business we'd get the commercial arab great fortune which was sixteen percent of our am the market and twenty twenty to be down in twenty twenty one automotive fails represented seventeen percent of total sales during the fourth quarter twenty twenty compared to fifteen percent to the year ago quarter and thirteen present during the third quarter of twenty twenty automotive grew almost forty percent sequentially following the growth in t three and returned he year on year growth of fourteen percent we've tracked automotive to contribute eighteen percent of total sales and que one for the full year automotive declined eleven percent and both demand and supply were affected by cold night came in the for capital year followed by a recovery and the second half of year in twenty twenty advanced technology was twenty six percent of our automotive and market compared to twenty percent in two thousand and nineteen for the full year we wanted design when when a lifetime value of six hundred and twenty nine million dollars compared to four hundred and seventy five million dollars in two thousand and nineteen new twenty twenty one year to be anticipated stronger died check the market to the about longer term forget of three to six percent the medical industrial instrumentation and market contributed fifteen percent of our total sales in the fourth quarter compared to seventeen percent in the year ago quarter and nineteen percent in the third quarter twenty twenty for the first quarter when you factor market to the fifteen percent of revenues
spk_3: for the full year
spk_2: yeah i and i grew twelve percent well above the trend line due to strengthen our instrumentation customers the typically automated tactical event and strengthen our medical customers particularly for emergency requirement of printed circuit boards you didn't ventilator and page and monitoring system applied for the treatment of cold and nineteen in twenty twenty one week that growth to be below that few to four percent for caf as we'd pregnant he moderated demand following the extraordinary strength of twenty twenty networking communicate and the accounted for sixteen percent of revenue during the fourth quarter twenty twenty good compared to seventeen percent in the fourth quarter twenty nine game and seventeen percent of revenue in the third quarter of twenty twenty we thought relative strength in the networking segment compared to a telecom segment and five he builds pause temporarily in key one be affected and market need fifteen percent of revenue due primarily to uncertainty around the dining and ray up of seemed to rebuild for five g in china for the full year networking community agents decline four percent lead the actors market to go but the below the longer term for cat of five to eight percent growth in twenty twenty one you to be anticipated fast start nearly part of the year followed by a ramp of five years infrastructure needs in the back half of the year complemented by growth and network you failed them the computing storage peripheral than market never done a thirteen percent of total sales in the fourth quarter compared to thirteen percent and for a two thousand nine game and in the third quarter and twenty twenty and market was up to protect your on your as growth and our semiconductor customers off that modest near on your declined from our data center customers read that revenue in this and market to represents approximately fourteen percent of first quarter sale for the full year computing room nine percent as we thought world the our data center and semiconductor customers in twenty twenty one we're back to be about the forecasted and market growth of one two three percent driven primarily by delegated center growth next covered some details from the fourth quarter note that all of the following operations metrics as food the mobility business unit and the to year that plants will be closed get information is also available on page six of our earnings presentation during the quarter or advanced technology that of which include h d i a huge influx and are up subsystems and components accounted for approximately thirty one percent of our revenue this compared to approximately twenty seven percent and year ago quarter and twenty nine percent send you three we are continuing to procure new business opportunities and increase customer design engagement activities that will leverage are advanced technology capabilities and new markets capacity utilization in asia pacific with fifty three percent in good for compared with fifty one percent in the year ago quarter and sixty three percent two three our overall capacity utilization in north america was fifty eight percent in cute dream compared to get you prefer in the year ago quarter and fifty one percent and you three our top five customers contributed thirty four percent of total sales in the fourth quarter twenty twenty compared to thirty picks percent in the third quarter twenty twenty or largest customer accounted for fourteen percent of sales in the fourth quarter at the end of que four or ninety day backlog which and subject to cancellation was four hundred and eighty three point nine million dollars compared to four hundred and two point eight million dollars at the end of the fourth quarter last year and four hundred and thirty seven point eight million dollars at the end of you three rpg the book to bill radio as one point one nine for the three months and being the timber twenty eight i'd like to conclude by again begging aren't ways for continuing to contribute to keep young and are critical mention of inspiring innovation with our customers their efforts are particularly appreciated during these times by our customers in critical federal areas like defense and the medical industries despite the coven nine game and currently related challenges challenges you faced and twenty twenty or didn't perform better than we expected as a direct result of operational excellence and market diversification and are employed concerted effort to engage and support parker
spk_4: customers
spk_2: we've also taken positive strategic move the will strengthen ppm for the longer now card will review our financial performance for the fourth quarter god thanks tom and good afternoon everyone the mentioned earlier and twenty point eight you can announce the closing of the theater with the mobility business in me as much that because you're keeping him gap results reflect the mobility business unit as the discontinued operation during the call i will discuss not yeah financial information which excludes the result for the mobility business you the enough to do it it's still included in both the gap and non gap result we have reported please refer to be earned schedule for additional detail on exited visitors and continuing operation page one of our earned presentation and he appendix for weren't worth repeating region also contains information for the fourth quarter yet sales from continuing operations were five hundred and forty three point eight million dollars compared to five hundred and thirty five point seven million dollars in the fourth quarter of twenty nineteen the year over year decrease in revenue would be to decline that our medical industrial instrumentation and networking telecoms and market with roughly a third of the decline coming from me he allowed to plant which we had cool it was particularly harsh goodness is partially offset by growth in our automotive aerospace and defense and computing and market excluding back to the to be in a clamp shut down our revenue good down one point one percent year on year operating income from continuing operators for the fourth quarter point when he was twenty nine point two million dollars compared to get operating income of twenty nine point four million dollars in the fourth quarter of last year on it galbraith net income from continuing operations in the court a point when he was thirty nine million dollars or thirty four cents per diluted share this compares to a net income of ten point eight million dollars or ten per per diluted share in the fourth quarter of twenty nine the remainder my comical focus on are non gap financial performance or not yeah it exclude north american mobility there this year nine or catch right i'm emily rated and restructuring cause certain noncash expect died and another on your or frequent items leonard yeah financial information for nato doctors to see the company through the eyes the manager and a pathetic comparison with expectations and prior period good margin in the fourth quarter with seventeen point five percent compared to nineteen point one person in a fourth quarter of point i d the year over year degree in gross margin would due to lola run a new home nineteen the rated part in associated labor and efficiency and for exchange edwin with increased our china be caught telling and marketing expenses thirteen point two million dollars in the fourth quarter or two point nine percent of natural birth and seventeen million or three point two percent on that failed a year ago
spk_1: fourth quarter dna extent with twenty four point four million dollars or four point seven percent of yet failed compared to twenty nine point eight million dollars or five point six percent of no tail and the same quarter a year ago
spk_2: a coupon that forty connie aren't be with four point six million dollars or point eight seven percent of revenues that's compared to four point three million dollars or point eight one percent in a year ago quarter we're operating margin in war with nine percent is compared the nine point six percent in the same quarter last year he can extend to the eleven point six million dollars in the fourth quarter a decrease of four point eight million dollars from the tape or last year to the lower interest rate and the term loan repayment a four hundred million dollars during the quarter we recorded five point three million dollars for exchange losses government advantage reduce the net was the one point nine million dollars or apartment approximately two said the dps that compared to a lot of one point eight million dollars or partner wants them to be as a cue for of last year or effective tax rate was a negative nineteen percent of the fourth quarter you know a change in the not get full year tax rate from fifty percent to six percent fourth quarter net income was forty point two million dollars for thirty seven cents per diluted share this compared the fourth quarter twenty nineteen their income of twenty seven point five million dollars or twenty victims producer i jump it either does for the fourth quarter with fifty eight point two million dollars or thirty percent of that feel compared with fourth quarter twenty nine teenager the got a seventy two point eight million dollars or thirteen point six percent of net fail depreciation for the fourth quarter with twenty two point seven million dollars net capital spending for the quarter or drinking point seven million dollars our balance sheet and that could have the positioned remain very strong cash flow from operations with fifty five point five million dollars in the fourth quarter or ten point six percent of revenue cash and cash equivalents at the end of the fourth quarter twenty twenty more four hundred and fifty one point two million dollars in cash number in after we pay two hundred and fifty million dollars to settle a convertible blonde and december fifteen your cash number of feeling at the end of the fourth quarter or net debt divided by last twelve months needed up with one point four times during the quarter we all for the kid too much upgrade for moody to be a to the tarmac hit comments today me out the two year one hundred million dollar share repurchase program as we continue to transform our company we have modified our capital allocation strategy enable start what he'll be our priority bring treating shareholder value but at the company become more consistent enough cash generating performance we believe that we can be like both tool to entry cheryl died there i'd like to turn our guys from first quarter looking ahead we believe the cold in nineteen they continue to cause and market demand disruption supply chain challenges and world in efficiently without production the good mind we have been a total revenue for the first quarter twenty twenty one to been away four hundred and ninety five hundred and thirty million dollars next that not get early in a range of nineteen to twenty five cents per diluted share gps war camp and based on a a cure cab approximately one hundred and nine or shares are share count guidance the group blue security patches often than ours need but note here that tokyo with are once you believe me fact that as teenage that will be about eight point four percent of revenue and the particular and are the to be about one percent of revenue we expect any which that the total approximately eleven million dollars and finally the at the made are effective tax rate between ten and fifteen percent to his you ended up and you can add some are will offer the following additional information during the point during the first quarter we expect to record amortization of intangible of about ten point nine million dollars stock based compensation expand of a four point seven million dollars nine cat hedrick expensive of approximately zero point five million dollars and we have to make a huge that will be approximately twenty two million dollars finally i'd like to now will be purchased getting virtually and the cowan aerospace and defense and industrial conference on february nine the jp morgan leveraged funny have been ideal conference on march first and a true and technology networking services conference on march ninth
spk_0: that concludes the prepared remarks the know like not gonna like for questions dwight i thank you i feel like asked us at this time to say my daughter a single us i passing star one on your telephone keep at it has a speaker phone please make sure you meet options turned off all your signal to reach us once again star one to ask a question of has purchased free fall
spk_5: i'm not affect our first question i'm not sharing with stifle i guess like iraq good afternoon i wanted to ask a question regarding that the for guidance sit back into that a gross margin number and looks like got going to be down as sequentially i'd be a modest on revenue decline it's on i'm trying to figure out what one of the drivers that bad i know that they're it we're hearing i'm on a lot of these happens cause that you are are incremental costs arm supply costs logistics cause or materials cause i know you've spent a lot on on copper another thing so are our dirty cause headwinds or that you're seeing
spk_2: the next quarter to
spk_5: why are you go out of the question year over year map
spk_2: four year over year looks like you're you're good sequentially okay sequentially so when you look acumen compared to keep war and looking at our good martin market your right to learn that that would be down blindly are people actually come on the more like what's really driving network is logically our revenue down sequentially little bit now lot of that comes from the dns business which are the to point plant of we'd be completed up production and a not been air in few more until there a little bit of plop the goes away from man that offer what we have been chinese new year in he one marketed advantage you for i'm in although revenue and stronger and asia are we have work to that chinese new year and yet the pay out a pain which this is a bit of a headwind and then a point where we continue to challenge to be challenged would be strengthening chinese currently wage should be quite sure you look at the modest increase i've watched every gay a year over year the bigger than one of those are the three really big issues that
spk_5: backing up making he gradually the cold it is you was pretty challenging eighty four weeks back to the be the similar he want for that not really a variant it was one okay and it on on mac a covert issue could you clarify perhaps the number one for you that have been affected and and and the cost associated with that maybe on a basis points
spk_2: metric yard and in terms of the head when you're ah our top comment on the employee information but in regards to prod and be in the during their certainly direct out a party card the been like masks and extra cleaning side with a things like that which we can applied that part of relatively modern what proving to be the bigger challenge you are although our plan for open when you have a very significant sickness or quarantining you know in in as a precautionary measure to boy people getting that you have production and efficiency the department my the down one day or you have to work overtime to keep up production schedule
spk_3: those are the kind of production inefficiencies of were referring to that were a much more pronounced was a few more and we'd take to have them additional challenges and que one on a director her qualification in his hip hop a deal but it was it was a substantial amount in terms of the a be a pack of the between from the bar
spk_2: mark labor efficiency
spk_6: to do what at a the yeah
spk_2: yeah i would just mom and pop up no one wanted was the other units agency mad as we thought without using the patch knew he had a yeah structure up with new delhi in north america because our plan for a smaller we will well then yeah they're dealing with i would challenge leagues around new products are advancing complexity of technology we bring and tiger teams for my other plants are yards out a lot of involvement by hand down from management
spk_6: obviously road the the to do a can not blinded comedy that we've been presented to him out from doing that you know from from organizing that kind of assistant and that go on him interact with action inefficiency that that god talk about very difficult to quantify but clearly yeah added that been on yelled in also an impact on topic
spk_2: production the other be compared to of our labor force as a about about ten percent to date of our on our labor force has been impacted by kogan or during the course the obvious pandemic mods help what we saw i and i think others he'd seen as is a real up kick yeah the incident was in cages i'm starting mid november carrying through our december and he up mid january we may be charging the see a little a little bit of peel off their we're we're encouraged by that the were also being very ah careful on you know good and i wow what has happened here it seems like every cell joe of that leads to a lot or leads to another guy in florida gators and end up so were we're very was in the third night
spk_5: to see the advocate to the third came down a that by doubling up not counting on that
spk_7: okay thanks very much for helpful
spk_0: document
spk_2: on her sex tell weinstein mistress security great i'm gonna get resolved summer by back announcement on expertise in my question first i'm wondering if kobe is restricting your revenue way either and que pour salt and i can i can jump in on that yeah that definitely well and and from the standpoint of our productivity and and are north america after cod have the impact vacuum in you for ah will have an impact in one yeah that's it i just got yeah again have that impact on yelp that impact on total production and that todd really hit on and it's us does it give had gone to forecast of uganda quarter that in different tells him or in a production jobs may be more impact than other and that causes in and imbalance and in the operations to add that absolutely impacts overall production in there for revenue i'm gonna have to ask another but our also asked if you have any way to quantify what the short might have been like if you've been a coven putting margin compact decide how much potential revenue do think you left on the table butter the fall on question is to what degree could you been affected by shortages you girl for your own business or from that perspective on your customers not being able to get chips or to put on boards to learn lamb yeah so in terms of the impact on rather again admitted it is difficult to lot to quantify what what i can tell you it if you know if you look at que one as an example an aerospace and defense were relatively flat athletes to that of course is the i years and commercial aerospace being soft ah but i also have a significant people that is guy is our inability to get to that girl production out and job he think about what would be a normal great three are you that aerospace and defense little area where and every talk about being in and that kinda for the same range more towards the i am a course last year we grew seven percent yeah was clearly i yeah we recorded situation an that done that are are to of course our brooklyn lay out the and lag between quarter that job the yeah cause it's pretty pretty significant their interns don't have other shortages now they're impacting our dignity yeah good idea i think know you're you're referring really good for components to have an important leave that been reading along with everyone else without the kid shortages how that relates to automotive or what i know humid yeah are not on the edges meeting with the ship shipmates man yeah i'll be affected by by customers running into a shortage of than it has not had a had a large it an impact on us we are continuing our particularly in automotive to monitor the situation carefully
spk_8: and you know and and and we're thrilled to see the booking not coming in or they have a good still watching those have polls
spk_9: out of the inventory have to see it that is at all impacted so far will get but damn you know i would expect eventually that going to check on the supply chain of interview with that we would start to see or your lord of the impact in terms of humboldt
spk_2: so that's what we're watching so far so good but again something to keep keep either big thank you and you thomas next stephen box off thanks good afternoon i'm first question i'm curious if you could go into little bit more detail on the i'm a big uptick in need percent of or revenues try to advanced technologies she said it when some twenty percent between six percent and so what what advanced technologies was driving at and what and application from then i had a follow up sure i'm young as the predominantly that's why i'm far as far as driving at in our outgoing and be a that other and and other autonomous vehicle related venture i need to club that the bigger driver secondary fact there is d i i and i and the impact of each the i am now positively him that that's more tied to like infotainment i am infotainment guy developments while and miniaturisation the components he can get more and more factor driving a need reach the i
spk_10: are those areas that got more are out loud than anything else thought well i'll tell you the booking that we talked about in the past like in the a that area now translating into lot in the revenues
spk_11: understood and then in terms of other data center than the urging mutations area can you to sort of talk a little bit more specifically about your expectations for hygiene data center
spk_2: i guess you're still waiting to hear it in terms of ah actual orders for china five g but i'd love to get so they get your field for an ugly the yankee one in i think and peppers markets thank you germantown yeah so under a separate that live you're catching them and the way the way we will get five five the bargain he lied or networking communications and market and sell popular after now blog a little bit about data center terms with fall into are computed and market on am i mean a networking communication fly five g what we want me thought last year was that you know gary of the real strong demand are coming out of china related to feed to of their five the investment now we've all been waiting for floured phase three and literally that was slated to take part in the fall of last year with the lead to this year the question question really revolving around would it be before chinese new year we're after i would say definitively a will be after chinese new year and frankly i think the and ah the chinese government is ah monitoring the situation with while way i there are design development mom and i will time of he'd read ah for the right finding and were not wally and and others are ready to to up with id equipment
spk_12: it's only a little better but know i think that's where where the uncertainty can't deny any glitter that from happening near ah situation where we should see that
spk_2: could give you an advantage of at least have literally ah what's out there are the chinese government and said the last year approximately five hundred and eighty thousand eight patients were installed i am what their lives what they're calling for this year is closer to six hundred thousand and then what you can pick up an internal that the other factors rest of world which frankly was very small last year that you know that asking it from market for here somewhere around a hundred and fifty thousand big data and get compared to that six hundred thousand in china this year i would expect a t are welcome forecasters are expecting a t the good up yet there could be two hundred and fifty thousand and could be more of that and get anywhere between two hundred and fifty thousand and four hundred thousand nine other for catholic the that i've seen that's going to be driven out of north america and we're starting to feed them up the initial find of that followed by a europe and then rest of asia so on bad activity is that is what we're starting that units he that out here which is encouraging and them while we're waiting for from a real you know a real significant can't blame of be that sign up pete combined with for the rest of the world expansion of the course of the year that's why we've been pointing really you know this is more of a second half of the year phenomenal in the first thousand year which we expect will be sought or in the meantime networking will continue to be out because along and in terms of that and market is data center trend always always done interesting you know last year second quarter with phenomenal with the the data
spk_13: require without yards riding some very young
spk_2: urgent need for our equipment i would say that we'd come off of that killed one was better than we expected which is encouraging i think you're one or looks good on the data fetter requirement standpoint and again and the longer term trend where there in terms of beta or needs that job that will help little to help at the center demand to continue to grow this year as are encouraging now on that side
spk_6: great that super helpful thank you very much
spk_2: the next of two sandwich with i good afternoon
spk_6: chelsea whether they can smoke increasing and you uploaded impact it's had him
spk_2: on your workforce you have one have you gone soon be are you doing some orders are coming in from your customers were equal could be tied to this one to be ads or else worth a listen kids needs to to increase i'm not sure i caught all of that the and new can he repeated the lifeblood joined the club and get out of up breaking up that oh the question i hadn't since regarding yeah it impacted colder and cooling it's ten he added intense of the workforce and and she's from brooklyn is listening to their your body in words that have been coming in from customers who themselves are being impacted by this are you didn't see that at all yet or just curious if it to playing into any of the forecast what i would play and and as we as you can get it is primarily going to be aerospace and defense were barely more than here that and and and i think they're than the supply chain as a whole have been added challenge our customers are moving our programs around i'd say it's pretty dynamic but they're moving program needs allowed to few accommodate added situation that supply chain until five hundred wanted a pretty good job on the gm oh wow i certainly allow the tpm and others to continue to work to shell out there is also i think you know part of that component if you give think broadly about components shortages i'm part of that is probably most impacted by the global situation as well and got i you know young for it hard to separate the two thousand i would say that overall you know customers are adjusting to them and they're allowing us to continue as shipments on on the critical programs and then and and had just been need they look out over cabin corners not a bad job
spk_3: and i get out there and i think began they've done a really good job of handling and what is a very complex supply chain situation
spk_2: right i know you guys don't guy beyond the quarter from as we start coming out of it sounds like but i'm over the next several months and be she more the vaccine getting out there guess should be it would seem like there should be submersed kinda gross margins just on the bench and said the disruption that he'd seen kids or negative statements to one is build a to think about it well there's no battle and world harry we're here we're carrying on i encourage you welcome him he born he won related to call that it from you the impact on our cost roger on to those of inefficiency when we talked about of with time of never get ramping and in case on an impact one for he mom now yeah you would expect that to read as as we did you know the country is rumored world gets covered the jewish people in ordinary to get destroyed one hundred under better control exactly few that the that point i think that had been we can all watch the news i can get on the vaccine will allow but i think there's no doubt that certainly had holding a cackling what my you the comparisons get eg a bomb on today in the commercial aerospace carrying when want to dig here last year for you in that area if he couldn't from from a revenue standpoint you know really i really know that your dream so dry didn't you you started energy really impacted us than and in two three and and team for anger and so i think that when you know again we're going to go through the court with a year at it until we get that to that second half of year it's gonna be a tough a tough compare garrett and and last question they a young and would seeing more than two towards the end of the new administration of it as by american and need to the edge and yeah i'm just wondering do you see any dinner to live in shared their to real that it might have been in terms of it's supply chains we dance yeah go out it is own guy and and i get there early too hard to predict how that will all come together on you clearly when when we were canada a we are well established in north america we have the out here we have the opportunity of that certainly the footprint we can continue to invest in hour as ah the administration wants as ad by america initiative they are you know what what we're what we are to certainly job thinking purely is a lot to do gym with ah if you start to think about our did as you start to think about a few things wanna die supply chain whether it's our land that laminate supply chain whether it's equipment that like in there are a number of areas where frankly and yet the of the us infrastructure is is insufficient for we end up importing and and we are we we bear quite a bit of cost associated with that a good second area is a jet simply volume manufactured because that i yeah we we an allergy and really need your high next low volume are tied up production in in the in the us and jo there needs to get recognition of like between our customer base for apps encouraged by the us government that i get it makes sense for a larger scale commercial production i can come back into the you at and then i need then you're looking at a full pr infrastructure requirement organ art supply chain as well as in the scale or demanded by those customers are that's that's what i would get loud get interesting but yeah learn you know obviously watching that globally and at least added with getting around it bob you know could could be encouraging longer term but it does sound like it's very early days at either
spk_0: hm i did this still just lots of challenges the and a ninety one execute on this yeah we're we're you know it the traffic always that the always starts with that customers
spk_14: yeah to the extent that our customers are looking have that obliged i need ah
spk_2: we we will be our outlaws and we will encourage our supply chain the that most good to meet meet those needs
spk_6: i'm so that that where it all starts
spk_2: okay thanks lot
spk_6: and you
spk_2: at us reminder to our audience place last one follow up i will take our next question of anymore your attention taking my questions a little late to the cold so as some of these my have been tough sponsors two questions or into stuff on the also funny thing at signs in the customer buys it would seem to know dozens of companies entering this year the spices necessarily beads at the moment and someone's strikes me that there must be some there logos and in your makes by now that said puts him in lightness yeah plan interesting and an adult and thank you for for the question out of broadened slightly i think i think i'm what interesting to me as we look at at the automotive as a and and what happened in the fourth quarter is that we'd meet sauna strong year on year our globe across across the board but if you start to look regionally and where we really were we challenge longest road continue to be asia i and then with europe coming in at right after asia and north america glad you're on your glove the not not the not insane level and what i'd attribute that is what what new planet and on we we have seen a lot of in a region and any the date certainly in asia and i and and that has helped our customers as a tier one and primarily tier one
spk_14: suppliers i think that's really help their business and it energize their business and consumer demand has come back and so that's really encouraging feature as a gun on the european side also i it's encouraging see fetus kind of growth be glad if you remember we were yelling a year ago with really that transition from out of evil and the big question in europe was wherever that the man go as a as a consumer transition that a one i think the answer is starting to emerge willing more and more at ease the adoption and yet some good solid demand for for internal combustion engine as well but the on t v certainly as playing a role
spk_2: and in that geography as well so
spk_14: so yeah for us that that yes there are directly at meant for some of these new customers i'll get me wrong and they're doing development work we're doing a lot of work for them but that that the major volume continues to be with the deer line and they're turning around and they're seeing a very different landscape of they look out at their customer base
spk_2: trigger an awful lot really goes on the also it's like and getting her puts more and the ice saw error on the mets the yum the supply constraints not related to cause people relate to the mods do i'm in silicon with it's a micro controlling so since moved on to
spk_14: technology i
spk_15: oh is that affecting you
spk_0: yeah so is oh yeah i'd i'd i did canada bit on that the are yeah
spk_16: the straight answer calls were not
spk_2: you haven't seen it yet our smoking very strong demand you can see that reflected in and in the backlog
spk_17: numbers language that are strong force coming out of the that of the fourth quarter or but we're watching it really closely and and the
spk_2: and that and that gonna be a function of of hub yeah at our have the inventory and the pull out of those adults have so we're watching it closely and and i would expect that yeah there will be an impact in here eventually but it didn't hadn't hadn't materialized yeah for good thanks so much thank you what's next best actress and shroff what kind of it i agree execution is challenging environment is is it wanted to be an optimist in this environment to assume in a to accelerate and and get into the fallen and everything's autumn or more predictable and safer environment ah well as we have phase three ah production starting a new light nation up in the figured asia pacific and divided think about you know how much gross margin could improve your flight guidance and into one to something we could be executed as you know in the back after the year you know could you allowed bridge that gap for us sure i'll pick a crack at that i mean what we talk about it is really looking at that revenue level and what happens right i pod maintain that's great and if preview the page three with if i give a lot of china kick in a trailer to pick por que una parte the ramp from there and we have a good chunk an app that can be very constructive when we looked our incremental margins associated with that revenue and come through we're looking at somewhere in that are you twenty to thirty but it's very twenty five to thirty percent depending on the complexity the higher the complexity the higher the incremental margins put on your a through to are operating income level and as a result of that income earner that we pick up and told people are to the time quoted in his comment earlier your utility
spk_18: some level than what age are relatively low rent alone sixty
spk_2: most sixty percent range which is very low number for on historically and we have plenty of capacity and capability as we got the atom labor and so forth but in terms of the fixed infrastructure when we have that in place and some reason or rich flow through on incremental eminem so if we look at our and markets and say okay mention the first have to be a bit of a tough compare because we had very excited medical industrial and and and on to some degree the telecom and networking telecom section and the per capita for twenty nineteen you're like people can't compare their didn't know things on adults and market strengthen and to go to the year on that's gonna have a nice flow through of if auto remain strong or continue to improve keep in mind that as excited as the armada worth no not yet back to are turning eighteen level and can't hold it in in some of the information provided no our lifetime when in automotive this past year with a with a very well but number on and it network on top of a very
spk_6: good year last year in when our knowledge the lag year but we're building the pipeline and we get that incremental revenue through that that good business because he can a lot of a fixed costs are already taken care of so we we look for a nice flow through as we grow revenue in the various markets and were competing and and we're we're up in the
spk_2: but that of we go to the big opportunity particularly the not commercial and markets where we have all over york are under utilized in our facility
spk_19: particularly at asia
spk_2: great good that that integrators military question has to deal with enter and on it is there any way for you to quantify how big their differences today
spk_6: i'll we well don't really have we don't think about it that way
spk_2: club i yeah one of what i like the point b if you think about
spk_3: as a business the required which is being integrated with iowa state in the fans business
spk_2: what i would look at it is that than the overall backlog in and then we acquired why and or in two thousand and eighteen that that overall backlog of in the blood and million dollar range and and are deeply the you know we're now we're now reaching record levels come from a from an overall backlog standpoint and and tel aviv university look at at that uplifted six hundred and eighty seven million not all that but the that i have a good majority of it is in the are out spades marriage was is a direct contribution from from the combination of the two captains and so bad that the impact that glad you know them that that nearly the combination is having that's probably the best you know that feel i can give them gifts that on the entering and back or is is there even a margin similar to what they were at with you acquire them and their maturity higher than your combined business fallen should we assume that they're still i and valley v i'm the only bought the only had with a heavy when we'd had their on the commercial side of the are at the that that segment to break out but that that outside we didn't need the the law way the death or which which added he added that book on revenue and on on profitability than other that it's yards are very similar similar kind of margins
spk_3: okay and that gets me to the punch like it so if you look at that business it is back in your bloke mass and you you thought you know what a market multiple on that business they'd be if it was treated by itself and not hidden inside your company it it could be the line cheered your market cap
spk_0: there are you guys exploring that or is it to are integrated for that to ever be something
spk_6: to to contemplate yeah alert were very were completely integrated the heck quit boy
spk_20: south korea i'd i think that god
spk_21: you know that at this point i the company where with that it's really the
spk_2: when we're looking at at i have paid in the fed isn't that the integrated good didn't them and that you're not eating a of he pivoted integrated module ira or our car designed inspect back element on that that utilizes the small company capability either we may and other programs be a be supplying a portion may be that printed circuit board lunch and needed a component boynton into a turn program but it that ability to to really be of flax to you the customer needs that that is so critical in the combination wow you're short answer is with nearly as an integrated i'll heavily a greater than that right no other questions that thinks that baggage i've had a sense of like crawford with iraq i'm all you if the general hospital it's about guy i look up on earth other mode of thought was withdrawn the giveaway to qualify much about smoking related to your new for ah i've read like margin now work with should perhaps in the future give up his adenoids that my son while up like fundamentalism if that that a great great example on major you know the empire of of how the did that work today go on in the the i look what we eventually acquired yeah i agree with the capability to produce live in high next more volume substrate like a joke good boy you know ganz circuitry for miniaturization there are different way the product then move move remarks are printed period boy facility into into the market one added as early as an internal supplier goes week we need them about capability for our our out component good lesson flow what were an internal customer another way as in the aerospace and defense is that we have customers that bed that need those words we also have customers they're very integrated and and a micro electronics you know and entered family a module so now they're looking at how what can we do and in turn to integrate and out of iraq out of our facility that would combine that board capability where the rf component capability and feel a flaw module and those are longer term programs that were feeding the day when you're planning to tell you to the ritalin yeah no three three to five years from now so if you look at their at the overall revenue or that use today the biggest portion and is what we moving internally for our own component needs if you look at that business three years from now it going a very different and kennedy i'm a combination of module business and and board goodness and then and internal peace
spk_22: so that the kind of development you know that that the organization is achieving now abide by both and the i agree element and what we brought him with and or and and combine that with the overall ppv good villain in the dm brought in table
spk_0: oh okay i get a lot of lesson alone
spk_2: is it more council them on your met with for that eighty percent you the guy on your target model arm or more your accidents i think you know how did we have a short term issues with congress that we have to work through but beyond that we need to top line growth we can drastically present utilization in your commercial facility and and knowledge will turbine oriented facility in a get there we talk about the need to get armor levels not to and caught him at long range on an annual basis of about two point three billion will not lead to billion now the we need to go to dinner to be able to adequately good
spk_0: current for and that's what we're driving for now he's an opportunity he was a revenue growth target the mid single digit organically on you can get there and the time from the we're looking at an arbitrary other thing can happen to like there quicker are slower depending on macro level the acquisition brother thing

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