Knowles Corporation

Good afternoon and welcome to the Knowles Corporation second quarter 2020 financial results conference call. At this time, all participants are in a 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 one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. With that said, here with opening remarks is NOLS Vice President of Investor Relations, Mike Knapp. Please go ahead.

Thanks, David, and welcome to our Q2 2020 earnings call. I'm Mike Knapp, and presenting with me on the call today are Jeffrey New, our President and Chief Executive Officer, and John Anderson, our Senior Vice President and Chief Financial Officer. Our call today will include remarks about future expectations, plans, and prospects for NOLS, which constitute forward-looking statements for purposes of the safe harbor provisions under applicable federal securities laws. Forward-looking statements in this call will include comments about demand for company products, anticipated trends in company sales and expenses and profits, and involve a number of risks and uncertainties that could cause actual results to differ materially from current expectations. The company urges investors to review the risks and uncertainties in the company's SEC filings, included but not limited to the annual report on Form 10-K for the fiscal year ended December 31, 2019, periodic reports filed from time to time with the SEC, and risks and uncertainties identified in today's earnings release. All forward-looking statements are made as of the date of this call, and NOLS disclaims any duty to update such statements except as required by law. In addition, pursuant to Reg G, any non-GAAP financial measures referenced during today's conference call can be found in our press release posted on our website at nols.com, including a reconciliation to the most directly comparable GAAP measures. All financial references on this call will be on a non-GAAP continuing operations basis unless otherwise indicated. Also, we've made selected financial information available in webcast slides, which can be found in the IR section of our website. With that, let me turn the call over to Jeff, who will provide some details on our results.

Jeff. Thanks, Mike, and thanks to all of you for joining us today. For Q2, we reported revenue of $152 million with better-than-expected sales of MEMS microphones and precision device solutions during the quarter. We also saw sales into the hearing health market improve throughout the quarter, which gives me confidence that Q2 marked the bottom for demand in this end market. Gross margins were 32.3%, and our loss per share was one cent. In audio, an inventory write-off associated with reduced investment in intelligent audio, as well as lower factory utilization and sales, weighed on margins. This was partially offset by sequential improvement in precision device margins. Let me begin with an update on customer demand across our end markets. In Hearing Health, revenue was down close to 50% from normal demand due to COVID-19, with sales increasing each month as we move through Q2. Earlier this month, one of our large customers announced that sales during the three months of Q2 were running significantly below prior year levels, but they saw stronger sales in the back half the quarter. In spite of mixed conditions in the U.S., I was pleased to see momentum in demand picking up in the second half of the quarter with improving market conditions in Europe and Asia markets. Based on our current backlog, we expect significant sequential sales growth in this end market in Q3. That said, I still believe it could take until 2021 to get back to 2019 revenue run rates. The mobile market represented less than 25% of total company sales in Q2. We saw shipments into the mobile market improve sequentially as stronger sales to Chinese and North American OEMs were partially offset by lower sales to a Korean OEM. Microphone sales into non-mobile end markets also increased sequentially, with much of the growth being driven by computing as work-from-home trends remain in place. Overall, microphone sales were up 4% sequentially in Q2 versus our expectations of them being flat. We are anticipating strong sequential growth in microphone sales in Q3, driven by continued strength in non-mobile applications and recovery in the mobile market. In precision devices, Q2 sales were up 11% sequentially, better than the 5% we expected going into the quarter, driven by continued demand for our differentiated products across the telecom and defense markets, partially offset by lower MedTech demand. Gross margins also increased from Q1 due to operational improvements and price recovery for increased palladium costs. In Q2 and early Q3, we have seen a slowdown in MedTech demand for high-performance capacitors as more states are reporting rising COVID cases and ICU availability has decreased. This has led hospitals to suspend or slow elective procedures for implantable devices. It has also delayed installations of new MRIs that use our product. We expect this slowdown in MedTech to be temporary in nature and remain confident in year-over-year growth for precision devices in 2020. Now let me discuss where we stand from an operations standpoint. For our manufacturer facilities around the globe, although we continue to operate below full capacity due to demand, we are now largely back to normal in terms of government restrictions. We remain diligent with the processes we put in place to keep our employees safe. One exception still impacting our operations is our ability to travel around the globe. Specifically, in the Philippines operations, COVID issues are delaying the timeline for installation of our new balanced armature automated line. The installation will be dependent on these issues being resolved, and this makes it difficult to set an exact timeline. In the interim, we plan to fill current demand for balanced armature receivers with manual production capacity. I mentioned last quarter we would take significant actions to manage working capital, reduce operating expenses, and control capital investments. In Q2, I was very pleased to see the team deliver $20 million in free cash flow as we focused on inventory and cash collections. In the quarter, we also announced an intelligent audio restructuring plan, which is part of a broader reallocation of resources that is expected to reduce our quarterly operating expenses to a run rate of $42 to $44 million by the end of this year, while increasing spend in areas where we see the highest returns. John will expand on this in just a moment. While there are still challenges with COVID-19, I'm pleased with the trajectory of the business. As we look to Q3, we anticipate strong sequential growth driven by hearing health and MEMS microphones. Our company remains uniquely positioned across the markets we serve, and I believe our strategy to deliver high-value, differentiated solutions to a diverse set of growing end markets will enable us to come out of the pandemic well-positioned to take advantage of future growth. With that, I'll turn it over to John to expand our financial results and provide guidance for the third quarter.

John? Thanks, Jeff. We reported second quarter revenues of $152 million, with higher-than-expected sales of MEMS microphones and precision device solutions. Shipments into the hearing health market were down nearly 50% from prior year levels, with sales levels increasing each month as we moved throughout the quarter. Audio revenues of $105 million were down 13% sequentially, with the decline attributable to lower shipments into the hearing health market. Shipments of MEMS microphones into the consumer markets were up 4% sequentially, with growth driven by computing as work-from-home trends continue to remain in place. The precision device segment delivered revenues of $48 million, up 11% sequentially, driven by robust demand in the telecom and defense markets. Second quarter gross margins were 32.3%, down 340 basis points sequentially. In the audio segment, gross margins were down 530 basis points sequentially, as we incurred a $3 million charge to write-off inventory as part of our reduced investment in intelligent audio. In addition, we experienced lower factory capacity utilization driven by weaker end market demand associated with the COVID-19 pandemic. Precision device gross margins improved slightly over Q1 levels as the impact of improved factory capacity utilization, labor productivity, and higher pricing more than offset an increase in palladium costs. R&D expense in the quarter was $20 million, down nearly 10% sequentially, primarily driven by reduced spending in intelligent audio. SG&A expenses were $27 million, down almost 20% from Q1 levels, driven by reduced spending in intelligent audio, lower company-wide discretionary spending, and headcount reductions taken to reduce costs during the COVID-19 pandemic. For the quarter, we reported a loss per share of $0.01. Further information, including a detailed reconciliation of GAAP to non-GAAP results, is provided in the financial tables of today's press release and can also be found on our website at Knowles.com. Now I'll turn to our balance sheet and cash flow. Cash and cash equivalents at the end of the second quarter were $168 million, up $21 million from Q1 levels. We were pleased to deliver strong free cash flow during the quarter, with cash generated from operations of $27 million and capital spending of $7 million. Moving to the third quarter, we expect total company revenue to be between $185 and $200 million, up 26% sequentially at the midpoint. Revenue from the audio segment is expected to be up more than 40% from Q2 levels due to stronger consumer market demand and recovery in our hearing health business as market conditions improve in a number of European and Asia markets and certain states within the U.S. Precision device revenue is expected to be down 10% sequentially, with the decline driven by reduced shipments into the telecom market following stronger-than-expected shipments in Q2. We project gross margins for the third quarter to be approximately 35% to 38%. up 420 basis points from Q2 levels due to improving factory capacity utilization in our audio segment and favorable product mix, as we expect a greater portion of revenues in the quarter coming from curing health products, which carry above-average margins. R&D expense in Q3 is expected to be $18 to $19 million, down more than $1 million from prior quarter levels due to restructuring activities related to intelligent audio. We're projecting selling and administrative expense to be between $26 and $28 million, flat with Q2 levels. I remain confident that we are on track to achieve our previously announced cost reduction targets and exit 2020 with quarterly operating expenses between $42 and $44 million. We're projecting adjusted EBIT margin for the quarter to be in the range of 10 to 14% and expect EPS to be within a range of 17 to 23 cents per share. This assumes weighted average shares outstanding during the quarter of 94.1 million on a fully diluted basis. We're forecasting an effective tax rate of 16 to 20% for the quarter as well as the full year, which is up from the first half of the year due to the impact of changes in jurisdictional mix. For the quarter, we expect cash generated by operations to be between $15 and $25 million, with capital spending approximately $10 million. Despite the challenging market conditions associated with COVID-19, we remain well positioned to serve our customers' needs, generate free cash flow, and deliver strong operating leverage over the long term. I'll now turn the call back over to Jeff for closing remarks, and then we'll move to the Q&A portion of the call. Jeff? Thanks, John.

Our company remains uniquely positioned across a diverse set of end markets poised to grow over the next several years. We remain the leader in hearing health solutions and expect a recovery to 2019 levels in six to nine months. In VEMS microphones, we expect non-mobile applications to drive growth in the future, and the mobile market to stabilize as 5G phones are introduced. We also remain on track to grow precision devices revenue this year. 2020 has been a challenging year so far, but I believe we can deliver shareholder value by driving revenue growth with strong offering leverage and cash flow in 2021 and beyond. Operator, we can now take questions.

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound or hash key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Charlie Anderson with Collier Securities. Your line is open.

Yeah, thank you for taking my questions and congrats on a nice bounce back here. So, I wanted to start with, you know, some of the healthcare exposures. So, it sounds like obviously hearing health is starting to recover somewhat. It sounded like as you went through the quarter that was the case and you expected to be the case . I wonder maybe if you could just kind of describe how things are running relative to that minus 50 you reported. And then as far as precision devices, you articulated some impact there. So I wonder if maybe you just remind us how much exposure there is to that healthcare vertical within precision devices.

Sure, sure. So let me start with the precision devices first. You know, I think as we look at it, you know, I would say, you know, the exposure to that life sciences market, you know, is between $25 and $30 million in 2019. We expect that to be down, I would say, you know, I would say probably about 15% to 20% for the full year. But it's really, as we see it today, highly in Q2 and Q3. We started seeing weakness in Q2. It was obviously later than what happened in the hearing health market. And that is definitely extending into Q3 weakness. But, I mean, again, these are, you know, things like pacemakers, other implantables, as well as installation of new MRI machines. And so we expect this is going to come back. It's just a matter of when. I think it's kind of in the same vein as we talk about the hearing health market. It will come back. As far as hearing health, as John mentioned, I mentioned sales in Q2 were down close to 50% from prior year levels. But we did see a fair amount of improvement through the quarter that it got a lot better as we got later in the quarter. I mean, right now, my best estimate right now is probably the hearing health market will probably be down maybe a little over 20%, maybe year over year still. And so, you know, I think we're getting increasingly confident that, you know, that we're starting to see that recovery. Our customers are getting more bullish about the recovery. You know, obviously, I have to preface this all with, you know, that if there's something that changes significantly with COVID again, you know, that could all change. But right now, we're feeling good that when I said last year, it could be to even maybe the second quarter of next year to return to normal levels. Right now, I'd probably say that's pushing a little bit inward as opposed to staying the same or pushing out.

Great. And then for my follow-up, I wanted to ask about BA. You mentioned some of the issues you have in terms of getting the resources you need for the automated line. I wonder maybe if you could just update us your thoughts on how the pipeline is looking, how demand is looking. Are you still as ambitious in terms of some of the build plans as you were previously? And maybe just some of the impact of capital spending as it relates to that program?

Thanks. Yeah. Well, first, I don't think we're going to make a decision to install a second line, you know, until at least the first line is installed. We have to make sure the yields are correct, the return is correct. On the reverse side, you know, we do have demand in the back half the year. And unfortunately, we're going to have to fill that with manual capacity. And what that means is probably as it'll be a little bit more in Q4 than probably Q3, you know, it's not going to be at gross margins considering it's going to be manual. But what we don't want to do is stop the momentum that we have with customers because the line's not installed. As far as the installation of the line, it is relative to travel restrictions. You know, the line will be ready to ship to the Philippines. this quarter and our anticipation it will be shipped. But unfortunately what we need is a team of people from the U.S. that have to go there from us in the automation house to help install the line. And so I'm a little bit nervous on putting in a date on when it would be installed. And we're making the assumption right now that it will not be installed in operation until the end of the year, but it could be earlier. For right now, we're planning manual production to be able to support the demand through the end of the year.

Okay, great. Thank you so much.

Your next question comes from the line of Bill Peterson with J.P. Morgan. Your line is open.

Yeah, hi. Thanks for taking my question. I'd like to try to parse between an audio in the case of mobile versus non-mobile. Obviously, you have earwear, you have smart home, you have mobile, you talked about compute. I believe you talked about TV in the past. How should we think about the demand profile for each of those segments here in the back half of the year? In particular, I'm seeing that third parties are assuming smart home, smart speakers are actually going to be down this year versus mobile. versus hearables, which are actually going to be apparently up, you know, double digits according to the third-party research. So try to get a feel for each of those segments within your microphone business.

Yeah. So, you know, I'm looking at the numbers here. I'm trying to see the real strong category beyond, you know, that – well, first of all, take it back. IoT, we agree with you. Smart speakers have been weak. But, you know, I think we're pretty confident with some of the things that we've got going on in smart speakers. We do have potentially some share gains coming in the back half the year in smart speakers with some unique products that are being introduced. Mobile, you know, as we kind of said, I would sit there and say that right now, you know, Q4 is going to be stronger than Q3, with Q3 being stronger than Q2 pretty significantly sequentially. I think tablet and notebook, you know, we still see Q3 being pretty strong. And I think that's going to kind of start to slow down. And then, you know, we see some pretty strong sequential improvement in year as we go to the back half of the year, some very strong sequential improvement in year. So, you know, what I overall would say is, you know, that we have this guide for Q3. Right now, I would say this is probably not the peak quarter for the year. You know, we think that Q4 will be the peak quarter in terms of shipments for the full year.

Okay, with that in mind, and also improved hearing health, and presumably maybe your medical business and precision devices getting better, how should we think about the gross margin trajectory into the fourth quarter? And I guess also assuming utilization continues to improve?

Yeah, Bill, this is John. Just to kind of recap here, Q2 gross margins within the audio segment, They were lower than what we expected going into the quarter. We had two things. First of all, we had a roughly $3 million charge related to our reduced investment in IntelliJ Audio, really scaling back product lines to areas that we feel we can win. So that was a charge going through gross margins in Q2. In addition, we had actually lower than expected capacity utilization, especially in our hearing health business in Q2. So as you move forward, I think that the guide I provided for Q3 at the midpoint was 36.5% up pretty significantly sequentially. That's really driven by improved capacity utilization, the absence of that charge that we had in Q2. And it's a little early to give guidance on Q4. But I would expect it should be close to Q3, potentially slightly above Q3 levels. But again, it's really, you know, it's heavily dependent on... Yeah. I mean, let me get a little more color.

Let me get a little more color, Bill. I don't think we're going to be back to 2019 levels in hearing health in Q4. That would not be my expectation at this moment. And so to that end, remember that isn't above our average gross margin for hearing health. And so, and we're probably going to be still suffering from factory utilization problems in the hearing health market, you know, into probably Q1 of next year.

Okay, so not expecting really much utilization positive impact.

It'll probably be incremental, and that's where John's kind of, I think, saying is right, is that it'll be incrementally better, but we're not seeing us getting back to 2019 levels.

Within the MEMS microphone, I see similar build plans Q3, Q4. The opportunity for margin improvement is better utilization, factory capacity utilization in the hearing health and the PD business. And then also more sales of hearing health, which would drive gross margin up.

Okay, that's fair. Thanks for the call, and good luck. Thanks.

Thanks, Paul. Your next question comes from the line of Christopher Rowland with Susquehanna. Your line is open.

Hi, good afternoon. This is Dustin speaking on behalf of . So in the prepared remarks, you said that shipments into mobile grew in China as well as North America during the quarter. I was wondering how should we think about the mobile market in the second half Should we expect this trend to continue? And also, if you're seeing any kind of share losses in China as trade tensions between the U.S. and China are seemingly heating up?

Yeah, okay. So, you know, I think, you know, we did see sequential improvement in mobile in Q2, and we expect some pretty significant improvement in mobile in Q3. And then, again, more sequential improvement in Q4. So, we continue to see this continue to get better through the year. So, you know, but overall, you know, this is all with the backdrop that for the full year, mobile is going to be down, right? I mean, mobile, it's a tough year for mobile. Now, back to your question about China. You know, I don't think our share losses have changed from what we said last quarter. In other words, we still have very low share at Huawei. Beyond Huawei, I don't think we've seen any significant shifts in share.

Okay, great. And as a follow-up, there have been some reports with some smartphone customers trying to exclude the inbox headsets with the purchase of their phone. Could you talk about some of the microphone content that you ship in a typical headset and the impact that it has to your business if customers would start to take the headsets out of the shop?

I'm struggling to understand the question.

Yeah, sorry. So, yeah, so there have been some...

Go ahead.

Yeah, sorry. There have been some reports out there that some of the smartphone customers would start to exclude those headsets inside of their box when they first buy their phone. So I was wondering if you could talk about the microphone content that you ship in a typical headset, and what would be the impact to your business if customers started to take out the headset out of the box?

Well, I think, you know, generally speaking, the true wireless market is doing quite well. I think there's a wide variance of different content from one microphone per ear on true wireless to two microphone per ear to three microphone per ear on true wireless. So there's a pretty wide variance of content from headset to headset. That being said, we do see a trend towards digital. There's more digital usage in true wireless, which is positive for us as well. So, you know, I think if this did move toward in-box content, I think that would be positive for us because right now most of the things that are in-box today are the, you know, the old what we call soap on a rope, the old headset that was wired which has one microphone. So if that started being put into a box, you could see at least one more microphone being put in two. And then maybe four or I doubt six. I would find it hard to believe that, you know, that the highest end products would be included in the box. But I can only think that that would be positive if it was put in box.

Got it. Thank you.

Your next question comes from the line of Harsh Kumar with Piper Sandler. Your line is open.

Yeah, hey, guys. You know, all things considered, I just wanted to say very good execution, just given all the uncertainties, particularly with hearing health, so I wanted to pass that along. My first question was, Jeff, you mentioned that 4Q will be the top quarter. I assume you meant that in absolute dollars versus sequential growth. I just want to clarify, you know, we're always greedy for growth, so I just want to make that point clear out.

Yeah, it'll be sequential growth again from Q3, our expectation.

Understood, but it'll be up in absolute dollars. And maybe to that point, Jeff, could you tell us where you are going to see the sequential growth? Like what drove 3Q guidance? Was this China? Was it U.S. predominantly? And then in 4Q, which one of these two will be the driver?

Yeah, I mean, I would definitely say it's North American focused in Q3. And a fair amount of non-mobile applications is driving that. So, you know, although mobile is definitely up sequentially, there's a fair amount of non-mobile application that is driving in North America. But China, our expectation will be up sequentially. And then, you know, as I look towards, you know, Q4, we are right now expecting China will be up sequentially again, where I would say, you know, North America report probably more flattish sequentially.

Okay. Thank you. And then I had a last one was on intelligent audio. You cut a bunch of costs out. You sort of got it for full year exit rate. Is that – so you believe at this point you're done with the restructuring, or you think there could be some lingering costs that you could take out in the future, or you just want to kind of wait and see how the business does from here?

Well, I mean, I think, you know, just to kind of describe it, I know John went into it, we did a fairly large restructuring in the quarter that was even beyond intelligent audio. And so – I would say Intelligent Audio is about half of what we took out relative to getting to the numbers that John was talking about overall. And so I think for right now, I think we're done. I think how I kind of feel about this, and I think we've talked about this on previous calls, is I think we've positioned ourselves well that if when we return to growth, which we would hope would be in 2021, that we are very well positioned to be a more profitable company at a lower revenue number than we had in 2019. That would be the goal. And so I think for right now, you know, I think we're, you know, we've done the restructuring that we felt was necessary to be done.

Thank you, guys.

Your next question comes from the line of Suji De Silva with Roth Capital. Your line is open.

Hi, Jeff. Hi, John. So in terms of the headset market and your expectation for doing better there, Next few quarters, how much of that is predicated on balanced armature and the automated line coming in, or does the microphone business there alone kind of give you kind of good tailwinds into the headset market?

Yeah, so, you know, I think, you know, I think even on the last call, Suji, we had not, you know, thought that there was going to be a huge amount of balanced armature within this year. You know, I would say that, you know, obviously, you know, we're kind of running, walking a little bit of a tightrope here now of demand versus how much manually we can really build, right? And so... I'd say incrementally, we're probably expecting a little bit less sales now because of the manual lines. But I think the important thing for us is that it's really about 2021. And so our intent is this line will be filled, and we are going to have to make an assessment of whether or not we should be buying another line. So this is very short-term focused in terms of – but it's incrementally lower, probably balanced armature demand. but not really a factor. It's really microphones that, you know, continue to be our focus, at least in this year, for the year demand.

Okay. That's helpful, Colin. And then the filter market, I think it mentioned as much here. Can you talk about where that is in terms of the demand in the wireless infrastructure millimeter wave market and if it's on track to your expectations?

Yeah. I mean, I think we've talked about it in the past. You know, first, you know, the fact that, you know, millimeter wave in terms of, 5G has probably been a lot slower than we would have expected. And what I said in previous quarters, that defense has been really driving the growth. What I would say is defense is still growing. It's probably just slightly slower than we had our expectation a quarter ago, but I wouldn't say overly measurable. We talked about $40 million in revenue from millimeter wave. It might fall a little bit short of that, but again, the demand in defense is still quite good.

Okay. Thanks, guys.

Again, if you would like to ask a question, press star 1 on your telephone. Your next question comes from the line of Tristan Guerra with Baird. Your line is open.

Hi. Good afternoon. Quick follow-up on the balance amateur speakers. I think your manual line is about 25 to 30 million units output per year. And you had talked about the automated line being about 12 million units per year. So what percentage are you going to move away from hearing health to balance how much your speakers from your manual line in Q4? And also perhaps if you could quantify the potential gross margin impact from that production in the quarter in Q4.

I'll let John handle the gross margin, but I think You know, if you want to say one thing that's going on relative to the hearing health market, we have excess capacity on the manual lines. And, you know, if you think about it, we have not been able to fill our manual lines because of hearing health demand. It has been hurting, obviously, our gross margins. So we do have some excess capacity right now in the manual lines. that's how we're able to still fill.

Quick follow-up. You mentioned telecom to decline sequentially in Q3. Is that driven by base station? It doesn't seem necessarily in line with what we've heard, you know, from some of the companies through earnings. So maybe a little bit more color is what you think is happening there. Yeah.

Yeah, so it is Bay Station, but what I would just say is we had a, if you remember at the beginning of the quarter, we thought PD was going to be up about 5% sequentially. They ended up being like over 10%, 11%. That was almost all telecom. And I would say, you know, we're seeing a little bit of lumpiness. In other words, we delivered a lot more product in Q2 than we expected. And I don't think it's really impacting what we're saying for the long term for telecom. It's just more a quarter to quarter that we ship more in Q2, which is resulting in less in Q3. So it's just more, I'd say, the lumpiness of delivery more than anything.

Great. Thank you.

Your next question comes from the line of Bob Labik with CJS Securities. Your line is open.

Thanks. Good afternoon. I want to talk about the cost containment and the cost cuts you've done. Obviously, you've done a very good job there. And just to clarify or to be sure, the 42 to 44 million in OPEX year-end run rate, that compares to 46.6 in adjusted SG&A for the quarter? Is that right?

Actually, it's 45.5, Bob. If you take the midpoint of the guidance, you know, call 45.5, 46 million for Q3. The biggest delta going forward is is going to be in our legal spending. We're still very active in the case we have from a patent infringement standpoint. We are very confident that the spending in this matter is going to fall off pretty significantly as we exit this quarter. Again, I'm confident that we will be able to, even though we're at, call it 45.5 this quarter, that we will be able to get in that range of 42 to 44 million as we exit 2020.

Okay, great. And then kind of as you return to growth in 21, is there incremental operating leverage? Is or do you have to bring back more expenses to support the growth?

Good question. We'll have some modest increases over that. Call the midpoint of exiting 2020 of 43. We'll have some modest increases, merit for wages, some medical insurance, a resumption of some travel, but we think we can maintain this to a level of, call it 45 million a quarter throughout 2021. Obviously, If the revenue accelerates, you know, we'll revisit this. But right now, as we look into the first half of 2021, we feel confident to maintain this kind of around the 45 and a quarter run rate.

Okay, terrific. Appreciate that. And then just another question. Earlier you mentioned, I believe, that sales into mobile were less than 25% of the total in the quarter. Can you give us a sense of what that was a year ago?

Look at the numbers right here. It was almost 30 last year.

Got it. Okay. Terrific. All right. Thank you.

There are no further questions at this time. I will turn the call back over to Mike now.

Great. Thanks very much for joining us today. As always, we appreciate your interest in Knowles and look forward to speaking with you on our next earnings call. Thanks and goodbye.

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