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spk08: Good afternoon and welcome to the Knowles Corporation second quarter 2022 financial results conference call. My name is Donyell and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. With that said, here with opening remarks is Sloan Bowen, Investor Relations.
spk00: Thank you. Welcome to our Q2 earnings call. I'm Sloan Boland and presenting with me on the call today are Jeffrey New, our President and CEO, and John Anderson, our Senior Vice President and TFO. Please be advised that today's conference call is being recorded. By now, you should have received a copy of our earnings release and webcast slides. If you've not received both documents, they are available on the IR section of our website at Knowles.com. 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. Such forward-looking statements include comments about demand for company products, anticipated trends in the company's sales, expenses and profits, and future financial outlook, 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 31st, 2021. Periodic reports filed from time to time thereafter with the SEC and the risks and uncertainties identified in today's earnings release. All forward-looking statements are made as of the date of this call and null if this claims any duty to update such statements except as required by law. In addition, we have provided both GAAP and non-GAAP financial measures this quarter. All references on this call will be on a non-GAAP continuing operations basis unless otherwise indicated. Please see our earnings release and webcast slides available on our website at NOLS.com and in our current report on Form 8K filed today with the SEC for reconciliation to the most direct comparable GAAP measures. With that, let me turn the call over to Jeff, who will provide some details on our results. Jeff.
spk04: Thanks, Sloan, and thank you to everyone for joining us today. Knowles performed well in the second quarter despite an acceleration of the headwinds we experienced beginning in the first quarter. Our revenues were pressured by weaker than expected global consumer electronics demand, lockdowns in China, and excess channel inventory. Even with that backdrop, Knowles still drove gross margins, adjusted EBIT and EPS at or above the midpoint of our guided ranges, and free cash flow at the upper end of our expectations. We are proud of these results, both for our execution in the quarter, but more importantly, because they continue to validate our strategy to prioritize higher margin products and markets. I will detail our segment results in a moment, but let me first share the latest update to our strategy. As you saw in our press release, Knowles is accelerating the focus of our business to further de-emphasize our exposure to commodity products. As discussed over the last few years and presented on our investor call in November of 21, This strategy was in place before the decline of consumer electronics demand we've encountered so far in 22. Our MEMS microphone restructuring is expected to yield annual life savings of $25 to $30 million across factory overhead and operating expenses with an anticipated one-year payback. This program will begin in Q3 with full implementation by the end of Q4. John will provide details, but let me summarize the key benefits to our shareholders. The program expedites our timeframe to achieve our medium-term financial targets. These targets include adjusted EBIT margins in the range of 22% to 24% driven by higher gross margins from higher capacity utilization with better mix and higher ASPs, free cash flow margins of 15% to 17% from operating leverage and lower CapEx. Lastly, we believe our exposure to the smartphone market will be in the mid-teens in 2023 compared to more than 20% of revenue in 2021. In sum, we are very pleased with how Knowles is strategically positioned. Our proactive strategy to focus on the most attractive end markets with above average corporate margins and long-term growth trends is tightly aligned with value creation for our shareholders. I am incredibly pleased with the speed with which our teams have reacted to current market conditions. This strong execution helps propel the company forward towards achieving our mid-term adjusted EBIT and free cash flow margin targets. With that, let me highlight our Q2 results. Revenue of $188 million was below expectation due to continued weakness in consumer electronics and COVID lockdowns I spoke about earlier. Across our segments, we continue to see strength in precision devices. Precision devices revenue grew 19% over last year, and demand was broad-based across all end markets, especially in defense and medical applications. In audio, hearing health also grew 19% year-over-year, as NOLS continues to increase market share, which was further aided by new product introductions. In contrast, the men's microphone business was negatively impacted by the headwinds I've already mentioned. We are taking advantage of this weaker demand environment to right-size our factory capacity in this business and drive the company towards the financial goals I've summarized. As inventory in the channel is reduced and demand in consumer electronics returns, our men's microphone business will be well-positioned for improved profit margins and cash flows. Turning to our overall profitability, again, we are very pleased to hit our guidance for gross margins despite a very challenging backdrop for revenue growth. Our adjusted EBIT margins of 20% in Q2 was above the high end of our guidance, and EPS of 33 cents was above the midpoint of our expectation. Lastly, our free cash flow exceeded our expectation, and we remain committed to our goal to return at least 50% of our free cash flow to shareholders. I continue to believe our strategic focus on higher margin products and markets positions those well to continue to create value for shareholders for the years to come. With that, let me turn the call over to John to review our Q2 financials and our Q3 guidance. John? Thanks, Jeff.
spk06: We reported second quarter revenues of $188 million, down $12 million from the same period a year ago, driven by weak demand for MEMS microphones, partially offset by increased demand in hearing health and our precision devices segment. Audio revenues of $129 million were down 14% from the same period a year ago, due to weak global microphone demand for consumer electronics, COVID lockdowns in China, and excess PC and smartphone channel inventory. The decline in MEMS microphone revenue was partially offset by increased shipments in hearing health on market growth, share gains, and new products. The precision devices segment delivered revenues of $60 million, up 19% from prior year, driven by growth across most end markets with the highest growth coming from defense, industrial, and medtech markets. Second quarter gross profit margins were 41.5% at the midpoint of our guidance range and down 90 basis points from the same period a year ago. Audio segment gross margins finished 300 basis points below 2021 levels, driven by lower factory capacity utilization in our MEMS microphone business, partially offset by lower factory spending and favorable mix in our hearing health business. Precision devices segment gross margins were 46.7%, up 350 basis points from the prior year, driven by favorable mix, productivity gains, and higher factory capacity utilization. R&D expense in the quarter was $18 million, down more than $3 million from the prior year, driven by lower incentive compensation costs. SG&A expenses were $24 million, $4 million lower than the prior year, driven by lower incentive compensation costs. For the quarter, adjusted EBIT margin was 20%, up 210 basis points from the prior year, driven by a reduction in operating expenses. EPS was $0.33, which was one cent above the midpoint of guidance and two cents above the prior year, with the increase driven by lower operating expenses reduced interest cost, and a lower share count, partially offset by the impact of lower shipment volume. Now, I'll turn to our balance sheet and cash flow. Cash and cash equivalents totaled $48 million at the end of the quarter. Cash from operations was $20 million, near the high end of our expectations, primarily due to lower net working capital. Capital spending was $7 million in the quarter, and we repurchased approximately 940,000 shares at a total cost of 18.6 million. Before moving to the third quarter guidance, as Jeff stated earlier, we're accelerating our strategy to reduce our exposure to lower margin commodity microphones. We're taking actions beginning in the third quarter to right size our manufacturing capacity and operating expenses in our MEMS microphone business. This restructuring is expected to yield 25 to 30 million of annualized savings with roughly half of the savings coming from lower factory overhead and half related to lower operating expenses. We expect NOLS to exit 2022 with a quarterly operating expense run rate of approximately $45 million, which reflects both the impact of our restructuring actions and normalized levels of incentive compensation. We expect to incur cash charges associated with the restructuring of approximately $23 to $28 million related to severance and the settlement of vendor obligations. Lastly, the cost reduction actions we're taking today support our strategy of focusing on higher value solutions, which should enable us to deliver on our midterm financial targets of 22% to 24% adjusted EBIT margin and 15% to 17% free cash flow margin earlier than we communicated last November. Moving to the guidance for the third quarter. We expect total company revenue to be between 170 and 185 million, down approximately 24% from the same period a year ago, driven by lower shipments of MEMS microphones in connection with weak consumer electronic demand and excess compute and smartphone channel inventory. Revenue from the audio segment is expected to be down more than 30% from Q3 2021, primarily due to lower demand for MEMS microphones driven by the macroeconomic headwinds we've discussed. Precision device revenue is expected to be up more than 10% over prior year levels, driven by continued broad-based strength in defense, med tech, and industrial markets. We estimate gross margins for the third quarter to be approximately 37% to 39%, down 390 basis points from the year-ago period driven by lower factory capacity utilization in our MEMS microphone business and unfavorable mix due to lower shipments to the high margin compute market. These negative impacts are partially offset by productivity gains and improved capacity utilization in precision devices. R&D expense is expected to be between 18 and 20 million and selling and administrative expense is expected to be between 26 and 28 million. down from the year ago period driven by lower incentive compensation cost. We're projecting adjusted EBIT margin for the quarter to be in the range of 11 to 13 percent and EPS to be within a range of 17 to 21 cents per share. This assumes weighted average shares outstanding during a quarter of 94.8 million on a fully diluted basis. We're forecasting an effective tax rate of 12 to 16 percent for the quarter and full year 2022. For the third quarter, we expect cash generated from operations to be between 20 and 30 million and capital spending to be approximately 10 million. While we don't typically provide guidance beyond the current quarter, I'd like to provide some commentary as it relates to our expectations for the fourth quarter of 2022. We're expecting 15 to 25 percent sequential growth for the total company driven by precision devices and hearing health and a modest increase in microphone shipments as channel inventory is expected to improve. We also expect significant sequential improvement in gross margins, adjusted EBIT margins, and cash flow as we benefit from higher shipment volumes and begin to realize the benefits of our restructuring program. We're estimating Q4 gross profit margins to be between 40% and 42% and adjusted EBIT margins to be above 20%. For the full year, we expect free cash flow as a percentage of revenue to finish above 10%. While demand and inventory levels in the consumer electronics market are challenging, our strategy, coupled with our optimized cost structure, positions us well to grow profitably when demand returns. This, along with expected continued growth in our precision device and hearing health businesses will enable us to accelerate achievement of the mid-term adjusted EBIT margin and free cash flow margin targets introduced last November. I'll now turn the call back to our operator to open the line for questions.
spk08: Certainly. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, please press star 1. As a reminder, if you are using a speaker phone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. The first question comes from Bob Labick of CGS Securities. Please proceed.
spk02: Thanks. Good afternoon. I just wanted to pick up on what you just said. Hey, how are you guys doing? I want to pick up on what you just said there, John, in terms of the discussion, not guidance, for Q4. Can you give us a sense of just inventory adjustments and corrections? Will they be fully done through Q3 and Q4? Is next year more normalized? Is Q4 reflecting end market demand? And what are the biggest puts and takes, and when will you have more clarity into, I guess, getting through the inventory and the channel and stuff.
spk04: Bob, this is Jeff. Just a couple of commentary. First, I'll just say is most of the sequential growth that John referred to, 15 to 25 percent, is coming from hearing health and PD. We are expecting, I would just say, a very modest sequential improvement in the microphone business. We're starting to see some signs of the inventory channel, you know, inventories kind of being worked down, but it doesn't appear to happen in Q3, and it still might extend to Q4. But, you know, I think from our perspective, you know, if we look in the 23, you know, we think that the inventory should be out of the system, and then we've got to think about what the growth is going to be in that business going forward. But how I kind of view it is, again, Most of the growth we're expecting in Q4 is coming from hearing health and PD, which has got longer lead times and a lot of the business is already booked.
spk02: Okay, great. That's helpful. And then when you get through, and let's just say it's 2023 or, you know, done by the end of Q4, just for argument's sake for this question, what's the expected impact on your top line from... you know, right-sizing or walking away from some of the more commoditized sales, lower margin sales, you know, how much kind of year over year would you be walking away? And where do gross margins normalize upon, you know, the, as we said, once you get through the correction and you have your new cost structure in place?
spk04: Yeah, I'm going to let John in on the gross margins in a second. But, you know, let's just start from the premise. of our mobile business and what percentage of this whole company is mobile. And I think in 2021, we were a little over 20% was mobile. And if you go back to 2019, 2020 is a tough year to look at. Mobile was probably 27%, 26%. And this year, I think we'll end up you know, well below 20% in terms of mobile, and it's going to be mid-teens next year. And so, you know, I think we're going to continue to look at this, but I think how we viewed it was, Bob, is that as we look forward to next year, we shouldn't have to deal with an inventory correction in the men's microphone business, and we intend to run the capacity that we have left over, you know, at 90% to 95%. That would be the goal. Our hearing health business should still grow at a GDP-plus type number, that four to five percent number, and that we would expect high single-digit growth organically from the precision device business. I think as we go forward, we're really focused on improving cash flow and improving EBIT margins, and we think we'll be able to do that going into Q4 and into next year. In terms of gross margins, Bob, Q3, our gross margins are down
spk06: close to 400 basis points year over year, that's almost entirely or it is entirely driven by a drop in capacity utilization for a MEMS microphone business. As Jeff mentioned and I mentioned, we're taking some pretty aggressive cost reduction actions, about 50% of which are impacting and reducing factory overhead. At more normalized capacity utilization, our gross margin would be closer to 42%. Got it.
spk02: Okay. Super. Thank you very much.
spk08: Thank you. The next question comes from Suji De Silva of Roth Capital. Please proceed. Hi, Jeff. Hi, John.
spk09: So maybe continuing on the restructuring theme here, the trough utilization you're seeing now versus kind of post-restructuring, what might it be, John? And what was the utilization, you know, just so we have some kind of benchmark for kind of what gross margin might do in the future as you reduce the capacity?
spk06: Yeah, Suja, I'm not going to go into specific gross margin or capacity utilization in terms of what we're currently operating at. but it's significantly below kind of our historical target, which is the kind of 90 to 95% run rate.
spk04: And let's be clear, there's three factors that have gone into this current capacity utilization. Number one is globally, demand in consumer electronics is down. I think we all acknowledge that. That's a lot like PCs, smartphone market, but even things like gaming. There's a lot of different products that are down. Second, There is excess inventory in the channel, right? So across many of our end markets, there is a lot of inventory in the channel. And the third thing that's driven it is we did make decisions earlier in the year on pricing, the whole pricing, and take less share. So there's three things to add that up to. Now, as far as the capacity utilization that we want to operate at, we've always said, It's 90% to 95% on an annualized basis, and that's going to be the target for what we're going to be shooting for in 2023.
spk06: Yeah, and I think with that, and to your other question, with that, we think clearly we have the opportunity for operating at close to this 90% to 95% capacity within our MEMS business. We can get those margins up to the high 30s and total company margins 42% or more. Okay.
spk09: And then just digging into the fourth quarter guidance, which you gave us, the 15%, 20% sequential, I believe, 25% sequential, you talked about it mostly coming from hearing health and PD. I didn't really think of hearing health as kind of a strong sequential business. You talked about long-term GDP-ish growth there. So I'm presuming a lot of 4Q is actually coming from PD. Just maybe correct me if I'm wrong, or maybe the OTC business. Any color there would help.
spk04: I like that, but it is actually, there is a fair amount from HHT for hearing health, Typically, Q4 is a seasonally very strong quarter for the hearing health business. There's a big hearing aid show that happens right at the beginning of the fourth quarter that drives a lot of demand from our customers as audiologists leave the show and place their orders and they start building new products. So there is a fair amount from HHT, but PD is also contributing.
spk09: Okay. And maybe you could touch my last question on the resilience of PD through HHT. but it seems to be kind of a weaker economic environment, obviously, versus consumer-oriented segments. Thanks.
spk04: Yeah, so I think, you know, we've been obviously very pleased with the PD business. It continues to, like you said, show resilience. I think, you know, they're very well positioned in a few markets that, you know, are doing extremely well. Defense Aerospace, doing very well for them. The life sciences or medical markets continue to be very strong for them. I would also add that, again, we're still growing in our EV business, although from a small base, and it is growing. So I think most of the markets that they have, we're seeing strength. And bookings continue to be strong. So I always think of the PD business, again, like the curing health business, a lot of our orders and knowledge of what's going to happen over the next six months is kind of already banked. And so that's why we feel pretty comfortable about where the growth is going to come from in Q4.
spk06: Yeah, so just to add a little bit, the defense and med tech business represents almost two-thirds of the total PD business.
spk04: So, you know... Well, and I would add this. I was just kind of adding up the numbers. Hearing health business being med tech plus PD plus the defense business in PD, about 45% of our business is now med tech and defense.
spk06: And I'd say the backlog and bookings continue to be very strong.
spk09: Okay, great. Appreciate all the callers. Thanks, Jeff. Thanks, Jeff.
spk08: Thank you. The next question comes from Christopher Rowland of Sukihana. Please proceed.
spk01: Thank you. Hi, guys. Yeah, I guess my questions are around the restructuring and... I guess, ongoing expenses that you're going to be able to cut? Are expenses going up queue on queue? And then how do these trail out as we move through? Is there any OPEX or is this mostly on the manufacturing and cog side? I know you mentioned it probably was, but is there anything in OPEX as well?
spk06: Yeah, Chris, in terms of the annualized $25 to $30 million, about half of it is IDL, so factory overhead in our MEMS microphone factories. And then the other half is OPEX, combination of R&D and SG&A.
spk01: Okay. That certainly makes sense. And then my second question is around... Second part here.
spk06: Sorry.
spk01: Yeah, go for it.
spk06: Yeah, so run rate, we're expecting OPEX to be right around $45 million. That's the quarterly run rate once we've implemented these actions and we adjust for incentive comp, kind of a normalized level of incentive comp. So if you're remodeling 23, that's kind of what you want to put in for quarterly run rate.
spk01: Okay. I think it's that incentive comp that would explain why that's up from here, I guess. Yeah, incentive comp obviously is way down this year. Okay, excellent. And then around inventories, I want to understand the inventory dynamic a little bit. I want to talk about customer inventories, but also your own inventories, you're at 157 days. So I would love to know internally where you want to bring that. And then secondly, can you talk a little bit more about the inventory dynamics that you're seeing? I mean, was this just a classic semiconductor cycle where there was overbuying just at the component level? Or are these finished goods, finished PC, finished mobile, finished IoT, et cetera, devices that are waiting to be sold? Maybe you could just classify customer inventories and how you see it. That'd be great, too.
spk04: Yeah, so I'll use the PC market as kind of a good example. It's the easiest one to track in terms of the number of units sold per year. And what you can see is, you know, based on the number of units that were sold in the PC market in 2021, we shipped significantly more units than the number of units that were shipped in the market. You know, our estimate is, you know, that right now, you know, in the market through a combination of, you know, there is some raw material of ours already out there. there is stuff that's work in progress and finished inventory, there's probably in the PC market three months worth of inventory in the marketplace. And with the lower demand, you can kind of see when you sit there and see like all the third-party data kind of says the PC shipments will be down around 15%. And if you take another quarter's worth of inventory, you can see how that can very quickly have to be worked down and driving demand down. You know, we're, again, hopeful as we talk to customers that, you know, the inventory will start to come down. I know there's been a lot of discounts in the marketplace to try to, like, move some of this inventory. When demand comes back, I think that's a little harder to say, but I think inventory is definitely going to come down. I'll let John comment on inventory internally, but, you know, just remember typically, I'll make this comment, typically toward the middle part of the year is when our inventory is at highest. because we're usually building seasonally for the back half of the year, right? Now, I would say with demand down, inventory is probably higher than we would like at this moment, but I think we're very active in an active program to make sure that that inventory kind of gets back in line by the end of the year. I don't know. Any other comments here?
spk06: Yeah. I would just add in terms of in addition to what Jeff said, you're right, Chris. At 157 days, inventory is well above what we were expecting. It's really – a couple of factors that's a pretty abrupt drop in demand. It's also we're keeping a higher safety stock just with the COVID related lockdowns that we've experienced in China. We've made the conscious decision to keep more safety stock. Things are improving slightly and I would say we expect inventory to come down fairly significantly between now and the end of the year. The other issue, too, is we had a conversion in our FAB from 6-inch to 8-inch, so we've kept a higher inventory for last-time buys and things like that, but we expect that to be coming down both in the second half of this year and in 2023. And, again, this will drive improved cash flow in the second half, particularly in the fourth quarter of this year.
spk01: Awesome. Thanks, guys.
spk08: Thank you. The next question comes from Tristan Guerra of Baird. Please proceed.
spk09: Yeah.
spk07: Hi, this is Tyler on for Tristan. Thanks for taking the question. I just have one. Could you please provide us an update on the capacity ramp of the balanced armature line?
spk04: Yeah. So I don't know if you saw during the quarter, we did a fair amount of marketing about high-definition audio and how balance armatures can enable that. What I would say is that obviously the capacity is not fully utilized today. We're expecting to see more of a ramp-up in the back after the year. I think one of the challenges that we've seen is with China being on lockdown a lot in the first half, new design wins in China have been a little bit tougher to come by. But I would just sit there and say, first of all, number one, it's achieving all its cost targets, doing very well on that side. Number two is we've learned a lot from this on our balanced armature automation line and are applying a lot of the learnings back to our manual line in order to improve gross margin, bring costs down. Very important. Third, beyond the balanced armatures for, I would say, the commercial market, we're starting to see some traction with some of our hearing health customers and also some demand for the over-the-counter market from the few customers that we have in that space. Overall, I would sit there and say our expectation is that hopefully we'll be filling that line in 2023. Great.
spk07: Thanks for all the insight.
spk08: Thank you. The next question comes from Anthony Stoss of Craig Hallam. Please proceed.
spk03: Hey, guys. John, maybe for you, I wanted to focus in on the September revenue guide. I'm curious if you'd care to comment on if you think you're losing share with your biggest North American smartphone customer or you're maybe walking away due to ASPs and then add a couple follow-ups.
spk04: Yeah, this is Jeff. We're not going to comment on any specific customer. I think we'll just keep going back to the comment here that we're committed to not pursue lower margin business. I think that's something that we've kind of stated for the last year, year and a half, Tony, and we'll leave it at that. Again, with the commentary that we expect in 23, our smartphone business will be 15% roughly of the total company revenue.
spk03: Got it. Thanks for that. And then, John, so you gave us OpEx where you think you'll be in Q4. Where do you think you'll exit 2023, both on gross margins and op-ex per quarter?
spk06: You know, Tony, I'm not going to give guidance on 2023, but as I mentioned today, earlier, once we've implemented the cost reduction actions that we discussed today, we expect these all to be implemented by the end of Q4. We think gross margins going into, assuming we're running at reasonably, high capacity, you know, kind of 90% in the MEMS microphone business, we think gross margins would be 42% or above in 2023.
spk04: Yeah, let me just make one other comment, Tony. You know, I think what we kind of said here on this call here is with the actions that we're taking, the shift in mix, better capacity utilization, you know, lower CapEx spending, right? I mean, you can go right down the list of all the things we kind of talked about. When we came out in November of 21 with our call, we kind of said we can get to the 22% to 24% in EBIT margins and free cash flow of 15% to 17% in the three to four year time frame. Well, we're going to be one year into that in November, and I would say that, based on the actions we're taking, I think we can get to those numbers potentially a year earlier. So we're two years away. So I would say that's just the commentary we would put. And there's different ways to get there, you know, through op-backs, through better capacity utilization, through better mix, right? There's a bunch of different ways to get there, but we're highly focused on hitting those adjusted EBIT margin targets and the free cash flow margins.
spk03: Got it, Jeff. And then last question, on the millimeter wave division, any update would be helpful and kind of your thoughts on, you know, if that's going to grow in 2023 over 2022?
spk04: Yeah, so we continue to do extremely well in the RF business. It's growing year over year, and that's primarily defense. Again, I would say we do have a few customers that we are starting production with in the millimeter-wave space. I just would caution, I'm very, very cautious about how well this is going to be accepted. We get big forecasts from people, but a lot of these customers that we have are small, and we're just not seeing... the rollout of millimeter wave, you know, in the commercial marketplace in any big way in the end market, although some of our customers that we have are telling us, you know, these could be larger numbers. So I just am very cautious about saying this is going to be a big number for telecom. But again, the defense business continues to do very well. The RF business continues to be very good for us.
spk03: Okay, if I can speak in one more, just, you know, on the... On the restriction charges, et cetera, I know you guys bought a fair amount of stock back. Is that something that you think you'll ease up on and pay down debt continually?
spk06: No, Tony, I don't think there's a change of course there. We committed last November that we would return 50% of our free cash flow back to shareholders through share repurchases. We're on track for that in 2022, and I don't see any reason – to change course. We're very comfortable with the cash flow generation looking forward, especially into the back half or the last quarter of 22 and 2023. So no, really no change of course. And I think it's important even with that commitment to returning cash to shareholders, we still have plenty of capacity for acquisitions and we're going to be pursuing and looking at those opportunities as well as repurchasing stocks.
spk03: Perfect. Best of luck, guys. Thank you.
spk08: Thank you. That will conclude our time of questions. I would now like to pass the conference back over to Jeffrey New for closing remarks.
spk04: Again, this is Jeffrey New. Thank you for your time. I think we look forward to the next few quarters in terms of taking action on this restructuring and setting this up for a much stronger Q4 in 2023. Thank you very much.
spk08: That concludes the conference call. Thank you for your participation. You may now disconnect your
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