Ttm Technologies Inc Q3 FY2022 Earnings Call

Thanks for everyone's patience. So we're going to start the call now. I've got Tom Edman with me and Todd Schull as well. So let me just read the safe harbor statement before we get started. Before we get started, I want to remind everyone that today's call makes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements related to TTM's future business outlook. Actual results could differ materially from these forward-looking statements due to one or more risks and uncertainties, including the factors explained in our more recent annual report on Form 10-K and other filings with the Securities and Exchange Commission. These forward-looking statements are based on management's expectations and assumptions as of the date of this presentation. TTM does not undertake any obligation to publicly update or revise any of these statements, whether as a result of new information, future events, or other circumstances, except as required by law. Please refer to disclosures regarding the risks that may affect TTM, which may be found in the other reports on Forms 10-K, 10-Q, 8-K, the registration statement on Form S-4 and the other company's SEC filings. We will also discuss on this call certain non-GAAP financial measures such as adjusted EBITDA. Such measures should not be considered as a substitute for measures prepared and presented in accordance with GAAP, and we will direct you to the reconciliation of non-GAAP to GAAP measures included in the company's press release, which was filed with the SEC available on TTM's website at www.ttm.com. We've also posted on the website a slide deck that we'll refer to during the call. I will now turn the call over to Tom Edman, TTM's Chief Executive Officer. Please go ahead, Tom.

Thank you, Sameer, and let's just make sure we're recording as well. I do want to apologize again on behalf of the company for the issues we had with this call. Unfortunately, it appears that the service provider for these calls was acquired and did not inform us of that change, or they did not set up the call. So my apologies for this. I hope you will bear with us here, and we'll do the best we can to respond to questions at the end of the call. So with that, let me just get started. Good afternoon to all, and thank you for joining us for our third quarter fiscal year 2022 conference call. I'll begin with a review of our business highlights from the quarter and a discussion of our third quarter results, followed by a summary of our business strategy. Todd Schull, our CFO, will follow with an overview of our Q3 2022 financial performance and our Q4 2022 guidance. We will then open the call to your questions. The quarter's highlights are also shown on Slide 3 of the investor presentation posted on TTM's website. In the third quarter of 2022, TTM delivered a solid quarter with revenues in line with the guided range and non-GAAP EPS above the high end of guidance despite a challenging supply chain and labor environment and the continued impact that COVID-19 is having on our business. While the results include the first full quarter of Telephonics, I do want to highlight that the rest of the company saw revenues grow 8.3% year-on-year, driven by broad-based growth across all end markets. On a year-on-year basis, we saw a significant improvement in our profit margins in Q3 from better product mix, higher pricing, and premium revenue. Also, the addition of Telephonics and favorable foreign exchange rates as the Chinese RMB weakened further against the dollar. I am proud of our employees for delivering solid results this quarter. As we look into Q4, inventory adjustments and supply challenges tied to some of our commercial customers are contributing to revenue and margin declines, but we will continue to see our business supported by our diverse end market mix, including our A&D business, which, with the addition of Telephonics, now represents almost 40% of our revenues. I would now like to provide a strategic update. TTM is on a journey to transform our business to be less cyclical and more differentiated. As part of this strategic transition, near the end of the second quarter, we closed the acquisition of Telephonics. Over the past several years, TTM has consistently emphasized that a key part of our strategy is to add value to the product solutions that we deliver to our customers, particularly in the aerospace and defense market. In 2018, we acquired Anaren, which broadened TTM's product portfolio into highly engineered RF components and subassemblies as well as adding critical RF engineering capability and resources. Telephonics builds on Anaren and TTM's customer-driven culture and disciplined approach to engineering and manufacturing by further broadening TTM's aerospace and defense product offering vertically into higher-level engineered system solutions and horizontally into the surveillance and communications markets while strengthening our position in radar systems. The aerospace and defense end market will provide growth and stability in a potentially challenging demand environment for commercial markets. Furthermore, over 50% of A&D revenues will be from engineered and integrated electronic products with PCBs being less than 50% of the overall contribution. Telephonics demonstrated strong performance in their first quarter with TTM, and integration is well underway. Another element of our differentiation strategy is the current construction of a new state-of-the-art, highly automated PCB manufacturing facility in Penang, Malaysia. The decision to build this new factory is a direct response to our customers' increasing concerns about supply chain resiliency and regional diversification, particularly the need for advanced multilayer PCB sourcing options in locations outside of China. The new facility in Malaysia will assist customers in our commercial markets, such as networking telecom, data center computing, and medical, industrial, and instrumentation. We made significant progress on the Malaysian facility this past quarter as we completed the 3,900 filings required for the building, laid the majority of the foundation, and began raising the steel framework. We also received multiple deposits from customers with whom we have signed long-term agreements, which provide a business base for over 60% of the planned new capacity in the building. Recent news on increasing export controls to Chinese companies reaffirms our view of the importance of regionally diversifying for our customers' supply chain resiliency needs. Finally, I'd like to say a few words about the overall macro environment. We are aware and understand the investor concerns of an economic slowdown and potential recession, which would mostly impact our commercial business. We will continue to closely monitor global economic influences on our commercial business. We have seen a booking slowdown in parts of our commercial business as some customers focus on managing inventories, while others continue to struggle with supply chain challenges. Our backlog continues to be robust; however, we expect the aerospace and defense market to provide a strong countercyclical element to our commercial business if conditions weaken further. Now I'd like to review our end markets, which are referenced on Page 4 of the investor presentation on our website. The aerospace and defense end market represented 38% of total third quarter sales compared to 31% of Q3 2021 sales and 30% of sales in Q2 2022. The majority of the year-on-year growth was due to the inclusion of Telephonics. Excluding that impact, our A&D revenues grew 7.0% year-on-year. We continue to experience a positive defense climate, with our A&D program backlog at $1.16 billion, including Telephonics. Excluding Telephonics, program backlog was $871 million compared to $723 million a year ago. This solid backlog was driven by record bookings of $319.4 million for core TTM and $387.8 million, including Telephonics. The solid demand in the defense market is a result of a positive tailwind in defense budgets and our strong strategic program alignment and key bookings for ongoing franchise programs. During the quarter, we saw significant bookings for key programs, including the Spy 6 radar program and a major space program. We expect sales in Q4 from this end market to represent about 40% of our total sales. The medical industrial instrumentation end market contributed 19% of our total sales in the third quarter compared to 20% in the year-ago quarter and 21% in the second quarter of 2022. Revenues from this market were up 18% year-on-year, exceeding $100 million for the sixth quarter in a row and performing much better than expected, with broad-based strength across all segments. For the fourth quarter, we expect MINI to be 17% of revenues as quick turn continues to moderate and select customers face component shortages. Automotive sales represented 15% of total sales during the third quarter of 2022 compared to 18% in the year-ago quarter and 18% during the second quarter of 2022. Automotive revenues grew 1.6% year-over-year and exceeded $100 million for the fourth quarter in a row. We continue to see stable trends for automotive PCBs, despite the combined impact of supply chain and demand disruptions caused by COVID, the Ukraine-Russia conflict, and semiconductor shortages that are all impacting automotive OEM production. We expect our automotive PCB business to contribute 16% of total sales in Q4. Sales in the data center computing end market represented 14% of total sales in the third quarter compared to 14% in Q3 of 2021 and 17% in the second quarter of 2022. Revenues from this end market were up 18% year-on-year due primarily to growth from our data center customers. We expect revenues in this end market to represent approximately 14% of fourth quarter sales as data center demand continues to drive year-on-year growth. Networking/communications accounted for 14% of revenue during the third quarter of 2022. This compares to 16% in the third quarter of 2021 and 14% of revenue in the second quarter of 2022. We saw relative strength on a year-on-year basis in networking compared to telecom as we continue to allocate capacity for high-layer count boards through our data center computing and networking customers. In Q4, we expect this end market to be 13% of revenue as customers manage their inventory levels. Next, I'll cover some details from the third quarter. This information is also available on Page 5 of our earnings presentation. During the quarter, our advanced technology and engineered products business, which includes HDI, rigid flex, and RF subsystems and components, accounted for approximately 41% of our revenue and now includes all of the Telephonics revenue. This compares to approximately 29% in the year-ago quarter and 33% in Q2. We are continuing to pursue new business opportunities and increase customer design engagement activities that will leverage our advanced technology and engineered products capabilities in new programs and new markets. PCB capacity utilization in Asia Pacific was 78% in Q3 compared to 91% in the year-ago quarter and 88% in Q2. Our overall PCB capacity utilization in North America was 45% in Q3 compared to 50% in the year-ago quarter and 42% in Q2. The lower rate in Asia Pacific was caused by a decline in production volumes, while the lower year-over-year rate in North America was due to additional plating capacity added earlier in the year and direct labor shortages in certain regions. Our top five customers contributed 33% of total sales in the third quarter of 2022 compared to 30% in the second quarter of 2022. We did not have any customers over 10% in the quarter. At the end of Q3, our 90-day backlog, including Telephonics, which is subject to cancellations, was $672.9 million compared to $594.8 million at the end of the third quarter last year, not including Telephonics, and $703.7 million at the end of Q2, including Telephonics. Our book-to-bill ratio, including Telephonics, was 0.92 for the three months ended October 3. The book-to-bill was below 1 due to a decline in bookings in our commercial business as lead times were reduced and customers manage inventories and face supply chain challenges. I do want to thank our employees for continuing to contribute to TTM and our critical mission of inspiring innovation for our customers. Our business performed better than we expected as a direct result of our employees and our supply chain partners' concerted efforts to support TTM and our customers. Now Todd will review our financial performance for the third quarter. Todd?

Great. Thanks, everybody, and I appreciate your patience today with all of our technical challenges. I'll take a quick review of our financial results for the third quarter, which are also shown in the press release distributed today as well as on Slide 6 of our earnings presentation that is posted to our website. For the third quarter, net sales were $671.1 million compared to $556.8 million in the third quarter of 2021. The year-over-year increase in revenue was primarily due to the inclusion of Telephonics as well as organic growth in each of our end markets. GAAP operating income for the third quarter of 2022 was $49.8 million. This compares to $32.2 million in the third quarter of 2021. On a GAAP basis, net income in the third quarter of 2022 was $43.5 million or $0.42 per diluted share. This compares to GAAP net income of $21 million or $0.19 per diluted share in the third quarter of last year. The remainder of my comments will focus on our non-GAAP financial performance. Our non-GAAP performance excludes M&A-related costs, restructuring costs, certain noncash expense items such as amortization of intangibles, stock compensation, and other unusual or infrequent items. We present non-GAAP financial information to enable investors to see the company through the eyes of management and to facilitate comparisons with expectations and prior periods. Gross margin in the third quarter was 19.7% and compares to 17.2% in the third quarter of 2021. The year-on-year increase was due to better product mix, higher pricing, and premium revenue and the addition of Telephonics, partially offset by higher year-on-year labor costs, particularly in North America as we increased wages earlier this year to be more competitive. Selling and marketing expense was $19.1 million in the third quarter or 2.8% of net sales versus $15.1 million or 2.7% of net sales a year ago. Third quarter G&A expense was $38 million or 5.7% of net sales compared to $29.1 million or 5.2% of net sales in the same quarter last year. The inclusion of Telephonics added $2.3 million and $3.2 million to sales and marketing and G&A, respectively. In the third quarter, R&D was $7 million or 1% of revenues compared to $4 million or 0.7% of revenues in the year-ago quarter. $2 million of the increase was due to the addition of Telephonics. Our operating margin in Q3 was 10.2%, an outstanding result given the macro challenges we've been facing. This compares to 8.6% in the same quarter last year. Interest expense was $10.4 million in the third quarter compared to $10.6 million in the same quarter last year. During the quarter, there was a positive $9 million of foreign exchange impact below the operating line. Government incentives and interest income increased this to $10.3 million or an $0.08 impact to EPS. This compares to a loss of $0.1 million in the same quarter last year. Our effective tax rate was 15% in the third quarter, resulting in tax expense of $10.2 million. This compares to a rate of 1.1% or tax expense of $0.4 million in the prior year. Third quarter net income was $57.9 million or $0.56 per diluted share. This compares to third quarter 2021 net income of $36.5 million or $0.34 per diluted share. Adjusted EBITDA for the third quarter was $102.5 million or 15.3% of revenue compared with third quarter 2021 adjusted EBITDA of $68.6 million or 12.3% of revenue. Depreciation for the quarter was $24 million. Net capital spending in the quarter was $26.3 million. Cash flow from operations was a very strong $80 million or 11.9% of revenue, exceeding our target of 10%. Free cash flow was also very good at $53.7 million or 8% of revenue. Cash and cash equivalents at the end of the third quarter of 2022 were $335.6 million, and our net debt divided by the last 12 months EBITDA was 1.8x, below our target of 2.0. Now I'd like to turn to guidance for the fourth quarter. We expect total revenue for the fourth quarter of 2022 to be in the range of $630 million to $670 million, and we expect non-GAAP earnings to be in the range of $0.36 to $0.42 per diluted share. As Tom mentioned earlier, we expect a sequential decline in revenues due to macroeconomic concerns by customers in our commercial end markets. Some commercial customers are carefully managing inventory levels, and others are facing supply chain challenges. We expect a sequential decline in margins due to lower revenues and less premium revenues. The EPS forecast is based on a diluted share count of approximately 104 million shares, which includes dilutive securities such as options and RSUs. We expect that SG&A expense will be about 9.1% of revenue in the fourth quarter, and R&D to be about 1.1% of revenue. We expect interest expense to total approximately $11.7 million. Finally, we estimate our effective tax rate to be between 13% and 17%. To assist you in developing your financial models, we offer the following additional information. During the fourth quarter, we expect to record amortization of intangibles of about $11.7 million, stock-based compensation expense of about $5.4 million, noncash interest expense of approximately $0.5 million, and we estimate depreciation expense will be approximately $24.5 million. Finally, I'd like to announce that we'll be participating in the Baird Industrial Conference on November 8 and the Bank of America Leverage Finance Conference on November 29. That concludes our prepared remarks, and now we'd like to give an opportunity for questions. Sameer?

Yes. Thanks, Todd. This is Sameer from TTM. If you have any questions for Tom and Todd, please text or email me, and I will call on you to ask your question. The first question comes from Will Stein.

Can you hear me?

Yes, we can hear you well.

Great. I figured it out. A couple of questions. First, you described premium revenue a couple of times in the call. I suspect that relates to sort of quick turn less than normal lead time sort of product that may be less important to customers today given the softening demand? Is that the right way to describe it?

Yes, that's correct, Will. The focus has been on quick turn and generally new product introductions. When customers need products within our lead times, that contributes to premium revenue. Historically, we’ve seen about 9% of our revenue coming from premium. In Q2, which was quite elevated, we were around 12%. In the most recent quarter, it was approximately 10%, still elevated. We expect in the fourth quarter to drop slightly below that historical average, indicating a shift back in premium requirements.

Got it. And as a follow-up, I'd like to ask about wage inflation. This has been sort of an issue in years past where you couldn't secure enough labor. This was a supply constraint. Earlier in the year, you talked about raising wages. I think there was a global analysis you made and you decided to raise wages globally. But I think I heard you say that you continue to be constrained by labor in North America. Is it something we should expect to continue to limit revenue growth? Or should we think about another potential wage increase on the compensation?

Thank you, Will. You're absolutely correct. Earlier this year, around February, we made a significant adjustment to our compensation structures in North America. We recognized the challenges of the labor market and understood that we had fallen behind in terms of competitiveness. This adjustment was part of a broader global leveling initiative aimed at aligning our titling and compensation across the organization. The final phase of this project involved making these necessary changes in North America. I’m happy to report that this has led to a decrease in turnover rates and an improvement in retention. However, we are still facing the ongoing challenge of recruiting direct labor in several regions of North America. This situation is further complicated by ongoing absenteeism linked to COVID, which has also led us to provide additional paid time off for COVID-related needs. These two issues continue to present challenges in North America. While I wish I could say the difficulties in direct labor are resolving, it largely depends on broader economic conditions. We are confident in our need for direct labor moving forward, and given the strength of our defense business in North America, we anticipate ongoing demand for TTM employees and will continue building our dedicated workforce for the foreseeable future. Next question?

Yes. Thanks. So next question, Mike Crawford, you can go ahead and ask.

You're good at reverse engineering, Mike. I'll give you credit for that. Yes, we're still going to have good margins. They just won't be as strong as our current quarter or Q3. We will still have a good performance. So if you do the reverse math, yes, you're going to probably come up with gross margins greater than 18%.

If I understood correctly about Malaysia, you might already have commitments for about 60% of the capacity of that facility. What is the target capacity for operating that facility overall? Additionally, how is the foundation and steel raising progressing? Are you on schedule, or are there delays in getting it operational?

Sure. Thanks, Mike. Yes, you're correct, 60% in terms of what would be our planned capacity. That planned capacity will be about $180 million of capacity for revenue. Of course, that will move around a little bit depending on the pricing at the given moment, and what the product mix is. But that's an approximate number for you. From a production volume standpoint, about slightly over 60% already committed with a long-term agreement. That's where we sit in terms of the customer side. We're continuing to work that, by the way. We continue to have some very fruitful discussions. Hopefully, that percentage will move upward. In terms of progress, I think we're very much on schedule at this point. The benefit of the site planning that we've done in our operations team has really put in place in terms of planning. Early on, they went with a steel frame construction for this building, and that's a little more expensive, but it involves less labor from a construction standpoint. Malaysia, like so many countries, is dealing with labor shortages. The fact that we've got a relatively simple and efficient construction framework is going to help us, and we certainly hope to remain on schedule. So far, we are...

So next question, Jim Ricchiuti from Needham.

Wonderful. Tom, I just wanted to drill down into not surprisingly some of the comments about the softening you're seeing in some of your commercial markets. I'm wondering if you could elaborate on that, which of the verticals? And how did that play out over the course of the quarter? And what are you seeing thus far in Q4?

Sure, Jim. I'll provide a ranking of the areas where we're observing some softening. In the semiconductor capital equipment side of our instrumentation business, which constitutes a bit less than half of our instrumentation segment, we are seeing a decline. In computing, which is semiconductor-related, we also notice some weakness. The telecom sector shows relative softness as customers focus on inventory control, although we believe this is indicative of a slight downturn as well. While 5G build-outs are progressing well in India, other countries appear to have slowed down. The commercial aerospace sector remains comparably weak. This situation is expected to improve as passenger traffic rebounds, jet production restarts, and customers manage their inventories. Regarding supply chain management and inventory controls, data centers and networking are on our watch list. Customers in these areas still express demand strength, but they are closely monitoring short-term inventory controls as their supply chains gradually improve. In the medical field, there's been a decline in premium work, suggesting further inventory control measures are being implemented. However, in industrial segments like downhole operations and industrial robotics, performance remains robust. Automotive demand continues to be strong from our customers, and the defense sector is very solid. Overall, while there are some softening areas, the markets are still relatively strong, and those are the sectors we're paying close attention to.

Got it. If I could ask a follow-up regarding telematics, and I may have missed this. Todd, I believe you mentioned it contributing around $0.04 in earnings. I'm not sure if that was the case this quarter and whether the synergies you discussed are still on track. I understand it might be early days for that update.

I'll answer the latter first and then follow up. So in regards to synergies, as Tom indicated, we are in the process of integration, and we're making good progress. When we announced the acquisition, we talked about our plan to achieve $12 million of run rate synergies by the end of 2024. We are on track to deliver that. We're feeling really good about that as we get into the weeds and start being specific in what actions to take. So that's moving nicely and consistent with our earlier expectations. In terms of Telephonics' contribution to the quarter, you're pretty close. The revenue for the quarter was about $68 million. Keep in mind that the calendar Q3 quarter is traditionally the peak quarter for Telephonics as that used to be their fiscal year-end. All their programs drive toward that end date. Profit performance came in pretty good. We were expecting about $0.04 of contribution. Maybe we got a little more than that, slightly favorable, maybe $0.05, but it was in that neighborhood. A good first quarter, but we expect things to be a little lighter in calendar Q4 as that's traditionally coming off their peak for their traditional fiscal year.

Yes. So next question, Tyler from Craig-Hallum. If we can't hear you, you might have done a year line get...

You may now...

Yes, I can hear you, Tyler.

Awesome. Great. I want to ask a question or two here quick. I guess I want to follow up on some of these commercial market weaknesses you're seeing. I just wanted your thoughts; looking into next year, would it be fair to expect some of these headwinds to persist into next year? It would seem that often these types of challenges and the inventory corrections and adjustments that go along with them are not just one quarter in nature. Is that a fair way to think about it as we head into the first half of next year or anything to call out there?

Thank you, Tyler. You've described the situation well. If we look at the areas I've mentioned as weaker, I anticipate that the commercial aerospace sector will provide positive momentum as we move into the next year. We've been at a low point as customers work through their inventory, and I expect real demand to start returning. The same goes for telecom; the 5G build-outs are expected to continue, and we should see renewed strength there. However, areas like semiconductor and semiconductor capital equipment might face challenges next year. For the other sectors, it's still uncertain. Customers in the data center and networking sectors indicate that while their programs are solid, they just need to address supply chain issues. This is a positive sign from them. In medical, I expect that area to rebound as well, as they are dealing with inventory which I believe is a temporary challenge. Overall, it’s advantageous to serve a diverse range of end markets, especially during times when some sectors might experience a downturn. Plus, we have a strong defense business that operates on a different cycle. I'm optimistic about our position as we approach 2023.

That sounds great. And then one more quick one, if I can, for Todd probably. On the margins again, gross margin specifically probably, could you give us what a normalized gross margin might look like at this level, absent some of these headwinds that we called out or what kind of impact you might attribute to the gross margins in your Q4 guide, just so we can kind of get a baseline as we go into next year?

I'm not sure I quite understand the question. Are you asking about Q4 guidance and expectations?

You talked about the Q4 guidance and you say that margins were going to be down due to some of the same macro headwinds and concerns at some of these markets we talked about. I guess, is it just a volume thing with those markets being down? Is there, I guess, anything else to call out on the margin front that we should be considering?

We noted in our script that there is a revenue decline in Q4 compared to Q3, which negatively impacts our volume. However, if you examine our overall margins—particularly our operating margins—you will find that the situation is similar for gross margins as well. If you analyze the EPS guidance we provided, it suggests an operating margin of around 9%, a drop from 10.2%. This decrease can be attributed to two main factors: reduced volume and a further decline in premium revenue. Earlier in the call, Tom mentioned that our premium revenue for the third quarter was better than anticipated, contributing positively. Nevertheless, it is certainly declining from its peak levels, indicating some softening in the market that we have discussed. Therefore, regarding our Q4 guidance, the decline in margin can be distinctly divided between lower volume and a decrease in expected premium revenue.

Thanks. So next question is Matt Sheerin from Stifel.

I appreciate you guys staying and providing all these details. Just one question. I just wanted to drill down on the automotive outlook. You're still trending down year-over-year even with a sequential growth in December. I understand the issues at your customers. But as you look at your backlog and visibility into next year, are you expecting kind of a nice rebound in growth next year?

Thanks, Matt. Yes, and I appreciate your patience. Automotive for us, year-on-year, if you look at the fourth quarter, we'll be down sequentially, maintaining a very solid position. Just to remind you, last year in the fourth quarter was when we were in the midst of a very strong rebound. Q4 last year was particularly strong. So as we go through the balance, we look into next year, everyone has their crystal ball. What I'm encouraged by is, number one, the overall macro trends from an automotive standpoint are going to continue to lean on electronics content. We're looking at PCB content moving from where it was at the end of last year at about $100 PCB content per vehicle upwards to, let's just say, I think the forecasters are calling for $150 to $160 by 2025. That trend is encouraging. I think we're in the right areas as we focus on ADAS build-out and ED support. Our team has done a good job in terms of program placement. I'm encouraged by that. I think that will certainly help TTM overall and our positioning in the marketplace. Regarding unit volumes in automotive, I think it's a case of when the supply chain catches up. Hard to predict. Right now, our customers are still dealing with shortages. Over this last quarter, we continued to see PCB demand really robust, particularly in Europe and North America, where we saw weakness in Asia, China, and Japan. The economic challenges in both of those economies make some sense. So as we go into 2023, I think it's a matter of at what point does automotive production catch up with demand, and then we'll see what the real demand across our geographies is. I would say we're going to be in a solid position in automotive for the first part of the year and we'll see what happens again when the supply catches up. By the way, program wins in automotive this quarter as well. We won a program value of about $125 million in the quarter off of 19 automotive designs, and that's comparable to where we were last year at this time. So positive to see customers releasing packages again for new designs, particularly as those packages start to build on a strong EV story for the industry.

This is Sameer. I don't believe we have any more questions at this point. I want to give everyone a final opportunity to ask questions if they would like, so please press star 6 if we can't hear you and you need to unmute your line. It seems we don't have any more questions. I will now turn it over to Tom for any concluding remarks.

Thank you, Sameer. Let me start out by thanking Sameer, for acting as operator and investor relations while dealing with a very challenging vendor situation today. So, thank you, Sameer, for that incredible job. I would also like to thank all of you for your patience and your willingness to get on this call on such short notice. Let me just close by summarizing the points I made earlier. First, TTM delivered revenues in line with guidance and earnings above the high end of guidance. Second, our end market diversification enabled strong revenue growth of 8.3% year-on-year. That's not including Telephonics. Third, we generated strong cash flow, and we're now down to a net leverage of 1.8x. Finally, we are well positioned for whatever comes our way here in terms of the commercial markets with an aerospace and defense business at 40% of revenues. In closing, I would just like to thank our employees, our customers, and of course, you, our investors, for your ongoing support. Thank you very much. I hope you have a good rest of the day.