Rogers (ROG) 28 Apr 182018 Q1 Earnings call transcript

Good afternoon. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the 2018 first quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session [Operator Instructions]. the to turn of Monti, now Relations. Investor will call Jack over Director I

your conference. begin may You

Thank and follow First section Quarter slide you, joining please of XXXX for Mike, presentation, Earnings thanks our so Web Call. the To see along site. the everyone with Investors much Rogers'

to Turning X. Slide

statements. disclosure We have a on forward-looking

number results call, uncertainties, which and we certain to During outlook. risks materially be the today's forward-looking statements cause actual of making will subject differ versus to a may

discussed metrics underlying will on In of addition, financial some believes the of basis, non-GAAP reflects the management core be which the a performance business. better operating

Turning CTO. and to introduce CEO, I it over will to Bob SVP Roger's President by my joined and Hoechner, Stipp, now Janice turn Bruce Slide X. Bruce. is and to It's and management SVP pleasure CFO; team. Daigle,

for Good of and Jack. Please call. XXXX to wireless Thanks, for you Advanced everyone, million weaker guidance. for with thank Systems offset demand Strong $XXX Driver on growth were by quarter, net afternoon, infrastructure joining and Rogers' for EV/HEV was revenue today's us flat applications applications. our previously Slide the QX sales in announced X. Assistance line turn and relatively

outlook XXXX. forward. from strategic helpful QX our to where this Adjusted and disappointed in are of adjusted XXX in to I that on was we decline XXXX. move context a QX a points margin we I XX.X%, map detail Although performance moment. At due some we basis achieved in EPS explain guidance, think road we operational was XX% more down would our our were issues margin will our QX provide $X.XX, point, from it be gross EPS as on

where existing significant global line, growth the and top markets, outlook connectivity, advanced we our the at in strongly is advanced Looking positive. mobility particularly in opportunities have

transitions to the advanced more it XG advanced We growth coming year. has lull to a in substantial connectivity have the somewhat market due recently demand while seen mobility, as in slowed in

a to As respect opportunity advanced much XG One past the margin mix XG due there they ACS revenue of to headwinds shift higher-margin the we'll our contributors margin where as generations in greater are the business temporary improving as our combination revenue systems as larger to much in results. lower corporate two but these EPS currently I'll XG complexity recent is are our technologies from are the key corporate see margins With and later, than content due a approaches. material higher targets, of the business, than telecom require. discuss in transition performance, see to -- we wireless with

discrete or are the operational that are being issues have been Second addressed.

margin we a our as financial QX in XX% gross sequential guidance to XXXX reflects vision As our and continue of margin result, reflected XX% quarter-over-quarter on our our objectives margin operating targets. path improvement

Let performance me turn now back specifically. to the QX

new margins impacted first, operational in three during negatively in by issues the business to opportunities mentioned, I projected associated issues. equipment with and the second, XG for surge issues customer yield preparation multisite product in capacity primarily associated key As were of and associated discrete product support growth performance downtime qualifications with due unplanned productivity areas: with efforts ACS optimization impact yield in demand; unit the quarter and third, introductions;

led addressed substantially as associated issues resolve new that with to are yields were downtime in the We QX. issues. lower equipment action introductions taking to specific decisive The well product these as

organization strong are excellence. increases pillars of Despite raw being progress which third to four the remain expected has the turn challenges, in to programs place the of well deliver on the strategy: as synergistic near-term to in our our Please strategically our the or implemented We we of growth and We through financial been have discussed XXXX focused completed the be we pricing is addition, are to year. the to objectives. operational X. and And work proven price material quarter. Slide a be market-driven, last quarter end expect qualification product addressed, offset M&A, positioned majority multisite continue the leadership, company by innovation and

operational consolidations our like result to footprint. I existing margins highlight manufacturing operational These and efficiency infrastructure Regarding and actions we in excellence, are the would underway. leverage improved now plant two that will as

of QX on are we previously campus announced consolidation to track complete Belgium First, this our in year.

in have Fe California, consolidate to the announced Silicone in our operations formerly plans Springs, Illinois facilities plant we addition, Santa Delaware. In and into existing Diversified Products,

to project anticipated take customer an a has transition. to meeting our this on place expectations and and focus in QX expect XXXX. products quality months nine maintain of the ensure after completion with approximately during delivering We plan The team we

Turning to Slide X.

in growth we is where secure drivers, investing connectivity, tomorrow's two opportunities. advanced and of mobility This Our are than support more XX% wins our advanced represent today's applications emerging to revenues. and design to

market. of or warning, as in as a accidents ADAS there data spot seeing Industry emergency braking assistance functions. which particular are two These in X lane automation are the is offer control blind forward Level change automatic that reduction and systems, We strength detection. collision sensor such more substantial with suggests such features

where the sensors see conditionally enable to As of vehicle evolution coming look to number Level per autonomy, we the ahead, increases driving. automated we X

additional near driving of in provides for autonomy autonomous opportunities be in expect in infrastructure for relation vehicles ongoing transitions significant penetration to the market for as the we of see to market to wireless degree higher XG. required further truly sensors applications future, of Rogers. In term the reality growth the connectivity, the softness and advanced greater While number demand may

around is evolves, design-ins the world. seeing Rogers the technology and XG pilot substantial As installations

sophisticated significantly material content greater in highly these systems. have We

QX Slide versus XXXX. million, X% actively are foreign XXXX. achieved revenue for Please of from In we X% demand. So decrease market upcoming capacity to QX When net expanding adjusted XXXX, ACS QX sales ACS $XX support a turn X. exchange, primarily decreased to

and by their was XXXX quarter, as During of the this NB roll-out year. materials for slower-than-expected the applications remain high-frequency infrastructure as half ACS announced IoT lower in a Two up wireless China's circuit XG to second LTE of in to pick growth China. a committed in build-outs, the we well activity ADAS, IoT of leading saw expect demand for completing see NB offset providers which

Looking positioned that systems. ahead, frequencies this thermal that is experts solve are very most projecting a evolution XG high half accelerate support will first to capitalize portfolio with deployments solutions more XXXX, for ACS on and of issues. well to the of complex in diverse offer

As experienced qualifications, respect at only first ACS. ACS significant and With inefficiencies several quarter customers we are the in we who have has have bottlenecks products the challenges site. operational This large discussed operation. the in multisite one qualified earlier, we our we addressing created in to

introductions products allow product on produce to being for the us capacity qualifications these QX multisite The and of suited first that were were new best impacted impacts end for impacted limited earlier We our by the products. I issues higher we've quarter also expect included QX. capacity incremental in manufacturing yield available costs by some these yields to equipment and will the on deliver made activities, mentioned equipment will these to with due Margins by guidance. these of associated associated complete by with multisite productivity. productivity qualifications Margins and available

pieces due consciously end We QX. of extremely by equipment deferred equipment XXXX. expect products on two during we high specific on these With to the issues, regard maintenance of demand be producing appropriate the to to equipment

EMS As and during in net introduced adjusted X. When general a OLED-related automation was QX X% issues QX applications broad many display sales Slide impact. yield within mass quarter, we transit lengthy smartphones. to equipment demands lower OLED offset exchange, versus segment essentially over industrial experienced XXXX. across of portable delivered demand result, headwinds reported for turn resolved EV/HEV for manufacturing. applications room slower a and and newly QX, We of despite In revenue by the applications strength the in the Please saw OLED in $XX applications these as downtime a result electronics of display foreign Higher million, EMS was in sales primarily widely We XXXX. a flat clean for QX. increase

are EV/HEV and enable These pads next-generation solutions We from with as ceiling batteries unique traction of the pressure materials. number conditions. environmental of well battery other the that is extreme water, dust pleased as gaining protect a in batteries that cooling EMS include

and We expect demand models are continue EV in introduced. HEV this more as market to

demand QX to growth Turning applications benefiting When sales XX%. QX, PES In was XXXX. achieved for Rogers for market China. adjusted accounting over and of energy. renewable methodology substantial net including Slide and increase an revenue X. in demand, growth primarily from to solar broad-based This the XX% $XX increased of is exchange in changes, mobility advanced PES foreign due million,

in modules ceramic components substrates interconnections solar cool provide IGBT high-performance within and Our applications.

hybrid to continue power of in tremendous provide such range to ceramic applications and improve opportunity where vehicle industry-leading advanced example substrates electrification. also another vehicle modules well mobility, vehicle as reliability. performance as We all-electric our This for and electric see is as

markets positioned XX. this Slide uniquely PES turn to expand, address Please these become is requirements the challenging, As solutions more and portfolio technology to the complexity.

are by is on key business in markets. many our the recent at Looking positive Based reports, strong. of very macroeconomic gaining environment, is global confidence encouraged GDP and we the forecast growth

to tariffs, we agile We response to analyze and announced remain recently potential the our in continue effects changes. will vigilant of and any

me retire to to she been over numerous helping joining XXXX, team on Arizona. well the take us wish Before will as a contributions in in now while the moment of her call financial same capable following Janice well has her in Janice, an wishing drive the May team. endeavors. appreciate executive since to greater I building it highlights. a member in as will to QX Please I finance Rogers from is effective I Janice? here valuable headquarters over time made experienced turn want to Janice additional and CFO who relocated I to at report and Janice, most future detail has our the specifically XX. company's at strategy announcement company results growth best the turn join her Chandler, new our a the in

and Bruce, Thank you, everyone. good afternoon,

the our our was revenue XX. Slide first in the in XX% favorable primarily QX quarter guidance of the of versus income adoption adjusted due followed QX previously and decline primarily operating $XX.X million the first revenue quarter operating slightly and operating is recognition adjusted of decreased as $XX.X income sales versus XXXX mix, which was range. versus $XXX.X XXXX future associated quarter operating million and review first The million, to percent above basis result adjusted of increasing initiatives. marketing, year. second million in Net a operating midpoint prior $XX.X with of challenges, from Adjusted of or XXXX XX.X%, XXXX decreased and million the income guidance. XXX R&D detail year revenue, XXXX as the last XXXX. results revenue $XX QX quarter revenue. from margin to noted, I'll expense the of FX million margin higher growth by down the QX of guidance. was more points million $XX.X Turning was $X.X

share decreased to quarter QX the $X.XX per our $X.XX high of of turn was First favorable our of a quarterly revenues. tax and guidance primarily above for of to adjusted versus due end Please XXXX Slide $X.XX XX review earnings XXXX effective rate. range

Our X.X% on basis. a up year-over-year revenue was

XXXX quarter favorably rates Korean markets. revenues versus first to recognition depreciation the favorably by million, renminbi impacted ADAS adoption of methodology was was or favorably from Rogers EV/HEV or XXXX. due impacted X.X%, $X.X exchange quarter impacted growth by XXXX. and euro, million QX primarily First versus QX the down revenues Revenue X.X% $X.X by X.X% the volume won. of and

volume However, LTE the offset wireless we not to due growth transition was XG declines lower this in to to demand XG. as able

Looking at Slide XX.

adoption XXXX. XXXX. QX margin and XXXX deterioration million operating downtime impacts income cost million and $X.X volume unplanned of income versus associated primarily and operating in with R&D of million, recognition from of income $X.X by other future process was due performance issues, scrap, million was such increased guidance QX SG&A XX.X% Increase million, equipment revenue of adjusted new as million. The support $X.X product in decreased qualification. $XX $X.X was in and primarily of offset the higher operating both XX% growth QX increases to commodity introduction favorable $X.X FX million impact of mix Volume initiative. QX unfavorable adjusted product to and XXXX yield Our with operating $XX.X discrete versus multisite and inefficiencies, $X.X partially lower of by million

of Slide to $X.XX year's Turning EPS of reported was down XX. XXXX, in first the We versus which quarter $X.XX. last

effective and performance $X.XX primarily expense the derivative These pricing with reform, higher XXXXA partially totaling contract. the items credit, $X.XX the costs, $X.XX were of As of and slide commodity to R&D higher income and due favorable releases, unfavorable associated $X.XX stock depicts, tax adjustments royalty improvement unfavorable $X.XX benefit. tax SG&A tax miscellaneous decrease primarily R&D, XX% was $X.XX mainly compensation to due by XX.X% tax lower to rate to due due U.S. offset transfer and

and revenue by volume In for favorable offset recognition volume addition, of of the $X.XX, to other due was of $X.XX $X.XX of $X.XX the and adoption partially effects mix. guidance, largely

turn If Slide see XXXX to results. you you our segment XX, will QX

of wireless portable due Adjusted increased revenue the is automation satellite respectively. ADAS. recognition demand segment decreased revenue industrial clean electronic ACS XG and for side electronics, in application FX for QX manufacturing. our EMS XXXX, specifically, lower left chart by than and the offset application, lower high-frequency as for business portable was a and room increased circuit sales lower for mainly On our revenue result volume. segment More X.X% EMS EV/HEV. by for material methodology PES of decreased display QX in mass X.X% This ACS unit. decreased the TV OLED XX.X%, and revenue more LTE, transit increased demand general offset revenue The XXXX, segment X.X% for in EMS changes, strategic partially to and decreased

growing segment demand drive, coolers. PES EV/HEV, growth the was motor variable segment fastest laser XX.X%. in frequency renewable energy, organic growth our and of is Finally, with associated diode with The higher

side segment operating of Looking our at adjusted slide, right income. see you'll the the

million, strategic to million product cost, and from R&D. to associated new product $XX.X primarily $X.X unplanned due continued impact yield mix, marketing and issues, sales, XXXX. and qualification, downtime was income volume with discrete support down issues optimization associated QX of operating equipment was in adjusted ACS This and higher First, multisite yield unfavorable commodity introduction, investment with impact capacity productivity and

and largely was cost, million to throughput commodity operating resulting million, adjusted and of lower QX unfavorable costs. down mix, The was EMS due fixed income $XX.X price XXXX. $X.X Next, from decrease under-absorption in higher

cost, in $X.X or up and volume from million, revenue the Lastly, to $X.X QX adoption and result performance and PES new was is operating product and partially due commodity recognition increase favorable offsetting income the mix This strategic and million the guidance, benefit of these marketing. adjusted items start-up higher unfavorable mainly from sales introduction of XXXX. investment favorable issues,

Turning to Slide XX.

first million, position revenue million ended $XXX $X.X $XX.X adjusted or excluding You quarter EBITDA the will the cash XX.X% see quarter of million. adoption we with of in a of the of recognition guidance

XX.X% increase capital range million. the of per in million range adjusted range $X.XX was in million of for During XXXX. share the Cash compared releases adjusted which a fluctuations and share. Slide due diluted to or XX%. to royalties, year higher the use decrease the one-timers approximately share basis, per the earnings for Guidance the sanction, a $XXX the On incentive of at earnings of accounts by to rate million, of the adjusted in partially per XXXX. $X.X effective $X.X share higher we working $XX.X rate earnings midpoint, a the The XX%. to in and with X.X% U.S. $X.XX versus XXXX was per lower was XX.X% XX. turn million. the revenue revenue diluted $X.XX pricing primarily QX year-over-year other million X.X% $X pricing methodology. partially Capital and $XX higher per an to midpoint is has earnings full million, million. increase in XX X.X% first credit, estimated $X.XX. to effective guidance back QX QX call $X.XX guidance QX of per $X.XX look programs, guide for $X anticipated government volumes compared than inventory XXXX is offset share. of $X.X ZTE to XX% reform, EPS an adjustment At due revenue. due higher currency on and are rate million our although guided an payable to cash of year be recognition increase accrued diluted now has compensation. taxes QX XXXX On expenditures quarter, midpoint for tax XXXX in XXXX of shift, portfolio spending $X.XX transfer of increase basis, of includes This guidance of quarter QX $X.XX million, XX% the $XX we I Revenues per XXXX $XX for share, accounts the $XXX of to primarily Bruce. earnings a of $X.XX in our million in $XX revenue or at tax range favorable share million paid $X of is QX adjusted by in million or in offset approximately of increase represents of for paid over QX was reflects the for per diluted revenue share-based capital million prices. for year-over-year an compensation, This is than guided tax Guidance the year of $X.XX to for impact to Taking at had of This of The R&D an diluted effective commodity a share, adjusted to receivable tax will of was guidance $X.X last the FIN to

Q&A. line remarks. Janice. concludes our the prepared We'll Thanks, This now open for

of first Ellis the B. FBR. from line comes [Operator question with Instructions] Riley Your Craig

is calling Craig in Peng Peter for actually This Ellis.

the these like mix product the talked if where you two of can how gross statement of we is expect. from On kind roughly clarification, basis of -- of issues true the is can XXX you the and margin by about then wondering quantify points discrete, whether you seems much quantify the two. about I'm it middle income each

you operating Well, is some majority percentage, operating equation. the The had. The mix color is but about probably the the majority that. on is lower I'll we give that a the issues of side

downtime that within also the operational yield issue, and buckets, be just And to that and you issues? Okay. three able capacity the optimization, then productivity would within quantify equipment

the as really of but the it's margin would out in XX% say, side. not or about miss range earlier, said I so specifics, breaking We're them on into I of the

and various takes So puts there's that. on

And kind going like in a to improvement are flattish. guidance, the margins of looking OpEx be the slight at EPS seems that it revenue and is

assume is to of to second So the this second issues quarter going half? Or in going up it as correct lingering throughout the kind that is be to be lingering these the well? half are second and in clear

of a things So here. couple

side, First, the The are we we've that had. operating pieces and two equipment now issues the up on equipment addressed running. of certainly

this although On the introduction, of we're taking we'll through be in lot first the multisite majority and new that, also into in of and QX will half early But the QX. of be qualification possibly a bleed it, the year. product care of

distributed, towards be the this out been the lot pushed the a initially in the And us. year. planned real what that see ACS, we we're side through move of second the challenge particularly these -- The is year, hearing on us issues revenue that half of we in as should where all So second the these on -- behind into let's that half NB of it's into IoT -- is of be year. say, evenly we had for would or

So pushed the down that's ACS. on one that's revenue for thing

half we're that well also counterbalance margin balance in see we've help back so And get I see that growth that's some term, in in the balance seeing hearing Asia into in equipment lower then mixed as we on that in that second surge when But saying rolling the manufacturer back their had when in half would the side we help the they the somewhat -- for that the XXXX. we're what manufacturer, XG that first in and which, in or carriers the year this XG -- we -- then roll-out, of longer ACS. United United is in the of start some day not the my States that PES, the telecom then of remarks, reports. One as of call seen large other mentioned half the are and things them. heard particularly earnings prepared States, the in we're in of maybe hearing, other -- will coming some equipment on the So some we've Europe second us the margin some said in, growth

that naturally spending that's of being as we bit make will a most the which capacity a sure produced we XG to appropriate roll the also, start for the and perspective facilities our our what that a bag, it's course, costs debottlenecking in belief but mixed the hits. right right preparing we efficient certainly from into and XG, is time we're adding yield in 'XX, have So of products the seeing so productivity now obviously, when way right then there and we're incurring

flattish the the gives kind of just on about of you Based of each segments? takes the and guidance, talk quarter can sales

saw in XX%, of as in that the general very with EMS, ADAS issue remarks, MSPU very for was quarter, into was be exception in prepared seen, a area the So we in sales I Again, continues much that that higher of we've of in clean manufacturing. mentioned has with stalled. portable goes all product market up I line the real us. the expected line an our industrial, EMS, the across and the in market good in pretty growth that which strong electronics, room about as had mentioned, call, OLED, wireless areas, we a the range bit what down ACS, we market In there. to

not anticipated. the as is phones have that apparently as selling issue well come are the OLED with think that new there I out

but the a flat. across delayed, that laser XX% EV/HEV in the was as had good renewable year, which next as out pretty ended up a has growth we and it about diode much has which OLED and the manufacturing EMS, screens coolers. diode investment of board move round been the year-on-year, of And the lot well, that has energy of had we affected at area exception, as for mixing in see that PES, continuing run through But then So laser with as us. well

overall, pretty to PES track. one seems much Things The narrowband be exception that and with So XG on challenge is us EMS well. roll-out. of extremely is for then ACS Internet and the doing the

following Kind on of and in few ACS the some of change up that accidents autonomous been demand on the on year? press tragic you're release there's a for rate point, affected this space. Has material expecting that the

Great And driving that the and driving. adaptive forth, ADAS we the our autonomous question. which -- increasing so penetrate is not It's Level growth and is not continues And what marketplace. is see see that it's to driving. We detection, blind X penetration assisted autonomy, spot that in the substantially cruise applications.

penetration So materials that numbers XX% market. of that something had into those like were the seen as a we market, I penetrate last I think

full autonomous. as any the just and really Level on seeing affecting number don't in increasing it's not years. happened that the X go over The accidents and -- opportunities of talk so I have of We said, we some the that will X driving, about Level the of autonomous that, see fully which driving, our expand our for and see us, to of autonomous was We're people multiyear next sales. out forth, that issues with sensors penetration the coming even they the as couple cars that driving autonomous

that you pair Chinese ZTE the any acceleration has any your the issue? seen issue, have impacted And orders? this of on of because from And

a normal we sanctions as this occurred these in -- very X% when it's returning is the and up we're equipment that we've of all other of QX, so when than and materials. Janice seen see pointed would we think less delay And slack a spec-ed that business noise in QX of that for and out but that us. the equipment bit So since had had in manufacturers, the included or is across in our -- XXXX I take what And procure guidance, sales, to in basically a QX. manufacturers bit of qualified

the more hop and I'll from One question queue. back me into

you expense, is the for of on that the Just level operating normalized expect this year? the kind

Are you SG&A or talking about [indiscernible]?

and do this some SG&A you've launched in half see pick second Or Just R&D. products? up the as new you

No, I believe steady that needed growth look year. in put we adds think for forward course XXXX, for propel place the any be SG&A. the have SG&A we we forward. if -- to back, This And over to of through very the you look we the see as XXXX, in we substantial we don't should

Instructions] comes CJS with Daniel Moore Your question of from the line [Operator next Securities.

-- Let quickly forward. thanks Bruce, going me me well, wishes just thoughts echo let your good echo and Janice and as our to

Thank you.

have I of to than maybe color with period revenue we declining little it the well? of XG, XG handle we X.XG be And any as wireless on little thought, Is rate just Bob, -- that's on get great. in -- And gap will quicker this slowing shift or can bit dissect the declining about would is wireless a might that trying a a decay. Talk the you the kind gears. bit technologies. sort of legacy maybe X.XG between legacy and more

to that. I'm Dan, ask on Bob to comment going

Yes.

of I days. as look of -- And be experienced if decline bit would stations you -- think was that really these OEMs, is what quarter, So the that Dan, be From from constructions XXX,XXX being in the ia lot the X.XG legacy between a deployments in right an belief gap what's XG occurred frankly, Bruce our base would neighborhood a similar been XG the belief, deployed but that, believe, as deployed we we're the was of in mentioned, -- the it's have past very year. NB which from announcements were to and hearing -- -- a IoT, first the in in quarter. could that a IoT XXXX our NB increase no again, little for now the out China lot lot last characterized LTE X.XG, is of of at

-- that XXXX. in mean, what's in sluggishness hearing, intent continued I NB still deploy base is we're NB reflects IoT IoT suggests guidance stations to reading, encouraging during QX, told being those is but us Our to there everything

So with see nice that in in uptick to in mind, we second half. the that space expect a would

the ask you XG different front And on obviously, players.

put You and ramping sizable actually in a of get full if If different you answers. came ramp up at but level, in But or to in today take how or production considerable place shipping? mass production a capacity start not sort ready. you're capacity long and would orders of amount it getting the

right X that applications positioned There's now. well we're right in day. are now. that We supporting on are is This to turn being not going piloted,

And so through we into certainly we introductions very we on what and materials and know and second good based in will position of year, in bigger first the we anticipate provide been see the as believe be we'll has volumes. designed half we what what the be what quarter of the to move

say to So also speak. summer we will going the in There's our presses we in are investment the continue as Europe, will and completed that here others we make in. over continue, there's and that presses installing and I one be

think well for from So well matched we're perspective, demand. I we're that positioned and the coming

at any ops. Belgium how expected and then consolidation the cost much I'll and newer around jump you as is saving as shift details save in might back DSP's consolidation us Remind well have cost it, gears the out. Got of the

We haven't we're to prepared that here. communicated so not that out, do and

last And one.

segment solid ACS the below those a relates do not do? incrementals. PES, still growth it and we of What lot in to -- lifting on to as front margin What's margins the key average and You yet longer of lot of margins sort term? gave need really that detail a to

some the talked consolidation. We moved And the cost also China. we've And add and about lower we the for Belgian will point. this be ceramic Part PES be improvement so doing installations completed good very there. during in summer. PES, about the business here of manufacturing we're Hungary will a to consolidation. as capacity year you automation that, That asked for the just addition sites and It's to in Belgian

the during in forward. move of activities those this of all will margins result course we improved So as year

automation. and site so there move and imagine, can site many from install we as you as As capacity are we production to efficiencies

be leakage until of to frank, some in place. very get we there's, margin So that

of gain you expected margin, had executed So very, moves, that maybe better automation. these incurred costs things, plans to have consolidation on confident some we're little there, and these as with the some growth revenue out, the very as But from we our that's do actually you took those -- the being kind consolidation PES bit that and a us. of in -- in back -- on well, but of it point would extremely

the Needham. from of comes question Hannan next Your line Sean with

and to just modifications if the have I mention understanding we that new, points new, not a specifically little make might to here clarify few around can be I ACS, -- these what what's sure impacts there's want what's within as of I'm see I some consider EMS.

hoping things. some these I'm of walk So I through can

uptick today. activity that yet the really XG a X.XG little aggregate up a about expectation when would second we in more we would this ties And Now good expect half here to is much weight? lower. bump from should today, it first, be second in your rather half, isn't 'XX very it in thinking but expectation particularly be it. do IoT, or be clearly, have that as as to consider would we the full as And push there that NB when something Or activity -- a

it to trying first. understand Just that piece of

not guidance, significant IoT. NB QX in did the we guide So

this view to is show our going So in half. up second that the is

for is lower? we and the if thinking that is becomes it and XXXX, in start in-aggregate -- But second aggregate is half the second is half still our whole thus, the Right. that were aggregate and point that weighted? does up just picks that aggregate picture about picture activity Or

the the of view -- is that issue performed be The there The is would in XXXX. that think I original no. back-end what aggregate gets No, it loaded.

And been told from and belief will and to China. everything so operators happen is the on our that and a that -- IoT we've NB various it folks this the heard, there's there year commitment by that in again, read

aggregate in year, loaded. just back-end still in the is So it

an that And demands were then morphed? downtick timing quarter, transpired that to So that more we at a for have support quarter, or least to observing loaded, were extension so have right? recognition going it the hiccups that's of related first here the further was the that basically, of I course that during in into a realization to kind -- correct? mean, the quarter. then of how second we Is thematically already back-end shifting -- some of you the

a that's think good it's -- I Yes, characterization.

margins I a uptick counterbalance, goes think to projecting strong EV/HEV for we're on the in the portfolio we see which also And were company, a of bit which very the so disappointed we of PES, didn't little a through QX. unfortunately, lower. where terms we really back with margin and that PES pick-up NB saw in the helps that are side bit the issues to the IoT,

over volume overall up it got affected but margin. more negatively So in ACS we and gave in PES some

-- you have just that your in So thought so process.

when then and -- at specific ACS. to I look is And this

or the second that that, I quals, of an going largely the that terms when at of in I the previously. addressing impression the be end getting bit seems should that knew high into fully be resolved So part, least in little may a the definitely accomplished at It we coming least challenges, high, the resolved least quarter? longer. was perhaps quarter It look to that, stretched be multisite quarter seems already at within third by second the got the operating quarter issue. we at resolution, confidence that that

bit to a sure vein, I was misinterpreted last if yields, was me just if So similar as quals. getting for I'm tiny me. telegraphed a And The the that the stretched further this new very has as quarter. sense you to bit to just I that issues, enter multisite the perhaps Can of something in known wasn't equipment want help tiny seems that then coming Because that or see a just assumption have understand? may stretched out a well discrete I quarter. we that well.

this projecting by early QX with So this into some we multisite would as QX, last with everything And into completed we'll the quarter, come also we're of said qualification. and start QX.

Just extended some forth time customers you so ours. their and on time line, qualification that specific to hadn't and it's and of can issue, in dealing not with sometimes, on, the the have lines we But back going some qualify it imagine, on for as anticipated. trying customers,

So...

okay. Sure,

then my observations So accurate, are It's... right?

Yes.

Okay.

but okay. issue. not So has a It it's stretched new little a bit,

And right. site. of a by that say impedes the our knock ability go of on products multisite then vacated extension, That there would that use. let's be part qualification, product multisite a different wanted the to equipment moving the bit Right, we to introduction, some to from new the of extension it to an

and So outages the bit therefore, in fixed. well. us more as are discrete maintenance thing had, we the impacted very are final we that that course, than the a and around and And had those deferred hoped the equipment quarter of of then understood some

not not that will see issue. So we see should of continuation any and

market. helpful, some wasn't right. much if for there my all into end demand Okay, ACS. sure the some Last That's strong backlog was built been is clarity here. really going how folks seeing bit consistently provides some have incorrect you Haven't question around end. interpretation heard of recall in And of military mention that I markets, a I particularly if here. correctly, on quite

And very some And think and thoughts? sets especially a budget occurring Any opportunity good DoD that's perspective, typically what margin terms Because what's incremental just so some be of that the with think, I I expansion? might And business. increases that's are there? good in useful.

you. Sure, Sean. Thank

your let question. last address so me And just

in relatively quarter, XX% with about aerospace the defense, are sales somewhere total aerospace the and And ACS it project-based. for it's and was generally defense, the what happens of they flat. ACS. X% business, of to So In around

it Usually, good projects done an very And from very defense. your one the to a will is one. by we've in next. uptick and aerospace will quarter. well come quarter the see and be we'll But observation so quarter Historically,

was flat in though, year-on-year QX. mentioned relatively quarter it I -- As

And do we technology certainly participation a made -- because our how in our so being see in what the in continued investments in lot by -- is a QX. are of there the We anticipate we'll are rise and systems. that military

have that we positive something it's outlook So a on.

this for remarks. further no will are call Bruce I turn questions over closing There back time. Hoechner the to at

us thank call. right. All you, Well, on joining everyone, for today's

our on we key continue as remain for our XXXX discussed and to We on we track on focus capitalize in profitability our certainly growth improvements we the markets, target. do

So everyone. good a Have thanks, day.

This call. concludes today’s conference

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