Good day, and welcome to the Sanmina Corporation Third Quarter Fiscal 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Paige Melching, Senior Vice President of Investor Communications. Please go ahead..

Thank you, Matt. Good afternoon, ladies and gentlemen, and welcome to Sanmina's third quarter fiscal 2022 earnings call. A copy of our press release and slides for today's discussion are available on our website at sanmina.com in the Investor Relations section. Joining me on today's call is Jure Sola, Chairman and Chief Executive Officer..

Good afternoon..

And Kurt Adzema, Executive Vice President and Chief Financial Officer..

Good afternoon..

Before we begin with our prepared remarks, let me remind everyone that today's call is being webcasted and recorded and will be available on our website. You can follow along with our prepared remarks and our slides provided on our website. Please turn to slide three of our presentation or the press release safe harbor statement.

During this conference call, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We caution you that such statements are just projections.

The company's actual results could differ materially from those projected in these statements, as a result of a number of factors set forth in the company's annual and quarterly reports filed with the Securities and Exchange Commission.

The company is under no obligation to and expressly disclaims any such obligation to update or alter any of the forward-looking statements made in this earnings release, the earnings presentation, the conference call or the Investor Relations section of our website, whether as a result of new information future events or otherwise, unless otherwise required by law.

Included in our press release and slides issued today, we have provided you with statements of operations for the quarter ended July 2, 2022, on a GAAP basis, as well as certain non-GAAP financial information. A reconciliation between the GAAP and non-GAAP financial information is also provided in the press release and slides posted on our website.

In general, our non-GAAP information excludes restructuring costs, acquisition and integration costs, non-stock -- or sorry, non-cash stock-based compensation expense, amortization expense and other unusual or infrequent items.

Any comments we make on this call as they relate to the income statement measures will be directed at our non-GAAP financial results.

Accordingly, unless otherwise stated in this conference call, when we refer to gross profit, gross margin, operating income, operating margin, taxes, net income and earnings per share, we're referring to our non-GAAP information. I would now like to turn the call over to Jure Sola..

Thanks, Paige. Good afternoon, ladies and gentlemen. Welcome. Thank you all for being here with us today. First, I would like to take this opportunity to recognize Sanmina leadership team and our employees for managing successfully around material constraints and navigating around COVID challenges in our China operations.

So to you Sanmina's team, thank you for delivering strong and consistent results for the third quarter. Let's keep it up. For agenda we have Kurt, our CFO, to review details of our results for you. I will follow up with additional comments about Sanmina's results and the future goals. Then Kurt and I will open for question and answers.

Now, I'd like to turn this call over to you Kurt..

Thanks, Jure. Please turn to Slide 5. In the third quarter, our team, once again did an outstanding job delivering strong revenue and profit growth as well as cash generation. Q3 revenue of $2.02 billion grew substantially by approximately 5.6% from the prior quarter and exceeded the high-end of our outlook of $1.825 billion to $1.925 billion.

This is primarily due to strong customer demand and excellent coordination with suppliers and customers to help mitigate material challenges. Non-GAAP gross margin improved to 8.4% compared to 8.1% in the prior quarter, primarily due to higher revenues and a more favorable product mix.

Non-GAAP operating margin was 5.5% compared to 5% in the prior quarter. This was primarily due to improved gross margins and operating expense leverage.

Non-GAAP fully diluted earnings per share grew significantly by approximately 14.4% to $1.30 compared to $1.14 in the prior quarter and exceeded the upper-end of the outlook range of $1.05 to $1.15 by $0.15. Finally, Q3 GAAP fully diluted earnings per share was $1.29. Please turn to Slide 6.

This slide shows the quarterly trends of our financial results. We have delivered consistent financial performance over the last two years, despite the challenges associated with COVID and the supply chain constraints. Non-GAAP gross margins have exceeded 8% for the last nine consecutive quarters.

In addition, non-GAAP operating margins have been 5% or higher for seven of the last eight quarters. Now please turn to Slide 7. Q3 IMS revenue increased to $1.625 billion, an increase of 4.3% over the prior quarter.

This is primarily due to strong customer demand and excellent coordination by the supply chain and operations team, in conjunction with our suppliers and customers to help mitigate these material challenges.

Non-GAAP gross margin for IMS improved to 7.3% compared to 7% in the prior quarter, primarily due to higher revenue levels and a more favorable product mix. Components Products and Services revenue grew significantly to $428 million. Non-GAAP gross margin for CPS was relatively flat at 11.9%. Now please turn to Slide 8.

We have a very healthy balance sheet which provides us a competitive advantage for our company. Cash and cash equivalents was $493 million. Between cash and the availability under the revolver or other debt facilities, we have approximately $1.3 billion of liquidity. There were no borrowings under our revolver at the end of Q3.

Cash generation continued to be strong in Q3. Cash flow from operations was $102 million and free cash flow was $65 million. Our strong balance sheet and cash flow generation allows the company to continue to be opportunistic, as it repurchases shares and returns capital to shareholders.

During the third quarter, we repurchased approximately 3.1 million shares bringing the total for the fiscal year through the end of Q3 to 7.4 million shares. At the end of Q3, we had approximately $188 million remaining of share repurchase authorization. Now please turn to Slide 9.

Despite the higher levels of inventory, we were able to manage working capital such that cash cycle days remained relatively steady at approximately 56 days. Non-GAAP pre-tax ROIC continued to improve to 31.6%. Now please turn to Slide 10. Let's talk about the outlook for Q4.

Overall, customer demand remains strong, but there continues to be supply chain challenges. We expect Q4 revenue to be in the range of $1.95 billion to $2.05 billion for the quarter.

We expect non-GAAP gross margins in the range of 8.1% to 8.6% depending on product mix; non-GAAP operating expenses in the range of $61 million to $63 million; and non-GAAP operating margin in the range of 5% to 5.6%.

We expect non-GAAP other expenses of approximately $8 million to $9 million, non-GAAP tax rate of approximately 17.5%, non-GAAP fully diluted share count of approximately $61 million. When you consider all of this guidance, our outlook for our non-GAAP diluted earnings per share for Q4 is expected to be in the range of $1.27 to $1.37.

I would note if we achieve the midpoint of our Q4 outlook for both revenue and non-GAAP EPS, fiscal 2022 revenue will have increased over 14% compared to fiscal 2021 and fiscal 2022 non-GAAP EPS will have increased over 20% compared to FY 2021.

We expect Q3 -- Q4 CapEx to be approximately $45 million, driven by growth of new programs and to support future growth. We expect depreciation of around $30 million. In summary, demand remains strong across our customer base.

We are confident in our business model and expect the company to continue to deliver strong operating leverage and cash flow generation over time. And with that, I'll turn the call back over to Jure..

growth was broad-based driven by strong demand from all our end markets. Performance of our supply chain organization was excellent by working closely with our customers and suppliers. Lead times for semi components is still challenging, but we saw some nice improvements in the third quarter.

And we had a great operational execution by creating the right flexibility to build the products in a short cycle time. Through operational flexibility and excellent operational execution, we're able to deliver critical requirements for our customers.

I can also tell you that our Sanmina team, has done outstanding job, as we continue to differentiate our industry-leading capabilities, by delivering competitive advantage to our customers. Overall, we delivered nice organic growth, quarter-over-quarter growth of approximately 6% and year-over-year growth approximately 22-plus percent.

Now please turn to Slide 12. Let me give you some highlights of the revenue for our third quarter by end markets. As you can see on this slide, top 10 customers were 47.7% of our revenue. Communication networks and cloud infrastructure, will continue to see strength in this market segment, which was 40% of our revenue.

This segment quarter-over-quarter, grew approximately 6% and year-over-year grew 14%. Growth was driven by optical systems, 5G networks and cloud infrastructure. Industrial, Medical, Defense and Automotive was approximately 60% of our revenue. This segment grew 5.5% quarter-over-quarter.

We see strong demand year-over-year growth, up 27.2% is a result of our efforts to diversify, in these segments as we win new programs. Growth was driven by Industrial, Medical, Defense and Automotive. We nicely saw a nice growth across all of these key markets. Let me tell you more about bookings. The third quarter bookings, continue to be strong.

Book-to-bill was 1.07:1. I can also tell you that the pipeline of new opportunities is solid. And overall, we have strong demand and solid backlog. Please turn to Slide 13. Now, let's talk about revenue outlook by market segments for the fourth quarter. We see a strong demand, across all end market segments.

Sanmina has a healthy backlog for the fourth quarter and beyond. New project wins, are driving the growth. We expect supply constraints to continue, and we expect to manage successfully around material constraints.

We're forecasting the 40% plus and minus, our fourth quarter revenue will be from communication networks and cloud infrastructure markets, driven by optical systems, 5G networks, cloud networking and enterprise storage system. All of these segments, we expect to move in the right direction.

We're also forecasting that approximately 60%, of revenue for the fourth quarter will be from Industrial, Medical, Defense and Automotive markets. Again, in this segment, we expect to move in the right direction. As you can see, Sanmina does not serve consumer markets. Our focus is on mission-critical, high-complexity, heavy regulated markets.

Please turn to Slide 14. For fourth quarter, again, we see nice strong backlog and we are forecasting approximately $1.95 billion to $2.0 billion for revenue. We also expect revenue growth for the year, to be around 14-plus percent. For non-GAAP EPS outlook is $1.27 to $1.37.

And for the year, we expect non-GAAP EPS growth of approximately 20-plus percent. So the way I would conclude, this was a pretty good year for Sanmina. Now let me talk to you about growth for our fiscal year '23 and beyond. Let's talk about inflation and potential recession.

I know this is on everybody's mind, but I want to just remind you I'm not an economist, but I do have strong foundation and experience of how to manage through this environment. As we all know inflation is here, a recession may be here already.

On Sanmina's management point of view, we are running Sanmina under the assumption the recession is already here. Most important, Sanmina is well positioned for any economic environment. On the positive side, we are excited about Sanmina's future for the fiscal year 2023 and beyond.

We have been consistent and continue to focus on the profitable growth which is evident in our results, despite the challenges of macroeconomic backdrop. We focus on things that we control, which is quality of our customer base, building right partnerships by focusing on high-complexity products.

We focus on quality of earnings, consistency and the growth of the earnings. We focus on quarterly and yearly cash flow that gives us opportunity to invest in our future that will drive the margin expansion. And we are focused on maximizing shareholder value short term and long term.

For fiscal 2023, we expect to see nice improvement over fiscal year 2022. Sanmina is in a great position. We have a strong balance sheet and we will continue to generate strong cash flow. Sanmina has a well-diversified customer base in high-complexity and heavily regulated markets and we can expect to continue to diversify our end markets as we grow.

We are going into fiscal year 2023 with strong backlog and strong forecasts from our key customers. New projects will continue to drive the growth and pipeline of new opportunities is exciting. Let me tell you more about making investment for the future and how we are expanding our capabilities to support new wins for fiscal year '23 and beyond.

We're really focused on some key markets that have been successful for us; such as medical, defense and automotive. We believe we're well positioned and fair amount of opportunities in front of us that we believe that will continue to drive the growth.

Industrial and alternative energy, we're in a great position and some great opportunities to continue to expand. In Communication and Cloud Infrastructure, we have a strong position, so we are focused on the leading-edge technologies here. In these key focus markets.

Overall, we are expanding into more profitable projects by providing industry-leading technical engineering solutions from R&D, advanced components, products and integrated manufacturing services. All of these opportunities in these key markets are translating to growth and margin expansion for Sanmina in fiscal year 2023.

Also, I can tell you that Sanmina still has a lot of leverage in our business model. Please turn to Slide 15. Third quarter was a good quarter for us. Revenue of $2.2 billion exceeding outlook by 5.6% sequentially and approximately 22% year-over-year. Non-GAAP operating margin of 5.5% expanding by 50 basis points.

Non-GAAP diluted EPS of $1.30 exceeding our outlook by 14.4% sequentially and approximately 31.7% year-over-year and we generated strong free cash flow. For the fourth quarter demand remains strong as we said. We continue to work through supply chain constraints and we'll be managing this pretty well.

We're forecasting solid revenue of $1.95 billion to $2.05 billion supported by a strong backlog, and non-GAAP diluted EPS $1.27 to $1.37. I can tell you, Sanmina is in excellent shape and we are well-positioned to manage through this dynamic environment. Now ladies and gentlemen, I would like to thank you all for your time and support.

Operator, we're now ready to open the lines for questions and answers. Thank you all..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Ruplu Bhattacharya with Bank of America. Please go ahead. .

Hi, Ruplu..

Hi, Jure. Thank you for taking my question. Maybe for the first one I'd like to ask in the communications end market.

Can you help us rank order the strength you saw in networking versus optical versus wireless 5G? Which one was the strongest? Which one was weaker? And then as you look into the fourth quarter, how do you see that playing out in the fourth quarter in terms of the relative strength of these end markets?.

Yes. As I mentioned I think that segment for us is we're in a good position. I think we're involved in a lot of the leading-edge technology. So with the networking part as you know in networking part there's optical components and optical parts that go both of those, I would say that the networking was for us very strong. Optical also very strong.

In all three segments that's 5G, it was a good quarter. It was a good quarter for us. We grew nicely and we expect to continue to do the same thing..

And so you expect that strength to continue into the fourth quarter as well?.

Well, we still -- we could have shipped a lot more if we have that part. So we're still challenged to get all the parts that we need. We expect to continue to get what we are looking for as we've been doing it. As I said I think things are getting a little bit better. So hopefully we'll get more parts. But we're in a good position to continue.

We have very strong shipments there..

Okay. Let me ask you this. The second half of fiscal 2022 when we look at the June quarter and the September quarter that you're guiding, those quarters had easier year-on-year compares on the revenue side.

But when we look at the first half of 2023, the December quarter and the March quarter, they have much -- the year-on-year revenue compares become much tougher.

So can you give us your thoughts on the first half of 2023? What are the puts and takes that we need to keep in mind? And how do you think about year-on-year revenue growth first half of 2022 versus first half of 2023?.

Yes. I think first half of 2023 is going to be pretty solid for us what we see today. As I said earlier in my prepared statement, Ruplu, we expect definitely 2023 to be a stronger year for us. What I mean by that to grow more than what we did in 2022 and also to -- in absolute dollars, I don't want to give percentages out there.

But definitely we expect to make more money in 2023 than we did in 2022. So we expect to have a very solid year. I think our company is in a great position. We are very aggressive. We've got one foot on the pedal and another one on the brake.

In this environment that's what we got to do, but we've been very aggressive and that's why we are expanding some -- we're not expanding, because of the capacity. We're going to expand in to bring some new technology that are required by our customers, some new opportunities that we already won.

So we expect to have a good year, but we'll take one quarter at a time. That's all I can tell you and -- but I know we'll have a good year..

Okay. I have a couple for Kurt. If we look at inventory it looks like inventory grew 11% sequentially and it's up like 78% year-on-year.

So just over the next couple of quarters, how do you see inventory trending given you're forecasting revenue growth? How should we think about cash conversion cycle and free cash flow over the next couple of quarters?.

Yes. So as we've said on prior calls, I mean, the main reason why inventory has gone up is that we've been buying parts in the hopes that we would get in some of these constraints semiconductor or other constrained parts. And therefore, when they haven't come in as expected, we still have that inventory on hand.

So I think in terms of how I expect inventory to play out, my expectation is that it will still grow a little bit more in the next quarter or two, but the hope would be as the supply constraints start to become more manageable that inventory would level off and then candidly ultimately decline to get back to a more normalized turns.

But I would say, we're probably in for another quarter or two of high inventory and perhaps a little bit higher inventory, but that will depend on a bunch of variables that are hard to predict..

Got it. And maybe for my last one, can I ask you the CPS segment gross margins declined looks like 20 bps on sequentially higher revenues.

What were some of the puts and takes in that segment?.

Yes. That's really just product mix. As you know that segment is made up of a bunch of different businesses Components, Products and Services. So I think just the mix -- even though the revenue grew, the mix was slightly different that quarter. We still believe in that segment.

And we expect as Jure mentioned, there's a lot of operating leverage in that segment, so we expect those margins to increase over time, especially as some of these supply constraints resolved..

Yes. If I can add to that, I think, if you look at where we are today, we did a lot of work in the last couple of years. The company is positioned to go to the next level. I think a lot of critical components products and services have a lot of opportunities. So we believe there's a lot more room there on both that segment and also on IMS.

We're not satisfied with our margins. We think we can do better than what we delivered this quarter..

Okay. Thanks for all the details. Appreciate it..

Our next question will come from Jim Suva with Citigroup. Please go ahead..

Thanks. Good evening. Both of you maybe comment a little bit on the operating margins. Very impressive here.

Is it structurally you think could stay at these levels? Or is it you're getting a little bit of extra profitability due to higher component costs and expedited shipping to meet customers? I just kind of want to dive into the sustainability of the operating margins and how impressive high they are..

Well, Jim, let me start with that and I'll turn it over to my expert, the CFO here. First of all, we drive -- we think our minimum margin should be 5% to 6% operating. As we said at beginning of the year, we want to get over the 5% which we did and then now keeping it up.

So we'll be in the 5% to 6% somewhere, but we want to be to the high end of that, okay? So that's the goal. I think what's happening a lot of these improvements that we're making are paying off. Because the parts -- not getting parts on daily basis, our efficiencies are not that good today. We expect our efficiency to improve as the constraint is up.

So we expect to really drive the margin up. We also bring in projects Jim. They are a lot better to drive the margins up. So, we got a higher goals than what we delivered this quarter. But it's going to take us a year to get what we want to get, but we move in the right direction..

Yes. Jim, I'd say, it's a combination of a couple of things. I mean obviously, gross margin improved by roughly 30 basis points. That was a combination of higher revenue. So we got a little bit more leverage in the model and also favorable product mix. But as Jure pointed out, we've done in the past candidly better gross margins.

And I think as we get more efficient as the supply chain gets more stable when we receive materials more evenly throughout the quarter, we think we should be able to improve that over time.

And then, on the operating leverage, again, we're trying to keep -- and I think we've been successful -- keeping OpEx around $60 million or $60-and-change million. Obviously, every quarter is up and down, there's different puts and takes, but we expect to see further leverage there.

So it was really a combination of better margins due to higher revenue and better mix and then operating leverage relatively flat OpEx on higher revenue and that resulted in the five-five. There's always going to be some variability quarter-to-quarter. But we think, as Jure has said multiple times, that there's continued leverage in the model.

And so as, revenue grows and as some of these inefficiencies caused by the supply chain, lack of linearity I'll say inside of a quarter, we should continue to be able to improve things..

And then as my follow-up, how should we think about uses of cash flow? Obviously, best to fund the current business. But beyond that, how should we think about uses of cash flow? Are there any areas, you kind of want to get into? Or you're comfortable with that or geographic footprint? I know you have a global footprint.

How should we think about your uses of cash that you could use in the future?.

All right. Let me talk from a growth and margin expansion and then I’ll turn it to Kurt to tune it up. Jim, I think -- we're planning to invest more probably in the next 12, 18 months than we did in the last couple of years, okay? Most of this investment is going in some unique capabilities that will drive the expansion of margins.

That's really what we want to focus. We're going to focus on this high-complexity in niche market area that we believe we have competitive advantage both technology and execution point of view. So, we're adding really capabilities there. And that's -- back to your first question.

We're going to change the model on this business, so I don't think it's acceptable anymore in this business to be at the 4% operating margin. I think it needs to move up in the 5% to 6% consistently and hopefully on the high end of 6%. So, that's our next step.

But Kurt?.

Yes. I mean I think as Jure said our priority is organic growth. And part of that organic growth is to continue to add to our capabilities and as a result of not only expanding our existing customer relations, but also new programs that we take on. I think, in general, we're very happy with our geographic footprint.

We have one of the broadest geographic footprints in the industry. But that doesn't mean we won't continue to expand existing sites to take on additional growth. So, I think our number one priority has been and will always be organic growth. We continue to pay down our debt, approximately $5 million a quarter. So, we've done that.

And then as you've seen we've opportunistically bought back shares. So, those are our priorities. But clearly organic growth above everything else. We feel like there's a lot of opportunity in this business and we're going to continue to invest in this business to drive profitable growth..

Thank you so much for the details..

Thanks Jim..

Our next question will come from Christian Schwab with Craig-Hallum Capital Group. Please go ahead..

Hey congratulations guys on another great quarter of execution and guidance. I just have a couple of quick questions Jure.

With the mindset that you're running the company as if we're already in a recession, can you talk to us about further clarity and visibility of bookings and backlog? And how many quarters does that extend? You're very optimistic, it sounds like for a continuation of topline revenue growth in fiscal year 2023 over 2022.

Is there any quantification you could put around that for us?.

Yes. I mean as I mentioned in our prepared statement, the demand today we see a strong demand. We have a strong backlog. Our customers still are optimistic about the future. We're well-positioned. We've got a strong pipeline of new wins that are coming up that should be shipping in 2023. And the shortage has really hurt us.

I mean if we didn't have the shortages, we could have shipped a lot more. So, we -- as that gets resolved I think some of these new programs that we have should continue to drive. So, we're optimistic that 2023 is going to be a solid year for us.

What we see today Christian is that we think in absolute dollars, we're going to do more than we did this year. But definitely I think we're in a position to make more money because we know internally that we can do more than what we're doing today. So, we're tuning that internally.

When I say we're running like it's a recession here, you constantly -- nature of this business is you have to tune things up on a daily basis. So, it's all about doing the right thing for your customers, listening to your customers, and executing. That's all it takes.

And the companies that execute better will be able to make a little bit extra money and that's our model right now. And our Components, Products, and Services, I think are moving in the right direction. They're making a huge improvement from a capabilities point of view and expanding the customer base in there.

So we expect to see a good return in our defense business. The backlog in our defense business is, I think is solid for next three, four years. So we have a lot of good opportunities that will help us improve the margin. But again, in this environment, you take one day at a time, one week at a time and one quarter at a time.

And we're going to continue with the same model. I like what I see. I like our position. We've got strong balance sheet. So no matter what happened with recession, this is not going to -- in 2008-2009, we had a lot of debt. We had a lot of moving parts. Today, we're strictly focusing today on execution and winning the business.

We have a strong balance sheet. So, whatever happens with the economy, I believe Sanmina will perform pretty well against any of our competitors. So that's why we're optimistic what's in front of us. But again, we have to make sure we do our job on a daily basis..

Great.

And then my last question, reverting back to the meaningful growth in inventory, that is your conviction -- investors should probably interpret your conviction in backlog, bookings, new program pipeline as a reason why despite possibly already being in a recession, we have no problem building a bunch of inventory waiting for constrained parts, because we don't really feel like there's little to no risk of any pushouts or cancellations..

Let me make sure, we're very clear. The inventory that we have is strictly customer guarantee. We only buy per customer requirement. So we don't build anything that is not under the contract with a customer. So, let's make sure that's very clear. So, the inventory we have is being driven by our customer requirements.

And for -- what we see today that requirements are there. And believe me, in some -- a lot of these cases, they wish we shipped them last quarter. So, that's kind of what we are operating in. Another thing, as I said earlier, Christian as you know, we are not in consumer market.

I mean, we -- I don't -- I think our market for consumer is a fraction of percent, if any. So we -- I think the other businesses, I think will go through. I don't think we're going to have a severe recession but I'm not an expert.

But in the market that we focus on I think, there's a lot of resilience in those type of markets and we are one of the leaders there..

Yes. Just one clarification on that point. So I think first of all, the inventory that grows that is component inventory, right? That's raw materials. We're not building finished goods that are sitting on docks waiting to get shipped that you add a semiconductor to as soon as it walks in. Our cycle times are really short.

So, it's really more raw materials or subassemblies not finished goods. I think the second thing I would say, as you said, well, it shows Sanmina's confidence. I'd say, it shows Sanmina's confidence, but it also shows our customers' confidence, because at the end of the day, the inventory is driven by our customers' forecast.

And at the end of the day, those customers are on the hook for that inventory. So, I would say, it's not just our confidence. I think it's our customers' confidence..

That's a good question..

Yeah. That’s wonderful. Thanks, guys. That’s it..

Thanks, Christian. Operator, we have time for one more question please..

Thank you. Our last question will come from Anja Soderstrom with Sidoti. Please go ahead..

Hello, Anja..

Hi. Thank you for taking my question and congratulations on another exceptional quarter..

Thank you..

I'm just curious, it is just like what's holding you back is some specific components that you're dependent on to be able to assembly the inventory you have. So what do you see in terms of attaining those components? Is there anything specific that needs to happen? Or....

No, I think this is a lot of these components are customer around semi. And it's been same challenges for over a year. I said earlier in prepared statement things are getting better. As you know some of these components were ordered over a year ago. We're getting our shares. I think we work very closely with our customers.

As you know, we have a who's who with our customer base. Between our strength and their strength we have a lot of connections with a component supplier. But we're going through the same challenges everybody else around the world. But we believe that we are managing it pretty well. We expect to see improvement sometimes in 2023 right now.

If I have to get probably middle of 2023, but I think for the next couple of quarters I think we continue to see some of these shortages will continue..

Okay. Thank you. Then just the last one, I understand, you have a pretty recession-proof end-market that you serve, but is there any area of end-markets that you see some sort of slowdown? Or....

Not really. I mean, we have a few parts that are built around the COVID, maybe some of those parts, but that's a small percentage of our business. But overall, we are in a very strong position..

Okay, great. Thank you. That was all for me..

That's all. Well, ladies and gentlemen, personally I want to thank you again for your time. Appreciate it. In this environment we take one quarter a time. We are excited what's in front of us. Now it's all about executing for another good quarter. So with that, thank you very much. We're looking forward to talking to you.

And any if you have any questions, please get back to us. Bye-bye..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..