Sanmina Corp
NASDAQ:SANM
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Sanmina Corp
Earnings Call Analysis
Q4-2023 Analysis
Sanmina Corp
Following a review of the earnings call transcript, it's evident the company has had an impressive fiscal year, exceeding internal goals and demonstrating resilience with positive growth figures. Specifically, revenue growth has been robust, with an increase of 17.5% last year and 12.8% this year. Additionally, non-GAAP operating income and diluted earnings per share have seen notable increases of 30% and 33.7% respectively.
Despite a strong fiscal year, the company anticipates temporary headwinds due to inventory adjustments and economic softness, particularly in the communication markets. The management maintains a positive outlook for the second half of the next fiscal year, expecting market demand improvements. Revenue for the first quarter of fiscal year '24 is projected to decline, with non-GAAP gross margins expected between 8.3% to 8.8%, operating expenses between $58 million to $60 million, operating margin between 5.3% to 5.7%, and a tax rate of approximately 17% to 17.5%.
The company is capitalizing on its diversified revenue streams, with significant segments like Industrial, Medical, Defense, Aerospace, and Automotive showing growth, and a particularly strong presence in communication and cloud infrastructure. Their strategic emphasis on diversification is apparent, with Industrial accounting for 22% of revenue, Medical 20%, Defense and Aerospace and Automotive 18% each, while Communication, including optical networks, represented 24% and cloud infrastructure 16%. These sectors are underpinned by growth opportunities like renewable energy, government-funded broadband initiatives, and a burgeoning market in India.
Moving forward, the company envisions strengthening its core markets and continuing its investment in technology for heavily regulated industries. With a history of longstanding customer relationships and a focus on leading-edge technology, the company aims at optimizing its operation for growth and margin expansion. Although short-term adjustments are expected to impact operating margins, which are currently forecasted to range between 5% to 6%, the long-term goal is to surpass 6%. They also have an internal target to grow revenue to $10 billion to $12 billion range and are committed to enhancing shareholder value.
Conclusively, the company delivered a commendable performance in fiscal year '23, and while it faces some demand softness early in fiscal year '24, it remains focused on growth in essential markets and is leveraging a strong balance sheet to build a solid foundation for the future. The management confidently reassures the shareholders and customers of their commitment to growth and long-term profitability.
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Good day, and welcome to the Sanmina's Fourth Quarter and Fiscal Year 2023 Earnings Conference Call. [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, Sarah. Good afternoon, ladies and gentlemen, and welcome to Sanmina's fourth quarter and fiscal year 2023 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 I turn the call over to Jure, 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 in the slides provided on our website.
Please turn to Slide 3 of the presentation and take note of our safe-harbor statement. During this conference call, we may make projections or other forward-looking statements regarding the future events or 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 factors set forth in the safe-harbor statement. 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 the earnings release, the earnings presentation, the conference call or on 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 and fiscal year ended September 30, 2023, 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, noncash stock-based compensation expense, amortization expense and other unusual or infrequent items. Any comments we make on this call as it relates 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 are referring to our non-GAAP information.
I'd now like to turn the call over to Jure.
Thanks, Paige. Good afternoon, ladies and gentlemen, and welcome. Thank you all for being here with us today.
First, I would like to take this opportunity to recognize Sanmina's leadership team and our employees. So to you, Sanmina's team, thank you for managing through a challenging environment these last few years, managing through COVID, supply chain constraints and ongoing geopolitical environment. Despite all these challenges, you delivered strong results for fiscal year '23.
Please turn to Slide 4. Ladies and gentlemen, let me give you some highlights for fiscal year '23. As you can see, revenue is 8.94%, grew 13% year-over-year. Non-GAAP operating margin also improved 80 basis points to 5.8%. And non-GAAP diluted EPS came in at $6.26, that's up 30% -- 34% year-over-year. These results are a reflection of our continued focus on our customers, the market leaders in the key markets. For the rest of the agenda, we have Kurt, our CFO, to review details of results for you. I will follow with additional comments about Sanmina's results and future goals. Then Kurt and I will open for question and answers.
And now I'll turn this call over to Kurt. Kurt?
Thanks, Jure.
Please turn to Slide 6. For the fiscal fourth quarter, our team did a solid job, delivering consistent gross and operating margins despite lower revenues, mainly due to ongoing customer inventory adjustments, primarily in the communication end market as the supply chain has significantly improved. Q4 revenue was $2.05 billion, slightly below our outlook of $2.1 billion to $2.2 billion. Q4 non-GAAP gross margin was 8.7% at the higher end of the outlook of [ $8.3 to $8.8 ] primarily due to favorable product mix.
Q4 non-GAAP operating margin was 5.7%, in line with the outlook of 5.5% to 6%. Finally, non-GAAP fully diluted EPS was $1.42, slightly lower than our outlook of $1.47 to $1.57 due to lower-than-expected revenues.
With that, please turn to Slide 7. Again, Q4 FY '23 revenue of $2.05 billion was lower than Q4 FY '22 revenue of $2.22 billion. Again, this decline was mainly due to ongoing customer inventory adjustments, primarily in the communications end market as the supply chain has significantly improved.
Q4 FY '23 gross margin was 8.7% compared to 7.9% in Q4 of FY '22, primarily due to a favorable product mix.
Q4 FY '23 non-GAAP operating margin improved to 5.7% compared to 5.3% in Q4 FY '22.
Finally, Q4 FY '23 EPS was $1.42 compared to $1.37 in Q4 FY '22 despite lower revenues.
Finally, Q4 GAAP fully diluted EPS was $1.04.
Now please turn to Slide 8. Q4 FY '23 IMS revenue was $1.64 billion compared to $1.82 billion in Q3 FY '23. Again, this decline was mainly due to ongoing inventory adjustments at customers, primarily in the communications end market as the supply chain has significantly improved.
Q4 gross [ IMS close ] margin was 8% in Q4 compared to 8.3% in the prior quarter. Q4 CPS revenue was $440 million compared to $419 million in Q3 FY '23. Q4 FY '23 non-GAAP gross margin for CPS improved to 10.8% from 8.8% in Q3.
Now please turn to Slide 9. As Jure said, fiscal 2023 was a really strong year for the company with excellent execution by the Sanmina team. FY '23 revenue grew 13% to $8.9 billion compared to the prior year as the supply constraints improved significantly relative to FY '22.
Non-GAAP gross margin improved to 8.5% compared to 8.1% in FY '22, primarily due to a favorable product mix. Non-GAAP operating margins improved to 5.8% compared to 5% in FY '22 as we did a good job managing our operating expenses.
Finally, FY '23 non-GAAP EPS grew 34% to $6.26 compared to $4.68 in FY '22. Again, GAAP fully diluted EPS for FY '23 was $5.18. Again, overall, FY '23 was a really strong year for the company with continued positive annual trends in revenue growth, margin expansion and earnings growth.
With that, please turn to Slide 10. We have a strong balance sheet that provides our company a competitive advantage to manage through dynamic market environment. Cash and cash equivalents at the end of the quarter were $668 million. There were no borrowings under our $800 million revolver at the end of Q4. Cash cycle days were 65.9% and pretax ROIC was 26.4%.
Please now turn to Slide 11. Cash flow from operations was $77 million in Q4 and $235 million for the full fiscal '23. Capital expenditures were $38 million in Q4 and $190 million for all of FY '23. And free cash flow was $39 million in Q4 FY '23 and for -- I'm sorry, [ $39 million ] for FY '23 and $45 million for all of FY '23.
During the quarter, we repurchased approximately 600,000 shares for a total of $33 million. And for the full fiscal year, we've repurchased 1.58 million shares for about $84 million. At the end of the fiscal year, we had $279 million of remaining authorization for additional share repurchases.
Next, let's talk about Sanmina's capital allocation priorities. Sanmina's top priority is to fund organic growth, and we are excited about the opportunities we are [Indiscernible]. During FY '23, we've spent more in [Indiscernible] in capital expenditures to position Sanmina for expected growth in the second half of FY '24 and beyond.
In addition, we'll continue to evaluate potential strategic transaction opportunities as well as to reduce our current debt levels.
Finally, we will continue to return cash to shareholders through opportunistic share repurchases. We believe that the strong balance sheet and cash flow generation positions Sanmina well for future growth.
Now please turn to Slide 12. Let's talk about the outlook for Q1 FY '24. We expect Q1 revenues to be in the range of $1.85 billion to $1.95 billion as we expect customers to continue to adjust inventory levels, primarily in the communications end market as the supply chain has improved significantly. We expect non-GAAP gross margins in the range of 8.3% to 8.8% dependent on product mix. Non-GAAP operating expenses in the range of $58 million to $60 million and non-GAAP operating margin in the range of 5.3% to 5.7%. We expect non-GAAP interest and other expenses of approximately $12 million. In addition, we estimate an approximate $3 million noncash reduction to our net income to reflect our JV partner's equity interest in the net income of our Indian JV. We expect non-GAAP tax rate of approximately 17% to 17.5% and non-GAAP fully diluted share count of approximately 58.5 million. When you consider all of this guidance, our outlook for non-GAAP diluted earnings per share is in the range of $1.20 to $1.30. We expect Q1 capital expenditures to be around $40 million, driven by the growth of new programs and to support expected growth in the second half of fiscal 2024 and beyond. We expect Q1 depreciation of around $30 million.
And with that, I'll turn the call back to Jure for more details on the outlook by market as well as the upcoming full fiscal year 2024.
Please turn to Slide 13.
Thanks Kurt.
Ladies and gentlemen, let me add a few more comments about our results for the fiscal year '23, fourth quarter and outlook for the first quarter of fiscal year '24 and the future goals.
Please turn to Slide 14. I can tell you that I am pleased with our fiscal year '23 results. Actually, I'm pleased what we accomplished in the last 3 years. Every one of these years we met or exceed our goals, especially last 2 years, if you look at the revenue growth, last year, we grew 17.5%. This year, we grew 12.8%. On a non-GAAP operating income, again, nice growth over 3 years. Last year, we grew non-GAAP operating income by 30%. And if you look at the non-GAAP diluted earnings per share, we grew that every 3 years, every year. Last year, almost 29.4% and this year, 33.7%, [ $6,026 ]. Again, these are the -- for all our internal plants, we either met them or exceeded them.
So with that, please turn to Slide 15. Now let's look at the revenue by end market for the fourth quarter of fiscal year '23. Revenue per quarter went down as you heard from Kurt 7% sequentially. Mainly due ongoing inventory adjustments, and it was primarily in the communications end market. For the fourth quarter, top 10 customers were 45 -- 49% revenues. We continue to diversify our market segments.
For Industrial, Medical, Defense and Aerospace, Automotive for fourth quarter revenue came in at 65.4%. That came to flat quarter-over-quarter. For the year, revenue was 60.3% and growth for the year was 13.6%. So overall, this segment did pretty well.
Communication networks and cloud infrastructure for a fourth quarter revenue was 34.6%, down 18% with more inventory adjustment than we thought beginning of the quarter, but for the year, the revenue was 39.7% and growth for a year-over-year was up 11.7%.
I can tell you that we had a solid operational execution as we deliver a competitive advantage for our customers.
Let me add a few more -- please turn to Slide -- no stand on this slide. Please add few more comments here about the outlook for our first quarter. For the first quarter of fiscal year '24, as you heard from Kurt, we are forecasting revenue to be down mainly driven by inventory adjustments from some of our end markets. So we expect to see some headwinds for the next couple of quarters, driven by inventory adjustments and some softness in economy. The majority of the inventory adjustments and softness is coming from our communication markets. On a positive side, for the second half of the year, we expect to see nice improvements in the market demand. We remain confident in what we are hearing from our customers about the long-term opportunities. Personally, I'm excited what's in front of us and about our future.
Now let me talk to you about market diversification and where we go from here. Please turn to Slide 16. Sanmina is a recognized leading brand in a high complexity, heavy regulated markets. We are a well-diversified company today and will be even more diversified in the future.
So let me give you more details about Sanmina focused markets and what we are working on. Please turn to Slide 17. On this slide here, you can see that we will diversify. Industrial is approximately 22% of our revenue for '23. Medical was around 20%. Defense and Aerospace and Automotive was about 18%. Communication mainly around optical networks that was 24% and cloud infrastructure was about 16% of our revenue. As you can see with this illustration here, we do not deal consumer products.
Now let's turn to Slide 18, so I can tell you more about industrial. For Industrial, where we focus areas are renewable energy, generation and storage, factory, warehouse, automation, power controls and management and semiconductor processing equipment. Our view of our market is that demand in semiconductor [ litography ] equipment, factory automation, test, measurement and inspection remains healthy. Other opportunities driven by ongoing inflation reduction act and other regional government support for transition to renewable energy is also driving the growth. And addition to this, we are also ramping some new programs in renewable energy to drive long-term growth.
Now let's turn to Slide 19, so I can tell you more about the medical side of our business. Sanmina is very strong in the medical markets. The key focus area for Sanmina are disposable wearable consumable products, laboratory diagnostic and research equipment, hospital medical office equipment. Our market view is simply the short term, we see some demand adjustments as our customer health care providers adjusted the last year backlog fulfillment and new norms are post-COVID extremes. We're well diversified across disposable, consumables, drug delivery, surgical, diagnostic, imaging and lab diagnostic equipment. And I can tell you that we continue to win new programs. Overall, Sanmina is well positioned for growth in the medical market, driven by digital health.
Now let's turn to Slide 20 to talk about Defense and Aerospace. Defense and Aerospace business for Sanmina has been a long-term business. We've been in this business for over 60 years. Some of our key focus areas for Sanmina is defense equipment, safety and security equipment and commercial aerospace. As you can see, we're well diversified in this segment. Our market view is that demand remains very healthy in this segment. New programs wins will drive the long-term growth for us. And also, we have a strong pipeline of new opportunities for the future.
Let's turn to Slide 21 to talk about automotive. Automotive and Transportation is also a very strong market for us. We are well positioned in automotive, especially around electrical vehicle. And as you can see in these segments, we are well diversified and also in transportation side of the business. Our market view is that growth trends are strong in electrical vehicle and electrical charges, I will say anything around electrical right now. We do have a long-term growth in this segment and some of the global initiatives, I believe, will drive high growth for Sanmina for many years in the future. I can also tell you that we are ramping a fair amount of new programs in these segments.
So let's turn to Slide 22 to talk about communication and cloud infrastructure markets. In this market, Sanmina is well positioned. We -- the most of the products that we build here is in a high-performance networks, as you can see here from optical systems 400 gig, 800 gig, we are developing 1.6 terabytes for the future. We're expanding our business in cloud, build around the IP routers. We're working on next-generation edge-based GPU platforms. So our view of this market short term as we see softer demand for some customers due to inventory adjustments. Actually, we have a few customers that are growing in this market, but some of the big ones for us are adjusting to the inventory. Future demand for cloud will be driven by AI and ML technology requirements. I can tell you that also we're well positioned. We've been expanding in this market. Also, B programs is getting -- basically getting the broadband to each household in the United States. It's about $43 billion opportunity, financed by federal government, when I say $43 billion, that's the whole market there. But it's basically something that federal government wants to make sure that there's a broadband in each household in the United States. The good thing about this opportunity is this has to be made in U.S.A., and we're already starting to participate in this area. Also, we are well positioned in India. India has a lot of opportunities in communication and cloud infrastructure. Our JV is doing well. We're growing at a higher rate than we expected a year ago. So overall, I can tell you that Sanmina is in a strong position as we provide some of the latest technology for these key market leaders.
So let's turn to Slide 23. As you can see, we are well diversified across key market segments. We are positioned pretty well in these key markets to drive focused growth of our strategy. The key markets again for us will be cloud AI and ML, defense and aerospace, digital health, electrical vehicle, industrial and optical packaging. And the reason this is key is that Sanmina delivered the total time to market and integrated manufacturing solutions for these high-technology markets. So we're very excited about the future.
Let's turn to Slide 24. Let me talk to you more about our priorities. Our priority is basically simple, is to provide a leading technology to customers in a heavy regulated markets to drive the profitable growth. So let me give you some highlights. Everything we do, we build around our customers. If you look at our customer relationship on an average is 10, 15-plus years. We have a strong customer base. I call it strong partners in these key markets, and we're well diversified. We provide a leading-edge technology in this heavy regulated markets by providing competitive advantage to technology. We get involved really stage of product development, focus on time to market, bringing the product to our customers to the market faster, delivering the quality of product, industry-leading. Our reputation is very, very high here. End of the day, we provide end-to-end technology solution for our key partners. The key for us is growth. We believe we have weighed the long-term growth and margin expansion, short term for 24, as you heard from us already in this dynamic market environment, short term, especially, we've seen some challenges as inventory gets adjusted. But for second half, based on what we see, and what our customers are telling us, we expect to see a growth. Most importantly is the Sanmina invested a lot in a key market such as medical, defense, automotive, industrial, alternative energy, cloud infrastructure, optical packaging, over $400 million in the last 2 years, and we continue to invest today. We are continuing to optimize, as you heard from Kurt, our capital structure to drive the growth in next 3 years. And our internal goal is to grow the revenue between $10 billion and $12 billion or so. We're going to continue to generate cash. That's the name of the game for us. We delivered a respectable operating margin. We believe we can improve the margin going forward. Short term, our operating margin will be in the range 5% to 6%. Long term, we believe our operating margin should be 6% plus, and we'll continue to generate enough cash to allow us to drive the growth.
When it comes to maximizing shareholder value, definitely, there's work to do there. Today, Sanmina is undervalued. We believe in a long-term value of Sanmina stock. As you heard from Kurt, we've been buying and will continue to buy. And we are focused on leveraging our competitive advantage of our business model to maximize the shareholders' value, not just the short term but also long term.
Please turn to Slide 25. In summary, we delivered strong results for fiscal year '23. We see softness in demand for the first half of the year. We expect demand to improve in the second half of the year. Number one, we're going to continue to focus on growth in the key end markets. And number two, we're going to continue to invest in these key markets for a better future for our customers and our shareholders. The good thing about Sanmina, we have a strong balance sheet, a strong foundation to build a better future on.
So ladies and gentlemen, now I would like to thank you all for your time and support.
Operator, we're now ready to open the lines for question and answers. Thank you all again. Operator?
[Operator Instructions] Our first question comes from Anja Marie Soderstrom with Sidoti.
For the network equipment market, you said the inventory adjustments there is primarily within that segment, but where else are you seeing inventory adjustments?
Well, most of our inventory adjustments is really across the communications side of the business, 5G, some networking product, but that's mainly adding with a few customers. The rest of the markets, as you can see, in industrial, medical, defense and automotive basically came in flat. We see some minor adjustment there, but nothing major like what we see in the communications side.
Okay. And in terms of auto, has the types of all affected you?
Not really. I mean we have a few projects there, but most of our stuff was with the industry leaders in electrical vehicle.
Okay. And in terms of the joint venture, you said you're seeing strong growth there better than you had expected. When will we see some significant revenue experience from there?
I would expect it to have -- well, first of all, we had a great year down there, operations performed excellent. We do expect to see some pretty good growth in '24, and I will say we are positioned end of '24, '25 to grow a lot.
Okay. And in terms of the gross margin and the product mix with the short term in the communications equipment, how should we think about the gross margin in the coming quarters and then in the coming years?
Well, first of all, let me make a comment about -- back to the margins. As you see, we delivered a respectable margin this year. We believe we can do better. I think the short term, I would say, operating margin will be in the range of 5% to 6%, even with the revenue being down. But we're going to continue to tune up and position the company as we know market is going to come back as we position the company for a lot of growth. As we start shipping more and some -- we know that in last year, we indi done better, let me put it that way. There's some room for improvements. As we look at the '24 and the '24, '25, we have a lot of upside, and we think our margin should be over 6%. We have a proven record on that, and we'll do it. Back to communication, type of communication market and margins we [ do is ], we delivered respectable margins there, Anja. We are focused there on really high performance, both in the networking side, in a storage side and also the routers. So we're well positioned there. Unfortunately, I think our customers [ grow draw ] more inventory. We finally realized there's more inventory in the pipeline than we realized. So there will be some correction going on. But the long term, I think we'll be okay.
Okay. And as you spoke about fiscal 2024 it's going to be softer in the first half and then you see growth again in the second half. What gives you confidence in the growth there? And for the full year, how should we think about the overall revenue performance?
Okay. Anja, as you know, in the last 3 years, as you covered us, we take [ 1/4 ] time. I think the short term, definitely, we see inventory being resolved in the next 6 months, hopefully sooner. But definitely, I think inventory will get resolved based on what we see today. So definitely, we're going to see some pickup in second half because of that. Unless the economy falls off the cliff, based on my customer forecast, I think there should be some upside across all our markets, especially in the second half. So -- and based on some of these new programs, that we're working, so there's 3 things that we're looking at, we expect to grow. We definitely expect to grow long term. But we'll take 1 quarter a time, Anja.
Okay. And 1 last one. You said you have some new program wins. Can you just talk about those? Are those with the existing customers or expanding your logo at this? Or how is this baseline...
We're expanding logo, but most of the big wins are with existing customers, but we have a fair amount of new logos, Anja, that that have a lot of potential, but probably that's more end of the '24, '25 because it takes some time to give this program up. So yes, we have an upside potential in defense and aerospace side of the business. I think alternative energy has a lot and cloud infrastructure and optical packaging in that area, I think, there's a lot about that. Also, Anja, I just want to remind in my prepared statement, I said, hey, we have a goal internally to grow this company a lot bigger than what we are today. And our -- as I mentioned, we -- in the next 3 years, we expect to be in the range $10 billion to $12 billion. So we are focused on growth, but we're going to make sure it's the most profitable growth.
Our next question comes from Christian Schwab with Craig-Hallum Capital Group.
Most of my questions have been answered. Maybe just a little bit further clarity on the inventory correction communications. Since the inventory correction was obviously bigger than you thought in September, going to continue into December and continue into March. When you talk about some customers, is that like 2 or 3, or is that more than 5?
Well, we do business in that segment with all the market leaders, Christian. As you know, we let our customers speak for themselves. But yes, I will say majority of the customers in that segment have a little bit extra inventory. And I think what happened there, Christian, is that when there was the shortages, I think there was more inventory driven by end customer and our customers. So you had this pipeline that got filled up at a higher rate than I don't know if anybody in the industry really realized that how much inventory was in a pipeline. The good thing is that I'm seeing or at least what customers are telling us that this thing is going to empty and hopefully, next 6 months, and we'll go from there. But good thing, Christian, we didn't lose any customers or any programs. Actually, we won some programs in that side of the business, business being transferred from us and a couple of other -- I mean, another competitor to Mexico for us, but that transfer is going to be delayed for a few quarters. So -- but overall, we're still in a good position with those key customers for long term. It's a basically short-term scenario.
Great. And then just elaborate this [Indiscernible] further. Obviously, you have historically 1 large customer. But when you talk about all the market share leaders in communications, remind us, are you selling to 10 significant people, 15 significant people?
If you look at the market leaders in there, Christian, you know them better than I do. There's approximately 10 companies. And out of those, there are the 5 big ones and 4 or 5 smaller ones.
Yes, okay. That's what I thought. Okay, and then just a follow-up on the fiscal year guidance. I know you don't give that. But kind of back of the envelope, it does appear in a recovery scenario in the second half in communications. We should be growing revenue year-over-year, right?
Well, it all depends how market turns. If demand is there -- first of all, we have capabilities and capacity to grow. So that's not an issue. And we are positioning the company -- we've been positioning the company for last 1.5 years to grow. That's why I just said it earlier, we had a major expansion for us. As you know, we don't throw money around unless we're going to grow, and we spend over -- we're actually spending right now. We're just finishing expansion in Thailand. We spend in Mexico for the growth of the projects that we want and the customers that will have a growth. So we're optimistic, and we -- that the second half will be better. It's hard for me to -- with all the stuff going on around the world, Christian, I think a smart thing for us is what I say our internal people. We only control what we can control is we can control what we do every day. So we're going to continuously stay on top of things that care of our customers but be aggressive as the demand comes back.
[Operator Instructions] Showing no further questions at this time.
Well, ladies and gentlemen, again, thanks for your time, and I appreciate your patience with us. Again, we're excited about our future, and if we didn't answer any of your questions, please get back to us. With that, thank you, and we'll talk to you 3 months from now, I guess. Bye-bye.
Thank you.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.