Sanmina - Q4 2023

Transcript

Operator (participant)

Good day, and welcome to Sanmina’s fourth quarter and fiscal year 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. 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.

Paige Melching (SVP of Investor Communications)

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.

Jure Sola (Chairman and CEO)

Good afternoon.

Paige Melching (SVP of Investor Communications)

Kurt Adzema, Executive Vice President and Chief Financial Officer.

Kurt Adzema (EVP and CFO)

Good afternoon.

Paige Melching (SVP of Investor Communications)

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 three 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 30th, 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, non-cash 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.

Jure Sola (Chairman and CEO)

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 challenging environment these last few years, managing through COVID, supply chain constraints, and an ongoing geopolitical environment. Despite all these challenges, you delivered strong results for fiscal year 2023. Please turn to slide four. Ladies and gentlemen, let me give you some highlights for fiscal year 2023. As you can see, revenue is $8.94 billion, grew 13% year-over-year. Non-GAAP operating margin also improved 58 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 results and future goals. Then Kurt and I will open for question and answers. And now I turn this call over to Kurt. Kurt?

Kurt Adzema (EVP and CFO)

Thanks, Jure. Please turn to slide six. 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-$2.2 billion. Q4 non-GAAP gross margin was 8.7%, at the higher end of the outlook of 8.3%-8.8%, primarily due to favorable product mix. Q4 non-GAAP operating margin was 5.7%, in line with the outlook of 5.5%-6%. Finally, non-GAAP fully diluted EPS was $1.42, slightly lower than our outlook of $1.47-$1.57, due to lower than expected revenues.

With that, please turn to slide seven. Again, Q4 FY 2023 revenue of $2.05 billion was lower than Q4 FY 2022 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 2023 gross margin was 8.7%, compared to 7.9% in Q4 of FY 2022, primarily due to a favorable product mix. Q4 FY 2023 non-GAAP operating margin improved to 5.7%, compared to 5.3% in Q4 FY 2022. Finally, Q4 FY 2023 EPS was $1.42, compared to $1.37 in Q4 FY 2022, despite lower revenues. Finally, Q4 GAAP fully diluted EPS was $1.04. Now please turn to slide eight.

Q4 FY 2023 IMS revenue was $1.64 billion, compared to $1.82 billion in Q3 FY 2023. Again, this decline was mainly due to ongoing inventory adjustments at customers, primarily in the communication end market, as the supply chain has significantly improved. Q4 IMS gross 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 2023. Q4 FY 2023 non-GAAP gross margin for CPS improved to 10.8% from 8.8% in Q3. Now please turn to slide nine. As Jure said, fiscal 2023 was a really strong year for the company, with excellent execution by the Sanmina team.

FY 2023 revenue grew 13% to $8.9 billion compared to the prior year, as the supply chain constraints improved significantly relative to FY 2022. Non-GAAP gross margin improved to 8.5%, compared to 8.1% in FY 2022, primarily due to a favorable product mix. Non-GAAP operating margins improved to 5.8%, compared to 5% in FY 2022, as we did a good job managing our operating expenses. Finally, FY 2023 non-GAAP EPS grew 34% to $6.26, compared to $4.68 in FY 2022. Again, GAAP fully diluted EPS for FY 2023 was $5.18. Again, overall, FY 2023 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 environments. 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 pre-tax 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 2023. Capital expenditures were $38 million in Q4, and $190 million for all of FY 2023. And free cash flow was $39 million in Q4 FY 2023, and $45 million for all of FY... I'm sorry, $39 million in Q4 FY 2023, and $45 million for all of FY 2023.

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 currently pursuing. During FY 2023, we've spent more than in recent years in capital expenditures to position Sanmina for expected growth in the second half of FY 2024 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 position Sanmina well for future growth. Now, please turn to slide 12. Let's talk about the outlook for Q1 FY 2024. We expect Q1 revenues to be in the range of $1.85 billion-$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%-8.8%, dependent on product mix. Non-GAAP operating expenses in the range of $58 million-$60 million, and non-GAAP operating margin in the range of 5.3%-5.7%. We expect non-GAAP interest and other expenses of approximately $12 million.

In addition, we estimate an approximate $3 million non-cash 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%-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-$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.

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.

Jure Sola (Chairman and CEO)

Thanks, Kurt. Ladies and gentlemen, let me add a few more comments about our results for the fiscal year 2023, fourth quarter, and outlook for the first quarter of fiscal year 2024, and the future goals. Please turn to slide 14. I can tell you that I am pleased with our fiscal year 2023 results. Actually, I'm pleased what we accomplished in the last three years. Every one of these years, we met or exceeded our goals, especially the last two years. If you look at the revenue growth, last year, we grew 70.5%. This year, we grew 12.8%. On a non-GAAP operating income, again, nice growth over three 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 three years, every year. Last year, almost 29.4%, and this year, 33.7%, $6.26. Again, these are the... For all our internal plans, we either met them or exceeded them. So with that, please turn to slide 15. Now, let's look at the revenue by end markets for the fourth quarter of fiscal year 2023. Revenue for quarter went down, as you heard from Kurt, 7% sequentially, mainly due to ongoing inventory adjustments, and it was primary in the communication end market. For the fourth quarter, top ten customers were 45.9% of our 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 the fourth quarter, revenue was 34.6%, down 18%, with a 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, stay on this slide.

Please add a few more comments here about the outlook for the first quarter. For the first quarter of fiscal year 2024, as you heard from Kurt, we are forecasting revenue to be down, mainly driven by inventory adjustment 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, heavily 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 focus markets and what we are working on. Please turn to slide 17. On this slide here, you can see that we're well-diversified. Industrial is approximately 22% of our revenue for 2023, 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 build 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 lithography equipment, factory automation, test measurements, 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. In addition to this, we're 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 our, in our medical markets. The key focus area for Sanmina are: disposable and wearables consumable products, laboratory diagnostic and research equipment, hospital and medical office equipment.

Our market view is simply the short term. We see some demand adjustments as our customer and healthcare providers adjust to the last year backlog fulfillment and new norms of post-COVID extremes. We're well diversified across disposable, consumables, drug delivery, surgical, diagnostic, imaging, and lab diagnostic equipment. We—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, 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 win-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're well positioned in, automotive, especially around electric vehicle. And as you can see in these segments, we're well diversified and also in transportation side of the business. Our market view is that growth trends are strong in electric vehicle and electric chargers. I would say anything around electric right now. We do have a long-term growth, you know, in this segment, and as and some of the global initiatives, I believe, will drive the 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 this segment. 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 gigs, 800 gigs. We are developing, you know, 1.6 TB in, for the future. We're expanding our business in cloud, build around the IP routers. You know, we're working on next-generation edge-based GPU platforms. So our view of this market short term is 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, you know, 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, and we've been expanding in this market. Also, BEAD programs is 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 for 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 USA, and we're already starting to participate in this area.

Also, we are well positioned in India. I mean, 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, for these key market leaders. So let's turn to slide 23. As you can see, we are well diversified across, you know, 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, electric vehicle, industrial, and optical packaging.

The reason this is key is that Sanmina delivers 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 priorities is basically simply, is provide a leading technology to customers in a heavily 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, it's 10, 15+ years. We have a strong, customer base, I call that strong partners in these key markets, and we're well diversified. We provide a leading-edge technology in these heavily regulated markets by providing competitive advantage through technology.

We get involved early stage of product development, focus on time to market, bringing the product, to our customers, to the market faster, delivering a 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, where we believe we have a way to drive the long-term growth and margin expansion. Short term for 2024, as you heard from us already, in this dynamic market environment, short term, especially, you know, we've seen some challenges as inventory gets adjusted. But for second half, based what we see and what our customers are telling us, we expect to see a growth.

Most importantly, 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 two 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 three years. Our internal goal is to grow the revenue between $10 billion and $12 billion or so. We're gonna continue to generate cash. That's the name of the game for us. We deliver in a respectable operating margin. We believe we can improve the margin going forward. Short term, our operating margin will be in a range 5%-6%.

Long term, we believe our operating margin should be 6%+, 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 it, we'll continue to buy. 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 the fiscal year 2023. 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 gonna continue to focus on growth in the key end markets, and number two, we're gonna continue to invest in these key markets for a better future for our customers and our shareholders. The good thing about Sanmina, we have 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 (participant)

Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Anja Soderstrom with Sidoti. Please go ahead.

Jure Sola (Chairman and CEO)

Hello, Anja.

Anja Soderstrom (Senior Equity Research Analyst)

Hi, Jure, and thank you for taking my questions. Just curious, for the network equipment market, you said, you said the inventory adjustments there is primarily within that segment, but where else are you seeing inventory adjustments?

Jure Sola (Chairman and CEO)

Well, most of our inventory adjustments is really across the communications side of the business, 5G, some networking and, you know, 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, that basically came in flat. We see some minor adjustment there, but nothing major like what we see in communication side.

Anja Soderstrom (Senior Equity Research Analyst)

Okay, thank you. In terms of auto, has the strikes at all affected you, or?

Jure Sola (Chairman and CEO)

... Not really. I mean, we have a few projects there, but most of our stuff was with the industry leaders in electric vehicle.

Anja Soderstrom (Senior Equity Research Analyst)

Okay. 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 streams from there?

Jure Sola (Chairman and CEO)

I would expect it to have. Well, first of all, we had a great, great year down there. Operations performed excellent. We do expect to see some pretty good growth in 2024, and I would say we are positioned end of 2024, 2025 to grow a lot.

Anja Soderstrom (Senior Equity Research Analyst)

Okay. In terms of the gross margin and the product mix, with the shortfall now in the communications equipment, how should we think about the gross margin in the coming quarters and then in the coming years?

Jure Sola (Chairman and CEO)

Well, first of all, let me, let me make a comment about, back to the margins. As, as you see, we, we delivered a respectable margin this year. We, we believe we can do better. I think the short term, I would say operating margin will be in the range of 5%-6%, even with the revenue being down. But we're gonna continue to tune up and position the company as, as the—we know market is gonna come back as we, you know, we position the company for, for a lot of growth. As, as we start shipping more, and some—we know that in last year, we could have done better. Let's, let me put it that way. There's some room for improvements.

As we look at the 2024 and the 2024, 2025, we have a lot of upside, and we think our margin should be over 6%. We, you know, we, we have a proven record on that, and we'll do it. Back to communication, type of communication, market and margins we do, it's. We delivered a respectable margins there, Anja. We are focused there on a, a really high performance, both in the networking side, you know, in, in a storage side and, and also the routers. So we're well positioned there. Unfortunately, I think our customers draw more inventory. We finally realized there's more inventory in a pipeline than we realized, so there will be some correction going on, but the long term, I think, will be there okay.

Anja Soderstrom (Senior Equity Research Analyst)

Okay, thank you. And as you spoke about, fiscal 2024, it's gonna 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?

Jure Sola (Chairman and CEO)

Okay. Well, we take, Anja, as you know, in last three years, as you covered us, we take one quarter at a time. I think the short term, definitely, you know, we see inventory being resolved in the next six months, hopefully sooner, but definitely, I think inventory will get resolved based on what we see today. So definitely, we're gonna 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 in the 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 three things that we're looking at, we expect to grow. We definitely expect to grow long term, but we'll take one quarter at a time, Anja.

Anja Soderstrom (Senior Equity Research Analyst)

Okay, thank you. And one 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 a bit, or how does the client-

Jure Sola (Chairman and CEO)

Well, definitely, we're expanding logos, but most of the big wins are with existing customers, but we have a fair amount of new logos, Anja, that have a lot of potential, but probably that's more end of the 2024, 2025, because it takes some time to give this program up. So yeah, we have an upside potential defense and aerospace side of the business. I think alternative energy has a lot, and cloud infrastructure and optical packaging. That area, I think there's a lot of opportunity.

Also, Anja, I just want to remind in my prepared statement, I said, "Hey, we have a goals internally to grow this company a lot bigger than what we are today." And our - as I mentioned, you know, we, you know, in the next three years, we expect to be in the range $10 billion-$12 billion. So we are focused on growth, but we're gonna make sure it's the most profitable growth.

Anja Soderstrom (Senior Equity Research Analyst)

Yeah. Okay, thank you. That was all for me.

Jure Sola (Chairman and CEO)

Bye.

Operator (participant)

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

Jure Sola (Chairman and CEO)

Hey, Christian.

Christian Schwab (Senior Research Analyst)

Hey, Jure. Most of my questions have been answered. Maybe just a little bit further clarity on the inventory correction communication. Since the inventory correction was obviously you know, bigger than you thought in September, gonna continue into December and continue into March, when you talk about some customers, is that like two or three, or is that more than five?

Jure Sola (Chairman and CEO)

Well, if we do business in that segment with all the market leaders, Christian, as you know, we let our customers speak for themselves. But yeah, I would say it's majority of the customer in that segment has a little bit extra inventory. And I think what happened there, Christian, is that when there was these shortages, I think there was more inventory driven by end customer and our customer. 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 gonna empty, and hopefully next six months, and we'll go from there.

Good thing, Christian, hey, we didn't lose any customers or any programs. Actually, we won some programs in that side of the business. You know, a business being transferred from us and a couple other, I mean, and another competitor to Mexico for us, but that transfer is gonna be delayed for, you know, few quarters. But overall, we're still in a good position with those key customers for long term. It's a basically short-term scenario.

Christian Schwab (Senior Research Analyst)

Great. And then just elaborate this a smidge further. You know, obviously, you have historically one large customer, but when you talk about, you sell to all the market share leaders in communications, you know, remind us, are you, are you selling to 10 significant people, 15 significant people?

Jure Sola (Chairman and CEO)

Well, if you look at the market, if you look at the market leaders in there, Christian, you know them better than I do. There's approximately, you know, 10 companies, and out of those, there's the five big ones and four-five smaller ones.

Christian Schwab (Senior Research Analyst)

Yep. Okay. That's what I thought. Okay, and then just to follow up on the fiscal year guidance, you know, I know you don't give that, but, you know, kind of back of the envelope, it does appear in a recovery scenario in the second half in communications, you know, we should be growing revenue year-over-year, right?

Jure Sola (Chairman and CEO)

Well, it, you know, it all depends how market turns. You know, 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 company for the last year and a half to grow. That's why I just said earlier, we had the major expansion for us. As you know, we don't throw money around unless we're gonna grow, and we spend for over four. We're actually spending right now. We're just finishing an expansion in Thailand. We expanded Mexico as for the growth of the projects that we want and the customers that will have a growth. So we're optimistic, and we, you know, 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 to our internal people, we only control what we can control, is we can control what we do every day. So we're gonna continuously stay on top of things, take care of our customers, but be aggressive as the demand comes back.

Christian Schwab (Senior Research Analyst)

Okay. Great. Thank you, Jure. No other questions.

Operator (participant)

Again, if you'd like to ask a question, please press Star, then one at this time. Showing no further questions at this time.

Jure Sola (Chairman and CEO)

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 three months from now, I guess. Bye-bye.

Kurt Adzema (EVP and CFO)

Thank you.

Operator (participant)

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