Benchmark Electronics Inc (BHE) 2011 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Benchmark Electronics first-quarter earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session.

(Operator Instructions)

I would now like to turn the conference over to your host, CFO Don Adam. Please go ahead.

Good morning. Welcome to the Benchmark Electronics conference call to discuss our financial results for the first quarter of 2011. I am Don Adam, CFO of Benchmark Electronics. Today, Cary Fu, our CEO, will begin our call talking about the business environment in Q1 and into the rest of 2011. Gayla Delly, our President, will then discuss our activities and performance for the first-quarter and our outlook for the second-quarter. I will then follow up with a review of our financial metrics for the quarter. After our prepared remarks Gayla, Cary, and I will take time for your questions in our Q&A session. We would like to hold this call to one hour.

During this call, we will make -- we may make projections or other forward looking statements regarding future events or the future financial performance of the Company. We would like to caution you that those statements reflect our current expectations and that actual results or events may vary materially. We also would like to refer you to Benchmark's periodic reports that are filed from time to time with the Securities and Exchange Commission, including the Company's 8-Ks and S-4 filings, quarterly filings on Form 10-Q, and our annual report on Form-10 K.

These documents contain cautionary language and identify important risk factors which could cause actual results to differ materially from our projections or forward looking statements. We undertake no obligation to update those projections or forward looking statements in the future. Now, I will turn the call over to Cary.

Thank you, Don. Good morning. Thank you for joining our call today. We are disappointed with our financial results for the quarter, as we'll miss our revenue, as well as the EPS guidance from a very strong Q4 2010, with increasing demand signal from our customers after we exit the year 2010. For first quarter 2011, our revenue of $538 million were approximately 5% below the low end of our guidance. Consequently, our earnings per share also fell below our expectations, as our overhead absorption, and therefore margins, fell during the quarters, as a result of low volumes.

During the quarter, we expect a higher than normal level of quarter-end volatility in demand. With, as we said, we expect -- we exited 2010 with a very strong Q4 results and ended Q1 with demand profile showing no more seasonality. Late in Q1, demand level declined. This attributed to two factors -- number one, we saw a broad-based demand level, a weaker demand level from our customers. Number two, to a lesser extent, we experienced component issues, causing the revenue shortfall in our medical sectors.

Those impacts are both timing or push-out revenue, and do not represent a loss of business or customers. We all that know that through our call that, as we expected, the reality of the volume-related unfavorable impact from the shortfall in revenue, such as short overhead inventory, et cetera, we plan no restructures or other inventory action as our overall revenue plan remains intact [for capturing our temporary] delays, as customers adjust their inventory level.

We expect second-quarter revenue to rebound, as our customer achieve a balance in their inventory level to match demand. With higher Q2 revenue, we expect a strong performance in operation margin, inventory turn, and cash flow from operations and other financial metrics. I would also like to mention that we closed our acquisition of the PT assets and capability in Penang, Malaysia into March 2011. Integration of the acquired asset is underway. We are excited to further expand the business, which had a better margin than traditional EMS business. Now, I will turn the call over to Gayla Delly, our President.

Thank you, Cary. As Cary noted, the first quarter was a disappointing start to 2011 for Benchmark. Our teams were driving operations to the original forecast of $565 million to $605 million for the quarter. The reductions from our customers came towards the end of the quarter; and therefore, the revenue shortfall significantly impacted our results. The top-line shortfall adversely impacted both our operating margin, due to under-absorption, as well as our inventory levels.

Based on the discussions with and forecasts from our customers currently, we believe that Q1 was somewhat of an aberration, as our customers corrected their inventory positions in this quarter. We now see demand increases resume again in Q2. With these demand increases, we will also see our margin trend resuming, as the revenue and volumes pick up. The overall market for our services continues to be strong.

During the fourth quarter, we booked 50 new programs, with current estimated annual revenues of $101 million to $121 million. These bookings were in each of the sectors we serve, with both new and existing customers, with approximately 40% of the new bookings being in the medical sector. These bookings are, of course, subject to the risks of timing and ultimate realization of our estimated revenues. Our teams continue to support the new programs that we have booked in prior quarters.

Specifically related to the two programs that we announced earlier last year, I will give you an update. One program is in the ramping phase and continues to gain momentum, although it has not reached the full annual revenue run rate as of today. The second program has had a slight schedule push out into the fourth quarter for a ramp, versus ramping in the second half related to design modifications.

Looking forward, with our base of customers and the new programs booked, but not fully ramped, we are positioned for resuming our revenue growth and continuing our operating margin improvement. Based on what we see today, as well as the indications from our customers, we expect estimated revenues for the second quarter of 2011 to be in the range of $560 million to $600 million, with the corresponding earnings per share for the quarter in the range of $0.28 to $0.34.

At this time, I will turn the call back over to Don to discuss financial metrics for Q1.

Thank you, Gayla. As Cary noted, we completed the first quarter of 2011 with revenues of $538 million, which was lower than our guidance provided earlier in the quarter of $565 million to $605 million. On a quarter-over-quarter basis, we saw weaker shipments in three of the industry sectors that we serve. Sequentially, comparing the first quarter of 2011 to the fourth quarter of 2010, revenues from the Computing sector were down 29%, revenues from the Medical sector were down 26%, revenues from the Telecom sector were down 8%, revenues from the Test and Instrumentation and Industrial Controls were approximately flat, when compared to the fourth quarter of 2010.

Sequentially, revenues from the Computing sector were impacted by the overall softening of demand from customers, in addition to the ramp-up of some production in the fourth quarter of 2010. The decline in the Medical sector revenues was twofold. Inventory corrections or adjustments from our customers, and as previously noted, supply chain constraints related to one of our customers. We do expect the Medical sector to rebound in the second quarter.

Our earnings per share for the quarter were $0.25. GAAP diluted earnings per share were $0.29 in the first quarter of last year. And earnings per share, excluding restructuring charges, were $0.30 in the first quarter of last year. It is important to note that we did not have any restructuring cost this quarter. To provide a more meaningful comparative analysis, we will present certain financial information, excluding special items for the prior periods, during this call. We will also call your attention to the fact that these items are excluded when we do so. In today's press release, we have included a reconciliation of our GAAP results to our results, excluding these special items.

Our resulting margins for the quarter have been impacted by the shortfall in revenue. Our gross margin for the first quarter was 7.1%, and our operating margin was 3.1%, which are declines from the fourth quarter, due to unabsorbed manufacturing overhead costs. Net income was $15.3 million for the first quarter of 2011, compared to $19.1 million in the first quarter of 2010, which is excluding special items. GAAP net income of -- for Q1 of 2010 was $18.3 million.

Interest income was approximately $404,000 for the quarter; interest expense was $332,000. In other expense, $435,000 was primarily related to foreign currency losses. Our effective tax rate was approximately 5.6% for the quarter, compared to 4.5% in the fourth quarter, excluding special items. Diluted weighted average shares outstanding for the quarter were $61.5 million. Our cash and long-term investments balance was $367 million at March 31, which includes $34 million of auction-rate securities, which are classified as long-term assets.

The unrealized loss on our auction-rate securities at March 31 was $3.6 million, due to changes in the market value for these securities. The unrealized loss is reflected in accumulated other comprehensive loss, as a component of shareholder's equity. For the first quarter, our cash flows were impacted by increased inventory levels caused by the shortfall in revenues.

During the quarter, cash flows from operations were approximately $14 million. Capital expenditures for the first quarter were approximately $26 million, which includes approximately $20 million related to the expansion of our Precision Technology Capabilities in Asia. Depreciation and amortization expense was approximately $8.4 million. Repurchases of common shares for the first quarter were $5 million, or 300,000 shares.

Since the inception of our share repurchase program in July of '07, we have repurchased approximately $239 million, or 13.7 million shares. We have $86 million remaining under our approved share repurchase plan. We will continue to evaluate any future repurchases under this program. Receivables were $419 million at March 31, a decrease of $37 million from the last quarter, due to the decrease in timing of sales. Inventory was $396 million at March 31, an increase of $34 million, which is consistent with the shortfall in revenue.

Our inventory turns were 5.1 times for the quarter, compared to 6.4 times in Q4. Our inventory turns were primarily impacted by inventory levels being in position for our revenue forecast, which did not materialize as expected. We believe that most customer inventory positions have largely been corrected, and we expect more normalized revenues in the second quarter, and associated margin improvements.

Current assets were approximately $1.2 billion, and the current ratio was 3.9 to 1 in Q1, compared to 3.8 to 1 in Q4 of 2010. As of March 31, we have $11.3 million in debt outstanding, which primarily relates to a long-term capital lease on one of our facilities. Comparing the first quarter of 2011 to the same period last year, the revenue breakdown by industry is as follows. Industrial Controls is 28%, versus 24% last year; Computing is 27%, versus 32% last year; Telecom was 23%, versus the same 23% last year; Test and Instrumentation was 13%, compared to 9% last year; and finally, Medical was 9% versus 12% last year.

At this time, I would like to open for the Q&A session. During the session, we request that you limit yourself to one question and one follow-up question, in order to allow enough time for everybody's questions. Thank you.

Thank you. (Operator Instructions) We will first go to the line of Wamsi Mohan with Bank of America. Please go ahead.

Yes. Thank you, good morning. When you look at the revenue shortfall in the first quarter, you brought up a few different things -- slow down in demand, inventory issues in Medical, and Component issues in Medical. Is there any way you can size those for us? And, specifically for components, is that issue now behind you, or are there any procurement issues you are contemplating in your guidance?

Wamsi, this is Gayla. I don't have a specific percentage breakdown, but as Don said, the significant portion was the broad-based decline in forecasted inventory requirements from customers as we exited the quarter. The Medical issue was limited in nature, as we have qualified some new components and are getting those [specked] in by the customer, and do not expect that to continue to impact through Q2. And overall, the component markets have improved generally, with lead times reducing as we entered Q1 specifically, which likely had a portion of the impact on the overall customer positioning for inventory -- which, of course, has been re-evaluated and is being evaluated on an ongoing basis day-by-day, given the events in Japan. So, I believe while there are improvements almost on an day-on-day basis related to the sourcing in Japan, the impact, if any, is not clear on that. But it is clear that the overall improvement is being made in Japan. So, two different aspects there, specific to the Medical, do not have an expectation that that would have any impact for the upcoming quarters.

Okay. Thanks, Gayla. And as my follow up, given the slow start to the year, do you still expect to see revenue growth this year, especially in 2Q and 3Q -- your compares, do they add significantly tougher -- I mean, it gets easier [on the] fold. But can you talk a little bit about your expectation of linearity or revenue growth for the year? Thank you.

This is Cary. The (inaudible) the Q1 revenue shortfall is definitely to make it more difficult to see the significant growth of the revenue, 2011. But, with the new program ramps and the all the new program we have here booked in the last couple of years, we will still see a [modest growth] for the years. And the timing of the program is, of course, is very important. But the base on the indication that the -- from our customer will anticipate a pretty nice Q2 growth. But (inaudible) grow (inaudible) anticipated in the beginning of the year.

Okay, thank you. Thanks, Cary.

Thank you. Next we'll go to the line of Sherri Scribner with Deutsche Bank. Please go ahead.

Hi, thank you. I wanted to get a sense of the gross margin trends as we move through the year. Clearly, this quarter we dropped down to 7.1%, and looks the guidance is not implying that you get back to your more typical 7.8% to 8% range. Just wanted to get a sense of your expectations for gross margins in June, and do we get back to that 7.8% to 8% type of range in September and December?

Yes, Sherri, this is Don. I think, looking at our guidance, certainly on the high end, we would expect to -- last year, I think we were around a 4%, 4.1% on operating margins. So, I think, certainly on the high end of the guidance, we would expect to approach or get pretty close to those margins for the quarter. So, we certainly viewed the -- this quarter is a temporary blip, but as revenues resume, we would expect our margins to return to what we did normally last year.

Okay. On the operating side. And I guess I'm more curious on the gross margin side, in maybe trying to get a little more granular on the SG&A. Are you assuming that the SG&A is generally flat as we move through the year, or is there some growth as those new programs come on?

Well, I think in terms of the margin, I think -- I addressed the operating margins, but certainly, the gross margins would hold the same. So, you would get -- on the high end of the guidance, you start getting the 7.8%, 7.9% percentage. And no significant changes in SG&A for the coming quarter.

Okay. Great. And then, in terms of the compute segment, I know you've got the two programs ramping. It sounds like that is going to be -- that one of the programs is going to be part of the gross in the second quarter, and one gets pushed out to the fourth quarter. Can you give us any sense of magnitude, of how much impact that new program has in the second quarter?

I don't have a specific number. I expect that we will continue to see growth in it. But I don't have a specific size for you on that. Generally, we would continue to ramp in the double digits -- whether that's $10 million, $15 million, I don't have a specific scope to it. But I guess one of the key points, Sherri, is that while we highlighted the two programs, when we look at our bookings from the past year, the number of programs that we have that are somewhere in the phase of ramping but not fully ramped is probably much higher than typical with the amount of R&D that customers have been investing over the past year. We see a lot of the programs that we have booked are not just shifting amongst and between players in the industry. While there is some of that, a significant portion of the opportunities are new programs, new designs, which take longer to ramp. And so, those are still in the front log, if you will, and still in what we see as our opportunity for growth and continuous growth into the second half of the year.

Okay, great. Thank you, Gayla and Don.

You're welcome.

Thank you. And next, we will go to the line of Brian White with Ticonderoga. Please go ahead.

Okay, good morning. When we think about the June quarter rebound here, where do you expect the strongest snapback in your market segments?

Consistent with what we saw, that it was kind of broad-based, I expect it to somewhat resume broad-based. But specifically, Medical is going to have a strong rebound again, related to some ramping of programs, related to the resolution of inventory, and -- both as to the specific component issued and to inventory corrections. So, that one probably has the most significant individual bounceback.

Okay. And we should think about every market growing, but Medical seeing the strongest snapback. Is that fair?

Yes, I believe so.

Okay. And then, when we think about the softness at the end of March, what really drove it? What did the customers say? Working down inventories, well, they're working down inventories because they're concerned about something. So, what do you think it was?

I don't think there was one market, one customer, or one underpinning that was consistent. Each one has some dynamics that were pointed to, but none of them -- there was not a consistency. I think there were a lot of moving parts, whether it was the overall economy, whether it was wait-and-see impacts from Japan, whether it was the inventory build levels they were seeing -- there were a lot of dynamics. But none of them were significant or pervasive impacting the demand as we see going into the second quarter. And in fact, as I said, they seemed to potentially have over corrected, and now we are rebounding some in demand.

Okay. Great. Thank you.

Thank you. And next, we will go to the line of Amit Daryanani with RBC Capital Markets. Please go ahead.

Thanks, good morning, guys. Couple of questions. One -- it seems like you had a whole bunch of issues in March that impacted the numbers. I'm curious, why guide for normal seasonality in the June quarter? Why not take a bit more conservative stance? And what really gives you a lot of conviction that you can see normal seasonal trends in the June quarter at this point?

Well, the -- Amit, this is Cary. After we [missed the Q1 recording], you can probably imagine we are pretty conservative to look at the Q2 numbers. And the guidance we put out there, we had a pretty high confidence that we can achieve. And like Gayla mentioned earlier, based on the quarter -- the business inflow, the demand increase in the Q1, Q2, maybe the correction is a little bit too -- they probably corrected too far in the demand driving. So, the number I gave out today, of course, is [corrected number of the team], but the -- we feel pretty confident about it. And, of course, we will take a little more conservative [picture] of the numbers -- of the projections.

Got it. And then, can you talk a bit more about the Precision Technology business? How big is that today? Where do you expect that to trend over the next -- by the end of 2011, maybe? And, what's the margin impact to the overall P&L from that business?

Well, as we indicated, 2011, that the PT business [growing] north of $200 million. Of course, after -- the difficulty for us is to identify numbers because we integrated some of our electronics into the final precision mechanical component. Therefore, it's sometimes difficult to segregate a number, but definitely we'll continue to see that sector continue to grow. As we talked about earlier, the new facility will definitely give us a lot more capacity, and one of the [charger] will have the current capacities are pretty full, and that's the reason we invested in [Polasias]. So we will probably see a higher growth rate than our traditional year in this particular business. From a margin standpoint, we will never segregate a margin from percentage [wise] as we have talked in the past, this is definitely a better volume business than a traditional year (inaudible) business.

Thank you.

Thank you. And next, we will go to the line of Jim Suva with Citi. Please go ahead.

Quick question, I'm trying to look at the bigger picture here. We so far have heard Benchmark, as well as Flextronics and Sanmina all talk about softness at the end of the quarter, and also guide below what expectations were for the calendar quarter 2. I know you can't speak on their behalf. The question I have is, we have not seen the OEMs or the end market demand customers dry up. IBM had very strong results, and we could go on with the myriad of list of OEM companies that have had very solid results. So, was it just in Q4, you think there was some over-ordering of product, given the component concerns then that now we are getting back to equilibrium? Or do you think that end markets really are softer than expected, because EMS outlook seems softer than what a lot of the OEMs -- I am just trying to bridge the gap about the big-picture. EMS seems weaker for Q1 and Q2, compared to the OEMs.

Jim, this is Gayla. I do believe that as we step back, there are a few pieces that we have, as take-aways from what we have seen in the strength in OEM, as compared to the production levels we are seeing in some cases. I do believe that the demand -- the end-market demand has somewhat tempered from the trajectory it was on, as we went through the last quarter and maybe the last four, five months of 2010. And so, I believe that the run rate growth somewhat was tempered. There's always a softer Q1, but I think that they had built into the anticipation, the momentum continuing, and I think that that has tapered off.

Secondly, as I pointed out in my comments, the lead times for components prior to the consideration of the events in Japan -- the lead times had really come back into check, with a lot of capacity being aligned to the increased demand levels. And ultimately, there is what I might consider a one-time correction associated with lead-time reductions throughout the supply chain. So, as we see that, and often is the case when you are building full products for customers, you will see it probably more intensely than others in the sub-tier supply chain. So, I do believe it is a calibration of inventory levels to demand. And I don't see that it is a continued fall off, but I think it is not at the rate that we were seeing in Q4.

Great. Thank you so much for the details on the big picture. Taking it specifically to Benchmark and switching gears for my follow-up question. On the Precision business that you have, is that being folded overall into the various end markets you have, or how much dollars is the Precision business -- or should we expect it to be a breakout, standalone segment at some point? I'm just trying to quantify the materiality of it.

No, it will be serving a variety of our industries, and does serve a variety of our industries, and will be folded in as such. And is folded in such.

And any thoughts of -- is it 5% of the Company's business, more than that, and above -- ? I'm just trying to gather the magnitude of

It would be in the single digits -- it'd be less than 10%. And as Cary said, the challenge there is, because we are doing full product for some customers, it has electronic components associated with some of the end products. So, it's a mix; it's not just [PTO] standalone.

Thank you so much for all the details, ladies and gentlemen.

Thanks.

Thank you. And next, we will go to the line of Brian Alexander with Raymond James. Please go ahead.

Hi, this is Brian Peterson stepping in for Brian Alexander. Just a clarification question. I thought you guys said that SG&A would be relatively flat, sequentially, in the June quarter. But it looks like revenue guidance is up about 10%. So, just wanted to clarify if that is still the case. And what gives you the confidence that you can manage to that cost structure?

Yes, I think -- well, when I said flat, I think generally we have been running -- you look at it the last four or five quarters, anywhere from $22 million to $23 million. I would expect a slight uptick next quarter; but in terms of -- we should get some leverage on the SG&A next quarter. But I would anticipate it to be relatively consistent with what we have done over the last year or so, on a quarterly basis.

Brian, maybe one of the keys to re-emphasize here is that with the shortfall and the adjustment in forecast late in the quarter, we -- other than, say, variable comp, there is not an adjustment that was made to realign our infrastructure costs or our overhead costs to a lower-level run rate. So, our run rate expenses were kept intact. And so that's why you don't see a swing.

Okay, that's helpful. Lastly, on the Precision machining business, I understand that's a higher fixed cost business, and it sounds like you expect a lot of growth there. But I know some of your competitors that are in the component space have struggled to operate. And I know -- I understand your model is a little different. But, can you maybe just talk about now, where the margins stand, either at, above, or below the corporate average? Understanding that, obviously, it has the potential to be much higher in the long term.

I guess, as with any of our business, the more value add versus material content that we have, the more margin. But it is clearly a bit above the average, based on the value add that you have in it.

And that's -- so, it's above the margin level as of this quarter?

That's correct.

Okay. Thank you.

Thank you. And next, we'll go to the line of David Fondrie with Heartland Funds. Please go ahead.

I wonder if you could give us a little more color on whether or not you have seen some positive acceptance of the new certified -- FDA-certified plant in Thailand? How that's impacted your ability to go out and get new programs?

Well, we definitely see a lot of interest in our new FDA class 3 certification in Thailand. The challenging -- the challenge in the medical industry is it takes a while to get a product in there, and ramp the product up. As we've definitely seen a lot of interest in Thailand as a whole, for the Medical customer base. We will probably see some [real true] impact in that particular certification in the second half of 2011 or early part of 2012. That is simply take that long to get the Medical customers and get into that capacity and that requirement to ramp the business up.

Go ahead, Gayla.

Where we see good opportunities are where customers are tailoring product solutions for the Asian marketplace, as opposed to just simply doing production in Asia for existing products, because of some of the related FDA requirements, as Cary pointed out. So, again, some of those will ramp as they have product solutions tailored for the Asian marketplace.

In your design wins in the last couple quarters, have any of them been -- or, particularly in this last quarter, were any of them for products that will go into that plant?

Yes, I think [the gain] reported the new business booking, it's about 40% of new business booking for 20 -- for the first quarter was in the medical field. And the -- part of the -- that new booking will go to that plant. Yes.

Thank you very much.

Thank you. Next, we'll go to the line of Brian White with Ticonderoga. Please go ahead.

Just housekeeping. Could you update us on how we should think about the tax rate in the second quarter and third and fourth quarter?

Brian, we are anticipating around 9% to 10% for the balance of the year.

Okay. And depreciation CapEx?

In terms of CapEx, we are still looking at, for the year, $55 million to $65 million of course, we spent about $25 million in the first quarter, $25 million, $26 million. We do expect an uptick in depreciation from our current levels, as we brought a significant amount of assets on the books late in the quarter. So, I would expect depreciation to probably jump up $1 million bucks or so from the current levels.

Okay. And just update capacity expansion plans, where we are expanding right now?

The really major expansion we have this point in time is in Malaysia, both for EMS as well as the PT business. All of the other expansions are pretty much completed in 2010. And there is no major plan for any expansion, but we do have a so-called maintenance type CapEx expenditure to upgrade machining, [pull] the efficiency, and so on and so forth. That's where the money Don talked about for CapEx for the year, is about $55 million to $65 million. Out of that, $25 million were related to the PT acquisition.

Okay. And Don, on the depreciation and amortization, what is the breakout depreciation versus amortization in first quarter?

I have to get back -- I think amortization is probably $1 million or so.

Okay, that's great. Thank you.

Okay. Thank you. And we'll go to the line of Sean Hannan with Needham & Company. Please go ahead.

Just going back to the Precision machining, can you talk about -- what's the general utilization of that business at this point today?

This is a fairly new business for us. And the -- at this point in time, we have three facilities in the US, one in Mexico, and one small one in Singapore. We are pretty busy at this point of time. And that's why we expanded capacity in Malaysia [side]. I can't tell you exactly what the utilization rate is, but it's pretty full this point in times.

I'm sorry, you said pretty full?

Yes.

Okay. And then, to what degree -- of the business that you have in place today, for the machining business, how much of that is actually supporting existing programs and customers? I think a lot of that was really put in place based on existing relationships, versus what is being installed and invested in to pursue new business opportunities? Can you contrast how that -- compare and contrast what that production level is, or capabilities are, and your strategy of that, moving forward?

I am not sure that we fully appreciated the question there, but let me take a stab at answering it, and you can come back if it does not suffice. Basically, we did expand supporting existing customers, and are looking to continue to expand, and have had some opportunities to expand into both new services for non-customers and expand to serve existing customers with new services. So, on all fronts, we are looking at and driving the opportunity. And part of the Malaysia solution that we have added provides us the opportunity to expand into new and incremental markets, both for existing new customers and new ways.

Okay. And from a facility perspective, in terms of bringing on new business, new customers, that would be really directed toward a particular facility -- would that be Malaysia?

No, clearly we are seeing that in other facilities also, is the opportunity. And I believe, as I've spoken about it before, really, in each of the industries -- Industrial Controls, Medical, and Test and Instrumentation, we are seeing that those are the three primary industries in which we participate, where there are opportunities to support customers through these facilities. And so, it's not geographic-central, specifically; it's in each of the sites.

Great. Thanks, Gayla.

Thank you.

Okay, thank you. And then, just a follow-up from the line of Amit Daryanani with RBC Capital Markets. Go ahead, please.

Thanks. Two quick follow-ups. Is there any customer that was over 10% revenues? And then, could you talk about how much what -- the top 10 customers as a percent of sales, as well?

We anticipate, for the year, it still continuing to be -- one top customer will be IBM, 10%.

All right. And then, top 10 customers, what were they as a percent of revenues?

I think (inaudible) in low double-digit.

All right. Thank you.

Okay. Thank you. And there are no further questions at this time. Please go ahead.

Okay. We will be in our offices for follow-up calls, and we thank you for joining us today. Thank you.

Thank you, ladies and gentlemen. That does conclude our conference for today. Thank you for your participation. You may now disconnect.