Benchmark Electronics Inc (BHE) 2015 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Benchmark Electronics third-quarter 2015 earnings conference call. At this time all participants are in a listen-only mode. Later, there will be a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, today's call is being recorded.

I would now like to turn the conference over to Lisa Weeks. Ma'am, you may begin.

Thank you, Shannon. Good morning, everyone, and thank you for joining us today for Benchmark's third-quarter earnings call. My name is Lisa Weekes, and I am Benchmark's VP of Strategy and Investor Relations. With me this morning are Gayla Delly, President and CEO; and Don Adams, CFO. Gayla will provide quarterly highlights and a strategic overview, and Don will provide a detailed review of our financial results followed by a question-and-answer period.

Earlier today we issued our earnings release highlighting our financial performance for the third quarter as well as a press release related to our planned acquisition of Secure Technology. And we have prepared a presentation that we will reference on this call. The press releases and presentation are available online under the Investor Relations section of our website at www.bench.com. This call is being webcast live and a replay will be available online following the call.

Please take a moment to review the forward-looking statements advice on slide 2 in the presentation. During our call we will discuss forward-looking information. As a reminder, any of today's remarks that are not statements of historical fact are forward-looking statements, which involve risks and uncertainties described in our press releases and SEC filings. Actual results may differ materially from these statements and Benchmark undertakes no obligation to update any forward-looking statements. The Company has provided a reconciliation of our GAAP to non-GAAP measures in the earnings release as well as in the Appendix of the presentation.

If you will turn to slide 3, I will now turn the call over to our President and Chief Executive Officer, Gayla Delly.

Good morning and thank you, everyone, for joining our call today. Before we discuss our quarterly earnings results, I would like to first review the other important release about an acquisition we announced this morning.

We are very excited to announce that we have entered into a definitive agreement to acquire Secure Technology. Secure specializes in providing ruggedized products and communication solutions which are primarily focused on the industrial, aerospace and defense sectors. Secure integrates its proprietary designs into customized products to provide cost-effective and reliable solutions to its customers.

This acquisition aligns directly with Benchmark's diverse portfolio strategy of building upon and expanding our strong platform of services and solutions supporting our focused markets of Medical, Test & Instrumentation and Industrial. And that is where we include our aerospace and defense sectors.

Our ongoing commitment is to expand the breadth and depth of our Industrial, Medical and Test & Instrumentation portfolio. These industries support long lifecycle products which often require complex engineering solutions which provide excellent and long-term growth opportunities for Benchmark.

Secure's last 12-month revenues were approximately $100 million. This business has experienced strong annualized growth rates of approximately 10%. We are excited to have Secure's talented and prudent senior management team and their diverse portfolio of well-positioned programs join Benchmark. Together we will continue driving our long-term diversification strategy into higher-margin businesses.

Moving to slide 4, with our range of engineering solutions, our customers increasingly seek Benchmark's support in providing engineering value that enables them to deliver world-class products to the market. Expanding the portion of our portfolio focused on longer lifecycle products and offering enhanced engineering support to our customers has yielded higher margins to Benchmark and helps to reduce the impact of historical demand volatility in our traditional Computing and Telco markets. The Secure acquisition will further extend our engineering capabilities and bring additional skills, resources and customers to the complement of the existing premier engineering solutions that Benchmark currently offers.

The acquisition will broaden our existing Industrial sector and provide critical technology platforms that we plan to extend across the combined blue-chip customer base of Benchmark and Secure. The acquisition will also scale our high mix and complex manufacturing capabilities for both systems and components with the operations in US and Mexico. Benchmark will leverage our manufacturing and supply chain expertise, operational systems and long history of quality performance to enhance the solutions that Secure provides to its customers, and we are very excited about driving value for our shareholders through the Secure acquisition.

The transaction will be immediately accretive to Benchmark's margins, earnings per share and cash flows. We will pay approximately $230 million in cash, using our bank credit facility, and we expect to close the transaction later in the fourth quarter, subject to customary closing conditions and regulatory approvals.

Equally important to our portfolio diversification strategy is our commitment to our balanced capital allocation. The Secure acquisition will enable us to deploy our resources in alignment with our strategies.

We expect to continue returning capital to shareholders through our share repurchase program. Benchmark returned $18 million to shareholders through our repurchases in the third quarter and we have returned over $71 million over the last 12 months. Our financial flexibility allows us to execute on a disciplined capital allocation plan and strategically designate spending on growth initiatives in the form of acquisitions and also in reinvesting in the business while also returning capital to shareholders.

We have a long history of value-enhancing acquisitions and a strong track record of successful integration. While we continue to view acquisitive growth favorably, we will remain disciplined in pursuing opportunities that are complementary, smart and in the best interest of the Company and its stakeholders.

Now turn with me to slide 5 in our presentation for a review of some of the third-quarter highlights. Benchmark delivered solid profitability results in the third quarter. Our operating margin improved to 4.3%. This is up 30 basis points year over year and 10 basis points quarter over quarter. We achieved these results despite the macro headwinds that continued to challenge our topline. Our revenue of $630 million was slightly below our guidance due to lower-than-expected demand from customers in the Telco, Industrial and Test & instrumentation markets.

We believe that some of our customers experienced an inventory correction in the third quarter associated with the sluggish end market demand, and some of that is expected to continue in the fourth quarter.

Now let's turn to slide 6. We continue making steady progress on our commitment to expand our engineering and manufacturing solutions in the higher margin Industrial, Medical and Test & Instrumentation markets. We have made substantial investments in recent years to increase our capability serving these targeted markets.

Our results are a testament that our strategy is working. Revenue in our higher growth markets have grown at almost a 10% CAGR over the first nine months of 2015 as compared to the first nine months of 2012. During this same period, revenues in the traditional markets declined by 5%.

We have focused on building a better mix of business, moving our margin profile up a bit. Our operating margins have improved by 6% over the first nine months of 2015 while revenues have declined 8% in the same period. This was also the fourth consecutive quarter where higher growth markets exceeded 50% of our revenue. We expect this trend to continue as we expand our revenue stream towards longer lifecycle products and increase our engineering services.

Even as traditional growth remains tempered in the short term, we have demonstrated the operational strength to manage the variability in our end markets and continue to increase margins above our stated targets. We are very pleased with our portfolio diversification product, and our pipeline of additional organic and strategic opportunities in our focused markets remain strong.

Please turn to slide 6. Our bookings this quarter once again aligned well with our targeted growth markets. We won 37 new programs, including 16 engineering projects, and these should result in estimated annualized revenues of $110 million to $130 million when fully released to production. Driving greater value through our engineering solutions remains a top priority, and our 16 engineering wins in the quarter are a key enabler for bookings in both our industrial and medical markets. We have continued to make disciplined investments, expanding our engineering and our go-to-market capabilities to drive higher bookings and margins in the future.

Now let me turn it over to Don to provide more details on the quarter.

Thank you, Gayla, and good morning to everyone. Please turn to slide 8 for a summary of our results.

Third-quarter revenues of $630 million were slightly below the guidance, which was driven by end market softness in Telco, Industrial and the Test & Instrumentation sectors. Net income on a GAAP basis was $21 million for the quarter compared to $17 million last year. Non-GAAP net income for the quarter was $21 million compared to $23 million in 2014. Our GAAP earnings per share was $0.40 compared to $0.31 last year. Non-GAAP earnings per share were $0.41 in the third quarter compared to $0.43 last year. Our non-GAAP operating margin was 4.3% compared to 4% during the third quarter of 2014. In the quarter we had $1.1 million of restructuring charges due to various realignment activities across the globe.

The third-quarter non-GAAP effective income tax rate was 18% compared to 22% last quarter. We expect the tax rate for the fourth quarter to be approximately 22%. The diluted weighted average shares outstanding for the third quarter were 51.6 million.

Please turn to slide 9 for a trending view of our operating income. Our third-quarter non-GAAP operating income of 4.3% demonstrates the strength of our operating platform. It represents an increase of 30 basis points from last year and a 10 basis point increase from last quarter. Our improving operating margins result from our continued efforts to diversify our portfolio onto higher margin business sectors and to execute in our lean and operational excellence initiatives.

Now please turn to slide 10, where I will highlight a few balance sheet and cash flow items. Our cash balance at September 30 was $462 million, which is up 13% from last quarter. Our US cash balance was $53 million. During the third quarter we repurchased 835,000 shares at a cost of $18 million. We have $51 million remaining for future repurchases.

Our near-term capital allocation priority is to continue investing CapEx in the business to drive continued operational improvements, supporting strategic growth initiatives and, finally, executing share buybacks. During the quarter, we generated $78 million in cash from operations. Capital expenditures were $7.9 million and depreciation and amortization expense was $12 million for the quarter. We believe that CapEx will range from $40 million to $50 million for the full year.

Our accounts receivable balance was $467 million, a decrease of $33 million from the last quarter. Our accounts receivable days were 67. Inventory at September 30 was $422 million, a decrease of $23 million from the last quarter. Inventory turns were 5.5, which is consistent with the last quarter.

Please turn to slide 11. Overall, the cash conversion cycle improved by one day in comparison to last quarter. We had originally forecasted a four-day improvement that did not meet this target because of lower sales during the quarter. We remain committed to our near-term target of 82 days and longer term goals of 75 days, which is appropriate given our continued transition into higher mix, lower volume business.

Our team has a number of initiatives underway to position us to achieve these results including better alignment of our customers' supplier payment terms, optimized demand in inventory management programs and finally preferred supplier strategic sourcing initiatives.

Please turn to slide 12 to review our fourth-quarter guidance. We expect revenues to range between $620 million to $640 million. Our non-GAAP diluted earnings per share is estimated to range between $0.39 and $0.43. Also implied in this guidance is an operating margin consistent with or slightly higher than the third quarter. Restructuring charges are expected to be $3 million next quarter.

If you will, please turn to slide 13. As we provide a review and outlook for the markets we serve, I want to highlight that we continue to see demand variability across end markets. As in our recent quarter, the growth that we see is largely from new products rather than wholesale demand improvements. We will first focus on higher growth markets. Industrial control revenues were $198 million and represent 31% of third-quarter revenues. On a sequential basis, revenues declined 2%. Revenues were lower than expected due to macroeconomic factors. We expect higher revenues in the fourth quarter from new programs.

Medical revenues were $87 million in the third quarter, which was down from the prior quarter and below our expectations due to new program qualifications for three customers that pushed into the fourth quarter. Even with these delays, medical revenues were up 15% year over year.

Test & Instrumentation revenues of $58 million were down slightly quarter over quarter due to lower semi-cap orders and we expect this to continue into the fourth quarter.

In our traditional markets, Telecom revenues of $147 million decreased sequentially from the second quarter, as expected, due to the continued delay in capital spending. On a year-to-date basis as compared to the strong double-digit growth in 2014, we have had a significant decline in revenue primarily related to product lifecycle transitions at one of our top customers. In addition, five of our top six Telco customers experienced modest order declines in the third quarter and we expect further declines in the fourth quarter, related to broader demand weakness associated with reduced infrastructure spend.

Customers are remaining deliberate in their decision-making and delay in capital spending as they await positive future catalysts. In general, our Telco customers are offering a cautious outlook regarding near-term market recovery.

Computing revenues of $140 million slightly increased sequentially from our second quarter, based on stronger-than-expected demand. For the fourth quarter, we expect demand to be relatively flat based on the most recent customer forecast.

In summary, we are excited about where we are going. We have enhanced profitability in spite of the revenue challenges. We have confidence in the trajectory of our portfolio and the anticipated expansion for our higher growth markets.

I will now turn the call back over to Gayla for her concluding remarks.

Please turn to slide 14. We are excited, as Don said. During the third quarter we continued to execute well on our portfolio diversification. Our employees remained focused during this period of significant new program ramp and have continued to deliver on our commitments to our customers. We have a strong culture of execution which is supported by our ongoing initiatives in customer focus, operational excellence and working capital.

I'm also very pleased to share the news about Secure. This strategic and complementary acquisition aligns well with our focus on prudent, disciplined and value-enhancing growth. Together with Secure, we will broaden our range of capabilities to help solve complex design and production challenges for our diverse customer base.

As our higher growth markets continue to outpace the growth rate of the traditional markets, including the Secure acquisition, we expect to exceed our previously stated target of 4.2% operating margin as we exit the fourth quarter. We continue to believe in our long-term strategy in our targeted markets and are confident that our initiatives enable us to continue to create value for our shareholders and customers.

With that I will ask the operator to open for Q&A. Operator?

(Operator Instructions) Jim Suva with Citi.

Thanks very much and congratulations to Benchmark and their team on this acquisition.

Gayla, I believe you mentioned that it was accretive immediately to EPS and margins. Can you help us understand a little bit is this like just double the Company's margin or a few percentage points higher? And importantly, what type of integration efforts will you have to do? Are they in secured locations that maybe you can't integrate with Benchmark or you can't integrate with your existing infrastructure? Will you need to close some factories and realign some stuff? And it seems like since they do some defense work, I would assume a lot of this is done in the US and may not be able to offshore it. Or maybe it's actually not even needed to be restructured, that you just want to integrate it and keep it as is.

If you can help us understand a little more about those integration plans.

Absolutely, Jim. So we won't get specifically into what the Secure margin range is. But suffice it to say that it is healthily above our traditional margin, which recognizes the proprietary system and subsystems and the solution nature of their business. And as you indicated or suggested in some of your comments, we don't see that it is in need of restructuring. What we see is this is an excellent bolt-on, an opportunity for us to go to market jointly to incorporate the solutions set and expand our business together.

We will, as we indicated in our comments, utilize some of the back office practices and leverage capabilities that we have within Benchmark. But the real storyline here is the opportunity that this brings us to join together in the business and grow the business and the associated solutions that we can offer customers.

Great. And then as a quick follow-up, the size of this is a little bit bigger than some of your past ones. I think it's approximately about 3% to 4% of your Company's total sales, if I do my math right. Are you looking more now at this more similar-size type of acquisitions? Or was this kind of a one-off special case? Or are you shifting and favoring more some of these larger ones versus the very, very small ones?

This is about $100 million in revenue annually, as we indicated. And we don't specifically target size. We are looking for enriching the solutions that we provide customers and don't specifically target it based on revenue. So I believe, as you've seen, we've really focused on enhancing our model. And as Don indicated, even though sometimes you will see acquisitions by others done for revenue, sometimes they are done for margins, we really look to enhance the portfolio to enhance the solution.

Great. Thank you very much and congratulations.

Andrew Huang with B. Riley.

The first question is on Secure Technology. Do they have any 10% customers? Or are there -- maybe you can give me a sense of who the major customers are.

We don't have 10% customers there. We do see there is blue-chip customers such as government primes, VOD. And in fact, to answer a question that I anticipate would be the next one would be is there any customer overlap. We have very limited customer overlap.

Okay, great. And then I just wanted to clarify one thing on the guidance. I think you mentioned it briefly, but I missed it. Did you say that the December quarter guidance includes the acquisition or it does not include the acquisition?

It is very nominal. Given the closing, which is projected to be sometime in mid-November, the impact is very minimal.

Okay. So it does include it, though?

A nominal amount would be included based on the --

Got it.

(multiple speakers) Expected timing, mid/late November, that it would close. So not a significant impact at all. It's incorporated into the potential range.

Understood. And then I just wanted to clarify one more thing about the operating margins. I believe your original target exiting this year was 4.3%. And then you are shooting for 4.5% exiting December 2016. Is that correct?

We are expecting, as we said in our comments, Andrew -- first, we had targeted 4.2% as we exited the year. We are expecting it to be modestly higher than we had for Q3, which was 4.3%.

Okay, that's great. Thanks very much and I'll get back into queue.

Sean Hannan with Needham.

Thanks for taking my question here. A few of them -- certainly, I first want to see if I could look at the guidance here. So there are aspects of the shortfall, I think, that some of us understand. Just trying to get an understanding, though, to what degree some of this may have been a surprise, particularly as I think about Telco. That's had some general softness for a few periods now as an end market. You mentioned product transitions. Is this end of life and you are not on the new platform? Or maybe there are some share shifts or larger delays in terms of new launch?

And then as I look at Computing, typically you get an interesting seasonal uptick in terms of demand and forecast from your large customer in that space. We are not seeing that in the fourth quarter. So a little bit more perspective, particularly focused around those two segments, would be helpful. Thanks.

In terms of the traditional side, in terms of the Telco, we started seeing late-quarter demand drops. And certainly on the Computing side, as you noted, we typically -- we see strength in the fourth quarter. As we have guided this quarter, we are expecting Computing to remain flat. So we are not necessarily seeing that what I would say traditional strength that we typically see in the fourth quarter.

And more specifically also ongoing back to Telco, again, the demand that we are seeing or the demand drop is really broad based, as we noted. I think five of the top six customers that we had until so we've seen declines as we head -- in Q3 and as we head into Q4.

Okay. So in both cases it's just simply incrementally deteriorated demand and nothing more than that?

Right. We have seen softness across five of the six Telco customers for networking, infrastructure, wireless, across a variety of portions of Telco and across a number of customers and so we consider that broad-based softness and some headwinds that that market is seeing. And as well, we are seeing some softness in Computing as compared to what you would expect for Q4. However, we have -- and I guess the underlying question that you may have is associated with the customers, customer relationship. We still are supporting the same customers and our growing customer base of programs. while there are headwinds in the throughput for a number of those programs.

Okay. That's helpful. Now, as I look to the wins, optically they continue to appear light. I do realize you effectively changed how you are reporting them. But we are now 12 months away from when I think you had made that change. And now we are looking at a disappointing forecast for December. I realize that some of that is that demand environment you just talked to.

But can you talk to your wins a little bit more to give us insight on the degree that we might have, either a deceleration in your win rates or a lack of general growth? Or is there a degree of embedded optimism that perhaps we are just not taking into account as you look to ramps that may be of better benefit in 2016? Because clearly we will probably be needing to pull down some of our estimates. I just want to get the right perspective of how to shape those model changes. Thanks.

As you know, we've gone through, really, a transformation. And as we look to drive I'll call it value ahead of volume, if you will, as Don indicated, we've seen the improvement associated with the mix of business that we are growing as it relates to the solution sets we are offering customers and the associated margin we are enjoying from that book of business.

However, that book of business does not necessarily come with the same size of revenue for each individual program. And so, the trade-off, if you will, is greater margin with a lesser size of revenue for each win and a longer term relationship that we develop over a period of time to expand the building blocks that we put in place with these more complex businesses. And, at the same time, we have balanced and are focused on maintaining our relationships in Computing and Telco and supporting them, although we've recognized in some of our prior calls -- and as you saw in 2014, we had some very good success in supporting some great products for customers that had outsized performance.

We expect, when we win those programs, that they will have periods of volatility and have outsized growth opportunities for three, maybe four quarters. And then the follow-on period where they are in a product transition may have some headwinds for us. And we believe, as we support those markets, which we do desire to do, that we will continue to see that performance variability within the overall business. But we are not deselecting customers and we have not parted ways with customers. We are acknowledging that our business model has to be robust enough to manage and deliver on behalf of shareholders amidst the market plays and the challenges that it presents us. And I think that's what we have been able to do and have shown in the business model that we have delivered on in 2015.

Okay. Thanks for the color, Gayla.

Steven Fox with Cross Research.

First off, going back on the acquisition I'm a little unclear as to how much of the business is related to some of the traditional CMS services you provided versus how much is purely product sales.

And then along those lines, can you talk about with the product businesses that you are getting in, how exactly you get synergies besides expanding your customer list? And then I had a follow-up.

Okay. You faded out just before customer list. So can you repeat that portion of the question?

Yes, sorry. I was just wondering in terms of the synergies from the product side of the business you are acquiring how you expand, how you get those synergies besides just adding new customers to your list.

Over 80% of the business is associated with solutions systems and subsystems, as I call them, associated with delivering solutions to customers as opposed to traditional EMS. And we expect to be able to grow that as a go-to-market and as solution sets that we offer an expanded portfolio of customers.

Okay. And then just in terms of the outlook for this coming quarter, it's a pretty severe guide down in terms of both Computing and Telecom. I guess the one common thread I worry about is it is the end of the year where, typically, you have budgets that get spent.

So can you just talk about what you think the underlying growth dynamics are in those markets for you outside of new programs, as you head into the next calendar year?

I believe -- and again, we don't give guidance for 2016. But what we see is that new programs are the key to the opportunities for growth and sustaining a strong base there and do not have great insight yet into some of the infrastructure spend that's expected in the Telco space. And then, of course, likewise, in Computing there are a number of new programs that we are supporting but also there are headwinds associated with volumes in production for Computing.

So there's puts and takes in both of those industries. But we are happy with both the business partners we are engaged with and some of the front log and funnel of opportunities that we are supporting and bookings we expect to be able to announce in the future.

Thanks for that. And just to be clear, in those two markets there, the incremental weakness is all related to end markets. There's nothing that's Benchmark-specific going on there, outside of just what products you are involved in. But there's nothing else that we should think about.

Your last comment is correct, other than the products that we support. So I don't know how it aligns specifically with the overall marketplace. But specifically to products we support, that's all there is. There's not a loss of a customer. There's not any other share shift. It's associated with programs that we are supporting.

Great, that's fair. Thanks so much.

Mitch Steves with RBC Capital Markets.

So if I do the quick math here on the September 14 numbers and basically your guidance, it's implying that the higher-growth market is doing about 6.1% operating margin and the remaining business at 3%. So I'm curious as to why, one, you can't sustain essentially 4.5% margins or better next year. And then secondly, what type of capacity are you guys running at? Because essentially you've had a $100 million decrease and yet margins increased. I'm wondering if you've switched your footprint or done something there to increase the margin line.

So, as we move to some of the nontraditional or the more complex business solutions that we are supporting customers with, it is a more comprehensive solution that we are participating in with our customers. And so, that is what drives the margins. I think your question began with the 4.5% target. That remains our target. We haven't given guidance for 2016, but that is our targeted longer term goal. And as you saw, our goal as we entered 2015 was to achieve a 4.2% margin exiting 2015. And we achieved that earlier last quarter and sustained it this quarter and have guided, likewise, for it to remain intact for Q4, at the midpoint.

So I believe we are expecting to drive and continue to support the growth trajectory to achieve the 4.5% margin.

Got it, thanks. And I'm not sure if this is really covered. But what quarter, roughly, would you expect an inflection point on that year-over-year comparisons in the traditional market to improve? If I look at the bookings, it looks like call it 85% or more is in the nontraditional market.

I don't have the crystal ball that helps us to find the timing on that. Again, we hope all our customers are successful in driving their growth plan for 2016 and even for the fourth quarter. And so, it isn't to say that some of our Telco and Computing customers don't also have some aggressive growth plans. And if they are successful, the portfolio might change.

So we are equally as excited when they excel and exceed expectations and supporting them with all the variabilities in the marketplace.

Got it, thank you. And just one quick one, back to the first question -- what type of utilization are you guys running at? Is it 60% to 70%, 80%? Just a rough number.

About 68% to 69% overall.

Got it, thank you.

(Operator Instructions) Rich D'Auteuil with Columbia.

I wanted to get to a little more detail on Secure. $100 million in revenue, $230 million in purchase price, 10% growth or greater than 10% growth. First of all, can you talk about the last two or three years' growth rate? I'm not sure what greater than 10 -- does that mean 20%? What has been the recent history on the growth rate?

The 10% is a CAGR that we've had that we've seen. So again, we are very excited with the growth rate and the growth opportunities that we see in the marketplace there.

That's a non-answer, though, Gayla. So for me to get comfortable that you are paying 2.3 times revenues, even if it had 20% operating margins or -- it would be a healthy multiple that you paid. You haven't given us any guidance on the operating margin and limited guidance on the growth.

So give me some sense that we didn't way overpay for this. What do you expect the return on investment to be versus your weighted average cost of capital? Just give us something.

We clearly expect it to be a good ROIC and clearly above our weighted average cost of capital. But as you can appreciate with where we are and within the MDA we have in place, we are going to be -- not that we wish to be incomplete in answering your questions. But, based on where we are and the timing of having just signed our definitive agreement, I'm not able to fully and completely provide the level of details that you are asking. But I think, suffice it to say it is healthily above our traditional margins. It has shown healthy growth rates of above the traditional growth rates for [EMS]. And it does provide some extended solutions and some great opportunities for growth and to continue the compound annual growth rate or increase it compared to what they have experienced themselves.

I hope you appreciate where we are in the timing, such that I'm not able to -- I don't own it yet. I can't really get into the details of answering a lot of the questions that you would like to have answered.

Okay. So once the deal closes in late November, will we get that level of detail then?

I would expect, as appropriate, we will incorporate the information post-closing that helps share where we are going and why I am excited about it.

Okay. And then as it relates to your comments on operating margins -- I know you're not providing guidance on 2016. But the goal of 4.5% was pre this acquisition. Is it fair to say that that goal needs to be revisited post this acquisition?

As you can imagine, our targets that we set forth of goals include managing the business to achieve those goals. And so we are constantly looking at the different levers and activities we need to embark upon in order to achieve our goals. And so, again without giving guidance, this is directionally correct and in direct support of achieving or exceeding our goals.

Okay, thank you.

I am showing no further questions at this time. Ladies and gentlemen, that concludes today's -- (multiple speakers)

Thank you, everyone, for joining us on our call today. We will be in our office for any call back and follow-up. Have a great day and thank you, operator.

You are welcome. Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day.