Benchmark Electronics, Inc. (BHE) Q4 2013 Earnings Report, Transcript and Summary

Ladies and gentlemen, we'd like to thank you for standing by. And welcome to the Benchmark Electronics Fourth Quarter 2013 Earnings Call. [Operator Instructions] And as a reminder, today's call will be recorded. I would now like to turn the conference over to your host and facilitator as well as your Vice President of Strategy and Investor Relations, Ms. Lisa Weeks. Please go ahead, ma'am.

Good morning, everyone, and welcome to the Benchmark Electronics earnings conference call for the fourth quarter of 2013. Thank you very much for joining our call today. Earlier today, we issued a press release describing our financial performance for the fourth quarter of 2013. If you did not receive a copy, you may obtain one from the Investor Relations section of our website. This call is being webcast live and a replay will be available on our website following the call. Gayla Delly, our President and CEO; and Don Adam, our CFO, are with me here this morning. After their prepared remarks, we will open up the call for your questions. For your information, Gayla and Don will be using a slide presentation, also available on the Investor Relations section of our website. The company has provided a reconciliation of our GAAP to non-GAAP measures in today's press release, as well as in the appendix of the earnings presentation slide. During our call today, we will be discussing forward-looking information. As a reminder, any of today's remarks that are not statements of historical facts are forward-looking statements and involve certain risks and uncertainties that are disclosed in the Safe Harbor section of our earnings release and SEC filings. Actual results may differ materially from such statements and Benchmark undertakes no obligation to update any forward-looking statements. Please turn to Slide 3 of the presentation. And I will turn the call over to Don Adam, Benchmark CFO.

Thank you, Lisa, and good morning to everyone. I appreciate you joining us on our call today. I will begin by reviewing our fourth quarter results. Q4 was a strong quarter for Benchmark. We generated revenues of $757 million, which was well above our guidance of $685 million to $715 million. The increased revenues were driven by higher than forecasted demand in computing, medical and test and instrumentation sectors. Our quarterly revenues increased $157 million or 26% from the third quarter and $123 million or 19% from the same quarter last year. Our CTS acquisition generated approximately $50 million in revenue for the fourth quarter. Organic growth in the fourth quarter increased 8% year-over-year with a difficult comp from 2012. Our growth accelerated during the fourth quarter with several of our new program ramps. For the quarter, non-GAAP operating margin was 4.1%, which is a 60 basis point improvement from last quarter and a 40 basis point improvement from the same quarter last year. Volume and operating leverage, strong productivity improvements, cost controls and mix contributed to these results. Our GAAP net income was $67 million for the quarter compared to $18 million last year. Our GAAP results include the following 3 nonrecurring items: The first is $31 million of Thailand flood insurance recoveries or $28 million net of taxes; the second is $2 million of charges primarily related to the acquisition and integration activities or $1 million net of taxes; and the third is a $17.5 million discrete U.S. tax benefit related to the release of our income tax valuation allowance. We are pleased that we have substantially completed our Thailand flood claim. A special thanks to all the team members supporting this claim and bringing it to a successful resolution. Our GAAP earnings per share were $1.24 versus $0.33 in the fourth quarter of last year. The net EPS impact of the 3 nonrecurring items was $0.81. Non-GAAP net income for the quarter was $24 million compared to $18 million last year. Our non-GAAP earnings per share of $0.43 increased by 39% from the third quarter and 30% from the fourth quarter year-over-year. For the fourth quarter, non-GAAP effective tax rate was 22%, which was in line with our guidance. We expect the tax rate to range from 22% to 23% in the first quarter of 2014. The diluted weighted average shares outstanding for the fourth quarter were $54.3 million. Now moving to Slide 4. For the full year 2013, our revenues were $2.506 billion. We experienced year-over-year growth of 2% in a difficult environment. For the full year, non-GAAP EPS was $1.26, which increased by 4% from 2012. Let's now review our fourth quarter revenue by industry. Please go to Slide #5. As we discussed in our last call, we anticipated higher revenues in all the market sectors. As a percentage of total revenue: computing was 32%, industrial controls were 27%, telecom was 24%, medical was 10% and test and instrumentation was 7%. Fourth quarter revenue for each of our industries was strong with revenues up in each industry sector on a quarter-over-quarter basis, specifically computing revenues, which experiences the highest level of seasonality, increased 35%. Although we anticipated some strength due to seasonality in program ramps, our revenues exceeded our expectations for 8 of the top 10 computing customers. Let me note here that for the full year, we had 1 customer with revenues exceeding 10%. Revenue for the full year from our top computing customer was 17% in 2013, which is down from 21% in 2012. Industrial control revenues were up 10%, including revenue from our new customers from our recent acquisition. Test and instrumentation revenues were up 23% sequentially with program wins and increased demand levels in the semi-cap space. Medical sector revenues increased 8% sequentially, associated with the timing of new programs. And lastly, telecom revenues increased 51% sequentially related to new programs in our recent acquisition. Our fourth quarter revenues included a delayed program ramp that we discussed last quarter. Now turning to Slide 6. Our cash balance at December 31 was $346 million with $38 million of this in the U.S.. Cash used in operation was $600,000 for the fourth quarter. This included $20 million of insurance recoveries attributable to inventory and business interruption losses. Our investing activities included the acquisition of CTS for $75 million, as previously announced early in the fourth quarter. Capital expenditures were $8.6 million, and depreciation and amortization expense was $11.3 million. We anticipate CapEx in 2014 to range between $40 million to $50 million. Our accounts receivable balance was $560 million, an increase of $136 million from the last quarter. Our accounts receivable days were 67 compared to 64 for the third quarter. Inventory at December 31 was $397 million, an increase of $2 million from September 30. Inventory turns were 7x compared to 5.6x for the third quarter. The improvement in returns was due to the strong revenue demand from our customers. And finally, during the quarter, we repurchased 462,000 common shares at a cost of $10 million and have $47 million remaining in our authorized share repurchase program. Capital allocation remains important for us at Benchmark. In this regard, during 2013, we invested almost $100 million in strategic acquisitions and $41 million in share repurchases. We continue to evaluate options to optimize and increase shareholder returns based on investing organically and supporting our business, strategic M&A and share repurchases. Let's turn to guidance on Slide 7. Based on the current forecast from our customers, our Q1 guidance is as follows: We expect revenues to range between $630 million and $660 million. At the midpoint, this represents an approximate $100 million increase over the same period last year. The increase is comprised of approximately 60% acquisition-related revenue and 40% organic growth from new programs ramped in 2013. We are pleased to see the realized revenue from our bookings having more meaningful impact in our first quarter guidance. Diluted earnings per share, which excludes restructuring other special-type items, are expected to range between $0.29 and $0.34. The following items are excluded from our guidance. Estimated integration cost of approximately $2 million and any residual insurance recoveries. At the midpoint, the guidance for Q1 operating margins reflect the 3.3% margin. This margin is below our fourth quarter margin and a -- in a target of 4% margin, primarily due to deleveraging. This includes reduced revenues due to seasonality, headwinds associated with the incremental back-office costs associated with the integration of our recent acquisition and new product introduction support. Our target remains intact to return the 4% plus operating margins in the second half of 2014. Now, if you will turn to Slide 9, I will turn the call over to Gayla.

Thank you, Don, and good morning to everyone on our call today. To top off a strong quarter's performance, I'm pleased to share with you another positive for Q4, our bookings level. Specifically, during the fourth quarter, we recorded 33 new bookings, including 10 engineering projects. These have an estimated annual revenue run rate between $150 million and $180 million. In the current macroeconomic environment where GDP generally fails to provide adequate growth opportunities, our growth comes from new customers, new technologies and new platforms. With an expansion of our selling team and our strategic approach to problem solving, we are finding opportunities to fulfill unmet needs in the marketplace, especially in the nontraditional markets where outsourcing is still not as prevalent or encompassing. Our results in filling our opportunity pipeline and executing new program ramps is positioning Benchmark well for future organic growth. Please turn with me to Slide 10 where we will discuss our perspective on the market. In general, the tone from our customers is becoming slightly more optimistic as we've headed into 2014. However, our customers remain cautious, and longer term visibility remains a challenge. For Q1, the computing sector will experience difficult first quarter decline. The combined performance for the remaining sector is expected to be flat, but with some significant mix changes within the production requirements. These forecast expectations from our customers are incorporated into our guidance. We expect a return to growth in the future quarters. Now let me share a broader perspective on the markets we serve with our customers. First, let's turn to computing. In the fourth quarter, our computing customers saw strong demand. Overall, we expect computing to return to seasonal trends in the coming year. Our Q4 revenue included at least $30 million for our product line where customers selected an earlier than expected end-of-life announcement. And this product has been removed from our first quarter guidance. The next-generation product has not yet been released for ramp-to-volume production. On another customer point of clarification and one of interest, Benchmark is not a participant in the x86 supply chain. As such, we are not impacted by the transaction announced by our top customer. During 2014, we expect the percentage of business from computing sector to decline as a percentage of revenue as the growth in our other sectors outpaces the growth in computing. The outlook for our customers in telecommunication: For 2014, this sector remains positive with the combined impacts of expanding telecom infrastructure spend and our growth in new bookings in the sector. Our customers have indicated that the strong finish in 2013 was the result of increased demand level versus a year-end budget flush. Our participation in this space varies widely from cellular infrastructure and networking, monitoring to carrier switches and satellite transmission. As we support new programs and products in this sector, there is sensitivity in timing related to market qualifications for telco products. We expect demand to be stable and our growth to come primarily from a strong pipeline of new product opportunities. Next, moving to industrial control. We see significant growth in the industrial sector in 2014, even though fixed investment in infrastructure spend is only expected to growth modestly. Our strong pipeline of opportunities in this space is generated by increased outsourcing for complex engineered products and manufacturing services. Industrial products typically have longer life cycle, which provide a long runway of positive opportunities. Next, looking at the medical sector. We remain excited about new business we're winning. We expect near-term demand to remain stable. During 2014, we see a number of product transitions with maturing products offsetting revenues from new product qualifications. Medical was our highest growth sector in 2013, and we expect growth in this industry to moderate in early 2014 due to the product transitions and gain greater momentum in late 2014 and into 2015, which will be based on the timing of product qualifications and regulatory approvals. And finally, our test and instrumentation sector. In the coming year, we expect to see strong growth coming from the T&I sector. We see some improved demand from our existing customer base, but the majority of growth is coming from new customers and new products. We have worked very hard over the past year to take advantage of increased outsourcing trends for customers in this sector. For new and existing customers, we are performing well and continue to benefit from the investment we have made in engineering, precision machining and extremely complex system assembly. Let's turn to Slide 11. In summary, Q4 was an excellent finish to a good year for Benchmark. We exited 2013 stronger than we were when we entered the year. In a challenging marketplace with tough end market conditions, our revenue and profitability was strong as we advanced our strategic initiatives and invested in 2 tuck-in acquisitions. We believe our 2013 results provides further proof that we are gaining traction and driving our performance to higher levels. There are 3 key focus areas that enabled this in 2013 and will continue to provide a strong platform for expansion in 2014. The first is operational excellence. Our global standardization and operational excellence initiative allowed us to successfully manage a record number of new product introductions last year. Our acquisition integration is progressing according to plan, and we are benefiting from the talent and capabilities added. Our culture has truly become one of continuous improvement to meet the evolving needs of our customers. Overall, we saw very good execution by our teams operating our business. The second is portfolio management. Over the past few years, we have seen marketplace opportunities change significantly for computing and some subsegment at the telco market. As these industries become more mature in outsourcing, we see an increased level of opportunities and have focused on the nontraditional markets of industrial, medical and test and instrumentation. In 2009, we began investing in expanded capabilities and precision technologies and organically growing our complex assembly and micro e-capabilities to meet the growing outsourcing needs of customers in these markets. With the increasing number of opportunities we see in the nontraditional market, we anticipate the growth rate in these markets to exceed the long-term growth rate in computing and telco. Our third key focus area has been in enhancing our understanding of customer needs and identifying incremental opportunities to serve them. The results of our enhanced customer focus continues to manifest itself and result in higher bookings. For 2014, we remain focused on driving profitable growth through continued execution, controlling what we can control and managing the evolution of our portfolio with increased growth opportunities arising in the markets we serve. Our team is confident and energized as we've moved in to 2014. In closing, I want to recognize and thank the Benchmark team for their commitment and contributions to our operational excellence initiatives and focus on our customers, and thank our business partners and shareholders for their continued interest in and support of Benchmark. With that, operator, I'd like to open the floor for questions.

[Operator Instructions] Our first question will come from the line of Sherri Scribner of Deutsche Bank.

I just wanted to dig into the compute segment a little bit. I wanted to see how much of that upside came from new programs. I think you did say 8 of your 10 customers were better than expected. How much of that was new programs? How much of that was on the server versus the storage side?

We don't break down server and storage, Sherri. And as far as new programs, I don't have the numbers specifically, but we do believe that the new programs are the ones where we've seen the volumetric increases. I don't think specifically there were any programs that ramped during Q4 specifically. They had -- there were new programs added during the course of 2013, but none specifically that had the launch only in the fourth quarter.

Okay. But you can't provide any detail about whether those were server programs or storage programs?

No. We've never broken out server and storage.

Okay. And then just thinking about, you mentioned the higher cost related to the acquisition as we move into 2014 in terms of back-office costs. Is that something, do you expect to reduce over time or do you think those costs are permanently going to be at a higher level? And what type of SG&A should we think about?

Yes. I think we'll spend the first half of this year integrating those, Sherri. I would expect that we finish just over $29 million in SG&A. I would expect those to certainly moderate over time. But clearly, we'll have the integration activities for the first half of the year. And we should see -- we'll get some leverage on SG&A in terms of percentage of sales as we move forward.

Our next question will come from the line of Mr. Jim Suva of Citi.

It sounds like, Gayla and Don, from your outlook, that really every sector is basically looking quite optimistic, flat to up, but most of them actually being up. So would you characterize kind of 2014 as a year more similar to, say, kind of 2012 of strong growth, in fact, maybe even approaching mid to high-single digits growth. Would you care to comment on how that's kind of shaping up or a little bit too early? It just seems like it's going to be a much stronger year than even what we posted in 2012, which my expectations were better than expected year in 2013?

Thank you, Jim. We do believe that the things that are within our control and the bookings we've had and the ability to ramp those bookings into the revenue stream has been very strong. The lack of visibility that we spoke to really has to do with trying to translate that into what the outlook would be for the full year, which is again why we gave guidance for 1 quarter. We know first quarter is down significantly, driven primarily by compute sector, and we see the strength there. But I don't believe that the confidence we feel and the things we can control has necessarily extended to confidence in the overall marketplace. We hear comments from customers that are feeling a bit more optimistic. I think in one of our conferences, I indicated that cautiously optimistic had a lower case C now instead of a capital C in front of it. But that hasn't necessarily translated into the level of increase you might expect it to overall. So a lot of mixed signals out there. Better tone overall, but not quite ready to say that things are markedly improved. So all in, again, not giving guidance for 2014, but I don't think we're ready to call it an exuberant movement.

Okay. And then when we think about SG&A with your recent acquisition integrating -- integration, can you help us understand kind of Q1? And that rate, should it be stable at that going forward? Is it kind of integration cost that hit Q1, and then we look kind of a step down in Q2? Or is it the opposite of Q1, you'll have a level that then kind of goes up in Q2? How's the SG&A progresses, especially with the complexity of the acquisition?

Well, I think in real dollars, we'll see a decline, Jim. I think, as a percentage of revenue because of the deleveraging, it'll be higher as a percentage of revenue than it was in Q4. But as I just mentioned to Sherri, I think we would expect those to decline in real dollars, as well as getting obviously, leverage as we move through the year.

Okay. So as the year progresses, even some more leverage.

Our next question will be from the line of Brian Alexander of Raymond James. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: Just a question on the computing upside in the quarter, I know you talked about an end of life that got pulled forward of about $30 million. Was all of that $30 million above your expectations? I'm just trying to get a sense for how much of the upside came from that versus the actual business?

Brian, thank you for asking. We try to make it clear, but none of that was upside. It was all within our expectation. The only thing that was not an expectation is the impact in Q1 that, that product was determined to go end of life after the build for Q4. So no impact to expectation. In fact, it was right on with our forecast amount for Q4. But the end-of-life announcement was what impacts Q1 more significantly than we would have anticipated otherwise. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: Okay, that makes sense. And then on the revenue outlook for Q1, if we look at the midpoint down 15% sequentially, is all of that coming from the computing segment being down, or will there be other segments to decline as well? I think you said that there's basically, the rest of the business is effectively flat, but some are up, some are down. I was wondering if you could give us more color on that.

Substantially, all of it is computing... Brian G. Alexander - Raymond James & Associates, Inc., Research Division: And then just final one, just CTS impact in the fourth quarter. Could you give us a sense for what the revenue and profitability impact was versus your expectations and any color by end market would be helpful?

As Don indicated in his transcript of the call notes, it was about $50 million in acquisition revenues included in the fourth quarter. And they are below our target operating margin, our overall operating margin. And that's where we still have expectations to harmonize and get our systems and processes in place over the next 3 to 4 months. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: Are we talking a couple of hundred basis points below or not quite that dramatic?

Not that dramatic. We've again seen improvements and driving improvements from day 1. So we are seeing somewhat below ours, but not that big.

Our next question will come from the line of Sean Hannan of Needham & Company. Sean K.F. Hannan - Needham & Company, LLC, Research Division: I just wanted to see if there is a way to get a little bit more detail in terms of the bookings that you had in the quarter. Were there any particularly large bookings in there? And I may have missed if there was a breakdown in terms of your different segments.

I believe we had wins in each of our segments. I would say there are -- were no large individual programs. There were a couple that were larger than maybe the average. But none were individually significant as you can kind of see from the way the percentages broke down by the number of wins on our presentation. I think what's very interesting and we're seeing more and more is the increase in wins in the nontraditional markets. And because a lot of those are going from in-sourcing to outsourcing, the sell cycle is taking a good bit longer. So I know -- and even on some of the ones that are looking at expanding the way in which they engage in outsourcing, some of the cycles are pretty long. There's, at least, 1 case that I can point to off the top of my head where it took an excess of 2 years that we were engaged before we actually landed the booking. Sean K.F. Hannan - Needham & Company, LLC, Research Division: That's helpful, Gayla. And really, just as a follow-up to that as you consider the bookings there and as that outsourcing trends kind of continues within those nontraditional markets, is there any sign or indication that the arena is getting more competitive, perhaps from a pricing standpoint, or as an impact to margins for participating in some of those segments, or what color can you perhaps provide around that?

I think the interesting thing in our industry and it probably applies to all industries is it is primarily dictated by the value-add services that we are providing to the customers versus specifically even what industry they're in or the product -- it's the level and type of services that we are providing customers. So what we are seeing is -- and as you've seen, no doubt, many industry players are talking about trying to compete in this marketplace. Several of them may be converting their focus from consumer markets to this marketplace. This is our playing field. It has been for a long period of time, managing and understanding the high mix, low-volume dynamics, the end-of-life cycle for products, managing the component issues that arise and as well as the complex support for the products, whether it be on the early stage of design engineering or on the build of the product itself. So we see, yes, there's more people wanting to participate. Not all of those who are wishing to participate have the skills and expertise that we have and are noted for the capabilities in the industry. But there are more people entering the soccer field. Sean K.F. Hannan - Needham & Company, LLC, Research Division: Okay, that's helpful. So basically, our wins are diversified in today and as we kind of canvas the wins. We're not seeing based on increased interest in these segments, any impacts around pricing or margins. Is that accurate?

Yes. I have not seen basically people trying to be overly aggressive in the way they price this business. I think it is very -- it's a very competitive marketplace. It remains that way that I believe that there is a level of support required for these products that is recognized and understood and being priced appropriately. It is a different model, clearly, than the consumer production. And I think that, that's recognized by everyone in the industry.

[Operator Instructions] And we have a question from the line of Mitch Steves of RBC Capital Markets.

So I just had a quick question on the operating margin front that you guided at 3.3%. I understand there's going to be some revenue deleveraging, but if you could help us walk through the 80 basis points decline, how much of that is the revenue and maybe so, maybe mix oriented?

As we've indicated in the call notes, it really is deleveraging, mix, as well as the integration of our new sites and the activities associated with those. And also associated with new program ramps that we continue to bring into the market. So what you really will see is with the lower revenue level, the impact from the significance of the new programs is more pronounced. And so without having a real accurate method of being able to estimate the impact of it, with and without the new programs, we do see that, that takes on a more meaningful cost structure impact, if you will, when the revenue level is decreased. So I would say that's probably the one, first impact would be decreased revenue levels; the second impact will be the new program impacts.

And we have a follow-up question from the line of Mr. Sean Hannan. Sean K.F. Hannan - Needham & Company, LLC, Research Division: I just want to follow-up in terms of -- it's really kind of the wins that you've garnered. The segments or areas, is there a way that you can maybe call out where you feel that you're really kind of outperforming in terms of gaining share? If you have any thoughts around that, thanks.

I think we see in industrial, we're -- had very good win level, and we're beginning to see some good increases in the wins in medical, so in both of those areas. The medical is the one that, as we identified in the call notes, that we won't see the full impact or even the expected impact to the revenue stream really fully coming through till probably 2015. So that's one that we're excited about because we know the bookings are there. We know that we are going through the qual. But it won't come into the revenue stream until 2015. So in both of those areas, we believe, we're performing very well.

Our next question is also a follow-up from the line of Brian Alexander. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: Maybe just a couple of quick ones. What did your largest customer contribute to the fourth quarter revenue? I think you said it was 17% of the year. If I think back into what that implies for the quarter, it's about 20%. I just wanted to confirm...

Yes, just south of 20%, I believe. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: So was that 1 of the 8 customers in the computing segment that was above your expectations?

Yes. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: And just -- I don't know, I know you can't go into a lot of detail. But your largest customers, hardware business doesn't seem to be performing well. How do we reconcile their performance with your performance? Is it mostly in share gain, or do you happen to just be positioned in the product areas that are doing well?

I kind of feel like back to the future, Brian, because that's one that we often got asked many, many, many years ago with Lucent. And I never could reconcile it and still can't. And so as you said, I really can't speak to the customer, but not only would it not be appropriate for me to do so, I simply don't know. So again, we're very pleased with seeing 8 of the top 10 customers up. I think the marketplace was strong in the segments we serve. We don't serve some of the higher volume ends of computing. And those seem to be very, very challenged right now for all of the compute players. So understand the concern but we have to ask you to look directly out the compute customers to understand better how that mix is playing out for them. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: And is your product positioning with them pretty concentrated in a couple of products, or is it more broad based than that? I realized you don't do x86.

So Brian, as I've said, we're not going into details for that or any of our other customers. And as you know from our industry, we really have to respect the confidentiality of our relationship. So I think we've shared what we can there. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: Okay, last one just on the operating margin of 4% plus in the second half, Don. Is that something that you would expect to achieve in each of the quarter for the second half of Q3 and Q4, or is that something that you would hope to achieve maybe exiting the year in Q4 alone?

Our expectations that we would start in Q3, Brian, each of the quarters in the second half.

And again, we want to be careful. We're not providing guidance. What we are providing though is the fact that we expect to have the integration efforts complete. And with the integration efforts complete, we would expect to see the revenue growth and the integration efforts to result in improved margins. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: And the final one, on Slide 10 where you talked about the outlook by segment. Is that for the industry, is that for Benchmark? How are we supposed to interpret what that means for your results in 2014?

That would -- on that slide, that would be our -- that would be Benchmark's view for us. The impact on us, Brian. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: When you say computing is mixed, does that imply that you think your computing business will be flat, up or down? I'm not sure what you mean by mixed.

As we indicated in my portion of the call notes, we would expect that as a percentage of revenue that computing growth will pale in comparison. So the computing, as a percentage of revenue, will go down. And the others will grow more rapidly than computing will. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: But to be clear, you expect all of your end markets to actually grow in 2014, some may just grow faster than others?

No. We would expect computing to not grow and with the other industries -- the other industries to grow. And again, without providing full year guidance, I want to make sure that we're clear on that. We would expect that the dynamics that we're seeing today in our outlook and that you're seeing in the industries would true up. So if there is strength overall in industrial, then we would expect the -- and know the benefits of that. If there's weakness in computing, we would not expect that we would be unfettered by the impact to computing. So whatever the broader markets do within those markets, we participate in. This is our outlook based on our portfolio of business. But the underlying business and the overall marketplace will truly dictate the rise and fall of the level of business. Thank you. I think, operator, we're coming to the end of our time. And we want to thank everyone for joining us today. And I look forward to following up with you. We will be at the Stifel Conference coming up next week and look forward to seeing some of you there.

Ladies and gentlemen, that does conclude our conference call for today. On behalf of today's panel, I'd like to thank you for your participation in today's call. And thank you for using AT&T. Have a wonderful day. You may now disconnect.