Benchmark Electronics, Inc. (NYSE:BHE) Q2 2023 Earnings Call Transcript

Benchmark Electronics, Inc. (NYSE:BHE) Q2 2023 Earnings Call Transcript July 31, 2023

Benchmark Electronics, Inc. beats earnings expectations. Reported EPS is $0.48, expectations were $0.47.

Operator: Good day, and welcome to Benchmark Electronics Inc. Second Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. Please, note this event is being recorded. I would now like to turn the conference over to Paul Mansky with Benchmark Electronics. Please go ahead.

Paul Mansky: Thank you, Betsy, and thanks, everyone, for joining us today for Benchmark’s second quarter fiscal year 2023 earnings call. Joining me this afternoon are Jeff Benck, CEO and President; and Roop Lakkaraju, CFO. After the market closed today, we issued an earnings release pertaining to our financial performance for the second quarter of 2023, and we have prepared a presentation that we will reference on this call. Both are available on the Investor Relations section on our website at bench.com. This call is being webcast live, and a replay will be available following the call. The company has provided a reconciliation of our GAAP to non-GAAP measures in the earnings release as well as in the appendix to the presentation Please take a moment to review the forward-looking statements advice on Slide two in the presentation.

During our call, we will discuss forward-looking information. As a reminder, any of today’s remarks, which are not statements of historical fact are forward-looking statements which involve risks and uncertainties as described in our press releases and SEC filings. Actual results may differ materially from these statements most notably due to ongoing supply chain constraints, macroeconomic conditions and semi-cap equipment spending. Benchmark undertakes no obligation to update any forward-looking statements. For today’s call, Jeff will begin by providing a summary of our first quarter results. Roop will then discuss our detailed financial results and our third quarter guidance. Jeff will then return to provide more insight on demand trends by sector, business wins and then closing remarks.

If you’ll please turn to Slide three, I will turn the call over to our CEO, Jeff Benck.

Jeff Benck: Thank you, Paul. Good afternoon, and thanks to everyone for joining our call today. The company executed well in the second quarter as we delivered revenue and operating income above the high end of guidance despite continued weakness in the semi-cap market and lingering component availability issues that impacted some output in the quarter. Specifically, we grew revenue 12% year-over-year in the quarter when excluding supply chain premiums or SCP. We believe assessing our revenue growth, excluding the 0 margin pass-through revenue more accurately reflects company performance. As an example, SCP was $17 million in Q2 2023, and $91 million in Q2 2022. This represents a $74 million year-over-year reduction. Excluding SCP, non-GAAP gross margins were 9.4%, up 1.5 points from the prior year, while non-GAAP operating margins were 4.1%, up from 3.6% last year.

This enabled us to deliver non-GAAP EPS at the higher end of our guidance range. Inventory came down modestly in the quarter, but we still have more to do to achieve our days of inventory goals. Lastly, we generated positive operating and free cash flow in the quarter. Looking at the drivers of our 12% growth, we saw double-digit year-over-year performance from four of our six sectors, including advanced computing, industrials, medical and next-generation communications. Although our sequential performance in semi cap was encouraging, industry commentary around potential timing of the broader market recovery appears to be shifting deeper into 2024. Nonetheless, we firmly believe in the constructive long-term secular trends underpinning our anticipated future growth in this sector and are investing accordingly.

We remain cautiously optimistic on the demand profile across our diversified sectors, which we believe will allow us to weather the current market uncertainty while continuing to deliver to our profitability targets. Before turning it over to Roop, I’d like to highlight a couple of key announcements we’ve recently made, reinforcing our ability to attract world-class talent to Benchmark. David Moezidis has joined us as Chief Commercial Officer, which is a new role at Benchmark. David’s 30-plus years of industry experience in operations, engineering, sales and marketing, across tech and specifically within EMS, making an incredibly valuable strategic addition to the team. David will direct Benchmarks’ commercial strategy, including vertical market sector plans and our global go-to-market approach, leveraging his deep expertise to drive continued business growth.

At the same time, we also announced Dave Valkanoff has joined as our new Chief Operating Officer. Dave is a global manufacturing executive known for a successful track record in driving lean principles and operational excellence. With over 30 years of experience in sectors such as aerospace and defense, industrial, automotive and semi cap, he brings extensive global operations knowledge to our team. We are very pleased to have both executives on board, and I’m confident they will make a significant impact. I also want to thank our current Chief Revenue Officer, Rob Crawford for his contributions over the past four years and wish him well in his retirement set to begin in August. Now let me pass it over to Roop to share more detail on the June quarter and our guidance for Q3.

Roop Lakkaraju: Thank you, Jeff, and good afternoon. Please turn to Slide five for our revenue by market sector. Total Benchmark revenue was $733 million in Q2, which is 6% higher sequentially and 1% higher year-over-year. As Jeff mentioned, excluding the effect of SCP, revenue was up 12% year-over-year in the period. A reconciliation of this and our sector level performance can be found in the Appendix section of the presentation materials. Turning to Slide six. Medical revenue for the second quarter was up 14% versus the prior year. Our growth was fueled by strength in existing programs and new programs ramping. Semi cap revenue decreased 4% year-over-year, in line with our expectations. A&D revenue was down 10% year-over-year.

Defense continues to be challenged by supply availability, coupled with the timing of program ramps. This was partially offset by growth in commercial aerospace. Industrial’s revenue for the second quarter increased 28% year-over-year as new customer programs are ramping in areas, including test and measurement and energy efficiency. Advanced computing increased 19% year-over-year as we benefited from the continued execution of mobile high-performance computing programs. In the next-generation communications sector, Revenue was up 53% year-over-year. Our year-over-year performance was driven by continued secular strength in 5G infrastructure and satellite communications. In the second quarter, our top 10 customers represented 52% of total revenue.

Please turn to Slide seven. Our GAAP earnings per share for the quarter was $0.39, our GAAP results included restructuring and other onetime costs totaling $3.3 million. For Q2, our non-GAAP gross margin of 9.1%, decreased 10 basis points sequentially and primarily due to lower revenue within our semi-cap sector. Excluding SCP, our gross margin was 9.4%, which was in line with guidance. Our SG&A was $37.7 million, down sequentially because of cost actions taken in the first half, coupled with lower variable compensation. Non-GAAP operating margin was 4%, excluding SCP, operating margin was 4.1%, representing the high end of our guidance range. In Q2 2023, a non-GAAP effective tax rate was 21.2%. For the quarter, non-GAAP EPS of $0.48 was $0.02 higher than the midpoint of our guidance.

Non-GAAP ROIC in the second quarter was 9.5%. Please turn to Slide eight to discuss the effects of SCP on a trended basis. In Q2, SCP declined to $17 million versus $18 million in Q1 and $91 million in Q2 2022. Excluding SCP, our revenue in the second quarter was $716 million, a sequential increase of $39 million or 6% and a year-over-year increase of $79 million or 12%. Please turn to Slide nine to review our cash conversion cycle performance. Our cash conversion cycle days were 103 in the second quarter compared to 109 days in Q1. The largest contributor to the decrease was a reduction in inventory. Total inventory decreased sequentially in Q2 by $22 million. Turning to Slide 10 for an update on liquidity and capital allocation. In Q2, we generated $25 million of cash from operations and invested $8 million in CapEx to support continued growth at our Mexico facilities and enhanced capabilities in our Precision Technologies business unit.

We expect our CapEx spending in Q3 2023 to be between $10 million and $15 million. For the full year 2023, we expect CapEx to range between $65 million to $75 million. Our cash balance on June 30 was $245 million. As of June 30, we had $129 million outstanding on our term loan, $300 million outstanding borrowings against our revolver and $246 million available to borrow under our revolver. In Q2, we paid our regular quarterly cash dividend of $5.9 million. Please turn to Slide 11 for a review of our third quarter 2023 guidance. We expect revenue, excluding SCP to range from $680 million to $720 million. SG&A expense will range between $36 million and $38 million. Excluding SCP, our non-GAAP operating margin range is forecasted to be 4.7% to 4.9%.

As a reminder, this includes approximately 50 basis points of stock-based compensation. Our non-GAAP guidance excludes the impact of $1.6 million in monetization of intangible assets and $1.1 million to $1.5 million of estimated restructuring and other costs. Our non-GAAP diluted earnings per share is expected to be in the range of $0.51 to $0.59 or a midpoint of $0.55. Other expenses net are expected to be approximately $9 million due primarily to interest expense, which has grown due to the higher rate environment. We expect that for Q3, our non-GAAP effective tax rate will be between 19% and 21% and the weighted average share count of 35.7 million. And with that, I’ll turn the call back over to you, Jeff.

Jeff Benck: Thanks, Roop. Please turn to Slide 13. All metrics I referenced here are related to demand trends we are seeing by sector are excluding the effect of SCP. In medical, we continue to see strong demand from our existing products while also ramping new programs I’m particularly encouraged by the strong demand we are seeing in the defibrillator subsector as the benefits of having these life-saving devices readily accessible are becoming increasingly well understood. We continue to build on our future success during this past quarter, securing new wins across our offerings. For example, in manufacturing, we won a program to deliver subassembly views in medical sterilization equipment. Within engineering, we won an engagement to design fluid pumps used in field applications by the DOD.

Lastly, we were pleased to be awarded a collaborative design engagement with the company to develop cardiovascular treatment devices. With the continued underlying medical product demand strength and a steadily improving supply chain, we expect solid year-over-year growth in the period and on a full year basis. Within semi cap, we’re encouraged by the better performance in the quarter and believe the March quarter may have been our low point for semi cap revenue in the year. However, as I mentioned earlier, we have heard from several OEMs that the timing of the broader market recovery may be pushed out a bit further than initially anticipated. For Q3, we expect revenue to be relatively flat sequentially. However, the long-term secular growth drivers are still very much intact, including silicon penetration, the quest for ever decreasing node sizes and the global efforts to build a broader foundry ecosystem.

We continue to invest in this space to capture disproportionate share as the next upswing commences. Moving to A&D sector. We continue to score new wins in defense. Just this quarter, we secured a manufacturing win to provide actuation control modules for an extension extended range guided multiple rocket system. Additionally, we expanded an existing engagement with the U.S. Army to manufacture camera systems used in live round tank gunnery training ranges. Within commercial aero, both demand and our ability to meet it continues to improve for us. Combined, we expect Q3 A&D revenues to be up double digits sequentially and year-over-year. Turning to Industrials, we position ourselves well to participate in megatrends, specifically automation, test and measurement and energy efficiency solutions.

Examples of this in Q2 include a manufacturing win for geospatial devices, which enable efficiency and productivity in the agriculture and construction industries. At the same time, our design engineering teams have secured new business collaborating with customers in areas such as additive manufacturing, environmental controls and security detection platforms. Looking forward, supply conditions in industrials are showing improvement, which we anticipate will continue. We expect sector revenue to grow year-over-year in the quarter and for the full year. In advanced computing, revenues were largely consistent with our guidance provided last quarter. As a reminder, our advanced computing efforts are not in support of cloud or data center infrastructure.

Rather, we helped build some of the largest and most sophisticated high-performance computing machines in the world. These are often government agency sponsored and by definition, relatively macro resilience. We highlighted last quarter that we expected to complete a significant project during the second quarter. This happened translating to a sequential decline in revenue, albeit still up nearly 20% year-over-year. Our third quarter will be the first full quarter without revenue from that completed project, translating to expectations of sequential and year-over-year declines. With the strong first half performance, coupled with a new win expected to ramp in Q4, we continue to anticipate growth in this sector on a full year basis. Lastly, and next-generation communications, we remain cautious on this sector given the carrier and operator CapEx spending rationalization that is going on in the near term.

We remain well positioned to capture investment in broadband infrastructure, demand for satellite communications and new broadband connectivity programs focused on rural areas. However, some of these initiatives are exposed to infrastructure deployment delays and macro sensitivity. As such, we expect second half revenue performance to be challenged with sequential declines in each of the next two quarters. Although on a full year basis, we continue to expect growth. In summary, please turn to Slide 14. While there is always room for improvement, I’m pleased with the team’s execution in the quarter. Despite the macro challenges and semi-cap cyclicality. Excluding SCP, benchmark delivered 12% annual revenue growth in the quarter. At the same time, non-GAAP operating income grew 28% or more than twice the rate of revenue growth.

The working capital initiatives we discussed on last quarter’s call are beginning to bear fruit with positive operating and free cash flow generated in the quarter. Looking to the second half, we expect to continue to reduce inventory and maintain our focus on operational execution, particularly as supply chains are expected to continue to improve, enabling us to fulfill more of our customer demand. We will protect investment from future growth sectors, particularly semi cap, given our conviction in the long-term secular drivers. Although as uncertain as to the shape of the recovery, we know it will come, and we will be ready for it. These collective efforts give us continued confidence we can grow revenue in the high single digits in 2023 when excluding the effects of SCP.

With that, I’ll now turn the call over to the operator to conduct our Q&A session.

Q&A Session

Operator: [Operator Instructions] The first question today comes from Jim Ricchiuti with Needham & Company. Please go ahead.

Jim Ricchiuti: Hi, good afternoon. I just had a question on the supply chain premium revenue that you’re talking about. You may have given it, but what are you anticipating for Q3? I believe you said $17 million is what it was in Q2?

Roop Lakkaraju: That’s right, Jim. This is Roop, good to have you. So Q2 was $17 million. We actually didn’t guide SCP for Q3 or Q4. So the guide we gave is exclusive of any SCP as we’ve done throughout the year. As we’ve seen, though, the one thing I guess, I’ll comment incrementally is just if you think about going back to Q2 of ’22, we were at a high point of $91 million. We’ve seen it sequentially decline. We do think — we anticipate that, that should continue to do so in the second part of this year, but we haven’t specifically guided to that.

Jim Ricchiuti: Got it. And any color you can give us on how we should be thinking about gross margins just given some of the mix you’re anticipating for the current quarter?

Roop Lakkaraju: Yes. Actually, gross margins should continue to strengthen as we think about ramp coming through, getting up to more volume level, more distributed revenue throughout our network. We anticipate growing that gross margin towards the high 9s, potentially down at 10% or so. So we feel pretty good about that distribution.

Jim Ricchiuti: Got it. And Jeff, with respect to some of the market verticals, where do you have the most confidence. I mean you can anticipate — I think we’ve all been anticipating a pickup in A&D, but it seems like supply chain has been weighing on that, and maybe it’s also your customers just dealing with their own issues. But apart from commercial…

Jeff Benck: Yes, happy to provide some color a little bit across the verticals. As we talked about semi-cap, maybe initially, we saw a bigger recovery in the second half of ’23. And we were talking to our OEMs, we see that pushing into 2024. So we’re not expecting a significant step-up in semi. But A&D is improving. Certainly, supply chain is freeing up there, and we’re continuing to ramp up there with a number of customers on the commercial side. Seeing particular strength, but even some new defense stuff happening for us. So look for that to be a bit better in the second half. And then medical and industrial are both still good growth sectors for us, held up well in the current environment. We see pockets of depending on the segment the customer is in, where there might be softness, but we also see strength in other areas.

We talked a little bit about that with medical around like the defibrillator space, which seems like everybody wants a defibrillator at anywhere you can put it, right, because they’re really great life-saving devices. And so see strength there as well. With — just turning to comms, we’ve seen some push out of some larger infrastructure deployment that is probably weighing a little bit on that, but we think we’re well positioned, and we’ve had a strong first half. So that’s actually going to serve us well, but not — maybe not as strong in the second half of ’23. But hopefully, that color helps.

Jim Ricchiuti: It does. Thanks. I’ll jump back in the queue.

Operator: Next question comes from Jaeson Schmidt with Lake Street. Please go ahead.

Jaeson Schmidt: Hey guys, thanks for taking my questions. I just want to follow up on the supply chain. I know it was down $1 million sequentially in Q2. And it sounds like you expect further declines from a supply chain premium standpoint in the second half. But just at a high level, has the supply chain environment continued to be a little weaker than you guys originally expected? Or kind of how should we think about the improvement here in the second half in that supply chain premiums?

Jeff Benck: I would say, broadly, it’s continued to improve. Instead of what used to be a year ago with thousands of parts, earlier this year might have been hundreds and now we’re — maybe it’s a handful of things that are gating us. We still — there’s still some long lead times there, and there are still pockets where custom ASICs or some, even some of the legacy technology, where all the supply went to some of the newer nodes has been a challenge and continues to be challenging. So it’s hard to communicate to customers, Hey, everything is great because there are still areas where we’ve seen it. What we have seen a significant drop in supply chain premiums, as Roop has talked about it. We kind of see that being sequentially down quarter-to-quarter in Q3.

It’s getting to the point where it’s getting smaller as we go. And so that ability to forecast it perfectly is part of the reason that we’re saying, look, let’s just guide without it, recognizing that it’s a downward trend. It was down over $74 million in Q2. So we’re kind of wrapping around where there’s not as much need to be leveraging these brokers and going there because the broad-based supply chain has improved.

Jaeson Schmidt: Okay. That’s helpful. And when you look at your backlog or business pipeline, have you seen any significant changes when it comes to kind of decommit or cancellation standpoint?

Jeff Benck: I mean it’s — broadly, I’d say it’s holding very consistent. I mean we talked about a high single-digit growth in the year, which is kind of in line with where our thoughts have been. There are pockets where a customer, depending on what they’re participating in or what’s going on with them may see some softness. So that’s certainly weighing on certain areas. We kind of touched on it a little bit in, for example, in communication, next-gen comps that we’ve seen, some there. But overall, I would say our diversified portfolio is serving us well. We’re seeing that — we believe when you exclude supply chain premiums from a product shipment, we expect 4 of 6 sectors to grow for the full year. And from that standpoint, we’re seeing things hold up pretty well.

Jaeson Schmidt: Okay. And then just the last 1 for me, and I’ll jump back in the queue. Just following up on sort of those comments on your communications segment. I’m correct, I thought you guys originally expected that to be down sequentially in Q2. It obviously was up. What was sort of the primary driver there? Was it just sort of deployment scheduling or shipment timing?

Roop Lakkaraju: Yes, that’s fair to say, Jaeson, it’s kind of some one-off. We got some parts that helped us produce a little more in the quarter and got it out the door. So that was helpful for us on that comps. As we indicated in the latest kind of sequential view based on our sector outlook, we are expecting comps to come down from a sequential standpoint. So a little bit of just that timing and seeing how customer demand is profiling through the year.

Jaeson Schmidt: Got it. Thanks a lot guys.

Operator: The next question comes from Steven Fox with Fox Advisors. Please go ahead.

Steven Fox: Hi, good afternoon. A couple of questions from me. First off, on the semi-cap comments. Can you just sort of maybe dice it a little bit closer in terms of new programs versus existing programs for the second half of the year? Are you seeing new programs get pushed out or just certain types of new programs get pushed out? Or is it all related to just sort of end markets of existing programs? How would you sort of describe the mix of what you’re seeing if things are going to stay flattish?

Jeff Benck: Yes. I would say it’s a little bit of both. And it’s good that you kind of — that you dug into that, a little color, a little bit because we just had a super strong year of bookings last year. And a number of those programs certainly expected a lot of activity in ’23 and some of those have pushed out. I will say they’re still active in the sense that they are next-generation tools. So there’s no fear about losing a win or whatever, but it’s like where an OEM might have said, “Hey, let’s build six tools this year.” Maybe now we’re building on, right? So that’s weighed a little bit. And we sort of anticipated going when I — when we kind of recasted in February, we probably anticipated that we would see more activity on the new wind front, building in ’23.

And I would say, while there’s certainly a lot of programs going on, it has moved a bit to the right. And then just — we have a broader footprint of wins across tool sets, whether it’s lithography or deposition or a lot of the front-end processes. And so we have certainly seen from a broad based, right, that, that business came down. And it stabilized and certainly, in Q3, we’re guiding kind of sequentially flattish in the third quarter. It’s just — we sort of anticipate initially that fourth quarter, we’d be preparing for a huge ramp up in Q4. And now we’re just here and signals that, Hey, it may be a little longer. While there’s certainly demand, and we’re seeing some strength in some of the areas that are under restriction on some of the legacy nodes.

We’re seeing people purchase those tools, and there’s OEMs who are looking to fulfill that. But I also would say some of the benefits like of the CHIPS Act, I’m not — I don’t see that at the beginning of ’24. It just recently was published that some of the builds here in Phoenix Valley are taking longer just because of labor force and such to build those new fabs here in the Valley as an example. So still long in the space and believe that it’s — that the upswing when it happens will be significant. But right now, we’re just not calling it in ’23.

Steven Fox: Understood. And then on the aerospace and defense, if I have this right — I’m sorry, I don’t have the slides in front of me, but it sounded like aerospace and the defense piece was down quarter-over-quarter and commercial aero was better. Do I have that fact right, first of all?

Roop Lakkaraju: Yes, that’s a fair way to characterize it, Steve.

Jeff Benck: We did have one defense program that we thought would start in 2Q that’s push into 3Q. So that was certainly a factor in that weakness in defense.

Steven Fox: Okay. And then my other part of that question on that number is just I know that there’s very specific part shortages that are especially challenging to get. Do you guys feel like you are performing in line with the market there? The only reason I ask is because it sounds like one of your peers was able to grow in aerospace defense, and you guys seem to have a problem in the defense piece quarter-over-quarter?

Roop Lakkaraju: Yes. I think it really comes down to program-specific kind of considerations there. And some of our programs, and we’ve commented in our sector outlook, we got some program ramps that are expected to come later in the year, these sort of things. So part of it is what programs are on specifically, whether it could be growth. The other piece is we’ve got some new programs, new wins that came in, in previous quarters that are ramping that we expect to see throughout ’23. What we can say is commercial aero has performed more consistently through the year so far and has been in an upward trend cycle.

Steven Fox: Got it. Thanks all for that. Appreciated.

Operator: [Operator Instructions] The next question comes from Anja Soderstrom with Sidoti. Please go ahead.

Anja Soderstrom: Thank you for taking my questions. I’m just curious, could you quantify how much revenue do you left behind your — the supply chain challenges?

Jeff Benck: I don’t know that we specifically called it out, but it was north of $100 million that we’ve kind of carried over. It’s come down some over the last six months. I don’t know if we addressed it on last quarter’s call. Obviously, as supply chain frees up, we will fulfill more than that, but we still have a fair amount that is unfulfilled rolling into the second half of this year.

Anja Soderstrom: Okay. Thank you. And what other opportunities do you have to improve the cash flow other than bringing down inventory?

Roop Lakkaraju: Well, Anja, I mean, I think we’ve got a number of items. Part of it is inventory. We have to work with the inventory we have. And so we’re actively working with our customers on aligning the inventory levels and the demand schedule to be clear to build these things. And I think those are really the primary. With that said, we obviously make sure that aero collections were on top of these sort of things. The other things we’re doing more strategically in terms of strategic suppliers and terms, aligning those terms more effectively as well as finding greater flexibility from that standpoint within those terms. So it’s multifaceted kind of a set of challenges to drive that cash flow. But the biggest priority is inventory alignment to clear to build and then just bleeding down that inventory as we continue to grow.

Anja Soderstrom: Okay. Thank you. And then just lastly, in terms of the semi-cap and that being pushed out a bit, how do you think that’s going to affect your margins in terms of capacity utilization?

Roop Lakkaraju: Yes. Maybe I’ll start in terms of — from a margin standpoint, maybe Jeff can add incremental color. I think as we’ve talked about semi-cap, especially the precision and the screening side and semi cap overall for us is a very strong market sector from a gross margin standpoint. We are liking investments on a concurrent basis. That’s why CapEx as we’ve provided the range that we have. And we’re going to continue to invest in semi-cap because it is cyclical, and that market upturn is coming. What we have done is paced out those investments effectively such that when they come online, how they might be a drag on margins is reduced or limited. And then, of course, as Jeff said, we’ve got some new programs that are starting to ramp there.

And so all of this, combined with the expectation that it will recover is going to bode well from an overall enterprise margin standpoint. In the interim, we’re very cognizant of managing the margin profile as we work through this softness.

Jeff Benck: Yes. Maybe I would just add, on the EMS side of the business, operational efficiency is improving, which is great. I think the incremental revenue that we’ve seen in product shipments has given — helps in areas of absorption. So our margins are performing quite well. You saw that in 2Q, and you’ll see that in the guide without the recovery of semi-cap. So we kind of look forward to — semi-cap is on the higher end of our corporate gross margin. So when we’re dealing with the downturn now, that’s putting some pressure there that we’ve been able to successfully kind of overcome. So we’re really looking forward to the opportunity to continue to drive that further towards our strategic goal as semi-cap comes back with significant growth. So maybe that’s how we think about it.

Anja Soderstrom: Okay, thank you. That was all for me.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Paul Mansky, for any closing remarks.

Paul Mansky: Thank you, Betsy, and thank you, everyone, for participating at Benchmark’s second quarter 2023 earnings call. Before we go, I’d like to remind listeners that we’ll be attending the 12th Annual Needham Virtual Industrial Tech, Robotics & Clean Tech one-on-one conference on August 7. With that, thank you again for your support, and we look forward to speaking with you soon.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.