Cohu (NASDAQ:COHU) Q2 2019 Earnings Call

0:00 Good afternoon, ladies and gentlemen, and welcome to the Kohu, Inc. Second Quarter 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star, then zero on your touch-tone telephone. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Jeff Jones, Chief of Financial Officer. You may begin. Thank you, and good afternoon, and welcome to our conference call to discuss Cohue's second quarter results and third quarter outlook.

0:47 I'm joined today by our President and CEO, Luis Muller. If you need a copy of our earnings release, you may access it from our website, cohue.com, or by contacting CoHUE Investor Relations. There's also a slide presentation in conjunction with today's call that may be accessed through the webcast link on CoHUE's website and is also posted as a PDF in the Investor Relations section. Replays of this call will be available via the same page after the call concludes. Between now and our next earnings call, we'll be participating in the Jefferies Semiconductor Hardware Summit in Chicago on Tuesday, August 27th. Please contact us if you would like to request a meeting with the company at this event.

1:37 Now to the safe harbor. During today's call, we will make forward-looking statements reflecting management's current expectations concerning Cohue's future business. These statements are based on current information that we have assessed, but which by its nature is subject to rapid and even abrupt changes. We encourage you to review the forward-looking statement section of the slide presentation and the earnings release, as well as CoHUE's filings with the Securities and Exchange Commission, including the most recently filed Form 10-K and Form 10-Q. Our comments speak only as of today, August 5th, 2019, and CoHUE assumes no obligation to update these statements for developments occurring after this call.

2:25 Finally, during this call, we will discuss certain non-GAAP financial measures. Please refer to our earnings release and slide presentation for reconciliations to the most comparable GAAP measures. Now I'd like to turn the call over to Luis Muller, CoHUE's president and CEO. Luis Muller Good afternoon. Today I plan on discussing second quarter dynamics at CoHUE and sharing our perspective on the current business environment. Jeff will then cover detailed financial results and Q3 guidance. Our internal measure of test cell utilization, which started improving in late first quarter, supporting an initial recovery in the mobility market, dropped three points in May and June to 77% at the end of the quarter.

3:14 Second quarter orders were 42% systems and 58% recurring, with the mix continuing to indicate soft business conditions in the near term. Second quarter sales of $150 million were at the low end of guidance due to the impact of export restrictions to Huawei on our customers and continued softness and mobility. Although our direct business with HiSilicon, a Huawei affiliated company, is less than 2% of annual sales, some of our U.S. customers that are part of the Huawei supply chain abruptly lowered their forecasts after mid-May when the export restrictions were imposed. In parallel, Huawei announced a sharp reduction in smartphone unit sales forecast for the second half of this year. It isn't clear whether this is a direct consequence of the export restrictions or more of a reflection of lower GDP growth in the region and globally.

4:12 The compounded effect was a late quarter reduction in RF and flat panel display driver tester sales. with some business pivoting to subcontractors in China and other customers pushing out the forecast to later quarters. Mobility was still our largest segment, comprising 29% of system orders. We received and shipped a volume order for thermal handlers testing mobile processors, also third handlers and testers for RF devices. Still, in mobility, We recently qualified and sold multiple units of a next-generation vision inspection platform featuring extended process integration capabilities that include infrared and microscale defect detection.

4:59 Although the automotive semiconductor market remains weak, we continue to benefit from the sale of thermal handlers and testers for the production of power management ICs. While our customers' forecasts are muted in the near term, The fundamentals remain strong for increasing vehicle electrification, growth in automotive ADAS, industrial automation, and moreover, the deployment of 5G communications that will have a significant positive impact on these markets. On this last point, the highlight of the second quarter was the initial shipment of a complete solution for testing next generation RF devices used in a global satellite network. Kohu is delivering the value of cross-functional expertise for complex applications that supports customers' needs for rapid volume ramps.

5:52 We forecast some business in the second half of this year and ramping volume in 2020, not only in satellites, but also with the higher volume units for the ground infrastructure. Our testers are deployed in volume for 4G RF power amplifiers, and being utilized for initial production of 5G devices coming out in new mobile products. Customers who require a test solution optimized for high-performance RF see the value in Cohu's unique differentiation that enables them to upgrade our large install bays of RF testers to 5G requirements while integrating our high-performance contactors to ensure signal fidelity across the device interface. Kohyu is well positioned to maintain leadership in RF power amplifier test. We see early production sales this year and expect 5G volume to grow substantially as it transitions from infrastructure build to the production ramp of mobile products starting in the second half of 2020.

6:56 Our PCB test business continues to see strong demand from customers in China, supporting server network equipment and telecommunications applications. and Soft Conditions across automotive and industrial customers, mainly in Europe. We made good progress integrating recently acquired Xera, reaching an agreement with the local Works Council to downsize and consolidate the handler operation with the Kohu business in Germany, completing the transfer of our handler manufacturing to our Malaysia factory, and on track to finalize the transition of contactors and device kits to our Philippines operation this quarter. In all, delivering 17 million of annualized run rate cost synergies in the second quarter and on track to exit this year at approximately 40 million.

7:45 In light of the soft market environment for semiconductor volume manufacturing, we're taking additional actions to reduce expenses and improve profitability while maintaining critical investments that will drive growth in our test contactor and equipment businesses. With that, I remain optimistic about our future that were well positioned to capitalize on the 5G opportunity as it transitions from early device characterization and infrastructure build to high volume products. Additionally, we will continue to enjoy strong business in automotive and industrial markets when our customers resume their growth. Now, I'd like to turn it over to Jeff to review our second quarter results and provide third quarter guidance. Okay, thanks, Luis. I'll start by reviewing our Q2 results, which delivered revenue at the low end of our guidance but with non-GAAP profitability higher than anticipated, supporting the strength of our financial model, including the realization of acquisition-related cost synergies. We'll also review our progress in accelerating our plan synergies from the acquisition of XERA and comment on our business model for 2020 and beyond, which includes estimated non-GAAP EPS amounts at different revenue levels.

8:58 Finally, I'll provide our third quarter guidance. Please also note that my comments that follow all refer to non-GAAP figures. For GAAP to non-GAAP reconciliations and disclosures, see the accompanying earnings release and investor presentation. For Q2, the GAAP to non-GAAP adjustments include approximately $3.7 million of stock-based compensation expense. Gap to non-gap adjustments primarily driven by the XERA acquisition include $10 million of purchased intangible amortization expense, $1.3 million of property, plant, and equipment step-up costs, and $7.3 million of restructuring costs. The Q2 net cash impact of these items is approximately $2 million, related primarily to employee severance.

9:48 Q2 revenue of $150 million was at the low end of our range and impacted by the export restrictions to Huawei on our customers and continued softness in mobility. One customer in data center, cloud, and AI accounted for 12% of sales in Q2. No other customer accounted for 10% or more of sales in the quarter. In Q2, we generated a gross margin of 41.3%, which is 130 basis points higher than guidance due to a better than expected contribution from recurring revenue. Operating expenses came in lower than forecast as a result of tight control on labor costs and discretionary spending. During the quarter, we realized approximately 4.3 million of acquisition cost synergies, which is in line with the forecast.

10:39 In the second quarter, we generated non-GAAP operating income of $8.9 million, or approximately 6% of sales. After interest expense, foreign currency loss of about $500,000, and the tax provision, KOU had non-GAAP EPS of $0.02. Adjusted EBITDA in the quarter was $11.8 million, or 7.9% of sales. As I stated on a prior earnings call, The effective tax rate is not meaningful at pre-tax levels near break-even. As a reminder, most of Cohue's operations and related profits are generated and taxed outside of the U.S. Additionally, when the U.S. operation generates a loss, as it did in Q2, there's no tax benefit to offset the foreign tax expense because of our deferred tax asset valuation allowance.

11:31 As a result, In Q2, we recorded tax expense on foreign profits without any benefit from the U.S. loss, resulting in a high and not meaningful effective tax rate. Now, turning to cost synergies in our business model, as announced on our Q1 earnings call, we've taken action that results in pulling forward approximately $20 million of cost synergies into 2019, ahead of the original target of three to five years. The result is that by the end of this calendar year, we expect to deliver 40 million in annual run rate cost synergies that will favorably impact the business model going into 2020. The annual cost synergy split is approximately 20 million in cost of goods sold and 20 million in operating expense savings.

12:20 Our business model is inclusive of the impact of the 40 million cost synergies. that we expect to achieve when exiting this calendar year and provides anticipated profitability including estimated non-GAAP EPS at various revenue levels. As a point of reference, the pro forma 2018 revenue for Cohue combined with XERA was approximately $778 million or about $194 million per quarter. The business model shows opportunity for strong profit and cash generation at this level once all synergy savings are in place. Our long-term capital allocation strategy continues to be use excess cash to pay down the debt of $356 million and deliver the company subject to business conditions and the cash required to achieve the synergies and support an eventual business ramp. For the balance of 2019, we're projecting cash payments of approximately $13 million in order to achieve the targeted synergies.

13:27 During Q2, COHU used approximately $9.5 million of cash from operations, and our cash balance was approximately $144 at the end of the quarter. COHU's board of directors approved a quarterly cash dividend of $0.06 per share, payable on October 18, 2019, to shareholders of record on August 23rd, 2019. For third quarter 2019 guidance, we're expecting sales to be approximately 143 million. Revenue distribution is expected to be 92% semiconductor test and inspection and 8% PCB test. Gross margins expected to be approximately 41%.

14:13 Operating expenses are expected to be approximately 51 million. Cost synergies of approximately $7 million or about $28 million on an annualized basis are included in the Q3 guidance. We're also taking measures in addition to the acquisition cost synergies to further reduce operating expenses with a forecasted Q3 benefit of approximately $1 million. We expect adjusted EBITDA in the third quarter to be approximately 8%. We're projecting the Q3 non-GAAP tax provision to be similar in total to the Q2 non-GAAP amount. For modeling purposes, we expect a normalized effective tax rate of approximately 22% on revenue of $170 million or more and profits in line with the business model.

15:07 The diluted share count for Q3 is expected to be approximately 41.7 million shares. And that concludes our prepared remarks. And now we'll open the call to questions. At this time, I would like to remind everyone, in order to ask a question, please press star, then the number one on your touch-tone telephone. Again, if you have a question at this time, please press star. then the number one key on your touch tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key.

15:58 Your first question comes from the line of Brian Chin from Stifel. Your line is now open. Hi, good afternoon. Thanks for letting us ask a few questions. Maybe first question just to focus a little bit, hone in on the near term a little bit and your Q3 outlook. Your guidance sails down a little bit sequential. Kind of curious, you know, looking at your order trends by end markets, the system bookings, they were not strong overall in Q2, but I think the mobility orders maybe were a little bit better than I would have thought, maybe data center, IoT a little bit softer. So just curious, maybe from a market perspective, where are you seeing more weakness quarter to quarter into the third quarter in terms of your revenue outlook? Well, hi, Brian. This is Luis.

16:43 Just one point here on the slide that talks about Q2 and markets. That is system-only orders. As we have mentioned in the past, we do have a strong recurring business on data center, cloud, and AI. So from a systems perspective, you're right, maybe a little weaker than you would expect, but it is still a strong recurring business for us. On a quarter-to-quarter basis, Mobility is the one that we expected to have taken off stronger, and for various reasons, I think that we talked here during the call, Huawei in particular, we created sort of a drop quarter on quarter. Automotive continues to be a soft, the automotive market continues to be soft, and so does the industrial market.

17:38 pretty much also weighing negatively on the third quarter guidance. Okay, thanks for the call, Luis. Maybe perhaps Jeff here, but talking about seasonality and sort of when you expect to be fully in your cost model, this year is more fluid than most probably, but if we think about normal, if you want to call it that, weaker seasonality, which tends to kind of hit late in the calendar year into early next year, Do you have first any way of calibrating what the impact of this could be on your business as we move into the December and March quarters? And secondly, in terms of where you think your EPS and EBITDA break-even levels from a revenue standpoint might be starting in the March quarter? Brian, your last part of that, starting in March of next year?

18:26 Is that what you're asking? Yeah, just when you have the full realization of the cost synergies. at what revenue level do you think you break even on an EPS basis and also from the EBITDA basis? Right. So let me just, I'll just start with that. A break even, once all synergies are included in the P&L, would be down about $125 million at that revenue level with gross margin in a 42%, about 42% range. Now, with your other question with regards to seasonality and how that's impacting perhaps Q3 and Q4, I mean, that's tough to say, right?

19:14 We've given guidance for Q3. We see it at about 143 million. You're right. The Q4 would tend to be a little weaker, Q1 as well, until we get past Chinese New Year. So, I mean, at this point, we're expecting We're expecting that to hold as it has in the past. Yeah, this is a very difficult year to talk about seasonality, especially with so much changing on a macro level and impacting the semiconductor supply chain. Yeah, that's fair. Maybe one last question just to walk this out a little bit further. I was curious. If we think about test contactor market as sort of a 650,700 million-ish market yet growing, can you remind us how large the RF portion of the market is today, perhaps how large it could be several years from now, especially as the millimeter wave era is ushered in?

20:13 And then maybe, Luis, even if you want to fan out a little bit broader because you did talk about sort of these full test cell solutions, so maybe that's sort of obviously a larger dollar opportunity for you, so even if you want to expand upon that more. Thanks. Sure, sure. Yeah, Brian, so the bundle, actually, both the RF and the precision analog, which is kind of the high-performance signal part of the contactor market, is on about $90 to $100 million a year. You know, to broaden up a little bit, since you asked, we have had a record quarter for sale of a high-performance RF contactor in Q1. I announced that a quarter ago, and that was mostly for Engineering Lab characterization on new IC products.

20:59 Now, we have had follow-on orders for that in Q2 for initial device production and one more customer that we got designed in for characterization, but all in all, we expect volume sales for RF contactors to really take off when 5G takes off in mobile devices, which is really not projected until second half of 2020. Now, outside of the RF market, we also gained some really good traction with the KEDA pins, KEDA being the pin business we acquired in Japan beginning of 2017. So the implementation of KEDA pins in our contactors. And as I mentioned before, we tried to track what's the attachment rate of our contactors and our install bays of handlers.

21:46 A little bit more difficult now in a down cycle market because, obviously, There are fewer equipments getting out the door, but we're estimating we're at about a 33%, approximately a 33% attachment rate of contactors to our handlers. And with that, the opportunity is to get it up to about 100%, which does create approximately $175 million incremental revenue opportunity that we want to capture over the next five years. All right. Thank you. Thank you. Next question comes from the line of Tom DeFelle from DA Davidson. Your line is now open.

22:31 Yes, good afternoon. First question is on the additional cost-cutting measures you've taken post-last quarter when you announced you were going to pull in all $40 million to this year. Is that just discretionary spending over the next couple of quarters that you've slowed down on, or are there additions to that $40 million that that would entail? No, it's aside from the $40 million, Tom. It has to do with labor, particularly sort of delaying replacement of particular positions, as well as the discretionary spending that you mentioned, things like travel and so forth. Okay, and so I guess big picture, though, you view those more as delayed spending, then, as opposed to long-term spending cuts that would create a new model?

23:21 Yeah, at this point, they're not in the model. They're not long-term. They are temporary until business conditions improve. Okay, that makes sense. All right, and then I'm looking at your two bigger markets, automotive and handsets or mobility. If you look at your crystal ball, which of those do you think is poised to recover quicker? Or is there any kind of difference you can point to between the two end markets as far as relative strength? Well, hi, Tom. This is Luis. That's a tough crystal ball question to answer. We both know here that auto is weaker right now, and it is our largest business, right? I mean, Cohue's exposure to a combination of auto and industrial market tended to be the largest segments for Cohue historically, predominantly for handler sales, right?

24:24 and automotive is down about 30% year over year right now. And this comes with the decline in vehicle sales in the larger markets, right? That would be the US, Europe and China. Now, in the midst of all of this, and as I mentioned in the prepared remarks here, we do see steel activity for power management semiconductors that really aligns more so with electrification of vehicles. We also have seen progress for thermal handlers testing ADAS, automated driver assist processors, and these are processors that dissipate energy during tests.

25:12 So overall, we're pretty well aligned on the electrification ADAS, but we need Thank you very much. So it's essentially the starting part of the infrastructure build. Most of the semiconductors in this today are digital with some RF or high-end digital, which is not exactly where CoHeat testers are aligned to. And then down the road will come the majority of the mobility or smartphones, if you will, that's going to drive a large content of RF power amplifiers.

26:12 We believe that's going to happen starting in the second half of 2020 based on all the predictions and forecasts we've seen from our customers. Now, naturally, there will be some early volumes ahead of that, but really volume is going to start second half of 2020 and will go on for a few years before it surpasses smartphones with 4G capability. Now, you put it all together and we just say which market comes first. I don't know. I think the 5G has a more well-defined path right now than the automotive, but that could change quickly. Okay. That makes sense. Maybe switching gears, it's been six months now since the acquisition has been finalized.

27:01 I just wonder if you've got any success stories on the... contact your business. You can talk to perhaps seed for future growth. Yes, we have quite a few actually, Tom. We have both a lot of traction getting the key to pins that I was answering the prior question, the key to pins in our contactors. These are in our digital mixed signal contactors. That has been gaining quite a bit of volume. We had really a great quarter in Q1 deploying sort of a record quarter for a millimeter wave contactor called the X-Wave for high-end RF applications. As I said before, this was early launch of the product, characterization labs.

27:51 Now it's going through the work and expecting to see volume towards the end of the year, beginning of next year as 5G starts rolling out. And, you know, One of the big highlights of second quarter was winning an application where we are selling the tester, the contactor, and then we're able to pull in the handler as well for this satellite network. And right there, you can see the tester and the contactor are really sort of the pair that solves the signal fidelity all the way to the device under test. And we're seeing more and more of those cases, particularly with 5G, early stages of 5G right now. Like I said, it's not really volume production, but early stages of 5G, the contactor and the tester are critical to ensuring signal performance.

28:46 Okay, so it sounds like you're still comfortable with the potential growth in contactors over the next few years? Yes. Okay. And finally, you talked about how Huawei or HiSilicon was less than 2% of your business. But do you have a number for us that describes, you know, through your customers, as a customer of Huawei, what your indirect exposure is to Huawei Silicon, for Silicon? We have more of the direct exposure than the indirect exposure. So we have less than 2% of our business is direct sales to Huawei or its affiliated companies, right? But as you pointed out, nevertheless, we do have several of our tester customers in the mobility market that supply to Huawei. It's hard to triangulate what the exposure is on the indirect side, right? And this is really impacting not only the RF power amplifier business for us, but also the display driver customers.

29:44 Because, you know, from one side you can talk about the export restrictions, and the other side you talk about, most importantly, I think, is the decline in forecasts. We've always forecasted smartphone sales in the second half of the year. The net-net of this is that we're seeing a push out in both RF and display driver ICs. Frankly, we quantified it to the tune of about $5 million in the second quarter. Okay. Great. Thanks for your time today. Thank you. Thank you. Next question coming from the line of Craig Ellis from B. Reilly FBR. You may now ask your questions. Yeah, thanks for taking the question. Just to follow up on a couple items, Luis, it's nice to see some successes with contactor attach and getting key to pins into cohort solutions. My question for the opportunity to drive higher attach rates, that $175 million opportunity, From what you can see today, how much of that gap do you think you could close in 2020 and 2021? What's the slope of the trajectory that it looks like we're on here?

31:01 Hi, Craig. We're looking at sort of a mid-teen growth rate. That's our plan right now, a mid-teen growth rate in the contactor business over the next few years. And so that includes both your share gain and just the natural sales that would come out of the recurring part of the business? That's right. That's right. Okay. And then I wanted to go back to one of the wins that you had talked about. You talked about RF tests for Global Satellite Network, and it sounded like that was pretty material. Can you scope what the financial opportunity for that win would be for next year? Yeah, well, first of all, we started shipping that in late Q2, so it was not really a Q2 material for that matter.

31:53 And the expectation is this could generate, call it in the order of $15 million or so next year. I'm sorry, 1.5? 1.5, correct. Yeah, great. Thank you. And then just a couple more items. We've obviously seen A number of things change geopolitically just within the last week. Just so we all understand how the company's approaching guidance, given the abrupt change in tariff tone, if you will, since late last week, how does the company incorporate that into guidance? What does that mean for the guidance that we see today for the third quarter?

32:44 Craig Jeff here so our visibility isn't fantastic it doesn't go out more than about three months and so we base it on we base our forecast as we always do on backlog what's scheduled to ship and then in the near term the orders that we expect to book and bill in the quarter based on immediate feedback from the customer and so we do have a lot of noise, you know, within the geopolitical landscape, as you noted. However, our approach is similar. Just try to get as close to the customer as possible, get the best information, most recent information. Customers, as you know, have shortened lead times.

33:30 They wait to the last minute to ensure that they have demand for the equipment. So that's how we've approached it. And certainly the numbers have been impacted from it. 143 is lower than I think any of us would have expected two or three quarters ago. So it's definitely impacted, and that's really the process we go through is to stay as close to the customer as possible. Thanks for that. Then my last question is a follow-up on something that I think Tom touched on. In the end market splits, the split shows 23% automotive and 29% mobility. And there's no question that there's a year-on-year unit growth headwind in both of those businesses.

34:18 But underneath that, in both cases, and I think as you mentioned well, Luis, there's some technology transitions or secular drivers that are favorable. The question is, in areas like automotive where There's work that has stronger growth than things like ADAS or EB. Can you distinguish in your order book when a customer's ordering for that type of application versus more of a legacy application? And if so, is it possible to aggregate how significant the businesses are across those two end markets right now that are related to secular drivers, whether it be 5G or ADAS and EB? Yeah, we actually can segregate. We have seen over the last six months when automotive has been weak that the majority, yeah, I guess I could say the majority of the orders have been EV-related or power management ICs for EV or potentially hybrid, but certainly power management ICs. And Not in as much ADAS over the last six months.

35:26 It's more of a forecast that ADAS is coming up alive in the coming quarters. And so we see a lot of activity both from an evaluation of new devices and our handlers as well as forecasting that are more ADAS related here for, like I said, for the balance of this year. So yes, we can see them both. Okay, that's helpful. And then perhaps last for me, You mentioned 5G a number of times. As we look at the early part of this next air interface transition, and if we were to compare it to 4G and 3G at Cohue, from what you can see now, how significant could 5G be vis-a-vis those two other air interface transitions that we've been through?

36:19 So let me, I'll talk about the 5G, but remember the 5G exposure for us come in the form of the XERA acquisition, more so than sort of former co-hue exposure to 3G, 4G, right? I mean, 5G today for us is really aligned with testing of RF power amplifiers, which are the XERA testers. And this is where those products, you know, the XERA testers that you acquire are sort of the leader in this approximately $60 million segment of the AT market. These RF amplifiers are really used in greater quantities in smartphones and to a lesser degree in the network infrastructure, which is where 5G cycle is today, really working on networks. So we don't really have testers that are suited for network ICs, which require greater digital, smaller RF test content.

37:17 On the other hand, We do have the largest install base today, and we believe the most economical solution for testing focused RF semiconductors that are using these will be deployed in these new 5G phones. So when these things come out, I mean, they're still in low volume. We do know that some of these phones from published teardowns, that they're using devices that have run, or the 5G amplifiers have been tested on our testers. And these initial 5G phones are still sort of in that sub-6 gigahertz frequency with a roadmap of developing millimeter frequencies over the next few quarters, actually, coming out soon. Now, put it all together, in terms of significance, we do believe that the market size, the $60 million market that we're talking about for RFPAs, RF power amplifiers, is bound to grow about 40% to 50% When 5G phones are produced in volume, which again won't happen this year, but it should start ramping on the second half of next year and then into 2021 and so on. It will take a couple of years for that volume to surpass 4G smartphones out there. But the opportunity is there, and I think it's going to drive not only the tester sales, but it was going to drive...

38:48 quite a bit of contact for sales. In this case, more of an attachment rate to testers than to handlers per se. That's real helpful. Thanks, Luis. Thank you. Next question coming from the line of David Gully from Steelhead Securities. Your line is now open. Yeah, just one clarification. I think, Luis, you mentioned the size of the Huawei impact or the estimated size of the impact in the quarter just reported. Could you repeat that again? Hi. Yeah, Dave, I mentioned that we triangulated both the direct and indirect, and the indirect being harder one to triangulate here. Impact of Huawei on our Q2 sales to been about $5 million. So about a $5 million decline.

39:37 and what we would otherwise have expected in the future. Okay. In your presentation, you have all these different revenue levels and the metrics for your business at each different revenue level. You also mentioned, I think, the 2018 quarterly run rate was like $195 million a quarter or so. Is there any reason to think that you can't get back to that level of revenue when the markets recover? Has there been any share losses or anything that might impact the business getting back to those quarterly run rates. No, there hasn't been any customer changes over the last six, nine months other than some traction that we gained on the contactor front.

40:26 As I mentioned, the RF contactor, the X-Wave, where we had a record quartering Q1. You know, the integration of key to pins in our contactors for digital mixed signal applications, but from an equipment side, really hasn't been no change in the market. Okay. And I think that there was a couple of programs that you initially expected to be strong in the second half of this calendar year, and I think one or two of them were pushed into next year. Could you just give us an update about those programs and what you expect now? Sure. Yeah, starting with the positive one, actually, was the satellite communication business that I just mentioned. That was a program that we've been working on since the acquisition, and it's finally starting to bear fruits here, with the initial ship in late second quarter into third quarter.

41:24 The other two programs had to do, one with... with 5G, RF for 5G, which really got pushed out since the mid-May, the new export restrictions on Huawei in mid-May. That actually changed the dynamics a little bit. And the third one was penetration in the flat panel display market, which we'll be doing. Actually, this is one that, from an execution perspective, we're doing really well, but a decline in forecast for smartphones in the second half of the year is really impacting demand. And as such, the projection that we would see increasing revenues here starting in the third quarter, that also got pushed out.

42:10 And on the flat penalty still you're referring to, you've picked up further customers there. They just stopped buying. Right. That's right. Okay. Thank you. That was all my questions. All right. Thanks, David. Thank you. I am showing no further questions at this time. I would now like to turn the conference back to our speakers. Okay. Thank you for joining us on today's call, and we look forward to speaking with you soon. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for your participation, and have a wonderful day. You may all disconnect.