OSI Systems Q4 2024 Earnings Call Transcript

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Provided by Quartr
August 22, 2024

There are 6 speakers on the call.

Operator

Hello, and thank you for standing by. Welcome to OSI Systems Inc. 4th Quarter and Fiscal Year 20 24 Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session.

Operator

I would now like to turn the call over to Alan Edward, Executive Vice President and Chief Financial Officer of OSI. Sir, you may begin.

Speaker 1

Well, thank you. Good morning and thank you for joining us. I'm Alan Edrick, Executive Vice President and CFO of OSI Systems. And I'm here today with Deepak Chopra, OSI's President and CEO. Welcome to the OSI Systems fiscal 2024 Q4 year end conference call.

Speaker 1

We are pleased that you can join us as we review both our financial and our operational results. Earlier today, we issued a press release announcing our fiscal 2024 Q4 and full year financial results. Before we discuss these results, however, I would like to remind everyone that today's discussion will include forward looking statements and the company wishes to take advantage of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to such forward looking statements. All forward looking statements made on this call are based on currently available information and the company undertakes no obligation to update any forward looking statement based upon subsequent events or new information or otherwise. During today's call, we will refer to both GAAP and non GAAP financial measures when describing the company's results.

Speaker 1

For further information regarding non GAAP measures and comparable GAAP measures of the company's results and a quantitative reconciliation of those figures, please refer to today's earnings press release. I will begin with a high level summary of our financial performance for the Q4 of fiscal 2024 and then turn the call over to Deepak for a discussion of our business and operational highlights. We will then finish with more detail regarding our financial results and a discussion of our outlook for fiscal year 2025. Following record revenues and non GAAP EPS in each of Q2 and Q3, we again saw record financial results in the 4th quarter, led by the Security division, resulting in outstanding revenue growth and a significant increase in year over year operating income. We are encouraged by the momentum in our business.

Speaker 1

Let's start with a high level summary of our fiscal 2024 Q4 and full year results. First, revenues increased 17% year over year to a Q4 record of $481,000,000 driven by the performance in our security division where Q4 revenues were up 27% year over year. For the full year, fiscal 2024 revenues were a record 1,540,000,000 dollars a 20% increase over fiscal 2023. 2nd, the significant revenue growth led to record Q4 non GAAP adjusted earnings

Speaker 2

per share of

Speaker 1

$2.84 For the full year, fiscal 'twenty four non GAAP adjusted EPS was a record $8.13 a 31% increase over the prior fiscal year. 3rd, bookings were again solid and we ended the quarter with a backlog of approximately $1,700,000,000 Our healthy backlog and robust pipeline of opportunities provide good visibility as we enter fiscal year 2025. Before diving more deeply into our financial results and discussing the fiscal 2025 outlook, I will turn the call over to Deepak.

Speaker 3

Thank you, Alan. Good morning, everyone. Thank you for joining us today as we discuss OSI Systems' strong performance for the 2024 Q4 and the full fiscal year. As Alan mentioned, I'm proud to say our revenues grew year over year by 17% in Q4 and 20% for the full fiscal year, resulting in record revenues for both of these periods. We ended the fiscal year with a significant backlog of approximately $1,700,000,000 which combined with the strength of our very robust pipeline gives us tremendous confidence for fiscal 2025 and beyond.

Speaker 3

Diving into the highlights, the Security division again delivered fantastic results with year over year revenues increasing 27% in Q4 and 37% for the full fiscal year. This growth was spread across many of our offerings in geographic regions, but was particularly notable in Latin America, Middle East and Asia Pac regions. During Q4, we continued to successfully execute on our major program with Mexico's Department of National Defense known as Sedena, which is expected to generate more than $500,000,000 in total revenue over the length of the contract. For Sedanah, we provide a range of inspection systems including the Eagle high energy and low energy cargo inspection portals, the CarView vehicle inspection system and the CertScan multi site integration platform for inspecting trucks, buses and cars at Mexico's northern and southern border checkpoints. We also continue to successfully deliver on another major cargo program, the $200,000,000 contract with an international customer.

Speaker 3

We are performing well with these programs and they are expected to be nice contributors again in fiscal 2025. The additional program we won from Sedena valued at over $100,000,000 is well underway also with revenues expected to commence in mid fiscal 2025. Our turnkey projects in Albania, Puerto Rico, Guatemala and a European airport continue to perform seamlessly providing strong recurring revenues and serving as great reference points on further opportunities. Our latest cargo turnkey project in Uruguay is expected to commence operations before the end of the calendar year. These successful projects each with their unique security requirements demonstrate our ability to deliver highly customized solutions to meet our customers' needs.

Speaker 3

Many of our turnkey and hardware projects also utilize CertScan, our multi site integration platform that is increasingly adopted by port and border customs agencies worldwide. CertScan sets us apart from competitors, enhancing the value of our offerings beside our broad product portfolio. We were active throughout fiscal 2024 with aviation customers also as passenger traffic continued to increase. We expect this general trend to continue. As our aviation related bookings were particularly strong in the second half of fiscal twenty twenty four, To that end, during Q4, we announced orders totaling approximately $52,000,000 from 2 international airports to furnish a comprehensive array of security solutions, including the RTT-one hundred and ten for whole baggage screening and the Orion 920CT for checkpoint security with extensive service and support commitments and recurring revenue.

Speaker 3

For ports and border security applications in Q4, we announced 2 awards from international customers totaling about $20,000,000 for the Eagle M60 mobile cargo and vehicle inspection systems including follow on maintenance and support. These M60 platforms enable efficient and flexible relocation of security checkpoints to optimize security for borders and critical infrastructure. We also announced an award from an international border security customer of approximately $11,000,000 for radiation monitoring solutions and related services and support. This has been a breakthrough year for the security division in addition to robust revenue and profit growth. Our continued success in securing major projects in ports, borders and aviation security reinforces our confidence in our strategy of offering a comprehensive range of products and services in order to provide our customers with the flexibility to meet their specific security needs effectively and efficiently.

Speaker 3

This approach ensures that we deliver solutions that offer the best value, further solidifying our position as a leader in the industry. With a strong backlog and strong pipeline, we are enthusiastic about the division's long term growth prospects in fiscal 2025 and beyond. Moving on to the Opto Group, the Opto Electronics Manufacturing division achieved a significant milestone with record Q4 revenues including intercompany sales of $102,000,000 Throughout fiscal 2024 including the Q4, We continue to work with our customers to adjust to their demand forecast and we believe we have made progress in rightsizing to this demand, putting this activity behind us in the coming months. We announced a couple of nice wins during the quarter. We announced a $7,000,000 repeat order from a leading healthcare OEM customer for portable device assemblies.

Speaker 3

We also received another $7,000,000 order to provide electronic sub assemblies to an advanced engineering solutions OEM. In fiscal 2025, we believe that our recent expansion into Mexico, the Tecate operation will benefit us for near shoring customer activity along with our favorable position globally in South Asia PAC region and in UK as large OEMs are seeking to establish or expand their supply chain to de risk their exposure to China centric supply chains. Based on the ability of our Opto division to effectively adjust to market trends and changes in customer demand, we believe Opto will continue to achieve profitable growth. Now let's turn our attention to the Healthcare division, where Q4 revenues were the strongest for the fiscal year 2024 though down year over year on a tough comparison. Fiscal 2024 brought significant challenges for patient monitoring in the U.

Speaker 3

S. Primarily as hospitals continue to defer capital purchases. Despite these hurdles, during the quarter, we secured a $6,000,000 award from a U. S.-based hospital to provide patient monitoring solutions and related accessories including Exhibit, central stations, expression, patient monitors and queue patient monitors. Additionally, our Rotman Index Predictive Analytics solution is seeing increased success.

Speaker 3

Our clinical services offerings also continue to be well received by our clients. We are committed to advancing our next generation patient monitoring solutions and enhancing the innovative features of our products to help doctors and clinicians deliver improved healthcare treatment. We adjusted the healthcare division cost structure in the quarter also, the benefits of which are expected to primarily start realizing in fiscal 2025. To sum it up, we are confident about our company's future and excited to build on our stellar fiscal 2024 performance. We are extremely excited and confident about fiscal 'twenty five and beyond.

Speaker 3

I will close this portion of the discussion by thanking all our employees, customers and stakeholders who have played a part in OSI Systems' success. With that, I will turn the call back over to Alan to discuss our financial results and fiscal 2025 guidance in more detail before we open the call to questions. Thank you very much.

Speaker 1

Well, thank you, Deepak. So let's review in greater detail the financial results for our fiscal 2024 Q4. Again, our Q4 revenues were up 17% compared with revenues in the Q4 of the prior fiscal year. This was primarily driven by our largest division, Security. The 27% year over year increase in Q4 Security division revenues was led by strong growth in our cargo and vehicle inspection product sales as well as solid growth in our aviation and checkpoint product sales.

Speaker 1

Q4 revenues included continued shipments from the $200,000,000 plus cargo contract announced in January 23 and from the $500,000,000 plus cargo contract announced in March 23. 3rd party Opto sales bounced back nicely as sales increased 6% year over year. We continue to see certain Opto customers adjusting inventory levels and or ordering patterns which we anticipate through the balance of calendar 2024. Although the Healthcare division's Q4 sales were the strongest of the fiscal year as Deepak mentioned, revenues were 15% lower than Q4 of the prior year due to a particularly challenging comparison period along with a challenging hospital spending environment. The fiscal 2024 Q4 gross margin of 32.1% was down from the 34.7% gross margin in Q4 of last fiscal year.

Speaker 1

This was largely due to the mix of revenues as Q4 growth was driven by a significant increase in security product revenues, which typically carry a less favorable margin than security service revenues, as well as a less favorable mix of security service revenues in the quarter. The year over year decrease in revenues in the healthcare division, which inherently carries the highest gross margin of all three divisions, also contributed to the lower gross margin. Our gross margin will generally fluctuate from period to period based on revenue mix and volume, impacts of changes in supply chain costs and inflation generally among other factors. Moving to operating expenses. We continue to work diligently across each of our divisions to improve efficiency and to manage our SG and A cost structure.

Speaker 1

Q4 SG and A expenses were $71,700,000 or 14.9 percent of sales compared to 67,100,000 dollars or 16.3 percent of sales in Q4 of the prior year. The year over year dollar increase in cost was driven by higher compensation costs including incentive compensation linked to our significant sales growth, increased professional fees and unfavorable foreign exchange rates among other items. Research and development expenses in Q4 of fiscal 2024 were $15,900,000 compared to $15,500,000 in the same prior year quarter. We continue to dedicate considerable resources to R and D and we anticipate further increases in such investment in fiscal 2025, particularly in our security division as we remain focused on innovative product development, which we view as vital to the long term success of our businesses. We recorded $3,900,000 of restructuring and other charges in Q4 of fiscal 2024 compared to $3,200,000 in the same quarter of the prior year.

Speaker 1

Moving to interest and taxes. Net interest and other expenses in Q4 increased to $8,200,000 in fiscal year 2024 from $5,700,000 in fiscal year 2023, primarily due to increased interest rates on a higher level of borrowings. Subsequent to fiscal year end, we completed a convertible notes financing which is expected to reduce our future interest expense which I'll talk more about shortly. Our reported effective tax rate under GAAP was 18.3% in Q4 of fiscal 2024 compared to 17.6% in Q4 of fiscal 2023. Excluding the impact of discrete items, our normalized effective tax rate in Q4 of 2024 was 21.2% compared to a normalized effective tax rate of 21.9% in Q4 of fiscal 2023.

Speaker 1

For the year, the normalized effective tax rate in fiscal 2024 was 23.4% compared to 22.8% in the prior fiscal year. I will now turn to a discussion of our non GAAP adjusted operating margin. Overall, our adjusted operating margin in Q4 of fiscal 2024 was 14.8% compared to 15.6% in Q3 of fiscal 2024 driven by the top line reductions in healthcare and a less favorable mix of sales in the security division. The adjusted operating margin in the security division was 18.5% in Q4 of fiscal 2024, which was roughly in line with that of Q3, but down from 19.3% in Q4 of fiscal 2023 given the less favorable mix revenue mix in the division. The adjusted operating margin in our Opto division increased to 13.9% in the Q4 of fiscal 2024 from 13.8% in last year's Q4.

Speaker 1

The Healthcare division reported its strongest quarter of adjusted operating margin for the fiscal year, though it decreased to 9.3% in Q4 of fiscal 'twenty four compared to 12.1% in the prior year on lower year over year revenues. Moving to cash flow, in Q4 of fiscal 'twenty four, we invested significant amounts in working capital and supported the company's growth. Cash used in operations in the quarter was $29,000,000 primarily due to increases in accounts receivable associated with the security division revenue growth. CapEx in the 2024 fiscal Q4 was $8,500,000 while depreciation and amortization expense in Q4 was $11,700,000 Our balance sheet is solid with modest net leverage of $1,600,000 Aside from $7,500,000 of annual required principal payments under our bank term loan, the bulk of our bank debt matures in fiscal 'twenty seven. As mentioned earlier, subsequent to fiscal year end, we issued $350,000,000 of convertible notes with a coupon of 2.25 percent due in fiscal 2030 and an initial conversion price of approximately $192 The proceeds were used to pay down our bank revolver and repurchase approximately 550,000 shares of common stock as well as cover transaction costs.

Speaker 1

This transaction provides enhanced liquidity to capitalize on future strategic initiatives while simultaneously being immediately accretive given a significant reduction in interest cost and a reduction in the share count. In combination with the interest rate swap entered into approximately 2 years ago, well over 3 quarters of our existing debt is now fixed versus floating. Finally, turning to guidance. We are introducing our fiscal 2025 sales and non GAAP adjusted diluted EPS guidance. For fiscal year 2025, we anticipate revenues in the range of $1,620,000,000 to $1,650,000,000 and non GAAP adjusted earnings per diluted share in the range of $8.80 to $9.15 This fiscal 2025 non GAAP diluted EPS guidance excludes potential impairment restructuring and other charges, amortization of acquired intangible assets and non cash interest expense and their associated tax effects as well as discrete tax and other non recurring items.

Speaker 1

We currently believe this guidance reflects reasonable estimates. The actual impact on the company's financial results of timing changes on the expected conversion of backlog to revenues, disruptions in the supply chain and inflation and interest rates is difficult to predict and could vary significantly from the anticipated impact currently reflected in our guidance. Actual revenues and non GAAP earnings per diluted share could also vary from the guidance indicated above due to other risks and uncertainties discussed in our SEC filings. We continue to remain focused on the growth of our businesses. We believe our efforts will enable OSI to continue providing innovative products and solutions.

Speaker 1

At this time, we would like to open the call to questions.

Operator

Thank Our first question comes from the line of Josh Nichols with B. Riley. Your line is open.

Speaker 4

Yes, thanks for taking my question. I guess, first of all, Deepak, congratulations on the retirement, although I know you're going to be staying on the Board to oversee things. Clearly, the company has been having a great run and it looks like set for another year, right, in fiscal year 2025 as well too. If I want to dive into a question here, I guess, good to see that the growth for this coming year north of 6%, right, coming in better than what we had thought. I'm just kind of curious, given that we're already kind of close to 2 months through the Q1.

Speaker 4

I know the September quarter is a little bit seasonally slower just because there's not much activity in Europe. Could you just provide a little bit of color about how you expect the cadence of that growth rate to kind of play out as we go through the Q1 and kind of build from there?

Speaker 1

Josh, this is Alan. I'll take that question. So really good question. Yes, typically we see that Q1 is our slowest quarter of the year given the summer and some of the holidays in various countries that you're discussing and suggesting. That being said, given our strong backlog, we do anticipate robust growth even in Q1, certainly down sequentially from where we were, but on a year over year basis we would anticipate a strong Q1 on a year over year basis.

Speaker 1

And then our revenues kind of building into Q2 and into Q3.

Speaker 4

Great. Thanks. Just want to make sure I got the cadence right now. I want to just kind of touch on gross margin and free cash flow. Clearly, the company has been investing a lot in things like inventory this past year.

Speaker 4

And I'm wondering like what the expectations are for gross margins and how that will impact free cash flow for fiscal year. 2025 as you get behind some of these large like more product heavy deliveries and services revenue starts to become a bigger component of the mix? Or do you think with the backlog as large as it is today that the gross margins are likely to remain where they are given the order cadence that we're seeing that's been persistently high?

Speaker 1

Yes, Josh, this is Alan again. Again, really good question. On the gross margins, they will fluctuate from period to period based upon a number of factors, some of which I had described earlier in the comments. Sort of that being said, on an annual basis, I think we see an opportunity to expand the gross margins particularly as service becomes a bigger component which inherently carries a higher margin than our products generally speaking. So I think there's some opportunity for gross margin expansion this year and as we move into future years.

Speaker 1

From a cash flow perspective, this was a year of significant investment in working capital. We concluded the year with a big investment in receivables as we had such strong sales growth. So that being said, we do expect that to effectively flip. So the higher DSO and higher days inventory that we have associated with the growth when we grew 20% or so last year with kind of the guidance that we're providing this year for still solid growth is we do see an opportunity to generate very meaningful free cash flow in fiscal 2025 and beyond. So it's an exciting period for us.

Speaker 4

And then last question for me. I know there's been a lot of skepticism over the last year, year and a half about like how sustainable all these award wins that the company has been securing. And when you look at the backlog today, right, despite the record quarter that you guys had still near record levels of $1,700,000,000 I think people are starting to come around to the fact that this is a durable growth story. And with that, you start seeing the share price continue to grind higher over time. When you look out to this next fiscal year, I'm just kind of curious like how much do you think of that current backlog is likely to be recognized?

Speaker 4

And also equally as importantly, what do you think is the potential large opportunity wins that you still have in the pipeline today so that you're kind of be able to replenish that backlog as you have recently with other large opportunities that come to market?

Speaker 3

Good question. This is Deepak here. Obviously, we can't break it down how much of the current backlog gets shipped out. Also Alan has mentioned to you many times that it varies from quarter to quarter depending on the readiness of the customer, the supply chain and stuff. Regarding the opportunities, like I said in my message, we are very confident about it.

Speaker 3

Our pipeline is very strong and we've been saying for some time, as we get larger and larger and get bigger customers and get a good reputation, we distinguish ourselves from our competitors and their customers all over the globe are looking at it and the reference checks out. We are very confident that there is pipeline is very strong and there are significant large opportunities that are there internationally. At the same time, the aviation sector is coming back. That's another positive for us, air cargo. And keep in mind that U.

Speaker 3

S. Business, especially CBP, was not a big contributor in 2024. And as it comes into 2025 and beyond, we are quite confident that we'll be a big participant in the business. So all in all, we feel very good about it. And it's been a very, very positive move into the next year 2025 and beyond that we're sitting on a strong backlog, great reputation.

Speaker 3

And maybe I want to add it on to it, maybe not trying to show off, but we crossed the $1,000,000,000 mark in our security division and can proudly say that we are now maybe number 1 size wise in our space and security worldwide.

Speaker 4

Appreciate the color. Thanks.

Operator

Thank you. Please standby for our next question. Our next question comes from the line of Jeff Martin with ROTH Capital Partners. Your line is open.

Speaker 5

Thanks. Good morning, Deepak and Owen. Congratulations on a fantastic fiscal 'twenty four. Deepak, kind of segueing off your answer to the last question there with the U. S.

Speaker 5

CBP, just curious what you're hearing out there in terms of potential timing of follow on orders. I think everybody feels pretty confident that you're well positioned to win a good portion of potential follow on over there.

Speaker 3

Well, basically can't comment on specifically, but we are very well positioned as you've said. CBP, we are very happy with our performance. There are some IDIQs that are presently still have some room left onto it. There is more being talked about. The budgets are being looked at it and we think there is strong possibility of growth in CBP business and we should get a good share of it.

Speaker 3

More than that, I can't comment. Yes, that's fair.

Speaker 5

With respect to the Sedena and the $200,000,000 international order, I was just curious if you could give some perspective on what percent complete those two contracts are?

Speaker 1

Jeff, this is Alan. So while we don't go into specifics on individual programs, I would offer that we are further along on the $200,000,000 international order given that we received that order a few months prior to the previous order. So significant shipments on that occurred in fiscal 2024 which as you might remember we started shipping that actually in Q4 of fiscal 2023. We did make significant shipments on the Sedena $500,000,000 plus order as well, but a lot more shipments to come on that project. And of course we also got yes and as a reminder we also got the follow on order with Sedena for another $100,000,000 order that we're gearing up here in fiscal 2025.

Speaker 5

Yes. Thanks for the reminder on that. And then Deepak, you mentioned significant or maybe it was Alan that mentioned that significant R and D spending in security. Was just curious if you have any planned submissions for approvals on products and maybe what end markets those might be geared towards?

Speaker 3

Well, I mean, a good question in a way, but they are 2 little separate things. We continue to look at certification of various of our products and technology. But in the R and D spend, one of the success stories that we have and we are very proud about it, we have the broadest product portfolio compared to any of our competitors, so that we continue to innovate and spend investment to continue to broaden it, to put more AI into it, to be more efficient into it and to work with our customers for their custom needs, especially doing the search scan integration into the product line customized to our customers' needs. And that's the kind of innovation we are doing, but we want to continue to remain ahead of the market compared to our competitors with a product threat. And that way we can continue to grow.

Speaker 3

That's very important and that's in our DNA.

Speaker 4

Thank you.

Operator

Thank you. Please standby for our next question. Our next question comes from the line of Larry Solow with CJS Securities. Your line is open.

Speaker 2

Great. Thank you. Good afternoon. Good morning. I guess first question, I know you guys don't provide specific segment guidance, but just curious any color sort of in that 5% to 7% growth.

Speaker 2

It sounds like all your segments, your comps are probably improving, maybe all will grow year over year. Obviously, security grew mid-30s last year, so we expect that to slow down. Is it fair to just use like that mid single digit as a starting point for all the segments? The security maybe grow a little bit slower than that. Looks like bookings are kind of you had a great last couple of years and they kept up with that.

Speaker 2

But in order to grow faster, do we need acceleration of bookings? Or is that service component going to kind of kick up, kick in and drive that sort of mid single digit growth? I guess that would be the first question. Thanks.

Speaker 1

Larry, this is Alan. So good question and you're correct. We generally don't provide guidance by division. But that being said, to give you some direction, we would anticipate the strongest growth to occur in our security division. We're again anticipating a good year, probably followed by Opto, as I mentioned in the comments, more weighted to the second half than the first half as more rightsizing of inventory is occurring, but we'd expect solid growth in Opto for the fiscal year.

Speaker 1

And then healthcare, maybe just some small modest growth.

Speaker 2

Got you. And just in terms of the on the service piece, I know you mentioned mix down year over year. It looks like service revenue was basically flat year over year and it grew a lot. I know it came for last year. What's sort of the outlook?

Speaker 2

I guess does the service component start to kick in the next few quarters as your installed base obviously has grown significantly in the last year? I assume there's some kind of warranty period or period where you don't actually get more service revenue. Is there any more color you can give us on that and remind us sort of the difference in gross margin between product and service in general directionally?

Speaker 1

Sure, Larry. This is Alan. So you've sort of hit the nail on the head. As we've gotten a larger and larger installed base of our security products and as they roll off a warranty, the service revenues begin to kick in. So we would anticipate some nice growth in our service revenues throughout fiscal 2025.

Speaker 1

And as you correctly point out as well, the margin profile of service revenues is generally superior to that of product revenues on a kind of a consolidated basis and there's a meaningful difference between the 2. So all of that can lead to some enhanced margins for us, not just this year but as we move into future years as well. So we look at the service revenues which are good recurring revenues as vital for us.

Speaker 2

Got you. And just a question, just Deepak, just a follow-up on the CBP question, I know you can't answer timing or whatnot. But I guess there I know there's another I guess, just still a piece of the IDIQ outstanding. So hopefully that will happen in the next year or so or whenever. But I guess my question here is, are there other U.

Speaker 2

S. Agencies, it looks like a lot of your growth has been international. Are there other U. S. Agencies besides CVP where they're sort of in that funnel of opportunities for you guys?

Speaker 3

Good question. And the answer is yes, yes and yes. One is on the CBP side, as we are sitting here, they're getting their budgets approved into it and that's from it looks like it's a pretty strong significant budgets for CBP going into the next year. On top of that, the other question, yes, there are other agencies. DoD is a big customer for us that continues to do look at it.

Speaker 3

There's air cargo in a way. There's also the Department of Defense and all these especially one of the things that we all talk about it, which is a little bit awkward to say that as the world goes through this unrest in Middle East or in Ukraine and stuff, ultimately all that area as it settles down requires more security around that area. And that continues to grow for us. Department of State is a big customer of us. So we look at other agencies besides CVP and right now there's a lot of interest.

Speaker 2

Got you. I guess just last question, and Deepak, I expect it and hope you'll remain active, so expect you will as the chairman when we find a replacement for you. I imagine that search is probably a slow process, probably not that easy to find someone like yourself. But any timeline, any sense of a timeline on that? Is it like before year end, you think you'll have someone in place or what are your thoughts there?

Speaker 2

Thanks.

Speaker 3

Well, that's the plan. I mean, part of our announcement before that by January 1, we should have the new person on board. And as you mentioned, I'll still be there as Executive Chairman, but that's our plan right now and we are quite deeply involved in it right now of the selection.

Speaker 2

Got you. Great. Thanks for all the color.

Operator

Thank you. I'm showing no further questions in the queue.

Speaker 3

Well, thank you very much once again for attending our conference call. I again once for all want to thank our employees, customers and stakeholders and looking forward to the October call after the Q1. Thank you very much and thanks for your support. Cheers.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

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