Q2 2024 Kimball Electronics Inc Earnings Call

Participants

Andy Regrut; Vice President, Investor Relations; Kimball Electronics Inc

Richard Phillips; Chief Executive Officer, Director; Kimball Electronics Inc

Jana Croom; CFO; Kimball Electronics Inc

Derek Soderberg; Analyst; Cantor Fitzgerald

Griffin Boss; Analyst; B. Riley Securities

Jaeson Schmidt; Analyst; Lake Street Capital Markets, LLC

Anja Soderstrom; Analyst; Sidoti & Company

Tim Moore; Analyst; EF Hutton

Presentation

Operator

Good morning, ladies and gentlemen. Welcome to the Kimball Electronics second quarter fiscal 2024 earnings conference call. My name is [Jiren], and I'll be the facilitator for today's call. (Operator Instructions) Today's call, February 6, 2024, is being recorded. A replay of the call will be available on the Investor Relations page of the Kimball Electronics website.
At this time, I would like to turn the call over to Andy Regrut, Vice President, Investor Relations. Mr. Regrut, you may begin.

Andy Regrut

Thank you, operator, and good morning, everyone. Welcome to our second-quarter conference call. With me here today is Ric Phillips, our Chief Executive Officer; and Jana Croom, Chief Financial Officer.
We issued a press release yesterday afternoon with our results for the second quarter of fiscal 2024. To accompany today's call, a presentation has been posted to the Investor Relations page on our company website.
Before we get started, I'd like to remind you that we will be making forward-looking statements that involve risks and uncertainties and are subject to our Safe Harbor provisions, as stated in our press release and SEC filings, and that actual results can differ materially from the forward-looking statements. Reconciliations of GAAP to non-GAAP amounts are available in our press release.
One other housekeeping item to mention, starting this quarter, we have added a page of other financial metrics to the press release, which includes depreciation and amortization, stock-based compensation, cash conversion days, and open orders for the relevant periods. These additional disclosures are in line with our commitment to providing you with enhanced transparency into our business operations and key performance metrics.
This morning, Ric will start the call with a few opening comments, Jana will review the financial results for the quarter and updated guidance for fiscal 2024, and Ric will complete our prepared remarks before taking your questions. I'll now turn the call over to Ric.

Richard Phillips

Thanks, Andy, and good morning, everyone.
As we expected, the second quarter of fiscal 2024 was hard fought, with our team navigating a challenging operating environment. Global macro headwinds, including pressure from elevated levels of inflation, higher interest rates, and geopolitical uncertainties, have persisted, and the consumer is pulling back. The markets we serve are experiencing demand softening, and our customers are changing production schedules and delivery date requirements.
Sales in Q2 declined compared to the same period last year, with manufacturing output in the quarter being reduced to meet the lower demand as our customers work through elevated inventory levels. Margins, on the other hand, remained stable, thanks in part to proactive measures taken to align our cost structure with slowing sales. We expect industry-wide pressures for the remainder of fiscal 2024 and have updated our guidance for sales and operating income for the full year to align with these trends.
Based on what we noted orders near-term choppiness, we did not change our guidance for capital expenditures in fiscal 2024 as we continue to invest in long-term growth opportunities. With a strong funnel of new business, supported by favorable industry megatrends, we're deploying a balanced capital allocation strategy focused on driving organic growth, global expansion, and long-lasting customer relationships.
Turning back to the results for the second quarter. Net sales totaled $421 million, a 4% decrease compared to the second quarter of last year. From a geographical perspective, the top line was strong in North America, [up low double digits, with particular] offset by declines in Asia and Europe. The decline in Asia occurred in Thailand, which was heavily impacted by our major medical customer that is involved in an FDA recall, while Europe appears to be a region of the world where the general economic slowdown is more significant compared to other areas of the globe.
One vertical market, industrial, posted year-over-year growth in the quarter, with net sales totaling $113 million, a 7% increase compared to Q2 last year, and 27% of total company sales. The strength this quarter was concentrated in charging systems, climate control, and public safety products. We frequently refer to our industrial business as green and clean. And in some respects, we're our own best customer, with products that reduce environmental impacts, promote energy efficiency, safety, carbon neutrality, and responsible use of natural resources, we specialize in heating and cooling systems, factory automation, optical inspection, electronic locking devices, and charging stations.
Next is automotive, where Q2 sales totaled $200 million, a 2% decrease compared to the second quarter of fiscal 2023, and 47% of total company sales. The decline this quarter was driven by weakening demand in Europe, partially offset by incremental strength in China. Longer term, we continue to see a strong runway for growth in the automotive vertical, driven by the industry trend toward incorporating more electronic content to vehicles, specifically in steering and braking systems. Our proven expertise manufacturing safety-critical products that meet the stringent regulatory requirements of the industry ideally positions us to support further advancements in these systems.
As a reminder, most of our automotive business is currently in steering and braking, and it doesn't matter what's under the hood, whether it be an internal combustion engine, electric motor, or a hybrid of the two. Essentially, the architectures are the same for these vehicles, which is important as consumer preferences and adoption rates evolve and the industry transitions toward EVs.
Finally, medical, with net sales of $108 million, a 14% decrease compared to Q2 last year, and 26% of total company sales. This result was in line with our expectations. As I alluded to earlier, our annual guidance reflects a $100 million reduction in sales with a major customer in this vertical, partially offset by growth in other programs. We expect these growth opportunities to continue to emerge as the population ages, access and affordability to healthcare increases, medical devices get smaller in size and require higher levels of precision and accuracy, and connected drug delivery systems become more common.
Our manufacturing capabilities extend beyond electronics and printed circuit board assemblies and include, but are not limited to, operations involving precision injected molded plastics, complete device assembly for drug delivery systems, and sterilization and cold chain management. The business development team focuses on leveraging these capabilities with higher level assemblies, or HLAs, which, as a category, represents an opportunity for more value-added content.
So in summary, a solid quarter in a difficult operating environment and an updated outlook for fiscal 2024. I'll now turn the call over to Jana to provide more details on the financial results for Q2 and review our guidance for the full year. Jana?

Jana Croom

Thank you, and good morning, everyone.
As Ric highlighted, net sales in Q2 were $421.2 million, a 4% decrease compared to the second quarter of fiscal 2023. Foreign exchange had a 1% favorable impact on consolidated sales year over year.
The gross margin rate in Q2 was 8.2%, a 40-basis-point improvement compared to the same period last year, with the increase being driven by a favorable product mix and lower material costs compared to 12 months ago when we were dealing with global shortages impacting the electronics industry. We are also aligning our costs to the current macro environment.
Adjusted selling and administrative expenses in the second quarter were $17.3 million, compared to last year's adjusted Q2 results at $16.4 million, with the increase being driven by a $2 million allowance for credit losses. Although the customer associated with this charge is not in bankruptcy, we determined it was appropriate to consider the age of the outstanding amount, the credit worthiness and payment history of the customer, and the timing of expected payments. As a percentage of sales, adjusted selling and administrative expenses were 4.1% or 40 basis points higher than the second quarter of last year.
Adjusted operating income for the second quarter was $17.1 million, or 4% of net sales, which compares to last year's adjusted results of $17.8 million, or 4.1% of net sales.
Other income and expense was expense of $5.3 million, compared to expense of $3.3 million last year. The increase was the result of higher interest expenses year over year, a product of our elevated debt levels and the current interest rate environment. The effective tax rate was 26.5% in the second quarter, compared to 24.5% in Q2 of fiscal 2023.
Adjusted net income in the second quarter of fiscal 2024 was $8.3 million, or $0.33 per diluted share, compared to adjusted net income in Q2 of last year of $11 million, or $0.44 per diluted share.
Turning now to the balance sheet. Cash and cash equivalents at December 31, 2023 were $39.9 million, and cash flow used by operating activities in the quarter was $30.7 million. Cash conversion days were 117 days, compared to 97 days in the second quarter of fiscal 2023 and 103 days last quarter. As a reminder, we have started including customer advances in our CCD calculations. The results for fiscal 2023 reflect this change.
The increase in CCD this quarter compared with Q2 in the prior year was driven by an increase in days sales outstanding and contract asset days and are indexed and in accounts payable days. In addition to a focus on inventory, we are also looking to significantly improve our cash conversion days as we more actively and aggressively manageme its components.
Inventory ended the quarter at $455.7 million, compared to $487.5 million at the end of Q2 and $482 million last quarter. We expect this number to continue to decline as we work with customers to rightsize inventory to match the current demand outlook.
Capital expenditures in the second quarter were $13.2 million, supporting organic growth, maintenance requirements, and investments in automation and efficiency.
Borrowings on our credit facility at December 31, 2023 were $321.8 million, compared to $273.5 million a year ago and $296.7 million at the end of Q1. Our short-term liquidity available, represented as cash and cash equivalents, plus the unused amount of our credit facility, totaled $105.7 million at the end of the second quarter.
It is important to note that on January 5, 2024, we amended our short-term credit facility to provide additional domestic liquidity for investments needed to meet working capital and other operating needs. The amendment increased the borrowing limit to $100 million from $50 million and changes the maturity date to January 3, 2025 from February 2, 2024.
There were no shares repurchased in the second quarter of fiscal 2024. Since October 2015, under our Board-authorized share repurchase program, a total of $88.8 million has been returned to our shareholders by purchasing 5.8 million shares of our common stock. We have $11.2 million remaining on the repurchase program.
As Ric highlighted, we are updating our guidance for fiscal year 2024, with net sales now expected to decline 2% to 4% versus fiscal 2023, which compares to our previous guidance of flat with the prior year. Operating income is estimated to be in the range of 4.2% to 4.6% of net sales, compared to our previous estimate of flat with the prior year. The guidance for capital expenditures did not change, with a range of $70 million to $80 million.
I'll now turn the call back over to Ric.

Richard Phillips

Thanks, Jana. Before we open the lines for questions, I'd like to recognize our team for, once again, being honored by Circuits Assembly Service Excellence Awards. In November, we achieved the highest overall customer ratings in the categories of dependability and timely delivery, technology, value for the price, and manufacturing quality. These awards are based solely on the direct customer input.
I am very proud of our team's consistent focus on building long-term relationships with our customers, regardless of whether they are new or customers we've worked with for a decade or more. They consistently recognize the Kimball team, our culture, and a common set of priorities that allowed us to continuously improve and keep our promises. I'd like to congratulate and thank our team worldwide for receiving this recognition.
We are winning together the Kimball way, and I'm excited about what's ahead for our company.

Question and Answer Session

Operator

(Operator Instructions) Derek Soderberg, Cantor Fitzgerald.

Derek Soderberg

Good morning, everyone. Thanks for taking the questions. I wanted to just touch on the current environment by end market. It seems like industrial has pockets of strengths, medical is tracking as expected. Can you talk a bit about where the incremental weakness is coming from by end market that is leading to the vision and the outlook? I would imagine you're feeling some of the impact of the UAE strike. Is the incremental weakness you expect for this year largely in automotive? Or really, is it broad-based?

Jana Croom

Hey, good morning, Derek, and thank you for the question.
So let's start off with medical because that is probably the cleanest and easiest to understand. Medical is tracking exactly as we expected, which is we're going to see a $100 million decline related to one large cut, offset by some new product launches that we have in roughly the $50 million range. And so that one is going exactly as expected.
Industrial, we are seeing significant weakness in Europe, particularly related to the smart metering product line. It is being offset by growth that we're seeing in North America, specifically related to charging station and also some benefit that we're seeing come through in the HVAC market.
Automotive is really a mixed bag because what we're seeing is softening in the European market. I will tell you, Europe, across the board, is just really tough right now. And if you're looking at, generally speaking, where the declines are coming from, it is very clearly Europe. Automotive in North America is holding in relatively flat. We saw minor disruptions as a result of the UAW strike. We don't anticipate seeing any more disruption come through for the remainder of the fiscal year. And in China, we also had some nice pockets of strength in the automotive business.

Derek Soderberg

Got it. And just on --

Jana Croom

Our mix in North America, but in China, those sales have been really strong.
Yes, sir.
I own a majority of our mix in North America and in China, those sales have been really strong.
Got it.
And there is a new the weakness in Europe.
I know you obviously have operations in Poland.
You just expanded in the prepared remarks.
You mentioned some geopolitical uncertainty.
You've got a conflict in the Red Sea there from a shipping rates are up on.
I'm wondering if that played sort of a quantifiable impact to how you're thinking about the rest of this year from and if that's not the case, I guess, June, or what are you seeing in the out quarters leading to the lower operating income guidance?
So we have seen disruptions and renting.
We actually ended up sending letters to all of our customers related to that in half Allison comment upon us as a buyer to be able to ship and distributing products to the customers who are actively lending on and so on.
We are doing our best to find alternatives opportunities for afraid.
I'm not going to blame it on USD2 million now like you are really soon now on is a true slowdown in Europe.
A lot of it has to do with what we saw in 22.
And as we talk the language and close this out, as you described it last year, new bond relative to customers, which announced demand.
This feels more like on on a lot of inventory near was a shortage and scarcity of product availability talk as much as they could from us.
And now they're sitting on a lot of inventory that they work through.
And so we know that, that will correct itself over time.
The latest causing us some tangible near-term choppiness as the benefit that inventory purchases through to the end market.
And then we resumed resume what I was referring to as a normal than the cadence of growth, our CCO liken that to the toilet paper debacle of COVID 2021, where you're sitting toilet paper, everybody ran out on a macro thing.
And then you have to work newsletter anywhere from five and the need for it back to a steady-state growth period.
You will appreciate the detail.
If I could just squeeze one more in from Rick.
You mentioned some strength in North America on industrial arm.
You did mention no clean and green minerals from each back charging station.
Seems like that's a growing opportunity for you.
Those are there any way for Trimble to sort of played in the manufacturing tax credits tied to the inflation Reduction Act on?
Would you have to reshift manufacturing to Jasper for them on?
Is that a real opportunity for you guys?
It's certainly something we talk about.
Yes, we see that we see a movie like the strength in North America around those areas where we are proud, as you know, all of our North American manufacturing network, and we have customers that want to talk to us about it all the time.
So it's certainly an opportunity that we're continuing to explore and and could be upside also.
We really appreciate it.
Thanks.

Operator

Our next question today comes from Chris in both from B. Riley.
Your line is now open.
Please go ahead.

Griffin Boss

Hi, Rick, Jenna, and thanks for taking my questions.
So first, on the working capital front, we saw a material step-up in days sales outstanding in the quarter.
Just curious what your expectations are going forward for this year and then longer term as it relates to receivables?
And I'll take that question.
Avoiding risk Griffin.
We have a lot of work to do here, right, and in partnership with our customers because as you know, we won't going according to the demand for our customer placed on us in the U.S. and CMR deleveraging.
We ordered 52 weeks ago, 39 weeks ago, 26 weeks of daily selling and as demand for assets moving out from a that inventory is continuing to build.
We're working through with customers and a variety of landing rights and some of it and entered the cash deposits from customers.
Some of it is going to be can consignment inventory for customer.
Some of it is clear carrying charges on it in, although my preference right now, not carrying charges as cash, which, as you know, in this type of environment scheme, I would expect that our RDSL. and RPDSLHE. to come down, as I previously said, insulin and insulin in car.
And so we really got to work on the 18 of our receivable, get that more in line with our contractual agreements.
Our customers working capital is a laser focus right now.
So in moving the inventory, but seeing it all the way through to the region impact that would have on our balance sheet in terms of debt relief.
Got it.
Okay.
Thanks, Jenna for the color there.
And then so just turning to medical, might you understand, obviously the fiscal year 24 guide accounts for $100 million reduction in sales related to that at the recall of the major medical customers.
So can you just remind us, I'm not sure if you said in the past when you expect that rig, call it to be remediated as the programs start to hit the top line again in 1Q 25 or later in 2025?
Or is that than I do not have that visibility?
Yes, we really don't.
What we've tried to be a grouping is really conservative about that at this.
I think we've said before, we continue to have a great relationship with that customer.
We're discussing multiple opportunities at any point in time and we stand ready to support.
But we've tried to be really conservative and not build that into our expectations.
one one point on medical outside of that customer that you can probably do the backwards math on.
But yes, as Jim said, we were really on expectations overall and haven't changed those expectations for 2024.
And our medical growth in Q2 would have been high single to low double digits outside of that reduction from that one customer.
So we are making progress.
We continue to see wins coming in, and we're really optimistic about about medical long term.
But up to directly answer your question was not built in any any expectations related to that program restarting.
Okay.
Fair enough.
Great.
Well, thanks for the color.
Appreciate you guys taking my questions.
Thank you.
So.

Operator

Our next question comes from Jaeson Schmidt from Lake Street.
Your line is now listen?

Jaeson Schmidt

Yes.
Thanks for taking my questions.
Understanding that there have been pushed out here just given the macro, but just curious if you're seeing any issues with the committee for cancellations within your backlog?
We would have seen yet decommissioning cancellations come through with our backlog, which, as you know, it's not usual in this business normally on that firm orders and that volume, you can see it out far away.
Now they haven't been huge comp and they have been geographically focused.
We've actually seen them in a good example is Europe, industrial, where we saw a significant shift.
That loan were quite honestly, the unexpected.
And so we work with the customer on on what that looks like.
Can we partner through it?
It's really interesting because we've had a solid ramp of new program launches and NPI. where we're seeing some of that often comes through our existing programs, Madison and places for years where we're seeing Deaconess cancel and St. Michel April.
Okay.
That's really helpful color.
And then just following up on that, I know you just give you example of industrial, but are those decommission cancellations concentrated in one of your segments or is it pretty broad-based?
Medical is actually tracking really well and selling it strange because each one of our peers have highlighted Medical as a softening vertical for them for us, that's actually going exceptionally well.
Industrial is really we're seeing more of a softening and struggle.
And so I think it depends on each vertical sort of where you'd like that asset for us at some softening in European automotive.
And that's really a result of just the economy and what they're experiencing their North American chugging along as expected.
Got you.
And then just last one for me and I'll jump back into queue with Almaden dynamics across your business and maybe some mix shifts here and there at a high level, how should we think about gross margin through the remainder of calendar 2014?
Asset.
That is a great question.
We're working through product mix for the remainder of the year right now and really understanding where our materials and labor costs are finishing out as a percentage of net sales.
You know, if you look at our guidance range for the full fiscal year of 40 to 46, what that tells you is our gross margins tend to be somewhere in the range of where you've seen us from the last two quarters.
And that on, you know, maybe eight ish level.
We're certainly going to do everything that we can pull through in terms of cost containment and alignment.
And then I know you didn't ask about SG&A, but laser focus there, reducing all the kind of where we can and where appropriate without sacrificing long-term growth.
We just kind of hunker down and get through it since the bottom line.
Okay.
No, I really appreciate all that color a lot guys.
one thing I will note that Jason asked about and I would like to say on an open mind, it was a very thoughtful decision by the leadership team to online costs to the current environment.
What we have told you is we're not going to talk about by hurricane and are there that are not going to have any of those conversations anymore or we just take the absorption and don't respond.
We really felt like it was incumbent upon us to make the decision to control costs where we could not have met the margin, you know slide into the at this point until we are, we are working significantly warmer.

Operator

Our next question today comes from Anja Soderstrom from Sidoti.
Your line is now open.
Please go ahead.

Anja Soderstrom

I think in taking my questions, have some follow-ups on the question.
So influence some of the Medical, a customer we were there are maintaining our app product.
Are you exclusive with that customer on that product?
Or could you be working if this was going to be the prolonged and the competitors taking serious is going to be able to work with the competitiveness in that?
Yes, we are.
We do have other customers in the oxygen and ventilator business we are working with and are seeing an increase in intake.
So yes, we do work across that part of the business with multiple companies.
Okay, thank you.
And you were talking about the weakness in Europe and you mentioned inventory and inventory adjustments there.
Is that mainly the reason for the weakness?
Do you also see a broader economic weakness?
It's prior economic weakness, the broader economic weaknesses, just exasperating inventory challenge, we are seeing some.
Thank you, Anna stamina coming out in the near future, but we're getting data daily consistent.
Okay, thank you.
And one last one is not related to the taxes and the revenue mix in North America will do better than the other regions.
And I noticed taxes are higher in.
Should we expect those to continue to be higher as North America, my continued to be stronger?
Or how should we think about the taxes going forward?
Yes, we are unique that the tax rate is really a direct impact into the mix of where sales are coming from geographically.
We expect to control that as much as we can be no tax arbitrage opportunity.
But I would say in an effective tax rate in the mid 20s went in should expect somewhere in that 526 range.
Okay.
Thank you all for me.
Thanks, Tanya.

Operator

Just a reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad.
If you change your mind, please press star followed by taking.
Our next question comes from Tim Morris from E.F. Hutton.
Your line is now open.
Please go ahead.

Tim Moore

Gina thing, forgetting the open orders amounts of the press release going forward.
So maybe just on the backlog of open orders, you mentioned EV chargers got the economic climate control, the public safety food home.
Can you maybe just highlighting there is going well and overlay of time with the tolling systems for heavy trucks and SUVs to not during the battery, if you could just maybe say late in females, it's growing pretty good.
You're seeing pretty good interest in orders?
Yes.
So you now have a lot of it.
We're seeing now in terms of on charging station, new medical customers that's going well, automotive, North America, steering and braking going really well and also automotive in China.
It's going well for us.
We've got some new product and program launches that we're going to see there that are emerging and exciting.
And two, offset by some some inventory that we've kind of worked through and softening in Europe.
Great.
That's helpful.
On new.
Just shifting gears, maybe I'd love to hear maybe worth Rick's appetite and your appetite is for M&A as or stoop willingness maybe to do medical.
Is the priority near term?
I know you've got the corporate development team in place.
Does anything change around now for your kind of put a bit of timing?
Yes.
I think you know, our thinking probably hasn't shifted significantly of late, Tim.
It's it's obviously something we never ignore and we continue to monitor opportunities.
We do see a really healthy funnel, as Janet mentioned.
And we as we look forward in the out years, you know, the lead time on wins.
I mean, we see some really nice wins.
We would like to places that we're playing.
And so we think the organic growth opportunities, our are really robust.
And as Janet said, we also are working on the balance sheet to free up and create flexibility for the future.
So I wouldn't say wherever out of the game, but we're we're really focused organically right now, and we think that's the right place given the balance sheet.
And given that the opportunity that are coming, our way would be one of our customers deciding that they don't want to produce a particular program or focus and they want us to take on the higher level assembly and they're going to drop out that business and we're going to take it over and some cases, the corn macro economic environment is interesting because it causes our customers evaluate their own margin improvement opportunity in ways that we can partner with and resolve that.
So you were to see us do something on that front.
It would be in that vein, Jim, you beat me to it?
That was exactly going to be my next point.
That's what this new growth we're going to talk with you and Rick about that before you've actually had some customers come to you immunotherapy that proposing of themselves.
But it would seem like you have a lot of organic or hybrid opportunities in the medical front with taking some work of other people's cleaved words, not a big focus for me, the merger of higher-margin businesses that we care about allocating capital to the.
That's good.
That's good.
And then I guess I just got one last question regarding your Investor Day.
You think you might be doing once you do still plan on maybe laying out the dollar amount remains immediately, the rough timing of global capital managers were pilot plant experiencing a cadence by year where that may be on hold a little bit to the macro slowdown in the you have any rough range of what maybe your investor day might be?
Is it going to be the spring.
So the Investor Day wouldn't be the spring of organizing the Investor Day.
It would be this fall.
And the only reason for that is we need more data rates as well as we continue to look at FY 25, 26 and beyond, really in the market to settle out.
And as you've seen sort of where we're shaking out in terms of our growth trajectory in terms of growth expansion internally, we certainly have a Blue plan and strategic plan for future expansion.
Quite honestly, Tim, if I were to come out to you right now and tell you that I'm expanding another region in the world, you would not be handy with me today that's well beyond RedFlow, that being where it goes out, that's a So yes, well, again, certainly, we I have that strategic plan and we spent a lot of effort into it.
We also recognize that in this current environment, we've got have to work harder before we add on to the future.
Great.
That's really what I wanted to get a rental agreement with.
Yes.
No, it makes sense is that we now have happens on a lot of other companies.
And you're not the first one and the Boden slowdowns pretty much globally known some pockets of pumps.
That's really great.
And looking forward to an Investor Day in the fall or whenever it is the number was not next month.
So a lot.
And that's it.
My questions.
Thanks to everybody that honor.
And Tim, yes.
Yes, we had our first trial born yesterday afternoon, baby boy and moms doing well.
And so the baby, the Thanks for asking Conrad, aye.
And it's wonderful.
Thanks generic in the ticker Provost.
Thank you, everyone.
That concludes today's Q&A portion of the cool.
There will be a replay available after today's call.
The details for this are as follows Please dial plus one nine two nine four five eight six one nine four.
The access code to this is a four eight one one nine.
Thank you, everyone.
That concludes today's call.
Me too new to me.