Integrated Micro-Electronics, Inc. (OBAI) Earnings Call Transcript & Summary

Again, good morning, everyone. We're IMI, about to present our Q2 earnings briefing. We're very excited to share positive news with everyone. Our second very positive quarter in a row, also concluded the sale of IMI Czech. So with me here today is our CEO, Louis Hughes, our CFO, Robert Heese; our VP for Finance, Laurice Dela Cruz. I'll go ahead and start with some market outlook updates. That's not showing up correctly on my screen. Give me one second to figure out what's wrong, sorry.

Probably have to close down other PDFs.

Yes. All right, I'm back. Let me share my screen again. All right. There we go. Okay. So some growth figures from the IMF. Tariffs still dominate the talks and the adjustments of GDP growth across all regions. There was some increased growth forecasted in 2025, mostly in anticipation of the tariffs. A lot of the economies, a lot of the companies have been front-loading some of their business before the tariffs kick in. One positive news specifically for IMI is the recovery of the Eurozone. This was showing some depressed growth numbers in the past few quarters, but it's trending in a positive direction. We think there's still some upside left for this, and we're hoping that recovery speeds up in the next couple of quarters. The European market is kind of the backbone of the IMI customer base, and we're really excited to see that the recovery is trending in the correct direction. One more upside on global growth is really still centered around the tariffs. The tariffs are okay as long as the negotiations lead to a predictable trade framework that companies and governments can work with in a predictable manner. The second round of tariffs just -- or the second version of the tariffs just kicked in a couple of weeks ago. And I think people and governments are still figuring out what they really mean, what they -- what the implications are on a per industry, per country basis, and there should be more clarity in the next couple of weeks, next couple of months. And yes, everybody is just going to figure it out as we go along. In terms of the key segments for IMI, I'm going to start with the automotive market. So the automotive market continues the trend of electrification. This is despite slower-than-expected growth in electric vehicles outside of China. So we've been talking about electric vehicles for the past 5, 6, 7 years. And initial forecasts were much more aggressive than they have been in reality. But the trend is still there. Everybody still believes that the world is going towards a battery electric vehicle dominated economy in the next decade. So it's just a matter of waiting it out and waiting for adoption to fully kick in, in a lot of economies outside of China. There are a few factors that have been increasing unit prices for automotive products. One of them is the increasingly complex systems required by ADAS. which is leading to higher development and testing prices. So the automotive market or most electronics goes through cycles of high initial prices and then a period of adoption where these products slowly become commoditized. We believe that right now we're in an up cycle again where new technologies, new platforms are starting to come in and with that comes higher prices. Aside from that, automotive products will also start to incorporate tariff costs especially for companies without a wide geographical footprint. I'll talk more about how this is actually an advantage for IMI, specifically because of retaliatory tariffs. So it's not just tariffs for products going into the U.S., but some economies have also imposed tariffs for products coming out of the U.S. to maintain some sort of parity. So for companies that don't have a wide geographical footprint like IMI, where they're limited to operating in specific countries or specific regions, this poses a pricing disadvantage compared to companies like us where we're able to cater to our customer and figure out the most cost-efficient location from where we serve our customers. So aside from that, our supply chain is also very global in nature in that aside from being able to talk to our customers from many different country sites, we're also able to source our components from China, from Europe, from the rest of Asia. And this allows us to maximize value and derive margin from our business lines. Moving on to the industrial market, which is IMI's second largest segment. So hyperscaler investments had been driving segment growth. Data centers have been an area of interest for IMI recently in the past year. So this will be products serving the Amazons of the world, the Googles, the Facebooks, who have invested in massive data centers. And there are a lot of electronic components in which IMI can play in. So we're quite excited to get into that space. Our sales teams have been tasked by Lou to aggressively hunt down opportunities in this space. Again, touching on vehicle electrification outside of the automotive mobility segment, there is also a need to support the infrastructure for battery-operated vehicles. And these charging stations require a significant amount of power electronics to enable the technologies that allow them to operate. So we're still very much in the power module space. There's been a bit of shift in the strategy, but we're excited to see that there's a growing segment that requires a good deal of power module components. Third bullet is in interconnected systems, particularly -- so everybody has been talking about IoT, Internet of Things. One particular area of interest for IMI would be industrial IoT, where a seamless data exchange platform is required to operate these things efficiently. And that's something that IMI has already been involved in and will continue to be involved in. And this isn't going away in the near, mid or long term. Systems will rely on interconnected devices for many, many years. Last point is that government mandates and investor selectivity is leading to rising demand for renewable energy applications. Myself being in Investor Relations, when I talk to investors, there's more and more focus on ESG and how sustainable our business practices are. And I guess the bread and butter of renewable energy still relies in solar, but also other renewable energy sources, all rely on battery management systems, distribution of energy, all still, again, pointing back to power modules and the role they play in enabling these technologies. That's it for me on market outlook. I'm going to pass you guys over to Lau and Robert to cover the financial results for the quarter.

So good morning, everybody. So for Q2, segment updates between automotive and nonautomotive, we're still seeing continued decline on the automotive side of the business on a year-on-year basis, although I think that decline is slowing down from a quarter-on-quarter basis. I think what's really positive for us, you can see on the chart, the non-auto, which earlier last year was kind of the weakest part of our business is now turning around and now we have almost 14% growth on the year-on-year quarter-on-quarter business. And so from the automotive side, we're still seeing decreased demand from our European end customers. OEM sales in Europe are weak. I think some of that is also related to potentially tariff as autos are probably struggling a bit to get into the U.S. market. So we're still impacted by that. And also overall demand, as Brian had shown on an earlier chart, GDP in Europe is still a bit anemic, although starting to trend in the right direction. There's also some impact on the transition process as we moved some of our business from our Czech facility. We've moved some of that business from Czech to our Serbia and Bulgaria facility, but there's some dislocation on that as we did that transformation. And then overall, we're seeing a slowdown in our electric motorcycle production business compared to '24, and that will probably continue on. On the nonautomotive side, this was one of our focuses for this year was to grow this side of the business, and we're happy to see that it is growing. The nonautomotive business is now accounting for 35% of IMI's 6-month results. So that's a good achievement. There's a continued recovery on the industrial security business, growth in our industrial metering demand with increased industrial energy efficiency requirements. And that's all kind of continued while we were deemphasizing our low-margin telecom business, which is now down to about 2.5% of our revenues. So this is good for us because the nonautomotive is a good margin business. And the fact that we've removed some of the lower-margin business while sales are increasing is good for our overall bottom line. And then the sales focus is now on data centers, medical, power modules, smart urban technology, battery technology and renewable energy applications, which will -- is a focus for us now to continue driving sales up on the non-auto side. Just on a region update, you can see from Philippines, the continued recovery on the industrial security and smart metering business has really stabilized the overall revenue for the business. There's still some slowdown on the automotive side, but that's been more than made up for on the non-auto side. And then as we mentioned earlier, the Philippines is where the motorcycle business is, and that's had some demand. So I think, again, it really speaks well to the recovery in the industrial side of our business that has been able to make up for the slowdown on the automotive side. In China, we have a 26% decline year-on-year and 6 months to 6 months. Again, the closure of our Chengdu facility is affecting the year-on-year comparison as well as the reduction of the low-margin business in telecom. We've been renegotiating some terms for complex automotive application business in China. And we've had further consolidation of our China facilities to further our footprint optimization, and we're to achieve increased utilization of our overheads. So that's had some impact on our revenue as well. From Europe, maybe the slowdown on the Europe side is -- the decline is declining. 18% decline on a 6-month basis, but it's dropping to 14%. Again, the impact -- some impact from our sale of our Czech facility as we were transferring some business to Bulgaria and Serbia. And again, as we mentioned earlier, the European automotive market remains soft, driven by uncertainty on the tariff situation in the U.S. market. We have a lot of very good OEM end customers that will definitely be impacted by their sales into the U.S. market. And then Mexico starting to grow now. Quarter-on-quarter we're seeing 3% growth. While on the 6-month numbers, it was a decline because we had a delay in the new steering application business, but that's now ramping up. And so now we're starting to see quarter-on-quarter growth in Mexico. So it's a good turnaround in the Mexico and the Philippines business for Q2. Next, go ahead, Lau.

Thank you, Robert. So we are pleased to present to you the company's performance for the second quarter of the year. And to begin with the upper left chart on the revenues, we reported a total of $249 million of revenues for the second quarter, which is 10% lower than last year because of the continued softness in the automotive electronics industry. But on the other hand, we are seeing some improvements in the core revenues, which is showing a $6 million increase or a 2.6% increase from the previous quarter. And this is mainly from the recovery of our non-automotive segment. In terms of the gross profit margin, despite the softness in demand compared to last year, we are now seeing significant improvement in our GP margins from the last year's trends of less than 8% to the level of 9.5% in Q1, although there's a slightly lower Q2 at 9.3% because of some one-off cleanups that we did for the -- related to the sale of the Czech Republic. But these improvements is a result of the restructuring activities that we have done in 2024, which resulted to a meaningful reduction in the factory overhead, while we also continuously improve our productivity and operational efficiency and also drive the reduction in our material cost. On the upper right chart, you'll see that we have significantly improved our operating income, which was mainly driven by the decrease apart from the increase in the GP margins, also the decrease in the SG&A expenses by $7 million for the core business versus the same period of last year. VIA has done the same cost reduction initiatives on top of the savings resulting from its voluntary delisting last year. In Q2, we also recognized some one-off expenses related to some additional restructuring initiatives, and this is to align the cost structure with the current market dynamics. And on the net income, as we have recently disclosed, we reported $7.6 million of net income for the first half of the year, and this is a significant turnaround from the last year's net loss of $8.8 million. And our non-GAAP net income for Q2 is almost more than double versus the Q1's net income, and this is mainly driven by the improvement in the operating income. I think those are the highlights for the performance of Q2. I'll turn you over to Louis to discuss the EBITDA slide.

Thanks, Lau. So I'd like to take you through what we've done over the last 12 months because I think it's important for everybody to understand the work that's gone into creating the numbers that you're now seeing in front of you, an 8.2% EBITDA in the quarter for the EMS business is a fantastic EBITDA. And our goal is to maintain an EBITDA above 7% over time, which is what I would consider to be global best-in-class for an EMS company of our size, of IMI's size. So we started out with the organization. The organization wasn't flat enough. We had a lot of overhead in our organization, a lot of silos, poor communication, poor understanding of who owned what and was responsible for what. So we did, I think, a really complete job of flattening the organization and creating the right reporting lines and creating the right set of KPIs for the teams so that everybody understood exactly what was expected of them when they did their jobs. The team of managers, of leaders that now work at IMI are servant-based leaders. So we are here to support the people in the organization, not the other way around. And we, as a result, have very motivated employees. Everybody knows and believes that they can make a difference, that the way they show up every day is going to make a difference to our customer satisfaction and then in that way, our bottom line. Number two, operations. That was a big point of focus for us at IMI. It starts off with quality. And one of the things that I believe IMI has always had is outstanding quality. It's the heritage of the company. The company does a fantastic job for its customers as it relates to quality. So we wanted to keep the quality focus of the organization, that zero defect mindset, Six Sigma mindset intact. And I believe we have. And our quality -- while a lot of companies in the EMS business will say quality is a given, I'm here to tell you that it is not a given. I've been doing this for 40-plus years, and not all companies provide the same level of quality to their customers. And I can say confidently that IMI does a wonderful job in this area. Where we could improve are things like lean. We had opportunities at our sites to improve lean execution. So we did a lot of value stream mapping for all -- almost all of the processes that we run. And I think across the board, across global sites, we've been able to improve our efficiencies extremely well. On the NRE side, this is also something that's extremely important to mention. IMI has an internal team that handles test and automation and a fast, efficient and flexible execution of this for our customers. And that is really, really important for a midsized EMS company like IMI to be able to have its own in-house resources to develop and execute, implement automation and test is unique. And we do an extremely great job at that. We do it fast, and we do it with a really relatively low cost compared to our competition. Lastly, we had to set ourselves up for mix. We are a company that is chasing big customers who have a lot of mix, who may run many, many different SKUs and smaller quantities. Some of the larger EMS companies are not attracted to that business. We are, and we happen to do it very well. And we will continue to do that well, and that will continue to differentiate us in the marketplace. As an aside to the operations, the number of locations, the number of rooftops that IMI had were just far too many for the revenue that it had. So over the last 12 months, we've closed multiple and many rooftops, and that's not just sites but locations. These are locations in Singapore, in Malaysia, in Japan, in the U.S., which was also a small site, now in Czech and in China, and that helps rightsize our company and our company's overhead, and that helps to lower our overhead to make us more competitive and a better operator. Third thing is sourcing and supply chain. This is something that we drastically had to improve upon, and I believe we are there now. We have got a [ spelt ] supply chain organization that is local to all of our sites, not centralized. The supply chain team does a great job. And you see our cash improving and our net debt improving by a huge amount. Robert will speak to that in a bit. But that has wholly to do with our customer service teams, our planning teams and our buyers that work hand-in-hand at our sites together as a team to ensure that we get the maximum number of turns that we can and that we drive our inventory down, which drives our cash up and our costs and profitability, our cost down, profitability up. And this is not easy in a business where you have high mix. So again, we differentiate ourselves through our high mix. But then our supply chain teams have to execute extremely well to succeed there. Sourcing, we have a whole new sourcing team led by new commodity managers. We work with the very best world-class companies in each commodity or domain. And we're bringing alternatives from those suppliers to our customers, helping them save money and improve performance and quality, and it is working really well. You are seeing that hit the bottom line with our [ VAM ] increasing. You are seeing that hit the bottom line with gross margins going up and EBITDA going up. We are taking ownership over the [ BOM ]. We are taking ownership over our sourcing, and we are driving that value back to our customers. Number four, sales. This is also something we had -- IMI had traditionally remoted sales where sales was more based at the factories, not as much in the field. And we have pushed our sales teams out to where our customers are, in Europe and the U.S. mainly. And we are targeting specific customers that we believe have the greatest growth potential. And I strongly believe that while our revenue has come down over the last 12 months as we've rightsized and changed our focus a bit, you are going to see us grow again in 2026, and you're going to see us grow nicely with the right customer mix. Lastly, I want to talk to you about vertical integration because this is something that very quietly we are doing at our sites, and this means mechanical vertical integration. The mechanical side of this business tends to be the most profitable side of the business. That's things like machining, plastics injection molding, metal stamping. So we have now across all 3 geographies, we will have by the end of this year because we're adding injection molding and machining to the Philippines. We will have that capability in all regions. That is going to drastically improve our customer satisfaction and responsiveness, and it will also continue to improve our margins. So I'll pass it on. And again, just look at the numbers here. The numbers don't lie. We are driving improvement in our performance financially. And that's not just the EBITDA or EBIT or net income, you're going to also see that drop to our net cash and net debt, which we are drastically reducing every quarter. And we will continue to reduce as we go forward. Robert?

Okay. Just a short one on the capital structure. Again, we continue to drive down our debt. So our ratios have improved significantly. Our bank debt to total equity has dropped from 1.3 down to 1.07. Net debt to total equity has gone from 0.89 to 0.58. We're slowly building that up, our book value per share. Our cash is at a comfortable level. We have additional lines of credit available, but we are focused on moving that cash into paying down the debt and reducing our interest expense. So you'll see more of that in the second half of the year. It was a little bit slower in the first half of the year. But as you can see, the cash has increased significantly over prior quarters, and we'll be targeting that on to our short-term debt. I think -- yes, that's good. Let's move on to the next one.

Robert, I think it's important to mention the 12-month debt reduction.

I mean we've set some -- we don't like to give out forecast.

No, I mean prior, I mean prior 12 months, since June or July of last year.

Yes. I mean we've paid down over $20 million. And I think we're over $40 million in the past 12 months. And we're going to do more than that this year.

I think we're over $100 million, Robert, aren't we? Difference in net-net.

On a net basis, yes. Because we've increased our cash and paid down our debt over the last 12 months.

That's right. Okay.

Go ahead, Brian. And then again, from a CapEx perspective, we spent only $3.7 million for the first 6 months of the year. We will spend more than that in the second 6 months of the year, but it's still going to be a very disciplined, and most likely it will be below what we've budgeted for the year for capital expenditures. We're focused on, as Louis said, kind of on the vertical integration, where we can get a good return out of spending the money and then any additional growth type CapEx that we have to spend.

Yes. Just a quick note here. When you improve lean and you improve operations, you free up extra capacity. When you're not operating as efficiently as you should, then you don't have as much available time on your equipment. So the beauty of what we've been able to do over the last 12 months is significantly improve the efficiency of our operations, especially in Philippines and Mexico, so that we've been able to free up additional capacity that doesn't cost us a dime of investment. Okay. So key takeaways that you as investors should be taking away from this meeting is that there's continued improvement in net income and EBITDA and you're going to continue to see that going forward due to all of the effort and results of this team. Core factory overhead and GAE reduced by a little under $17 million year-over-year in Q2 2025. And that's net, right? That's net of increases because you've got to increase people's pay every year to keep the good people on board. We have further reductions at the end of Q2 and Q3. We are going to be consolidating our 2 Shenzhen facilities. We had 4 facilities a year ago in China. The business in China is very, very difficult because with the tariff, there is more SMT and PCBA assets that are needed because to get substantial transformation in country of origin, you have to do that outside China. So when everybody leaves China, those SMT resources lose their value. So beginning a year ago, we quickly moved to reduce our square footage there, and we'll be down to about 40% of our original square footage by the end of September. Czech Republic, we have moved that facility to another company. We've taken our customers with us down to Serbia and Bulgaria to better utilize those facilities. And we do that without any investment, any new investment. And by doing that, we have fewer larger facilities. It enables you to be more competitive from an overhead perspective. When you can run more business in each facility, it just gives you much better overhead utilization, and we'll get scale out of that as we grow next year. We're really, really focused now on developing new business. The operations are wholly fixed. Our sourcing and supply chain teams are operating fantastic. And now it's all about bringing new profitable business into the company. I am almost exclusively focused on that now with the sales and commercial teams. And I think 2026 has every indication of us getting back into growth mode. This $83 million in net debt improvement over the last 12 months is something that's also really important to note. And I think our team from Robert on down on the finance and accounting side is doing a great job of helping us to drive our debt down and down. And as we generate cash every quarter, because we have a profitable organization that's managing cash well, we're going to continue to aggressively pay down the debt. The sale of the Czech facility, this was, in my mind, a really great thing for us. We had too much capacity in Europe. Czech is a really difficult place to operate, especially with Ukraine right there and all the turmoil that it creates with people passing through Czech. We struggled maintaining the right people at that facility. And we are really, really solid in Bulgaria and Serbia. Notably, in Serbia, we're in the center of the country in a town called Nis, which is a great place to operate. Our competitors are not there. They're all up in Belgrade. And what's nice is we have a much better available labor market, much better available talent pool and very little turnover, very stable. So things are going extremely well in those 2 locations. Tariffs, I think one of the things that isn't widely known is that the Philippines tariff back to the U.S.A. for electronics and electrical product is only 6.3% and 6.6%. So it's not 19% as it is for the other commodities. So this is something that is really important because IMI being the largest EMS provider in the Philippines, now has a unique advantage over other Southeast Asian manufacturers who are sitting up at 19% and 20%, and we're sitting at 6.6%. So we believe that's going to really drive a lot of the OEMs and especially our current customers to want to invest more in the Philippines and do more business in the Philippines. And having clarity on the tariff situation really enables us to hunker down now. And the fact that our Philippines facility under new leadership with a great team leading it, we're just ready to rock and roll right now. So our footprint is nailed down. Our supply chain is working really well and our sourcing teams are doing a great job together with our customers in concert with our customers. So I believe now we have the most cost-efficient solution for our customers, especially when we're working with customers that are high mix. Thank you.

All right. Thank you, Lou. We'll open the floor up for some Q&A. While we're waiting for questions to filter in. Let me touch back again on the consolidation activities in China. So following the closure of IMI Chengdu several months back, our core operations in China are now concentrated in 3 sites, 1 in Jiaxing and 2 in Shenzhen. And at the moment, that is the situation. The further consolidation that Lou was talking about was more on a support structure basis in that we're streamlining the support structures, particularly between the 2 Shenzhen sites, the finance support, the HR support. So we're streamlining that. So we're consolidating in that regard. So while the majority of IMI China's revenues are driven mostly by domestic demand and remain largely unaffected by global tariff talks and trade tensions, we still continually assess the efficiency of our manufacturing footprint in the region. our objective really is to optimize asset utilization and streamline support structures to drive improved profitability. So in that regard, we will provide further updates as specific actions are implemented. But at the moment, that's what we're sitting on, one in Jiaxing and 2 in Shenzhen.

Yes. Brian, I want to throw in a comment as well just from Lou's last slide. There was -- noted on the slide, we've improved our net debt position by $85 million for the group. But I really want to emphasize the core of our business is really the real generator of cash. And we've improved over the last 12 months, $109 million on our net debt position. We've paid down about $85 million of debt and improved the cash by $24 million. So the real -- just to really double emphasize the core of our business is generating cash, and we're really paying down debt hard. So just an extra anecdote on that.

Nice.

Thank you. I got a direct message regarding NRE. "Lou, you mentioned NRE. What does NRE mean?" Basically, it means nonrecurring engineering costs. So that would be, as Lou mentioned, setting up testing, development for specific products. And as Lou mentioned, we have a dedicated team for that. And we've recently streamlined and given better -- more aligned objectives to this team, and they're operating more efficiently than ever.

I just want to, Brian, make another comment that a lot of our competitors seem to be focused more on product design from an engineering perspective. They're going to customers and trying to promote their capabilities in product design and more product-level engineering. We're doing -- intentionally, we're doing just the opposite. We're doubling down on automation engineers, production engineers, test engineers, quality engineers. And our customers, the customers we work with, the Tier 1 brands, like a company like ASSA ABLOY, they want to do their own design. And so we're out there helping them execute in production, which they don't want to do. And we're helping them build test solutions. We're helping them build automation. And so our investment in engineering is going on into the production side. And I think because our competition is losing focus, they've become product design houses, which, I guess, the midsized customers, many of them are looking for, but that's not what we're looking to do. We're looking to focus on our top 20. And our top 20, that's 85% of our sales. Our top 20 want us to be great at manufacturing. And that is where we will be great from an execution perspective. I think there are some questions in the chat.

Yes.

"So during Q4 2024 investors briefing mentioned that third quarter 2025 would reflect the real positive impact of the restructuring that we're doing. Does that statement still hold true despite recent economic distortions such as the U.S. final tariff, supply chain disruptions, delayed Fed rate cuts?" I would say that our results have improved a bit sooner than we expected. And I would say that our goal is to continue to see our results improve. So I don't see -- in fact, I think that because the tariff situation has now cleared up, and it is not an unknown. I think this is going to help us because our customers now can make decisions. They're not frozen in place. And I think as far as supply chain disruptions go, the lead times of components, both electrical and mechanical is really manageable now. So we're not in a position where we have these huge long lead times to manage as we were 2 years ago. So I think that has stabilized. And we don't see demand changing. Sure, demand has come down a bit, but we don't see it changing drastically. The reduction in our revenue is due to us reshaping the kind of business we want to do, not so much due to the overall macro market.

Just touching still on that. So while macroeconomic factors are beyond our control, we are taking proactive steps to diversify and secure additional profitable business streams as well as doing very well at the things we can control. And part of that would be the streamlining that we've been doing with the closure of IMI Chengdu, U.S., Japan, all those sites and most recently, IMI Czech. So all those actions that Lou mentioned earlier, so these are the things that we can control. So from that point of view, yes, I think Q3 will reflect the overhead structure that we have in mind, an optimized overhead structure. For the revenues, yes, a lot of it is beyond our control, but we are still trying to address that in ways that we can through diversified business lines, going into new segments like trying to break into the data center business. So these things we are trying to solve and address from multiple avenues.

So the China, business leaving China and moving to our other sites, it definitely is. Customers are across the board looking to move production out of China when they're shipping product back to the U.S.A. So we do have some customers that are looking to diversify out of China. It's a 1 plus 1 strategy, especially. And so some customers were late in doing so from the first pass of tariffs back in 2016. And any customer that had not done it is now doing it. So I think that this idea of reducing footprint in China is not a new one, and you're going to continue to see that going on. And the company like ours has to be really decisive about how we move and make bold moves where we need to, to ensure that we have square footage and capacity where our customers require it. And today, that's outside China. And this current status of the tariffs, I think we went through that just before. Bottom line is that the Philippines has negotiated a better deal on all of the tariff classifications around electrical and electronic, which is really nice, getting our tariff down below 7%. And again, that's something that's not very widely known. South China Morning Post did an article about it yesterday, front page. And I think the Philippines government did a nice job of negotiating those carve-outs. Those carve-outs are found in Annex 2 of the executive order for the Philippines tariff. That's where you can find those classifications that are now being taxed or dutied at 6.6%.

Okay. I got a direct message. "What are the motivations about selling IMI Czech Republic?" I think, Louis, you touched about this on this earlier, but is there anything else you want to add about motivations for selling Czech?

No. The main motivation is efficiency of a location and the base of location that you're operating in. We looked at Bulgaria, Serbia and Czech. And for sure, there was no question for us that we wanted to centralize our European production in Serbia and Bulgaria. Way, way lower costs, way more stable workforce. And from a long term -- from a size perspective, we were doing about $100 million in Czech and just slightly less than that. We had a lot of EV business there that just didn't turn out. So in the end, for us to move out of Czech and consolidate that business into Serbia and Bulgaria just made a lot of sense for us. So you do not yet see the value of that consolidation. And I believe that consolidation will pay off over time. Into next year, we will begin investing in Serbia because we own land there. So we will increase the size of that facility over time, got a great relationship with the government there. And again, we supply Europe from there. That's our focus when it comes to Serbia and Bulgaria.

Thank you. A quick follow-up on that is, in our disclosure we've been talking about a manufacturing service agreement between IMI and Keboda. I guess I can take this on since I put on my Head of Business Development and Finance hat for a couple of months, going to Czech Republic multiple times just to hammer out the deal. And in the end, I think we were able to craft an agreement that really allowed both companies to come out as winners. So the agreement that we've been talking about, it establishes a partnership with Keboda, now the owner of the former IMI CZ facility to continue serving specific customer accounts that remain operational at the site. We've been talking about the high-value businesses that we transitioned into IMI in Bulgaria and Serbia. But there were certain product lines that were only viable if we had kept them in the Czech Republic. So that's what this partnership is looking to address. Most of the former IMI CZ management team has been integrated into Keboda CZ and a significant portion of the factory workforce has also stayed on. So this continuity ensures deep familiarity with the product lines now being produced under this new arrangement. One good thing about the arrangement is that IMI retains control over direct material procurement. So this allows us to leverage our global supply chain to maximize value from these remaining accounts. The manufacturing service agreement delivers sustainable profitability, I believe, for both parties and which -- this also allows IMI to retain business streams that would have typically been lost in typical divestment structure. So again, I firmly believe it's a good win-win in this case.

Yes. Maybe I'll just add in. I mean, to emphasize the point that IMI retains the customer relationship with those remaining customers in Keboda. The basis of the agreement is for Keboda to continue doing the manufacturing, but we own the relationship with the customer. We'll be the ones doing the billing to the customer.

Right. Good point, Robert. "Do we expect Q3 profit levels to be sustainable into Q4 and early 2026?" We don't give out forward-looking statements in our briefings. But Robert, anything you want to add to that.

Yes. I think maybe we can add, we've -- you know very well now about all the strategic changes that we've made in our organization. And again, as we kind of alluded to last year that we'll get the benefit of it in 2025. So yes, we're going to see the benefits into Q3 and Q4 of what we've already achieved. So expect good things from that. And I think expect better things into 2026. I mean, Lou already alluded to potentially our revenue growing into 2026. So from I think IMI point of view, Q3, Q4 and then into '26, it's all good for us.

"Robert, any update about the stock appreciation?"

Yes. So on the stock appreciation, right, it's actually with the Philippine SEC at the moment. There's not really any update. The plan from the SEC point of view is considered a bit novel. So they're just taking a bit more time to review it. We will update when that process is completed, particularly for the option holders and I guess the general market once we get some clearance from the SEC. I think just in terms of considering a buyback or dividend strategy, the Board has not contemplated either of those at this point in time. So I don't really have anything to comment on that. This will definitely be coming from the Board of Directors, and it's not on the table at the moment.

Sorry, maybe I'll just add one other thing. I think our -- on that topic, our focus at the moment is debt reduction. So if earnings continue and we keep generating cash the way we're generating cash, I mean, we want to pay down our debt. So I think that's the primary focus. And maybe when we get debt down to a level that is maybe on a more sustainable and has interest expense at a more reasonable level, then the Board can consider maybe a buyback or some kind of a dividend.

Okay. Brian, maybe we want to wrap it up.

Yes. As always, for any further questions, feel free to e-mail me at [email protected]. Thank you for joining us today. Thank you, Louis, Robert, Lau. We appreciate the very active participation in the meeting today. Have a good day, everyone. Thank you.

Thank you.

Thanks, everybody.

Thank you, everyone.