IEC Electronics Corp (IEC) CEO Jeffrey Schlarbaum on Q2 2021 Results - Earnings Call Transcript

May 09, 2021 12:02 AM ETIEC Electronics Corp. (IEC)1 Comment
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IEC Electronics Corp (NASDAQ:IEC) Q2 2021 Earnings Conference Call May 5, 2021 10:00 AM ET

Company Participants

Jennifer Belodeau - Institutional Marketing Services

Jeffrey Schlarbaum - President, CEO & Director

Thomas Barbato - CFO & SVP

Conference Call Participants

Michael Morales - Walthausen & Co.

Joichi Sakai - Singular Research

Shawn Boyd - Next Mark Capital

Operator

Greetings, and welcome to IEC Electronics' Second Quarter 2021 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms. Jen Belodeau of IMS. Thank you. You may begin.

Jennifer Belodeau

Thank you for calling in today. On the call this morning, we have Jeff Schlarbaum, President and CEO; and Tom Barbato, CFO. Before we get started, I would like to take a moment to read the safe harbor statement.

This conference call contains certain statements that are or may be deemed to be forward-looking statements. These forward-looking statements, such as when the company describes what it believes, expects or anticipates will occur, and other similar statements include, but are not limited to, statements regarding future sales, revenues, backlog, and operating results, future prospects, strategic initiatives, capabilities and capacities of business operations, any financial or other guidance and all statements that are not based on historical fact, but rather reflect the company's current expectations concerning future results and events.

The ultimate accuracy of these forward-looking statements is dependent upon a number of risks and uncertainties that may cause the company's actual results, performance, or achievements to be different than as expressed or implied by these statements.

Specific risks and uncertainties include, but are not limited to, those set forth in the company's earnings release issued immediately before this call and in the company's most recent annual report on form 10K, its quarterly reports on form 10Q, and other reports filed with the Securities and Exchange Commission. The company undertakes no obligation to publicly update or correct any of the forward-looking statements made during this call, whether as a result of new information, future events, or otherwise, except as required by law.

I will now turn the call over to Jeff Schlarbaum. Please go ahead, Jeff.

Jeffrey Schlarbaum

Great. Thank you, Jen. And good morning, everyone. I hope this call finds everyone healthy and safe. It's certainly encouraging to see how the COVID-19 vaccines have become more widely administered, and it's increasingly more obvious that we're seeing a greater number of businesses reopen, in person classroom learning returning for our kids, and overall economic activity continuing to improve. As we observe these steady improvements, certainly on a macro basis, we at IEC are adapting our workforce protocols to create greater in-office participation by our own administrative staffs, adopting a similar approach as many schools, whereby we are bringing everyone into the office weekly, but on staggered days to maintain previously established reduced workforce density measures.

And while we saw minimal impacts from the COVID-19 pandemic in fiscal Q2, we continue to experience impacts to our customer and supplier in-person activities. While it's worth noting, we are seeing some modest to face-to-face meetings, the levels are still far less than they have been in the past. We believe that reduced customer visits to our facilities contributed to a greater number of delays, which in some cases slowed down the timing of some of our expected new business awards. Despite these occasional delays, I'm pleased to report we have continued to add new logos from industry leading global customers complementing our already impressive portfolio of customer partners, and we are expecting more in the upcoming months and quarters.

Another item worth noting is the current global supply chain situation, which is having broad-based effects on items such as building materials, raw materials like resins for plastics, and even some of the basic electronic components like those that we utilize. For example, I'm not sure, but I'm sure most of everyone has already read Apple's recent earnings announcement, where they cited unprecedented demand for their products, but they signaled that they're expecting component shortages to negatively impact their ability to meet those demands for the foreseeable future. Layered on top of this are logistical challenges resulting from earlier winter storms in the US, delays at shipping quarters, like the one we recently saw in the Suez Canal, and ongoing lower levels of air travel, which are still creating logistical challenges that we've not seen in the past. While IEC has continued to work collaboratively with our customers to mitigate these risks, it won't be without its challenges to continue to supply an uninterrupted stream of lifesaving and mission critical products to the essential customers we serve.

As we've said in the past, we've set our sights on achieving increasingly higher levels of revenue and have targeted our next milestone of $50 million in quarterly revenues. We have deliberately scaled our infrastructure to operate at this higher level. In Q2 however, we experienced an unusually high level of complex technical challenges related to the ramp up of 2 large-scale newer programs that prevented us from achieving this goal. Despite this, it gives me great satisfaction to witness the collaboration between our customers and our highly skilled team here at IEC, which are some of the most technically savvy in the industry. And from the feedback we've received, we believe our partnerships have been strengthened by IEC's ability to effectively remediate many of these complex issues.

That said, despite some of the aforementioned headwinds, our second quarter revenues represent our fourth consecutive quarter above our $45 million quarterly revenue goal. We had internally targeted over 50 million in quarterly revenue for fiscal Q2, but given the technical challenges we experienced, we believe our ability to deliver revenues above 45 million was a solid achievement. Revenues for the quarter were 45.4 million, which represents a year-over-year increase of 2.7%. As a result of these lower than expected conversion levels, our gross margin was 7.3% for the second quarter.

If we look at our recent performance, the last time gross margins were at this level was in the first quarter of fiscal 2018, which not coincidentally, was another quarter where we encountered significant conversion delays. Given the more than 3-year span between these lower margin quarters, we believe both the first quarter of fiscal 2018 and the second quarter of fiscal 2021 margin performance were anomalies. And in fact, during the years in between, we've consistently achieved industry leading gross margin levels and are confident in our expectation that we will return to those levels.

As you'll remember, we closed fiscal 2020 with a solid order backlog drive from a diverse range of customers and programs, and we believe those opportunities remain, as well as we continue to see strong, ongoing demand signals. As we move into the second half of fiscal 2021, we remain focused on executional excellence as a partner providing highly complex and highly engineered manufacturing solutions for life-saving and mission critical products. We also continue to build upon our reputation in the marketplace as a premier provider of unique vertically integrated services. As a result, we're seeing continued strong demand from existing and new customers, who recognize the value in both our one-stop shop business model and our ability to adapt to complex challenges and program fluctuations much like the ones we saw during the second quarter.

Our customer base is comprised of partners from a broad range of regulated industries who often favor 100% US-based manufacturing, the highest levels of IP protection, and industry expertise to reduce supply chain risks. We believe we are well positioned to deliver on each of these requirements, and our capabilities and proven recipe continue to be a competitive advantage in attracting new programs and new customers. With our visibility today, we remain bullish on our expected ability to drive strong organic growth throughout fiscal 2021.

Before I hand it over to Tom for the financials, let me provide a quick update on our new facilities. We have completed the full move of our interconnect solutions business into our new state-of-the-art manufacturing location at Silver Hill in Newark, New York. And the transition was nearly seamless. To put a finer point on that, our move to the new facility did not contribute to the conversion issue in the second quarter and we have a detailed transition plan for our electronic assembly business over the coming months. While this is a complicated plan that is focused on leveraging our equipment footprint and our very technical talented team to ensure that our move is successful and we maintain more importantly continuity of supply to our customers. The thought of being fully operational in a brand new custom built facility is exciting, and we anticipate at the new location will improve operating efficiencies and enhance our performance.

Our new building on Jet View Drive in Rochester, New York continues to progress for occupancy, which is expected to occur over the summer. With Rochester's high-tech demographics, we believe establishing this vocation will heighten the recognition of IEC among local businesses in the local markets and help us attract workforce talent from the local high-tech community. These 2 new locations are a strong addition to our operational foundation as we pursue our goal of double-digit organic growth during fiscal 2021. We're excited about the opportunities we're seeing in the marketplace, and we look forward to leveraging our capabilities and customer base to deliver a strong second half of fiscal 2021.

Now I'll turn the call over to Tom to provide more detail around our fiscal second quarter financial performance. Tom.

Thomas Barbato

Thanks, Jeff. And good morning, everyone. Revenue for the second quarter of fiscal 2021 was 45.4 million, an increase of 2.7% as compared to the second quarter of fiscal 2020. Gross profit for the second quarter of fiscal 2021 was 3.3 million, or 7.3% of sales, compared to gross profit of 5.5 million, or 12.5% of sales, in the second quarter of fiscal 2020. Selling and administrative expenses increased slightly to 3.5 million, or 7.7% of sales, compared to 3.2 million or 7.3% of sales in the second quarter of fiscal 2020.

The company recorded a net loss of $300,000 in the second quarter of fiscal 2021 or a loss of $0.03 per basic and diluted share compared to net income of $1.5 million or $0.15 per basic in $0.14 per diluted share in the first quarter of 2020. Excuse me, the second quarter of 2020. Looking at our market sectors for the second quarter of fiscal 2021, we saw revenue distribution of aerospace and defense at 70%, medical at 19%, and industrial 11%. Various increases and decreases in sales in our aerospace and defense customers resulted in a net increase of $5.3 million in the second quarter of fiscal 2021. A new customer resulted in an increase of $8.3 million, production ramp-up for 2 customers resulted in an increase of revenue of $2.3 million. These increases were partially offset by reduction to revenue from various customers due to decreases in demand of $5.3 million.

The medical sector saw a decrease of $2 million in the second quarter of fiscal 2021, compared to the same period of the prior fiscal year. We saw decreases in customer demand of $5 million and decreases related to disengaging with one customer of $400,000. These decreases were partially offset by increases related to a new program ramping up with one customer amounting to an aggregate of $600,000 and various net increases in customer demand of $2.5 million.

We continue to expect some volatility in the medical sector going forward. The net decrease in the industrial sector at $1.7 million resulted primarily from the phase out of one customer amounting to $1 million and $600,000 of customer program delays at 2 other customers. The remaining decrease of $100,000 is due to net decreases in demand from various customers. Now looking at the results for the first 6 months of fiscal 2021, revenue increased 4.4% to $92.8 million compared to $88.9 million in the prior fiscal period. Revenues from the aerospace and defense sector increased $6.9 million, revenue from the medical sector decreased $800,000, and revenue from the industrial sector decreased $2.2 million.

Gross profit in the first 6 months of fiscal 2021 was $9.1 million or 9.8% of sales compared to gross profit of $10.7 million or 12.1% of sales in the first 6 months of fiscal 2020, which included the negative impact of a onetime inventory reserve of $1 million related to a reorganization at one of the company's medical customers. Selling and administrative expenses increased to $7 million or 7.5% of sales in the first 6 months of fiscal 2021, compared to $6.5 million or 7.3% of sales in the comparable prior fiscal year period. Net income for the first 6 months of fiscal 2021 was $1.2 million or $0.11 per basic and diluted share as compared to net income of $2.7 million or $0.26 per basic and $0.25 per diluted share in the same prior fiscal year period.

Adjusted for the onetime impact -- adjusted for the impact of a onetime inventory reserve taken in the first 6 months of fiscal 2020, adjusted net income per common share would have been $o.34 per basic and $0.32 per diluted share for the 6 months ended March 27, 2020. Please refer to the reconciliation tables included in the press release this morning for further information regarding these non-GAAP measures.

Now looking at our balance sheet, our balance sheet remains strong with $47.9 million in working capital and $40.5 million in stockholders' equity. You will see that inventory at the end of Q2 was $54.1 million compared to $51.4 million at the end of fiscal 2020. We continue to see a willingness on the part of our customers to help mitigate the risks associated with ongoing component shortages. And as a result, customer deposits grew to $27.8 million at April 2, 2021, in comparison to $19.8 million in September 30, 2020, despite almost $12 million of existing deposits being consumed within the first 6 months of 2021 fiscal year. As a result, inventory netted deposits decreased by $5.3 million during the first 6 months of 2021 fiscal year.

With that, I'll turn it back to Jeff.

Jeffrey Schlarbaum

Great, thank you, Tom. As we enter the second half of fiscal 2021, we're optimistic about the demand signals we're seeing from the marketplace for high value, long-term programs, which has culminated in our expectation that we'll achieve our goal of double digit growth for the fiscal year.

Some of you may recall the second half of fiscal 2020 produced improved profit performance versus the first half of that fiscal year. We believe that same dynamic will occur in fiscal 2021 with the improvement in the second half of the fiscal year expected to be even greater than what we experienced in fiscal 2020. As I stated earlier, we view our second quarter performance as an anomaly, and we maintain our aggressive internal goal of surpassing our next milestone of $50 million in quarterly revenue.

At the same time, we're continuing to gain traction in the marketplace, winning new programs from existing customers, as well as adding new logos to our distinguished list of pre-existing customers. For example, during the course of fiscal Q2, 2021, we increased the value of what we classify and believe are higher probability new program opportunities in our sales funnel by more than 3X the levels from the end of fiscal Q1, 2021. These new opportunities vary in size and complexity, but universally, they represent potentially new award opportunities from industry leading OEMs that are anticipated to contribute non-trivial new business revenue in the future.

Furthermore, as it relates to new logos and opportunities, we internally track the percentage of revenue that is generated in the quarter from new customers. And historically, it is consistently tracked somewhere between 5% and 10% of total revenue. In the second quarter, we saw the percentage of new business reach 14.2%, and it would have been even higher if not for the previously mentioned technical challenges we experienced. We expect this metric to continue to trend positively for the balance of fiscal 2021.

In the end, we remain focused on growing our leadership position by continuing to advance our solid reputation as a premier 100% US-based manufacturing partner for highly complex life-saving and mission critical products. With that, I will now turn the call back over to the operator for any questions.

Question-and-Answer Session

Operator

[Operator Instructions]. Our first question comes from the line of Mike Morales with Walthausen & Co.

Michael Morales

I want to dig into the technical difficulties in the shortfall that came from that a little bit more just to make sure that I fully understand and can get a sense of the back half of the year and beyond. Can you just shed any more color on what maybe caused those difficulties? And just to be clear, none of this is work that was being manufactured in the new facility, is that correct?

Jeffrey Schlarbaum

So Mike, yes, thanks for the question. So I'll try to be as concise I can with the answer, because it's obviously fairly complicated. We usually have a number of technical challenges, supply challenges across the entire business, and those are what I would say usual fluctuations in volatility and that happens quarter to quarter, we managed through it. In this particular quarter, we had 2 very large specific programs who are in the midst of a substantial ramp up into production. And there were a number of technical challenges related to the supply base that halted production for what normally would be days and weeks.

But in this case, proceeded to span more than a month and more than half the quarter. And it wasn't one specific supplier issue, it wasn't one specific technical snafu, but it was a whole host of them that affected 2 large scale programs. So we understand the nature of the impact, we understand the root cause, and we're optimistic that much of that is behind us. So as that rolls into Q3, we'll be well-positioned to resume production on those programs and hopefully, get to a, what I'd say, cruising altitude in the outward-looking quarters.

Michael Morales

So it sounds like at its crux, if I'm understanding you correctly, maybe more of the issue was from supply chain disruptions as opposed to defects with the equipment. Would that be a fair characterization?

Jeffrey Schlarbaum

Yes. I mean it's things from fabrication of the actual materials required for the end product itself and given the leading edge technology and some of the maturity issues with the manufacturers themselves supplying us the raw material, in this early stages of the program, culminated in an inability to keep production running at steady levels. And so you're right in that it's largely supply chain-related, but less about availability of materials, but in the usability of materials that were required for these very exact and precise applications.

Michael Morales

Got it, got it. As you guys think about the back half of the year, then, as I go back and look at 2019, right, the business was running at a really strong clip, especially in the back half, gross margins in the 14.5% range. As good as all of our crystal balls are, looking into the second half of 2021 here, is it reasonable to think that you can get back to those levels or, potentially, given the high value of these programs, even exceed that?

Jeffrey Schlarbaum

No, I'd say we're optimistic, for sure, that we're going to see much greater revenue conversion in the back half of the year. We see line of sight of that. Once again, we haven't, thankfully, unlike some other firms in the post-COVID era, we've had very solid demand from our customers, and it really has been about converting that into finished product for our customers.

I would say that margin-wise, we had a decent margin quarter in Q1 and I see us trending back to that, at much higher revenue levels. And then once we sort of get at cruising altitude, as I would say, where we've got steady production for multiple quarters from these programs, that we could push margins even higher.

Michael Morales

That's really helpful, Jeff. As I think about constraints to growth in the past, there's been kind of 2 factors that stick out. One is the raw material portion, which you just talked about. And the second is labor, and labor is kind of the topic of the day. How are you guys bearing with that? Any challenges or bright spots that you'd like to call out? What are you seeing?

Jeffrey Schlarbaum

Yes, you're right. I mean those are, candidly, if you simplify it down to the greatest constraints to overcome, they're as you characterize them. As it relates to labor, that hasn't been a constraint for us. We're well positioned. I said in my previous comments that new Jetview facility in Rochester was deliberately incorporated into our strategy to tap into a much deeper labor pool than we have near our headquarter facility on the most eastern side of the Rochester area. So the labor pool, going back into the center of the city, is almost 10X the size.

So that was deliberate, in that we want to prevent having labor constraints in the future. For now, we're holding our own and we're sufficiently staffed to convert at revenue levels we see for the next couple of quarters. But we see that potentially could be a constraint over time, which we're addressing with the new facility, which hopefully sustains the double digit growth that we envision into the future.

Michael Morales

And then maybe just last for me, touching on that new facility. Good to hear the progress that you guys have talked about so far. Maybe just help me understand, what have you learned so far as you've transitioned some production over to the new facility? And any challenges, bright spots there, and maybe anything that you can give about the cadence of additional programs, whether they're new or existing, heading into that facility?

Jeffrey Schlarbaum

Yes, so we're in the midst of transitioning work, as I said, from our previous headquarters at Norton Street in Newark to the Silver Hill new operation in Newark. And that interconnect solutions business transferred over, and it really went very, very well, almost a seamless transition. And what we're experiencing is that, the way this facility is laid out, it's a much more efficient flow. So we think, as we see volume scale, we'll be much more efficient executing the business, which should obviously help the P&L and also help our customer sat areas of on-time delivery and quality.

We're going to start the next phase of the electronic assembly business, which is more complicated, so I haven't seen the effects of that yet. By the next call, we'll have already had that first phase of electronic assembly moved in here. So it'll be better to report on kind of the progress there.

But there's no doubt in this new facility, as we've laid it out purposely built for our business, it provides much better collaboration, much better flow. And we think as we get critical mass of business in here, time to problem solving, ability to execute efficiently from start to finish, we see that already in interconnect solutions group, and I think it'll translate over to electronic assembly.

It's too early to be said on Jetview. That business, we're really planting some early seeds, so longer term, over the course of time, we'll be able to take advantage of the greater density of workforce population. And it's too early to tell how that will go, but we know that having access to that talent pool will serve us well long term. So hopefully that helps a little bit.

Operator

Our next question comes from the line of Chris Sakai with Singular Research.

Joichi Sakai

I just had a question. Yes, I had a question. Maybe you could give me a sense, have you seen any signs of inflation?

Jeffrey Schlarbaum

We are seeing upward pressure for sure, Chris, on many of the raw materials we purchased for the end products for manufacturing. And more specifically, it's around the electronic components we're buying. They're in high demand. So there's certainly inflationary pressures. As a build to print supplier, supporting our customers that specify the manufacturers' and the technical specifications around the parts that we purchase and use, there's a lot of collaboration with our customers on mitigating, and are working together to address the inflationary pressures. But yes, we are seeing quite a bit of that. And I think we'll be effective working with our customers to impact the effect of that on our P&L, but certainly they're happening, and it's causing a lot more, sort of intense, monitoring and collaboration with our customers to prevent.

Joichi Sakai

Okay. Wanted to ask about, I guess, the revenue breakdown between the 3 segments. Do you have a target for that? And then if you could shed some more light on, I guess, the revenue decline drivers for medical and industrial, that would be great.

Jeffrey Schlarbaum

Yes, I would say that in terms of what I think would be the ideal split, we're probably going to be more weighted towards the aerospace and defense. I'd say that likely, if I was to think about where that lands on a normalized basis, probably 60% or so. Medical in that 20 to 25%, and the balance of the highly regulated industrial, more like a 15%. So I think that would probably be a reasonable way to look at that.

In terms of the business itself, we see fluctuations quarter to quarter. Our aerospace and defense business is very strong. As Tom mentioned, we had some COVID demand last year that was much greater than we see this year, which is not to be unexpected. But offset, we're also seeing some new programs come on board compensate for some of the lower volumes that related to the COVID demand that was inflating last year's volumes.

So I don't think there's anything really to note one way or another about fluctuations. They're kind of normalized reasons that we understand, but there's really strong order demand on the aerospace, defense side. And I think that stems from our reputation and what we've established in the marketplace as one of the premier providers for Tier 1 defense contractors, all the way down to smaller defense customers supporting our US defense demand. And so I think that'll remain steady.

Operator

Our next question comes from the line of Shawn Boyd with Next Mark Capital.

Shawn Boyd

Can you hear me okay?

Jeffrey Schlarbaum

I can hear you fine, Shawn.

Shawn Boyd

Great. Jeff, just wanted to come back to a couple of comments earlier. And I apologize, I kind of missed this, but you -- in the script, you mentioned, I think I got this, the value of opportunities in the sales funnel up by 3X? I might have that wrong.

Jeffrey Schlarbaum

Yes.

Shawn Boyd

Can you clarify that just a bit for us?

Jeffrey Schlarbaum

Yes. So the way we classify, you got to be careful when you talk about the sales funnel. There are some very early stage developments in any sales process, and companies classify and characterize their sales funnels in different ways. But what we monitor here internally, and what we focus on, and what I was referring to, is what we consider the high probability opportunities that are either close to an official request for quotation to price and size our response to supporting a new program. All the way through the -- it's been delivered and it's been waiting a decision our customers are waiting, pending a visit, to qualify for our facility.

So these aren't what I would say high up in the early stage sales process, we consider them high probability. And so in that classification, we saw a substantial increase since last quarter in the number and dollars, and it's really dollars I was referring to, of high probability opportunities. And we won't convert them all, but we will convert our fair share, which is a bullish sign for the future of adding new customer revenue to the existing base of existing customers where we're pursuing a deeper and wider strategy on growing our share.

Shawn Boyd

Got it. Okay. And do you think that is just booming economy and things are coming back? Or also your transition on your manufacturing facilities and kind of the newer facilities that you're able to offer a few months down the road now?

Jeffrey Schlarbaum

Yes, I think it's a combination of, a lot of things kind of came to a real strong slowdown in the early phases of COVID. And I think now things are starting to open up a bit. So I think that's a part of it.

I think that our continued good performance and reputation has also led to other companies that have an interest in engaging us as a supplier of the future to maybe replace some underperforming suppliers that they have today. So I think it's a combination. I don't think it's really around the facilities as much.

I mention in my remarks that things are improving COVID wise, but still the supplier interactions, the customer interactions, many of our customers still are not hosting visits and nor are they coming to our facilities. Having said that, in Q2 we saw a pretty good uptick in in-person interactions, both at our facilities and out to some of our key stakeholders. So I think that will continue to improve.

But for the reasons I mentioned a moment ago, those are really the drivers behind the increased activity. And we believe we're well positioned to win our fair share of those new programs.

Shawn Boyd

Got it, got it. So that potential impact of being able to kind of show off Newark and the new facilities and have that impact, that sales funnel, that's really not in there yet. That's not in the boost you've seen so far, maybe that comes to us in the fall perhaps?

Jeffrey Schlarbaum

Very early stages. I mean we won some programs. One particular customer last quarter, global, a market leading company, household logo everyone would recognize, they were here. They audited us. And they awarded us the business. And that's going to be a foundational customer for the future where we can grow a deeper and wider share with them. So in that case, it actually, showing out the new facility helped us. But they were one of the exceptions. Most of the other customers are still slow rolling their visitations and in-person audits. But we see that hopefully progressively getting better and better.

Shawn Boyd

Got it. Okay. And moving from the sales funnel on to actual orders. I know we don't like to talk about numbers within the year, but can you just give us anecdotal comments? Are you actually seeing orders starting to tick up? Are they down quarter to quarter? What can you tell us on conversion?

Jeffrey Schlarbaum

Yes, so our bookings from Q2 were up from Q1, and so we saw an uptick in bookings. We had anticipated seeing some bookings in Q2 that actually drifted into the current quarter. So I see the current quarter bookings being substantially higher than in Q2. So I think we're on another good trajectory, Q2 was better than Q1, and I see Q3 being substantially better than Q2.

Shawn Boyd

Okay. To the point where we could see a book to bill greater than one?

Jeffrey Schlarbaum

Yep.

Shawn Boyd

Okay. Fantastic. Your comment on revenue growth, I was lost a little bit on -- I know that you target double-digit growth for the year, that's how we started out the year. We have since had a couple of quarters that, different issues have happened, and so we've had a lower first half. Are you saying that you expect double-digit growth still for the full year or just for the last 2 quarters of the fiscal year?

Jeffrey Schlarbaum

Still for the full year. I maintain that outlook that we'll have a stronger second half, similar to what we had last year. And certainly from a P&L perspective, a much greater P&L performance with the higher revenue levels. So yes, I was referring to the full year.

Shawn Boyd

Okay, fantastic. And so the drag that was alluded to earlier on the question with respect to market segments and maybe medical, and the comments about there being a little bit of COVID demand last year, we must be largely through any negative impact from that at this point?

Jeffrey Schlarbaum

Yes, absolutely. I think that's a good way to look at it.

Shawn Boyd

Yes. Okay. Customer deposits relative to inventory. Great to see. I have no questions on that. Love to see you collecting the cash. I'll move right over to expenses and then try to wrap it up. I'm sorry to monopolize the conversation here. Tom, I wouldn't want to leave you out. Is there any kind of duplicate expenses that we should be thinking about that might've hit? I mean you seem kind of lean and mean, but anything that's been hit in the March quarter? Or that we should think about for the June quarter as you guys continue to get the moves out of the way?

Thomas Barbato

Yes, there is some, we obviously, as we move, we've got expenses planned, but it's not a significant amount. We do a good job at -- and quite honestly, we are doing as much of it on our own as we can just because a lot of the equipment, especially the support electronic assembly business is sensitive equipment. So we've got a team that is accustomed to moving it within our facility to support changes in our production process. And given it's only 2 miles down the road, we're going to handle a lot of that ourselves. So there will be some incremental costs, but it won't be a material amount.

Shawn Boyd

Great, great. Last one from me is on CapEx. Obviously, it was high in the first half. Actually not that high in the March quarter though. Anyhow, what should we think about for CapEx for the back half of the year? And then also out to next year, which seems like it will be a more normal year?

Thomas Barbato

Yes, I think you'll see things moderate in the second half of the year. And then I think with the new building coming online, we've made significant investments towards the back end of last year and this year. And I think you'll see that moderate into 2022. We've upgraded a lot of our manufacturing equipment to kind of align to standing up this new building and going through certification and qualification processes with our customer. So we should be good to go and we'll have plenty of capacity to support the growth.

Shawn Boyd

Okay. So back into that kind of low single digits, millions sort of budget?

Thomas Barbato

Yes. Yep.

Operator

Ladies and gentlemen, we have reached the end of today's question and answer session. I would like to turn this call back over to management for closing remarks.

Jeffrey Schlarbaum

Great. Just want to say thank you to everyone for participating in today's call. We certainly wish everyone continued health and safety, as we all try to manage and work through the challenges associated with the pandemic. Thank you again for everyone's interest in IEC. And we look forward to speaking with everyone next quarter.

Operator

Thank you for joining us today. This concludes today's conference. You may disconnect your lines at this time.

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