Oct 27, 2011
Operator
Good day, everyone, and welcome to Entegris' Third Quarter 2011 Earnings Release Conference. Today's call is being recorded.
At this time for opening remarks and introductions, I'd like to turn the conference over to Steve Cantor, Vice President of Corporate Relations. Please go ahead.
Steve Cantor
Thank you, Anthony, and good evening, everyone, and thank you for joining our call. Earlier this afternoon, we announced the financial results for our third quarter ended October 1, 2011.
You can access a copy of our press release on our website, entegris.com. Before we begin, I would like to remind listeners that our comments today will include some forward-looking statements.
These statements involve a number of risks and uncertainties which are outlined in detail in our reports and filings with the SEC. On this call, we will also refer to non-GAAP financial measures as defined by the SEC in Regulation G.
You can find the reconciliation table in today's press release as well as on our website. On the call today are Gideon Argov, President and CEO; Bertrand Loy, Chief Operating Officer; and Greg Graves, Chief Financial Officer.
Gideon will now begin the call.
Gideon Argov
Thank you, Steve, and good evening, and thank you for joining the call. After reaching record levels in the second quarter, our third quarter revenue of $173 million declined 17% sequentially and was below guidance as semiconductor production and capital spending flowed through the quarter across much of the industry.
Despite the softening trends in the industry, there were several bright spots. Sales were strong at the advanced nodes as we continued to win key nominations on new platforms.
We executed well both operationally and financially achieving cash EPS of $0.17 per share and an adjusted operating margin of 16.5%, both in line with our target operating model. And we generated $50 million in cash from operations for the quarter.
In terms of Q3 sales, our semiconductor business clearly felt the impact of lower industry capital spending and reductions in fab utilization and output. While the slowdown was not surprising, the magnitude of the reductions in customer fab utilization proved to be more than anticipated as our unit-driven sales declined 15% from the second quarter.
Demand for our liquid filtration products weakened particularly for older process nodes. Many foundry and memory customers operated their legacy fabs at utilization rates of 70% and in some cases even lower in order to work down inventory levels.
In addition, sales of filters were also impacted by the drop in OEM shipments of liquid tools such as wet etch and clean tools and photolithography track systems. Shipments of these tools tend to require purchases of liquid filters in order to get them up and running.
These trends were in contrast to demand from logic makers, which grew during the quarter. In terms of other unit-driven products, we achieved record sales of our 300 mm FOSB wafer shippers, although this growth was somewhat offset by lower sale of shippers for legacy wafer sizes.
Our CapEx-driven sales in the third quarter declined 22% sequentially and represented 36% of total sales. This was in line with our expectations and reflected lower OEM tool shipments and fewer fab construction projects across the industry.
We felt the impact in our sales of CapEx-driven products such as fluid handling components, purification systems and FOUPs. In our markets outside of semiconductor, order trends also softened in TFT/LCD data storage, as well as sales of graphite products for certain high-tech industrial markets, they all declined modestly.
In our newer emerging markets, sales of solar products were flat, although we continue to get traction with the new electrostatic truck used in the ion implant process for solar applications. While the demand environment in Q3 was far from ideal, we continue to be pleased with how we're executing our strategy, both in terms of our long-term growth as well as financial execution.
We achieved a number of design wins for our fluid handling products, our new OEM platforms that will yield revenue as sales of those platforms begin to ramp. We also had strong performance from other new products such as our Torrento filters and the 300 mm wafer shippers I spoke about earlier.
And we continue to win a growing share of available new opportunities for our advanced FOUPs. Several members of the Entegris Senior Leadership Team and I just returned this week from visiting customers in Asia.
The conversations we had reaffirmed our conviction that we are continuing to gain market share at the advanced nodes in both our unit-driven as well as capital-driven product areas. This is a direct result of our strategy to become even closer to our strategic and critical customers.
And we're doing that in a number of ways, including engaging in oil joint development projects with customers, as well as with key industry consortia and strategically moving resources such as manufacturing and engineering closer to our customers. As an example of that last week, we inaugurated a new manufacturing and development center in Hsinchu Science Park in Taiwan, which is a stone's throw from Taiwan's largest foundries and memory makers, as well as a number of LED manufacturers.
We're also increasingly aligned with customer technology roadmaps and are continuing to develop unique solutions to meet their contamination control challenges, particularly for 28-nanometer and below semiconductor processes for EUV and for 450 mm. These strategies continue to service well even in the current uncertain environment.
Over the past several quarters, we have performed well against our peers and against industry metrics. Over the past 9 months, year-to-date, we've grown by 16% and have generated significant amounts of cash flow while executing consistently to our model.
We expect that when 2011 is complete, it will be a record year for revenues, profits and cash flow for Entegris. In looking out to the future, our commitment to R&D and the technology roadmaps of our customers, as well as our momentum in emerging market is positioning us well to achieve our goal of reaching $1 billion in revenue over the next 2 to 3 years.
Our Board has authorized a $50 million repurchase of stock, which will be put in place when our quarterly open window period begins in a few days. I'll now turn the call over to Greg for some additional commentary on the financials and our outlook for the fourth quarter.
Greg?
Gregory Graves
Thank you, Gideon, and good evening. Although from a top-line perspective the quarter proved to be softer than expected, we are pleased with our operating performance for the quarter.
Our adjusted operating margin of 16.5% and our cash EPS of $0.17 were in line with the target model for the Q3 revenue level. Q3 sales of $173 million were down 17% from Q2 and 3% below the third quarter last year.
Our year-to-date revenue is up 16% from the prior year. The unit-driven CapEx mix shifted to 64%, 36%.
From a geographic perspective, sales to Asia were 37%, North America was 30%, Japan was 18% and Europe was 15%. In terms of our performance by division, sales for contamination control solutions or CCS declined 20% after a record quarter in Q2.
CCS operating margin was 26.8%. Sales from the Microenvironments division or ME declined 16% despite record sales of 300 mm FOSB wafer shippers.
ME's operating margin was 16%, reflecting the lower sales levels. Sales of our Specialty Materials division declined 6%, as the graphite business was down modestly both in industrial and in the SEMI market.
The operating margin for the Specialty Materials division improved to 23% in Q3. This is a record margin for that division.
Consistent with the lower sales levels, consolidated third quarter gross margin was 43.2% as we reacted quickly to the downturn in the business to reduce costs. Q3 operating expenses were $48 million.
SG&A was $33.5 million or $6 million below Q2 reflecting tight control over discretionary spending and lower variable compensation. R&D expense of $12 million was down about $500,000 from Q2.
The relatively small decline in R&D reflects our commitment to sustaining R&D investment to support our initiatives in advance wafer handling, CMP, lithography and other applications. Our tax rate for the quarter was 17%.
Looking ahead to Q4, we will have a noncash tax benefit of approximately $29 million as a result of removing the reserves on our tax assets. As a result, beginning in Q1 of next year, our tax rate will be approximately 30% to 32%, although our cash taxes will continue to be approximately 20% to 22%.
EPS on a non-GAAP basis was $0.17 per share. The non-GAAP number excludes amortization expense.
Cash flow from operations for the quarter was $50 million, just shy of the record high of $52 million we achieved in Q2. As a result, our cash position reached $229 million, an increase of $38 million over the Q2 level.
As Gideon mentioned, the Board authorized the $50 million share repurchase program. This reflects the confidence we have in our strategies and the strong cash flow of the business.
Depreciation expense was $6.8 million in Q3 and CapEx was $9.6 million. We are on track to spend approximately $30 million in capital investments for the year.
This includes a new manufacturing and R&D facility in Taiwan which we opened last week, the migration of additional product manufacturing to our facility in Malaysia and equipment in tooling for 450 mm wafer handling products. Looking ahead to Q4, we anticipate another quarter of industry weakness driven by cyclical trends and macroeconomic uncertainty.
Given the current environment, we expect Q4 sales of $155 million to $165 million. At these revenue levels, our target model calls for operating margins of 13% to 17% and non-GAAP EPS of $0.11 to $0.15.
In summary, lower industry CapEx and wafer production clearly impacted our Q3 revenues, even as we continue to achieve design wins at advanced process nodes. For the 10th consecutive quarter, we delivered financial results consistent with our target model and again demonstrated our ability to flex our cost structure.
We are confident in our long-term strategy to grow to $1 billion in revenues and in our ability to deliver strong cash flow and a higher return on equity. Finally, the share buyback that we announced today demonstrates our confidence in the future of the business.
With that, we'll now take your questions. Operator?
Operator
[Operator Instructions] We'll take our first question from Krish Sankar from Bank of America Merrill Lynch.
Krish Sankar
I had a couple of them, given when I look at your guidance, can you just help us understand what signals will be down, which is going to be down for the consumables or the CapEx-driven portion?
Gideon Argov
As we look forward we would expect, though our guidance is sort of down in the -- on a percentage basis around midpoint, we'd expect the 5%. It's about a little bit more on the capital side, a little bit less on the consumables side, so low-single digits decline on the consumables is what I would expect to see given the trends we see in the fourth quarter.
That's a general statement, obviously.
Krish Sankar
Got it, got it. All right.
And then the other question I had was you guys have seen the Specialty Materials both SEMI and industrials are weak. If I remember correct, industrials are pretty strong until Q2, right?
So is this kind of like the beginning of the rollover of the industrial cycle given that it's more of a late cyclical versus SEMIs?
Gideon Argov
I don't think it's the beginning of the rollover of the industrial cycle. And I think one of the things I want to point out with regard to that business is that's been our top-performing business from a growth perspective this year.
I mean year-to-date, the revenue growth in that business is about 24%. So overall, we've seen good performance in that business this year.
We did see a little bit of softness in the most recent quarter, but it was not dramatic.
Krish Sankar
All right. And then in terms of the gross margin, right, clearly I understand part of it is top-line driven, but do you feel that the incremental pressure on your gross margin as you start gaining more market share?
Or do you think that's just the name of the game at this point?
Gideon Argov
I think I was happy with the margin for the quarter given the revenue volume and how quickly we actually saw the revenue drop beginning in July. I mean, I think our organization reacted relatively quickly.
I mean we are operating in the margins, we're operating the near the lower end of our target model, [indiscernible] overall, feel good about the performance on the margin side.
Krish Sankar
All right. And then just a final question.
The $50 million share buyback, is there a certain time frame on it or is it open-ended?
Gideon Argov
I guess by definition it's open-ended. Our expectation is, is that we would use that over the next 12 months.
Operator
And we'll take our next question from Avinash Kant with D.A. Davidson & Co.
Avinash Kant
Maybe Gideon, you talked about this already. But just to give us some idea about what's the mix of materials versus CapEx in the Q4 guidance approximately that you're talking about?
Gregory Graves
Gideon mentioned that briefly. But it's the midpoint of our guidance, revenue is down 7.5%, we'd expect the CapEx side to be down something more than 7.5% and the unit-driven side to be down something less than 7.5%.
So that will make -- I mean the mix could change a little bit, but it wouldn't -- it's not going to change markedly from kind of the 64, 36 we saw this quarter.
Avinash Kant
Okay. And in this Specialty Materials side, you have pretty good operating margins.
Could you give us some details on how you achieved that?
Gregory Graves
A couple of things. One relates to the margin on the graphite-related products, we've seen some improvement in those margins as we moved into a lower-cost layer of the product there.
The second thing would be we have very good mix in that division this quarter. I wouldn't look for that operating margin.
We've consistently said to expect 20% as we get to revenue levels over $20 million. I mean clearly we did much better than that this quarter, like I said largely driven by mix.
Avinash Kant
And final question of course, more in terms of visibility, the broad visibility. How much of it is our debt and how have you seen things go maybe thus far in the current quarter?
Gideon Argov
I think we see volatile times. If you're asking whether things have totally stabilized, it's premature to say that.
I think you still see some weakness clearly on the capital side. And you see a really different levels of capacity utilization.
We've seen at the advanced nodes, Avinash, demand being quite sustained and quite strong in many cases. And then at more mature nodes, we've seen that be quite a bit lower in terms of capacity utilization.
Avinash Kant
Actually I would take one more in. So maybe that's a good theme, this has been a good theme all along, that the advance node seems to be doing quite well.
So could you give us some idea about what percentage of your sales come from advanced nodes, like I would say 32 nanometer and below, maybe?
Gideon Argov
Well, by definition of the percentage of sales in the industry is 32 nanometers and below is something like 5% overall. So you're not going to find that to be a huge portion of our revenue, but what it does bode well for us in the future because we do see quite a bit more, let's say, intensive demand for those consumable products at the advanced nodes.
Operator
And we'll take our next question from Wenge Yang with Citi.
Wenge Yang
One of your competitors actually mentioned 20-nanometer ramp is going to start significantly in the next 2 quarters. And so based on your exposure to the 28 nanometer, have you seen a similar trend that 20-nanometer ramp is starting at this point?
Bertrand Loy
Well, this is Bertrand, Wenge. And I can tell you actually, both Gideon and I spent a certain amount of time in Asia over the last several weeks and had plenty of opportunities to interact with some of our major customers.
And I would tell you that yes, we definitely are seeing some greater activity at the most advanced nodes and it correlates for us in actually good performance of some of the leading edge filters such as the Torrento filters, which is used in the wet etch and clean applications. What we have also recorded this quarter is a historical high for some of our FASB products, the 300 mm products, which again set a new record in terms of quarterly revenues and that's also driven by the demand of a large U.S.
device maker here. And that's also in direct relation to their adoption of most advanced nodes.
So again, as Gideon expressed earlier, we are very confident about the potential of the newest product lines that we've been lately introduced in the marketplace.
Wenge Yang
Okay. What's your overall view in terms of fab utilization rate and also wafer starts in December quarter and any projection for the first half of next year?
Gideon Argov
It's a complicated story which we don't know all the details of. I would say the likelihood is that again, certainly 45 nanometers and over, you're still likely to see utilizations somewhat lower than we'd like to see it.
And then the advanced nodes, it'll be higher and I think that, that is the expectation here. And then as far as memory goes, other than -- so you're likely to see some low utilization in memory as well for obvious reasons into the fourth quarter as well.
Wenge Yang
Okay. In terms of gross margin, when I compare your gross margin in Q3 versus similar revenue level last year in 2010, it seems to be down about 200 basis points.
Could you give some explanation on why the gross margin is depressed year-over-year at the same revenue level and how does it trend in the next couple of quarters, assume -- if the revenue maintain at the same level?
Gregory Graves
Okay. So let me answer that, I'll answer the second part first.
I mean if the revenue were to maintain at the same level as the most recent quarter, I'd expect the margin to be relatively similar. With regard to the first -- well, in that 43% range.
With regard to the first question, when you're in a ramp, I mean you're building inventory, you're putting cost on to your balance sheet, you're not bringing cost down as fast as the ramp. You do tend to have higher margins on the way up and on the way down, as you're trying to reduce inventories and take cost out, you don't get the cost out, it's not instantaneous.
So that would be my answer to that.
Gideon Argov
Yes, I would just underline that point, Wenge. I think that one thing that we're seeing is a high volatility of demand, a rapid movement.
We saw a lot of deceleration go on over relatively short period and that's when you do see some impact on the gross margin, which goes the other way when you [indiscernible].
Wenge Yang
Okay. Just one last follow-up.
It seems that the company's generating pretty descent cash flows and it seems this buyback program is a very good reward to the shareholders. So just wondering, I think of the questions asked earlier, that the time frame that you want to complete that buyback and if there's any further plans beyond this $50 million?
Gregory Graves
Yes, I mean I guess first of all I'd say in the buybacks, that only shows kind of our confidence in the business. We've said all along that we'll look at our cash balances at every quarter.
We typically said we need $150 million to $200 million to run the business today and we're well above that. We think the combination of that and what we're seeing in the environment, it makes it a good time for us to repurchase shares.
The timing will be dependent on price. But I think as I answered the question before, in most likely over the next 12 months.
As it relates to additional buybacks when this money is spent, we'll again reevaluate our cash position, look at our opportunities and decide whether to buy additional stock or not.
Operator
And we'll take our next question from Dick Ryan with Dougherty.
Richard A. Ryan
Greg, when you look at the gross margin, if you said similar revenue levels at 43 -- you'd be coming in at 43%, but for Q4 you've guided down a little bit below that. What assumption are you using for gross margins in Q4?
Gregory Graves
First, what I would say I'll come back and I'd say we're committed to achieving kind of the target model and the target model, the primary focus is operating margin. So I want to be clear that we will make our model in Q4.
As it relates to gross margin, if the revenue is down at say the midpoint, I'd expect that we'll see some additional weakness in the margin from where we operated in the last quarter. It's not going to go down to 40, but it could be down a point or so.
Richard A. Ryan
Okay. And in the expectation or goal to get to $1 billion, have you changed any of the assumptions to getting there from previous discussions whether it's market gross, advance market, solar market share assumption?
Gregory Graves
No, we have not changed our market share assumptions, Dick, and we haven't changed our assumptions for the growth of our core business in terms of new products or what we're doing in some of our newer adjacency areas. The goal that we have set in place does require a positive industry environment and whether we see that environment in 2013 or 2014, we can't predict.
What we can predict when the industry will fully recover, we are quite confident that would be in a position to accelerate our revenues if that happens. So we are -- we continue to talk about that and are confident we'll get there.
Richard A. Ryan
Okay. One last one, Greg, on the numbers.
What would you use for CapEx for 2012 and where do you think G&A goes?
Gregory Graves
At this point, the only thing I would say with regard to 2012 is that I'd expect it to be at least consistent in the $30 million range that we saw this year. We do have a number of significant projects that we're considering, so there's a scenario where it could be higher than that $30 million.
But right now as a starting point, I'd say use $30 million.
Operator
[Operator Instructions] We'll hear next from Patrick Ho with Stifel, Nicolaus.
Patrick J. Ho
Gideon, in terms of a little bit of color on the share gains you've talked about in the past and on this call, particularly on the unit-driven side of things, can you give a little bit of color on which process segments you're seeing some of these or some of the most share gains over this period of time and where you expect the revenues to ramp?
Gideon Argov
Yes, I mean, as Bertrand indicated earlier, first of all on the Microenvironments side, we had a record quarter for FASB. We're delighted with that and we expect that growth to continue.
So we're executing on that, spike that goal and we are on track to be in the mid-20s in terms of market share over the next sort of 18 to 24 month period. Number two, we've seen very good performance in our filtration products for wet etch and clean, 60 of the advance nodes are Torrento products were up again significantly and that's a positive as well.
And then we've seen very good performance again at the advanced nodes in our PVA brush product lines as well. Those are all advanced node related, they're all very strategic goals for us because we're sort of carving out a position that will be long-term and important in nature and they all relate to the advanced nodes, so we're delighted about all 3.
Patrick J. Ho
Great. Looking at your balance sheet, inventories were relatively flattish quarter-over-quarter.
Can I read or interpret that as any signal from your CapEx-based customers that they're kind of telling you to stay ready just in case they get some potential late quarter type of orders and shipment request? Is that reading into too much of what your CapEx-based customers are saying?
Gideon Argov
Yes, Patrick, I'd say that's reading a little bit too much into it. I mean what I would say, given our current operating levels, we're focused on actually reducing that inventory balance.
Patrick J. Ho
Okay, great. And final question, Greg, for you in terms of the operating margin line and the OpEx, I think you guys have done a really good job there.
Can you just give a little bit of color on some of the trade-offs you can do on the SG&A line, particularly as you're trying to maintain your R&D investments into the next generation nodes as well as new process technologies, how you're able to trade-off at least on those leverage there?
Gregory Graves
Well I would say first of all, I mean we're very careful. I mean if you look back to 2009 when things got really ugly, we've been very careful around R&D headcount and making sure that we maintain kind of the muscle in the R&D organization and we'll continue to do that.
In terms of levers, and there's a fair amount of discretionary spending in the SG&A line, things like travel and entertainment where we've clearly tightened up. And then obviously, the other big lever is variable compensation.
Operator
We'll take our next question from Tom Claugus with Graham Partners.
Thomas Claugus
One question on Poco -- well I actually have 2 questions but on Poco, what's the outlook and why would -- is it still running 67% -- 60% to 70% SEMI, because it held up extremely well. And so I know we are expecting share gains.
I know you were expecting that, but what's kind of the outlook based on what you guys have booked and is it going to be up next year? What's your take on what you think Poco's going to do?
Bertrand Loy
All right, so this is Bertrand. If you think about the exporter to SEMI versus non-SEMI business within Poco, SEMI only represents about 40% of the Poco top line.
Now it is true that if you add specialty coating to that, which would add up to the what we call internally the Specialty Materials division, the SEMI exposure would be closer to 50% to 60%. Now, so it is true that we've been very pleased with the performance of this division and one of the contributing factor for this very steady quarter is the very good performance of our E-Chucks business, primarily used in the ion implanters.
So this add application obviously in SEMI but as you are probably aware, those tools are also finding new applications in solar, so just outside of the SEMI processes. So again, so this is primarily the reason why we've seen a very stable environment for our ESMD division and I would expect for Q4 to see some relative stability to this business.
Now I won't comment really about 2012 because that's too far away and too distant and I reserve the right to make that comment during the next call. But again as of right now, we expect this business to continue to perform extremely well as part of our overall portfolio division.
Gideon Argov
One additional point, Tom, on Poco, which may be an obvious point but we are also spending resources on new product and new market development within the ESMD business as well. And that will bear fruit, where there's actually very interesting and significant efforts in those areas that are ongoing.
Some of the -- what I can tell you is that some of the capacity that we've just opened up in Taiwan actually is related to products that are ESMD products and is designed to bring us closer to Asian customers. So longer-term, whether it's quarter A or B or C, we never know because it's a macro situation we're dealing with, but we're investing in that business because we think it can continue to grow in some very interesting direction.
Thomas Claugus
Okay. And then my other question was on SG&A.
The takedown was pretty significant, $5.6 million sequentially. Was that -- was there some one-off items in there?
Is that what we should model for next quarter going forward or what's your -- because that's $20 million a year.
Gideon Argov
It will be up slightly next quarter, there was I mean, with rather variable compensation down for the year and that had a meaningful impact because we're bringing that down for the prior 2 quarters as well as the third quarter.
Thomas Claugus
Okay, so I should expect some rebound in Q4 then?
Gideon Argov
Nothing like we saw back in Q2, you may see it up a $1 million or $2 million.
Thomas Claugus
Okay. And in R&D, you're going to hold around the $12 million level?
Gideon Argov
Yes, for the most part.
Thomas Claugus
The R&D is going to be held around $12 million?
Gideon Argov
Yes, the R&D, I mean our goal is to keep that relatively constant. I mean you could see it fluctuate a little bit one way or the other.
Gregory Graves
It's not going to go up, Tom, if that's the question.
Operator
[Operator Instructions] We'll hear next from Steve Schwartz with First Analysis.
Steven Schwartz
My first question, Gideon, I think you made a comment in your prepared remarks that unit-driven sales were perhaps weaker in the quarter than you expected and so my question is given the level of production -- shipped production, what would you have expected sales to be? And ultimately the reason I'm asking this question is to try to understand whether or not you believe your customers are drawing down inventories.
Gideon Argov
That's a very good question, in fact. The shortfall was primarily in our liquid filtration products, which was really -- being impacted by 2 factors, as we said.
Number one, the fab capacity utilization in older nodes through the quarter was more depressed than we anticipated and then secondly, as we said, there were lower shipments of OEM wet tools and those things have filters on them as well. And it is the case that probably there was some drawdown of inventory and what that's related to and whether that goes back to Japan and so forth is unclear and we won't know the answer.
But my sense clearly, our sense is that there was some drawdown of inventory, which really was partially the cause of this trend that we saw.
Steven Schwartz
Okay. And so I know you guys don't typically forecast or offer up your outlook view on these sorts of things, but if the industry is saying that shipped production starts to come back in the first quarter then you might expect to see a little bit of a bump then in your purchases as inventories get rebuilt.
That's possible, right?
Gideon Argov
Yes. That is the case and if you look historically at the trends in our unit-driven side of our business, that is exactly what happened pretty much like clockwork, though when that happens that will occur.
Gregory Graves
It's Greg. One other thing I just mentioned, we talked about it before, remember that our unit-driven business is not like Cabot or ATMI where they're putting a little bit of something on every wafer.
I mean ours is very correlated to unit production, but we talked about units and products that have a life of less than 18 months. I guess the other thing that I would point you to the unit revenue is up 15% for the year.
Steven Schwartz
Okay. Greg, since you're at it and my follow-up question and is tied a little bit to what Patrick was asking about with respect to inventories, if I could ask such from another way, looking at the cash flow statement, it does look like in the third quarter, you consumed a little cash on inventories.
During downturns, there are quarters where you can generate as much as $10 million in cash from inventory. Can you tell us a little bit about what we might expect there?
And maybe what happened for the fourth quarter -- maybe first quarter and kind of what was behind the third quarter number?
Gregory Graves
Well, I think as I said a little earlier, our goal is clearly to reduce inventory in the fourth quarter. So we should generate some cash from that initiative.
And as you look at the cash flow overall for the fourth quarter, I wouldn't expect it to be as strong as Q3 even if the revenue is similar, because we did generate an awful lot of cash in Q3 from receivables coming down.
Operator
And we have no further questions at this point, so I'd like to turn the conference back over to Gideon Argov for any additional or closing remarks.
Gideon Argov
Thank you very much for joining our call. Have a good evening.
We look forward to speaking with you in the future.
Operator
Once again, this does conclude today's conference call. We thank you all for your participation.