Question-and-Answer Session
Operator
Thank you. (Operator Instructions) Our first question will be from Brian White with Jefferies. Please go ahead.
Brian White - Jefferies
Hi, good afternoon. When we look at the defense business, will this business grow sequentially in the December quarter?
Bob Hult
Brian, it’s Bob here. The ACS business, let me back up even further. Our guidance at 51 for the December quarter is coming off a quarter of 49. So, total debt is not that much growth sequentially. As you can see from the information I shared around Q1, we had growth, significant growth in the defense business and our commercial business in ACS did fall-off a bit from previous quarters. Both of those businesses are characterized by lumpy orders and lumpy situations with customers.
So, I don’t think it’s going to be too much different from what we saw in Q1, but for the full year, we’re expecting 50% defense, 50% commercial. Maybe a little bit stronger in favor of defense based on what we can see right now. So, I don’t think it’s going to be too dramatically different from Q1 in terms of mix.
Brian White - Jefferies
So how did?
Bob Hult
Maybe a little less defense percentage wise than we just experienced in Q1, because it was very strong due to certain programs drawing orders down.
Brian White - Jefferies
Okay. So how did gross margins go from 64% to 58% in one quarter?
Bob Hult
How did they go down?
Brian White - Jefferies
Yes. How did they go down?
Bob Hult
Well, we've got a couple of moving parts here. I’ll take the easiest one first. The improvements we’ve made and continue to make in our supply chain, our ability to really cap our gross inventories and do a much better job of demand forecasting and working with our supply chain partners, our EMS partners.
We’re really seeing that benefit in the need for inventory, excess and obsolete inventory reserve provisions. And we had a pretty good pick-up in Q1 on that, approximately two points of the improvement that you saw in the 64% versus the previously guided 57%. So maybe, a third of that was in the inventory provision space.
We believe that that is a permanent improvement or at least a portion of it. So we’re thinking we got a solid point to sell there, but we’re not quite ready to say we got the full two points. The rest of it is customer and product mix.
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