Q3 2021 Ichor Holdings Ltd Earnings Call
[music].
Greetings, ladies and gentlemen, and welcome to the <unk> third.
Third quarter 2021 earnings conference call at this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time.
As a reminder, this call is being recorded.
I would now like to introduce your host for today's conference Claire Mcadams Investor Relations for Ichor. Please go ahead.
Thank you operator good after.
And thank you for joining today's third quarter 2021 conference call as you read our earnings press release, and if you listen to this conference call. Please recognize that both contain forward looking statements within the meaning of the federal Securities laws.
Forward looking statements are subject to a number of risks and uncertainties many of which.
And which part of it could cause actual results to differ materially from such statements. These risks and uncertainties include those spelled out in our earnings release.
In our annual report on Form 10-K for fiscal 2020 and those described.
<unk> and subsequent filings with the SEC.
You should consider all forward looking statements in light of those and other risks.
Certainty. Additionally, we will be providing certain non-GAAP financial measures. During this call our earnings press release, and the financial supplement posted to our IR website. Each provide a reconciliation of these non-GAAP financial measures to their most comparable GAAP financial measures on the call with me today are Jeff injury.
Send our CEO and Larry Sparks our CFO.
Jeff will begin with an update on our business and a review of our results and outlook and then Larry will provide additional details of our third quarter results and fourth quarter guidance.
After the prepared remarks, we will open the line for questions.
And I'll now turn over the call to Geoff Andreessen, Jeff. Thank you Claire and welcome to our Q3 earnings call.
Q3 revenues were $263 million, which is $27 million below the low end of guidance provided on August 30.
While the low end of our guidance had factored in the impact of the reduced workforce in the two week factory shutdown in Malaysia or plans to adjust to continued limitations in Malaysia also included shifting supply to our other sites that manufacturer well.
Fortunately the plants are fully recover the lost capacity took longer than anticipated. The combination of these had a direct impact on our gas panel integration business and our ability to ship gas panels at the forecasted run rate in September.
In simple terms, the $27 million below the low end of guidance equates to approximately one five weeks of gas panel output.
As for the mid to high end of our revenue guidance range. Those had assumed a more aggressive ramp and recovery of the lost capacity.
I'd like to take a step back to review a bit more in detail the issues that affected our Malaysia factory over the past several months.
And Jim the Malaysian government issued an enhanced movement control order that initially limited our workforce to 60%.
We saw the Covid cases, increasing in early Q2, and built inventory ahead, which enabled us to offset some of the impact for early July.
We operate in the southern portion of the country near Kuala Lumpur, which had a much higher rate of Covid cases, and that's led the government to the government's decision to shut down most businesses in the region in July.
We manufacture about 50% of our Weldment in this facility and between the two week shutdown and prolonged output constraints, we lost about 40% of our output through mid August.
The majority of the output from this facility is used internally by our gas panel integration sites, we were able to utilize our other manufacturing sites to offset a large portion of the lost capacity.
But we were not able to offset all of it.
And as a result, this impacted our gas panel revenues more than we forecast.
During this period of reduced capacity, our focus was working very closely with our customers to meet their critical deliveries and continue to do so continue to do this as we recover our backlog.
Today, because the vaccinated level of our workforce in Malaysia up over 400 people as well over 90%. We are permitted to operate at 100% capacity and are in the process of adding additional capacity.
Given our recovery in Malaysia, and our estimates of the impacts of the supply chain constraints. We see today, we are on track to recover output and believe we can ramp revenues by about 10% in Q4 versus Q3 levels.
With regard to supply chain constraints for over a year, we have extended our purchase orders to the six to nine month range to provide the same level of visibility to our suppliers as our customers are providing to us.
One positive aspect of the challenges the entire supply chain is experiencing is that we're all working together to help maximize overall industry output and address customer demand.
As we all manage through this period.
There has been no change to the strong demand environment. In fact, it has continued to strengthen we continue to expect to set new revenue record in Q4.
But the continued challenges in the supply chain has dampened our expectations from what we previously expected to deliver this quarter.
The strong demand from our customers indicate sequential growth for Q4, and also into 2022 and the limitations of the supply chain has had the effect of lengthening and prolong and our visibility into what looks like a very very strong year ahead for 2022.
Our progress on gross margin improvement is on track and we are pleased to report a 16, 7% gross margin for Q3 in spite of the revenue shortfall and its impact on our factory efficiencies.
Net earnings of 81 per share were up over 30% from the same quarter last year, even with the higher share count.
For the first nine months of 2021 we have grown net income by over 80% compared to the first nine months of 'twenty 'twenty.
Now that we are nearly through 2020. One it is apparent that the underlying demand for wafer fab equipment R. W. F. E continues to be very robust and is expected to continue with these unprecedented levels for the foreseeable future.
With semiconductor supply constraints pervasive and ongoing most major device manufacturers have provided multiyear visibility into their heightened levels of investments.
Which are being put into place to support ever increasing demand forecasts.
Companies across the supply chain are working to increase capacity and so are we.
Earlier in the year, we talked about our plans to increase capex in order to add the capacity that will enable <unk> to achieve quarterly run rates in excess of $400 million. We continue to aggressively drive. These efforts ahead up a very strong 2022.
We continue to believe that 'twenty 'twenty. One is just the second year of a multiyear growth cycle propelled by the convergence of multiple demand drivers such as five G. I O T AI high performance computing and autonomous vehicles. In addition to more recent initiatives in support of.
Stick semiconductor supply self sufficiency.
Together all of these drivers are resulting in increased capital intensity for the semiconductor industry and higher levels of investments in Fab Technologies, Inc capacity.
And then this extremely healthy business environment plays a critical role, especially as the greater intensity of etch deposition and.
<unk> lithography plays into our focus on fluid delivery for these critical applications for leading edge devices.
Now I'll update you on the progress the team has made on our strategy to leverage our engineering capabilities and IP portfolio to develop new products that will result in longer term expansion of our share of served markets as well as drive the operating model towards increased levels of profitability.
We continue to make progress on our proprietary next generation gas delivery solution as well as with our other components. We have developed as part of this overall R&D efforts.
Our first fully configured next generation gas panel was shipped and will start qualification. This quarter. The qualification process is expected to take at least six months, we continue to work with two additional customers and given the current demand.
On their engineering resources. During this robust periods of WSI investments. We currently expect to ship our second beta systems in early 2022.
And our chemical delivery business, we shipped a beta chemical delivery system to a north American customer in the third quarter.
We expect this qualification period to extend through this year with first revenues occurring in early 2022.
Additionally, we expect to ship another beta units for an additional application in early 2022.
We completed the qualification of our first the value valuation unit of our proprietary liquid delivery subsystem to a Japanese customer in the third quarter.
Noted on our last call. The scaled this first opportunity is relatively small, but an important step in penetrating the Japanese market, which is the largest portion of the wet processing, Sam as well as continue to quote opportunities at other Oems that are larger in scale.
In our precision machining business. The two qualifications, we highlighted last quarter, we'll begin to see first revenues beginning later in the fourth quarter. These qualifications will both increase our proprietary content on a gas panel can be accretive to our gross margin profile.
In summary in a very challenging operating environment. The team is working extremely hard to ramp the business to address the customer demand. We are experiencing and we expect to return to record setting revenue levels for the forthcoming quarters.
Our fourth quarter guidance revenue guidance of $275 million to $305 million indicates our expectation for sequential growth about Q3.
And our target to achieve a new revenue record for the company.
Given the supply chain challenges our current forecast for Q4 is not quite as high as we expected a quarter ago, but we have strong visibility for at least six months and anticipate continued sequential growth as we move into 2022.
At the midpoint of Q4 guidance, our expected growth in 2020, one will be below Wi Fi growth. However, we have consistently outperformed wip over the longer term and expect to outgrow wf fee in 2022.
We are also pleased with our gross margin improvements in 2020, one as we and as we look to 2022, we expect strong earnings leverage on the revenue growth forecast as a result of the continued gross margin improvements.
Which brings us to larry's discussions of our financial performance and further details on our outlook Larry.
Thanks, Jeff.
First I would like to remind you that the P&L metrics discussed today are non-GAAP measures.
These measures exclude the impact of share based compensation expense amortization of acquired intangible assets nonrecurring charges and discrete tax items and adjustments.
There is a very helpful schedule summarizing our GAAP and non-GAAP financial results, including the individual line items for non-GAAP operating expenses, such as R&D and SG&A in the investors section of our website for reference during this conference call.
Third quarter revenues were $263 million up 15% year over year, but a 7% decline from Q2 due to the limitations in Malaysia and supply chain challenges, Jeff discussed and the resulting impact this had on our overall gas delivery subsystem output.
Given the challenging operating environment, we are pleased with our gross margin and profitability performance in the quarter gross margin of 16, 7% was similar to last quarter is continued cost reduction programs and favorable product mix were offset by labor inefficiencies due to the lower factory volume.
Compared to the third quarter of 2020 gross margin increased 210 basis points and the flow through on the incremental revenue volumes year over year was above 30%.
Covid related impacts on our gross margin continue and are primarily related to higher freight and logistics costs. The impact of these higher costs on our gross margin remains around 50 basis points and are expected to persist for the foreseeable future.
Q3, operating expenses were $16 3 million slightly below forecast due to the timing of new product engineering materials purchases.
Operating margin of 10, 5% was 65 basis points below Q2, and 220 basis points above Q3 of last year for.
For the nine months of 2021.
Operating margin has increased 300 basis points over the same period last year.
Interest expense for Q3 was $1 $5 million down slightly from Q2, due primarily to a lower overall effective interest rate.
Tax rate for the quarter was 11%.
Selecting a true up to a slightly lower expected tax rate of 12% for the year.
Given the lower expected U S income and geographic mix.
We reported earnings per share of 81.
<unk> <unk> below Q2, as a result of the 7% decline in revenues and very similar operating performance.
For the first nine months of 2021 net income increased 82% compared to the same period last year.
Now I will turn to the balance sheet.
We ended the quarter with cash and investments of $227 million, which was a $20 million decline from Q2 as a result of cash used in operations of $14 million capex of $3 million and a debt reduction of $2 million.
A large portion of the use of cash can be attributed to the increase in inventory, which was driven by higher purchasing activity aligned with strong customer demand, while our output was constrained.
The resulting inventory turns for Q3 were $4 nine compared to turns of around six on average for the past year.
Q3 days sales outstanding increased slightly to 42 days due to the higher volume of late quarter shipments.
We finished the quarter with total debt of $166 million last week, we completed a refinancing and a 100 million dollar expansion in our borrowing capacity from our existing credit facility from 300 million to $400 million.
This facility will have $850 million term loan and a $250 million revolving credit facility.
The new credit agreement extended the maturity date from February 2023 to October 2026, and decrease the overall industry, resulting in a forecasted Q4 interest cost savings of approximately $300000.
Given the debt refinancing and expansion.
We now have more capital available for acquisitions and investments supporting our strategic growth initiatives.
Now I will turn to our fourth quarter guidance with revenue guidance in the range of $275 million to $305 million. Our earnings guidance is 82 to 98 cents per share.
Mentioned earlier that our solid margin performance in Q3 benefited from favorable product mix at these revenue volumes in Q4, we will see a higher mix of gas panels, roughly offsetting the benefit of higher revenue volume. So we are expecting similar gross margins in Q4.
We continue to drive improvements to our gross margin profile, our key strategies to drive gross margin higher or through incremental cost reduction programs growing our share within our higher margin components businesses and increasing our content of proprietary IP within our products.
We are on track with our gross margin improvement plans and expect to continue to deliver on greater margin leverage as we progress into 2022.
Our Q4 operating expense forecast is $17 $5 million with the majority of the increase due to the extra week. This quarter, we continue to make incremental investments in R&D supporting our new product development programs, the new ERP system and additional costs associated with becoming Sox.
Compliance this year.
We expect our interest expense will come down to $1 $2 million in the fourth quarter, our tax rate to be approximately 12% and our fully diluted share count to be approximately $29 million.
Our tax planning rate over the next couple of years continues to be in the range of 12% to 13% given current tax policy.
Finally.
As Jeff mentioned, we are stepping up capacity investments this year to support the strong demand forecast for the next couple of years and I expect capex to be around two 5% to 3% of revenues for 2021.
In spite of the higher Capex, we expect to deliver strong free cash flows in 2021 for Q4, specifically, we expect to generate strong cash flow from the P&L and also generate cash flow from working capital as we show improved cash conversion metrics compared to Q3.
Operator, we are ready to take questions. Please open the line.
Yeah.
Thank you, ladies and gentlemen, we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star keys.
One moment please call for questions.
Our first question comes from the line of Craig Ellis with B. Riley. Please proceed with your question.
Yeah. Thanks for taking the question and thanks for the detailed discussion on the operating items affecting the quarter, Jeff I wanted to follow up on that one of the questions I've gotten from clients is regarding market share implications for what happened operationally and with an impact of about 12 minutes and gas.
<unk> panels.
What's the company's view on whether or not there was any market share implications from what occurred.
Well Craig Thanks, Thanks for those comments on our Malaysia update I appreciate that the.
I think as you think about share shifts we don't see any real change in our customer strategies. If there's any share shifts I would say they are temporary in nature and I would say that would be largely around our weldment business.
You know so if I looked at Q3 and Q4, if I was just to put a number on it I'd say it would be no more than 10 or $15 million that our customers would've had to reposition to support their business.
In lieu of some of the constraints, we had coming out of our Weldment factory. So I hope that kind of helps put a frame around it.
Yeah, that's great, Jeff and then nice to hear the very constructive calendar 'twenty two color.
The question is this given the nice growth that we're seeing in the fourth quarter, although some of that its facilities just getting ramped back up to normal how should we think about what's possible as you moved through calendar 'twenty two not looking for specific guidance, but the company has been investing to build its capacity to 400 million.
Which.
It was 33 above the level that we're at we'll exit this year. So any color on how things could proceed would be quite helpful. Thank you.
I think our view of next year is gonna be revenue or a market growth of in the 10% range. So we're certainly going to see growth year over year I think as we kind of look at our early part of next year, we see steady growth from Q4 into Q1.
Some of that may be muted by the supply chain constraints that were all seen but you know you would hope that those will begin to lessen. So I think we will see steady growth into next year now I couldnt actually predict the quarter to quarter and the size but.
One question that probably comes up is as you recover a lot of this shortfall.
Sure Paul this year of a does it fall into next year. The answer is yeah, I would say a large portion of this will continue into next year, but I don't expect a huge step function in the first quarter, but hopefully we see steady improvement throughout the year after that.
Got it and if I could just yep yep and if I can throw went in for Larry Larry where despite mix, where we're staying at a high level on gross margin.
We will get volume help as we go through next year, but is it going to be volume helped it really.
Is adverse to gross margin or how should we think about gross margin potential as the business continues to grow sequentially.
I think you know, we're modeling and expectations to to continue on the 10 to 20 basis points improvement as we kind of go go into 2022.
You will have an increase in gas panels absolute business, but I think you know our plan is to continue to push on the components side of the business is a higher percentage of our overall revenue, which as you know you.
You know between the precision machining businesses and kind of recapturing some of the Weldment business. I think you know those will help us be very margin accretive as we go through a through the year. So we did it this year and I think the expectation is we will do that do that next year. So we're we're <unk>.
Spectrum to continue this kind of March up in gross margin as we go into 2022.
Sounds good.
Alright, thanks, so much for the help.
Thanks, Thanks, Thanks, Craig.
Thank you. Our next question comes from the line of it.
Tim.
With D. A Davidson. Please proceed with your question.
Uh Huh yeah. Thank you for taking the question so Larry just to follow up on that it felt like over the last year, you had a 30% incremental gross margin, which obviously quite impressive but what would you say the natural incremental are.
Transient margin is on the incremental dollar of revenue on a go forward basis.
Well, we've been around 20%.
I think when you look at the mix combination the MX and the <unk>.
Cost improvements.
Okay. So what was the big difference over the past year that drove it up to 30%.
Well I think there was a few things one is the we did some cost reduction activities, we talked about.
Closing the Union city business.
And changing our cost profile, there, but I'd say one of the the biggest components is really around precision machining and growing that piece of the business.
As a percentage of our overall revenue profile I'd say, if you take that combined with a few of the other cost initiatives, we had around materials and a few things that that's really what's driving us a little bit better.
Okay, Great and then Jeff when you look at your both your next generation gas panel and you look at delivery system, which do you think is going to be the bigger driver in 2022, and which one is the bigger driver ultimately.
I think next year.
The bigger driver will probably be some of this success in the liquid delivery module that chemical delivery systems that we have.
Those evaluations are complete and wrap up those are those are fairly large wins for us and there you know youre going to be designed in on a new generation of a tool I think longer term. Obviously the next generation gas panel will have the biggest effect on the company and its profitability profile as we.
Add more and more content.
Onto the gas panel that we manufacture and design.
Okay great.
Then just finally when.
When you look at the the hiccups over the last quarter. So with manufacturing has that changed your long term process at all you do.
Anything you know on a more permanent basis like you know keeping the higher inventory level going forward or any changes that might be more permanent.
Yeah, I, you know I think I hate to use the term 2020 hindsight, but I think you learn from these events.
I think that there are some inventory positioning that we could beef up and even in respect to some of the other supply constraints. So I do think we will look at things differently.
We're also looking at things geographically differently as well, we haven't solidified any of those plans as we're kind of managing through this phase, but they will they'll they'll definitely be considered going forward.
And you know that.
The industry is only getting bigger so.
It's it's kind of why we've had a few hiccups this quarter and challenges, it's a pretty exciting place to be right now.
Yeah, no absolutely okay, well. Thank you both for your time.
Thanks.
Thank you. Our next question comes from the line of Quinn Bolton with Needham <unk> Company. Please proceed with your question.
Hey, Jeff and Laura I wanted to ask you about the lower fourth quarter revenue guidance relative to 90 days ago can you sort of walk us through what the impact. There is you know did you still see some impact in early October from the lower Weldment shipments coming out of Malaysia that affected gas panel integration or.
Could it be some of that 10 to 15 million potential share shift.
You had mentioned in response to Craig's question.
Yeah. Good question, what I would tell you is our factory in Malaysia is fully operating and maybe there was very little effect on our early October I mean, as we look at.
October versus for example last quarter, you know, we're seeing a kind of a higher run rate of revenue already which gives us some confidence.
And that we're seeing some improvements along other supply chain challenges, but I would say as you look at it I'd really say, it's the other supply chain challenges that are muting. It I think we have some recovery to do and weldment, but the vast majority of that is related to other issues within the supply chain that you've that you've heard these are fairly.
Persuasive pervasive across the.
Across the industry and the sub tier suppliers as well.
Got it that's helpful. Thank you for that and then I guess second question just as you go through this period of disruption.
In World Mints and gas panel integration is that prompting any audits or or sort of OEM.
OEM customers coming in to kind of do a review of the supply chain or do you think they understand sort of the this was.
Covid effect in Malaysia, It wasn't specific to the company, it's pretty broad based across the country and it hasnt prompted any new reviews are audits or anything like that.
No I think the simple answer is no, but I'll expand on it I mean, we work extremely close with our customers all the time.
And there's always a review of our you know your continuity of supply and working with our customers. So there's nothing new that would happen that as a normal course of business I think you.
I wouldn't say, we're 100% unique but all of the southern portion of Malaysia was hit really hard with Covid cases, and so it was a unique to very few number of suppliers, whereas a lot of the suppliers, you hear that or Malaysia or up in the Penang area, which is in northern.
Malaysia, so a bit unique because those of us that operate in the southern portion.
Got it and then just a quick one for Larry that the 400 million of annual revenue capacity. When would you think you'd hit that it's not something you achieve in calendar 2022 or is that a longer term capital investment plan.
Well I'd say, it's a longer term plan I think.
Yeah.
For us we have to be.
And plan our capacity well ahead of the requirement for customers.
Want to see that especially when we're talking about brick and mortar and some of the longer lead time capacity investments. So.
No. That's we have to put that in place I mean, we talk about a 10% growth year over year and.
We will continue to to fill that up as we go through 'twenty, two and into 'twenty. Three I think yeah I think the way you can think about it.
When is that $400 million or so of run rate that say, it's $1 six versus what what what we're estimating now and that's quite a large increase in wip. So this will support us for several years, if not three or four.
We'll have pockets of investment machining and things like that that will continue we want them to continue to outgrow Wi Fi, but I think largely brick and mortar and the integration side, where we're in pretty good shape with the plans we have today for several years out.
Got it thank you.
Beth.
Thank you. Our next question comes from the line of Krish Shankar with Cowen. Please proceed with your question.
Yeah.
Oh, hi, thanks for taking my questions.
Even calling on behalf of Krish.
Maybe first question for you on your gas.
Gas delivery products.
I think the gasoline cracks have been have had.
Variable inventory since their customized products that was curious like what are your cycle times today with products that compared to the typical.
On average about four to six weeks.
Okay.
That's a good question and I I mean, I think what you're saying is is I mean, our lead times are definitely expanded with our customers given some of the supply constraints, but I mean, typically if we were operating in a normal environment that would be under a month and they're probably longer than that by a week or two.
Got it guys. Thank you for that.
Just a sort of one other longer term question related to I guess your expectations.
Expectations to outgrow Wip next year, I know, you're not providing any long term forecast right now, but just given the.
The urgency to add head count are sort of in the near term here is as you're recovering from some.
The issue last quarter. It was curious like you know sort of your head count growth plans going into early next year.
Are you a little color on that that'd be helpful. It looks like in terms of the growth rates will be cyclical.
Taken from greater than Vicki has been growing black couple of years are a little more in line.
I'm not sure I understand the question so I'll start that to answer it and you tell me if I'm on the right track at first I don't think that our biggest issue is getting people. It's a little tougher now, but where we are adding heads are fairly consistent.
So most of it is is that the effect of you know some of the supply chain. It keeps your factories less efficient. So that's actually once the efficiency level comes up that's going to help reduce the need to add kind of rape for rate people into next year, our labor content generally in the <unk> and the gas does.
Liberty areas pretty low I won't give you a specific number but it's below kind of 5% of total costs. So.
Well, we'll continue to focus on hiring in advance of the revenue outlook that we have today I don't you know we.
We would like to see it faster, but it's not like it's at a standstill people are coming back to work.
Perfect. Thank you.
Yep.
Thank you. Our next question comes from the line of Patrick Ho with Stifel. Please proceed with your question.
Oh, Hi, there. Good afternoon. This is Brian calling in for Patrick Thanks for letting us ask a few questions maybe first.
Yeah, maybe conceptually maybe directionally and if you want to you can quantify but from a gross margin standpoint, I'm thinking about sort of the 16 seven ish.
Level here in <unk>, roughly in terms of gross margins and.
I'm talking about the initiatives.
You talked about Jeff.
Kind of the you know the beta tools that you're gonna get higher gross margins on and sort of the six month Qual times, Yes, you may start to dip into some of that that's favorable mix second half of next year can you talk about relative to sort of the <unk>. This year.
You think your gross margins, assuming we're kind of in that growth mode year over year still relative to this year with those gross margins could kind of look like you know could we be at 17% year end any sort of commentary would be helpful.
I'll start and Larry Larry can add if I, if I missed something but are you you're talking about 17% at the end of 2022 cause I think Larry basically said given you know where we're at today, we see relatively flat.
Q4 gross margins, but he also indicated that kind of the area of.
Gross margin of proven it'll be between 10 and 20 basis points.
On a quarterly basis. So certainly we would be unhappy if we didn't have a one seven on the gross margin by the end of next year.
Okay got it yeah, I was talking about just like the year and not necessarily the full year right.
Okay.
That's helpful and then.
Yeah, maybe in terms of you talked about sort of the refi and the additional flexibility. It gives to the company you are moving forward, obviously, we're hitting hitting levels on the house that that people wouldn't expect too in terms of the Wi Fi.
Number and it is expected to go higher next year and obviously.
It's hard for a lot of suppliers to keep pace in this kind of a growth environment and this quickly. So I mean have you seen that in terms of sort of the landscape out there.
Fast supplier landscape, it's pretty ripe maybe for further kind of consolidation at the moment is that kind of play into.
Some of the moves you've made recently.
Well I, what I would tell you is and we've been you know a.
Pretty consistent that the kind of the M&A landscape is pretty active right now.
And beyond that I wouldn't comment about anything specific but you do know that we were looking for.
Higher IP content higher margin type acquisitions, so obviously when we did the refinancing.
Part of it was just the rate environment was really good we're coming up on getting within a year of our.
Last five year debt and we wanted to refinance it between now and say I don't know February of next year, so but.
But in doing that the company has grown this added some flexibility to go into a 400 million from 300 million and.
So it does give us better flexibility to do M&A.
And it gives us more capacity to do a larger scale M&A should the opportunities to be out there that fit for us.
Okay, great. Thank you.
Okay.
Thank you.
Okay.
Ladies and gentlemen, this concludes today's.
Question and answer session.
I would now like to turn the floor back to Jeff and Jason for closing comments.
Thank you for joining us on our call this quarter.
I'd like to thank our employees suppliers and customers for their support and strong execution in this historic demand environment for the semiconductor industry. We look forward to updating you on our next earnings call in early February in the meantime, we hope to see you at one of our Q4 investor conferences, such as the CEO summit at Semicon.
And those being hosted by D. A Davidson UBS and Stifel.
<unk> that concludes our call.
Thank you ladies and gentlemen, thank you for your participation you may disconnect your lines at this time.