Q4 2021 Ichor Holdings Ltd Earnings Call
Speaker 1: Good day ladies and gentlemen and welcome to the ACOR fourth quarter 2021 earnings conference.
Good day, ladies and gentlemen, and welcome to the <unk>.
<unk> fourth quarter 2021 earnings conference call at this time, all participants are in a listen only mode.
Speaker 1: Later, we will conduct a question and answer session and instructions will be given at that time.
Later, we will conduct a question and answer session and instructions will be given at that time.
Speaker 1: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this call is being recorded.
Speaker 1: I would now like to introduce your host for today's conference, Claire McAdams, and domestic relations for ICOR.
I'd now like to introduce your host for today's conference Claire Mcadams Investor Relations for Ichor. Please go ahead.
Speaker 2: Thanks, Jamali. Good afternoon and thank you for joining today's fourth quarter and fiscal year 2021 conference.
Thanks, Shirley good afternoon, and thank you for joining today's fourth quarter and fiscal year, 2020 One conference call.
Speaker 2: If you read our earnings press release and as you listen to this conference call, please recognize that both contain forward-looking statements within the meaning of the federal securities laws.
You read our earnings press release, and as you listen to this conference call. Please recognize that both contain forward looking statements within the meaning of the federal Securities laws.
Speaker 2: These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and which could cause actual results to differ materially from such situations.
These forward looking statements are subject to a number of risks and uncertainties many of which are beyond our control and which could cause actual results to differ materially from such statements.
Speaker 2: These risks and uncertainties include those spelled out in our earnings press release, those described in our annual report on Form 10-K for Fiscal 2020, and those described in subsequent finals.
These risks and uncertainties include those spelled out in our earnings press release. Those described in our annual report on Form 10-K for fiscal 2020 and those described in subsequent filings with the SEC.
Speaker 2: all forward-looking statements in light of those and other risks.
You should consider all forward looking statements in light of those and other risks and uncertainties.
Speaker 2: Additionally, we will be providing certain non-GAAP financial measures during this conference call. Our earnings press release and the financial...
Additionally, we will be providing certain non-GAAP financial measures during this conference call.
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.
Speaker 2: provide a reconciliation of these non-GAAP financial measures to their most comparable GAAP financial measures.
Speaker 2: On the call with me today are Jeffy and Griesen, our CEO , and Larry Sparks, our CFO .
On the call with me today are Jeff Andreessen, our CEO and Larry Sparks, our CFO Jeff.
Speaker 2: Jeff will begin with an update on our business and a review of our results and outlook. Then Larry will provide additional details of our 4th quarter results and 1st quarter guide.
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 fourth quarter results and first quarter guidance. After their prepared remarks, we will open the line for questions I'll now turn over the call to Geoff Andres It Jeff.
Speaker 2: After the prepared remarks, we will open the line for questions. I'll now turn over the call.
Speaker 3: Thank you Claire and welcome to our 2 4 earnings call.
Thank you Claire and welcome to our Q4 earnings call.
Speaker 3: Q4 revenues were $287 million, up 9% from Q3, and just below the midpoint of guidance.
Q4 revenues were $287 million up 9% from Q3, and just below the midpoint of guidance, while the acquisition of <unk> added $7 million of incremental revenue in the quarter. The supply chain challenges the industry has been facing progressively worsened in Q4.
Speaker 3: While the acquisition of IMG added $7 million of incremental revenue in the quarter, the supply chain challenge is the industry has been facing progressively worsened in Q4. Not only for components supply, but also the additional labor constraints brought by the Omicron COVID variant, which we had not predicted when we provided Q4 guidance.
Not only for components supply, but also the additional labor constraints brought by the Omicron Covid variant, which we had not predicted when we provided Q4 guidance despite.
Speaker 3: Despite these challenges, it was a strong end to 2021, with gross margin improvement to 17.1% in Q4. For the full year, we achieved a record $1.1 billion in sales.
These challenges it was a strong end to 2021 with gross margin improving to 17, 1% in Q4 for.
For the full year, we achieved a record $1 $1 billion in sales and $3 37 in earnings per share. We increased gross margin by 210 basis points year over year and grew net income by 65% on revenue growth of 20%.
Speaker 3: $3.37 in earnings per share. We increase growth margin by 210 basis points year over year and grew net income by 65% on a revenue growth of 20%.
Yeah.
Speaker 3: You have probably heard on many earnings calls at this point the incredibly robust business environment we are seeing in the way for Fabby Quittin.
You probably heard on many earnings calls at this point the incredibly robust business environment, we are seeing in the wafer fab equipment industry to.
Speaker 3: To support unprecedented levels of customer demand, we increased revenues by 47% in 2020 and another 20% in 2021. To levels now 77% higher than we reported in 2019.
To support unprecedented levels of customer demand, we increased revenues by 47% in 2020 and another 20% in 2021 to levels now 77% higher than we reported in 2019 XP.
Speaker 3: Expectations for continued industry growth in 2022 have recently increased.
Our expectations for continued industry growth in 2022 have recently increased from sequential annual growth of about 10% a quarter ago to now high teens percentages or a $100 billion.
Speaker 3: from sequential annual growth of about 10% a quarter ago to now high teens percentages or $100 billion.
Speaker 3: At the same time, the challenges in the supply chain have not only continued, but they have worsened in many ways, shifting from frayed logistics issues initially to factory shutdowns affecting us mid-year, to the labor impacts stemming from Omicron to increasing component supply challenges, particularly electronic components, as well as shortages of materials, which certainly affected the fourth quarter, and we expect will be a factor through at least the first half of this year.
At the same time the challenges in the supply chain have not only continued but they have worsened in many ways shifting from freight and logistics issues initially to factory shutdowns affecting us midyear to the labor impact stemming from omicron to increasing components supply challenges, particularly electron.
Components as well as shortages of materials, which certainly affected the fourth quarter and we expect will be a factor through at least the first half of this year.
Speaker 3: Nonetheless, we, along with the rest of the supply chain, are working to manage these challenges and steadily increase our output each quarter through 2022, which we expect will result in another record revenue and earnings.
Nonetheless, we along with the rest of the supply chain are working to manage these challenges and steadily increase our output each quarter through 2022, which we expect will result in another record revenue and earnings year in support of $100 billion of WMC demand.
Speaker 3: in support of $100 billion of WFE domain.
Speaker 3: With our current visibility, we are forecasting Q1 revenues to be up around 4% to 5% sequentially, chiefly as a result of a full quarter of IMG revenue.
With our current visibility we are forecasting Q1 revenues to be up around four 5% sequentially chiefly as a result of a full quarter of IMG revenues.
Speaker 3: though we have widened the range to account for the incremental uncertainties in the supply.
Though we have widened the range to account for the incremental uncertainties in the supply chain.
Speaker 3: We also expect our revenue output to increase sequentially through each quarter of 2022, and given current WFE growth expectations in the high teams percentages, we also expect our revenue growth while I perform WFE.
We also expect our revenue output to increase sequentially through each quarter of 2022, and given current wip growth expectations in the high teens percentages. We also expect our revenue growth well perform wf fee this year.
The added visibility brought upon by tight supply conditions bodes well for the longevity of the current demand cycle with our customers expecting industry supply to finally catch up with demand sometime in 2024.
Speaker 3: That invisibility brought upon by tight supply conditions both well for the longevity of the current demand cycle.
Speaker 3: with our customers expecting industry supply to finally catch up with demand sometime in 2024.
Speaker 3: In this environment, we expect to continue to demonstrate incremental improvements to our gross margins, increasing operating leverage and strong growth in earnings per share.
In this environment, we expect to continue to demonstrate incremental improvements to our gross margins, increasing operating leverage and strong growth in earnings per share.
Speaker 3: Earlier in 2021, we talked about our plans to increase CAPEX in order to add the capacity that will enable I-4 to achieve quarterly revenue run rates and access to $400 million.
Earlier in 2021, we talked about our plans to increase Capex in order to add the capacity that will enable <unk> to achieve quarterly revenue run rates in excess of $400 million. We will continue to invest in 2022 to ensure that we have the right level of capacity to support the demand that we see in the next two years.
Speaker 3: We will continue to invest in 2022 to ensure that we have the right level of capacity to support the demand that we see in the next
Speaker 3: We are also making incremental investments in R&D and in the company's infrastructure to support the growth ahead.
We are also making incremental investments in R&D and in the company's infrastructure to support the growth ahead.
Speaker 3: Now I'll discuss in more detail the benefits of our IMG acquisition and our progress in
Now I will discuss in more detail the benefits of our IMG acquisition.
And our progress in other strategic growth initiatives.
Speaker 3: Our M&A strategy is focused on increasing the IP content of the business, which is a creative to our gross margins, while also leveraging our existing sales.
Our M&A strategy is focused on increasing the IP content of the business, which is accretive to our gross margins, while also leveraging our existing sales channels.
Speaker 3: IMG fits the strategy very well. They have a strong precision machining capabilities, but address a larger format versus what we have today. So it is complimentary, and it will be instantly accretive to our gross margin and earnings.
<unk> fits this strategy very well they have a strong precision machining capabilities that address a larger format versus what we have today. So it is complementary and it will be instantly accretive to our gross margin and earnings.
Speaker 3: As we indicated in our November press release, we expect IMG to add 100 basis points to gross margin and at least 40 basis points to operating margin for our fiscal 2022.
As we indicated in our November press release, we expect AMG to add 100 basis points to gross margin and at least 40 basis points to operating margin for our fiscal 2022 results from.
Speaker 3: From a valuation perspective, the EBITOM multiple was around 13, which is a bit higher than I-Core's currently, but compares favorably to deals currently being completed for other machining-based business transactions. It brings a strong management team with the-
From a valuation perspective, the EBITDA multiple was around 13, which is a bit higher than <unk> currently but compares favorably to deals currently being completed for other machining base business transactions. It brings a strong management team with a very capable engineering group as well.
Speaker 3: The acquisition of IMG has been closed for just over two minutes.
The acquisition of IMG has been closed for just over two months and in that time, we have been impressed with their leadership team and their strong customer relationships. We are expecting a smooth integration process. <unk> also brings a bit of diversification to our revenues and that a portion of their revenue is recurring and they also serve.
Speaker 3: And in that time, we have been impressed with our leadership team and their strong customer relationships. We are affecting...
Speaker 3: IMG also brings a bit of diversification to our revenues in that a portion of their revenue is recurring and they also serve exciting growth applications in medical, aerospace, and defense.
Exciting growth applications in medical Aerospace and defense.
Now I'll update you on the progress the team has made on our strategy to develop new products that will result in longer term expansion of our share of our served markets as well as drive the operating model towards increased levels of profitability.
Speaker 3: Now I'll update you on the progress the team has made on our strategy to develop new products that will result in longer term expansion of our share of our serve markets, as well as drive the operating model toward increased levels of profitability.
Speaker 3: Our first next generation gas panel is beginning the qualification processes.
Our first next generation gas panel is beginning the qualification process this quarter.
Speaker 3: qualification processes expected to take up to a year.
Qualification process is expected to take up to a year to complete we currently expect to ship our second beta system to an additional customer by mid year.
Speaker 3: We currently expect to ship our second beta system to an additional customer by mid-year.
In our chemical delivery business after shipping beta chemical delivery system to a North America customer in Q3. We recently competed completed this phase of the evaluation are now working on designing the production configuration for their tool.
Speaker 3: after shipping a beta chemical delivery system to a North America customer.
Speaker 3: We recently completed the phase of the evaluation, and are now working on designing the production configuration for their tools.
Speaker 3: We expect this qualification period for the production unit to extend into the second half of this year. Additionally, early-
We expect this qualification period for the production unit to extend into the second half of this year.
Additionally earlier this year, we shipped another beta unit for an additional application, which will begin the first phase of qualification this quarter.
Speaker 3: for an additional application, which will begin the first phase of qualification in this quarter.
Speaker 3: We completed the qualification of our first evaluation unit of our proprietary liquid delivery subsystem to a Japanese customer. An expectancy first product.
We completed the qualification of our first evaluation unit of our proprietary liquid delivery subsystem to a Japanese customer and I expect to see first production orders by mid year.
Speaker 3: As they noted on our last call, the scale of this first opportunity is relatively small, but an important step in penetrating the Japanese market, which is the largest portion of the web process.
As I noted on our last call. The scale of 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.
Speaker 3: continue to quote opportunities at other OEMs that are larger in scale.
We continue to quote opportunities at other Oems that are larger in scale.
Speaker 3: and our Precision Machining Business, the two qualifications completed in 2021 will begin to see first revenues this quarter and increase.
In our precision machining business. The two qualifications completed in 2021 will begin to see first revenues this quarter and increasing from there.
Speaker 3: qualifications will both increase our proprietary content on a gas panel and be accreted to our gross margin pro.
Qualifications will both increase our proprietary content on a gas panel and be accretive to our gross margin profile.
Speaker 3: 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...
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 with our current visibility we are expecting to report sequential growth and record setting revenues for the next several quarters.
Speaker 3: And with our current visibility, we are expecting reports to clench the growth and record-setting revenues for the next several quarters.
Speaker 3: We are also pleased with our gross margin improvements in 2021. As we look to 2022, we expect strong earnings leverage on the revenue growth forecast. As a result of our continued gross margin.
We are also pleased with our gross margin improvements in 2020 , one as we look to 'twenty 'twenty. Two we expect strong earnings leverage on the revenue growth forecast as a result of our continued gross margin improvements.
Speaker 3: which brings us to Larry's discussion of our financial performance and further details on our outlook. Larry.
Which brings us to larry's discussion of our financial performance and further details on our outlook Larry.
Speaker 4: 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, non-recurring charges, and discrete tax items that
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 Theres, a very helpful schedule summarizing our gas.
Speaker 4: There's a very helpful schedule summarizing our GAP and non- GAAP financial results, including the individual line items for non-GAP operating expenses, such as R&D and SGNA, in the investor section of our website for reference during this conference call.
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.
Speaker 4: Fourth quarter revenues were $287 million of 9% from Q3 and 17% higher than Q4 of 2020.
Fourth quarter revenues were $287 million up 9% from Q3, and 17% higher than Q4 of 2020.
Speaker 4: Per se your revenues totaled a record $1.1 billion.
First year revenues totaled a record $1 $1 billion.
Speaker 4: Given the challenging operating environment, we are pleased with our gross margin and profitability performance. Q4 gross margin of 17.1% was up 40 basis points from Q3 and benefited from the addition of IMG during the last month of the quarter, along with continued cost reduction programs.
Given the challenging operating environment, we are pleased with our gross margin and profitability performance Q4 gross margin of 17, 1% was up 40 basis points from Q3 and benefited from the addition of IMG during the last month of the quarter, along with continued cost reduction programs.
Speaker 4: Full year gross margin increased to 16.7% up 210 basis points from 2020.
Full year gross margin increased to 16, 7% up 210 basis points from 2020.
Speaker 4: COVID-related impacts on our gross margin continue to be around 50 basis points and are expected to persist for the foreseeable future.
Covid related impacts on our gross margin continued to be around 50 basis points and I expect it to persist for the foreseeable future.
Speaker 4: Q4 operating expenses were 18.6 million dollars compared to our guidance of 17.5 million dollars reflecting approximately one million dollars added from the partial quarter of IMG operations.
Q4, operating expenses were $18 $6 million compared to our guidance of $17 $5 million, reflecting approximately $1 million added from the partial quarter of IMG operations.
Speaker 4: Operating margin of 10.7% increased 20 basis points from Q3. And for the full year, Operating margin was also 10.7% of 240 basis points from 2020.
Operating margin of 10, 7% increased 20 basis points from Q3 and for the full year operating margin was also 10, 7% up 240 basis points from 2020.
Speaker 4: Interest expense for Q4 was just under $1.5 million, essentially flat to Q3 as a result of our new debt terms, with a lower overall interest rate on the increase in borrowings to fund the IMG acquisition.
Interest expense for Q4 was just under $1 $5 million essentially flat to Q3 as a result of our new debt terms with a lower overall interest rate on the increase in borrowings to fund the <unk> acquisition.
Speaker 4: Our tax rate for the quarter was 10% and the full year tax rate was 11.5%
Our tax rate for the quarter was 10% and the full year tax rate was 11, 5%.
Speaker 4: We reported earnings per share of 90 cents for Q4 at the midpoint of our guidance. The strong operating leverage in 2021 resulted in record net earnings of $98 million up 65% from 2020 with EPS also outgrowing revenue growth of 34% from 2020 reflecting the higher share count. We
We reported earnings per share of 90 cents for Q4 at the midpoint of our guidance the strong operating leverage in 'twenty 'twenty. One resulted in record net earnings of $98 million up 65% from 2020 with EPS also outgrowing revenue growth of 34% from 2020, reflecting that.
Higher share count.
Now I will turn to the balance sheet, we closed the acquisition of IMG in late November and the purchase price of $270 million was funded with approximately $140 million of cash and investments on hand, and $130 million of incremental borrowing on our newly revised credit agreement.
Speaker 4: We closed the acquisition of IMG in late November and the purchase price of $270 million was funded with approximately $140 million of cash and investments on hand and $130 million of incremental borrowing on our newly revised credit agreement.
Speaker 4: This transaction drove the majority of the increase in total debt to $295 million and the decline in total cash and investments to $75 million at year-end.
This transaction drove the majority of the increase in total debt to $295 million and the decline in total cash and investments of $75 million at year end.
Speaker 4: Based upon our prior revenue guidance for Q4, we had expected stronger cash conversion of working capital late in the year. But given the continued increases in customer demand, concurrent with output challenges, we built inventory in the quarter to support the growth forecast for the next several quarters. This reduced our inventory turns to 4.4 and Q4, and DSOs were hired at 49 days, compared to 44 days in Q3.
Based upon our prior revenue guidance for Q4, we had expected stronger cash conversion of working capital late in the year, but given the continued increases in customer demand concurrent with output challenges, we built inventory in the quarter to support the growth forecast for the next several quarters. This reduced our inventory turns to.
The $4 four in Q4, and Dsos were higher at not at 49 days compared to 44 days in Q3.
Speaker 4: Going into 2022, we expect these working capital investments in 2021 will translate to strong free cash flow generation in the quarters ahead.
Going into 2022 we expect these working capital investments in 2020 , one will translate to strong free cash flow generation in the quarters ahead.
Speaker 4: Now we'll turn to our first quarter guidance. With revenue guidance in the range of $280 to $320 million, our earnings guidance is $0.80 to $1.04 per share.
Now I will turn to our first quarter guidance with revenue guidance in the range of $280 million to $320 million. Our earnings guidance is 80 cents to $1 <unk> per share at the midpoint of guidance. This includes approximately $18 million of revenue from IMG compared to $7 million in Q4.
Speaker 4: At the midpoint of guidance, this includes approximately $18 million of revenue from IMG compared to $7 million in Q4.
Speaker 4: Our guidance assumes the industry's supply chain constraints will persist at the same level through the quarter. But we have also widened the guidance range to factor in the additional uncertainty. We've all been experienced since last quarter.
Sure.
Our guidance assumes the industry's supply chain constraints will persist at the same level through the quarter, but we have also widened the guidance range to factor in the additional uncertainty we've all been experiencing since last quarter.
Speaker 4: We are expecting about an 80 basis point improvement in gross margin for Q1, reflecting a full quarter of IMG and continued cost improvement F.
We are expecting about an 80 basis point improvement in gross margin for Q1.
Selecting a full quarter of IMG and continued cost improvement efforts.
Speaker 4: We continue to drive improvements to our growth, growth margin profile.
We continue to drive improvements to our garage gross margin profile.
Speaker 4: Our key strategies to drive gross margin higher are through incremental cost reduction programs, growing our share within our higher margin components businesses, and increasing our content of proprietary IP within our product.
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 our proprietary IP within our products with the IMT acquisition, an important element of increasing our revenue mix of higher margin components. We expect continued.
Speaker 4: With the IMG acquisition and important element of increasing our revenue mix of higher margin components, we expect continued progress on our other gross margin improvement plans as we progress through 2022.
Progress on our other gross margin improvement plans as we progress through 2022.
Speaker 4: Our Q1 operating expense forecast is $21.4 million with the majority of the increase due to the full quarter of IMG operations along with seasonal
Our Q1 operating expense forecast is $21 $4 million with the majority of the increase due to the full quarter of IMG operations, along with seasonal increases.
Speaker 4: Through 2022, we expect the off-ex to increase a bit each quarter as we continue to make incremental investments in R&D supporting our new product development programs, the new ERP system and overall investments supporting company growth.
Through 2022 we expect opex to increase a bit each quarter as we continue to make incremental investments in R&D supporting our new product development programs, the new ERP system, and overall investments supporting company growth.
Speaker 4: We expect our interest expense will be approximately $1.5 million in the first quarter, reflecting a full quarter of borrowings for the IMG acquisitions, as well as our lower borrowings.
We expect our interest expense will be approximately $1 $5 million in the first quarter, reflecting a full quarter of borrowings for the IMG acquisitions as well as our lower borrowing rate.
Speaker 4: Our tax rating Q1 will increase to approximately 13.5% given the higher mix of US-based revenues, and we estimate our fully diluted share count to be approximately 29.1 million.
Our tax rate in Q1 will increase to approximately 13, 5% given the higher mix of U S based revenues and we estimate our fully diluted share count to be approximately $29 1 million.
Speaker 4: Our tax planning rate over the next couple of years is now in the range of 13 to 14% given current tax policy and the expected geographical mix of revenue.
Our tax planning rate over the next couple of years and is now in the range of 13% to 14% given current tax policy and they expected geographical mix of revenues.
Speaker 4: Finally, we expect capex to be around 3% of revenues for 2022, which reflects the higher levels of investment required to support our precision machining business.
Finally, we expect capex to be around 3% of revenues for 2022 which reflects the higher levels of investment required to support our precision machining business.
Speaker 4: We expect to deliver strong free cash flow performance in 2022 as we show improved cash conversion metrics compared to 2021 when we built inventory in support of the growth ahead.
We expect to deliver strong free cash flow performance in 2022, as we show improved cash conversion metrics compared to 2021, when we built inventory in support of the growth ahead.
Operator, we are ready to take questions. Please open the line.
Speaker 1: Operator, we are ready to take questions. Please open the line. Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad.
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Speaker 1: The participants using speaker equipment may be necessary to pick up your handset before a person starts keys.
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One moment, please while we poll for questions.
Speaker 1: And our first question comes from the line of Tom Difflee with DA Davidson.
And our first question comes from the line of Tom definitely with D. A Davidson.
Please proceed with your question.
Speaker 5: Yeah, thank you, I'm good afternoon. First, Larry, question on the guidance. The range, $0.80 to $1.00 for, is that strictly just the operating leverage overhead absorption, or is there other factors that go into that earnings level based on that revenue?
Yeah. Thank you and good afternoon first Larry a question on the guidance.
The range 80 cents to a dollar for is that strictly just the all pretty leveraged overhead absorption or is there other factors that go into them.
The level based on that revenue level.
Speaker 4: Well, the biggest piece, Tom, is the IMG will be in full quarter. So that's um, drives some...
Well the biggest piece Tom is the IMG will be in for a full quarter. So that's.
Drives.
Speaker 4: some of the improvement. The others we will get a little bit of volume leverage, but I'd say that the majority of the changes is from my MG.
Some of the improvement the others, we will get a little bit of volume leverage, but I'd say that the majority of the changes is from from IMG full quarter.
Speaker 5: I guess I'll talk more about 30% range from the low end of earnings to the high end of their earnings versus much smaller.
I guess I was talking more about 30%.
30% range from the low end of earnings to the high end of range person is much smaller revenue percentage change.
Speaker 3: Yeah, from the midpoint to the top, you'll see a little bit of leverage, but again, most of that flex up is, we're pretty kind of capex light here, so you get some, but you don't get tons of it. So, most of it is just the incremental revenue.
Yeah from the midpoint to the to the top you'll see a little bit of leverage but again you know.
Most of that flex up as you know, we're we're pretty Capex light here. So you don't you get some but you don't get tons of it. So most of it is just the incremental revenue that.
Speaker 3: that'll flow through it kind of relatively the same flow through a rate so
That'll flow through it kind of relatively the same flow through rates that we would be if we've had in the past.
Speaker 5: Thanks Jeff. You know, when I look at the IMG acquisition, curious, does that create, or does that bring with it some extra capacity you can use for your core business? Or is it just too different a business to have it help out the core business going forward? And that'll be its own kind of growth driver, very separate going.
Okay. Thanks, Jeff.
Yeah, when I look at the the IMT acquisition.
I'm curious does that create or does that bring with it. Some extra capacity you can use for your core business or is it just too different of a business to have that helped us too.
The core business going forward, and then it'll be its own kind of growth driver.
Going forward.
Speaker 3: Yeah, they do have some incremental capacity that can be utilized for certain portions of the machine that we do. And so they can do some of the steps of the components that we machine and we've already started that process. That'll take a little while to move things in two to three months.
They they do have some incremental capacity that can be utilized for certain portions of the machining that we do and so they can do some of the steps of the components that we machine and we've already started that process that'll take a little while to move things in two to three months and the other thing.
Speaker 3: The other thing they do is they have a portion of the businesses is in e-beam welding, which we also outsource, so we can in-source into that capacity that they have as well. And so we're working on that as well. And those are part of the kind of the cost reductions and synergies that we've seen as we did the act.
They do is they had a portion of the business is in E beam welding, which we also outsourced. So we can in source into that capacity that they have as well and so we're working on that as well and those are part of the kind of the cost reductions and synergies that we've seen as we did the acquisition.
Speaker 5: Okay, and you can just remind us what the percentage of recurring business there and the percentage of non-
Okay and can you just remind us what the percentage of recurring business there in the percentage of non semi business.
Speaker 3: Yeah, they have they have some exposure to I'll call it service parts and services primarily around kind of their welding operation where they do welding for customers that supply the parts and so I want to say kind of off the top of my head it's probably a third or so.
Yeah. They have they have some exposure to Oh call. It service parts and services are primarily around kind of the.
There are welding operation, where they do a welding for customers that supply the parts and so I wanted to say kind of off the top of my head, it's probably a third or so.
Speaker 5: And final question, when you look at the increased expenses, really, especially on the shipping, what kind of an impact is that had on your model? And do you think some of these shipping expenses are more of a permanent increase versus a temporary increase? Well, I think.
Okay and final question.
When you look at the increased expenses lately, especially on the shipping.
What kind of an impact has that had on your model.
Do you think some of these shipping expenses or more of a permanent increase versus a temporary increase.
Well I think it's been.
I'd say today, it's it's a good.
Speaker 4: The bulk of the COVID impact is really around shipping. It's been a, we've probably seen, if you look at pre-COVID to now a 50% increase in the freight costs, which we've offset by some operational.
The bulk of the Covid impact is really around shipping.
It's been a we've.
We've probably seen if you look at pre Covid and now a 50% increase in and kind of freight costs, which we've we've offset by some operational.
Speaker 4: activities that initiatives like shipping from Malaysian to Singapore with their own trucks that sort of thing but I think in general right now we don't see a lot of
Activities that initiatives like shipping from Malaysia to Singapore, where their own trucks that sort of thing but.
In general right now, we don't see a lot of.
Speaker 4: significant improvement in the environment. I think it looks at least for the first half of this year that we're gonna be facing the same issues. And we'll continue to try to look for creative ways to mitigate some of that, but right now we don't see a lot of change.
Significant improvement in the environment I think it looks at least for the first half of this year that we're going to be facing the same issues and we.
We will continue to try to look for creative ways to mitigate some of that but right now we don't see a lot of a lot of change in the in the business.
Speaker 3: Yeah, I think, Tom, I think until supply increases for air freighters, particularly it'll be with us for a while, but I think that people are getting creative on how they attack the air freight. And so we've done some of that too with consolidating and partnering with others to try and minimize the effect on us.
Yeah, I think Tom I think until supply increases for air fragrance, particularly it'll it'll be with us for a while but I think that our people.
People are getting creative in how they attack the airfreight and so we've done some of that too with consolidating and partnering with others.
To try and minimize the effect on us so.
Okay well. Thank you both for your time today.
Thanks, Tom.
Okay.
Speaker 1: Our next question comes from the line of Patrick Ho with Diffle. Please proceed with...
And our next question comes from the line of Patrick Ho with Stifel. Please proceed with your question.
Speaker 6: Thank you very much. Jeff, I know there's been a lot of moving parts on the supply chain, the COVID-related costs and the workforce reductions that have occurred.
Thank you very much Jeff.
Theres been a lot of moving parts on the supply chain.
Covid related costs and the workforce workforce reductions that have occurred.
Speaker 6: As you look at the current March quarter and maybe into the June quarter as well, can you rent, I guess, those aspects and which ones are creating the most pressure? Is it the supply chain that's probably causing the greatest headwinds today? And maybe as a follow up to that, if it is the component shortage, just...
As you look at the current March quarter, and maybe into the June quarter as well can you I.
I guess, the those aspects of them, which ones are creating the most pressure eases the supply chain, that's probably causing the greatest headwinds today.
And.
Maybe as a follow up to that if it is the component shortages are.
Speaker 6: Are there multiple components that are becoming more challenging to procure or is it just kind of...
Are there multiple components that are becoming more challenging to procure or is it just kind of one area.
Speaker 3: Hey Patrick, so I do think that the component shortages are gonna have the biggest effect on...
Hey, Patrick So I do think that the.
Component shortages are going to have the biggest effect on on.
Speaker 3: on recovering and growing and on the
On recovering and growing in on the on our outlook and so you know we've we've seen the omicron kind of peak.
Speaker 3: on our outlook. And so, you know, we...
Speaker 3: We've seen the Omicron kind of, you know, peak a little bit. It's getting much, much better now. I would say that's becoming a little bit of a less of an issue, but it obviously did start to spike sometime in late October and things like that. We didn't say it affected the internal I-Core much, but we did see some of that at a few suppliers. But I think largely we're seeing kind of, I'll call them electronic components, semiconductors.
Peak, a little bit it's getting much much better now I would say, that's becoming a little bit.
Less of an issue, but it obviously did start to spike sometime in late October and things like that I wouldn't say it affected the internal ichor much but we did see some of that at a few suppliers, but I think largely we're seeing kind of I'll call them electronic components semiconductors other electronic.
Speaker 3: other electronic components, things like that that
And it's things like that that are still kind of challenged I do see some improvement.
Speaker 3: are still kind of challenged. I do see some improvement in the future and plans and things like that. So we're hoping that with each month, everything continues to get a little bit better.
Improvement in the future and plans and things like that so you know, we're hoping that with you know each month everything continues to get a little bit better.
Speaker 6: Great, that's helpful. And maybe that's my follow up question. In terms of, you talked about cat vaccines, 3% of revenues this year, you continue to expand capacity.
Great that's helpful and maybe as my follow up question in terms of you talked about Capex being 3% of revenues. This year are you you continue to expand capacity.
Speaker 6: Are these plans, you know, they're always looking forward, but how much forward are they looking? Are they looking at the next year or so, or are they more three to four year planning of when, you know, let's just say hypothetically, we're looking at a $1.6 billion to $2 billion type of...
These plans are.
You know, they're always looking for but how much or what are they looking at theyre looking at next year or so or are they more three to four year planning of when you know, let's just say hypothetically. We're looking at a $1 6 billion to $2 billion type of you know revenue company what are some of the the the plans there.
Speaker 6: you know, revenue company. What are some of the plans there in terms of capacity expansion? And I guess what I'm looking for is
In terms of our capacity expansion and I guess, what I'm looking for it.
Speaker 6: You try to play a little bit of catch-up over the next year or so because it's a strong teammate or are these long-term plans?
Tried to play a little bit of catch up over the next year or so because of the strong demand or are these long term plans.
Speaker 3: They're long term pans. I mean, I think, you know, we started talking about this probably towards the end of 2020 and the outlook of going into 2021 and 2021 ended up much stronger. So it might end up the year off of the two to three years. So I'm pretty comfortable with our plans and for the next one to two years for sure.
They're long term pans I mean, I think we started talking about this probably towards the end of 'twenty 'twenty and the outlook going into 2021 and 2021 ended up much stronger so it might end up the year off of the two to three years, so I'm pretty comfortable with our plans and for the.
The next one to two years for sure and not everything is in place are largely in place and I think youre seeing is kind of raise that capex number towards 3% and that's really driven by the fact that we have to continually increase our capacity on the machine inside of the business, which has got a higher.
Speaker 3: And not everything is in place, largely in place. And I think, you know, you're seeing I was kind of raised that cap-ex number towards 3%. And that's really driven by the fact that we have to continually increase our capacity on the machining side of the business, which has got a higher cap-ex level. So on the integration side, it's still kind of been that one to 2%. So we're certainly looking out multiple years.
Capex level, so I'm on the integration side, it's still kind of in that 1% to 2%. So we're certainly looking out multiple years.
Speaker 3: I think we're largely aligned with the view that our customers have and the industry has for the next couple of years.
And and I think and you know I think were largely aligned with the view that our customers have.
And the industry has for the next couple of years.
Great. Thank you very much.
You bet.
Speaker 1: Our next question comes from the line of Chris Hancock with Cowan Cleef O'Cee.
Our next question comes from the line of Chris Shankar with Cowen. Please proceed with your question.
Speaker 7: Hi, this is Bob Wurt Merton on behalf of Chris. Thanks for taking my question.
Hi, This is Robert Mertens on behalf of Krish. Thanks for taking my question.
Speaker 7: I just wanted to give a little bit more detail on the IMG. Integration, if that business has an atypical seasonality or you're just expecting sort of 18 million.
I just wanted to get a little bit more detail on the IMT.
Integration.
That business has any typical seasonality or your.
We're just expecting sort of the 18.
$18 million.
Speaker 7: poorly revenue in March to grow from there. And then I know you mentioned that business has some air space and defense exposure.
Quarterly revenue in March to grow from there and then I know you mentioned.
That business has some aerospace and defense exposure.
Speaker 7: these sort of as a breakdown of the end markets for that business overall.
Do you sort of break down because the end markets for that business overall.
Speaker 3: And then I'm gonna question. Yeah, okay. It has a little bit of seasonality, believe it or not, I think largely, but not tremendous depth functions, but I would say kind of Q2, Q3 is always been a little bit.
And then a question.
Yeah, Okay. It has a little bit of seasonality believe it or not I think.
Largely but not not tremendous step functions, but I would say kind of Q2 Q3 has always been a little bit stronger.
Speaker 3: stronger and you know we have some plans to try and you know obviously add some revenues so we can probably make that.
And you know we have some plans to try and you know obviously you had some revenue synergies so.
We can probably make that a little bit less of an issue.
Speaker 3: a little bit less of an issue. You know, as you go into fourth quarter, sometimes defense and things like that slow up a little bit.
As you go into the fourth quarter, sometimes defense and things like that slow up a little bit.
Speaker 3: But I don't see their semiconductor business slowing up as we go through it. We don't actually break out their pieces of the business. But I would say the vast majority of that business is still semiconductor and the services around semiconductor that they provide. But they do address some of the defense applications. And I would say.
But I don't see their semiconductor business slowing up as we go through it where we don't actually break out there are pieces of the business, but I.
I would say the vast majority of that business is still semiconductor and the services around semiconductor.
They provide but they they do they do address some of the defense applications and I would say of those.
Speaker 3: Of those, you know, you've heard some of the commercial defense, but it's not necessarily all commercial defense. So it's actually stayed pretty robust.
You've heard some of the commercial defense, but it's not necessarily all commercial defense. So it's actually stayed pretty robust.
Speaker 3: for the last couple of years that we did a pretty deep diet, obviously doing diligence on. So it's got a very strong base and they've got some really neat new products that, you know, as they get qualified, you know, they have some products that address some medical application.
Yeah for the last couple of years that we we did a pretty deep dive obviously doing diligence on so it's got a very strong base and they've got some really neat new products that you know what.
As they get qualified you know they they have some products that address some medical applications and and those are kind of in the early stages, but if they get adopted by their customer you know those could be actually good growth drivers for them beyond this year and into next year. So.
Speaker 3: And those are kind of in the early stages, but if they get adopted by their customer, those could be actually good growth drivers for them beyond this year and in the-
Great. That's very helpful. And then just real quick.
Speaker 7: Great, that's very helpful. And you're just real quick. A question around the inventory levels. You confident at the current levels supporting above growth, WSE growth this year, should we expect a bit more of a buff for the next few quarters, just a...
Question around the inventory levels.
The current.
Levels supporting above growth Wi Fi growth.
Year should we expect a bit more.
For the next few quarters just a.
Speaker 7: Make sure you're following on the supply. Challenges going forward.
To make sure you're following on the supply challenges Gulfport.
Speaker 3: Yeah, I think we've been, and I think you've seen this across the industry, is no one's trying to constrain inbound inventory levels, because it only takes a part that can keep you from shortage from, you know, ship and something. So I don't think they'll grow greatly from here. And if supply chain becomes improves, and as we get through mid-year, and in the next year, they'll probably modulate down, actually.
Yeah, I think we've been and I think you've seen this across the industry. It's no one's trying to constrain inbound.
Inventory levels because it only takes apart that can keep you from shortage from you know shipping something so I don't think they'll grow greatly from here and if supply chain becomes improves.
Improves and as we get through mid year and into next year that they'll probably modulate down actually.
Okay. Thank you that's all for me.
Thanks Robert.
Yeah.
Speaker 1: And as a quick reminder, if anyone has any questions, you may press star one on your telephone keypad to join
And as a quick reminder, if anyone has any questions. You May press star one on your telephone keypad to join the question and answer queue.
Speaker 1: Our next question comes from the line of Quinn Bolton with Need Him in Company.
Our next question comes from the line of Quinn Bolton with Needham <unk> Company. Please proceed with your question.
Speaker 7: Can I say a question just to the clarification on your outlook for 2022, where you said you're going to grow faster than WFV? Is that organically or does that include the probably roughly six or seven points of growth that you get through the IMG acquisition in 2020?
Hey, guys can I ask a question just a clarification on your outlook for 2022, where you said you were going to grow faster than WP ease that organically or does that include the probably roughly six or seven points of growth that you get through the IMT acquisition in 'twenty two.
Speaker 3: Yeah, it does. Obviously, we're talking about the whole corporation, so you're approximately right, that's about 6% of growing above WFE. I think we will grow.
Yeah. It does obviously you know we're talking about the whole corporation. So you're approximately right that's about 6% of growing above W. O N E.
You know I think we will grow.
Speaker 3: You know, I had to put a number on it. I kind of think low 20s or something like that would be a reasonable estimate of where we think we can come out.
If I had to put a number on it.
Kind of think low twenty's or something like that would be a reasonable estimate of where we think we can come out this year.
Speaker 3: giving our exposures to the depth edge EUV products and then anti-ni-in.
Given our exposures to the Dep Etch E V products, and then adding IMG.
Speaker 7: That's low 20s, inclusive of IMG. Yeah. Got it. Great. And then the second question just around component availability. You'd mentioned, sounds like it's mostly semi-conductor related or maybe other electronic components. Wondering, are there any constraints that you're seeing on state like mass flow controllers or valves or manifolds or anything else that you're sourcing that are sort of less electronics but perhaps still critical to the gas fans?
Got it so that's low twenty's inclusive of IMG.
Yes got it got it great and then second question just around component availability, if you'd mentioned it sounds like it's mostly semiconductor related or maybe other electronic components wondering are there any constraints that you're seeing on say like mass flow controllers or valves from animals or anything else that you're sourcing that are.
Sort of less electronics, but perhaps still critical to the to the gas panels.
Speaker 3: I mean, I would say that I don't want to be specific, obviously, on any, you know, specific supplier component, but I would say anywhere, you know, that we see the use of semiconductors, and I wouldn't say that there's a lot of these issues, but there's one or two that have impacted some of the...
I mean, I would say that I don't want to be specific I'm, obviously on on any.
Specific supplier component, but I would say anywhere you know that we.
We see.
Use of semiconductors, and I wouldn't say that there's a.
A lot of these issues, but there's one or two that that have impacted some of the the ability for those suppliers to to ramp and support the demand that we're seeing and I think you know that in the industry. Most of us are still chasing demand because of these issues so but.
Speaker 3: the ability for those suppliers to ramp and support the demand that we're seeing. And I think you know that in the industry, most of us are still chasing demand because of these issues. So, but-
Speaker 3: Other than that, I don't want to be much more specific on the supply chain.
Other than that I don't want to be much more specific on the supply chain challenges.
Speaker 7: Yeah, but if you're short on a component, it's probably because that component includes a semiconductor or some kind of electronic component that everybody's struggling to sort.
But if you are short on a component, it's probably because of that component.
Conductor or some kind of electronic components and everybody's struggling.
<unk>.
Speaker 3: Yeah, that would be a good characterization, yeah. Yeah, I understand.
Yeah that would be that would be a good characterization yeah got it understood. Thank you.
Yeah.
And our next.
Speaker 1: Question comes from the line of Greg Ellis would be right in security.
Question comes from the line of Craig Ellis with B Riley Securities. Please proceed with your question.
Speaker 6: Yeah, thanks for taking the questions and appreciate all the transparency you're providing around IMG. So I'll just start there, a quantitative and a qualitative question. Larry, for you, you commented on the revenue contribution for four and one Q, but can you say if the business is accretive to the bottom line and more qualitative for you, Jeff, can just talk about how you're feeling about the early integration and the customer reaction to the business as we've had it in the portfolio. Actually, something may be in the portfolio victory, it's still a portfolios on the eighth traditional ??? by
Yeah. Thanks for taking the questions and I appreciate all the transparency or providing around I am Chi. So I'll just start there a quantitative and qualitative question Larry for you your comments Don that revenue contribution per port in one Q, but can you say if the business is accretive to them.
Bottom line and more qualitative for you Jeff can you just talk about how you're feeling about the early integration and customer reaction to the business to sweep had it in our portfolio for a couple of months.
Speaker 3: I'll start and Larry can finish up with the financial. So, you know, from an integration, you know, largely we've kind of organizationally already integrated it. So it's going fine. We're not going to rush it on to ERP systems and things like that. I think that...
I'll start and then Larry can finish up with the financial so.
From an integration.
You know largely we've kind of organizationally already integrated it so it's going fine, we're not going to rush it onto ERP systems and things like that.
I think that.
Speaker 3: We're excited, you know, as you own it, you can see the capability of their engineering group and their manufacturing group and they do a much higher level of automation than we do and we can leverage that learning.
We're excited you know it is you own it you can see the capability of their engineering group and their manufacturing group and they do a much higher level of automation than we do and we can leverage that learning into it and but I think the customer reaction has been has been very pretty pretty good.
Speaker 3: into it and but I think the customer reaction has been has been very pretty pretty good There's a lot going on obviously in the world today is everybody's trying to ramp and manage some of the challenges we're doing so C and synergies in revenue might take a little longer just because they all will require some level of engineering Support and those and that's just challenging and times like this even
There's a lot going on obviously in the world today as everybody is trying to ramp and manage some of the challenges we're doing so seeing synergies and revenue might take a little longer just because they all will require some level of engineering support and those and that's just challenging in times like this.
Even regardless of.
Speaker 3: you know what? Dealing with the supply chain constraints that everybody is dealing with. So, but we do see some, and we'll keep you posted on how we might grow that. And they're tight to some pretty good applications that are growing a little bit faster, I would say.
No.
Dealing with the supply chain constraints that everybody is dealing with so but we do see some and we'll keep you posted.
How we might grow that and they're tied to some pretty good applications that are growing a little bit faster I would say.
Than the overall semiconductor business, but it is a relatively new kind of a win for them in the last couple of years, So I see that continuing to grow.
Speaker 3: than the overall semiconductor business, but it is a relatively new kind of win for them in the last couple of years. So I'll see that continuing.
Yeah, and I think on the Yep.
Speaker 4: Yeah, I think on the, yeah, thanks. Sorry. Yeah, I'm a creative question. So as we said, it is instantly a creative, about 100 basis points on margin, 40 basis points roughly on operating margins. And then I think if you go to net, it's probably around 20 basis points on the net line. So for the year, year over year. Got it. Got it.
Thanks, Larry.
Yeah on the accretive question. So as we said it is instantly accretive.
About 100 basis points on margin.
40 basis points roughly on operating margins and then I think if you go to that its probably around 20.
Basis points on the net line so for the year year over year.
Got it got it that's helpful and then.
Speaker 6: With regard to this supply chain issues, and I hate to beat that debt horse, but I just wanna make sure I really understand it. To what extent are the supply chain issues that you're seeing things that are part of the products you're building and necessary inputs or just the cadence of your manufacturability versus things that are external to I core and maybe slowing an end customer's demand for your product because
With regard to the supply chain issues and I hate to beat that dead horse, but I just wanted to make sure I really understand that.
To what extent are the supply chain issues that you're seeing things that are part of the products. You are building in necessary inputs or just the cadence of or you're a pure manufacturer ability versus things that are external to ichor and maybe slowing and then customers demand for your product because.
Yes.
Speaker 6: Some other part is a business issue. It's everything we're talking about today, things that are really just internal to I-core is a death broader issue than that, that you're expressing as you talk about some of the things impacting revenue. Of course.
Some other part is this an issue it's everything we're talking about three things that are really just internal to ichor.
My core or is it a broader issue that that that.
But you're expressing as you talk about some of the things impacting revenue and gross margin.
Speaker 3: Yeah, I think it's on, it's basically on components that are impacting our supplier's ability to supply parts to us. I think if you're talking about internally, only those would be...
I think it's on.
It's basically on components.
That are impacting our suppliers' ability to supply parts to us I think if you're talking about internally only those would be.
Speaker 3: labor-related things like that. That is not significantly affecting us. I mean, we, everybody was affected by Omicron and stuff, but to a pretty low level for us, and that was dealt with over time and other things. So most of it is just in the timing and predictability of Parkflow.
Labor related things like that that is not significantly.
Affecting us I mean, we you know everybody was affected by omicron and stuff, but to a pretty low level for us and that was dealt with with you know overtime and other things. So most of it is just in you know in the timing and predictability of park flow.
Speaker 6: Yep, and, and I may have missed it because we're hopping on and off different calls, but was the impact of that quantified for the quarter and the outlook are we talking five to 10 million 10 to 20 million any scoping would be particularly helpful.
Yep, and and I may have missed it because we're hopping on and off different calls but.
Was the impact of that quantified for the quarter and the outlook are we talking five to 10 million 10 to 20 million any scoping would be particularly helpful.
Speaker 3: Yeah, no, we haven't quantified it. What I would say is we've expanded the range. The high end of the range would need some further recovery in the supply chain versus, you know, what we can see today. And I would say demand is above that number.
Yeah, No we haven't quantified it.
What I would say is we've expanded the range.
The high end of the range would need some further recovery in the supply chain versus you know what we can see today and I would say demand is above that number for sure.
Speaker 6: Yep. And demand above that number, but you're not concerned at all about any share issues or anything like that.
Yep.
It demands above that number, but you're not concerned at all about any share issues or anything like that yet.
Speaker 3: Well, I mean, obviously we're all kind of in the same situation. So we always worry about things like that, but I don't think we're unique in any way, shape, or form. We have a fairly complex, obviously, supply chain, particularly on the integration gas panel side. There's a lot of different components, different suppliers.
Well I mean, obviously, we're all kind of in the same situation. So yeah. We always we always worry about things like that but I don't think we're unique in any way shape or form them, we have a fairly complex obviously supply chain.
Particularly on the integration gas panel side, there's a lot of different components different suppliers.
Speaker 3: So we do manage a lot of different parts and suppliers and things like that. So, but I do not think we're unique in any way, shape, or form with the issues that are...
And so we do manage a lot of different parts and suppliers and things like that so but I do not think we're unique in any way shape or form with the issues that are kind of I'd hate to use the word generically most people are facing but no I don't think we're much different than that.
Speaker 3: I hate to use the word generically. Most people are facing, but now I don't think we're much different.
Speaker 6: Got it. And just last one for me. And the
Got it and just last one for me.
And the.
Speaker 6: The reason for the question is just respecting the trends that we've seen over the last 12 months, which I think you spoke to quite well in your prepared remarks, Jeff. But if demand from your customers proves to be materially higher than that,
The reason for the question, it's just respecting the trends that we've seen over the last 12 months, which I think you spoke to quite well in your prepared remarks, Jeff, but but if so or if.
Demand from your customers proves to be materially higher than that.
Speaker 6: kind of low 20s that you talk about. Can you just talk about your confidence in being able to hit an number that might be mid 20s or high 20s should industry evolve to that level?
Kind of low Twenty's that you talked about can you just talk about your confidence in being able to head in a number that might be mid twenties for high twenty's should industry.
At that level.
Speaker 3: Oh, I think if the industry continues to grow in the supply chain, it's healthier. I think that, in fact, will occur. It's hard to handicap when the supply chain is going to get healthy. I think most of us think that, at least through the middle of this year, we're going to still have constrained environments.
I you know I think if see if the industry continues to grow in the supply chain gets healthier I think that that in fact will will occur it's hard to handicap when the supply chain is going to get healthy I think most of us think that.
At least through the middle of this year, we're going to still have constrained environments.
Speaker 3: And then, I think even the $100 billion WFE has the assumption in there that people are going to, that's the demand that they believe they can fulfill. The underlying demand may be a little bit higher.
And then you know I think you know that even the $100 billion Wi Fi has the assumption in there that you know.
People are going to you know that.
The demand that they believe they can fulfill the.
The underlying demand, maybe a little bit higher.
Got it got it thanks very much guys appreciate it.
Thank you.
Speaker 1: And we have reached the end of the question in our session, and I'll now turn the call back over to Jeff Andrews.
And we have reached the end of the question and answer session and I'll now turn the call back over to Jeff Andreessen for closing remarks.
Speaker 3: 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 May. Operator, that concludes our call.
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 May.
Operator that concludes our call.
Thank you.
You may disconnect your lines at this time.
You have a good day.
Yeah.
Yeah.
Yeah.
Hum.