Q4 2022 MKS Instruments Inc Earnings Call

Speaker 3: K.S. Instruments' fourth quarter and full year 2022 earnings conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during that session, you will need to press star-one-one on your phone. You will then hear an automated message advising your hand is raised.

Speaker 3: So, we throw your question. Please press star 1, 1 again. Please be aware that today's conference is being recorded. And I would not like to hand a compass over to your speaker today. Mr. David Rizzick. Mr. Rizzick, please go ahead.

Speaker 4: Good morning everyone. I am David Rizjic, Vice President of Investor Relations and I am joined this morning by John Lee, President and Chief Executive Officer and Seth Backstraw, Executive Vice President and Chief Financial Officer.

Speaker 4: and full year 2022, which are posted to our investor website at investor.mks.com. As a reminder, various remarks about future expectations, plans and prospects for MKS comprise forward-looking statements.

Speaker 4: Actual results may differ materially as a result of various important factors, including those discussed in yesterday's press release and in our quarterly report on Form 10Q for the quarter ended September 30, 2022. These statements represent the company's expectations only as of today and should not be HTML form of proper access.

Speaker 4: and out of track limited.

Speaker 4: which MCAS acquired on August 17, 2022. Also, unless otherwise noted, all income statement related financial measures will be non-GAAP other than revenue.

Speaker 4: non- GAAP financial results and a reconciliation of our gap and non- GAAP financial measures. As a reminder in the fourth quarter, MKAS updated.

Speaker 4: its end-market classifications, including replacing advanced electronics with electronics and packaging, reclassifying products and services supporting light-emitting diode, laser diode, and solar markets from electronics and packaging to specialty industrial, and reclassifying material solutions division products and services supporting wafer-like energy collection.

Speaker 4: level packaging from semiconductor to electronics and packaging. For a detailed breakout of reported revenues by end market as well as out of tech and combined company revenues by end market, please visit the investor relations section of our website. Now I'll turn the call over to Jonathan.

Speaker 4: Thanks, David. Good morning, everyone, and thanks for joining us today. We ended 2022 on a strong note, with revenue and ETS exceeding the high end of our guidance range.

Speaker 4: Of course, the first quarter did not begin the way we expected. On February 3rd, we identified that the NCATS had been a victim of a ransomware incident.

Speaker 4: We took immediate action to contain the incident which has materially impacted our business systems as well as the operations of our photonics solutions division and vacuum solutions division, including our ability to process orders, ship products, and

Speaker 4: We provide service to customers. The operations of our material solutions division were not impacted. Today, we're well into the recovery phase. And we've begun starting up the effective manufacturing and service operations.

Speaker 4: And we expect these operations will be restored over the coming weeks. We plan to provide a more complete picture of the costs and related impacts of the incident on our first quarter earnings call, but we do expect there will be a material impact on our first quarter performance. Our main focus today, of course, is on ramping up our production.

Speaker 4: that the best prove the mettle of the toughest moments, but you often don't get to see that.

Speaker 4: I'm extremely proud of the unprecedented responsiveness, stamina, innovation, and resiliency demonstrated by our teams. I also want to thank our customers, the pliers, and other business partners.

Speaker 4: for their understanding, patience and support through this difficult period.

Speaker 4: We're working hard to be fully back up soon and I look forward to delivering our recommended to all of you.

Speaker 4: Now, onto the business. I start by reflecting on the major milestone of 2022, which of course is the addition of ATTECH to the NKS portfolio.

Speaker 4: Attacks critical process chemistry and equipment solutions. Across our electronics and packaging and especially industrial markets.

Speaker 4: extremely well, and our initial engagements, the major PCD manufacturing customers, have been very positive. We look forward to demonstrating the value of our company's broader and unique capabilities to all of our stakeholders. 2022 also marked another record year.

Speaker 4: for our Semican Interbusiness highlighted by strong demand across our vacuum and photonics portfolios. Our customers count on our broad domain and process expertise to solve their most complex challenges. We are uniquely positioned in a Semican Third Capital Equipment Industry, as MK solutions are used in over 85 percent.

Speaker 4: of the steps needed to manufacture a semiconductor chip. Operationally, during 2022, our global team navigated well to continue supply chain constraints and significant inflationary pressures.

Speaker 4: I'm proud of how we executed to meet those challenges while we remain focused on innovating across our portfolio to solve the industry's critical technology challenges. While we believe macroeconomic challenges along with expected pressures in WSE investment will persist this year, our 2022 achievements combined with our leadership.

Speaker 4: across a broad array of end markets should significantly enhance our long-term potential to deliver sustainable and profitable growth within an estimated $25 billion availableYes.

Speaker 4: broad array of end markets should significantly enhance our long-term potential to deliver sustainable and profitable growth within an estimated $25 billion addressable market. Now let me discuss our results in wonky-till.

Speaker 4: We delivered 4.4 revenue of $1.09 billion, and just a bit of $282 million, at net earnings per due to share of $2. Sales to our stimulus market exceeded our expectations, as we executed well in responding to supply chain constraints delivered on shipments better than anticipated. Our Fritonic Solutions revenue set another record, reflecting continued customer traction and market penetration.

Speaker 4: 2022 are revenue from these applications grew almost 30%.

Speaker 4: outpacing estimated industry growth rates.

Speaker 4: We expect this will remain an area of growth and investment for MKS. Now moving to our electronic and packaging market, revenue was in line with our expectations of a sequential decline compared to combined company results for the third quarter.

Speaker 4: As anticipated, softening and global lachon demand impacted sales of our chemistry solutions for advanced PCBs and packaged substrate applications. Sales of our flexible PCB leaves are only permitted in a quarter, as expected. As customers continue to digest the strong growth and flexibility.

Speaker 4: well, a multi-unit order in the first quarter from a long time adite customer. This is the first example highlighting the potential cross-selling synergies as we further integrate our businesses. For the full year, sales are electronics and packaging market from the adite business grew by 3%.

Speaker 4: when excluding the impact of foreign exchange and palladium passroom. Overall, we're very pleased with Aditex performance in a difficult near-term, but triumphed device market. Turning to our specially industrial market, revenue was also consistent with our expectations and flat sequentially.

Speaker 4: Convey, prepare to combine company results for the third quarter. Our general mental finishing business continued to be impacted by lower automobile production volumes.

Speaker 4: due to lingering supply chain constraints. In addition, some of our GMF customers were negatively impacted by disruptions associated with COVID-19 in China in the fourth quarter.

Speaker 4: That said, when excluding the impact of foreign exchange and plating pass through, how the text GMS business grew 2% year over year in the fourth quarter and 4% for the full year.

Speaker 4: Looking ahead to the first quarter of 2023, because of the impact of the ransomware incident, we're not able to provide our usual guidance at this time, but Cecil provides some color shortly.

Speaker 4: In summary, our fourth quarter results highlight our solid execution in the challenging environment. 2023 kicked off with its own challenges at the Rensselaer Institute has demonstrated. It also presents opportunity. As we execute on our recovery efforts, we will remain focused on our growth strategy across our end markets.

Speaker 4: which includes attractive revenue symmetry opportunities. These markets feature powerful, secular growth drivers. And as near-term industry headwinds of eight, we look forward to capturing the valuable opportunities that lie ahead.

Speaker 4: which includes attractive revenue synergy opportunities. These markets feature powerful, secular growth drivers. And as near-term industry headwinds of eight, we look forward to capturing the value of opportunities that lie ahead. Now I'd like to turn the call over to Seth.

Speaker 4: Thank you, John . I'll cover a fourth quarter in full-year results that provides some thoughts for our first quarter of 2023, including the preliminary impact of the Ransom Air Inc. Starting with a fourth quarter, we've done the revenue of $1.09 billion above the height of our guidance range. Revenue is down 5 cents sequentially, and down 6% year-over-year, each compared to combined company's health to the previous period. This grew in the impact of foreign exchange fluctuations in played and passed through.

Speaker 4: Fourth quarter revenue grew 1% on a year-rear basis compared to combined company results. Turning to our end market results, fourth quarter semiconductor revenue was $503 million declining sequentially and growing 2% year by year.

Speaker 4: Each compared to combined companies out for the previous period, which was better than our expectations. Despite headwind, some PTA supply chain constraints, as well as newly enacted US export restrictions in the fourth quarter, our team executed very well in delivering to our customers.

Speaker 4: Fourth quarter revenue from what trion packaging market was $260,000,000, a decrease of a percent sequentially, and 19 percent year by year, each compared to combined combined cumbersome for the previous period.

Speaker 4: It's good the impact of foreign exchange in plate-in pass-through. Fourth order, revenue decline 11% on a year-over-year basis compared to combined company results.

Speaker 4: My sequential basis just decreased in revenue's primarily function of lower chemistry revenue resulting from the softer global petrionics demand.

Speaker 4: Let's try on the packing revenue. We have 25% of overall revenue in the fourth quarter. As you mentioned in our recent annual stay, we have a unique opportunity to combine our capabilities to optimize the interconnect. As package substrates, as the NCPCBs require greater integration through the transadministralization in complexity. Thank you very much for your time.

Speaker 4: We are very pleased the initial reaction to marketplace are combined laser drilling and chemistry capabilities. That reaffirms our belief that we can deliver meaningful revenue synergies from the combination of our two companies.

Speaker 4: As customers begin to focus on next generation device design cycles. Moving to our specially industrial market, revenue in the fourth quarter was $316 million, flat sequentially, into declining 4% year by year, each compared to combined company results in the previous period.

Speaker 4: You'll see the impact of foreign exchange and play the impasse through. Fourth quarter revenue grew 3% year by year on a combined company basis. In the quarter, especially industrial market made up 29% of total revenue. As a reminder, especially industrial market utilizes proprietary technologies.

Speaker 4: In the fourth quarter, Consulables and Service Revenue across the three end market categories comprise 37% of our total revenue, up 3% year by year on a combined company basis.

Speaker 4: is going to impact the foreign exchange and put it in the bathroom. Looking forward, we expect this revenue stream to provide greater resilience in our financial model as we enter a period of cyclical and macroeconomic softness.

Speaker 4: Our services revenue in particular showed strong momentum led by our semiconductor market. These results are byproduct of the actions we took several years ago.

Speaker 4: So, digitally reorganizing services to drive a more market-centric growth in profitability strategy. Turning to our margins, reported 4th quarter growth margin of 45.9% exceeding the behind of our guidance range.

Speaker 4: It has good well and interesting continued supply chain constraints, anti-flationary pressures, and also benefitted from the more favorable product mix. Fourth quarter often expenses with $242 million up slightly from the midpoint of our guidance to the higher revenue volume.

For the quarter operating margin was 23.6%, significantly above the height of our guides range. Due to strong operating leverage in our financial model, along with Vable Product Mix.

Our integration of ethics is progressing well and we are on track to achieve our cost to achieve target of $55 million within 18 to 36 months post-close.

Fourth quarter, adjusted EBDA was $282 million, also above our guides range. Just EBDA margin was 26%.

Net is expense for the fourth quarter with $75 million. With the slight and lower than we anticipated, with variable timing of rate increases relative to interest reset dates of our term loans, as well as higher interest income. Our catch rate for the fourth quarter was 20%, better than expected.

Do primarily to refinement of acquisition related valuations estimates in a fairable geographical mix of income. Net earnings for the fourth quarter with $133 million for $2 per diluted share. Turn to our balance sheet and cash flow, consistent with our track record of due leveraging, we made a voluntary principal payment of $100 million in the fourth quarter.

Dex in the quarter maintains strong liquidity with cash and short-term investments of $910 million. They're evolving credit facility of $500 million.

We exit the quarter with gross debt of $5.1 billion, which includes their voluntary debt pre-payment, partially offset, with a re-evaluation of Euro-denominate debt to be a strong Euro in the quarter.

Our net-leaved ratio actually in the fourth quarter, which means calculated on a combined company basis, was 3.4 times based on trail in 12 months adjusted EPSDA. So the fourth quarter, offering cash flow, was $184 million. And free cash flow was $130 million. A capital expenditure is in the fourth quarter, or $54 million. $20 million.

up 20% year-by-year for $2.9 billion reported in 2021. My combined company basis with DataTech revenue was consistent year-by-year. However, through the impact of foreign exchange and plating pass-through, 2022 revenue grew 5% for the combined company. Same conduct to revenue set another record in 2020.

What brought the packaging revenue was 1.1 billion dollars in 2022 on a combined company basis.

It's going to impact a foreign exchange to put in pass-through. Combined company sales declined 8% on a year-to-year basis.

Attachix Business Performance is a well-electronics-impacting market, growing 3% year by year with the booting foreign exchange in plating pastoral.

Especially in just your revenue is $1.3 billion in 2022 on a combined company basis. It's going to impact a foreign exchange to play to pass through. Combined company sales grew 4% on a year-by-year basis. In 2022 on a combined company basis.

The revenue split between our semiconductor, the draw's packaging, especially industrial markets, was 46%, 25%, and 29% respectively. Total consumables and service revenue amounted to $1.7 billion in 2022 on a combined company basis. Up 5% year-to-year.

It's going to affect foreign exchange in pletium passroom. The 2022 on a reported basis offered in cash flow is $5.29 million in free cash flow with $365 million.

I'll now turn to our first quarter outlook. John addressed the current staff's recovery from the ransomware incident, given that our effective operation is adjusting to return to production, and our folks on serving our customers, we're not able to buy the usual guidance for the first quarter.

In addition, as you may have seen yesterday, we filed a notification with the SEC that emergency 0 Ding a

Given that we in the process of restoring our systems, we require additional time to complete our end report. As John noted, the incident has materially impacted our operations for our vacuum and proton solution divisions. The operations from the Chilis solution division were not impacted. The operation of the Chilis solution division was impacted.

MSP revenues are spread across electronics and packaging, especially industrial markets. What we can share is that prior to the Rantzware event, we're planning to guide total MCAS revenue for the first quarter to be approximately $1 billion. This reflected widely publicized sickle softness and semiconductor industry.

I said, somewhat, by a strong backlog coming into the quarter, continued weakening in global electronics spending impacted our electronics and packaging market and a modest sequential decline of revenue, especially industrial market.

We estimate the ransom incident will impact our fourth put a revenue by at least $200 million. However, we expect to substantially recover this revenue by the end of the second quarter.

Price the incident, we're also expecting growth margins of 44.5% down from the fourth quarter levels to the lower volume and mix.

In terms of the operating expenses, we're also expecting a process of $20-60 million in the first quarter up from fourth quarter levels, primarily due to seasonal increase in compensation in French expenses.

as well as continued investments into product development and customer-facing sales in marketing expenses. Our ability to keep investing in critical initiatives has been a key strategic driver behind our long-standing ability to exit cycles in a stronger market position to continue to accelerate our customers' product roadmaps. We plan to maintain the investments where also we keep a close eye .

on macroeconomic and industry trends, in a proven playbook for managing costs to cycles, allow for just spending levels when and if needed. As an example, we've already executed approximately one third of a $55 million ad-tech cost energy target within just a short period of time. Yicion of your infrastructure is a global system for ecosystem you can monitor directly. PlayStation 6, 2017ätt

Just to run out of expectations, pride into it. For the first quarter, we expect their tax rate to be 27%. We're going to expect our net income expense to be $78 million.

With that, I'll turn it back to John to wrap up. Thanks, Seth. All the events of the last month have been an unpleasant distraction. They do not change the end-case story.

Following an important 2022, which we close our strategic acquisition of the ATTEC and delivered strong financial performance.

MKAS is even better positioned for the future. We now address all of the core building blocks of advanced electronic devices from the semiconductor chip to wafer level packaging to the package substrate to the PCB with enabling technologies that solve for miniaturization, complexity, and novel chemistry. And we do so with an enhanced business profile featuring.

The most comprehensive technology portfolio in the industry, spanning vacuum, photonics, and chemistry.

Market leadership and 20 critical product categories across the balanced and market profile. A resilient business model with a significant mix of consumable and services revenue and a larger addressable market. For all these reasons, we are confident that we are ready to capture a broader set of exciting market opportunities.

Now I'd like to turn the call back to the operator for Q&A. Thank you. As a reminder to ask a question, please press star 11 on your phone and wait for your name to be announced.

We also ask that you please limit yourself to one question and one follow-up. To withdraw your question, please press saw-one-one again.

standby while we compile the Q&A roster and again we ask you to please limit yourself to one question and one follow up

One moment for your first question. Our first question will come from Jim at E2E.

of Needham and Company. Your line is open. All right, thank you. Good morning. So if we look beyond the ransomware incident and you should be suggesting, you think you could pick up a significant amount of that revenue impact in Q2. I'm wondering if...

How we might think about some of the other metrics that you outline in the Q1 guide prior to the incident. In other words, should we think in terms of those kind of expense levels and margins? And again, I'm not looking for guidance for Q2, but you've all fared up this slide. I'm just wondering, you know, as we think beyond this. I'm just wondering.

into the June quarter, how we might think about some of these other metrics, other than interest expense, which you have difference in color on. Yeah, yeah, thanks, you know, Mrs. Fath, I'll answer your question. Yeah, I think you'll, you know, our view, we gave a little snapshot of the Q2 expected guidance prior to the incident until we gave it metrics for how to think of the business going forward. You know, obviously we've got a much different.

platform in terms of more resilient revenue stream from unit-based chemistry and service revenue. We've got many opportunities to grow the business of the multiple markets. And we'll continue to invest in the areas that really derive product investment as well as customer facing opportunities like a sale to marketing. So we have a lot of opportunities we want to invest in.

And our goal is to exit any cycle, strong worth, and we enter that cycle. So really no change in the business of John mentioned. This is kind of a, that's what take you once need bump for us. They're very important. We continue to get our customers up from operation size, while the service size as well. But we're really focused on, again, growing the business in the long term, making those investments.

Okay, my follow-up question just relates to your specialty in industrial business. If I heard you correctly, you're talking about a modest, I think, sequential decline. And I'm wondering is that we don't have a lot of experience with that part of the business.

Is that seasonal or is that macro related? Hi, James John . I'll take that. There is a little bit of seasonality to the automotive industry, but really it's end-of-man driven. I think if you read about supply chain constraints and automotive.

You can see that the first half of these expectations are that it's a little weaker and automotive than perhaps later. Of course, we don't know what will happen later, but really that's really what's driving lots of that. Thank you. Thank you. One moment, please. For our next question.

Our next question will come from Sydney Hope of Dr. Bank. Your line is open. Great. Thanks for taking my questions. I don't start off with the ransomware event. He talked about at least $200 million of revenue impact in first quarter, and most of that will be recovered. Thank you.

by the end of second quarter. If you double click on that, is that mostly impacting the semi-business versus your other segments? And the other part of the question is, do you think any of the revenue is perishable, whether it's potentially losing share to competitors?

or that's an opportunity for your customer to cancel order based on what's going on in the broader market. Cinean, thanks for questions, John . I would say that a lot of the revenue is, of course, semi-based.

And that's why, as you know, in the industry, you know, these critical substances that we make are co-design with our customers, qualified by their customers. And so, really difficult to displace. And, you know, we have relationships with these customers for decades. And they've been very supportive. So we feel that, you know, all this revenue is easily recovered in terms of designs. I think that...

There are other revenue that could be lost a little bit, but those are very diminimous. We're really not worried about that, and we're going to try to get those back as well. That's helpful. Thanks. My follow-up question is if I look at the first quarter, you gave some color on the pre-rendom-ware events. What you have guided, $1 billion down to 8%. You give a little comment on send me firsts and electronic package payments, especially the industry, just on an order basis, do you expect first quarter to be this?

any of these businesses maybe can comment on the kind of backlog what we're seeing in two second quarter. Well, that would be great. Thank you. Yes, Eddie. So we don't really comment on order rates, but I think that you can surmise that because we would have guided a billion, the strength of the backlog is really carrying that, especially for the semiconductor industry, as you mentioned. And so we're really happy with the strength of our backlog.

that we would have done much better. As I said before, whatever gets lost in Q1 because of the ransomware event, we expect substantially will be made up by Q2. Okay, thank you. Thank you. One moment, please. For our next question. One moment. Our next question will come from Chris Sankar.

of a power and company. Your line is open. Yeah, I'm answering my question. I have to ask them to first one, John , back to the prior question, you know, about pre-Ransom, I would have added a billion dollars. Thanks to the backlog. Is it fair to zoom, you know, if you try to look at the, you know, the linearity to the year, your revenue should eventually follow.

the WFK pattern, in other words, your customers are knowing their inventory. So in theory, Seneesh should have slowing as we progress through after Q1 pre-ran somewhere. Is that a fair assumption?

Yeah, Chris, I think that's a fair assumption, but it wouldn't point out though that because we're exposed to 85% of WFE, as you know, well, no, you cover these companies.

Not all of them are behaving the same way. Some customers of ours in wait for Fab equipment are saying, they're going to go down in Q1 or first half. Some have different rates at which they're going to go down. Some are saying, no, it's a feel pretty steady in the first half. Some of the saying is going up for the whole year even. So.

works well with all those customers. So in general, you write, if WFE goes down, we'll go down. Our long-term model is obviously demonstrated that we can't outperform WFE by 200 basis points. But we're a much broader company now, and we're supposed to different parts of WFE. And so I think that just allows us to be a lot stronger supplier to the ecosystem. We got it. Thanks, John . And then follow-up for set. We just curious with this brand-finger insight on the revenue.

How does that affect your Derm-Lone A Covenant? Yeah, as we talked about in the X in the fourth quarter, our net leverage ratio is 3.4, gives a lot of headroom relative to a 5.25 leverage covenant ratio. I was not the Derm-Lone A only by the way.

which is where we paid off $100 million in the fourth quarter. So that comes only tied to Termalone, that's $90 million exiting Q4. And looking ahead, we see headroom going forward as well. So that's an error we feel very comfortable with, honestly. That revenue...

Moving from Q1, we've substantially recovering Q2, a kind of offset that on a six month basis. So we feel very couple of the coven's called forward. But we'll kind of lean into that term loan A as well to kind of where we're going to kind of deliver more aggressively. And I just want to come back to one comment I had before early on as we respond to Jim or Shuddy's call. I meant to refer Q1 pre-ran some where, you know, information involved in Q2s is when it got clarified at that point as well.

Thank you very much. Thank you. One moment please for our next question. Next question will come from Joe Kratachi, a well-foggle. Your line is open. Yeah, thanks for taking the question. I wanted to understand the gross margin.

guidance or commentary for one, two, maybe if you could unpack that a little bit in terms of just like the moving parts there because I would have thought that I guess maybe it could have been a little bit better than that given material solution should be a higher percentage of the total company revenue. I believe that has a higher kind of...

and corporate average gross margins, you could just help us out there. Yeah, Joe, take that to the staff. So in the fourth quarter, we talked about a little impact favorable on the next for the quarter. That's where above the high end of the guides range. And then a Q1 commentary, a billion dollars. Most of the impact on the margin is really volume driven.

with a slight nixed differential there as well. You're absolutely right on the MSD side, those marked a little bit higher than our corporate average. Fundamentally, that $1 billion commentary has quite a bit of revenue in the photon solutions division as well as with the back interest division as well. So really the Q1 commentary is primarily volume driven, a little bit more normalized.

Got it. And then just, is there any sort of like cash outlay related to the ransomware attack that we should be aware of, I guess, and I think about that kind of back to your estimating the net leverage?

Yeah, Joe. Appreciate the question, but we're really not going to provide any details on the ransomware investigation. Certainly, we are hiring experts to help us recover, and those are expenses. But in terms of cash outlay, I think there's really no comment here. Fair enough. Thank you.

Thank you. Again, one moment please. Next question. Next question will come from Mark Miller of the Benchmark company. Your line is open.

Or does the backlog indicate it's going to be a front end, back end, or basically an even year in terms of sales? Yeah, Marcus John , I would say that, too, as I said earlier, the guidance we would have given prior to the ransomware of a billion dollars. A lot of that is on the strength of the backlog that we have.

where event hadn't happened.

And the margin profile, what's in the backlog is that similar to what you've been seeing recently. Yeah, I think there's no change there, Mark. You know, same kind of customers. So no, no real change there in the margin profile form.

Thank you. One moment please. Next question. One moment. Next question. We'll come from Steve Bajor of Keybank Capital Market. The online is open.

Thanks, good morning. You mentioned the 4Q Geodorder and I think a separate multi-unit order. Can you talk about pipeline visibility into further orders from legacy ATC customers?

Yes, Steve. I would say we talked about the fourth Q-order. That was a multi-unit order. That was...

That was not with ATTEX, you know, extra synergy, if you will. There was another order, which we did call out in Q1, which was a long time ATTEX customer that we really didn't have a relationship with. So that was clearly a synergy. That happened a lot sooner than I was expecting Steve, so I'll take it for sure. But we have a long pipeline that's reviewed with me every month.

of other potential synergy opportunities going both ways. Yeah, areas where ESB could help out attack and vice versa. And these are, you know, you gotta look at these as multi-year efforts. You know, you talk to the customer, you get qualified, then they ramp. And, you know, that's the kind of time frame that you should think about. And, you know, everyone's probably gonna move her like we talked about in call. Got it. And, can you talk about how ATC's recurring revenue stream performed during the quarter versus your model? And is that?

And that will conclude the Q&A portion of the conference. I would now like to turn the conference back to David Rizic for closing remarks.

All right. Thank you for joining us today and for your interest in MCATs. Operator, you may close the call, please. Thank you. This will conclude today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.

The conference will begin shortly to raise and lower your hand during two

So.

Introducing Dipl, Good Bye.