Q4 2022 Cohu Inc Earnings Call
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Good day and thank you for standing by welcome to co use fourth quarter and full year 2022 financial results Conference call.
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Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your Speaker today, Jeff Jones, Chief Financial Officer.
Good afternoon, and welcome to our conference call to discuss <unk> fourth quarter 2022 results and first quarter 2023 outlook.
I'm joined today by our President and CEO Luis Mueller, if you need a copy of our earnings release, you may access it from our website at <unk> dot com or by contacting <unk> Investor Relations.
There's also a slide presentation in conjunction with today's call that may be accessed on <unk> website in the Investor Relations section.
As of this call will be available via the same page after the call concludes.
Now to the Safe Harbor during today's call, we will make forward looking statements, reflecting managements current expectations concerning <unk> future business.
These statements are based on current information that we have assessed but which by its nature is subject to rapid and even abrupt changes.
We encourage you to review the forward looking statements section of the slide presentation and the earnings release as well as <unk> filings with the SEC, including the most recently filed Form 10-K and Form 10-Q, our comments speak only as of today February 16, 2023 and.
<unk> assumes no obligation to update these statements for developments occurring after this call.
Finally during this call we will discuss certain non-GAAP financial measures. Please refer to our earnings release and slide presentation for reconciliations to the most comparable GAAP measures.
I would like to turn the call over to Luis Mueller co. He was president and CEO Luis.
Good afternoon, and thanks for joining us.
I'll go straight to the key points and let you ask questions at the end.
Q4 was an outstanding quarter in terms of financial metrics, albeit your typical seasonally slow revenue at year end.
Revenue of $191 1 million was about flat year over year with a strong non-GAAP EPS result.
More importantly.
We continue to make great progress managing costs growing <unk> recurring business and selling differentiated products.
Fourth quarter non-GAAP gross margin of 48, 8% is a code you record.
Reflects 470 basis points growth year over year.
It's better than our target financial model at this revenue level.
Gross margin benefited from steady growth of <unk> recurring revenue, where we achieved a three year compound annual growth rate of five 2% through Q4 and represented approximately 45% of fourth quarter revenue with 55% non-GAAP gross margin.
And the last four quarters recurring revenue was $338 million, delivering a very profitable and resilient revenue stream through industry cycles.
Our recurring business is primarily made up of tester interface hardware and device application kits that our IC design, driven and benefit from the introduction of new semiconductor products by our customers.
Co use test interface annual revenue grew over 9% year over year, demonstrating the value differentiation of our solutions when integrated with our testers and handlers.
We also established a strategic collaboration agreement in the fourth quarter with CHP Chi in Taiwan to deliver advanced probe card interface to customers.
This new collaboration we plan to accelerate the proliferation of products addressing five G and advanced node technologies with cost efficient interface solutions, leveraging the strength of both companies.
C HPT intends to contribute with PCB and Mems probe technology, while <unk> intends to integrate core high frequency RF and thermal management capabilities.
The balance or approximately 45% of our recurring revenue over the last 12 months.
Comes from service revenue generated from an installed base that just further expanded with the acquisition of MCT.
Over 24100 actively supported systems at customer sites.
Part of our service offer includes <unk> data analytics platform.
We recently announced that our European IDM customer selected and started deployment of coal use predictive maintenance software. This is our first software subscription sale and a major accomplishment for us.
This is part of a suite of data analytics products sold under the <unk> brand to deliver improved productivity to our customers.
Core is a key element of co. His midterm strategy to increase value services and grow software revenue to between 15 and $25 million in a few years.
Tampering these positives as desktop utilization that we now estimate down three points quarter over quarter to about 79%, reflecting known ongoing softness in mobility consumer and computing end markets.
<unk> systems business was 55% of total fourth quarter revenue with 44% non-GAAP gross margin.
System revenue distribution in the quarter was notably stronger in automotive and industrial end markets that we have been saying remain more resilient through this down cycle.
Turning to our semi test business annual revenue was about flat year over year, but with a significant diversification out of the mobility segment that was particularly weak in 2022.
Our analog and power management sales grew to about 32% of semi test business, mostly serving out of motive and industrial end markets.
Display driver grew from a single digit percent of revenue in 2021 to approximately 16% of the total semi test revenue in 2022.
We've had a remarkable year in pivoting revenue to new applications and customer design wins that help build a more sustainable path forward predominantly with the Diamond X platform.
On the handler business, we had five customer design wins in the fourth quarter with our thermal handlers three of which penetrated unserved production sites of existing customer names.
We delivered two new systems for Silicon carbide semiconductor test and inspection in the fourth quarter with projected expansion into these customers new backend test operation and test subcontractors throughout 2023.
Now turning to our recently announced MCT acquisition were integrating the business within our test handler unit.
MCT brings critical technologies that will help accelerate our product development roadmap to address growing opportunities in advanced packaging panel test.
This acquisition also adds a couple of products to call his portfolio and a small revenue stream with gross margins in line with our target financial model.
It's a relatively simple business to integrate with <unk> with neutral EPS impact projected for this year and expect it to be accretive after realizing operating synergies.
As demonstrated we have made significant progress toward building a resilient business model that is well suited to weather the cyclicality of semiconductor capital equipment spending.
We're very well positioned to continue delivering strong profitability and cash flows quarter over quarter.
The main focus now is on growth and ensuring our investments in product roadmaps are aligned to secular growth market opportunities.
We're also driving hard to deliver wins under Diamondbacks desk platform expand our inspection and metrology business and continued expansion of our interface products and <unk> core software.
Let me now turn this presentation over to Jeff for additional details on fourth quarter results and first quarter 2023 guidance.
Jeff.
Thanks Luis.
I walk through the Q4 results and Q1 guidance. Please note that my comments that follow I'll refer to non-GAAP figures information about the non-GAAP financial measures, including the GAAP to non-GAAP reconciliations and other disclosures are included in the accompanying earnings release and Investor presentation, which are located on the investor page of our.
Our web site.
Now turning to the financial results Cohill again delivered strong revenue and profitability in the quarter.
Q4 revenue was $191.1 million and slightly higher than midpoint of our guidance range.
Revenue for full year, 2022 was $812 8 million.
During the fourth quarter, one customer in the automotive market accounted for more than 10% of sales for full year 2022, no customer accounted for more than 10% of sales.
Gross margin in Q4 set a new record for <unk> at 48, 8% about 180 basis points higher than guidance driven by co Hughes recurring business and differentiated products.
Winds from cost increases for IC components used on our tester products impacted our gross margin in Q4 by approximately 37 basis points.
We expect these challenges to persist at reduced levels.
Into mid 2023, as we increase sourcing directly with semiconductor manufacturers and component availability improves.
Full year 2022 gross margin also set a new record for <unk> at 47, 2%.
Which is a 360 basis point improvement year over year and tracking to our midterm target of 49%.
The headwinds from cost increases for IC components impacted full year 2022 gross margin by approximately 100 basis points.
Operating expenses for Q4 were in line with guidance at $52.4 million.
Full year 2022 operating expenses were approximately 25, 6% of revenue and also tracking to our midterm target.
Fourth quarter non-GAAP operating income was 21, 4% of revenue and adjusted EBITDA was 22.2%.
Full year operating income was 21, 6% higher than 2021 by 110 basis points and adjusted EBITDA for 2022 was 23, 7%.
Higher than 2021 by 150 basis points.
The non-GAAP effective tax rate for Q4 was approximately 16%.
And lower than guidance due to a shift of projected annual pre tax income from higher tax rate jurisdictions to lower tax rate jurisdictions.
The non-GAAP effective tax rate for full year 2022 was approximately 20%.
non-GAAP EPS for the fourth quarter was 70 cents.
For full year 2022, EPS was $2.91.
In summary, Q4 profitability was strong as gross margin and adjusted EBITDA continued to expand toward the mid term financial target.
Now moving to the balance sheet Q4 cash flow from operations was strong at $27 6 million.
Net of share repurchases totaling $12 6 million debt repayment of $1 million capital additions of about $4 million and other changes in working capital cash and investments increased quarter over quarter by $17 million to $386 million at the end of Q4.
Overall co whose balance sheet maintains a strong position to support debt reduction the share repurchase program and investment opportunities to expand our served markets and technology portfolio in line with our growth strategy.
Now moving to our Q1 outlook, we're guiding Q1 revenue to be between $173 million and $187 million.
Q1 gross margin is forecasted to be approximately 47.5%.
Better than the financial target model, and down 130 basis points quarter over quarter due to lower sales volume and mix.
The IC cost component headwinds in the tester business I mentioned earlier will persist and we're projecting the Q1 impact to be approximately 30 basis points.
With a three year compound annual growth rate of 5.2% co use high margin recurring business provides consistent cash flow through industry cycles.
Operating expenses for Q1 are projected to be approximately $53 million essentially flat quarter over quarter.
We're projecting Q1 interest expense to be approximately $1 million.
We offset by interest income of approximately $1 million.
We expect Q1 adjusted EBITDA at the midpoint of guidance to be approximately 20%.
The Q1 and full year 2023 forecasted non-GAAP tax rate is approximately 20% at the midpoint of guidance a.
The diluted share count for Q1 is expected to be approximately 48 million shares.
That concludes our prepared remarks now we'll open the call to questions.
As a reminder to ask a question. Please press star one one on your telephone.
Our first question comes from the line of Craig Ellis with B Riley Craig Your line is now open.
Yeah. Thanks for taking the question and guys congratulations on a very strong execution.
I wanted to start with a follow up on gross margin so great to see that both recurring and systems had a 100 basis point gross margin increase in the quarter.
Can you just talk about how much further upside there is from here on each side of the business.
How should we think about Europe you are.
Where the target should be given that you're getting so close to that 49% model.
Hey, Craig this is Jeff and thank you.
Yes, so so we're still on the path to that 49% gross margin for the full year we.
We have more contact or in sourcing to do in the Philippines.
With additional.
Revenue growth in contact as well as testers that will improve the overall gross margin as well as growth in inspection metrology as well as our data analytics software. So.
So we're still on that path and we.
<unk>.
We expect to achieve that 49% within the within the mid term.
Okay got it and I'll follow up with a question.
On our.
Backlog and just the level of visibility so.
In quarters past, you've often provided some color on what you think the business is capable of in the out quarters. So you should look at <unk> can you talk about some of the Gibson cakes and I think in the past you had talked about the potential for business to rise half on half in the back half of the year. How do you think about prospects for the second half from what you.
Can see today.
Yes, let me talk a little bit about the.
Backlog here.
No.
With extended lead times were seen.
We're typically we'd see 80.
Percent plus of the backlog consumed in two quarters, we're seeing that elongated a little bit here Craig. So we're looking at Q1.
We've got.
Strong amount of backlog.
Q1 shipments, but then it.
It does also shift into Q2 and Q3, so we're about 50% of backlog.
Rolling into <unk>.
Q1 shipments represent about 50% of the backlog is so strong and then that schedules out all the way through the end of the year really so and Thats. A result of extended lead times, Yeah. Let me let me add here I think you're also asking about the second half of the year right the way.
The way we're seeing this now Craig.
We're expecting the first half to be soft.
And I think that's pretty obvious now due to inventory correction in consumer mobility.
PC and servers.
We tend to agree with statements made recently here by TSMC also teradyne that predicted that Q2 is likely the trough in this cycle.
And honestly, considering our systems lead times today, which.
For handlers are about 24 weeks on average and tests was about 12 weeks.
We expect that there'll be a slow climb from the bottom through the second half of the year. So it's difficult to.
Predicted last quarter of the year like all the way out to Q4, which is typically seasonally down.
But.
It can be also opposite as we're heading into a stronger 2024, but that would be truly depends on the shape of the recovery. So put it all together, we think for the full year this could be.
Down approximately 10% to 15% year over year, and Thats could be better off on the on the better off site, depending if we can manage through shortening system lead times to address growing orders too.
And also sort of the recovery profile.
After after we passed the trough so we'll figure that out but that's about the view best view at the moment for the year.
Got it that's real helpful guys, and then just understand that a little bit better Luis.
As you look at backlog backlog suggests that the mix of business in the second half would be somewhat similar to the first half or does it suggest that there would be more of a resumption in mobility.
And and compute.
No, we really don't get that kind of visibility out of the backlog three or four quarters from now Craig. So I just think it's too premature to tell based on backlog.
Yep Okay.
Hum.
Fair enough and if I could just ask one more as a last question can you just talk a little bit about the probe card initiative. The partnership when do you expect material revenues from that.
And if there are any incremental R&D or other investment that you need to make with your partner as you pursue that opportunity.
So starting from the end no the investments in R&D.
Are going to stay at the levels that they're at now.
On our interface business.
Yes.
That partnership is at this stage, we discussed the future collaboration what they intend to provide what we intend to provide we're taking that out to customers gaining some interest at the moment I think that's going to lead to some evaluations and opportunities that.
Quite honestly I would expect it to be material in 2024, less so this year more and more.
Initial applications in the lab is that what we're seeing at the moment.
But real volume production I would expect in 2024.
Got it look forward to seeing that and congratulations again on a great cross merchandise network.
Thanks, Craig.
Our next question comes from the line of Brian Chin with Stifel.
Hi, there good afternoon, and thanks for letting us ask a few questions. Congratulations on the strong results.
Thank you.
One question to lead off here.
Yes, I think you said, 79% test cell utilization in Q4, it's down something like 800 basis points year over year and yet your revenue is essentially flat year to year.
Even though monitoring some of them in the March quarter outlook.
I'm a lot more resilient than past cycles. So I'm wondering from your perspective, what are really the main drivers that account for this revenue resilience I'd imagine share gains and increased service offerings are part of it but kind of love.
Love to hear your perspective on that.
Yeah. Good question, Brian It really comes out of Q2 main threads of business wins here one is on the.
Interface side I commented that our revenue for the interface business is up 9% year over year. Despite as you said utilization being down. So there has been a number of design wins for our contractors and frankly, we also saw the number of probe cards.
Still small in the Grand scheme of things, but a number of probe cards in 2022.
So net net an increase in the interface business, which which was a key driver of increase indeed.
And the overall recurring business.
Secondly, on the tester business side.
I made a comment that our revenue was essentially flat year over year.
Again with the backdrop of a test desktop utilization coming down but that tester business has been a big story of pivoting.
To win new customers outside of mobility, I guess, some in mobility is still but but a lot outside of mobility and significantly increasing.
The fraction of that revenue that's in the analog and power IC test, which we grew to about 32% of the semi test business.
Last year, so kind of that diversification push that we've been doing.
Predominantly with the Diamond <unk> platform, yielding results and sort of bucking that trend of test utilization going down.
Great Great. That's helpful. And then just working through I think a question that was just asked a few minutes ago.
In terms of your commentary on the year.
I know, you're not giving precise guidance here, but based on our first quarter guide it sounds like second quarter, maybe goes down a little bit something like mid single digits, plus and then you have some recovery off of that in the back half of the year and maybe kind of mid single digits low to mid single digits something around that.
One is that sort of without giving guidance is that kind of a framework to use and then two in terms of the mechanics of moving pieces is this a function of trying to gauge the moderation that you are seeing.
For your presentation presentation in terms of auto and industrial kind of what that recovery looks like for <unk> for handsets and phones.
It is kind of the key mechanics here that youre looking at.
Yes, I think you I think you hit it all pretty pretty well pretty accurately there.
It's extended as you can be accurate in our forecast, but that's exactly the logic you described it pretty well there is some moderation, particularly in industrial right now we expect wafer.
Seen already in Q4, some moderation in automotive don't expect it to be dramatically different going forward and at some point more of a recover in the mobility of the handset, but but nothing dramatic and then you factor that in the lead times that I described right.
And there is only so much you can actually do within this year considering the backlog of the lead times, we have so yes, it's kind of looking at.
Progressively down to a trough in Q2, and then in a slow progression recovery on the second half of the year now if we do see demand increasing dramatically it will certainly work.
Works to reduce further the lead time or increase manufacturing capacity to address that but I think the parameters you described it pretty much the way we're seeing the evolution.
The evolution of this year.
Okay. Thanks, and then maybe one last one for Jeff.
Maybe this factor into some of the gross margin upside in Q4, but the test contactor as you had sort of improvement plans sort of mid 40% in the year I think upper Forty's, maybe by mid this year are you on track or ahead of schedule. There and then just kind of more holistically, if you or it might be sort of a.
Favorable events that kind of really took the gross margins towards 49% this last quarter, but that's at a sub $800 million annualized revenue level.
Is it time that at the 1 billion level into the future.
Is it time to put maybe a 50% <unk>.
On that set of 49.
And we've had we've had that conversation Brian I think we're going to hold off for now we need to string together.
Three or four full quarters here.
At 48, 49% gross margin before we before I think before we can jump into that 50%, but in Q4.
Obviously, it was a fantastic quarter for gross margin.
As I said, we had about we had a headwind of about 37 basis points.
Of that $48 eight is net of that we have strong recurring revenue in the quarter was 45% of total revenue. So it was very strong in addition to that we had a.
A good mix, particularly in the in the tester business unit so.
Just a really strong quarter.
I would say mix related but all the business units.
Improved in terms of gross margin handlers mid 40% contactor is mid 40% and then testers are where you would expect them to be in sort of the high fifty's.
Okay, great. Thank you.
Our next question comes from the line of David Duley with Steelhead Securities.
Yes, thanks for taking my question.
So I was curious if you could just elaborate a little bit more you mentioned this pivot in your test business towards <unk>.
Analog and power IC applications could you just talk a little bit about how you were able to accomplish that with the diamond acts.
What some of the major win.
Yes.
In markets, where that are serving these these wins and then would you expect that percentage.
Of the semi test business in these power and analog pieces to be greater than 32% going forward.
Hi, David Yes, good question.
Well none of it not all of it was outside of mobility rates, we talked about wins in the DDI C. For example display driver IC test earlier last year and.
That was actually ml, Aladdin and mobility related but we also talked about wins in automotive power.
Controller RF Iot again.
Okay.
You put a little bit different perspective, and more by end market and I have some data here by end market.
<unk>.
The full.
Full year result.
It was about just for the semi test business right for full year revenue profile.
Was about 33% mobility.
25% auto and industrial 14% computing.
And Thats for systems only right I mean, there is another 16% or so there was recurring and related for semi test.
Where do we expect that should be in the future I mean, certainly the areas that we're pushing at right now are more related to analog and power semiconductor is spread across automotive industrial and computing applications. So naturally I would expect that to increase because that's our area of focus.
Concurrently.
Obviously, if the mobility market.
Starts to recover.
We'll see a natural shift a percentage of revenue back into mobility out of our semi test business right. So so it's really a matter of how what's the timing of our new wins.
In automotive industrial computing relative to the recovery timing of mobility. So I can't tell you that nest.
Necessarily one or the other is going to is going to outrun.
And quarter to quarter Youll see some fluctuations on that but all things being equal as of today, Yes, I would expect more growth outside of mobility, that's a focus area.
Okay and then on.
I think you've kind of rounded out.
<unk> for the market.
For the company.
Perhaps down 10 or 15% for the E.
For calendar 2023, I think on the last conference call you might've been talking let's say down 5% or 10%. So you have.
Lower the expectation a bit however, I think one of your.
One of your larger backend competitor is talking about the business being down perhaps 20% next year. So.
And at the lower end of your range.
It was down 10%.
Obviously double the performance of apparel.
Significantly better than their performance I'm wondering what you think the key reasons are that you might outperform the overall market and perhaps the large competitor there.
Well without knowing exactly who they are hard to compare but alright, you have.
Okay, we do have a.
Substantial recurring business right, we talk about this every quarter.
It's approximately 45% of our revenue, it's a higher percentage of our combined gross margin right about 55% in Q4.
It is extremely resilient and if anything it has.
Has grown.
Last year. Despite the fact that you'd look test cell utilization has gone down as we have managed to grow our our interface contactor business.
And frankly, we have also increased the number of customers that sign up to service contracts with us.
In a much smaller scale have increase the revenue of that software product line. The <unk>. So that that is a significant difference relative to.
Many many of our peers in the industry right I'm not going to say all because I can't speak for everyone, but many of our peers in the industry that resilient high margin recurring business, it's quite unique right and some people out there and talk about their business being entirely consumables and then they have this incredible fluctuation in revs.
A 20% quarter over quarter, that's not what we call recurring or recurring we'll see a three 3% fluctuation quarter over quarter, if anything that fluctuation has been up quarter over quarter over the last four quarters, despite gas utilization being down so it's a true recurring nature business and not just the marketing flare.
Sure.
To be used for investor benefit right. Its a true it's a true value I think that.
That creates a differentiation that I think answers your question chip to the core of it.
Okay. One final question for me is.
And your.
Presentation, you talk about the gross margins in both pieces of your business recurring being 55% and systems being 44% when.
When we think about margins improving throughout the year as you suggested backup about 49% by the end of the year.
Will it come from recurring or will it come from systems. That's the first part and then the second part is.
As far as systems gross margins go.
Can you foresee that 44%.
Getting to let's say upper Forty's.
And the next year or two.
Hey, Dave So like your last question yes.
Driven by driven by growth in the test their systems business.
And the recurring will also grow as we continue to grow the contactor or the interface business and that business is a combination of revenue growth, which also supports.
Better leverage of our infrastructure driving higher higher margins as well as.
Complementing the <unk>.
The in sourcing in the Philippines. So it's.
So all of that to be honest with you.
Thank you.
Our next question comes from the line of Krish Shankar with Cowen <unk> Company.
Hi, guys. Thanks for taking my questions. Ed This is Steven calling on behalf of Krish.
Luisa if I could I wanted to ask.
A couple follow up questions on the recurring revenue business as you can.
As described.
I guess he discussed like the <unk>.
E.
Decline in utilization rates for for some of the tools.
But then yet your recurring revenues are still very resilient.
Is the right way to think about.
About that in that.
You guys are gaining share in the market and hence.
And hence able to.
Keep that recurring revenue relatively flattish.
Declining slightly or is there a different dynamic at play in terms of lower utilization rates allow your customers to actually.
Take advantage of the service contracts that were.
Explain that that's great.
Yes, Steven first of all recurring revenue.
<unk> fluctuate a little bit with test cell utilization right.
But I really have two.
Underlying that a little bit right. It will go up and down like I said about three percentage points.
With tests fertilization fluctuation, but but small fluctuations so when test utilization does go down typically youll see the recurring recurring revenue go down.
Alongside with it.
In this case he went the opposite direction and it's not because of customers taking advantage of anything it's really because of that increased.
Sure.
Share penetration of our test interface, our contactor business and I think.
An outstanding job by our service manager business manager sort of increasing.
The retention rate of customers through contracts and displacement of a in.
In some cases third party suppliers through third party providers, and just getting that business back to a OEM supplied spares right.
Even kits so that has been.
A positive both on the on the service side of the business as well as in the contactor side of the business that offset.
The reduction in test cell utilization over the last.
Four quarters.
Okay, Great and then the other.
I guess, the smaller component of recurring revenue slide to ask that as well.
Whereas software subscription practice.
You described early today.
I guess for that in your product.
Is that.
More of a.
At a monthly or annual.
Term for those types of contracts.
Relative to your existing installed base, which part of it.
<unk> installed base do you expect to see strong adoption rates from.
Yes. It is it is this new product PDL predictive maintenance, it's an analytics solution that.
Heads onto the insight platform that we're selling through last year. So we introduced <unk> here in the fourth quarter.
As a subscription sale, it's an annual renewal rate. It provides the analytics. So that you can improve your overall equipment efficiency or utilization of yourselves.
It's all part of the <unk> umbrella. So it's all part of the plan that we have had to increase revenue in that area.
Like I said, we said in the past, it's about a $1 million revenue stream last year, obviously significant growth year over year, because he came off from a few hundred thousand in 2021.
We see an opportunity here in aggregate to get to about 25 30 $35 million in revenue.
Over the years in the software space on sort of addressing our installed base of equipment for start is we're really working on our test handlers. These are the electromechanical systems. These are the ones that.
Demand more maintenance more repair over time.
And the ones that you can have a greater opportunity to impair.
Optimization of OE for our customers, so that's where the real value is.
Okay, great. Thank you so much.
Our next question comes from the line of Trevor de <unk> with Needham.
Yeah, Hi, guys. This is Trevor on for Quinn, Thanks for letting me hop on.
Last may at the Analyst day, you changed the timeframe of the target model from three to five years to 2024, but the new January investor presentation shows three to five years again, given the macro this is very understandable of course, but I just wanted to double check if you're reverting back to.
That timeframe and if thats the case, it seems likely that gross margins could be 50 plus.
Is that the right way of thinking about it.
Yes, that's right Trevor.
That's possible 50, plus but will intercepted.
Likely be beforehand, or when the when the 49% is achieved so that we can reset reset the targets, we're not going to wait for some time to elapse. It's a matter of when we achieve it then we'll set the bar higher.
Okay. Thank you makes sense and so you spoke about shipping to silicon carbide systems to a customer.
Any new silicon carbide opportunities come about in the fourth quarter.
No we talked about it in the third quarter about the same opportunity.
We're talking about the same thing we did a quarter ago.
Okay, Okay, and can you remind us or <unk>.
To quantify what that opportunity is or percentage of current revenue to give us an idea.
We think that singular customer opportunity can be about $30 million spread over two years.
We're still trying to see how much of that is going to materialize this year versus next year.
But it is ramp that's starting to ramp.
Okay. Thank you and sorry, if I missed this point, but less so last quarter, you gave an estimate that test and inspection market could be down.
Mid single digits in 2023.
Figure changed at all.
No Steve.
The same view.
We view the market as a whole.
Was probably on the order of $500 million or at least the portion of the market that we expect to serve and we think that could be going down to about 450.
$450 million in 2023.
Okay perfect. Thank.
Thank you.
Okay.
That concludes today's question and answer session I would like to turn the call back to Jeff Jones for closing remarks.
Okay. So before we sign off I just want to thank everybody for joining today's call have a nice day and we'll talk to you as soon.
This concludes today's conference call. Thank you for participating you may now disconnect.
The <unk>.
France will begin show T. Two reasons lower Johan during Q&A, you can dial star one one.