Q4 2023 Ichor Holdings Ltd Earnings Call

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Operator: Good day, ladies and gentlemen. Welcome to Ichor's fourth quarter of 2023 earnings conference call. At this time, all participants are on the listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time.

Good day, ladies and gentlemen, and welcome to eye core first first fourth quarter 2023 earnings conference call. At this time, all participants are in a listen only mode.

Later, we couldn't we will conduct a question and answer session and instructions will be given at that time.

At this time all participants are in a listen only mode. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad I would now like to turn the conference over to your host Claire Mcadams Investor Relations for Ichor. Please go ahead.

Operator: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I would now like to turn the conference over to your host, Claire McAdams, Investor Relations for Ichor. Please go ahead.

Yeah.

Claire E. McAdams: Thank you, operator. Good afternoon, and thank you for joining today's fourth quarter 2023 conference call. As 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 law. 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 those expressed. 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 2022, and those described in subsequent filings with the SEC. You should consider all forward-looking statements in light of those and other risks and uncertainties.

Thank you operator, good afternoon, and thank you for joining today's fourth quarter 2023 conference call.

As 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.

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.

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 2022 and those described in subsequent filings with the S E T.

You should consider all forward looking statements in light of those and other risks and uncertainties. Additionally.

Claire E. McAdams: Additionally, we will be providing certain non-GAAP financial measures during this conference call. Our earnings press release and the financial supplement posted to our IR website each provide a reconciliation of these non-GAAP financial measures to their most comparable GAAP financial measures. On the call with me today are Jeff Andreson, our CEO, and Greg Swite, our CFO. Jeff will begin with an update on our business, and then Greg will provide additional details about our results and guidance. After the prepared remarks, we will open the line for questions. I'll now turn over the call to Jeff Andreson. Jeff?

We will be providing certain non-GAAP financial measures. During this conference call our earnings press release, and the financial supplement posted to our IR website. Each provide a reconciliation of these non-GAAP financial measures to their most comparable GAAP financial measures.

On the call with me today are Jeff Andreessen, our CEO and Greg White, our CFO, Jeff will begin with an update on our business and then Greg will provide additional details about our results and guidance. After their prepared remarks, we will open the line for questions.

I'll now turn over the call to Jackie and dress it Jack.

Jeffrey S. Andreson: Thank you, Claire, and welcome to our Few Core Earnings Call. Our fourth quarter revenues came in at the upper end of our expectations at $203 million. This equates to sequential growth of 3% from Q3 within an otherwise stable demand environment. I'd like to provide some color on our revenue movements during the fourth quarter. First, the majority of the outside-in revenue growth above the midpoint of guidance was essentially pass-through. This is because, during the quarter, we elected to take the opportunity to reduce inventory levels in order to drive strong free cash flow generation, which in turn was used to reduce our debt levels and ongoing interest expenses. We sold the inventory at zero margin, and so while this decision carried a number of benefits for our ongoing financial performance, it did have a negative impact on our Q4 gross margin.

Thank you Claire and welcome to our Q4 earnings call our fourth quarter revenues came in at the upper end of our expectations at $203 million.

This equates to sequential growth of 3% from Q3 with van and otherwise stable demand environment.

I'd like to provide some color on our revenue movements within the fourth quarter.

First the majority of the upside in revenue growth above the midpoint of guidance was essentially pass through.

This is because during the quarter, we elected to take the opportunity to reduce inventory levels in order to drive strong free cash flow generation.

Which in turn was used to reduce our debt levels and ongoing interest expenses.

We sold the inventory zero margin and so while this decision carries a number of benefits for our ongoing financial performance. It did have a negative impact on our Q4 gross margin.

Jeffrey S. Andreson: Further, our Q4 revenue forecast had incorporated expectations of an improved mix compared to Q3, but instead, our revenue mix actually became less favorable, and this had the largest impact on our lower-than-expected gross margin. Our build-to-print gas panel business, which is our lowest margin business, improved during the quarter to drive both the remaining upside to revenue as well as offset the decrease in our wealth in business as our customers continue to focus on reducing inventory levels. While this unfavorable mix shift did have an impact on our gross margin, strengthening the gas panel segment of the business is a very good indicator that we are coming off the bottom of the cycle. So, in total, we witnessed a temporary low in gross margin performance in Q4 through a combination of unfavorable products and customers.

Further our Q4 revenue forecast has incorporated expectations of improved mix compared to Q3, but instead, a revenue mix actually became less favorable and this had the largest impact on our lower than expected gross margin.

Our build to print gas panel business, which is our lowest margin business improved during the quarter to drive both the remaining upside to revenue as well as offset the decrease in our weldment business as our customers continue to focus on reducing inventory levels.

While this unfavorable mix shift did have an impact on our gross margin strength in the gas panel segment of the business is a very good indicator that we are coming off the bottom of the cycle.

So in total we witnessed a temporary low in gross margin performance in Q4 through a combination of unfavorable product and customer mix the impact of inventory sales at costs and to a lesser degree continued headwinds and slightly higher manufacturing costs.

Jeffrey S. Andreson: The impact of inventory sales at cost, and to a lesser degree, continued E&O headwinds and slightly higher manufacturing costs. With RPEC just below the midpoint of guidance, operating profit would roughly break even. Interest expense came down quarter over quarter given our decision to deploy free cash flow towards reducing our debt level. During Q4, we generated $35 million in free cash flow and reduced our debt levels by $32 million while still adding $4 million to our cash balance. Given the lower profit versus forecast, with a slightly lower off-axis and interest expense and a higher net tax benefit, the net loss per share was $0.06.

With Opex just below the midpoint of guidance operating profit was roughly breakeven.

Interest expense came down quarter over quarter, given our decision to deploy free cash flow towards reducing our debt levels. During Q4, we generated $35 million in free cash flow and reduced our debt levels by $32 million, while still adding $4 million to our cash balance.

Given the lower profit versus forecast with the slightly lower opex and interest expense and a higher net tax benefit the net loss per share was <unk> now.

Jeffrey S. Andreson: Now I'll turn to our outlook. There are many reasons to be optimistic about the growth ahead. First, we estimate that our exposure to memory WFE will decline to just about 25% in 2023, which means we are well positioned to outperform industry growth as memory spending improves, in particular within the NAND segment. Next, as our memory exposure has declined over the last few years, we have increased our exposure to a number of growing market segments of WFE, such as EUV lithography and FE gas panels for silicon carbide. As a result of our leadership in providing gas delivery for the EUV market, we added ASML as a third 10% customer for fiscal 2023.

Now I'll turn to our outlook there are many reasons to be optimistic about the growth ahead.

First we estimate that our exposure to memory wf feed decline suggest about 25% in 2023.

Which means we are well positioned to outperform industry growth as memory spending improves in particular within the NAND segment.

Next is our memory exposure has declined over the last few years, we have increased our exposure to a number of growing market segments of WSB, such as <unk> lithography and abbvie gas panels for silicon carbide.

As a result of our leadership in providing gas delivery for the EV market. We added ASML is a third 10% customer for fiscal 2023.

Jeffrey S. Andreson: We anticipate that our EUV sales will continue to expand in line with unit shipment growth in the years to come. We are also pursuing opportunities that expand our exposure to the overall lithography market and believe we are well-positioned to benefit from next-generation platforms such as HiNA as well as WindShare in additional areas of lithography. We continue to ship production volume gas panels for the silicon carbide market and have been qualified on the Next Generation Epi System. Our design lens for FE applications resulted in strong growth from our fourth largest customer in 2023. And as the application and market opportunities continue to grow in support of EV manufacturing in the years to come, we anticipate our silicon carbide exposure will continue to be a tailwind to our revenue.

We anticipate that our <unk> sales will continue to expand in line with unit shipment growth in the years to come.

We are also pursuing opportunities to expand our exposure to the overall lithography market and believe we are well positioned to benefit from next generation platforms, such as high N a as well as win share and additional areas of lithography.

We continue to shift production volume gas panels for the silicon carbide market and have been qualified on the next generation <unk> systems.

Our design wins for FAA applications resulted in strong growth from our fourth largest customer in 2023 and as the applications and market opportunities continue to grow and support of EV manufacturing in the years to come we anticipate our silicon carbide exposure will continue to be a tailwind to our revenue growth.

Jeffrey S. Andreson: We estimate the silicon carbide market for gas deliveries to be around $60 million in 2023 and expect it to double in the next three to four years. We are also seeing the emergence of new technology drivers and process inflections that require an increasing use of applications that are more highly dependent on the accuracy and repeatability of the gas delivery system. These include the growing use of certain etch and deposition techniques within advanced logarithmic architectures, 3D DRAM, and advanced packaging.

We estimate the silicon carbide market for gas delivery to be around $60 million in 2023 and expect it to double in the next three to four years.

We are also seeing the emergence of new technology drivers and process inflections that require an increasing use of applications that are more highly dependent on the accuracy and repeatability of the gas delivery system.

These include the growing use of certain etch and deposition techniques within advanced logic architectures, really DRAM and advanced packaging.

Jeffrey S. Andreson: We recently refreshed our investor presentation to reflect the increased use of certain of these growing applications. We have a role in providing fluid delivery to all of these applications, as EUV adoption continues to proliferate across multiple devices. Our process tool customers are witnessing the need for more etch and deposition steps to help create smooth patterns and reduce line width roughness. Additionally, the growing importance of advanced packaging has revealed process challenges that require better film stress management, improved defectivity, enhanced uniformity, and increased material selectivity, all of which are enabled by more precise control of gas and fluid delivery.

We recently refreshed our investor presentation to reflect the increased use of certain of these growing applications such as selective etch a L D.

<unk> silicon etch and more we have a role providing fluid delivery to all of these applications.

As <unk> adoption continues to proliferate across multiple device types. Our process tool customers are witnessing the need for more etch and deposition steps to help create smooth patterns and reduced line with roughness.

Additionally, the growing importance of advanced packaging has revealed process challenges that require better film stress management improved defect.

Enhanced uniformity increased material selectivity.

All of which are enabled by more precise control of gas and fluid delivery.

Jeffrey S. Andreson: Outside of semiconductors, specifically for our IMG business, we are also driving cross-selling opportunities at our historical gas panel customers, as well as opportunities to offer high-course components and capabilities to IMG's customer base in medical, aerospace, and defense. As these new technologies and drivers evolve and proliferate, we see opportunities for Ichor to expand our revenue potential and continue to add breadth and diversification to our customer base. All of these factors build a strong story for Ichor's revenue growth as the industry recovery accelerates. But it's our proprietary products, including our next generation gas panel, that we are most excited about as our key initiative to drive overall gross margin expansion within our business. We have been qualified on three applications and are now supporting our customers' evaluation tools that are shipping to a device manufacturer.

Outside of semiconductors, specifically for IMG business. We are also driving cross selling opportunities at our historical gas panel customers as well as opportunities to offer <unk> components and capabilities to amg's customer base in medical Aerospace and defense.

As these new technologies and drivers evolve and proliferate.

The opportunities for <unk> to expand our revenue potential and continue to add breadth and diversification to our customer base.

All of these factors built a strong story for <unk> revenue growth as the industry recovery accelerates.

It's our proprietary products, including our next generation gas panel that we're most excited about is our key initiative to drive overall gross margin expansion within our business. We have been qualified on three applications and are now supporting our customers' evaluation tools that are shipping to a device manufacturer.

Jeffrey S. Andreson: Our latest investor presentation includes a slight adjustment to our target model to reflect the higher level of investments we are making in R&D in order to develop additional proprietary products, which we believe, in turn, can drive our growth margin north of 20%. We are focused on the development of proprietary products that support our customers' long-term technological growth. These periods of lower demand provide both Ichor and our customers with the ability to work on new qualifications.

Our latest Investor presentation includes this slight adjustment to our target model to reflect the higher level of investments, we're making in R&D in order to develop additional proprietary products, which we believe in turn can drive our gross margin north of 20%.

We are focused on the development of proprietary products that support our customers' long term technology Road maps. These.

These periods of lower demand provides both <unk> and our customers the ability to work on new qualifications. We continue to make very good progress in our key focus areas. These include our next generation gas panel and qualifications of our proprietary machine components.

Jeffrey S. Andreson: We continue to make very good progress in our key focus areas. These include our next generation gas panel and qualifications of our proprietary machine components. I am very pleased with the progress of our new gas panel as we are now moving into qualifications at the device manufacturer.

I'm very pleased with the progress of our new gas panel as we are now moving into qualifications at the device manufacturers. We continue to work with multiple customers and expect to add additional customer evaluations over the course of 2024.

Jeffrey S. Andreson: We continue to work with multiple customers and expect to add additional customer evaluations over the course of 2024. Our new gas panel contains about 75% proprietary Ichor content, compared to around 10% today, which will drive a significant expansion of our gross margin profile. In the next several months, we expect to shift gas panels that will support five additional systems for end-user customer tool evaluation.

Our new gas panel contains about 75% proprietary high court content compared to around 10% today, which will drive significant expansion of our gross margin profile.

In the next several months, we expect to ship gas panels that will support five additional systems for end user customer tool evaluations. This is a major milestone for the program.

Jeffrey S. Andreson: This is a major milestone for the program. Our best estimate of when production systems will begin is late 2024, and we continue to learn new qualifications across our customer base.

Our best estimate of when production systems will begin is late 2024.

And our proprietary machine components, we continue to win new qualifications across our customer base.

Jeffrey S. Andreson: The ramp is taking longer as we work through the inventory on hand, but we are qualified and expected to positively impact our first quarter gross margin and continue over the course of the year. In summary, I'll remind everyone here today that our revenues tend to recover more sharply when industry spending recovers. Furthermore, our business model and financial profile tend to generate significant operating leverage as revenues grow.

The ramp has taken longer as we work through the inventory on hand, but we are qualified and expect this to positively impact our first quarter gross margin and continue over the course of the year.

In summary, I'll remind everyone here today that our revenues tend to recover more sharply when industry spending rebounds. Furthermore, our business model and financial profile tends to generate significant operating leverage as revenues grow.

Jeffrey S. Andreson: Current industry expectations are that the business environment for WFV will persist at these levels through the first half of 2024, and given the modest mid-single-digit growth outlook for the full year, 2024 WFV revenues will likely be more weighted towards the second half. Given our current visibility, we also expect our revenue run rate to continue around the $200 million level through the first half, followed by the beginning of a revenue ramp in the second half. As we look ahead to an expected strong recovery year in 2025, we look forward to ramping revenues back towards the $250 million to $300 million plus level in 2025. We expect to be able to deliver significant earnings growth as revenue volumes increase, which is why we continue to make critical investments in our business in support of future growth. With that, I'll turn it over to Greg to recap our Q4 results and provide further details on our Q1 financial outlook. Thanks Jeff.

Current industry expectations are that the business environment for WSB will persist at these levels through the first half of 2024.

And given the modest mid single digit growth outlook for the full year 2020 for WMC will likely be more weighted towards the second half.

Given our current visibility we also expect our revenue run rate to continue around the $200 million level through the first half followed by the beginning of a revenue ramp in the second as we look ahead to unexpected strong recovery year. In 2025, we look forward to ramping revenues back toward the 250 million to three <unk>.

<unk> million dollar plus level in 2025, we expect to be able to deliver significant earnings growth as revenue volumes increase which is why we continue to make critical investments in our business and support our future growth with that I'll turn it over to Greg to recap, our Q4 results and provide further details.

Around our Q1 financial outlook Greg.

Thanks, Jeff.

Greg Swite: To begin, I would like to emphasize that the P&L metrics discussed today are non-GAAP measures. These measures include the impact of share-based compensation expense, amortization of acquired intangible assets, non-recurring charges, and discrete tax items and adjustments. There is a useful financial supplement available on the investor section of our website that summarizes our GAAP and non-GAAP financial results, as well as a summary of the balance sheet and cash flow information for the last several quarters. In the fourth quarter, our revenues were $203 million, at the upper end of guidance and up 3% from the prior quarter, with customer demand remaining relatively stable from Q3 levels. The majority of the upside in revenues, compared to the midpoint of guidance, reflected pass-through inventory sales at zero margin, as just discussed. With the less favorable product and customer mix, the impact of the sale of our inventory at no margin, and some continued E&O and slightly higher manufacturing costs headwinds, our gross margin was 10.4%, which was well below our expectations.

To begin I would like to emphasize that the P&L metrics discussed today are non-GAAP measures.

These measures exclude the impact of share based compensation expense amortization of acquired intangible assets nonrecurring charges and discrete tax items and adjustments.

There is a useful financial supplement available on the investors section of our website that summarizes our GAAP and non-GAAP financial results as well as a summary of the balance sheet and cash flow information for the last several quarters.

In the fourth quarter, our revenues were $203 million at the upper end of guidance and up 3% from the prior quarter.

With customer demand remaining relatively stable from Q3 levels.

The majority of upside in revenues compared to the midpoint of guidance reflected pass through inventory sales at zero margin as Jeff discussed.

With the less favorable product and customer mix the impact of the sale of our inventory at no margin and some continued <unk> and slightly higher manufacturing cost headwinds.

Gross margin was 10, 4%, which was well below our expectations.

Greg Swite: We anticipate a significant improvement in margins as we move through 2024. Q4 operating expenses were slightly lower than Q3 at $21.2 million, and our operating income for Q4 was roughly breakeven. Our net interest expense was $4.7 million, and our non-GAAP net income tax benefit exceeded our forecast at $2.8 million. The resulting net loss per share was $0.06.

We anticipate a significant improvement in margins as we move through 2024.

Q4, operating expenses were slightly lower than Q3 at $21 $2 million and our operating income for Q4 was roughly breakeven.

Our net interest expense was $4 $7 million and our non-GAAP net income tax benefit exceeded our forecast at $2 $8 million, the resulting net loss per share was <unk> <unk>.

Greg Swite: Now turning to the balance sheet, at the end of the quarter, our cash and equivalents totaled $80 million, a $4 million increase from Q3. We generated $37.6 million in cash flow from operations, and after deducting $2.3 million of capital expenditures, our free cash flow was $35.3 million. Free cash flow for the quarter was particularly strong given the $37 million sequential decrease in accounts receivable, which drove GSOs to only 30 days. Inventory decreased to $21 million during the quarter to end the year at $246 million, and inventory returns increased to $2.8. During the quarter, we paid down $31.2 million of debt, and our net debt coverage ratio currently stands at 3.4 times. Now, let's discuss our guidance for the first quarter of 2024. With anticipated revenues in the range of $190 to $210 million, we expect our Q1 gross margins will improve to a range of 13 to 13.5%. At this time, we expect Q1 operating expenses to be approximately $22.3 million. The increase reflects the seasonal impact of payroll taxes resetting, audit fees, and other variable compensation costs.

Now turning to the balance sheet at the end of the quarter, our cash and equivalents totaled $80 million a $4 million increase from Q3.

We generated $37 $6 million in cash flow from operations and after deducting $2 $3 million of capital expenditures, our free cash flow was $35 $3 million.

Free cash flow for the quarter was particularly strong given the $37 million sequential decrease in accounts receivable, which drove dsos to only 30 days.

Inventory decreased to $21 million during the quarter to end the year at $246 million and inventory turns increased to two eight.

During the quarter, we paid down $31 $2 million of debt and our net debt coverage ratio currently stands at three four times.

Now, let's discuss our guidance for the first quarter of 2024.

With anticipated revenues in the range of $190 million to $210 million. We expect our Q1 gross margins will improve to a range of 13 to 13, 5%.

At this time, we expect Q1 operating expenses to be approximately $22 $3 million.

The increase reflects the seasonal impact of payroll taxes resetting.

Fees and other variable compensation costs.

Greg Swite: As we move beyond Q1, we expect offsets to remain at a similar level as we are making targeted investments in IT and R&D. Net interest expense for Q1 is expected to be approximately $4.3 million. Looking beyond Q1, we expect our net interest expense to continue to decline as a result of our focused efforts on reducing our debt levels, as well as an anticipated favorable reduction in our interest rates later in 2024. For modeling purposes, you should model interest expense for 2024 to be approximately $16 million.

As we move beyond Q1, we expect Opex to remain at a similar level as we are making targeted investments in <unk> and R&D.

Net interest net interest expense for Q1 is expected to be approximately $4 3 million.

Looking beyond Q1, we expect our net interest expense to continue to decline as a result of our focused efforts on reducing our debt levels as well as an anticipated favorable reduction in our interest rate later in 2024.

For modeling purposes, you should model interest expense for 2024 to be approximately $16 million.

Operator: We do not expect to record a tax expense or benefit for Q1. For the full year, we are forecasting a non-GAAP effective tax rate of 5%. Operator, we are ready to take questions. Please open the line. Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question area. You may press star two if you'd like to remove your question from the queue.

We do not expect to record a tax expense or benefit for Q1 for the full year, we are forecasting a non-GAAP effective tax rate of 5%.

Operator, we are ready to take questions. Please open the line.

Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue.

You May press star two if you'd like to remove your question from the Q.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for questions. My first question comes from Craig Ellis with B. Reilly Securities. Please proceed with your question. Thanks for taking the question and thanks for all the coverage, guys.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Yeah.

Yeah.

Hi, first question comes from Craig Ellis with B Riley Securities. Please proceed with your question.

Thanks for taking the question and thanks for all the color guys.

Jeffrey S. Andreson: I wanted to start off just by clarifying the gross margin line item in the fourth quarter and then understanding how those dynamics played out through 2024. So, Greg, can you just quantify the specific factors that were at play that caused gross margin to decrease so significantly and then just help us understand the arc of those, of how those come out of the model as we look through 2024? Thanks. I'm Pete Craig. It's Jeff.

Wanted to start off just by clarifying the gross margin line item in the fourth quarter and then understanding how those dynamics played out through 2024. So Greg can you just quantify the specific factors that were at play that caused gross margin to decrease so significantly and then just help us understand.

The arc of those of how those come out.

Model as we look through 2024 thanks.

Hey, Craig its Jeff.

Jeffrey S. Andreson: I'd like Greg to chime in at the back end, but I think given the magnitude of the missing, I'd like to kind of walk you through it. I think, you know, first of all, we elected to sell some inventory at cost. As we looked at our inventory and months of supply, we had some inventory that we were able to go ahead and sell. Had we built that, that piece would have generated about, say, a million dollars of kind of incremental profit off the bottom. And so on that side of our business, really, the depth of the component side has been down. This quarter's mix is primarily a kind of a much lower level of wealth. So, that mix of that by.

Hey, Jeff.

I'll, let Greg chime in at the back end, but I think given that the magnitude of the Miss.

I think I'd like to kind of walk you through it I think.

No.

First of all.

We elected to sell some inventory at cost you know as we looked at our inventory and months of supply. We had some inventory that we were able to go ahead and sell and we built at that.

That piece would have generated about say $1 million of kind of incremental profit off the bottom and so as that side of our business really the the depth of the components side has been down. This this quarter's mix was primarily kind of a much lower level of weldment.

<unk> seen before so that mix offset by.

Jeffrey S. Andreson: The gas panel mix was the largest driver, so as we look forward, I think in the gross margin that we've talked about, we see the mix staying relatively stable and coming out of there. And as you kind of look into next year, all of the key initiatives that we've been driving around internal supply and developing new products that we can integrate into our gas panels are going to help us recover some of this stuff. We also will see some normalization of some of the inventory reserves that have been bigger than we've seen in the past as well. And what I would like you guys to lead with, and I'm sure this question will come up again, is as we kind of recover the $225 million or higher, which is what we maybe see late in the fourth quarter or around the fourth quarter, that's kind of our outlook at this time, we think we can get it back up to around 17%. So from 13 to 17, you're going to see, go through the challenge. Sought after.

The gas panel mix was the largest driver so as we look forward I think in the in the gross margin that we've talked about we see the mix staying relatively stable and coming out of this.

And as you kind of look into next year.

All of the key initiatives that we've been driving around internal supply and developing new products that we can integrate into our gas panels are going to help us recover some of this stuff. We also will see some normalization of some of the inventory reserves that have been bigger than we've seen in the past as well and and what I would like to.

Guys to lead with and I'm sure. This question will come up again as is as we kind of recover to 225 million or higher which is what we maybe see late in the fourth quarter or around the fourth quarter, that's kind of our outlook.

At this time, we think we can get it back up to around 17%. So from 13 to 17 youre going to see increases as we kind of go through the calendar year.

Yeah.

Hum.

No question.

Yes, okay.

Jeffrey S. Andreson: Yeah, and then I wanted to follow up on your comments on the new gas panel product and the fact that you've got a much higher content there and that's going to be a gross margin tailwind check. If you start to ship that later this year, can you help us understand how the mix of that newer product will feather in with all the existing products that are the current customer programs right now, said differently, how abruptly can they commit ramp to a significant majority of the death penalty. Yeah, another good question.

N.

I wanted to follow up on your comments on the new gas panel product and.

I'd like the fact that you've got that much higher content, there and that's going to be a gross margin tailwind Chuck as you start to ship that later this year can you just help us understand how the mix of that newer product will feather in with all the existing product.

Part of current customer programs right now.

Said differently, how abruptly can Kevin that ramp to significant majority.

Yes panamax.

Yes.

Another good question.

Jeffrey S. Andreson: You know, as we're working through these qualifications, the first three applications that we won are essentially, I'll call them market share gains; they're applications we haven't had before and going forward. So, as we kind of look later in the year, I would say this year, we're probably going to see kind of low single digits of revenue start to happen. It's really in 2025, as these qualifications start to layer on and get qualified at multiple customers that we'll start to see the inflection. Having said that, Craig, a lot of the internal components that are in the gas panel that's fully configured with about 75% of our content, we can work on the, I'll call them the legacy gas panels.

As we're working through these qualifications that first three applications that we won are essentially I'll call. It market share gains there applications, we haven't had before.

And going forward. So as we kind of look later in the year I would say this year, we're probably going to see kind of low single digits of revenue start to happen. It's really in 2025 as these qualifications start to layer on and get qualified at multiple customers that will start to see the inflection having said that Craig.

A lot of the internal components that are in the gas panel thats fully configured with about 75% of our content. We can work on the I'll call them. The legacy gas panels. The gas panels today, there's a lot of components, we can still get qualified on theirs.

Jeffrey S. Andreson: The gas panels today, there's a lot of components we can still get qualified on. There's valves, fittings, substrates, things like that, that are adding content. And that's the internal supply that I refer to. So, it's going to start to happen during the year. We've already won the qualifications.

Theres valves fittings substrates things like that that are adding content and that's that's the internal supply that I referred to so it's going to start to happen during the year. We've already won the qualifications, they're moving a little slower because of kind of our inventory position in some of our on order position, but we're going.

Jeffrey S. Andreson: They're moving a little slower because of kind of our inventory position and some of our on-order position, but we're going to see that as a piece that helps us in, you know, Q1, specifically, and going forward. And those are measured in kind of tens of millions of dollars. So you'll see those first before we get to the fully integrated gas panels that affect our gross margin in 2021. Got it. That's helpful. Apologize. I'll hop back in with you.

See that is a piece that helps us in Q1, specifically and going forward and those are measured in tens of millions of dollars too. So you'll see those first before we get to the fully integrated gas panels affect our gross margin in 2024.

Got it that's helpful color guys I'll hop back in the queue.

Brian Edward Chin: Thanks for your question. Our next question is from Brian Chin with Stiegel. Please proceed with your question. Hi there, good afternoon.

Thanks, Greg.

Yeah.

Our next question is from Brian Chin with Stifel. Please proceed with your question.

Hi, there good afternoon, thanks for letting us ask a few questions.

Brian Edward Chin: Thanks for allowing us to ask a few questions. But maybe first, just to kind of go back to the gross margins, just maybe to lay things out, maybe we'll gain a little clarity here. Yeah, if we're logging, say, 14% for Q4 and the non-GAAP is 10.4.

Maybe first just to kind of go back to the gross margin just maybe the way things out maybe.

We'll gain a little clarity here.

Yes, we're modeling say like 14% for Q4 and non-GAAP is 10 four.

Jeffrey S. Andreson: If the revenue upside was kind of zeroed out gross margin, that's still only maybe like 30 basis points. And so there are still, you know, several hundred basis points there to kind of understand, is there a way you can reconcile sort of higher inventory reserves? Worth Next, Uh, you know, other elements there that kind of get us to the Delta. Yeah, I think when you look at the mix and its product and customer mix, I'm pretty sure that was probably somewhere around... the gas panel business, the bill to print, is, as I said in my prepared remarks, our lowest margin versus our higher margin. Products that the mix didn't have at the beginning of the quarter. So, the pass-through, think of that as kind of, you know, 50 bases, points of a million dollars.

The revenue upside was kind of zeroed out gross margin thats, the only maybe like 30 basis points and so there's still several hundred basis points there to kind of.

I understand so is there a way you can reconcile sort of higher inventory reserves.

Worse mix.

Other elements, there that kind of get us to the delta.

Yes, I think what.

When you look at the mix and its product and customer mix.

Say that was probably somewhere around <unk>.

Two thirds of the challenge.

Obviously, the gas panel business to build to print as I said on the prepared remarks, our lowest margin versus our higher margin.

Products that the.

The mixed it in.

We didn't achieve that mix, we set out at the beginning of the quarter. So the pass through I think of that as kind of 50 basis points of $1 million I think I did the math right and then the other kind of headwinds.

Jeffrey S. Andreson: I think I did the math right. And then, the other kind of headwind, you know, between, you know, 13 and 14% where we ended last quarter and where we wanted to be this quarter is really a little bit higher than we expected, but really, the slower ramp of some of the internal supply parts, which we'll be covering again in, Well, I don't think that adds enough granularity and color. Okay, and maybe an add-on to that, but also, maybe my second question, in terms of the rationale for kind of doing that pass-through, was that... I mean, that's sort of a prioritization of cash flow over P&L, you know, for that given quarter. That's kind of the fall for that.

Between 13, and 14% where are we where we ended last quarter and where we want it to be this quarter is really a little bit higher than.

And then we expect it but really the slower ramp up some of the internal supply parts, which will recover again in Q1.

So I think that adds enough granularity and color.

Okay.

It does maybe kind of.

And add on to that but maybe my second question.

In terms of the the rationale for kind of doing that pass through was that.

I mean.

This is sort of a prioritization of cash flow or over P&L for that for that given quarter.

It's kind of a follow up to that but then kind of tied into that.

Jeffrey S. Andreson: But then, kind of tied into that, you know, when I look at their customers' balance sheets, and you can definitely see their inventory is moving in the right direction, you know, they still have maybe two quarters, two quarters plus worth of inventory. But when you drill down into what the excess is of your product, either gas panels, finished goods, machine components, and raw materials inventory, how severe is that excess, and is that part of what gives you confidence that the C-stock will basically be over in the first half? Your question, I think you have got a couple of parts. So first, this decision that we made specifically was around parts where we saw the usage, the months on hand, to be well out beyond a year, and so we took advantage of that to generate cash, pay down this, and it did have a P&L hit. We would have had to wait a while before we could have consumed that, so that was a little bit about time, value, and money, and our ability to pay down some debt and the fact that it would have taken us a while.

Well when I look at your customers' balance sheet and you can definitely see their inventory is moving in the right direction, yes. They still have maybe two quarters two quarters plus worth of inventory, but when you drill down into what the excesses of your products either gas panels in finished goods of machine components and raw materials inventory.

How severe is that excess in and is that part of what gives you confidence that this destock.

<unk>.

The over in first half.

Yeah. Good question I think you've got a couple of parts. So first that this decision that we made.

Specifically it was around parts, where we saw the usage the months of on hand to be.

Out beyond a year and so we took advantage of that to generate cash pay down debt.

And it and it did have a P&L hit we would've had.

Wait a while before we could consume that so that was a little bit around time value of money in and our ability to pay down some debt and the fact that it would've taken us awhile. So the second part of your question is really around.

Jeffrey S. Andreson: So the second part of your question is really around, you know, our confidence that we'll be through kind of our customer's burndown, I think. It obviously varies by, I'll call it, kind of business segment within ours. I think, in general, gas panels, they're done, right?

What's our confidence that we'll be through kind of our COO.

Customers burned down I think.

It obviously varies by I'll call it kind of business segment within ours I think in general gas panels that they're done right like most of this is going to be in the Weldment and machine components side I think it will carry to some degree towards through throw even this year our inventories are.

Jeffrey S. Andreson: Like, most of this is going to be on the weldments and machine component side. I think it will carry through to some degree this year. Our inventories are 2.8; they're about half our peak year inventory terms, so we're clearly carrying excess inventory that we're looking forward to ensure that we can burn it down. So we see a path for how we get back to more normalized terms, but it may take just a little bit beyond the end of this year. Okay. Thanks, Jeff.

Two eight or about half our peak year inventory turns so we're clearly carrying excess inventory.

Inventory that were we're looking forward to ensure that we can burn it down so we see a path for how we get back to more normalized turns but it may take just a little bit beyond the end of this year to get there.

Charles Shi: Our next question is from Charles Shi with Medium & Company. Please proceed with your question. Yeah, thanks.

Okay.

Yes, Thanks, Jeff.

Thanks.

Our next question is from Charles <unk> with Needham <unk> Company. Please proceed with your question.

Jeffrey S. Andreson: Hey, first of all, congratulations on winning the Applied Materials Supplier Award. I have a question, Jeff, about the 24 revenue progression, the way you kind of described it. I almost feel like you're going to be around rated around $200 million for two quarters, I mean, until June and December. You think you can approach that $250. That's quite a bit of a step up. Are you expecting September to be somewhere in between?

Yes. Thanks.

First of all congratulations on winning applied materials supplier Award.

I have a question Jeff about that.

As for revenue progression.

What are you kind of described almost feel like that.

You're going to be run rating around 200 million two quarters, I mean until June and December you're thinking you kind of approach that 250, that's a quite a bit of a step up are you.

Back in September to be somewhere in between.

Jeffrey S. Andreson: The reason why I ask this is one of your two largest customers, Lamb Research, recently talked about more of a moderate, I mean, a modest, actually not moderate, modest recovery but actually a little bit stronger close to the year and almost feel like a Q3. They're not expecting so much of an uptake. Are you seeing a little bit of that earlier uptake in Q3? I mean, it's kind of embedded in the way you described it about a year ago. Any color for that?

The reason why I ask this is lumpy your two largest customers Lam research recently talk about more of a moderate I mean, a modest actually not moderate modest recovery backed up by the actual a little but a strong close to the year I almost feel like Q3, they are expecting not so much about <unk>.

Okay.

You're seeing a little bit of the early uptick in Q3.

I mean, it's kind of embedded in the way you described about a year any color for that.

Jeffrey S. Andreson: Yeah, yeah, yeah. It's a good question, Charles, because maybe my... My comments during our Q4 meeting, I don't think it's going to get to 250. Just to be clear, that wasn't the intent of what I was trying to get across. I think it's going to be a little in that kind of 225, 230 range, maybe our visibility today, and then Q3 will be somewhere in between. Keep in mind that we have, Because we're still kind of working through the inventory reduction, we're going to see a different profile as those are our longer lead time parts. So those will kind of lead any kind of gas panel for the kind of growth.

Yeah, Yeah, Yeah, let me.

It's a good question Charles because maybe in my life.

My comments during our.

At the beginning we talked about specifically, we're looking forward to getting back to those kind of $2 5300 millions as really looking into 2025 Q4, I don't think is going to get to $2 50, just to be clear.

That wasn't the intent of what I was trying to get across I think it's going to be a little and that kind of $2 25 to 30 range, maybe as our visibility today, and then Q3 it'll be somewhere in between.

Keep in mind that we have.

Okay.

Because we're still kind of working through the inventory reduction we're going to see a different profile is is those are longer lead time parts. So those will kind of lead any kind of gas panel and further kind of growth, but again.

Jeffrey S. Andreson: But again, you know, I think 2025, I think the confidence level among us and with our customers is that it's going to be a pretty good growth year, so I would expect that some of that has to occur in the back half of our year to support the beginning of their years and their revenue. I hope that kind of helps you kind of position where we kind of see our... Got it. Thanks, Jeff. That's great.

I I I think 2025, I think the confidence.

With us and with our customers is that's going to be a pretty pretty good growth here.

So I would expect that some of that has to occur in the back half of our year to support the beginning of their years in their revenues. So.

I hope that kind of helps you kind of position, where we kind of see our year ago.

Got it thanks, Jeff.

That's great color.

Yes.

Maybe the other.

The other question.

Jeffrey S. Andreson: Maybe the other question I have would be, I mean, among the two largest customers, I think the prior person ahead of me asked about the land research still carrying a good amount of inventory. Applied Materials looks like their inventory level seems to be relatively okay. Do you see a differential in terms of your revenue coming from land versus supply?

Half would be I mean.

I mean between the two largest two customers.

Thank God.

Higher person head.

Ahead of me asking about the Lam research still carrying good amount of inventory.

Applied materials, it looks like at their inventory levels seems to be relatively okay.

Do you see a differential in terms of your revenue coming from that vessel supply this year.

Jeffrey S. Andreson: This year, is your revenue to apply slightly better than them, or not? The reason why I ask this is I really just want to figure out where the upside of your revenue from the two largest customers is more likely to come from which customer. Thanks.

Need to apply the slightly better.

And them or the reason why I asked the business I really just wanted to figure out.

The upside of your.

Revenue from the two largest customers.

It's more likely to come from which from which customers. Thanks.

Good question.

Jeffrey S. Andreson: Probably some stuff I can't specifically answer at a customer level, but certainly. Our two largest customers had different profiles, and I would say largely around where they were positioned, primarily in the memory market. I mean, we do know our largest customer had a very, very high level of market share in the 3D NAND. That recovery is something when that comes back, then you would actually probably see that side of our business accelerate faster than FoundryLogic. Having said that, FoundryLogic, we view, is remaining fairly strong into next year. We don't see a massive drop-off in China shipments, and we're not getting any of those from our customer base as well.

Probably some stuff I can't specifically answer at a customer level, but.

Certainly.

Our two our two largest customers had different profiles and I would say largely around where they were positioned primarily in the memory market. I mean, we do know our largest customer had a very very high level of market share in the three D. NAND that recovery is something when that comes.

Back then you would actually probably see that side of our business accelerate faster than foundry logic, having said that foundry logic, we view and.

Is remaining fairly strong into next year.

We don't see a massive drop off in China shipments and we're not getting any of those signals from our customer base as well so.

Jeffrey S. Andreson: So beyond that, I don't, I don't want to get too specific on the customer profile. And yeah, that's it. Thanks. Thanks, Charles. Our next question comes from the line of Krish Sankar with TD Town & Company. Please proceed with your question. Hi, this is Robert Mertens on the line on behalf of Chris.

Beyond that I don't I don't want to get too specific around customer profiles.

Yeah.

Speaker Change: Thanks, Jeff that's great. Thanks.

Okay. Thanks Charles.

Our next question comes from the line of Krish Shankar with TD Cowen <unk> Company. Please proceed with your question.

Okay.

Hi, This is Robert Mertens on.

Robert Mertens: Thanks for taking my questions. I guess just the first one is, if you have any additional color on the expectations for the component business this year. I know inventory levels have seemed to be a headwind, but have you seen any change over the last few months, and then on top of that, just what the tailwinds from design ramping would look like this year, or if that's more of a calendar 25 story. Tom, good question. Maybe the way I would.

On behalf of Chris Thanks for taking my questions.

I guess just the first one is if you had any additional color on that.

The expectations for the components business this year I know inventory levels I've.

That seemed to be a headwind.

<unk> seen any change over the last few months and then on top of that.

Just sort of what the tailwind from design win ramping but look like this year.

That's more of a.

Calendar.

25 story.

Good question, maybe the way I would answer.

Jeffrey S. Andreson: And I guess I'll just answer the component side of our business. We're seeing very similar outlooks quarter-over-quarter in the first half for machining. We would expect that to start to go, but weldments will probably run a little longer. They have a, I think, a higher level of inventory, and the value chain going forward is kind of the totality of our components business. If you kind of went back to the 21 time frame, to somewhere in there, probably ran somewhere between 20 and 25% of our business. It's kind of running kind of mid to high singles today.

The components side of our business is we're seeing very similar outlooks quarter over quarter in the first half for machining.

We would expect that starts to go Weldment will probably run a law.

Little longer they have I think a higher level of inventory and AR and the value chain going forward or kind of the totality of our components business. If you kind of went back to the 'twenty one time frame 'twenty two somewhere in there probably ran somewhere between 20 and 25% of our business.

Maybe a little closer to 25.

Kind of run in kind of mid to high single digits.

Jeffrey S. Andreson: So that's the gap in the mix that we need to recover. And that'll help us accelerate towards our ultimate goal, which is to get our growth margin up and around. But that probably will occur in 2025 as we kind of compound our new design wind and the gas panel 2.0, the recovery of our component. Now, the other part of the question is, you know, how do we kind of size this?

So that's the gap in the mix that we need to recover and that will help us accelerate towards our ultimate goal, which is to get our gross margin up and around 20%.

Speaker Change: But that probably will occur in 2025, as we kind of compound our new our new design wins.

Speaker Change: And the gas panel to point out the recovery of our component mix now you are at your other part of the question is how do we kind of size some of the wins, we've already had and I would probably just say, it's kind of tens of millions.

Jeffrey S. Andreson: Some of the wins we've already had, and I would probably just say it's kind of tens of millions of dollars in wins, and we expect a pretty significant number of those, and it's going to help us continue to drive our gross margin back to that 17%, and get kind of north of 225 by the fourth. And then maybe just one more, I know you talked through the next in gas panels, but I just wanted to make sure I heard correctly that with those evaluation systems and shipments, you were thinking maybe low single-digit millions in the latter half of this year, and then the more material revenues would be next year. Did I hear that correctly? You did hear that correctly. I mean, anything... You know, we're qualified, and with the success of customers, how fast they move, if the market starts to accelerate, obviously, that number will improve, I would say. I got it. All right, well, thank you. That's very helpful. That's all for me.

Of wins, and we expect a pretty significant uptake of those and it's going to help us continue to drive our gross margin back to that 17%.

When we get kind of north of 225 by the fourth quarter.

Speaker Change: Got it that's helpful and then maybe just.

One more I know you talked through the Nextgen gas panels I just wanted to make sure I heard correctly that.

With those evaluation systems in shipments you were thinking maybe low single digit millions in the later half of this year and then the more material.

Speaker Change: Revenues would be next year did I hear that correct.

Speaker Change: We did hear that correct I mean anything.

We are qualified and with success of customers how fast they move with the market starts to accelerate obviously that number will.

Improve I would imagine.

Got it alright, well. Thank you that's very helpful.

That's all for me Thanks, Rob.

Jeffrey S. Andreson: Thanks, Craig. Our next question is from Dave Duley with Steelhead Securities. Please repeat with your question. Speaking of my question, I was wondering if you could elaborate just a little bit more on your silicon carbide opportunity.

Our next question is from David Duley with Steelhead Securities. Please proceed with your question.

Taking my question.

I was wondering if you could elaborate just a little bit more on your silicon carbide opportunity.

Jeffrey S. Andreson: And you know, I think you have one customer now. And is there a possibility to sign up new customers in the next few quarters? And, Are there other opportunities for you guys outside of EPI in Salt Lake City? Thanks Dave. Good question. So the answer is yes.

I think you have one customer now and.

Is there a possibility to sign up new customers in the next few quarters and.

Are there other opportunities for you guys outside of N P and silicon carbide.

Thanks, Dave.

Good question.

The answer is yes.

Jeffrey S. Andreson: I think there's still opportunity for us in the deposition side, as I call it. It might not be an Epi-like thing, but there are other companies out there doing other processes that we've had some initial discussions with at a very early stage. I think the bigger opportunity is around the implant side of the business, and those discussions are ongoing. I would say we, in particular, have run a little bit of a weldment business, pretty small, but it's a foot in the door at one of the implant suppliers, and we're going to continue to drive that. And I think that's kind of where we would probably see kind of an inflection point beyond our initial customer that's doing the epi, so we can kind of... Do you think you can win further at the customers because there are like, I think, four or five of those guys? Well, I mean, I think there's kind of three in total that we're kind of looking at. And the answer is, it's probably a... You know, this year, if we start, we're just starting the discussions late last year. We haven't really done any evaluations or gotten deep enough.

Speaker Change: Think there's still opportunity for us.

And the deposition side of call it might not be unhappy like thing, but there are other companies out there doing.

Other our other processes that we've.

We've had some initial discussions with very early stage I think the bigger opportunity is around the implant side of the business and those discussions are ongoing.

I'd say weeks.

Particular, we've learned a little bit of Weldment business pretty small, but it's a foot in the door at one of the implant suppliers and we're going to continue to drive that and I think thats kind of where we would probably see kind of at an inflection point beyond our initial customer that's doing the happy silicon carbide.

Do you think you can win further ft customers, because there's like I think four or five of those guys.

Well I mean.

I think theres kind of three in total that we're kind of looking at and the answer is yes.

It's probably oh.

This year, if we start and we're just starting to discussions late last year, we haven't really done any evaluations or gotten deep enough. So it's not out of the question, but it's probably a 2025.

Jeffrey S. Andreson: So it's not out of the question, but it's probably the 2025 revenue driver versus 2024. 2024 would have to be similar to our gas box stuff. It's the beginning of the conversation of what we can do. And, you know, when we talk to our customers, they obviously see the breadth of what we can do as a company from gas panels, www.thevenusproject.com. And I think that's how we, in essence, quickly won the first application, which is now kind of multiple generations of tools moving forward with our initiative. Thank you. Now, I guess the other question I had is you talked about the second half ramp, you know, in your core business. Are your large OEM customers coming in and talking to you about getting ready for this ramp, or, you know, it's just the typical? I'm just wondering if there's a little bit more in the rolling forecast behind the excitement about the second half. I would say it's maybe less about the rolling forecast and more about the conversations we're having in preparation of the growth that they see kind of coming out of Q4 and into 2025. So, I think it's a very consistent message from our talk. So they're telling you to get ready for a ramp in the back.

Revenue driver versus 2020 for 2024 would have to be Sim.

Similar to our new gas box stuff, it's the beginning of the conversations of what we can do and.

When we talk to our customers. They obviously see the breadth of what we can do as a company from gas panels, Weldment machining and we can manage a lot of their supply chain and I think that's how we in essence are quickly won the first application, which is now kind of multiple generations of tools moving forward with that.

Our initial customer.

Thank you I guess the other question I had is.

You talked about a second half ramp.

In your core business.

Our adult all your large OEM customers coming in and talking to you about getting ready for this ramp or or it's just the typical.

I'm, just wondering if theres, a little bit more than rolling forecast behind our excitement about the second half.

I would say, it's maybe less about the rolling forecast and more about the conversations we're having in preparation of of the growth that they see kind of coming out of Q4 and into 2025. So I think it's a it's a very consistent message out of our top four customers.

So theyre, telling you to get ready for a ramp in the back half.

Yes.

Jeffrey S. Andreson: Thank you. Thanks Dave. We've reached the end of the question and answer session. I'd now like to turn the call back over to Jeff Andreson for closing comments. Thank you. As Charles kind of noted, today we won an award from Applied Materials for a Supplier Excellence Award. Quality for 2023. This is quite an honor to be recognized by the company and the contributions we've made to our customers over the past year and looking forward to future years. So it's always great to see these awards occur.

Thank you.

Thanks, Dave.

We have reached the end of the question and answer session I'd now like to turn the call back over to Jeff Andreessen for closing comments.

Thank you.

As Charles noted today, we we won an award from applied materials for a supplier Excellence award and and quality for 2023. This is quite an honor to be recognized by the company and the contributions we have made to our customer over the past year and looking forward to.

Jeffrey S. Andreson: I want to really thank everybody for joining us on this call this quarter. I'd like to thank our employees, our suppliers, customers, and our shareholders for their ongoing dedication and support as we continue to navigate this highly dynamic business environment. We look forward to updating you again on our Q1 earnings call scheduled for early May.

Speaker Change: Occur.

I want to really thank everybody for joining us on this call this quarter I'd like to thank our employees our suppliers our customers our shareholders for their ongoing dedication and support as we continue to navigate this highly dynamic business environment. We look forward to updating you again on our Q1 earnings call sketch.

Fuel for early May operator that concludes our call.

Jeffrey S. Andreson: Operator, that concludes our call. Thank you. This concludes our call for today. You may disconnect your lines at this time, and we thank you for your participation.

Yeah.

Thank you. This concludes our call for today you may disconnect. Your lines at this time and we thank you for your participation.

Operator: Thank you. Thank you. Thank you.

Yeah.