Q4 2023 Vertiv Holdings Co Earnings Call

Fourth quarter and full year 2023 earnings conference call.

All lines have been placed on mute to prevent any background noise.

Please note that this call is being recorded.

I would now like to turn the program over to your host for today's conference call Lynn Mexicana.

This president of Investor Relations.

Alright, Thank you breaker and good morning, and welcome to <unk> fourth quarter and full year 2023 earnings Conference call. Joining me today are <unk> Executive Chairman, Dave Cody, Chief Executive Officer, Giordano, Abra, Topsy, and Chief Financial Officer, David fallen before we begin I'd like to point out that during the course of this.

Good morning, My name is pretty good and I will be your conference operator for today.

Speaker Change: This time I would like to welcome everyone to the back half so called fourth quarter and full year 2023 earnings conference call.

Call, we will make forward looking statements regarding future events, including the future financial and operating performance averted. These forward looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. We refer you to the cautionary language included in today's earnings release, you can learn more about these risks in our annual.

Pretty Good: All lines have been faithful mute to prevent any background noise.

Pretty Good: Please note that this call is being recorded.

Speaker Change: I would now like to turn the program over to your hosts for today's conference call.

Mexicana: <unk> Mexicana, Vice President of Investor Relations.

Mexicana: Okay.

Early reports and other filings made with the SEC.

Mexicana: Great. Thank you breaker and good morning, and welcome to <unk> fourth quarter and full year 2023 earnings Conference call. Joining me today are verdicts executive Chairman, Dave Cody, Chief Executive Officer, Giordano, Abra, Topsy, and Chief Financial Officer, David fallen before we begin I'd like to point out that during the course of this call we will make forward looking statements.

Any forward looking statements that we make today are based on assumptions that we believe to be reasonable as of this date, we undertake no obligation to update these statements as a result of new information or future events.

During this call. We will also present, both GAAP and non-GAAP financial measures our GAAP results in our GAAP to non-GAAP reconciliations can be found in our earnings press release and in the Investor Slide deck found on our website at investors I've heard of Dot com with that I'll turn the call over to executive Chairman Dave Cody.

Mexicana: Regarding future events, including the future financial and operating performance of Virtu. These forward looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. We refer you to the cautionary language included in today's earnings release, you can learn more about these risks in our annual and quarterly reports and other filings.

Well 2023.

For Birdie English year rooms, we created tremendous value.

Mexicana: Made with the SEC.

<unk> increased 200.

Mexicana: Any forward looking statements that we make today are based on assumptions that we believe to be reasonable as of this date, we undertake no obligation to update these statements as a result of new information or future events.

52% in 2023, putting us well ahead of that.

Number one performer in all of the S&P 500.

Mexicana: During this call. We will also present, both GAAP and non-GAAP financial measures our GAAP results in our GAAP to non-GAAP reconciliations can be found in our earnings press release and in the Investor Slide deck found on our website at investors I've heard of Dot com with that I'll turn the call over to executive Chairman David Cody.

Well again, so far this year.

We announced the capital allocation strategy at our November Investor Conference is very flexible and we believe disrupted well to provide additional benefits to shareowners and is a great reflection of the cash generating capability of the company.

Very nice and exceptionally promising changed from where we were.

Mexicana: Yeah.

David M. Cote: Well 2023.

We finished the year strong.

David M. Cote: Good year for birdie.

David M. Cote: We created tremendous value.

In fact, we fully expect this to set us up well to continue to provide good returns for our shareholders in 2024 and beyond.

David M. Cote: Price increased 252% in 2023, putting us well ahead.

So Joe and team are off to a very good start, but we still have.

David M. Cote: Number one performer in all of the S&P 500, and it's worked very well again, so far this year.

Work to do you'll hear Gino talked about his focus areas for 2024, and what we plan to accomplish this year to deliver another good year for our investors is getting the important.

David M. Cote: We announced the capital allocation strategy at our November Investor Conference is very flexible and we believe disrupted well to provide additional benefits to shareowners and is a great reflection of the cash generating capability of the company.

Thanks.

Customer relationships technology, Dol's organization, resiliency, working capital and capital deployment.

David M. Cote: Very nice and exceptionally promising changed from where we were.

Demonstrated our potential in 2023, but we still have a long way to run and that's all upside so with that I'll turn the call over to Jill.

David M. Cote: We finished the year call.

That's strong and that we fully expect this to set us up well to continue to provide good returns for our shareholders in 2024 and beyond.

Well, thank you Dave Thanks, a lot.

As Dave mentioned, our stock was up 252% last year.

David M. Cote: So Joe and team are off to a very good start, but we still have.

David M. Cote: Work to do you'll hear Gino talked about his focus areas for 2024, and what we plan to accomplish this year to deliver another good year for our investors, it's getting the important.

And as Dave said, if we were in the S&P 500, we would have been the top performing stock. We believe we meet that criteria and we believe very good candidates for S&P 500 inclusion.

David M. Cote: Thanks.

David M. Cote: Customer relationships technology, Dol's organization, resiliency, working capital and capital deployment.

Let's go to slide three.

We finished the year strong operational execution continues to improve.

David M. Cote: Demonstrated our potential in 2023, but we still have a long way to run and that's all upside and so with that I'll turn the call over to Jill.

Q4 sales were up 12% organically growth continues to be led by the Americas orders grew 23% year on year and 18% sequentially. Good across all regions. Additionally book to Bill was very strong at one three X. It.

Jill: Well, thank you Dave Thanks, a lot.

Jill: As Dave mentioned, our stock was up 252% last year.

Jill: And as Dave said, if we were in the S&P 500, we would have been the top performing stock. We believe we meet that criteria and we believe very good candidates for S&P 500 inclusion.

<unk> of market strength that gives us confidence in what we believe will be a strong demand environment for 'twenty four and beyond.

Jill: Let's go to slide three.

Operating profit of $330 million and adjusted operating margin.

Jill: We finished the year strong operational execution continues to.

$17, 7%.

Clearly a step function improvement and a demonstration of a sharpened operational execution.

Our adjusted free cash flow was $305 million for the full year at $778 million, resulting in more than a $1 billion improvement year on year.

Our net leverage at the end of the year was $1 nine X. So within our target range of one to two acts.

And we were upgraded by both Moody's and S&P in December <unk>.

Simba, we announced the acquisition of called Terra that further strengthens our technology leadership in high density and liquid cooling more to come on that in a few slides.

I'm pleased with a strong foundation as we enter 2020 full cup.

Coupled with strong market demand, we feel good about the trajectory.

For the year and beyond and let's move to slide four.

We take a look at the market environment here and it's pretty consistent with what we have been seen for awhile.

Cloud Hyperscale continues to lead the growth.

Jabil signs of AI deployment, and very strong build plans.

We continue to see encouraging signs in enterprise with the customers are starting to develop AI plans for the business be it either on prem or cloud.

It's good to have voted a.

Telecom.

Not a lot new here Capex is tight and mainly focused on retrofit.

From a regional standpoint, APAC remains soft let's continue continues to be a story of China and the rest of Asia. The China market continues to be weak, but we saw some small positive signs in terms of orders. We don't think the market is getting weaker but recovery is slow paced.

<unk>.

In the rest of Asia, including India, we see significant investments happening across the market.

Cloud Colocation are certainly leading the pack, but enterprise customers are also investing.

We moved commercial and industrial to Green in APAC really driven by India investment in infrastructure are accelerating the India market is quite exciting.

And we are well positioned.

<unk> pipeline formation is good and particularly strong in the Colo Hyperscale segment.

Let's go to the next slide slide five.

I am pleased with the order strength, we saw in Q4, 23% year on year and 18% sequentially.

<unk> and to 'twenty four influenced by a strong two H 'twenty three bookings driven by large projects, reflecting also demand from Adi.

We continue to post record backlog, which was up about half a billion dollars from the end of Q3, good visibility for 2004 and beyond.

We expect Q1.

24 orders to continue to be strong.

Up in the high teens on a year on year basis in the first quarter across the portfolio.

Slide slide five.

I am pleased with the order strength, we saw in Q4, 23% year on year and 18% sequentially.

We anticipate they will be down sequentially from Q4.

This is just a normal business pattern.

We are working in close collaboration with our customers and suppliers to make sure. We have the capacity in place to support the likely strong demand environment for the foreseeable future. We inaugurated a new thermal management a plant in India, we have significant capacity expansion underway for switch gear and bus bars.

We enter 2004 influenced by a strong two H 'twenty three bookings driven by large projects, reflecting also demand from Adi will.

We will continue to post a record backlog, which was up about half a billion dollars from the end of Q3, good visibility for 2004 and beyond.

Crosses a thermal portfolio, including of course liquid cooling as I mentioned at Investor Day.

We expect Q1.

24 orders to continue to be strong.

On a weekly basis, we look at evolving demand scenarios in a disciplined rigorous and focused way to make timely investment decisions.

Up in the high teens on a year on year basis in the first quarter across the portfolio.

We anticipate there will be down sequentially from Q4.

The backlog for AI orders continues to grow robustly the acceleration of the overall order book related to AI and it's never an exact science as I explained matches the expected growth rate for the application Aida growth uplift of 3% to 4%.

And this is just a normal business pattern.

We are working in close collaboration with our customers and suppliers to make sure. We have the capacity in place to support the likely strong demand environment for the foreseeable future. We inaugurated a new thermal management plant in India, we have significant capacity expansion underway for switch gear and bus bars.

<unk> to the overall market as we mentioned in November.

Across our thermal portfolio, including of course liquid cooling as I mentioned at Investor Day.

I continue to caution what is and what is not AI is fungible to a certain extent what matters is that we believe the traction is consistent with the market up lift from AI <unk>.

On a weekly basis, we look at evolving demand scenarios in a disciplined rigorous and focused way to make timely investment decisions the.

Perhaps a bit ahead, given our strong position in terminal and thermal is a clear differentiator.

The backlog for AI orders continues to grow robustly the acceleration of the overall order book related to AI and it's never an exact science as I explained matches the expected growth rate for the application Aida growth uplift of 3% to 4%.

Continuing to the right side of slide five.

We believe that supply chains have largely returned to normal, but I would say normal in a post pandemic world. We are focused on making sure that resiliency is constantly increasing across the supply chain.

Sent to the overall market as we mentioned in November.

Two whether what are quite complicated world can throw at us so a lot of focus here.

Speaker Change: I continue to caution what is and what is not AI is fungible to a certain extent what matters is that we believe the traction is consistent with the market up lift from AI <unk>.

Looking at material inflation, we expect materials pricing to be relatively stable year on year, but we are very mindful that things can change rapidly.

Pretty Good: Perhaps a bit ahead, given our strong position in terminal and thermal is a clear differentiator.

And with that over to you David.

Thanks, Joe.

Speaker Change: Continuing to the right side of slide five.

Turning to page six.

This slide summarizes our fourth quarter financial results.

Speaker Change: We believe that supply chains have largely returned to normal, but I would say normal in a post pandemic world. We are focused on making sure that resiliency is constantly increasing across the supply chain.

We finished the year quite strong.

Our organic net sales increased 12% and 5% from volume.

<unk>, 7% from price and America continues to be the growth engine, which Americas was up 22% in the quarter.

Mexicana: Whether what are quite complicated world can throw at us so a lot of focus here.

Our sales performance was within guidance range, but slightly below midpoint.

Mexicana: Looking at material inflation, we expect materials pricing to be relatively stable year on year, but we are very mindful that things can change rapidly.

With which was mainly attributable to a weaker China and some project delays in EMEA.

Adjusted operating profit was $330 million up $120 million from last year's fourth quarter and that was mainly driven by favorable price cost and the higher volume.

And with that over to you David.

David M. Cote: Thanks, Joe turning to page six.

David M. Cote: Slide summarizes our fourth quarter financial results.

We beat the midpoint of our implied fourth quarter adjusted operating profit guidance base.

David M. Cote: We finished the year quite strong or our organic net sales increased 12% 5% from volume.

Based upon good commercial execution and material inflation below.

Mexicana: <unk>, 7% from price and America continues to be the growth engine, which Americas was up 22% in the quarter.

Our modeled assumptions or.

Our adjusted operating margin was 17, 7% in the quarter of 500 basis point improvement compared to last year and that certainly was driven by our continued relentless focus on operational execution and that clearly showed in the results.

David M. Cote: Our sales performance was within guidance range, but slightly below midpoint.

David M. Cote: With which was mainly attributable to a weaker China and some project delays in EMEA.

David M. Cote: Adjusted operating profit was $330 million up $120 million from last year's fourth quarter and that was mainly driven by favorable price cost and the higher volume.

As we move to the right our fourth quarter GAAP diluted EPS includes a $115 million nonrecurring tax benefit related to the release of evaluation allowance and we have removed that from adjusted diluted EPS and we provide additional detail on that value.

David M. Cote: Beat the midpoint of our implied fourth quarter adjusted operating profit guidance.

David M. Cote: Based upon good commercial execution and material inflation below.

Value value valuation allowance release on page 28 in the appendix, but otherwise the year over year increase in adjusted diluted EPS was driven by higher adjusted operating profit.

David M. Cote: Our modeled assumptions or.

David M. Cote: Our adjusted operating margin was 17, 7% in the quarter up 500 basis point improvement compared to last year and that certainly was driven by our continued relentless focus on operational execution and that clearly showed in the results.

To the far right another very strong quarter for adjusted free cash flow as we generated $305 million in the quarter more than doubling.

David M. Cote: As we move to the right our fourth quarter GAAP diluted EPS includes a $115 million nonrecurring tax benefit related to the release of evaluation allowance and we have removed that from adjusted diluted EPS and we provide additional detail on that value.

Last year.

Certainly higher profitability contributed to this result, but working capital is also an important part of the story with plenty of opportunity for continued improvement.

As Joe mentioned net leverage declined to one nine times.

Within our target long term leverage range of one to two times and down from five six times at the end of 2022.

David M. Cote: Value value valuation allowance release on page 28 in the appendix, but otherwise the year over year increase in adjusted diluted EPS was driven by higher adjusted operating profit.

This leverage level supports the capital deployment framework provided at our Investor Conference and gives us significant flexibility and optionality to deploy excess cash.

David M. Cote: To the far right another very strong quarter for adjusted free cash flow as we generated $305 million in the quarter more than doubling.

Turning to page seven.

This slide summarizes our fourth quarter segment results.

Jill: Last year.

Jill: Certainly higher profitability contributed to this result, but working capital is also an important part of the story with plenty of opportunity for continued improvement.

The Americas region as I mentioned continues to fuel the growth engine with organic net sales up 22% in the quarter.

Jill: As Joe mentioned net leverage declined to one nine times.

The improvement in adjusted operating margin in the Americas continues up 640 basis points from last year to 26, 9% with the increase primarily driven by favorable price cost and fixed cost leverage.

Speaker Change: Within our target.

Jill: Long term leverage range of one to two times and down from five six times at the end of 2022.

Jill: This leverage level supports the capital deployment framework provided at our Investor Conference and gives us significant flexibility and optionality to deploy excess cash.

<unk> sales increased 3% organically, but continues to be weighed down by China, where sales were relatively flat year over year, but below expectations included in our quarterly guidance.

Jill: Turning to page seven.

Jill: This slide summarizes our fourth quarter segment results.

APAC adjusted operating margin declined 220 points with unfavorable mix and the timing of fixed cost contributory factors.

Jill: The Americas region as I mentioned continues to fuel the growth engine with organic net sales up 22% in the quarter.

EMEA grew 1% organically in the fourth quarter, which was lower than anticipated.

Jill: The improvement in adjusted operating margin in the Americas continues up 640 basis points from last year to 26, 9% with the increase primarily driven by favorable price cost and fixed cost leverage.

Primarily due to delays on several larger projects. However, we did see an 18% sequential sales increase from the third quarter, which is which is encouraging and EMEA experienced strong year over year fourth quarter orders growth, both which provide.

Jill: <unk> sales increased 3% organically, but continues to be weighed down by China, where sales were relatively flat year over year, but below expectations included in our quarterly guidance.

<unk> for us to project low double digit organic growth in EMEA for full year 2020 for EMEA.

EMEA delivered strong adjusted operating margin of 28, 3% in the fourth quarter, an increase of 750 basis points from last year's fourth quarter, although they did benefit from a $6 million.

Jill: APAC adjusted operating margin declined 220 points with unfavorable mix and the timing of fixed cost contributory factors.

Jill: EMEA grew 1% organically in the fourth quarter, which was lower than anticipated.

Nonrecurring gain from an asset sale in the quarter and as of now.

Jill: Primarily due to delays on several larger projects. However, we did see an 18% sequential sales increase from the third quarter, which is which is encouraging and EMEA experienced strong year over year fourth quarter orders growth, both which provide.

<unk> sang ER America's President has emphatically reminded us without that gain the adjusted operating margin for the Americas and EMEA would have been approximately the same as those two regions continue.

Pushy chubb's other for highest regional adjusted operating margin.

Jill: <unk> for us to project low double digit organic growth in EMEA for full year 2020 for EMEA.

Next turning to page eight.

A summary of full year 2023, I can safely say it was a very strong year.

Jill: EMEA delivered strong adjusted operating margin of 28, 3% in the fourth quarter, an increase of 750 basis points from last year's fourth quarter, although they did benefit from a $6 million.

It's always a good thing when the orange bars on this slide are significantly higher than the gray bars and that is the case for all financial metrics for.

Jill: Nonrecurring gain from an asset sale in the quarter and as of now.

This past year.

2023 produced a step function change in financial performance from 2022 that is not often seen in a 12 month period. This significant improvement is a result of our relentless focus on operational execution, which very clearly reads directly through to our financial results.

Jill: <unk> Americas, President has emphatically reminded us without that gain the adjusted operating margin for the Americas and EMEA would have been approximately the same as those two regions continue.

Jill: Pushy chubb's other for highest regional adjusted operating margin.

Our full year organic sales up 21% reflects a great position and a strong end market adjusted operating margin of 15, 3% an improvement of 760 basis points from last year, certainly provides a strong foundation.

Jill: Next turning to page eight.

Jill: A summary of full year 2023, I can safely say it was a very strong year.

Jill: It's always a good thing when the orange bars on this slide are significantly higher than the gray bars and that is the case for all financial metrics for.

To surpass our mid term adjusted operating margin target of 16%, which we expect to do in 2024 with about 110 basis points to spare at the midpoint.

Jill: This past year.

Jill: 2023 produced a step function change in financial performance from 2022 that is not often seen in a 12 month period. This significant improvement is a result of our relentless focus on operational execution, which very clearly reads directly through to our financial results.

We did well on converting the improved profitability to cash.

With an over $1 billion improvement year over year, and let me repeat that and over $1 billion improvement in adjusted free cash flow year over year.

Jill: Our full year organic sales up 21% reflects a great position and a strong end market adjusted operating margin of 15, 3% an improvement of 760 basis points from last year, certainly provides a strong foundation.

With this improvement driven by the higher profitability and improved working capital management, while continuing to invest in capex to support growth adjusts.

Adjusted free cash flow of $778 million drove.

Jill: To surpass our mid term adjusted operating margin target of 16%, which we expect to do in 2024 with about 110 basis points to spare at the midpoint.

And adjusted free cash flow conversion of 114%.

With this improved conversion benefiting from a significant increase in deferred revenue, primarily from advanced customer payments, which increased $280 million or 80% in the year, while sales were up 21%.

Jill: We did well on converting the improved profitability to cash.

Jill: With an over $1 billion improvement year over year, and let me repeat that and over $1 billion improvement in adjusted free cash flow year over year.

Which we estimate contributed about 30 percentage points to that conversion.

While we expect continued growth in deferred revenue.

Jill: With this improvement driven by the higher profitability and improved working capital management, while continuing to invest in capex to support growth adjusts.

There are many market dynamics at play and we should not expect similar growth in 2024, which is one of the primary reasons, we are guiding to adjusted free cash flow conversion in the low to mid nineties.

Jill: Adjusted free cash flow of $778 million drove.

For full year 2024.

Jill: And adjusted free cash flow conversion of 114%.

We have much work to do and there is plenty of opportunity for continued improvement, but 2023, certainly demonstrates our potential and helps build credibility and confidence that we can execute upon our long term strategy and deliver the financial targets, we introduced at our Investor Conference.

Jill: With this improved conversion benefiting from a significant increase in deferred revenue, primarily from advanced customer payments, which increased $280 million or 80% in the year, while sales were up 21%.

Jill: Which we estimate contributed about 30 percentage points to that conversion.

Pivoting to 2024 and moving to slide nine this is a look at our first quarter guidance.

Jill: While we expect continued growth in deferred revenue.

Jill: There are many market dynamics at play and we should not expect similar growth in 2024, which is one of the primary reasons, we are guiding to adjusted free cash flow conversion in the low to mid nineties.

We're expecting first quarter sales to be up approximately 5% organically with Americas up high single digits APAC up mid single digits and EMEA relatively flat.

Jill: For full year 2024.

Adjusted operating profit between 200 and $220 million.

Jill: We have much work to do and there is plenty of opportunity for continued improvement, but 2023, certainly demonstrates our potential and helps build credibility and confidence that we can execute upon our long term strategy and deliver the financial targets, we introduced at our Investor Conference.

And adjusted operating margin of 13, 1% up 160 basis points from last year's first quarter and that is driven by price cost tailwind and productivity programs, partially offset by continued growth investments.

As you likely have noted in our slide deck.

Jill: Pivoting to 2024 and moving to slide nine this is a look at our first quarter guidance.

<unk> not provided the detail split between price and cost slash inflation for 2024, as we emphasized at our Investor Conference. Our ambition is to cover all inflation, including labor inflation with price and being price cost positive is an important lever.

Jill: We're expecting first quarter sales to be up approximately 5% organically with Americas up high single digits APAC up mid single digits and EMEA relatively flat.

Jill: Adjusted operating profit between 200 and $220 million.

For us to attain our long term adjusted operating margin target of 20% plus.

Jill: And adjusted operating margin of 13, 1% up 160 basis points from last year's first quarter and that is driven by price cost tailwind and productivity programs, partially offset by continued growth investments.

As you will see on the next slide.

We fully expect to be price cost positive in 2024.

We expect that to be the case each year going forward we.

Jill: As you likely have noted in our slide deck.

We will continue to price our products commensurate with the increasing value we provide our customers.

Jill: Have not provided the detail split between price and cost slash inflation for 2024, as we emphasized at our Investor Conference. Our ambition is to cover all inflation, including labor inflation with price and being price cost positive is an important lever.

However for commercial and competitive reasons, we are not disclosing the specific quantified pricing figure going forward, but rest assured that commercial excellent.

Excellence actions are core tenants to our continued profit improvement program and we believe we are well positioned in a favorable market to continue to execute upon our long term plans.

Jill: For us to attain our long term adjusted operating margin target of 20% plus.

Jill: As you will see on the next slide.

Next turning to slide 10, our full year guidance higher across all metrics from the view presented at our November Investor Conference organic net sales growth is expected to be 9% to 11% up from the 8% to 10%. We shared in November we are increasing the midpoint for adjusted.

Jill: We fully expect to be price cost positive in 2024.

Jill: We expect that to be the case each year going forward we.

Jill: We will continue to price our products commensurate with the increasing value we provide our customers.

Jill: However for commercial and competitive reasons, we are not disclosing the specific quantified pricing figure going forward, but rest assured that commercial excellent.

<unk> operating profit from 125 billion to $1 3 billion with adjusted operating margin at 17, 1% well above the previously established mid term target of 16% and as a reminder, our long term margin target is 20% plus and we.

Jill: Excellence actions are core tenants to our continued profit improvement program and we believe we are well positioned in a favorable market to continue to execute upon our long term plans.

Believe we will take all the necessary next steps in 24 on our path towards that target.

Jill: Next turning to slide 10, our full year guidance.

Across all metrics from the view presented at our November Investor Conference organic net sales growth is expected to be 9% to 11% up from the 8% to 10%. We shared in November we are increasing the midpoint for adjusted operating profit from 125 billion to $1.

Our projected 2024 adjusted diluted EPS of $2 23 at the midpoint is approximately 25% higher than 2023, primarily driven by higher adjusted operating profit and partially offset by taxes and a higher share count as a higher share price drives.

Jill: 3 billion with adjusted operating margin at 17, 1% well above the previously established mid term target of 16% and as a reminder, our long term margin target is 20% plus.

More accounting dilution for employee stock options.

We have included some estimates for share repurchases and share price and our estimated 24 diluted share count.

We're not prepared at this point to share specifics for either but we believe the 393 million shares.

Jill: And we believe we will take all the necessary next steps in 24 on our path towards that target.

Estimate for full year diluted.

Jill: Our projected 2024, adjusted diluted EPS of $2.23 at the midpoint.

Share count is.

Is a reasonable and balanced guidance, but certainly subject to change based upon several variables.

Jill: Is approximately 25% higher than 2023, primarily driven by higher adjusted operating profit and partially offset by taxes and a higher share count as a higher share price drives more accounting dilution for employee stock options.

Moving to the right on this slide we are projecting adjusted free cash flow between 808 hundred $50 million, representing 94% adjusted free cash flow conversion at the midpoint.

Jill: We have included some estimates for share repurchases and share price and our estimated 24 diluted.

As mentioned this is lower than 2023 conversion, primarily due to assumptions with deferred revenue and higher investment in capex.

Jill: Share count.

Jill: We are not prepared at this point to share specifics for either but we believe the 393 million shares.

And finally as we introduced at our Investor Conference There will be a couple of external reporting changes in 2024 to align with how we run the business.

Estimate for full year diluted.

We summarized these changes on slide 31 in the impending and we have provided in our historical recasting for these changes going back to 2020 and exhibit 99.2 of our earnings release and with that said I turn it back over to Jim <unk>.

Jill: The share count.

Jill: <unk> is a reasonable and balanced guidance, but certainly subject to change based upon several variables.

Jill: Moving to the right on this slide we are projecting adjusted free cash flow between 808 hundred $50 million.

Jill: <unk>, 94% adjusted free cash flow conversion at the midpoint as mentioned this is lower than 2023 conversion, primarily due to assumptions with deferred revenue and higher investment in capex.

Thanks, a lot. Thanks, a lot David and we go to slide 11. Thank you.

You saw the slide at our Investor Conference.

We are the market leader in thermal management for data centers, we have the most complete portfolio of thermal management solutions, including liquid cooling.

Jill: And finally as we introduced at our Investor Conference There will be a couple of external reporting changes in 2024 to align with how we run the business.

Really the industry as a transition to GPU accelerate.

Jill: We summarized these changes on slide 31 in the impending and we've provided a historical recasting for these changes going back to 2020 and exhibit 99.2 of our earnings release and with that said I turn it back over to Jill.

We can do this customizing at scale and we believe a very strong position.

Slide It shows also our high density liquid cooling portfolio in November the technology was both owned.

And partnership based now it's fully owned.

Jill: Thanks, a lot. Thanks, a lot David and we go to slide 11. Thank you.

We can go to slide 12.

Speaker Change: You saw the slide at our Investor Conference.

December we closed the acquisition of Terra, which has industry, leading liquid cooling technology, we have now secured that technology with full ownership.

Jill: We are the market leader in thermal management for data centers, we have the most complete portfolio of thermal management solutions, including liquid cooling.

We have been close partners of cool Tara.

Jill: The industry has a transition to GPU accelerate.

Is now <unk>.

Jill: We can do this customized and get scale and.

<unk> Terrace Premier technology, certify and approved by key chip manufacturers, along with established customer relationships combined that with vertical reach and you can scale the technology at a pace that will support our customers are aggressive.

We believe a very strong position. This slide here shows also our high density liquid cooling portfolio in November the technology was both owned.

Jill: And partnership phased now it's fully owned.

<unk> deployment plans we.

Jill: We can go to slide 12.

We have already started to manufacture <unk>.

Jill: <unk> December we closed the acquisition of Terra, which has industry, leading liquid cooling technology, we have now secured that technology with full ownership.

And one of the votive plans.

And we expect to have capacity quadrupled by the end of Q1.

We're executing on our plan to scale the production of our liquid cooling solutions.

Jill: We have been close partners of cooled Tara.

More than 40 times by the end of this year.

Jill: Is now <unk>.

Jill: <unk> Terrace Premier technology, certify and approved by key chip manufacturers, along with established customer relationships combined that with <unk> reach and you can scale the technology at a pace that will support our customers are aggressive.

We truly want to make sure we have capacity to cover the most aggressive GPU growth scenarios.

That is what vertical means by scaling technology, activating our global manufacturing and supply chain footprint.

Jill: <unk> deployment plans we.

Let's go now to slide 13.

Jill: We have already started to manufacture <unk>.

This is where we obsessively focus to deliver another very good year.

And one of the votive plans.

It starts with our customers.

Jill: And we expect to have capacity quadrupled by the end of Q1.

We plan to continue leveraging our far reaching and deep customer relationships.

Jill: We're executing on our plan to scale the production of our liquid cooling solutions.

And have the technology the portfolio, the innovation and the capacity to meet their demand.

Jill: More than 40 times by the end of this year.

We spoke about the capacity expansion onto ways, we have allocated any additional investments to capex to support our customers.

Jill: We truly want to make sure we have capacity to cover the most aggressive GPU growth scenarios.

Jill: It is what <unk> means by scaling technology, activating our global manufacturing and supply chain footprint.

Our global scale matters and will continue to differentiate us.

Vertical operating system is foundational across the organization, helping us to realize productivity.

Jill: Let's go now to slide 13.

Jill: This is where we are obsessive really focused to deliver another very good Jim.

Improvements in general and given us the speed, we have started to make progress on trade working capital, but there is more work to do.

Jill: With the customers.

Jill: We plan to continue leveraging our far reaching and deep customer relationships.

We are not optimized it continues to have my full attention and we are improving.

Jill: And have the technology the portfolio, the innovation and the capacity to meet their demand.

Our capital deployment framework provides much flexibility drill.

Jill: We spoke about the capacity expansion onto ways, we have allocated any additional investments to capex to support our customers.

Driven by good cash flow generation.

So a lot to do in 2024 and the Shaw work is fully underway to continue to execute well on all these focus areas now to slide 14.

Jill: Our global scale matters and will continue to differentiate us.

Jill: Vertical operating system is foundational across the organization, helping us to realize productivity.

We started to instrument footprint strong positions orders in Q1 backlog at the end of the year with very strong orders in Q4 backlog at the end of the year were very strong.

Jill: Improvements in general and given us the speed, we have started to make progress on trade working capital, but there is more work to do we are not optimized. It continues to have my full attention and we are improving.

End markets continue to signal strong and increasing demand for the foreseeable future certainly driven by AI we.

Back to have the capacity to support our customers that is our commitment to them investments in capacity and R&D to support the growth of the business will continue.

Our capital deployment framework provides much flexibility.

Jill: Driven by good cash flow generation.

So a lot to do in 2024.

Our foundation is stronger today than ever before.

Jill: And be sure work is fully underway to continue to execute well on all these focus areas now to slide 14.

Our focus area will continue to strengthen that foundation and increase the resiliency of the organization to navigate.

Jill: We started two instruments footprint strong positions orders in Q1 backlog at the end of the year with very strong orders in Q4 backlog at the end of the year were very strong.

Again, an increasingly complicated world.

<unk> vertical operating system is a cornerstone for that robust Brazilian to operating system deployed globally.

Jill: End markets continue to signal strong and increasing demand for the foreseeable future certainly driven by AI, we expect to have the capacity to support our customers that is our commitment to them investment in capacity and R&D to support the growth of the business will continue.

I am pleased with the progress, but I see even more opportunity than I did when I stepped into the CEO role much more.

There is work to do and we look forward to updating you on our progress and we look forward to our questions now so over to the operator and thank you very much.

Jill: Our foundation is stronger today than ever before.

Thank you.

Jill: Focus area will continue to strengthen that foundation and increase the resiliency of the organization to navigate.

We will now begin the question and answer session.

Oh did you ask a question Christa and the number one on your telephone keypad.

Jill: Then an increasingly complicated world.

And the common interest please limit yourself to one question.

Jill: <unk> vertical operating system is a cornerstone for that robust resilient operating system deployed globally.

And if you have a follow up please rejoin the queue, we'll pause for a moment to compile the Q&A.

Jill: I am pleased with the progress, but I see even more opportunity than I did when I stepped into the CEO role much more.

We have the last question from Andrew <unk> of Bank of America Country Youre line is open.

Hi, yes, good morning.

Jill: There is work to do and we look forward to updating you on our progress and we look forward to our questions now so over to the operator and thank you very much.

Good morning.

Just a question on we've gotten a lot of questions. This morning on the pace of savings that you guys are forecasting for next year.

Just on a net basis is just material slowdown.

Versus 2023.

Also the rig question regards what kind of pricing.

I know youre not going to talk about for competitive reasons, you have disclosed pricing for <unk>.

Speaker Change: Thank you.

Speaker Change: We will now begin the question and answer session.

2023, so if we sort of plug in any sort of reasonable pricing for 'twenty four right on a net basis $60 million looks fairly conservative, particularly given what you rich even on the fourth quarter. If you could address that thank you.

Speaker Change: In order to ask a question Christa and the number one on your telephone keypad.

Speaker Change: The common interest please limit yourself to one question and if.

Speaker Change: Do you have a follow up please rejoin the queue.

Well, Thank you Andrew I'll start and David if you want to chip in.

Speaker Change: <unk> for a moment to compile the Q&A.

We've been previewed vocal about the strength of our pricing muscle would.

Speaker Change: We have the last question from Andrew <unk> of Bank of America Country Youre line is open.

Built over the last 12, plus plus months, it's something that continues just simply just.

By the same token I have been vocal about the fact that.

Hi, yes, good morning.

Andrew: Good morning.

While we continue to believe that we operate in.

Andrew: Just a question on we've gotten a lot of questions. This morning.

Price favorable environment by the the.

Andrew: The pace of savings that you guys are forecasting for next year.

The marginal price gains will diminish for obvious reasons and a different.

Fisher environment, we're in but.

Andrew: On a net basis is just material slowdown.

We operate the biggest part of our business operates in are in our.

Andrew: Versus 2023.

Favorable from a demand supply balance.

Andrew: The Big question was what kind of pricing and I know youre not going to talk about for competitive reasons, but you have disclosed pricing for.

Balance environment, So we continue to.

You got to count on price.

The pace of that price will again price gains diminished, but we were confident it will continue to be positive.

Andrew: 2023, so if we sort of plug in any sort of reasonable pricing for 'twenty four right on a net basis, the $60 million looks fairly conservative, particularly given what you rich even on the fourth quarter. If you could address that thank you.

And I don't know if want to add something David.

No just the.

Just for avoidance of doubt that $60 million, certainly is a price cost or price inflation number and when when we look at price cost. We include labor inflation in that number.

Speaker Change: Well, Thank you Andrew I'll start and David if you want to chip in I mean, we've been pre vehicles are about the strength of our pricing muscle would.

Speaker Change: Built over the last two.

Which we have disclosed previously that's in the $100 million range and we certainly expect.

Speaker Change: <unk> plus plus months, it's something that continues just simply just.

Speaker Change: By the same token I have been vocal about the fact that.

Both material.

And freight.

Speaker Change: While we continue to believe that we operate in.

Contribute some inflation next year, so you got to take that into consideration.

Speaker Change: Price favorable environment by the.

When youre looking at that.

Speaker Change: The marginal price gains will diminish for obvious reasons and a different.

That price cost dynamic in <unk>.

Including.

Speaker Change: Fisher environment, we're in but.

Looking at price.

Got you and just a follow up question on North America, you are guiding North America revenue up high single digits from the first quarter, but 22% growth in the fourth quarter orders up 23% in the fourth quarter 2003.

Speaker Change: We operate the biggest part of our business operates in are.

Speaker Change: In a favorable from a demand supply.

Speaker Change: Balance environment, So we continue to.

Speaker Change: To count on price.

Speaker Change: The pace of that price will again gain diminished, but we are confident we will continue to be positive.

Is there any specific dynamic taking place in the first quarter why do you think North America is only going to be up high single digits, given the strength of the fourth quarter. Thank you.

Speaker Change: And I don't know if want to add something David.

David: No just the.

Well.

We continue to believe that we believe and we have a strong business North America pipeline is very very encouraging just wanted to remind that.

David: Just for avoidance of doubt that $60 million, certainly is a price cost or price inflation number and when when we look at price cost. We include labor inflation in that number.

The Q1 last year in North America.

Because already particularly was particularly strong if you remember we were coming out of 2022, where we had a lot of let me say pent up backlog.

David: Which we have disclosed previously that's in the $100 million range and we certainly expect.

David: Both material.

David: And freight.

So.

That is also that's also that's also a reason, but we feel very good about our America.

David: Contribute some inflation next year, so you got to take that into consideration.

David: When youre looking at that.

Our business in America.

That price cost dynamic.

Alright, guys. Thanks, a lot congratulations thanks, Jamie thanks.

David: Including.

David: Looking at price.

We now have contact.

Speaker Change: Gotcha and then just a follow up question on North America, you are guiding North America revenue up high single digits in the first quarter, but.

Okay.

TD Cowen.

Hi, Thanks, guys for taking the questions and congrats on the performance it looks like book to Bill not only improved in the fourth quarter, but accelerated so I'm thinking about the organic sales growth guide for 2024, which.

Speaker Change: 22% growth in the fourth quarter orders up 12% to 3% in the fourth quarter 2003.

Speaker Change: Any specific dynamic taking place in the first quarter why do you think North America is only going to be up high single digits, given the strength of the fourth quarter. Thank you.

Certainly terrific in an absolute sense is obviously a lot lower than what you achieved in 2023, So I'm wondering to what extent does the guidance for 'twenty four reflect potential bottlenecks both from the standpoint of perhaps your customers ability to source permitting and utility power on the one hand, and then also.

Speaker Change: Well.

Speaker Change: We continue to believe that we believe and we have a strong business in North America pipeline is very very encouraging.

Speaker Change: Just wanted to remind that.

Speaker Change: The Q1 last year in North America.

Speaker Change: Americas already particularly was particularly strong if you remember we were coming out of 2022, where we had a lot of let me say pent up backlog.

Your own supply chain with respect to fans.

<unk> <unk> and <unk>.

Speaker Change: So.

Speaker Change: That is also that's also that's also a reason, but we feel very good about our America.

And breakers and so forth. Thanks.

Thank you.

Speaker Change: America, our business in America.

The.

As you noticed of course, we are very happy about our book to Bill in our in our in our backlog.

Speaker Change: Alright, guys. Thanks, a lot congratulations thanks, Jamie thanks.

Speaker Change: We now have.

We have dynamics in the sense that certainly our second half.

Speaker Change: Hey, John.

John: <unk> Cowen.

<unk> 23, where we're strong and good and that reflects in the way.

John: Hi, Thanks, guys for taking the questions and congrats on the performance it looks like.

John: To build not only improved in the fourth quarter, but accelerated so I'm thinking about the organic sales growth guide for 2024, which.

The shape of our backlog in general we do not see a supply chain bottleneck our end.

It's never infinite, but the constraining factor if you will if we can call. It. So is the fad is simply there is large projects and large project, we're talking have relatively long requested.

Cowen: Certainly terrific in an absolute sense is obviously a lot lower than what you achieved in 2023, So I'm wondering to what extent does the guidance for 'twenty four reflect potential bottlenecks both from the standpoint of perhaps your customers ability to source permitting and utility power on the one hand, and then also.

Lead times from our customers. So it's a natural cycle, we were vocal in the past and will continue to be vocal that the whole industry needs to confront itself with with power availability permitting et cetera, but I would say that in the in the 12.

Cowen: Of course, your own supply chain with respect to fans.

Cowen: <unk>.

And breakers and so forth. Thanks.

Speaker Change: Thank you.

18 months.

Is really the natural pace of.

Cowen: <unk>.

Cowen: <unk>.

Cowen: As you noticed of course, we are very happy about book to Bill in our in our in our backlog.

Bel Donaldson sites et cetera, So we're pretty much there.

Deliver on on what our customers request right now.

Cowen: <unk>.

Cowen: We have dynamics in the sense that certainly our second half <unk>.

Thank you.

<unk> 2003, where we're strong and good and that reflects in the way.

We now have Nigel Coe of Wolfe Research your line is open.

Cowen: The shape of our backlog in general we do not see a supply chain bottleneck our end.

Thanks, Good morning, everyone.

I'll keep it to one question. So if I'm doing the math right. It looks like $2 $4 billion of orders in the quarter up from $1 nine.

Cowen: It's just never infinite.

The constraining factor if you will if we can call. It. So is the fad is simply those large projects and large project with talking have relatively long requested.

In the third quarter.

I'm guessing you're going to say Americas, hyperscale, such but maybe just give us some context on what drove that sequential acceleration, but more importantly can you maybe towards the fund logo.

The funnel the funnel up were going to call it.

Cowen: Lead times from our customers. So it's a natural cycle, we were vocal in the past and will continue to be vocal that the whole industry needs to confront itself with with power availability permitting et cetera, but I would say that in the in the 12 18.

Of opportunity do you see coming up next quarter or two.

And then David just.

Just maybe.

Maybe just justice specifically, you said deferred revenues will continue to grow.

In 2012 does that indicate the backlog continues to expand from here.

Cowen: 18 months is really the natural pace of.

I'll start Nigel to answer your.

Cowen: <unk> sites et cetera, so we've pretty much.

Three questions in one.

So.

Cowen: Deliver on on what our customers request right now.

Clearly clearly we like the exploration.

We like the acceleration in orders and you remember we were vocal about the strength of the pipeline both at the earnings call in October and in November at Investor Day that continues to be true.

Speaker Change: Thank you.

Cowen: Okay.

Cowen: We now have Nigel Coe of Wolfe Research your line is open.

What what what we have.

Nigel Coe: Thanks, Good morning, everyone.

Nigel Coe: I'll keep it to one question.

Paul as we typically do.

Nigel Coe: If I'm doing the math right it looks like $2 $4 billion of orders in the quarter up from $1 nine in the third quarter.

Notice is is an increased velocity in in the pipeline. So we believe that.

Nigel Coe: Im guessing youre going to say Americas, hyperscale, such but maybe just give us some context on what drove that sequential acceleration, but more importantly can you maybe talk about the fund logo.

Characteristic trait of the pipeline that will stay with.

With us.

So that is.

Through the funnel continues to grow and that's true pretty much pretty much.

Nigel Coe: The funnel the funnel a lot we're going to call it of.

Of opportunity do you see coming up next quarter or two and then David just.

Globally, certainly for our for the Americas EMEA and.

Nigel Coe: Just.

Nigel Coe: Maybe just address this specifically you said deferred revenues will continue to grow.

In many parts of Asia. So.

We're positive we're positive about that.

Nigel Coe: In 2012 does that indicate that backlog continues to expand from here.

So we see opportunity that you want to comment on the on the other part of the other question, yes, yes, so as it relates to deferred revenue.

David: I'll start Nigel to answer your.

David: Three questions in one.

I may oversimplify, this but deferred revenue can grow for two reasons one.

David: So.

Speaker Change: Clearly clearly we like the exploration.

Nigel Coe: We like the acceleration in.

That is as you mentioned backlog grows the other is just improved execution and further penetrating customers with those advanced payments.

Nigel Coe: In orders and.

Nigel Coe: You remember we were vocal about the strength of pipeline both at the earnings call in October and in November at Investor Day that continues to be true.

Quite frankly, we would hope for boat.

We feel pretty good at that.

Continued growth in those customer advance payments.

Nigel Coe: What we have.

Nigel Coe: Paul as we typically do.

Okay.

Nigel Coe: Notice is is an increased velocity in in the pipeline. So we believe that.

Thanks.

Your next question comes from Rich Galliani ethical.

Nigel Coe: Characteristic trait of the pipeline that will stay with.

Yes.

Nigel Coe: With us.

Yes.

Good morning, Thanks for taking my question.

Nigel Coe: So that is.

I was hoping you could talk about I think you talked about AI activity broadly in line, if not slightly better than you had expected and that's the way you described it can you maybe just talk about I realize you said, it's not easy to be precise but how much of your orders are your backlog you think our AI driven today and as you engage with these cloud customers do you see them sort of.

Nigel Coe: Through the funnel continues to grow and that's true pretty much pretty much.

Nigel Coe: Globally, certainly for <unk> for the Americas EMEA and in.

Nigel Coe: In many parts of Asia. So.

Nigel Coe: We're positive we're positive about that.

So we see opportunity that you want to comment on the on the other part of the other question, yes, yes, so as it relates to deferred revenue.

Preferring more the route of director chip or full immersion just sort of lumpy yesterday with what your customers are looking to build a data center technology without the go forward.

Nigel Coe: And I may oversimplify, this but deferred revenue can grow for two reasons one.

Nigel Coe: It is as you mentioned backlog grows the other is just improved execution and further penetrating customers with those advanced payments.

Thank you Matt and.

Good day to you.

As I think Simon a couple of occasions.

It's very very hard for us and I think for everyone truly to be.

Nigel Coe: But frankly, we would hope for both.

Nigel Coe: We feel pretty good at that.

Exact because it's not an exact science as said in while we're going through the slides not exact science deciding what what goes to or.

Nigel Coe: <unk> continued growth.

Nigel Coe: Those customer advance payments.

Nigel Coe: Okay.

Being sure of what goes through AI application applications or or not have said there are some product lines.

Nigel Coe: Thanks.

Nigel Coe: Your next question comes from Rich Kelly.

Rich Kelly: Galliani ethical.

Univocal destined to high density GPU AI like.

Nigel Coe: Okay.

Rich Kelly: Good morning, Thanks for taking my question.

Any sort of identity cooling of liquid cooling.

Rich Kelly: Jim I was hoping you could talk about I think you talked about AI activity broadly in line, if not slightly better than you had expected and that's the way you described it can you maybe just talk about I realize you said, it's not easy to be precise but how much of your orders are your backlog do you think are AI driven today and as you engage with these cloud customers do you see them sort of.

Some elements of our in rock power distribution.

But at the start of phase.

We want to make sure that.

We don't go to the side of too.

Too much details it too much details also from a competitive standpoint.

We are very happy about the trajectory of the backlog and the trajectory of the of the pipeline, but the vast majority of the vast majority of all of our portfolio is really a fungible as I said in a sense of that.

Rich Kelly: Preferring more of the route directed chip or full immersion just sort of lumpy yesterday.

Rich Kelly: Customers are looking to build a data center technology without the go forward.

Also a lot of what you see built today and designed today it is not univocal one.

Jim: Thank you Matt.

Speaker Change: Good day to you.

Speaker Change: As a as a consignment out a couple of occasions.

One or the other is data centers that needs to be a hybrid in their very nature, because they will host both.

Speaker Change: It's very very hard for us and I think for everyone truly to be.

Speaker Change: Exact because it's not an exact science have said, while we're going through the slides not exact science deciding what what goes to or.

Traditional let's say, a CPU and GPU with configurations that may and will actually changed over time. So the mix of loads in the same data center changes that challenge hit to role in the industry and that's why we cooperate very very strongly with the hyperscale and the largest <unk>.

Speaker Change: Being sure of what goes through AI.

Speaker Change: <unk> application applications or or not have said there are some product lines.

Univocal destined to high density GPU AI like.

Speaker Change: Any sort of identity cooling of liquid cooling.

How did you design it in a way that you can transition that way how can you build that intrinsic flexibility. There. So that's why it's very difficult for me to answer in a credible.

Speaker Change: Elements of in rock power distribution.

Speaker Change: But at a certain stage.

Speaker Change: We want to make sure that.

Speaker Change: But we don't go to the side of.

Way to your question and I.

Speaker Change: Too much details it too much details also from a competitive standpoint.

I would invite the entire industry to be less Biochemically block.

Speaker Change: We're very happy about the trajectory of the backlog and the trajectory of the of the pipeline, but the vast majority of the vast majority.

Black and white on this because.

I don't think you can having said that we're very happy about the trajectory, we're very happy about the trajectory of what is.

Speaker Change: Of our portfolio is very fungible as I said in a sense of that.

Univocal desk.

Destined to AI, but also the pull through of what we know believes see is AI driven medium long term.

Speaker Change: Also a lot of what you see built today and designed today it is not univocal.

Speaker Change: One or the other it is data centers that needs to be a hybrid in their very nature, because they will host both.

Our pipeline.

Direct.

Emotion direct.

Speaker Change: Traditional let's say, a CPU and GPU with configurations that may and will actually change over time. So the mix of loads in the same data center changes that challenged him to role in the industry and Thats why we cooperated very very strongly with the Hyperscale is under largest colo is.

That's what we hear in spades, the discussions that we have predominantly with.

It doesn't mean that there is no room for emotion.

But it's just we just see more more direct than anything else, but again.

The the fun part of the of the our a lot of the very interesting part of our job today is that we really figure out and design with the big players across the world and what the future looks like and that is a highly cooperative activity.

Speaker Change: How do you design, a new way that you can transition that way how can you build that intrinsic flexibility. There. So that's why it's very difficult for me to answer in a credible way to your question and I.

Speaker Change: I would invite the entire industry to be less Biochemically block.

It was a bit long answer sorry about that hopefully.

Speaker Change: <unk> and white on this because I don't think you can having said that we're very happy about the trajectory, we're very happy about the trajectory of what is.

No very helpful. Thank you.

Thank you.

Now have Scott Davis Melius research.

Speaker Change: Uniquely.

Hey, good morning, everybody congratulations on good morning.

Speaker Change: Destined to AI, but also the pull through of what we know believe C is AI driven medium long term in our pipeline.

Okay.

Thank you. Thank you.

This might be a little hard to answer but do you have do you guys have a view our view or a vision either one but.

Speaker Change: Direct.

Speaker Change: Emotion direct.

What percentage of the mix liquid.

Speaker Change: That's what we hear in spades, the discussions that we have predominantly with.

Cooling would be in a couple of years is it.

Trying to just get a sense of size and materiality of it I think.

Speaker Change: It doesn't mean that there is no room for emotion.

Speaker Change: But it's just we just see more more direct than anything else, but again.

Question.

Scott, it's very much we do not deviate very much from our from what we were saying.

Speaker Change: The the fun part of the of our a lot of the very interesting part of our job today is that we really figure out and design with the big players across the world and what the future looks like and that is yes.

At invest at Investor Day.

Quiet.

Quite honestly, so if I if I go back to those to those thoughts.

The process, we would see.

Speaker Change: Highly cooperative activity.

Let's say it.

Going to a 15 to 20, 15% to 20% of the overall.

Speaker Change: It was a bit long answer sorry about that hopefully.

Sure.

Yes.

Speaker Change: No very helpful. Thank you.

Let's say a thermal part overtime overtime as that builds up okay.

Speaker Change: Thank you.

Speaker Change: We now have Scott Davis Melius research.

But again, it's really still still a bit early.

Okay.

Scott Reed Davis: Hey, good morning, everybody congratulations on good morning.

And again I know you've got a lot of different skus, but can you give us a sense of your capacity utilization by region.

Speaker Change: Okay. Thank.

Scott Reed Davis: Thank you.

Speaker Change: This might be a little hard to answer but do you have do you guys have a view our view or a vision either one but.

And maybe the real question I'm trying to get at is how much how much did lack of capacity kind of slow down your growth in 'twenty three.

Speaker Change: What percentage of the mix liquid.

Or perhaps impact your growth and even.

Speaker Change: <unk> would be in a couple of years is it.

The first couple of quarters here 24 before.

Speaker Change: Im trying to just get a sense of size and materiality of it I think.

Your new capacity comes online.

Speaker Change: Just a question.

Capacity and capacity creation is is a known going I would tell you that.

Speaker Change: Scott, it's very much we do not deviate very much from our from what we were saying at the Investor day.

The open the big steps, we're opening as well.

At Investor Day.

Two doses, so many times India.

Speaker Change: Quiet.

Speaker Change: Quite honestly, so if I if I go back to those to those thoughts.

And Monterey after that it's it's more of a gradual.

Speaker Change: The whole process, we would see.

Expansion.

Speaker Change: <unk>.

Adding.

Speaker Change: Let's say.

Going to with 15 to 20, 15% to 20% of the overall.

Adding.

Line <unk> shifts.

Improving utilization improving output.

Investing more in.

Speaker Change: Let's say a thermal part overtime overtime as that builds up okay.

In our assembly lines and tools so in.

Speaker Change: But again, it's really still still a bit early.

In general we.

We do not see in this moment and we do not see for 2024.

Speaker Change: Okay, and and again I know you've got a lot of different skus, but can you give us a sense of your.

Capacity.

Beyond because capacity is a limiting as a limiting factor.

Speaker Change: Passenger utilization by region.

Not in any kind of a.

Speaker Change: And maybe the real question I'm trying to get at is how much how much did lack of capacity kind of slow down your growth in 'twenty, three or perhaps impact your growth even.

My two material material fashion.

Clearly as I mentioned, we we.

Mkay capacity decisions almost on a weekly basis, because never have we experienced a market that is dynamic to this extent and I want to make sure. We have kind of a very robust process to to be there and to provide our customer with the right.

Speaker Change: The first couple of quarters here at 24 before.

Speaker Change: Your new capacity comes online.

Speaker Change: Capacity and capacity utilization is is a known going I would tell you that.

Speaker Change: The open the big steps, we're opening as well.

The right capacity.

Speaker Change: Two doses, so many times, India and.

Okay. That's helpful. Thank you I'll pass it on I would like to share.

Speaker Change: In Monterey after that it's more of a gradual.

Thanks, Scott Thanks.

We now have a question from Jeff Scott.

Speaker Change: Expansion.

Speaker Change: Adding.

Speaker Change: Adding.

That's good research.

Speaker Change: Line <unk> shifts.

Hey, Thank you good day everyone.

Improving utilization improving output.

Hey, maybe just coming back to the slide 12 Geo.

Speaker Change: Investing more in.

Speaker Change: In our assembly lines and tools so in.

Just help us get our head around what exactly this means.

Speaker Change: In general.

Speaker Change: We do not see in this moment and we do not see for 2024.

<unk> you are increasing capacity at very very low base.

Capacity.

But.

Speaker Change: Beyond because capacity is a limiting as a limiting factor.

Yeah.

If we go back to the Investor Day, you said you had $100 million.

Speaker Change: Not in any kind of a.

Speaker Change: My two material material flash.

Really direct.

Hi.

Revenue exposure and there was another $250 million, which was kind of in that fungible category that was may be AI, but you didn't know for sure.

Speaker Change: Clearly as I mentioned, we we.

Speaker Change: Mkay capacity decisions almost on a weekly basis because.

Speaker Change: Never have we experienced a market that is dynamic to this extent and I want to make sure. We have kind of a very robust process to to be there and to provide our customer with the right with the right capacity.

I don't think youre, telling us here that $100 million has gone to $4 5 billion multiplying it by 100 by 45.

What are you telling us here.

It's obviously a pretty dramatic sharp.

Speaker Change: Okay. That's helpful. Thank you I'll pass it on I would like to share.

What what we're saying is that here we will.

Speaker Change: Thanks, Scott Thanks.

In the space of 12 months, our plan is to make sure that we have.

Speaker Change: Hi.

Jeff: We now have a question from Jeff Scott the vertical research.

The necessary demand to cover the needs.

Jeff: Okay.

Jeffrey Todd Sprague: Hey, Thank you good day everyone.

Directorship liquid cooling needs.

Jeffrey Todd Sprague: Hey, maybe just coming back to the slide 12 Geo.

Of the industry and and making sure that we do not.

Jeffrey Todd Sprague: Just help us get our head around what exactly this means.

Limits, our ability of our customers to grow their direct to chip liquid cooling that means that.

Jeffrey Todd Sprague: Obviously, you're increasing capacity at very very low base.

We indeed start from a relatively low base.

Jeffrey Todd Sprague: But.

Jeffrey Todd Sprague: Yeah.

Jeffrey Todd Sprague: If we go back to the Investor day that you had $100 million.

<unk>.

When we were talking about.

<unk> hundred million at Investor Day of course.

Jeffrey Todd Sprague: Really direct.

Jeffrey Todd Sprague: Revenue exposure and there was another $250 million, which was kind of in that fungible category that was maybe AI, but you didn't know for sure.

That doesn't mean it so.

Liquid cooling by the way.

The.

We were talking about a backlog that was spread over months and quarters. So it's not necessarily a peak point realized in <unk>.

I don't think youre, telling us here that $100 million go into $4 5 billion multiplying it by 100 by 45, but what are you telling us here.

Beginning of the year.

The fact is.

We start forms from low base, we believe that we'll be able to bring the capacity that the industry needs and close.

Jeffrey Todd Sprague: It's obviously a pretty dramatic sharp.

What what we're saying is that here we will.

And thats done activating.

Activating three votive plants across all continents across all continents.

Jeffrey Todd Sprague: In the space of the 12 months of our plan.

Jeffrey Todd Sprague: Is to make sure that we have.

And.

And with the rapidity and with the <unk>.

Jeffrey Todd Sprague: The necessary demand to cover the needs.

Broad reach of our of our.

Jeffrey Todd Sprague: Direct to chip liquid cooling needs.

<unk>.

Supply chain, so the messages without going in exactly in the numbers for obvious reasons, but the message is we will have capacity and we have capacity and.

Jeffrey Todd Sprague: Of the industry and and making sure that.

Jeffrey Todd Sprague: We do not.

Jeffrey Todd Sprague: Limited our ability of our customers to grow their direct to chip liquid cooling.

And we have the technology and Thats what we.

Jeffrey Todd Sprague: That means that.

We see a lot of.

Jeffrey Todd Sprague: Indeed start from a relatively low base.

That's why we see a lot of conversation and a lot of pipeline forming in this moment.

Jeffrey Todd Sprague: <unk>.

Jeffrey Todd Sprague: When we were talking about 100 million that at Investor day of crews.

We have the next question is from Nick Hello, Hello.

Jeffrey Todd Sprague: That doesn't mean it so.

Jeffrey Todd Sprague: Liquid cooling by the way.

Hello, CIT bank.

Jeffrey Todd Sprague: The.

Yes, thanks, good morning, guys.

Jeffrey Todd Sprague: We were talking about a backlog that was spread over months and quarters. So it's not necessarily a peak point realized in.

Hey, good morning.

Hi, just maybe.

Yes.

As I alluded to some shipment delays that took place in the fourth quarter.

Jeffrey Todd Sprague: At the beginning of the year.

Jeffrey Todd Sprague: The fact is we start forms from low base, we believe that we'll be able to bring the capacity that the industry needs in close.

I guess can you talk a little bit about maybe quantify that talk about the impact of keeping kind of recoup all of that in the first quarter and talk about the quarterly cadence of growth to get to low double digits for 2024. Thank you.

Jeffrey Todd Sprague: And thats done activating.

Jeffrey Todd Sprague: Activating three votive plants across all continents across all continents.

The line was very very noisy better I believe.

Jeffrey Todd Sprague: <unk>.

And with the rapidity and with the <unk>.

We believe that we have understood. Your question. So Q4 was a forum for EMEA was.

Jeffrey Todd Sprague: Broad reach of our of our.

Jeffrey Todd Sprague: <unk>.

Supply chain, so the messages without going in exactly in the numbers for obvious reasons, but the message is we will have capacity and we have capacity and.

Predominantly a question of the customer readiness and site readiness, so not so much a internal capacity, but it was more us.

Jeffrey Todd Sprague: And we have the technology and that's what we.

More the customer side with teething when it comes through the sequence of when it comes to the sequence of quarters going into 2024 for EMEA.

Jeffrey Todd Sprague: We see a lot of.

Jeffrey Todd Sprague: That's why we see a lot of conversation and a lot of pipeline for me at this moment.

With premature.

Certainly we'll have a we'll have a challenging comparison in <unk>. So the excitement is really this acceleration that we that we.

Speaker Change: Alright, thanks for that and then just.

Jeffrey Todd Sprague: Andy.

We have the next question is from Nick Hello, Hello, Hello.

Nick: I look at your bank.

We shared with you to happen necessarily in Q1, but as said we are.

Nick: Yes.

Andy: Yeah. Thanks, good morning, guys.

We are.

Nick: Hey, good morning.

Convinced and.

Speaker Change: Hi, just maybe.

And we are very happy about the pipeline and we are happy about the example, and specifically referred to our order intake in Q1. So we are we're quite optimistic about anyway.

Speaker Change: You guys alluded to some shipment delays that took place in the fourth quarter.

Speaker Change: I guess can you talk a little bit about maybe quantify that talk about the impact of Cuba.

Recoup all of that in the first quarter and talk about the quarterly cadence of growth to get to low double digits for 2024. Thank you.

We will move on to the next question Mark Kennedy with Goldman Sachs.

Yes, thanks very much for taking my question backlog grew 16% to reach a record high of $5 5 billion can you talk about how much of the backlog is supporting sales in 2024 and how much is for 2025 and as you think about the order and backlog strength does that imply that in the next few years murders revenue would be at the higher end or.

Speaker Change: The line was very very noisy better I believe.

Speaker Change: We believe that we have understood. Your question. So Q4 was a forum for EMEA was.

Speaker Change: Predominantly a question of the customer readiness and site readiness, so not so much a internal capacity, but it was more us.

Maybe even above the 8% to 11% long term revenue CAGR target provided at the Investor day. Thanks.

Speaker Change: More the customer side with teething when it comes to the sequence of when it comes to the sequence of quarters going into 2024 for EMEA sort of a little bit premature.

Our long term long term.

Let's say vision.

Stays.

Saves what we shared with you at Investor Day.

Speaker Change: Italy will have.

With a with a good Q4 under our belt our backlog.

We'll have a challenging comparison in <unk>. So the excitement Sally this acceleration that we that we.

Backlog, 16% up is something that makes us very happy.

It is heading in the right direction when it comes to the.

Speaker Change: <unk> shared with you to happen necessarily in Q1, but as said we are.

This year.

The future is over the next year and future years.

Speaker Change: We are.

I would say that we do not see a distributions.

Speaker Change: And we are very happy about the pipeline and we are happy about the example, and specifically referred to our order intake in Q1. So we are we're quite optimistic about anyway.

Anyway.

Much difference than what we saw a year ago in the same vein the same condition, so I would say pretty pretty natural.

Pretty.

Wrangler split, let's say this year and next year.

Speaker Change: Some some noise here.

Is the is tobacco good yes is the backlog.

Speaker Change: Because still there thank you.

Let's say encouraging.

Speaker Change: We will move on to the next question.

Absolutely absolutely.

Kennedy: Kennedy with Goldman Sachs.

Well you saw you saw.

Our long term.

Kennedy: Yes, thanks very much for taking my question backlog grew 16% to reach a record high of $5 5 billion can you talk about how much of the backlog is supporting sales in 2024 and how much is for 2025 and as you think about the order and backlog strength does that imply that in the next few years murders revenue would be at the higher.

In our view.

You have your our 'twenty to 'twenty 2024 plan.

Yeah.

Thank you.

Thank you we now have.

Thank you.

Acre stocking.

Kennedy: And or maybe even above the 8% to 11% long term revenue CAGR target provided at the Investor day. Thanks.

Hi, This is <unk> on for Andy capital and the capital that's good morning.

Good morning, good morning.

Kennedy: Our.

Kennedy: Our long term long term.

Thanks for the question guys.

It's now been roughly three months since the <unk> transaction, and you mentioned that asset integration and vigorous production acceleration will continue through 2024 to the extent possible could you. Please clarify the impact of the Terra acquisition has had on the 24 guide since the analyst day was pre acquisition more specifically what is the.

Kennedy: Let's say vision.

Kennedy: Stays.

Kennedy: Saves what we shared with you at Investor Day, and with a good Q4 under our belt our.

Kennedy: Backlog, 16% up is something that makes us very happy.

Kennedy: Is heading in the right direction when it comes to the.

Our revenue and cost impact of the quarter acquisition on the 24 billion.

Kennedy: This year.

Kennedy: The future years old next year and future years.

We closed <unk> acquisition on.

Kennedy: I would say that we do not see a distribution as it is.

On the eighth of December so, yes, it's in all three months.

Kennedy: Anyway.

Kennedy: Much difference than what we saw a year ago in the same the same condition, so I would say pretty.

Yet.

But.

But yes I would.

I'll tell you that our plan and our in our Investor day.

Kennedy: <unk> <unk> natural.

Kennedy: Pretty.

And our vision of the future included certainly certainly.

Kennedy: Split, let's say this year and next year.

Kennedy: Is the is tobacco good yes is the backlog.

An important acceleration an important acceleration in liquid cooling.

Kennedy: Let's say encouraging.

Kennedy: Absolutely absolutely.

Yes.

It was already part it was already part of our portfolio.

Kennedy: You saw you saw.

Kennedy: Our long term.

The references.

Kennedy: In our view.

With the acquisition and one may think that we probably kind of a well.

Kennedy: Have your our 'twenty to 'twenty 2024 plan.

Kennedy: Yeah.

Where that things would many would have evolved that direction on the 'twenty nine silver in November.

Speaker Change: Thank you.

Speaker Change: Okay.

But that gives us.

Speaker Change: Thank you we now have.

Again more.

Speaker Change: Thank you.

Speaker Change: <unk> of Citi.

Let's say confidence in the ability and the speed to execute on that plan, so nothing revolutionary nothing dramatically different.

Speaker Change: Hi, This is <unk> on for Andy capital the capital good morning.

Speaker Change: Good morning, good morning.

That's our position because we have secured something that was likely announced but not sure.

Speaker Change: Thanks for the question guys.

It's now been roughly three months since the <unk> transaction, and you mentioned that asset integration and vigorous production exploration will continue through 2024 to the extent possible could you. Please clarify the impact of the <unk> acquisition has had on the 24 guide since the analyst day was pre acquisition more specifically what is the.

Absolutely.

Thank you.

And just one more I see that your.

Your views for the communications segment and market was unchanged and you mentioned that Capex remains tight.

Could you please provide a bit more color on what youre seeing in the end market in terms of outlook for 'twenty. Four how are you seeing there's still elevated rate environment impact your telecom related customers.

Revenue in cost deductible quarter acquisition on the 24th.

Any further color there would be much appreciated.

Speaker Change: We closed <unk> acquisition on.

Yes.

Telecom is.

Speaker Change: On the eighth of December so, yes, it's in all three months.

Let's say it hubs in Florida, depending on on the technology waves.

Speaker Change: Yet.

Speaker Change: But.

Speaker Change: But yes, I would tell you that our plan and our in our Investor day.

<unk> of course create acceleration of shoes ago, and then slowed down and that's typically the type of cycle that business that business is we do not see any imminent cycles and <unk>.

And our vision of the future included certainly certainly.

Speaker Change: An important acceleration an important acceleration in liquid cooling.

Hence we continue to believe that that market will be pretty pretty slow we do not think that would be shrinking.

Speaker Change: NII It was already part it was already part of our portfolio.

Speaker Change: The references.

In the future there will be new technology, new acceleration is certainly an area where.

Speaker Change: With the acquisition and one may think that we probably kind of where.

Very distributed edge could at a certain stage have a positive impact on were there with the technology with the presence with the go to market their capacity.

Aware that things would maybe you'd have evolved that direction on the 'twenty nine silver in November.

Speaker Change: That gives us.

But again in <unk>.

Speaker Change: Again more.

In our <unk>.

Guide and our vision for the future we are very prudent with this space.

Speaker Change: Let's say confidence in the ability of the speed to execute on that plan, so nothing revolutionary nothing dramatically different.

Thank you.

Hi, Steve Tusa of Jpmorgan your line.

Speaker Change: That's a position because we have secured as something that was likely announced but not sure yes absolutely.

Hey, guys How's it going.

Okay.

Speaker Change: Thank you.

The.

Speaker Change: And just one more I see that you are.

Just a question on the orders outlook I mean, do you guys expect to grow orders in 2024, and I think you said you'd grow that deferred balance, but it would be growing just slower than the 80% that you saw this year and then I have a follow up thank you.

Speaker Change: Your views for the communications segment and market was unchanged and you mentioned that capex remains tight could.

Speaker Change: Could you please provide a bit more color on what youre seeing in the end market in terms of outlook for 'twenty. Four how are you seeing there's still elevated rate environment impact your telecom related customers.

Yes, we believe that orders will will grow.

Speaker Change: Any further color there would be much appreciated.

Speaker Change: Yes.

We started of course mentioning that Q1 will be sequentially up sorry, it will be year on year up sequentially year on year up in high teens as I've explained during the slideshow.

Speaker Change: Telecom is as well.

Speaker Change: Let's say it ebbs and flows depending on the on the technology waves.

Speaker Change: <unk> of course create acceleration of shoes ago, and then slowed down and that's typically the type of cycle that business that business is we do not see any imminent cycles and hence we continue to believe that that market will be pretty brief.

But we believe that overall, there will be it will be up.

And the deferred balance and then I have a follow up to that.

Yes, we would generally expect that deferred balance to be very much correlated with the growth of sales or orders one being a proxy for the other so we would expect growth in.

Speaker Change: We do not think that would be shrinking.

Speaker Change: In the future there will be new technology, new acceleration, certainly an area where.

In that account.

Commensurate with what we see the growth being in and both orders and sales.

Speaker Change: Very distributed edge could at a certain stage have a positive impact on were there with the technology with the presence with a go to market capacity.

Got it and I appreciate you guys.

Talking about.

Pricing and a little bit more of a sensitive way, but then you were pretty clear that like supply demand remains relatively favorable you guys.

Speaker Change: Again in <unk>.

Speaker Change: In our.

Speaker Change: In our guide and our vision for the future we are very prudent with this space.

Offering greater value for the customer.

Speaker Change: Thank you.

Are you guys planning on getting just roughly any.

Speaker Change: Okay.

Sequential price increases in orders this year.

Speaker Change: I'll have Steve Tusa of Jpmorgan your line.

Steve Tusa: Hey, guys How's it going.

We are talking about.

Steve Tusa: Okay.

In an environment going forward with our price cost price cost is up.

The.

Steve Tusa: Just a question on the orders outlook I mean, do you guys expect to grow orders in 2024, and I think you said you would grow that deferred balance, but it would be growing just slower than the 80% that you saw this year and then I have a follow up thank you.

And we believe in an environment in which price remains positive as I explained that necessarily translates in the same equation being true for four orders otherwise that would be a short lived statement, but okay, but I guess is there any time. This year that you would expect price declines in orders year over year.

Speaker Change: Yes, we believe that <unk> will grow.

<unk>.

Speaker Change: We started of course mentioning that Q1 will be sequentially up sorry.

We do not expect that.

Great. Thank you very much.

Okay.

Speaker Change: The year on year sequentially year on year up in high teens as I've explained during the slideshow.

We have next question from Nigel Coe.

Follow up Wolfe Research you May proceed.

Speaker Change: But we believe that overall, there will be it will be up.

Oh, Thanks for the second part of the Cherry Hill.

Speaker Change: And the deferred balance and then I have a follow up to that.

So yes. My question is actually partially addressed by Jeff, but the 45 X increase in capacity.

Speaker Change: Yes, we would generally expect that deferred balance to be very much correlated with the growth of sales or orders one being a proxy for the other so we would expect growth in.

On the call Tara Cpus, but.

Any kind of conservative read of your current capabilities would suggest you're planning for a billion dollars plus.

Kind of revenue line here in 2025.

In that account.

Speaker Change: Commensurate with what we see the growth being in and both orders and sales.

Wondering if thats completely off base, but.

Just more broadly on capacity it seems to me that adding second shifts.

Speaker Change: Got it and I appreciate you guys.

B.

Speaker Change: Talking about.

Meaningful increase in your capacity capabilities. So just curious what you're seeing and what you're doing second shifts across the whole of our footprint.

Speaker Change: Pricing a little bit more of a sensitive way, but then you were pretty clear that like supply demand remains relatively favorable you guys are offering greater value for the customer.

Sure Let me, let me sorry, Im not sure I fully heard you very well on the first part of the other question, but when it comes to capacity there is never it's never.

Speaker Change: Are you guys planning on getting just roughly any sequential price increases in orders this year.

Adding a second shift.

Adding more shifts in general I do more capacity utilization of the of the asset So think about our capacity increase as exactly combination of more.

Speaker Change: We are talking about.

In an environment going forward with our price cost price cost is up.

Speaker Change: And we believe in an environment in which price remains positive as I explained that necessarily translates in the same equation being true for four orders otherwise that would be a short lived statement, but I guess is there any time. This year that you would expect price declines in orders year over year.

Net net more square.

Feet.

Square meters.

More utilization.

Investment going up and you have seen our capex projections go up year on year and there is utilization pass vertical operating system productivity certainly plays a big role and there is an ability to utilize more.

Speaker Change: <unk>.

Speaker Change: We do not expect that.

Speaker Change: Great. Thank you very much.

Thank you.

The capacity that at any given instant we have available and there is no different from what we shared already in in October and indeed at the Investor day. So there is flexibility in that respect.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: We have next question from Nigel Coe I'll follow up with Wolfe Research you May proceed.

We are using.

Okay.

Nigel Coe: Oh, Thanks for the second part of the Cherry Hill.

But first of all I couldnt capture very well, so real quick as well at a time.

Nigel Coe: So yes. My question is actually partially addressed by Jeff, but the 45 X increase in capacity.

Can you just kind of asking yes look slide 12, 45 X increase it seems like a $1 billion plus of Av.

On the call Tara Cpus, but.

<unk> of capacity is what youre pointing to here, but just wondering if there's any multiyear lows.

Nigel Coe: Any kind of conservative read of your current capabilities would suggest you're planning for $1 billion plus.

So I think we are reading too much into that.

Nigel Coe: Kind of revenue line here in 2025.

Read it like.

The industry has a growth rate in Dar to chip, we want to make sure that we.

Speaker Change: I'm wondering if that's completely off base, but.

Just more broadly on capacity it seems to me that adding second shifts.

Speaker Change: Be a big meaningful increase in capacity capabilities. So just curious what you're seeing and what you're doing or second shifts across the overall footprint.

Provide capacity over and above that.

That growth rate, so that whatever the.

Industry needs.

We'll be able to cover that.

Speaker Change: Sure Let me, let me sorry, Im not sure I fully heard you very well on the first part of the other question, but when it comes to capacity there is whatever it is.

Okay. Thank you.

Yeah.

Thank you.

This does conclude our question and answer session.

I'd like to turn conference back over to T. Giordani, an appetite for any closing remarks.

Speaker Change: Never.

Speaker Change: Adding a second shift.

Speaker Change: Adding more shifts in general I do more capacity.

Well. Thank you. Thank you very much and thanks, everyone for thanks, everyone for your questions and looking forward to two more interaction in the next few days one thank the <unk> team.

Speaker Change: Utilization of the of the asset so think about our capacity.

Speaker Change: Increase as exactly combination of more.

Net net more square.

Speaker Change: Feet.

Overly hard work in 2023, and we have executed well.

Speaker Change: Square meters.

Speaker Change: More utilization.

We as we mentioned a few times in the recent past and continues to do we are shifting our culture towards high performance.

Speaker Change: Investment going up and you have seen our capex projections go up year on year and there is utilization pass vertical operating system productivity certainly plays a big role and there is an ability to utilize more.

Our high performance culture, it doesn't happen overnight, but it's certainly happening adverting gradually a lot a lot more to do but we're heading into the right direction with start to develop the right sense of urgency across the organization and and you can see that.

Speaker Change: The capacity that at any given instant we have available and there is no different from what we shared already in in October and indeed at Investor Day. So there is flexibility in that respect.

As.

As I like to say I'm pleased absolutely never satisfied good year 2023.

Speaker Change: We are using.

Yeah.

Speaker Change: But the first part I couldn't capture very well, so real quick as well at a time.

Looking forward for a stronger year, yet in 2020 for a lot of potential very excited thanks, everyone for joining us and we'll speak soon.

Speaker Change: Can you just kind of asking them, yes look slide 12, 45 X increase it seems like a $1 billion plus of Av.

Speaker Change: <unk> of capacity is what youre pointing to here, but just wondering if there's any multiyear lows.

Thank you. The conference has now concluded. Thank you all again for attending today's presentation you may now disconnect.

Speaker Change: So I think we are reading too much into that.

Speaker Change: Read it like.

Speaker Change: The industry has a growth rate in Dr to chip, we want to make sure that we.

Speaker Change: Provide capacity over and above that.

Speaker Change: That growth rate, so that whatever the.

Speaker Change: Industry needs.

Speaker Change: We'll be able to cover that.

Speaker Change: Okay. Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Does conclude our question and answer session I would like to turn conference back over to T. Sure Danielle Optionality for any closing remarks.

Danielle Optionality: Well. Thank you. Thank you very much and thanks, everyone for thanks, everyone for your questions and looking forward to two more interaction in the next few days one. Thank the <unk> team globally hard work in 2023, and we have executed well.

Danielle Optionality: As we mentioned a few times in the recent past and continues to do we are shifting our culture towards high performance.

Danielle Optionality: Our high performance culture, it doesn't happen overnight, but it's certainly happening adverting gradually a lot a lot more to do but we're heading the right direction with start to develop the right sense of urgency across the organization and and you can see that.

Danielle Optionality: As a.

As I like to say.

Danielle Optionality: Pleased absolutely never satisfied good year 2023.

Danielle Optionality: Looking forward for a stronger year yet.

Danielle Optionality: 24, a lot of potential very excited.

Speaker Change: Everyone for joining us and we'll speak soon.

Speaker Change: Okay.

Speaker Change: Thank you the conference has now concluded.

Speaker Change: Thank you all again for attending today's presentation you may now disconnect.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Okay.