Q1 2024 Intevac Inc Earnings Call

Good morning, and welcome to <unk> first quarter 'twenty 'twenty four financial results conference call.

Operator: Good morning, and welcome to Intevac's first quarter 2024 financial results conference call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star then zero on your telephone keypad. Please note that this conference call is being recorded today, April 21st, 2024. At this time, I would like to turn the call over to Claire McAdams, Investor Relations for Intevac. Please go ahead, ma'am.

At this time, all participants are in listen only mode.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press Star then zero on your telephone keypad.

Please note that this conference call is being recorded today April 21st 2024.

At this time I would like to turn the call over to Ken Mcadams Investor Relations for Interbank. Please go ahead Ben.

Claire McAdams: Thank you operator, and good morning to everyone on today's call. Thank you for joining us today to discuss <unk> financial results for the first quarter of 'twenty 'twenty, four which ended on March 30th.

Claire McAdams: Thank you, operator, and good morning to everyone on today's call. Thank you for joining us today to discuss Intevac's financial results for the first quarter of 2024, which ended on March 30th. In addition to discussing the company's recent results, we will discuss our outlook going forward. Joining me on today's call are Nigel Hunton, President and Chief Executive Officer, and Kevin Soulsby, Chief Financial Officer. Nigel will begin with an overview of our business and outlook.

In addition to discussing the company's recent results.

Claire McAdams: We will discuss her outlook looking forward joining me on today's call are Nigel Hunton, President and Chief Executive Officer, and Kevin Solesbee Chief Financial Officer.

Claire McAdams: Joe will begin with an overview of our business and outlook then Kevin will review our financial results before turning the call over to Q&A.

Claire McAdams: Then Kevin will review our financial results before turning the call over to Q&A. I'd like to remind everyone that today's conference call contains certain forward-looking statements, including, but not limited to, statements regarding financial results for the company's most recently completed fiscal quarter, which remains subject to adjustment in connection with the preparation of our Form 10-Q, as well as comments about future events and projections about the future financial performance of Intevac. These forward-looking statements are based upon our current expectations, and actual results could differ materially as a result of various risks and uncertainties relating to these comments and other risk factors discussed in documents filed by us with the Securities and Exchange Commission, including our annual report on Form 10-K and quarterly reports on Form 10-Q.

Speaker Change: I'd like to remind everyone that todays conference call contains certain forward looking statements, including but not limited to statements regarding financial results for the company's most recently completed fiscal quarter, which remains subject to adjustment in connection with the preparation of our Form 10-Q.

Speaker Change: Well his comments about future events and projections about the future financial performance are in Tibet.

Speaker Change: These forward looking statements are based upon our current expectations and actual results could differ materially as a result of various risks and uncertainties relating to these comments and other risk factors discussed in documents filed by US with the Securities and Exchange Commission, including our annual report on Form 10-K.

Speaker Change: And quarterly reports on Form 10-Q.

Claire McAdams: The contents of this April 25th call include time-sensitive, forward-looking statements that represent our projections as of today. We undertake no obligation to update the forward-looking statements made during this conference call. I'll now turn the call over to Nigel.

The contents of this April 25th call include time sensitive forward looking statements that represent our projections as of today.

We undertake no obligation to update the forward looking statements made during this conference call I'll now turn the call over to Nigel.

Thanks, Claire and good morning to all of you on today's call. We appreciate you accommodating the early time this quarter as I'm currently calling from the U K before returning to Asia for additional customer meetings. After several international trips during Q1.

Nigel D. Hunton: Thanks, Claire, and good morning to all of you today. We appreciate your accommodating in the early time this quarter as I'm currently calling from the UK before returning to Asia for additional customer meetings after several international trips during Q1. I am pleased to report solid results for the first quarter, with revenues of nearly $10 million and strong gross margin performance driven by the favorable mix of Hammer technology upgrades during the quarter.

Nigel D. Hunton: I am pleased to report solid results for the first quarter.

Nigel D. Hunton: Revenues of nearly $10 million and strong gross margin performance is driven by the favorable mix of how much technology upgrades in the quarter.

Nigel D. Hunton: Our results for the first quarter confirm that following our Q4 call in February we arrive at an agreement with our largest customer regarding payment types.

Nigel D. Hunton: Our results for the first quarter confirm that, following our Q4 call in February, we reached an agreement with our largest customer regarding payment terms. This led to continued strength in the delivery and installation of hardware upgrades throughout Q1. So, while our total balance of cash and investments at quarter end was just over $65 million, as of today, our cash balance exceeds $75 million.

Nigel D. Hunton: This led to continued strength in the delivery and installation of hardware upgrades throughout Q1.

Nigel D. Hunton: Okay.

Nigel D. Hunton: So while our total balance of cash and investments at quarter end was just over $65 million as of today, our cash balance exceeds $75 million.

Nigel D. Hunton: We're also pleased to announce today, a 25% increase in our total backlog since year end, reflecting continued strong bookings for hammer technology upgrades.

Nigel D. Hunton: We're also pleased to announce today a 25% increase in our total backlog since year-end, reflecting continued strong bookings for hammer technology. Total new orders for the first quarter exceeded $20 million and included HDD technology upgrade bookings from multiple customers, including the initial hammer upgrade orders placed by a leading data storage company. Next, on our call today, I'm pleased to discuss the resolution of our joint development program for the TRIO platform. Looking back, the success of the platform's development and achieving qualification in 2023 was testament to the quality of engineering resources resident within Intevac and decisively demonstrated the trio's ability to deliver on multiple key performance metrics, which will enable Intevac to address very large market opportunities.

Nigel D. Hunton: Total new orders for the first quarter exceeded the $20 million and included H D. D technology upgrade bookings from multiple customers, including the initial hammer upgrade orders placed by a leading data storage company.

Speaker Change: Next on our call today I'm pleased to discuss the resolution of our joint development program for the tree of platform.

Speaker Change: Looking back the success of the platforms development and achieving qualification in 2023 was testament to the quality of engineering resources resident within Tibet and decisively demonstrated the trios ability to deliver on multiple key performance metrics, which will enable it to back to address very large market opportunities.

Speaker Change: Achieving a successful colocation of the initial system by year end with a major milestone for Internet.

Nigel D. Hunton: Achieving the successful collocation of the initial system by year-end was a major milestone. At the same time, in our ongoing commercial negotiations with our JDA partner, Year Today, we have continued to navigate the complexities of the display cover glass ecosystem for consumer electronics. In evaluating our respective roles within a well-established supply chain, we and our partner have mutually determined that Intevac will now convince shipping trio systems directly to the existing cover glass manufacturers that are direct suppliers to the leading OEMs. And that is precisely what we've already done.

Speaker Change: Yeah.

Speaker Change: At the same time in our ongoing commercial negotiations without J D. A part of the year to date, we have continued to navigate the complexities of the display cover glass ecosystem, so consumer electronics.

Speaker Change: In evaluating our respective roles within a well established supply chain, we and our partner have mutually determine in tabak will now commenced shipping trio systems directly to the existing cover glass manufacturers, it's our direct suppliers to the leading Oems.

Speaker Change: Yeah.

Speaker Change: And that is precisely what we've already done the first stereo system was delivered this month to an established cover best finisher for a leading smartphone Oems.

Nigel D. Hunton: The first Trio system was delivered this month to an established cover glass finisher for a leading smartphone OE. We believe this supports our assertion over the past several earnings calls that we're seeing strong customer pull for the Trio. As soon as the system is fully installed, we will immediately begin the qualification process. Achieving customer qualification will trigger the formal purchase order.

Speaker Change: We believe this supports our assertion over the past several earnings calls that we're seeing strong customer pool for the trail.

Speaker Change: As soon as the system is fully installed we will immediately begin the qualification process.

Speaker Change: Achieving customer qualification will trigger a formal purchase order.

Nigel D. Hunton: Therefore, our expectation is that this will be the first trio system to revenue in 2024 and that successful qualification with the customer will also lead to a follow-on order for multiple. As a reminder, we have the inventory on hand in order to deliver on multiple systems with relatively short... At the same time, our relationship with our JDA partner continues to be positive. We have mutually agreed that the characteristics of the existing supply chain for consumer devices dictate that we must sell directly, and as a result, we have paused our commercial discussions.

Speaker Change: Therefore, our expectation is that this will be the first trio system to revenue in 2024 and that successful qualification with the customer will also lead to a follow on order for multiple systems.

Speaker Change: As a reminder, we have the inventory on hand in order to deliver on multiple systems with relatively short lead times.

Speaker Change: At the same time, our relationship with our JV partner continues to be positive.

Speaker Change: We have mutually agreed that the characteristics of the existing supply chain for consumer devices dictates that we must sell directly and it was adult we have paused all commercial discussions.

Speaker Change: We are grateful for the partnership and everything achieved over the past 15 months, including the many new customer relationships developed.

Nigel D. Hunton: We are grateful for the partnership and everything achieved over the past 15 months, including the many new customer relationships developed as the industry continues to adopt more durable coats. We believe we have future-order opportunities with our JD paper beyond the recent customer shipment. We're also running samples with multiple additional companies who are in various stages of evaluating them.

Speaker Change: As the industry continues to adopt more durable coaches, we believe we have future opportunities without J D with a partner.

Speaker Change: Beyond the recent customer shipments, but also running samples with multiple additional companies who are in various stages of evaluating the trail.

Speaker Change: In total we have engaged with several leading companies, especially in demand for the trail office.

Nigel D. Hunton: In total, we have engaged with several leading companies expressing demand for the TRIO. With our trio growth opportunities now extending to several potential customers, we are stepping up our investment in the organization, especially in marketing and business development. Recent new additions to the leadership team include Dylan Fernando joining us as VP of Business Development and Shannon Fogle as VP of HR.

Speaker Change: Without trio gross opportunities not extending to several potential customers. We are stepping up our investment in the organization, especially in marketing and business development.

Speaker Change: Recent New addition to the leadership team include dealer Fernanda, joining us as VP business development, and Shannon Fogel SVP of HR.

Speaker Change: With the first three are shipping early this month, our multiple evaluations underway the morale and excitement among the internet team of exceptional employees is the strongest I've seen since joining the company.

Nigel D. Hunton: With the first trio shipping early this month and multiple evaluations underway, the morale and excitement among the Intevac team of exceptional employees is the strongest I've seen since joining the company. It is truly gratifying to see the smiles and excitement as we officially launch the initial trio of shipments, yet another major milestone for our company. Which brings me to our outlook for 2020. We have now successfully resolved negotiations with our major partners in each of our primary end markets, which enables us to resume guidance and reiterate our prior expectations for full-year revenues in the low $50 million range. This incorporates our consistent expectation for 2-3 TRIO systems to generate revenue this year, equating to potential revenues totaling over $10 million.

Speaker Change: It is truly gratifying to see the smiles and excitement as we officially launch initial free of shipments yes, another major milestone for our company.

Speaker Change: Which brings me to our outlook for 2024.

Speaker Change: We have now successfully resolve negotiations with our major partners in each of our primary end markets.

Speaker Change: Which enables us to resume guidance and reiterate our prior expectations for full year revenues in the low $50 million range.

Speaker Change: Yeah.

Speaker Change: This incorporates all consistent expectation for two to three trade out systems to revenue this year.

Speaker Change: Equating to potential revenues totaling over $10 million.

Speaker Change: In the hard drive industry. We are currently forecasting full year sales approaching $40 million.

Nigel D. Hunton: In the hard drive industry, we are currently forecasting full-year sales approaching $40 million. Not surprisingly, the majority of our HDD revenues this year will be for Hammer Up. And as referenced earlier, in 2024, we're now reporting an initial order for hammer upgrades from an additional customer, which is a leading data storage company. Industry news of improving fundamentals for the hard drive industry continues to build and proliferate. Data center spending strength is a highlight of many Q1 earnings scores, and strong customer demand and strengthening cloud CapEx are leading to certain supply challenges, as well as pricing increases for several HDD product categories. We continue to expect Hammer Technology upgrades to dominate our HDD business for the next few years. This is because boosting aerial density results in tremendous efficiency gains for the day.

Speaker Change: Not surprisingly the majority of our HDD revenues this year off the hammer upgrades.

Speaker Change: And that was referenced earlier in 'twenty 'twenty four we're now reporting an initial order for hammer upgrades provide additional customer which is a leading data storage company.

Speaker Change: Industry news of improving fundamentals for the hard drive industry continues to build and proliferate.

Speaker Change: Data center spending strength is it highlights that many Q&A any schools and strong customer demand and strength in cloud capex.

Speaker Change: Leading to certain supply challenges as well as pricing increases for several H D D product categories.

Speaker Change: We continue to expect how much technology up race to dominate our HDD business for the next few years.

Speaker Change: This is because boosting areal density it results in tremendous efficiencies for the dataset.

Speaker Change: Transitioning to high capacity drives without adding this is very positive for our business and there is no doubt the interbank has emerged as the enabling technology partner for the adoption of Hana.

Nigel D. Hunton: Transitioning to high-capacity drives without adding disks is very positive for our upgrade business, and there is no doubt that Intevac has emerged as the enabling technology partner for the adoption of HANA. Meanwhile, improving HTD unit growth and capacity utilisation also provides us with optimism for an eventual return to 200 k lean capacity. For the foreseeable future, our HTD business will be strongly supported by a multi-year upgrade cycle. Recent results and strong order activity have demonstrated once again that we are a critical enabler of this transition and that all technology upgrade plans in the HDD industry are taking place on our flagship 200 lean plan.

Speaker Change: Yeah.

Speaker Change: While improving HDD unit growth and capacity utilization also provides us with optimism for an eventual return to 200 lean capacity additions.

Speaker Change: For the foreseeable future our HDD business will be strongly supported by a multiyear upgrade cycle.

Speaker Change: Recent results in strong order activity have demonstrated once again that we are critical enablers this transition and that all technology upgrade plans in the HDD industry are taking place on our flagship 200 lean platform.

Speaker Change: A critical role in the HDD industry provides significant visibility for continued solid base of business and so Paul it's our expectation for strong growth yet in 2025.

Nigel D. Hunton: Our critical role in the HDD industry provides significant visibility for a continued, solid base of business and supports our expectation for a strong growth year in 2025, a year in which we currently expect meaningful incremental growth for our trio plants. Finally, protecting the balance sheet remains a key priority for the company. We ended 2023 with over $72 million of total cash and investment. And that balance has now strengthened to over $75 million.

Paul: Yeah, and which we currently expect meaningful incremental growth for our trio platform.

Paul: Finally, protecting the balance sheet remains a key priority for the company.

Paul: We ended 2023 with over $72 million of total cash and investments and that balance has now strengthened to over $75 million.

Paul: Our expectation is to exit 2024 in a similar range as I eat around 2023.

Nigel D. Hunton: Our expectation is to exit 2024 in a similar range as at year-end 2020. Our customer is now paying on our agreed terms, and so we do not expect to have any delayed payment. And with that, I'll turn the call over to Kevin for his review of our results.

Paul: Our custom is not paint to our lead times and so we do not expect to have any delayed payments.

Paul: And with that I'll turn the call over to Kevin for his review of our results.

Kevin H. Soulsby: Here are the first quarter results. First quarter revenues totaled $9.6 million and consisted of HDD upgrades, spares, and service. Q1 gross margin was 43.7% and benefited from a favorable mix of upgrades during the quarter. Tier 1 operating expenses were $8.6 million, which exceededs our current run rate and included a small fixed asset write-off and higher than typical legal costs, in addition to the seasonal increases in audit and payroll. The gap net loss for Q1 was $1.6 million, or $0.06 per diluted share.

Kevin H. Soulsby: Thank you Nigel.

Kevin H. Soulsby: Turning to the first quarter results.

Kevin H. Soulsby: First quarter revenues totaled $9 $6 million consisted of HDD upgrades spares and service.

Kevin H. Soulsby: Q1, gross margin was 43, 7% and benefit benefited from favorable mix of upgrades during the quarter.

Kevin H. Soulsby: Q1, operating expenses were $8.6 million, which exceeds our current run rate and included a small fixed asset write offs and higher than typical legal costs. In addition to the seasonal increases in audit and payroll.

Kevin H. Soulsby: The GAAP net loss for Q1 was $1 6 million or six cents per diluted share.

Kevin H. Soulsby: This includes a $2.4 million benefit receivable by our claim from a cobot era employee retention credit program.

Kevin H. Soulsby: This includes a $2.4 million benefit receivable on our claim from the COVID-era employee retention credit program, of which $1.5 million was recorded in other income, and $0.9 million was allocated to photonics and recorded as income from discontinued operations. The non-GAAP net loss was $2.7 million, or 10 cents per diluted share. Total backlog increased to $53.1 million at quarter end, reflecting the $20.3 million of new orders booked in the quarter. Permeate the balance.

Kevin H. Soulsby: Which $1.5 million was recorded in other income.

Kevin H. Soulsby: $9 million was allocated to photonics and recorded income from discontinued operations.

Kevin H. Soulsby: The non-GAAP net loss was $2.7 million were 10 cents per diluted share.

Kevin H. Soulsby: Total backlog increased to $53 $1 million at quarter end, reflecting the $23 million in new orders booked in the quarter.

Kevin H. Soulsby: Turning to the balance sheet.

Kevin H. Soulsby: We ended the quarter with cash and investments, including restricted cash of $65 $5 million equivalent to $2 47 per share based on $26 5 million shares at quarter end.

Kevin H. Soulsby: We ended the quarter with cash and investments, including restricted cash at $65.5 million, equivalent to $2.47 per share based on 26.5 million shares at quarter end. As Nigel mentioned, our cash has rebounded to over $75 million following more significant collections of receivables from our largest customer quarter to date. Total cash flow used by operations was $6.5 million during the quarter. Capital expenditures in Q1 were $0.6 million. Non-cash expenses for Q1 included $0.8 million for stock-based compensation and $0.6 million for depreciation and amortization, as well as the $0.5 million fixed asset write-off. Now, moving to Q2 guidance.

Kevin H. Soulsby: As Nigel mentioned, our cash has rebounded to over $75 million following more significant collections of receivables from our largest customer quarter to date.

Kevin H. Soulsby: Total cash flow used by operations was $6 $5 million during the quarter.

Kevin H. Soulsby: Capital expenditures in Q1 point $6 million.

Kevin H. Soulsby: Noncash expenses for Q1 included point $8 million for stock based compensation is $6 million for depreciation and amortization as well as the point $5 million fixed asset write offs.

Speaker Change: Now moving into Q2 guidance.

Speaker Change: We are projecting revenues to be in the range of seven five to $8 $5 million.

Kevin H. Soulsby: We are predicting revenues to be in the range of $7.5 to $8.5 million. We expect second quarter gross margins to be in the 34 to 37 percent range due to increased underabsorption and a less favorable mix of higher margin upgrades. Q2 operating expenses are expected to be in the range of $8.3 to $8.5 million, reflecting lower seasonal costs but continued high levels. We expect interest income of about $500,000 and gap tax expense of about $400,000 in the court. Most of the tax expense will be non-cash.

Kevin H. Soulsby: We expect second quarter gross margins to begin the 34% to 37% range due to increased under absorption.

Kevin H. Soulsby: A favorable mix of higher margin upgrades.

Kevin H. Soulsby: Q2 operating expenses are expected to be the range of eight three to $8 $5 billion, reflecting a lower seasonal costs, but continued haile.

Kevin H. Soulsby: We expect interest income of about $500000 in GAAP tax expense of about $400000 in the quarter.

Kevin H. Soulsby: Most of the tax expense will be noncash.

Kevin H. Soulsby: We are projecting a net loss in the range of 20 to 22 per share based on 26 7 million shares outstanding.

Operator: We are projecting a net loss in the range of $0.20 to $0.22 per share based on 26.7 million shares outstanding. For the full year, as Nigel mentioned, we expect total revenues in the low $50 million range. This includes TRIO revenues potentially exceeding $10 million, as well as HDD sales consisting of upgrades, spares, and service approaching $40 million. As a reminder, our 2023 revenues included one 200-lien system and one refurbished system, which we do not expect to repeat in 2024.

Kevin H. Soulsby: For the full year as Nigel mentioned, we expect total revenues in the low $50 million range.

Kevin H. Soulsby: This includes trio revenues potentially exceeding $10 million.

Kevin H. Soulsby: As well as H D D sales, consisting of upgrades spares and service approaching $40 million.

Kevin H. Soulsby: As a reminder, our 2023 revenues included one 200 lean system and one refurbished system, which we do not expect to repeat in 2024.

Kevin H. Soulsby: Given this revenue profile and expected mix, we anticipate gross margins for the year, we have a low thirties.

Operator: Given this revenue profile and expected mix, we anticipate gross margins for the year will be below 30. This is lower than our earlier expectations in the high 30s, given the change in customer composition and the expected additional cost to qualify the trio with both the cover glass finisher and the end customer OEM. We expect ongoing operating expenses will decline below the $8 million level beyond Q2, but that will still be higher than our post-restructuring budget due to the incremental investments we are making in business development, marketing, and other areas in order to address a broader potential customer opportunity for the trio.

Kevin H. Soulsby: This is lower than our earlier expectations in the high Thirty's given the change in customer composition and the expected additional costs to qualify the trio with both the covered glass finisher, Indiana customer OEM.

Kevin H. Soulsby: We expect ongoing operating expenses will decline to below $8 million level beyond Q2.

Kevin H. Soulsby: But still be higher than our post restructuring budget due to the incremental investments we are making in business development marketing and other areas in order to address the broader potential customer opportunity for the trio.

Kevin H. Soulsby: We expect both interest income and taxes to continue to be in the range of 400 to $500000 per quarter.

Operator: We expect both interest income and taxes to continue to be in the range of $400,000 to $500,000 per quarter. Finally, our expectation is that we will end 2024 with a similar balance of cash in investments as of year-end 2023. Operators, we are ready for questions.

Kevin H. Soulsby: Finally, our expectation is that we will end 2024 would be similar balance of cash and investments as of year end 2023.

Kevin H. Soulsby: Yeah.

Speaker Change: This completes the formal part of our presentation operator, we are ready for questions.

Speaker Change: Thank you. So at this time, where you we will be conducting a question and answer session. If you would like to ask a question. Please press star and then one on your telephone keypad.

Operator: Thank you. So at this time, we will be conducting a question and answer session. If you would like to ask a question, please press star and then one on your telephone.

Operator: A confirmation tone will indicate your line is in the question queue. You may press a star and then two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Again, if you would like to ask a question, please press star and then one now. The first question we have comes from Peter Wright from Intro Act. Please go ahead.

Speaker Change: A confirmation tone will indicate your line is in the question queue. You May Press Star and then two if you would like to move your question from Cube co.

Speaker Change: Call participants using speaker equipment, it may be necessary to pick up your handset before pressing the stocking.

Speaker Change: Again, if you would like to ask a question. Please press star and then one no.

Speaker Change: The first question we have comes from Pizza right from Intro Act. Please go ahead.

Pizza: Great. Thank you for taking my question and congratulations on the trio shipment.

Peter Wright: Great, thank you for taking my question and congratulations on the TRIO shipment.

Pizza: Thank you Peter.

Nigel D. Hunton: Thank you, Peter.

Pizza: Wonderful Mike My first question is you'd say, if we look into your your R&D spend and specifically your focus on Ontario.

Peter Wright: My first question is, when we look into your R&D spend and specifically your focus on TRIO, what are the main operations there? Is it more development of the existing product with your large customer? Or is it more expanding into new end markets and new applications? Or could you give us some color on your thoughts there on the meaning of the TRIO platform for investors going forward.

Pizza: What are the main operations there is it more development of the existing product with your large customer.

Pizza: What is it is it more expanding into new end markets.

Pizza: And new applications or if you could give us some color on kind of your thoughts thoughts there on on the meaning of the tree of platform.

Pizza: For investors going forward.

Nigel D. Hunton: Okay, thank you for the question. I mean, very clearly, the TRIO platform has had significant investment, and we've progressed pretty effectively to qualification, and it's great to see us putting the first system now into the field. There'll be quite a lot of cost around supporting the field installation, developing that, getting it through qualification. But really, beyond that as well, some of the customer feedback we've been getting is around, "How do we look at automation of an anti-fingerprint spray coating on the end of the machine?"

Speaker Change: Okay. Yeah. Thank you for the question.

Speaker Change: I mean, very clearly the trio platform has had significant investments and we progressed pretty effectively to qualification.

Pizza: And great to see us putting the first system now into the field to be quite a lot of cost around supporting the field installation developing and that's getting us through qualification.

Pizza: But really beyond that as well some of the customer feedback we've been getting is around.

Pizza: How do we look at automation of an anti fingerprint.

Pizza: Paint spray coating on the end of the machine. So one of the things. We've done is we've designed the capability. They can put a high throughput machine into an existing facility the consumer devices.

Nigel D. Hunton: So one of the things we've done is we designed a capability that can put a high-throughput machine into an existing facility for consumer devices. Within that, there are some process steps that we want to be integrated into the machines. There'll be some R&D work around the integration of additional process steps. We've also, as we've talked about on prior calls, thought about, you know, this is a modular platform. And one of the real excitements for me about how we've designed it and the way that the design concept has this modularity capability enables us to add additional features.

Pizza: Within that there are some process steps that we want to be integrated into the machines there'd be some R&D work around integration of additional steps.

Pizza: We've also as we've talked on prior calls thought about it. This is a modular platform and one of the real excitement for me about how we've designed this.

Pizza: And the way that the design concept has this modularity capability.

Pizza: <unk> enables us to add additional features so for example, we can add additional features in few G. S. Around an implant we can look at it additional features demanded cleaning step that enables a product in the future to actually be expanded into not just the automotive but into advanced packaging now those are multi years ahead, that's why.

Nigel D. Hunton: So, for example, we can add additional features in future years around an implant. We can look at additional features around a cleaning step that enables a product in the future to actually be expanded into not just the automotive industry but advanced packaging. Now, those are multi-years ahead. That's why it's important for us to maintain this level of investment in R&D, because we believe that the TRIO platform has multiple opportunities going forward.

Pizza: Important for us to maintain this level of investment in R&D, because we believe that the tray a platform has multiple opportunities going forward.

Nigel D. Hunton: So, hopefully, you'll see some of that investment in the current product, which will be the majority for this year. And then, as we move into 2025 and beyond, we'll maintain that level of investment as we expand into other market applications. Hopefully, that answers your question.

Pizza: So hopefully you'll see some of that investment in the current product, which was the majority for this year and then as we move into 2025 and beyond we will maintain that level of investment as we expand into other market applications.

Speaker Change: That answers your question.

Peter Wright: That's wonderful! And if you could help me understand in the conversations, I think that there's a slight pull-down maybe of expectations on TRIO if it's north of 10, if I'm reading that right, maybe one incremental system from prior expectation number one. If you could clarify, is that right, and what is that, is that just you operationally you guys are ready for it, or is it a demand-driven pull-in of demand?

Speaker Change: Wonderful and if you could help me understand the conversations like I think that there are there's a slight pull in maybe of expectations on trio. If it's north of 10, if I'm reading that right, maybe one incremental system from.

Speaker Change: Prior expectation number one if you could clarify is that right and what is that is that just operationally you guys are ready for it or is there is it a demand driven you know pull in of demand there.

Nigel D. Hunton: We've always said this year it'll be two or three trio remixes. And that's consistent with that number of around 10 million.

Speaker Change: I think we've always said this year it would be two or three trios revenues.

Speaker Change: And that's consistent with that number.

Speaker Change: Around the $10 million.

Nigel D. Hunton: So there's this, we believe, again, as we've said very strongly now as well, this pull to get a machine into the field and running and actually going direct to the key finishes. I think it's a key step forward. It does require a qualification, but we're pretty open about that. That machine will now start qualification in May. Our team will support that, so we'll have a pretty extensive team in Asia supporting that qualification. But from a pricing point of view and unit numbers, it's pretty consistent with the prior calls. There will be two to three systems and around $10 million.

Speaker Change:

Speaker Change: So there's this we believe is again as we've said very strongly in that as well. This is pulled to get machine into the field and running and actually going direct to the key finishes I think is a key step forward. It does require the qualification and we've been pretty open about that that machine it will Nash.

Speaker Change: <unk> qualification in May so it's going to be in and the team will support that Samsung will have a pretty extensive team in Asia supporting that qualification, but from that from a pricing point of view and unit numbers, it's pretty consistent to the protocols there'll be two to three systems and around $10 million.

Speaker Change: Yeah.

Speaker Change: Fantastic and very last question and then I'll go back into queue.

Peter Wright: Fantastic. And the very last question, and then I'll go back into queue on the hard drive side. I have to think, you know, your customers need you potentially more than you need them, you know, in this business, supporting their upgrades. How are conversations taking place with your customer base during a year where we don't have any 200 lien sales? to continue to kind of support that infrastructure? How do your customers continue to feel comfortable securing you enough to continue to be there for them?

Speaker Change: On the hard drive side.

Speaker Change: I I have to think Youre your customers need you potentially more than than you need them you know in this business supporting their upgrades.

Speaker Change: Hi, how are conversations taking place with your customer base on on a year, where we don't have any 200 lean sales to.

Speaker Change: To continue to kind of support that infrastructure.

Speaker Change: How do your customers kind of continue to feel comfortable securing you enough to continue to be there for them.

Speaker Change: And I think.

Nigel D. Hunton: I think we said on prior calls as well that we believe this sort of level of hammer upgrades is going to be at this similar level for the next four to five years, which gives us a nice base level for the business. And we have very, very strong partnerships.

Speaker Change: We said on prior calls as well we believe this sort of level of hammer upgrades is going to be at least similar level for the next four to five years, we've seen a nice base level for the business.

Speaker Change: And we have a very very strong partnerships I mean, I mean, that's key it and you think of this the hammer importance of the Ham a success I mean, what what do you read in the press. So you pick up some key underlying trends I.

Nigel D. Hunton: I mean, that's key, and you think of this as the hammer importance of the hammer success, I mean, whether you read in the press or you pick up some key underlying trends. I mean, HAMR technology enables a data center to take its existing capability out, replace it with HAMR, that boosts its capacity dramatically in the same footprint without building a new data center. It also gives them a step change in electricity and power consumption because the HAMR upgrades in these new systems give lower power.

Speaker Change: I mean, the hammer technology enables a data center to take its existing capability out replace it with hammer that boosts our capacity dramatically in the same footprint without building a new data center.

Speaker Change: It also gives them a step change in our electricity and power consumption because the hammer upgrades in this new systems get below a pass so it really is going to drive for the next couple of years.

Nigel D. Hunton: So it really is going to drive for the next couple of years an investment in upgrades which will ensure that all of the 200 leans become Hammer capable. And that's the key focus. And it's about making sure we're there to support those customers as they grow and ramp up their Hammer demand. If I look out beyond three to five years, I mean, you've got to believe very much, as we've seen, that the HDD industry requires and demands disk drives.

Nigel D. Hunton: A investment in upgrades, which will ensure that all of the 200 leans become hammer capable and that's the key focus and it's about making sure. We're there to support those customers as they grow and ramp the hammer demand.

Speaker Change: If I look out beyond three to five years I mean do you you've got to believe very much as we've seen.

Speaker Change: The H D D industry requires and demands disk drives them.

Nigel D. Hunton: And therefore, as we do Hammer and as things grow, it's going to have, I think, an increasing scope and opportunity for the business, and I think that will eventually lead to some 200 million orders, but I don't see that in this sort of near-term horizon. But that, for me, is about, let's focus on the Hammer upgrades.

Speaker Change: And therefore, as we do hammer and as things grow.

Nigel D. Hunton: It's gonna have any I think an increasingly scope and opportunity for the business and I think that will eventually lead to some 200 lean orders, but I don't see that in the near term horizon.

But that for me, it's about let's focus on the hammer upgrades the strong margins consistent revenue throughout the next couple of years and have that as a basis, we build trio on top of it.

Operator: Thanks for watching!

Nigel D. Hunton: Thank you for taking my question. Thank you, Peter. Thank you.

Speaker Change: Thank you for taking my questions.

Nigel D. Hunton: Thank you Peter.

Mark S. Miller: The next question we have comes from Mark Miller of the Benchmark Company. Please go ahead. Mark, your line is live.

Speaker Change: Thank you.

Mark S. Miller: The next question we have comes from Mark Miller off the benchmark company. Please go ahead.

Speaker Change: Okay.

Mark S. Miller: Yeah.

Mark S. Miller: Mark Your line is lifestyle.

Operator: Yeah, I can't hear anything here at the moment. Have you unmuted Mark? Mark had problems last time.

Mark S. Miller: I can't hear anything here in a moment.

Speaker Change: Young muted mark.

Mark S. Miller: Market problems last time.

Mark S. Miller: I'm here. Great. Good to hear from you, Mark. Always good to hear your voice. That's good. I'm just wondering...

Mark S. Miller: I'm here I'm here sorry.

Mark S. Miller: Good to hear from you Mark always good to hear your voice sounds good.

Mark S. Miller: I'm just wondering in terms of the tool that shipped in April do you expect a.

Mark S. Miller: I'm just wondering, in terms of the tool that shipped in April, what do you expect revenue recognition for?

Mark S. Miller: Revenue recognition in the third quarter.

Mark S. Miller: Yeah.

Mark S. Miller: Yeah.

Mark: Yeah Baby, maybe Kevin can add to this but clearly that is our first tool shipped that has to go through qualification and we.

Nigel D. Hunton: Yeah, maybe Kevin can add to this, but clearly, that is our first tool shipped that has to go through qualification with revenue recognition, and I think the first step for me as Kevin will cover me on the gap requirements. The two of y'all need to be quiet for one minute.

Kevin: The revenue recognition.

Nigel D. Hunton: The first step for me is Kevin will cover me on the GAAP requirements.

Speaker Change: The two young these rules will be.

Nigel D. Hunton: The tool has to be accepted by the customer and fully signed off before we can take revenue, being the first time we've shipped one of these. That will be the case for the first couple of tools until we prove that the installation is, as they say, perfunctory.

Kevin: It can carry out allowed to be accepted by the customer and fully signed off before we can take revenue being the first time, we have shipped one of these that will that will be the case for the first couple of tools to recruit at the installation as they.

Speaker Change: They say perfunctory there we go.

Nigel D. Hunton: and we can take revenue on shipment in the future.

Speaker Change: Take revenue on shipment in the future.

Nigel D. Hunton: I mean, clearly from our perspective is that installed unit the customer where its going is excited about it wants to accelerate and do that as fast as we can so you know I would like to hope that we can get that completed in the qualification done within the quarter, but certainly within 2024 that will absolutely be revenue.

Nigel D. Hunton: I mean, clearly, from our perspective of that installed unit, the customer where it's going is excited about it, wants to accelerate and do that as fast as we can. So I would like to hope that we can get that completed and the qualification done within the quarter, but certainly within 2024, that will absolutely be revenue.

Nigel D. Hunton: But based on your revenue guidance for this quarter.

Mark S. Miller: Now, based on your revenue guidance for this quarter and for the year, it looks like you're leaning towards maybe 302 being recognized this year. Is that off base?

Mark S. Miller: And for the year it looks like you're leaning towards maybe three tortellini a trio tools are being recognized this year is that off base.

Speaker Change: No that is absolutely correct looking to two to three tools and that'll be in the second half of the year yeah.

Nigel D. Hunton: No, that is absolutely correct. We're looking to introduce 2-3 tools, and that will be in the second half of the year.

Mark S. Miller: You mentioned there were several multiple evals away for TRIO. Any more color you can provide there in terms of timing or anything else?

Nigel D. Hunton: You mentioned you were you there were several multiple evolves away for trio any more color you can provide there in terms of timing or anything else.

Mark S. Miller: I mean, the key amazing I'd say over the last quarter, we have shipped multiple samples out in the field.

Nigel D. Hunton: I mean, I mean, it's the Keith Meazie sandwich.

Nigel D. Hunton: I mean, the key for me is this. I'd say over the last quarter we've shipped multiple samples out into the field, they've gone through initial evaluations, that then leads to further meetings, so I think we'll have... [inaudible]

Nigel D. Hunton: I've gone through initial evaluations and that then leads to further meetings. So I think it will have.

Nigel D. Hunton: Strong positive interactions on those coatings over the next couple of quarters.

Nigel D. Hunton: And I think they will start to deliver I think.

Operator: Thank you. Ladies and gentlemen, just a reminder, if you would like to ask a question, please press star and then 1. The next question we have comes from Hendi Susanto of the Babeli Fund. Please go ahead.

Nigel D. Hunton: You know that we will get maybe at least one of those two to three additional liens, we'll be driving hard to come from a separate customer.

Hendi Susanto: Okay. Thank you very much.

Hendi Susanto: It's mark.

Operator: Yes.

Hendi Susanto: Thank you ladies and gentlemen, just a reminder, if you would like to ask a question. Please press Star then one.

Hendi Susanto: The next question we have comes from Hendi societal off the Gabelli Fund. Please go ahead.

Hendi Susanto: Good morning Nigel.

Hendi Susanto: Good morning, Nigel, Kevin, and Claire. And congratulations on winning the initial HAMR upgrade from a new major data storage company. So, Nigel, my first question with the new Hammer Upgrade customers, I think they're behind..., your like leading the first major customers. So how do we envision the timeline, like how quickly they can accelerate their, let's say their, work on Hammer that can open up more opportunity in the near term?

Hendi Susanto: Nigel caffeine that's clear.

Hendi Susanto: And congratulation on winning initial.

Hendi Susanto: Great from a new major data so as a company.

Hendi Susanto: Yeah.

Speaker Change: Thank you very much.

Nigel: Yeah. So my first question with the new Hammer.

Speaker Change: Great customers.

Hendi Susanto: I think they like behind you.

Hendi Susanto: You're like leading first major customers.

Hendi Susanto: So how how we in fish and the timeline like how quickly they can accelerate their.

Speaker Change: Hey, there.

Hendi Susanto: Work on hammer that kind of opened up like more opportunity in the near term.

Nigel D. Hunton: Just to be clear, the customers we have, as you know, we can't mention their names or talk about what their specific development plans are. But again, for me, it's a fantastic achievement and it's a great step forward. And that really does give credibility to Hammer in the market. We believe the first one will always take a bit of time.

Nigel: Yeah just.

Nigel D. Hunton: But clearly the customers we have as you know we call mentioned the names or talk about.

Nigel D. Hunton: The specific development plans out.

Nigel D. Hunton: But again for me, it's a fantastic achievements and it's a great step forward and that really does give credibility to hammer in the market.

Nigel D. Hunton: We believe the first one.

Nigel D. Hunton: Always take a bit of time, it's got to go through it.

Nigel D. Hunton: It's got to go through. The company has got to evaluate it, see the benefits, and then put that into their own strategy. So we can't comment on what their strategy or rollout plans are, but the great news for us is that we have another customer evaluating it. We don't comment on whether they're ahead or behind anyone else; that's up to them to comment on. But for me, it's a fantastic opportunity for Intevac, and it really does give testament to being the key driver and enabler of Hammer in this market. And I think Hammer is going to drive and maintain the competitive nature of disk drives for data centers, and it's a great position to be in. So we're very excited.

Nigel D. Hunton: The company has got to evaluate it and see the benefits.

Nigel D. Hunton: And then put that into their own strategy. So we cannot comment on what best stretch your rollout plans off but the great news for us is that.

Nigel D. Hunton: We have another customer evaluating it and we don't want whether that ahead or behind anyone else that's up to them to comment on.

Nigel D. Hunton: But for me, it's a fantastic opportunity green tobacco and it really does give testament to our I mean.

Nigel D. Hunton: The key driver and enabler of Hammer in these markets and I think hammer, he's going to drive and maintain the competitive nature of disk drives for the data centers and it's a great position to be in so we're very excited.

Speaker Change: I see.

Nigel D. Hunton: And then.

Hendi Susanto: Nigel, the TRIO system sells expectations for two or three tools. So we know that the first one will go toward qualification. What do the other one to two additional systems represent?

Nigel D. Hunton: The three of US just some south expectation for two or three tools. So we know that the first one will go toward qualification what oh.

Nigel: What do the other like want to Chew Edie shoulder system represents.

Nigel: Yeah. So I think as we said some articles we've made.

Nigel D. Hunton: Yeah, so I think, as we've said on prior calls, we've made, as a company, we have backed the TRIO platform, and we've made a significant investment in sort of investment in inventory, in parts, and capability. So we have, you know, we've shipped one unit. We have another shipment in final assembly as we speak, so we can very quickly put another unit into the market. So therefore, you know, having that inventory allows us to respond very quickly.

Nigel D. Hunton: A company, we have banked the twilio platform and we've made a significant invention.

Nigel D. Hunton: So.

Nigel D. Hunton: Investments in.

Nigel D. Hunton: Inventory in parts and capability. So we have you know we've shipped one units we have another shipment in final assembly as we speak. So we can do very quickly put another unit into the market. So therefore, you know having that inventory allows us to respond very quickly.

Nigel D. Hunton: Our initial focus is still around consumer devices, and I sense that will be the focus for 2024. As we look beyond that, then we should start looking at getting some evaluations in the automotive sector as well. But the primary focus for this year, the primary focus for the tool that's gone, the primary focus for the additional tools, which have the inventory so we can respond very quickly, will be the consumer device market.

Nigel D. Hunton: Our initial focus is still around the consumer devices.

Nigel D. Hunton: Since that will be the focus for 2020 full as we look beyond that then we saw looking at getting some evaluations in the automotive sector as well, but the primary focus for this year. The primary focus for the tool that's gone.

Nigel D. Hunton: Primary focus for the additional tools, which have the imagery. So we can respond very quickly.

Nigel D. Hunton: <unk> will be the consumer device market.

Nigel D. Hunton: And then any update whether it's political toward smartphones and wearables.

Hendi Susanto: and any update, whether it will go towards smartphones or wearables.

Nigel D. Hunton: At this point, we're saying they'll be consumer devices.

Hendi Susanto: At this point, we're saying it'll be consumer devices and.

Speaker Change: Okay Fair enough and then one.

Hendi Susanto: Okay, fair enough, Nigel. And then one question for Kevin, with regard to the payment terms with your major HCD customers, when did exactly that get resolved? And then you indicated a quarter today to receive like $10 million. How much more beyond that $10 million does Intevac have not yet received?

Kevin: One question for Kevin.

Hendi Susanto: With regard to the payment terms with your major HDD customers when did.

Hendi Susanto: Exactly it get resolve and then you indicated that quarter to date to receive like $10 million, how much more beyond that 10 million deaths. The fact has not yet received.

Kevin H. Soulsby: Kevin, if I can add to that. I will add to that initially, then you can add to it, Kevin, if you want.

Speaker Change: If it did Kevin if I can if I can add.

Speaker Change: This initiative and you're going to have to Kevin.

Speaker Change: We received the agreement in the culture and that is the amount of clarity, we get and they gave us.

Nigel D. Hunton: We received the agreement in the quarter, and that is the amount of clarity we're going to give. We have a great partner there, and we've resolved the differences around that. We now have a great position with them in terms of cash, but it was resolved within the quarter, and that's really the sort of guidance we're giving about the timing of that. Anyone want to add to that, Kevin?

Kevin: We have a great part of that.

Nigel D. Hunton: We have resolved the differences around that we now have a great position with them from cash, but it was resolved within the quarter and that's really the sort of guidance. We're giving you about the timing of that type of event when you want to add to that Kevin.

Kevin H. Soulsby: I mean, they've caught up. We are now, you know; our receivables are at terms with them currently.

Kevin: They've caught up where we are now our receivables are at terms with them currently.

Speaker Change: And then any rebating paper I saw.

Kevin H. Soulsby: and any remaining payment term associated with the cancelled orders. We still have all that inventory. It's being worked on with Seagate, but there's been no progress on that.

Kevin H. Soulsby: It with the cancel orders.

Speaker Change: Can you still have all of that inventory, it's being it's being worked with seagate.

Kevin H. Soulsby: But theres been no progress on that.

Kevin H. Soulsby: Okay.

Kevin: Yeah, just just to add to that when we don't talk about customer names. So apologies I mentioned and I want alright.

Nigel D. Hunton: Just to add to that, one, we don't talk about customer names, so apologies for mentioning that one. We have no exposure to that company.

Nigel D. Hunton: We have no exposure to the company we've had many many times so.

Nigel D. Hunton: We've said many, many times that the customer gave a cash deposit that covers all the inventory. We're working very diligently with them. We've made some great progress this quarter on identifying what levels of those parts can be moved either to them or elsewhere. But there is no exposure for Intevac.

Nigel D. Hunton: Customers gave a cash deposit that covers all the imagery. We are working very diligently with them. We've made some great progress this quarter on identifying what level of those pumps can be moved to either to them or elsewhere.

Nigel D. Hunton: But there is no exposure for interbank and the cash is there to cover all that inventory and we will get that resolved over time. It's you know clearly everyone has different priorities that are.

Nigel D. Hunton: The cash is there to cover all that inventory, and we will get that resolved over time. Clearly, everyone has different priorities at the moment. A key priority is ramping and making sure the hammer gets delivered on time. And we've hit the on-time delivery, which we are doing. So over time, that will get resolved, but it clearly is not critical because we have the cash covering that inventory.

Nigel D. Hunton: A key priority is ramping and making sure the hammer.

Nigel D. Hunton: Right on time, and we hate to their on time delivery, which we're doing.

Nigel D. Hunton: And so over.

Nigel D. Hunton: Over time that will get resolved, but it clearly is not critical because they can we have the cash covering that imager.

Speaker Change: Okay. Thank you and then any.

Hendi Susanto: Any insights on the income from discontinued operations in the income statement?

Nigel D. Hunton: Any insights on the income from discontinued operations in the income statement.

Speaker Change: That was not what we had.

Kevin H. Soulsby: That was the result of the employee retention credit claim that we filed in the quarter. Part of that was related to Photonics wages in 2021, so that piece of it was allocated to discontinued operations.

Hendi Susanto: All.

Kevin H. Soulsby: Of the employee retention credit claim that we filed in the quarter part of that was related to photonics wages in 2021, so that piece of it was allocated to discontinued operations.

Speaker Change: Got it.

Hendi Susanto: Uh, yep, I think, uh... Thank you so much for your time and for taking my questions, Nigel and Kevin. You're welcome. Thank you. We always answer your questions.

Speaker Change: Okay, Oh, Yeah I think.

Speaker Change: Thank you so much for your time and for taking my questions Hi, Joe It Kevin.

Nigel D. Hunton: You're welcome. Thank you. We always hear your questions, and we appreciate your support for the company. So, thank you, Hendi.

Nigel D. Hunton: Youre welcome. Thank you would always at your questions and we appreciate your support for the company. So thank you hendi.

Nigel D. Hunton: Yeah.

Nigel D. Hunton: Thank you. The last question we have is a follow-up from Peter Wright. Please go ahead, sir.

Nigel D. Hunton: Yeah.

Nigel D. Hunton: Thank you. The last question. We have is a follow up from Pizza right. Please go ahead Sir.

Peter Wright: Great, thank you for taking my follow-ups. If I look at 25, and I just focus on the TRIO part of your business, if I could ask you a three-part question and help me with these assumptions? So, I understand that there's some delay in kind of the revenue recognition from the stack in 24 into the back half just as you're recognizing your first tool. But on a run rate basis, it would suggest that you could be at about six tools in 25, you know, if we're looking at potentially three systems in the second half of 24.

Peter Wright: Great. Thank you for taking my my follow ups, if I if I if I looked at 25 and I just focus on the the trio part of your business.

Peter Wright: If I can ask a three part question and help me with these assumptions so.

Peter Wright: I understand that there's some delay in kind of the revenue recognition from your from the stack and 24 are into the back half just as you're recognizing your first tool, but on a run rate basis. It would suggest that you could be at about six tools. In 25, you know if we're looking at potentially three systems in the second half of 'twenty four.

Peter Wright: Is that a good assumption you know on it and then the second part to that is there any capacity constraints to be able to deliver on that or kind of what is your capacity capability.

Peter Wright: Is that a good assumption, you know? And then the second part to that, are there any capacity constraints to be able to deliver on that or kind of what is your capacity capability for developing TRIO systems? And then the third part of that question is, are there other sources of revenue other than equipment revenue that could hit the TRIO part of the model?

Peter Wright: Developing trio systems and then the third part of that question is is there other sources of revenue other than equipment revenue that could hit the trio part of the model.

Speaker Change: Okay, great questions Pizza, we appreciate that where we're not giving guidance for 2025 on the number of trails, but I would assume we're going to be you know this product is a game changing technology, we have to get that momentum.

Nigel D. Hunton: Okay, great questions, Peter. We appreciate that. We're not giving guidance for 2025 on the number of trios, but I would assume we're going to be, you know, if we, this product is a game-changing technology, we have to get that momentum. We have to get the product qualified in 2024, and it is great to have a product now in the markets that is starting that qualification. If those go through and we get the two to three this year, I would like to believe we will be at six in 2025, if not higher. But we're not going to give an actual number against that.

Nigel D. Hunton: You have to get the product qualified in 2024 and it was great to have a product now in the markets starting that qualification if those go through and we get the two to three this year I would like to believe we will be at six in 2025, if not high but we.

Nigel D. Hunton: We're not going to give an actual number against that I mean for me, we've got to start 2025 being a substantial growth yes.

Nigel D. Hunton: I mean, for me, we've got to start 2025 being a substantial growth year. And as we've talked about with a hammer being a base load, it really is all around the trio. From a capacity point of view, we are absolutely investing in the capability to manufacture the TRIO platform, not just in Santa Clara in the US but in our Singapore facility in Asia. Ace is going to be key to the strategy.

Nigel D. Hunton: As we've talked about with a hammer being a baseload. It really is all around the trio.

Nigel D. Hunton: From a capacity point of view, we are absolutely investing in the capability to manufacture the trio platform not just in Santa Clara and the U S, but they're not seeing it for the full facility in Asia.

Nigel D. Hunton: She is going to be key to the strategy.

Nigel D. Hunton: And as Tom Dickinsons building and his operational plan, we are building a base capacity around our facilities.

Nigel D. Hunton: And as John Dickinson's building in his operational plan, we're building a base capacity around our facilities. He's building and looking at a contract manufacturing model, which will also help within the cash flow to expand beyond that. And as we look at how we actually build a system from a modularity point of view, it gives us a unique way of actually building capacity across multiple contract manufacturers. So I think from a capacity point of view, and that was a key question from some of our potential customers, is that we have an ability to wrap very quickly.

Nigel D. Hunton: He's building and looking at our contract manufacturing model, which helped will also help within the cash flow to expand beyond that and.

Nigel D. Hunton: And as we look at how we actually build a system from our modularity. It gives us a unique way of actually building capacity across multiple contract manufacturers. So I think from a capacity point of view it and that was a key question from some of our potential customers is we have an ability to ramp very quickly we have an ability to expand our capability to both Singapore contract manufacturers.

Nigel D. Hunton: We have the ability to expand our capability into both Singapore contract manufacturers. So for us, we've got really no constraints moving forward, and we'll invest and build this business to meet the demands and requirements. So hopefully that answers the first two questions.

Nigel D. Hunton: So for US we've gotten really no constraints moving forward and we will invest and build this business to meet the demands and requires.

Nigel D. Hunton: So hopefully that answers the first two questions if I look at the business model.

Nigel D. Hunton: If I look at the business model, one of the opportunities we have within this system is the ability to start looking at the service model. The machine runs very effectively. However, the machine has consumable parts, such as the silicon sources. It has parts that need some sort of maintenance. As you think about running the business and running this tool very effectively and efficiently, then there are parts of that machine that need maintenance every couple of weeks, maybe a month or four to six weeks.

Nigel D. Hunton: What are the opportunities we have within the system.

Nigel D. Hunton: Is an ability to start looking at the service model.

Nigel D. Hunton: The machine runs very effectively.

Nigel D. Hunton: The machine has consumable parts such as the silicon sources.

Nigel D. Hunton: It has passed that need so a maintenance as you think about running the business and running this tool very effectively and efficiently than there are parts that machine that need maintenance every sold a couple of weeks maybe a month.

Nigel D. Hunton: Four to six weeks. So that's why there's an opportunity for us to actually deliver from this platform.

Nigel D. Hunton: So, therefore, there's an opportunity for us to actually deliver some level of service revenue and consumable business from this platform. But it's early days yet, and the key priority is to get the first tool in the field. Learn from that, understand the service and consumable needs, and then put in place an efficient organization and model that helps us build and capture some of that ongoing revenue because that will be an ongoing source of revenue for the company. So if I compare that to going back 20 years on the 200 lean, it really wasn't part of the strategy then. It was just a pure play equipment sale.

Nigel D. Hunton: Some level of service revenue and consumable business. Its early days yet in the key priority is to get the first well in the field.

Nigel D. Hunton: Then from that understand the service and consume belief and then put in place an efficient organization model that helps us build and capture some of that ongoing revenue because that will be an ongoing source of revenue for the company.

Nigel D. Hunton: So if I compare that to going back 20 years on the 200 lean.

Nigel D. Hunton: Really wasn't part of the strategy than it was just a pure play equipment sale I think we've got an opportunity here to actually stop building out our level of service and parts for this.

Peter Wright: I think we've got an opportunity here to actually start building out a level of service and parts for this. So hopefully, that answers your question that we are looking to actually build it beyond just equipment. We are building capacity and capability, and we do want to get a run going that's ahead of 2024.

Peter Wright: So I hope that answers your question that we all love you to actually build it beyond just equipment, we aren't building capacity and capability and we do want to get a run rate is ahead of 2020 fours numbers.

Speaker Change: That's that's amazing you know one one note I didn't make us congratulations on being such a good steward of capital being cash neutral on a year of bringing such a significant platform to market is quite a quite a success. So congratulations on that very last question. If I look at 25, when I just look at your trio.

Nigel D. Hunton: That's amazing. You know, one note I didn't make is congratulations on being such a good cash neutral in a year of bringing such a significant platform to market is quite a success. So congratulations on that. Very last question. If I look at 25 and I just look at your trio business, do you think that that business, on a standalone basis, has the possibility of being cash neutral?

Nigel D. Hunton: Business do you think that that business on a standalone basis has the possibility to be cash generating.

Nigel D. Hunton: I think Kevin can always add this, I think that the business has to be absolutely cash generating, and you know we've talked about this business many times, this business has to build towards profitability; it's not just about protecting the cash. It has been fundamental and a key focus for me to retain and actually protect that core cash in the company. But we also have to think about how do we actually get the business back towards profitability? How do we get this business to generate cash?

Nigel D. Hunton: I think we came in and those assets I think that the business has to be absolutely cash generating and we've talked for many times. This business has to build towards profitability is not just about protecting the cash the kashi has been fundamental and a key focus for me.

Nigel D. Hunton: To retain and actually protect that cool cash in the company, but we also have to think about how do we actually get the business towards back towards profitability.

Nigel D. Hunton: Do we get this business cash generation and therefore, I'm very excited about the future and the opportunities ahead of us, but Kevin you want to add to that.

Nigel D. Hunton: And therefore, I'm very excited about the future and the opportunities ahead of us. I don't know whether Kevin, you want to add to that. No, I agree with what you said, Nigel.

Kevin: No I agree with what you said Nigel.

Kevin: The products should start.

Kevin H. Soulsby: The product should start, you know, generating cash as we go through 2025.

Kevin: Generating cash as we go through 2025.

Speaker Change: Thank you Kevin.

Kevin H. Soulsby: Yeah.

Speaker Change: Thank you so ladies.

Operator: Ladies and gentlemen, there are no further questions at this time. I will now turn the call back over to Nigel Hunton for his closing remarks. Please go ahead, sir. Thank you. And again...

Kevin H. Soulsby: Ladies and gentlemen, there are no further questions at this time I will now turn the call back over to Nigel Hunton well. His closing remarks. Please go ahead Sir.

Nigel D. Hunton: Thank you and again I really appreciate the flexibility of everyone to allow me to pull is cool forward.

Nigel D. Hunton: Thank you. And again, I really appreciate the flexibility of everyone to allow me to pull this call forward. It's actually a very sensible hour here in the UK. It's in the afternoon. But for many people, it's been pulled forward to a very early hour in California, for example.

Nigel D. Hunton: It's actually a very sensible out here in the U K, it's been in the afternoon, but for many people it's being pulled forward. So very early hour in California. For example, but now I appreciate that and I, especially appreciate all the questions, we get and so I think they do help.

Nigel D. Hunton: But I appreciate that and especially appreciate all the questions we get. So I think they do help. And hopefully, everyone understands how we're taking this company forward. You know, I do want to wish and thank all of our employees and their counterparts, our industry partners, for all the hard work and dedication. This has been a very, very lot of hard work over the last couple of years. It's not just one quarter, but we delivered a strong quarter in Q1.

Nigel D. Hunton: Hopefully everyone understands how we're taking this company forward.

Nigel D. Hunton: I do want to wish to thank all of our employees and their counterparts without there are industry partners for all the hard work and dedication. This this has been a.

Nigel D. Hunton: Very very little of hard work over the last couple of years, there's not just one quarter.

Nigel D. Hunton: But it's delivered a strong quarter in Q1.

Nigel D. Hunton: We're now gonna really flip and really focus on growth, and it's exciting to focus on the customer qualification for TRIO. And, of course, as always, I'd like to thank our investors for their ongoing support and backing. And, as always, anyone can reach out to Claire directly, and I look forward to updating you on TRIO progress on our Q2 call. So thanks again, and that closes the call.

Nigel D. Hunton: We're not going to really say from really focus on growth and it's exciting to focus on the customer qualification for Korea.

Nigel D. Hunton: And of course, it's always about that like our investors.

Nigel D. Hunton: Their ongoing support and backing them and as always you know anyone could reach at declare directly and I look forward to updating you on trail progress on our Q2 cool. So thanks, again and a lot closer to the coal.

Operator: Thank you, sir. That concludes today's conference. Thank you for joining us. You may now disconnect your lines.

Nigel D. Hunton: Okay.

Speaker Change: Thank you so that does conclude today's conference. Thank you for joining US you may now disconnect your lines.

Operator: Hmm.

Operator: Hum.

Operator:

Operator: Hum.