Q1 2024 Tower Semiconductor Ltd Earnings Call

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Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Tower Semiconductor First Quarter 2024 Financial Results Conference Call. All participants are currently in a listen-only mode. Following management's prepared statements, instructions will be given for the question and answer session. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded on May 9th, 2024. Joining us today are Mr. Russell Ellwanger, Tower CEO; Mr. Oren Shirazi, CFO. I would like to turn the conference call over to Ms. Noit Levy, Senior Vice President of Investor Relations and Corporate Communications. Ms. Levy, please go ahead. Thank you, and welcome to

Ladies and gentlemen, thank you for standing by welcome to the tower semiconductor first quarter 2024 financial results Conference call. All participants are currently in a listen only mode. Following management's prepared statements instructions will be.

Noit Levy: Given for the question and answer session.

Operator: For operator assistance during the conference. Please press Star Zero as a reminder, this conference is being recorded May nine 2020 for joining US today are Mr. Russell Ellwanger Tower CEO, Mr. Oren Shirazi CFO.

Operator: I would like to turn the conference call over to MS know eat Levy senior Vice President of Investor Relations and corporate Communications Ms. Levi. Please go ahead.

Noit Levy: Thank you, and welcome to Tower's Financial Results Conference Call for the first quarter of 2024. Before we begin, I would like to remind you that some statements made during this call may be forward-looking and are subject to uncertainties and risk factors that could cause actual results to be different from those currently expected. These infringements and risk factors are fully disclosed in our Form 20-F and 6-K, filed with the Securities and Exchange Commission, as well as in our filing with the Israeli Securities Authority. They are also available on our website. Tower still has no obligation to update any such forward-looking statements.

Noit Levy: Thank you and welcome to tower for natural resource Kashan scarves held the first close of 'twenty 'twenty four.

Noit Levy: Please note that the first quarter of 2024 financial results have been prepared in accordance with U.S. GAAP. The financial tables and data in today's earnings release and in this earnings call also include certain adjusted financial information that may be considered non-GAAP financial measures under Regulation G and related reporting requirements as established with the Securities and Exchange Committee. The financial tables include a full explanation of these measures and the reconciliation of these non-GET measures to the GET financial measures.

Noit Levy: I would like to remind you that some statements made during this call.

Noit Levy: Looking at our subjects.

Noit Levy: Risk factors that could.

Noit Levy: Cause actual results to be different from those countries.

Noit Levy: These uncertainties and risk factors.

Noit Levy: What are you disclosing all those forms 20-F and 6K.

Noit Levy: Filed with the Securities and Exchange Commission.

Noit Levy: Filings with the Israeli Securities Authority.

Noit Levy: Also available on our website.

Noit Levy: There's no obligation dropping to any such forward looking statements.

Noit Levy: Now that the first quarter of 2020 girlfriend onto our results have been prepared in accordance with U S. GAAP the financial tables in today's earnings release.

Noit Levy: Earnings call.

Noit Levy: Adjusted.

Noit Levy: Asia.

Noit Levy: non-GAAP financial measures.

Noit Levy: G and related like roll down in Wyoming, and established with the Securities and Exchange Commission.

Noit Levy: Sure.

Noit Levy: Explanations of these measures and the reconciliation of these non-GAAP measures to the GAAP financial measures.

Noit Levy: We have a supporting slide deck that complements today's conference call. This presentation is accessible on our company's website and is also integrated into today's webcast for your convenience. Now, I'd like to turn the call over to our CEO, Mr. Russell Ellwanger. Russell, please go ahead.

Noit Levy: Haven't been bragging slide deck. This country much today conference calls this presentation is accessible on our company's website and is also integrated in today's webcast soil convenience.

Russell C. Ellwanger: Now I'd like to turn the call Tomorrow.

Russell C. Ellwanger: Russell. Please go ahead.

Russell C. Ellwanger: Welcome everyone.

Russell C. Ellwanger: Thank you for joining our first quarter 2024 earnings conference call. I have been looking forward to this opportunity to discuss our performance and positive outlook. Revenue for the first quarter was in the upper half of our guidance. $327,000,000. We delivered a net profit of $45 million, representing a net margin of 14%.

Russell C. Ellwanger: Thank you for joining our first quarter 2024 earnings conference call.

Russell C. Ellwanger: I had been looking forward to this opportunity to discuss our performance and positive outlook.

Russell C. Ellwanger: Revenue for the first quarter was in the upper half of our guidance at $327 million.

Russell C. Ellwanger: We delivered a net profit of $45 million, representing a net margin of 14%.

Russell C. Ellwanger: For the remainder of 2024, our target is to achieve quarter over quarter revenue and margin of, Our guidance for the second quarter is for revenue to be $350 million plus minus 5%. I'll now provide a breakdown of Q1 revenue for the major technology groups. For reference, please see slide three.

Russell C. Ellwanger: For the remainder of 2024.

Russell C. Ellwanger: Our target is to achieve quarter over quarter revenue and margin increases.

Russell C. Ellwanger: Our guidance for the second quarter is for revenue to be $350 million plus minus 5%.

Russell C. Ellwanger: I'll now provide a breakdown.

Russell C. Ellwanger: Of Q1 revenue for major technology group for <unk>.

Russell C. Ellwanger: References please see slide three I'll read.

Russell C. Ellwanger: I'll refer to the business momentum we see for each group and highlight significant achievements. RF-Mobile, predominantly RF-SOI, represented 37% of revenue in the first quarter of 2024, a strong increase over the 2023 run. We continue to experience strong demand from RFSOI customers. Our 300 millimeter RFSY capacity at WOSU is fully utilized, and we are addressing excess demand by transitioning some production to a Grotte

Russell C. Ellwanger: And the business momentum, we see for each group and highlight significant achievements.

Russell C. Ellwanger: RF mobile predominantly RF soi.

Russell C. Ellwanger: Represented 37% of revenue in the first quarter of 2024.

Russell C. Ellwanger: Strong increase against the 'twenty two 'twenty three run rate.

Russell C. Ellwanger: We continue to experience strong demand from RF soi customers.

Russell C. Ellwanger: Our 300 millimeter RFS why capacity at zoo is fully utilized.

Russell C. Ellwanger: We are addressing excess demand.

Russell C. Ellwanger: By transitioning some production to withdraw stay where we are currently working through final steps of production qualification.

Russell C. Ellwanger: We are currently working through the final steps of production qualification towards production ramp-up, which remains on track with the planned schedule. This transition and capacity expansion will extend through 2024 into 2025 to meet the forecasted growth in customer demand. Wrapping up the new facility in Egrate, we'll bring, as previously communicated, some expected reduction to margins in the short term due to added depreciation and startup costs due to low utilization, but these will be offset and become accretive with the ship volumes we expect to achieve within the first half of 2025.

Russell C. Ellwanger: Production route.

Russell C. Ellwanger: Which remains on track with our planned schedule.

Russell C. Ellwanger: This transition and capacity expansion will extend through 2024 into 2025.

Russell C. Ellwanger: To meet the forecasted growth in customer demand.

Russell C. Ellwanger: Wrapping up the new facility and across day will bring as previously communicated some.

Russell C. Ellwanger: Unexpected reduction to margins in the short term due to added depreciation of startup cost its a low utilization.

Russell C. Ellwanger: But will be offset and become accretive with a ship volumes, we expect to achieve within the first half of 2025.

Russell C. Ellwanger: This is enabled by an accelerated corridor for profitability, through having partnered with S. We continue developments in 200mm and 300mm RFSOI technologies, setting industry benchmarks in efficiency and power handling, having customers demonstrated sub-60 femtosecond RONC on. For Enhancing Battery Life and Signal Reception Enhancement, please see slide four.

Russell C. Ellwanger: This is enabled by an accelerated corridor for profitability.

Russell C. Ellwanger: Through having partnered with S T.

Russell C. Ellwanger: We continue developments in 200 millimeter and 300 millimeter RF Soi technologies.

Russell C. Ellwanger: Setting industry benchmarks inefficiency and power handling.

Russell C. Ellwanger: Having customer demonstrated sub 60 femtosecond on sea off.

Russell C. Ellwanger: And having battery life and signal receptions in handsets.

Russell C. Ellwanger: Please see slide four.

Russell C. Ellwanger: The increasing RF content in 5G handsets drives market growth, and our technological advancements have captured increased market share. This momentum is expected to be strong throughout all of 2024 and is expected to be so for 2025 as well. RF infrastructure business represented 14 percent of revenue this quarter, an increase from 10 percent in the fourth quarter of 2020. During the past quarter, we experienced strong performance in our RF infrastructure business, where we provide optical transceiver components, such as silicon germanium and silicon photonics, for AI infrastructure, data centers, and data com markets. This performance is a testament to our strategic initiatives and technological advancements in this sector. The growth can be attributed to several factors.

Russell C. Ellwanger: The increasing RF content in five T handsets drives market growth.

Russell C. Ellwanger: Technological advancements has captured increased market share.

Russell C. Ellwanger: This momentum is expected to be strong throughout all of 2024 and expect it to be so for 2025 as well.

Russell C. Ellwanger: [noise] RF infrastructure business represented 14% of revenue this quarter, an increase from 10% in the fourth quarter of 2023.

Russell C. Ellwanger: During the past quarter, we experienced strong performance in our RF infrastructure business, where.

Russell C. Ellwanger: Where we provide optical transceiver components, such as silicon germanium and silicon photonics for AI infrastructure.

Russell C. Ellwanger: Out of centers and Datacom markets.

Russell C. Ellwanger: This performance is a testament to our strategic initiatives and technological advancements in this sector.

Russell C. Ellwanger: The growth was attributed to several factors.

Russell C. Ellwanger: Expanded market opportunities driven by substantial investments in AI, the introduction of new products for higher data rates spurred by AI development, and the unexpected rapid adoption of silicon photonics for 800G with an increased interest in lower latency and lower power architectures like linear pluggable optics (LPO). Additionally, we've seen a recovery in legacy product orders after the previous quarters of inventory adjustment. Additionally, our Achievements in Solar Photonics were marked by a technology award from Coherent and a partnership with Inalight, the top two worldwide optical integrators.

Russell C. Ellwanger: Standard market opportunities driven by substantial investments in AI.

Russell C. Ellwanger: The introduction of new products for higher data rates spurred by AI developments.

Russell C. Ellwanger: And the unexpected rapid adoption of Silicon Photonics for 800 G with an increased interest and lower latency and lower power architectures like linear applicable optics L. P O.

Russell C. Ellwanger: Additionally, we've seen a recovery in legacy product orders after the previous quarters of inventory adjustments.

Russell C. Ellwanger: Our achievements in soy photonics were marked by a technology award from coherent and our partnership with it a light.

Russell C. Ellwanger: Top two worldwide optical integrators.

Russell C. Ellwanger: We're advancing 400G and 800G products and pioneering with select customers on 200G per lane technologies for future 1.6T systems, including In a Light and Coherent, the top two. We have an Active Silicon Photonics Program, with six of the top ten optical companies..., validating these achievements. The Optical Fiber Conference, March 25-29 in San Diego, felt much more like a family reunion than a conference call.

Russell C. Ellwanger: We are advancing in 400, G and 800 G products and.

Russell C. Ellwanger: And pioneering with select customers on 200 G protein technologies for future 1.6 T system.

Russell C. Ellwanger: Including enlighten coherence the top two.

Russell C. Ellwanger: We have active silicon photonics programs with six of the top 10 optical integrators.

Russell C. Ellwanger: Validating these achievements.

Russell C. Ellwanger: The optical fiber conference March 25 through 20 nights in San Diego.

Russell C. Ellwanger: Felt much more like a family reunion then at toxins.

Russell C. Ellwanger: It's gratifying to see our vision of creating an open-soil confotonics foundry coming to fruition. Beyond Datacom, our engagement with automotive leaders in frequency-modulated continuous wave-based LiDAR and other sensors, including SIFO-based positioning gyros with Enelo, confirmed a broad-based need and usage for advanced photography; please see slide five. Please note that we have over 50 SIFO customers, most of which are in active silicon. Silicon Photonics currently represents 5% of our revenue, greatly accelerated by the adoption of AI, with momentum that is extremely strong and promises to be long lasting.

Russell C. Ellwanger: It's gratifying to see our vision of creating an open silicon photonics foundry coming to fruition.

Russell C. Ellwanger: Beyond Datacom.

Russell C. Ellwanger: Our engagement with automotive leaders and frequency modulated continuous wave based lidar.

Russell C. Ellwanger: And other sensors, including Cypher based positioning gyros with a mellow.

Russell C. Ellwanger: Confirmed a broad based need in usage for advanced Photonics, Please see slide five.

Russell C. Ellwanger: Please note we have over 50 sighful customers.

Russell C. Ellwanger: Most of which an active silicon phases.

Russell C. Ellwanger: Silicon Photonics currently represents 5% of our revenue.

Russell C. Ellwanger: Greatly accelerated by the adoption of AI.

Russell C. Ellwanger: With momentum that is extremely strong and promises to be long lasting.

Russell C. Ellwanger: In the Silicon Germanium segment, we are experiencing renewed demand thanks to new high data rate products, active cable, and LPO technology. LPO is enhancing the Silicon Germanium market by integrating equalizers in receivers and transmitters, eliminating the need for the DSP in the pluggable module, hence reducing costs, power consumption, and latency, all crucial for AI and data centers. Please see slide.

Russell C. Ellwanger: And the Silicon germanium segment, we are experiencing renewed demand. Thanks.

Russell C. Ellwanger: Thanks to new high data rate products active cable and L. P O technologies.

Russell C. Ellwanger: L. P O is enhancing the silicon germanium market, integrating equalizers and receivers and transmitters.

Russell C. Ellwanger: Eliminating the need for the D. S P a plausible module hence.

Russell C. Ellwanger: Hence reducing cost power consumption and latency all crucial for AI and data center applications.

Russell C. Ellwanger: Please see slide six.

Russell C. Ellwanger: Momentum is strong through the year and expected to be so beyond as well. Census and displays represented 15% of the total revenue in Q1. We continue with all development and manufacturing activities as detailed last quarter. Please see slide seven for a review. We expect a notable increase in imaging revenue from Q1 to Q2, and to maintain that strong level throughout. How will I see business?

Russell C. Ellwanger: Momentum is strong through the year and.

Russell C. Ellwanger: And expect it to be so beyond as well.

Russell C. Ellwanger: Sensors and displays represented 15% of the total revenue in Q1.

Russell C. Ellwanger: We continue with all development and manufacturing activities as detailed last quarter. Please see slide seven for a review.

Russell C. Ellwanger: We expect a notable increase in imaging revenue from Q1 to Q2.

Russell C. Ellwanger: And to maintain that strong level throughout the year.

Russell C. Ellwanger: Power IC business, excluding power discrete represented 10% in the first quarter of our corporate revenues.

Russell C. Ellwanger: excluding PowerDiscrete represented 10% of our corporate revenue in the first quarter of our corporate revenue. Present P.O.s show a substantial increase in Q2 revenue, with further increases throughout the year. We view Q1 as the low point in revenue for our power business and expect long-term growth thereafter. We are progressing with power management platform qualification in Albuquerque under our capacity agreement with..., with on-target initial silicon results. We anticipate starting customer prototyping in the second half of 2024, leading to qualification and production ramp-up in 2020.

Russell C. Ellwanger: Pressing appeals show substantial increase in Q2 revenue with further creases increases throughout the year.

Russell C. Ellwanger: We view Q1 as the low point in revenue for our power business and expect long term growth thereafter.

Russell C. Ellwanger: We are progressing with power management platforms qualification in Albuquerque, under a capacity agreement with Intel.

Russell C. Ellwanger: On target initial silicon results.

Russell C. Ellwanger: We anticipate starting customer prototyping in the second half of 'twenty 'twenty four leading.

Russell C. Ellwanger: Do you think to qualification and production ramp start in 2025.

Russell C. Ellwanger: This is slide 8, showing our power offerings over a large voltage range. Our discreet business was 14% of revenue and expected to be stable at this revenue level throughout 2020. Mexico's CMOS business was 8% of revenue, and about 2% was miscellaneous for the year, fab utilization for the quarter.

Russell C. Ellwanger: See slide eight shown or power offerings over a large voltage range.

Russell C. Ellwanger: Our discrete business was 40% of revenue and expect it to be stable at this revenue level throughout 2024.

Russell C. Ellwanger: Mixed signal Cmos business with 8% of revenue.

Russell C. Ellwanger: And about 2% was miscellaneous for this period.

Russell C. Ellwanger: Our fab utilization for the quarter.

Russell C. Ellwanger: FAB 1, which as announced will be operationally consolidated into FAB 2, was about 65%. That 2.8 inch was about 75%. Fab 3 8-inch at about 45%, presently at a very high round. That 5'8 inch was about 40% impacted by the earthquake in Japan and is presently wrapped. That 7-12 inch was about 75% due to the earthquake impact. And since recovery from the earthquake, it has been fully loaded, which to remind you, according to our model, is 85% utilization. Fab 9, 8-inch was about 60%, related to the worldwide decreased demand for power management. With that, I'll turn the call to our CFO, Mr. Oren Shirazi.

Russell C. Ellwanger: Fab, one which has announced will be operationally consolidated into fab two was about 65%.

Russell C. Ellwanger: The up to eight inch was about 75%.

Oren Shirazi: SAP three eight inch at about 45% presently at a very high rack.

Oren Shirazi: About five eight inch.

Oren Shirazi: About 40% impacted by the earthquake in Japan.

Oren Shirazi: And is presently wrapping.

Oren Shirazi: That's 712 inch was about 75% due to the earthquake impact and since recovery from the earthquake. It has been fully loaded.

Oren Shirazi: Which to remind per our model is 85% utilization.

Oren Shirazi: That nine eight inch was about 60%.

Oren Shirazi: Related to the worldwide decreased demand for power management.

Russell C. Ellwanger: With that I'll turn the call to our CFO, Mr Oren shirazi or in place.

Oren Shirazi: Hello, everyone.

Oren Shirazi: Earlier today, we released our first quarter financial results. For the first quarter of 2024, we reported revenue of $327 million, gross profit of $73 million, and net profit of $45 million, reflecting a 14% net profit margin. I will now begin a more detailed review of our results, first analyzing the P&L highlights, followed by our balance sheet. Revenue for the first quarter of 2024 was $327 million, in the upper range of our guidance compared to $352 million in the fourth quarter of 2023.

Oren Shirazi: Earlier today, we released our first quarter financial results.

Oren Shirazi: Gross Profit and Operating Profit for Q1 were $73 million and $34 million, respectively, aligned to our financial model, compared to $84 million and $45 million, respectively, in the pre-quarter. Net profit was $45 million, reflecting 14% net profit margins, or $0.40 diluted earnings per share, compared to net profit of $54 million, reflecting 15% net margins, or $0.48 diluted per share, in the pre-quote

Oren Shirazi: The first quarter of 2024 reported revenue of 327 million total gross proceeds of $73 million and that's roughly a $45 million.

Oren Shirazi: Reflecting 14% brokerage margins.

Speaker Change: I will now begin a more detailed review of probably the first time analyzing the P&L highlights followed by a balance sheet.

Oren Shirazi: Revenue for the first quarter of 2024 was 327 million below the upper range of our guidance compared to 300.

Oren Shirazi: $52 million in the fourth quarter of 2023.

Oren Shirazi: Gross profit in the operating pull fruitful, if you aren't aware of $73 million and $34 million respectively.

Oren Shirazi: Aligned to our financial model.

Oren Shirazi: But compared to $84 million and 45 for me doing the Ono, respectively in the quarter.

Oren Shirazi: That's brokerage was $45 million, reflecting 14% and appropriate margins or 40 cents diluted earnings per share compared to net profit of $54 million, reflecting 15% net margins O 48 cents.

Oren Shirazi: Diluted bellshill in the quarter.

Oren Shirazi: Moving to the balance sheet and future CAPEX and cash planets. As of the end of Q1 2024, our balance sheet assets totaled $2.98 billion, compared to $2.58 billion in the same period last year, primarily comprised of $1.18 billion of fixed assets, mostly machinery and equipment, and $1.74 billion of current assets. Last week, we were very happy to receive an updated corporate credit rating from Standard & Poor's. Following their annual review, our rating has been reaffirmed at ILAA, including a stable outlook for the company.

Oren Shirazi: Moving to balance sheet, and future Capex and cash flow.

Oren Shirazi: End of Q1, 'twenty four our balance sheets outfits talked out grew 19 8 billion below compared to $2 58 billion in the same period last year.

Oren Shirazi: Primarily comprised of $1 18 billion isn't all fixed up that's mostly machinery and equipment.

Oren Shirazi: And $1 74 billion Olive garden in Boston.

Oren Shirazi: Last week, we were very happy to receive an updated copel with credit rating for standup and pools.

Oren Shirazi: Following their I know all of you a rating that hasn't been real field at all.

Oren Shirazi: The other day.

Oren Shirazi: Including a stable outlook for the company.

Oren Shirazi: This reflects the robustness of our financial position and underscores our ongoing commitment to maintaining a strong financial foundation. The Current Assets Ratio, reflecting the multiple by which current assets are larger than short-term liabilities, is very strong at 5.4x. Shareholder equity reached a total of $2.5 billion at the end of Q1, further increasing from $2.4 billion at the end of December 2021. 2023 and from $2.0 billion as of the end of March. Our strong financial position enables us to plan the following investments in strategic opportunities that are aligned to our vision.

Oren Shirazi: This reflects the robustness of our financial position and underscores our ongoing commitment to maintaining a strong financial foundation.

Oren Shirazi: Current offered ratio, reflecting the multi peril by which got us into larger than short term liabilities is very strong at five point for sure.

Oren Shirazi: Shareholders' equity reached a propellants $2.5 million at the end of Q1 further increasing from $2.4 billion at the end of December 2000.

Oren Shirazi: 2023.

Oren Shirazi: And from 2.0 billion, though at all as of the end of March 2023.

Oren Shirazi: Approximately $500 million of total aggregate cash was allocated to make investments in equipment and other CAPEX items required for the 12 inch factory in Agrate, Italy, following the previously announced ST micro partnership agreement signed in 2020. We have already invested $340 million to..., while $160 million are to be paid from Q2 2024 to the end of 2020. In addition, as previously announced, we will invest up to $300 million in the coming two and a half years to buy equipment and other Cartex items that we will own at Intel's Fed in New Mexico, enabling us to ramp up Fed capacity and capabilities for our customers.

Oren Shirazi: Our strong financial position enables us to plan the following investments in strategic opportunities that are aligned to our vision.

Oren Shirazi: Most of them would be 500 million total aggregate cash was allocated to make investments in great Britain and the other capex items.

Oren Shirazi: Required for the 12 inch Victorian on Gawker, Italy.

Oren Shirazi: The previously announced SD micro partnership agreements signed in 2021.

Oren Shirazi: We have already invested 340 million, even though what else with it.

Oren Shirazi: While $160 million of ought to be paid from Q2 'twenty full to the end of 'twenty for us.

Oren Shirazi: In addition, as previously announced we will invest up to $300 million in the coming two and a half view to buy equipment and other topics later.

Oren Shirazi: We will own and Intel fab in new Mexico.

Oren Shirazi: And that's leading us to ramp up capacity and capabilities for our customers.

Oren Shirazi: This payment will commence in Q2 2024. In addition, we expect our maintenance capex baseline level to remain, as previously announced, at about $200 million per annum. And lastly, we expect to invest additional cash to acquire more capability capital expenditure tools and other assets to expand our technology offering, including increasing our 5G and CIFOR capacity and technological offerings, to enhance our flexibility and support our customers from our various sites, as well as change our product mix to a richer mix from Margin's perspective.

Oren Shirazi: These payments will commence in Q2 24.

Oren Shirazi: In addition, we expect element in our Capex baseline liver do remain a previously announced it about 200 million a little bit on them.

Oren Shirazi: And lastly, we expect to invest additional cash to acquire more capability capex tools and other office.

Oren Shirazi: We'll expand our technology offering including interesting insights.

Oren Shirazi: Insightful capacity and technological offering.

Oren Shirazi: To enhance our flexibility and support our customers.

Oren Shirazi: For my various sites.

Oren Shirazi: That's why that's changed.

Oren Shirazi: To a richer mix from margin perspective.

Oren Shirazi: In summary, the above investments are aligned to our business strategy as well as the financial model as previously presented by the company this past November. In the model, we outline a revenue target of $2.66 billion per annum that could be achieved by loading our existing facilities at 85% utilization, which would result in $500 million annual net profit. Now, I'd like to turn the call back to our CEO, Mr. Ellwanger.

Oren Shirazi: And somebody there a lot of investments are aligned to our business strategy as well as financial model I was previously presented by the company. This past November.

Ellwanger: And the more than we outlined our revenue target of $2 $66 billion bill on them that could be achieved by loading all the existing facilities at 85% utilization.

Russell C. Ellwanger: Which would result in $500 million on one and that's both.

Ellwanger: Now I'd like to turn the call back to us when we started that long ago.

Oren Shirazi: Yeah.

Russell C. Ellwanger: Thank you, Oren. We'd like to go ahead at this point with whatever questions you might have at any time, after which I will come in and give some summary and concluding statements. Thank you.

Ellwanger: Thank you Lauren.

Ellwanger: We'd like to go ahead at this point with whatever questions you might have.

Oren Shirazi: At which time.

Oren Shirazi: At the end of which I will come in and give some summary.

Russell C. Ellwanger: Please.

Speaker Change: Thank you.

Operator: Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press star 1. If you wish to cancel your request, please press star 2. If you are using speaker equipment, kindly lift the handset before pressing the numbers.

Speaker Change: Ladies and gentlemen at this time, we will begin the question and answer session.

Operator: Have a question. Please press star one if you wish to cancel your request. Please press star two if you are using speaker equipment country, what's the handset before pressing the numbers.

Operator: Your questions will be polled in the order they are assigned. Please stand by while we poll for your question. The first question is from Kody Acree of Benchmark. Please go ahead. Okay, Kody.

Operator: We pulled in the order. They are received please standby while we poll for your questions.

Operator: Oh.

Operator: Yeah.

Cody Acree: The first question is from Cody Acree of benchmark. Please go ahead, hey coating.

Cody Acree: Hey guys, thanks for taking my questions and congrats on the progress. Oren, I can then start real quickly on a point of clarification or further color on your CapEx expectations. You've mentioned increasing your, I guess, your maintenance level but increasing some of your core CapEx on your fabs to, what did you say, further expand some of your leadership products and shift your mix to those areas. Can you just add some specification to what you're expecting to spend?

Cody Acree: Hey, guys. Thanks for taking my questions and congrats on the progress one if I can then start real quick.

Cody Acree: One clarification or color on the Capex.

Cody Acree: Expectations there Jim.

Cody Acree: <unk> seen more of I guess, your maintenance level, but that increase in some of your core capex.

Cody Acree: Two.

Cody Acree: Would you say are there.

Cody Acree: Span some of your leadership products and shift your mix to those those areas can you just add some specification, but what you are expecting to spend.

Oren Shirazi: Yeah, we did not mention, I mean, I mentioned the $500 million, of which we are left with $160 million to pay from Q2 until the end of 2025, plus... [inaudible] many, many tens of millions, but of course, we have the cash to support it from our balance sheet.

Oren Shirazi: Yeah, we did not mentioned I mean, the I mentioned, the 500 million on garage sale for which we are left with a $160 million to pay for in Q2 until the end of 'twenty five plus.

Oren Shirazi: Intel's 11 X hundreds of millions that will start to be paid this quarter and the maintenance capex $200 million.

Oren Shirazi: In regards to the additional machines, there that we want to buy full inside your insightful other well see.

Oren Shirazi: Evaluating now the plans.

Oren Shirazi: We didn't do you have to come up with final numbers.

Oren Shirazi: It will be in the whole of the whole foods, many many tens of millions.

Oren Shirazi: So we have the cash to support it from our balance sheet.

Cody Acree: Okay, and any guesses as to what that might do to your $2.66 billion in revenue potential?

Oren Shirazi: Okay.

Oren Shirazi: Swaths of debt.

Cody Acree: What that might do to your.

Cody Acree: Your $2 66 billion of revenue potential.

Oren Shirazi: This is already included, meaning when we presented the model in November with the 2.66 billion dollar revenue, all these topics that I'm saying here are already included, the fact that we don't yet know exactly how much they will cost.

Speaker Change: No. This is already included meaning when we presented.

Oren Shirazi: Presented the model in November with a $2 $66 billion revenue all of these topics that I'm.

Oren Shirazi: Thing. He is already included the fact that we don't yet know exactly how much that would cost.

Oren Shirazi: And you didn't have to finalize the plan its still.

Oren Shirazi: Our multi year plan that rich the $2 66 billion include revenue form those machines that will improve the mix and this is already built into the model smelting Felicia.

Cody Acree: Okay, very good. Thank you for that clarification.

Speaker Change: Okay very good. Thank you for that clarification Russell I guess for you.

Cody Acree:

Cody Acree: In your prepared remarks.

Cody Acree: Our press release, we're very encouraged and talked about.

Russell C. Ellwanger: And Russell, I guess for you, your comments in your prepared remarks and in the press release were very encouraging. You talked about gaining some visibility from customer forecasts. Has that also translated to improved customer orders, or is that more of a longer-term outlook?

Cody Acree:

Cody Acree: Some visibility for.

Russell C. Ellwanger: Customer forecasts.

Russell C. Ellwanger: Has that also translated to improving customer orders.

Russell C. Ellwanger: Or is that.

Russell: More of the longer term outlook.

Russell C. Ellwanger: Good question; orders that we have are very much related to the optimistic forecasts we have for this year of quarter over quarter growth. What I was referring to was forecasts from customers, specific around data centers, that would show that the inventory has been burnt off in the legacy data center in addition to the orders that we're getting for acceleration of 800G. And then we've also begun to see some increases, both in P.O.

Russell: A good question Lee.

Russell C. Ellwanger: Orders that we have is very much related.

Russell C. Ellwanger: Into the.

Russell C. Ellwanger: Optimistic.

Russell C. Ellwanger: Forecast, we have for this year of quarter over quarter growth.

Russell C. Ellwanger: What I was referring to was.

Russell C. Ellwanger: Inputs from customers forecasts from customers specific around data center that would show that the inventory has been burned off in the legacy data Center. In addition to the orders that we're getting.

Russell C. Ellwanger: For acceleration of.

Russell C. Ellwanger: 800.

Russell C. Ellwanger: So.

Russell C. Ellwanger: And then we've also begun.

Russell C. Ellwanger: To start seeing some increases.

Russell C. Ellwanger: Both npls and forecast.

Russell C. Ellwanger: then in forecast, for Power Management, but power management. As I stated, Q1, we see it as having been the lowest in our business. If I look really, very closely at our plan for 2024, but the power management, specifically automotive, is still, I think burning off inventory. But with signs right now that there will be new buys. But the overall power management market, I think, is still weak. If we look at our own numbers for 24 versus 23, it is deficient in comparison to the 23 total, but the growth that we have within our plans is really, dependent on POs and pretty vetted forecasts, not what I'm talking about, the trend of the market itself recovering.

Russell C. Ellwanger: For power management.

Russell C. Ellwanger: But power management.

Russell C. Ellwanger: As I stated Q1, we see it as having been below in our business. If I look really very closely at our plan for 2024.

Russell C. Ellwanger: But the power management specific to the automotive is still.

Russell C. Ellwanger: I think burning off inventory.

Russell C. Ellwanger: But with signs right now that's.

Russell C. Ellwanger: There will be new buys but.

Russell C. Ellwanger: Overall power management market I think is still weak if we look at our own numbers for 24 versus 23. It is deficient to the 23 total.

Russell C. Ellwanger: But the.

Russell C. Ellwanger: The growth that we have within our plans is really.

Russell C. Ellwanger: Dependent on P o's, and I'm pretty vetted forecast.

Russell C. Ellwanger: Not what I'm talking about the trend of the market itself recovering.

Cody Acree: Okay, and Russell, thank you.

Speaker Change: So okay.

Cody Acree: Sure.

Speaker Change: I'm sorry.

Russell C. Ellwanger: I'm sorry, Cody. Should the market recover within some short term, which I don't know, that would be accretive to the targets that we have. But it's not that clear. What I stated was really signs of recovery.

Speaker Change: I'm, sorry, I thought he should the market and that number within some short term, which I don't know that would be accretive to the targets that we have right now, but it's it's not that clear what I stated was really signs of recovery.

Cody Acree: Okay, and specifically in power management, just to be clear, you are still seeing inventory excesses pressure that market, but are you expecting Q2 to be a low point for that market?

Russell C. Ellwanger: Okay, and specifically in power management just to be clear.

Cody Acree: Are you are you are still seeing inventory excesses pressure that market, but.

Cody Acree: Are you expecting Q2 to be a low point for that market.

Russell C. Ellwanger: Now, Q1 has already passed was a low point. Oh, Q1, sorry. Yeah, we had a substantial increase in power management from Q1 to Q2, which you might see reflected in the increased guidance, but then we would also see growth in power management throughout the year, but not having recovered to hide the freebie. Okay.

Cody Acree: Now Q1 already passed with a loved one.

Russell C. Ellwanger: I'm, sorry that we have substantial increase.

Russell C. Ellwanger: In power management from Q1 to Q2.

Russell C. Ellwanger: Which you might see reflected in the increased guidance, but.

Russell C. Ellwanger: And then we will see also growth in power management throughout the year.

Russell C. Ellwanger: But not having recovered to highs of previous years.

Cody Acree: Okay, that's very helpful. Thank you very much. I guess if you could handicap your own in the market, either order rates or forecast visibility improvements, where do you think you're going to get the best growth recovery through the second half?

Speaker Change: Okay. That's very helpful. Thank you very much I guess, if you could handicap.

Cody Acree: Ah well in market.

Cody Acree: Either order rates or or forecast visibility improvement, where do you think you are going.

Cody Acree: Well get the best.

Cody Acree: All growth recovery from the second half.

Cody Acree:

Russell C. Ellwanger: The growth is very strongly related to Data Center, a lot with AI, I think, and then also with RFSOI. Those are the two bigger growth markets, as well, against the Q1 baseline of 300 millimeter power management.

Cody Acree: The growth was very strongly related to data center a lot with AI I think and then also with RF Soi.

Russell C. Ellwanger: Those are the two bigger growth markets.

Russell C. Ellwanger: As well.

Russell C. Ellwanger: Yeah.

Russell C. Ellwanger: Against the Q1 baseline is 300 millimeter power management.

Cody Acree: Thank you very much, Russell, for that. I guess just on the AI business. I think I've asked this in the past, but maybe we can revisit it. Just have you had a chance to parse out your business that is AI-driven, whether that be on the data center piece of business or even as we're looking at AI shifting more toward consumer end devices, such as smartphones. Can you talk about your overall AI leverage?

Speaker Change: Oh, Thank you very much the Russell, but I guess just on AI business I think I've asked this in the past but.

Cody Acree: We can we visited.

Cody Acree: Have you all had.

Cody Acree: I had a chance to parts of the business.

Cody Acree: That is AI level.

Cody Acree: Whether that be on the data center.

Cody Acree: Piece of business or even as we're looking at shifting more towards consumer and devices.

Cody Acree: Slipped in smartphones.

Cody Acree: Talk about your overall leverage.

Cody Acree:

Russell C. Ellwanger: I think the bulk of it right now is pluggables going into data centers. I don't I think there's an awful lot going into a mobile phone at this point, if any. But certainly, the movement within the pluggable to move away from the Discrete Indian Phosphide Detector and Modulator to a monolithic SIFO with an integrated modulator and silicon detector, and then the passives within the guide being part of the pluggable, that's where we see the growth rate.

Cody Acree: I think the bulk of it right now is.

Russell C. Ellwanger: Plugging holes going into data center.

Russell C. Ellwanger: I don't.

Russell C. Ellwanger: I think there's an awful lot going into a mobile phone at this point, if any but certainly.

Russell C. Ellwanger: The.

Russell C. Ellwanger: Moving.

Russell C. Ellwanger: Movement within.

Russell C. Ellwanger: The plug a hole to move away from.

Russell C. Ellwanger: Discrete indium phosphide detector and modulator to.

Russell C. Ellwanger: Two a monolithic saiful with an integrated modulator and Silicon detector, then the passives within the guide being part of the portable.

Russell C. Ellwanger: That's where we see the growth right now.

Cody Acree: Okay, great. Thank you for that, Russell. That's just two quick ones. Are you seeing any impact in March or June from the end-of-life pull-ins from FAB 1 shutdown?

Speaker Change: Okay, great. Thank you for that Russell.

Cody Acree: Are you.

Cody Acree: Just two quick ones are you seeing any impact.

Cody Acree: Impact in March or June.

Cody Acree: In Poland.

Cody Acree: Once you have them.

Russell C. Ellwanger: Non-material, if we were to look at FAB 1, I would probably say the revenue levels in Fab 1 are higher for the year. [inaudible] Okay, thank you for that.

Russell: Not material, if we were to look at fab one.

Russell C. Ellwanger: I would say probably the revenue levels in fab one.

Russell C. Ellwanger: Our higher for the year.

Russell C. Ellwanger: Because at the end of life, then they would be otherwise and that's why we decided to consolidate certain flows into fab two at the end of life. Those that were really by customer demand going to be end of life in general, but it's not an appreciable increase against previous year run.

Russell C. Ellwanger: Rates, if anything it brings it back almost to previous year run rates.

Cody Acree: Okay, thank you for that. And then lastly, any impact on pricing, local pricing, as the business is recovering as you look at the rest of the year?

Speaker Change: Okay. Thank you for that.

Russell C. Ellwanger: Lastly, just any impact on pricing wafer pricing.

Cody Acree: All of the businesses is recovering as youre looking at the rest of the year.

Cody Acree: Hum.

Cody Acree:

Russell C. Ellwanger: I'm not exactly sure what you mean by recovery. We've not had a decrease in prices. We're not seeing huge increases in pricing. But what we do have, always, is the newer the platform, the higher the price for the platform. So I expect, as with most years, that our ASP will probably increase this year, especially if we look at all of the silicon layers that were sold versus silicon layers last year, because of a much richer mix with silicon photonics, which is a new platform that has a different price point on Acree, price per layer than other platforms, and probably the highest price per layer that we offer.

Speaker Change: I'm not exactly sure what you mean by recovery, we've not had a decrease in pricing.

Russell C. Ellwanger: Not seeing huge increases in pricing, but what we do have always is when you were the platform the higher the prices for the platform.

Russell C. Ellwanger: I expect as with most years laps are a S. P.

Russell C. Ellwanger: Well.

Russell C. Ellwanger: This year, maybe especially will probably increase if we look at.

Russell C. Ellwanger: For all of the silicon layers that were sold versus silicon layers last year because of a much richer mix with silicon photonics.

Russell C. Ellwanger: Which is a new platform that has a <unk>.

Russell C. Ellwanger: Price point on a.

Russell C. Ellwanger: Price per layer than other platforms and probably.

Russell C. Ellwanger: Is the highest price per layer that we offer.

Cody Acree: Okay, great. Thank you, guys. I really appreciate all the support.

Speaker Change: Okay, great. Thank you guys I really appreciate all the calls.

Russell C. Ellwanger: I appreciate your questions. Thank you.

Speaker Change: I appreciate your questions. Thank you.

Operator: The next question is from Richard Shannon of Craig Hollum. Please go ahead.

Russell C. Ellwanger: The next question is from Richard Shannon from Craig Hallum. Please go ahead Richard.

Richard Cutts Shannon: Russell, hi, how are you? yourself.

Richard Cutts Shannon: So hi, how are you.

Richard Cutts Shannon: Second yourself excellent.

Russell C. Ellwanger: Excellent. You know, I can't complain. It's a nice spring day here. Thanks for asking.

Richard Cutts Shannon: You know I can't complain, it's a nice spring day here thanks for asking.

Operator: I'm sorry, I couldn't hear you before it got a little jumbled, Richard. Sorry, I lost my headset, so I'm doing the...

Richard Cutts Shannon: Sorry, I didn't hear you before right, we've got a little jumbled Richard.

Richard Cutts Shannon: Oh, I'm, sorry, I lost my headset, so I'm doing the speakerphone hopefully this was good enough now it's better okay. Okay.

Operator: Now it's better.

Russell C. Ellwanger: Now it's better, okay? Let's hear a couple questions here. You mentioned in the RFSOI that you're gaining share. Maybe you can kind of discuss this a little bit here. I think you've talked about having a subset of the customer base out there. Are you gaining new customers or getting more share from them? And any way to think about the magnitude of the increase you're expecting to see in kind of the

Operator: Okay.

Russell C. Ellwanger:

Russell C. Ellwanger: Let's see a couple of questions here, you mentioned that the RFS II that youre gaining share maybe you can kind of discussed this a little bit here I think you've talked about having a subset of the customer base out. There are you gaining new customers, you're getting more share from them and in a way to think about the magnitude of the increase you're expecting to see it and kind of the next generation.

Russell C. Ellwanger: Yes.

Russell C. Ellwanger:

Russell C. Ellwanger: Yes.

Russell C. Ellwanger: We certainly have new customers that were supplied by other foundries prior to us serving them now, so there I am quite convinced that we're gaining share. We also have existing customers whose demand last year was much lower than it is presently.

Russell C. Ellwanger: We certainly have new customers that had been supplied by.

Russell C. Ellwanger: Other foundries prior to us serving them now so there I I'm quite convinced.

Russell C. Ellwanger: So we're gaining share.

Russell C. Ellwanger: And we also have existing customers who.

Russell C. Ellwanger: Who's the bad last year was much lower than it is presently.

Richard Cutts Shannon: I'm so.. nominally, they've gained share, potentially gained share against people that maybe weren't using us. As far as giving a specific quantitative measurement at this point as to how many points of share we've gained, I wouldn't feel very comfortable to give that, as I've not really seen the overall numbers for RFSOI, but as reports get out talking about the amount of modules having been sold and the amount of SOI wafers having been sold. When that data is available, I'll be happy to make it available, but I really don't know what the overall market is at this point. And fair enough for those comments.

Russell C. Ellwanger: So.

Russell C. Ellwanger: Dominantly they've gained share.

Richard Cutts Shannon:

Richard Cutts Shannon: And potentially gain share against people that maybe werent using us as.

Richard Cutts Shannon: As far as giving us specific quantitative measurement at this point as to how many points of share we've gained.

Richard Cutts Shannon: I wouldn't feel very comfortable to give that.

Richard Cutts Shannon: I've not really seen the overall numbers for RF Soi.

Richard Cutts Shannon: As these reports get out talking about.

Richard Cutts Shannon:

Richard Cutts Shannon: The amount of modules, having been sold and the amount of Soi wafers, having been sold.

Richard Cutts Shannon: When that data is available I'll be happy to make comments on it but I really don't know what the overall market is at this point.

Russell C. Ellwanger: So let's jump over to silicon photonics. Did I hear correctly that this was 5% of sales in the first quarter? An excellent number here, obviously, in the early stages of growth here. I guess a few questions around this here. Do you have any sense of what kind of share Silicon Metronics has in the 800-gig generation? And any thought process about how that changes?

Speaker Change: Okay fair enough. So those comments, so let's jump over to Silicon Photonics did I hear correctly that this was 5% of sales in the first quarter.

Speaker Change: Yes, Sir.

Russell C. Ellwanger: Hum an excellent number here obviously in the early stages of growth here.

Russell C. Ellwanger: I guess a few questions around this here.

Russell C. Ellwanger: Do you have do you have any sense of what kind of share Silicon Photonics has an 800 gig generation and any thought process about how that changes I assume that increases as you go to 1.6.

Russell C. Ellwanger: I assume it increases as you go to 1.6. A qualitative feel, certainly, you know, at the 800 gigabit, basically, you know a 4x200, right? discreet detectors, and as compared to doing the monolithic SIFO, it becomes substantial as well as the form.

Russell C. Ellwanger:

Russell C. Ellwanger: Yeah.

Russell C. Ellwanger: A qualitative feel certainly you know at the 800 gig.

Russell C. Ellwanger: It's basically you know a four by 200 right.

Russell C. Ellwanger: So.

Russell C. Ellwanger: The cost of doing the.

Russell C. Ellwanger: Discrete detectors and.

Russell C. Ellwanger:

Russell C. Ellwanger: As compared to doing a monolithic FIFO become substantial as well as the form factor.

Russell C. Ellwanger: If you go to the 1.6T, it's an 8x200, in which case the form factor becomes very critical as well as the cost. So how much SIFO is right now at 800 G? I don't know. I really don't.

Russell C. Ellwanger: If you go to the one point 60, it's an eight by 200.

Russell C. Ellwanger: In which case form factor becomes very critical as well as cost. So how much saiful is right now at 800 G I.

Russell C. Ellwanger: I I don't know I really don't I, that's where I think our biggest cutting is and I believe that the bulk of all the.

Russell C. Ellwanger: That's where I think our biggest cuts are, and I believe that. 5% of the corporate revenue of Q1 was into $800,000. What percentage that is, I don't think that it's a major percentage of 800 G. But 800 G itself is surprisingly quickly being adopted. According to reports of two years ago, there would have been very little 800 G now. I think 800 G is probably 40-50% in the market at this point. 1.6T is probably already going to be coming in, the end of 24, certainly in 2025, but I couldn't tell you exactly at 800 what the... Syfo percent of sales will be, but I think at 1.6T it will be very low. Okay, that sounds great here. And you also called out Infiliki Botanics having six of the top 10 Plugable Module suppliers as customers here. I have two questions around this.

Russell C. Ellwanger: 5% of corporate revenue of Q1 was into 800 G.

Russell C. Ellwanger: What percentage that is I don't think that it's a major percentage of 800 G. At this point.

Russell C. Ellwanger: But 800 G itself and surprisingly quickly being adopted.

Russell C. Ellwanger: According to reports from two years ago, it'd be very little 800, G. Now and I would think 800, she is probably 40 or 50% of the market at this point.

Russell C. Ellwanger: But and.

Russell C. Ellwanger: And one point 60 is probably already going to be cutting in at the end of 'twenty four certainly in 'twenty 'twenty five.

Russell C. Ellwanger: But I I couldn't tell you exactly at 800.

Russell C. Ellwanger: What the.

Russell C. Ellwanger: Sighful percent of sales will be but I think at one point 60, it would be very substantial.

Russell C. Ellwanger: Okay.

Russell C. Ellwanger: Okay that sounds great here and you also called out in Silicon Photonics, having six of the top 10.

Russell C. Ellwanger: Applicable module suppliers as customers here I guess two questions around that.

Richard Cutts Shannon: What I said, I said SIFO engagements; there might be more that are customers, but not with Cypher. What I talked about specifically was six of the top 10 players that were engaged with SIFO, and not that all ten are engaged with SIFO themselves. But six of the top ten were engaged with SIFO.

Russell C. Ellwanger: What I said I said is sighful engagements, there might be more of that or customers.

Richard Cutts Shannon: But notwithstanding.

Richard Cutts Shannon: What I talked about specifically was six of the 10 top players that were engaged with cycle and not that all 10 or engage with stifle themselves, but six of the top 10 were engaged with Sighful I didn't say, how many of our customers specifically.

Russell C. Ellwanger: I didn't say how many customers specifically, but at least six of 10 are our customers, maybe more are customers outside. Okay, I guess to that point here, do you see the potential for seeing that number increase as you go to 1.6? Yes, sir. Excellent, great to hear.

Russell C. Ellwanger: But at least six of 10 of our customers maybe more of our customers outside of cycling.

Russell C. Ellwanger: Okay.

Russell C. Ellwanger: Gets too to that point do you or do you see the potential for.

Russell C. Ellwanger: Seeing that number increase here as you go to go to one six.

Speaker Change: Yes, Sir.

Russell C. Ellwanger: Okay excellent great to hear I actually have already increased.

Richard Cutts Shannon: I actually think it's already increased. Okay. I wasn't sure if I didn't say it, whereas to say six was a sure bet.

Richard Cutts Shannon: Yeah.

Richard Cutts Shannon: Okay.

Richard Cutts Shannon: I'm grateful that sure so I didn't say it whereas to say six was a sure bet.

Russell C. Ellwanger: Okay. All right. Fair enough. Wonderful.

Speaker Change: Okay, all right fair enough what a wonderful.

Russell C. Ellwanger: <unk>.

Richard Cutts Shannon: I guess a quick question here as we think about your overall revenue profile with 300 millimeter versus 200. You talked about, I think, even today here about expecting some increase in 300 millimeter power management. I know you're trying to, you know, drive 300 millimeter into more of your product lines here. So, can you give a general sense of where you sit in terms of revenue exposure at 300 millimeter and then how will that progress over the next one to two years?

Russell C. Ellwanger: I guess a quick question here as we think about your overall revenue profile with 300 millimeter versus 200, you talked about I think even today here about.

Richard Cutts Shannon: You'll get some increase in 300 millimeter power management and I know you're trying to.

Richard Cutts Shannon: Try 200 millimeter to more of your product lines here. So can you give us a general sense of where do you sit in terms of revenue exposure 300 millimeter and then how does that progress over the next one to two years.

Richard Cutts Shannon:

Richard Cutts Shannon: Right now, it's a bit over 20% of our revenue. And it obviously is, if you look at the fact that the capacity that we're growing is in Grotte, that's 300 millimeters, and in Albuquerque, that's 300 millimeters, it'll be substantially higher. So a good portion of our plan for the $2.6 billion is 300 millimeter growth. So I would say that by the target of 2.6.

Richard Cutts Shannon: Right now.

Richard Cutts Shannon: A bit over 20% of our revenue and it is obviously if you look at the fact that the capacity that we're growing is in a garage, that's 300 millimeter and in Albuquerque that 300 millimeter it'll be substantially higher.

Richard Cutts Shannon: A good portion of our plan of the $2 6 billion, just 300 millimeter graph.

Richard Cutts Shannon: So I would say that by the.

Richard Cutts Shannon: Target of the 2.6.

Richard Cutts Shannon:

Russell C. Ellwanger: The majority of our business will be, Okay, excellent. Last question for you. I'll jump on the line, Russell.

Richard Cutts Shannon: The majority of our business will be 300 millimeter.

Richard Cutts Shannon: I want to get your sense here of thinking about revenues for the year. I think you've characterized this call as, in the last call, we're going to see sequential growth throughout the rest of the year. I have two questions to that end.

Russell: Okay excellent.

Russell C. Ellwanger: Last question for me and I'll jump out of line Russell wanted to get your sense here, but thinking about the the revenues for the year I think you've.

Russell: Or is this this call as in the last call, where do you see sequential growth throughout the rest of the year I guess two questions to that and.

Russell C. Ellwanger: How do we think about the growth profile in the next two quarters of the year, kind of qualitatively? Would you expect the third quarter to be similar or higher sequential growth? And then, as we've seen in your normal patterns in the past, the fourth quarter tends to be, you know, more slasher, at least a lot more gross than the third.

Russell: How do we think about the.

Russell C. Ellwanger: The growth profile in the next two quarters of the year kind of qualitatively what do you expect the third quarter to be similar or higher sequential growth and then as you've seen in your normal patterns in the past the fourth quarter tends to be you know more flattish or at least a lot more gross and the third is that still.

Russell C. Ellwanger: Revenue profile that we should count on.

Richard Cutts Shannon: Is that still a revenue profile that we should count on? Well, I'm not sure I want to commit to that question. But what I said on the previous call was that there would be notable growth in the quarter. I still feel that we'll have notable growth in the quarter. But will it be a continuum of 7% or an 8% or a 9%?

Speaker Change: Well I'm not sure I'd want to commit to that question.

Richard Cutts Shannon: But what I said.

Richard Cutts Shannon: At the previous call was that there'd be notable growth in the quarters.

Richard Cutts Shannon: I still feel that we'll have notable growth in the quarters.

Richard Cutts Shannon: Will it be a continuum of a 7% or an eight or nine.

Russell C. Ellwanger: I'm not committing, but I do believe that Q2 to Q3 will be notable. Okay. Maybe I'll ask the question in a slightly different way, which is to ask you a question I asked you on the last call, which is, do you expect to grow this year? I think you said you would be disappointed if you did not. Is that still your expectation? I'd still be disappointed if we didn't.

Speaker Change: I I'm not committing to that.

Richard Cutts Shannon: I do believe that Q2 to Q3 well.

Russell C. Ellwanger: Be a notable growth.

Russell C. Ellwanger: Okay, maybe I'll ask the question slightly different way, which is to.

Russell C. Ellwanger: Ask your question I asked you on the last call, which is do you expect to grow. This year. I think you said would be disappointed if you did not is that still your expectation.

Russell C. Ellwanger: I'd still be disappointed if at all.

Russell C. Ellwanger: Okay.

Richard Cutts Shannon: OK. Excellent. That's all my questions. I'll jump in the line. Thank you, Richard. I appreciate it.

Speaker Change: That is all my questions I'll jump on the line I appreciate your second.

Operator: The next question is from Nedi Husseini of SIG. Please go ahead. Yes, thanks for taking my question.

Speaker Change: The next question is from Med D. Hussaini of Sig. Please go ahead.

Nedi Husseini: Yes, thanks for taking my question and a couple of follow-ups from my end. Russell, if Silicon Cortana is going to take some of your revenue in Q1, how should we think about the contribution, either the percentage of revenue or sequential growth by Q4 of this year? And I understand that I'm not asking for the year-end guide, but I just want to see how these new wins and new markets are helping you with the overall revenue trajectory.

Nedi Husseini: Yeah. Thanks for taking my question and a couple of follow ups for ammonia.

Nedi Husseini:

Nedi Husseini: Some people call me people talk with some of your revenue in Q1, how should we think about it.

Nedi Husseini: The contribution are there it seems like revenue or.

Nedi Husseini: Sequential growth by Q4 of this year.

Nedi Husseini: Stan.

Nedi Husseini: Hum I'm not asking for the building block one just wanted to see home.

Nedi Husseini: New wins in new markets.

Nedi Husseini: With the overall.

Nedi Husseini: The trajectory.

Nedi Husseini:

Russell C. Ellwanger: The level of revenue of Q1... We would see it in Q4 being higher, but the level of revenue for the company will be higher in Q4 as well, so I don't think that we'll necessarily have higher than 5% of the corporate revenue being silicon photonics. But staying at the 4.5% to 5.5% level would be a higher silicon photonics revenue baseline for that 4.5% to 5% contribution, if that answers your question. Yes, absolutely.

Nedi Husseini: The level of revenue of Q1.

Russell C. Ellwanger: We would see it in Q4 being higher but the level of revenue for the company will be higher in Q4 as well. So I don't think that will necessarily have higher than 5% of the corporate revenue being silicon photonics.

Russell C. Ellwanger: But staying at the four and a half to five 5% level would be a higher silicon photonics revenue.

Russell C. Ellwanger: Baseline for that 4.5% to 5% contribution if that answers your question.

Russell C. Ellwanger: Yes, absolutely.

Speaker Change: And then.

Russell C. Ellwanger: And then a good.

Russell C. Ellwanger: Cause synergy between Silicon Photonics Silicon germanium.

Russell C. Ellwanger: What's enabling you.

Russell C. Ellwanger: T O.

Nedi Husseini: [inaudible] be that basically you're the person on the silicon photonics in that video. Is that, is thinking germanium enabling you to do that?

Russell C. Ellwanger: Is it basically awards for some of the Silicon Photonics, you Gotta do you mean.

Speaker Change: You bet.

Nedi Husseini: Do you need to enable them to do that.

Russell C. Ellwanger: Certainly, there's... See you later, both at this point going into the pluggable. So it's more or less the same ecosystem of customers and end customers. Also, within the Cypho platform that we have, we're doing a germanium modulator, so we have experience with CyG to be depositing and dealing with germanium. So yeah, there's certainly overlap both in the space and the customers, in the knowledge, and then specifically... I'm not trying to sound overly arrogant, but I think that our RF technology team is pretty much the best in the world. So it's all within the... within the frame of what they serve and what they know. Yes.

Nedi Husseini: Yeah.

Nedi Husseini: Certainly there's.

Russell C. Ellwanger: You know it's both at this point going into the plug a hole.

Russell C. Ellwanger: So it's more or less the.

Russell C. Ellwanger: Same ecosystem of customers and end customers also within the.

Russell C. Ellwanger:

Russell C. Ellwanger: Cypher platform that we have.

Russell C. Ellwanger: We're doing a germanium modulator. So we have experience with <unk> to be depositing in dealing with germanium.

Russell C. Ellwanger: So yeah, there's there's certainly overlap both in the space and the customers.

Russell C. Ellwanger: And the knowledge.

Russell C. Ellwanger: And then specifically.

Russell C. Ellwanger: And I'm not trying to sound overly arrogant, but I think that our.

Russell C. Ellwanger: RF technology team.

Russell C. Ellwanger: Pretty much the best in the World.

Russell C. Ellwanger: So it's all within the.

Russell C. Ellwanger:

Russell C. Ellwanger: Within the frame of what they serve and what they know and.

Russell C. Ellwanger: The advancements that we're continuing on the platform, looking at new modulator materials, et cetera. I think that that will keep us in a very strong leadership position, and it's based on having incredibly capable people. President of the company Marco Racanelli is an RF expert, the person running these activities at Priestler, I think the best of the best. So really having his whole team.

Russell C. Ellwanger: The advancements that we're continuing on the platform.

Russell C. Ellwanger: Now looking at.

Russell C. Ellwanger: Modulator materials et cetera.

Russell C. Ellwanger: I think that that will keep us in a very strong leadership position and it's based on having incredibly capable people.

Russell C. Ellwanger: I'm President of the company Mark a rock in L. A is an expert.

Russell C. Ellwanger: Person running these activities and pre seller.

Russell C. Ellwanger: As I think the best of the best.

Russell C. Ellwanger: So.

Russell C. Ellwanger: It really has and his whole team.

Russell C. Ellwanger: I could give you several handfuls of people, but I'd be fearful of them getting recruited. But really, excellent, excellent people. But it is, it's related to our Silicon Germanium project, but also, it's related to the capabilities of the people that are doing Silicon Germanium and know that RF space so well. I want to play this.

Russell C. Ellwanger: So I could give you a several handfuls of people, but I'd be fearful of them getting recruited someone but it really excellent excellent people and that's but it is it's related to our.

Russell C. Ellwanger: Silicon germanium, but as well it's related to the capabilities of the people that are doing so like premium I know that RF space so well.

Russell C. Ellwanger: Okay.

Nedi Husseini: We have extremely good customers that are very good partners within Now, we've done several press releases with Enelo in the past. The CEO of Enelo, Mario Panicchia, has been an amazing partner that, in general, has been very helpful for us. So the customer base that we have and the way we work with our customers are also tremendous enablers, and... [inaudible]

Russell C. Ellwanger: No I wont say this we have extremely good customers that are very good partners within that.

Nedi Husseini: We've done several press releases with the mellow in the past the.

Nedi Husseini: See all that Nello Mario open of Chia.

Nedi Husseini: It's been an amazing partner that's in general has been very helpful for us so.

Nedi Husseini: The the the customer base that we have in the way we work with our customers are also tremendous enablers.

Nedi Husseini: And technical advancement.

Russell C. Ellwanger: Just on that note, given how sophisticated the analog design is and the characterization of silicon, even if computation catches up, these wings are sticky. I shouldn't be concerned with any pricing pressure looking to next year because competition is catching up.

Nedi Husseini: Just on that note do you didn't pull sophisticated.

Russell C. Ellwanger: Analog design is in.

Russell C. Ellwanger: The characterization of Sydney Kim.

Russell C. Ellwanger: Given competition catches up.

Russell C. Ellwanger: The winds are sticky.

Russell C. Ellwanger:

Russell C. Ellwanger: I shouldn't be concerned with any pricing pressure looking into next year because competition is catching up.

Nedi Husseini: You could be a single source book sometime. Is that the right way of thinking about these new ways?

Russell C. Ellwanger: You could be a single source book some time is that the right way.

Nedi Husseini: These new routes.

Russell C. Ellwanger: If it's the right way, it's the way I'd like to look at it. I think it's predominantly correct.

Speaker Change: If it's the right way, it's the way I'd like to look at it.

Russell C. Ellwanger: Okay.

Russell C. Ellwanger: I think it's predominantly correct, it's very sticky.

Russell C. Ellwanger: And you know.

Russell C. Ellwanger: It's very sticky, and, you know, pricing pressure. You always have to work with your customers very closely on prices that allow them to win as well. If you have a good customer, it's not that you're being leveraged against A, B, or C competitors; it's that you're working together to make sure that they're successful in the market. So, pricing pressure, I honestly see it in many cases as being a partner to help each other be successful and win.

Russell C. Ellwanger: Pricing pressure you always have to work with your customers.

Russell C. Ellwanger: Very closely on prices that allow them to win as well.

Russell C. Ellwanger: Pricing pressure.

Russell C. Ellwanger: If you have a good customer, it's not that you're being leveraged against a b or C competitor that you're working together to make sure that they're successful in the market so pricing pressure I see it honestly in many cases as being a partner to help each other be successful and win.

Russell C. Ellwanger: But the way that one mitigates any pricing pressure is by having technological advancements to where you're either decreasing the form factor and hence increasing the amount of devices, Persilicon, Aerial Unit for your increasing performance to where the value becomes higher of the silicon that you're selling. So, but the pricing pressure. I don't think that that's such a big problem. The fact of having a sole supplier relationship is really where we try to work with all of our customers, and that's because we have a partnership in trust.

Russell C. Ellwanger: The the way that one mitigates any pricing pressure is by having technological advancements to where you're either decreasing form factor and hence increasing the amount of.

Russell C. Ellwanger: Devices per silicon.

Russell C. Ellwanger: Ariel unit or you're increasing performance to where the the value becomes higher of the silicon that you're selling.

Russell C. Ellwanger: But.

Russell C. Ellwanger: The pricing pressure I I I'm not I don't think that's happened, which are a big problem. The fact of having a a sole supplier relationship is really where we tried to work with Oliver customers and and that's off of having a partnership and trust.

Nedi Husseini: And in that context, um..., combined with silicon photonics, germanium, and combined with shrapnel RFSOI. Are these going to be? Margin Acree, David Williams, Lisa Thompson, Richard Shannon, Natalia Winkler, Avi Strum, Marco Racanelli, Noit Levy, Oren Shirazi, Russell Ellwanger, TowerJazz, or Marjorie Mitchell. Hopefully, there's not much to do there.

Nedi Husseini: And then we've got contracts.

Nedi Husseini: Combined.

Nedi Husseini: Silicon photonics through maybe even combined with shaping or it's like I.

Nedi Husseini: This is going to be.

Nedi Husseini: Launching.

Nedi Husseini: Peter.

Nedi Husseini: Or more neutral hopefully wants you to do this.

Nedi Husseini:

Russell C. Ellwanger: The silicon photonics is definitely a margin to create a Silicon Germanium has always been at the upper end of our margin spectrum in general. [inaudible] RFSOI itself is a very, very good margin, dilutes RF-SOI margin to some extent because the SOI substrate itself is very, So RFSOI has a very good revenue contribution, but the margin that you get on the RFSOI is really on You're not doing a big uplift on the substrate, and the substrate's expensive. So if you look at the total margin on an RFSOI wafer, it's not the highest margin that we sell. If you look at the margin per layer of silicon manufacturing, it's very...

Nedi Husseini: Silicon Photonics is definitely margin accretive.

Russell C. Ellwanger: And silicon germanium has always been at the upper end of our margin spectrum.

Russell C. Ellwanger: In general.

Russell C. Ellwanger: And Paula for so long.

Russell C. Ellwanger: RF Soi itself is very very good margin.

Russell C. Ellwanger: But.

Russell C. Ellwanger: Dilutes RF Soi margin to some extent is that the soi substrate itself is very expensive.

Russell C. Ellwanger: RF Soi.

Russell C. Ellwanger: It has a very good revenue contribution, but the margin that you get on the RF Soi is really off of the silicon that you're processing your.

Russell C. Ellwanger: Not doing a big uplift on the substrate in the substrates expensive.

Russell C. Ellwanger: So if you look at the total margin.

Russell C. Ellwanger: Of an RF soi wafer, it's not the highest margin that we sell if you look at the margin per layer them silicon manufacturing, it's very very good.

Russell C. Ellwanger: Okay.

Nedi Husseini: and then lastly, Alpexa. I couldn't hear the beginning of the question.

Russell C. Ellwanger: And then lastly, the opex.

Speaker Change: I don't think so.

Speaker Change: Cause it to be in the house.

Speaker Change: I couldn't hear the beginning of the question if you could repeat it.

Oren Shirazi: I'm shifting to OpEx. You did $33.5 million in Q1. How should we model this for the rest of the year?

Nedi Husseini: And shifting to Opex.

Oren Shirazi: $33 5 million for Q1.

Oren Shirazi: How should we model for the rest of the year.

Nedi Husseini: Our op-eds are pretty much flat, I mean, despite the revenue increase that Russell has made. Talking about, we do not expect to increase those OPEX because they are fixed costs. So I think the current level is the right level.

Oren Shirazi: Oh, our opex on a pretty much a flat despite the revenue increase the thrust of his.

Nedi Husseini: Talking about we do not expect to increase those real opex because there are fixed cost.

Nedi Husseini: Well I think current literally there he's delivered.

Nedi Husseini: But realistic.

Oren Shirazi: Just the model kind of slavish going forward. Thank you.

Nedi Husseini: So just the mother upon its sluggish.

Oren Shirazi: Okay.

Speaker Change: Got it thank you and congrats.

Speaker Change: No further questions.

Operator: I appreciate your coverage as well.

Speaker Change: Appreciate your coverage as well.

Lisa R. Thompson: The next question is from Leah Thompson of Zacks Investment Research. Please go ahead.

Oren Shirazi: The next question is from Lea Thompson of Zacks investment Research. Please go ahead.

Lisa R. Thompson: Hey, Leo.

Operator: Hi there. I do have a couple of questions for you. I was wondering, could you talk a little bit about the electronic vehicle market in the United States, how your products go into that, and what you're seeing as to what's going on there?

Lisa R. Thompson: Hi, there I.

Lisa R. Thompson: Do you have a couple of questions for you.

Operator: Was wondering could you talk a little bit of electronics like Oh.

Lisa R. Thompson: How are your products go into that and what you're seeing as to what's going on there.

Lisa R. Thompson: I'm sorry, I really couldn't make out the question. Could you answer it again or ask it again, please?

Speaker Change: I'm, sorry, I really couldn't make out the question could you sort of get a question that again please.

Operator: Sure. Could you talk a little bit about the electronic vehicle market and what you're seeing for your products there? Oh, yes. Thank you.

Lisa R. Thompson: Sure could you talk a little bit about the electronic vehicle market and what this means for your products there.

Speaker Change: Oh sure. Thank you.

Operator:

Russell C. Ellwanger: So, the biggest market that we serve and have served within the EV is battery management, which right now is not as strong as it had been as the overall automotive industry, but that is an area that we serve. We have a new platform, which is a reserve platform that is gaining a lot of traction for designs for battery management. I think the first protos on that will be happening in the fourth and first quarter, the fourth quarter of this year and the first quarter of 2025, according to recent customer interactions that I have had.

Operator: So.

Speaker Change: The biggest markets that we serve and have served with an easy is the battery management.

Russell C. Ellwanger: Which was.

Russell C. Ellwanger: Right now it's not as strong as it had been as the overall automotive is not but that is an area that we serve.

Russell C. Ellwanger: We have a new platform.

Russell C. Ellwanger: As a research platform that is gaining a lot of traction for designs for battery management.

Russell C. Ellwanger: I think the first protos on that will be happening in the fourth and first quarter fourth quarter of this year and first quarter of 2025 according to them.

Russell C. Ellwanger: Some customer interactions that I had house so the biggest area.

Russell C. Ellwanger: So the biggest area of the EV that we have is within battery management. Within automotive in general, we have a variety of other activities that we do, that have been press-released over the years. We do radar, silicon germanium-based radar. That was with Denso Toyota.

Russell C. Ellwanger: On the easy that we happens within battery management within automotive in general we have a variety of other activities that we do.

Russell C. Ellwanger: We have.

Russell C. Ellwanger: Now that had been press released him over the years.

Russell C. Ellwanger: Do.

Russell C. Ellwanger: Radar Silicon germanium based radar that was with Denso Toyota.

Russell C. Ellwanger: We have... a variety of activities with. Automatic door openings, spinning mirrors, a certain amount of activities with cameras. And right now, a lot of activity, be it with an electric vehicle or not, dealing with light. And I think I mentioned that in the script, dealing with silicon photonics for FMCW-based LiDAR, which has not been drawn into.

Russell C. Ellwanger: We have a.

Russell C. Ellwanger: A variety of activities with them.

Russell C. Ellwanger: Automatic.

Russell C. Ellwanger: Door openings.

Russell C. Ellwanger: Getting mirrors.

Russell C. Ellwanger: A certain amount of activities with cameras.

Russell C. Ellwanger: And right now a lot of activities be.

Russell C. Ellwanger: Be it with electric vehicle or not I'm dealing with lighthouse.

Russell C. Ellwanger: I think I've mentioned that in my script.

Russell C. Ellwanger: Uh huh.

Russell C. Ellwanger: Okay.

Russell C. Ellwanger: Dealing with.

Russell C. Ellwanger: Silicon Photonics for S. M CW days later.

Russell C. Ellwanger: Which has not gone into.

Russell C. Ellwanger: Mass Manufacturing yet, but it promises to really be that which will take over on Autonomous Driving for the Lidar Market. Those are the major activities that we do, with automotive and specifically with. Electric Vehicles. Now, there's many other products that we serve with an automotive focus as well, that comes from having purchased the Maxim Facility, where the bulk of the long-term contract we have is serving automotive, very captive, Wicked Maxim, and the specific applications that are served within there, I really shouldn't get into because that's back. [inaudible] on a contract, well, ADI, and that's predominantly what it is.

Russell C. Ellwanger: Mass manufacturing, yet, but promises to really be that which will take over on autonomous driving for the lidar market.

Russell C. Ellwanger: So.

Russell C. Ellwanger: Those are the major activities that we have with with automotive and specific with them.

Russell C. Ellwanger: With electric vehicles now there's many other products that we serve within automotive as well on that comes from having.

Russell C. Ellwanger: Purchased the.

Russell C. Ellwanger:

Russell C. Ellwanger: Maxim facility.

Russell C. Ellwanger: Where the bulk of the long term contract we have is serving automotive.

Russell C. Ellwanger: That's <unk>.

Russell C. Ellwanger: Very captive within Maxim.

Russell C. Ellwanger: And the specific applications that are served within there I really shouldn't get into because that's back some business and not mine.

Russell C. Ellwanger: But we sort of Maxim on a contract.

Russell C. Ellwanger: At this point and that's predominantly automotive.

Lisa R. Thompson: So, are you seeing demand going up, down, or sideways?

Russell C. Ellwanger: So are you seeing demand up down sideways.

Russell C. Ellwanger: I said initially that automotive demand is weak right now, and I reiterated that for battery management, that it's also down right now.

Speaker Change: Well I said.

Lisa R. Thompson: Initially that the automotive demand is weak right now and I reiterated that for battery management, but it's also down myself.

Lisa R. Thompson: Okay, and then a question for Oren. Could you explain what happened with taxes this quarter and whether we should still expect them to be about 14% for the full year?

Speaker Change: Okay, and then a question for all of them could you explain what happened with the taxes this quarter and whether we should still expect it could be about 14% for the full year.

Oren Shirazi: Yeah, the model should be that you should expect, I mean, all in. I mean, all in effective rate, whatever you want. The Israeli operations create 7.5% are taxable at 7.5%, the U.S. at 20%, Japan at 30%, so you can assume 14 or whatever.

Oren Shirazi: Yeah, the model should be the X factor I mean, all in I mean.

Oren Shirazi: All in effective rate whatever you want Disraeli operations create seven 5% and.

Oren Shirazi: Fixable at seven 5% of the U S. A 20% did you find it 30%. So you cannot so in 14 or whatever.

Lisa R. Thompson: For this, from Q2 and beyond, for this quarter, as you see, there was a one-time benefit, which is the basis for your question. Instead of having an expense, we have a benefit from some accrual. Historical, Accrual, and Reduction. But of course, this cannot be the baseline assumption for the future that we'll have tax benefits when we have pre-tax income, like in this quarter. So for the future, the assumption should remain the same.

Speaker Change: For these four in Q2 and beyond for this quarter.

Lisa R. Thompson: You'll see there was a one time benefits, which is the basis for your question.

Lisa R. Thompson: So they'll have an inexpensive wherever where they benefit for them from a poorly.

Lisa R. Thompson: He kind of cost reduction.

Lisa R. Thompson: But of course this cannot be the baseline assumption for the future tax.

Lisa R. Thompson: Tax benefit when we have break docs the income like in this quarter. So for the future of the assumptions remain the same.

Oren Shirazi: And then just to ask you about the interest in the other company, at $4 million, that was significantly lower than I was guesstimating just based on interest income. So what do we think about that going forward?

Lisa R. Thompson: And then just to ask you about the interest and other.

Oren Shirazi: It's 4 million that was significantly lower than I would guesstimate in the states that interest income so what do we think about that going forward.

Lisa R. Thompson: So, usually it's between four to seven million dollars per quarter. Last quarter, we had a one-time benefit there in that line from... Usually, in this line, it's not only interest; it's also gains from some sale of machinery or other specific transactions in that line, and again, from exchange rates. So this line is not something that is like the OPEX, which I could answer before that it's a fixed amount. Usually, it's between 4-7, obviously Q4-23 last quarter, the previous quarter was... exceptionally good, but you'll see that it's coming back to this level of force.

Oren Shirazi: So we usually its between $4 million to $7 million per quarter.

Lisa R. Thompson: Last quarter, we had a one time benefit there in that line.

Lisa R. Thompson: From.

Lisa R. Thompson: He was running in this line, it's not only interest it's also games from insomnia sale of machinery or other specific transactions.

Lisa R. Thompson: In that line.

Lisa R. Thompson: The gains from exchange rate so.

Lisa R. Thompson: This line is not the something like the Olympics, which I think we're done so before what are the perfect.

Lisa R. Thompson: A month.

Lisa R. Thompson: It's really between four to seven and obviously Q4 was 23 last quarter I mean previous previous quarter was.

Lisa R. Thompson: Exceptionally good.

Lisa R. Thompson: But you'll see that in for coming back to this live and so forth.

Lisa R. Thompson: Four to seven.

Oren Shirazi: Okay, I think you had any kind of a big exchange rate hit there, didn't you, this quarter? According to the press, well, not exchange rates, no. No, that wasn't it. We have a cylinder hedging transaction that hedges against any material change in the exchange rate. And actually, the exchange rate this quarter, the Israeli exchange rate, and the Japanese exchange rate didn't make any impact if at all, it was a little bit positive. So there was no significance of any material kind.

Speaker Change: Okay. I think did you have you had any kind of a big exchange rate.

Oren Shirazi: In this quarter.

Oren Shirazi: What is not.

Oren Shirazi: Nothing's changed with snow.

Oren Shirazi: No that wasn't it.

Oren Shirazi: Alright.

Oren Shirazi: We have a cylinder hedging transaction that hedge against any my theory, all are changing their generous and naturally that generate this corridor.

Oren Shirazi: Exchange rates and the Japanese accelerates it doesn't make it any impact if at all it was a little bit opposed to people. So there was no.

Oren Shirazi: It's significant.

Oren Shirazi: Zero.

Lisa R. Thompson: Okay, great. Thank you. That's all my questions. Thank you.

Speaker Change: Okay, great. Thank you that's all my questions. Thank you.

Operator: The next question is from David Dooley of Steelhead Securities. Please go ahead.

Lisa R. Thompson: The next question is from David Duley of Steelhead Securities. Please go ahead.

Operator: Yeah.

David Williams: Congratulations on a nice execution. Thanks, David.

David Williams: Congratulations on nice execution and thanks, David.

Russell C. Ellwanger: Sure. I just thought it. I just thought it

David Williams: Sure.

David Williams: I have a couple of questions. I'm guessing they're more housekeeping. Oren, you gave us a bunch of CapEx numbers, but they seem to kind of be over a multi-year period. I was wondering if you could give us your best guess as to when we're going to be able to do that.

David Williams: Got a couple of questions in there.

David Williams: One more housekeeping or you gave us a bunch of capex numbers, but they seem to kind of be over a multiyear period. I was wondering if you could give us your best guess as to what Capex is going to be in 2024.

David Williams: Best guess as to what CapEx is going to be in 2024.

Oren Shirazi: So, I mean, it's pretty straightforward from what I said. I mean, $200 million a year maintenance capex. So it's $50 million a quarter, plus we said $160 million remained this year and next year. You can assume about $30-$40 million a quarter for Agrate, and you saw in Q1 that the CAPEX was $98 million, which means that on top of the $50 million baseline, there was probably 40 to 50 million for Agrate, so you can assume this will also be for the next quarter.

Oren Shirazi: So I mean, it's a pretty straightforward with them for another phase I mean $200 million.

Oren Shirazi: Maintenance Capex.

Oren Shirazi: It's 50 million a quarter plus we.

Oren Shirazi: We said the 160 <unk> remained a D C over the next year you can assume about 30 40 million so another quarter for glop and you'll so weak in Q1, but the Capex is at 98, which means about both top of the 50 baseline there was.

Speaker Change: Probably $40 million to $50 million I got it. So you can assume this will be also for the next quarter.

David Williams: So $40 or $50 a quarter for a gopher? Yeah.

Oren Shirazi: A 40 or 50, a quarter for agave, yes, yes, okay. No full a further 11 access you don't want to speak about it. It's also related to all the Intel business for Capex that we buy from them and did they buy from vendors and fell to a friend or I don't want to enter into the number of jobs.

Oren Shirazi: Yes. Now, for Intel Feb 11X, I don't want to speak about it. It's also related to Intel's business, CapEx that we buy from them and that they buy from Windows and sell to us. And I don't want to enter the number. I just said that it's a three hundred million dollar investment that will start this quarter, Q2 2024, for the coming two and a half years. If you want, you can divide the $300 million by ten quarters, which is two and a half years, and reach $30 million. Everybody can make it a subject; I don't want to enter into specific numbers.

Oren Shirazi: Said.

Oren Shirazi: It's a three onwards medium rollout.

Oren Shirazi: And that's when we started this quarter Q2, 'twenty fulfilled the comings doing off yes. If you want you can divide.

Oren Shirazi: This runs maybe owned by then quota, which is doing I feels and reached 30 million around about.

Oren Shirazi: Everybody Gonna make you know something I don't want to put specific numbers.

Speaker Change: That's all.

David Williams: And then you were going to spend some more on SIFO and PsyG, right? Yes, SIFO and PsyG capability tools. I said it was multiple tens of millions of dollars. This year, if you average it over a few quarters, it's almost a quarter of that, but it will not be material amounts this year. Because we are now ordering those tools for capability, and most of the payments will not be DC.

Oren Shirazi: And then you will get a sensible on FIFO insight yes.

David Williams: Yes, I suppose how did your capability towards the I said, it's a multiple dozens of for multiple tens of millions of dollars out there. This year. If you average it over a few quarters.

David Williams: So you'll see it but it's not it will not be material amounts it's easier.

David Williams: Because we are now ordering those tools for capability.

David Williams: Most of the payments will not be this year.

Oren Shirazi: So that sounds like it adds up to somewhere like around 125 million, a quarter of CapEx.

David Williams: So that sounds like it adds up to somewhere like around 125 million in the quarter Capex.

David Williams: It could be, we don't give guidance for that, but it's a reasonable calculation. (inaudible)

Oren Shirazi: It's supposed to be we don't give a guidance for that that's a reasonable calculation.

David Williams: So quite not something particularly now.

David Williams: Just along the same lines, I'm looking at your cash flow statement and your press release. The depreciation expense was down like $6 million quarter over quarter. First of all, why was this depreciation down so much with you ramping up CapEx? And then if you could help us understand what that depreciation number is going to do on a quarterly basis for the balance of the year, I'd appreciate it.

Speaker Change: Just along the same lines I'm looking at your cash flow statement in your press release, the depreciation expense was down like 6 million quarter over quarter.

David Williams: First of all why depreciation down so much with you ramping up Capex and then if you could help us understand what that depreciation number is going to do on a quarterly basis for the balance of the year I'd appreciate it.

Oren Shirazi: Yeah, depreciation, as you can see, in the, you're looking at the appendix to the cash flow, it's a $60 million average per quarter. So a year ago, it was 62, a quarter ago it was 65, now it's 60. So it's pretty much the same numbers. The fact that it is, or was down, is not attributed to new caps, of course, that you are justifiably pointing out that it's going to be as a result of tools that finished their depreciation 15 years ago. So Yeah, so, what do you play, do you act like 15 years old? I'm 15 years old.

David Williams: Yeah.

David Williams: Depreciation as you can see in the Youre looking at the appendix to the cash flow it's a.

Oren Shirazi: $60 million of Legit.

Oren Shirazi: Quarter.

Speaker Change: So okay.

Oren Shirazi: It always was 60 to.

Oren Shirazi: 65 from our fixed fee. So it's pretty much the same numbers and the fact that these are what's done is not attributed to new carpets of cool.

Oren Shirazi: You all are justifiably pointing out that it is going up.

Oren Shirazi: It's oh he's out of it towards the finish still depreciation of 15 years ago.

Oren Shirazi: So.

Oren Shirazi: Yeah. So when it is placed against them.

Oren Shirazi: From 15 years ago.

David Williams: Ah, I think, yeah. So, anyway, it's probably tools that were purchased in 2009 and have finished their depreciation, but that's $60 million is the baseline, and you're right that you should add to that whatever amount of new capex that should be now will not change a lot.

Oren Shirazi: Yes.

David Williams: So.

David Williams: Anyway.

David Williams: Probably told US that were purchased in 2000 and I'm under finish desert position, but that's.

David Williams: The 60 million DAU, what I'll use the baseline.

David Williams: You're right that you should add to that the whatever amount of new capex that would be appreciated.

David Williams: They don't change a lot.

David Williams: Well, what do you think that will be for the balance?

David Williams: But what do you think that will be for the balance of the year to do that because it's kind of important for your gross margin.

Oren Shirazi: you know, because it's kind of important for your close margin. So I don't think it will go up much above the $60 million mark, maybe $65 maximum. Because one reason is that, as I mentioned, I mean the Intel CapEx. For Feb 11 CapEx, this will not be starting to be depreciated this year, right? And the other tools until we start to be in play also, if not that we are paying and immediately start depreciation.

Oren Shirazi: So you know.

Oren Shirazi: I don't think he's going to go up much above the 60 million, maybe 65 maximum because the.

Oren Shirazi: One reason is that as I mentioned, both I mean, the Intel Capex seemed.

Oren Shirazi: Aimed at fulfilling 11 Capex. This is will not be starting to be depreciated. The fear right until it was stopped their production.

Oren Shirazi: Are the ideal.

Oren Shirazi: The tool is until we start to be in play.

Oren Shirazi: So it's not that we are paying and immediately start depreciation first you're bang on unfortunately, you'll get the tours. After a few quarters until it is qualified and then it started to position usually sometimes oh, you ideally there wouldn't be any impact from the underlying factors that we started depreciation right and there's I'll say they felt the death of one of the reasons for it.

Oren Shirazi: First, you're paying; unfortunately, you get the tools after a few quarters until they're qualified and then start depreciation, usually sometimes with a year delay. There will be an impact from the Agrate tools that will start depreciation, right? And Russell referred to that as one of the reasons for Edwins. So I would assume 65 new levels.

Oren Shirazi: Yeah.

Oren Shirazi: So I would assume 65.

Oren Shirazi: The new living.

David Williams: Okay, and then just the final question for... for me, and...

Speaker Change: Okay and then just.

Speaker Change: Final question for me.

David Williams: Felipe.

David Williams: It has a lot to do with these depreciation questions, because going forward, you're ramping up your capex.

David Williams: It has a lot to do with the depreciation question going forward, you're wrapping up your capex and Opex and depreciation is going to be going up and during that time frame I'm kind of wondering what you think the drop rate of the business. It's gonna be you've always given us a target drop rate, but that's not one year spending 100 and.

David Williams: and now, of course, in depreciation, it's going to be going up. And during that time frame, I'm kind of wondering what you think the drop rate of the business is going to be. You've always given us a target drop rate.

David Williams: 25 million a quarter in Capex, so I'm kind of wondering when we're at these elevated capex levels, what the drop rate to gross margins as you expect with revenue growth through the balance of the year.

David Williams: So we believe.

David Williams: Strongly in our financial model that we published in November and it already.

David Williams: Included baked into that all those capex or forgot to full truly live and expose children in the oilfield division another capability at all.

David Williams: Are there milestones are outlined there are very clear I mean.

David Williams: We expect to be $502 60.

David Williams: 66, so it's almost 20%.

David Williams: And that's profit margin and you'll have the girlfriend operating soul.

Speaker Change: Well I don't I can't see that right now so what could you just.

David Williams: Articulate what you think the gross margins drop rate is going to be this year.

David Williams: This year, we didn't give a guidance for this year.

Speaker Change: Okay. So longer term you think the drop rate is going to be what again.

David Williams: I couldnt exactly to the slides, which is publicly filed with the financial model.

Speaker Change: Yeah, I can't see the slides right now or that's why I'm just asking.

Speaker Change: I have it in front of us either but we'll pick it up.

David Williams: Okay.

David Williams: Alright.

Speaker Change: That's great. Thank you.

Speaker Change: Uh huh.

David Williams: So the financial automotive clearly states I'm, just reading the publicly filed documents.

David Williams: The gross profit supposed to go up from 347, a baseline that was in the end of last year to seven faulty or your gross profit out of 266, which is 32% incremental margin.

David Williams: Alright, thank broker to go from less than 200 to 560 or you are which is 30% incremental net brokerage firm 200 to 500, which is a two four acre growth, which is 24% incremental margin.

David Williams: Yeah.

Ellinger: There are no further questions at this time, Mr. Ellinger would you like to make your concluding statement.

David Williams: [inaudible]

Speaker Change: I Wouldnt say its second.

David Williams: So I'm kind of wondering, when we're at these elevated capex levels, what the drop rate to gross margins is you expect with revenue growth through the balance of the year. Thank you.

David Williams: So.

Oren Shirazi: So we believe strongly in our financial model that we published in November, and it already included, baked into that, all those CAPEX of Agrate for sure, 11x for sure, and also the additional capability tools, and the margins are outlined very clearly, I mean, that we expect to be 500 at 2.66, so it's almost 20%, net profit margin, and you have growth and operating.

David Williams: To summarize.

David Williams: As we move through the year remained focused on and confident about continuous growth.

Oren Shirazi: Driven by the performance of several of our differentiated technologies.

Oren Shirazi: Being critical to present market needs.

Oren Shirazi: And not having partnered with market leader customers, who really are true partners.

Oren Shirazi: This growth is against the landscape, but not yet robust market.

Oren Shirazi: Recent customer forecast give us reason to believe the market recovery is forthcoming.

David Williams: I can't see that right now, so could you just please articulate what you think the gross margin drop rate is going to be this year?

Oren Shirazi: Greatly appreciate your continued support and confidence in our vision.

Oren Shirazi: This year? We didn't give any guidance for this year.

David Williams: Our team is eager fully prepared to continue to capitalize on opportunities.

Oren Shirazi: Targeting substantial value for our customers and shareholders.

Oren Shirazi: As far as.

Oren Shirazi: Activities going on within the next month or two.

Oren Shirazi: And.

Oren Shirazi: Conferences, where we really hope that we'll have opportunity to see you on.

Oren Shirazi: On may 20th twenty-first will participate in the 50 <unk> annual J P. Morgan Global Technology Media and communication conference in Boston.

Oren Shirazi: On May 26 will participate in the 25th annual Israeli open all the conference in Tel Aviv.

Oren Shirazi: And on May 29th in 30th who will be attending the 52nd annual TD, calling technology media and Telecom conference in New York.

Oren Shirazi: As many as you as we have opportunity to come.

David Williams: Okay, so longer term, what do you think the drop rate is going to be again?

Speaker Change: We would look forward to meeting talking with you.

Oren Shirazi: according exactly to the slide which is publicly filed with the financial models.

David Williams: Yeah, I can't see the slides right now, Oren, that's why I'm just asking.

Oren Shirazi: We don't have it in front of us either, but we'll pick it up. Okay. One second. All right.

David Williams: And explaining.

David Williams: That's great; thank you.

Oren Shirazi: So the financial model clearly states, I'm just reading the publicly filed documents, that the gross profit is supposed to go up from 347 baseline that was at the end of last year to 740 a year gross profit out of 266 which is 32% incremental margin, operating profit is supposed to go from less than 200 to 560 a year, which is 30% incremental, and net profit is supposed to go from 200 to 500, which is a 2.4 acre growth

Oren Shirazi: Where we're at where we're going and why we're confident.

Operator: There are no further questions at this time. Mr. Ellwanger, would you like to make your concluding statement? I wouldn't be...

Russell C. Ellwanger: I would indeed, thank you.

Russell C. Ellwanger: So to summarize, as we move through the year, remain focused on and confident about continuous growth, driven by the performance of several of our differentiated technologies being critical to present market needs, and Nat having partnered with market leader customers who really are true partners. This growth is against a backdrop of a not yet robust market.

Russell C. Ellwanger: Recent customer forecasts give us reason to believe a market recovery is forthcoming. We greatly appreciate your continued support and confidence in our vision. Our team is eager and fully prepared to continue to capitalize on opportunities, targeting substantial value for our customers and shareholders, as far as... activities going on within the next month or two, conferences where we really hope that we'll have an opportunity to see you. On May 20th and 21st, we'll participate in the 52nd Annual JPMorgan Global Technology, Media, and Communication Conference in Boston.

Ellwanger: Where we would be.

Russell C. Ellwanger: On May 26, we'll participate in the 25th Annual Israeli Open Armour Conference in Tel Aviv. And on May 29th and 30th, we will be attending the 52nd Annual TD Callen Technology Media and Teleconference in New York, so as many of you as have the opportunity to come. We look forward to meeting, talking with you, and explaining where we are, where we're going, and why we're confident about where we live. So thank you very much again, and have a wonderful day and following.

Ellwanger: So thank you very much again and have a wonderful day and following week okay.

Operator: Thank you. This concludes the Tower Semiconductor conference call. Thank you for your participation. You may go ahead and disconnect.

Speaker Change: Thank you. This concludes the tower semiconductor conference call. Thank you for your participation you May go ahead and disconnect.

Operator: Okay.

Operator: Yes.

Operator: Hum.

Operator: [music].