Ichor Holdings, Ltd. (NASDAQ:ICHR) Q4 2022 Earnings Call Transcript

Ichor Holdings, Ltd. (NASDAQ:ICHR) Q4 2022 Earnings Call Transcript February 7, 2023

Claire McAdams: Good afternoon, and thank you for joining today’s fourth quarter 2022 conference call. As you read our earnings press release and as you listen to this conference call, please recognize that both contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and which could cause actual results to differ materially from such statements. These risks and uncertainties include those spelled out in our earnings press release, those described in our annual report on Form 10-K for fiscal 2021 and those described in subsequent filings with the SEC. You should consider all forward-looking statements in light of those and other risks and uncertainties.

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

Jeff Andreson: Thank you, Claire. And welcome to our Q4 earnings call. Q4 revenues of $302 million, moderating 15% from our record third quarter. As we indicated in our January 10 preannouncement, we witnessed further weakening in customer demand in the last month of the quarter. So while we had previously expected to report a decline in sales for both Q4, as well as the current quarter, our actual results and current forecasts indicate quarter-over-quarter declines that are modestly higher than what we were expecting a quarter ago. Not surprisingly, this change in the near-term business environment has been echoed by leading equipment OEMs, with significantly reduced shipment levels and build plans expected for the March quarter.

The current expectation is that following the first quarter decline, industry shipments should stabilize somewhat and we should see a relatively balanced WFE demand environment between the first and the second half of 2023. As we reflect on 2022, which was a record year for WFE, we reported strong year-over-year revenue growth, expanding gross margins and record earnings, all while navigating through a highly dynamic and often challenging business environment. We grew revenues by 17%, which represented organic growth of more than 10% in addition to the full year impact of the acquisition of IMG. This compares to overall WFE growth in the high single digits. Gross margin improved 30 basis points, and we reported record earnings of $105 million or $3.62 per share.

On the last quarter’s call, we discussed the softening business environment expected for 2023 and the drivers for our revenue that should result in our continued outperformance versus WFE in the coming year. In particular, we discussed our reduced exposure to the memory market, our increased exposure to EUV lithography and our expectations to continue gaining market share and winning new product evaluations. All three of these drivers continue to be very much intact today. First, we continue to estimate that our exposure to the memory market fell to below 40% of our revenues in 2022. Current expectations are that memory WFE could be down as much as 50% this year, which is higher than we expected a quarter ago. As a result, even though foundry and logic capital spending is expected to hold up better than memory this year, the worsening memory market has certainly led to overall cuts and revenue expectations for 2023.

Next, we continue to forecast growth in the part of our business that is tied to EUV. The WFE market is currently experiencing an unprecedented bifurcation and outlooks between lithography and the other major segments of WFE, such as etch, deposition and process control. For example, within the overall WFE outlook calling for a year-over-year decline of 20% or more, revenues in the lithography segment are expected to increase by 25%. This means that the rest of the market or non-litho is expected to be down in the range of 25% to 30%. And while we steadily increased our share of lithography market over the past several years, it continues to represent less than 10% of our revenues, and therefore, the majority of our revenues will be impacted closer to the 25% to 30% range declines that are expected for non-litho WFE.

We continue to expect three primary offsets to this forecast that can help add some resilience to our revenue performance in 2023. The first is clearly the continued growth expected in our gas delivery business serving the EUV lithography market. The second is the portion of our revenues from the IMG acquisition that is independent from the semiconductor industry. While a small piece of our overall revenues today, the IMG sales forecast to areas such as medical, industrial and aerospace are holding up better than WFE in 2023. And lastly, we continue to expect to benefit from success in gaining market share and winning new product evaluations. Before providing an update on our share gain initiatives, I’ll also add a fourth potential offset, which is that our revenues tend to recover more sharply when industry spending rebounds.

Current expectations call for a bottoming in non-litho WFE shipments around midyear, followed by the beginning of a recovery. Depending on the slope of the recovery, we could see a material improvement in customer demand towards year-end, and that would, therefore, be a fourth offset to the 25% range declines expected this year, which brings me to an update on our share gain initiatives. Historically, we have taken advantage of these slowdowns in industry demand to drive market share gains as our customers are able to focus more resources into new product evaluations and qualification. Our areas of focus remain: qualifying more of our internally developed machining components. We have several opportunities that we are quoting this quarter and hope to see first revenues in the second half once qualified, leveraging our global weldment footprint to gain additional share.

Qualifying our next-generation gas panel, we expect to ship a third qualification unit by midyear and qualifying our chemical delivery systems as well as developing new components that address this market. Beyond these, we are continuing to work with the customer on a gas delivery solution that serves the growing silicon carbide market and expect to deliver our first unit for qualification on late Q1. So our focus turns to the expected spending environment over the next several quarters in our ability to manage our variable operating model to adjust to lower levels of WFE demand. We have executed reductions in our workforce to align to the business volumes we expect in 2023 across our global footprint. We have always maintained good discipline on operating expenses, and we’ll continue to invest in our R&D programs and optimization of our capacity to ensure we can support the future growth in the business.

In 2023, these continued investments will, by definition, result in a more limited reduction in operating expenses as compared to the levels of revenue decline, as Larry will discuss later. We are an essential part of our customers’ growth plans as we look beyond this current downturn. And just as they will continue to invest for the future, we will as well, which in turn will drive strong operating leverage as we come out of this temporarily weak business environment. In the meantime, we are confident that we will show solid financial results and strong cash flow performance during 2023, which, by the way, is expected to be the third largest WFE year in our industry’s history. And with that, I will now turn the call over to Larry. Larry?

Larry Sparks: Thanks, Jeff. First, I would like to remind you that the P&L metrics discussed today are non-GAAP measures. These measures exclude the impact of share-based compensation expense, amortization of acquired intangible assets, nonrecurring charges and discrete tax items and adjustments. There is a very helpful schedule summarizing our GAAP and non-GAAP financial results, including the individual line items for non-GAAP operating expenses, such as R&D and SG&A, in the Investors section of our website for reference during this conference call. Fourth quarter revenues were $302 million, up 5% from Q4 of last year and down 15% from our record third quarter. Even though revenues declined more than expected, gross margin of 16.7% represents flow-through of approximately 25% on the revenue volumes compared to Q3, which is consistent with our expectations going into the quarter.

Q4 operating expenses were $23.4 million, slightly higher than forecast, primarily due to an increase in R&D investments in support of our new products. The resulting operating margin was 8.9%. As a result of higher interest rates, interest expense increased to $4.2 million in line with our expectations while our effective tax rate was lower than expectations at 7%, reflecting the revised full year effective rate of 9%. The resulting EPS for Q4 was $0.72. Now I will turn to the balance sheet. As expected, cash conversion of working capital improved again in the fourth quarter, and we generated $32 million of free cash flow. Cash from operating activities was $39 million and CapEx for the quarter was $7 million. Cash flow from operations benefited from a $47 million decline in accounts receivable and receivables DSO were 41 days compared to 47 in Q3.

Inventories were $284 million at year-end, $7 million lower than Q3 with turns of $3.5 million. Total cash was $86 million at quarter end, up $30 million from Q3. And total debt was $303 million, down about $2 million from Q3. Now I will turn to our first quarter guidance. With revenue guidance in the range of $210 million to $240 million, our Q1 earnings guidance is $0.19 to $0.37 per share. The midpoint of revenue guidance at $225 million reflects about a 25% decline from Q4. At this revenue level, we are expecting gross margins in the range of 15.5% to 16%, which incorporates our recent new and previous cost reduction action. The result is an improvement in flow-through on the lower revenue volumes to about 20% compared to 25% in Q4. At this time, we expect operating expenses to decline to approximately $21.7 million in Q1 through a combination of headcount and other controllable spending reductions.

We will continue to maintain our R&D investments in support of new product programs with the majority of the quarter-over-quarter spending reduction coming from G&A. We will continue to invest in new product programs and critical IT infrastructure, and currently expect our quarterly OpEx run rate to remain around $21.5 million to $22 million for the balance of the year. We expect our interest expense will be $4.9 million in the first quarter, reflecting the continued increases in interest rates. Our tax rate in Q1 is expected to be 10%, and we estimate our fully diluted share count to be approximately $29.4 million. Operator, we are ready to take questions. Please open the line.

Q&A Session

Operator: Thank you. We will now be conducting a question-and-answer session And the first question comes from the line of Brian Chin with Stifel. Please proceed with your question.

Brian Chin : Hi, there. Can you hear me okay?

Jeff Andreson: Yes.

Brian Chin : Great. Good afternoon. And thanks for allowing me to ask a few questions. Maybe, Jeff, just to kick things off, it sounds like €“ and just correct me if I’m wrong here, but it sounds like you said maybe revenue could drift a little bit lower in Q2 in terms of that midyear commentary about shipments, maybe bottoming. Can you give a sense of €“ that’s roughly accurate percentage-wise, how closer are we to maybe the trough here in Q1 relative to maybe what you think in Q2? And then can you also wrap that around how you would characterize your customers’ inventory levels relative to other slowdowns and kind of whether you think your shipments trend at this point pretty much in line with theirs.

Jeff Andreson: Yes, good question. So at this stage, and I think given our visibility, we kind of see the two quarters relatively the same, I would say, if we €“ it depends on what was in Q1. If things pull forward, then maybe it moderates down. If things flatten a little, maybe it moderates up or something. But we see them pretty similar right now. So we see the first half is the low point. And whether I can call it Q1 or Q2 exactly now I can’t, but I think they’re very close and very similar. And the second part of your question, no, I’ve kind of forgotten it.

Brian Chin: Customer inventory.

Jeff Andreson: Customer inventory. I would say when you look at gas panels, I’d say it’s pretty muted. Most of that, we were kind of chasing demand to some degree and staying up and close. Most of the impact will be in the component side. And as I have said in the last conference we attended in general in the last call is that we think that will be less of an impact than we saw in the 2018 downturn, I think, it took a while for the component business. I would say part of our miss this quarter where we preannounced some of that was in the components being more soft. And so we’ve already seen some of that, but I don’t think it will be the depths we’ve seen before. So our customers probably will do some inventory adjustments, as you guys can see their inventory levels. But I think it will be a less impact than we saw in the last one.

Brian Chin: Okay, that’s helpful. And then, Jeff, I think in your remarks, you referenced, I guess, some optionality whereby revenue could pick up prior to year-end. What are you looking at that provide some optimism here? Is it more memory, advanced logic foundry, trailing edge focused? Or were you commenting more in reference to visibility you have into company-specific span expansion initiatives?

Jeff Andreson: Well, what I would say is the comment was largely around if we’re going to see 2024, and I would say most people think that will be up today, well, we’re ahead of that when it comes to providing our components, have the longest lead time in what we deliver. And then as you know, our gas delivery and chemical delivery usually is kind of leading by about a month. So we’ll see it a little sooner, and that’s what it’s meant to say. So depending on when we see the uptick, we should see a quicker reaction than maybe our customers’ revenue shift.

Brian Chin: Okay, got it. So looking at the natural order of things in terms of how supply chain operate and work.

Jeff Andreson: Yes.

Brian Chin: Maybe one last thing for Larry real quick. Clearly, strong cash flow generation in Q4 and receivables came way down. Do you think inventories €“ can we look for inventories to come down and continue to generate pretty good working capital cash flow here even with the step down in revenue in Q1?

Larry Sparks: Yes, that’s our expectation over the next couple of quarters is to drive that inventory down. It came down a little bit in Q4, but we expect that to come down more significantly in the next couple of quarters.

Brian Chin: Okay, great. Thank you.

Jeff Andreson: Thanks Brian.

Operator: And the next question comes from the line of Quinn Bolton with Needham & Company. Please proceed with your question.

Quinn Bolton: Hey, guys. Just wanted to ask relative to last quarter. You sort of talked about the ability to outperform WFE by about five points. It sounds like on this call, you’re saying, hey, maybe you don’t outperform all of WFE because the strength in lithography, but it still sounds like you’re confident in outperforming the nonlitho WFE of down 25% to 30%. So, if we’re thinking about the year, would I be correct in thinking that something in the down 20%, 25% would be the right ballpark based on where you sit today?

Jeff Andreson: Well, I’d say we see the market down 20% to 25%. So, maybe when I talked about the outperformance of 5%, it’s really around €“ that includes the EUV lithography performance, market share gains in that. So, it depends on where the market ends up, but we think we’ll be about five percentage points better based on some of that, the IMG side of the business that isn’t floating down and things like that.

Quinn Bolton: Sorry, Jeff. I just want to make sure I’m very clear. You still think you can outperform total WFE by five points? Or do you think it’s the nonlitho portion of WFE?

Jeff Andreson: Nonlitho.

Quinn Bolton: Nonlitho, okay. Perfect. And then…

Jeff Andreson: Alright.

Quinn Bolton: No. No. Thank you for the clarification. And then the second question, Larry, you had mentioned seeing a 20% fall-through in the March quarter versus previous expectations of a 25% fall-through on incremental revenue. Do you expect that 20% fall-through to continue into future quarters? Or does that 20% fall through really reflects some of the cost reduction activities? And then as we get into the second quarter and beyond, we should sort of think about going back to that 25% fall-through whether revs are up or down in subsequent quarters?

Larry Sparks: Well, I think the €“ as we said before, we started at 25%. We have a little bit €“ about between 20% and 25% depends on product mix and some of our share gains, so I’d say we’re probably somewhere in between 20% to 25%. 2020 really does reflect a bottoming out of some of our product mix, and then we did some pretty significant cost reductions starting in the quarter that we’re going to see come to kind of full benefit this quarter if that helps.

Quinn Bolton: It does. And then last for me, Larry or Jeff, can you talk about the company’s plans to perhaps get more aggressive on debt paydowns, interest expense is almost at $5 million a quarter, and it feels like we may have another one or two rate hikes still to go. Do you think with the strong cash flow generation that you’ll be more aggressive with debt paydown over the next couple of quarters?

Jeff Andreson: Yes. I think that right now is kind of our primary plan. As we generate cash, we know where we can run our business at. You guys have seen it. And so as we start to generate cash and pull that inventory down, we’re going to pay off some of the debt along the way.

Quinn Bolton: Perfect. Okay. Thank you. I’ll get back in the queue.

Jeff Andreson: Yes. Thanks.

Operator: And the next question comes from the line of Craig Ellis with B. Riley Securities. Please proceed with your question.

Craig Ellis: Yes. Thanks for taking my question and appreciate all the color so far. I wanted to just follow up on some of the dynamics that are going on in the business in the very near-term. Jeff, I think you mentioned that one of the things that you were seeing is relative strength in gas delivery and EUV. So as we think about the way the segments are performing, is it fair to think that gas delivery would be performing relatively well versus some of the other segments? Or how do we think about the gives and takes across gas delivery, chemical delivery, weldments and precision machining?

Jeff Andreson: Okay. I’ll take in one piece at a time. I think with EUV, we clearly expect a pretty significant growth year for us, largely aligned with comments that our customers made. Gas delivery, I think, will have less of any kind of inventory adjustment. So I would say our components will probably drop down early and then recover a little quicker in the back. So it’s a bit of a mixture of different types of business and stuff. But I think in general, we’d see the second half, we’d hope to see our components business grow because that’s where a lot of focus of our share gains are at, and maybe in the front half, gas will perform better than the other segments of the business.

Craig Ellis: Got it. And then on the €“ just staff management, staff planning, Larry. Did you say that you put through the more SG&A-focused reductions already? And is that in the first quarter’s OpEx guide? Is there anything left to do? And are you saying that you’re happy with where staffing is on the manufacturing side, and that will just be steady here at current levels as we go through the trial?

Larry Sparks: Yes. I think we’re pretty much done. We did some of this late in December time frame and then very early January, so we’re pretty complete regarding the personnel actions. And we’ve not only just people impacts, but mandatory shutdowns and overtime reductions. And so I’d say the majority of that is showing up in the Q1 results both on the cost of sales side and on the OpEx side as well.

Jeff Andreson: Yes. I think just to add a little color, Craig.

Craig Ellis: Yes. Go ahead Jeff.

Jeff Andreson: Late in the year we began kind of the rightsizing with temporaries and things like that. We did have to impact some RFTs in early January, unfortunately. But we’ve largely rightsized them to a large degree to reflect kind of the revenue with some potential burst capacity in our manufacturing operations. And then in OpEx, as Larry always reminds us is we’re pretty OpEx light. We’re not very extravagant that way, but given the run rate that Larry put in his comments you’d see that’s around a 5% year-over-year kind of target reduction. And we’ve got those plans in place.

Craig Ellis: Got it. And Larry, I typically think of gross margin having the highest correlation to volume, and you’ve been clear with the revenue guidance for the quarter. And Jeff noted that 1Q, 2Q, we might bounce up or down a little bit, but that looks like a bottom. The question is, as we think about the contour of gross margin through the year, is there anything happening from a one-off basis that would impact how we think about the gives and takes, either from the first quarter to the second quarter or beyond just a potential volume benefit, things that could happen in the back half of the year?

Larry Sparks: I think if you look at Q1 to Q2 and assuming revenue is fairly consistent and assuming the product mix between gas and the components business, we wouldn’t see much of a change between what we’ve guided in Q1 and what we would expect in Q2. I think what happens in the second half, one of the benefits, and Jeff mentioned this is that we do expect to drive a lot of share gains, primarily in the components business with some of the new product wins and some of the things that were in the qualifications now. So we would expect that the component mix of our business would improve and the fact that some of the inventory impacts that we saw in the fourth quarter and kind of early in this year would moderate some. So we do expect a little bit of a tailwind when it comes to margin going to the back half of this year.

Craig Ellis: That’s helpful. And then just clarifying that new product win point either for you or Jeff, can you just put some context around how material the wins are that you’re seeing now that could start to impact the business in the second half of the year relative to prior years? Any context on, where the shakes out top of the list or bottom of the list would be helpful? Thank you.

Jeff Andreson: Yes. I’ll give you without being too specific. I mean, obviously, we’re trying to focus on machine components and things like that, and that’s usually in kind of the high 30%, low 40% gross margin. So if you look at the outperformance we were talking about, I’ll call it, largely in the nonlitho area, a lot of that is focused around that particular area. There is some incremental I’d call it subassembly and gas that we can probably pick up but largely focused on getting new components qualified in the second half. And that will €“ that like Larry said, that’s a strong tailwind for us. When we see that side of the business grow, the incremental flow-through is much higher than what we’ve seen on the average going down, so.

Craig Ellis: Got it. Thanks guys.

Jeff Andreson: You bet.

Operator: And the next question comes from the line of David Duley with Steelhead Securities. Please proceed with your question.

David Duley: Yes. Thanks for taking my question. I was wondering you gave us an assortment of reasons why your non-core businesses could uptick, I guess, in the back half of the year. Could you perhaps rank order what you think the €“ I think you gave us four reasons. What do you think are €“ what is the biggest to largest opportunities of those offsets that you talked about?

Jeff Andreson: Yes. I would say probably in rank order without sizing them specifically, obviously, we have the EUV growth that’s different than the overall WFE growth. We also have incremental market share wins largely around €“ the next biggest one will probably be around qualifying components. And then kind of bringing up the end is probably more around the chemical delivery.

David Duley: Okay. And I’ve asked this question in the past, and I’ll just ask it again just sort of fresh commentary. As far as the new gas panel product goes you talked about, I think, shipping another evaluation system in the middle of this calendar year. When would you expect the product to start to generate some significant revenue? And is this something that your customers will easily adopt? Or it’s just €“ once you have a new product that’s improved with your own components, does it take a lot longer to get into production? I’m just looking for timing?

Jeff Andreson: Yes. I would say I’m going to answer it in two pieces, a fully kind of integrated gas panel, which has the bulk of our components on there. These are the two evals we have out there. The earliest I would probably expect one to be qualified and start to get on a platform of any significance would be late in the year. But the other one kind of following behind that. The midyear one will probably take up to a year. And then having said that, as we’ve talked in the past, components that we’re putting on there can be also integrated into existing gas delivery. Those I would say some of those qualifications are done, and we’ll start to implement some of those in the first half of the year, and there’s more that we’re working on to try and implement and qualify, as I said in my prepared comments for the second half of the year. So that’s kind of how we see revenues associated with those big moving pieces.

David Duley: Okay. Final thing for me is you talked about a second half recovery for the industry. I’m assuming you’re getting that feedback from your customers. Are there any other €“ I guess the simple question is, what gives you confidence that we will see a second half ramp? And that’s it for me. Thanks.

Jeff Andreson: Yes. Well, I mean, I think it’s the slope of the recovery. I think what we’re trying to indicate is that we kind of €“ we see the bottom being the first half and how big the second half of the year will probably, for us, at least be contingent on how the market recovers in overall. But we do see a modestly up back half from the front half today.

David Duley: Thank you.

Jeff Andreson: Thanks.

Operator: And the next question comes from the line of Krish Sankar with Cowen. Please proceed with your question.

Robert Mertens: All right. This is Robert Mertens on behalf of Krish. Thanks for taking my questions. Just first, in terms of scenario this year of WFE contracting, say, the 20%, 30%. And I know you have the EUV portion of the business. Just how would you sort of frame inventory drawdown by customers? I’m just trying to make sure that I have the right numbers in terms of how you view your business versus the overall WFE market?

Jeff Andreson: I think we’ve talked about the €“ you’re going to have to talk about them in lithography and nonlithography segments. And we’re going to see a fairly healthy percentage growth in EUV. And in relation to inventory, I don’t know if you’re talking about the deferreds that have been talked about that one of our customers are not, my comments will be really around system shipments. The other side of that is the nonlitho WFE, this again we’ve talked about outperforming on the downside by going down about 5 percentage points less than the overall market for the reasons we’ve talked about on the call. From a customer-specific inventory, they will rightsize their component inventory. We’ve already seen some of those effects.

My belief is that, that will be largely done in the first quarter and really occurred late in the fourth quarter as well. But it may roll a little bit into the second quarter, it’s hard to tell at this point. Gas panel inventory is not generally hung up between two quarters and two years. But there’s always a little bit when you have these sharp downturns. So I don’t know if that answered all your questions, Robert.

Robert Mertens: No, that’s definitely helpful. And then maybe just another one around your earlier pre-announcement, just when you start experiencing the incremental weakness in the quarter, and was it right to say that, that was primarily in the components portion of the business?

Jeff Andreson: No. We saw €“ I would say it’s largely tied to just the memory softness. Most of what we saw was memory, but not 100% of it. Components was a fair chunk of it, but the gas panels also saw reduction for sure.

Robert Mertens: Okay. All right. Thank you.

Jeff Andreson: Thanks Robert.

Operator: And the next question comes from the line of Hans Chung with D.A. Davidson. Please proceed with your question.

Hans Chung: Thank you for taking my question. I’ve just two quick questions. First, so any update on the supply chain constraints. I remember last quarter we saw much improvement but still have some overhang. Just wondering how €“ are those challenges are now completely behind? And is any implication to the, of course, marketing or the ability to deliver things like that? Thank you.

Jeff Andreson: No, I’d say the supply chain has been pretty good position right now or health. It’s not €“ it’s never perfect. So there still are pockets that we’re working, but I would say those are things that we’re working out months in advance looking ahead. But I’d say largely the component suppliers to us are performing pretty well, given the downtick in demand, there’s plenty of capacity out there. So we’re not seeing much in the way of supply chain. And so it’s not going to be something that necessarily we can see impacting us today.

Hans Chung: Got it. And then a follow-up on the next-generation gas panel product. So first, I think you mentioned the third tool is expected to deliver by midyear. And any color around whether it’s existing customer or new customer, and what type of application are useful? And then I think for the first Q €“ previous first Q, it seems like it could start to see the follow-on order in 2024. So I just wondered, like how much the revenue opportunity could be in 2024 for the next-generation gas panel?

Jeff Andreson: Hans, good question. We’ve said that the €“ of the first two, one is a new customer and one is an existing customer. The third one would also be to an existing customer. The timing and the size, I mean, our gas panel business is fairly significant. It’s hard for me to put a number on it at this stage until we actually know what we’re going to be qualified on. We do know the application. Unfortunately, I can’t share that on a conference call. But the opportunities will be measured in tens of millions of dollars by platform if we win a whole platform on an annual basis.

Hans Chung: Thank you.

Jeff Andreson: Okay.

Larry Sparks: Thank you, Hans.

Operator: Thank you. At this time, we have reached the end of the question-and-answer session. And I would like to turn the call back over to Jeff Andreson for closing comments.

Jeff Andreson: Thank you for joining us on our call this quarter. I’d like to thank our employees, suppliers and customers for their ongoing dedication and support as we continue to navigate this highly dynamic business environment. Our upcoming investor activities include the Susquehanna Technology Conference being held virtually on March 3rd. We also look forward to our next quarterly earnings call scheduled for early May. Operator that concludes our call.