Mark Miller: Congratulations on your progress last year and looking forward to the future. After listening to Western Digital over the last week, they are indicating that the customer inventory for hard drives is starting to deplete. And as a result, they’re more optimistic about the outlook, at least for hard drives for the remainder of the year. Have you sensed anything in terms of improvements and capacity utilization or a thing in terms of maybe more demand, kind of expected now that the customer inventories of hard drives come down?
Nigel Hunton: Yes, I think the first indicator, what we’ve seen is and really excitement is, as you say, listening to some of other calls, one in particular, and the emphasis and the level of Q&A around the HAMR. I think well, we’ve done in the last year we have enabled the HAMR technologies has come through that’s been a key part of our last quarter’s performance. And we’re seeing that HAMR focus and the HAMR readiness and to ensure that actually the equipment is capable of supplying the equipment for their launch, to be maintained. And I think Jim said that would be maintained into Q1. So we’re seeing continued focus around those technology upgrades. And again, like you, we are optimistic that demand is starting to come back.
Some of those key markets in Asia will start to get additional business for them. And we’re confident that the positive outlooks are going to sort of start to make through. But really, under fundamentally, is this technology shift to HAMR I think, is actually also going to be a significant change in that sector in our industry. And we’re well positioned to maximize on that. Anything you want to add to that, Jim?
Jim Moniz: No, I think as Nigel mentioned, it’s been, you can see some of that in the results in Q4. And some of our customers calls as you mentioned, Mark, they really are taking advantage of the lower capacity and trying to build that inventory to improve their technology. And we’re a key component of them being able to do that. And they’re helping, as you see in Q4, that’s one of the main drivers why revenue was above guidance. And will continue, as I said in my prepared remarks that the first half of the year will actually be stronger than what we implied on the last earnings call as it relates to the linearity of shipments first half second half, and most of that will be upgrades.
Mark Miller: Okay, from what I gleaned from your — you’re just comments about cash in 2023. There’s going to be some drawdown as you build new tools. But you’re talking about shipping, I believe one Lean tool later in the year, do you think by the fourth quarter you will be cash flow positive?
Jim Moniz: I think it all depends on what happens with the TRIO build. That’s really going to be the driver of cashflow positive when you look at combination of what the linearity of the revenue is in Q4. But I think the biggest use of cash for us, which is just going to be a timing issue is going to be building to support a large backlog should that happen once we pass qualification on TRIO.
Mark Miller: Terms of the Lean tools you’ll be shipping later late this year and beyond. These tools have more features such as more deposition chambers than prior tools, or any new technology in these tools.
Jim Moniz: I think that the one that’ll ship has an additional process module. But I don’t think there’s much additional technology other than some of it has some HAMR enabled capability.
Nigel Hunton: I mean, the major focus is really we’ve talked on is enabling the install base, putting in the HAMR upgrades for those tools, and ensuring that our customers are ready and enabled to actually execute on their HAMR roadmaps. And that’s a key thing we’ve done is making sure our roadmaps are absolutely aligned with our key customers. And that’s been a key success over the last 12 months is having those regular technology, review meetings, and ensuring we’re meeting their needs and actually helping enabling them to actually move to that next generation of technology. So it’s been an exciting year.
Mark Miller: If all goes well, with the first qualification of the TRIO tool, you’re talking about delivering two more TRIO after that. When could you think these tools be revenue in early 2024?
Jim Moniz: I think as is customary with our reg responsibility and rules, we’ll need a couple of tools on the field to be installed to go through full qualification on site. And once they do that, and the customer signs off on the qualification, we’ll take revenue, and then probably the third or fourth tool after that. We can take revenue as at the time of shipment, but we have to first pass the call. And we do expect revenue in 2023 as we’ve said, that first qualified tool that Nigel emphasizes, and I think everybody should remember is that’s our focus right now. Our focus right now is building a production tool getting to qualification trying to get that qualification through Q2. Once we get qualification and sign off, that tool can take revenue, and then any tools we ship after that if they go into the field, they’ll have to get installed, qualified signed off and then we can take revenue there and then it’s after that point in time that we can probably take revenue at shipment but revenue at shipment is likely to happen in 2024.
But we will see sign offs and we will see revenue in 2023 from TRIO.
Nigel Hunton: Absolutely, yes.
Operator: Next question today is coming from Srini Sundar from Partner Capital.
Unidentified Analyst : Hi, guys. Congratulation for that fantastic quarter. My first question is why was the accounts payable postponed?
Nigel Hunton: Accounts payable postponed.
Unidentified Analyst : Why were the accounts payables? Yes.
Jim Moniz: Yes. I’m not sure if your question is why is accounts payable higher at the end of the year?
Unidentified Analyst : Yes.
Jim Moniz: Is that your question?
Unidentified Analyst : Yes.
Jim Moniz: So if I understand your question, although it was hard to understand that question, the accounts payable was higher at the end of the year because of the timing, mostly of the delivery of the TRIO inventories. So it came in it was received, but their payment terms of when we have to pay our vendors, those payment terms required us to pay the vendors in January, not December, so it was sitting in accounts payable, you’ll see accounts payable went up from the September quarter to the December quarter. And that helped the cash because essentially, it was in accounts payable, which has since been paid, and it was roughly around $5 million. But it coincided with the growth of the TRIO inventory in this quarter.
Unidentified Analyst : Thanks. As a follow up the new 200 systems that you will be shipping in the next two or three years, they will all be going out with HAMR updates, right?
Nigel Hunton: Those were ordered around this time last year. And some of that technology innovation will be included in them and there’ll be some that’s not, so that we further upgrade for those tools, sort of post install. So there’ll be some level of HAMR readiness, but not the latest HAMR upgrades that we’ve actually developed and executed and delivered on in 2022.
Unidentified Analyst : Also on the subject of exclusivity, could you explain what it exactly means meaning that you cannot sell it to somebody else or you can sell it to somebody else.
Nigel Hunton: So, the exclusivity is very clearly for consumer electronic devices for glass and glass ceramic substrate. So it is a very clear definition of the market and the substrates.
