Nigel Hunton: I think what we said on prior calls is 2023 saw us complete around probably 15 or 16 HAMR upgrades. And that was the amount we did through the year, and that’s sort of the number we’re giving for 2023. And as we’ve said on many occasions, the HAMR upgrades — the value of those depend on the upgrade of the system. Some systems need additional process modules, if it’s going from a five process module to a seven process module and then the addition of the cooling and heating stations and other key upgrade systems. Or some have already got seven process modules, and it’s just some of the key upgrades around heating and cooling. So the range of upgrades can be between $1 million to $2 million. So it changes depending on the mix of the system that we’re upgrading, which is again adds to some of the lumpiness quarter-to-quarter.
Hendi Susanto: And, Nigel, one last question for me. When we come to a negotiation for like TRIO system sales, any background on the likelihood of the customers buying one, two or three? In other words, what will drive customers to buy two instead of one or three instead of two? I think in the past, you mentioned that customers have like multiple locations. But besides location, are there other factors that drive the decisions in terms of the number of systems that they want to purchase?
Nigel Hunton: I think the key message at the moment was the sort of the original JDA we completed, the TRIO system was qualified. And the critical next step is to finalize a formal agreement for TRIO tool shipments. And I said, we had hoped to conclude that for the end of December. However, the negotiations are ongoing now. And we really can’t send any more at this stage other than to confirm we expect to ship multiple systems in 2024.
Hendi Susanto: Okay. Thank you, Nigel. Thanks, Kevin.
Nigel Hunton: Thank you.
Operator: Our next question is from Peter Wright with Partner Cap Securities. Please proceed.
Peter Wright: Great. Good afternoon guys and thank you for taking my questions.
Nigel Hunton: Hi, Peter.
Peter Wright: I have three questions. The first one is on your shift to a long-term focus on the financial model, and I think that makes sense just on number of customers, and it’s easy to understand. But what I’m hoping you can do is kind of reflect on this comment. If I look at your backlog, helping to guide kind of services and call that about $40 million and across a four, five year cycle, you’re looking at about 10 hard disk drive tools and about 20 tools on the contract with your existing one customer there. It averages about $30 million a year. It’s going to be lumpy, and it’s tough to figure that out. But that’s about a $70 million average cross-cycle revenue run rate. Given kind of where your expenses are now, that’s suggesting to me about a $4 million or $5 million free cash flow yield on an annualized basis kind of on a cross cycle. Is there anything I’m missing there at a high level of what your long-term guidance and picture would look like?
Nigel Hunton: Yeah. I mean, I think for me, it’s critical that we focus our time at the moment ensuring we actually optimize the long term and get the right deals and the right negotiation and to get the right forecast for the future. So I don’t really want to comment on the detail within the agreements we’re actually in the middle of negotiating. But if you take the base from prior announcements, I think that is probably a logical analysis of what we announced on prior earnings calls. I don’t know whether Kevin, you want to add anything to that?
Kevin Soulsby: No, I would agree that that’s consistent with what we said in the last couple of quarters.
Peter Wright: Yeah. Okay. Fantastic. And if I look at the one comment you made on end market pull, can you give us a little more color of what it is that some of these end market customers are looking at and what they specifically like about your glass?
Nigel Hunton: I think there’s a couple of key points there. One, the capability of the TRIO and the qualification being completed, has proven that we have a machine that has great capability. The ability to deliver hard scratch-resistant and antireflective coatings on substrates is critical and that has been proven. And if you look at the market opportunities, whether that be in the consumer device market where it’s very apparent the need for those sort of coatings and those sorts of applications. As we’ve look beyond that and start to talk to some key automotive customers and some of the coating people in that sector, in a similar way, the deployment of glass across the auto sector, whether it be touchscreens in cars, whether it be looking at applications externally where they have accurate and anti-chip coatings on some of those substrates around the cameras on external of cars, LIDAR, et cetera are proving that the opportunities in auto are going to come through and come through over the next three to five year period pretty strongly as well.
So we see sort of multiple applications now for the TRIO platform. We see it being able to be expanded beyond consumer devices into multiple other sectors and the ability of the tool to put specialized coatings with the key attributes that we’ve proven on to multiple materials is also going to prove benefits long term. So I think we’ve proven a phenomenal tool. It’s taken us over 18 months of development time and focus, but having gotten that tool to a point where it’s now fully qualified, it’s absolutely the right time to think about the long-term opportunity for that. And the feedback we’ve been getting about this quality of the coatings gives you more and more confidence on the future.
