And so we’re going through that now. We’re looking for key indicators of when the inflections will occur. But fundamentally, we believe, over the mid and long term, we’re going to get to those goals. The timing, we’re going to work through and provide an update in January.
Brian Chin: Okay. Thank you.
Operator: Our next question comes from the line of Joe Moore with Morgan Stanley. Please proceed with your question.
Joe Moore: Great. Thank you. You talked about a memory business that’s being driven by speeds and kind of new standards, but we are seeing some volume pickup there. So I’m wondering, are you seeing test utilizations in memory that could drive business there at some point? And then some of your memory customers have underutilized their fabs. Any indication that, that supply comes back online?
Greg Smith: Hi, this is Greg. Hey, Joe. How are you doing? The — so we definitely are seeing that the market is being driven this year by technology-driven retool. So HBM, DDR5, LPDDR5 and next-generation protocols. The fundamentals in the memory market are getting better. So inventory levels are coming down a bit and production rates are going up. Right now, we haven’t seen that reach a trigger to drive a large amount of capacity buys. But that is one of the tailwinds that we’re expecting to help a little bit in 2024, that we don’t expect it to be a dramatic increase, and we would expect it to be somewhat back-end loaded because there is a fair amount of capacity that needs to be loaded before they trigger more buys, but it’s definitely a tailwind.
Joe Moore: Great. And do you think that you can continue to gain share within memory given the transitions that are happening?
Greg Smith: Well, we would love to. The thing that I can tell you is that our share in memory is highest in final test and we also tend to be a first mover that we have the capability to test next-generation standards and protocols, and that allows us to sort of capture more share in that part of the market. In the wafer sort part of the market that’s driven really by capacity needs, there’s less differentiation, less profit and more competitors. So what we tend to see is when we’re in a technology-driven retooling cycle, our share tends to be high. And when we’re in a much broader capacity add that our share would tend to go down a little bit. But we’re always fighting and we do have share in the wafer sort space. It’s just not as high as our share in the final test space.
Joe Moore: Thank you.
Operator: And our next question comes from the line of Steve Barger with KeyBanc Capital Markets. Please proceed with your question.
Steve Barger: Hey, thanks. Good morning. Just going back to the robotics demand stabilizing, we are seeing some plateauing in some industrial markets but the long-term model appears unchanged for robotics. So as you target bigger customers, do they have more durable robots plans relative to smaller customers? Or what gives you confidence that you can get back on track to that mid-20% CAGR by 2026?
Greg Smith: Hi, Steve. So, thanks for your question. Definitely, large customers are a very different sales process and application process than small customers and robotics. So in small customers, the sales cycle can be quite short but the level of repeat purchases tends to be low. What we’re seeing is we increase our direct coverage of large accounts from robotics is that they work against annual planning cycles and they come up with sort of multi project plans that they will put you into or not. And so since we started assigning more salespeople into this space in 2023, we now have a pretty rich opportunity funnel but it takes longer to get through that funnel than it does with smaller customers. So we expect to see a much greater impact from large customers in ’24 than we do in ’23.
At the same time, there’s also a lag time associated with the build-out of our OEM channel. So just to remind you, when I say OEM, what I’m talking about is we’ll sell a robot to someone who has developed a repeatable solution, whether it’s for adhesive application or welding or palletizing, they basically have a product that has our robot inside of it. And then they have their own sales and marketing and service to take care of distribution and customer service. So we signed up 48 new partners in 2023. Those partners have to go through that development process and build out their own distribution. So what we see is that, not all of the OEMs succeed. There’s a certain percentage that do, and they tend to have an inflection about 18 to 24 months after the initial sign-up.
So we’ll — we have sign-ups that have come from 2021 and 2022 that have inflected and are about to inflect. The ones that we signed up in 2023 are going to become a factor towards the end of ’24 and into ’25.
Steve Barger: So if I can summarize that, that longer selling cycle could help mitigate the cyclicality of the underlying markets just because of that length? Is that fair?
Greg Smith: It’s fair. There’s still cyclicality because big companies have lean times and investment times as well. So they sort of follow these PMI cycles a bit, but they work on longer lead times. The thing that I think we’re looking at long term as a key way to reduce revenue volatility is to try to increase the amount of software and service revenue as part of our robotics business. So we’re working to try and make sure that we can develop some recurring revenue streams in that space. And we think that, that will have a good effect. Not immediately, but by the end of this — by sort of the ’26, ’27 timeframe.
