Greetings. Welcome to Advanced Energy's Fourth Quarter 2023 Earnings Call. [Operator Instructions].Please note, this conference is being recorded. At this time, I'll turn the conference over to Edwin Mok, Vice President of Strategic Marketing and Investor Relations. Mr. Mark, you may now begin.

Thank you, operator. Good afternoon, everyone. Welcome to Advanced Energy Fourth Quarter 2023 Earnings Conference Call. With me today are Steve Kelley, our President and CEO; and Paul Oldham, our Executive Vice President and CFO. You can find our earnings press release and presentation on our website at ir.advancedenergy.com. Let me remind you that today's call contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially and are not guarantees of future performance. Information concerning these risks can be found in our SEC filings. All forward-looking statements are based on management's estimates as of today, February 06, 2024, and the company assumes no obligation to update them. Any targets beyond the current quarter presented today should not be interpreted as items. On today's call, our financial results are presented on a non-GAAP financial basis unless otherwise specified. Excluded from our non-GAAP results are stock compensation, amortization, acquisition-related costs, facility expansion and related costs, restructuring and impairment charges, unrealized foreign exchange gains or losses and onetime tax benefit. Detailed reconciliation between GAAP and non-GAAP measures can be found in today's press release. With that, let me pass the call to our President and CEO, Steve Kelley.

Thanks, Edwin. And to those on the line, thanks for joining the call. Fourth quarter revenue of $405 million met our guidance, while earnings per share of $1.24 surpassed our guidance. We delivered record cash flow of $85 million in the fourth quarter. Over the full year, we delivered record cash flow of $213 million by maintaining good profitability and reducing inventory. For the full year, we benefited from diversified end market exposure. Even though our semiconductor revenue was down about 20% in 2023. Revenue in our other markets, stayed flat. In total, our revenue declined roughly 10% in 2023, a significant improvement over our performance in previous semiconductor downturn. In the semiconductor market, we enjoyed record sales of high-voltage products in 2023. We also achieved record revenue in our service business due to a growing installed base of subsystems in a broader portfolio of services. In our other markets, we achieved yearly revenue in the industrial medical space and successfully ramped a major hyperscale product to high volume. Across the company, we launched 20 new platform products in 2023. Many of these platforms are viewed by our customers as game changers. In semiconductor, we launched eVerest and eVoS for etch and deposition applications. In the industrial medical space, we recently launched NeoPower, our new flagship configurable power platform. We are working closely with our customers to adapt and customize our platform products to meet the specific requirements of high-value applications. We achieved a record number of design wins in the semiconductor, industrial and medical markets in 2023, exciting new products, a motivated sales team and enhanced go-to-market strategies enabled these wins, which are a critical leading indicator of future growth. On the manufacturing front, we took advantage of softer loading to accelerate our factory optimization plan. We are executing…

Thank you, Steve, and good afternoon, everyone. In the fourth quarter, we delivered revenue of $405 million at the midpoint of our guidance in a tightening environment. Good execution throughout the organization resulted in Q4 earnings of $1.24 per share at the higher end of our guidance range. In addition, we delivered record operating cash flow of $85 million and exited 2023 with cash in excess of $1 billion. As we projected, our backlog returned to a normalized level of $407 million. Given shorter lead times and the transition of many of our customers back to utilizing hub or jet bins rather than direct orders, we expect our backlog to remain a quarter of revenue going forward. Now let me go over our results in more detail. Revenue in the semiconductor market was $191 million up 3% sequentially. Product revenue increased quarter-over-quarter to meet end-of-year customer requirements, partially offset by lower service revenue on low fab utilization. Sales into the industrial and medical market were $109 million, down 6% sequentially. As we began to see in Q3, increasing macroeconomic weakness impacted overall demand in Q4 partially offset by revenue from design wins we secured in prior quarters. Base center computing revenue of $63 million, down 8% sequentially. Our business in this market can be lumpy, and we continue to benefit from the ramp of the large hyperscale win we reported in Q3, partially offsetting further weakness in the enterprise server market. Telecom & Networking revenue was $42 million, up 2% sequentially due to end of year shipments to our telecom customers. Fourth quarter gross margin was 35.7%, down 40 basis points sequentially, mainly on less favorable revenue mix. Premiums paid for critical materials approached normalized levels exiting the quarter. Based on the timing of costs flowing through inventory, we continue…

Thank you. [Operator Instructions] And our first question will be from the line of Joe Quatrochi with Wells Fargo.

Yes thank you for taking the questions. Maybe first on the semi side. I'm just wondering if you could maybe help us out and understand. I think last quarter, you were talking about consumers planning for a flat 2024, is that still kind of the thought process there? And then just secondly, on the semi business, can you remind us just how to think about the mix exposure between foundry/logic and memory. Are you able to, you think, at least match the market growth rate, just given kind of your mix relative to the market growth expectations this year.

Yes, Joe, this is Steve. Thanks for the questions. Yes, with regards to your first question, our customers still are telling us that they think that 2024 is -- roughly the same as 2023. The other thing that's telling us is that the second half will better than the first half. So essentially, what we're looking at in semiconductor is a Q1 low point and a gradual recovery in the course of the year. We are very well positioned for the node transitions that are going to transpire starting in the second half of this year. So we're very confident in our ability to grow that business second half 2024 and into 2025. As far as our exposure to foundry/logic and memory, we don't have precise numbers on that. We feel we're a little bit more exposed to foundry/logic. But I think as we look at the future memory processes, we're also positioned there. So I think over time, we should benefit from both the transitions in memory as well as the ones in foundry/logic.

Thanks for that. And then just on the industrial medical side, can you help us understand the change in demand? Or what is incrementally weaker than last quarter? I think last quarter, you highlighted a couple of different sub markets, but maybe just some help in terms of where you're seeing the incremental weakness from just because it's such a diverse business or market for you.

Yes. The industrial medical market is an interesting one for us. We put a lot of resources there and a lot of emphasis there over the past two years. And what happened was in 2023, we set all kind of records. We set a record revenue performance in I&M. And we also saw that our design win funnel increased by just under 50%. So we're very well positioned going into this year. I think when I take a look at that market, you're right, it's thousands of customers, hundreds of sub applications. In the industrial medical market, it was actually the last market where supply caught up with demand. That happened largely in the second half of last year for Advanced Energy and is still going on at some of our competitors. And so what our customers are dealing with is some inventory rebalancing and they're also dealing with compressed lead times. Lead time is not too long ago in this business were 26 to 50 weeks and now they're about 8 to 12 weeks. So that creates a bit of an air pocket. What we think is that air pocket will last in -- for the first 6 months of 2024 as the customers or their inventory rebalancing and adjusted to new lead times. But we think it returns to normal in the second half of this year. And that's what we have in our plan.

Thank you.

Our next question is from of Krish Sankar with TD Cowen. Please proceed with your question.

Hey hi, thanks for taking my question. Two of them first one, Steve, on the last point you made in terms of your customers on the semi side doing inventory rebalancing, shorter lead time. Do you think that your customers' revenue have to recover first before you see your semi revenues recover? Or do you think it could be in tandem? Or do you think you could lead the recovery?

Yes, Kris, just to clarify, my comments on the inventory rebalancing in the short lead times, those apply to the industrial medical market. So I was answering Joe’s second set of questions essentially.

Alright. What do you think of it on the semi side?

On the semi side, I think all of our customers are saying pretty much the same thing, right, where they've seen some drop in tween edge demand still relatively strong in China, but starting to taper a little bit outside of China. And from a memory standpoint, there's an expectation that they'll see some recovery in DRAM around midyear and NAND towards the end of this year. And in leading-edge logic, I think there's a lot of excitement right now about some node transitions that are on the way. So I think with a little pickup in smartphone demand, continued demand in AI and other computing areas, I think that lead edge should pick up as well in the second half.

Got it. Got it. And then a follow-up for Paul. Paul, I think you mentioned the March quarter gross margin should be about 35%. I'm just curious, hypothetically speaking, if your June revenue volume and product mix is similar to March at $350 million and now that you have the benefit of the premium pricing going away and some of the factory closures, how much would gross margins be in June quarter is the revenue and product mix was similar to March?

Yes. I think if you held everything equal, we ought to see modest improvement from the March quarter to the June quarter. I think as you move further into the year, though, we start to set improvement from the continued factory transitions and other things that we're working on. I think the important point here is we continue to feel that as revenues move back up and get roughly, say, flat to the Q4 levels of around $400 million. We feel pretty confident towards the end of the year that, that should yield gross margins that are 250 to 300 basis points higher than we have in Q1. And that's a combination of the last bit of the materials rolling out, factory improvements and efficiency coming in volume recovery just back to where we've been running, not actually anywhere near previous peak levels or high levels. And so as revenues just get back to where we were, we think that's a meaningful improvement in gross margins. Now as you look into next year because of the things that we'll be doing, we've done already with the factory closures, we'll be doing with other factory efficiencies this year. We think that we can get gross margins to around 40% on revenues in the mid-$400 million range. And that's better than what we've been modeling up to now where we thought we'd take -- need to get to the mid-to high $400 million range. So we think there's a lot of upside in the company for gross margins. Obviously, the biggest factor impacting us now is just the revenue levels. In fact, things we've done, we think are actually protecting gross margins at 35%, which is only down 70 basis on the drop in volume we've seen. So we think this sort of forms the foundation for a gross margin acceleration as revenues recover from this point.

Got it. Thanks a lot Paul, thanks Steve

Our next question is from the line of Steve Barger with KeyBanc Capital Markets. Please proceed with your questions.

Thanks. Steve, most industrial companies we cover are saying what you just did, which is weak first half return to normal in the back half. But can you talk more about why you think that -- just where that confidence comes from? And do you expect I&M can show positive growth for the year in 2024?

Yes. So basically, Steve, I think I&M is obviously going to be inherently more difficult given the number of customers we're dealing with in a number of different submarkets. And so we look to a couple of things. One key indicator for us is distribution. So we sell about 45% of our I&M products through distributors. And if we took a look at the data and a few things kind of stand out. One is the re-sales. So re-sales at our top 5 distributors around the world have grown every quarter since Q2 of 2022. So we basically exited 2023 at a very high resale rate. It also shows that we have gained power share -- power subsystem share at all of our major distributors over the past year. And at our top three distributors, AE is now number one in the category of power subsystems. So I think those are all positive indicators that show we have some momentum in this market and that our design wins are having some impact on our revenue already. I think the second thing that gives me confidence is that if you take a look at the industrial medical market, we were still chasing parts through the first half of last year, so there's still a fair amount we closed out those delinquencies in the second half of last year. And so what's happening is the customers have different levels of inventory because there are a lot of different parts in the systems that they build. And so they're working through the inventory and doing the inventory rebalancing. The other big change our customers are dealing with is lead times. And again, the lead times have contracted significantly, and that creates a bit of an air pocket. So that's why I made the statement that we believe second half were back to normal from a demand standpoint.

And as you think through all that, do you think that I&M can show positive growth for the year versus 2023?

Steve, we're not sure. We haven't gone through that model yet, but I hope so.

And one quick one for Paul. Decremental margin in the back half averaged high 30% range. Is that how we should be thinking about 1Q and 2Q if revenue is down? Or can you do better than that?

I think when you look at going from Q4 to Q1, we feel pretty good about holding margins at the 35% range. We think that's going to be a floor. If revenue does tick down again, which we don't anticipate, then I think that's probably a reasonable range for decremental margins, maybe a little bit less because we'll still have some improvement on the material costs, and we continue to reduce our manufacturing footprint as we go. I think the important thing, though, as margins start to recover or revenue start to recover, is that the incremental margins on the upside ought to be well north of 40%. And in some quarters could be well over 50% as we get the benefit of these various factors coming together. So we're actually pretty excited as we've continued to work this that we believe we've been able to reduce the revenue point at which we can get to 40% gross margin to this mid-$400 million range per quarter. And look, if we're able to do that and we get to mid-$400 million our peak earnings, our earnings on that level will be substantially higher than our prior peak. And that's not even getting back to peak revenue levels. So we've done a lot of good work. I think we're getting the foundation in place on gross margin. Obviously, the environment, the last 1.5 years has been challenging with parts that's abated where you're now in a bit of a market subpoint. But the underlying setup for gross margin, we feel is very good as we go forward.

Appreciate that color. But just to level set, I think you earlier said that you might exit the year at a $400 million run rate. And so what you're talking about -- I mean, that would be the earliest that you're running an incremental most likely, right?

Yes. I think over the course of the year, we'd see some pickup in volume, and that would lead to some incremental. But you're right. Our projections at this point was that we would expect revenues to recover back to the $400 million level exiting this year. And at that level, we ought to be able to deliver gross margins 250 to 300 basis points higher than Q1. So that would put you in the 37.5% to 38% range on roughly $400 million. And just to calibrate that with Q4 that would be a 200-plus basis point improvement off of the Q4 levels at the same revenue level. I think that's what we're talking about is we see fundamental ability to improve gross margins and lower the revenue levels that it takes to deliver those gross margins.

Great details. Thanks.

Our next questions are from the line of Mehdi Hosseini with SIG. Please proceed with your question.

Yes thanks for taking my questions. A couple of follow-ups from my end for Steve and Paul, just going back to your commentary how this year is looking to be more weighted towards the second half. That's well understood the beauty of low-spot numbers. But how should I think about second half of this year 2024 compared to second half of 2023. And I have a couple of other follow-ups.

Yes. I think what we said is we're seeing early signs of improvement or that suggests there will be improvement across most of our markets. So we do anticipate things picking up as we go through the year. And our best view is that we believe we can get back to revenues at $400 million or higher exiting the year, which would be Q4. I think that's the best visibility that we have at this point?

Sure. I guess we got the March quarter guide, we got a feel for June flat to up. We got the December at 400 plus. We just need some more color on the September quarter is what I was trying to figure out.

Well, there's not that many numbers in between there, Mehdi. So I don't think we have perfect visibility to what the pattern will be during the year. Look, semi continues to bounce around the bottom. This is a bit lower than Q1 than Q4, but we think that's going to improve. I think there's early signs of data center improving that can be lumpy. That could come sooner and it could come in a bump, right? I think Industrial & Medical will be more paced, as Steve said earlier. And telecom is going to sort of glide path down a little bit. So it's hard to say exactly how the quarters will play out. I think in the near term, we have pretty good visibility. And as we look out towards the end of the year, we have -- we see enough factors that give us confidence to get back to the $400 million or higher, but it's a little hard to project each quarter.

That's fair. And I appreciate all the details. One follow-up here, and I think it will be very helpful if you could give us some thoughts around ASP. Obviously, two years ago, industry was faced with sufficient supply, and there was a significant price increase for all semiconductor components. And I believe some of that price increase was passed on to the end customer. As we go through this inventory correction and the weaker end market demand, how are you positioning the company for a pricing leverage, especially in this core semi cap could your customers wait to last minute to get any kind of concession? And I'm just wondering how we should think about it.

Yes. So let me just kind of retrace our steps over the past couple of years during the supply chain crisis. Many of our customers chose to pay premiums. So it wasn't a price increase per se, but we would go out on the third-party market to find these scarce chips and then they would pay the premium that we had to pay for those particular ICs or MOSFETs. And so I think, as Paul explained during his presentation, most of those premiums have gone away. We had some other customers who preferred price increases. In those cases, we're working with them. The first step is to get the price decreases from our IC suppliers and MOSFET suppliers. And quite frankly, that's been a bit of a challenge. So we're working hard to move our IC and MOSFET costs down, but they went up a lot faster than they're coming down.

Okay thank you Steven. A quick follow-up for Paul. OpEx in 2024, should we assume that it's kind of flattish from here on?

I think sort of flattish or certainly, that's what we guided to for Q1. I think Q2 will be similar, and flat means it could bounce around a little bit, plus or minus, because we get in the second half, we'll see how revenues recover. There could be a little bit of increase in the second half, more based on inflation and other factors. But in any event, we don't anticipate operating expense going up. We have a good cost structure. We've worked hard to get it down from where we exited a year ago. We want to try to live within that cost structure. We're funding our priorities are making great progress on our NPI and other strategic initiatives. So I think we're going to try to stay in roughly within this envelope, but I'd say maybe a little bit of increase in the second half just based on normal factors.

And Mehdi, let me just quickly answer on the pricing issue. Can I just add a little more color because I think your question was more about what leverage we might have moving forward on the price. And I think it's really about new products. In semi, in I&M, even data center. We're bringing products to market now. They're not for more value to the customers and offer more profits to us. And that's how we plan to move our profitability together with the actions we're taking manufacturing.

Got it. Thank you Steve.

Thank you.

The next question is from the line of Scott Graham with Seaport Research. Please proceed with your question.

Hey good evening, thanks for taking my question guys. I wanted to maybe talk a little bit more about the gross margin. Are you guys saying that the premiums had no effect on the fourth quarter gross margin?

Yes. No. What I said is that it did have some effect. We think that's sort of in the 50 to 100 basis points. So that's continued to come down every quarter. And I think what we said as we ended the quarter, it was approaching normal levels. So I think our very end of the quarter, exit rate was pretty small, but that just means that those costs largely just need to roll through inventory now. So expect that same whatever 75 basis point improvement kind of flow through over the next quarter, 1.5 quarters. That's part of how we protect staying at 35 as part of it in that baseline as we go forward that those premiums are largely washed out. But there will be a little bit more in the first few months. But in terms of an ongoing activity, we think that's largely normalized.

Okay. Okay. So is there a case here, Paul, where I think you just answered it, but I'm not sure on the math. Are you saying that like sort of in the second half of the year, as we roll through sales and the gross margin should start to naturally move up because the sales are no longer burdened by the premiums of the gross income dollars goes up in the gross margin dollar gross margin percent goes up with it. Is that the right way to look at it?

Yes. Said another way, the headwind that we've had over the last year, which has been dying down, but a headwind nonetheless, that dissipates completely after, say, the first quarter or a little bit into the second. So that's -- that means that going forward, we don't have that headwind. But -- so as volume picks up and other things improve, then we get that all the way to the bottom line. But I think the other thing is the improvements that we're making in the factories and efficiency from a cost perspective and even a little bit of mix is we're getting some product benefit from a sole source perspective, sole source mix towards the end of the year. All of those things really start to fall through. And that's why on similar revenue levels in the fourth quarter to what we had this year in the fourth quarter, we ought to be doing roughly 200 basis points better or, as I said, 250 to 300 basis points better than where we're starting the year.

Okay. Thank you. Steve, I was hoping you could tell us a little bit more about sort of this seems like another push to the right in semi because the numbers that we're hearing for WFE. Obviously, they started six months -- a year ago, they were in the down 20s and then they came in from that to down 10s and 15s, and I'm just wondering why with market conditions is still difficult, but seemingly less difficult. Why is it kind of going the other way for you?

Yes, Scott, I think if you take a look at the data, we sell into etch and deposition applications, ion implant applications. So more conventional applications within the semiconductor process universe. We do not sell in to litho. So if you extract the litho WFE, then I think you'll find that we're actually gaining share in that particular part of the market. I think what's important to realize though is the share gains are going to happen with the next-generation processes. So that's why I spend so much time talking about eVerest and eVoS because those are two new flagship technologies, which have been eagerly embraced by the customers and we think they are going to drive real share gain for the company over the next three to five years.

Okay. Last question, promise. The debt offering that you did last fall kind of sitting and waiting for an acquisition to deploy that on. Could you just give us an idea how the funnel is looking? Is this sort of a modest setback in earnings here is does that slow that process down? Or is that still full speed ahead and you're getting closer and closer to something? Just maybe sketch out kind of where you're at.

Yes. Just let me just give you some context. This is a modest speed bump for us and it doesn't really impact any of our activities. So we're going full speed ahead on development. We're going full speed ahead on M&A. And our M&A approach hasn't changed. We're basically looking at two tracks. The first track is technology tuck-ins. Those will be primarily for semiconductor applications. And the other track is basically larger acquisitions. And we are in contact with our targets, and we certainly have the money to deploy when we reach agreement with one or more of these targets. But we're in no hurry. We want to make sure that the deals we engage in make strategic sense, make financial sense for the company. And then we'll basically deploy the same playbook we used with SL Power, we'll integrate quickly and maximize our synergies as fast as we can.

And I'll just remind you -- I'll just remind you, Scott, also that -- when we did the debt offering, one of the beauties of that was that it gives us optionality as well. So we don't have to be in a hurry. We can be patient. There's other things we can do to deploy that cash that add value to the company, including arbitraging our debt next fall, if that's something that makes sense at the time. So we have a lot of options, and that I think gives us flexibility to be smart to be patient and make sure we're doing the right thing.

Okay, thank you.

[Operator Instructions] The next question is coming from the line of Jim Ricchiuti with Needham & Company. Please proceed with your question.

Hi, thanks. Most of the questions were answered. I was just curious, as we think about 2024, the way you're describing the year, if that plays out that way. I'm wondering as you layer in some of the e-commerce activity, you've talked about working more on the distributor front. Is there -- does any of that have the potential to add incrementally to the revenues in a meaningful way this year? Or is that more in 2025?

It's a good question, Jim. I think we have the ability to add incrementally to revenues this year and next year. We actually launched the website in August of last year, and we saw an immediate uptick in engagement and downloads and so forth. So I think some of that work is already underway. So I'm encouraged by what I've seen so far. And that will continue throughout this year, right? So it's much easier for customers now to engage with us than it was six months ago. And as we add e-commerce to our website later this month, they'll be able to get samples of our products very quickly and make their decision more quickly. So I'm encouraged by that. And also by the enthusiasm within our distributors, they're seeing how popular our products are -- and they also are encouraged because they tend to make more money selling our subsystems than they do selling ICs. And so that certainly makes a difference. And we're seeing a lot more enthusiasm for both power and advanced energy through our distributor channel.

Thanks a lot. Good luck.

Thank you.

Our next question is from the line of Duksang Jang with Bank of America. Please proceed with your question.

Hi, thanks for taking the question. I want to go back to an earlier semis question. So you said excluding litho [ph], you're potentially gaining share in some of the areas. But if we look at one of your lead edge customer, they posted a strong December. And even looking into March, they've had flattish outlook, whereas I think your semis outlook is a little bit falling behind. So I just want to understand that disconnect between you and your -- some of your customers?

Yes. Basically, there's two issues there. One is inventory that some of our customers are still carrying, right? And the second is timing because typically, we'll be shipping products into a customer the quarter before they ship their products to their end customers, sometimes it two quarters before. And so it's very hard to correlate our results with our customers' results on a quarter-by-quarter basis.

Got it. Got it. And then on to gross margins. So I think exiting this year, you're targeting 57% to 57.5%, but you still have that another 200 to 300 basis points in order to reach the 40% mark. So what other kind of tailwinds do you have now? You don't have that inventory normalization anymore. Potentially, you have the factory optimization but is that really enough to get you that 200 to 300 basis points? Thanks.

Yes. So that's right. We would be exiting the year based on what we said in our prepared comments, somewhere between 37.5% and 38% gross margins. As we get then into 2025 or are the other things, there are still more activities on the factory consolidation front. I think that the full benefit of that certainly bleeds into the first half of 2025 as we execute our plans over the course of full course of 2024. I think that's another 100 basis points that could come through for sure. I think the second thing is we start to see more benefit from our shift in mix as we have more sole-source products. That could add another 50 or more basis points. Over time, over a couple of years, we think that could be as much as another 150 or 200 basis points in total. But certainly, I think in the in the early 2025 range. I think there's easily 50 basis points in better mix and sole-source products there. And the last thing is we -- while this year has got a bit of a front-end air pocket, as Steve said, I think it exits back on a rate that's increasing. And I think generally, the market views 25 as a pretty strong year, which we'll benefit from irregardless of our new products, the channel investments and everything else. Those will be accelerators. And so that's why we look into 2025, we think that will be a strong year. And as we said, if we can get back to $450 million, roughly mid-$400 million range, that's going to yield just with the volume impact margins in the -- around 40%. So we feel pretty good about that when you look out in time because of the work we're doing now, the setup of things we can control in terms of managing our cost structure, getting that where we'd like it, getting the foundation for gross margin in place, the investments in new products and opportunity to gain share of the investments in channel. We think all of that positions us well to see really nice earnings growth as we go into 2025. And look, that mid-$400 million, as I said earlier, is an even peak revenue for us from the last up cycle. So if you ran that out to a peak revenue level, I think we'd be well in excess of 40% gross margins.

Thank you.

Thank you. Our final question today is from the line of Mark Miller with Benchmark. Please proceed with your question.

I'm just wondering if you're seeing any impact of the slowing in EV sales, especially at second-tier foundries.

Your question, Mark, was whether we're seeing any impact in the slowing of EV sales. We really have very little direct exposure to that market. There's some indirect exposure through our work with IC makers who are building silicon carbide chips and power MOSFETs and so forth. But at this point, we haven't seen any meaningful impact.

And what about the funding by the U.S., Europe and Japan for internal chip production. Is that going to become a driver in 2025?

I think it will, Mark. Obviously, that benefits our customers or the equipment customers. And anything that benefits them ultimately benefits us. So we think building these geographical ecosystems is a good thing for the industry, and it will be a good thing for us.

Thank you.

Thank you. Ladies and gentlemen, this concludes our question-and-answer session and will also conclude today's conference. You may now disconnect your lines at this time, and we thank you for your participation. Have a wonderful day.