Earnings Call: Q1 2021

Feb 24, 2021

Good morning, ladies and gentlemen, and welcome to the Photronics First Quarter Fiscal Year twenty twenty one Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct question and answer session and instructions will follow at that time. As a reminder, this conference is being recorded, Wednesday, 02/24/2021. I would now like to turn the conference over to Troy Duar, Vice President of Investor Relations. Please go ahead. Thank you, Jerome. Good morning, everyone. Welcome to our review of Photronics' twenty one first quarter financial results. Joining me this morning are Peter Kirlin, our Chief Executive Officer John Jordan, our Chief Financial Officer and Chris Prodler, our Chief Technology Officer. The press release we issued earlier this morning, along with the presentation material which accompanies our remarks, are available on the Investor Relations section of our webpage. I would like to note the press release had inadvertently omitted the bottom half of the balance sheet. The verge on the eight ks is correct, and we will be correcting the press release. Comments made by any participants on today's call may include forward looking statements that include such words as anticipate, believe, estimate, expect, forecast, in our view. These forward looking statements are based upon a number of risks, uncertainties and other factors that are difficult to predict. Actual results may differ materially from those expressed or implied, and we assume no obligation to update any forward looking information. At this time, I will turn the call over to Peter. Thank you, Troy, and good morning, everyone. We achieved sequential growth in the first quarter, defying seasonal trends as demand improved across many sectors. Most notable improvement was observed in the high end FPD, where strong AMOLED demand for new mobile displays led the increase. High end IC was modestly lower with slight improvements in mainstream IC and FPD. Typical seasonality indicates that Q1 revenue would decline sequentially, so an increase of 2% demonstrates solid performance by our global team. John will offer more insights into the details shortly, but I'd like to make some general observations on what we are seeing in our markets. Over the last eighteen to twenty four months, there have been tremendous supply chain disruptions driven by a combination of trade policies and economic lockdowns resulting from COVID nineteen. In our view, these government mandates move the market in ways that were not easily anticipated. Some cases, the impact has been positive for industry, such as the trend to do more of what we do every day remotely, spurring demand for work from home electronics. Conversely, many automotive manufacturers suspended or severely curtailed vehicle production last spring. When automobile manufacturing recently returned to normal levels, silicon capacity had shifted to work from home applications within that effect being chip shortages. The semiconductor industry is quickly reacting to these demand dynamics, creating what we believe to be an inventory driven semiconductor up cycle. Pending the installation of additional capacity, particularly at the high end logic nodes, semiconductor manufacturers are focusing their resources on increasing output of needed chips and not on releasing new products. Therefore, new design activity has been constrained in what to us resembles a semiconductor industry cycle of old, where the upturn in our business flags the capital equipment suppliers by one to two quarters. Once the new tools are installed with the resulting capacity online, as inventory levels are replenished, the dam breaks and a wave of new design flows. Shifting gears to FPD, the trade policies implemented by The US over the last few years have clearly impacted the electronics industry in China. Up until late last year, these policies had little impact on our business. However, that changed when Huawei was placed on denied entity list last fall. As a leading manufacturer of smartphones in China, Huawei had its own ecosystem of suppliers when their ability to purchase leading edge semiconductors was severely constrained. It effectively froze their new product roadmap. The impact on us was a dramatic drop in demand for photomask to build their new display panels. Fortunately, the end market demand for those phones did not disappear. As we move through Q1, we started to see a resurgence in new designs from alternative phone manufacturers and recently the very first tape out for Honor. Furthermore, significant amounts of new AMOLED display manufacturer capacity is being brought online by our customers in China this year. And moving forward, we expect a significant rise in AMOLED photomask demand that should continue throughout 2021. Returning to our first quarter results, gross and operating margins were lower for this period. There are several reasons for this and John will provide details during his commentary. But the bottom line is we must do better. We have positioned our operations at the high end of the market and delivering masks that are critical for the production of leading edge devices. Based on these factors, our margins need to improve. We know well what is required to accomplish this and we are committed to deliver the results of investors as well as we expect. Moving to the bottom line, earnings per share were $0.13 Our cash balance was steady and our strong balance sheet continues to provide superb flexibility in managing our value creation strategy moving forward. We held our Investor and Analyst Day in December. If you attended the live event or listened to the archived webcast, thank you for your interest and I truly hope you found the presentation helpful. If you've not yet listened, I encourage you to do so. During that event, we reviewed the commitments made during our twenty eighteen Investor Day and how we performed against them. We also looked ahead as our investment focus evolves to maintain alignment with market trends. The two areas we highlighted were advanced display technologies and China market growth. We have three new FPD mass writing tools that will be installed during 2021. These will bring us additional capacity to serve our customers who manufacture advanced panels. These investments should provide us with sequential growth in capacity and therefore revenue during the second half of twenty twenty one. As stated before, we have entered into three multiyear purchase agreements that collectively represent a business commitment in excess of $40,000,000 annually to support these investments. We often comment that the display market is very dynamic. This includes development and adoption of new technologies. The increased penetration of AMOLED displays within smartphones is one example. This manufactures combat plateauing sales by offering premium options such as upgraded displays. Similarly, the introduction of five g requires a premium display consistent with five g capability and feature set. The resulting transition from LTPS to AMOLED requires mass with more layers. The most basic rigid AMOLED mass set has only 12 layers, while the most advanced can have up to 25. Only does the number of layers increase, but there are more critical layers within each set, further enhancing the value we provide. Similarly, high end technologies are expanding into the large screen TV market. You have seen the ramp of G10.5 plus form factor, which has come to dominate the production of standard LCD panels for large screen TVs. With this transition largely behind us, we are currently seeing the commercialization of various OLED displays intended to capture the premium sector of the TME market. An alternative approach combines a conventional LCD with a mini LED backlight to create a similar visual experience. These technologies are good for mass demand as they require more mass layers and more critical layers per set, creating more complexity and higher value. As a display for the mass market and technology leader, we are well positioned to benefit from these trends. Shifting to the Chinese IC market, we're in the process of qualifying the final lithotool from our initial phase of investment in Xiamen. The installation of this tool was delayed six months because the supplier self imposed travel restrictions in response to COVID-nineteen. The tool is targeted at production of high end photomisks. Our expectation is that we'll begin to generate revenue by the end of the second quarter and ramp through the back half of the year. China remains a key region of expected growth for the semiconductor industry and our presence there should position us well to grow with the market. Over the last three years, our IC revenue of product shipped to China has grown at a compounded annual growth rate of 60% and is currently running slightly above 100,000,000 annually. We anticipate that our business there will continue to grow and we will remain the merchant foot on this market leader in China. We are off to a strong start. I would like to thank all of our employees for your good work during the first quarter. Looking forward, I continue to believe that 2021 will be one of the best years ever for Photronics as we invest to support growing end markets, expand our business in advanced display technologies, enable our global customers to meet their product road maps, and improve profitability and cash flow to facilitate continued investment in projects that improve our return on capital. At this time, I will turn the call over to John. Thank you, Peter. Good morning, everyone. Revenue improved 2% compared with the fourth quarter as growth in FPD was partially offset by a decline in IC. FPD growth was driven primarily by AMOLED displays for advanced smartphones. We've communicated over the last few quarters that The US ban on Huawei had an impact on the display supply chain as design activity stopped while they reacted to the new restrictions. This affected our fourth quarter FPD results as panel suppliers did not require new masks for Huawei phones. During the first quarter, we saw this disruption ease and AMOLED demand return as new phones produced by other manufacturers made their way to the consumer. Elsewhere in FPD, demand for LCD masks, G10.5 plus remained depressed as panel producers took advantage of favorable market dynamics by maximizing output of current product and not releasing new panels. IC revenue was down slightly compared with the previous quarter as an increase in mainstream and memory growth was offset by reduced high end logic demand, partially due to the industry dynamics Peter mentioned earlier. In addition, one of our high end riding tools in Taiwan was down for an extended period as travel restrictions delayed the repair and returned to production. On a year over year basis, many of the trends we saw were similar to the sequential trends with a larger decline in high end logic and a smaller increase in smartphone smartphone displays. Looking forward, there's a plethora of positive data points for our industries that suggest photomask demand should increase in 2021. That, combined with the additional capacity we plan to bring online during the second half of the year, gives us confidence in our outlook for 2021 of high single digit percentage revenue growth and operating profit growth similar to the 23% growth we achieved in 2020. Gross profit for Q1 was 20% lower than the previous quarter and previous year, driven primarily by unfavorable product mix, which we expect to improve as high end logic demand returns. Operating expenses were higher sequentially, which is not unusual for the first quarter and within our expectations as a percentage of revenue. Below the operating income line, net effects of other income, tax provision and non controlling interests were more favorable than comparable periods, resulting in earnings per diluted share of $0.13 for the period. Our cash balance at the end of the first quarter was $279,000,000 essentially unchanged from the beginning of the quarter. Operating cash flow was $26,000,000 and we spent $18,000,000 on CapEx. For full fiscal year 2021, we're still forecasting approximately $100,000,000 in CapEx as we execute on the next phase of FPD capital investment. We repurchased 1,200,000.0 shares of our common stock for $13,000,000 during the quarter, leaving approximately $69,000,000 remaining under our current share repurchase authorization. On the balance sheet, total debt increased by a net of $33,000,000 which includes a new equipment lease. Before I provide second quarter guidance, I'll remind you that our visibility is always limited as our backlog is typically only one to three weeks, and demand for some of our products is inherently uneven and difficult to predict. Additionally, the ASPs for high end mask sets are high. And as this segment of the business grows, a relatively low number of high end orders can have a significant impact on our quarterly revenue and earnings. Geopolitical risk related to government actions to address health concerns and trade policy may have an impact on our operations, the operations of our customers or suppliers, or end market demand, resulting in an adverse impact on our industry and therefore our results. Given those caveats, we expect second quarter revenue to be in the range of 153,000,000 to $162,000,000 We are encouraged by demand trends in our markets and overall positive commentary by others in the industry. High end logic recovery is anticipated, but timing is uncertain. Other markets should continue to grow and we're on track to deliver on 2021 targets. Based on our revenue expectations and our current operating model, we estimate earnings for the second quarter to be in the range of $0.14 to $0.20 per diluted share. We have begun 2021 on an encouraging note, growing revenue in a seasonally soft period and meeting supply chain challenges. We are pleased with our performance, but there is room for improvement. Margins should improve as we grow revenue, further benefiting from fixed cost absorption and continued focus on removing costs from our supply chain and operations. During our Investor Day in December, we presented our three year target model that establishes operating margins in the high teens, earnings in excess of $1 a share and free cash flow of approximately $100,000,000 We're confident that these targets are achievable and look forward to updating you as we move forward. I will now turn the call over to the operator for your questions. Your first question comes from the line of Tom Diffely with D. A. Davidson. You may now ask your question. Yes. Good morning. I guess I first wanted just to look into the mainstream market for you. Obviously, it's still a big part of your revenue. What are you seeing as far as industry capacity? And what are the pricing trends and growth trends you see there? Yes. Our mainstream the mainstream market right now, particularly in Asia, for us is very strong. So our capacity in Korea, Taiwan and China, it was sold out in the current quarter. U. S. And Europe, not. But throughout Asia, we're in an oversold situation. And if you look relative to historical behavior. Probably the first time in my thirty five years, anyways, where I see or we see significant investment being made in legacy nodes. Never seen that before. So the market is oversold for photomasks, and there's more capacity coming online. So this also sets the stage to do things that we have effectively never been able to do in the mainstream, which is to start to nibble at raising prices. So we're in a dynamic now where we expect to see pricing move up instead of in the mainstream market segment. And that should start to happen in the current quarter. And as we step through the year, we'll see how far we can take that. Won't have a big impact on revenue necessarily, but will have a disproportionate effect on profitability. So obviously we Okay. That's great. Yeah. Obviously, we like that trend. Right? We like that Yes. We like that trend. Okay. Great. Thanks, Peter. And then maybe as a follow-up, you talked about $40,000,000 of annual contracts right now with a few large flat panel customers. When you look at phase two, do you typically get into those contracts ahead of time? And so they're kind of in place for when you spend the money to put in another line? Or what are the dynamics there for a new line going in? Yeah. It's a mix. It's a mix of the two. You know, as far as our FPD business is concerned, just, you know, remind you know, remind you that for a couple of years running, we were sold out in our FPD business. Q4 on the Q3 call, we said we expected Q4 not to be sold out, which was for us you know, a dislocation. And indeed it happened as we expected would. Then when we got on the Q4 call and then our Analyst Day, a day or two later, what we said was November was a month of still a month of grim market. And in December, by the time we had those calls, we were able to sell our capacity. And that obviously continued through the quarter. So our FPD revenues this quarter reflect one month of of crappy market, and two months not of what I would describe as a strong market, but strong for us because of our position, particularly in AMOLED. So if we project forward, as I said, we expect a lot of amyloid capacity to come online, particularly in China, right? We estimate for our customers a doubling, more or less, from the beginning of the year to the end. And we're bringing this capacity online right into the midst of that capacity ramp, which has serviced, I think, very well. So if you look at our AMOLED, there's three litho tools. Two are slated to be delivered in the current quarter. Because of the short qualification cycles, we expect to ramp both of those tools in the third quarter. By the fourth quarter, they should be fully sold out. Basically, we think as soon as we can get them online, they're going to be sold out. The third tool is being installed in the third quarter, so we should be ramping into the fourth quarter. So anyways, the AMOLED capacity we're installing this year, as soon as it comes online, we believe we should be able to fill it. And the entire factory for the rest of the year, we believe should be fully sold. So we're feeling good about AMOLED and what should constrain our revenues is our ability to install and ramp those new tools. Right? So Okay. Great. Yeah. And unlike, you know, John made some remarks. If you look at our global cost structure, right, the capacity additions we're making this year were more or less point tools, not lines. So point tool installations have more financial leverage than when we have to do what we just did in China, right? Which is build factories and install lines that where the lion's share of the CapEx there is not fully utilized. So the second wave in Hefei should help us effectively grow into and fully leverage our cost structure there. Yes. Okay, great. Maybe if I could just squeeze one more in for John. When you look at the single digit revenue growth, but the twenty three percent or so operating leverage, Is that just kind of normal operating leverage for you? Or is it some special things going on this year that creates a little bit higher leverage than you would normally see? No, Tom. We should see OpEx improve as a a percentage of revenue through the year. First quarter is generally kind of tough one with OpEx, with employer taxes, etcetera, reinstating. And then with our regular our normal operating leverage through the rest of the year, we should be pretty comfortably within the range that we discussed, the 20 mid low to mid 20%. So the increase of these new tools doesn't ramp up your COGS meaningfully? We only start depreciation as we qualify and start generating revenue from those tools. So we have a fairly close match of depreciation with revenue, and it's a smaller portion of the depreciation coming on. So our operating leverage will still be 50% or better. Great. Okay. Well, thanks for your time today. Thank you. Your next question comes from the line of Patrick Ho with Stifel. You may now ask your question. Thank you very much. Peter, maybe first off, in terms of the high end excuse me, high end IC business that you talk about recovering, are you seeing it where are you seeing it in specific markets of this potential recovery? And could it be a steep ramp when it does finally recover? Yes. You know, Patrick, I think you know, we have a really strong global team that react that has reacted and does historically and continues to react very quickly to shifts in markets. And likewise, it's a very seasoned team. So if we look at our memory business, for example, you know, John commented on it. It snapped back just like you would expect in a normal upturn. So boom, you know, memory business, you know, full on. So traditional. Logic business, you know, different story. We've talked about the mainstream where over the last two to three years and over the next certainly one to two years, see new capacity coming online. So the mainstream market is oversold like I've never seen in thirty five years, oversold, and likely stay that way. On the other hand, if you look at the high end logic, I think as you know well, right, there is a problem there, not for our customers, but for their customers because there's a shortage of high end logic capacity. I think that now is well understood. So the capital equipment guys are selling a fistful of tools. I think we had bookings of $3,000,000,000 in a month in January. I don't think that's ever happened before. And those tools, you know, are largely, you know, many of them being installed in, you know, the Asian foundries, which right now are, you know, running the current designs in general quite hard, trying to keep their customers happy. So yes, if you look at how the high end logic market is behaving, it looks like to me the kind of cycles I saw fifteen years ago where the business would turn up, right? The customers would react to the upturn in the business by building current products. And then as they added capacity, we would see a significant uplift in our business because now, you know, inventory is starting to build a little, people are more comfortable, the new designs that, you know, they kept on the shelf for, you know, quarter or so, break out. That's what the whole business, when it was more diversified with many more manufacturers, looked like fifteen years ago. That was a classic cycle for the entirety of our business. We see that classic cycle now. We haven't seen it for at least ten years, but we see it now in the high end logic sector. The designs, they're sitting there. They're going to get released. And they're going to get released when our customers are doing a better job of keeping their customers happy. So yes, that will be likely a steeper step up and it will be reminiscent of the days of old. So what we see this year is every quarter successively being a better quarter. That's what we see both in our FPD and our IC businesses. That's what we said during our Analyst Day, that's what we said on the last call. And the only thing that's happened really to change our view between then and now is the information flow is incrementally more positive. So yes, it's an interesting time, right, with markets doing and behaving in different ways. But if you look back over many years, each market you look at, you can see the reasons for why what is happening is happening. So it's an interesting, fluid time, but there's lots of opportunity there, I think, for us quarter by quarter. And the capacity we have coming online, when we made the purchase decisions, it wasn't completely clear what was going to happen. But generally, I think we have the right pieces on the board in the right places to maximize the financial outcome of the current trends in the various markets we participate in. So we're feeling pretty good about the business and about the markets this year for sure. Great. That's helpful, Peter. Maybe as a follow-up question, you talked about the strength in the mainstream IC business, which, again, is not a major surprise given the market environment we're in today. Maybe related to some of the comments you made about high end ICs and how historically it's been driven by new design wins. Aside from the strong demand and the need for new masks to keep up with, again, the demand trends out there. Are you seeing any new designs on the mainstream IC? And what I'm trying to get at that is we're seeing more silicon content in markets like automotive. There are also other types of, again, silicon content increases in different marketplaces. Are you seeing any design wins on the mainstream IC side? Yeah. That that you know, the the yeah. The answer is yes. Right? So I think most nearly all the automotive applications are not high end, or at least the way we define high end is 28 nanometer and below. The automotive applications, the high end of automotive might touch the 28 nanometer node, but in general it's an older, what we would call older nodes. So this is a market where historically when you saw an upturn, the business would get better, but there wouldn't be new capacity coming online. I think it's very clear that now and for the last year or two, there's been there are investments being made in new mainstream fabs. And those investments are being driven by increased demand at those nodes, not just for the existing products, but for new ones. And I think the point you made, the new car, I think today has $800 of silicon content in it on average. And if you go to a high end car, it's much more. And as we go shift from the internal combustion engine to the hybrid electrification model, there's going to be a boatload. Power electronics, that's all mainstream. All. I mean, some of the chips are a couple inches in diameter for the switching electronics. This, what's going on in the automobile industry, is going to create dislocations in our industry that we don't think any of us have ever seen. And you can see the CapEx being adjusted, you know, to in advance of it. So, this is it's it's interesting times. Alright. Your next question. Alright. Again, ladies and gentlemen, if you have a question at this time, please press star then the number one key on your touch tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Your next question comes from the line of Gautam Richard with Northland. You may now ask your question. Yes, thanks for taking the question. Just in terms of the gross margin in the first quarter was down 130 bps sequentially, and you had some tools down and it was a weaker mix. Could you parse those out and just give us a little bit of guidance as to which was the bigger impact or the mix between those impacts? Yeah. I don't know that we would we'd say one is bigger than the other. We had, you know, the decline in the high end IC, which and we had a slide, kind of lower geometry product up to high level machines. And then in FPD, we had, you know, some unabsorbed overhead. So I I don't know that I'd weigh one effect on the margin more than the other. Okay. And then, in terms of, it sounded like some of your competitors are adding, capacity for mature markets. Given most of the equipment in the market is fully depreciated, can those new assets be competitive at current prices and be profitable? No. I mean, I think what so yeah. To to just go back and, you know, clarify one of John's comments. So we saw a high end logic demand weak. So what we did is we and mainstream demand very strong. So what we did was we split we basically split our capacity where we took basically, we kind of moved everything to tool up to keep do our best to try to maximize our market share. As the high end demand resumes, we'll push that all back down. You can see the effect on our margins, right? And anyone who tries to do the same thing is going to have the same outcome, right? To the extent you use a more expensive tools to bring build lower ASP product, your margins are gonna get compressed. And today, it's not feasible to buy a new mainstream line and have it make money at current pricing. It's not feasible. But what the industry will do is what we are doing and what we planned for last year, and that is if you look at our maintenance CapEx, it's largely targeted at the mainstream market. And it's there to debottleneck the existing lines that we have. So we can get a little financially viable capacity uplift in the mainstream by putting the right tools in the right location. But, you know, what can we squeeze out? I don't know, another 10%, maybe 15%, about, and then we're done. You know? And I think our competitors are in a very similar situation. They can do what we're doing at a point tool to align, gain, incrementally more capacity, but then they're gonna be done. So and and the consequence of that, I think, which I think you've highlighted is prices have to go up. And they'll go up until you can add new capacity and make money, right? How much that is? I don't think run models, but it's it's it's not small. Got it. Got it. So what what you're painting a picture of is as the high end fills up in the back half and designs are released, you're gonna you're gonna see a significant, uplift in utilization, in in both mature and high end and prices should go up and this should be a very favorable trend for margins walking through the year? Yes. Basically, we'll be we'll slide the mainstream business down off the high end tools and refill those tools with the high end logic in Asia. That's one trend. Another trend is it's undeniable that prices will start In fact, we started after Chinese New Year with select customers where they're to start to raise mainstream pricing. You know, I've been doing this for thirty five years. I've never been able to do that before. So but and I we can do it. We can do that because everybody is sold out. Everybody. Not just Photronics. Everybody. Got it. And then, last question. Climate change. You know, there was this cold snap in, Texas, a lot of water damage, power out, etcetera, etcetera. I think you have a plant in Round Rock. And I was just wondering, was that plant impacted? Is it back up and running? Just any color there. Yeah. Both we and our largest competitor have factories in Texas. And we were both impacted. Their factory was down for a week. Our factory was down. We were offline based on loss of power for about a day. And the impact of that loss of power more or less depressed output for the best part of a week. So we lost about half of our output as a result of the dislocation in the power grid. So on one hand, we're happy we outperformed our competitor who was down hard the entire period. On the other, it did have an impact on our revenues and that's already been baked into the guidance. There's nothing that we know of beyond that that you don't already, you know, see the financial consequences of. So, yeah, wasn't wasn't a good wasn't good for us. It was worse for our competitor. Of course, we have several significant customers in Texas, in particular NXP, which was the old prescale, which was the old Motorola and Samsung, both both and also Infineon. All three offline for basically for a solid week and now trying to recover, production. Got it. And then the last one you We did better. We did better than all, but, you were still affected. Yeah? Yeah. Yeah. And then just last one for me. You know, you've had some issues getting, you know, things installed, repaired, because of quarantine and COVID. Are those issues behind you at this point, or are you still, you know, struggling to get, you know, vendors in to do stuff? Yes. So, the problems with installations, we, you know, hope are, behind us. No. Different, but but, yeah, we we think the installation issues are behind us because there's kinda one category of vendor that has struggled more than, you know, others regarding, COVID. We're still gonna have, you know, I think some issues related to, the inability, the travel constraints imposed by COVID because not every, vendor for the photomask industry has fully capable people in all the regions where we operate. So this is going to be a nagging headache for another quarter or two. But as we're already seeing with infection rates dropping, as the vaccination cross section of the countries we do business in increases the problems we've been fighting for us. It started in Hefei more than a year ago. We've been fighting with these struggles for a year. I think we've done a very good job at mitigating the impact, but we kinda see a tail that'll last another quarter or two. So and the good news is is that, you know, that high end it's a nine k in Xiamen. That's a very high end e beam. Right? That was delayed. You know, it was the installation, the final acceptance of that tool was, at the end of or it was beginning it was the October, the October. So we've been working to qualify that tool. And as the qualification period is completed, it should ramp right into what we think is the ramp in the high end logic market. Now that might be lucky, I don't know, but the tool was always intended for Xiamen. And, you know, the rest of the costs that are needed needed to support that tool is already, you know, dragging our income statement. And once that tool is installed, the leverage of it financially should be high. Right? So, anyways, the fact that it was delayed isn't the worst thing in the world given the softness in the high end logic market we're presently seeing. So maybe we got lucky on that one. It. Got it. Okay. Thanks so much. Thank you, guys. Ladies and gentlemen, there are no further questions at this time. I will now turn the call over to Peter Kerlin for closing comments. Thank you for taking the time to join us this morning. We truly appreciate your interest. Photronics is well positioned to grow revenue, earnings and cash flow this year, extending our marketing technology leadership positions and moving us towards our long term financial target. Look forward to updating you on our success as the year progresses. Ladies and gentlemen, that concludes the conference call for today. We thank you for your participation.