Intevac , Inc. (NASDAQ:IVAC) has delivered a robust financial performance for the first quarter of 2024, marked by nearly $10 million in revenues and a substantial gross margin, primarily fueled by its HAMR technology upgrades.
The company's total backlog has seen a 25% increase since the end of the previous year, and its cash balance has soared above $75 million. A significant development for Intevac is the delivery of the first TRIO system to a cover glass manufacturer, which is expected to contribute to revenues in 2024 and promises even stronger growth in 2025.
Key Takeaways
- Intevac's Q1 revenues approached $10 million, with a strong gross margin thanks to HAMR technology upgrades.
- The cash balance surpassed $75 million, and the total backlog grew by 25% since the previous year-end.
- The first TRIO system was delivered to a cover glass manufacturer for a leading smartphone OEM.
- Full-year revenue projections are in the low $50 million range, with HDD sales nearing $40 million and TRIO revenues potentially topping $10 million.
- Intevac is investing in marketing and business development to expand the customer base for the TRIO system.
Company Outlook
- Intevac anticipates full-year revenues in the low $50 million range.
- Gross margins are expected to be in the low 30s percentage range for 2024.
- Operating expenses are projected to decrease below $8 million after Q2.
- The company plans to maintain a similar cash and investments balance by the end of 2024 as at year-end 2023.
Bearish Highlights
- Gross margins are forecasted to be lower than initial expectations due to changes in customer composition and additional qualification costs for the TRIO system.
- Operating expenses will be higher than the post-restructuring budget because of increased investments in business development and marketing.
Bullish Highlights
- Positive customer feedback on the TRIO platform, with investments being made to enhance its automation and features.
- Strong partnerships in the hard drive business are expected to continue driving HAMR upgrades for the next four to five years.
- The TRIO platform has potential opportunities in automotive and advanced packaging sectors.
Misses
- There were no specific financial misses reported in the earnings call.
Q&A Highlights
- Intevac clarified that they have resolved payment terms with major HDD customers and have no exposure to any specific company.
- The company is prioritizing on-time delivery of HAMR and has sufficient cash to cover all inventory.
- Future plans include substantial growth in the TRIO business, with investments in manufacturing capabilities in the US and Singapore.
Intevac's focus remains steadfast on the HAMR market, positioning itself as a critical driver and enabler. The company's investment in the TRIO platform allows it to swiftly meet market demands, initially targeting consumer devices with potential future evaluations in the automotive sector.
Moreover, Intevac is looking to enhance its profitability and cash generation by expanding its service revenue and consumable business. By 2025, the company aims to make the TRIO business cash-generating, with an emphasis on profitability. Intevac has expressed appreciation towards its employees, industry partners, and investors for their continuous support.
InvestingPro Insights
Intevac, Inc.'s (IVAC) first quarter of 2024 has been highlighted by significant financial developments, but a deeper dive into the company's performance and outlook through InvestingPro metrics and tips offers a more nuanced view. Here's what investors should consider:
InvestingPro Data:
- The company's Market Cap stands at 112.15M USD, reflecting the current valuation in the market.
- A negative P/E Ratio of -11.19 indicates that the company is not currently profitable, a figure that aligns closely with the adjusted P/E Ratio for the last twelve months as of Q1 2024 at -11.07.
- Revenue Growth for the last twelve months as of Q1 2024 is at 18.42%, showing a notable increase, although quarterly revenue growth has seen a decline of -16.56%.
InvestingPro Tips:
- Intevac holds more cash than debt on its balance sheet, which could signal financial stability and an ability to invest in growth or weather economic downturns.
- The stock has seen a significant return over the last month, with a price total return of 14.32%.
For investors looking to delve deeper into Intevac's financial health and stock performance, there are additional InvestingPro Tips available. For instance, while the company has liquid assets exceeding short-term obligations, it has been quickly burning through cash and is not profitable over the last twelve months. Moreover, the RSI suggests the stock is in overbought territory, and the valuation implies a poor free cash flow yield.
Investors interested in these insights can find more tips on InvestingPro, and using the coupon code PRONEWS24 will provide an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 9 additional InvestingPro Tips available for Intevac, investors have a wealth of information to guide their decisions.
Full transcript - Intevac Inc (IVAC) Q1 2024:
Claire McAdams: Thank you, operator and good morning to everyone on today's call. Thank you for joining us today to discuss Intevac's financial results for the first quarter of 2024, which ended on March 30th. In addition to discussing the company's recent results, we will discuss our outlook looking forward. Joining me on today's call are Nigel Hunton, President and Chief Executive Officer, and Kevin Soulsby, Chief Financial Officer. Nigel will begin with an overview of our business and outlook, then Kevin will review our financial results before turning the call over to Q&A I'd like to remind everyone that today's conference call contains certain forward-looking statements including but not limited to statements regarding financial results for the Company's most recently completed fiscal quarter, which remains subject to adjustment in connection with the preparation of our Form 10-Q, as well as comments about future events and projections about the future financial performance of Intevac. These forward-looking statements are based upon our current expectations and actual results could differ materially as a result of various risks and uncertainties relating to these comments and other risk factors discussed in documents filed by us with the Securities and Exchange Commission including our annual report on Form 10-K and quarterly reports on Form 10-Q. The contents of this April 25 call include time-sensitive forward-looking statements that represent our projections as of today. We undertake no obligation to update the forward-looking statements made during this conference call. I'll now turn the call over to Nigel.
Nigel Hunton: Thanks, Claire and good morning to all of you on today's call. We appreciate you accommodating the early time this quarter, as I'm currently calling from the UK, before returning to Asia for additional customer meetings after several international trips during Q1. I am pleased to report solid results for the first quarter with revenues of nearly $10 million and strong gross margin performance driven by the favorable mix of HAMR technology upgrades in the quarter. Our results for the first quarter confirm that following our Q4 call in February, we arrived at an agreement with our largest customer regarding payment terms. This led to continued strength in the delivery and installation of HAMR. upgrades throughout Q1. So while our total balance of cash and investments at quarter end was just over $65 million. As of today, our cash balance exceeds $75 million. We're also pleased to announce today a 25% increase in our total backlog since year-end reflecting continued strong bookings for HAMR technology upgrades. Total new orders for the first quarter exceeded $20 million and included HDD technology upgrade bookings from multiple customers including the initial HAMR upgrade orders placed by leading data storage companies. Next on our call today, I'm pleased to discuss the resolution of our joint development program for the TRIO platform. Looking back, the success of the platform's development and achieving qualification in 2023 was testament to the quality of engineering resources resident within Intevac, and decisively demonstrated the TRIO’s ability to deliver a multiple key performance metrics, which will enable Intevac to address very large market opportunities. Achieving the successful co-location of the initial system by year end was a major milestone for Intevac. At the same time in our ongoing commercial negotiations with our JDA partner year-to-date, we have continued to navigate the complexities of the display cover glass ecosystem for consumer electronics. In evaluating our respective roles within a well-established supply chain, we and our partner have mutually determined that Intevac will now commence shipping TRIO systems directly to the existing cover glass manufacturers with our direct suppliers to the leading OEMs. And that is precisely what we've already done. The first TRIO system was delivered this month to an established cover best finisher for a leading smartphone OEM. We believe this supports our assertion over the past several earnings calls that we are seeing strong customer pull for the TRIO. As soon as the system is fully installed, we will immediately begin the qualification process. Achieving customer qualification will trigger the formal purchase order. Therefore, our expectation is that this will be the first TRIO system to revenue in 2024 and that successful qualification with the customer will also lead to a follow-on order for multiple systems. As a reminder, we have the inventory on hand in order to deliver on multiple systems with a relatively short lead time. At the same time, our relationship with our JDA partner continues to be positive. We have mutually agreed that the characteristics of the existing supply chain for consumer devices, dictates that we must sell directly. And as a result, we have paused our commercial discussions. We are grateful for the partnership and everything achieved over the past 15 months including, the many new customer relationships developed. As the industry continues to adopt more durable coatings, we believe we have future order opportunities with our JV with a partner. Beyond the recent customer shipment, we're also running samples with multiple additional companies, who are in various stages of evaluating the TRIO. In total, we have engaged with several leading companies expressing demand for the TRIO office. With our TRIO growth opportunities now extending to several potential customers, we are stepping up our investment in the organization especially in marketing and business development. Recent new additions to the leadership team including Dilan Fernando [ph] joining us as VP Business Development and Shannon Fogle SVP of HR. For the first TRIO shipping early this month and multiple evaluations underway, the morale and excitement among the Intevac team of exceptional employees is the strongest, I've seen since joining the company. It is truly gratifying to see the smiles and excitement as we officially launched initial TRIO shipments. Yes, another major milestone for our company. Which brings me to our outlook for 2024. We have now successfully resolved negotiations, with our major partners in each of our primary end markets, which enables us to resume guidance and reiterate our prior expectations for full year revenues in the low $50 million range. This incorporates our consistent expectation for two to three TRIO systems to revenue this year, equating to potential revenues totaling over $10 million. In the hard drive industry, we are currently forecasting full year sales approaching $40 million. Not surprisingly, the majority of our HDD revenues this year, up a HAMR upgrades and that was referenced earlier in 2024, we're now reporting an initial order for HAMR upgrades from an additional customer which are leading data storage company. Industry news of improving fundamentals for the hard drive industry, continues to build and proliferate. Data center spending strength is a highlight of many Q1 earnings calls and strong customer demand and strength in cloud CapEx leading to certain supply challenges as well as price increases for several HDD product categories. We continue to expect HAMR technology upgrades to dominate our HDD business for the next few years. This is because boosting areal density results and tremendous efficiencies for the data center. Transitioning to higher-capacity drives without adding this is very positive for our upgrade business. And there is no doubt, that Intevac has emerged as the enabling technology partner for the adoption of HAMR. While improving HDD unit growth and capacity utilization also provides us with optimism for an eventual return to 200 Lean capacity additions. For the foreseeable future, our HDD business will be strongly supported by a multi-year upgrade cycle. Recent results and strong order activity have demonstrated once again, that we are a critical enabler of this transition and that all technology upgrade plans in the HDD industry are taking place on our flagship 200 Lean platform. Our critical role in the HDD industry provides significant visibility for continued solid base of business. And so pause our expectation, for strong growth year in 2025, year which we currently expect meaningful incremental growth for our TRIO platform. Finally, protecting the balance sheet remains, a key priority for the company. We ended 2023 with over $72 million of total cash and investments, and that balance has now strengthened to over $75 million. Our expectation is to exit 2024, in a similar range, as year-end 2023. Our customers now paying to our agreed terms, and so we do not expect to have any delayed payments. And with, that I'll turn the call over to Kevin for his review of our results.
Kevin Soulsby: Thank you, Nigel. Turning to the first quarter results. First quarter revenues totaled $9.6 million and consisted of HDD upgrades, spares and service. Q1 gross margin was 43.7% in benefit -- benefited from favorable mix of upgrades during the quarter. Q1 operating expenses were $8.6 million, which exceeds our current run rate and included a small fixed asset write-off and higher-than-typical legal costs in addition to the seasonal increases in audit and payroll. The GAAP net loss for Q1 was $1.6 million or $0.06 per diluted share. This includes a $2.4 million benefit receivable on our claim from the COVID era employee retention credit program, of which $1.5 million was recorded in other income and $0.9 million was allocated to Photonics and recorded as income from discontinued operations. The non-GAAP net loss was $2.7 million or $0.10 per diluted share. Total backlog increased to $53.1 million at quarter end, reflecting the $20.3 million of new orders booked in the quarter. Turning to the balance sheet. We ended the quarter with cash and investments, including restricted cash of $65.5 million, equivalent to $2.47 per share based on 26.5 million shares at quarter end. As Nigel mentioned, our cash has rebounded to over $75 million following more significant collections of receivables from the largest customer quarter-to-date. Total cash flow used by operations was $6.5 million during the quarter. Capital expenditures in Q1 were $0.6 million. Non-cash expenses for Q1 included $0.8 million for stock-based compensation and $0.6 million for depreciation and amortization as well as the $0.5 million fixed asset write-off. Now, moving to Q2 guidance. We are projecting revenues to be in the range of $7.5 million to $8.5 million. We expect second quarter gross margins to be in the 34% to 37% range due to increased under absorption and a less favorable mix of higher-margin upgrades. Q2 operating expenses are expected to be in the range of $8.3 million to $8.5 million, reflecting a lower seasonal costs, but continued high LIVAR. We expect interest income of about $500,000 and GAAP tax expense of about $400,000 in the quarter. Most of the tax expense will be non-cash. We are projecting a net loss in the range of $0.20 to $0.22 per share based on 26.7 million shares out standing. For the full year, as Nigel mentioned, we expect total revenues in the low $50 million range. This includes TRIO revenues potentially exceeding $10 million as well as HDD sales consisting of upgrades, spares and service approaching $40 million. As a reminder, our 2023 revenues included one 200 Lean system and one refurbished system, which we do not expect to repeat in 2024. Given this revenue profile and expected mix, we anticipate gross margins for the year to be in the low 30s. This is lower than our earlier expectations in the high 30s, given the change in customer composition and the expected additional cost to qualify the TRIO with both the cover glass finisher and the end customer OEM. We expect ongoing operating expenses will decline below $8 million level beyond Q2, but still be higher than our post-restructuring budget due to the incremental investments we are making in business development, marketing and other areas in order to address a broader potential customer opportunity for the TRIO. We expect both interest income and taxes to continue to be in the range of $400,000 to $500,000 per quarter. Finally, our expectation is that we will end 2024 with a similar balance of cash and investments, as of year-end 2023.This completes the formal part of our presentation. Operator, we are ready for questions.
Operator: [Operator Instructions] The first question we have comes from Peter Wright from Intro-Act.
Peter Wright: Great. Thank you for taking my question and congratulations on the TRIO shipments.
Nigel Hunton: Thank you, Peter.
Peter Wright: Wonderful. My first question is, if we look into your R&D spend and specifically your focus on TRIO, what are the main operations there? Is it more development of the existing product with your large customer or is it -- is it more in expanding into new end-markets and new applications? So if you could give us some color on kind of your thoughts there on the meaning of the TRIO platform for investors going forward?
Nigel Hunton: Yeah. Thank you for the questions. I think very clearly the TRIO platform has had significant investment. And we progress pretty effectively to qualification and great to see us putting the first system. Now into the field, to be quite a lot of cost around supporting the field installation, developing that getting through qualification. But really beyond that as well some of the customer feedback we've been getting is around, how do we look at automation of an Anti-Fingerprint spray coating on the end of the machine. So one of the things we've done is we've designed a capability that we put a high throughput machine into an existing facility for consumer devices. Within that there are some process steps that we want to be integrated into the machines. So that based on R&D work around integration of additional process steps. We've also as we've talked on prior calls a lot about this is a modular platform and one of the real excitement for me about how we've designed this. And the way the design concept has this modularity capability enables us to add additional features. So for example, we can add additional features in future years around the implant. We can look at additional features around a cleaning step. That enables the product in the future to actually be expanded into not just automotive, but into advanced packaging. And those are multi-years ahead. That's why it's important for us to maintain this level of investment in R&D. Because we believe that the TRIO platform has multiple opportunities going forward. And so hopefully you'll see some of that investment in the current product which would be the majority for this year and then as we move into 2025 and beyond, we'll maintain that level of investment, as we expand into other market applications. Hope that answers your question.
Peter Wright: That's wonderful. And if you could help me understand in the conversations, I think that there is a slight pull-in maybe of some expectations on TRIO, if its north of 10, if I'm reading that right maybe one incremental system from prior expectation. Number one, if you could clarify is, is that right? And what is that? Is that just operationally you guys are ready for it? Or is there a demand-driven pull-in of demand there.
Nigel Hunton: And we've always said this year would be two or three TRIO revenues. And that's consistent with that number of around $10 million. So there's this, -- we believe -- again as we've said very strongly as well this is pull to get a machine into the field and running and actually going direct to the key finishes, I think is a key step forward. It does require qualification. And we've been able to discover that the machine will now start qualification in May. So it's going to be -- and our team will support that. So we have a pretty extensive team in Asia, supporting that qualification. But from a pricing point of view and unit numbers it's pretty consistent to the prior calls. It will be two to three systems for around $10 million.
Peter Wright: Fantastic. And the very last question and I'll go back into the queue. On the Hard Drive side, I have to think your customers need you potentially more than you need them in this business supporting their upgrades. How are conversations taking place with your customer base in a year where we don't have any 200 lean sales to continue to kind of support that infrastructure? How do your customers kind of continue to feel comfortable securing you enough to continue to be there for them?
Nigel Hunton: I think and we've said on prior calls as well. We believe this sort of level of HAMR upgrades is going to be at this similar level for the next four to five years which gives us a nice base level for the business. And we have very, very strong partnerships. I mean that's key. And you think of this the HAMR importance of the HAMR success. I mean what do you read in the press or you pick up some key underlying trends. I mean HAMR Technology enables a data center to take its existing capability out, replacing it with HAMR. That boosts the capacity dramatically in the same footprint without building a new data center. It also gives them a step changing electricity and power consumption because the HAMR upgrades and new systems give lower paths. So it really is going to drive for the next couple of years a investment in upgrades, which will ensure that all of the 200 lanes become HAMR cable. And that's the key focus and it's about making sure with us support those customers as they grow and ramp the HAMR demand. And if I look out beyond three to five years, I mean you've got to believe very much as we've seen that the HDD industry requires and demands this drives. And, therefore, as we do HAMR and as things grow, it's just going to have any -- I think an increasingly scope and opportunity for the business. And I think that will eventually lead to some 200 Lean orders. But I don't see that in the near-term horizon. But that for me it's about let's focus on the HAMR upgrades, the strong margins, the consistent revenue throughout the next couple of years and have as a basis we will drill on top of it.
Peter Wright: Thank you for taking my questions.
Nigel Hunton: Thank you, Peter.
Operator: Thank you. The next question we have comes from Mark Miller of The Benchmark Company. Please go ahead. Mark, your line is live.
Nigel Hunton: Yeah, I can’t hear anything here, Mark. Have you unmuted Mark?
Mark Miller: I'm here. Sorry.
Nigel Hunton: Good to hear from you, Mark. It’s always good to hear your voice. It’s good.
Mark Miller: I just wanted in terms of the tool that shipped in April; do you expect the revenue recognition in the third quarter?
Nigel Hunton: Yeah, maybe Kevin can add to this, but I'm clearly that is our first tool shipped that has to go through qualification with the revenue recognition with I think the first step to make as Kevin will cover me on this, the GAAP requirements.
Kevin Soulsby: We want it to be accepted by the customer and fully signed off before we take revenue being the first time we shipped one of these and that will be the case for the first couple of tools until we prove that the installation is perfunctory and then we can take revenue on shipment in the future.
Nigel Hunton: I mean clearly from my perspective that installed units the customer where it's going is excited about it wants to accelerate and do that as fast as we can. So I would like to hope that we can get that completed and the qualification done within the quarter, but certainly within 2024 that will absolutely be revenue.
Mark Miller: Based on your revenue guidance for this quarter and for the year, it looks like you're leaning towards maybe TRIO tool being recognized this year. Is that off base now?
Nigel Hunton: That is absolutely correct. We look into two to three tools and now be in the second half of the year, yeah.
Mark Miller: You mentioned you were there were several multiple valves away for TRIO. Any more color you can provide there in terms of timing or anything else?
Nigel Hunton: I mean, the key for me is it's I would say over the last quarter we've shipped multiple samples out in the field. They've gone through initial evaluations and that then leads to further meetings. So I think we'll have strong positive interactions on those coatings over the next couple of quarters. And I think they will start to deliver. I think we will get maybe additional -- one of those two to three additional lanes we'll be driving hard to complement a separate customer.
Mark Miller: Okay. Thank you very much.
Nigel Hunton: Thank you, Mark.
Operator: Thank you. [Operator Instructions] The next question we have comes from Hendi Susanto of Gabelli Fund. Please go ahead.
Hendi Susanto: Good morning, Nigel, Kevin and Claire, and congratulation on winning initial – upgrade from a new major data storage company.
Nigel Hunton: Thank you, Hendi.
Hendi Susanto: Yeah. So, Nigel my first question with the new HAMR upgrade customers, I think they like behind you're leading first major customers. So how we end efficient, the time line, like how quickly they can accelerate their, let's say their work on HAMR that can open up more opportunity in the near-term?
Nigel Hunton: Yeah. And just to be clear with the customers we have as you know we can't mention the names or talk about what their specific development plans are. And but again, for me, it's a fantastic achievement and it's a great step forward. And that really does give credibility to hammer in the market. We believe the first one will always take a bit of time, it's going to go through the power of the company has got to evaluate it and see the benefits and then put that into their own strategy. So, we can't comment on what their strategy or rollout plans are. But the great news for us is that we have another customer evaluating it. And we don't comment whether that ahead or behind anyone else steps up to them to comment on it. But for me it's rent. It's a fantastic opportunity for Intevac, and it really does give a testament to our being the key driver and enabler of hammer in this market. And I think hammer is going to drive and maintain the competitive nature of disk drives for that data centers and it's a great position to be in. So now we're very excited.
Hendi Susanto: I see, Yes. And then, Nigel, the TRIO just some sales expectation for two or three tools. So we know that the first one will go toward qualification. What do the other, like one to two additional systems represents?
Nigel Hunton: Yes. So I think as we've said on prior calls, we've made -- as a company, we have backed the TRIO platform and we've made a significant investment in inventory in parts and capability. So we have shipped one units. We have another shipment in final assembly as we speak so we can very quickly put another unit into the market. So therefore, having that inventory allows us to respond very quickly. And our initial focus is still around the consumer devices, and I sense that will be the focus for 2024. As we look beyond that then we start looking at getting some evaluations in the automotive sector as well. But our primary focus -- for this year the primary focus for the tool that's gone, the primary focus for the additional tools, which have the inventory. So we can respond very quickly. We'll be the consumer device market.
Hendi Susanto: Okay. Any update whether it will go towards smartphones to wearables?
Nigel Hunton: At this, wearables, say, it will be consumer devices.
Hendi Susanto: Okay. Fair enough, Nigel. And then one question for Kevin. With regard to the payment terms with your major HDD customers, when did exactly it get resolved? And then you indicated the quarter to-date you receive $10 million, how much more beyond that $10 million that in fact has not yet received?
Nigel Hunton: If Kevin about getting back in it, I would say that there's anything to add to Kevin. We received the agreement in the quarter and that is the amount of clarity we're going to give, and we have a great partner and it's -- we've resolved the differences around that. We now have a great position with them from cash but it will resolve within the quarter. And that's really the sort of guidance you're giving about the timing of that. Payment that you want to add to that, Kevin?
Kevin Soulsby: They caught up where we are now our receivables are bad terms with them currently.
Hendi Susanto: And then any remaining payment term associated with the canceled orders?
Kevin Soulsby: We still have all that inventory. It's being worked with CGATE, but there's been no progress on that.
Nigel Hunton: And just to add to that, one we don't talk about customer names. So apologies, I mentioned that one.
Kevin Soulsby: Sorry.
Nigel Hunton: We have no exposure to the company. We've had many, many times, so that the customer gave their cash deposit that covers all the inventory. We had working very diligently with them. We've made some great progress this quarter on identifying what level of those parts can be moved to either to them or elsewhere and where there is no exposure for Intevac. The cash is there to cover all our inventory and we will get that resolved over time. But clearly everyone has different priorities at the moment. A key priority is ramping and making sure the HAMR gets delivered on time, and we've hit the on-time delivery, which we're doing. So over time, that will get resolved, but it clearly is not critical, because we have the cash covering that inventory.
Hendi Susanto: Okay. Yes. Thank you. And then any insights on the income from discontinued operations in the income statement?
Kevin Soulsby: That was a result of the employee retention credit claim that we filed in the quarter. Part of that was related to Photonics wages in 2021. So that piece of it was allocated to discontinued operations.
Hendi Susanto: Got it. Okay. Yes. I think, thank you so much for your time and for taking my questions, Nigel and Kevin.
Kevin Soulsby: You're welcome. No, thank you. We always answer your questions and we appreciate your support for the company. So thank you, Hendi.
Operator: Thank you. The last question we have is a follow-up from Peter Wright. Please go ahead sir.
Peter Wright: Great. Thank you for taking my follow-ups. If I look to 2025, and I just focus on the TRIO part of your business, if I could ask a three-part question; and help me with these assumptions. So I understand that there's some delay in kind of the revenue recognition from the stack in 2024 into the back half just as you're recognizing your first tool. But on a run rate basis, it would suggest that you could be at about six tools in 2025, if we're looking at potentially three systems in the second half of 2024. Is that a good assumption on it? And then the second part to that, is there any capacity constraints to be able to deliver on that? Or kind of what is your capacity capability of developing TRIO systems? And then the third part of that question is, is there other sources of revenue other than equipment revenue that could hit the TRIO part of the model?
Nigel Hunton: Okay. Great questions, Peter. We appreciate that. We're not giving guidance for 2025 on the number of TRIOs. But I would assume we're going to be -- if we -- this product is a game-changing technology. We have to get in that momentum. We have to get the product qualified in 2024, and it's great to have a product now in the market starting that qualification. If those go through and we get the two to three this year, I would like to believe we will be at six in 2025, if not higher, but we're not going to give an actual number against that. I mean for me, we've got to start 2025 being a substantial growth year. And as we've talked about with the HAMR being a baseload, it really is all around the TRIO. From a capacity point of view, we are absolutely investing in the capability to manufacture the TRIO platform, not just in Santa Clara in the U.S., but in our Singapore facility in Asia. Asia is going to be key to the strategy. And as John Dickinson is building in his operational plan, we're building a base capacity around our facilities. He's building and looking at a contract manufacturing model, which will also help within the cash flow to expand beyond that. And as we look at how we actually build a system from a modularity, it gives you a unique way of actually building capacity across multiple contract manufacturers. So I think from a capacity point of view and it was a key question from some of our potential customers is, we have an ability to ramp very quickly. We have an ability to expand our capability into both Singapore contract manufacturers. So for us we've got really no constraints moving forward and we'll invest and build this business to meet the demands and requires. So hopefully that answers the first two questions. If I look at the business model. One of the opportunities we have within the system is an ability to start looking at the service model. The machine runs very effectively. The machine has consumable parts such as the silicon sources. It has parts that need sort of maintenance as you think about running the business and running this tool very effectively and efficiently. And there are parts that machine that need maintenance every so often a couple of weeks maybe a month was four to six weeks. So therefore there's an opportunity for us to actually deliver from this platform. Some level of service revenue and consumable business. It's early days yet. And the key priority is to get the first tool in the field learn from that understand the service and consume belief and then put in place an efficient organizational model that helps us build and capture some of that ongoing revenue because it will be an ongoing source of revenue for the Company. So if I compare that to going back 20 years on the 200 Lean that really wasn't part of the strategy then it was just a pure play equipment sale. I think we've got an opportunity here to actually start building out a level of service and parts release. So hopefully I answered your question that we are looking to actually build it beyond just equipment. We are building capacity and capability and we do want to get a run rate ahead of 2024's numbers but
Peter Wright: That's some amazing one note I didn't make is congratulations on being such a good steward of capital being cash neutral and a year of bringing such a significant platform to market is quite a quite a success. So congratulations on that. Very last question. If I look at 2025 and I just look at your TRIO business, do you think that that business on a standalone basis has the possibility to be cash generating?
Nigel Hunton: I think we can’t [indiscernible] that is I think that the business has to be absolutely cash-generating. And we've talked for many times this business has to build towards profitability. Is not just about protecting the cash, the cash has been fundamental and a key focus for me and to retain and actually protect that core cash in the company. But we also have to think about how do we actually get the business towards back towards profitability, how do we get this business cash generation and that ramp. We're very excited about the future and the opportunities ahead of us there. But Kevin you want to add to that.
Kevin Soulsby: No, I agree with Nigel. The products should start from generating cash as we go through 2025.
Peter Wright: Thank you, Kevin.
Operator: Thank you, both. Ladies and gentlemen there are no further questions at this time. I will now turn the call back over to Nigel Hunton for his closing remarks. Please go ahead, sir.
Nigel Hunton: Thank you. And again I really appreciate the flexibility of everyone to allow me to pull this call forward. It's actually a very sensible out here in the UK. It's been in the afternoon but for many people it's been pulled forward to very earlier in California, for example. But I appreciate that and especially appreciate all the questions we get. So I think they do help and hopefully everyone understands how we're taking this company forward. I do want to wish and thank all of our employees the counterparts with that there our industry partners for all the hard work and dedication. This has been a very, very long hard work over the last couple of years its not just one quarter, but we’ve delivered a strong quarter in Q1. We're now going to really flip and really focus on growth and is excited to focus on the customer qualification for TRIO. And of course as always about thank our investors for their ongoing support and backing. And as always in any way could declare directly. I look forward to updating you on TRIO progress on our Q2 call. So thanks again and that closes the call.
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