PDF Solutions, Inc. (PDFS) Q4 2019 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen and welcome to the PDF Solutions, Inc. Conference Call to discuss the company's financial results for the fourth quarter and the full year ended December 31, 2019. [Operator instructions] As a reminder, this conference is being recorded. I will now turn the call over to Joe Diaz of Lytham Partners. You may begin.

Thank you operator and thanks to all of you for participating on today's call. We appreciate your time and your ongoing interest in PDF Solutions. As the operator indicated my name is Joe Diaz, I am managing partner at Lytham Partners, we are the investor relations consulting firm of PDF. With us on the call today are John Kibarian, President and Chief Executive Officer of PDF Solutions, Kimon Michaels, Co-Founder and Executive Vice President and Christine Russell, Chief Financial Officer. If you have not yet received a copy of today's press, it is available at the company's website at www.pdf.com. Before we begin with prepared remarks, please be aware that some of the statements that will be made during the course of this conference call forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding PDF’s future financial results and performance, growth rates and demand for its solutions. PDF’s actual results could differ materially. You should refer to the section entitled risk factors on PDF’s annual report on Form 10-K for the fiscal year ended December 31, 2018, and similar disclosures and subsequent SEC filings. The forward-looking statements and risks stated in this conference call are based on the information available to PDF today. The company assumes no obligation to update them. Now I would like to introduce John Kibarian, PDF Solution's President and Chief Executive Officer, who will be followed by Christine Russell, Chief Financial Officer. John, please proceed.

Thank you for joining us on today's call. If you’ve not already seen our earnings press release and management report for the fourth quarter and full year please go to the Investors section of our website, where each has been posted. As we head into 2020 I believe we started the new decade with clear and focus strategy and the potential for significant revenue growth and bottom line results. We continue to make progress on our revolution to become the leading analytic company focused on delivering improved profit efficiency and product reliability to the global semiconductor supply chain. Going forward our focus will be to grow our analytic business where we can increasingly deliver our solutions via the cloud to generate consistent recurring revenue and a higher gross margin that will bring increased level of profitability to our revenue. Today's press release started reporting two revenues components; analytics, and integrated yield ramp or IYR. IYR composes of revenue from our engagements that include performance based incentives on customers yield achievement such as gain share royalties. Analyst complies all other revenue including from our Exensio software, deifying characterization vehicles without performance based incentives. We believe that reporting revenue in this manner will provide you with better visibility into the business. The financial results of 2019 reflect our ongoing transition to predominantly analytics business. For the quarter and for the full-year analytics comprised 60% and 58% of total revenue respectively. It's worth noting that Q4, 2019 analytics revenue grew 31% compared with Q4, 2018 and full year 2019 analytics revenue grew 29% compared to 2018. These results are in line with our internal expectations as we de-emphasize the [ERM] business. We are pleased with the progress achieved to this point and look forward to greater momentum in the coming years. We believe that some of the momentum will continue to come from getting the more than 130 Exensio customers, most of whom used only one extend Exensio module for example manufacturing analytics. To use more of the additional modules available on the high robust Exensio platform for example test operations, assembly operations or Artificial Intelligence. Additionally, significant momentum will come from moving these customers to our cloud offering. In 2019, we undertook a number of pilots with key existing customers to achieve these goals. In the latter half of 2019 we started to see initial results. For example in the third quarter an IBM customer added Exensio online test control to its existing offline analytics resulting in growth of our annual recurring revenue from this customer of more than 10x to the run rate in just a few years. We also had a number of pilots with major customers in 2019 utilizing our Artificial Intelligence Solutions and the initial results are encouraging. For further example in 2019 we completed 3 clause pilots and we anticipate those customers moving to Exensio deployments to PDFs cloud offering in the first half of 2020. These customers will be able to leverage the Big Data module of Exensio which offers an 8x improvement in loading and retrieval time and a 40X improvement in database computation. The annual recurring revenue of our cloud deployments is typically more than 2x the ARR of our customers who install Exensio on-premise. PDF is the number one commercial solution for manufacturing yield and control because we are the only commercial analytic focus provider with the breadth and scale required by our customers. We have a global demanding and cutting-edge customer base which includes the leading tablet foundry IDM's, OSATs and system companies. No more than 25% of our sales is from any one international market which helps to insulate us somewhat from localized events such as the current Corona virus pandemic. While we have an office in the affected, our our employees are able to work remotely and our global workforce is able to support customers wherever located. We hope the spread of the virus is contained and those effective recover quickly. Luckily we do not see a significant impact on our business from the virus in the foreseeable future. Over the years we have made a number of acquisitions and investments to expand our offerings to adjust manufacturing challenges of customers building products with mature nodes in addition to our capability in aiding customers on advanced nodes. As a result we have a suite of software designed for the continued more than more environment which represents a growth opportunity for us. Further semiconductor companies are increasingly accepting and adopting cloud-based software which can more effectively process the increased data volumes they generate. Our customers need their information flow seamless and efficiently. We are the only end-to-end analytic software provider in this space capable of delivering that accelerated level of performance and we believe that once our analytic software is integrated within a customer's operation it will stay in place for an extended period of time. In 2019 our customer retention rate was over 95%. This stickiness will provide greater predictability to our financial and operational results on a quarterly and annual basis. Throughout PDF's transition to an analytics company including in 2019 we have managed expenses invested in our future and overall generated cash to maintain a solid financial foundation for the company. In 2019 the company generated over $24 million in cash from operations and as of December 31 we have cash and equivalents in the neighbor of $100 million with zero long-term debt. We believe our balance sheet provides the necessary drive power to continue to grow our analytics business both organically and with strategic acquisitions. A stock repurchase programs have taken approximately $50 million in shares of the market since 2014. Our continuing stockholder support has allowed us to go into 2020 in a leading position and we look forward to upcoming opportunities to continue to grow our business. As you may have seen yesterday we announced that Christine will step down as CFO after we file our 10-K and Adnan Raza will take over as Chief Financial Officer. We really appreciate the leadership Christine has brought to PDF and we're sure the best as she focuses on contributing to the industry via board participation. We are very excited to have Adnan Raza to join us. A number of months ago Adnan began consulting for us on a number of matters. Through that period we got to appreciate his quick mind, deep thinking and collaborative work style. When the opportunity arose Kim and I both thought PDF would be enriched with him as our next CFO. Over the next few weeks as we meet with many of you we will take that time to introduce Adnan to you all. For today I'd like to turn the call over to Christine for a review of the numbers after which we will open the call to your questions. Christine?

Thank you John. Most of you will have seen our financials in our earnings release. In addition, we've posted a management report in the Investor Relations section of our website. The report has financials and comments regarding the results of PDF for the quarter and year. So I'll focus my comments on a few key areas. All of the financial results that we provide on this call are on a non-GAAP basis which excludes stock based compensation, amortization of intangibles and restructuring charges. Please refer to our press release for our GAAP results and GAAP to non-GAAP reconciliation. As John mentioned starting with our fourth quarter and yearend financial results, we began reporting our revenue as analytics and integrated yield ramp. IYR reporting comprises revenue from our engagements that include performance incentives based on customers yield achievement such as gain share royalty. Analytics reporting comprises all other revenue including from our Exensio software platform designed for inspection solution DFI and characterization vehicle solutions. We believe this presentation provides our investors better insight into our business and the path ahead in the coming years. Our former revenue reporting segments were solutions which included all products and services revenues and gain share which represented our royalty revenues. Fourth quarter’s total revenues of $22.6 million, was up 3% sequentially. In general revenues were as we anticipated given that our model is still in an evolution towards analytics. In the fourth quarter analytics was a majority of total revenues at 60%. We'll continue to be very selective and strategic in generating future IYR business that can contribute to our top and bottom line results. Although we expect to generate IYR revenue for a number of years going forward primarily as a result of gain share royalty payments for legacy engagements looking ahead to 2020 and beyond our expectation for IYR revenue is that it will be lumpy quarter to quarter with a gradual decrease over the next several years as we focus on our analytics business. We expect continued growth in our analytics business, although there may be quarters where the revenue growth in analytics is offset by variable IYR revenue results. Now let's turn to costs of sales and gross margin. Non-GAAP gross margins were 64% during the fourth quarter compared to 55% in the year ago fourth quarter. On a dollar basis Q4 gross margins were $14.4 million compared to the same period a year ago which was $10.9 million. Non-GAAP costs sales for the fourth quarter was $8.1 million compared to $8.8 million in the same period a year ago. The reduction in cost of sales as a result of the increasing software component of our sales which is less expensive to deliver than a complete integrated yield ramp solution. As we continue to build the revenue contribution from software, [staff] and subscription sales we expect gross margins to continue to expand subject to the quarterly variability inherent in IYR. Ultimately we expect to achieve our target margins of more than 70%. During the fourth quarter we entered into an agreement with TIBCO software that extends a collaboration to embedded customized Spotfire in our Exensio analytics platform. The agreement provides that PDF will continue to use TIBCO Spotfire tools for AI powered visualization for our analytics product line as well as adding the capability of TIBCO EBX for master data management. This creates a powerful combination of software to provide advanced lifecycle product analytics for our customers. With the TIBCO Software embedded with PDF Software we solve the problem of silos of data which only provide local optimization. By integrating the data and applying an AI and ML we can provide fourth side across the entire production process reducing the time it takes to make critical decisions that drive higher product yield quality and reliability. The agreement extends the collaboration which began back in 2010 by up to another decade. We expect to amortize this prepaid license over the term of the agreement. In the fourth quarter of 2019 the true up to round out the prior agreement and the partial quarter amortization was $260,000. The upfront cash payment will be made in Q1. Now let's look at our operating expenses which were up 6% sequentially at $13.1 million for an increase of $700,000 quarter-over-quarter. R&D expenses increased by approximately $300,000 primarily due to our investment in analytics R&D hiring related to our cloud and AI offerings to prepare for strong deployment of AI and cloud in the first half of 2020. SG&A increased by almost 400,000 as a result of one-time expenses including our October user conference and analyst day for 200,000 and audit fees for the end of year. We also incurred approximately 100,000 for patent filings pertaining to the analytics business as we expanded our patent portfolio with additional DFI patents and Machine Learning and related technologies. Bottom line we posted non-GAAP net profit of $1.1 million. Non-GAAP earnings per share in the quarter was $0.03. Shares outstanding for Q4 were $32.4 million. Now we'll turn our attention to the balance sheet. Cash at the end of Q4 was $97.6 million, a $2.7 million decrease from the prior quarter. The primary use of cash during Q4 was $2.8 million for CapEx for DFI eProbe Solution. Our strong balance sheet continues to provide a solid foundation for opportunistically executing acquisitions and funding organic growth. Turning to the full year 2019, it was a year in which we became a predominantly analytics company. Total revenues in 2019 were $85.6 million compared to 2018 revenue of $85.8 million. In 2018 the revenue segmentation was 45% analytics and 55% IYR. In 2019 it flipped to 58% analytics and 42% IYR. This is year-over-year growth and analytics revenue of 29% within the target we discussed with our user conference and analysts day of 20% annual analytics revenue growth. IYR revenue declined by 24% compared to 2018. This is as we expected and it resulted in flat year-over-year total revenue performance. The IYR category includes engagements with both fixed fees and gained share with gain share now the majority component which contributes to variability. With analytics revenue now the predominant component of our total revenues we're benefiting from the increasing annual recurring revenue that provides better visibility looking forward. ARR primarily includes software and DFI and characterization vehicle time based licenses as well as support and maintenance contracts. ARR grew by close to 20% from 2018 to 2019. We have seen a continuous trend in increasing ARR going back to 2014. In fact since 2014 ARR has quadrupled. As expected non-GAAP gross margins increased from 55% in 2018 to 65% in 2019. The predominance of analytics revenue in 2019 which commands more software like margins drove the gross margin expansion. As we mentioned at our user conference and analysts day we are ultimately targeting 70% or better gross margins. Operating expenses increased in 2019 from 2018 by 13%. During the year we invested in additional hires in R&D in the analytics part of the business as we continue to focus on expansion of the offering. Greater than 50% of our operating expenses consists of new product development and deployment. Turning to SG&A. During 2019 we hired directors of marketing and business development to focus on accelerating the growth in our analytics business through events, brand awareness and strategic alliances. We also incurred additional expenses in connection with legal actions to compel a slow paying Asia customer to pay contractual fees due of which 7.7 million was successfully collected before year-end. We posted a non-GAAP profit of $4.5 million in 2019 or $0.14 compared to a non-GAAP profit of 2.8 million or $0.09 cents in 2018. Our 2019 ending cash balance of $97.6 million increased by $1.5 million compared to the prior year. During the year we generated $25 million cash from operations and used $12 million of that cash to repurchase stock, $3 million for acquisition related expense and the remainder for CapEx. In summary during 2019, we became primarily an analytics company. We put the components in place to drive revenue, expand margins and maintain an exceptional balance sheet. And finally I've greatly enjoyed working with PDF and all of you and I hope our paths cross again in the future. We will now turn the call over to the operator for questions. Operator?

Now we're ready to take questions. [Operator Instructions] We have a question on queue from Jon Tanwanteng from CJS Securities. Your line is now open.

Good afternoon. Thank you for taking my questions.

Hi John.

John, can you talk about the Corona virus impact on your Chinese businesses and prospects in the near term? I know you said you don't expect it to have a significant impact but is that just a timing thing? Are you seeing a slowdown now and expect to pick back up later? In that context has there been any change in the timing of signings or gain shares through Q1 so for? Any color or context will be appreciated. Thank you.

Sure Jon. Yes. So I think there is obviously a couple of layers to what's going on in China. First of all our Chinese national customers we have been working with them many of them we are working with them with our folks remotely but we see vehicles continuing to run, data being tested and analyzed and we continued to engage with them primarily for the customers that are outside of the Wuhan area. We know our software is being used at factories all around the country and our cloud-based offering is continuing to be used and we continue to engage with customers primarily remotely though. Then we also have international customers who have significant operations in China as well and for those customers we have less direct access to those facilities. They're mostly assembly and test facilities at this point. Our software runs in those facilities with less of our insight about what's going on. Places where we run vehicles we tend to know a little bit more about what's going on. However, I would say that the multinationals are slower to bring backup their facilities in some of the local companies. That said we don't really foresee at this time a substantial impact in our business. Our customers tell us that there will be more back to full steam as we get into the next few weeks and we continue even on contracting, having contracting discussions with our customers in that location. Obviously it's a very dynamic situation. So things can change that we don't foresee at this point but we see the customers over there being very-very resilient in finding ways to continue to maintain activity and we are trying to support them the best way we can.

Great. Thanks for the color and then could you talk a little bit more about the traction with the eProbe and DFI products and if you have any updates on the series 250 performance and any updates on the expectations for more shipments this year perhaps to the same or different clients?

Sure. Yes, so we extend the customer we have a customer one existing machine we extended this year and in a customer and we began as the second half of 2019 a paid pilot with a second customer taped out that vehicle at the end of 2019 and expect those wafers to come to our facility in the first part of this year. We also had another pilot going on with another leading-edge logic company. So this point we're engaged with three leading-edge logic manufacturers for DFI capability virtually all looking for the same benefits. We anticipate as we get through this year to have expanded activities inside those facilities. So shipping machines at a combination of those customers exactly we have a limited capacity in what we could ship so exactly where it goes to who first and when it's hard for me to predict right now.

Okay. Great. And then any color on what gain ship did in the quarter and if you released that at all and kind of if there was any commentary around that?

It's primarily 14 nanometer gain share and it was comparable to what we see typically in Q4 over the past few years.

Okay. Thanks. Just looking at the SG&A line you mentioned there was a couple of one times costs, Christine, are those, does that mean SG&A will come down and Q1 as we come through Q4?

Well, there are some permanent costs and there are some one-time costs. First of all hiring a director of marketing and business development will be ongoing especially as we pursue the analytics business that really is what you need to put wood behind your arrow to grow the business. So that part of the cost will continue. Obviously the user conference is a one-time thing. The patent filings are part of G&A and so those will be ongoing. So I would say, I would be thinking about SG&A as staying at about the level we are right now.

Got it. Thank you and then just one more thing I think resides on moving on to whatever's next. It wasn't clear are you going to be on the board of the company after that from the press release? Is that what you are going to be?

No. I am on the board of three publicly traded companies but not PDF.

Got it. Okay understood. And then John what priorities will Adnan be having as CFO and kind of what made him interesting to you guys as a candidate?

Sure. Yes. So I think Adnan has a very strong background both on the operational side and before that on the banking side. As we transition the business from being a yield ramp business to being more and more the Exensio Software platform, we see ways that we can bring metrics in the way we run the day-to-day operation that are much more consistent with other software and SaaS entities and Adnan’s strong analytic skills can help us with that as well as the fact that every time [he’s] made kind of these tuck-in acquisitions there's a number of additional benefits we're able to drive in terms of expanding our footprint in the accounts as well as connecting our customers internally we say that our first goal right now is to expand the landed accounts. We have 130 accounts. None of whom spend as much as they can with PDF and so we're expanding that revenue but as customers realize that a lot of their partners also use Exensio. We see lots of ways to collaborate. So M&A becomes a way of us driving a larger and larger footprint and our accountant and Adnan's background in M&A will also help us there as well.

Great, I do have one more but I'll jump back in the queue, so others have questions first. Thanks.

[Operator Instructions] We have a question from Christian Schwab from Craig-Hallum Capital. Your line is now open.

Great. Thanks for taking my questions. I'm just wondering if you have any updates regarding the IYR business with potential new customers in China and have I know actually Corona virus but have we had increased dialogue there as different manufacturers begin to try to ramp up different technology nodes there or is there nothing new to report?

No, actually it's a good point Christian. We have seen an increased dialogue in the second half of 2014 with a number of leading edge logic manufacturers in China and we anticipate in the first half of the year converting some of those to licenses, we know of a handful of companies all engaged on FinFET technology nodes and so when we go back to our own forecasting for the year we are a little bit cautious on how much of that we forecast. Hence part of our reason for saying we don't anticipate much impact is most of those factories are not in the affected area and number two we've been a little bit cautious about how we've forecasted that into our bookings plan. I think our team is tracking something like for ongoing FinFET Technologies all of which were engaged with at some level. So that's a lot for a single country.

Right. Okay.

We have modeled it a little bit [indiscernible].

Okay. Perfect. I don't have any other questions. Thank you.

Thank you, Christian.

And we have a follow-up from Jon Tanwanteng from CJS Securities. Your line is now open.

Thank you. John, you usually run down then the list of new deals signings in the quarter. Not sure if there's anything of note that you want to talk about. But maybe more specifically but what are the expectations of projects or signings or licenses in your pipeline for 2020 whether it's a lot of deals from penetration of existing customers, think your large engagements on your horizon or maybe new clients, whatever you force to.

Yes. So yes, as we transition the business with Exensio, the deal flow in a given quarter ends up becoming much larger, right, though well over 50 contracts signed in the quarter typically. And so, I -- we have very little. And to plus to -- it's hard to so usually now I just select if you'd to tell a story rather than when it was primarily your end business and you get exhaust fully describe the contracts signed in the quarter and four or five thoughts, next. And so, as we look into this year, it's kind of my prepared remarks. We have been and part of the reason why we increase spending in Q4, as we completed a number of cloud pilots with customers and we're told that they like the cloud performance. We anticipate those findings in the first half of this year and we expect to expand our number of customers on the cloud. As I said generally that means the ARRs well over 2x, the run rate when they're on premise. At our user conference, we had had one of the guest speakers were AWS, an executive from AWS because a lot of our customers we are bringing them to the Exensio cloud that is on Azure on AWS. We expect the first half to be out to be a substantial part of the bookings activity. Moreover, we kept, we concluded a couple of AI deployments and this pilots in the second half of 2019. And already have approval from customers to roll out, at least one of the customers on a production roll out and anticipate the other as well. And we believe that will also drive substantial growth. So, there's a number of what we call expand the land in accounts that have been PDF accounts, in some cases a 10 or 15 years user either Exensio as point tools over yield ramp customer whether or not looking at deploying Exensio on a platform basis. So, that for the first half of the year it's greatly those activities, some vehicles on a subscriptions for vehicle that we also see in leading edge logic manufacturers outside of China and then as Christian brought up, we do see some increase yield ramp activity in China itself. With its activity on DFI, we anticipate the extension of our main customer this year as well as expansion into additional customers as we get through this first half of the year. As we complete up the pilots that we're doing with them in this first part of the year. So, obviously we're generating revenue from those pilots already. But we like to get those machines, that machine going from our lab into their side. So, I think that kind of captures the majority of the activities that are going on. In part of that explains a little bit what Christine discussed about our TIPCO spend as we're deploying more and more with our customers. They started seeing the need of looking at Exensio as their data lake or their overall data environment. Historically, Exensio has been a system that customers use for the datatypes that PDF supports and installs which is most engineering data in a fab and if not out customers wanting to load in financial data into Exensio product costing data and other data for newer module. And so, the extension with TIPCO allows them to load data and on-demand data that not they we may not actually typically get access to. So, we can do additional AI activities. So, we do see as we get on the second half of the year, opportunities to expand customers who start looking at Exensio as a data like for them rather than just as a platform for all their engineering and office.

Great, thanks, John. I appreciate it.

And our next question is from Gus Richard from Northland. Your line is now open.

Yes, thanks for taking the question. In terms of gainshare, I think you have still a few big contracts. When did those particularly 14-nanometer contracts will or how many more years do you have on them.

Yes. Some of the early ones we'll have over the next couple of years and then there's others that are just starting up that will have many years past that. There were gainshare contracts that run out. I mean, primarily once you got through the first half of the 2020, so the 2022 timeframe, the majority of the non-Chinese facilities will have. And as you go from 2022 to 2030, primarily it's China and to a less extent Taiwan entities that will drive in the drive the gainshare.

Got it, thank you. And then on in terms of sort of what you're thinking about in terms of M&A, you did the Kinesys acquisition a while back, was very successful. Are you, why don’t you have a number of companies that you're looking at? Are you looking at more data sources, can you just sort of give any color around what the M&A pipeline might look like?

Sure, Gus. It's actually relatively robust. There are additional datatypes that typically outside of the fab at this point as we have most of the fab datatypes included in even though sort of the test and assembly datatypes. So, our additional datatypes that we're looking at and there are also what we found, if you look at the Syntricity acquisition. Syntricity was a cloud based while your mentioned system that had a subset of functions that we had with Exensio manufacturing analytics module. But there were a handful of customers that were very relying on that product. When we acquired that and then integrated it, we were able to increase a footprint of those accounts because they needed some of the base capability that Exensio had. Yet, when you were going itself from the outside, they already had deployed an existing product. So, we do find sometimes consolidation of companies that are in the same category as us helps us expand the revenue inside those accounts. In my prepared remarks I allude to the fact that we're the only company that really has the scale. A lot of these companies tend to be smaller private entities. And as these semiconductor companies and system companies, see manufacturing analytics as a strategic activity in their business. And I would say many of CTOs had the manufacturing CIOs that meet with, I'll say that digitization of the manufacturing is becoming a strategic activity. They need to have a supplier that they can actually count on. And so, a lot of those companies are really kind of hit the end of their road in terms of what they're able to do for the customer. But the customer has a huge investment of that software being integrated in to their facilities. It's just like our retention rate is quite high, their retention rate is also quite high. So, by acquiring those companies, integrating their product onto Exensio platform, we give a lot of these customers a path towards a greater platform without needing to wrap-up and replace the investment that those companies have made in those company. So, there is a lot of activity in little companies like that.

Got it. And then I know this is a tough question. Can you size the Exensio you saw for opportunity at this point and then perhaps entry guess is to what the growth will be over the next few years?

Yes. So, at our Analyst Day we said that we anticipated the growth rate for the business to be on or of 20% a year. If you look at our analytics business this year, it grew at over last year grew at 30% roughly 30%. And obviously that's why primarily driven by Exensio and nearby analyst business. So, we anticipate the growth rate staying very robust over these next few years for Exensio and the analytics business overall. In terms of what the serviceable market, I we reported that on our Analyst Day as well and I feel at the top of my head because I don’t remember the specific number. I'm more being much larger than we are now, so it's like a way to down from a tech but this one is a little much smaller than what I'm having my checkbook I was okay. So, I do see that we are trying a good runway in front of us for the analytics business overall. And as it's gotten larger as I alluded to in the cloud rate, we see ways that we think overtime time the business opportunity extend as customers start relying on analytics more and more to control their manufacturing.

You're right, okay. And then, last one from me. At this point on DFI, do you have any more significant investment that's going to be required to get let's say half a dozen systems out in the field.

Yes. And from a development standpoint, the majority of investment is done or some incremental that's being for doing on this specific features. Any others, always a level of software investment that's going on particularly look at new applications. And our spend so far, recently it's been around building early purchasing of components that we need for deployment of systems at our core customers. While we're very mindful of the fact that we told customers that we -- if they were to order [131 on the next 102] machine that will be quite a lead time for them. Even if we rewarded some long lead items as well. So, we feel like we're in a good position here, we have a number of companies interested in the next capability and a limited amount of capability out there.

Got it. And that's it from me. Thanks so much.

Thank you.

And there are no more questions on queue. I'm now turning the call over to Mr. Kibarian for closing remarks.

Thank you for participating on our Q4 call. We look forward to talking with you again soon. Have a great day.

This concludes today's conference call. Thank you for your participation, you may now disconnect.