Photronics, Inc. (PLAB) Q3 2016 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Photronics Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, August 18, 2016. I would now like to turn the conference over to you, Troy Dewar. You may begin.

Thank you, Kevin. Good morning, everyone. And welcome to our review of Photronics 2016 third quarter financial results and an overview of our China IC Investment we announced this morning. Joining me this morning are Dr. Peter Kirlin, Chief Executive Officer; Sean T. Smith, Senior Vice President and Chief Financial Officer; and Dr. Christopher Progler, Vice President, Chief Technology Officer and Strategic Planning. The press releases we issued this morning along with presentation materials which accompanies our remarks are available on the Investor Relations section of our webpage. Comments made by any participants on today's call may include forward-looking statements that include such words as anticipate, believe, estimate, expect, forecast. Forward-looking statements are based upon a number of risk, 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. Finally, during the course of our discussion, we will refer to certain non-GAAP financial metrics. These numbers are useful for analysts, investors and management to evaluate our ongoing performance. A reconciliation of these metrics to GAAP financial results is provided in our presentation materials. At this time, I will turn the call over to Peter.

Thank you, Troy, and good morning, everyone. Early this morning, in addition to releasing the third quarter results, we announced details of our planned investment in the China IC market. This morning's call, I want to briefly review our Q3 results and discuss our outlook and spend the rest of the time sharing our China plans with you. For Q3, we achieved results that were generally in line with our expectations. High-end logic is showing strength as sales to Asian foundries improved during the quarter. Memory demand fell as DRAM industry conditions are causing foundry memory customers to delay new product introduction and we experienced the decline of the Micron business coincident with the conclusion of our JV. Mainstream IC is doing well as general overall semiconductor industry activity that drives demand for legacy nodes is strengthening. On balance, given all of the external opportunities and challenges, I would say our IC business is performing well, while IC demand has been mixed, FP demand remained healthy and our capacity was sold out throughout Q3. New applications and product innovation in this industry continues to grow. As the market and technology leader, we're in great position to grow in 2017 as we take delivery of the tools that we ordered last quarter. For the balance of our fiscal year, the high-end IC photomask market should see increased demand for logic, while memory remains subdued. Mainstream ICs should continue to slowly build as overall market conditions continue to improve and we expect to see one quarter of temporary softness in FPD as the industry leaders transition capacity from LCD to OLED. We think this will be a quick transition and expect overall FPD demand to build in early 2017 and beyond driven by OLED displays for mobile application. As I mentioned earlier, we believe we have timed the delivery of additional capacity such that we can effectively support our leading customers’ AMOLED ramp expected to begin in late spring of 2017. Looking at the business through a different lens, while we've been challenged to achieve consolidated growth year-to-date in our top line, we've been able to deliver solid earnings and cash flow. It should not come as a surprise, relentless focus on managing costs is part our culture, and year-to-date operating profit is up more than 5% despite a 2% drop in sales. Shifting to the balance sheet, net cash is up a $150 million since the beginning of the year, as a result of operating cash flow generation, debt reduction and a cash payment from Micron. Two of our key strategic objectives were to grow our high-end IC business and expand geographically into the regions where we see opportunity for long-term growth. Today's announcement regarding our China investment, should enable us to make significant progress in meeting both of these objectives. Growth in the semiconductor industry continues to migrate on a global scale. The U.S., European and Japanese markets are now mature. Korea and Taiwan have been active over the last decade. It’s becoming more and more apparent that these markets have plateaued. This is even truer with the merchant photomask market. Within this changing landscape, we've been able to make selective investments to drive growth, but this has largely been share shifts at the expense of the competition rather than new business. Looking at China over the past 10 years, we see a dramatically different story. Rather than maturing, China has progressively become a more important region for the manufacturing of advanced electronics. And more than 50% of the world's supply of semiconductors is now being purchased by Chinese manufacturers. As a result, the State Council of China is now heavily promoting the semiconductor industry, providing incentives for a greater percentage of chips consumed by Chinese companies to be manufactured within country. And there has been a rapid expansion of the semiconductor manufacturing activity. This growth is from both domestic suppliers, as well as international companies building capacity in China. For example, nearly all of the leading foundries have or soon will have a manufacturing presence in China. This is clearly the region where growth will occur in our industry. Our investment will provide us with the state-of-the-art manufacturing facility in China to serve existing customers and penetrate new business. Location of Xiamen was chosen due to the presence of our largest IC customer. It's also located within a technology park, ensuring needed infrastructure, available workforce, and proximity to other firms within the supply chain. We are installing a number of tools, including new, used and transferred to enable us to meet anticipated high end demand, while also providing the ability to manufacture mainstream products. Current industry investment in China covers the entire spectrum of the IC landscape, memory and logic, mainstream and high-end. Our investment in proven process technology will allow us to serve all the customers and all the technology nodes. As a leading merchant mask producer, we're well positioned to establish leading position in China, which is presently lacking a strong domestic supplier. This investment is a logical step in our progression from technology follower to market and technology leader. We already have a strong presence in Asia and this led to further strengthen our position. Many of the leading domestic producers plus all the multinational firms investing in China are already customers. I believe that our investment in Xiamen will allow us to build new and solidify existing customer relationships. Due to financial diligence and discipline we've exercised over the last several years, our balance sheet is strong and more than capable of supporting the $160 million investment we've planned for a new Chinese factory. One thing that is constant in our industry is that it is always changing. Long-term success requires good technology in a low cost format along with the willingness to adjust your manufacturing footprint to be aligned where the growth opportunities present themselves. Given our current position on these attributes relative to our competition, I'm more optimistic now regarding our growth prospects than anytime during my career at Photronics. On the IC side of the business, our largest customers are pulling us into China. For FPD, the transition to OLED and then many innovative technologies this move will spur is setting up a very attractive investment opportunity for us that should extend over the next several years. Moreover, our balance sheet affords us options that were not available in the past, including M&A to consolidate the photomask industry as well as explore potential adjacencies to diversify revenues. It is truly an exciting time at Photronics, and I look forward to updating you as we progress. Before turning the call over to Sean, I'd like to thank all the Photronics employees for their commitment and hard work during the quarter. Sean will now provide more details on our Q3 performance and outlook. Sean?

Thanks, Peter, and good morning, everyone. I will first provide a brief overview of third quarter results including our guidance for Q4, and then provide an overview of the financial details for the China investments. From a high level perspective, operating results for Q3 were strikingly similar to Q2 as consolidated revenues, gross and operating margins, were essentially flat on a sequentially basis. Sales of IC photomasks improved sequentially due to strong demand for mainstream products as general macroeconomic improvement drove increased demand, and we were successful in winning business opportunities. Sales of high-end IC photomasks were down as an uptick in logic sales was offset by reduced demand for memory products. FPD photomasks were down modestly sequentially due to a mix shift toward mainstream product. As Peter mentioned in our next phase of capacity installation should begin to come online in 2017, which allow additional growth as the large customer ramps AMOLED products. Breaking out sales geographically, 73% were from Asia, and 27% were from North America and Europe. EBITDA for the quarter was $37 million, and $171 million on a trailing 12 month basis. The lower line, other income net was up sequentially, primarily related to favorable foreign currency. Income tax expense was higher has resulted increased income tax – income from taxpaying jurisdictions principally in Asia, and minority interest expense increased due to higher income from our Taiwan JV. Net income was $8.1 million or $0.12 per diluted share. Now turning to the balance sheet. We ended the third quarter with cash balance of $292 million, bringing our net cash position to $223 million, an improvement of $166 million since Q3 of last year. Working capital increased $108 million sequentially. CapEx for the quarter was $10 million and $45 million year-to-date. We anticipate spending approximately $50 million to $70 million in CapEx this year and CapEx for the FPD investments mentioned earlier will occur through 2017. Turn to China, our investment will be approximately $160 million comprised of cash and existing capital equipment and transfer from other sites, while we certainly confirm the entire investment with our cash currently on our balance sheet plus cash we expect to generate over the next several years. We may possibly finance a part of the investment to a local debt to take advantage of subsidies offered to us by the local government. We have however stress tested our balance sheet and are confident that even under a self-funded scenario, our credit metrics and balance sheet will remain healthy. Once this side is complete, tools have installed and we have met customer qualification requirements, we anticipate ramping up the facility as we have significant support from a large customer. Over time, we would anticipate hitting profit margins that meet our corporate targets and generating cash to enable further investment as the market opportunities arise. Before providing fourth quarter guidance, I just want to remind everyone that our visibility is always limited, and our backlog is typically only one week to two weeks. Also demand for some of our products is inherently lumpy and difficult to predict. Finally, as our high-end business has grown, and the ASP for these masks are higher are relatively few number of high-end orders can have a significant impact on sales for the quarter. Given those caveats, we expect fourth quarter sales to be between $118 million and $128 million. This range assumes that high-end logic in mainstream will see improving trends for the fourth quarter, while the high-end memory is flat. FPD will see some softness if a large customer retools a factory from LCD to OLED. Based upon this revenue expectations in our current operating model, we estimate earnings for the fourth quarter to be in the range of $0.09 to $0.17 per diluted share. While year-to-date results are of the last year's record setting pace, we are performing well in the demand environment that has been challenging. We've been able to maintain respectable levels of the profitability and generate cash coupled with the payment we received upon the termination of our joint venture with Micron, we are able to fund the various growth projects we have including expansion at the China, without the need to incur a significant debt. And I remain confident that we are on a path to improving growth and profitability. Thank you for your interest. I will now turn the call over to the operator for your questions.

[Operator Instructions] Our first question comes from Edwin Mok with Needham & Company.

Hi. Good morning. Thanks for taking my questions. So, first question on near-term guidance and I guess a little bit below – beyond near term as well. If I focus on the IC side, it seems like memory has been challenging and now that your Micron JV has ended how should we kind of think about the high-end memory part of your business? Is it – should we expect that business to come back or is it more call it, I don't want to say – I want to say that maybe structurally we should expect at low level now that the JV has ended?

Yeah. I think when we look at the memory business, I think the good news is that – ironically, it’s pretty clear that DRAM’s finally bottomed out. An as the DRAM market recovers, what we expect to see is a build back of – both the build back of our existing foundry memory business, as well as some new revenues from new customers that are leveraging the Micron bid [sale] [ph]. So that, I think, will it happen in next quarter? We're assuming not, but do we expect to see it building in the quarters after that? Yeah, yes we do. The other part of our memory business that has been very soft is the flash business. And as we look into next year and we see the – our customers move from the first generation of NAND flash which is essentially not cost competitive with a cleaner flash, to the second generation of 3D NAND, we expect the business to grow as well. So, right now, our memory business isn't strong, but we are able to cover it in the quarter as we projected with – our high-end logic IC business as well as our mainstream that was no small feat, so I'm very pleased with how the team executed there, but certainly as we move into 2017, we expect the reversal of what has been a couple quarters of negative headwinds in that business to be tailwinds.

Edwin, this is Chris. Just to make one more comment if you – maybe you have concerns on the technology roadmap and absence of a Micron JV and we have solid technology in DRAM, the next two nodes are already in hand and we have yielding processes, so we're in great shape there. The NAND as you know is 3D, particularly little less lithography intensive or qualified for the next two nodes, so there's no technology roadmap impediment for quite some nodes on either of those technologies, it's just a matter of getting the processes qualified and getting the customers lined up.

Okay. Great. That's helpful. And then, on the flat panel display, you mentioned one quarter step back as you have some convert capacity from LCD to OLED. Just trying to understand, should we expect that to come back in the subsequent quarter and then you'll have a new tool that you guys are planning to install in the late spring. When should we expect that to start to be able to contributing revenue for your company?

Yeah. Edwin, I think it's pretty clear now that it's going to be – if you look at mobile displays, the overall market, right now of the three kind of – of the three classic technologies, we have the amorphous silicon, we have the low-temperature polysilicon and then finally AMOLED. Right now, for mobile displays, AMOLED represents a little less than maybe 20% of the overall market. But it's has become very clear I think to everyone that, the A company is going to need to transition their display technology, that's going to require a tremendous amount of capacity. So what occurred during the quarter and is one of our largest customers in Korea, announced they were literally taking a traditional alpha silicon large format display factory offline and converting it to AMOLED. So that's a short-term negative for us, but you can see that we shifted during the quarter the business to keep our tools full. But anyway with short-term negative, but next year early spring, when that factory is starting to crank out AMOLED displays, it should be a significant positive for us given our position with that customer. And I think finger in the ear, it's hard to project exactly, but I guess by the time 2018 rolls around, the fraction of mobile displays that are built with AMOLED technology will likely double approximately, that's a huge shift, lot of business and we think we are positioned very well to exploit that shift.

So is it fair to say that even with [indiscernible] you are largely capacity constrained until your new tool come into production, right?

Yeah. We said we've invested $40 million, that's more than a single tool.

I see. Okay. That's helpful. And then lastly, I guess on your China announcement, congratulation on the announcement. Trying to understand the investment profile or cash impact outflow this year and next year. Does that $160 million investment include any kind of incentive that you will expect to receive and as you start going to production in 2018, any way you can think about the size of capacity or production capacity once you start to produce or maybe [indiscernible] once you finish this $160 million investment?

The $160 million, Edwin, just to be clear is not all new capital. That's the initial ramp of the facility which includes the clean room, the building. There are some redeployed assets that we will put in there. We've historically done that quite a bit specifically into Taiwan over the last few years. So, we'll provide further granularity as we move forward, but we're also have to be very cognizant of because of the competitive nature of the business then in China that we don't want to provide too much clarity at this point in time, but certainly, as we said, we can self-fund it, we expect it to be significant portion of the business. I think we talked – Peter talked on the last call that China was already – China IC revenue and FPD revenue was already getting to be material for Photronics, so we expect that would continue as we move forward.

Yeah. To answer it differently, when China is fully ramped, I think we would expect that it would represent 10% to 20% of our overall revenues, there is some range there, but it depends on how successful we are in gaining market share and ramping our business. So there is – but there is no doubt, there is a significant opportunity for us, and that's IC alone, that doesn't include FPD.

Great. Actually that's good color. Thanks very much. That's all I have.

Our next question comes from William Stein with SunTrust.

Great. Thanks. I have a couple questions about the China investment as well. First on your last comment, you mentioned that, you mentioned something about FPD, and I'm trying to tease out whether this facility will be producing FPD masks as well or just ICs or how does that play out?

For the factory, it potentially could produce both, but that's not contemplated in what you heard this morning. So we're still working to fully elaborate our FPD plan for China. But I would say the opportunity there as at least as large maybe even greater than I see. So, as we done historically, we will work hard to tactically execute the business against the market as it stands today. At the same time, the team works to try to cascade the growth opportunities and for us next year clearly at the AMOLED ramp 2018 it's clearly China. So far you've heard about IC you haven't heard much better FPD, but we're working hard at it.

Thanks for that color. I think I get it. One more if I can, I think the answer is that there is a lot of difference, but can you highlight what's different about this effort in China relative to an earlier foray that where there was some trouble?

Yeah. I think what's most profoundly different is we already have developed the customer base in China today where before we built the factory and then develop the business. We've actually developed the business that already quietly. Beyond that, we have large customers one in Xiamen for example that are building and ramping mega factories where we already have overwhelming market share that are quite anxious to have a domestic source of supply. And finally, if you look at China overall, for the last few years, not just this year, more than 50% of all the semiconductors that are made globally were actually being incorporated into electronics goods in China. So the domestic market there now is overwhelming. So there is no doubt -- there is no doubt in the demand side of the equation today versus several years ago, and now it really boils down to our ability to execute against demand instead of trying to create demand. Very different scenario.

It’s very helpful.

Very different scenario. Yeah.

Understood. Very helpful. Thank you.

Our next question comes from Tom Diffely with D. A. Davidson.

Yeah. Good morning. I guess first question for Chris on 3D NAND. When you look at the mask set moving from the first generation to the second generation, third generations and so forth, what happens as far as the number of masks in that set of the cost to that set?

Yeah, Tom as you know, the lithography for the 3D NAND is generally less aggressive. It's probably known for example, Samsung's using a kind of a 40-nanometer grade litho process for their current 3D NAND et cetera. So it's generally a node or two back from what we associate with cutting-edge from a lithography perspective. Generally, 3D has more patterning layers than the equivalent density planar NAND. So there are more masks in the set, and depending on how the architecture stacks the different layers of NAND, it could go up more. So I think from a set perspective less lithographically intensive, but more layers and there are a few very critical layers even in 3D NAND and they're generally the ones that are required to tie together the different levels of stacking. As you continue to shrink most of the of 3D or V NAND companies are looking still at the vertical direction for scaling that is more stacking layers as opposed to shrinking the cell. So we don't expect for the next node or two significant changes in the kind of lateral or conventional lithographic resolution needed for those things, beyond that then you'll start to see a shrinking of the cells as well and high resolution needed. As far as the set cost, generally, we wouldn't really comment on that, I can just say that the larger number of noncritical layers in 3D and the few very critical layers, maybe it's kind of similar to planar NAND which had fewer masking layers, but more critical layers from it, total perspective, but beyond that we probably of course shouldn't give specifics on that.

Okay. But if the customers are doubling the number of layers, is that masks being reused for the second set of layers?

Generally they are, yeah, and it's a ...

Okay.

... it's kind of a deck stacking idea and the additional masking layers are needed for how those are knit together those stacks, but generally speaking, most of the masks are used for subsequent stacks, but a few changed but not all of them.

Yeah. Okay, great. That's helpful. And then moving over to the flat panel side of the business, just wanted to clarify your new tool or tool and a half or whatever it is, will be up and running by early 2017, you believe to hit the OLED ramp?

Yeah, to give just a slight more color. It's really two listed tools and the reason why they of course doesn't quite look like the price of two new tools is – there is a trading of all tools against new, so that our capacity is particularly tuned to the demand and they will come on in subsequent steps in 2017, but soon enough to catch the wave.

Okay. And then, it looks like the industry is expecting a fairly robust OLED ramp over the next few years. Is this the first of or maybe the second of several new tool sets you'll have to be adding?

I think that's correct, but as we – again as we always try to do is we try to invest in lockstep with demand and even to the extent we can tune the profile of our capacity to maximize our revenue and cash flow as well as our profitability, but I – even what we see for AMOLED, I don't believe that this wave of investment is going to be adequate to address all the market opportunities that's going to be in front of us. So, we're quite excited about that business and if you think about the market right, it was – AMOLED was essentially in OEM Samsung's products. Samsung was smart, they actually sold the displays to some Chinese manufacturer and this basically put up on a box where they had no choice.

Yeah. It's not something that.

So, there is a huge wave coming there.

Yeah.

So, huge wave.

Okay. Great. And then Sean when you look at the investment for China is at $160 million, big picture, how does that split between brick-and-mortar and equipment?

Roughly, the brick-and-mortar is approximately $20 million plus or minus or so which includes the cleanroom, and that just to clarify that $160 million is not being spend whole one year or one quarter, it's over time.

Right.

And some of that's redeployed. So as we crystallize our plans, and we have our Q4 closing when we give guidance for CapEx next year, we'll give our baseline CapEx, and we'll talk about what the plan is for China for the next fiscal year and give you further clarity.

Okay. But just to confirm, the CapEx of $60 million to $70 million this year does not include that initial Chinese investment or the flat panel tools, the $40 million?

So...Yes or no. The $60 million to $70 million which we've been discussing for the last two quarters or three quarters does not – it does include a portion of that $40 million FPD, because I think in Q2, what we announced for Q1, we had put deposits down with long lead times for these tools, but it does not include any amount related to China.

Okay. Great. And then finally, Peter, when you look at -- looking into China, whether you have to do from an IP protection or I guess for you guys more of a process knowhow protection, so semiconductor imitate your capabilities over time?

Yeah. Well, it really boils down. I think to -- having the right thing, your factoring strategy whereas Chris pointed out, the most difficult layers are held tightly to that. The one question I think I'd ask, but I thought I might, it was touched upon at the very beginning but there is a company in Northern China, that's an existing customer that utilizes the Micron Technology that is being really aggressive in both 3D XPoint and NAND flash. It should be a great opportunity for us and they are very, like our other large customer, enthusiastic about having a domestic supplier in China. So, we have to be very cautious about the – keeping the crown jewels in a specific location. Other than that, we need to do everything we possibly can to build every layer that the customers need locally.

Yeah.

Okay.

Tom, I can might also add on this topic. We have a lot of experience now with the kind of tech protective measures and we're not being complacent but we had JV with Micron, some of that technology was, we could use at other locations, some we couldn't. We developed internal protocols and tools to protect technology. You know we have a JV with BNP in Taiwan, same thing, we have some things we need to confine there. Other things can move. So we also have internal systems in controls to be very careful on this matter and we will deploy those to China as well and be very careful with it as best as possible.

Okay. Great. Thanks for your time.

Thanks, Tom.

Our next question comes from Patrick Ho with Stifel.

Thank you very much. Peter, first, in terms of the near-term business and your comments about memory, you did highlight that Micron's business was declining post the JV dissolution, where there other issues involved with memory customers that cause the continued weakness in that segment or was it entirely due to the – I guess the natural decline following the JV ending?

Yeah. We're still seeing a – the first – regarding Micron, we still have and expect to have for the – a very long time memory business with Micron. We're still a valuable customer and we do everything we possibly can to ensure they're successful, but having said that, the other part of our memory business that right now is really suffering is the foundry memory business. It is going through a technology transition and you can't – our foundry memory customers basically with the old 3X DRAM technology cannot make money. So they're not taping up any designs on that node, that industry is shifting to the 2X node and they're now qualified sources, but the designs are underway being finished. So we expect to see not next quarter, but the quarter after and build back in the foundry memory business at the 2X technology node.

All right, that's helpful. Going to the China investment, obviously this is a 2018 quote revenue generator for the company, but obviously in 2017 you probably trying to get other customers sign on a site from one of your largest logic customers to date. Where will you be doing the qualifications as you're trying to get other customers sign, are that going to be done in some of your Korean and Taiwan facilities or you're going to be able to do some of them in the United States as well?

Yeah. It will be done across the company. As Sean mentioned, we already have material amounts of business with many of the Chinese customers, but there are certainly customers in nodes that we've yet to qualify and we'll do that work in advance of the JV to maximize the speed of – the speed of the ramp. And what I guess, little known for example, if you look at the Chinese memory landscape, the domestic supplier, it's in the best position right now at least in the NAND flash arena is XMC. We happen to be POR, so that work has already been done and depending on how quickly they ramp, that could be a little bit or a lot of business for us.

Right. And I guess the final follow-up question to that is, sounds like, you can correct me if I'm wrong, you just mentioned XMC as being one of the local customers that you're working with. Would it be fair to assume initially over the first few years of this venture that you'll be getting up more of your business from the – what I would characterize multinationals that are already existing in China and the local indigenous ones that are once you're going to be building on a going-forward basis?

Yes.

Great. Thank you.

Thanks, Patrick.

Our next question comes from Stephen Chin with UBS.

Hi. Peter and Sean. Congrats on the China announcement. I just had some follow-up questions. Can you elaborate on the China announcement, when you talk about getting support from an IC customer, does this basically mean you have a signed contract with this Chinese customer and if there a – a minimum purchase agreement at all involved there?

Here we're really not able to disclose the extent of the relationship with that customer, but let's just say it's strong.

Okay. A follow-up question is, can photomasks that that you may get at this China facility, will you have the ability to sell these sort of masks to China customers based in other cities throughout China, or is the arrangement that that photomasks made at the facility can only be sold to customers in the Xiamen city or province? Thanks.

No, I think it can be sold anywhere in China and this is the primary reason you for locating there. Today for example, if you look at our factories in Taiwan in an hour you can have a photomask sitting in China, but you usually have a three-day or four-day delay to get that photomask through customs. Likewise if you look at dial-in for example where we think there is going to be a load of memory mask needed, that's an hour and half away from our factory in Korea, but the radical shift in customs for three days or four days. So the importance of having a landed factory in China is to avoid the delay associated with clearing customs. And depending on what industrial park or zone that mask goes into, there could be as much as a 27% tax and duty applied or not, depending on the specific location, if it's coming from overseas. All of that is eliminated if it's produced within China itself.

Okay. Thanks for sharing. And then just one last question on the China announcement. The fab that you're building, will it have the – will it have the capability and permission to make both foundry and logic photomasks as well as memory photomasks? Sorry if I ...

Yeah. They – yeah, it's being tooled to be able to build memory and logic, foundry, mainstream, high-end, a full mask of market basket of products we sell, that's actually we will be capable of producing.

Okay. Thanks for your [indiscernible].

Thanks, Stephen

And I'm not showing any further questions at this time. I'd I like to turn the call back over to our host.

Thank you once again for your interest in Photronics. Well, we have some short-term challenges, we remain very optimistic regarding our long-term outlook. Additionally, our balance sheet is as strong as ever, enable us to explore options for profitable growth. Look forward to updating you as we make progress.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.