MKS Instruments, Inc.

Q1 2023 Earnings Conference Call


spk02: Good day and thank you for standing by. Welcome to the MKS Instruments first quarter 2023 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during this session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your speaker today, David Ruchek, Vice President of Investor Relations. Please go ahead.
spk04: Good morning, everyone. I am David Rizek, Vice President of Investor Relations, and I am joined this morning by John Lee, President and Chief Executive Officer, and Seth Backshaw, Executive Vice President and Chief Financial Officer. Yesterday, after market close, we released our financial results for the first quarter of 2023, which are posted to our investor website at As a reminder, various remarks about future expectations, plans, and prospects for MCAS-comprised forward-looking statements. Actual results may differ materially as a result of various important factors, including those discussed in yesterday's press release and in our annual report on Form 10-K for the year ended December 31, 2022. These statements represent the company's expectations only as of today and should not be relied upon as representing the company's estimates or views as of any date subsequent to today, and the company disclaims any obligation to update these statements. During the call, we will be discussing various financial measures. Unless otherwise noted, all references to combined company financial measures reflect the combined results of MCAS and Auditech Limited, which MCAS acquired on August 17, 2022. Also, unless otherwise noted, all income statement related financial measures will be non-GAAP other than revenue. please refer to our press release and the presentation materials posted to our investor website for information regarding our combined company results, non-GAAP financial results, and a reconciliation of our GAAP and non-GAAP financial measures. For a detailed breakout of reported revenues by end market, as well as out-of-tech and combined company revenues by end market, please visit our investor website. Now, I'll turn the call over to John.
spk06: Thanks David. Good morning everyone and thank you for joining us today. I'm very pleased to report that we have restored our global operations following the ransomware incident we identified in early February. We are on track to meet our commitment to substantially recover revenue by the end of the second quarter. I can't say enough about how proud I am of the entire MKS family. Thanks to the dedication, hard work, and ingenuity of our 10,000 plus employees, we are a stronger and more resilient company today than we have ever been. I also want to take a moment to thank our customers and suppliers for their support and cooperation throughout this process so that we continue to deliver as a critical enabler to the industries we serve. With that, I'll review our operating environment, including our first quarter results and the trends we are seeing in the second quarter. We delivered first quarter revenue of $794 million, adjusted EBITDA of $142 million, and net earnings per diluted share of 48 cents. We estimate the ransomware incident had a negative impact on revenue of approximately $160 million for the quarter. As Seth will detail, revenue for the quarter excluding the impact of the ransomware incident was a little lower than we anticipated. The difference reflected softer demand that developed in the latter part of the quarter, which was relatively more pronounced in our electronics and packaging market. In our semiconductor market, business levels continue to soften in the first quarter, consistent with a well-publicized decline in industry-wide WFE spending in 2023. We remain very engaged with our customers across a spectrum of opportunities in deposition, etch, lithography, metrology, and inspection. And our ability to invest through the cycles has been a key reason we have outperformed WFE and the critical subsystems market over the long term. In fact, as reported by Tech Insights, our share of the overall critical subsystems market grew in 2022 on top of the gains we made in 2021. Our performance in 2022 exemplified our technical leadership and the breadth of our Surround the Wafer portfolio, where we gained share in a number of categories, including remote plasma sources, microwave power, liquid ozone, FTIR gas analysis, linear motion subsystems, and optical fiber thermometry. Our broad portfolio positions us well for when WFE spending recovers. Now more than ever, we are reminded of how important semiconductors are to our daily lives, and we firmly believe they will become even more important over time. This reliance on semiconductors will require not just more equipment, but also solutions addressing increased miniaturization and complexity in semiconductor design and manufacturing. And MKS is uniquely positioned as the broadest critical subsystem solutions provider in the industry, enabling more process steps in the fab than anyone else in the world today. As we look into the second quarter, we anticipate demand for semiconductor capital equipment to remain muted, consistent with expectations for a decline in WFE spending in 2023. Turning to our electronics and packaging market, revenue was below our expectations but consistent with softness and demand for global electronics, such as PCs, servers, and smartphones. Customers scaled back production, which impacted our chemistry sales, as well as delayed delivery of plating equipment for PCB and substrate applications. That said, we expect demand to improve sequentially in the second quarter due to additional working days in the quarter and delivery of equipment pushed from the first quarter. We are pleased with the progress of the integration of Adatech, both from a cost perspective and in establishing the value proposition of our combined proprietary chemistry and laser drilling solutions, which positions us at the forefront of what we call optimize the interconnect. This is the next frontier in the integration of SEMI and PCB design for advanced electronics. On our last earnings call, I noted that we had received our first HDI laser drilling order from a longtime Adatech customer. Since then, we received our second HDI order from another Adatech customer. These wins were a result of the combination of Adatech's longstanding relationships in the HDI market and the reference wins that our geo laser drilling tool had already achieved in an emerging market application. It's early in the game, but we are very pleased with customer interest in our combined capabilities as it provides initial validation of the potential for revenue synergy. At our analyst day in December, we discussed how packaged substrates are a critical building block for electronic devices, and in particular, high-performance computing architectures. I'm pleased to announce that we recently held an expansion ceremony at our Yokohama Tech Center in Japan, which included the introduction of two new significant products. The first is an extension of our ESI geodrilling platform, which is geared towards next-generation packaged substrate applications such as ABF build-up laminate processing. Our proprietary VIA drilling technology enables the highest throughput and lowest cost per part for advanced flip chip ball grid array packaging, which is critical for high performance computing applications. The second new product is our Adatek G-Plate vertical desmear and electrolysis copper plating tool for next generation package substrates. This new tool will support customers in their yield optimization and next-generation process development for advanced packaging applications with lines and spaces below 5 microns. These product announcements further extend our capabilities as a foundational solutions provider for advanced PCB and substrate applications, as we are the industry's only integrated provider of advanced laser drilling, proprietary chemistry, and horizontal and vertical plating solutions. As the defining trends of miniaturization and complexity dominate advanced PCB and substrate manufacturing the way they did in the semi-industry, we are well positioned to become the industry's go-to technology enabler. Turning to our specialty industrial market, business levels softened slightly on a sequential basis in the quarter. However, our GMF business held up well. Looking out to the second quarter, we expect demand to remain fairly steady. In summary, While the year got off to an unexpected start, we have rebounded well operationally and are delivering effective shipments to customers. We're also building early momentum with customers for our optimized the interconnect offering. Overall business levels have softened entering the second quarter, but we remain optimistic about the quarters to come. We expect NCAS's total revenue in the second half of 2023 to be slightly higher than the first half levels. driven by a modest improvement across each of our three end markets. We will continue to keep a close eye on near-term macro and industry-specific conditions. Longer term, we are as bullish as ever on the secular tailwinds and attractive growth opportunities across our markets, and we intend to seize them. Now, I'd like to turn the call over to Seth. Thank you, John. I will cover our first quarter results and provide details and outlook for the second quarter of 2023. Starting with the first quarter, we delivered revenue of $794 million. As John mentioned, our global team executed well during a challenging period for the company as we worked to restore operations following the ransomware incident. We estimate the negative impact to revenue was approximately $160 million for the quarter, and our team worked diligently to restore production relative to our initial expectations of at least $200 million impact when we reported our fourth quarter results. While recovery has gone well, we've seen a softening of business levels relative to our prior outlook, mainly in the electronics and packaging market. As a result, we're excluding the impact of the ransomware incident. We estimate first quarter revenue would have been lower than our original expectations. As our outlook indicates, we expect softness in overall business levels will continue in the second quarter. However, we see a slight improvement in the second half of the year. Turning to our end markets for the first quarter, As a reminder, the ransomware incident only impacted our vacuum photonics solutions divisions. Therefore, we mostly felt an impact on our semiconductor and specialty industrial markets, and to a lesser extent, electronics and packaging market. We expect to recover approximately 95% of this revenue, remaining 5% largely tied to our transactional catalog business in our specialty industrial market. With that as a backdrop, Semiconductor revenue was $309 million in the first quarter, declining 38% sequentially and 37% year-over-year, primarily due to the negative impact of the ransomware incident, as well as lower industry demand for semiconductor capital equipment. We estimate the ransomware incident impacted our semiconductor revenue by approximately $110 million in the first quarter. Given the impact of the ransomware incident, we estimate semiconductor revenue was down approximately 17% sequentially and 14% year-over-year. We expect to make up approximately 75% of that delayed revenue in the second quarter, with virtually all the remaining balance made up in the third quarter. While the first quarter was challenging, we have deep relationships with our customers and work closely with them to restore shipments as quickly as possible. Turning to electronics and packaging market, revenue was $222 million, a decrease of 17% sequentially and 24% year-over-year, with Q1 2022 representing combined company results. Assuming the impact of foreign exchange and palladium pass-through, first quarter revenue declined 20% on a year-over-year basis compared to combined company results. We estimate the ransomware incident has only nominally impacted our electronics and packaging revenue, We expect this to be substantially recovered in the second quarter. As John mentioned, our chemistry and plating equipment sales were negatively impacted by the industry's slowdown in global electronics demand. Our chemistry revenue declined 13% year-over-year, with the impact of foreign exchange and plating pass-through, reflecting the widely publicized slowdown in unit production volumes across PC, smartphone, and server applications. To add some context, according to Gardner, overall PC shipments declined 30% year-over-year in the first quarter. According to Canalys, smartphone shipments declined 12% year-over-year. Because there are more factory working days in the second quarter due to the Chinese New Year holiday in the first quarter, we expect electronics and packaging revenue to improve sequentially in the second quarter. In addition, we expect revenue to grow in the second half compared to first half levels. Moving to our specialty industrial market, revenue in the first quarter was $263 million, declining 17% sequentially and 18% year-over-year, with Q1 2022 representing combined company results. We estimate the ransomware incident impacted our specialty industrial revenue by approximately $45 million in the first quarter, which we expect to recover approximately $20 million in the second quarter and most of the remainder in the second half of the year. Excluding the impact of the ransomware incident in foreign exchange and plaguing pass-through, first quarter revenue declined approximately 2% year-over-year on a combined company basis. We do not expect to recover a nominal amount of revenue in this part of our business due to the transactional book-and-turn nature of orders that we generate through our catalog business. In the first quarter, consumables and service revenue across our three end markets comprise 43% of our total revenue. Turning to our margins, we reported first quarter gross margin of 42.2%, a sequential decline of 370 basis points, primarily due to the underutilization of a factory associated with a ransomware incident. First quarter operating expenses were $240 million, a sequential decline of $2 million due to lower variable compensation associated with the reduced revenue levels in the first quarter, as well as prudent cost control. First quarter operating margin was 12.1%. Adjusted EBITDA margin was 17.8%, both negatively impacted by lower revenue volumes as well as factory underutilization associated with the ransomware incident. Our integration of ad tech is progressing well. We're made on track to achieve our cost synergy target of $55 million within 18 to 36 months post-close. We exited the first quarter achieving annualized synergies of $25 million. Net interest expense for the first quarter was $76 million, slightly lower than we had anticipated due to favorable interest income. Our tax rate for the first quarter was a benefit of 47% driven by the geographic mix of earnings in the quarter. Net earnings for the first quarter were $32 million, or 48 cents per diluted share. Turning to our balance sheet and cash flow, despite the unusual challenges we faced, we exited the quarter maintaining strong liquidity with cash and short-term investments of $880 million and revolving credit facility of $500 million. We exited the quarter with gross debt of $5.1 billion. Our net leverage ratio exiting the first quarter, which is calculated on a combined company basis, was 4.0 times based on trailing 12-month adjusted EBITDA. For the first quarter, operating cash flow was $37 million, and free cash flow was $20 million, both negatively impacted by the ransomware incident. Insisting with prior quarters made dividend payments of $15 million, or 22 cents per share. I'll now turn to our second quarter outlook. We expect second quarter revenue of $980 million, plus or minus $50 million. While we normally do not provide specific guidance by end market, given the different moving pieces, such as recovery of ransomware revenue and underlying business levels, we believe a little more granularity would be helpful. With that, in the second quarter, we expect revenue from a semiconductor market to be approximately $400 million, plus or minus $20 million, revenue from electronics and packaging market to be approximately $240 million, plus or minus $10 million, and revenue from a special industrial market to be approximately $340 million, plus or minus $20 million. To the impact of the rent incident from the first and second quarters, we estimate second quarter revenue of approximately $870 million, which would represent a sequential decline from the first quarter. We expect this to be primarily a result of softer revenue from a semiconductor market, reflecting declines in wafer fab equipment spending, partially offset by lost improvements in revenue electronics and packaging, and especially industrial markets. Based on anticipated product mix and revenue levels, we estimate second quarter gross margin of 45%, plus or minus one percentage point. We expect operating expenses of $255 million, plus or minus $6 million. The sequential increase in the first quarter levels is due to higher revenue volumes, timing of annual merit increases, variable compensation, and normalization of product spending following a ransomware incident. For the second quarter, we estimated adjusted EBITDA approximately $223 million, plus or minus $27 million. For the second quarter, net incident expense expected to be approximately $82 million, reflecting slightly higher interest rates compared to the first quarter. And our tax rate expected to be approximately 27% for the second quarter. Given the tax benefit record in the first quarter, along with our guidance for the second quarter, we expect our tax rate to be higher in the second half to arrive at an estimated full year rate of 27% within our long-term model range. Given these assumptions, we expect second quarter net earnings of $1.13 per diluted share, plus or minus 29 cents. In summary, despite unusual challenges, we executed well on driving profitability in the first quarter. Moving forward, we are focused on resuming strong free cash flow generation, realizing acquisition synergies, and executing our discipline strategy to leveraging our balance sheet.
spk03: With that, I'll turn it back to the operator for Q&A.
spk02: Thank you. At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you'll need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please limit yourself to one question and one follow-up, please. Stand by while we compile the Q&A roster. Our first question comes from the line of Steve Barger of KeyBank Capital Markets. Your line is open, Steve.
spk00: Hey, thanks. Good morning. Great to hear about that second system order from an ATC customer. Are you surprised by the timing of that, given how tough the cycle's been? And can you talk about customer engagement around the combined advanced packaging applications versus what you expected, given current conditions?
spk06: Hi, Steve. It's John. Thanks for the question. As I said last quarter, it's a bit of a bluebird, a little sooner than we'd expect for these, but I think it does validate the thesis for the acquisition, the synergy and combined capabilities of Adatech chemistry solutions and chemistry equipment as well as laser drilling. You're right. The industry is a little more muted at this point, but at these times, design wins continue. and design work continues. And that kind of interaction we have with our customers continues to be very strong. As we mentioned in the prepared remarks, we had a ceremony at the Yokohama Tech Center, and many customers were invited, and we had great participation. We got to give them a tour of two brand-new capital equipment, a laser tool and a wet-clean tool, a vertical wet-clean tool. So that engagement remains very strong, and we're really happy to see that.
spk00: And for the electronics, chemistries, and plating business, can you remind us, is it basically a one-to-one relationship between volume and fab utilization rates, meaning as the cycle turns, you see an immediate increase in volume?
spk06: I think that's how we look at it, especially the chemistry part, obviously. That is very much utilization dependent. And so I think the latter half of Q1, we started seeing some of that slowing down. And that's what caused the slight down in Q1. And as we talk to customers, as we talk to and read about the industry and plans by our customers, that's why we think that, number one, Q2 will be a little better, more working days mostly. That is the assumption. And then the second half we think will be slightly better because we see the markets improving slightly in terms of utilization rates.
spk03: Great. Thank you. Thanks, Steve. Thank you. One moment, please.
spk02: Our next question comes from the line of Krish Shankar with TD Cohen. Krish, your line is now open.
spk01: Yeah, hi. Thanks for taking my question. I have two of them. First one says, John, if I look at the commentary on second half revenues slightly above, it does imply that September quarter revenue will be sequentially down from June of 980. But I understand June has some of the ransomware slip out. If I strip that out, it seems like September could be up from June X ransomware. Is that the way to think about it?
spk06: Krish, yeah, I think that is the way to think about it. So I think your question is, is X ransomware is Q2 kind of a trough? And trough quarter and I think that's the way to think about it And so the second half is going up but slightly in all three markets And so that's the that's how we are seeing the market at this point Just add that to Chris the second half there'll be obviously some revenue that we didn't ship in the first quarter that roll into the second half of the year and We say slightly higher that's above kind of those rollover revenue numbers. So it's actually increasing the markets.
spk01: Got it, got it. And then just out of curiosity, just as my follow-up, you know, the argument that, you know, Q2 is the trough and semi-revenues, I understand some of your customers have also spoken about kind of running at these Q2 revenue levels into Q3 and Q4. But historically, like, you know, as the use of their inventory increases, And it seems like coming out of a downturn or getting into the worst part of the down cycle, you should lag your customers because of the use of the inventory, but that doesn't seem to be happening based on what some of the other subsystem folks have mentioned. I'm kind of curious, why do you think that's going on where your bottom is kind of in tandem with your customers versus lagging them?
spk06: Well, I think we tend to precede our customers, obviously, our semi-equipment customers. And I think that's what we're seeing right now. I think the backlog was strong coming into Q1. And so there was a lot of that that maybe added a little more confusion to the normal cycles. But I think what we see right now is a lot of inventory burn off in the market. And we can see from plans of our customers that it should be slightly up.
spk01: Got it. Thanks a lot, John. Thanks, Chris.
spk03: Thanks, Grace. Thank you. One moment.
spk02: Our next question comes to the line of Joe Quattrochi of Wells Fargo. Your line is now open, Joe.
spk07: Yeah, thanks for taking the question. A question on the material solutions business, that the improvement that you're expecting in the second half of the year, how much should we think about that being maybe more seasonally driven versus kind of a bottoming in Q2 of kind of in demand?
spk06: Hey, Joe, it's John. You know, I think maybe I'll address Q2 first. As I said earlier, Q2 is really about more working days, you know, relative to Q1, as Seth said in his prepared remarks. I think to your question, the second half, there can be and is usually some seasonality especially with the consumer products part of the portfolio. But remember that the chemistry business for Adatech addresses not just the consumer products, but also servers and industrials and all that. So it's a little broader. And, you know, when you look at all the markets and all the data we're getting from all the customers, that's how we kind of come up with this slightly better second half versus first half. So it's not just the consumer markets only.
spk07: Got it. That's helpful. And then just as a follow-up process, how do we think about the cadence of voluntary debt pay down now that we kind of have the ransomware attack behind us? Should we expect that to start to pick back up, you know, this quarter?
spk06: Yeah, there's been no change in our approach here to deliver the balance sheet pretty aggressively. And we'll lean into the term loan A, by the way. We've done that $100 million voluntary payment back in the fourth quarter. and so that's kind of where we'll lean in going forward. You know, we haven't kind of given a bright line of when that will occur, but that's certainly our policy and our desire and our goal, so that's kind of leaning to that for sure. I think Q2, because of the, you know, lower revenue we booked in the first quarter, we'll catch up in Q2. There might be a little more, you know, working capital required on the receivable side in Q2, so to kind of give you a full transparency there, but Again, we think the back half of the year will be a little bit stronger, slightly up a little bit, get back to that free cash flow generation. So once that cash is generated, that's what we're going to put back to work to take off the term loan off the balance sheet. Got it. Thank you. Yep, you're welcome.
spk03: Thank you. One moment, please.
spk02: Our next question comes from the line of Sydney Ho of Deutsche Bank. Your line is now open, Sydney.
spk08: Great. Thank you. I guess if you strip out the impact of the ransomware, how do you think your semis revenue for the full year versus what you thought two months ago? I know there's a lot of moving parts with more production cuts in memory and foundry, but your customers also talk about people to ship more to China. There may be a lagging edge boundary in logic. It's a little bit stronger than they thought. I just want to get your thoughts on that.
spk06: Yes, Sidney. It's John. So you're asking me to predict SEMI again. I know. But I would say this, Sidney. I would say we came into the year certainly expecting the well-publicized downturn in memory capex. And I think that's not a surprise. I think we've been monitoring Foundry, and that's kind of been operating, I guess, as we kind of expected still, as we expected in the beginning of the year. But to your point, lagging edge does seem to be a little stronger, probably than even we expected, and the industry probably expected. And then as you've seen, obviously, what we can ship to China, what our customers can ship to China, there's a little more clarity to that. And I think, you know, we have... said that the impact of the October 7th restrictions on our revenue in China was a range of 250 to 350 million at, you know, kind of 2022 run rates. And I would say our view now is that's probably towards the lower end of that is our view today.
spk08: Okay, that's great. That's helpful. Maybe a second question on the gross margin. I think you guys guide the second quarter to be 45%. Should we expect that to be the fully normalized number and just start going up as revenue goes up in the second half of the year, or there's some lingering impact from the underutilization coming from the ransomware events? Thanks.
spk06: Yeah. Yes, and this is Seth. Yeah, so the volume is the biggest driver for sure. So if you, you know, model revenue up, you know, that would be the uptick on the overall margins as well because variable margin is higher than 45%. And then we've talked before, you know, in the longer term, we have inflationary, you know, pressures that everybody else has faced. So we take some action to kind of mitigate that going forward as well. So our goal is always, you know, kind of drive, you know, gross margin improvement through those actions and, you product development, you know, high-value, you know, offerings for our customers and so forth. So, that'll be our – obviously, continued our view on margins going forward. But, you know, for kind of the short-term modeling, I think the way you want to look at it is the volume is the biggest driver.
spk03: Okay. Thank you very much. Yep. Thanks, Sydney. Thank you. One moment, please.
spk02: Our next question comes from the line of Jim Rusciutti of Needham & Company. Your line is now open, Jim.
spk05: Thank you. Good morning. So specialty industrial X, the ransomware was down about 2% sequentially. Is that what you said?
spk06: Yeah, Jim, I think what we said is we had about a $45 million impact. from ransomware in Q1. And I believe that that number is right that you mentioned, but we'll triple check that for you.
spk05: Yeah. And I guess, John, where I'm going with this is, you know, we don't have a lot of experience with the GMF portion of the business. And obviously, we're seeing signs of slowing in different markets, different industrial markets. And I'm wondering if how you guys are thinking about that part of the business as we look out to the second half of the year? Not looking for guidance, but just in terms of have there been some changes at all in the demand trends? You alluded to the fact that it's holding up relatively well.
spk06: Yeah, that's right. And Jim, just to answer your first question, that 2% is year over year for the specialty industrial. Okay. But, you know, as we send the prepared remarks, as we look at all the specialty industrial markets, we do expect that market also to be slightly better in the second half than our first half. And so while it has stayed pretty stable in the first half, ex-ransomware, we do see that it will also, it looks like, will improve slightly in the second half. And that's made up of many different markets, as you can imagine. And that's what we're seeing today. And so I think it's a great stabilizing part of our revenue stream for the company now.
spk05: Got it. Seth, you mentioned the synergies in Q1. Was that in line with your expectations going back to the December quarter or did things change? Just given what happened with the ransomware and just the changing macro environment. I'm curious if that's been consistent and how do we think about synergies on a go forward basis?
spk06: Yeah, the 25 million we've realized annualized for the first quarter is probably better than we expected, I would say six months ago. The team has done a really good job getting engaged and obviously finding opportunities. And obviously the MSD, you know, field service division was not impacted by ransomware, so they had business as usual for the quarter. So I would say the takeaway is, you know, we feel very good about the $55 million in the 18th to 36th months. You know, obviously trying to pull that forward as best we possibly can. The $25 million I think is a little bit above our expectations. And, again, the teams have been really engaged and working on the right opportunities, and we think there's more opportunity going forward as well.
spk03: Thank you. Yep. Thanks, Jim. Thank you.
spk02: Our next question comes from the line of Steve Barger of KeyBank Capital Markets. Your line is open, Steve.
spk00: Hi. Thanks for letting me back in. Seth, you mentioned getting back to better free cash flow generation in the back half. Can you estimate what free cash flow could look like this year? And more broadly, where do you expect free cash flow margin will run as your operations in the cycle normalize?
spk06: Yeah, so yeah, thanks for the question, Steve. So obviously not giving guidance for the full year, but I think it went back to, you know, typical volume, you know, that we had, you know, pre-ransomware. Look at the cash flow off that, you know, those quarters will give you a good indication. We expect going forward. There's really nothing unique looking forward to Q3 and Q4, you know, based on work capital requirements or profitability or expectations for sure that has any different, you know, impact on free cash flow than we saw kind of pre-ransomware. So I think if you look at those back quarters, you get a pretty good sense of the, you know, free cash flow generation. There's always things we can do better, obviously. We're always going to challenge ourselves to drive more efficiency and working capital and certain profitability. So consider those things always front and center how we want to run the business. But that's kind of how I'd look at it. Look at historical, you know, kind of pre-ransomware metrics. We kind of get a good sense of the free cash flow generation we can pull off.
spk00: Got it. And this has been a tough cycle even before the ransomware attack. Does anything you've seen, you know, from the cycle, from the integration, change how you think about the level of the 2027 revenue and EPS targets, whatever the timing may be?
spk06: No, not at all. I mean, obviously, you know, there's always cycles in any business and certainly in the semi space, you know, we're well tuned to that, but, you know, everything we talked about the analyst day and we're seeing today is exactly intact. You know, we are well positioned across the markets we play in, you know, we gained share this past year in 22 in a very challenging environment. That was on top of a very substantial share gain in 21, so we're kind of doubling down on that. The engagement with customers is really strong. The interaction is very good. The R&D teams are fully engaged. So there's really no change in the fundamental piece of the business and how we grow long-term shareholder value. And as John mentioned in the prepared remarks, the team has done a fantastic job navigating a very, very difficult supply chain environment in a ransomware incident. And we did better than we expected coming into this quarter. So, no, no change in our view looking out five years. You'll have these fluctuations for sure. But we can manage these pretty well, we think.
spk03: Great to hear. Thanks. Okay. Thanks, Steve.
spk02: Thank you. I'd now like to turn the call back to David for closing remarks.
spk04: Thank you for joining us today and for your interest in MKS. Operator, you may close the call, please.
spk02: Thank you. And thank you for your participation in today's conference. This does conclude the program and you may now disconnect.

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