Photronics, Inc.

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Good day and thank you for standing by. Welcome to the Photronics first quarter fiscal 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Rochelle Burr, Chief Administrative Officer.

Thank you, Rivka. Good morning, everyone. Welcome to our review of Photonics' fiscal 2023 first quarter results. Joining me this morning are Frank Lee, our Chief Executive Officer, John Jordan, our Chief Financial Officer, Chris Progler, our Chief Technology Officer, and Eric Rivera, our Chief Accounting Officer and Corporate Controller. The press release we issued on Monday together with the presentation material that accompanies our remarks are available on the investor relations section of our webpage. Comments made by any participant on today's call may include forward looking statements that include such words as anticipate, believe, estimate, expect, forecast or in our view. These forward looking statements are based upon a number of risks, uncertainties and other factors that are difficult to predict. Actual results may differ materially from those expressed or implied, and we assume no obligation to update any forward-looking information. 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 ongoing performance. A reconciliation of these metrics to GAAP financial results is provided in our presentation materials. At this time, I would like to turn the call over to Frank.

Thank you, Richard, and good morning, everyone. I'm pleased to report we achieved revenue of $211.1 million in Q1, which exceeds our expectations. This was against a backdrop of macro challenges and uncertain industry conditions, showing that Fortranis was able to navigate a difficult environment very well. Indeed, the IC photo mass market has been mixed, with strong demand in certain nodes and suffering demand in others. On the positive side, we received strong order flow from Asian factories for mid-range nodes from 65 to 45 nanometer, mainly for the smart card, LED driver, automotive, image sensor, IoT, and other specific applications. Our customer long-term purchase agreement that we enter over the last few years benefit us by preserving market share and providing a good mix of product demand, helping us maintain revenue. These agreements have helped us better plan for capital investment and handle period of slowing industry demand. On the FPD side, our Q1FAP utilization remains at a high level, with smartphone displays showing particular strengths for China panel makers. This provides a major contribution to our FPD business growth. and was consistent with the strong demand for our mid-range IC display driver photo mask . Gross margin and operation margin was slightly softer than Q4 last year, but still maintained a strong level through continuous cost control management and pricing strategy. John will discuss the financial metrics in more details later. Looking forward to Q2 outlook, based on current order trends and ongoing input from our customers, we anticipate demand to remain stable in Q2, resulting in guidance that is roughly in line with our first quarter operation results. While demand uncertainty beyond Q2 is higher than usual, we continue to work closely with our customers to understand their demand and ready to support their business. In many cases, photo mask demand can remain steady even during an industry downturn as photo mask demand is design-driven and now always on the same cycle as wafer starts or display production. Longer term, We believe photo masks are a great place to be in the semiconductor and FPG supply chain. As design heavy future and great outsourcing from captive mask shop point to growing photo mask demand. Moreover, the global dry torque regionalization of IC supply will be a positive long-term driver of photo masks, as these new fabs require masks. We believe our global presence, broad technology portfolio, and the close customer relationship position us well to capitalize on this market trajectory over the long term. We have made a good start in 2023, which will be a challenging year. I have full confidence in Fortran's global team. and we will continue to support our customers by navigating through dynamics as they evolve and by executing with world-class performance in capability, cost, and delivery. Before turning the call over to John, I would like to offer a few comments on the continued evolution of export control laws. Japan and Netherlands will recently agree to tighten restrictions on the export of chip manufacturing technology to China. This may create additional risk for us, as we rely on some Japanese funds for material, tools, and services necessary to manufacture photo masks. We continually review our import and export practices to ensure compliance with the regulatory requirements, and work closely with our partners, vendors, and suppliers to create plans that best serve our customers. The new restrictions did not have a material impact on our first quarter results. We continue to review the restrictions and what impact they may have on our future operations. With that, I turn the call to John.

Thank you, Frank. Good morning, everyone. Revenue increased slightly in the first quarter as both IC and FPD were up somewhat from the fourth quarter and successfully offset typical seasonal trends, particularly for high-end technologies. Design activity continued reasonably robust. Our commercial teams have done a great job working with customers to understand their technology roadmap and wind orders, and our global team executed well and delivered. IC revenue is $156.6 million, up 0.2% sequentially, an increase in high-end demand, particularly in Asia, offset limited softness in mainstream. The supply-demand imbalance continues to support a favorable pricing environment, and for the most part, we're able to maintain ASP pricing exclusive of premiums established over the last two years. FPD revenue improved 1% sequentially to $54.5 million. Again, growth in high-end revenue more than offset lower mainstream demand. High-end growth came from improved G10.5+, demand and continued strength in mobile displays. Many times the production capacity dedicated to strong demand for high-end masks can lead to reduced production of mainstream masks. Gross and operating margins are about two percentage points less than fourth quarter margins due to less favorable mix and somewhat lower expediting premiums that customers pay to accelerate deliveries. Although the revenue increase was in high-end, both IC and FPD, not all high-end businesses created equal. Difference in mix, including nature of the product, product pricing and margins, and location of manufacturer, especially related to memory, all affect operating margin outcome. Operating expenses were slightly increased sequentially on higher people costs. First quarter SG&A costs are typically higher than fourth quarter due to higher employer taxes and health care costs. SG&A increased from first quarter last year due to overall higher salaries and wages driven by labor market conditions and health care costs. Nonetheless, operating expenses remained well below the 10% of sales implied in our target model, maintaining a tight grip on expenses is part of our DNA, so to speak. Non-operating loss in the quarter of $14.4 million resulted primarily from the unrealized loss from month-end re-measurement of U.S. dollar-denominated balance sheet items into the local functional currencies in our foreign operations. The re-measurement exercise produces an unrealized, non-caste, accounting for variations in currency relationships, which can result in either a gain or loss each quarter. These non-operating items have been generally favorable over the last two years. Due to the degree of variation in the fourth quarter and first quarter amounts, we provided a non-GAAP presentation to demonstrate that operating results excluding the FX loss were in line with expectations. The income tax provision of $12.6 million and non-controlling interest expense of $15 million resulted in net income of $14 million and diluted EPS of 23 cents on a GAAP basis. On an adjusted basis, net income was $24.4 million and diluted EPS was 40 cents. Last quarter, non-GAAP net income and EPS were $31.2 million and 51 cents, respectively. The analogous net income in EPS last year were $14.2 million and 32 cents. Cash flow generated from operations was $28 million in the first quarter. We invested $31 million in capital expenditures and received $1 million in government incentives. For full year 2023, our CapEx forecast remains at approximately $130 million primarily for increased high-end and mainstream IC capacity. Our cash balance, including short-term investments, was $374 million at the end of the quarter, or $340 million net cash after $34 million in debt. We believe we have ample liquidity for our investments in growth and for resilience against uncertainties we may face in 2023. Before I provide guidance, I'll remind you that our visibility is always limited, as our backlog is typically only one to three weeks, and demand for some of our products is inherently uneven and difficult to predict. Additionally, the ASPs for high-end mask sets are high, and as this segment of the business grows, a relatively low number of high-end orders can have a significant impact on our quarterly revenue and Given those caveats, we expect second quarter revenue to be in the range of $205 to $215 million. We anticipate that the current revenue level will be sustained in second quarter, and the ability to maintain revenues at this level ratifies our belief that the industry's cyclical phase is not necessarily reflected in demand for photo masks. Based on those revenue expectations in our current operating model, we estimate earnings per share for the current quarter, the second quarter, to be in the range of 38 cents to 48 cents per diluted share. We have made a great start to 2023. Photomass demand has been stable, and our commercial and operating teams are performing well. Despite near-term uncertainty, we remain optimistic with a positive long-term view of increasing photo mask demand. We believe we are the market leader, and we plan to continue to grow and carefully manage margins to keep moving toward attainment of our long-term financial targets. I'll now turn the call over to the operator for your questions.

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Thomas Diffily of D.A. Davidson. Your line is now open.

Yes, good morning, and thank you for taking my call, my questions. So, John, I'm curious, when you look at the second quarter guidance, you know, you talk about it being stable quarter-by-quarter. Why do you think you're not seeing the typical post-Chinese New Year ramp in demand, and is it just being offset by some other moving parts?

I think I'll defer that one to Frank, who's much more of an authority on Chinese New Year and the auto rates.

Typically, a lot of tableau happens before Christmas or Chinese New Year. This year, it's slightly different because of the overall industry environment. So we do see some mainstream tableau start to increase, but on the higher side, We haven't seen the strong recovery yet, but according to the input from our customer and from our sales, we believe the tap out may start to happen later in the quarter, but we need to continue monitoring the situation.

Okay, thank you. And then in your prepared comments, you talked about growing nationalism. What regions in particular are you looking at there, and when do you think the capacity will be in place to benefit P-Lab and kind of your ongoing business?

Hi, Tom. This is Chris. You know, all the regions have programs to expand their domestic supply chains for semiconductors. Every major producing region has that, so we're looking at all of them. You know, U.S. and Europe in particular have seem to be wanting to install significant amounts of new capacity. So we're tracking that, we're meeting with customers, we're looking at also opportunities to apply for incentives ourselves to expand our networks there. As far as when that might materialize, I think you have to look at probably a three year, two to three year horizon at minimum. Probably four to five years to really achieve the full entitlement of those kind of government initiated programs. So we're seeing a little bit of it, frankly, already, where some companies are trying to get ahead of the curve by expanding capacity. But I think you should think about probably a three-year horizon before it really takes hold.

Okay. Thanks, Chris. And then maybe, Chris, follow up on this question. Maybe a little bit more on the Japanese technology restrictions. Is it too early to tell, but what nodes does that include and what is your percentage of business at those potentially advanced nodes?

I think for the most advanced nodes, the EUV in particular, I don't see that having a large impact on us. Our EUV business is actually growing. Year over year, we expect it to happen again this year, but it's mostly to support OEMs, equipment manufacturers, R&D programs, piloting, that sort of thing. So we don't have a big exposure to production impacts from EUV, although it is growing for us. On the mid-range nodes, of course, today, I think, as you know, the scanner companies are still selling mid-range scanners. This is really deep UV, 248, and dry ARF at immersion. into all regions around the world. If that was severely curtailed, then, you know, that has a major impact on future capacity at those nodes because a lot of our key mid-range products fit into those nodes. So that we do have to watch pretty closely. It does not seem to be happening right now, but it could in the future. So we keep an eye on it for sure. I guess one of the ideas is that, you know, the world will still need those chips And if those tools don't go to one region, they're going to go to a different region, and it gets back to this regionalization opportunity we see. So that would be the response if you ask, how will you make up for it? The idea is those chips are going to be built someplace, and we certainly are plugged in on all regions of the world, and we'll try to take advantage of that. There may be another comment or two from... for Michelle on this particular topic. She's working on it very diligently every day.

I think that's right, Chris. I think everything you said is accurate, and we're still waiting to see the, you know, what actually Netherlands and Japan finally agree to.

Okay. Thank you both. I appreciate that extra color. And the final question, John, you know, you talked about CapEx of 130 million this year. I'm surprised you talked about the mainstream expansion. I thought we were still at a point where the pricing in the mainstream market did not support the acquisition of new tools for that space.

And that's a good memory, Tom. You're absolutely right. But as we mentioned, I think at the beginning of last year, there are still point tools that we can supplement our existing lines with and to the extent that those are available There are other used tools on the market that we may be able to pick up at much less than new price. And those, for the most part, aren't even produced anymore. So to the extent we can scavenge tools like that, we also supplement the existing lines. So it's really just on a point tool kind of exception basis.

Okay. Well, thank you all for your time this morning.

Tom, thanks for getting up so early to call in.

Just another day on the West Coast here.

Yeah.

Again, as a reminder, to ask a question, you'll need to press star 11 on your telephone.

Ladies and gentlemen, there are no further questions at this time.

I will now turn the call over to Frank Lee for closing comments.

All right, thank you. Thank you for joining us this morning. We have made a good start in 2023, and we are working hard to serve our customers and control our operations so we can maintain our revenue and margins. We remain optimistic on a long-term demand outlook for photo masks and believe we can maintain our position as the market leader. Thank you again for your interest and have a great day. Thank you.

Ladies and gentlemen, that concludes the conference call for today. We thank you for your participation and ask that you please disconnect your lines.

The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 1 1. you Thank you. Thank you.

Good day and thank you for standing by. Welcome to the Photronix first quarter fiscal 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Rochelle Burr, Chief Administrative Officer.

Thank you, Rivka. Good morning, everyone. Welcome to our review of Photonics' fiscal 2023 first quarter results. Joining me this morning are Frank Lee, our Chief Executive Officer, John Jordan, our Chief Financial Officer, Chris Progler, our Chief Technology Officer, and Eric Rivera, our Chief Accounting Officer and Corporate Controller. The press release we issued on Monday together with the presentation material that accompanies our remarks are available on the investor relations section of our webpage. Comments made by any participant on today's call may include forward looking statements that include such words as anticipate, believe, estimate, expect, forecast or in our view. These forward looking statements are based upon a number of risks, uncertainties and other factors that are difficult to predict. Actual results may differ materially from those expressed or implied, and we assume no obligation to update any forward-looking information. 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 ongoing performance. A reconciliation of these metrics to GAAP financial results is provided in our presentation materials. At this time, I would like to turn the call over to Frank.

Thank you, Richa. Good morning, everyone. I'm pleased to report we achieved revenue of $211.1 million in Q1, which exceeds our expectations. This was against a backdrop of macro challenges and uncertain industry conditions, showing that Fortranis was able to navigate a difficult environment very well. The IC photo mass market has been mixed, with strong demand in certain nodes and suffering demand in others. On the positive side, we received strong order flow from Asian factories for mid-range nodes from 65 to 45 nanometer, mainly for the smart card, LED driver, automotive, image sensor, IoT, and other specific applications. Our customer long-term purchase agreement that we enter over the last few years benefit us by preserving market share and providing a good mix of product demand, helping us maintain revenue. These agreements have helped us better plan for capital investment and handle period of slowing industry demand. On the FPD side, our Q1FAP utilization remains at a high level, with smartphone displays showing particular strengths for China panel makers. This provides a major contribution to our FPD business growth. and was consistent with the strong demand for our mid-range IC display driver photo mask . Gross margin and operation margin was slightly softer than Q4 last year, but still maintained a strong level through continuous cost control management and pricing strategy. John will discuss the financial metrics in more details later. Looking forward to Q2 outlook, based on current order trends and ongoing input from our customers, we anticipate demand to remain stable in Q2, resulting in guidance that is roughly in line with our first quarter operation results. While demand uncertainty beyond Q2 is higher than usual, we continue to work closely with our customers to understand their demand and ready to support their business. In many cases, photo mask demand can remain steady even during an industry downturn as photo mask demand is design-driven and now always on the same cycle as wafer starts or display production. Longer term, We believe photo masks are a great place to be in the semiconductor and FPG supply chain. As design heavy future and great outsourcing from captive mask shop point to growing photo mask demand. Moreover, the global dry torque regionalization of IC supply will be a positive long-term driver of photo masks, as these new fabs require masks. We believe our global presence, broad technology portfolio, and the close customer relationship position us well to capitalize on this market trajectory over the long term. We have made a good start in 2023, which will be a challenging year. I have full confidence in Fortran's global team. and we will continue to support our customers by navigating through dynamics as they evolve and by executing with world-class performance in capability, cost, and delivery. Before turning the call over to John, I would like to offer a few comments on the continued evolution of export control laws. Japan and Netherlands were recently agreed to tighten restrictions on the export of chip manufacturing technology to China. This may create additional risk for us, as we rely on some Japanese funds for material, tools, and services necessary to manufacture photo masks. We continually review our import and export practices to ensure compliance with the regulatory requirements, and work closely with our partners, vendors, and suppliers to create plans that best serve our customers. The new restrictions did not have a material impact on our first quarter results. We continue to review the restrictions and what impact they may have on our future operations. With that, I turn the call to John.

Thank you, Frank. Good morning, everyone. Revenue increased slightly in the first quarter as both IC and FPD were up somewhat from the fourth quarter and successfully offset typical seasonal trends, particularly for high-end technologies. Design activity continued reasonably robust. Our commercial teams have done a great job working with customers to understand their technology roadmap and wind orders, and our global team executed well and delivered. IC revenue is $156.6 million, up 0.2% sequentially. An increase in high-end demand, particularly in Asia, offset limited softness in mainstream. The supply-demand imbalance continues to support a favorable pricing environment, and for the most part, we're able to maintain ASP pricing exclusive of premiums established over the last two years. FPD revenue improved 1% sequentially to $54.5 million. Again, growth in high-end revenue more than offset lower mainstream demand. High-end growth came from improved G10.5+, demand and continued strength in mobile displays. Many times the production capacity dedicated to strong demand for high-end masks can lead to reduced production of mainstream masks. Gross and operating margins are about two percentage points less than fourth quarter margins due to less favorable mix and somewhat lower expediting premiums that customers pay to accelerate deliveries. Although the revenue increase was in high-end, both IC and FPD, not all high-end businesses created equal. Difference in mix, including nature of the product, product pricing and margins, and location of manufacturer, especially related to memory, all affect operating margin outcome. Operating expenses were slightly increased sequentially on higher people costs. First quarter SG&A costs are typically higher than fourth quarter due to higher employer taxes and health care costs. SG&A increased from first quarter last year due to overall higher salaries and wages driven by labor market conditions and health care costs. Nonetheless, operating expenses remained well below the 10% of sales implied in our target model, maintaining a tight grip on expenses is part of our DNA, so to speak. Non-operating loss in the quarter of $14.4 million resulted primarily from the unrealized loss from month-end re-measurement of U.S. dollar-denominated balance sheet items into the local functional currencies in our foreign operations. The re-measurement exercise produces an unrealized, non-caste, accounting for variations in currency relationships, which can result in either a gain or loss each quarter. These non-operating items have been generally favorable over the last two years. Due to the degree of variation in the fourth quarter and first quarter amounts, we provided a non-GAAP presentation to demonstrate that operating results excluding the FX loss were in line with expectations. The income tax provision of $12.6 million and non-controlling interest expense of $15 million resulted in net income of $14 million and diluted EPS of 23 cents on a GAAP basis. On an adjusted basis, net income was $24.4 million and diluted EPS was 40 cents. Last quarter, non-GAAP net income and EPS were $31.2 million and 51 cents, respectively. The analogous net income in EPS last year were $14.2 million and 32 cents. Cash flow generated from operations was $28 million in the first quarter. We invested $31 million in capital expenditures and received $1 million in government incentives. For full year 2023, our CapEx forecast remains at approximately $130 million primarily for increased high-end and mainstream IC capacity. Our cash balance, including short-term investments, was $374 million at the end of the quarter, or $340 million net cash after $34 million in debt. We believe we have ample liquidity for our investments in growth and for resilience against uncertainties we may face in 2023. Before I provide guidance, I'll remind you that our visibility is always limited as our backlog is typically only one to three weeks, and demand for some of our products is inherently uneven and difficult to predict. Additionally, the ASPs for high-end mask sets are high, and as this segment of the business grows, a relatively low number of high-end orders can have a significant impact on our quarterly revenue and Given those caveats, we expect second quarter revenue to be in the range of $205 to $215 million. We anticipate that the current revenue level will be sustained in second quarter, and the ability to maintain revenues at this level ratifies our belief that the industry's cyclical phase is not necessarily reflected in demand for photo masks. Based on those revenue expectations in our current operating model, we estimate earnings per share for the current quarter, the second quarter, to be in the range of 38 cents to 48 cents per diluted share. We have made a great start to 2023. Photomass demand has been stable, and our commercial and operating teams are performing well. Despite near-term uncertainty, we remain optimistic with a positive long-term view of increasing photo mask demand. We believe we are the market leader, and we plan to continue to grow and carefully manage margins to keep moving toward attainment of our long-term financial targets. I'll now turn the call over to the operator for your questions.

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Thomas Diffily of D.A. Davidson. Your line is now open.

Yes, good morning, and thank you for taking my call, my questions. So, John, I'm curious, when you look at the second quarter guidance, You talked about it being stable quarter-by-quarter. Why do you think you're not seeing the typical post-Chinese New Year ramp in demand, and is it just being offset by some other moving parts?

I think I'll defer that one to Frank, who's much more of an authority on Chinese New Year and the other race.

Typically, a lot of travel happens before Christmas or Chinese New Year. This year, it's slightly different because of the overall industry environment. So we do see some mainstream table start to increase, but on the higher side, we haven't seen the strong recovery yet. But according to the input from our customer and from our We believe the table may start to happen later in the quarter, but we need to continue monitoring the situation.

Okay, thank you. And then in your prepared comments, you talked about growing nationalism. What regions in particular are you looking at there, and when do you think the capacity will be in place to benefit P-Lab and kind of your ongoing business?

Hi, Tom. This is Chris. You know, all the regions have programs to expand their domestic supply chains for semiconductors. Every major producing region has that. So we're looking at all of them. You know, U.S. and Europe in particular seem to be wanting to install significant amounts of new capacity. So we're tracking that. We're meeting with customers. We're looking at also opportunities to apply for incentives ourselves to expand our networks there. As far as when that might materialize, I think you have to look at probably a three-year, two- to three-year horizon at minimum, probably four to five years to really achieve the full entitlement of those kind of government-initiated programs. So we're seeing a little bit of it, frankly, already, where some companies are trying to get ahead of the curve by expanding capacity. But I think you should think about probably a three-year horizon before it really takes hold.

Okay, thanks, Chris. Maybe Chris, follow up on this question. Maybe a little bit more on the Japanese technology restrictions. Is it too early to tell, but what nodes does that include and what is your percentage of business at those potentially advanced nodes?

I think for the most advanced nodes, the EUV in particular, I don't see that having a large impact on us. Our EUV business is actually growing Year over year, we expect it to happen again this year, but it's mostly to support OEMs, equipment manufacturers, R&D programs, piloting, that sort of thing. So we don't have a big exposure to production impacts from EUV, although it is growing for us. On the mid-range nodes, of course, today, I think as you know, the scanner companies are still selling mid-range scanners. This is really deep UV, 248 and dry ARF at immersion. into all regions around the world. If that was severely curtailed, then that has a major impact on future capacity at those nodes, because a lot of our key mid-range products fit into those nodes. So that we do have to watch pretty closely. It does not seem to be happening right now, but it could in the future, so we keep an eye on it for sure. I guess one of the ideas is that the world will still need those chips And if those tools don't go to one region, they're going to go to a different region, and it gets back to this regionalization opportunity we see. So that would be the response if you ask, how will you make up for it? The idea is those chips are going to be built someplace, and we certainly are plugged in on all regions of the world, and we'll try to take advantage of that. There may be another comment or two from... for Michelle on this particular topic. She's working on it very diligently every day.

I think that's right, Chris. I think everything you said is accurate, and we're still waiting to see the, you know, what actually Netherlands and Japan finally agree to.

Okay. Thank you both. I appreciate that extra color. And the final question, John, you know, you talked about CapEx of 130 million this year. I'm surprised you talked about the mainstream expansion. I thought we were still at a point where the pricing in the mainstream market did not support the acquisition of new tools for that space.

And that's a good memory, Tom. You're absolutely right. But as we mentioned, I think at the beginning of last year, there are still point tools that we can supplement our existing lines with. And to the extent that those are available now, There are other used tools on the market that we may be able to pick up at, you know, much less than new price. And those, for the most part, aren't even produced anymore. So to the extent we can scavenge tools like that, we also supplement the existing lines. So it's really just on a point tool kind of exception basis.

Okay. Well, thank you all for your time this morning.

Tom, thanks for getting up here early to call in.

Just another day on the West Coast here.

Yeah.

Again, as a reminder, to ask a question, you'll need to press star 11 on your telephone. Ladies and gentlemen, there are no further questions at this time. I will now turn the call over to Frank Lee for closing comments.

All right. Thank you. Thank you for joining us this morning. We have made a good start in 2023, and we are working hard to serve our customers and control our operations so we can maintain our revenue and margins. We remain optimistic on a long-term demand outlook for photo masks and believe we can maintain our position as a market leader. Thank you again for your interest, and have a great day. Thank you.

Ladies and gentlemen, that concludes the conference call for today. We thank you for your participation and ask that you please disconnect your lines.