Entegris Inc (ENTG) 2007 Q4 法說會逐字稿

Welcome to the Entegris fourth quarter 2007 earnings release conference call. Today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Mr. Steve Cantor, Vice President of Corporate Relations. Please go ahead sir.

Thank you Cindy. Good morning everyone, thank you for joining our call today. Earlier we released our financial results for our fourth quarter ended December 31, 2007. You can access a copy of our press release on our website, www.entegris.com.

Before we begin I would like to remind listeners that our comments today will include some forward-looking statements. These statements involve a number of risks and uncertainties and our actual results may differ materially. These risks and uncertainties are outlined in detail in this morning's press release, and in our most recent 10K report, as well as in our other reports and filings with the SEC. We encourage you to carefully read those reports and filings.

On this call we will also refer to non-GAAP financial measures as defined by the SEC and Regulation G. You can find a reconciliation of non-GAAP financial measures to the comparable reported results of operations under GAAP in today's press release, as well as on our website. Going forward we intend to only provide GAAP results. I should point out that all numbers discussed on this call unless otherwise noted are based on results from continuing operations.

On the call today are Gideon Argov, President and CEO; Jean-Marc Pandraud, Chief Operating Officer; Greg Graves, Chief Financial Officer; and Peter Walcott, our General Counsel. Gideon will now begin the call.

Thanks Steve. I'll begin with some comments on sales and business trends, and then turn the call over to Greg Graves for some financial highlights.

Our Q4 sales were stronger than originally expected, as we saw strengthening demand extend through the last week of the year. Sales of unit-driven products represented 61% of our revenues, reflecting healthy production levels at chipmaker customers. Sales to non-semi customers, such as manufacturers of flat panel displays and data storage components were also strong, in particular sales of liquid filtration products for lithography applications and chemical filters to control airborne molecular contamination in the fab performed well.

Wafer and data storage shippers were essentially flat compared to Q3. Our newest business Entegris specialty coatings, which is the semiconductor portion of Surmet Corporation that we acquired in last August, grew as planned in its first full quarter with Entegris. EC's [fracture] product, a consumable specialized coated electrostatic chuck used to hold the wafer in the ion implant tool continues to lead the market.

The capital-driven side of the business, which accounted for about 39% of revenues, also did well despite declines in capital spending across the industry. Sales of our liquid systems grew in part on higher shipments related to advanced lithography applications. Specifically we shipped a large order for our newest photochemical pump. This product is targeting retrofit applications for the large installed base of track tools.

We also had sustained demand for our gas purification system, which offset lower sales of our wafer process carriers, such as our 300mm FOUPs, that were impacted by weaker capacity related spending.

Geographically, Q4 sales for both Asia and North America reached respective highs for the year. Sales to Asia grew 5% sequentially and represented 36% of total revenues. Relatively strong utilization levels at leading foundries and memory makers, and a growing strength in TFT-LCD production had a positive impact on our Asian Sales as well. North American sales represented 28% of the total and rebounded from a particularly slow Q3, growing 19% sequentially. The improvement was due to growth of both liquid and gas filtration products at U.S. located semi-device makers, which offset softer OEM sales. In Japan year-end preventive maintenance change outs at IDM customers helped to drive our Japanese sales up 9%. Europe represented about 14% of revenues and declined 4%, mostly due to slower capital spending.

To summarize, 2007 was challenging, but we made meaningful progress in a number of areas to strengthen and build on the platform of products, technology and customer relationships. That platform is based on a product portfolio which is among the broadest in our markets. This breadth does two things for us; one, it provides us with multiple touch points with customers who are becoming larger and more demanding; number two, it enables us to combine multiple products and technologies to develop comprehensive solutions to the most challenging contamination problems in the industry.

The breadth of products is complemented with a breadth of customers, which in the semiconductor space, are spread across the worlds IDMs, foundries, memory makers, wafer growers, materials companies, as well as equipment manufacturers. It's a broad customer base, and together with a consumable unit-driven nature of the majority of our products, it provides us with strong cash flow.

2007 was an important year for new product launches, many of the new products we introduced this past year are still in relatively early stages of being accepted in the market. A product such as the 300mm FOSB, the Clarilite solution for reducing reticle haze, our 20nm rated Torrento liquid filter are just beginning their contributions, their future contributions to revenue. And I would say in addition, our expanded family of liquid filtration products to address applications in TFT and LCD and other microelectronics markets is gaining traction.

We expect these products to grow in 2008, even in a lackluster industry environment. To keep us at the forefront of the industry roadmap, we are continuing to add next generation contamination control solutions to our product offerings. In the lithography area we're developing a Clarilite certified solution that is specifically designed for EUV applications. Within our wafer handling area in December we contributed to a successful demo in Japan of a prototype 300mm prime wafer handling system. This advanced handling system is viewed by many in the industry as having significant potential to increase the throughput of a fab.

Another area we made significant progress in is manufacturing capacity and capability. We have begun to implement a long-range plan to improve our manufacturing flexibility and reduce our cost structuring. This plan, as we've talked about, involves moving production of some key products, implementing [Lean Sigma] across the company and increasing our use of outsourcing. Of the products currently being transferred to our facility in Kulim, Malaysia, three are fully production ready at the present time. Volume production of two of those is pending the completion of customer qualifications, which are expected beginning late in the second quarter.

We initiated plans to close two of our smaller operations, a facility in Gilroy, California that manufactured cleaning equipment products and provided cleaning services at a small facility in Singapore. In addition to those closures, we're taking additional measures to further reduce our manufacturing costs and increase our operational flexibility.

Another key development in 2007 was the restructuring of our balance sheet to position the company for growth and higher long term returns, supported by $125 million of cash flow from operations over the past year, our financial position enables us to both repurchase shares and make acquisitions. We currently have a $50 million stock buy back in place, and will continue to repurchase shares on a monthly basis over the next few months.

Turning to our outlook, we expect first quarter sales to moderate from the unexpectedly strong levels of Q4, and to range from $142 million to $150 million. This outlook is based on our expectation of further softening of capital spending in Q1, which does impact demand for liquid systems products and wafer carrier products.

In addition we would expect production levels at IDMs and foundries to moderate from the levels in Q4, which could impact the unit-driven side of the business. As such, we anticipate our mix of unit-driven and capital-driven product sales to shift modestly toward the unit-driven side, which is typical during periods of capital spending slowdowns.

For Q1 we expect GAAP EPS to range from $0.03 to $0.05, which includes approximately $4 million of merger related amortization, which is approximately $0.03 per share. And to simplify reporting, we will no longer report our results on a non-GAAP basis in 2008. Given our anticipated revenue levels, combined with the general uncertainty in the global economy, we're taking active steps to reduce our cost structure. Although the news from the industry is mixed, we are familiar with the kinds of challenges that occur in this stage of the industry cycle.

Given the importance of what we do for our customers as they implement advanced processes and new semiconductor materials, we remain confident that we're well positioned to make the most of the cyclical rebound when that occurs. We remain committed to making the necessary investments to develop new contamination control solutions and help our customers continue to move along the industry roadmap to 45nm and 32nm technologies. Greg will now provide some additional financial detail on the past quarter.

Thank you Gideon. Good morning everyone. Sales for the fourth quarter were $161.3 million, which was up 6% from the third quarter, and down 5% from a year ago. Net income in Q4 was $10.8 million or $0.09 per diluted share.

On a non-GAAP basis, net income from continuing operations was $16.9 million or $0.15 per diluted share. Reconciliation information between our non-GAAP and GAAP results may be found in today's press release, which can be accessed on our website.

Gross margin for the fourth quarter, on a modified basis, was 43% of sales, versus 43.7% in Q3. Despite higher sales, gross margin was impacted by lower overhead absorption resulting from a planned $8 million reduction in inventories. To achieve the lower inventory, our plants produced less than we did in Q3.

Operating expenses, on a modified basis, were $53.9 million, or 33.4% of sales. The increase in operating expenses from Q3 was due in part to severance expenses related to the plant closures that Gideon mentioned, as well as marketing expenses and year end sales incentive adjustments that hit in Q4.

ER&D was $10.1 million, reflecting our continuing investments in new product development projects. Our GAAP operating expenses included $4.2 million of merger related amortization. Total stock based compensation in Q4 amounted to $1.9 million or $0.01 per diluted share. Adjusted for merger related and other restructuring, our non-GAAP operating income was $15.4 million or 9.6% of sales.

We reported an income tax benefit on a GAAP basis of $1.6 million in the quarter. This reflects the favorable impact of the $8 million U.S. tax benefit that resulted from a series of transactions to bring approximately $100 million of cash to the U.S. The full effect of the tax benefit from the Japan dividend in Q4 was offset by the geographic mix of income and changes in certain contingent tax estimates.

Weighted average shares on a fully diluted basis at year end totaled $115.8 million. Cash flow remained strong. For the quarter we generated $25 million of cash, and for the year we generated more than $125 million. A good portion of that resulted from working capital improvements, particularly reductions in inventories which went from $93.4 million at the start of the year to $73.1 million at the end of December.

Inventory turns increased to about 4.8 times. Accounts receivable in dollars increased as a result of the higher sales, and DSOs were 63 days versus 62 days in the third quarter and 70 days at the beginning of the year. Depreciation and amortization totaled approximately $11.2 million, and capital expenditures for the quarter were $5.5 million. Total Cap Ex for 2007 was $27 million and we are budgeting a similar level for 2008.

Cash, cash equivalents and short term investments totaled $160.7 million at the end of Q4, an increase of $34.8 million from Q3. The increase is due to operating cash flow and a $10 million increase in borrowings.

To recap our guidance for Q1, we expect sales to be in the range of $142 million to $150 million. At the high end of that range we expect the gross margin to decline slightly from Q4, in part as a result of the lower sales levels. We expect operating expense to be down approximately $3 million. Our tax rate for 2008 is planned for 32%. With that, we'll now take your questions.

Thank you. (OPERATOR INSTRUCTIONS)

And we'll take Brett Hodess with Merrill Lynch.

Good morning. Gideon, I'm wondering if you could talk a little bit about the first quarter outlook in the -- if you look at some of the other material and sub component companies, I know none of them are an exact match for you. But some of them also had a little bit stronger fourth quarter and their first quarter revenue guidance was flat to down 2% or 3%. Yours is, you know, down 7% or 8%. I'm wondering if you could talk a little bit about why you think you might be down a little bit more or if it's just the more cautious view.

And the second comment that I'd like you to make is, if you're looking at the non-semi business, as you said, they were pretty strong in the fourth quarter. You know we've heard a lot of real strength out of the flat panel area and the unit side of data storage being very strong. Could those flats provide some offset to the weakness you're seeing in semi-cap in the near-term?

Yes, good morning, Brett. First of all, as far as our forecast for the first quarter, we do try to be realistic in our forecast as best we can. I would remind everyone on the call that we are in a quick turn business around here and so we tend to book and ship in the same quarter. And that means we have limited visibility.

Number two, approximately 40% of our revenue is in the capital area. And I think that in that area we do see a slowdown and that is going to impact our first quarter. That is the primary reason why we see that as being a lower quarter.

Now, I'll let Jean-Marc talk about our flat panel business.

Yes, Brett, this is Jean-Marc. Indeed, to supplement Gideon's answer on the consumable goods side, I do see a modest decline going into the first quarter but, as Gideon predicts, it's mostly the capital side. But we see a negative trend in the coming quarter.

And in flat panel, we should, and the consumable electronic business should be pretty stable in the first quarter. So, only a modest decline, but mostly on the capital side. But it drags us down for the first quarter.

And then if I could have a quick follow on; as you look into the ramp up of the next quarter or so of the two other product lines in Malaysia, if revenue stayed around this level and product mix stayed around, you know, sort of the current kind of product mix, would we be starting to see a gross margin improvement, in those two additional product lines, start to ramp? Or do we need to wait to see the further product lines to be moved over?

Brett, I would say we would see some very modest improvement. But when you look at kind of our whole gross margin story, I mean, there's a number of headwinds as well as a number of tailwinds. On the headwinds front I would say we face some modest increases in material costs, probably about 2%. That has an overall relatively modest, less than a half point impact on gross margin.

We also, as we've talked about some of our newer product lines, we'll face margin pressure, such as the FOSB. The tailwinds, however, are the migration of the products to Malaysia, which has, again, a modest positive impact. Initiatives like we took to close the Gilroy facility, again, something that doesn't have a big impact but it's got a third of a point of margin improvement for the year. And so, the margin story, it's a lot of little things. And so to quantify specifically, the improvement related to those products is difficult to do. But I mean they will have a favorable impact.

I would say the two products that are there, if you said what's the number, the cost savings related to those two, it's probably about $2 million a year.

Okay. Great; thank you.

And we'll take our next question from Chris Blansett, with JP Morgan.

What should we expect, you know, are you going to make, I guess, a material structural change to your Op Ex costs or maybe your (inaudible)? Where should we model say, and how should we look at it?

First of all, good morning. We have both long-term transition in our cost structure that we're making, which Greg alluded to and that involves moving infrastructure to Asia. And we're in the process to do that. And number two, we have short-term cost containment, a measure that we're going to be taking, which we're involved in at the present time. As we make decisions, we'll communicate those to you. We don't have any more specifics to say on that at the present time.

All right.

I think, specifically, as it relates to Q1, we would expect the operating expenses in Q1 of this year to be comparable to what we saw in Q1 of last year, which is something right around $51 million, excluding the merger related amortization.

Right.

And just, Chris, that would be excluding any impact of any cost containment measures.

When you talk about cost containment, is this, like, employee comp? Or, you know, I'm trying to understand what you're getting at.

Well, it's a variety of things. It's discretionary spending.

Okay.

It's headcount in certain areas; it's the kind of things that we're used to doing because, obviously, this is an industry that experiences up and down cycles and it's the prudent thing to do. So, it's a variety of those kinds of measures, Chris.

One thing that I was kind of wondering, with the kind of the progressive ramp that you're having in Malaysia, how has your kind of total top line revenue potential grown? And, based on what the outlook is, I mean, should we expect, or could we expect, a serious facility consolidation sometime this year if things remain weaker?

We have taken a series of steps to trim our footprint. The latest of those is closing a small facility in Gilroy. Between that and the Singapore represents about just under 100 people. There's just over $1 million savings from the Gilroy facility. We have a plan that involves continuing to make those kinds of steps but I would not read more into it than we've actually said.

Okay and then one quick last thing; since you guys have the majority of the 200mm wafer shipper and cassette business, there's been a lot of discussion, or, I guess, news flow about some of these large memory factories either shutting down temporarily or closing them. I wasn't sure if this is also kind of what you're seeing in your first quarter outlook and has that affected you yet?

Yes, Chris. We have seen a move, in fact, away from North America to outside of North America, I mean (Israel for 300 and Asia to Dalian. But for what we are left with in 200 we have seen some softening. And, as you know, this is becoming a competitive area and at some point in time, there is business we take and business we don't take. So, we are very careful about pricing in material.

We continue to have a very large market share there and are enjoying some very good cash generation.

All right and then what(inaudible).

You also alluded to some of the push outs in Asia on the memory side.

Right.

If you look at some of the weakness that we're seeing in the Cap Ex side of the business, I would say the most significant area of weakness is on the capital side of some of the new fab retro fits, particularly the memory area, where we're seeing push outs that are affecting things like FOUP orders.

Right. All right and then one quick last one for me; since the solar side of, you know, the solar industry's growing and most of these facilities today they look to be similar to, say, a 200mm model of handling wafers. What kind of opportunity exists out there for you? You know, should we expect you guys to address some products in '08? Or is -- kind of these lines along that line.

Yes, I mean, the opportunity exists but it's not that great. I mean, the requirements in terms of contamination control for solarproducts are less stringent than the semiconductor business. So, we'll explore some opportunities but it's not that important.

And on the shipment side, it is the same. This is not that sophisticated so at this point in time, it will be only a very small revenue addition for us.

All right. Thank you guys; appreciate it.

Operator, can we have the next question please?

(OPERATOR INSTRUCTIONS) And we'll take our next question from Timothy Arcuri: with Citi.

: Hi guys; a couple of things. First of all, Gideon, I think you said, last quarter, that your 300mm wafer shipper revenue would be roughly $8 million a year by the end of '08. You know, I know that that's been an issue this year that's been holding back your consumables revenue. So I'm wondering, are you still on track to hit that goal by the end of '08? And I think you also mentioned that you were close to qualifying a second customer. Did that actually occur?

The answer is, if I did say that, you have a very good memory and the answer would be yes and yes, Chris. Very simple; yes and yes. I'm sorry -- Tim; sorry about that. Obviously, I don't have a good memory.

: Thanks. Okay, yes and yes. All right, next thing would be, I think, also, Gideon, you were talking about $25 million to $50 million worth of new product revenue in '08; incremental product revenue in '08. Is that still the expectation?

It is, it absolutely is. You know, our revenue is not being held back by new products. It's being held by overall market demand. In fact, I'll let Jean-Marc, in a minute, describe what we're seeing but Tim, we track these things on a monthly basis. There is a series of these initiatives. It's very top-of-mind here and, Jean-Marc?

Yes, I mean, we can never be pleased with new product revenue. In fact, in -- just to give you a number, Tim, in 2007, they only contributed to about 12% of our total revenue. In quarter 4, however, it was already 15% of our quarter's revenue related to these new products. So, we did achieve the internal target for those revenues in 2007. For 2008, I expect that the contribution will be in excess of 15% to 16% of revenue.

Ideally, I would rather it be in the 25% to 30% but we are not there yet. We need to ramp up and hopefully we'll get there in the next couple of years. But for 2008, 15% to 16% would be a good number.

: Okay so, I guess, on that point, you know, you assume pretty healthy revenue through the end of '08. And you strip $25 million off of that number, you know, to kind of compare apples-to-apples, year-over-year, it seems like your core business is down a lot more than pretty much anybody else, just in the absolute core business. Is that kind of the wrong way to read that? And is that all due to the 300mm wafer shipper issue?

This is true that, on the core business, we have seen -- there do exist pressures from Asia. You know, these cheap manufacturers, especially in the lower dimension. I mean, 150 mm, the 90 mm, the 125 mm and so on and so on. We have seen some pressure from some Asian companies and we are not ready to take the business at any price there.

So, we have to admit that. The reason for us is to hope, is to come up with a stream of new products that we have today in the plans but we as Gideon said we are tracking this every month. I mean, eight of these key products are representing about 40% of our total revenue and they are the top products that we are looking at. And they are additionally differentiated product, well in demand product for the key contamination control applications. And we do expect that the market share we're going to take with these eight families of products this year will drag us into the coming years with much more additional revenue.

But, for the (inaudible) commodities ? product of when this is true, that we have seen some

: Okay, okay. And then, I guess, the last thing for me, Greg, I would've thought that the tax rate would've been better than, you know, 32% in '08, given the holiday that you're getting in Kulim. So, was that not the right expectation, I guess? Or, when does that tax holiday begin to actually help?

As more and more profit shifts to Malaysia, we should clearly see a decline in the rate. But I mean, if you look at sort of a core federal and state rate for us, I mean, with nothing outside of the United States, I mean, it's 35%, 36%. Our next biggest country is Japan, which is another 35%, 36% country. So, 32% does take into account some benefit from Malaysia.

We did have, clearly in '07, we had a number of discrete items that helped our rate that we don't expect to recur.

: So then, what's the right, you know, Greg as you kind of look out longer-term, if it's not going to help us much in '08, what's the right -- you know, you look out two, three years, what's the normalized tax rate once you move as much as you think you'll eventually move over to Kulim?

The normalized rate, would be -- today, like I said, it's 32%. It would have a downward bias from there, Tim. I haven't modeled it out three years to say that it will be 25%. I would expect there to be a downward bias though.

: Okay but it's not going to be, like, sub-20%, right?

It's not going to be 24%. I mean, it might be 28% or 29%.

: Okay, great. Thanks.

And we'll take our next question from Jim Covello, with Goldman Sachs.

Mr. Covello?

Hello, Jim? Are you there?

Mr. Covello, your line is open.

Hi, this is [Kate Kotlarski] for Jim Covello. Just a quick question on your target operating model. I'm curious whether there is a model that you're thinking about for the end of 2008. And maybe if you can comment on what your current breakeven is and how that's going to change throughout the year.

Yes, Kate, the current breakeven is $130 million a quarter. I would expect that to improve modestly through the year. When I look at kind of our long-term model we've laid out, we think this is a mid-40% gross margin business. If you look at our margins over the last four quarters, they've been relatively consistent at about 43% on what I would consider relatively weak sales volumes in terms of where we are in the cycle.

So the long-term model is mid-40% gross margin with leverage in the operating expenses. So we would expect to see improvement in operating margin over the next couple of years.

Okay and is there a specific operating margin target that you have?

Our specific operating margin target that we laid out at the analyst day back in May, which we would still stick with, was low to mid-teens. I believe it was about 14%.

Okay, thank you.

(OPERATOR INSTRUCTIONS)

And we'll take our next question from Ali Irani with Al Capital Management.

Good morning, Gideon. I was hoping--.

Good morning, Ali. How are you?

Good thank you. Gideon, I'm hoping you could give us a sense of what your materials cost changes have been, given the price rise in commodities. And also, given that the environment is slowing down a little bit of your OEM business, is there potential for accelerating the re-qualification process for your products and accelerating the move to Malaysia?

If you are referring to accelerating the qualification process, here's the way that works. We have three products right now that are in Kulim, fully moved, production ready, tooling is done. One of them, in fact, is in production at this point; really, only in the past 30 to 45 days. And that product is one that gives -- the nature of the product allows us to, I would say unilaterally, make decisions about production location.

There are a couple of other products there in the wafer shipper business; sorry, the wafer transport business that are fully tooled up but where the nature of the contracts with customers makes it necessary for us to get their, if you will, their blessing to move the production location.

And that takes a period of a number of months. We're in that process, that's why it doesn't happen until, realistically, the middle to the end of the second quarter so we're going to start to see volume. And that was part of the plan all along.

There are another two to three products, I would say to you that are going to be moving over there over the next six to nine months. And we are sort of speeding that process along. And in a couple of those cases, there are permit permissions that are required. In at least one, there is not. We're working that as aggressively as we possibly can because the more volume that we shift over there, the more volume we have at zero tax rate. And, it obviously helps our gross margin. So, we're very, very keenly aware of it.

I would say this to you also, Ali; it's been a very smooth process of transition from an internal standpoint. Greg, I know, wants to answer, as well, part of your question.

Yes, with regards to material costs, we are planning, in '08, for our materials cost to increase approximately 2%, on average. Materials costs make up 40% of our cost to sales. So, when you take that and you look at the overall impact on the margin, it's not significant. I mean, it's one of the things that we mentioned as a headwind but, I mean, we have a number of tailwinds as well.

Most of our, just to comment a little further on materials, most of our materials are purchased under longer-term contracts. They're mostly -- many of them are resins and so they're petroleum based. But I would say, in general, our procurement people have done a good job in managing those costs, even in this $90.00 to $100.00 petroleum environment.

And one additional brief point, since we're talking about materials; transferring multiple product lines and at the same time increasing inventory turns to somewhere close to, you know, four times -- five times, excuse me; and lowering inventory by $20 million over a year, as you transfer product lines, is a complicated dance, which I think we have executed, frankly, very well.

Gideon, just shifting a little bit to the 45nm migration that is in swing at the microprocessor guys and coming up with the memory guys, you know, there was a lot of talk over the last cycle about the benefits that your contamination control business would see, as we would migrate into the smaller geometries.

I know the focus has been really, over the last couple of calls, over the cost containment, migration to Malaysia and just the cyclical factors but, could you give us a renewed sense of what you see out there, in terms of interest for some of your existing and new products, as we make these migrations? Maybe some specific examples that allow us to understand the trends out there?

Yes.

And also, if I could just add one....

It's kind of hard to hear you. Just to paraphrase your question, you want us to speak to the continued transition to 45nm on the part of memory makers and the impact on our--?

Exactly and what that's doing to enhance your business prospects.

It's the single biggest tailwind that we have in our business. There are several factors that result from that. Most significant is the level of [purification and filtration that's required. The reason we're seeing success with our Torrento 20nm filtration product, which is the first in the industry and the best in the industry, I would add, the reason we're seeing a ramp, a good ramp in a difficult capital environment of our Clarilite-certified solutions, is the move to 45 nm.

We saw that, for example, in Intel-Israel, where they are about to open their third fab. It's a 45 nm fab and we're seeing very good orders into that, specifically, to address that advanced technology node.

The 193nm technology node in photolithography is another manifestation of exactly the same phenomenon. It is manifested in the liquid lens product sales that we see into lithography producers. And so, I would say, this is a good tailwind. Jean-Marc, you may have additional thoughts on that.

Yes, I would complement that, saying that on the liquid sub system, I mean, we had a growth, which was in excess of 50% this year; 50%, 5-0, which means that we are addressing these demanding 45nm lithography applications.

And we mentioned Torrento and 20mm, which is exactly the same kind of application. So, the new [POMs], the new intelligent media we just introduced as well, will, as well, be a requirement for these applications.

Yes, and as a final point on that because it's a very important part of our business model, we tend to sell everywhere we can, based on a cost of ownership model, Ali. And that is true, you know, because, from a customer standpoint, it helps us maintain margin. But it helps us maintain margin particularly at the advanced nodes.

Great. Thank you very much.

Yes, thank you.

And it appears we have no further questions at this time. I would like to turn the conference back over to Gideon Argov for any additional or closing remarks.

Thank you for your interest in Entegris. We look forward to speaking with you in the future.

Thank you. That does conclude today's conference. You may disconnect at this time.