Ultra Clean Holdings Inc (UCTT) 2009 Q1 法說會逐字稿

Good afternoon. I will be your conference operator today. At this time, I would like to welcome everyone to the Ultra Clean technology first quarter financial results conference call. (Operator Instructions). Joining us today is Mr. Clarence Granger, Chairman and Chief Executive Officer. I will now turn the call over to Mr. Granger. Sir, you may begin your conference.

Thank you, Ashley. Welcome to our first quarter financial results conference call. With me today is Linda Clemens, our Vice President of Finance, Principal Financial Officer and Principal Accounting Officer. Linda will begin by presenting the financial results for our first quarter, and then I will follow with some remarks about the business. Linda?

Thank you, Clarence. A few moments ago, we issued a press release reporting the financial results for the first quarter ended April 3, 2009. The press release can be accessed from the Investor Relations section of Ultra Clean's website at uct.com. In addition, we have arranged for a taped replay of this call, which may be accessed by phone. This replay will be available approximately one hour after the call's conclusion and will be accessible for two weeks. The dial-in access number for this replay is 800-642-1687 for domestic callers, and 706-645-9291 for international dialers. The pass code is 94739714 for both domestic and international dialers. This call is also being webcast live with a web replay also available for 14 days from the Investor Relations section of our Web site at uct.com.

Together with our recently issued press release, this conference call enables the Company to comply with SEC regulations for fair disclosure. Therefore, investors should accept the contents of this call as the Company's official guidance for the second quarter of fiscal 2009. Investors should note that only the CEO and Principal Financial Officer are authorized to provide Company guidance. If at any time after this call we communicate any material changes in guidance, it is our intent that such updates will be done officially via a public forum such as a press release or publicly announced conference call. The matters that we discuss today include forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995 related to matters including our future financial performance, new product orders and shipments, and industry growth.

Investors are cautioned that forward-looking statements are neither promises nor guarantees, but involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements. Some of those risks and uncertainties are detailed in our filings with the Securities and Exchange Commission, including our most recent form 10-K filed for the year ended January 2, 2009. The Company disclaims any obligation to publicly update or revise any such forward-looking statements or to reflect events or circumstances that occur after this call. Now here are the first quarter results.

Revenue for the first quarter of 2009 was $22.4 million, down 52% from fourth quarter revenue of $47.1 million, and a decrease of 76% compared to revenue of $92.4 million in the same period a year ago. The decrease in revenue was due to the continued industry-wide cyclical reduction in demand affecting all semiconductor capital equipment customers. In addition, we saw a decrease in our non-semiconductor business as a result of current economic conditions. Semiconductor revenue declined $15.5 million, or 57% sequentially.

Non-semiconductor revenue, including sales within the medical device, flat panel display, and solar industries, decreased $9 million, or 46% sequentially to $11 million. We experienced a negative gross margin for the first quarter of 12.8%, down from a gross margin of approximately 1% recorded in the fourth quarter, and a decrease from approximately 13% in the same period a year ago. Of the $3.3 million sequential gross profit decrease, $5.4 million is related to the volume decrease, offset by approximately $2.1 million of cost savings. We recorded a restructure charge during the quarter related to the closure of our Tualatin, Oregon facility of approximately $146,000 net of tax, or $0.01 per share. We also expensed approximately $316,000 net of tax, or $0.01 per share, for costs related to an acquisition transaction that was not consummated.

Operating expenses, inclusive of the restructure charge and transaction costs, were $7.3 million, a decrease of approximately $600,000 from the prior quarter when excluding impairment costs recorded in the fourth quarter of 2008. The sequential decrease reflects the cost savings from staff reductions and other cost-saving activities, as well as the absence of amortization of intangibles as a result of the asset impairment recorded in the fourth quarter, offset in part by the restructure charge and transaction costs. Net interest and other expense of $195,000 represents an increase of approximately $150,000 from the prior quarter, primarily as a result of interest income recorded in the fourth quarter on government reimbursements offsetting interest expense related to third party debt.

Our pre-tax loss was $10.4 million, inclusive of the restructure charges and transaction costs discussed previously. Our effective tax rate of 32% is less than the 35% previously forecasted, due primarily to the effects of foreign operations. We continue to review our corporate tax structure used to manage our business in light of current economic conditions. The first quarter net loss was $7 million. This compares to a net loss of 52.2 million in the fourth quarter of 2008, and net income of 1.9 million for the same period a year ago. Our first quarter net loss per share was $0.33, compared to a net loss per share of $2.45 for the fourth quarter of 2008, and net income per share of $0.09 for the same period a year ago. The first quarter 2009 net loss per share is inclusive of non-cash charges of $0.03 per share related to FAS-123R during the period.

As previously discussed, the 2009 net loss per share is inclusive of costs associated with an unconsummated acquisition transaction of $0.01 per share, and $0.01 per share for the restructure costs associated with the closure of our Tualatin, Oregon facility. First quarter revenue of 22.4 million and the $0.33 loss per share is within our guidance of revenue of 20 to $28 million, and loss per share between $0.25 and $0.36. Turning to the balance sheet, during the first quarter, cash increased sequentially to 29.8 million, while third party debt decreased 1.2 million, to $17.3 million. Taken together, cash, net of third party debt, increased 1.4 million during the quarter, as working capital reductions more than offset the operating loss. This brings our net liquidity to its highest level since the first quarter of fiscal 2006. Accounts receivable of $10.5 million decreased sequentially $3.3 million, or 24%, due to lower revenue.

Days sales outstanding increased to 42 days from 26 days at the end of the fourth quarter. Accounts payable of $10.7 million decreased approximately $600,000, or 5% sequentially, due to reduced purchases during the quarter. Days payable outstanding at the end of the first quarter increased to 38 days, from 22 days at the end of the fourth quarter. Accounts receivable and accounts payable days outstanding returned to a more normalized level at the end of the first quarter. Net inventory decreased $1.9 million, or 5%, to $37.9 million, as we continued to consume inventory. Now, Clarence will discuss our operating highlights for the first quarter, and provide guidance for the second quarter of 2009. Clarence?

Thanks, Linda. Semiconductor capital equipment demand continued its dramatic decline during the first quarter of 2009, with end user demand limited to next generation technology, and maintenance purchases only. Our OEM customers continued their focus on re-working existing sub-system inventory whenever possible to fulfill their limited system orders. In this very challenging market environment, our primary focus has been on maintaining a strong balance sheet while decreasing our cost structure and strengthening our customer relationships.

During the quarter, we successfully completed several balance sheet-related activities. We extended the term of our revolver loan to January, 2012. We added a $3 million three-year term loan to our borrowing base. We received a $6.5 million IRS tax refund, and we reduced our inventory by $1.9 million. We also achieved our revenue and EPS guidance, and continued to increase our non-semiconductor revenues as a percentage of total revenues. Additionally, our new supply agreement with FEI company is off to an excellent start. On the negative side, our China-based revenue fell as a percentage of total sales to 18.1%, as the result of declines in our semiconductor, flat panel, and solar equipment demand. Finally, during the quarter, we continued to take extensive actions to reduce our cost structure. I will now provide further details on these activities and accomplishments. Due to the unprecedented industry decline, we continued our aggressive cost reduction measures. We decreased our active US-based workforce from 556 employees at the end of Q1 to 351 employees at the end of Q1.

We took 20 shutdown days in the first quarter, and have planned 15 shutdown days in the second quarter of 2009. Also beginning in Q2, we have implemented across the board pay cuts ranging from 15 to 45%. These actions to reduce our cost structure and lower our break-even are central to maintaining a strong cash position. As Linda mentioned in her remarks, during the quarter we recognized a net expense of $316,000 associated with an unconsummated acquisition transaction. As we have stated previously, we will continue to explore acquisition opportunities that meet our criteria of size, profitability, and added capabilities. In this case, we were pursuing an acquisition that met our criteria; but given the changing business environment, we could not come to mutually agreeable terms. I will now provide an update on our three key strategic initiatives: Increasing the non-GAAP delivery portion of our business; increasing revenue in our Shanghai facilities; and expanding our revenue base outside of the semiconductor capital equipment industry.

The non-gas panel portion of our revenue continued to increase to 71% of total revenue in Q1. This was primarily the result of major declines we have experienced in the semiconductor and flat panel portions of our business. Our China-based revenue decreased to 18.1% of total revenue in Q1, down from 26% of revenue in Q4. Again, this was the result of greater declines in the semiconductor, solar, and flat panel portions of our revenue, which are primarily manufactured in our Shanghai facilities. At the same time, we continued to make progress on expanding beyond the semiconductor equipment industry. While our revenue declined in all sectors during Q1, non-semiconductor revenues increased on a percentage basis to 47.5% of total revenue, up from 42% of total revenue in Q4. Finally, at the end of January, we announced our global supplier agreement with FEI Company. Under the terms of this agreement, Ultra Clean is providing hosted manufacturing services to FEI in their Hillsborough, Oregon facility. FEI is a leader in the nanotechnology imaging industry.

The transfer of currently identified product lines to UCT is proceeding on schedule. During March, we made our first delivery to FEI; and during Q2, we project FEI will be approximately a 10% revenue customer to UCT. For 2009, we expect revenues from our agreement with FEI to range between 10 and $15 million, with future upside potential as FEI grows its revenue and expands its outsourcing opportunities. Next, I would like to provide our guidance for Q2. During Q2, we project a stabilizing of industry-wide demand. Revenue for the second quarter is expected to range between 20 and $26 million, and net loss per share is projected to range between $0.16 and $0.27.

To recap the first quarter activity, UCT achieved its revenue and earnings per share guidance in another very challenging quarter for the industry. We've strengthened our balance sheet, increasing our cash, and decreasing our net debt. We also extended the term of our revolver loan to January, 2012, and added a $3 million term loan to our available borrowing base. We took necessary cost control measures, including headcount reductions, mandatory time off, and the initiation of across-the-board pay cuts. Finally, we announced and started a major new partnership agreement with FEI Company. Though industry demand is very weak, our pipeline of new products remains strong.

In closing, we are very pleased with our financial stability, and we remain very optimistic about our market position and our flexible business model. With that, Operator, we would now like to open the call for questions.

(Operator Instructions). Our first comes from Jay Deahna, individual investor.

How are you?

Hi, Jay.

I'm going to ask a few questions and I then will get back in the queue. The first one is, on your 2Q revenue guidance, you've got a little bit of down and a little bit of up there. Just wondering which end looks more real, as you see it today. I presume the down is just being conservative; but within that, how has the outlook for 2Q revenue evolved over the past two or three months?

Sure, Jay. I guess what I would say first of all, you said how has it improved or changed over the last two or three months. I would say the biggest changes have occurred in the last two or three weeks; and directionally, we've seen it upward significantly in the last two or three weeks. We had actually anticipated that Q2 revenue would be lower than Q1 revenue a couple of months ago, and we anticipated that Q2 would probably be our lowest revenue quarter. It no longer looks that way. It now looks like Q1 was probably our lowest revenue quarter.

I see. And is the revision up coming from one, or a combination of your serve net markets?

Sure. I guess what I would say is with regard to our overall served end markets, we are starting to see a significant upturn in semiconductor. The solar and flat panel are still very slow. And recently, medical has slowed also, but that has been offset by the increase that we're experiencing with FEI.

I see. And at this point in the ball game, have your semiconductor customers sort of explained to you why they're revising their forecasts up to you, and do you have an initial outlook on what 3Q might look like verse 2Q directionally?

Jay, this is just 2Q. We're not going to give guidance on 3Q. It is really too early to say on that. Basically, our customers are starting to get some new orders. So for a long time, they were getting only technology builds and refurbishment activity. They've started to get some new orders from some of their end customers.

Okay. I will punch back in.

Okay.

Our next question comes from Edwin Mok with Needham & Company.

Operator, we seem to be getting quite an echo. Is there -- okay.

Hi, Clarence. How are you?

Hi, Edwin. (Inaudible).

Two questions. Hello?

No baby yet?

The baby is out.

Congratulations.

Thank you. So can I ask you a few questions on your guidance? As I look at the midpoint of your revenue guidance, around flattish, but earnings seems to improve quite a bit. Are you getting more leverage on your manufacturing, or are you seeing more offerings saving? Can you help me with that.

Sure, Edwin. So what has really happened is in Q1, when we had these huge headcount reductions and many of the other actions that we're starting to implement. We actually went -- from Q4, we had 556 employees, and by the end of Q1, we were down to 351. So that occurred throughout the quarter. Obviously, there are all sorts of costs and expenses associated with that. It was a very painful quarter, but as the results were coming out with much lower costs on the other end. We have also implemented across the board pay cuts starting in Q2, which will further reduce our expenses in Q2. So we're pretty confident of those earnings -- EPS projections in Q2 will be, based on those projected revenue levels.

Great. And then on FEI, it sounds like you are quite optimistic -- or quite confident that that business (inaudible). I was just wondering did you recognize any revenue in the first quarter? And it looks like it is very back end loaded. Any risk there that the customer will have to dial back their expectation there a little bit?

Sure. Linda, do you remember how much revenue we recognized in Q1?

About $200,000.

So it was very small, Edwin. I don't know if you heard -- about $200,000. But it was -- we did make initial shipments, and we are tracking on schedule. As I mentioned, we anticipate that they will be about a 10% customer in Q2. So if we're talking, say 23 million at the midpoint, we're talking about them doing 1 or $2 million in revenue, up from 200,000, and we're very comfortable with that number. So that is a big step function for us. And we expect to see a continued pretty good growth ramp there; targeting again for all of 2009, with UCT between 10 and $15 million in revenue. So yes, it is still back-end loaded as we start to ramp, but we're starting to see pretty good numbers in Q2. Our ASPs with them are extremely high. They're close to a million dollars.

That was helpful. The first question regarding the (inaudible) display in the solar sector you mentioned during your comments, or during your answer to Jay's question, was that those markets remain quite slow for you. Just curious, just if you look at just year to year point of view for 2009, do you expect kind of any improvement in those end markets, going through the rest of this year? For example, last year, you guys had ramped Photon Dynamics. So I imagine you were -- probably end of the year at a high revenue base. So I was just curious year to year, any chance of improvement there?

Yes, I guess I would say of the two, we see more life in the flat panel at the moment. Solar seems extremely slow. Now we -- on the solar side, we primarily have one customer, and we haven't -- things have been very slow on that side and we have not seen any measurable recovery at this point in time. On the flat panel side, Applied and Photon Dynamics are our two major customers, and we are starting to see a little bit of life in that side of the business with both of those. We've been very successful with Photon Dynamics. They're very pleased with us, and they have been looking to award us new business opportunities. Of course, Photon is now owned by Orbitech, so they are really our customer now.

Okay. And finally, just one more question, right? The inventory level has come down; but relative to your current revenue base, it looks still at the higher than your historical level in terms of inventory base. I was just curious, any risk that you might have to write down any inventory going forward?

Well, we always have some level of inventory writedowns. We think we've protected ourselves pretty well. We don't think there will be any huge inventory writedowns. We do expect continued declines in our inventory. If you look over the last year, we brought our inventory down by about $11 million. I would expect over the next year we could probably bring it down by another 10 million. So that is one of our key sources of cash over the next year. But I don't think there is -- I think we're pretty comfortable with the way we're accounting for inventory. Linda, would you like to add anything?

Yes. So we provide allowance for obsolescence within our inventory, and really scrub that -- excuse me -- scrub that pretty well, at least quarterly. We also have some protection in our customer contracts on -- in certain inventory. So we do believe we are -- we don't have -- that we have kind of managed the exposure there.

That net inventory includes about a 12% reserve, is that it?

Yes.

For (inaudible). So we've already factored in 12% of the inventory as being obsolete.

Great. Sorry, I have to squeeze one in. Just on gross margin, you guys had negative gross margin last quarter, because of fixed cost assumption, and you're guiding for revenue to be around flattish about at the mid-point. Do you still visualize negative gross margin in the coming quarter? Or would the restructuring help lower that -- help reduce the fixed cost assumption there?

This is Linda. We still expect to have a negative gross margin in Q2; while overall we are reducing our costs, they are kind of reduced across the board. So we still will experience a negative gross margin in Q2. Or at least, that's our forecast.

Great. Thank you.

Thank you, Edwin.

(Operator Instructions). Our next question comes from Tim Summers with Wunderlich Securities.

Good afternoon.

Hi, Tim.

Clarence, on the guidance, let me just run through the math I've got here. You are saying your business has stabilized, and you did basically 22.5 million in the quarter. If we add 10% onto that for FEI in 2Q, you're kind of at a revenue run rate of 25 million in 2Q. I know you've already given guidance, but is the way I'm looking at that reasonably correct?

Yes, it is reasonably correct. I guess the only thing I would say on the downside is we had not seen much decline in our medical equipment customer, Intuitive Surgical; and lately, they are seeing some decline. Essentially, it is an issue with the funds that hospitals have to invest in new equipment. So I would say they're down about 10 to 15%.

10 to 15% quarter over quarter?

Yes.

And secondly, on the last -- on the fourth quarter earnings call, you guys highlighted several times that the OEMs were reworking their inventory, and I know they were doing that the first couple of months this quarter. Have you seen that abate somewhat, and do you anticipate that to be an issue in 2Q?

Sure, Tim. This Clarence again. It will still be an issue in Q2. There are some areas that we're still seeing that our customers have some inventory. However, it is definitely coming down. So I would expect the rest of that to be consumed during Q2; and by Q3, I would expect that to be abating significantly.

Okay. And is there any way you can quantify how much that impacts your revenue line on a quarterly basis?

Gee, Tim, you know, I will have to go back and do an analysis. We really don't have anything that we've done on that right now. I will try and give you an analysis at our next earnings call. I will try to give you some feedback on that.

Okay, great, Clarence. Thanks.

You're welcome.

(Operator Instructions). And we do have a question from the line of Jay Deahna, individual investor.

Couple more questions. First of all, Varian -- I believe you guys are getting deeper there, and just wondering how that is progressing and when we could see that potentially be a broader customer for you.

Yes, we're very comfortable with Varian. We continue to expand our market opportunity there. Unfortunately, as I'm sure you're aware, they are not shipping very many systems at all; and unfortunately, the ones that they are shipping, they do have existing inventory that they're utilizing. So we're very comfortable. It is hard for me to quantify it at this point in time. But they are very interested in expanding their relationship with us. And they are interested in not extending their internal manufacturing capabilities as they recover from this downturn, and so we have been led to believe that we will have significant opportunities moving forward.

Okay. In terms of your pipeline of new business opportunities, obviously FEI was a big deal for you in the first quarter. I didn't hear about any new design wins at the rest of your customer base, such as Applied. Is your pipeline of new design activity that could turn into new mandates -- how does that compare to where you've seen it in the past?

Well, first of all, it is very full. It is also very similar to what it has been in the past. So we haven't seen any decline in our new business opportunities -- actually if anything, it is going up. One of our big opportunities relates to the transition of Applied Materials to a larger presence in Southeast Asia. They have been a little bit slowed down on that. So that is maybe slowed things down a little bit in terms of an actual transition, but we're very confident that we're very well positioned to benefit from that as they start to move ahead.

I presume you're talking about them shifting their final assembly from -- for certain products anyway -- to the back half of this year, from Austin to Singapore? Is that right?

Yes, we're talking about their future Singapore facilities. Yes, that's correct.

Okay. So if you look at Applied shifting a lot of their final assembly to Asia from Texas, the general desire of companies like Varian not to ramp up their internal manufacturing as they come back up in the next cycle, and the increasing Asia-centric nature of equipment demand, do you think that as we roll through the next couple of years into the next cycle that your business out of your China facility will be a larger percentage of your sales versus the last cycle? And if so, what kind of impact can that have on your operating margins versus the last cycle?

Sure. Well, first of all, with regard to our long-term expectation in China, as you know, we set up our first manufacturing location in China in March of 2005. And so that has -- we think we've done an excellent job in preparing ourselves for future transitions to Asia. So we opened our first facility in Shanghai in March of 2005. We opened our second facility in Shanghai fairly close to the first one, in November of 2007. I would anticipate when the industry starts to recover, and within the next few years, the majority of our manufacturing -- greater than 50% of our manufacturing -- will come out of Asia. Currently, as I mentioned, in the script, 18% is coming out of Asia. When we do transition to Asia, we do capture higher margins due to some of the lower costs that we experience in Asia. So we would expect our margins -- our operating margins and our gross margins -- to increase as we transition to Asia. Our model is a growth margin of 18%, operating margin of 11%. We still believe that is very achievable when we return to higher levels of revenue and transition more to Asia. So that is what our long -- that's still our long-term target, Jay, is to achieve 18% gross margin margin, 11% operating margin, with a higher percentage of revenue in China, as we start to come out of this next downturn.

Okay. And two more quick ones for now. First of all, for Linda, when you said you're expecting a negative gross margin margin in 2Q, is that at the entire range of revenue guidance for the quarter? In other words, if you hit the higher end of the revenue guidance, you still expect a negative gross margin?

No, Jay. So the negative gross margin is at the mid-point, so we would expect to have a small negative gross margin at the mid-point, but at the higher end of the range we expect positive gross margin.

Okay. And then Clarence, let's say at some point -- I believe you're -- if I recall from the last call, you guys are targeting a cash break-even around 35 million. Is that still the case? And once you cross over that and go cash flow positive, what are the priorities between, I guess, paying down the line of credit, buying back stock or making acquisitions?

I will let Linda address the cash flow break-even.

So Jay, right now our cash break-even looks like it is about 38 million at our current levels.

So our target is still to get down to 35, and we're very confident that we can do that. Obviously, we've got some other actions in place to do that. But going back to your -- the crux of your question, what are we going to do with the money when we start getting back to cash flow positive? I think there are several ways we could spend the money. We could pay back our debt. We could buy back more stock, or we could look at other acquisitions, or we could just sit on the money.

We are not likely -- I mean, we're paying the revolver down according to our terms. We're very comfortable with our current payment schedules, and so I have no additional desire to accelerate any loan repayment, and we wouldn't anticipate doing that. in terms of buying back our own stock, we have done that in the past. At that time, we thought there were no other better alternatives than buying back our stock. Right now, I think there are probably better alternatives or better opportunities out there, in terms of the potential acquisitions. We think in a downturn like this, there are likely to be potential acquisition opportunities that are going to make sense from a long-term strategic standpoint. We're not acquisition crazy. I mean, we've only done one in the last three years, but -- a company called Sieger -- but it has worked out very well for us. So I would say the most likely scenario, if the right opportunity came along, would be to consider an acquisition.

Okay. I got two more, but I will step out of the line right now, after I congratulate Edwin on his baby.

Our next question come Edwin Mok with Needham & Company.

Thanks, Jay, really appreciate it. Just two housekeeping questions. One is, what was the depreciation in CapEx flow for the past quarter?

Depreciation was -- sorry -- it went down about $500,000 from Q1, so that puts it at about -- actually, I don't have that number right in front of me, and I apologize for that. Can we get back to you on that one?

Yes, no problem at all. And just quick question on tax, so tax rate you guys had reported 32% in the last quarter. How should we model that going forward?

Well, we believe that 32% is the appropriate rate for this year. We used an effective tax rate for the year, and so that's what it looks like this quarter -- this year should end up at.

Great. That was helpful. Thank you.

Thank you, Edwin.

And we have a follow-up from the line of Jay Deahna, an individual investor.

Questions. First of all, Clarence, at the start of the last cycle, Ultra Clean was a gas delivery sub-system supplier, almost exclusively focused on semi-equipment; and by the end of last cycle, you're serving four end markets, building many different types of sub-systems and full systems. So what I'm wondering is, in the last revenue peak, Ultra Clean annualized was about $440 million, based on taking your peak quarter and multiplying it by four. Now, that happened in tandem with a 60--ish billion dollar global semi-CapEx figure that was calendar '07. Just wondering, do you have any idea at what level of semi-CapEx roughly Ultra Clean could kind of get back to that 400 to 450 million revenue level? I mean, obviously it depends on what other markets are doing, and there are some moving parts there; but I'm just wondering, do you think you can do that on 30 or 40 billion in global cap ex? Just trying to gauge it.

Sure. So -- and again, these are -- we're just taking rough estimates here. But if you looked at that time that you're talking about, roughly 70 to 80% of our overall revenue came from gas delivery systems. We're down to roughly half that right now. So my expectation would be that we could probably achieve those same revenue levels -- same revenue levels and same margin levels at about half the semiconductor equipment demand. So it is somewhere in the 30 to 40 billion range.

Okay. That's very helpful. And then lastly, obviously we're all worried about the general economic trends and the general semiconductor cycle trends, and what not. But if you just kind of push that aside for a moment and focus on what you're trying to do tactically and strategically with Ultra Clean Holdings, what are the primary Company-specific execution risks that keep you up at night?

Everything keeps me up at night, Jay. First of all, the macro still is kind of the overwhelming thing. Once we come out of the recession -- whatever it is -- once we come out of that, I know we will do well. But in terms of Company-specific, the biggest one right now for me is employee-related. So we've forced everybody to take pay cuts, time off -- people are -- some people are on furlough. The morale is -- it is pretty low. I am very concerned about what do we need to do to make sure that our team is sufficiently motivated and wants to stay committed to UCT. So part of that is related to what can I give back to them in the way of stock options and other things to keep our key employees motivated and make sure that they don't want to look at ways to jump ship. So that is primarily what we're focused on right now from a UCT-specific standpoint, is how do I make sure we cut costs, but keep the core team intact.

Got it. Thanks very much.

You're welcome.

(Operator Instructions). And I'm showing that there are no further questions at this time.

Okay. Well, at this point, I would like to thank everyone for participating in our Q1 conference call. We look forward to seeing you at the investor conferences, or again in our Q2 conference call. Thank you, everyone.

This concludes today's Ultra Clean Holdings first quarter financial results conference call. You may now disconnect.