Earnings Call Transcript - ICHR Q1 2025

Operator, Operator

Good day, ladies and gentlemen, and welcome to Ichor's First Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to introduce your host for today's call, Claire McAdams, Investor Relations for Ichor. Please go ahead.

Claire McAdams, Investor Relations

Thank you, operator. Good afternoon and thank you for joining today's first quarter 2025 conference call. As you read our earnings press release and as you listen to this conference call, please recognize that both contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and which could cause actual results to differ materially from such statements. These risks and uncertainties include those spelled out in our earnings press release, those described in our annual report on Form 10-K for fiscal year 2024 and those described in subsequent filings with the SEC. You should consider all forward-looking statements in light of those and other risks and uncertainties. Additionally, we will be providing certain non-GAAP financial measures during this conference call. Our earnings press release and the financial supplement posted to our IR website each provide a reconciliation of these non-GAAP financial measures to their most comparable GAAP financial measures. On the call with me today are Jeff Andreson, our CEO, and Greg Swyt, our CFO. Jeff will begin with an update on our business, and then Greg will provide additional details about our results and guidance. After the prepared remarks, we will open the line for questions. I'll now turn over the call to Jeff Andreson. Jeff?

Jeff Andreson, CEO

Thank you, Claire, and welcome everyone to our Q1 earnings call. Thanks for joining us today. First quarter revenues came in right around the midpoint of our expectations, reflecting that the overall customer demand environment has remained relatively consistent since our last earnings call. To date, there has been little change to the expectation that 2025 will be a modest growth year for wafer fab equipment or WFE, and our Q1 revenues were up 5% sequentially from Q4 and grew 21% over the same period last year. Given our visibility today, we continue to expect our revenue growth this year will outperform overall WFE growth in 2025. On the gross margin side, first of all, let me say that we fully acknowledge that our track record guiding expected improvements in gross margin has been impacted by excursions one too many times at this point. In evaluating our results for the first quarter, we too found it challenging to fully understand why our increasing momentum in integrating internally sourced components has not resulted in more meaningful improvements to our gross margin profile. The best way to capture the lower than expected flow through in our Q1 gross margin performance is best summed up as growing pains. Once our internal supply is fully up to speed, we will see the benefits of the new product wins through the P&L. Our strategy is working. The qualifications are continuing, and the impact will materialize as we progress forward. In Q1, our strategy did not materialize into the margin flow through we anticipated, essentially because we ended up purchasing far more external supply than we had forecasted. So, why did that happen? As internally sourced products become a more significant portion of our bill of materials, we must improve our processes for the management of the inventory levels needed prior to inserting these components into our manufacturing pipeline. In the first quarter, the impact of the slower inventory build in the fourth quarter combined with other machine components ramping at the same time resulted in the need to buy more external supply in order to fulfill our gas panel deliveries in the early part of the quarter. Why this resulted in low 20s gross margin flow through, well below expectations is because our strategy is to share a portion of the component cost saving with our customers and therefore when we purchase more external supply instead of using our own components, the expected flow through didn't materialize. This impact accounts for about two-thirds of our gross margin miss in Q1. Most of the remainder of the gross margin impacts came in our non-semi business, where we were awarded a new contract in the commercial space market that began shipments in the quarter. As we moved from pilot to production, it was determined that a redesign of some aspects of the part was required, and this resulted in a push out of revenue as well as incurring higher costs than expected with these initial deliveries. And lastly, during the quarter, we made the decision to exit our refurbishment business in Scotland. As the demand for products we were licensed to refurbish declined to a level too low to sustain the operation, exiting this business had a slight impact on both revenue and gross margin in Q1. As we look ahead, we have identified what has made an accurate prediction of our gross margin such a challenge over the last several quarters, and as we build in the processes that better gauge both the pricing and the cost sides of the equation, we are confident you will see a longer-term trend developing and how we demonstrate progress towards our gross margin targets, which brings me to an update on our progress in qualifying our proprietary products, which are chiefly comprised of certain components used in our existing gas panel business as well as our next generation gas panel. We achieved a significant number of new component qualifications in 2024, and we expect these qualifications to convert into more meaningful internal supply within our gas panel business as we progress through 2025. As stated previously, three of our major process tool customers have already qualified our substrate, which are incorporated into our gas panel. Today, we are pleased to announce a fourth customer will incorporate our substrates into their next generation products as a transition to surface mount technology. This same customer will also be incorporating our valve products upon successful qualification later this year. Last quarter, we announced a second customer qualification for our valve product line. We expect to complete valve qualifications for a third customer this summer, as well as the fourth substrate customer, anticipated by year-end. For fittings, we announced two customer qualifications in 2024, and a third customer qualification remains in the final stages today. We likewise are progressing on a fourth qualification for our fittings product line used in our weldment business, which we expect to achieve later in the second half. The key takeaway of our component qualification progress is that by the end of 2025, we expect to have all four of our largest customers qualified on all three of our major product families, valves, fittings, and substrates, which will mark a significant milestone for our business. Additionally, we have several exciting new products under development scheduled for later release this year, enabling us to expand our share of the addressable market of our components. Now, I'd like to discuss the outlook we are providing today given the complexities of recent tariff announcements. In general, today we are affected by the steel and aluminum Section 232 tariffs for certain inbound material to the U.S. Our Mexico machining business falls under the USMCA exemption as of today. We are working with our suppliers and customers to mitigate and/or pass on the costs of these tariffs, but there could be some transitory impacts on our gross margin as we work through the processes and customer discussions to incorporate the additional costs of tariffs and their relative impact on total supply chain costs. The final decisions on the semiconductor export controls and tariffs are expected to be issued early this summer. Obviously, there is a large range of outcomes, but we will not speculate on the outcome today. As we look at our revenue guidance for the second quarter of between $225 million and $245 million, this is about $10 million lower than what our visibility indicated a quarter ago. The lower forecast is not attributable to one particular change in demand, but rather several small factors. For example, one customer forecast was recently affected when a domestic device manufacturer began to slow their WFE purchases in advance of understanding the broader implications of various tariff policies. At the same time, the delivery timelines within lithography and advanced packaging had seen some shifting to the right, while silicon carbide applications have weakened further. This appears to be affecting each of our OEM customers differently depending on customer and end market exposure, and there's absolutely no question that our primary markets of leading edge foundry and high-bandwidth memory, as well as technology upgrades for NAND, continue to move forward on schedule. We have not further handicapped our Q2 revenue guidance to account for additional adverse demand impact that could result from the tariff policy, other than what our customers have already incorporated into our visibility. Our visibility is somewhat shorter in duration than where we were on our last earnings call, meaning at this time, we have a good feel for the first half, but less confidence in exactly how the second half will shake out. At this time, we think our business in 2025 should be relatively even weighted first half to second half, but I will remind everyone that this is the visibility we have today. Before turning the call over to Greg, a few last comments about gross margins. First, I want to provide a bit more context as to the level of proprietary content we expect to achieve this year. As a reminder, prior to stepping up our R&D investment and launching our new product, about 90% of the bill of materials for our gas panel was sourced externally. In 2024, we were able to shrink that by about 5%. In 2025, we believe we can make further progress towards reducing external supply down to approximately 75% of the bill of materials. This is meaningful progress, but there is still much more progress to be made. The most leverage will eventually come from increasing penetration of our next generation gas panel, which has roughly 30% external parts and 70% internal. These gas panels incorporate our proprietary flow control technology. Many of the next generation gas panels delivered today are currently undergoing qualification with end device manufacturers. These qualifications are particularly important as they represent the first end-user qualifications for our proprietary flow control technology, which constitutes the largest portion of our bill of materials and carries the longest qualification cycle. It is not realistic to think that we will be able to move 100% of our gas panels to the Ichor proprietary version, but we expect to continue to make incremental progress. The most immediate and significant impact you should see to our gross margin profile will be as we move from the roughly 15% proprietary content in 2024 towards around the 25% level in 2025. In Q1, we didn't achieve the flow through we anticipated due to purchasing far more external supplies than forecast, but as our processes improve and we work through these growing pains, we still expect to show incremental improvements to gross margin through each quarter of the year, even on similar revenue levels. In February, we were confident that our gross margins for the full year would exceed expectations. Today we're backing off that absolute number, which is currently prudent in response to the tariff uncertainties as well as the impact of the Q1 miss. With that said, we currently expect our second half gross margin will be in the 15% to 16% range. With that, I'll turn it over to Greg to recap our Q1 results and provide further details around our financial outlook.

Greg Swyt, CFO

Thanks, Jeff. To begin, I would like to emphasize that the P&L metrics discussed today are non-GAAP measures. These measures exclude the impact of share-based compensation, amortization of acquired intangible assets, non-recurring charges, and discrete tax items and adjustments. There is a useful financial supplement available on the investors section of our website that summarizes our GAAP and non-GAAP financial results, as well as a summary of the balance sheet and cash flow information for the last several quarters. First quarter revenues were $244.5 million, near the midpoint of guidance and up 5% from Q4. The gross margin for the quarter was 12.4%, an increase of 40 basis points from Q4, but below our forecast of 14.5%. As Jeff discussed, the gross margins were negatively affected by several factors. Primarily the slower transition from externally supplied products to our internally manufactured products, as well as higher costs associated with the redesign efforts of our commercial space contract and the decision to exit our refurbishment business in Scotland. Operating expenses came in at $23.7 million, in line with our expectations. Operating income for Q1 was $6.6 million. Our net interest expense was $1.6 million, and our non-GAAP net income tax expense was below our forecast at $600,000. The resulting EPS was $0.12 per share. Turning to the balance sheet, our cash and equivalents totaled $109 million at the end of the quarter, up slightly from year-end. We generated $19 million in cash flow from operations and after deducting $18.5 million in capital expenditures, our free cash flow was $500,000. Our planned CapEx investments for 2025 are expected to be above our historical average of 2% of revenue as we execute our global expansion of our machining and non-semi-business capabilities. We estimate our 2025 CapEx will be closer to 4% of revenue and be front half weighted. Our total debt at quarter end was $127 million and our net debt coverage ratio has now improved to just 1.5 times, well below any potential threshold for covenants. Now, I'll discuss our guidance for the second quarter of 2025. With anticipated revenues in the range of $225 million to $245 million, we expect our Q2 gross margins will improve to a range of 12.5% to 14%. We expect Q2 operating expenses to be approximately $23.5 million or roughly flat to Q1. We expect our OpEx run rate will moderate somewhat in the second half of the year, leading us to expect our year-over-year increase in operating expenses to be somewhat lower than communicated previously and in the range of a 4% to 6% increase compared to 2024. Net interest expense for Q2 is expected to be approximately $1.5 million. For modeling purposes, you should model net interest expense for the full year of 2025 to be approximately $6 million. We expect to record a tax expense in Q2 of $800,000. For the full year, we are forecasting a non-GAAP effective tax rate of 12.5%. Finally, our EPS guidance range for Q2 of $0.10 to $0.22 reflects a share count of 34.4 million shares. Operator, we are ready to take questions. Please open the line.

Operator, Operator

Thank you. We'll now be conducting a question and answer session. Please proceed with your question.

Brian Chin, Analyst

Good afternoon. Let me just - thanks for letting me ask a few questions. Maybe the first one on the change in the revenue outlook for the year, understand kind of what you said Jeff about a couple of different factors sort of adding up there. If you try to isolate this on the four buckets of NAND, DRAM, advanced logic and mature semi, which of these you think is incrementally more cautious relative to your thinking 90 days ago for 2Q and maybe even second half visibility?

Jeff Andreson, CEO

Yeah, I would actually, I think of it a little bit differently and I'll come back to the segments, but I think the way you guys should think about this is etch and deposition for us are generally the same kind of outlook as we came in. I would say we're softer in our lithography business today, but more than half of this is coming out of our decision to exit Scotland. Softer non-semi-business that we see not ramping as fast in the first half, which affects the whole year and then silicon carbide and that's much, much softer almost to the point where most of it is shipped into 2026.

Brian Chin, Analyst

Got it, okay. And then maybe sort of we have one question follow up around gross margins and then you know the tariff, which is I know not fully quantifiable at this moment, but in terms of the execution in Q1 on the gross margin, internalization of some of those components, out of 100%, what you expect to execute, what percentage you actually execute on in terms of the internal sourcing and then, I know we're months into the second quarter, but how much progress have you already seen here to start the quarter to give you confidence that it's sort of back on a better trajectory.

Jeff Andreson, CEO

I'm reflecting on the situation. The shortfall began last quarter and carried over into this one. Early in the quarter, we realized we needed to acquire some external supply to catch up from last quarter. We managed to achieve about 75% to 80% of our goals for the new components, particularly weldments, which accounted for 10% of the gas box without any issues this quarter. I anticipate that we will still have some external purchases in our second quarter, which we have factored into our forecasts. Our headcount needed for ramping up is beginning to improve, and there is better alignment in our production processes. We experienced some disconnects between factory output and our purchasing needs due to the complexity of the precision parts we manufacture. While there are still some challenges, we've accounted for these going into the next quarter, and I believe the second half of the year will see revenue levels improving. Our strategy is proving effective, although we are still navigating some growing pains as we align our operations across three major integration sites.

Brian Chin, Analyst

Got it. I just close out. I imagine when you have the sort of resource or increase the source to some of your suppliers, maybe it's not in the best terms in terms of that short window, but it sounds like overall the qualifications and the cut-ins are kind of progressing as you expected, it's just sort of your ability to catch up in an efficient way with that.

Jeff Andreson, CEO

Yeah, Brian, that's a good point. I would say they came out stronger than we anticipated, so I think their progress has been at least as good as we expected, if not a bit better.

Krish Sankar, Analyst

Yeah, thanks for taking my question. I have three of them Jeff. First one, just to clarify, the gross margin, you mentioned growing pains, are you seeing any of your customers trying to push down the tariff cost onto the suppliers like you, or that has not been a factor yet?

Jeff Andreson, CEO

I would say we're fortunate enough in my earlier comments that our factory in Mexico is exempt through the USMCA exemption. I'd say the 90-day exemption for semiconductors and CapEx has gotten most of ours covered. I think the area that we're most exposed at today is the Section 232, which is really around steel. It really is our weldment business that ships back to the U.S. and so we're still working on that process to push that through pricing and things like that, so like we said we might see some transitory, we're hoping that we can get all of this stuff worked out between our customers and ourselves. I think our customers truly understand what's happened here, I think there's a pretty good collaboration at this point to help them and help us through this. So, I think it's moving in the right direction.

Krish Sankar, Analyst

Got you. And for some of your other customers, can you like ship stuff from your Malaysia facility to mitigate the effect of tariffs, or it doesn't work that way because a lot of your big customers are in the U.S., you also have facilities overseas?

Jeff Andreson, CEO

Yeah, all of our customers have facilities overseas. I would say, we have kind of a natural hedge that we could affect depending on how the tariffs work out and pass-through, the cost of building in the U.S. versus Malaysia, they might be closer than you think between tariffs and no tariffs, but until there's kind of final agreements country by country, obviously you know we have one large customer that manufactures almost all of their systems now offshore, we can support them fully and then one customer that probably builds, well I won't say what percentage, but a very large proportion that we service out of Singapore. So, I think, in our fourth largest customer is largely a Singapore-based operation too, so a little bit less of an impact for them.

Krish Sankar, Analyst

Got it and then final question, Jeff. I understand there are so many moving parts, the tariffs and the macro, but the kind of impacts they can have some of the footstep, which is still a pretty healthy growth year-over-year of like 13% versus WFE for the full year. And in the past I remember your visibility has been about 4 to 5 months, so I'm just kind of curious if we look into that, is it fair to assume where is the strength for you in calendar Q2 and your conviction on calendar Q2 coming from? Is it land upgrades? Is it leading edge? Any color on that?

Jeff Andreson, CEO

Yes, we might not capture all the sales, but NAND remains quite robust. We're also noticing strengths in DRAM, which we anticipate continuing into the third quarter. Our lithography business likely hit its low point in the second quarter and we expect it to start growing in the latter half of the year. We have four major customers with varying outlooks, and we closely align with what our process tool customers are experiencing. While we do produce in advance of their revenue, we continue to see strength in the second quarter particularly around deposition and etching, driven by investments in Foundry Logic, NAND upgrades, and DRAM.

Charles Shi, Analyst

Hi, good afternoon, Jeff and Greg. I think you will likely receive this question often, especially considering that your largest customer is projecting a softer second half of the year. It's unclear if they are being conservative or if this reflects their actual outlook, but it seems like you expect the second half to be relatively stable. What do you think accounts for the difference between your expectations and what the largest customer is publicly communicating regarding the second half?

Jeff Andreson, CEO

Yeah, well, it's a good question. I mean we did anticipate that we might get this. I would tell you that we're pretty mirrored with our customers and our customers all have different trajectories, front half, second half. What I would tell you is, we believe the second quarter is the low point for us in lithography products, so that offsets, semi will get stronger in the second half, so we have natural kind of offsets for anything that they see in forecast. I won't comment specifically what we see from them obviously, but I would tell you we don't see any significant disconnect front half to back half from what our customers are talking about in the marketplaces as well. And then the other thing I might point out Charles is that and I don't know the exact percentages, but our largest customer and our second-largest customer are within a few percentage points, okay. And so we have two really pretty large customers.

Charles Shi, Analyst

I understand your concern about the second being close to the first. Jeff, I want to revisit something you mentioned about the purchase of external resource components. Was there anything that really surprised you about your customer's increased demand for external items? I had thought that this was something your customers needed to qualify, and that decision was made long ago. Why is this occurring? Any additional information you could share would be appreciated, as we want to determine if this is just a temporary setback or if we need to rethink the adoption rate for your internal resource components.

Jeff Andreson, CEO

Yes, Charles, that's a great question, and I hope to provide some clarity. The demand for our products and qualifications is either in line with or slightly stronger than expected. Our main challenge is ensuring timely delivery to our integration sites, which is where we have encountered difficulties. This issue is not due to a lack of demand; rather, it stems from supply constraints. Our customers are not telling us to refrain from purchasing our products. Once our products are qualified, we are able to fully utilize our supply, as well as external sources to fill any gaps. We are not facing restrictions on what we can use at this point. These are passive components, and once qualified, they can be applied across our product line. The challenge lies in accelerating our supply to allow for integration before we finalize pricing decisions. We aim to share some of the benefits of in-sourcing with our customers while still retaining significant margin improvements internally. This has also affected our profitability on the parts we manufactured, as we haven't been able to absorb our factory overhead effectively. These are the two main factors impacting our gross margin.

Charles Shi, Analyst

Maybe, Jeff, if I could ask a quick question for clarification. In the press release, there's a note regarding the GAAP to non-GAAP reconciliation for your total expenses, which is about $1.5 million. The note indicates that this includes severance costs related to the global reduction in in-force programs. I understood you were discussing only the exit from Scotland, but the note suggests that the restructuring might involve other areas as well. If you could clarify that, it would be appreciated.

Greg Swyt, CFO

Hey Charles, this is Greg. I'll take that. So obviously, we mentioned that we had made the decision to exit Scotland. That was the majority of that $1.5 million severance cost that we took for those individuals impacted. And so that was the majority of it. We did have some smaller reductions in the quarter, but Scotland was by far the majority of that charge as we plan for those individuals to exit.

Craig Ellis, Analyst

Yes, thanks for taking the question. And at the risk of beating a dead horse, I'll start with gross margins. So Jeff, you've provided a lot of color. I think what I'm missing is I just listened to a pretty full discussion of what's going on is, where exactly the issue arose? Is it the company's inability to forecast the amount of supply it needs to get that on site so that it can do some initial work with the initial work? And the second part of the question is, what new monitoring steps have been put in place and how quickly or how regularly are things being monitored so that you, on your dashboard, have optics into what's going on and can confidently steer gross margins to guidance going forward?

Jeff Andreson, CEO

Yes, that's a good question, Craig. The short answer is yes. When we were forecasting this business, we had a clear idea of demand. However, the supply coming from our machining operations can be complex. We had other products that we prioritized over some others, and by the time we realized we needed to purchase externally, we found that two-thirds of our business relies on the gas panel integration sector, which means we can't afford any delivery risks. We didn't quite align our inputs and outputs this time around. That said, in this quarter, the level of detail that I'm and my team are analyzing is increasing to ensure better alignment with demand. We're committed to understanding the issues more deeply within the organization to prevent them from reaching us. Looking back, we could have done a better job at forecasting, which might have led to a similar outcome, but we want to be transparent about it. Regarding the second quarter, Craig, as we mentioned, there are still some headwinds we're tackling, though they are not as significant. The first half of this year is seeing a less favorable gross margin, and for the full year, it's clear that we won't achieve the 16% margin we discussed on the last call because we can't make up for lost time and the margin gap.

Craig Ellis, Analyst

And then just looking at revenues, Jeff. We've got a range for the current quarter. Can you just frame up what's different from the low end to the high end of the range in terms of what you can see today? What would it take for revenues to come in at the low end? What would need to happen for revenues to come in at the high end?

Jeff Andreson, CEO

Yes. The low end seems to be impacted as demand timelines begin to change; customers are looking to delay orders. However, overall performance is holding steady. To reach the high end, it would require customers to move orders from the third quarter to the second quarter and to pull some items in sooner. We often see significant demand shifts between quarters, so we aim to account for that variability. Additionally, we do not anticipate any major new tariff developments until early in the third quarter, which could influence our forecasts, but we haven't factored that in yet.

Greg Swyt, CFO

Hi, Craig. I think we said we would moderate it. So, we said last time, we were saying 5% to 7%, so 4% to 6%, it will be down slightly, but not materially in the second half as we've had some front-end loaded costs in Q1, Q2. So, you can moderate it down a little bit, but not significantly.

Tom Diffely, Analyst

Yes, good afternoon. So Jeff, I was curious, has your view of the required manpower or the actual yields of the internal source changed at all? And has your long-term view of the incremental margins from this project changed at all?

Jeff Andreson, CEO

I'll answer the easy question. The incremental margin in the long run has not changed. I think we still have to get down what I'd call the learning curve. I think the resources, the machinists are coming along pretty well. But keep in mind, we also need assembly people and things like that. And so a lot of this is centralized around our Minnesota operations. And so the headcount is coming in pretty well. And then that helps us offset some of the higher-cost external resources that we use to start this ramp.

Tom Diffely, Analyst

And is the long-term plan to regionalize this where you do this in every region? Or is it going to be a global operation?

Jeff Andreson, CEO

We will. And I think if you look, our CapEx was pretty healthy in Q1. That's all largely around our kind of global expansion for what we see coming, which the largest piece is going to be a machining operation in Malaysia. So, we are going to globalize it and build certain things in certain places. And that strategy may, in fact, actually help a little bit if tariffs stick around permanently and things like that. So that facility is kind of a 2026 start-up.

Greg Swyt, CFO

To quantify it, Tom, we're estimating that currently about 15% of our inbound is coming from U.S. sources, with Malaysia being the largest contributor. However, the impact from the steel side is not significant at this time, particularly concerning the 232 tariffs. We are exploring ways to manage this, such as finding alternative suppliers or diverting products away from the U.S. Additionally, it's worth noting that Mexico is currently exempt from these tariffs.

Jeff Andreson, CEO

Yes. Our largest weldment facility is in Malaysia, which serves as an entry point for the capabilities and volume we have in the U.S. The U.S. focuses on more sophisticated weldment subassemblies. We face challenges because the 232 tariffs do not allow duty drawback for either our customers or us, making this the biggest obstacle.

Edward Yang, Analyst

Thank you, thanks for the time. Jeff, you mentioned the core dep and etch outlook has not changed. What's your level of confidence that stays strong? You had a large OEM and process control postpone their Analyst Day. And are there any historical parallels that you could draw on in terms of the current environment relative to the past that could kind of guide you in terms of forecasting?

Jeff Andreson, CEO

It's not related to COVID. The uncertainty stems from geopolitical factors and concerns about the final decisions regarding semiconductors and the associated supply chain. I can't speak for the other company regarding their delays. However, based on what I'm observing, we do not see a significant decline in demand beyond the areas I mentioned earlier in the call. We maintain a positive outlook for 2026, and planning for that should continue. We need to wait for clarity on the export controls and tariffs before making any conclusions about potential demand reductions. Currently, we're focused on the situation as it stands, and by early summer, we expect to receive updates on the semiconductor sector and whether exemptions will continue. It's important to note that China is still permitting the flow of equipment, especially where our operations extend beyond the U.S. I want to thank you for joining us on our call this quarter. I'd like to thank our employees, suppliers, customers, and investors for their ongoing dedication and support. Later this month, we will be participating in the B. Riley conference in L.A.; the Craig-Hallum conference in Minneapolis; and the TD Cowen conference in New York. After that, we will look forward to our next quarterly update in early August for our Q2 earnings call. In the meantime, please feel free to reach out to Claire directly if you'd like a follow-up with us. Thank you.

Operator, Operator

Thank you. With that, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.