Good afternoon, everyone, and welcome to AXT's first quarter 2024 earnings call. Leading the call today is Dr. Morris Young, Chief Executive Officer, and Gary Fischer, Chief Financial Officer. My name is John, and I'll be your coordinator for today. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Star followed by 1 on your telephone keypad. If you would like to withdraw your question, please press Star 1 again. Thank you. I would now like to turn the call over to Ms. Leslie Green, Head of Investor Relations for AXT. Thank you, John, and good afternoon, everyone. Before we begin, I would like to remind you that during the course of this conference call, including comments made in response to your questions, we will provide projections or make other forward-looking statements regarding, among other things, the future financial performance of the company, market conditions and trends, including expected growth in the markets we serve, emerging applications using chips or devices fabricated on our substrates, our product mix, our ability to increase orders in succeeding quarters to control costs and expenses, to improve manufacturing yields and efficiencies, to utilize our manufacturing capacity, the growing environmental, health and safety and chemical industry regulations in China, as well as global, economic, and political conditions, including trade tariffs and restrictions. We wish to caution you that such statements deal with future events, are based on management's current expectations, and are subject to risks and uncertainties that could cause actual results or events to differ materially. These uncertainties and risks include, but are not limited to, overall conditions in the markets in which the company competes, global financial conditions and uncertainties, COVID-19 and other outbreaks of contagious disease, potential tariffs and trade restrictions, increased environmental regulations in China, the financial performance of our partially owned supply chain companies, and the impact of delays by our customers on the timing of sales and their products. In addition to these factors that may be discussed on this call, we refer you to the company's periodic reports filed with the Securities and Exchange Commission. These are available online by link from our website and contain additional information on risk factors that could cause actual results to differ materially from our current expectations. This conference call will be available on our website at axt.com through May 2, 2025. Also, before we begin, I want to note that shortly following the close of market today, we issued a press release reporting financial results for the first quarter of 2024. This information is available on the investor relations portion of our website at axt.com. I would now like to turn the call over to Gary Fischer for a review of our first quarter 2024 results. Gary? Thank you, Leslie, and good afternoon to everyone. Revenue for the first quarter of 2024 was $22.7 million. That's up from $20.4 million in the fourth quarter of 2023, and up from $19.4 million in the first quarter of 2023. To break down our Q1 2024 revenue for you by product category, indium phosphide increased sequentially to $8.1 million. That's reflecting strong growth from data center applications, including AI, and continued improvement in passive optical networks. Gallium arsenide also grew to $7.5 million, with broad-based improvement across a number of applications. Germanium substrates were $1.4 million, up from the prior quarter, with renewed strength and demand for satellite solar cells. Finally, as expected, revenue from our consolidated raw material joint venture companies in Q1 was $5.8 million, down from Q4 as we consumed a greater portion of their output for our growing substrate demand. In the first quarter of 2024, revenue from Asia Pacific was 79%, Europe was 16%, and North America was 5%. The top five customers generated approximately 33% of total revenue, and one customer was over the 10% level. Non-GAAP gross margin in the first quarter was 27.3%, compared with 23.2% in Q4 and 26.9% in Q1 of 2023. For those who prefer to track results on a GAAP basis, gross margin in the first quarter was 26.9%, compared with 22.6% in Q4 and 26.3% in Q1. Beyond the near term, we remain confident that we can get back to the mid-30% range as the environment strengthens through higher overall volume, favorable product mix, and the benefits of our recycling programs, along with continued efficiency improvements throughout our business. Moving to operating expense, total non-GAAP operating expense in Q1 was $8.7 million, compared with $7.5 million in Q4 of 2023 and $8.7 million in Q1 of 2023. On a GAAP basis, total operating expense in Q1 was $9.4 million, compared with $8.2 million in Q4 and down from $9.5 million in Q1 of 2023. As you've seen from our quarterly run rate in 2023, we had put in a number of constraints in place for OpEx to align with market conditions. As things are beginning to trend up, we're loosening up some of these constraints, which has brought OpEx up from the previous run rates. We do expect to hold it at approximately this level throughout the rest of this year. Our non-GAAP operating loss for the first quarter of 2024 was $2.5 million, compared with a non-GAAP operating loss in Q4 2023 of $2.7 million, and a non-GAAP operating loss of $3.5 million in Q1 of 2023. For reference, our GAAP operating line for the first quarter of 2024 was a loss of $3.3 million, compared with an operating loss of $3.6 million in Q4 and an operating loss of $4.4 million in Q1. Non-operating other income and expense and other items below the operating line for the first quarter in 2024 was a net gain of $1.3 million. The details can be seen in the P&L included in our press release today. For Q1 2024, we had a non-GAAP net loss of $1.3 million or $0.03 per share, compared with non-GAAP net loss of $2.8 million or $0.07 per share in the fourth quarter, and non-GAAP net loss in Q1 2022 was $2.4 million or $0.06 per share. On a GAAP basis, net loss in Q1 was $2.1 million or $0.05 per share. By comparison, net loss was $3.6 million or $0.09 per share in the fourth quarter, and GAAP net loss in Q1 of 2023 was $3.3 million or $0.08 per share. The weighted average basic shares outstanding in Q1 of 2024 was 43.0 million shares. Cash and cash equivalents and investments were $41.3 million as of March thirty-first. By comparison, at December thirty-one, it was $52.3 million. Cash is down for two main reasons. First, our revenue billings tended to be back-end loaded in the first quarter, as most of China shuts down for Chinese New Years. As a result, in Q1, accounts receivable increased by $6.1 million. This is simply a timing issue, as most of that cash can be collected in Q2. The second reason for the decline in cash in Q1 was CapEx spending of $5.7 million. This is not new commitments to facilities. This was work done in 2023, for which payment was due in Q1. As we look to the balance of the year, we expect CapEx to be in the $2-$3 million dollars a range quarter, per quarter, most of which goes towards a facilities work, which was done in 2023. One more note on cash. From time to time, we have had outside parties approach us, with an interest to invest in our supply chain companies. Currently, interest in China is growing, perhaps related to the change in the economic circumstances in China. We believe that there's real value in these assets to be unlocked and may consider monetizing a portion of them this year. As a reminder, we now have over 10 companies in our supply chain where we have partial ownership shared with industry partners. Depreciation and amortization in the first quarter was $2.2 million. Total stock comp was $800,000. Net inventory was down $600,000 in the first quarter. This includes inventory added through our recycling program. 33% of the inventory is raw materials, and WIP was 63%. Finished goods makes up approximately 4%. The increase in WIP is primarily the result of increased crystal growth in anticipation of higher demand in Q2. With improving demand, we hope to bring our total inventory down by approximately $10 million over the year. Okay, this concludes our discussion of our quarterly financial results. Turning to our plan to list our subsidiary, Tongmei, in China, on the STAR Market in Shanghai. We now believe that we have had some significant developments on the issue that the CSRC previously raised, and we believe the likely next step is that the CSRC can resume consideration of our application. As we've said, this is a lengthy process, but we continue to believe that Tongmei is an excellent candidate for listing. With that, I'll now turn the call over to Dr. Morris Young for a review of our business and markets. Thank you, Gary. We believe our business is on a firm path to recovery, as evidenced by the continued growth in our business and solid execution, which allowed us to exceed our Q1 revenue and profitability guidance. In the first quarter, we achieved 11% sequential growth in our revenues and 29% sequential improvement in our non-GAAP net income. While certain parts of the demand environment remain somewhat soft, all three of our substrate product line showed improvement, including a 48% growth in indium phosphide revenue from Q4. Looking individually at these product lines, indium phosphide once again became our biggest selling material in Q1. Sales was driven by continued recovery in the power market and a meaningful increase in demand related to AI. We review AI as a exciting catalyst for indium phosphide in the years to come. As AI requires high-speed lasers and detectors for rapid data transfer with increased bandwidth, low attenuation, and low distortion. Today, AI applications are primarily using gallium arsenide pixels, which require a relatively small amount of substrate material. But as the industry moves to 800 gig and then 1.6 terabyte speed, we expect that there will be a necessary transition to indium phosphide. We're already seeing development work happening today with next-gen rich silicon photonics devices and electro absorption modulated lasers, or EMLs, for high-speed data center transceivers. Revenue from these applications contributed to our strong indium phosphide growth in Q1 and will help drive our expected growth in 2024. Our gallium arsenide revenue grew 24% sequentially in Q1, reflecting increased demand across a broad base of applications, including power amplifiers, HBT applications for wireless switches, high power lasers, and LEDs… We believe much of the excess inventory in the supply chain has been defeated, and we are benefiting from a desire among our customers to diversify their supply base as the market recovers. For example, today, our share of the HBT market is relatively small, but we believe we have a great opportunity to increase our market share over time and are pleased with early customer traction. In addition, our 8-inch gallium arsenide development efforts have led to a groundbreaking advancement in both of our defect densities and yields. We believe this innovation can be applied to our 6-inch gallium arsenide products, allowing us to further enhance our competitiveness across all of our market research. In germanium substrate, demand for satellite solar cells were down substantially throughout 2023, is now beginning to recover. Sales increased 25% in Q1 over the prior quarter, with renewed strength in Europe and Asia. Finally, coming off three quarters of strong sales in our raw material business, as well as contribution from our recycling efforts, sales from our raw material business declined, as we expected, in Q1. This decline was primarily the result of our consuming a greater portion of the output from our consolidated joint venture as our substrate business has strengthened. In total, our portfolio of joint venture companies continues to be a strategic value to our business, providing many of the critical material we use to make our products and allowing us to benefit from the cost and efficiency advantages. Now, in closing, we're optimistic about the coming year and the growth and expansion of our business. We are seeing tangible signs of recovery across all of our product lines, with new catalysts, such as AI, providing strong incremental opportunity. We've worked hard over the last two years to pave the way for an exciting future by providing world-class products for a highly dynamic technology landscape, elevating our own business practices to meet the requirements of Tier One customers, delivering breakthrough innovations in the development of large-diameter gallium arsenide and indium phosphide substrates, and executing on a recycling program that both advances our ESG commitments and improves our cost structure. We remain steadfast focused on business efficiency and accelerating our return to profitability. With that, I will turn the call back to Gary for our second quarter guidance. Gary? Thank you, Morris. In keeping with our comments today, we expect Q2 revenue to be between $25.5 million and $27.5 million. We expect our non-GAAP net loss will be in the range of $0.03-$0.05, and GAAP net loss will be in the range of $0.05-$0.07. Share count will be approximately 43.0 million shares. Okay, well, this concludes our prepared comments. Morris and I will be glad to answer your questions now. John, can you take it back? Thank you. At this time, if you would like to ask a question, please press Star, followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press Star one again. We'll pause for just a moment to compile the Q&A roster. The first question comes from the line of Charles Shi from Needham. Please go ahead. Hi, Morris, Gary, congrats on the good Q1 results and the very upbeat Q2 guidance. I want to start with the AI related question. The indium phosphide, I think last time, well, when we spoke about this, you were talking about semi-insulating indium phosphide wafers potentially being used for some of the high-speed detectors application. But in your prepared remarks, it sounds like you are getting a little bit more upbeat about the high-speed laser type of applications for 800 gig, 1.6 Terabits, those kind of applications for the next generation EML, et cetera. So can you provide us a little bit update on your engagement on these AI applications so far? Do you, when do you see the laser application will start to contribute some meaningful revenues for the indium phosphide business? Thanks. Charles, first of all, the order we received, one customer specifically told us is for AI, and that was from semi-insulating indium phosphide. The fact that we're guessing it was for detectors, it was a guess, okay? Because usually, indium phosphide, semi-insulating are either for electronic applications or for high speed detectors. However, recently in the industry, we also heard some of the EMLs require semi-insulating substrates. So, you know, this, whether it's for lasers or for detectors, we all know, you know, from what we are making, the customer demand for our product is sort of a slight change from silicon-doped—I mean, sulfur-doped semiconducting substrates, usually good for lasers, and now it's for semi-insulating ion-doped indium phosphide. But whether it's for detectors or lasers, it's a guesstimate. Guesstimate. We don't really know. I'm sorry. But we do hear from our customer, it's for a pretty large, AI customer. Got it. Thanks. Morris, thanks for the color you provide. I guess, yeah, it's something we will continue to chat and, obviously, we don't wanna dig more if there's something about your customer you don't wanna share. So maybe a second question, maybe for Gary. I think you, in your prepared remarks, you talked a little bit more about the stock listing. It sounds like you are making some progress on that front. Can you kinda provide a little bit more color, in terms of, what kind of a progress exactly, and, give us a little bit better sense about why, why you think it's moving forward, a little bit more, this time? Thanks. So, you know, the process of communication with the Shanghai Stock Exchange, CSRC, is such that once we send in our applications, they will continue to ask questions. They want us to clarify a few things, and there are things which they express they have concerns with, and we provide them with answers. And we think we made some good progress on the questions they have. So now we think we are ready to go through the next step, which is go through their review process again, and they will then look at our whole application and either continue to ask questions or Approve. Approve. All right, thanks. Thanks for the update. Okay, that's all from me for now. Thanks so much, and congrats again- Sure. on the results and guide. Yeah. The next question comes from the line of Richard Shannon from Craig-Hallum. Please go ahead. Oh, hi, guys. Thanks for taking my question as well, and congratulations on a really nice guide here. Great to see. To that point here on the guidance here, wondering if you could elaborate on a couple items here. First of all, just trying to understand the relative growth dynamics of each of your four revenue buckets here. I would assume indium phosphide is probably your best growth driver, but wondering if you can kinda rank those, and whether you expect them all to be growing sequentially. And then second of all, trying to get a sense of what's implied here for gross margins, given that you said that OpEx could generally be the same in the second quarter as the first. I'm kinda getting a number that's, you know, slightly higher than the first quarter, maybe as high as $0.30 or 30%, but just wondering if I'm doing the right math on that one. Yeah, so let me first try on the business conditions. Actually, the strongest growth we think next quarter is gonna come from gallium arsenide and also germanium. Germanium seems to be very strong, and raw material is very strong as well. Indium phosphide, actually, at this point of the timing, that we are projecting flat. And one other thing which is interesting about this business environment right now is that wherever the customer wants something, the lead time is extremely short. I mean, we usually ask the customer to give us at least four weeks lead time because we need to process the wafers, and sometimes we even have to grow the crystal. So the lead time usually is long. We don't have a standard product for offering. But nowadays, I mean, customers just want two weeks lead time, which is great. However, it sort of prevents us from having, you know, better visibility. But we can see that gallium arsenide is extremely busy, and indium phosphide right now, as we see now, is a flat quarter. But things can change because we still got almost two months to go. You know, giving two weeks lead time, we have six weeks to take orders and deliver. On the margin, Gary? Maybe we can do this on a follow-up call, Richard, because it gets kinda complicated, and I didn't understand exactly what your model is telling you, but we can work on it with you, so. Okay, fair enough. Morris, I did want to follow up on your comment regarding gallium arsenide being your highest growth driver here. To what degree is this maybe some inventory fill in some product areas that were, you know, driven down so hard in the last year and a half? And then I think you also mentioned some pickup in the wireless/HBT market. So I'm wondering, you know, what to what degree that's contributing in this quarter? Well, first of all, I would say, you know, gallium arsenide was the first product coming down in terms of revenue, right? I mean, I remember it was the second quarter of 2022, gallium arsenide start to come down. So, you know, it takes usually six weeks before, you know, all the inventory got depleted, so now it's coming back. So because indium phosphide takes, I think, three longer weeks before it start to come down. Quarters. Three, yeah, three quarters too. So I expect the indium phosphide perhaps not to recover as quickly as gallium arsenide. Although, you know, the pickup of indium phosphide last quarter, I attribute that to the new business on AI. And because, you know, I see PAM business is doing okay, but not really robust. You know, the telecom business is not great. And data center, from what I see, there's still inventory out there. So I think, you know, the AI part of the data center, I think is pulling the demand for us and increase our revenue by what? 40-some odd percent. Forty-eight, yeah. Yeah, 48% from Q4 to Q1. So, The, the- Yes? I didn't mean to interrupt, Morris, please continue. Oh, no, actually, I forgot what my trend-- so what was your-- the other part of the question? Sorry about that. Yeah. Yeah. Yeah, I think so. But there is an interesting follow-up to those comments here, which is, like, how much of your indium phosphide business is data or is AI today? It seems like, given these kind of growth rates, it's got to be a pretty substantial part now. Can you quantify that in any way? Well, I think last quarter was significant. I would say could be as much as 20%. Although, you know, it's a little bit difficult for us to really nail it because some customer will tell us, and some customer don't, okay? But as I said, you know, indium phosphide business is very strange, interesting. I want to encourage analysts to help us to do the analysis. There are 2 parts of indium phosphide, one is semi-insulating and the other is semiconducting. The semi-insulating is usually made for detectors and electronic applications, and the sulfur-doped semiconducting are usually low EPD and good for lasers, and they are the dominant demand for indium phosphide for many, many years. It's almost like 8-to-1 in favor of semiconducting wafers, okay? But the last 2 or 3 quarters, the trend is reversed. There's so much more demand on semi-insulating iron-doped wafers. So it's as if the laser just didn't grow or maybe they still got too much inventory. And this new demand of iron-doped, making either some kind of laser or more likely, high-speed detector, is growing very strong. So what I'm hoping for is that, you know, the sulfur-doped material will recover as the inventory get consumed, it will come back again. But this iron-doped actually is a new application, will continue its own trajectory of growth. Okay, very, interesting dynamics there. I'm gonna ponder that while I ask a couple other questions here. I guess just a quick one here: You had a 10% customer in the quarter. Can you identify that or at least the sector and whether that they've been a 10% customer in the past? It was an Epi house, Richard. And It's actually related to the AI customer, right? So, yeah. Yeah. Um... Okay. Yeah. It's a historically long-term customer for us that does Epi. And Okay ... we don't know for sure where that was going, but... Well, actually, we do know, but we can't say. So I'm not gonna lie to you, so. Okay. All right, fine. Fair enough, Gary. Maybe just a couple last questions here. And I'll ask both of you to put on your, your long-term lenses here, or I guess we'll call it medium-term lens here. But just kind of one of you conjecture on the, opportunity for getting back to break-even level, by the end of this year or early next year. And maybe just as a reminder, what that model looks like in terms of revenues and gross margins. Well, we certainly think that it's a reasonable target and goal to do that, you know, maybe this year. So we're not giving up, we're not giving up on it. I would say it's this year. Yeah, so, It's gonna be this year. Yeah. It's probably somewhere between $28 million and $30 million a quarter, and we would need to get the gross margins to go up and maybe close to 28%, and keep the OpEx somewhere around, you know, $9.3 million, $9.4 million. Yeah. And- That's GAAP OpEx, by the way, so- Yeah. Um. I think we do need some help from indium phosphide. I mean, right now- Yeah ... indium phosphide is only 50% of what we used to do at the peak. Yeah. Yeah, I mean, that's probably the wild card, and it's, I would say that the indium phosphide surge, especially since it's centered in the artificial intelligence area, it's happening sooner than we expected. We thought it would. We believed early on it was gonna happen, but it's happening sooner. So the question is, what's gonna happen in the next 2 or 3 quarters? But it's a tremendous opportunity and, you know, there's $ billions and $ billions of dollars that are being invested in the hardware side of AI and the software side, so. And, of course, we play in the hardware side, so. Right. So it's pretty amazing what's on the horizon, so. Mm-hmm. Okay. One last question, I'll jump out of line here, guys. The short report that came out on your stock early last month, I think is—I think we've established pretty well it was a bunch of malarkey for the most part, but it does bring up an interesting topic that I think it would be very interesting for you to address, and I think it's a risk that a lot of investors bring up with me, and that is related to the STAR listing and the investment by private equity investors. And if there's any, you know, rejection of the application for whatever reason here, what's the risk, and how do you get around the risk of having to repay that money and then find other ways to finance the company? Well, as long as we're in the process, they have no right for redemption. And equally important, they don't wanna be redeemed. I mean, the last thing they want is their money back. So they're very willing to be patient and work with us, and it's you know, everyone's disappointed that it's taken longer than we all expected, but So let me try to help out a little bit here, Gary. Look, I think, I mean, hard assets and doing manufacturing, semiconductor or materials job industry is hot in demand in China, and that is showing up in the fact that we have, you know, other investors interested in acquiring a minority share of our other joint ventures. Yep. Okay? So, so although, you know, the IPO takes longer than we thought it is, but I think, you know, our assets in China are highly valuable. You know, I, I think the psychology or the, or the thinking from, from a, from a Chinese investor point of view, you know, their money, you know, no longer can go into real estate to invest and, you know, doing materials and doing manufacturing and the real, m- you know, fundamental business manufacturing is highly desirable. So if we don't, for whatever reason, we don't go, uh, IPO, I would say one possibility is, you know, s- invest, uh, uh, inviting other customer, uh, I mean, investors investing into our joint ventures, and we have several of them which are highly valuable. I mean, of course, the most valuable is Tongmei Manufacturing Substrates, where we have the world-ranking, you know, leadership in those field. Although they are small, but nevertheless, it's highly desirable. But because we're going public in China, so we cannot separate them and then invite investor into the main body of the investment, Tongmei. But for our joint ventures, we can certainly, you know, get other investors investing in those joint ventures. Yeah, and let me give you... I mean, we have talked about this internally, so, you know, we're not worried about it. But as I said, the PE companies want us to go public. They don't want, they don't wanna pull out. So, you know, these equity, private equity investors are all large and premier institutions, each with an investment of just under $5 million, which represents a relatively small part of their respective portfolios. And, so far, since they have to be patient, no matter what, they're being patient. So, and, you know, another thing that's probably interesting to note is that they don't have any recourse, or this, their investment is not collateralized, so, they-- that's why they need us to succeed. So, and we made some significant progress and some developments that, you know, we really can't give any details, but some very good steps were taken in the recent quarter, which continues to sustain our hope regarding the IPO. Well, great. I appreciate all that detail. I think a lot of investors wanted to hear that, and I think that's a great great response, so appreciate the time, guys. That's all for me. The next question comes from the line of Tim Savage from Northland Securities. Please go ahead. Hi, good afternoon, and congrats on both the results and the outlook, and especially the growth in indium phosphide. I think there was a mention of, you know, kind of peak levels that you had achieved in indium phosphide, and that's getting up toward $20 million a quarter, maybe $18 million. But, you know, at that point, you also had some additional consumer business. And I guess my question is, as you look at it now, the market opportunity you're seeing, do you think this AI, kind of, optical data center opportunity can move you back toward peak indium phosphide levels by itself? And I have a follow-up. That's a good question. You know, the customer who used our product for consumer product, at the time, I mean, they still have one product using it for consumer product, by the way. They didn't go out completely, and we are, I believe, a big dominant supplier for that product. And we are also in negotiation and in qualification for yet another product, although I don't know what's the launch time and whatnot. And the other thing is that talking to their engineers, at one time, they told us they have 11 projects centered around using indium phosphide in their consumer product devices. So I don't think I'm giving that up, but, you know, indium phosphide just has so many different characteristics, such as far-infrared, and using as a detector, et cetera, et cetera. So it's unique in its place to be used as a technology device. Whereas, you know, AI application, I think it's an extension of what people use it for data center. You know, if you want high bandwidth, high speed data transfer, you know, low attenuation, I mean, that's the perfect choice. And if you have AI, that means you've got to access data much in 100 times, 1,000 times, even 10,000 times, and you have so many more data center, you want to exchange information. What's the best way to transfer that information? It's no-brainer. It has to be some kind of optical device to transfer that data. So I think it's difficult for me to say when it's gonna be so strong and so how big, but, you know, whether it's gonna rival to, you know, the consumer product, but I think both of them do need indium phosphide. Yeah, when Morris says optical, that means it's gotta have the indium phosphide, too, 'cause the wavelengths can be read by indium phosphide. So, but yet we believe we will get back to those levels, Tim. As Morris says, we're not sure on the timing, and it very well could get back to that level sooner than we thought because of AI. You know, six months ago, we didn't have this kind of expectation. I don't know for the people listening, but I think last week there was really an amazing article in the New York Times about the amount of money invested in AI in Q1 of this year, and it was, I think, $32 billion. And that's not just software, that's hardware too. So it's data center stuff. So, you know, I mean, you know, we've all been around a long time, and so we've seen stuff, but I was, I was very amazed by that, and I sent it to Morris and Leslie. I sent it to our board of directors, 'cause, 'cause that's gonna—you know, we know we're at the bottom of the food chain or the, you know, the end of the train, but that's gonna benefit indium phosphide substrates. And, so the dream or the hope is that the consumer comes back, and it competes against AI for who's gonna be the biggest, you know, contributor to indium phosphide revenue. And, and, you know, we don't need a miracle for that to happen. I think it's a very reasonable goal. Got it. And I want to ask a little bit more about the improvement or the pretty dramatic growth that you saw in Q1 in Indium phosphide. And you've already talked to, you know, you have a unique perspective kind of in the ecosystem, and maybe I'm gonna ask you to guess a little bit more here. But I guess my question of is around the breadth and how we could characterize that strength. Obviously, you can sell to a lot of different folks in this arena, whether it's epi wafer suppliers or vertically integrated laser manufacturers or module manufacturers, and I think you've done business with all of those types of guys. And so whether it's looking at the type of customers and or looking at wafer sizes, you know, what does that tell you about the breadth of demand that you see? Is there, you know, historically, you've had a couple of major customers on the data center side, or, you know, can you see if, you know, the extent new customers are showing up, or are there a couple of customers, are they moving the needle for you when you see this extraordinary growth in Q1? The Q1 customer actually is new. I mean, they, they have, they are a customer on other product, but for that application, for AI was new. And they're telling us they're a customer, but I can't repeat it. It's a big, big customer. Well, there's you know, we know the players, right? There's Meta, there's Google, there's Microsoft. All of those data centers are going to, you know, where indium phosphide is gonna have a play is rack to rack, rack to the aggregation point within the data center, and then the aggregation point to a different data center. All of that needs high speed. You know, if you think of the data that's computed in AI, then you've got to transfer it, move it around in order to get an end result. And so within the rack, we don't think they'll go to AI, to a indium phosphide. But rack to rack and beyond, that's where indium phosphide has a definite application, so. Of course, Gary, you're not saying anything different. Why is it AI? Data center already doing this. Yeah. Okay, yeah. But it's just that data center has to get so busy talking to each other and exchanging information 1,000 times or 10,000 times, that requires higher speed highway. That is where the indium phosphide come in. The other thing that one of our marketing guys taught me is that some of the large data centers are now having a shortage of power, electricity to run the thing. So they're downsizing in the future architecture to smaller, more data centers that are smaller, but are spread around. And that's gonna benefit us, so. Got it. Well, okay, it sounds like there was, you know, sort of a big customer helping to drive that growth in Q1. And sort of the, the rest of the color I was looking for, I know there's only so much you can say, but clearly, you're, you're at the substrate level. You've got an epi wafer supplier who, you know, may be selling into a module manufacturer. I mean, I imagine that you're maybe not all the way up to the, the cloud provider level, but, you know, you have customer touchpoints all along that ecosystem. And I was just looking for, as you see the, the pieces move around, you know, what you're seeing, in terms of opportunity at, at any of those levels, right? Whether it's going directly to a chip supplier, obviously, you used to do a lot of business with Intel, and their module assets are over at Jabil now. You know, are you seeing sort of different customers, you know, kinda show up at different parts of the food chain, I guess, in driving this AI growth? No, not yet. In fact, I think—I mean, we have some Chinese customer which is showing up, taking a lot of wafers as well, but they're not telling us anything. I mean, I think the customer base seems to be shifting somewhat, you know. Before this thing all happened, you know, it's a consumer product that sort of went away. And then there was a data center, you know, that you were talking about, which was taking a lot of wafers. They are not prime customer at the table right now. There is a new Chinese customer coming in, but we don't know where they're coming from, and this new customer is taking this semi-insulating indium phosphide, and we know, they're telling us it's going to AI. But I wish I could see there's a second one or third one coming in. That would be great. Okay, thanks. We think we understand the architectural needs well enough that there's little doubt in our mind. There's no doubt, frankly, that we're gonna end up benefiting and getting into multiple data centers along the big names that I just ran off, so. Got it. Thanks very much. Thanks, Tim. Next question? The next question comes from the line of Dave Kang from B. Riley Securities. Please go ahead. Good afternoon. My first question is actually on gallium arsenide. So you're expecting that to be the main driver from first quarter to second quarter. Just wondering, is there any applications or customers kind of driving this, you know, strong growth? LED is strong for automobile. Lasers is strong, but not as, as high as the, at the peak. I would say it's about 50% of the peak level. Automobile is probably 70%-80% of the peak. And HBT is a new, I believe, opportunity for us, and we're trying very hard to get ourselves back into it. And, if we are successful, we can expect more revenue growth for HBT as well. And the China market seems to be fairly strong in gallium arsenide. ... Got it. Just wondering how sustainable, you know, your expectation is on gallium arsenide. Are we talking, you know, just a few quarters or kind of a multi-year cycle? Oh, I can't. I cannot guarantee multi-year. I would say we have probably good visibility at least to Q3. I mean, demand is strong, but as you know, that I do worry about the world economy. I mean, I think. But then, you know, people are saying there's a recession, but it never come, right? It's- Yeah. I mean, I'll just comment, David. Yeah. Most of our cycles are more than one quarter, so- Yeah. You know, Gallium arsenide is you know, more robust than we expected it to be, but we're not thinking like, "Oh, then it's gonna drop back down in July," so. Got it. And then just on indium phosphide for AI applications, is there any data on market share, how big that is, and the market share between you versus two competitors? No... We don't know. There is some public projections on markets that Coherent shared publicly at a, in one of their presentations. If you haven't seen that, you might wanna take a look, 'cause there's some stuff in there that might give you some information, so. But just on the market share, I mean, you think, should we expect maybe 1/3 each for you and your competitors, or somebody has a dominant market share? Just on the AI. Any color on that? Yeah, the customer we have, I think they are giving us all the order, but I don't know whether our competitor is taking order from a different customer. Yeah. Okay? In other words, the order we got, we know we got 100% of that order from that customer, and they told us it's for AI, but I don't know whether our competitor are serving yet another channel. Mm-hmm. Got it. All right. Thank you. Thanks, Dave. The next question comes from the line of Matt Bryson from Wedbush Securities. Please go ahead. Hey, thanks for taking my questions. On the HBT side of things, if you're successful in getting traction, any idea of what the size of that opportunity might be? Say it again? I didn't quite hear. The expected value? How big is the HBT market? Oh! Yeah, on the HPT market, what could that look like on a quarterly or annual revenue run rate, assuming you're successful in getting traction in that market? Okay. I would say close to $20 million a year. Got it. So that's a nice big round number. Similarly, or slightly different question, I think a lot of the focus on indium phosphide has been around the AI opportunity. But do you have any sense of how close to the point where inventory is normalized we are? Like, is that two to three quarters out? Is it a year out? And then any idea in terms of how much revenue you think you're losing, because there's inventory out there right now? Or what might your revenue look like if that inventory didn't exist? Any thoughts? Yeah, I think it... Right now, it's very difficult for me to estimate, 'cause I don't even know whether they are in full production or not, although the amount of substrate they're buying, it doesn't look like it's pilot. I think they're making something, but we haven't seen... I mean, the first thing I'd like to see is, I mean, the last order was for three months. If they give us another six months order, if they're increasing, then I can estimate. And better yet, is if there's a second customer, Solar coming in, wants the same thing, then that's even better. At this point- Sorry to interrupt, Morris. I'm actually asking on kind of that traditional indium phosphide business, like, where you know you have inventory kicking around in the supply chain, if you have any idea. So not so much the AI side, but that traditional business, if you have any idea, like, how, what the impact on your revenue is today, how much it's holding it off, and then, you know, any thoughts on when that inventory might get worked out, you might resume normal revenue run rate on that older business? I think that's because the business is right now at just beginning; it's hard for me to tell. But, I mean, I think we have the capacity. We can definitely you know, make 3 or 5 times what they are ordering now, or even 10 times, if giving us a little bit time to increase our facility. So, so I think the volume is no problem, and I think our product quality really fits well with what they wanted. So at this point is I, I think, I don't know whether I'm answering your question or not. I think I'm excited about it, and we're trying to get as much information as we can, and we know the customer, end customer, which is large. I don't think they're fooling around. So hopefully, they're coming back with increased order or somebody else is gonna come in following their lead. So I think that's the best I can. Yeah, I've had some of these conversations with our marketing guys, and I think that they expect that we're gonna continue to work through the inventory into the second half of this year. But that's not AI. No, no, it's not AI, it's just in general. Data center. Data center, yeah. Yeah. Yeah. Which has the inventory. Yeah. So that, that's what I was referring to, so- Yeah. Um- Okay. So there's still some out there. There's still some out there. Okay. But, but- But- Yeah. It's getting cleared out and then restoring normal levels, that's probably a 2020, in early 2025 type phenomenon, is your thinking right now? Yeah, maybe Q4 of this year, but. Yeah ... definitely, definitely in 2025. So it's gonna happen, so we're, we can't wait. We're so excited about it. Yeah, I guess last one from me, Gary. I completely understand that customers don't want to hold inventory, and so they're putting in rush orders, which makes it hard on your end to clear out your inventory because you don't wanna turn down business. But I guess given that environment, I—how confident are you you can take down inventory by $10 million, or what are the dynamics involved in that, where you're not effectively having to turn down business because you can't meet those rush orders? Well, you know, I wanted to take it down $10 million last year, and you know, it came down last year, but not as much as our target. However, I have a couple of reasons that I think it's a realistic target. One is if you look back at our historical inventory levels compared to our revenue run rate levels, you know, the inventory was in the $60 million level range, $65 million level range. So you know, the difference is we have more inventory in the consolidated joint ventures now, 'cause they have different added product lines and things like that. And our recycling program, which is good, it helps us on gross margin, and it helps us with ESG, but you're converting what I would call scraps of materials or slurry, which has a little or no book value, and then you bring it in at standard cost, so your inventory goes up. So I'm. It's counterintuitive, but even so, I'm absolutely convinced we can take money out of the inventory. Is it gonna be $10 million? That's my target. And if the revenue grows, you know, for us, then it makes it a little easier to take the inventory down. So yeah, I don't need a miracle to have that happen. I just need some good, you know, business decisions. It was easier, frankly, when I could go to China, 'cause I would hold inventory review meetings. So I haven't been there for a while because of the COVID thing, but I'm gonna go this year, so you know, we're getting back in that cycle. But it's a good question, so thanks. Awesome. Thanks, thanks for taking my question. As there are no further questions at the queue this time, this concludes our Q&A session. I would like to turn the call over back to Dr. Morris Young for closing remarks. Thank you for participating in our conference call. This is a quarter we will participate in the Northland Securities Growth Conference until June 25th. I hope to see you there. As always, please feel free to contact me, Gary Fischer or Leslie Green, if you would like to set up a call with us. We look forward to speaking with you in the near future. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.