Welcome to the Intevac Fourth Quarter and Fiscal Year 2022 Financial Results Conference Call. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded today, February 1st, 2023. It's now my pleasure to turn the call over to Claire McAdams, investor relations for Intevac. Please go ahead, Claire. Thank you and good afternoon, everyone. Thank you for joining us today to discuss Intevac's financial results for the fourth quarter and full year 2022, which ended on December 31st. In addition to discussing the company's recent results, we will provide financial guidance for the first quarter of 2023 and our outlook looking forward. Joining me on today's call are Nigel Hunton, President and Chief Executive Officer, and Jim Moniz, Chief Financial Officer. Nigel will start with a review of our business and our outlook. Jim will review fourth quarter results and discuss our financial outlook before turning the call over to Q&A. I'd like to remind everyone that today's conference call contains certain forward-looking statements, including but not limited to, statements regarding financial results for the company's most recently completed fiscal quarter and year, which remain subject to adjustment in connection with the preparation of our Form 10-K, as well as comments regarding future events and projections about the future financial performance of Intevac. Actual results could differ materially as a result of various risks and uncertainties relating to these comments and other risk factors discussed in documents filed by us with the Securities and Exchange Commission, including our annual report on Form 10-K and quarterly reports on Form 10-Q. The contents of this February 1st call include time-sensitive forward-looking statements that represent our projections as of today. We undertake no obligation to update the forward-looking statements made during this conference call. I will now turn the call over to Nigel. Thanks, Claire, good afternoon. I'm excited to share with all of you today our latest earnings results and to highlight the momentum we built and the achievements we had in 2022. 2022 was quite a year for Intevac. We set out with a bold ambition of transforming the business and laid out a clear vision of the future of the company. I'm pleased to say we have taken huge strides towards that vision over the past 12 months. It has been a year of significant change for the company. Intevac now feels and operates very differently to that of a year ago. We have transformed Intevac into a new company, the new Intevac, as we refer to internally and with customers. Intevac will continue this journey in 2023. The goal of this journey is to return strong shareholder value with sustained, profitable growth, and we are already creating this momentum. I'm immensely proud of the entire team, not only for the progress they have made in delivering on our ambitious aims, but how they have embraced the vast and rapid change I have tasked the company with through this past year. As I reflect upon our commitments to our shareholders, starting with my first earnings call one year ago, I am pleased to share that our team has executed on every single one of the mandates that we laid out for 2022. We have refocused the business around a leaner product portfolio, streamlined our business, and strengthened and diversified the leadership team and the wider business as a whole. We've laid out a clear plan to return to profitability, built on our existing strong position in the hard disk drive market, and most excitedly of all, have developed a critical strategic partnership that is supporting Intevac's expansion into a new growth market. We also delivered on each quarter's commitments and our financial targets for 2022. Looking briefly back on 2022, I am pleased to share the following highlights with all of you. Each of these achievements has been a significant contributor to the change of direction, pace, energy, and momentum the company has gained recently and was a specific intent set out at the start of my tenure with Intevac. A primary goal for Intevac in reestablishing momentum and focus last year was to first assess the growth potential in each of our end markets. Intevac needed to refocus its business around a leaner product portfolio. As vaccines for COVID continued their global rollout and with the gradual reopening of travel, I took the opportunity to meet personally with each and every key customer in order to determine the correct direction and priorities for Intevac going forward. I'm pleased to share that I've traveled extensively each quarter of the year and met personally with all critical stakeholders that touch our business today and who have potential to impact it greatly in the future. These efforts not only resulted in strengthened relationships, but also led to the decision to cease development of multiple equipment initiatives in order to focus our innovation efforts on our flagship 200 Lean and to enable the development and emergence of our game-changing TRIO platform. This proved to be a decision that has not only shifted energy and momentum for the company, but has changed its future growth trajectory and also the company's financial potential. It has also led to an early patent award for our TRIO platform, and a further nine patent applications have been submitted. Key achievements as Intevac begins the process of strengthening and broadening its IP portfolio. Looking internally, we committed at the start of 2022 to streamlining the structure of the business, and doing so, took action to align internal resource to genuine revenue growth prospects. 2022 saw us raise the bar for employee performance and also saw us dramatically enhance the capability of the organization. We introduced an internal development program within the business and recruited high caliber talent. We have taken steps to significantly strengthen and diversify the senior leadership team and unified the organization under one cohesive leadership group comprised of the best talent from both the U.S. and Asian teams. Further still today, we repeatedly measure and assess the strength of our organizational culture, having heightened emphasis on our company values of innovation and accountability. Our internal metrics and measurements are already showing strong evidence that our global team of employees feel invested in, energized, and excited for the future, and our customers and partners have also validated the strength of the organizational culture plays in our ability to deliver outstanding engineering. This past year has not only seen Intevac invest in personal and professional development, but we've invested in our physical space too. We know the importance of having an environment that encourages collaboration, something that in turn enables innovation. The changes made to our building through the creation of a dedicated collaboration space has been a key enabler of greater cohesion throughout the business and also led to the rapid development of our game-changing TRIO platform. 2022 was momentous from an organizational perspective. Our products, people, culture, and customers have been part of this positive change and have seen this all year. Today, our R&D, engineering, and operational teams are developing into world-class high-performing teams. We have begun the process of enhancing and developing our commercial team. I believe we are beginning 2023 with a strong team and are poised for continued execution in the year ahead. In relation to returning the company to profitability, we are firmly on track to return Intevac to profitability for the full year in 2024, and remain fully invested in preserving the strength of our balance sheet. I have personally met and engaged with dozens of investors, each of which have expressed their preference for our measured protection of our balance of cash and investments, whilst also showing their reassurance at how we have executed on these preferences to date. In 2022, we maintained the strength of the balance sheet and are committed to do the same in 2023. Turning to our existing hard disk drive market and our flagship 200 Lean product. We believe firmly that we are increasing our share of worldwide media capacity, and our customer partnerships have resulted in us rapidly advancing business opportunities through HAMR upgrade initiatives and the securing of $70 million in 200 Lean orders, which will be delivered over the next four years. We continue to believe in the future of the hard drive business, and our efforts in 2022 have kept us in a prime position to continue to be at the forefront of the market and its development. Finally, in what is now highly regarded internally with Intevac, as well as externally as a game-changing development, 2022 saw us deliver on our commitment to develop a meaningful partnership relating to a new product craft category. Intevac's development of the TRIO platform, a new product that supports consumer electronics and other applications, has the potential to provide a runway of compelling and sustainable long-term growth opportunities and revenue for Intevac far into the future. It is by far and away the most important development achieved by the company since the launch of the 200 Lean product 20 years ago. The recently announced partnership on December 30th is a key milestone in our growth strategy. It broadens our product line and dramatically increases the total addressable markets we can now reach. As we sit today, we have a stronger, leaner, more diverse team delivering world-class products to the forefront of the markets we are operating in and pursuing. Our objective on this call today is to ensure that our investors, analysts, employees, suppliers, customers, and all stakeholders recognize the achievements of the past year and our confidence and commitment in our strategy to deliver strong growth and financial performance for years to come. Turning towards the TRIO. In late December, we completed our joint development agreement with a leading provider of glass and glass ceramic materials. The completion of this definitive agreement was a transformational event for Intevac. The agreement includes a minimum revenue requirement of approximately $100 million over five years in order for our customer to maintain exclusive access to the TRIO platform for consumer electronics applications. The agreement also includes a minimal annual commitment to maintain exclusivity. We are currently completing the first TRIO system, which will begin qualification later this quarter. We anticipate that once the first TRIO completes qualification, we'll receive a purchase order for the qualified unit. At this time, we are planning to deliver at least two additional TRIO systems within 12 months of qualification. We will be building several additional tools this year in advance of 2024 shipments, so we can be ready for some upside to support our key partner. I would like to point out at this time that going forward, we'll be limited to what we can communicate about our work with this customer. However, I can share with you a bit of what makes the TRIO such a compelling manufacturing platform for the coating of glass on consumer electronic devices, which is what excited this customer to engage with us and seek a level of exclusivity, which we granted. I can also share why we see the potential for this partnership to be well in excess of $100 million over the next five years. The TRIO offers three primary advantages over current coating options. First, it offers tremendous flexibility compared to existing coating equipment, as the platform can accommodate almost limitless configurations of device form factors, including both 2D and 3D shapes. Second, building upon our 20-year history of leadership in the hard disk drive market, our systems have a proven track record of depositing highly uniform and defect-free films at the highest quality standards for durability and precision, executed with very high yields over a long operating life. Lastly, also critical to our TRIO customer is its productivity, throughput, and competitive cost of ownership in a compact footprint. The compelling advantages of the TRIO platform are flexibility, cost competitiveness, and providing one platform for many different applications. Our plans for 2023 will be focused on qualifying the initial TRIO system for our customer's thin-film technologies by mid-year, delivering the initial systems and working with our customers to ramp in the field. As our customer gains confidence in the value of TRIO, we expect that many additional systems will be deployed, potentially beyond the minimum contractual volume required to maintain exclusivity. The investments in inventory that we are making today, and which began in earnest during Q4, support the build of multiple TRIO systems. These include not only the systems we expect to deliver this year, but substantially more systems to ship in the following 12 months. In the short term, these investments will be enabled by our strong cash balance. It is worth noting that the strength of our balance sheet is critically important to each of our customers, not just for the TRIO partnership, but also for our HDD business. The investments we are making in 2023 will set us up for a profitable year in 2024 and consistent positive cash flows and returns on invested capital beginning next year. As I mentioned earlier, the $100 million revenue level is merely the minimum required to maintain exclusivity with our first customer. We will continue to pursue additional customers for TRIO outside of consumer devices. Once successful with the first few tool deployments, we continue to expect our TRIO opportunity will be very significant. In summary, the development of this innovative and game-changing platform will make a significant contribution to our growth plans. Which brings me to an update on our HDD business. Recent news indicates encouraging signs on the horizon, setting up a return to growth in data center investments and mass capacity drives. In the meantime, as we discussed last quarter, we're seeing a greater level of customer investments in new technology during this period of reduced factory utilization. We're very proud to be a critical technology partner in the industry's transition to HAMR, which is proceeding ahead of schedule, testament to our strong upgrade revenues in Q4 and another strong quarter expected ahead for upgrades in Q1. A fundamental part of our strategy is to maintain a focus on innovation in collaboration with key partners. As such, our roadmaps are aligned with them. Our HDD guidance for 2023, as well as the five-year revenue forecast, remains consistent with what we communicated last quarter. We continue to see an extended investment cycle in both capacity and technology upgrades that is providing visibility for at least $300 million of HDD revenues from 2022 through 2026. We expect this strong revenue growth the next few years will be driven by upgrades in support of the install base of over 150 systems that will require additional process modules to be HAMR-capable, as well as a system backlog today of about $70 million. In summary, 2022 was a transformational year for Intevac. We are very excited about the year ahead and our new partnership for our TRIO platform. I will take this moment to emphasize just how committed we are as a company to increasing stockholder value and protecting the strength of the balance sheet as we grow the business and transform Intevac into a consistently growing and profitable cash-generating company with a leading position in each of its key markets. That completes my prepared remarks, and with that, I will now turn the call over to Jim. Thank you, Nigel. First, I will briefly summarize our fourth quarter results. Revenues came in a bit stronger than forecast at $11.3 million compared to our guidance of $10 million. As expected, Q4 revenues were comprised of HDD upgrades, spares, and service. The primary reason for the upside in Q4 was our customers' prioritization and pull-in of certain upgrade investments, which resulted in a more favorable mix of revenue in the quarter. This resulted in Q4 gross margins of 44.3%, well above our guidance of 32%-34%. The mix of lower margin business that was expected in Q4 is now spread across our full year 2023 forecast. We expect to continue to maintain our quarterly gross margins of 40% or more for the forthcoming quarters. Q4 Operating expenses were $8.3 million, slightly above our guidance of $8 million due to the prioritization of certain R&D spending for TRIO, as well as an increase in variable compensation due to the exceptional work of the team in executing key milestones before year-end. Q4 net loss was $3.2 million or $0.13 per diluted share, and better than our guidance of $0.17-$0.21 per diluted share, primarily as a result of the favorable revenue profile in the quarter. With total new orders of $133 million in 2022, we ended the year with 12-year record high backlog of $122 million. As we have communicated throughout 2022, the strong level of order activity for both systems and upgrades resulted in quarterly increases in backlog during every quarter of 2022. Of the 1,100 Lean HDD systems in backlog, we expect to deliver one in Q4 and multiple Leans in each of the following three years. We ended the year with cash and investments, including restricted cash of $113 million, equivalent to approximately $4.42 per share based on 25.5 million shares at year-end. Our year-end cash balance was stronger than our forecast of $105 million-$110 million, primarily due to Q4's TRIO inventory purchases still residing in AP at the close of fiscal 2022, and we have since paid down that AP year to date. Cash flow used by operations was $11.3 million during the quarter, and $7.4 million for the year. During Q4, we added $11.9 million in inventory to support the growing backlog and anticipated shipments of TRIO systems in 2023. Q4 capital expenditures were $493,000, and depreciation and amortization were $383,000 for the quarter. Moving to Q1 2023 guidance. We are projecting revenues to be between $10.5 million and $11.5 million. Consistent with our commentary last quarter, we do not expect system revenues until the second half of 2023, but the level of upgrades in field service for the first half of 2023 is a bit stronger than we indicated last quarter. We expect first quarter gross margin to be between 40% and 42%. Q1 operating expenses are expected to be between $9 million and $9.5 million, slightly higher than our expected run rate for the full year due to timing of investments in research and development, along with some typical seasonal increases. After Q1, we expect quarterly OpEx to be around the $9 million level for the remainder of 2023. We expect interest income of about $400,000 and GAAP tax expense of about $400,000 in the quarter. We are projecting a net loss in the range of $0.16-$0.20 per share based on 26 million shares outstanding. As we look ahead to the full year's financial results, I'll recap some highlights from Nigel's remarks. We continue to expect approximately $40 million in HDD revenue in 2023, which will be relatively evenly weighted between the first half and second half, with upgrades driving most of the first half revenue and one system expected to revenue in the second half. The TRIO activity in the first half will be to build the first production system and work with our customer to pass qualification in Q2 on that system. After we pass qualification, we expect to receive the purchase order for the initial unit. We are currently planning to deliver at least two additional TRIO systems within 12 months of successful qualification. On our May call, once we are well into the qualification process, we expect to be able to provide a range of how many systems could revenue in 2023. With this revenue profile, which is largely HDD driven but should also include some level of TRIO systems revenue, we expect full year gross margins to be around 40% and as I mentioned earlier, OpEx of approximately $36 million-$37 million. We expect both interest income and taxes to be in the range of $1 million-$2 million in 2023. Finally, we will continue to closely manage cash to support the business strategy. This concludes the formal parts of our presentation. Kevin, we're ready for questions. Certainly. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one. One moment please while we poll for questions. Our first question today is coming from Hendi Susanto from Gabelli Funds. Your line is now live. Good afternoon, Nigel and Jim. Hi, Hendi. Afternoon. Yeah. Nigel, a big congratulations on the TRIO partnership. May I inquire like more colors on what kind of, let's say like profiles, that we can expect, let's say for the TRIO system, once the customer ramp up, should we expect a linear sales profile or it will resemble more like a step-up profile, from, let's say like one period to another? Hendi, thanks for the question. I mean, very clearly, and hope it came across on the call, our focus absolutely has to be this month on completing the build of the first tool. We move into the qualification of the tool, we are, you know, optimistic and enthusiastic and excited about the process we're going through on this qualification. That's a qualification of the production tool. I mean, the tool was qualified on the test bed, and it now moves to a production tool. Really, that process is gonna take the next couple of quarters. That's the critical thing for me is to maintain this organization's focus on delivering and executing on that plan. If I look out way beyond that and the profile, I think it's too early to say. I mean, I think for me, the opportunity, as we've said, is pretty compelling. It's a very significant opportunity. It's a very different market we're entering. It's one that is, you know, the partner and us are gonna maintain a level of confidentiality, which is why I said we're gonna have to be cautious what we actually share with people on these calls moving forward because the key for me is to maintain our strength and maintain that technology advantage and then move forward. Really for this call, it's very much about we're absolutely on track with that first unit. We're on track with our partner to get that qualified. I think once we get through that, we'll have a much better view on what the market potential and opportunity is. And the great thing for me is there's the commitment from that partner for the $100 million over five years as a minimum for that period. I think it's too early to say that that's a linear or anything else. I think, I think the excitement for me is to get the first tools completed into the market and actually start building success and securing some orders. That's gonna be my absolute focus. It's really too early. You know, we're so excited about it, and the potential is huge. I don't think it'll be linear, let's say. That's probably the only thing to say. Nigel, with regard to the TRIO system, what is the latest estimate of the production rate? I would like also to know, let's say when there's an estimate for production rate will be it's somewhat like semi-fixed, meaning that's the run rate, and then there is no like big window, let's say, if like from like early into like a full ramp up, whether there's like a big range, like how many units they can produce? Would you share some color on that? I mean, I think probably one of the really exciting things about the product is this new platform, which is very different to anything we've done before. People have got to start thinking about segregating in their minds the traditional business to this new platform. This platform has huge flexibility. Not only can it do two-dimensional coating, but it can do three-dimensional coating, which is a phenomenal step forward. But it also has the ability to actually do multiple size structures through the machine. It's not like we're just putting through, if I go back to the HDD business, a machine that does billions of one size disk day in, day out, and so on. It's this platform concept and the flexibility of the design is one of the key things that attracted us and this technology to our partner. The machine can have multiple sizes running on it. It can be running on different programs. You can't really say it's gonna be a fixed number. I think that level of flexibility is probably one of the unique capabilities of the technology. Is it going into consumer electronics market? I mean, that, again, that market is huge, has different components within it. Therefore, this flexibility of the tool is probably fundamentally one of the game changers and why we've been selected by the partner. Okay. Doesn't quite answer your question, but hopefully gives you some flavor that this machine can do. You know, this isn't about one machine, this is about multiple machines supporting a very large industry that we're actually gonna start entering. Nigel, with regard to the annual minimum commitment of that partnership, like, when is the timing of, like the exclusivity? Like, will it start when the annual minimum commitment, like is met or whether now you can explore, potential sales with other customers while waiting for the annual minimum commitment to be met sometime, later in 2023? The agreement, I think we're pretty clear when we announced it, does not restrict us from looking at other market opportunities. The exclusivity is within the consumer electronic devices for glass and glass substrates. That is very clearly documented and was in the sort of announcement. Outside of that, we can look for other opportunities from the starting point of the agreement. The agreement that should be announced was signed in December, that's the start date for the agreement. For me, it's the real focus today is making sure we get the first production unit executed on, finished. That first unit qualified and then move forward with that strategic partner. Got it. Questions for jim. Jim, would you be able to share how much like cash consumption we can expect in 2023, especially considering that Intevac needs to build TRIO systems? I also noticed that there is a long-term customer advances of $22 million on the balance sheet. I'm wondering whether the cash on the balance sheet got boosted by that $22 million, and that's why the cash balance is higher than the prior estimate? Sure. I can answer a couple of questions. First, let me answer your second question first. The ending cash of $113 million was not influenced necessarily by the $22 million. That was known quarters ago. That is one of our customers who placed large orders that are in our backlog. Customary for that customer to give us cash down payments or customer deposits. We use those customer deposits to secure inventory. If you look at the inventory growth through the year, inventory went up by about $24 million from the beginning of the year to the end of the year. The majority of that was not TRIO. TRIO inventory started to build in earnest in the fourth quarter. We were using the customer's down payments to support the backlog and to buy the inventory as the customer requested. That number of the cash down payment, the $22 million, had been reflected in our estimations of $105 million-$110 million, and when we ended at $113 million. The slightly higher $113 million above our last call's guidance was we did secure the inventory for TRIO that we expected, but it came later in the quarter, so the payment was not made, did not draw down the cash. It was in accounts payable. We've since drawn that down. As far as the cash being used for the business, you know, I think if you look over the last number of years, and especially in 2022, we've been excellent stewards of the cash. We'll continue to use the cash strategically. As Nigel said in his prepared remarks, we're building inventory beyond whatever the minimum order quantity is for 2023. So you'll likely see inventory continue to go up, as we go through the year, but we will still manage cash. You won't see cash go down, let's say, to an $80 million or $90 million level right away. If you see cash go down, there'll be normally a corresponding increase with less building inventory to support customer requirements. Okay. Got it. Yeah. Thank you, Jim. Thank you, Nigel. You're welcome. Thank you. Thank you for the questions. Thank you. Next question from Mark Miller with Benchmark. Your line is now live. I'd like to congratulate you on your progress last year. I'm looking forward to the future. Thank you. After listening to Seagate and Western Digital over the last week, they are indicating that the customer inventory for hard drives is starting to deplete. As a result, they're more optimistic about the outlook, at least for hard drives, for the remainder of the year. Have you sensed anything in terms of improvements in capacity utilization or anything in terms of maybe more demand than expected now that the customer inventories of hard drives have come down? Yeah. I think the first thing to cover what we've seen is, and really excitement is, and as you say, listening to some other calls, one in particular, and the emphasis and the level of Q&A around the HAMR. I think what we've done in the last year, we have enabled the HAMR technology to come through. That's been a key part of our last quarter's performance. We're seeing that HAMR focus and the HAMR readiness, and to ensure that actually the equipments are capable of supplying the equipment for their launch to be maintained. I think Jim said that will be maintained into Q1. We're seeing, you know, the continued focus around those technology upgrades. Again, like you, we are optimistic that demand is starting to come back. Some of those key markets in Asia will sort of start to get additional business for them. We're confident that their positive outlooks are gonna sort of start coming through. Really under fundamentally is this technology shift to HAMR, I think is actually also gonna be a significant change in that sector, in that industry, and we're well positioned to maximize from that. I don't know whether you want to add to that, Jim? No, I think as Nigel mentioned, it's been. You could see some of that in the results in Q4. You know, some of our customers' calls, as you mentioned, Mark, they really are taking advantage of the lower capacity and trying to build down inventory to improve their technology, and we're a key component of them being able to do that. They're helping, as you see in Q4, that's one of the main drivers why revenue was above guidance. We'll continue, as I said in my prepared remarks, that the first half of the year will actually be stronger than what we implied on the last earnings call as it relates to the linearity of shipments first half, second half, and most of that will be upgrades. Okay. From what I gleaned from your just comments about cash in 2023, there's gonna be some drawdown as you know, build new tools. You are talking about shipping, I believe, one Lean tool later in the year. Do you think by the fourth quarter you'll be cash flow positive? I think it all depends on what happens with the TRIO build. That's really gonna be the driver of, you know, cash flow positive when you look at combination of, you know, what the linearity of the revenue is in Q4. I think the biggest use of cash for us, which is just gonna be a timing issue, is gonna be building to support a large backlog should that happen once we pass qualification on TRIO. Okay. In terms of the Lean tools you'll be shipping, later, late this year and beyond, these tools have more features such as more deposition chambers than prior tools, or any new technology in these tools? I think that the one that'll ship has an additional process module, but I don't think there's much additional technology other than some of it has some HAMR-enabled capability. Yeah. I I mean, the major focus is really, as we've talked on, is enabling the install base, putting in the HAMR upgrades for those tools, and ensuring our customers are ready and enabled to actually execute on their HAMR roadmaps. That's a key thing we've done, is ensuring our roadmaps are absolutely aligned with our key customers, and that's been a key success over the last 12 months, is having those regular technology review meetings and ensuring we're meeting their needs and actually helping enabling them to actually move to that next generation of technology. It's been an exciting year. If all goes well with the first qualification of the TRIO tool, you're talking about delivering two more TRIOs after that. When could you think these tools be revenued, early 2024? I think as customary with our, with our rev rec responsibility and rules, we'll need a couple of tools on the field to be installed to go through full qualification on-site. Once they do that, and the customer signs off on the qualification, we'll take revenue. Then probably the third or fourth tool after that, we can take, you know, we can take revenue at the time of shipment, but we have to first pass the qual. We do expect revenue in 2023, as we've said. Absolutely. That first qualified tool that Nigel emphasized, and I think everybody should remember, is that's our focus right now. Our focus right now is building a production tool, getting through qualification, trying to get that qualification through Q2. Once we get qualification and sign-off, that tool can take revenue, and then any tools we ship after that, if they go into the field, they'll have to get installed, qualified, signed off, and then we can take revenue there. Then it's after that point in time that we can probably take revenue at shipment. Revenue at shipment is likely to happen in 2024, but we will see sign-offs, and we will see revenue in 2023 from TRIO. Absolutely. Yeah. Understood. Thank you. Thank you, Mark. Thank you, Mark. Thank you. Next question today is coming from Srini Sundararajan from Summit Insights Group. Your line is now live. Hi, guys. congratulations on a fantastic quarter. My first question is, why was the accounts payable postponed? The what? [crosstalk] Being an under number for accounts payable. Why was the accounts payable. Yeah. I'm not sure if your question is why is accounts payable higher at the end of the year? Yeah. Is that your question? Yeah. if I understand your question, although it was hard to understand that question, the accounts payable was higher at the end of the year because of the timing, mostly of the delivery of the TRIO inventory. It came in, it was received, but there are payment terms of when we have to pay our vendors. Those payment terms required us to pay the vendors in January, not December. It was sitting in accounts payable. You'll see accounts payable went up from the September quarter to the December quarter, and that helped the cash because essentially it was in accounts payable, which has since been paid. It was roughly around $5 million. Kind of coincided with the growth of the TRIO inventory in the quarter. Thanks. As a follow-up, the 200 Lean systems that you'll be shipping in the next two or three years, they will all be going out with HAMR upgrades, right? Those were ordered around this time last year. Some of that technology innovation will be included in them, and there'll be some that's not. There'll be further upgrades for those tools sort of post-install. There'll be some level of HAMR readiness, but not the latest HAMR upgrades that we've actually developed and executed and delivered on in 2022. Also, on the subject of exclusivity, could you explain what it exactly means? Meaning that, you cannot sell it to somebody else, or you can sell it to somebody else? The exclusivity is very clearly for consumer electronic devices for glass and glass-ceramic substrates. It is a very clear definition of the market and the substrate. Okay. Against that, what that means, that exclusivity means we cannot sell to anyone for those applications. That's what the. Mm-hmm. That's why you have exclusivity. It is absolutely exclusive to them for that application. Mm-hmm. This is actually a show of my ignorance, but I want to know what is the market share of your TRIO partner in the cell phone market? information- May On our partner's market share is not really for us to comment on. The market share of our partner is I think is probably on their website, but they are clearly the market leader, an absolute number one. They're the market leader in that sector. I would just say. Yeah. That has paid attention over the last four or five months as to what we're doing. Mm-hmm. Yeah. Yeah. Okay. There is a trend towards putting tempered glass on top of the display. Would that tempered glass stick to your TRIO film? I mean, I think if you look at what we announced in the press release, the TRIO is for coating glass and glass-ceramic substrates. Any glass and glass-ceramic substrate is covered in that agreement. It's- Okay. It doesn't matter if it's tempered or not tempered. I think it covers any substrate. I mean, it's a game-changing technology that really has the flexibility and everything about it is why our partner is so excited about it and why we're given the exclusivity. I think, those were all my questions. Thank you very much. Congratulations. Thank you. On good execution. Thank you. We appreciate that, Srini. Thank you. Next question today is a follow-up from Hendi Susanto from Gabelli Funds. Your line is now live. We can't hear you, Hendi. I don't know if it's just me. Hen- Operator, can you hear Hendri? Hendri. Hi again, Nigel and Jim. May I ask, I think 2024 is still far away, but with regard to the first full year of profitable results, do you have insight into what revenue level and what kind of revenue mix is the underlying assumptions among, let's say, like hard disk drive market, 200 Lean, HAMR and TRIO? I would say at this time, we're not prepared to talk about what the revenue mix could be, how much between the two. What we look at internally is if you look at the investments we'll make in R&D this year, and as we said in our prepared remarks, our OpEx being somewhere between $36 million and $37 million. If you just did simple math and assumed a 40% gross margin, you need to be somewhere around $90 million in revenue to break even. I see. That is very encouraging then, Jim. The second question is. Absolutely. The second question is, I saw on your website, Intevac Burst Coating. Is that the commercial name for TRIO's, let's say, end products? Then outside of consumer electronic devices, do you see any, like, low-hanging fruit applications? Yeah, just to cover that first. I mean, as you said, as you know, when I joined a year ago, we had the Intevac ballistic coating and the IBC, as a potential route forward and a potential technology. Some of that has been developed into the TRIO tool. The website, as it says, is under development, and we will actually address that in 2023. My focus in 2022 has not been about trying to put nice things onto a website. It's been absolutely about creating a new technology platform, getting this business fundamentals correct. But you're right, this year is the time to get the website upgraded, put some additional material on there, and actually bring TRIO to life on the website. That will be one of my actions for this year. Last year was very much about getting the technology launched, focused, and making this company a success. You're right. I think the website still does say under development for IBC, and we will change that to TRIO and our current platform and the future growth. I see. Nigel, my second question's about, like, potential, target application outside of consumer electronic devices for TRIO. I mean, at the moment, as we've said, very much the focus is getting this tool built. Qualified and out there and making that a success. Beyond that, I see other opportunities. I think we talked in one of the announcements about there's potential around the automotive and other sectors. There's market opportunities. I mean, but for me at the moment is let's get this thing built, qualified into the market, and keep updating you as investors every single quarter by saying, "This is what we've done. This is what we're gonna do next quarter," and keep building that story and building that success. I think I've got enough to do to focus on that one exciting market opportunity of electronic devices first. Yeah. Thank you, Nigel. All the best for winning TRIO sales in the production environment. Brilliant. Thank you, Andy. Appreciate that. Thank you, Andy. Thank you. Next question is coming from Dan Weston from Westcap Management. Your line is now live. Hi, good afternoon, guys. Thanks for taking the questions and congratulations on all the progress. Most of the questions have been answered. Just a few more, if you don't mind. In terms of the TRIO, could you share with us what you think, your internal capacity is for build and ship per year for that product? I mean, that's highly confidential as you can imagine. What we're really doing now is building the plan around it. We're executing on the first builds. We're gonna get the full qualification done. Then we're gonna ensure we have capacity to meet whatever demand is out there. It's the market size and what we're gonna do and how we're gonna deliver against that is clearly within internal plans. We are planning and scaling and building for success. You don't enter something like this without saying, "We're gonna be successful." We know what we need to do. We have to have capacity to do it. We have to be able to actually manage our way through the industry with its some still supply chain challenges. We've got the strength of the balance sheet to actually help us leverage with some inventory, so we can be ready to ramp and build whatever the market needs. I don't wanna put numbers in there for people at the moment 'cause it's. We know what we have to do, and as we've said, we actually plan things out, we think it through, and then we execute. We are positively moving forward. Okay. No, I think I get your point. [crosstalk] Yeah. We've just got to get the first run built. Yeah, I appreciate it. Sorry to cut you off. No, no, it's fine. It's great. It's, you know, we are gonna move forward, we're gonna be successful, and it's about getting this first run qualified and then moving forward successfully with our partner. Totally understood. Thank you for that, Nigel. Let me ask it this way. Just given the minimum commitments on this particular customer for TRIO, assumes, I'm guessing, using a roundabout figure of about four units per year to build and ship in revenue. Let's say that customer exceeded this minimum commitments, and he required eight or 10 units to be built and shipped to him in a particular year. Are you saying that you could successfully build and ship 10 units per year? Yeah. I'm not committing to any number, but I'm saying we're planning for success and whatever our customer needs, we will deliver. Fair enough. If you gonna read into that, what we're doing. Yeah. Okay. Fine. Let me ask you a question. In terms of the evaluations that Corning was doing initially on the TRIO platform, did they have any of their end customers involved in that evaluation as well? I mean, clearly I can't answer that question. What I can say to you is the. We've covered it on the last couple of calls. When you launch a new product, you align it with a key partner. To be successful on launching products, through my 30 years of experience in many different companies, is when you have a customer who's working with you, is feeding and working with your development teams, and you're producing product. We talked on a call a couple of quarters ago, we gave them some samples. They came in, they ran their own samples. We've done coupons for multiple different potential applications and so on. We've had other people come in and run. The qualification success and the real performance of the TRIO and its flexibility and adaptability has been superb. On the back of that, you know, that's why they wanted exclusivity. you should be able to read into that what we've been doing. Fair enough. That's all I had for you. Thank you, Nigel, for answering those questions. Great. I appreciate it. No, I appreciate it. Thanks, Dan. Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to management for any further closing comments. Thank you. You know, as I look at where we are today compared to my first earnings call one year ago, you know, I feel we've executed on a complete transformation of the company. We've created a new Intevac, an outstanding achievement. You know, we are now squarely on a path towards consistent annual revenue growth and a 2024 outlook supporting significant revenue growth, positive cash flow from operations, and a profitable year for the company. Overall, I'm extremely enthusiastic about the future of Intevac, and we will continue to leverage our collective expertise and strong balance sheet to ensure the company is positioned for growth well into the future. To find out, I want to thank all of our employees, as well as their counterparts with our industry partners, for their hard work and dedication as we progress with our partnership with the new TRIO platform, as well as the HDD's industry transition to HAMR. That's been, for me, it's been a fantastic achievement all around. We've also been steadily ramping up our investor outreach over the last year, and we're eager to continue meeting with as many industry investors as possible. If anyone wants to reach out to Claire, please do that directly, and we'll organize follow-ups with us. With that, I will conclude today's call. Thank you. Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation.