Christian Schwab

Christian Schwab asked about the impact of new market entrants in China on mainstream business pricing and gross margins, the expected timeline for G8.6 adoption to become a meaningful percentage of FPD revenue, potential multi-year gross margin impacts from significant investments, the revenue potential of the Allen, Texas facility, and the opportunity for captive manufacturers to outsource to the merchant market, especially in the U.S. due to reshoring.

Answer

Frank Lee, Head of Asia Operations, explained that Photronics optimizes its China capacity for high-end products (22nm and 28nm) with better ASPs, mitigating mainstream pricing competition. Chris Progler, CTO, stated that G8.6 adoption is in early stages but expects gradual increases in FPD revenue contribution in fiscal 2026. Eric Rivera, CFO, and George Macricostas, CEO, anticipate increased revenue and stable-to-growing gross margins from investments, including end-of-life tool upgrades. Chris Progler and Frank Lee indicated that the Allen, Texas facility will target mid-range to higher-end mainstream nodes, bringing incremental revenue and profitability starting in H2 fiscal 2026, while also freeing up Boise capacity for higher-end applications. They also confirmed a broader trend of captives seeking more outsourcing opportunities, which Photronics is well-positioned to capitalize on, especially with regionalization trends.

Christian Schwab asked about the end markets for the 6-8nm expansion, the potential for market share gains, the timeline for CapEx normalization, the growth outlook for the Gen 8.6 FPD market, associated ASP trends, and the company's capital allocation strategy, specifically regarding dividends versus buybacks.

Answer

CTO Christopher Progler and President of PDMC Frank Lee identified high-end processors, edge AI, EVs, and memory as key end markets for the 6-8nm expansion, noting it represents a market share gain opportunity. CEO George Macricostas projected a three-year period of elevated CapEx for technology upgrades and end-of-life tool replacements. Frank Lee confirmed the company is well-positioned for Gen 8.6 FPD growth. CFO Eric Rivera stated that while the company has evaluated dividends, share repurchases remain the preferred method for returning cash to shareholders, though internal investment is the current priority.

Christian Schwab sought clarification on the U.S. Army's SBMC program and the $1 billion SAM opportunity, including increased drone procurement, and when material revenue from these initiatives is expected to begin.

Answer

CEO Michael Murray clarified that approximately 40% of the $1 billion pipeline is for SBMC production opportunities, with the remainder from armored vehicles, advanced night vision goggles, and next-gen thermal weapon sites. He detailed Kopin's $15.4 million color micro-LED contract as a critical technology acquisition for SBMC, expecting further Army investment in 2026 (tens of millions) for production in 2027, aiming for Kopin's device to be designed into SBMC applications.

Christian Schwab with Craig-Hallum sought clarification on the U.S. Army's Soldier-Borne Mission Command (SBMC) program, specifically the $1 billion serviceable available market opportunity, including drone applications, and the timeline for material revenue generation from these initiatives.

Answer

CEO Michael Murray clarified that approximately 40% of the $1 billion opportunity pipeline is attributed to SBMC production, with the remainder from armored vehicles, advanced night vision goggles, and next-generation thermal weapon sites. He explained Kopin's $15.4 million contract award for developing a sovereign-built color micro-LED for SBMC and similar applications, anticipating further multi-million dollar investment in 2026 for production in 2027, aiming for design-in to SBMC applications by then.

Christian Schwab asked for directional clarity on Ceragon's 2026 growth expectations, specifically whether to anticipate mid-single-digit growth or an opportunity for higher top-line expansion.

Answer

CEO Doron Arazi explained that Ceragon is currently in the midst of its annual operational planning for 2026, making it difficult to provide concrete figures. He prudently suggested planning for mid-single-digit growth but expressed hope for better results once the AOP is finalized.

Christian Schwab sought clarity on what "growth and optimism for 2026" implies, asking if it suggests mid-single-digit growth or a higher top-line expansion, to help bracket expectations for 2026 estimates.

Answer

CEO Doron Arazi explained that while the annual operational planning for 2026 is ongoing, it would be prudent to currently plan for mid-single-digit growth, with hopes for a better outcome once the AOP is finalized.

Christian Schwab asked about the expected growth rate of Ribbon's government program business in calendar year 2026, excluding the catch-up from the U.S. government shutdown. He also requested insight into the typical yearly run rate or broad range of revenue that a new voice modernization win with a government agency represents.

Answer

CEO Bruce McClelland stated it's too early to provide a precise answer for 2026 growth due to budget uncertainty, but highlighted a new win with another top three U.S. government agency starting a voice modernization program, which is additive to existing business. He expressed an aspiration for solid growth next year by expanding current deployments and securing new agencies. Regarding the typical run rate for a new government win, Mr. McClelland explained that these are multi-year projects involving hardware, software (some recognized upfront, some ratably), and service support (recognized ratably). He indicated that larger projects could represent 'tens of millions of dollars' over their duration.

Christian Schwab from Craig-Hallum Capital Group followed up on the government business, asking about the expected growth rate for Ribbon's government program business in calendar 2026 versus 2025, excluding any catch-up revenue from the shutdown. He also requested a broad range for the typical yearly run rate of a new voice modernization win with a government agency.

Answer

CEO Bruce McClelland acknowledged it was early to provide a precise 2026 growth rate for government business, especially without a budget. However, he highlighted a new win with a top-three U.S. government agency starting its own voice modernization program, which is additive to existing business. Mr. McClelland expressed an aspiration for this business to grow at a "really solid rate" in 2026 by expanding current deployments and securing new major agency wins. He explained that a typical large voice modernization project with a government agency would span multiple years and involve tens of millions of dollars over that period, combining hardware, software (some recognized ratably), and service support (all recognized ratably).

Christian Schwab from Craig-Hallum Capital Group LLC sought clarification on the currency headwinds impacting the full-year 2025 gross margin and EBITDA guidance, and asked about the visibility into the Verizon business for calendar 2026.

Answer

President, CEO & Director Bruce McClelland confirmed that ongoing FX headwinds are the primary reason full-year gross margin and EBITDA are trending toward the lower end of the guidance range. Regarding Verizon, he reiterated that it is a multi-year program, currently one year into a three-year initial phase, and expressed confidence in a strong 2026, with additional potential from the integration of Frontier's network.

Christian Schwab of Craig-Hallum asked for an explanation of how Ribbon Communications benefits from the retirement of copper phone networks and requested a reiteration of the 2025 growth forecasts for the Cloud & Edge and IP Optical segments.

Answer

CEO Bruce McClelland explained that Ribbon benefits from copper retirement by providing call servers for lines moving to fiber/IP, and more directly by supplying media gateways and software to transition services from copper to IP, either at the central office or the network edge. He reiterated the Q2 forecast, projecting Cloud & Edge sales to grow approximately 20% year-over-year and IP Optical to grow 5% to 10% year-over-year.

Christian Schwab asked to quantify the opportunity from AT&T's copper network retirement, requested a revenue range for the Verizon modernization program in 2025, and sought to validate the size of the Metaswitch replacement market.

Answer

CEO Bruce McClelland declined to give a specific figure for the AT&T opportunity but confirmed the Verizon program is on a run rate greater than $100 million annually and is expected to grow. He also affirmed that the Metaswitch replacement opportunity, with deals ranging from hundreds of thousands to millions of dollars, could total around $200 million, aligning with the analyst's estimate.

Christian Schwab inquired about the potential size of the Microsoft Metaswitch replacement opportunity and the expected timing and revenue impact from the BEAD program.

Answer

Bruce McClelland, CEO, explained that the Metaswitch opportunity is substantial, citing public filings that show an ongoing maintenance revenue stream of around $75 million. He noted that while some customers will continue operations, Ribbon is highly focused on capturing this footprint. Regarding the BEAD program, McClelland stated the revenue ramp would be gradual, with modest impact in the first half of 2025, accelerating in the second half, as Ribbon's involvement in the Middle Mile portion occurs later in the project cycle.

Christian Schwab (Citi) inquired about the expected timing for a material improvement in bookings to drive revenue, particularly for Aehr Test Systems' AI-driven growth opportunities in the second half of the fiscal year. He also asked about the target number of AI customers by fiscal year-end and the timeframe for the AI total addressable market (TAM) to become three to five times larger than silicon carbide, specifically regarding material orders from one or two key customers.

Answer

CEO Gayn Erickson indicated that additional capacity needs from the lead AI wafer-level burn-in customer are anticipated this fiscal year, potentially exceeding last year's volumes, with timing likely in the second half of fiscal 2026. He noted increased wafer-level customer engagements across hyperscalers and AI processors, as well as interest in Sonoma for packaged parts. Erickson confirmed discrete quantity targets for new AI customers are part of officer bonus structures and highlighted that many ASIC and GPU suppliers are currently using inefficient system-level burn-in, validating the need for Aehr's tools. He expressed confidence in the AI opportunities but refrained from providing specific timing for large orders, suggesting that early indicators would be positive customer results, followed by significant production orders.

Christian Schwab (Citi) inquired about the expected timing for a material improvement in bookings to drive revenue, particularly for Aehr Test Systems' AI-driven growth opportunities in the second half of the fiscal year. He also asked about the target number of AI customers by fiscal year-end and the timeframe for the AI total addressable market (TAM) to become three to five times larger than silicon carbide, specifically regarding material orders from one or two key customers.

Answer

CEO Gayn Erickson indicated that additional capacity needs from the lead AI wafer-level burn-in customer are anticipated this fiscal year, potentially exceeding last year's volumes, with timing likely in the second half of fiscal 2026. He noted increased wafer-level customer engagements across hyperscalers and AI processors, as well as interest in Sonoma for packaged parts. Erickson confirmed discrete quantity targets for new AI customers are part of officer bonus structures and highlighted that many ASIC and GPU suppliers are currently using inefficient system-level burn-in, validating the need for Aehr's tools. He expressed confidence in the AI opportunities but refrained from providing specific timing for large orders, suggesting that early indicators would be positive customer results, followed by significant production orders.

Christian Schwab of Craig-Hallum Capital Group LLC asked for clarification on the company's investor deck customer slide, whether 10% customers would be named in filings, and for a comparison of the total addressable market for AI versus silicon carbide.

Answer

President & CEO Gayn Erickson confirmed the slide lists current customers, not prospects, including those from the InCal acquisition. He stated that due to new SEC rules, 10% customers will no longer be named. Erickson elaborated that the AI market opportunity is projected to be three to five times larger than the silicon carbide market for Aehr, driven by the complexity and multi-step testing requirements for advanced AI processors.

Christian Schwab of Craig-Hallum Capital Group questioned when Aehr Test Systems would see an inflection point for long-term sustainable growth, given revenues have been flat for three years, and inquired about the potential growth rate for fiscal year 2026.

Answer

Gayn Erickson, an executive at Aehr Test, explained that while the company does not provide multi-year forecasts, they are seeing significant growth opportunities in new markets like AI processors, GaN, and flash memory, which are now materializing. He expressed confidence that these new segments, alongside a potential recovery in silicon carbide, will drive future growth, with more specific guidance for fiscal 2026 to be provided in July.

Christian Schwab of Craig-Hallum Capital Group LLC inquired about the new silicon carbide customer pipeline, asking if they were new or existing engagements and their potential ramp size. He also sought more detail on the AI processor opportunity, questioning if the potential for a 10% customer was a conservative long-term estimate.

Answer

CEO Gayn Erickson explained that the silicon carbide pipeline includes both previously identified customers with shifted timelines and two to three new engagements. He stated these customers are planning initial system purchases in late 2024 or early 2025, with production ramps in the second half of 2025, and confirmed they have the potential to become as large as Aehr's current top customer. Regarding the AI opportunity, Erickson noted the evaluation is progressing well and the Incal acquisition positions Aehr to serve both wafer-level and package-level testing needs, giving them a "front row seat" with major AI players.

Christian Schwab of Craig-Hallum Capital Group asked for details on the new silicon carbide customer pipeline, including their potential ramp and scale, and inquired about the long-term opportunity for the AI processor business beyond the initial 10% customer forecast.

Answer

Executive Gayn Erickson explained that the new silicon carbide customer prospects include both previously anticipated customers whose timelines shifted and new engagements. He projects initial orders of one to two systems within the fiscal year, with ramps in the second half of calendar 2025, noting these customers could become as significant as their current largest. For the AI processor opportunity, Erickson stated it is substantial and that the Incal acquisition provides deeper capabilities for both wafer-level and package-level testing, reinforcing the value proposition for testing complex multi-chip AI modules at the wafer level.

Christian Schwab of Craig-Hallum Capital Group asked for the average dollar content per device across Lantronix's drone customer engagements and requested a broader revenue forecast for the drone market to understand its potential scale over the next few years.

Answer

President & CEO Saleel Awsare disclosed that the average selling price (ASP) for its solutions in the drone market is approximately $500 per device. He elaborated that individual customer opportunities could represent $4 million to $5 million in annualized revenue. Looking further out, Awsare suggested that the drone business has the potential to grow to 10-15% of Lantronix's total revenue by fiscal 2027, highlighting the significant long-term opportunity.

Christian Schwab sought clarification on the company's forecast for double-digit growth in fiscal 2026, asking if this projection includes a return of revenue from Gridspertise or if it is based solely on the core business and other growth drivers like new products and partnerships. He also asked for confirmation that Lantronix remains the sole supplier to Gridspertise.

Answer

President and CEO Saleel Awsare clarified that the double-digit growth forecast for fiscal 2026 is based on the current business run rate and does not include any significant revenue contribution from Gridspertise. He attributed the expected growth to design activity, the Qualcomm relationship, new industrial IoT products, and a new out-of-band solution. Awsare also confirmed that Lantronix is still the single-source supplier for Gridspertise, a status he verified as of a month prior to the call.

Christian Schwab asked management to frame the company's multi-year growth expectations and provide an outlook on whether gross margins would remain at current levels or if there was a more aspirational target for the future.

Answer

CEO Saleel Awsare stated that the company expects to grow around a 12% rate, with potential for acceleration from Edge AI initiatives and the recent NetComm acquisition. CFO Brent Stringham reiterated that near-term margins are expected to be slightly higher, after which Saleel added that the longer-term goal is to improve margins toward the 45% level, driven by a focus on supply chain.

Christian Schwab asked for an update on the relationship with Intel, including its current stage and long-term potential, and questioned why the SAP partnership is being highlighted more than others like Advantest.

Answer

CEO John Kibarian confirmed Intel is an important and growing customer, noting their recent joint appearance at an Intel event signaled the strengthening relationship. He explained that the focus on SAP and the SecureWise acquisition stems from a growing customer need to orchestrate the entire enterprise for AI deployment. As customers deploy AI models at scale, they realize the necessity of connecting engineering data (Exensio) with enterprise systems (ERP/MES) to manage the supply chain, a need that partnerships with SAP and platforms like SecureWise directly address. The Advantest partnership remains ongoing for tester connectivity.

Christian Schwab of Craig-Hallum Capital Group requested an update on the company's various partnerships, with a specific focus on Advantest, and asked if other ongoing pilots are expected to convert into contract revenue.

Answer

Executive John Kibarian stated that the Advantest partnership generates ongoing revenue through joint selling and Advantest's own use of PDF's systems, and he expects the relationship to continue. He noted that for most partnerships, including with SAP, the model is collaborative, with each company typically selling its own part of an integrated solution. Kibarian emphasized that PDF has learned to run partnerships effectively and often handles its own sales to best capture value.

Christian Schwab of Craig-Hallum Capital Group sought clarification on the business outlook for calendar year 2025, asking if growth should be expected to meet or exceed the company's long-term target of 20%.

Answer

CEO John Kibarian affirmed that while not providing a specific number, the company's strong Q4 growth trajectory sets the stage for 2025. He described the outlook for 2025 as "robust" and stated that Q4 is more representative of future potential than the 2024 average. He suggested growth in 2025 should be in the "zip code" of the 20% long-term target, or potentially better.

Christian Schwab from Craig-Hallum Capital Group LLC asked for clarification on whether strong product bookings were driven more by superior products or by market share gains from competitors like HPE, Juniper, and Cisco.

Answer

President & CEO Ed Meyercord responded that it's a combination of factors. He emphasized that Extreme sells solutions, not just products, with differentiation coming from software and management platforms like the newly launched Extreme Platform One. He also noted that competitive disruption, such as the HPE-Juniper merger and Cisco's strategic shifts away from traditional networking, is creating opportunities and helping Extreme get more 'at bats' with large customers.

Christian Schwab requested more detail on the total cost of ownership (TCO) advantage driving wins with large customers and asked for an update on customer adoption of WiFi 7 technology.

Answer

President and CEO Ed Meyercord attributed large customer wins to the company's unique campus fabric technology, which provides significant advantages in automation, security via micro-segmentation, and resilience. He also highlighted the new AI for networking capabilities of Platform ONE. Regarding WiFi 7, Meyercord noted adoption is progressing as planned, with CFO Kevin Rhodes adding that adoption is in the teens.

Christian Schwab inquired about the timeline for Wi-Fi 7 adoption and when it is expected to have a more meaningful positive impact on Extreme's business.

Answer

CEO Ed Meyercord responded that Wi-Fi 7 is starting to ramp, highlighting its enhanced reliability for mission-critical enterprise applications and noting that Extreme was among the first to market. CFO Kevin Rhodes added that Wi-Fi 7 already constitutes about 12% of their access point sales and cited a Gartner forecast that nearly half of all APs sold in 2027 will be Wi-Fi 7.

Christian Schwab asked if it was fair to assume the business could return to a 10-12% top-line CAGR in fiscal 2026, and if achieving a 20% operating margin by fiscal 2027 was a reasonable expectation given that growth.

Answer

CFO Kevin Rhodes affirmed that the company's long-term view is to achieve double-digit growth once the market fully normalizes, driven by high single-digit product growth and low-teens subscription growth. He also confirmed that achieving a 20% operating margin is the target, noting that the company will see sequential improvement throughout the current fiscal year and will continue to gain operating leverage as revenue grows.

Christian Schwab from Craig-Hallum Capital Group LLC asked for elaboration on the company's statement about taking market share, requesting specific details on which products and end markets are expected to drive these gains.

Answer

President & CEO Fusen Chen identified several key product areas for market share expansion. These include clip attach and pin welders for the high-power semiconductor market; advanced dispense solutions featuring differentiated micro-dispensing technology; vertical wire, which is set to be adopted in next-generation DRAM; and thermal compression bonding (TCB), where the company is focused on driving adoption and gaining traction in new applications.

Christian Schwab from Craig-Hallum Capital Group LLC asked for more specific details on the products through which Kulicke & Soffa plans to gain market share across its various end markets.

Answer

CEO Fusen Chen detailed several key areas for market share gains. These include clip attach and pin welder products for the high-power semiconductor market, differentiated advanced dispense solutions with micro-dispensing capabilities, vertical wire technology for next-generation DRAM, and the company's leading Thermal Compression Bonding (TCB) solutions for both logic and HBM applications.

Christian Schwab from Craig-Hallum Capital Group LLC requested that management elaborate on its statement about taking market share by identifying the specific products expected to drive these gains.

Answer

President & CEO Fusen Chen identified several key product areas for market share gains. These include clip attach and pin welders for the growing high-power semiconductor market; advanced dispense solutions, where K&S has a differentiated and cost-competitive platform; vertical wire, which is set to be adopted in DDR5 and offers a significant bandwidth increase; and Thermal Compression Bonding (TCB), where the company is focused on gaining traction.

Christian Schwab requested more detail on the market dynamics, questioning why order activity was up in Taiwan despite tariff concerns that are impacting Southeast Asia. He also asked for clarification on the 'fully booked' status for fluxless TCB in fiscal 2025 and requested an update on orders from a leading foundry customer.

Answer

President and CEO Fusen Chen explained that utilization rates in Taiwan and China are high enough to potentially trigger capacity buys, whereas Southeast Asia's utilization is lower and more exposed to the automotive sector, which is sensitive to tariff uncertainty. On TCB, Chen confirmed the 'fully booked' status is due to being capacity constrained, with plans underway to increase capacity from a target of 60 systems per year. He projected TCB revenue to grow from about $70 million this year to over $100 million next year, partly driven by growth from foundry customers.

Christian Schwab of Craig-Hallum Capital Group LLC asked for the specific percentage of revenue currently driven by AI and inquired about the timeline for AI-related business to drive double-digit year-over-year growth for the company.

Answer

President, CEO & Board Chair Dhrupad Trivedi clarified that current AI-related growth comes from customers building new data centers for AI traffic, making it difficult to precisely quantify the AI-specific portion. He noted that direct revenue from solutions like AI firewalls is expected in 2026 and beyond, as those customer engagements are in earlier stages. The company will explore ways to quantitatively address this exposure in the future.

Christian Schwab asked if management remains comfortable with high single-digit revenue growth for the full year and questioned who A10 competes with most often in the AI-driven data center market.

Answer

Executive Dhrupad Trivedi confirmed that A10 is currently comfortable with the high single-digit revenue growth expectation for the year, barring any significant, unforeseen macroeconomic shifts. On the competitive front, he stated that the dynamic for AI data centers is not substantially different from traditional build-outs. A10 leverages its existing relationships with large service providers, and its established technology differentiation continues to be its key advantage against the usual competitors.

Tyler Burmeister, on behalf of Christian Schwab, asked for a breakdown of current AI-related revenue and its growth potential, questioned if 2025 growth could surpass the long-term 10-12% target, and requested clarification on the sequential decline in Q4 operating expenses and the expected run rate for 2025.

Answer

CEO Dhrupad Trivedi explained it is too early to quantify AI revenue as current products are already being used in AI applications, but they will explore how to communicate this in the future. While noting a positive growth trajectory, he remained cautious about committing to growth above targets for 2025 due to macro uncertainties. CFO Brian Becker clarified that Q4 OpEx was not a new run rate and that spending would increase in 2025 to fund investments in cybersecurity and AI, consistent with their long-term margin goals.

Christian Schwab sought confirmation that the security-led business grew 10% and asked about future growth expectations for this segment. He also inquired about any new developments regarding potential M&A or other strategic initiatives.

Answer

Executives Brian Becker and Dhrupad Trivedi confirmed that security-led revenue grew 10% on a year-to-date basis. Becker added that a 10% to 12% growth rate is a reasonable near-term expectation. On M&A, Trivedi stated that A10 is actively but cautiously evaluating both consolidation and technology-accelerating opportunities, emphasizing a disciplined approach to capital deployment to balance growth acceleration with defending the long-term business model.

Christian Schwab from Craig-Hallum Capital Group LLC inquired about the currency exchange rate assumptions in the Q3 guidance and asked if ADTRAN is benefiting from the bankruptcy of competitor BCS.

Answer

SVP & CFO Tim Santo stated that the company is largely naturally hedged on an EPS basis and does not anticipate material currency movements in the next three months. CEO & Chairman Tom Stanton confirmed that ADTRAN has already started shipping to multiple former BCS customers, primarily in the US, and expects a positive, material impact on revenue.

Christian Schwab of Craig-Hallum questioned if ADTRAN is considering currency hedging instruments and asked for a comparison of business momentum between Europe and North America.

Answer

CFO Timothy Santo confirmed that the company is now actively exploring currency hedging options. CEO Thomas Stanton characterized the European market as 'really hot' with strong booking rates, while describing the U.S. market as more 'hit and miss,' with continued strength in the Tier 2 space and signs of a recovery among Tier 3 customers.

Christian Schwab inquired about ADTRAN's target for inventory levels and how low they could be reduced. He also asked if expecting 10% or more top-line growth for the full year would be a fair assumption given the improving business environment.

Answer

CFO Ulrich Dopfer stated that the company's goal is to increase inventory turns from the current 2.1-2.2x range to approximately 4x, which will involve a gradual reduction in inventory levels throughout the year. CEO Thomas Stanton added that the 4x turns level is a comfortable target that balances efficiency with customer service. Regarding full-year growth, Stanton reiterated that ADTRAN does not provide annual guidance and, while trends are positive, it's too early to commit to a specific growth figure.

Christian Schwab of Craig-Hallum Capital Group LLC inquired about the outlook for the memory market in 2026 and the potential for improvement in the general mature market in 2025.

Answer

President, CEO & Director Russell Low explained that while not formally forecasting 2026, new memory capacity is expected to come online in late 2025 or early 2026 as HBM demand consumes existing DRAM capacity. He clarified that any revenue growth in 2025 would be driven by the power segment, as the general mature market remains in a digestion period.

Christian Schwab asked if silicon carbide technology transitions increase capital intensity for customers, the current mix of planar versus trench devices, and for details on the company's inorganic growth strategy.

Answer

CEO Russell Low confirmed that transitions to trench and super junction devices increase implant intensity, particularly for high-energy tools, which plays to Axcelis's strengths. He noted most customers are moving towards trench architecture for better performance and yield. CFO James Coogan added that for inorganic growth, the company is keeping a wide aperture, looking to leverage its global footprint and expertise, but will assess opportunities against other capital return options.

Christian Schwab of Craig-Hallum Capital Group inquired about the end-market mix for auto/industrial, the geographic split of its auto business, the nature of its technology investments, and the feasibility of its long-term $1.6B revenue target given the 2025 outlook.

Answer

EVP and CFO James Coogan and President and CEO Russell Low clarified they don't track revenue by final end market (auto/industrial) as they don't receive that data from customers. Low stated that most automotive-grade SiC devices are currently supplied by European, North American, and Japanese customers, not domestic Chinese firms. Regarding investments, they are broad-based, covering upgrades and new product development for power and memory. On the long-term target, Low affirmed the strategy remains intact, but the timing for reaching the $1.6B goal is now uncertain due to the current downturn.

Christian Schwab questioned the company's enthusiasm for a DRAM recovery over a NAND recovery, asking for clarity on the drivers and the expected timing for increased DDR5 wafer starts.

Answer

CEO Russell Low clarified that Axcelis's business is driven by wafer capacity, not layer count, making DRAM more impactful. He noted that HBM adoption is absorbing DRAM capacity, driving demand for new tools for advanced nodes like DDR5. While Q4 will see more activity, the major CapEx will come from new fabs. CFO James Coogan cautioned that the exact timing and scale of the memory recovery remain uncertain.

Christian Schwab asked if the long-term gross margin target of 20% or more is still considered achievable. He also inquired about any potential downside risks to gross margins in the second half of the year, aside from a significant drop in revenue.

Answer

CEO Jeffrey Andreson reaffirmed that the 20% gross margin target is still attainable but stressed that reaching it depends on the successful commercialization of high-margin proprietary products, like the newly qualified flow controller. He indicated the main risk to near-term margins remains operational execution, including hiring and achieving product cost targets, with some products not expected to reach target cost until early next year.

Christian Schwab of Craig-Hallum Capital Group LLC asked for the approximate annual revenue of the recently closed Scotland operation and inquired what percentage of internal components is needed to reach the aspirational 18-20% gross margin target.

Answer

Executive Jeffrey Andreson estimated the Scotland operation's revenue was around $20 million in 2023, declining thereafter, with its closure impacting the full-year outlook by about $10 million. To reach the 18-20% gross margin target, he explained it would require significant adoption of their next-generation gas panel, which includes their proprietary flow controller, on top of the progress being made with passive components.

Christian Schwab sought clarification on the 2025 gross margin outlook, asking if the target of over 16% was for the full year or an exit run rate. He also asked about the company's view on optimal gross margins for 2026.

Answer

Executive Greg Swyt clarified that the company expects a full-year 2025 gross margin of 16%, with an exit run rate north of 16%. Executive Jeffrey Andreson added that the company's long-term model targets 19-20% gross margins. He believes they can get 'pretty close' to that target in 2026, provided WFE continues to grow and quarterly revenue run rates surpass the $300 million level, which would allow for better absorption of infrastructure costs.

Christian Schwab sought to confirm the company's target of outgrowing WFE by 5 percentage points. He also asked if the industry's transition to 300-layer NAND, particularly moly replacement, offered a specific benefit to Ichor.

Answer

Executive Jeffrey Andreson confirmed the goal is to outperform WFE growth by approximately 5% and to achieve even faster profitability growth. Regarding the NAND transition, he noted that while Ichor has a position in moly applications, he does not see it as a unique driver, expecting broader growth across multiple applications as the NAND market recovers.

Christian Schwab from Craig-Hallum Capital Group LLC inquired about the expected timeframe for the hyperscaler, GPU, and custom ASIC business to become a more significant and scaled contributor to revenue.

Answer

CEO Michael Slessor indicated that the company is working hard to ensure exposure to these trends, particularly looking toward the latter part of 2025 and into 2026. He noted that success in the custom ASIC space will largely depend on the success of their hyperscaler customers' own product roadmaps, but sees it as a great opportunity to diversify the Foundry and Logic business away from the slower PC and mobile markets.

Christian Schwab from Craig-Hallum Capital questioned if the Foundry & Logic segment could return to $100M+ quarterly revenue in the second half, driven by a PC refresh, and asked for an update on the collaboration with Advantest following their investment.

Answer

CEO Mike Slessor agreed the PC refresh assumption is valid for a potential F&L rebound, but noted that tariff uncertainty casts a shadow on that outlook. Regarding Advantest, he described the investment as a statement of commitment to an open ecosystem, emphasizing that close collaboration with ATE partners is crucial for tackling the complexity of advanced packaging, which creates competitive barriers.

Christian Schwab asked if it's a fair assumption that FormFactor's HBM business could outgrow the broader HBM market in 2025, given the increased test intensity and complexity associated with the transition to HBM4.

Answer

CEO Mike Slessor confirmed this is a fair assumption. He explained that the move to HBM4 involves more layers and higher test speeds, which increases both test intensity and probe card complexity and value. This dynamic should enable FormFactor to grow faster than the overall HBM market during its high-growth ramp phase.

Christian Schwab of Craig-Hallum sought confirmation on HBM3E's dominance in 2025, asked if FormFactor will ship to all three HBM makers, and questioned if the key customer for Blackwell could become a 10%+ customer next year.

Answer

CEO Mike Slessor confirmed HBM3E's 2025 dominance but noted FormFactor's business leads bit shipments. He affirmed they already ship to all three major DRAM makers, though revenue is indexed to the market leader. For the Blackwell-related business, Slessor expects revenue will be attributed to the foundry partner, which could be driven into the double-digit customer range in 2025 by advanced packaging opportunities.

Christian Schwab of Craig-Hallum Capital Group LLC asked for an outlook on Wafer Fab Equipment (WFE) for 2026, given the strength in AI and other investments, and questioned whether UCTT could outgrow the WFE market during a potential upturn.

Answer

Answering as Cheryl, VP of Marketing Cheryl Kneffler stated that with several fabs expected to come online, 2026 WFE could see high single-digit to low double-digit growth. She affirmed that UCTT expects to outperform WFE, citing the company's product mix, share gains, and alignment with customer technology roadmaps in DRAM and Foundry, which are now expected to grow with the overall market.

Christian Schwab requested details on the company's cost reduction plans to align with a $2 billion revenue run rate and asked if workforce reductions would be a single event. He also sought confirmation that customers are prepared to absorb new tariff costs and clarified whether Q1 issues were solely due to technical challenges or broader demand pushouts.

Answer

CFO Sheri Brumm confirmed a comprehensive review of costs, including headcount and footprint, is underway but declined to provide a specific OpEx target, noting reductions have started but are not at a level requiring a formal announcement. Interim CEO Clarence Granger affirmed that while customers dislike cost increases, they are obligated for tariff costs on components they specify, making the net impact manageable for UCT. Granger also clarified the Q1 miss was due to specific customer technical issues, not broader demand pushouts.

Christian Schwab of Craig-Hallum Capital Group asked for clarification on the full-year 2025 revenue outlook based on commentary about a flat first half and stronger second half. He also inquired about the most significant AI-related growth drivers for the company.

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CFO Sheri Brumm clarified that the company currently projects a "somewhat flat" first half but is not providing a full-year outlook, though they are hopeful for a stronger second half. Cheryl Knepfler, Head of Marketing, identified high-bandwidth memory (HBM) and the industry's transition to gate-all-around (GAA) at the 2-nanometer node as key growth drivers due to increased process complexity.

Christian Schwab requested an update on the Wafer Fab Equipment (WFE) outlook for 2025, referencing previous company commentary about strong anticipated growth.

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CEO James Scholhamer reaffirmed a positive outlook for 2025 WFE growth, maintaining an estimate in the 10% to 14% range. He clarified that the final number depends on the 2024 baseline but expressed confidence that UCT would grow faster than the overall WFE market.

Christian Schwab asked for confirmation of double-digit top-line growth expectations for 2026, questioned if AgenTeq AI would positively impact long-term growth rates, and sought clarification on the strategy for international expansion via sovereign data centers.

Answer

CFO Cory Sindelar confirmed the expectation for double-digit growth in 2026 with improving margins. CEO Michael Weening affirmed that AgenTeq AI will positively impact long-term growth by helping the existing base and opening new markets. He elaborated that the new platform architecture removes data sovereignty as a barrier to entry in new international geographies like the EU.

Christian Schwab asked if management views its U.S. manufacturing capabilities with Jabil as a significant advantage in the current environment, particularly regarding supply chain stability and potential tariffs.

Answer

CEO Michael Weening highlighted the company's overall strength, including a simplified SKU count of 150 and manufacturing diversity, as key advantages. CFO Cory Sindelar added that while U.S. manufacturing provides capacity to handle potential reciprocal tariffs, it comes at a higher cost, and the company will continue to optimize its global supply chain to minimize costs.

Christian Schwab asked management to quantify their multi-year outlook for revenue and earnings, referencing the company's commentary about a "once in a generation disruption." He also asked if Calix has seen any revenue benefits from the initial release of BEAD program funds.

Answer

CFO Cory Sindelar stated that the company has not provided a specific multi-year outlook beyond its Target Financial Model, which suggests a 10% to 15% growth range. Regarding BEAD funding, Sindelar confirmed Calix received its first small order from Louisiana and expects customer turnups and more significant deliveries to occur in the second half of the year, aligning with their expectations.

Christian Schwab of Craig-Hallum Capital Group asked for color on the company's sequential growth trajectory into late 2025 and beyond, given the 1-5% quarterly guidance. He also asked for an update on appliance lead times and whether they have returned to pre-pandemic levels.

Answer

CFO Cory Sindelar reiterated the guidance for 1-5% sequential growth, expecting to be at the low end of the range for the next several quarters and exit 2025 at the mid-point, but noted it was too early to forecast the slope for 2026. He also explained that while lead times are stable, customer inventory levels have normalized at a slightly higher level than pre-pandemic, establishing a 'new normal' for ordering patterns.

Christian Schwab questioned the expected margin profile as the company enters its busier season and works off legacy projects, asking if the majority of this work would be complete by the end of 2025. He also inquired about the company's balance sheet strength.

Answer

CFO Keith Bassano confirmed the M&P work is expected to be substantially complete by year-end 2025 and that the $2.3 billion new core backlog will increasingly drive results, though risk on remaining legacy work persists. President and CEO Frankie S. Renda added that large transportation projects are ramping up to replace legacy work. Regarding the balance sheet, Bassano stated that Southland has ample liquidity, with Q1 2025 unrestricted cash more than double the prior year's level, supplemented by access to a delayed draw facility.

Christian Schwab of Craig-Hallum Capital Group questioned whether recent political shifts and discussions of federal spending cuts were creating anxiety about the funding for future infrastructure projects.

Answer

Frank Renda, President & CEO, expressed confidence, stating that the critical infrastructure work Southland performs benefits communities across the political spectrum and is unlikely to be impacted. He noted that the Infrastructure Investment and Jobs Act (IIJA) provides a multi-year tailwind for the business. Renda also saw potential benefits from administrative efforts to reduce project red tape and highlighted that Southland's in-house manufacturing capabilities could be an advantage regarding tariff policies.

An associate on behalf of Christian Schwab asked for quantification of the revenue impact from project delays, the potential gross profit impact from the remaining legacy work, and the comparative growth outlook for the Civil and Transportation segments.

Answer

President and CEO Frank Renda quantified the revenue impact from timeline shifts at approximately $60 million, which is delayed, not lost. He explained that the growing contribution from new, profitable core work is expected to overshadow the remaining zero-to-low margin legacy backlog. He expressed excitement for both the Civil and Transportation markets, anticipating a return to profitability in 2025 as the strong backlog begins to contribute more significantly.

Christian Schwab asked for clarity on the number of projects involved in the remaining legacy disputes, the potential cash generation from them, the long-term organic growth outlook, and whether the company's disciplined bidding strategy remains a core competency.

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CFO Cody Gallarda noted that while the exact number of projects is undisclosed, the City of Charlotte dispute is one of the largest, and they expect to convert their recorded contract assets into cash. CEO Frankie S. Renda confirmed the bidding environment has improved with less competition and that their disciplined approach remains a core competency. Both executives expressed optimism for future growth driven by healthy markets and the IIJA.

Christian Schwab inquired about the status of the product design partnerships with Quanta, seeking an update on the timeline for a ramp-up in the second half of 2025 and material shipments in 2026. He also asked about the expected timing for receiving the two remaining investment tranches from Quanta.

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CEO Paul Travers confirmed his enthusiasm for the Quanta partnership remains high, stating that multiple programs are progressing well and at least two should be rolling before the end of 2025. Regarding the investment, Travers noted that Vuzix is ahead of schedule on performance milestones and expects to receive both remaining tranches, totaling $10 million, before the end of calendar year 2025.

Christian Schwab of Craig-Hallum Capital Group inquired about the total value of M400 inventory Vuzix expects to sell in 2025 and sought clarity on the timeline and potential average selling price for the anticipated ramp-up to millions of units with partner Quanta.

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CEO Paul Travers and CFO Grant Russell clarified that the M400 inventory represents approximately $9 million in cash potential at cost, with expectations to earn a margin on top of that. Travers added that strong customer rollouts could even necessitate building more M400 units. Regarding the Quanta partnership, Travers explained that Vuzix will supply waveguides at a competitive sub-$50 price point in high volumes. He also noted that white-labeled products, with higher margins and selling prices, are expected to enter production before the end of 2025, with a significant ramp anticipated in 2026.

Christian Schwab from Craig-Hallum Capital Group questioned whether any fundamental aspects of the business had changed, beyond macro headwinds, to explain the deviation from the company's long-term 15%-25% annual growth target.

Answer

CEO Babak Taheri asserted that the business fundamentals remain strong, citing Silvaco's market position in TCAD and growth in IP and EDA. He pointed out that the high end of the 2025 revenue guidance ($70 million) represents 17% growth, falling within the target range. He attributed the conservative forecast to macro uncertainty and the company's learning process as a newly public entity. Interim CFO Keith Tainsky added that the expanded customer base from acquisitions presents significant cross-selling opportunities.

Christian Schwab of Craig-Hallum Capital Group inquired about the specific generation of high-bandwidth memory (HBM) being addressed, how the new silicon carbide die-level burn-in solution compares to wafer-level alternatives, and sought confirmation that the business is bottoming and poised for growth in 2025.

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President and CEO Luis Müller stated he could not share specifics on the HBM generation. He clarified the silicon carbide solution is for singulated die burn-in, which is a lower-cost replacement for, not complementary to, wafer-level burn-in because it avoids processing known bad dies. Müller confirmed the business is seeing broad demand improvement, driven by both market recovery and new product wins. CFO Jeffrey Jones added that it has been over a year since the company felt confident enough to provide two quarters of directional guidance.

Asked for a summary and total potential value of all the recently announced design wins over a three-year period. Also inquired if more substantial orders from other customers are expected during 2024.

Answer

The company detailed several multi-year design wins: a $100-200M ICE7 subsea deal, a $200-300M GX open line system deal, a $100-200M ICE6 solution, a $200-300M GX systems win, a $300-700M 800-gig pluggable win, and a 400-gig pluggable opportunity potentially worth $300-400M. They also confirmed they expect to receive initial orders from a major U.S. service provider and a U.S. MSO during the current quarter (Q2), which would then scale into the second half of the year and 2025.