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ICHR Ichor

Participants
Claire McAdams Investor Relations
Jeff Andreson Chief Executive Officer
Larry Sparks Chief Financial Officer
Craig Ellis B. Riley
Patrick Ho Stifel
Krish Sankar Cowen and Company
Tom Diffely D.A. Davidson
Quinn Bolton Needham & Company
Call transcript
Operator

Good day ladies and gentlemen, and welcome to Ichor's Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Claire McAdams, Investor Relations for Ichor. Please go ahead.

Claire McAdams

Thank you, Melissa. Good afternoon and thank you for joining today's second quarter 2021 conference call.

As you read our earnings press release and as you listen to this conference call, please recognize that both contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and could cause actual results to differ materially from such statements. These risks and uncertainties include those spelled out in our earnings press release, those described in our Annual Report on Form 10-K for fiscal year 2020, and those described in subsequent filings with the SEC.

You should consider all forward-looking statements in light of those and other risks and uncertainties.

Additionally, we will be providing certain non-GAAP financial measures during this conference call.

Our earnings press release and the financial supplement posted to our IR website each provide a reconciliation of these non-GAAP financial measures to their most comparable GAAP financial measures.

On the call with me today are Jeff Andreson, our CEO; and Larry Sparks, our CFO. Jeff will begin with an update on our business and a review of our results and outlook. And then, Larry, will provide additional details of our second quarter results and third quarter guidance. After the prepared remarks, we will open the line for questions. I'll now turn over the call to Jeff Andreson. Jeff?

Jeff Andreson

Thank you, Claire, and welcome to our Q2 Earnings Call. I hope that all of you and your families are having a healthy and safe summer so far. Today, we reported another record revenue quarter for Ichor, and continued strong financial performance. Revenues grew 7% over Q1 to $282 million.

While the demand environment continues to strengthen, revenues were slightly below the mid-point of guidance as output from our Malaysian operation was affected by the movement control order mandates issued in early June that limited the number of employees allowed to work to 60%, and while we maximized our direct labor, it did have an impact on our revenue.

We are very pleased to report a gross margin increase of more than 70 basis points, compared to the first quarter, and 280 basis points improvement from the same period last year.

We are a couple of quarters ahead of schedule on our planned margin improvements and as a result, our operating and net profitability for Q2 were at their highest levels in three years. The leverage in our operating model is evident in our earnings growth. We reported $0.90 per share in earnings for Q2 and $1.66 for the first half, which represents 57% growth in earnings per share on a 24% increase in revenues, compared to the first half of 2020. This has also been the strongest period of free cash flow generation in the company’s history with $82 million generated in the last 12 months equal to 8% of trailing 12-month revenues.

Now half way through 2021, the underlying demand for wafer fabrication equipment or WFE continues to be very robust and is expected to continue at these unprecedented levels for the foreseeable future. The semiconductor supply constraints pervasive and ongoing, [most major] device manufacturers have provided multi-year visibility into their heightened levels of investments, which are being put into place to support ever increasing demand forecasts.

As a result, WFE and expectations for 2021 have again increased since our last earnings call with expectations of growth in excess of 30%, compared to last year. The strengthening demand environment to date and 2021 is evident in our Q2 results and Q3 guidance with upticks in demand witnessed among each of our key customers and across each of our business units.

Our Q3 revenue guidance is in the range of $290 million to $320 million or 8% sequential revenue growth at the mid-point. Companies across the supply chain are working to increase capacity and so are we. Last quarter we talked about our plans to increase CapEx this year, in order to add the capacity that will enable Ichor to achieve quarterly revenue run rates in excess of $400 million. Each quarter we are achieving incremental improvements and output in order to deliver on continued steady sequential growth in an unabated demand environment.

Our visibility remains very good and continues to extend about six months or so, which along with the outlook provided by our customers provides us with the confidence to forecast sequential quarterly growth for both Q3 and Q4 with continued strong momentum carrying into 2022.

We continue to believe that 2021 is just the second year of a multi-year growth cycle propelled by the convergence of multiple demand drivers such as 5G, IoT, AI, high performance computing and autonomous vehicles, in addition to more recent initiatives to support – in support of the domestic semiconductor supply self sufficiency. Together, all of these drivers are resulting in increased capital intensity for the semiconductor industry, and higher levels of investment in fab technology and capacity. And in this extremely healthy business environment Ichor plays a critical role. I'll now turn to our key strategies to continue to outperform industry growth and in turn deliver strong operating leverage and cash flows. I'll begin with our strategic focus on some of the strongest markets within WFE. The three key markets for our products are: etch, deposition, and EUV lithography, all of which have been outpacing overall industry growth due to multiple technology drivers. In NAND, the industry continues to invest in the technology that will take them from 96 layers to 128 layers to 256 layer devices and beyond. At [each node], the cost per gigabyte declined, striving incremental demand for solid state memory in both PCs and enterprise storage and as well as increased storage with each new generation of cell phones. We see this as an elastic market, which will continue to grow with the ever increasing bit growth. At each node, there is much more etch and deposition capital intensity. Similarly, with DRAM, as we go from 1Y to 1Z nodes to the 1-alpha and the 1-beta nodes, there is more of a need for etch and deposition, and we are the leading provider of fluid delivery subsystems into these markets.

Additionally, we are seeing increased utilization of EUV tools beginning at the 1-alpha node. In logic, we are seeing the progression towards the 5 nanometer and 3 nanometer nodes by the largest manufacturers and this will require more complex geometries, and more precise control of fluid delivery. In each case, as these geometries become more complex, this drives the need for faster etch rates, better material selectivity, and more precise control of the processes. The key takeaway as it relates to Ichor is that these advanced technology nodes, capital intensity is increasing and in particular, are requiring more etch and deposition, as well as an increasing use of EUV, all of which drives more fluid delivery systems. In total, each of these technology transitions across all three device types is driving increased opportunity for all three of our key markets.

Now, I’ll update you on the progress the team has made on our strategy to leverage our engineering capabilities and IP portfolio to develop new products that will result in longer-term expansion of our share of the serve market, as well as drive the operating model towards increased levels of profitability. Since our last update, we have made very good progress on our proprietary next generation gas delivery solution, as well as with our other components that we have developed as part of this program. We recently shipped our first fully configured next generation gas panel to our initial beta customer.

We expect the qualification process to begin soon, but it will take at least six months to fully qualify. This is an exciting milestone in our program, and we look forward to keeping you apprised of our progress.

We continue to work with two other customers and expect to ship our second beta system in late Q4. In our chemical delivery business, we remain on track to deliver a beta chemical delivery system to a North American customer in the third quarter.

We expect the qualification period to extend through this year with first revenues occurring in 2022. Also, we did ship our first evaluation unit to a Japanese customer that will begin qualification in the third quarter. The scale of this first opportunity is relatively small, but an importance step in penetrating this regional market.

We continue to quote opportunities at other OEMs that are larger in scale. And while we have been delayed by impacts of COVID, our opportunity remains large, and we will continue to focus on Japan. In our precision machining business, we completed the two qualifications we highlighted on the last quarter’s call and expect to see a small amount of revenues in the third quarter with the first significant revenues beginning in the fourth quarter. These qualifications will increase both our proprietary content on gas panel and will be margin of accretive. In summary, the team continues to do a very good job of ramping the business to address the customer demand we are experienced and delivered another record revenue quarter for Ichor.

Our third quarter revenue guidance indicates our expectation for continued sequential growth above Q2 and year-over-year growth of 27% to 40% versus Q3 of last year. And as I mentioned earlier, we have strong visibility for at least six months and anticipate another quarter of growth for Q4.

We are also pleased to have delivered gross margin improvements ahead of plan in Q2 due to a combination of cost reductions and favorable product mix. And for the second half of the year, we expect margins to remain at similar levels.

So, we'll see solid earnings leverage on the revenue growth forecast for the second half, which brings us to Larry's discussion of our financial performance and further details on our outlook. Larry?

Larry Sparks

Thanks, Jeff.

First, I would like to remind you that the P&L metrics discussed today are non-GAAP measures unless identify the measure as GAAP base. These measures exclude the impact of share-based compensation expense, amortization of acquired intangible assets, non-recurring charges, and discrete tax items and adjustments. There is a very helpful schedule summarizing our GAAP and non-GAAP financial results, including the individual line items for non-GAAP operating expenses such as R&D and SG&A in the investors section of our website for reference during this conference call.

Second quarter revenues were a record $282 million, up 7% from Q1 and up 27% from Q2 of 2020. Business conditions continue to strengthen during the quarter and our operations team did an excellent job responding to strong customer demand in a challenging operating environment, which includes continuing impacts from COVID-19. We achieved a new record revenue quarter and delivered our ninth straight quarter of sequential revenue growth.

We also achieved sequential increases in gross margin, operating margin, and net income. Gross margin for the quarter came in better than forecast at 16.8%, up 70 basis points from Q1 and up 280 basis points from Q2 of 2020. COVID related costs continue to impact gross margins by about 50 basis points. COVID impacts on gross margin are mostly related to higher freight costs, as well as higher costs ensuring the health and safety of our global workforce.

While these impacts are expected to persist for the foreseeable future, we continue to drive improvements to our gross margin.

Our key strategies to drive gross margins higher are through incremental cost reduction programs, growing our share within our higher margin components businesses and increasing our content of proprietary IP within our products.

Our Q2 gross margin performance reflected earlier than planned impacts of some of the cost reduction programs combined with favorable product mix.

As expected, Q2 operating expenses were $16 million. Operating margin of 11.2%, improved 100 basis points over Q1 and 370 basis points over Q2 of 2020. Interest expense for the quarter was $1.6 million, down from Q1 as a result of an overall lower effective interest rate and outstanding debt balance.

Our tax rate was a little less than 13% year to date, and our planned rate over the next couple of years is expected to be in the range of 12% to 13% with 2021 expected to be at the high-end of that range. With revenues just under the mid-point of guidance and gross margin above forecast, earnings of $0.90 per share were near the high-end of the range.

Now, I will turn to the balance sheet. We ended the quarter with cash and investments of $247 million, an increase of $4 million from last quarter. We generated over $13 million in cash from operations, and after a CapEx spend of $10 million, free cash flow is $3 million. Total debt declined by $2 million to $168 million. Q2 days sales outstanding were relatively consistent with the last couple of quarters of 38 days as were inventory turns of 6.1.

Now, I will turn to our third quarter guidance. With revenue guidance in the range of $290 million to $320 million, our earnings guidance of $0.90 to $1.06 per share reflects similar gross margins as Q2.

Our Q3 operating expense forecast is $16.5 million, which reflects the incremental audit fees and associated costs related to becoming SOX compliant, the additional expenses associated with our new ERP system, and the higher level and R&D spending to support new product development programs.

As a reminder, for modeling purposes, we will have a 14-week quarter in Q4 of this year.

We expect our interest expense in Q3 will be around $1.5 million.

Our tax rate to again be approximately 13% and our fully diluted share count to be approximately 29.4 million.

Finally, as Jeff mentioned, we are stepping up capacity investments this year to support the strong demand forecasts for the next couple of years and expect CapEx to be around 3% of revenues for 2021. Operator, we are ready to take questions. Please open the line.

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Craig Ellis with B. Riley. Please proceed with your question.

Craig Ellis

Thanks for taking the question, and guys congratulations on the gross margin progress and overall profitability. Jeff, I wanted to go back to comments on supply and just try and put a finer point on things and understand things a little bit more broadly.

So, can the – one, can the company just quantify what the supply impact was in the quarter from the Malaysian issue that you identified? And two, just given some of the things that we're hearing more broadly from either larger companies, but our customers are potentially competitors that are speaking to constraint issues, was the business impacted indirectly by any supply issues beyond the things that you saw in Malaysia?

Jeff Andreson

Yeah, I'd say for this quarter, Malaysia had a bigger impact on us than some of the other supply constraints, which we've managed. It's hard to put an exact number on it Craig, but I would probably say kind of, you know, high single digits in millions is what we probably could have got out if we had a Malaysia operation run in, you know, full out.

And so it took us a few weeks to, kind of rejigger things and you lose a little bit of time. Like others, we're seeing some other pockets of supply constraints that obviously have some effect on you, but we're working pretty closely with those suppliers, and honestly, our customers to try and manage those as best so that we don't impact our, you know, our customers’ needs.

And so, I think we've done a pretty good job, but there are still a few pockets of that that we have to work through. Hopefully, through this quarter. We'll be through most of that. And I think that's probably as clear as I can make it without being too specific.

Craig Ellis

Yeah, that's helpful. Thanks, Jeff. And then nice to see the gross margin, like I mentioned earlier, it sounds like we're looking at flattish trends over the next couple of quarters.

So, guys if you could just talk about some of the gives and takes whether there's mix or other issues that have some offsets? And then staying on the gross margin line, Jeff, as you were talking through some of the strategic items, it seems like there's a number of positive things happening with new product introductions that could begin to benefit the model next year, not looking for guidance, but what's a reasonable way to think about some of the margin dynamics, whether there are tailwinds or headwinds as we look out to 2022 for Ichor?

Jeff Andreson

I'll let Larry answer some of the gross margin stuff, and then I'll circle back to the second half of your question.

Larry Sparks

I think, as we talked about in the last, you know, we're shooting for around a 20 basis point improvement quarter-over-quarter. We were happy with our progress this quarter at 70 basis points. I'd say of the incremental 50, about half was product mix, which is a heavier mix of our components business, which is what we've talked about before. And we're seeing that come through the P&L, and the other half was – some of our cost reductions that were able to execute a little earlier than planned.

I think when you look at the third quarter and beyond, you've got a few things in play: one, you know, significantly strong business out there.

So, the, you know, the mix of gas to our other products, we'll have to keep an eye on that. It looks like Q3, we have a little bit of a headwind there, but we'll continue to improve on the cost side.

So, we expect to, you know, overcome some of that impact. And then I think, if you look at the longer-term, we definitely with continued cost reduction programs, and with the share gains we expect and components. And then as Jeff talked about, you know, some of these products that have more IP content in them, you know, we'll continue the trend line going into 2022. Jeff, you want to add to that?

Jeff Andreson

Yeah, and I mean, obviously, I'm not going to, you know, guide the absolute impact as these new winds start to roll out.

You know, a lot of what we've been investing in is in our precision machining area and components along those lines that carry higher margins. We always say, they're, you know, kind of in that low-30s or so and so you can just take that differential, and you know, if you've got 10 million and new wins, you can see it moves the needle pretty nicely, but having said that, we're very early in some of these wins.

We have to get through the qualifications. And then as we get through those, we'll give you a little more specificity around the impacts on the year, but we're really excited about the progress we made this quarter.

Craig Ellis

Excellent. Thanks very much, guys. Good luck.

Jeff Andreson

Thank you.

Operator

Thank you.

Our next question comes from line a Patrick Ho with Stifel. Please proceed with your question.

Patrick Ho

Thank you very much, and congrats on the nice quarter and outlook. Jeff, maybe first-off, just following up on some of the commentary you made about qualifications for some of your newest products.

You know, I know qualifications can take time, but given the current demand environment and the extended visibility, the entire ecosystem is seeing right now, have you seen any acceleration in terms of qualifications? And what I'm kind of trying to figure out is, as you look at your customers on the [tool], are they trying to hasten the speed to get out some of their new tools? Because the demand is clearly out there and the industry is moving to next generation devices, have you seen any pickup law on the qualification side that could accelerate, you know, your adoption of these new products?

Jeff Andreson

I think it's – I would say it’d be marginal that they're accelerating beyond what they have to do to get in and qualify. Remember most of what we're doing, gas flows through, for example, or a chemical.

So, it has to go through a pretty long qualification period. Having said that, I think we've taken a step forward. I do think that there is, to your point that there is a demand for more. And this is helpful.

So, we could see some acceleration, but since we're just now getting through this first phase, and then we just shipped our first fully configured gas panel, by the time we do the next call, we'll have a better feel for how fast everybody's moving versus what we would think normally.

Patrick Ho

Great, that's helpful. And maybe as my follow up question for Larry, as you talked about CapEx is increasing for you guys as well to add the necessary capacity for future demand of your customers, as you look at the margin profile, as you add on this CapEx, typically there are startup costs associated with it, but again, with this strong demand environment, the extended visibility we're seeing, do you feel as we go into 2022, that – you know, the new capacity that’s been added on, that can be absorbed quicker than usual, and that'll actually be a gross margin boost, you know, as we head out of 2022 and longer-term for the company?

Larry Sparks

Patrick, I think the first thing is that, you know, the bulk of this investment in capacity is in the machining and components area, which for us, as you know, is the higher margin business.

So, I think when you look at, you know, even though we've kind of elevated our CapEx investment, as this comes online and we're able to ship more precision machine parts in a very, very healthy environment, I think that'll be margin accretive to us.

So, we're very confident that, you know, where we're putting the money is needed.

We have made some investments in the integration side, but those on an absolute dollar basis is less than what we're making on the machining and component side.

Jeff Andreson

Yeah, we don't think the integration investments will pull us off, kind of our business model, because as you know, the volumes are going up, and they'll carry some of the overhead anyway.

So, yeah, I think at the end of the day, we would expect margin accretion out of these investments, as Larry said, largely around the component side of the business.

Patrick Ho

Right, thank you very much.

Jeff Andreson

Thank you, Patrick.

Operator

Thank you.

Our next question comes from line of Krish Sankar with Cowen and Company. Please proceed with your question.

Krish Sankar

Hi, thanks for the question. I had two of them.

First one, either for Jeff or Larry, you mentioned that December should be up sequentially, and clearly, WFE has grown at least 30% this year. If I do the math, is it fair to assume the December quarter revenue should grow at least 10% sequentially from the September quarter? And then I have two follow-ups?

Jeff Andreson

Yeah, well, I'll take this one Krish.

I think some of the, just to really couch it, some of the upside to WFE has been in DUV lithography and optical. I would say, you know, we're not going to guide that, specifically in that, but we think we'll be pretty close to the overall growth rate of WFE, if that helps you.

Krish Sankar

Got it, got it. That’s super helpful. And then, the next question is, maybe for Larry, you said the difference is a 14-week quarter, is that the implication is not going to be a whole lot of upside to revenues, but your OpEx could be higher in December versus September, is it the [right way] through?

Larry Sparks

Well, I think the – I mean, having an extra week, you know, does help the revenue picture.

So, I think, we, you know, that just having those extra days. But yes, it will translate into higher OpEx. And you can assume, you know things like labor and some of our depreciation and other things will scale at 14-weeks versus 13-weeks.

Jeff Andreson

And when we get closer, we’ve have a better feel for it too. It's highly, you know, you get a lot of holidays and people taking time off.

So, it's not – it's just not a divide by [13 or multiply by 14], it’ll be a subset.

So…

Krish Sankar

Got it. Got it. And then just a final question on the [eval tools], I remember like, you know, a while ago, you said that some of these eval got delayed because of COVID.

Now, that it seems like the eval is happening, I’m just trying to assume – I'm assuming these are maybe one-year eval, if that is the case, you have costs associated with it, but not a lot of revenue to customers effectively qualify it.

So, is it fair to assume that or?

Jeff Andreson

I think – two things, Krish.

I think the one that's been delayed by COVID is an opportunity we still have in Korea, the ones in Japan are new, the North America customer will be a new eval. These probably take somewhere between three months and six months before revenue. And there's very little cost associated with these particular units as they put them on their tools and run it.

So, you won't see it. We'll have some incremental costs, but I mean, it's kind of in the noise at this stage.

So, and then the first generation gas panel obviously is a new one as well.

So, we're pretty happy with our progress in the third quarter – our second quarter, sorry.

Krish Sankar

Thanks Jeff. Thanks, Larry.

Jeff Andreson

Thanks, Chris.

Larry Sparks

Thanks, Chris.

Operator

Thank you.

Our next question comes from the line of Tom Diffely with D.A. Davidson. Please proceed with your question.

Tom Diffely

Yeah, good afternoon. Maybe a first quick question for Larry, on the margins, so obviously, we talked a lot about the gross margins, but wondering over the next couple quarters, if you expect some nice flow through for nice acceleration of the operating margins? Or are these expenses coming back in terms of maybe return to travel or new R&D programs that might offset that a bit?

Larry Sparks

Well, we'll see a little bit of travel, although most of that shows up in OpEx.

I think, you know, we do have COVID, I'd say, you know, everybody was hoping this COVID would go away and it's just not going away, and you're seeing it in freight, and we're definitely seeing it in couple of the orders in Malaysia and a few even the Delta variant in the states here, but so that's sort of an unknown. We're sort of just projecting that that's going to impact us in a similar fashion going forward.

So, that's a little bit of a headwind.

I think, you know, looking at product mix for us, we'll expect gas to bump up a little bit, but I really do think in the components business and in the machining business in particular, you will see continuing share gains there and continuing improvements in the margin profile.

So, we're, you know, you put all that together, and, you know, we've said 20 basis points. We did have a acceleration this quarter.

You know, I'm hoping that, you know, we get into Q4 and beyond, we can get back on, kind of back on that train as we, kind of go into the early part of 2022. But we're definitely, I think, very optimistic, as Jeff mentioned, on some of the new qualifications and things and where we're adding capacity. And that's all starting to come online.

You know, that'll put us in a good position.

Jeff Andreson

Yeah. And you'll see leverage through the operating margin, clearly, because our OpEx even though we've guided a little bit of an increase from the SOX, it's still well within the range we have, and then you've got the revenue growing and the margin staying at similar levels.

So, you will see operating margin improve.

Tom Diffely

Okay. And, Jeff, you talked about six months of visibility, which is, kind of unheard of in this industry. Has that changed your planning at all, your operations, your inventory levels, anything like that, on the go forward basis [indiscernible] visibility?

Jeff Andreson

I think the answer is, yes.

I think that, you know, with better visibility, we get better forecasts, we get really pretty good forecasts, we have more confidence to lay out our procurement plans and [POs] who our suppliers.

Our customers are being very cooperative and ensuring that, you know, we get as much visibility as possible.

So that helps all the supply chain, know what to do. Obviously, we've talked about a few challenges, but I think in general, I think things are starting to, you know, improve, and we'll see continued progress.

You know, barring of, you know, the COVID impact that we ended up having in Malaysia, I think is a little unique to a few of the sub tier suppliers. But I think we've managed through that and rejiggered within our network and with other partners to, kind of replace that.

So, we're – but we still got some catching up to do.

Tom Diffely

Great. And then finally, when you look at the next generation gas panel that you sent your first [indiscernible] on, is that a gas pedal that's applicable to all of your end-markets or is that just for a very specific end-markets or applications?

Jeff Andreson

This particular one is focused on a particular application, and as we continue with the program development, it will be able to apply to all our markets. But we need a few more months to get some other well control volumes, kind of through R&D and onto the next gas panel.

So, the [next data] that we talked about will actually address the different application.

Tom Diffely

Great. Thanks for your time.

Jeff Andreson

You bet.

Operator

Thank you.

Our next question comes from the line of Quinn Bolton with Needham & Company. Please proceed with your question.

Quinn Bolton

Hey, guys, let me echo my congratulations on the nice margin performance. Jeff, I wanted to start with [OPM parts] availability, one of your peers last night cited that as a constraint, doesn't sound like you've seen a dramatic effect, but wondering if you could just address, you know, kind of supply of flow controllers, power supplies, other types of components going into these systems? And do you think supply, you know, kind of getting better or getting worse? Just your thoughts going in the second half, you know, given how strong the demand environment is.

Jeff Andreson

Yeah.

Just to be clear, I mean, what we manufacture and I, obviously, I know you're talking about, but we don't have the semiconductor, kind of content that some other people have.

So, we don't get much of that impact at all. We've done as much as we can. We've tried to secure anywhere where we think it's risky. We tried to secure incremental inventory, much to the last gentleman's comments around supply chain and stuff, but we're, you know, it's getting better. There are still some pockets. Obviously, when you go through any kind of these ramps, you always get one or two suppliers that has to catch up and then that affects us to some degree, and you know, we've, you know, maintained our broader range of revenue guidance, obviously, with quicker recovery, probably moves us up. But at this point, you know, we've given you our best visibility with what we see out there. But I'd say in general, it's not through our entire supply chain. It's very localized to a few areas. And we're working really well with those suppliers to, kind of get through this, and get back on track. But this has been pretty unprecedented growth for a lot of us in the industry. And I'd say, in general, they're doing remarkably well.

Quinn Bolton

Got it, and then just to, sort of looking at 2021, obviously, WFE mix shifting, I think to foundry logic and DRAM, perhaps a little bit away from NAND you have any thoughts on whether etch and deposition segments, WFE can grow in-line faster or slower than the overall market this year? And, you know, how does that affect your outlook, your growth outlook for the year?

Jeff Andreson

Yeah, I mean, obviously, you know, we're once removed from that, but I mean, you can see some of our customer’s progress.

So, I think it's growing maybe a little closer to in-line to the market this year, but not like it did maybe last year, obviously. But you know, NAND demand, you know, for equipment, I think is still pretty strong in the second half, but obviously with logic, you do see, you know, more deposition and things like that in that.

So, but I think it'll grow pretty closely in-line with the market is kind of our take.

Quinn Bolton

Great, thank you.

Operator

Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Mr. Andreson for any final comments.

Jeff Andreson

Thank you for joining us on our call this quarter. I'd like to thank our employees, suppliers, and customers for their support and strong execution in this historic demand environment for the semiconductor industry. We look forward to updating you again on our next earnings call in early November. In the meantime, we hope to see you at one of our Q3 investor conferences, such as those being hosted by B. Riley and Needham in August. Operator, that concludes our call.

Operator

Thank you. Ladies and gentlemen, this concludes today's conference.

You may disconnect your lines at this time. Thank you for your participation.