Lam Research Corporation (LRCX) Earnings Call Transcript & Summary

All right. Good morning. Let's go ahead and get started. Welcome to JPMorgan's 50th Annual Technology, Media and Communications Conference. Good to see everybody in person. My name is Harlan Sur, a semiconductor and semiconductor capital equipment analyst here for the firm. Very pleased to have Doug Bettinger, CFO of Lam Research, here with us today. Lam is, for most of you who don't know, a top semiconductor capital equipment supplier, strong leadership in etch and deposition and fast-emerging businesses like resist processing, advanced packaging. I've asked Doug to start us off with articulating Lam's view of the industry, wafer fab equipment, or WFE, spending outlook for this year and Lam's performance within that. So -- and then we'll go ahead and kick off the Q&A. So Doug, thanks for joining us today, and let me go ahead and turn it over to you.

You bet, Harlan. Thanks for having me. I always like to keep my attorneys happy. I'm going to read the safe harbor to remind you guys that today's discussion may include forward-looking statements that could be subject to risks and uncertainties, and actual results may differ materially. Additional information considering factors that could cause actual results to differ materially from those forward-looking statements can be found in the risk factors disclosed in our public filings with the SEC, including the most recent 10-K and 10-Q. Thank you. As I look out in the room, it is really good to be back face-to-face and see so many people jammed in this room. It's been too long. So good to see everybody again. Yes. Harlan, let me talk a little bit about what we see going on this year, just to kind of frame it. First, I start at the highest level. What's going on in the semiconductor industry? Boy, frankly, when I look at what occurred over the last 2 years, so many digital transformations got pulled forward, frankly. And it has created an enormous demand for semiconductors. That's great. This is an awesome industry to be in. So then peeling that onion down a little bit. Technology transitions are occurring as fast, if not faster, because of that pull forward of the digital transformations that I described. So when you layer on top of a really strong semiconductor industry, the investment in wafer fab equipment this year is extremely strong. Capital intensity is up because of all the things I know Harlan is going to ask me about. So that's the awesome part about end demand. End demand is very strong for wafer fab equipment this year. Our unique position in enabling 3D device architectures and the transformation of a lot of things, again, that I know Harlan is going to ask me about, has Lam outperforming relative to what's going on in the rest of the industry. Now having said all that, we are supply constrained as an industry, meaningfully supply constrained as an industry. You've been hearing all of us talk about this for a while. It's still something we continue to grapple with, and I'll talk more about it during the Q&A here. But when we look at our expectation for what the industry's investment is going to be this year, our view is it's roughly $100 billion. And that is insufficient to meet the demand for equipment that's out there. And so I think all of us are working through this with different levels of success. We're working our way through issues bit by bit, and we'll talk about that in the Q&A as well. Demand is stronger than supply. Lead times are stretched out. Every aspect of the industry is growing investment this year, so that's good. Again, coming back to the demand for semiconductors is the most important thing going on. So I don't know, Harlan, that maybe will get us going as we jump into the Q&A you want to go through.

Yes. No. Thanks. That was a great intro and prepared remarks. In terms of -- you talked about it. And in terms of unconstrained or true demand, right, you and your larger peer that reported last week, both see true demand at $100 billion plus in wafer equipment spend for this year. That's up high teens percentage plus year-over-year. So very strong demand. In terms of actual revenues and shipments, which is constrained, it's really how you see supply chain opening up near term and in the second half of the year that drives maybe the slight difference in constrained outlook for this year. You're talking about $100 billion constrained business for this year. Your larger peer last year -- last week talked about full year WFE constrained in the low 90s. But I guess the difference is basically confidence level on how you see sort of the second half sort of opening up or not from a supply chain perspective.

Yes. Harlan, it's always hard for me to compare and contrast, hey, they said this. You said that, ABC, because I don't know what everybody else is seeing. I can only tell you what we see. I'm sure it's -- and if you go through all the equipment companies, we've all said something a little bit different. And I do believe the difference is our view on how quickly and to what magnitude does the supply chain get better. As I sit here today at Lam, we believe things get incrementally better as we go through the year. And I say that because -- and we'll get into this. I won't jump ahead in some of the stuff I know you want to talk about. But frankly, we are in a task force mode with most of our large suppliers. And basically, what that means is we have Lam Research employees camped out at every factory location, at every one of my major suppliers, trying to figure out what's going on, what's mitigating output, why can't we get more in terms of what we really want to see. And frankly, it's a whole bunch of different issues. But as I know from years and years in the industry, once you get to a root cause of what a problem is, you can go work on it and make it better. And that's our view of things as I sit here today that as we get down to root cause at all of the mitigating problems limiting output, we're going to make it better. To what rate and pace, I think, will remain to be seen. But that's -- when I talk about $100 billion, I believe we make things somewhat better in the second half of the year, Harlan. And I don't know what applied things.

What types of -- there are several different issues, right, that the team is grappling with. There are components or subsystems that your suppliers are having a hard time piecing together. That's number one. Number two is obviously the production shutdowns in China that's causing either production delays, freight delays and so on. What are the bigger issues right now as you see? And as you work with your suppliers, what's the visibility that you have and confidence level that things are going to get better in the second half of the year?

Again, it's just going back to what I already said. Once you get to the root cause problem, you can begin to make it better. Maybe let me paint the picture with broader brushstrokes a little bit, so you can kind of see it. Like I said, task force mode probably with our top 30 suppliers, maybe even more than that. And what does that mean? It means we have teams of Lam Research employees, like I said, at every factory location all over the world, and I really think of it for 2 reasons. One, we need to know when delivery dates are going to happen. Are commitments going to be met that were made, right? We can't be surprised. So that's one reason why people are there. But secondarily and more importantly, what are the root cause problems? And it does truly vary supplier by supplier, location by location. But I guess if I was going to put it into categories, perhaps, yes, there's subsystem availability that is impacted by raw material availability. It's impacted by labor. It's, sometimes, impacted by shutdowns related to COVID breaking out in different areas in Asia. So that's one broad category. But it's got a lot of root cause problems for why subsystem availability isn't where we would like it to be. So that's one. Again, if I step back and keep peeling that onion, frankly, this may surprise some of you, but we can't get the semiconductors we need and the volumes we need. It's actually kind of crazy when you think about it, right? This industry needs more equipment to supply more semiconductors. We can't get all the semiconductors we need to build the equipment. And frankly, prior to the situation we're in right now, I don't believe we had ever purchased semiconductors for the production volumes anyway. Clearly, in R&D, we need that as we're developing things. But we're needing to work several layers back in the supply chain to help, again, try to mitigate the root cause problems. And there's a lot of semiconductor availability challenges we're having. So that's another one, Harlan. Second, freight lanes, there's still not enough freight availability going back and forth across the Pacific Ocean where we fly a lot of things, both directions, frankly. There's third-party warehouse availability. There's a broad set of other things, I guess, I would characterize. I mean some of them are very unique to the situation with any one supplier. I've got one that's struggled with an ERP implementation. You bang your head against the wall and asked how did that happen, right? So it's a broad set of things. And I've been describing it if you know the game whack-a-mole, right? It's been a bit of a game of whack-a-mole. You go whack one thing down, and something else pops up. You got to get it where nothing's popping up again and make it better. I believe we will make it better, though, as we go through the second half of the year.

Any differences in terms of the architecture of the tools that you provide? Is it harder getting the subsystems and the parts for dielectric systems, for etch systems, for your cleaning systems? Are there any differences? Are their architectures sort of relatively the same?

We're having challenges in every tool type, Harlan. There are some that are probably a little bit more challenging than others, but we're having it across the entire suite of our products.

And then I know on the last earnings call, I had asked you and Tim about, are there any differences between different end markets, right, memory versus foundry and logic. And I think the answer was no. I mean it's impacting the end market sort of across the board. But the question I have now is it feels like the situation is getting to a point where could it impact the current book of manufacturing business with your customers today. In other words, the installed base of manufacturing that your customers are driving today, super high utilizations, right? Target usage is high. Spare parts usage is high, right? They want to upgrade chambers. Is this actually starting to impact the current run rate book of this manufacturing business with your customers?

A little bit. Inherently, you're getting into our CSBG business, the Customer Support Business Group. So maybe I'll just jump into that and talk about what's going on there, Harlan, because that's what you're asking about, the installed base. Frankly, in some ways, this is my favorite part of our business model that oftentimes, it'll be the last 2 minutes of a fireside chat like we're having, and I'll have to bang on the table, and say, "Hey, don't forget about this," but let me talk to you about the installed base business. This is the service we provide to customers and the revenue we generate from helping maintain the installed base that's in the customer's fab already. It's not necessarily selling the new equipment. It's not -- although part of it is, I'll talk about that. But it's -- let me go through it. It's spare parts. It's service. It's equipment upgrades. Our equipment can be upgraded next generation or next capability on an existing tool where you upgrade part of the tool. And then it's what we call the Reliant product line, which are the tools that historically anyway -- although not so much today, historically, we have gone to market there by selling refurbished equipment. And we're now selling new old equipment if that makes any sense. It's the legacy nodes or the specialty technology. So when you unpack all that, Harlan, you're absolutely right. Utilization is as high as it's ever been, right? And so what that means for 2 of the 4 components of CSBG, spare parts and service, consumption of those aspects of the business is very high, right? The higher utilization is, the more frequently spare parts need to be replaced, and the more frequently service needs to be performed. So that's 2 components of it. And Harlan, I don't -- that's not -- we're not impacting utilization right now. We're not impacting performance installed base. Fortunately, with spare parts, it's something that you always maintain a good deal of inventory for because it's often a consignment model with how we make sure inventory is hubbed around the world so the customer gets spares when they need them. So that's in service. Obviously, we've got the labor available to go in and do that work. So those are -- think about those 2 things as humming along quite strongly. Supply chain is impacting the other 2, though, right? As we exited the December quarter, I had been talking in Reliant. I think it was 12 consecutive quarters of record Reliant revenue. So that talks to the strength of the legacy nodes. Think about IoT, power analog, all of those things, great business, doing really well. But frankly, like I said, because in the Reliant product line today, we're selling new equipment, not refurbish so much anymore because used equipment isn't available. It's in the fab. It's running. And so that's impacted by supply chain, just like the newer models are. And similarly, with equipment upgrades, that's like upgrading a part of the tool. It also is currently impacted by some of the supply chain challenges. So unpacking it, that's the way to think about that part of the business, Harlan.

Perfect. One of the other questions I get from investors is on China, right? And so on your shipments to China domestic customers, which I believe represents about 13% to 20% of your total system shipments. Roughly, it's about roughly half of your China shipments, right? There's been increasing rhetoric out of Washington on further limitations being imposed on U.S. equipment suppliers into China. I know the Lam team already has to apply for licenses to ship to certain China customers, but has your government relations team seen any increase in activity or momentum from Washington in that there are more aggressive export actions coming down the pipeline for the U.S. equipment suppliers?

It's hard to know that, Harlan, for sure. But let me unpack the stuff and everything you said, you got the numbers exactly right as you always do. The China revenue for Lam is about 30%, call it, 30 -- 1/3 of the business, roughly speaking. Very strong. And when you unpack that 30%, it's fairly evenly distributed between the global multinational customers that have fabs in China and the local Chinese customer base, just to kind of get your head wrapped around that. And I think pretty much every one of the large multinational customers has a fab in China. So that's a piece of that. And then within the local China customer base, just to paint a picture a little bit, really one large NAND customer, and I think everybody probably knows who that is, one large DRAM customer and then a whole bunch of more specialty node foundry partners. It's a very large set of customers, a lot of whom I promise you, you've never heard of because every time I look at the list, I'm like, who is that? I have to go down and remind myself who everybody is. So then more directly to your question, currently, there's only one customer or one semiconductor customer in China that requires licenses. And for that customer, we have received some licenses primarily for spare parts. However, we haven't received licenses for new equipment for the most part. I'm oversimplifying that a little bit. And that's the state of the world today. Now you asked, could this get broader? I think the way I look at it -- and we have invested in a very, very good government affairs team today. It's something, I think, 5 years ago when I think about what we're doing at Lam. We weren't all that actively involved in this aspect of things we are now. We've hired a very senior individual who's very well connected and does his best on our behalf to educate people and government about how the industry works, what it looks like, who Lam is and so forth and has done a very nice job. We've got very actively involved in that. And I guess what I would tell you, Harlan, like any issue you look at, there's people on the left side of the issue, and there's people on the right side of the issue and people that want to do more and, frankly, people that want to do less. And how this all plays out, I can't help forecast it. I don't have a crystal ball to tell you is it going to become more onerous or, frankly, might it become less onerous? Just don't know, Harlan. There's lots of discussion and lots of press being written. Not all of the press you read is all that well informed, I observe. It's a very nuanced issue, frankly. And like I said, there's people on each side of it. We'll see how it plays out.

Perfect. Before I move on, are there any questions from the audience? If you have a question, feel free to raise your hand, and we have some mics that we can bring to you. No? Okay. Let's talk about the longer term. So this year is actually a great example, right? So unconstrained WFE, $100 billion plus, that's up sort of high teens percentage plus year-over-year, maybe even better. Semiconductor industry, I think we're forecasting to grow 10% to 15%. So outperformance by WFE. And in fact, this continues the trend that we've seen over the past 8 years where wafer equipment spending has grown at a 15% CAGR versus the semiconductor industry that has grown at an 8% CAGR. Lam has grown at a 20% CAGR over this 8-year period of time. So very strong outperformance. Given the complexity challenges, the need for more installed capacity to support strong demand trends, do you anticipate WFE to continue to outgrow industry revenues on a go-forward basis?

It's always hard for me to answer that question. Everybody wants to say, "Hey, capital intensity is pretty high, and can it continue?" Here's what I observed and what I know. The demand for semiconductor is very strong. That's not going to change. It's going to continue to grow. The industry will be meaningfully bigger in 5, 6, 7 years' time than it is today. Capital intensity is going up. And when I think about capital intensity, I think about capital required to get a wafer through the fab, not WFE as a percent of revenue. And I'll talk about how I think about that piece. It's going up. Unfortunately, for us and the businesses we're in, in etch and deposition, that's growing as a proportion of the wafer fab equipment required simply because you've got 3 device architectures coming in. You still have nice growth from multiple patterning and different types of materials coming into, being needed to manufacture these leading-edge wafers. So our spot in this is quite nice. I wouldn't trade it for anybody else in the industry, frankly. Then to your direct statement, hey, can this capital intensity -- when you're asking -- or WFE as a percent of revenue. Hard to know for sure. Is it precisely this number consistently? Does it go up? Does it go down? It's probably going to vacillate a little bit year by year. But what I always point out to people is, frankly, that's the wrong metric to be looking at. It's the wrong metric. WFE, as a percent of revenue, is a metric we've all been trained over the years to look at. And why is that? It's because we want to know, is the investment affordable? Well, guess what, I think you guys all know -- guys and gals all know, investment's not made out of revenue dollar. It's made out of profit dollar, right? As a CFO of a company, I look at profit, and can I afford to fund what needs to get funded? So the metric we need to start training ourselves to look at actually is not WFE as a percent of revenue. It's WFE as a percent of operating profit dollars in the industry. And frankly, if you actually go look at that metric, it's not at a high watermark. It's actually at a low point, frankly, in a 10-, 15-year time horizon. So go take a look at that data. I don't know if you've ever published it in any of your reports, Harlan. You probably have, but I encourage you all to look at that because that's the more important metric if you're worried about affordability. And when I look at it, frankly, it's very affordable because industry profitability, never been better. So it's a function of pricing being quite strong. So that's how I think about that.

Yes. I think to your point that we just had Western -- your customers, Western Digital and Micron Analyst Days over the past week and a half, and both of them said exactly the same thing. They put up some nice graph showing CapEx as a percent of their operating profitability. And you're right, like it's actually kind of at a low point. And they stress the point of this is the reason why like we're trying to improve through cycle profitability is because capital intensity continues to move higher, right? Every single generation of new technology, whether it's DRAM or NAND, continues to go up on a normalized basis, right? Equipment spend per wafer continues to sort of move higher. So that -- to that point, your customers are certainly echoing the focus on profitability.

Yes. We -- listen, at the end of the day, we all need to get paid fairly for the value that we're creating and generating for the industry. And I see that actually in a very good spot right now.

The team has -- I remember back at the Analyst Day, the team has a target to grow its etch and deposition share cumulatively by about 4 to 8 percentage points. Tim mentioned on the last call that the team actually gained share in 2021 in both deposition and etch.

Yes.

When we look at the recent Gartner share numbers, it looks like Lam sort of grew in line with the market in terms of etch and deposition. So how does Lam team define share versus the way that some of the third-party research guys do find share?

Yes. I guess the first thing I'd tell you about the third-party data is it's noisy. It's lumpy. It's -- sometimes, it gets confused between shipments versus revenue. And they define markets different than we define markets. They have things in our markets when they report it that actually isn't in our market. We don't compete for some things. So anyway, when you unpack all that, what I would tell you about the third-party data is over a multiyear horizon is directionally correct. But in any 1 year, it is not precisely correct, at least it never ties out with our data and the stuff my corporate analytics team and my investor relations teams put together. But yes, when we look at our data on a shipment basis in our markets, we gained a little bit of share last year. And so let me unpack that a little bit too because last year was a pretty strong foundry/logic year. I think most people know that. I think most people also know that our strongest footprint is in memory, right? So in a year when it was a strong growth year in foundry and logic, we still gained a little bit of share when the mix was moving a little bit against us relative to NAND, DRAM, foundry/logic. So that is actually a very strong statement of the strength of our growth in foundry and logic, actually, the strength in the growth at some of those legacy nodes, the Reliant product line and their continued strength in memory. So when you put it all together, even with mix kind of going against us a little bit, we still more than held our own. So felt -- actually, when I looked at it, I felt pretty good about it.

Given the outperformance of the Lam team, as I mentioned to you, right, over the past 8 years, you guys have outgrown WFE by 5 percentage points per year. And given the pipeline, it feels like you guys are going to continue on that sort of momentum. So one of the big initiatives by the team has been to expand your systems assembly capability. You're starting to ramp your new Malaysia factory. I know that there was a big Omicron sort of spike in Malaysia sort of mid-March and -- but COVID cases are back down to kind of normal levels. So couple of questions. Did this impact the start-up and ramp for your Malaysia facility? Or is it on track to drive revenues in the second half of this year? And can you just remind us on the gross margin tailwinds as you start to ramp into that facility?

Yes. Let me talk maybe a little bit broader about kind of the company's footprint -- manufacturing footprint, and then I'll get in specifically to your question on Malaysia. So obviously, Lam Research is a global company. We manufacture all over the world, but we have a heavy focus on manufacturing in the United States. Our biggest factories today are in Northern California and in Oregon around Portland, right? That's where the biggest stuff is. We've got a large spare parts factory in Ohio. We're expanding all of those locations to the best of our ability, right, because we're constrained. I guess it was 2 years or so ago that Reliant product line having been primarily refurbished equipment, we move the factory to Asia. So where we build that product line is in Taiwan. And then we have factory in Korea that's been with the company for quite a long time and a relatively small factory in Austria. But the new factory that you're asking about, Harlan, is in Malaysia. So as we looked around and as we assessed where we believe growth was going to be, it made sense that we're going to need a new location to support increasing volume. And so the intention is and was to grow that volume in Malaysia. Great location. The semiconductor industry has been in Malaysia, Penang. It's West Coast of Malaysia, I don't know, since the early '70s, right? Great skilled workforce, availability of talent, knowledge of the industry. It's a very conducive place to be, actually. And so we're the first equipment company of any scale that has been to Malaysia, not technically in Penang. We're on the mainland just across the bridge from Penang. We were fortunate that we had contemplated needing that factory quite a long time ago. We had begun construction quite a long time ago. And as volume grew, we, frankly, were able to accelerate the schedule such that, that was a big reason why when I look at what is limiting our output, it's not the bricks and mortar or people at Lam because we were able to pull the schedule forward of that factory. And yes, you're right, COVID has impacted Malaysia. There's been different movement restrictions or whatnot. But frankly, there's been that all over the world. We know how to operate safely everywhere. And frankly, not only has that not limited us, it's helped us deliver a little bit upside in terms of our own physical infrastructure. The ramp is very much on track. It eventually -- once it's fully ramped, the factory in Malaysia will be the largest factory in our network, not today. But once it is fully ramped, it will be. So that's where we see a lot of the growth going. And yes, I had been, last year, describing it as somewhat of a margin headwind. Frankly, right now, it's probably neutral. It's still a facility that is by no means close to being fully ramped. There's lots of ability to continue to grow into that footprint. But you shouldn't think of it as the headwind to margin that I was describing last year, not so much anymore. The headwind to margin right now, frankly, is everything going on in the supply chain.

Any questions from the audience? We've got one question up here.

So totally agree like you talked about like CapEx intensity is going up because as we move to advanced nodes. But just looking at the near-term picture, right, from '19 to '22, WFE has kind of doubled, $50 billion to $100 billion, right? We all are kind of entering this global slowdown period. So I guess the question is given everybody's supply constraint, first of all, how would you even know that we are not leading to kind of overcapacity? And then what are you monitoring to see, like, will this lead to overcapacity build? And I'm talking kind of more near term, like next 1, 2 years kind of a time frame.

Yes. The benefit we have that you guys don't all have is I've got somebody at the company at every customer location every single day talking to a customer about what are their plans, what are you doing, when are you doing it. And frankly, now it's trying to calm the unhappiness that they're not getting the equipment when they want it. So if I was to generalize what we hear, frankly, we can't meet demand. I can't describe for you how strong the book of business is, except to tell you it's stronger than I've ever seen. Lead times are longer than I've ever seen. The escalations from customers are more significant than I've ever seen in the industry. I've been in the industry 30 years. I've never seen it quite like this. That's what I see now. I'm not blind to the fact that, I think, is the heart of your question that, yes, the economy is softening. Consumer discretionary income is not what it was 1.5 years ago. And so I know for sure that consumer consumption of devices like phones and client PCs is likely -- not likely, it is weakening to a certain extent, but it's completely offset right now by the heavy investment in enterprise, the investment by the hyperscale set of customers. That is an enormous consumer of silicon, and I see it, frankly, offsetting any of the softness that might be trickling its way through. I guess the other thing I would go back and tell you is if you're worried about oversupply of semiconductors, please tell me where it is because I need them badly. I can't even convey -- and if anybody could find semiconductors, I would think my procurement guys would be pretty good at it. And frankly, we can't find what we need. And we're paying -- I'm actually embarrassed to tell you how much we're paying for some of these things. I'm not going to tell you. It's a lot. So do I worry about the heart of your question? I do. Do we pay attention to it? We do, but I just don't see it right now. I don't know if that helps.

So on that same note, your memory customers, they're pretty quick to rein in orders if they feel the demand environment is starting to deteriorate, right? I remember back, was it 2018 or 2019, all of them started to pull back on their CapEx literally all at once. And this was before memory pricing actually started to go down, right? And so...

In fact, Harlan, you've never seen that quick of a response from the industry for at least not that I can recall.

Exactly. And part of it is, as you mentioned, right, your customers are very focused on profitability. So are you seeing -- have you seen any of that just very recently?

I see continued what I call prudent management of everybody's business in memory, everywhere, frankly. And I attribute that to the fact that the industry is consolidated. Capital intensity has gone up, so it's more expensive to add supply. And I just see everyone doing the best that they can do to just match supply and demand. It doesn't mean it's not going to perfectly happen every single time period. It won't. But I do see an intention in a more prudent measure cadence of investment today than I've ever seen before. That's especially true in memory.

Perfect. And then we're just about out of time, but I wanted to ask you on the gross margin because my view is that if we didn't -- if you didn't have the freight, logistics, components, materials related issues, Malaysia facility start-up costs, you're driving 45% gross margins, my view is that you guys would probably be somewhere in that sort of 48% to 49% range. Is that kind of the right way to think about it? And what's your line of sight in terms of when do some of these gross margin headwinds start to abate?

Yes. Harlan, it is about the right way to think about it. What I've been telling people is inflation is really a challenge to work through right now, but we're working through it, frankly, for all of us. I haven't, again, operated in an environment like this in my working career. And so as you go through things, inflation is more than I think we would have expected a year ago. And so part of it, you got to manage cost. Part of it, you got to manage pricing. What I've been telling people is it's -- we're in a transitory period right now where there are some accelerated temporary costs like these teams of people I have all over the place managing the supply chain that will come and go. There are some aspects of cost inflation that I think will come back to a more rational level like semiconductors, frankly. And then there are some aspects of costs that are permanently higher like wage, rates and things like that. Permanent inflationary items, you got to get paid for. And we are working on that, and we will. The temporary stuff, maybe you get paid for some of it, but you also have to go manage the cost. Relative to the profitability of the company, I've been telling people the profit model of the company is unchanged from what I -- what we showed at the Investor Day, right, pre-COVID, and it's 47%, 48% on the gross margin line, Harlan. So you got it about right.

Perfect. Well, we're just about out of time. Doug, great insights. Thank you for participating.

Thanks for having us, Harlan.