MKS Inc. (MKSI) Earnings Call Transcript & Summary

All right. So we'll get right to it. I'm Matt Prisco with Cantor. And today, we have the pleasure of chatting with John Lee, CEO of MKS; and Ram Mayampurath, CFO. Thank you both for joining us today.

I wanted to kick off with the NAND market today, given the early signs of life here in MKS' leverage to the area. First, how are you thinking about the upgrade cycle through 2025, kind of the key drivers and the magnitude? And then how do we think about that cycle translating to growth for MKS' power business?

Yes. No, thank you for that question. I think -- and thanks for having us here, by the way, at your inaugural conference. Great to be here. So as you know, we've talked about our RF power market share in NAND. And this is a critical enabling subsystem that enables the high aspect ratio etch. And so we're the only one to supply that in the industry today. We talked about inventory burn through for us for most of 2024. Most of that inventory is now burned through. So as upgrades occur, we're going to see the benefit of that. We're already starting to see some of that. So we've talked about that. I think certainly, the pace in which we see that happen will depend on the end users. How many convert, when they convert. Certainly, we stay close to our customers to make sure that we are going to have the materials ready for them to do that. But I think in general, it's going to be better for us this year just because our inventory has burned down.

Okay. So do you now see maybe growth roughly in line with the market in NAND because I assume that's a NAND comment, not just an overall.

Right. That's a NAND comment because even in 2024, most of the other inventory had burned down. So we were shipping to what our customers are shipping for the rest of our broad portfolio. So really NAND was the only headwind at that time. And now it will be just like every other product category.

Perfect. Maybe you could talk about the competitive landscape today for the power products specifically regarding Lam highlighting conductor etch system this Analyst Day and pulsed DC being a primary topic of discussion today.

Yes. So as many of you know, we are the strongest in dielectric etch versus conductor etch. We have had a couple of design wins in conductor etch, but still most of our revenue in market share is in dielectric etch. Pulsed DC is a new way to deliver power to an etch chamber. And this is something that's new that's being adopted mostly in things like conductor etch, not yet totally adopted in high aspect ratio dielectric etch yet. We're working on that as are our other competitors. I would say this, today, every NAND Etcher in the market is using RF power, not pulsed DC. In the future, that could happen. But right now, we're all working hard to see if that is something that's going to be differentiated to be used in the market.

Okay. And I think there's a view that in that pulsed DC transition, when and if it happens more meaningfully, it happens on 1 of the 3 boxes within the system. So why 1 of 3 boxes? Why can't it pull 3 curves all? And you said you're also working on a product offering here potentially. Where are you with customer conversations there? What's the reception, early feedback, anything like that?

Yes. So we're pretty happy with our reception to our pulsed DC solution. We're working with all the usual suspects, if you want to put it that way. People know that there's only a couple of companies that can actually deliver the technology needed for the next-generation power solutions. The reason there's only 1 box is because you have several boxes inside a plasma etch chamber. Some of those power boxes are generating a plasma, making these charge species. And some are controlling a uniformity. And some are putting the energy to have them move very quickly and rapidly into the whole. And that's the bias generator. And that's what pulsed DC is targeted to potentially replacing the RF solution that's there today.

If there is a move to pulsed DC, and you see one of those boxes upgraded, does that favor your competitor on the other two boxes? Or do they stick with MKS on those other two boxes and then that one can go elsewhere over the ground?

I think in general, you don't change if you don't have to, right? And so if the other boxes have been designed in and there's a long history of learning, to integrate those in. There's no reason to change if you don't have to. So I think really, the battle is in that pulsed DC part. And as I said, today, every NAND etcher is made without pulsed DC today. In the future, that could change.

Okay. I guess moving to the optical side. I believe you talked about 3 primary wins year-to-date. Can you maybe walk us through the timing, magnitude and breadth of these ramps? And then what is it that is primarily driving the wins here for MKS?

Yes. So certainly, what we call this effort world-class optics. So it's an investment made by us in CapEx and process engineering to develop more sophisticated solutions for the lithography, metrology and inspection market. We did that about 5 years ago. And just as a data point, 5 years ago, our revenue in this market was about $150 million. Now it's $300 million. So we're starting to see the numbers show up with that. Now as we have developed capability, we're getting asked to do more sophisticated things. And these are more difficult things that require that investment in innovation throughout the several -- last several years. We're also unique in that there's no other company that has a portfolio of potential solutions that could be integrated for a lithography or metrology or an inspection application. So we have optics, we have optical control, we have motion, we have lasers. No one company has all of that together. And so we think we provide a broader portfolio of solutions to our customers.

Okay. And now one of these wins, I believe, is for an optical system upgrade. That seems like a pretty big deal in terms of solidifying your position as the optical market, given you're kind of newer to this market, newer to playing here and really bolstering the portfolio. So with that said, now that we have these 3 wins under our belt, we have the upgrade. Is there now a snowball effect in terms of driving new wins, new designs? Or are we still in the proven phase that MKS is a real deal here.

Yes, I feel like we're beyond the proven phase. I think we've done a couple of very difficult things that are now in production. And that's the proof point. And these customers are very demanding from a technical perspective. And so when you can meet those kinds of criteria, I think you've proven that you can do it. So in terms of snowball, maybe, maybe not, but certainly, we are intending to continue to invest so that we become the first choice. I think when you look at the supplier market in lithography, metrology and inspection, there's kind of a couple of big companies like us and then a lot of smaller companies. And so scale does matter because size allows you to invest during down cycles. And some of these problems that we're addressing, they take multiple years to fix to solve, right? And so you have to be able to invest through cycles. And it's easier to do that when you have scale versus being a smaller company.

Is there an opportunity for consolidation there given all these smaller players and to kind of bolster your portfolio to give a greater breadth of offerings?

Yes. I think there's always possibilities there. I think as I said, it's kind of a dumbbell barbell kind of shape in terms of size of companies in this market. There's a couple of big ones like us, on one end, not a lot in between and a lot of small ones. And it kind of reminds me of the semiconductor equipment industry 30 years ago, right? Lots of small companies, great technology, a single point solutions. And I think at some point, you need the scale to be able to invest in manufacturing capability, need a scale to invest in R&D through multiple cycles. So I think potentially, that's an opportunity for consolidation in the photonics optics market.

Okay. And then given these wins that you're now accruing, how do we think about MKS' growth rate maybe versus the litho inspection and metrology markets in '25 and '26 as these wins ramp?

Yes. Ram, you could take that one.

Yes. So we are very happy with the growth in litho metrology and inspection. We've seen double-digit growth in a flattish year, if you may. We are well differentiated with both from the depth and the breadth of the offering we have. And we are investing in that area. Actually, we're happy to see the progress we've made so far, and we're happy with the design wins we are securing now, which will give us traction in the years to come as well.

So this outgrowth of the subsegment of WFE, litho metrology inspection is one of the ways we outgrow WFE over the long term, right? This is about taking share. Other areas are about just the growth, for instance, VNAND, right? Certain segments grow faster than others. Today, for instance, dep etch is becoming more and more important, again, as verticality comes to chips. Gate-all-around requires more dep etch processes, and that's been our historic strength as well.

Is there an area within that litho inspection metrology market that you guys are greater levered to today? Or are you providing a solution -- optical solution that can kind of play across all markets?

Yes. I think I would say this, the expertise in optical coatings and optical subsystems, integrating them for very difficult optical applications. That's the expertise. So a lot of that's know-how. And then being able to fabricate the various hardware to enable you to do that. Those are really some of the differentiating areas that we have, where it's not just about optical design engineers, it's about manufacturing engineers, knowing how to make the optics so that the designers can actually use those differentiated capabilities. You have to have both. And if you have both, you have a differentiating portfolio versus someone who just has optical design or someone who has just the manufacturing design.

Okay. Now I guess, looking to broader semis now. Any updates you can offer on customer utilization rates, spare parts, ordering patterns, really anything that helps inform your view on how 2025 dynamics play out for the business?

Maybe I'll start and Ram can take that, too. I think in general, you've seen our service revenue become stronger for fab utilization. So that service business is something we focused on for the last several years making a separate business. So we're pretty happy with that progress. I think you have some numbers there.

Yes. So service is about 13% of our overall revenue and a very profitable part of our business. We are happy to see the growth continue in that. And to your question, Matt, utilization levels are high in the fabs, and we see it in our service business. It's a good indicator that to show the utilization levels when we -- in service gives us an indication of that. And going back to what John said earlier, it appears that we have burned through the inventory in the channel, and we are starting to see orders. It's off of a small base, but at least we are seeing it more real time down.

And you guys typically talk about underperforming during the downturn and outperforming during an upturn. How should we think about this dynamic as we look at 2025 and the moving parts, if we are in a flat to plus mid-single WFE environment? And then how does that change if we look to 2026 and say there's growth of 15%. And in that world, how do we think about MKS' growth opportunity?

Yes. I think it's not a surprise. I think as our customers think about the future, their future quarters, if they see a big uptick, they start ordering right away. We start seeing that overperformance. If they see flat like it has been for the last several quarters, then we're kind of shipping to their demand. And so right now, I think we would be saying we're kind of shipping to the same demand and growing at the same rate as WFE now that our inventory has been mostly burned off. I think during an upturn, a fast upturn, that's when we outperform. I think the other fact I'd say is, if you took out China because we can't sell to many of our semiconductor equipment customers, previous semiconductor equipment customers in China, we've actually outperformed WFE over the last 2 or 3 years. So -- but with China, that's a big headwind. So we're not backing off from our overperformance over a long time. But it gives me confidence that we -- that model still works.

Okay. in a plus 15% world, how do you think about the leverage for your growth there? Because I know you give overall through cycle, how you outperformed WFE. But in that upturn, is there typically a rule of thumb we can use?

Yes. I don't know if it's a rule of thumb, but some data is that I think in 2021 or so, WFE grew 15%, we grew like 35%, right? And so it is really -- and that was a ramp, right? So we could be multiple times the growth rates of WFE depending on how steep that upturn comes.

Okay. And will there be a restocking of inventory at that point as well? Will that help you? Or is inventory kind of at a healthy level right now that there doesn't need to be a restock, anything about that dynamic?

Well, inventory levels are relative, right? So relative to where the market is. If it's a flat market, it is healthy today. But in an upturn, certainly, no one wants to be short of parts, right? And so then you build a lot of inventory for that, our customers do. And they continue doing that as long as that market keeps going up. And of course, the last upturn, that kept going up for a long time. and there was a lot of inventory built and therefore, the hangover is even longer as well. But in general, I think it's a view of how steep the curve is as well as how long people think it's going to sustain. That will determine the inventory levels that our customers are comfortable with. I think in general, though, all of us in the industry are holding a little more inventory, including ourselves than we have in the past. A lot of it is chip inventory because of the last upturn. That was one of the constraining components for our ability to ship.

Got it. And now with all the drama and leading-edge foundry logic, how are you thinking about MKS' position within this construct? And what would it potentially mean for MKS if we were to see consolidation of these leading-edge players?

Yes. I think maybe the answer to that is going back to the fact that we address 85% of all WFE, right? No 1 else comes even close to that. So we're shipping the big 5 OEMs. Obviously, all the growth in any 1 cycle is coming from the leading edge, right, 3-nanometer build-out, 2-nanometer build-out. And so we're addressing most of that equipment, 85% of it. So I think whether it's 1 company, 3 companies, whoever is building, we really don't care. We kind of care that the overall number is X. WFE is $100 billion or $110 billion, we're $90 billion. That's really going to set what we see.

Okay. And then you recently touched on advanced ozone applications for gate-all-around as an incremental opportunity for MKS. Within this broader semi bucket, are there any other notable areas that could be incremental to the growth story versus overall WFE spend outside of the power and optical that could drive kind of outperformance?

Yes. I think gate-all-around is this new structure as lot of you know and it's got a 3D component to it. And it's more sensitive. Things are smaller. And so you have to have better precision and control of the etching process, the cleaning process and the deposition process. And because of that, there's a lot more etch dep relatively than when there wasn't gate-all-around. And so I think a lot of our etch and dep company customers are pretty happy that for the next little while, there's a tailwind for them. Now if you step back, we care about dep etch. We also care about litho metrology. And the reason we have a broad portfolio in WFE is because in 1 decade, dep etch takes off, relative to litho, another decade, the reverse, right? We're trying to position ourselves so that we really want to be leveraged at WFE, whether that's more dep etch or less dep etch or more litho, we want to make sure that we're not levering too much to one type of process step or not.

So in your electronics and packaging market, about 25% of overall revenues, you saw stronger-than-expected uptick in equipment orders for both drilling and electroplating a couple of quarters ago, I believe, still flowing through the P&L today. Will these be a headwind as they roll off? Or is there even further traction that will kind of rezone some sustainability here moving forward?

Yes, we talked about maybe 2 quarters ago, right? We got these relatively surprised orders for chemistry equipment for advanced packaging. And it was chemistry equipment tied to multilayer board and HDI level packaging, not even the most advanced PCB industry, the IC substrates. And this is tied to AI. We continue in the next quarter, we talked about that. The bookings continue to be strong. So far, they've been pretty steady, right? We haven't seen this onetime blip. And so we're pretty excited about the fact that we'll see how long this extends, but the best part of delivering chemistry for us is that 100% of the equipment, sorry, that we deliver, 100% of the chemistry is ours for longer term, too. And so that's great for our chemistry business, which is the recurring part. And so it's good to see the industry investing in equipment in certain parts tied to AI.

Maybe we could just dig a bit deeper to that AI opportunity specific to electronics and packaging. This used to be just substrates to now benefiting more of that MLB and HDI, what changed here? Why are these other markets all of a sudden becoming growth drivers? And has this dynamic impacted your vision for growth for the MLB and HDI market? I think you previously talked about MLB less than 4% and HDI around 5% for the market. Is that vision now changed?

Yes. I think those growth rates of MLB being kind of GDP, GDP plus, it's probably GDP plus now for HDI, the middle part of the PCB industry being mid-single-digit CAGR, probably a little incrementally better. And fundamentally, it's all driven by AI. So MLB is washing machines and refrigerators. We don't need more of those. We have enough capacity for that. But what's driving MLB and HDI now is when you make an AI chip and board, it goes through this most advanced IC substrate part, but still not connected to the outside world. You've got to go through the HDI and MLB boards and those boards are now 30 to 40 to 50 layers. So washing machine MLB board is 4, right? AI MLB is 25 and HDI is 15 to 20. And so that's what's driving this equipment orders, these equipment orders that we see. So as AI becomes a more and more important part of the entire packaging industry, the PCB industry, we'll see more of the MLB growth, HDI growth as well as obviously the highest growth part, which is the package substrate. We think that grows at high single-digit CAGR.

Can that layer growth sustain from here? Or is that kind of a onetime tick up to make these boards appropriate for AI and now we're at a level that I can handle it? Or are we just going to as the AI performance improves, we're just kind of keep seeing higher and higher layers?

Yes. I think it can sustain. So the idea here is -- the bigger idea is I need denser interconnections. I can do that by putting more layers, connecting more layers. I can do that by making the lines and spaces smaller or I can do that by making that board bigger, right, kind of like semi, right? Wafer is getting bigger, smaller lines and features, more layers, right? It's exactly the same thing. So all 3 are actually happening. And so while the number of layers is growing and has grown remarkably quickly. At some point, it becomes very expensive to grow it, but people figure ways to thin each layer, for instance, People are making the boards bigger and people are making lines and spaces smaller. And so all 3 have to happen. And what we care about is surface area because each layer maybe 1 layer at a time. The chemistry is applied 1 layer at a time. The holes are drilled with lasers, one layer at a time, then they glue together. So we think area is a big part of it and the size of the board as well. But not to be dismissed is making the lines and the hole smaller. That's harder to do. Filling smaller holes, just like in semi, is harder to do, making small lines of spaces, it's harder to do. That is going to be an advantage for companies who have that technology, who have infrastructure to continue developing that technology, the 100 PhDs in Berlin doing all this, right? And of course, because it's harder to do, it's more differentiated. And so you can get -- you could get paid for that and there's a moat around your solutions.

Well, since we're talking about the surface area, maybe it makes sense to talk chemistry for a second since you're winning when you cope that surface area. How do you view the trends today in that market, especially as you have the secular trends plus the market that's kind of not so great. So are you bouncing along the bottom here with kind of seasonal trends in chemistry? Or is there some other dynamic we should be thinking of?

Yes. So in 2024, our Electronics chemistry revenue grew 12% year-over-year. The industry grew 5% or 6%. So we're happy about that rebound growth. This is organic growth. A lot of it is driven by the AI applications. You're right that a big part of the market is still driven by smartphones and PCs and non-AI servers. And those markets have been muted. So our overall numbers have been relatively flattish, but the AI part is the part that's growing very fast. And so we're happy about our traction there. So I think longer term, AI becomes a bigger and bigger part of the PCB packaging market. And as a result, I think the market will continue to grow faster. If smartphones came back and PCs came back with a refresh cycle or an AI application, that will continue to be tailwinds to the entire market.

And as you maybe look towards the equipment orders, which have been doing pretty well, how does that help inform your view on chemistry sales maybe over the next 12, 24 months as that equipment gets put in place, how do you think about the chemistry sales over the next year or 2?

Yes. Well, I think we're very positive -- very happy about it. So that equipment that's being ordered, they're ordering it because they need it, right? And they need it because -- and therefore, they're going to use it 100%. And so the chemistry there becomes an annuity, if you will. And that really allows us to continue growing chemistry sales relative to the market, especially because the equipment is ours as well, and therefore, the chemistry will be ours.

Now you've talked about for that laser business here, the interesting back-end opportunity with the HBM win, I think you talked about maintaining momentum there last quarter. So can you talk about traction maybe beyond this initial customer? Is there more opportunity beyond that? And how do you think about just the size of this opportunity over the coming years?

Yes. We talked about lasers. Our lasers being used for HBM and dicing applications. I think the size of that market will probably depend on how the HBM market goes, right? I think the reason why some of our most advanced lasers are being used is because when you're stacking 8 dies of DRAM on top of each other for HBM, you can't have defects because now 8 does go away, right, instead of just one. And so the dicing of the edges of those die have to be cleaner, produce less particles. And that's why you need more precise lasers and so I think that's a good trend. When we get to 12 layers, 12 DRAMs and 16, that will be even bigger challenge from a yield standpoint. So I think we're pretty happy with the progress we've had. It's been multiple customers, by the way, not just one. And we have been working hard on developing new laser technologies that allow our customers to get that capability without much more power at the same cost. And some of the lasers that we're delivering now have shown to the industry that we're quite differentiated with respect to those parameters.

As you prove to be successful with this laser product in HPM, are you seeing other market opportunities open up where people are coming to you in other advanced packaging areas or anywhere else?

Not necessarily for lasers. Lasers have been used for many kinds of micromachining. So HBM is the latest, but solar has already been used using lasers. Other areas, though, for packaging of HBM is motion. So bonding wafers together with each other. You're trying to precisely locate chips on top of wafers or chips on top and chips. And so precision motion becomes another area of opportunity we've talked about in the past as well.

All right. Great. And then maybe last question on this topic. How should we be thinking about the ramps of the MKS ATC synergy wins? And can you offer an update on where we stand today in terms of those wins and new customer traction over the past few months?

Yes. I think it's been about 2.5 years now since we closed the acquisition. I would say there's probably a dozen synergy wins. So meaning either one group was not in it or the other group wasn't. Most of them have been from Atotech, bringing the laser group over, but there have been some where the laser group brought Atotech into it. At some point, a lot of customers have both and the synergy though is a different synergy. It's not that one wasn't there and one was. It's just that, together, we're more valuable to that customer. And so we don't count that, right? But I think more and more, that's really the real synergy going forward.

Okay. And then moving to Specialty Industrial quick. Market recently came in a bit worse than expected. I know you shock given the industrial backdrop overall. But maybe you can walk us through the moving parts here. How should we be thinking about the growth potential through the rest of the year? And are there areas of the business where you're perhaps a bit more excited about the opportunities and the other areas which may be greater risk within today's backdrop?

Yes. As we talked about, our Specialty Industrial segment is made up of many different markets and different products. And I think the headwinds have been from a couple of markets that aren't a surprise, the manufacturing, general industrial manufacturing, that's been down for everybody. And so that's been a big driver of the year-over-year decrement about 5%, I would say. A little bit of solar, too. Solar is not as good in '24 as it was in '23. Everything else has been puts and takes. And so Automotive also has been a bit down as well. We are unit driven in automotive. We're not -- we supply chemistry there. So that's very much utilization dependent. But overall, it's down about 5% year-over which is not a surprise, driven by general industrial, a little bit of automotive and a little bit of solar.

And how do you think about the growth potential this year kind of within today's backdrop.

Yes. I think a lot of it is going to be macro dependent, I think. And that's -- your guess is good as mine what that's going to do this year because I thought coming in was a different view than last week and certainly today. So I think certainly, if the macro economy picks up, that will be good. We'll just see that. And if it doesn't, of course, we'll see that as well. As we've said in the past, especially industrial market is really a way for us to leverage the R&D we put into semi and E&P so that we can use that innovation in different markets.

Great. So deleveraging, obviously, remains a key focus of MKS today. How should we be thinking about the pace of the debt pay-down from here? Kind of what are guardrails we should be thinking about maybe in terms of free cash flow allocation towards this goal or minimum cash balance or even the target interest rate reduction by the end of the year. I think last year you paid down $130 million on the annual reduction in interest rate expense throughout the year. Any help you can give us in deleveraging story?

So let's -- if we can take a step back and look at the P&L for a second, and the team executed very well in '24. If you think about a flat top line year, we improved gross margin by 190 basis points, kept OpEx flat, improved operating income by 180 basis points year-over-year, brought tax rate down below 15%, all while executing in the CapEx and R&D requirements, translated a lot of that to the cash, 92% of our net earnings was free cash flow, which helped us pay down $476 million towards our debt. That's $426 million more than our mandatory payment and also grew EPS by 49% year-over-year. So it was a very strong year of execution. Our interest rates, if you look year-over-year, Q1 '24 to Q1 '25 is down 40%. And that's a combination of early pay downs and also pricing, repricing as market opportunities arise. We are -- our leverage is 4.3x now. Our goal is to get it to 2 to 2.5x and to your question on capital allocation, outside investing in CapEx that we need for growth and business continuity in the $60 million we pay as dividend, all focus is to pay down debt and make the balance sheet stronger.

All right. And do you still have a targeted minimum cash balance there, so we can think of what portion of excess cash?

It fluctuates a little bit quarter-to-quarter, depending on our CapEx. Sometimes, it picks up speed. Our CapEx is in the 4% to 5% now. It's going to stay at that level for the next 18 months or so. It used to be 3% to 4%. So we are investing in some large facilities in Southeast Asia, in particular, as we have disclosed publicly. So there'll be a little bit of that, but a $650 million is a decent number to keep in mind for cash balance.

All right. That's helpful. And then Ram, you've been in the CFO seat for nearly 5 months now. On a company level, any changes to operations, targets or strategies that have been implemented or you're planning on implementing in the not-so-distant future? And just kind of what's your focus over the next 12 months for MKS?

Yes, it's a good question. So there are a number of activities we are working on. John and I have discussed several ideas for improvement. But the key is to continue the same pace of execution that the company has demonstrated to control what we can control, be quick in correcting costs as the top line changes, which MKS has proved to be very good at and keep the focus on gross margin. So to manage both commercial actions and operational excellence activities, which is a combination of manufacturing excellence, procurement and design to manage your product costs, control your OpEx and drive -- continuously drive the EPS growth. So focus on execution. And once you correct that cost structure to where it is, as top line comes back to more normal levels, you're going to see much more flow through, and we can accelerate our cash generation.

It's been great to not be the CFO. It's great to have Ram on board, a really experienced CFO. He's added a lot of value in a very short period of time. The team is strong under him, and he's going to be a great coach for them as well.

Very good team.

But we only have a few seconds left, so I want to sneak in 1 more question here. China. And I know you guys, direct exposure at this point is relatively low. So how do you think about your exposure to the region just through the OEMs? How does that track maybe this year, next year? How do you view risk? And then just tariffs? Any comment you can make on how many you're managing the situation today?

Yes. I think our exposure to semi equipment in China is very low, as you said. So our exposure to semi in China is indirect through the OEMs. So you can look at the big 5 and their percentage of China, that's kind of our exposure. So it goes up and down depending on what they ship. So that's a pretty simple math. I think in terms of tariffs, yes, we have a couple of factors in China. Several of them are China for China, especially the chemistry factories. Several do produce to China, but also outside of China. Many of those are shipped to customers whose factories are not in the U.S., so kind of really no tariff issue there. But we do have a work stream of people looking at tariffs, because they affect -- we're global. We have lots of sites in different kind of countries. So we're looking at ways to look at where we have risk or not and then how to mitigate it. There are many ways to mitigate it short term. There are longer ways -- longer-term approaches too, but those would take time. So I think right now, we're in a pretty good position with respect to understanding where our exposure is. And remember, the tariffs haven't really all gone in yet, right? So we're not doing something yet because we don't have to. But we're ready in case we have to.

Wonderful. Well, thank you guys both so much for chatting today.

Thank you, Matt. Thanks, everybody.

Thank you.