ASML Holding N.V. (ASML) Management Presents at Goldman Sachs’ Global Semiconductor Conference (Transcript)
ASML Holding N.V. (NASDAQ:ASML) Goldman Sachs’ Global Semiconductor Conference Transcript May 31, 2023 3:20 PM ET
Executives
Pete Convertito – Vice President, IR
Analysts
Alex Duval – Goldman Sachs
Alex Duval
Great. Well, hi, everyone. I am Alex Duval. I head up the Europe semis coverage for Goldman in London. Delighted to be here with Pete Convertito, VP of IR, ASML. Thanks so much all for joining. We will have some time at the end for Q&A. But I think we will get straight into questions from me, and once again thanks a lot, Pete, for joining.
Pete Convertito
Great to be here.
Question-and-Answer Session
Q – Alex Duval
Great. So, perhaps, we could just start off with a quick recap of how you see the broad high level trends, perhaps, you could help us understand a bit the high level supply and demand dynamics and then we will get into more specifics.
Pete Convertito
Sure. So we had our Q1 results and we talked about we are seeing the same dynamic market as everyone else with a bit of weakness in the Memory market as customers try to work through supply-demand imbalances in Memory.
Logic continues to be strong, particularly, areas like automotive and industrial and mature Logic continue to be healthy and strong. Strong demand from China, and in total, if you do all that, we said it’s about 25% growth in our topline and if you break that up across markets, we said the EUV continues to grow at about 40% over last year, non-EUV about 30% and our Installed Base Management, which is a combination of service and upgrades grows about 5%.
So a bit of a headwind on that this year. Our service business continues to grow with the installed base, but the upgrade business is a bit muted this year as customers wait for the cycle to work through and the recovery to come back. So we take that all together, it’s about — we see at about 25% growth this year on the topline. So in a dynamic market with things like Memory cycle and inflation still a positive year for us.
Alex Duval
Super helpful. And perhaps, we can dive in a little bit on EUV, we saw in the last quarter, obviously, orders for EUV came in a bit below what people may have expected, down slightly quarter-on-quarter. Can you help put that in context a little bit, what should we be expecting in the coming quarters and months and any color there much appreciated.
Pete Convertito
Sure. So we don’t guide on our bookings, but we have certainly had a good eight quarters or nine quarters of strong bookings through last year and I think we indicated coming out of last year that in the environment we are in it would be not unreasonable to see bookings come down, which we did see them come down to €3.8 billion from a peak of about €8 billion in the third quarter.
But keep in mind, we are also now booking tools, especially some last year High-NA tools that are €350 million a piece plus. So orders will continue to be lumpy when you are booking tools of that ASP, as well as €170 million a piece on low end EUV.
But keep in mind, we have a — so it wasn’t unreasonable to see bookings come down. But if you look at our backlog, we have a backlog of €39 billion, which is roughly 2x what we will ship this year, not all of that is deliverable next year, some of that again is High-NA tools, of which some of those won’t ship until 2025.
So Peter Wennink on our call, was asked about next year right out of the chute on the earnings call, and he said, well, it’s only Q1, it’s a bit early to guide next year. But with €39 billion, that’s double what we will ship this year. There’s still some slots to fill in the second half of next year and those — there’s still time for those bookings to come in to fill out next year.
Demand from our customers is certainly. They are asking for more tools to ship — be shipped next year than what we are shipping this year, but there’s still some slots to be filled with bookings and there’s a couple of quarters for that to still be filled out as our supply chain improves, which means our lead times improve a bit.
And I think Peter Wennink described it as we expect the supply chain to be back in the shadow of ZEISS, ZEISS is our longest lead time supplier sometime through this summer. So there’s still a couple of quarters to be able to fill out next year and that will be basically a function of where our customers think they are in the supply-demand balance. In their calendar Q1 results, they were cautiously optimistic. So I think we think in the next quarter, we will see bookings come back.
Alex Duval
Super helpful. And I think you saw in first quarter, your order backlog at the €39 billion roughly. To what extent could there be a risk that there’s some kind of pushouts there that could perhaps put at risk your guidance for next year, which is that both DUV and EUV would grow? How plausible is that kind of scenario for next year?
Pete Convertito
Well, again, it comes down to this — where they think they are in the supply-demand balance if they get back to that and throughout the summer, we were confident we will see bookings to fill out next year. Although, we haven’t guided how many we will do next year and what that is, but certainly, the demand is there.
If it’s a quarter we are — another quarter that they probably will still book it, because of the lead times of our tools. If they think we are in a longer term recession or the cycle is several quarters, then they will have to make a decision around that. But those are kind of the factors that will go into that.
Alex Duval
Brilliant. I’d like to talk about Logic demand. So one of the themes we have seen in semi cap land is more demand from mature nodes.
Pete Convertito
Absolutely.
Alex Duval
We have seen that on the analog side, the power semi side, et cetera. How do you feel about the sustainability of that?
Pete Convertito
Well, if you follow this and you followed our Investor Day the last two years, typically, we do them every two years, but we did one in 2021 and then we did another one in 2022, because we were seeing very strong demand and looked at the drivers of what we are driving at and had to up our capacity plans to support that.
And one of the significant growth drivers there, particularly, for Deep UV tools was this mature Logic market and we underestimated that in 2021 and we talked about a bit in the 2022 Investor Day.
And things like distributed compute or edge compute as enabled by 5G and connectivity is driving a lot more of these devices, Ring Doorbells, Nest thermostats, more and more ICs in household appliances. So we think there’s a lot of growth in that area enabled by leading edge.
And then on top of that you have the conversion to electric vehicles, which has quite a lot of IC content to it and we are in the early innings of that transition and we see that consuming a lot of mature devices. So we see secular growth there and we see this continuing for years to come and so we don’t see this as a transient thing.
And frankly, that market in the past has been served by quite a bit of used equipment, especially when it was on 8-inch, but now that a lot of that has moved to 300-millimeter. There’s not really any used equipment out there to support it.
So there’s been capacity adds all along, but now that it’s transitioning or primarily in 300-millimeter, there’s not much used equipment. So the capacity adds have kind of gone under the radar and now they have to buy new equipment to support that. So we see that in Europe and U.S., as well as China.
Alex Duval
Great. Another key discussion point, of course, is AI. No discussion will be complete at this conference without it. Obviously, had the very clear commentary and guidance from the likes of NVIDIA. Can you just help us understand how much upside ASML could have from this, how you get into it and how do you think about that in the near-term specifically, as well as the longer term?
Pete Convertito
Sure. So that was another area of the mega trends we talked about in our Investor Day in 2022 that was incremental over 2021. Not specific to AI, but leading-edge Logic. We underestimated in our 2021.
The way our long-term model works is, we take end-market semi forecast and demand, and apply knowledge we have around die size and Logic and bit growth in Memory and knowledge of layer stacks and can calculate number of tools from that.
One of the areas we were a bit conservative on in 2021 was die size and in talking with customers, our assumption need to be slightly bigger, which means for the same number of devices you need to process more wafers, which is driving more equipment demand and leading-edge Logic in our model.
Now is all of that AI, not saying that, but certainly, some of it is probably AI. We haven’t — I don’t think we have revealed specifically what portion of it is attributed to AI. But certainly, we see that as a long-term trend that’s driving demand for leading-edge Logic tools longer term. So I’d say, we are positive on that for equipment spend longer term.
Short-term, I think, our customers are cautiously optimistic about it. They are still in the learning phases of it. So are we in the ramp or are we in a bit of a hype cycle? I think that’s still a little bit TBD. But I think in general, you would say — you could say ASML is positive on AI and capital spend that should be associated with it.
Alex Duval
Great. And if we spend a bit of time on leading-edge Logic and foundry. We saw talk of lower utilization on 7-nanometer and 5-nanometer, but then still strong demand on 2-nanometer and 3-nanometer. How does that sort of impact your expectations for Logic foundry as we go into the second half of the year and into next year as well?
Pete Convertito
Yeah. So as I said in the earlier comments, we still see obviously mature Logic running strong, most advanced nodes a 3-nanometer ramping, so demand — strong demand for equipment there. And frankly, leading-edge Logic and Memory, as well as they plan their technology transitions and the tools they need for that EUV with its long lead time, they continue to order and buy that equipment.
On the utilization of, say, second-tier nodes are not lagging edge, but larger than 3-nanometer, a customer of ours commented on a bit of weakness in utilization, because of the smartphone and PC market, but they expect that to return as the market comes back. So we still see demand and shipments to leading-edge Logic, as well as Memory for technology buys and as they work through this supply-demand imbalance, they expect that to come back.
Alex Duval
Got it. And talking of supply-demand imbalances, I think on DUV, the company has talked about a delta of about 20% between supply and demand at the latest results. What’s your sort of latest update on where the gap is? And as we look forward in future quarters, do you see that increasing or could that close a little bit?
Pete Convertito
Yeah. So I think it’s worthwhile going back and first talking about where we were coming out of 2021. On Deep UV, Peter Wennink had commented that we were undersupplying by 40% to 50% on a unit basis on Deep UV systems to the market and which was another driver to step up our capacity, which we are growing to 600 units in 2025 on Deep UV and 90 units on EUV.
Throughout the year, as this cycle started, we saw some players, majority being Memory, pushing demand on Deep UV out a bit. But still exiting the year 2022 undersupplying by about 30% on a unit basis, but that was to all customers.
And certainly, China was included in that, we are undersupplying to them and when they see others pushing out, they said if they don’t want it, we will take it. If you saw in our results, we are stepping up shipments to China this year, because they are willing to take those tools and now we are undersupplying by about 20%.
So that’s a combination of the demand of undersupply being satisfied and us also growing our capacity. We said, we will do about 375 Deep UV tools this year, of which about 25% is immersion. So we are at about 20% under shipping to the demands of the market right now.
Alex Duval
Very helpful. And I think you referenced China and we know that now roughly 20% of backlog is represented by China and I think that’s supposed to be roughly where sales will be for this fiscal year. Some investors just asked, to what degree does that represent real demand, to what degree could that represent sort of rush orders before some kind of incremental change in terms of regulation vis-à-vis the U.S. comes in? So how should we put that in context?
Pete Convertito
Yeah. Like I mentioned, we were undersupplying to everybody last year to demand including China. This is — if you have followed us and you have listened to the commentary of our management over the last year and a half.
Peter Wennink talked about, we added nearly a dozen customers almost a year ago in Deep UV and they were some China customers in areas that you probably never heard of and they are building things like power devices, analog devices, microcontrollers, CMOS image sensors, things that go into these mature Logic markets of edge or distributed compute, consumer electronics and even automotive.
I mean, China has got a big market — a good market share of automotive ICs and that’s a growing area. So we see these going to the big customers in China, but also a long tail of these smaller customers ordering a handful of dry tools here and there.
So it’s real demand and if you follow our Capital Markets Day or Investor Day, this is an area that we see of strong secular growth. And like I said earlier, it’s not just China, it’s Europe and U.S. that are putting capacity in to serve that market. So we see this carrying on going forward.
Alex Duval
Great. And if you were to see a sort of ratchet — further ratchets and restrictions from the U.S., what impact would that have, maybe you can sort of recap where we have got to and what you think will happen with the next layer of restrictions?
Pete Convertito
Sure. So, I mean, I think, we were the first ones to be affected by restrictions four years or five years or so ago with EUV. We were restricted from shipping EUV tools there. We have been unable to get an export license for that.
And in October, there was another round of restrictions around advanced processes in Logic and in Memory. It was on U.S. suppliers, but we took a look at that time at our backlog and what processes those tools could be shipping to, and said, well, there’s probably about an indirect impact of about 5% — on 5% of our backlog, as if they can’t get other parts of the process, they might not want to take the litho. They have continued to take the litho.
In March was announced there would be a trilateral agreement between Europe and Japan and the U.S. around advanced immersion tools. And I think Peter talked about — Peter Wennink talked about a bit on our Q1 results and said, it’s around advanced immersion.
And if we look at advanced immersion, we interpret that as our NXT:2000 and beyond, so 2000, 2050 and 2100, because those would be able to be used for advanced processes, which they are trying to be restricted. But so we will have to apply for an export license there.
And — but there’s still mature processes like 28-nanometer node and 45 that do require immersion, a single pass. So we think the more mature immersion tools, we will be able to get a license and ship, but there will be more clarification on the restrictions in the coming months. I think Peter put it, so in another month or so.
But if you look at the — what those restrictions could be or will be, our long-term modeling and the current demand environment, we think there’s — there won’t be any material effect on our business short- or long-term in our model.
Alex Duval
Very helpful. I’d like to also talk about average selling prices. Clearly, there was some discussion about potentially getting higher ASPs to help compensate for inflationary impacts. Where are we on that and to what extent is there more upside to sort of come through from that and equally given the sort of weakening macro environment we have seen, is there any sort of downside risk on the selling prices?
Pete Convertito
Yeah. So, Roger Dassen talked about that just quite a bit over the last couple of quarters. We saw some impact last year as we had headwinds on our margins as inflation crept into our costs. Some of those costs we don’t add value to.
So for instance, the shipping and transportation costs and that’s an area where we have been going back to our customers and saying, hey, it’s an area we don’t add value, it’s pretty much passed along, can you help with that? And we are seeing some success in that in improved ASPs.
So we have seen some of that and we will probably see a bit more going forward. And Roger comment about that and team, in terms of gross margins, we think we have neutralized that for this year in terms of impact on gross margins as long as inflation doesn’t continue to go up.
Alex Duval
Great. And I think another topic we have had questions on a bit is on sort of lead times. So if you think across EUV and DUV, the argument, I guess, a few quarters ago, was that these lead times are so long that it insulates you to quite a significant degree from macro risks, because the customer knows they have to wait a long time to get the tool, and therefore, they don’t want to go to the back of the queue. I think the numbers quoted were one year on DUV, two years on EUV. To what extent does that dynamic still hold, to what extent has it perhaps changed and to what degree does it still help insulate a bit from risks?
Pete Convertito
Sure. So litho is still quite a long-lead time item in the fab compared to the other equipment. Pre-pandemic, if you came to us and hadn’t given us any forecast for tools or hadn’t included a forecast for incremental tools that you wanted, it was about six months to nine months for a Deep UV tool, six months on the, say, a dry tool and more like nine months for an immersion tool and 12 months to 15 months on a Low-NA EUV tool. Through the pandemic, that grew as supply chain grew and our capacity was well below what demand was out there.
And so you had Low-NA that was more like 18 months to two years across the Board. Deep UV was settling at more like a year if you hadn’t given us an advanced forecast. And now those, as we have worked through supply chain issues and increased our capacity, those have come down not to pandemic levels, but as Peter or pre-pandemic levels, but as Peter Wennink put it, the supply chain probably throughout the summer will get back to in the shadow of ZEISS, which is our longest — traditionally our longest-lead time supplier on optics, so getting much better. So there’s still a couple of quarters where customers put orders in to fill out next year.
But it’s still a long-lead time item, so from the insulating factor standpoint, you are still a year plus on Low-NA EUV tools and somewhere between nine months and a year on Deep UV. So if you think this is — if you are a customer and you think the supply-demand gets back in balance in a quarter or two, you are not going to get out of line for, say, an EUV tool, you are going to want to put orders in.
Because what you are putting orders in, if it’s second half of next year delivery, it’s about outputting wafers in the second half of 2025. So that’s why we say things like technology tools are insulated from this a bit. And on the Deep UV tools, if they think it’s a back-end balance within a quarter, they will put orders, and if they think it’s a couple of quarters out, they may hold off a bit to see where they are at, but still relatively insulated.
Alex Duval
Makes lot of sense, Pete. I’d like to now talk a bit longer term. We have talked a lot about Low-NA. Let’s talk about High-NA. So could you give us the latest snapshot on the situation on High-NA orders? If we look at your 2025 plan, your 2030 plan, you obviously updated those relatively recently. How much of the High-NA unit targets within that is actually covered by current backlog and how should we be thinking about the High-NA orders going forward?
Pete Convertito
Sure. Well, we certainly saw — well, we started booking High-NA tools, the EXE:5000, which will be the first version of it, development tools for customers several years ago. We initially booked, I think, we talked about four tools to three customers. We booked a couple more since then.
But last year, we started booking orders for what would be the production of high volume manufacturing tool of the EXE:5200 and we booked several of those. I think we even commented that at least every customer has at least one in the backlog of the 5200s in both Logic and Memory. So we have a good backlog of those tools.
We will start shipping the EXE:5000 late this year, first tools. That 5200 doesn’t really start to go out until late next year into 2025. If you look at our modeling that we showed at Investor Day, I think, we show a high scenario revenue of five systems in 2025. We will start shipping those tools again late this year and the 5200s in 2025. So you will see the revenue from those in there, but we will plan to ship more than that.
It will take a while to revenue these tools as it’s a new platform and we have to ship them and install them in our customer’s fabs and prove they meet spec before we get revenue on those as with any new platform. So I think we are working towards those numbers. We talked about growing the capacity to 20 units in the 2027 timeframe at our Capital Markets Day and we are still working towards that plan.
Alex Duval
Super helpful. And just maybe as a follow-up, could you help put in context a bit their applicability to Logic versus Memory? How should we be expecting the order trends there?
Pete Convertito
Yeah. So I think in our backlog, EUV in total is high 70%, low 80% Logic and the remainder of Memory and I think it’s — that’s representative of EUV in general.
Alex Duval
Very clear. I think we have got 15 minutes left. So I’d like to leave some time at the end for audience questions, but maybe just one more from me. How should we think about scope for High-NA to cannibalize Low-NA over time? How will the dynamic play out, because obviously, you are getting high productivity, you are getting all these extra bells and whistles and efficiency from High-NA. So these are very expensive tools. So how should we think about how they coexist with Low-NA as they ramp up towards 20 tools, et cetera, per year?
Pete Convertito
Sure. Sure. So just like with — as EUV came in for Deep UV, it’s there to mitigate the need to go to multi-pass patterning. Frankly, on EUV, we were late to it when we initially thought it would go in. So multi-pass patterning grew, which allowed our customers to continue to shrink, but not in a cost effective manner.
If you went back to one of our Investor Days, when we started seeing EUV actually going to volume manufacturing, we thought we would see some cannibalization of the immersion business as it ramped.
But frankly, we didn’t, we are shipping just as much now, if not more immersion tools, because the nodes that it applies to continue to grow longer and stronger. But certainly, it did cannibalize some of that on a specific application when you go from one node to the next.
On Low-NA to High-NA, it’s there to negate the need to go to multi-pass patterning on Low-NA EUV. So it will be used on the additional critical layers that would need multi-pass patterning if you didn’t have High-NA.
So I don’t think we see a lot of cannibalization there. You would see more Low-NA if High-NA weren’t there, but as it comes in, you will see Low-NA kind of stay on the layers it’s on and the more critical layers will move to High-NA. So, yeah, some, but not as much as you saw as the transition from immersion to Low-NA, because we were a bit delayed on that and multi-pass patterning grew quite a bit.
Alex Duval
Great. Maybe one final question for me before we go to the audience questions. If we look across the semi cap landscape, we have got some of these new trends, chiplets and new materials, and also gate-all-around. And sometimes we get asked by investors, what does that mean for EUV, what does it mean for ASML? Can you help put that in context a little bit?
Pete Convertito
Sure. So we see gate-all-around as a good thing. The reason they go to gate-all-around is because if you don’t, if you try to shrink FinFET, the performance of the tools or the power consumption, it gets worse. So you need to go to a different architecture just as they did going from planar to FinFET. FinFET allowed shrink to continue and performance to continue to improve.
We see the same thing happening when you go from FinFET to gate-all-around. You are going to gate-all-around, because you want to allow performance to improve, and frankly, it allows shrink to continue. So we think the transition will be very similar to the transition from planar to FinFET, which took place at the 20-nanometer node and slight so it leads to the 16-nanometer.
At 20-nanometer they were a planar. At 16-nanometer they brought FinFET in. There really wasn’t any shrink, because it’s highly risky to do shrink and an architecture change at the same time.
So they introduced 16-nanometer. FinFET on 16-nanometer, put an amount of capacity in that, let them pipe clean out that process and once that was working, then you go to a sub node of 14-nanometer and 12-nanometer where you have more shrink, and frankly, required more litho. But we consider that all one node, meaning 20-nanometer, 16-nanometer, 14-nanometer, 12-nanometer.
We think you will see the same thing at gate-all-around, whether regardless of what node you are doing at. The first incarnation, you will bring gate-all-around and you probably won’t really shrink. But after you pipe clean that initial introduction of it, then that enables shrink and we will see more litho or more EUV as you do sub nodes of that.
So, in general, we will see more EUV for the whole node and we have talked about, in general, you see about 30% more litho spend per Logic node as you go forward and DRAM is about 20%, NAND it’s about 10% to 15% spend per node. So gate-all-around, we see as a positive.
Certainly, materials benefit from that, and our CTO in the past has talked about, there’s four ways to continue to improve cost on the semiconductor roadmap. There’s shrink, which we are the shepherds of, if you will, and certainly, going to gate-all-around enables more shrink to happen, so we see that as a positive. There’s material. So you need those materials for gate-all-around, so that’s a positive.
Packaging is a positive. Things like chiplets make the ability to do this more affordable. So anything that improves cost or affordability for our customers has the ability to spur demand. So we see that as a positive as well and last is architecture, which we just talked about. So we see any of these that are improve the cost per function equation for our customers as beneficial for all of us in the equipment business.
Alex Duval
Super helpful, Pete. I’d like to go to audience questions. If anyone has a question, be most grateful if you could raise your hand.
Pete Convertito
Great crowd
Unidentified Analyst
Thank you for taking my question. At the beginning of your remarks, you said that in your long-term model, you maybe did not correctly think about the die size and die sizes were a bit bigger than what you initially thought in advanced Logic. But what I am interested in is also trying to understand how you came up with your long-term $1 trillion model for 2030, and in particular, how you think about volume versus price of semiconductors? I think over the past two years we have seen a very strong ASP for some semiconductor areas and I was wondering if in your long-term model you assume normalization of price growth, price declines versus volume? If you had any thoughts around that.
Pete Convertito
Yeah. It’s a good question. So our — again our long-term model is built off again to your point a third-party forecast and I think even in that Investor Day slide deck, if you look at it, there’s a couple of different ones that are anywhere from $1 trillion to $1.2 trillion or so semi end market in that timeframe.
And we use that and apply things like die size and bit growth and our knowledge of, which are — we have pretty good knowledge on layer stack and roadmaps and can calculate a number of tools from that.
If our CEO, Peter Wennink was here, he would say, the industry in total, us and forecasters, always get that long-term model wrong to the conservative side, because we are always thinking of the current drivers, not the future drivers, right?
So in 2014, we did an Investor Day and we made some assumption about node sizes. But did anybody know in 2014 what a Ring Doorbell or a Nest thermostat was, probably not. They were thinking about things like PCs and mobile phones and saw that flattening and were concerned that maybe we were overestimating a mid-market scenario. But frankly, they weren’t thinking about some of these things nor were we. But so, he would say, we probably, if anything, are always wrong to the conservative side.
In terms of ASPs, I am sure our marketing, people that do the modeling made rational decisions about ASPs, they are not using peak ASPs, but kind of long-term average ASPs in there. So, but I’d say, our CTO and our CEO and CFO would say, if anything, the industry always gets it wrong to the conservative side.
Alex Duval
Great. I think we have got 2 more minutes of this off-record discussion. So I don’t know if anyone else has a question.
Unidentified Analyst
Hey, Pete. How are you? EUV installed base revenue is based on some operating variables at the customer sites. How have those trended versus expectation and do you expect the same algorithm, which again, we don’t know exactly, but do you expect the same terms on future shipments or an adjustment in installed base revs?
Pete Convertito
Yeah. So we talked about our Installed Base Management model as, we went to a different type of model on EUV, a more output-based model. In our Deep UV, we talked about roughly 2% of the ASP of the tool in revenue on what has been a break-fix model on Deep UV or parts and labor type of model.
But under that model, we can meet the contractual obligations that we signed up to, but there could still be long downs in that. If a tool goes down and a field service engineer goes in and say he needs a part, maybe he has it on hand and he can get it back up and running quick. But maybe you need something out of Wilton or Veldhoven or San Diego and it’s a day or two or maybe a week. That’s a long down and that’s an unpredictable output for our customers.
So on EUV, we went to more of an output based model where you could — it’s — we agree on, say, a price per or service cost per wafer and agree on an output they want to get and we are responsible for maintaining the tool and providing good uptime and availability of the tool and if we exceed the agreed number of wafers, we get paid for that, if we short them, they pay less.
The win-win is they get more predictable output, and we get paid for the value we are offering in service and we think we can get about 5% of the ASP of a tool per year under that type of model. And that’s after the tool comes out of warranty, so roughly 18 months, some tools are one year, some are two years, but if you say 18 months, that probably captures it. We have seen EUV service business grow over the last couple of years, in line with what we have expected in terms of revenue.
I think Roger talked about the margins being coming out of 2021, roughly, say, 20 — high 20%s gross margin on that business and it grew to probably 30% last year and that grows towards corporate margins in the 2025 timeframe. So I think we are seeing the revenue we expected, and we see margins continue to grow as more tools are installed per location and we continue to work on the cost of parts for that as well.
Alex Duval
Great. Well, Pete, thank you very much for a very illuminating discussion. I think we are out of time.
Pete Convertito
Thanks for having me.
Alex Duval
Thanks everyone for joining and speak very soon.
Pete Convertito
Great.