Tower Semiconductor Q4 2023 Earnings Call Transcript

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Provided by Quartr
February 14, 2024

There are 7 speakers on the call.

Operator

Q4 and Full Year 2023 Financial Results Conference Call. All participants are currently in a listen only mode. Following management's prepared statements, instructions will be given for the question and answer session. As a reminder, this conference is being recorded February 14, 2024. Joining us today are Mr.

Operator

Russell Ellwanger, Towers' CEO and Mr. Oren Shirazi, CFO. I would now like to turn the conference over to Ms. Noit Levi, Senior Vice President of Investor Relations and Corporate Communications. Ms.

Operator

Levi, please go ahead.

Speaker 1

Thank you, and welcome to Tower Financial Results Conference Call for the Q4 and Full Year of 2023. Before we begin, I would like to remind you that some statements made during this call may be forward looking and are subject to uncertainties and risk factors that could cause actual results to be different from those currently expected. These uncertainties and risk factors are fully disclosed in our Forms 20F and 6 ks filed with the Securities and Exchange Commission as well as filings with the Israeli Securities Authority. They are also available on our website. Tower assumes no obligation to update such forward looking statements.

Speaker 1

Please note that the Q4 and full year of 2023 financial results have been prepared in accordance with U. S. GAAP. The financial tables and data in today's earnings release and in this earnings call also includes certain adjusted financial information that may be considered non GAAP financial measures under Regulation G and related reporting requirements as established with the Securities and Exchange Commission. The financial tables include a full explanation of these measures and the reconciliation of these non GAAP measures to the GAAP financial measures.

Speaker 1

Please note, we have a supporting slide deck that complements today's conference call. This presentation is accessible on our company's website and is also integrated into today's webcast for your convenience. Now I'd like to turn the call to our CEO, Mr. Russell Edwards. Russell, please go ahead.

Speaker 2

Thank you, Noeet. Welcome, everybody. Thank you for joining our call today. During today's call, we will discuss our financial results for the Q4 and the full year of 2023 and share our strategic direction and expected growth outlook for 2024. To begin, as is known, On January 1 this year, there was an earthquake in Japan and a surrounding area to our facilities at Hokuriku.

Speaker 2

We are grateful that no employee suffered any physical harm through this event. Due to state of the art building practices, We did not suffer facility structural damage. We did suffer tools damage and scrap of some percentage of work in progress at both factories as well as succession of operations. Our dedicated and most capable employees have recovered both factories to full operation with start levels currently to the level set in the annual plan. 2023 was marked by an industry wide slowdown resulting in an annual revenue of $1,420,000,000 As we transition into 2024, There are clear indicators of market recovery.

Speaker 2

We are realizing renewed demand across several of our key market segments. We will give more color on this as we continue the call. Revenue for the Q4 was $352,000,000 At this revenue level, fab utilizations were: Fab 1, 6 inches was about 60%, Fab 2, 8 inches was about 75%. Fab 3 remained at about 40%. Fab 5, 8 inches was about 40%.

Speaker 2

Fab 7 12 inches was about 70%. Fab 9 8 inches was also about 70%. As a validation of our value add products and next generation customer aligned roadmaps, we not only maintained our blended average selling price per layer, but saw an increase of about 4% in 2023 over 2022. This was not due to price increases, but rather due to value add products resulting in a richer mix and is a reason for maintaining in a period of industry pullback. Anticipating shifting market dynamics and customer demand, We are actively optimizing our operations through a consolidation of our 6 inches activities into our 8 inches operations in Migdal Haemek, Israel.

Speaker 2

As part of this optimization process, we will phase out certain lower margin products in our 6 inches offerings, aligning to our long term strategic goals and financial model while porting certain activities to the Fab 2 8 inches For example, a high value technology serving a next generation advanced computer tomography, CT machine into our 200 millimeter factory, ensuring continuity and even greater efficiency for this technology, which will require several 100 of 200 millimeter wafers per CT machine. A breakdown of Our 2023 revenue per end market is as follows shown in Slide 3 in the supporting slide deck. Sensors and displays represented 20%, RF Mobile Business 22%, RF Infrastructure Business 10%, Power IC Business 24% Discrete 15% Mixed Signal CMOS 7 and there's about 2% of miscellaneous for this period. Revenue breakdown by end market as follows. Please reference Slide 4.

Speaker 2

Infrastructure revenue, which is predominantly RF optical with a certain amount of advanced discrete was 11%. Wireless was approximately 22% automotive 17%, which we serve with power ICs, Discrete, with imagers and with RF radar. Consumer, in which we consider compute power management for general accessories and home appliances and home use security cameras was approximately 13%, industrial about 7%, image sensors for high end photography and medical applications about 7%, aerospace and defense about 4% and there was about 2% of mixed signal CMOS where we do not have exact end market knowledge. Additionally, about 14% of power device revenue for which we do not have granularity on the Exact end market application, which serve multiple of the above mentioned segments such as automotive, industrial, wireless and consumer and lastly an additional 3% divided among the end markets that we've spoken, but of which we cannot granularize. Specific on RF Mobile, We are experiencing a rebound in the mobile market running presently at high utilization for both 200 millimeter and 300 millimeter RFSOI capacity with additional capacity coming online throughout 2024 2025.

Speaker 2

Our capacity planning is and will continue to pay off, having met our initial targets at the Agrate, Italy facility, having qualified and shipped our first products with a planned ramp throughout this year supported by an already executed double digit number of production tape outs to meet the increasing demand shown in our customers' forecasts. Wisely partnering with ST and hence leveraging the ST build out, we reduced the impact on margins of the new manufacturing activity. But as is in any new capacity ramp from scratch, there is an initial headwind on margins. This should be fully absorbed and become accretive margins within the first half of twenty twenty five, the planned completion of the present phase capacity to ramp in the EGRATE facility. Looking forward, we are prototyping new 200 millimeter and 300 millimeter technologies.

Speaker 2

Please see Slide 5. With best in industry efficiency as measured by R ONC OFF and output power as measured by breakdown voltage, winning new customers and design slots, whilst beginning conversations with customers about 6 gs requirements. Prior to the adoption of new wireless standards such as 6 gs, we see additional AI and mobile ARVR applications having the potential to drive a stronger handset refresh market over the next several years to further benefit our RF business. RF Infrastructure. We are strongly positioned supplying AI infrastructure growth in part by our previously announced silicon photonics partnership with Innalight, the global number 1 optical module provider and Marvell, a Tier 1 optical connectivity provider as well as with a total of over 50 additional customers currently using our silicon photonics foundry platform.

Speaker 2

In addition to our current silicon photonics production supplying 400 gs and 800 gs AI, data center and datacom infrastructure, We're investing with our lead customers in new technologies, enabling more efficient 1.6T systems through innovation in both materials and architectures, including options for co package optics. We continue to expand the silicon photonics application space by working with leaders in automotive and commercial lidar to enable silicon photonics based future frequency modulated continuous wave that can create solid state cost effective LiDAR solutions with better resolution and capability than possible with other technologies. Please see Slide 6. Leveraging our incumbent position, we continue to work with our previously announced silicon germanium customers including MACOM, Broadcom and Semtech and many others to develop next generation optical components for pluggable transceivers, active cables and for LPOs, linear programmable optics to not only support faster data transmission rates for single wavelength, but also to reduce latency and power consumption data centers supporting generative AI and machine learning applications. Finally, We just recently announced our partnership with Renesas, a global conglomerate and market leader in supporting the rapidly growing satellite broadband market.

Speaker 2

Today, our silicon germanium products can go into beamformer terrestrial antenna terminals where each user terminal requires more than 250 Silicon Germanium transceivers. For reference, please see Slides 78. Longer term, the industry is ways to incorporate satellite reception into headsets, which could create an even larger market opportunity, including a change of cadence in next generation mobile platform refresh adoption. With multiple fab qualifications for silicon germanium, We are well positioned to support the capacity needed for these expanding markets. Looking at our power business.

Speaker 2

While 200 millimeter power is undergoing some level of inventory correction driven in part by automotive, we continue to see very strong for a 300 millimeter power management BCD platform for advanced power performance and increased digital processing creates the ideal match for the smaller sizes needed for power, audio, battery management ICs with a broad feature catalog Pick and choose modular platform. Please see Slide 9. In addition, the advanced power performance makes it an excellent technology solution to deliver high power to computing processors and AI accelerators within data centers. This platform fits many power and mixed signal applications and is therefore being chosen by Tier 1 companies for a wide range of applications, which are now running at high volume in our Wozu factory in Japan. We have recently delivered successful first silicon from our most advanced and feature rich 65 nanometer BCD platform to a Tier to a Tier 1 customer and are working together bringing initial products to market on this most advanced platform.

Speaker 2

Regarding progress in Albuquerque, we have initial full flow material completed while making meaningful progress in qualifying the technology to enable further ramp of both existing customers as well as new high volume power and mixed signal customers and we'll begin customer prototyping in the in the second half of twenty twenty four towards full qualification and production in 2025 and obviously beyond. Moving to sensors and displays. Our machine vision market is expected get back to high demand levels in 2024. This rebound is mainly driven by the Chinese machine vision camera market where our customers and their customers are gaining significant share in factory automation and embedded robotic camera systems. For this market, We are completing the development of a small pixel global shutter roadmap scalable to various resolutions from mainstream of 5 megapixel to 12 megapixel sensors to very high resolution sensors of up to 325 megapixel enabled by our advanced proprietary stitching technology, printing sensors larger than the lithography frame size.

Speaker 2

Please see Slide 10. In the medical market, we've developed a new 12 inches 65 nanometer lean flow as a comparative answer to non CMOS, non silicon, IGZO, indium gallium zinc oxide, thin film transistor technology. Please reference Slide 11. This enabled customers the high performance of CMOS imagers namely low dose X-ray sensitivity and high frame rate at cost levels now competitive to IXXO. As mentioned, as a key technology being moved from 6 inches to 8 inches We are producing new photon counting sensors for next generation CT scanner, a new market for us with a silicon SAM of about $300,000,000 In this market, we partner with an absolute leader to provide a unique technology, which allows scanning at lower doses with much higher resolution due to energy separation.

Speaker 2

In addition, we are expanding our high end photography portfolio, Capitalizing on our leadership position and learnings in the cinematography and broadcasting market, where in one instance, the end customer is an iconic industry leader. Revenue guidance for the Q1 of 2024 is $325,000,000 plusminus5% in line with industry seasonality and in spite of the impact of the earthquake in Japan. Looking throughout 2024, we target notable quarter over quarter sequential growth. We left 2023 with multiple powerful doors having been opened, catalyzed through the unrealized merger deal. Tower is in the best position in its history based upon financial strength, techno offerings, operational performance tied with growing operational capacity and backed by strategic customer partnerships, the strength of which cannot be overstated.

Speaker 2

We enter 2024 with strong focus on strategic value add growth addressing both immediate and longer term objectives. What is this strategic value add growth based upon? Market expansion with growing capacity and innovation, both based upon strategic partnerships. For market expansion, we continue intensifying our efforts in several where we see substantial demand and opportunities. RF infrastructure with very strong focus on silicon photonics and a complete power offering are 2 areas poised for robust growth that we are well positioned to serve.

Speaker 2

Innovation, In order to meet the evolving needs of customers and to outpace the competition, innovation remains at the core of our value proposition. In this call, we've discussed several areas of best in industry figures of merit. Strategic partnership. We believe in the supernal power of collaboration. We are expanding our partnerships with existing customers, leaders in their respective markets as well as new customers with ideas and excitement, pausing them to become leaders as well.

Speaker 2

With that, I'm pleased to turn the call to our CFO, Mr. Oren Shirazi. Oren, please.

Speaker 3

Hello, everyone. We'll release today our quarterly and annual financial results. For Q4 'twenty three, we reported revenues of 3 $2,000,000 gross profit of $84,000,000 and net profit of $54,000,000

Speaker 4

For the

Speaker 3

full year, We reported revenues of $1,420,000,000 gross profit of $354,000,000 and net profit of $518,000,000 which included $290,000,000 net profit impact of the merger contract termination fee received from Intel. I will start my review by analyzing the P and L highlights followed by our balance sheet and CapEx plan. Revenue for Q4 was 3 $52,000,000 as compared to $358,000,000 in the prior quarter and gross profit for Q4 was $84,000,000 as compared to $87,000,000 in prior quarter. Operating profit for Q4 was $45,000,000 and net profit was $54,000,000 or $0.49 basic and $0.48 diluted earnings per share. Operating and net profit for the Q3 included the net impact merger contract termination fee we received from Intel in the amount of $314,000,000 net of associated cost included in operating profit and an amount of $290,000,000 net of tax included in net profit based on a 7.5% preferred income tax rate as applicable to us in Israel.

Speaker 3

Including the termination fee, Operating profit for the Q3 was $362,000,000 and net profit was $342,000,000 or $3.10 basic and $3.07 diluted earnings per share. For the full year, revenue was $1,420,000,000 as compared to $168,000,000,000 in 2022 And gross profit was $354,000,000 as compared to $466,000,000 in 2022. Operating profit for the full year was $547,000,000 and included $314,000,000 net from the Intel merger contract termination fee, compared to operating profit of $312,000,000 in 2022. Net profit for the full year was $518,000,000 or $4.70 basic and $4.66 diluted earnings per share and included $290,000,000 net due to the payment by Intel of our merger contract termination fee compared to net profit of $265,000,000 or $2.42 basic and 2.39 diluted earnings per share in 2022. Moving to the balance sheet and future CapEx and cash plans.

Speaker 3

Our balance sheet As of the end of December 2023, totaled $2,900,000,000 primarily comprised of $1,200,000,000 of fixed assets, mostly machinery and equipment and $1,700,000,000 of current assets. Current assets ratio reflecting the multiple by which Current assets are larger than short term liabilities is very strong by a multiple of 6.2x as compared to 3.9x as of the end of 2022. Shareholders' equity increased by 29% as compared to its amount at the end of 2022 and reached a total of $2,400,000,000 Our strong financial position enables us to plan the following investments in strategic opportunities are aligned to our vision. Approximately $500,000,000 of total aggregate cash was allocated to make investments equipment and other CapEx items required for the 12 inches factory in Agate, Italy, following the previously announced ST Micron partnership agreement signed in 2021. We already invested $100,000,000 in 2022, an additional $200,000,000 in 2023 And the remaining $200,000,000 will be paid during 2024 and 2025.

Speaker 3

In addition, as previously announced, we will invest up to $300,000,000 to buy equipment and other CapEx items that we will own in Intel's fab in New Mexico, enabling Tower to ramp up this fab capacity and capabilities for our customer. In addition, we expect our maintenance CapEx baseline level to remain as previously announced at about $200,000,000 per annum. And lastly, we expect to invest additional cash to acquire more capability CapEx tools and other assets to expand our future technology offering, including increasing our SiGe and SIFO capacity and technological offering to enhance our flexibility to support our customers from our different sites and change our product mix to result in a richer mix from a margins perspective. All the above is aligned to our business strategy as well as our financial model as presented by the company in our pre call in November, Rich Financial model outline our revenue target of $2,660,000,000 per annum that could be achieved by loading Our existing factories at 85 percent utilization and that should result in $500,000,000 annual net profit based on the specified assumptions that were outlined. Now, I'd like to turn the call back to our CEO, Mr.

Speaker 3

Russell Erwanger.

Speaker 2

Yes, maybe we would open up to questions and from there we can go ahead and I'll give a closing. Thank

Operator

The first question is from Cody Acree of Benchmark. Please go ahead.

Speaker 2

Hey, Cody.

Speaker 5

Hey, good afternoon or good morning. This is actually David Williams on for Cody this morning.

Speaker 2

Okay.

Speaker 5

Russell, thanks for all the great color As usual, but what is it digging a bit on the impact on the revenue side and maybe even on the margins from the transition or the shutting down of that 6 inches and moving to 8 inches seems like there should be some nice margin tailwinds there, but also just kind of what that revenue impact could look like over the Couple of quarters as you port that over.

Speaker 2

Yes, Oren?

Speaker 3

Yes. It will not impact the margins at all this Feb 1 because anyway that's the oldest Feb we had built years ago in 1984, it was very nice highly utilized. But in recent year or 2, it's about at the breakeven point. So we did not really contribute to the margin. So there will not be any deficiency to the margin.

Speaker 3

So it will be pretty much breakeven. The revenues we didn't disclose publicly, but it's immaterial really to the total amount and it's already baked into our financial model that we presented in previous time.

Speaker 5

Okay, great. Yes, it seems like that might have been margin dilutive and you might get a tailwind from that as in addition to the economics of moving that from that 6 inches to 8 that fair to say?

Speaker 2

It is. But over the next few quarters that actually We've been well aligned with customers and getting prepared for this. And if anything, revenues will be higher through some pull ins of Endo Life activities. So over the next 2, 3 quarters, if anything, it's going to be beneficial, not negative, but on a small level.

Speaker 5

Okay. All right. Great. Thanks so much for that. And then maybe just on the rebound that you're talking about, what is maybe can you point to this giving you that confidence?

Speaker 5

Is it within the near term order rates that are forecasting customers? Or are you getting better longer term visibility of the customer demand?

Speaker 2

That's a combination of both. Had stated that we're targeting notable quarter over quarter growth throughout the year. If we look at our forecasts on most all of the core businesses that we have, There's good strong double digit growth in the year, but really driven off of the second half, not very much off of the first half. With the exception right now, the RFSOI is very strong. And as well, we have certain mixed signal and power also going into mobile platforms, that's very high at the moment.

Speaker 2

So that's two areas of really increase in forecast. Had mentioned that I think fortuitous, but based upon good planning. When we started the activity in Italy, the Adrate facility, We had by plan going to be shipping our first qual wafers in the Q4 of 2023. And that is right now, an area where we really do need capacity. And as the capacity is coming online quarter over quarter.

Speaker 2

It's fully spoken for throughout this year and by forecast for the 2025 as well, when it hits the full capacity of this ramp, phase in the Q2 of 2025. So in the area of the RFSOI and some other mobile applications, we have seen a very big pickup in orders. In the area of silicon germanium, which and silicon photonics, we see very strong forecasts for which we've not yet received the POs, but really in Q2, Q3, Q4. And that's very real. If I look at SIFO, year over year growth in silicon photonics by forecast is multiple 100s of percent.

Speaker 2

And then our 300 millimeter power is also very strong growth year over year as well as the 300 millimeter mixed signal, which is serving some of these mobile applications that I had said. If I look again at our core CIS activities, had mentioned the industrial sensors and that's doubling from present run rate in Q3, Q4. Now, I'd say these are customer forecasts or not yet POs, but our customers are pretty good about forecasting. And We are fairly good about what we put in the system. So across many of our segments, we see very strong growth coming in this year, But back in the second half, that's what gets us very exciting is that either with new technologies that are now gaining new market shares for us and for our customers or a rebound in the market itself, both have the same accretive benefit on revenue and ultimately on margins.

Speaker 2

One area that we do have weakness now, we don't see an increase coming quickly is that of our 200 millimeter power management predominantly being done in our factory in tsunami, Japan. And I think anyone that looked at the TI release knows that there I think TI is a pretty good bellwether of across the board power management, that market is weak right now. And a big portion of what was being served in that market for us was automotive, in particular, battery management, and that has pulled back. So that's the one area that I don't see yet by customer forecast a rebound. But most everything else that we're doing, I think looks very good at least in the second half and some already having started in Hopefully, that answers your question.

Speaker 2

I tried to make it very complete.

Speaker 5

No, very, very great color. Thanks for that Russell. And then maybe One last one for Oren. Just kind of given the trough that we're seeing in revenue next quarter, how should we think about the gross margin and just given the mix and that

Speaker 3

The baseline of Q4 actual, which resulted in I believe 24%, gross profit is the baseline and for Q1. And now since the revenue guidance is indicating about $25,000,000 $27,000,000 lower revenue. So then you should apply the 50% incremental model whether we go up or down.

Speaker 5

Great. Thanks again.

Speaker 2

Thank you. Good questions.

Operator

The next question is from Richard Shannon of Craig Hallum. Please go ahead.

Speaker 6

Hey, Richard.

Speaker 4

Russell, hi, how are you? Hi, Oren. Thanks for taking my questions. I'm actually going to follow-up on the gross margin question. I appreciate the thoughts here, Oren, as to how to think about the Q1 here.

Speaker 4

I think I heard from one of you too about Some sort of impact here from the SDMicro and Ratte fab ramping up here. I wondered what that might be because it doesn't seem like you're necessarily seeing it here in the Q1. How do we think about that? And then as the lower margin products in Fab 1 roll off, does that give us any thought process for a higher feeling of gross margins in your model? I think I heard you say No, Oren, but I just want to make sure.

Speaker 3

Yes. I think my previous answer that To assume 50% incremental on the revenue increase or decrease is Considering all that meaning, let's say, currently the gross profit was whatever it was $84,000,000 And if one assumes $25,000,000 revenue reduction, so it should be attributed to 50% of that gross profit 84%, 50% of $24,000,000 for $72,000,000 Yes, what Russell mentioned is true about the fact that we will start since we start like Russell said from scratch the Agrate factory, it will Until it will reach the breakeven point, which Russell indicated in a year from now, may influence a little bit on the margins. We didn't specify the amount. It could be some lower margins, but it will be offset by other activities and richer mix. So I think it's already in the numbers that I specified before.

Speaker 4

Okay, fair enough. Thanks for that clarification, Oren. Russell, kind of going under pressure, Lisa and your comments here on the call about notable growth after this Q1 here and you're clear in saying more in the second half here. Trying to put numbers together and think about the total year, I think the fair question to ask here is, do you you're going to grow your total revenues in 24 over 23, it seems like it'd be right in that range, but just want to get a sense of how do we interpret notable?

Speaker 2

I would expect that we grow our revenue 24 over 23, yes.

Speaker 4

Okay. Excellent. That's great to hear. Let's hear maybe a couple of questions in

Speaker 2

I'll actually be very disappointed if we don't.

Speaker 4

Okay. Excellent. That's great to hear. Quick question on the data center area here. It sounds like you're seeing some pickup here.

Speaker 4

But want to get a sense of kind of exposure in some of the growth drivers here. You talked about higher end datacom and 800 gig. I'm wondering if you get is there any way that you know where quantify how much of your business is 800 gig. And then you've talked about today and in the past about linear pluggable optics LPO. You think that's going to be a sizable part of the market down the road?

Speaker 2

What I think isn't necessarily that critical, yes, I believe that there's major advantages in it that should be implemented. How big it will get? I don't know. I think it could and it does have benefits. It certainly would be beneficial for us in the offerings that we give.

Speaker 2

But I'm not a market analyst. I think that's really more of a question for you than me. But it's From the technical benefit, yes, I think that there's strong benefit there. As far as what you said about data center though, I did want to state what I have not yet seen other than in silicon photonics, we have not yet seen a big uptick in POs. We've seen an uptick in forecast.

Speaker 2

And there's sometimes a difference between the two, but I'm confident in the forecast and that will be picking up in the second, third and fourth quarter as far as POs and ultimately shipments. For what we're doing in the with our customers and what's being done in the end customer. I was Delightfully surprised in the executive meeting with a big integrator in the second half of twenty twenty three to hear how much of their present volume is going into 800 gs. And it was certainly much higher than the standard analyst reports were saying was 800 gs. So and that's I think very obviously driven by AI.

Speaker 2

So How much is now going in 800 gs? I would again, that's an overall market analyst statement, not mine. But quite a bit of what we're shipping will be going into that. I believe most all of what we're doing in SIFO is added at the 800 gs and obviously targeting into 1.60.

Speaker 4

Okay. That's helpful. Two quick questions, I will jump out of line. You talked very positively about silicon photonics and I think it's a very small piece of your revenues within the company, much less in data center. How should we think about this over the next couple of few years, Big picture about how much of this becomes part of your data center business.

Speaker 4

I don't know if you want to give a percentage of that business and how fast that can grow or Just any context of this area that you seem very excited about? So

Speaker 2

I see by all of our own plans and by customer alignments that SIFO will be a predominant portion of data center market and elsewhere as well, but data center definitely. And realize that we have both passive and active SIFO. The activity that we have going on on integrated laser is pretty exceptional and we are the only pure play foundry that has that and those are very, very high dollar, high value systems as well as what we're doing now with SIFO that for example we're shipping to Intellite. But I wouldn't say that it's an insignificant amount of our revenue presently. If I look at what we're having in our forecast for 2024, the SIFO revenue is not insignificant.

Speaker 4

Okay. Well, thanks for that clarification. Russell, my last question, I'll jump in the line here. Obviously, you have a very strong balance here and I think you're probably going to be free cash flow positive to some degree this year. How do we think about your plan for the cash here as it continues to grow?

Speaker 3

Hi. So first, I don't forecast we will be positive free cash flow because and we did not And we were not also in Q4 and Q3 because of the big CapEx that we have for Agrate and also for Intel, They are exceeding our cash from operations.

Speaker 2

Not for Intel for the Albuquerque capacity.

Speaker 3

The Intel fab. Our capacity, our tools, our equipment that will be in the Intel fab in Albuquerque. So this $300,000,000 and the other remaining of $200,000,000 plus the other CapEx that we have run rate of every year of €200,000,000 This exceeds the cash from operations. So I don't think it so it will not be positive. But still it's good that we have the cash on the balance sheet, so we can fund it all that.

Speaker 3

And like I mentioned in my prepared remarks, We still have to pay we didn't pay anything towards the $300,000,000 for Feb 11 for Intel's Feb 11 for our tools there. And we still have $200,000,000 for Agate and we have $200,000,000 for maintenance. And in addition to that, like I mentioned, we are planning to invest to increase the capacity of Sypho and Sygi in our various sites, so we have flexibility.

Speaker 4

Okay, great. Thanks for that clarification guys and keep up the good work. Thank you.

Speaker 2

Thank you, Rich.

Operator

The next question is from Lisa Thompson of Zacks Investment Research. Please go ahead.

Speaker 6

Hello. And I just had a quick question a little bit about the finances, Oren. So given your plans for this year, what would be the CapEx expenditure by quarter? And then given that and your nice $1,200,000,000 in cash, what should we expect for interest income?

Speaker 3

Okay. Interest income, you can see in the balance sheet the cash amounts we have. You can assume that we and on the other hand, we have $200,000,000 of loans. The loans are carrying 2%. Our investments are currently I mean, we enjoyed this year also from rates of between 6% to 7% Interest on deposits and yields on marketable securities, so we did really good.

Speaker 3

For currently the interest rates are a little bit lower in the world. So instead of getting excellent 6.5% to 7% that we got last year, Maybe you should assume 5% or 5.5%. And of course, not on the entire cash amount because some of that is working capital required all the time. But for majority of our cash, we invested in deposits and up to and about $150,000,000 in marketable So I would assume 5.5% of that. For CapEx, So I actually said in the beginning, we have $200,000,000 for maintenance CapEx sustainable level.

Speaker 3

So it's $50,000,000 a quarter, right? On top of that, you should assume, I mean, I said $200,000,000 remaining for Agata. That's in the coming one and a half years. So if you want you can divide it by 6 to reach the quarterly CapEx for Agrate Feb. And for the Feb 11x the Tools for that Feb, I assume the $300,000,000 will be paid in the coming 2, 2.5 years.

Speaker 3

So everybody can make his assumptions. Overall, for sure the CapEx should be more than $100,000,000 per quarter Between $100,000,000 to $150,000,000

Speaker 6

Okay, great. Thanks. And So just take that off the cash balance? No, because you're going to generate a little bit in operating income, right?

Speaker 3

Yes. But like I answered before to, I believe, Richard, the cash flow operations is typically lower than $100,000,000 to $150,000,000 a quarter, right?

Speaker 6

Right, right. So definitely negative cash flow, obviously. All right, great. Thank you. That helps a lot.

Speaker 6

That's my only question.

Operator

This concludes the question and answer session. Mr. Ellwanger,

Speaker 2

Thank you. Thank you for joining the call. Really is a very exciting time for the company. As stated in the press release itself, it is Probably the best position Tower has ever been in, in its history in all aspects, in our financial strength, in our technology offering and in our operational capability and That then all underpinned by the customer partnerships is it's an amazing place to be. Look forward to tracking our progress over the year and reporting on it.

Speaker 2

In the Upcoming short period on February 29, Doctor. Racinelli, Our President will host 1 on 1 meetings at the Susquehanna Technology Conference in New York. On March 19, We will be hosting an investor conference in Tel Aviv Stock Exchange at the Tassa building itself. Overall, appreciate your continued support and confidence. Our team is eager and ready to seize opportunities ahead and to drive value for our customers and stakeholders.

Speaker 2

Thank you and look forward to follow-up conversations.

Operator

Thank you. This concludes Tower Semiconductors conference call.

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Tower Semiconductor Q4 2023
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