Ambarella Inc (AMBA) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen and welcome to your Ambarella's Q1 fiscal year 2015 earnings call.

(Operator Instructions)

As a reminder, today's conference is being recorded. And now, I would like to turn the program over to your host, Deborah Stapleton.

Good afternoon, and welcome to Ambarella's first fiscal quarter 2015 financial results conference call. Thank you for joining us today. Our speakers will be Dr. Fermi Wang, President and CEO; and George Laplante, CFO.

The primary purpose of today's call is to provide you with information regarding our fiscal first quarter. The discussion today and the responses to your questions will contain forward-looking statements regarding our financial prospects, market growth, and demand for our solutions, among other things.

These statements are subject to risks, uncertainties and assumptions. Should any of these risks or uncertainties materialize, or should our assumptions prove to be incorrect, our actual results could differ materially from these forward-looking statements. We are under no obligation to update these statements.

These risks, uncertainties, and assumptions, as well as other information on potential risk factors that could affect our financial results, are more fully described in the documents that we file with the SEC, including the annual report on Form 10-K that we filed on April 4, 2014 for the 2014 fiscal year, and then Form 10-Q for the first quarter of fiscal 2015 that will be filed shortly.

Access to our first-quarter results press release, historical results, SEC filings, and a replay of today's call can all be found on the Investor Relations portion of our website. I'll now turn the call over to Fermi Wang. Fermi?

Thank you, Deborah, and good afternoon everyone. We are very pleased with our fiscal Q1 2015 financial results. Q1 revenue was $14.9 million, up 20.6% from the $33.9 million we reported in the first quarter a year ago.

Q1 non-GAAP net income was $7.8 million, or $0.25 per diluted ordinary share. This compares with a non-GAAP net income of $6.2 million, or $0.21 per diluted ordinary share, for the same period in fiscal 2014.

I would like to discuss some of our products and the [market] highlights. Then I will turn it over to George for more in-depth discussion of our first-quarter financial performance and our guidance for Q2.

The security market remained strong in Q1, with substantial sequential and year-over-year growth, reflecting the steady development of customers added over the last 12 months, as well as continued expansion of the global market. Ambarella has been very successful in penetrating the professional security camera market across all geographies and across a wide range of product categories.

This was evident during the ISC West 2014 International Security Exhibition and Exposition held in Las Vegas in April, where many leading professional security customers introduced new products based on Ambarella solutions. This included the latest 4K, or ultra-HD resolution cameras, as well as panoramic cameras based on Ambarella's new S2 camera SoC.

During the show, [UH dates] FLIR, a leading supplier of thermal images and professional IP security cameras, introduced and demonstrated 31 new models of camera based on Ambarella's SoCs. FLIR's professional security camera product line includes HD and up to six megapixel visible cameras, as well as a full line of thermal security cameras.

Additionally, Hikvision, one of the world's largest video surveillance equipment suppliers, introduced its new line of panoramic IP security cameras based on Ambarella's H2 camera SoC. The new models can be mounted on walls or ceilings to provide a 360-degree or 180-degree field of view, and are available in three megapixel and six megapixel (inaudible) versions.

In April, Ambarella introduced its new S2L family of full HD camera SoC designed for consumer, small business, and professional IP security camera on locations. The S2L's SmartAVC H.264 low bitrate streaming technology significantly reduce bandwidth requirements to lower cloud storage costs and support the use of multiple cameras in home environments.

It has the performance required for intelligent video analytics, such as intruder detection or audio analytics, such as breaking glass detection. The S2L's multi-exposure high dynamic range processing delivers outstanding image quality, even in challenging lighting conditions.

Additionally, the S2L dewarper can correct images captured from wide-angle lenses to enable cameras that cover a wide viewing areas. The S2L family is the first from Ambarella to be manufactured in advanced 28-nanometer technology.

As mentioned in previous earning calls, we expect the consumer security market to increasingly be a growth opportunity for Ambarella. This camera category is being enabled by cloud-based video storage and by remote monitoring via smartphone or tablets.

Additionally, Telco satellite and [Cab] cable television operators are now beginning to offer HD security cameras to consumers as part of their service offerings. Examples of consumer IP security cameras launched during the quarter included Philip's new InSights N120 wireless HD home monitor camera, based on Ambarella's A5s camera SoC. The HD camera includes remote viewing from such smart phone or tablet, wide-angle viewing, night vision, and motion detection.

Additionally, Lorex, a leading global supplier of security camera systems for home and business basing in the US, introduced its Little Link portable HD Wi-Fi video baby monitor, based on Ambarella's low-power A5s camera SoC, the Little Link camera enables light remote viewing on smartphones or tablets, and is also both portable and cordless, allowing the camera to be taken out of nursery and used in other locations, including outdoors.

In summary, we anticipate continued growth in IP security market as cameras continue to transition from analog to digital and from extended definition to high definition. We expect continued revenue growth from the production ramp of the ultra-HD S2 chip, the adoption of the new S2L SoC, and the proliferation of A5s-based HD Wi-Fi cameras.

In the wearable sports camera market, our sales continue to be led by GoPro, with its successful Hero 3+ camera models. As expected, given the seasonal nature of this market, our Q1 wearable sports camera revenue was lower than in the previous quarter.

In the second half of the year, we expect renewed growth as we enter the normally busy holiday season and consumer continue to appreciate the benefits of hands-free cameras with great video quality and the wireless connectivity.

We also see opportunities in the new UAV, or quadcopter, market, as the manufacturers move to offer integrated HD camera solutions. In particular, quadcopter makers are demanding cameras with ultra-HD or 4K resolution, as well as cameras with advanced [wireless] and computer vision capabilities.

In the automotive aftermarket, Ambarella provide cameras SoC solutions for video cameras, recorders, or dash cams. These cameras are sold primarily to Russia, China, Taiwan, and South Korea.

At the [China consulting fair], a leading consumer electronics show held in Hong Kong during April, multiple ODNs introduced new product based on Ambarella's [advanced] (inaudible) SoC solution, including new features, such as high dynamic range, Wi-Fi, and two channel camera operation. Ambarella demonstrated its latest multi-view super HD reference design, which incorporates two-exposure, high dynamic range of full HD resolution to significantly boost dash camera visibility in real-world conditions.

In general, the automotive dash camera market continue to face economic challenge in Russia, and a competitive price pressure at a low end in China. Ambarella is, however, successfully driving the adoption of cameras with higher image quality and more advanced features, and has new design wins with leading brands in Korea, Japan, and Taiwan, in addition to existing Chinese customers.

In conclusion, we are very pleased with our first quarter execution and the financial results. We have strong momentum in all our camera markets, including IP security, sports, and automotive cameras. The introduction of S2L camera SoC extends our leadership in the security market, and we are help define the feature of the next generation of Internet-connected home security cameras.

With that, I will hand it over to George to discuss our financials.

Thank you, Fermi, and good afternoon everyone. Today, I will discuss the financial highlights for the first quarter of FY15, ending April 30, 2014. I will then review the financial outlook for Q2 of FY15, which ends on July 31, 2014.

During the call, I'll discuss non-GAAP results and ask that you refer to today's press release for a detailed reconciliation of GAAP to non-GAAP results. For non-GAAP reporting, we have eliminated stock-based compensation expense as adjusted for income taxes.

As we discussed in the past, the Company has seasonality to both its revenue and gross margins. So, I will include year-on-year comparisons for certain key operating metrics to assist in the understanding of changes in our business.

I'll now start with a review of Q1 results. Our Q1 2015 revenues of $40.9 million represented an increase of 20.6% over the $33.9 million of revenue in the same period in the prior year. Camera market revenue is estimated at 90% of Q1 revenue, compared to 86% for the same period in the prior year.

Our professional and consumer IP security market was a principal driver of year-over-year revenue growth, ending the quarter as the largest camera segment, based on both revenue and units. The growth in security, both sequentially and year over year, reflected the increase in revenues from customers added since Q1 of last year, and the initial production shipments of our 4K IP security chip, the S2.

Geographically, North America and Asia increased both sequentially and year over year, while we saw a year-over-year increase in Europe at a sequential decline. As expected, Q1 revenues in our wearable sports camera market declined both sequentially and year over year. We mentioned in our Q4 2014 earnings call, that Q1 of last year was positively impacted by the launch of three new camera models from GoPro, creating a challenging comparisons to this year.

Q1 automotive market and revenues were flat compared to Q4, and below Q1 of the preceding year. Q1 infrastructure revenues were also flat compared to Q4, but remain below the same period in the prior year, as system manufacturers continued to experience soft markets in most regions. We continue to be cautious on infrastructure revenues for the next year, as service providers delay investment in anticipation of the network upgrade to 4K and the new HEVC compression technology.

Non-GAAP gross margins for Q1 of FY15 was 62.7%, compared to 64.1% in the immediately preceding quarter, and 64% in the first quarter of the prior year. Compared with Q4, gross margin declined, primarily due to an increase in mix of product revenue from lower-end China IP security camera manufacturers.

Net GAAP operating expenses for Q1 2015 were $16.9 million, compared to $17 million for Q4 of 2014, and $14.9 million for Q1 in the prior year. OpEx remained flat from the previous quarter, as expected costs associated with the 14-nanometer chip development projects ramped slower than anticipated. But as we have mentioned before, these costs are expected to expand as the year progresses.

Non-GAAP net income for Q1 2015 was $7.8 million, or $0.25 per diluted ordinary share, compared with non-GAAP net income of $6.2 million, or $0.21 per diluted ordinary share, for the same period in the previous year.

The non-GAAP effective tax rate in Q1 2015 was 11.5%. As the federal government has not renewed the R&D credit for 2014, we are forecasting our effective tax rate to be between 11% and 12% for the year.

In Q1 2015, the non-GAAP earnings per ordinary share are based on 31.8 million diluted shares, as compared to 29.1 million diluted shares for Q1 of 2014.

Total headcount at the end of Q1 2015 was 501 employees, compared to 495 at the end of the previous quarter, with about 351 employees dedicated to engineering. Approximately 76% of our total headcount is located in Asia, primarily in Taiwan and China.

We ended Q1 with cash and marketable securities of $155.6 million, adding $10.3 million of cash from operations in the quarter. Total accounts receivable at the end of Q1 2015 were $21.3 million or about 46 days sales outstanding. This compares to accounts receivable of $18.8 million, or 43 days sales outstanding, in the prior quarter.

Net inventory at the end of Q1 was $10 million, or about 61 days, compared to $10.5 million, or 74 days, at the end of Q4. Accounts receivable and inventory remain in line with the Company targets.

Ambarella uses WT Microelectronics as its logistics supplier for distribution for the majority of our ODM and OEM customers. For the quarter ended April 30, 2014, sales to WT represented 69% of revenue, compared to 40% in the same period in the previous year.

Chicony Electronics, a manufacturer of camera products for multiple OEM customers, as well as for their own distribution, represented 17% of revenue for Q1 of FY15, compared to 42% for the same period in the prior year. WT and Chicony were the Company's only 10% customers.

I would now like to discuss the outlook for Q2 of FY15. We expect revenues for the second quarter of FY15, ending July 31, 2014, to be between $43.5 million and $45.5 million. This represents an increase of between 15% and 21% over Q2 of last year.

Q2 camera revenues are estimated to be between 91% and 93% of total revenue for the quarter, compared to 90% in the same period in the prior year. Due to the faster transition by customers to the A9 and S2 chips than originally forecasted, revenue expectations in the quarter may be impacted due to the uncertainty of delivery timing during the initial manufacturing ramp of these chips.

Q2 revenues in our wearable sports camera market are expected to increase, both sequentially and year-over-year. We anticipate a year-over-year increase in IP security revenues, although sequentially, those revenues are expected to be flat due to near-term softness in China as a result of competition at the low end of the market.

We expect improved revenues in automotive in Q2 as compared to Q1, as customers continue to launch A7LA-based products. This, provided the Russian market is not negatively impacted by current political activity.

Infrastructure will be flat compared to the previous year, but down sequentially. As discussed, we see softness in the infrastructure market, at least through the remainder of the fiscal year.

We estimate Q2 non-GAAP gross margins to be between 61.5% and 63.5%, compared to 62.7% in Q1 of FY15 and 61.9% in Q2 of the prior year. Q2 camera market gross margins are expected to be positively impacted by the increase in sales of the new S2 chip in the quarter, offset by a decrease in infrastructure revenue as a percent of total revenue.

We expect non-GAAP net income for the quarter to be between $8 million and $9.5 million. We are using an estimated non-GAAP annualized effective tax rate of 12% for net income amounts. We estimate our diluted share count for Q2 to be approximately 32 million shares.

With that, I would like to thank everyone for joining our call today. And now we will turn it back to the operator to manage our Q&A session. Operator?

(Operator Instructions)

Cody Acree from Ascendiant Capital.

Congrats on the results. You specifically highlighted some of the competition in China. Could you spend a bit more time there and talk about your expectations for China growth, and then what that competition might mean to your gross margins going forward?

In the previous call, we have been talking about Hisilicon in China as being our main competitors in China, [mainly] on the low-end side. And in fact, in the last four months, we start seeing the Hisilicon introduce a new chip and being very aggressive on the pricing side.

As expected, we have been expecting this kind of move from our low-end competitors, and what we are trying to do is two-fold. One is we continue to introducing new chip with a higher performance and higher feature set, so we can continue to providing the best solution on the mainstream high-end products. And also, we are prepared to competing with our low-end competitors on the price side.

So, by averaging out, by providing high-end products, we believe we can continue to maintain our gross margin goal of 60% to 63% as corporate target market -- gross margin target. And as in time, we will be aggressively competing with those competitors.

On the lower-end side, though -- with the more aggressive competition at the low end, do you think that with your price-competitive parts, that that's not going to be a margin dilution issue?

Right now, on the low-end side, you mean A5s? I'm going to continue using that chip to competing with them on that. But as I said, we just introduced a new product called S2L, which is going to be our mainstream product starting second half this year and then moving forward, so that we are going to have better products on the mainstream on low-end side.

A5s has been our mainstream chip for a long time, and we also continue to have a [cost down] plan with our suppliers. So, although we are ready to compete on the low-end side, but I think we will continue to repeat that our corporate gross margin target is not changed.

And then, George, you mentioned OpEx was a bit better than expected this quarter. Can you talk about your expectations for the rest of the year with those cost increases that you anticipate?

Yes, we've talked about -- quite a bit about moving into 14-nanometer during the year, and we expect our OpEx to increase pretty consistently during the year from where we are in Q1. We had anticipated that to start earlier, but due to wrapping up some of the other products and actually starting the 14-nanometer later in the quarter than originally anticipated, we had some OpEx benefit. But you can anticipate -- for the rest of the year, you'll see quarterly increases.

Any magnitude help there?

Excuse me?

Any magnitude help on those increases?

Yes. We probably expect, by year end, to be somewhere $1.5 million to $2 million higher than we are currently, on a quarterly basis. So, we'll ramp to that level.

Okay, great.

Lastly for me -- a little different topic. Given the recent talk around Google buying Dropcam, and the partnership that you, of course, announced last year, how is the relationship with Google? And how might that acquisition, if it comes to fruition, impact you positively or negatively?

We have been working closely with Dropcam for a while, since they introduced their first product, and we expect to continue to maintain a strong relationship with Dropcam. But as you -- just like you've said, we also hear these rumors. So, really, there's nothing can comment on it.

Is there any speculation on impact? Is there any way that that would not be a positive for you, one way or the other -- neutral to positive?

We haven't given any speculation on the impact. Every time we mention Google, though, something happens in the marketplace. (laughter)

Okay, guys. Thanks and congrats; appreciate it.

Ross Seymore from Deutsche Bank.

George, a question for you. On the gross margin, can you walk us through a little bit of the details and what's driving it up this quarter? I know you talked about some new product timing. But a little more color, given the direction infrastructure is going, what's happening within camera to get that up sequentially?

Yes. We did mention the ramp of the S2, which is our high-end chip in security, which is ramping a little faster than we had originally forecasted, so that's a positive. We also are starting to ship the A9 version of that product.

So, we are getting the benefit of the higher end of the marketplace in the quarter, as well in Q2 as some of the softness in the low end, which -- the security business, which runs below our corporate margins. Some of that business is being offset by high-end margin business.

As we go into the second half of the year -- I know you're not guiding with any precision there. But with what Fermi said about some of the wearables, the sports side coming back, and I would assume some of the securities side comes back, is this mix that's a positive driver in the July quarter something that you expect to reverse itself, albeit within your corporate range?

We haven't talked too much about that. Right at the moment, we would sit -- I guess I would repeat that our Q3 is normally our lower margin quarter, just because of the consumer side of it. But I don't think there would be any other major impact, other than a higher rate of consumer business in Q3.

So, I'm comfortable with 60% to 63%. Expectations are maybe Q3 being impacted a little bit by consumer.

Great, and as my last question -- one for you, Fermi. I believe you said that you expected your IP security revenues to be flat sequentially, obviously off of a very good ramp year over year. But can you go into a little bit of detail on what the competitive basis is? Is this a digestion from some growth? Is it all pricing, some sockets loss -- any color on that front would be helpful. Thank you.

Well, as you can see, a lot of conversion from analog to digital IP security camera not happens in China, particularly. In fact, we see a lot of end-low camera being replaced by very low-end IP security camera where our competitor is using pricing to compete there.

Also, I think that's where we've seen the major competition. We haven't seen any losing market share on the major accounts. But on the low end, replacing a small L camera, that's where the competition is strong.

Is that something that you expect to continue? Or like you said, when you have the new chip out, you'll be able to fight back a little bit better in the back half of the year?

We'll still participate there, but I think the -- we've never been trying to compete very aggressive on the price, but we definitely try to [offer us] customer who has the product line from very low end to a very high end. We also poll our key customers to continue to compete in that space. But I do believe that our competitors, the main competition criteria for them is using price competing in that particular market.

Okay, great. Thank you.

Quinn Bolton from Needham & Company.

Congratulations on the results. Wanted to follow up on the low end of the security camera market. Was hoping you might be able to just give us some sense -- what percentage of your overall security revenue would you categorize as low-end China? How much of your business is affected by this competition from Hisilicon?

Let me start first. First of all, I think we only see Hisilicon competition in China for now. We haven't seen in any other areas. Again, this is really at the very low end -- IP security camera replacing analog.

I think this is, definitely, one area that can continue growth, while other area will grow, too. But I think this is where we see only competition. In the past, we were there, and now we will work with our main customers, like we talk about Hikvision and [Dawa] in China, to continue to serve their market. (multiple speakers)

Quinn, one other point is, as you saw, Q1 was heavily -- percentage-wise was security business. You noticed our margins were fairly in line with our corporate margins. So, I think the impact has been positive in Q2, and maybe slightly negative in Q1. You can see where our range is.

Okay. And then, moving on to the -- sorry, the sports camera business. I think you mentioned, in your comments on the revenue outlook, that there could be some volatility, depending on timing of shipments of the A9, and I just wanted to clarify. Is that for sports cameras? Or was that the A9 version of the security camera solution?

It's for all A9 and S2 products. It's the same chip. It's more than just sports; we use it across other markets, also.

When you say that the timing of A9 -- it's both S2 as well as the A9 for sports cameras, it's the whole group, not any one market in particular?

That's correct. It's even broader than those two markets that we use that dye in, yes. It's just that -- whether we can fill the backlog -- the ramp of the backlog was a little bit higher than we had forecasted.

Got it. Okay. And then, just the last question, and I know it's been a softer outlook this year on the infrastructure business. Can you give us any updates how you are progressing on solutions that would support the HEVC standard in the infrastructure business?

Yes. Like I said before, I think we continue to work on HEVC solution. And in the near future, we will announce our HEVC solution for the broadcasting.

Great. Thank you very much.

Suji De Silva, Topeka.

Nice job on the quarter. Can you talk about, in fiscal second quarter, George, you guided autos and wearables both up sequentially. Which one do you expect stronger contribution from, or are they fairly similar?

We always would expect wearable sports cameras to be a bigger contribution than automotive, at this point. Wearable sports cameras is the second largest of the camera segments.

I guess I meant in terms of sequential growth versus dollars, George.

Oh, yes. I would still say it's going to be wearable sports cameras.

Okay, great. For FY15, the full year, which do you think is going to grow faster -- the professional IP security market or the prosumer one? Or are they both going to be at a similar clip?

What we've talked about in the past is the consumer market is really more anticipating to be a second-half engine -- growth engine for us. So, obviously, the professional would be a growth engine for the entire year, and it's significantly bigger than we would anticipate the consumer side of the Business this year.

Maybe lastly, on the Google Helpouts, can you help us understand when and if that has a revenue impact, and the timing of that? Thanks.

Like we said before, we don't expect any revenue from wearable market until next year, and I think that's continue to be the case.

Great. Thanks, guys. Nice job on the quarter.

Jay Srivatsa from Chardan Capital Markets.

Fermi, going back to Hisilicon, it appears they're clearly making a push with some of the high-definition products to move upstream. Are you concerned as you look to the rest of the year and into 2015, that some of their competition might drift to the mid end and possibly to the high end? What does it mean for Ambarella going forward?

We always been very careful about how our competition position their product. The new product that they introduced is still -- in terms of spec and performance, still lower than our mainstream products, especially lower than the H2L we introduced. So, with H2L that we introduced earlier this year, we very well established ourself, continue to be the key supplier for the mainstream and the high end.

So, I think to answer your question, yes, we be very careful to review our competition. But so far, we are still confident that, on the mainstream side, we should be okay.

Okay. And then, on to the wearables part. Everybody's seen the GoPro numbers. It looks like Q1 was sequentially down from previous year. But your guidance appears to suggest that the new products are going to be ramping up in the second quarter. What is your view on wearables beyond just the new product in Q2, as you look to the rest of the year?

I think what we said is we expect that because we're selling season in Christmas-time, we do expect that the wearables sport camera will have a growth over Q1. I think that's what we said in our guidance. We believe that wearables sports camera Q1 was low because -- compared to last Q1, is because last Q1 was strong. So, it's as expected. This year, we just expected that wearable sports camera just have a typical product cycle -- and typical product cycle and the seasonality of the year.

Okay. Last question, on the infrastructure business, I think, George, you mentioned that there were some delays in the upgrade cycle by the service providers. What is your sense, in terms of timing on when do you expect that to come back?

So, in the last conference call, we talk about 18 months. I think that we still stand to that expectation. I think it will still take at least another year for the service providers to upgrade into HEVC in a meaningful scale.

Okay. Thank you.

Kevin Cassidy from Stifel.

Congratulations on the quarter. For the 14-nanometer, you said there is a slight delay. Could you give us more information on that? Is there delay in introducing the product -- maybe you can even just tell us when you expect to ship 14-nanometer products for volume?

Maybe you can relate to internal process. You might kept in mind to, first of all, wipe out the previous project properly, and also try to define our first 14-nanometer product carefully, and making sure that we meet our customers' target.

As you can see, that 14-nanometer is very costly to us. So, we have been extra careful, in terms of defining the spec. I think that caused a delay a little bit. But I do expect, like George said, we would expect that we're going to ramp up 14-nanometer expense very quickly.

Okay, so, would that be in the second half of 2015 or first half of 2015?

We're already starting the work, Kevin. You'll just see it ramp up, hopefully smoothly, for the rest of the year and into next year. I don't think, other than some shortfall in dollars spent in Q1, the rest of the quarters will really change much from what most of the analysts have projected.

Okay. Maybe just along those lines of 14-nanometer, do you see any of your competitors moving towards 14-nanometer? Or how much of a lead do you think you have on the market?

Well, the latest Hisilicon solution, we estimate is at 55 nanometers. So, there's still a huge gap there. I don't see them come to a 14-nanometer for the security camera any time soon. I don't see TI introducing any new product recently. So, there's no other major competitors that we are aware of trying to tape out to the 14-nanometer competing with us in our market.

Our S2L chip is actually in 28-nanometer. So, we've got a significant lead on the current products in the marketplace.

Great, that's it, congratulations again.

Charlie Anderson from Dougherty & Company.

Congrats on the strong results, again. Fermi, I wondered if you could maybe give us a little bit of commentary on some of the language we saw in the GoPro S1 around devoting R&D dollars to, quote, image silicon processors. If that was something that was complementary and on top of you, or if it's something where you think they're trying to maybe insource some of the algorithms? Any comments on that would be helpful.

First of all, we work closely with our partners on the development of their products. SoC [howard] platform -- the IP and ownership belongs to Ambarella. However, like we said before, we do provide a development platform -- a very programmable development platform to our key partners -- so they can write software to enable differentiated features on their product line. That's why we work closely with GoPro.

I think they do -- using that platform to developing features that only GoPro has. I think that's what they are referring to. That's my guess, what they are referring to.

Got you. Not to beat a dead horse on the Hisilicon issue, but I wondered if you could just help us with maybe the mix in that IP security business between the low-end China ODMs, who maybe aren't as discerning on price, versus the high end, where it's really more about the features? Just to help us understand what portion -- where you're facing this pressure.

The highest volume portion of it is in the mid-range. This is where our strength is. Actually, a lot of our growth is at the high end. So, at the low end, there is growth there, both in the consumer side as well as the professional side. But it's still a minority portion of our Business.

Got it. Thanks so much.

Thank you. That does conclude our Q&A for today. I'd like to turn the call back for concluding remarks.

Thank you. Thanks for joining us today. A special thanks to all of our employees for their continued dedication and hard work. Good-bye for now. Thank you.

Okay, ladies and gentlemen, this does conclude your conference. You may now disconnect, and have a great day.