AXT Inc (AXTI) 2011 Q4 法說會逐字稿

Good afternoon, everyone, and welcome to the AXT Fourth Quarter and Fiscal 2011 Financial Conference Call. Leading the call today is Dr. Morris Young, Chief Executive Officer, and Raymond Low, Chief Financial Officer. Today's call is being recorded. I would now like to turn the call over to Leslie Green, Investor Relations for AXT.

Thank you, Doris. And good afternoon, everyone. Before we begin, I would like to remind you that during the course of this conference call, including comments made in response to your questions, we will provide projections or make other forward-looking statements regarding, among other things, the future financial performance of the Company and our ability to control costs and improve efficiency, increase orders in succeeding quarters, improve our competitive position as the market improves, as well as other market conditions and trends.

We wish to caution you that such statements deal with future events and are based on Management's current expectations and are subject to risks and uncertainties that could cause actual events or results to differ materially. These uncertainties and risks include, but are not limited to; overall conditions in the markets in which the Company competes, global financial conditions and uncertainties, market acceptance and demand for the Company's products, and the impact of delays by our customers on the timing of sales and products.

In addition to the factors that may be discussed in this call, we refer you to the Company's periodic reports filed with the Securities and Exchange Commission and available online by link from our website,for additional information on risk factors that could cause actual results to differ materially from our current expectations.

This conference call will be available on our website, at www.axt.com, through February 23, 2013.

Also before we begin, I want to note that shortly following the close of the market today, we issued a press release reporting financial results for the fourth quarter and fiscal 2011. This press release can be accessed from the Investor Relations section of AXT's website, at www.axt.com.

I would like to turn over to Raymond Low for a review of the fourth quarter and fiscal 2011 results. Raymond?

Thank you, Leslie. Revenue for the fourth quarter of 2011 was $21.2 million, compared with $28.3 million in the third quarter of 2011.

Total gallium arsenide substrate revenue was $11.1 million for the fourth quarter of 2011, compared with $18.7 million in the third quarter of 2011.

Indium phosphide substrate revenue was $724,000 for the fourth quarter of 2011, compared with $1.5 million in the third quarter of 2011.

Germanium substrate revenue was $3 million for the fourth quarter of 2011, compared with $3 million in the third quarter of 2011.

Raw material sales were $6.4 million for the fourth quarter of 2011, compared with $5.1 million in the third quarter of 2011.

In the fourth quarter of 2011, revenue from North America was 19.9%,Asia Pacific was 61.2%, and Europe was 18.9% of total revenue.

One customer generated more than 10% of our revenue during the fourth quarter, while the top five customers generated 35.2% of our fourth quarter revenue.

Gross margin in the fourth quarter was 36.9%, compared with 43.2% of revenue in the third quarter of 2011. The drop in gross margin was the result of lower raw material pricing and lower capacity utilization. We expect gross margin in the first quarter of 2012 to be flat to up from the fourth quarter of 2011, as a result of higher revenues and improved product mix.

Selling, general and administrative expenses were $3.9 million for the fourth quarter of 2011, compared with $3.6 million in the third quarter of 2011.

Research and development costs of $657,000 for the fourth quarter of 2011, compared with $612,000 for the third quarter of 2011.

Total stock compensation expense was $258,000 for fourth quarter of 2011, of which $24,000 was included in cost of revenues, $222,000 in SG&A, and $12,000 in R&D.

Income from operations for the fourth quarter of 2011 was $3.3 million, compared with income from operations of 6.1 -- $8.1 million in the third quarter of 2011.

Net interest and other income for the fourth quarter of 2011 was $443,000. Net income in the fourth quarter of 2011 was $2.6 million, or $0.08 per diluted share. This compares with net income of $6.5 million or $0.19 per diluted share in the third quarter of 2011.

Let's now look at our cash and the balance sheet. Cash and cash equivalents with maturity of less than three months, short-term investments and other investments in high-grade debt securities with maturities of less than two years, were $40.6 million at December 31, 2011, compared with $39.2 million at September 30, 2011.

Accounts receivable, net of reserves, were $18 million at December 31, 2011, compared with $22 million at September 30, 2011.

Days sales outstanding were at 78 days for the fourth quarter, compared with 71 days for the third quarter of 2011.

Net inventory was $46 million at December 31, 2011, compared with $44.3 million at September 30, 2011. Of this, approximately 55% is raw materials, 40% is work-in-progress and 5% finished goods.

When we guided for the fourth quarter, we had expected our inventory to decline from the prior quarter. However, the timing of the receipt of prior raw material purchases coupled with weaker gallium arsenide substrate demand in the quarter resulted in an increase in our inventory. We now believe we are at a peak inventory and that we will see a decline in our inventory over the coming quarters, beginning with Q1.

Depreciation and amortization in the fourth quarter was $898,000. And capital expenditures were $3.8 million.

As of December 31, 2011, the Company, including our consolidated joint ventures, had 1,308 total employees, of whom 1,014 worked in production.

And now let's turn our results to the year ended December 31, 2011. For the fiscal year 2011, revenue was $104.1 million, and 9% increase from $95.5 million in fiscal year 2010.

Gross margin for fiscal year 2011 was 43% of revenue, compared with 38.2% of revenue for fiscal year 2010.

Net income for fiscal year 2011 was $20.3 million,or $0.61 per diluted share, compared with net income of $18.7 million, or $0.57 per diluted share, for fiscal year 2010.

This concludes our review of the results. I will now turn the call over to Morris. Morris?

Thank you, Raymond. Our fourth quarter results came in sequentially lower and within the guidance range we provided in October, as a result of competitive dynamics in our customer base for semi-insulating gallium arsenide substrates, softer LED market conditions, and flooding in Thailand that impacted our indium phosphide revenue.

However, despite these near term challenges, for 2011 as a whole, we posted the strongest fiscal year results in more than ten years. Revenue for the year was up 9% from the prior year, gross margin increased by nearly 400 basis points, and net income rose by approximately 9%. In addition, we laid important groundwork to prepare our Company for growth as we enter the next semiconductor cycle, as well as increasing demand relating to a number of key secular trends that we play into.

Across our business, we placed great emphasis on diversification of our customer base, with notable success in every product category. We strengthened our sales presence and product specifications to enhance our participation in key geographic areas such as China, Japan, and Taiwan. Further, we took a critical measured step to ensure that we have the appropriate level of capacity at the right time to meet market demand, as it increases over the next several years.

Throughout 2011, we carefully managed our expense levels and further improved our manufacturing and operating efficiency to keep pace with the pricing requirement of our customers and the sizeable fluctuation in raw material costs. I'm very pleased with -- by the way our team executed on its mission in 2011, and believe that we are well-positioned for continued growth in 2012.

In many ways, 2011 highlighted a key theme for AXT, of diversification. Early in the year, the tragic event in Japan prompted many customers in our universe to rethink their supply strategies and consider additional substrate vendors to satisfy their requirements, which has opened up many doors for us and has given way to one of the most active qualification periods in our history.

Further, our own customer concentration, particularly in semi-insulating substrates limited our ability to grow our revenue and resulted in a significant drop in revenue in the fourth quarter. As a result, we have placed tremendous focus on developing our relationships with new and returning customers across our product portfolio, as well as growing revenue from customers that we are currently not a major supplier.

While we cannot specify particular customers, I'm very pleased to report that we have successfully recompleted multiple direct and indirect qualifications with mid and top tier customer accounts, which we believe will ramp throughout 2012. There remains a number of significant accounts that we are currently still in various stages of qualification, and these are a primary focus of our business this year.

Looking at our product categories, in the demand environment for semi-insulated substrate and during Q1 was somewhat challenging, but we are already beginning to see a pick-up in order activity as we move through the quarter,which is leading us to expect growth in our revenue from the -- from Q4.

Many of our customers in our space are expanding their capacity. And the nature of our discussion indicates a growing confidence from them in market demand. We are experiencing, however, continued strong pricing pressure as customers in every region are planning their business conservatively, given the near term lack of micro economic clarity. As we look ahead to the calendar year, analysts largely agree that the demand for wireless devices will continue to grow. And our increasing customer penetration and diversification is expected to drive growth in this area of our Business throughout this year and beyond.

In semi-conducting gallium arsenide substrate, as we discussed last quarter, the market for LED applications has been fairly weak for the past two quarters,following tremendous growth in late 2010 and early 2011. We have utilized this opportunity to tackle certain technical and cost considerations that are important in expanding our presence in key strategic regions, such as Asia. As a result of our work, we successfully qualified two new accounts in this region. We are already seeing revenue contribution from these customers in the first quarter. Therefore, we expect sequential growth in semi-conducting substrates this quarter, with positive growth indicators throughout the year.

We are also monitoring, with interest, the latest industry development regarding the use of LEDs in solid state lighting. Currently, the solid state lighting, other than street lighting, can be achieved by using radio ED to soften white light for warmer indoor light. This application for our substrate is experiencing tremendous pricing pressure, as manufacturers of LED light bulbs are working to bring down the overall cost of the light bulb in order to drive more widespread adoption. For example, LED light bulbs that recently sold for around $40, are now selling for less than $15. As a result of this decrease,the volume of LED light bulbs sold is increasing, and consequently, we are be beginning to see a more meaningful contribution from this adoption application in our product mix.

Turning to the germanium substrates. This area of our Business continued to be healthy. The worldwide satellite markets remains the primary near-term driver for our germanium substrate revenues. But we may begin to see growth from the nascent germanium-based terrestrial solar cell market later this year.

Investors ask us, from time to time, whether we have exposure to the weakness in the terrestrial silicon-based solar cell market that has been well-publicized in the past year. In fact, the two markets are very different, and we have no exposure to the silicon solar cell market.

The germanium-based solar cell market is targeted at large-scale solar power plants, such as the installation going on currently in a number of locations worldwide including, China, Southern California, Spain and Middle East. Germanium based CPV is ideal for this application, as it can generate tremendous power in certain environmental conditions in a very cost-effective manner. Currently, germanium solar cell conversion efficiency is over 43%. We believe that as the reliability of this relatively new technology becomes increasingly proven, we will see acceleration in the adoption rate. We are well-positioned in this market and expect to participate in this growth as the technology achieves greater commercial viability.

Turning to raw material; the improving demand in the development for gallium arsenide and germanium substrate is translating into healthy demand for raw material, as well. Our joint ventures have been working to build capacity to prepare our customer requirements and are well-positioned to support increasing demand. Increased capacity from our joint venture, as well as other suppliers around the world, is contributing to some of the decline in raw material market price. Spot prices for gallium are currently approximately $540 a kilogram, and germanium is approximately at $1,400 a kilogram. However, as the demand strengthens throughout the year and next, the industry will be in a better position to support customer requirements.

As we have mentioned -- as I have mentioned in the past, our unique business model allows us to enjoy healthy margin contributions from raw material, when the price of this material is high as a result of what we can sell on the open market from our joint venture. When the market of raw material drops, our margin contribution from these products is reduced. However, the negative effect to our margin is partially offset by the benefit of our lower raw material costs in our substrate business, as soon as our higher priced raw material in our inventory is worked out. In the first quarter, we will be working down higher-priced inventory and we'll begin to realize more of a margin benefit from our lower raw material pricing in our substrate business mid-year.

As we look ahead to our margin performance in the coming quarters, it is important to note that Q4 is likely to be the bottom for our gross margins, as we are expecting margins to be flat to up modestly in Q1. We are very pleased that, given the difficult business environment of the last couple quarters, we were able to maintain a mid to high 30% gross margin range and post a fiscal year improvement from 2010. We believe that this demonstrates the strength of our financial model and the health of our Business.

Now, before I close, I want to say a few words about our announcement to establish a second manufacturing site in Tianjin, China. The arrangement provided AXT with land use rights for approximately 32 acres of industrial land to construct a manufacturing facility that will be completed, in phases, by 2017. Our investment over the next two years will be approximately $12.5 million, that we can comfortably cover with our healthy cash position and continued cash from operations.

While our current facility in Beijing continues to provide us with ample capacity to grow our Business for the next 18 to 24 months, we believe that a second manufacturing facility in Tianjin will provide us with additional capacity for many years to come, particularly in light of healthy secular trends in our Business. The positive financial consideration of this arrangement, coupled with what we believe to be our long-term capacity needs, provide compelling incentives to proceed with our expansion plans at this time. This arrangement allows us to begin planning for growth and redundancy in our Business in a measured and incremental way, that is suitable for both the current economic conditions and the sizeable opportunity ahead.

In closing, while the fourth quarter presented challenges to us, we are entering a new semi-conductor cycle in 2012 with healthy demand for our product, an ever expanding customer base, and positive secular trends that provide an ongoing catalyst for further growth. In addition, we continue to execute well at every level of our organization, providing a positive experience to our customers while delivering a solid financial model and continued profit. We are excited about our growth potential to 2011. And are actively preparing our Company to take advantage of many opportunities ahead.

I would like to personally thank our employees of AXT for their tremendous dedication to our mission, and our customers, our partners and our investors for their continued support of our Company. I will now you turn the call back over to Raymond to discuss our forward-looking guidance. Raymond?

Thank you, Morris. As a result of market conditions in the first quarter, we expect total revenues of between $21 million and $24 million. We are expecting net income in the fourth quarter -- first quarter of between $0.07 and $0.11 per share, based on approximately 33.2 million common shares outstanding.

This concludes our prepared comments. We are now happy to answer your questions.

Thank you. (Operator Instructions). Our first question comes from Avinash Kant with DA Davidson & Co.

Good afternoon, Morris and Raymond.

Good afternoon.

Maybe you broke this one down, but I -- did you give our the semi-conducting and semi-insulating mix for the quarter?

Semi-conducting, 55%, semi-insulating, 45%.

Okay. And could you talk a little bit about the customer wins that you talked about?I believe there were more on the wireless side of the Business. And could you give us some idea, in terms of how big these customers are? Have they already started to order? Or what is the potential from them?

Avinash, it is the other way around. We said that we had some semi-conducting customer wins. Because the qualification cycle for semi-conducting is shorter than semi-insulating, so we are already getting two customer wins in semi-conducting, which we are already getting some first quarter revenue contribution, and we expect them to continue. However, semi-insulating, we are still working on them.

Okay. So you have not had any wins in the semi-insulating yet, but you are working on them?

Well, we have some wins. But because they work slower, so we don't have any revenue contributions, so we don't want to talk about it.

I see. I see. Then in the semi-conducting side, your numbers have been down a lot. Do you expect this to grow, sequentially, from here on?

I believe so, Avanish. As we said on the conference call, we have problems that we have a customer concentration issue, as well at industry was taking a dip and there was an inventory correction. And as we see, going forward, just about all those problems are either alleviated or partially alleviate.

Okay. And then any comments on CapEx and tax rate for the year? What should we model?

CapEx -- we haven't put out the number for 2012 yet.

All right.

But, you know , we are probably looking at about $4.5 million for normal

Okay. And tax rate, any idea?

Tax rate is usually between 13% to 15% of net income before tax.

Thanks, Raymond.

And we will go next to Richard Shannon with Craig-Hallum.

Hi, guys. A question on the guidance, specifically on revenues -- in your prepared comments you talked about some of the segments, in terms of direction. Wondering if you can give us a little bit of color on which ones you expect to grow more or less than the others? Basically, I'm curious about raw materials if that is expected to grow materially or more so than the other segments in the first quarter?

Well, Richard, it is difficult for us to break it down because these are projections, first of all, and we have a sort of a hodge-podge effect. So I mean for us to give a range is already difficult and you know our Business can turn. But I would think, as we said, I think we are starting to see the demand environment start to turn already, as we enter the second enter the second half of Q1. I do expect and most of our segment of Business is coming back. Which one is stronger or is going to contribute more revenue for Q1, specifically? It is hard, really, to nail it down.

Okay. Fair enough then. And maybe just digging in one of those areas a little bit more, on the wireless side, I think you mentioned that you are expecting that to grow in the first quarter. Do you expect your six inch semi-insulating to grow, specifically, as well in the first quarter?

Oh yes, that is mainly coming from six inch.

Okay. I just wanted to make sure of that. Second question also related to guidance here. You've talked about gross margins coming upwards here, and if I try to bake in the numbers you gave for guidance, it would suggest the gross margins could get to the high 30s, if not maybe close to 40%. Is that a general feeling? Is that kind of in the range of what you are thinking?

I don't think you want to be that aggressive.

Okay.

Right, Raymond?

Yes.

Okay. Fair enough.

Give us a little bit of time.

Okay. Next question -- now, Morris, you mentioned in your prepared comments about the germanium [arcen], specifically in the CPV terrestrial. What gives you confidence that you are going to see some improvement in that part of your Business in the second half of the year? Can you see into the customers and tell what problems and issues are being solved, be it technological or financing or whatever, that gives you that confidence?

Well, Richard, that is reading into the tea leaf, per se. As you know, CPV has always been the market of tomorrow. And we have not said, we definitely see it. If you ask me, what do I see?For one, we see a lot of activities from our customers. We have customers asking for quote for a very large quantity we know is for CPV. We heard our customer want us to nail down certain capacity of raw material. But none of them has turned into purchase order yet. And we also see a lot of activities -- recently there is a lot of VC activities, as well as company merger or announced production agreement, recently. And so they all seem to indicate the CPV market is getting to be more mature. Although the timing of that happening is still -- we cannot be sure of.

Okay. That's fair enough. Good to hear that. And my last quick question, probably for Raymond. What was the percentage of sales coming from your top customer in the fourth quarter?

The top five? 35%.

The top customer -- single customer.

The top customer --we only just give that it is greater than 10%.

Fair enough. That's all my questions, guys. Thank you.

(Operator Instructions). We will go next to Edwin Mok with Needham & Co.

Hi, guys. Thanks for taking my question. And actually -- good guidance. So kind of inline with the question on the guidance; just curious, on the gross margin side, you said maybe flat to potentially up a little bit. How much of that was contributed from a lower raw material mix versus just high utilization in your factory?

We don't normally break down guidance, going forward, for raw materials revenue or the substrate revenue. It is always a combination.

I see. But it is fair to say that those are the two contributors for the flat to up gross margin?

Well, the gross margin, this time, was a combination of a lower gallium pricing and then also lower capacity utilization. So looking forward, $21 million to $24 million, it would probably be similar.

I see. Okay. Great. That was helpful. And then touch on the semi-conducting gallium arsenide business. You talked about two new qualifications that already started to drive your new growth here. Are those related to this LED light bulb application that you mentioned, Morris? Or is it related to auto market?

Well, we can't never be sure. As we said before, when we sell substrate, we don't know exactly where they are using those -- substrate for particular application, whether it is for store-front moving signage or full color display or what not. In fact, when we mentioned about LED and the solid state lighting, we said it could be one of these areas. And particularly, with such a tremendous price pressure and we start to see also volumes start to ramp,those are good indications that they could be using for some of the solid state lighting. But whether they are directly related, we can't tell.

I see. Okay. Do you believe that your customers are producing more of these light bulbs with the LED integrate [and stuff]?

Again, Edwin, I really cannot pin it down. At least one of our customers -- we recently got a qualification win, and we took apart one of the light bulbs they offered and we see red LED in there.

Great. That's good indication. And then just one on the insulation side. A question on your customer inventory. Do you start to -- do you believe your customer inventory is starting to improve, and that gives you the confidence that maybe business start to -- ?

Yes, yes. Especially on the semi-insulating side. We start -- inventory is very much depleted, especially in the last weeks.

Great. One last question I have on raw material. So on the raw materials, you mentioned that there is some expansion in capacity on your side as to your competitor's side, which basically has caused some price decline on the last two quarters. I was wondering how you think about the capacity there? Do you see a need to continue to expand the share? Or do you think that maybe there is no expansion to expect of this share?

Well, that is a good question -- well, that is a good question. As far as raw material is concerned, with the raw material price decline, it is a double-edged sword, as far as AXT is concerned. When the price declines, our margin contribution from those raw material sales is less. On the other hand, we can much easier handle our substrate business. As you know, that is a major component of our cost of goods sold for gallium arsenide, for instance. So it is for germanium. I wish I could develop more germanium capacity, but that is a bit more difficult.

As you know, the raw you material is really much of a natural resources business. And so I think if we have the opportunity, I think it is in our plan to expand even more. Because natural resources is a commodity that you will never regenerate, you cannot create. It may hurt you in the short-term, but in the long-term it is a great business to be in. And that will protect our business model, in terms of providing affordable substrate price to our customers.

Great. Good call. Thank you.

All right.

We will go next to David Kang with B. Riley.

Thank you. Good afternoon. Raymond, can I get those stock compensation numbers again?

Sure, it was $256,000 for the whole year. I'm sorry -- for the whole quarter.

Quarter, right, okay.

And broken down into $24,000 for cost of revenues, $222,000 SG&A, and $12,000 R&D.

Got it. All right. And then Morris, regarding indium phosphide, so you were impacted because of the flooding in Thailand. So can we expect some kind of a rebound in Q1 or maybe even Q2?

No, it's coming back in Q1. It is coming back to the old form. I just checked.

Can it reach pre-flood level. So you did, what, 1.5 in Q3?So can we expect that kind of rebound or more of gradual recovery?

No, I think it is going to be a rebound.

Rebound -- like a 1.5 rebound?

Well, as I say --

Something like that, right?

Yes.

Okay. Fair enough. And then regarding your new customers -- semi-conductor customers, were they Chinese? Or can you tell us who they were?

They are Asian customers.

Asian customers. Okay. All right. What about your top -- your 10% customer, was is semi-insulating or conducting?

Semi-insulating.

Okay. That is what I thought. Okay. And then last question is regarding your terrestrial -- germanium terrestrial; how how many customers are in the pipeline that you are expecting them to ramp in second half? Are we talking maybe one or two? Or more than two?

Well, right now, we have got one, two, three four -- yes, four or five of them -- really decent customers. One of them is really dominating. And we are seeing a lot of signals from them, potentially, they can ramp up CPV. But if this market were to mature, I think, the participants can be a lot. We are not counting, for instance, some of these Chinese customers. You saw the recent completion of the big capacity increase in China. And we are not counting on those yet.

Right. Sure. And then -- actually, the last question is, on the semi-insulating side, you talked about several customer qualification activities. Any near term maybe some kind of a first half announcement can we expect, on the wireless side?

Well, Dave, I don't think we ever have a habit of announcing customer wins usually. Because it is -- especially, even for semi-conducting, I'm happy to report that we had two new customer qualifications. But usually we don't announce those. And also you will start to see the activity of order more coming in. As they reach 10%, we will let everybody know. But I don't think we ever have a habit of announcing new customer qualifications.

All right. Fair enough. Thank you.

Our next question comes from Tom Sepenzis with Northland Securities.

Ouch. Okay. I just had a couple of questions --most of my questions have been answered. Can you just talk a little bit more -- I know you touched on the market for solar, but just in terms of what the opportunity there is over the next couple years? And how you see that playing out?

Well, the solar business -- I think if you look at the satellite business, which is the bread and butter, which is very steady, I believe -- and our opportunity mainly is getting into more markets. And we have been saying that we have qualified in most of the major satellite markets, including Europe, Asia, Russia. And the area that we are lacking is the United States, which we very eagerly tried to get into that market. And that market -- it has been steady. And they are contributing to about 80% of other revenue for the germanium solar cell business.

I think what is explosive -- potentially can get very explosive would be the CPV market. But when they are going to start to take off and how big the size of the market is? I think it is a very, very difficult prediction to give. Because we have been wrong over and over again. We thought 2011 could be the year to take off. And then now it's 2012. And every time there is a financial crisis it could be a hindrance to its taking off.

From what I understand -- that the good thing about the CPV using germanium of gallium arsenide, that really the strength is that the technology is very, very good. It can convert sunlight into electricity at very high efficiency rate. And in certain environments, where there is an abundance of sunlight and they call it BNI being very high, then you can be very economically generating a lot of electricity at very low cost. When would that technology being adopted -- accepted by the industry and that is the time for it to take off. And I believe there is a lot of opportunity for it.

Any guess as to when that might happen?

Well, I put it late 2012 or 2013.

Okay, great. And in terms of the inventory, maybe we can just talk a little bit about that. Is that mainly -- I know the majority of it was raw materials. Is that just being opportunistic as the costs come down? Because inventory was already at a relatively high level at the end of Q3. I'm just curious as to why you continue to build on that.

I think it was just a slight -- it was just timing, Tom.

Okay. Great.

It was just the timing of the receipt of the prior raw material purchases.

Okay. Great. Thank you very much.

And our next question comes from Richard Shannon with Craig-Hallum.

Hi, guys. Just a couple of quick follow-ups on your joint ventures.

Richard, you are fading. You are not very clear. Can you speak louder?

I'm sorry, how is that?

That is much better.

Sorry. A couple of questions on your joint ventures, specificallythe gallium ones. How much did your overall capacity grow in 2011? And how much do you expect it to increase by the end of 2012?

We have a lot of increasing capacity. The plan that we have on GI is almost more than double.

During 2012?

Yes.

During 2012, okay. Great. I think that is my question then. Thanks very much, guys.

At this time, there are no further questions. Dr. Young, I will turn the call back to you for any closing remarks.

Thank you for participating in our conference call this quarter. We will be participating in the Roth Conference in Dana Point. I look forward to seeing many of you there. As always, feel free to contact me, Raymond or Leslie, directly. Or if you would like to meet with us, we look forward to speaking with you in the near future.

And ladies and gentlemen, that does conclude today's presentation. We thank you for your participation.