AXT Inc (AXTI) 2023 Q3 法說會逐字稿

Good afternoon, everyone, and welcome to AXT's third quarter 2023 financial conference call. Leading the call today is Dr. Morris Young, Chief Executive Officer; and Gary Fischer, Chief Financial Officer. My name is Christina, and I'll be your coordinator today. (Operator Instructions) Thank you. I would now like to turn the call over to Leslie Green, Investor Relations for AXT.

大家下午好，歡迎參加 AXT 2023 年第三季財務電話會議。今天主持會議的是執行長 Morris Young 博士；和財務長加里·費雪。我叫克里斯蒂娜，今天我將擔任你們的協調員。 （操作員說明）謝謝。我現在想將電話轉給 AXT 投資者關係部門的 Leslie Green。

Thank you, Christina, 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, market conditions and trends, including expected growth in the markets we serve, emerging applications using chips or devices fabricated on our substrates, our product mix, our ability to increase orders in succeeding quarters, to control costs and expenses, to move manufacturing yields and efficiency, and to utilize our manufacturing capacity, the growing environmental health and safety and chemical industry regulations in China as well as global economic and political conditions, including trade tariffs and restrictions.

謝謝克里斯蒂娜，大家下午好。在我們開始之前，我想提醒您，在本次電話會議期間，包括針對您的問題發表的評論，我們將提供預測或做出其他前瞻性聲明，其中包括公司的未來財務業績公司、市場狀況和趨勢，包括我們服務的市場的預期成長、使用在我們的基板上製造的晶片或設備的新興應用、我們的產品組合、我們在接下來的季度增加訂單、控製成本和費用、提高製造產量的能力和效率，並利用我們的製造能力、中國日益嚴格的環境健康和安全以及化學工業法規以及全球經濟和政治條件，包括貿易關稅和限制。

We wish to caution you that such statements deal with future events 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, COVID-19 and other outbreaks of contagious disease, potential tariffs and trade restrictions, increased environmental regulations in China the financial performance of our partially owned supply chain company and the impact of delays by our customers on the timing of sales and their product.

我們希望提醒您，此類涉及未來事件的陳述是基於管理層當前的預期，並受到可能導致實際事件或結果產生重大差異的風險和不確定性的影響。這些不確定性和風險包括但不限於公司競爭市場的整體狀況、全球金融狀況和不確定性、COVID-19 和其他傳染病的爆發、潛在的關稅和貿易限制、中國加強的環境法規以及我們部分擁有的供應鏈公司的財務表現以及我們的客戶延遲對銷售及其產品的時間的影響。

In addition to the factors that may be discussed on this call, we refer you to the Company's periodic reports filed with the Securities and Exchange Commission. These are available online by link from our website and contain 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 axt.com. through November 2, 2024.

除了本次電話會議中可能討論的因素之外，我們還請您參閱本公司向美國證券交易委員會提交的定期報告。這些可透過我們網站的連結在線獲取，並包含有關可能導致實際結果與我們當前預期產生重大差異的風險因素的附加資訊。本次電話會議將在我們的網站 axt.com 上發布。至 2024 年 11 月 2 日。

Also before we begin, I want to note that shortly following the close of market today, we issued a press release reporting financial results for the third quarter of 2023. This information is available on the Investor Relations portion of our website at axt.com. I would now like to turn the call over to Gary Fischer for a review of our third quarter results. Garry?

在開始之前，我想指出，今天收盤後不久，我們發布了一份新聞稿，報告 2023 年第三季的財務業績。此資訊可在我們網站 axt.com 的投資者關係部分取得。我現在想將電話轉給加里費雪（Gary Fischer），以審查我們第三季的業績。加里？

Thank you, Leslie, and good afternoon to everyone. Our revenue for the third quarter of 2023 was $17.4 million, down from $18.6 million in the second quarter of 2023 and down from $35.2 million in the third quarter of 2022. To break down our Q3 '23 revenue for you by product line, indium phosphide came in at $4.9 million, reflecting a stabilizing market with modest improvement in data center applications. Gallium arsenide was $4.2 million.

謝謝你，萊斯利，祝大家下午好。我們2023 年第三季的營收為1,740 萬美元，低於2023 年第二季的1,860 萬美元，低於2022 年第三季的3,520 萬美元。以產品線為您細分23 年第三季的收入，磷化銦收入為 490 萬美元，反映出市場穩定，資料中心應用程式略有改善。砷化鎵價值 420 萬美元。

We were pleased to obtain our first permits to ship gallium arsenide substrates during the quarter and continue to work through that process on behalf of a growing number of our gallium arsenide customers. Germanium substrates were $1.2 million up from the prior quarter, also reflecting our progress in obtaining permits on behalf of our customers.

我們很高興在本季度獲得了第一個運輸砷化鎵基板的許可證，並繼續代表越來越多的砷化鎵客戶完成這一過程。鍺基板比上一季增加了 120 萬美元，也反映了我們在代表客戶獲得許可證方面的進展。

Finally, revenue from our two consolidated raw material joint venture companies in Q3 was $7.0 million. In the third quarter of 2023, revenue from Asia Pacific was 82%, Europe was 14% and North America was 4%. The top five customers generated approximately 31% of total revenue and new customers over the 10% level.

最後，我們兩家合併的原料合資公司在第三季的收入為 700 萬美元。 2023年第三季度，來自亞太地區的營收為82%，歐洲為14%，北美為4%。前五名客戶約佔總收入的 31%，新客戶則超過 10%。

Non-GAAP gross margin in the third quarter was 11.3% compared with 9.8% in Q2 and 42.2% in Q3 of 2022. For those who prefer to track results on a GAAP basis, gross margin in the third quarter was 10.7% compared with 9.2% in Q2 and 42.0% in Q3 of 2022.

第三季的非GAAP 毛利率為11.3%，而2022 年第二季為9.8%，第三季為42.2%。對於更喜歡以GAAP 基礎追蹤績效的人來說，第三季的毛利率為10.7%，而2022 年第三季的毛利率為 9.2%。2022 年第二季為 %，第三季為 42.0%。

The primary drivers affecting our corporate gross margin in Q3 were volume, product mix and an improvement in our raw material business gross margin. Beyond the near term, we remain confident that we can get back to the mid 30% range as the environment strengthens through higher overall volume, more favorable product mix and the benefits of our recycling programs, along with continued efficiency improvements throughout our business.

影響第三季公司毛利率的主要驅動因素是銷售量、產品結構和原物料業務毛利率的改善。在短期內，我們仍然有信心，隨著環境的改善，透過更高的總量、更有利的產品組合和我們的回收計劃的好處，以及整個業務的持續效率提高，我們可以回到30% 的中間範圍。

Moving to our operating expenses, with the reduction in overall revenue, we have maintained spending discipline in our operating expenses to align with the current environment.

轉向我們的營運支出，隨著總收入的減少，我們保持了營運支出的支出紀律，以適應當前的環境。

Total non-GAAP operating expense in Q3 was $7.8 million, consistent with our results in Q2 2023, and down from $9.2 million in Q3 of 2022. On a GAAP basis, total operating expenses in Q3 was $8.6 million, consistent with our results in Q2 of 2023 and down from $10.2 million in Q3 of 2022. Our non-GAAP operating income for the third quarter of 2023 was a loss of $5.8 million compared with the non-GAAP operating loss in Q2 of 2023 of $5.9 million and the non-GAAP operating profit of $5.6 million in Q3 of 2022.

第三季的非GAAP 營運費用總額為780 萬美元，與我們2023 年第二季的業績一致，低於2022 年第三季的920 萬美元。根據GAAP 計算，第三季的總營運費用為860萬美元，與我們第二季的業績一致2023 年第三季的營業收入為1,020 萬美元，低於2022 年第三季的1,020 萬美元。我們2023 年第三季的非GAAP 營業收入為虧損580萬美元，而 2023 年第二季的非GAAP 營業虧損為590 萬美元，而2023 年第三季的非GAAP 營業收入為虧損580 萬美元。2022 年第三季營業利潤為 560 萬美元。

For reference, our GAAP operating line for the third quarter of 2023 was a loss of $6.7 million compared with an operating loss of $6.8 million in Q2 and an operating profit of $4.6 million in Q3 of 2022.

作為參考，我們 2023 年第三季的 GAAP 營運線虧損 670 萬美元，而 2022 年第二季的營運虧損為 680 萬美元，2022 年第三季的營運利潤為 460 萬美元。

Non-operating other income and expense and other items below the operating line for the third quarter of 2023 was a net gain of $0.9 million. The details can be seen in the P&L included in our press release today.

2023 年第三季的非營運其他收入和支出以及營運線以下的其他項目淨收益為 90 萬美元。詳細資訊可以在我們今天新聞稿中包含的損益表中看到。

For Q3, 2023, we had a non-GAAP net loss of $4.9 million or $0.12 per share, compared with a non-GAAP net loss of $4.2 million or $0.10 per share in the second quarter of 2023. Non-GAAP net income in Q3, 2022 was $6.8 million or $0.16 per share. On a GAAP basis, net loss in Q3 was $5.8 million or $0.14 per share. By comparison, net loss was $5.1 million or $0.12 per share in the second quarter of 2023.

2023 年第三季度，我們的非GAAP 淨虧損為490 萬美元，即每股0.12 美元，而2023 年第二季度的非GAAP 淨虧損為420 萬美元，即每股0.10 美元。 第三季度的非GAAP 淨利潤，2022 年為 680 萬美元，即每股 0.16 美元。以 GAAP 計算，第三季淨虧損為 580 萬美元，即每股 0.14 美元。相比之下，2023 年第二季的淨虧損為 510 萬美元，即每股 0.12 美元。

GAAP net income in Q3 2022 was $5.8 million or $0.13 per share. The weighted average basic shares outstanding in Q3 was $42.6 million. Cash, cash equivalents and investments were $43.6 million as of September 30, by comparison at June 30, was $49.6 million. The reduction in cash was primarily due to net cash generated by operating activities. Although last quarter that was positive in Q3, it was negative this quarter.

2022 年第三季的 GAAP 淨利潤為 580 萬美元，即每股 0.13 美元。第三季已發行加權平均基本股為 4,260 萬美元。截至 9 月 30 日，現金、現金等價物和投資為 4,360 萬美元，而 6 月 30 日為 4,960 萬美元。現金減少主要是因為經營活動所產生的現金淨額。儘管上個季度第三季為正值，但本季為負值。

Depreciation and amortization in the third quarter was $2.2 million and CapEx was about $4 million. Total stock comp was $0.9 million. As I mentioned, net inventory came down by $700K to $86.4 million at September 30. 41% of the inventory is raw materials and WIP is 55%. Finished goods makes up only approximately 4%.

第三季的折舊和攤提為 220 萬美元，資本支出約為 400 萬美元。總股票補償為 90 萬美元。正如我所提到的，截至 9 月 30 日，淨庫存下降了 70 萬美元，降至 8,640 萬美元。庫存的 41% 為原材料，WIP 為 55%。製成品僅佔約4%。

Okay, this concludes the report on our quarter financial results. Turning to our plan to list our subsidiary, Tongmei in China on the STAR Market in Shanghai, we do need to resolve a one open item. Morris is in China as we speak and is working on this matter. Although it is moving slower than we expected, we are making progress and we're confident that Tongmei remains an excellent candidate for listing and will be approved to proceed.

好的，我們的季度財務業績報告到此結束。至於我們計劃將中國子公司同美在上海科創板上市，我們確實需要解決一個懸而未決的問題。就在我們說話的時候，莫里斯正在中國，正在處理這件事。儘管進展速度比我們預期的要慢，但我們正在取得進展，我們相信同美仍然是上市的優秀候選者，並將獲得批准繼續進行。

With that, I'll now turn the call over to Dr. Morris Young for a review of our business and markets. Morris, welcome from China.

現在，我將把電話轉給莫里斯·楊博士，讓他對我們的業務和市場進行審查。莫里斯，歡迎來自中國。

Thank you, Gary, and good morning, everybody. Well this is in China here in Mali. The demand environment include three main table and we were pleased to see some encouraging early signs of improvement in the data center market, resulting in modest higher indium phosphide revenues. We still believe that our inventory position across our markets will continue through the end of the year. Only in some cases, may persist into 2024.

謝謝你，加里，大家早安。嗯，這是在中國，在馬利。需求環境包括三個主要表格，我們很高興看到資料中心市場出現一些令人鼓舞的早期改善跡象，導致磷化銦收入適度成長。我們仍然相信我們整個市場的庫存狀況將持續到今年年底。僅在某些情況下，可能會持續到 2024 年。

But we believe the worst of the declines are behind us, and we're looking forward to the new year with optimism. We have worked diligently throughout 2023 to advance our innovation in large diameter substrates and to support future emerging opportunities across our portfolio in a fast time. As the data center market prepares to move to 800 Gbps data rates. We are seeing increased development around next-generation silicon photonics devices, electro-absorption modulation laser or EMLs for high-speed data center transceivers.

但我們相信最嚴重的下滑已經過去，我們樂觀地期待新的一年。我們在 2023 年努力工作，推進我們在大直徑基板方面的創新，並快速支持我們產品組合中未來的新興機會。隨著資料中心市場準備轉向 800 Gbps 資料速率。我們看到圍繞下一代矽光子元件、電吸收調製雷射或用於高速資料中心收發器的 EML 的開發不斷增加。

The growing adoption of AI technology is providing a strong catalyst for the industry transition to higher speed, and we are excited to be engaging with customers for new opportunities as the market expands. Our proven performance in optical devices for the data center, coupled with our success in developing six-inch indium phosphide substrates is putting us in a solid position for both current and future generation of data center optical devices. We're also seeing positive development activities in both consumer and healthcare applications for indium phosphide. This further reinforces our conviction that we are very, very early stage in our adoption of this material across a multiple multitude of emerging applications.

人工智慧技術的日益普及為產業向更高速度轉型提供了強大的催化劑，我們很高興能夠隨著市場的擴大與客戶合作尋找新的機會。我們在資料中心光學設備方面經過驗證的性能，加上我們在開發六英寸磷化銦基板方面的成功，使我們在當前和未來一代資料中心光學設備方面處於穩固的地位。我們也看到磷化銦在消費者和醫療保健應用方面的積極開發活動。這進一步堅定了我們的信念，即我們在多種新興應用中採用這種材料還處於非常非常早期的階段。

Our early success not only validates indium phosphide as the material of strategic importance, it validates AXT, as a world-class supplier to Tier one companies. We believe that the next two years we'll see the further expansion into these and other areas.

我們早期的成功不僅證明了磷化銦是具有戰略重要性的材料，也證明了 AXT 作為一級公司的世界級供應商。我們相信，未來兩年我們將看到這些領域和其他領域的進一步擴張。

Now in gallium arsenide we're pleased to announce in September that Tongmei, our subsidiary in China received these initial export activities and was able to resume shipping gallium arsenide substrates and germanium substrates in the second half of September to a number of our customers. We made good progress in filling customer orders and minimizing disruptions.

現在，在砷化鎵方面，我們很高興在9 月宣布，我們在中國的子公司通美已獲得這些初步出口活動，並能夠在9 月下半月恢復向我們的一些客戶運送砷化鎵基板和鍺襯底。我們在滿足客戶訂單和最大限度地減少干擾方面取得了良好進展。

We're very proud of the way our team has responded quickly and effectively, and we're grateful for the partnership of our customers in working with us through this process lagging the cost line. The market for gallium arsenide remains weak but stable. We see inventory should likely to continue into 2024. That said, we are actively preparing for a new wave of innovation in our markets.

我們對我們的團隊快速有效的回應方式感到非常自豪，我們感謝客戶與我們合作完成這個落後於成本線的過程。砷化鎵市場依然疲軟但穩定。我們認為庫存可能會持續到 2024 年。也就是說，我們正在積極為市場的新一波創新做好準備。

We're pleased by the progress we're making in our eight-inch gallium arsenide for customers. And this consumer high end display and automotive applications for micro-LEDs, we today our customers' workflow applications specifications for micro-LEDs, expotentially more stringent than they were when our eight-inch development began. And yet we have been able to meet these requirements delivering outstanding TSR densities results in volume.

我們對為客戶生產的八英寸砷化鎵所取得的進展感到高興。對於 micro-LED 的消費性高階顯示器和汽車應用，我們今天為客戶提供了 micro-LED 的工作流程應用規範，可能比我們開始開發 8 吋時更加嚴格。然而，我們已經能夠滿足這些要求，批量提供出色的 TSR 密度結果。

We feel very confident in our ability to serve this emerging market. We believe that there will be a growing number of use cases in development. Our expectation is that product development from multiple customer is slightly to ramp throughout 2024, with the first micro LED products come into market in 2025 and beyond.

我們對服務這個新興市場的能力充滿信心。我們相信，開發中的用例將會越來越多。我們的預期是，多位客戶的產品開發將在 2024 年略有增加，首批 Micro LED 產品將於 2025 年及以後上市。

In Q3, we saw a modest increase in our germanium substrate revenue, so may receive the first export permits for germanium substrate customers during the quarter and was able to ship accordingly. Overall solar cell satellite markets is navigating similar cyclical headwinds as the other markets. But we are confident that this area of our business will recover as the market strengthens.

第三季度，我們的鍺基板收入略有成長，因此可能會在本季度獲得第一批鍺基板客戶的出口許可證，並能夠相應發貨。整體而言，太陽能電池衛星市場正面臨與其他市場類似的周期性逆風。但我們相信，隨著市場走強，我們這個業務的領域將會復甦。

Finally, sales from our raw material business trended down slightly in the quarter, the gross margin improved from Q2. Overall, the pricing environment remains relatively stable. We don't expect any major changes in Q4.

最後，我們的原物料業務本季銷售額略有下降，毛利率較第二季有所改善。整體而言，定價環境保持相對穩定。我們預計第四季不會有任何重大變化。

In closing, we're looking forward to the new year pathways with renewed optimism. While inventory rationalization may persist into the new year, we are pleased to be seeing the early signs that I can make a positive change for 2024.

最後，我們以新的樂觀態度期待新的一年。雖然庫存合理化可能會持續到新的一年，但我們很高興看到早期跡象表明我可以在 2024 年做出積極的改變。

We believe, that the trend that have been driven our revenue and customer expansion and remain very much intact. Further, we have executed well in our development of large diameter substrates that will pave the way for our opportunities in next-generation devices, spending from data center, consumer, and other markets. As we navigate the natural environment, we continue to prioritize our cost savings and efficiency, and we are focused accelerating our return to profitability.

我們相信，推動我們收入和客戶擴張的趨勢仍然完好無損。此外，我們在大直徑基板的開發方面表現出色，這將為我們在下一代設備、資料中心、消費者和其他市場的支出方面的機會鋪平道路。在應對自然環境的過程中，我們繼續優先考慮節省成本和提高效率，並專注於加快獲利能力的恢復。

I would like now to turn the call back to Gary for our fourth quarter guidance. Gary?

我現在想把電話轉回給加里，詢問我們的第四季指示。加里？

Thank you, Morris. In keeping with our comments today, we expect Q4 revenue to be between $16 million and $19 million. We expect our non-GAAP net loss will be in the range of $0.13 to $0.15, and GAAP net loss will be in the range of $0.15 to $0.17. Share count will be approximately 42.6 million shares.

謝謝你，莫里斯。根據我們今天的評論，我們預計第四季營收將在 1,600 萬美元至 1,900 萬美元之間。我們預計非 GAAP 淨虧損將在 0.13 美元至 0.15 美元之間，GAAP 淨虧損將在 0.15 美元至 0.17 美元之間。股份數量約 4,260 萬股。

Okay, this concludes our prepared comments. Morris and I would be glad to answer your questions now.

好的，我們準備好的評論到此結束。莫里斯和我現在很高興回答你的問題。

Christin, operator?

克里斯汀，接線生？

(Operator Instructions)

（操作員說明）

Richard Shannon, Craig-Hallum.

理查德·香農，克雷格·哈勒姆。

Well, hi, Morris and Gary, thanks for taking my questions and Morris, thanks for getting up early in China this morning.

嗯，嗨，莫里斯和加里，謝謝你回答我的問題，莫里斯，謝謝你今天早上在中國起得很早。

Let's hear -- let's ask question on the guidance here for the quarter, just to kind of get the assumptions built in here. Obviously, the midpoint here is roughly flat with the third quarter mix, which makes sense, given your comments about stabilization, are there any unusual trends within the substrate buckets as well as raw materials to get to that point? Are they all roughly similar to flat sequentially?

讓我們聽聽——讓我們對本季的指導提出問題，只是為了得到這裡的假設。顯然，這裡的中點與第三季度的組合大致持平，這是有道理的，考慮到您對穩定的評論，基材桶以及原材料是否有任何不尋常的趨勢達到這一點？它們都大致類似於扁平順序嗎？

I don't think there's much ripples or nuances. It's kind of business as usual, frankly. So you know, yeah, I don't have a lot of other other color to add.

我不認為有太多的漣漪或細微差別。坦白說，一切都像往常一樣。所以你知道，是的，我沒有太多其他顏色可以添加。

Yeah, the only thing I may add is Gary and I, we're still working through how many permits can we get. So I mean, the more the permits we can get and perhaps we can increase that slightly, but it's not a very significant increase.

是的，我唯一可以補充的是加里和我，我們仍在研究我們可以獲得多少許可證。所以我的意思是，我們可以獲得的許可越多，也許我們可以稍微增加，但這並不是一個非常顯著的增加。

Okay. And then I guess specifically, I wanted to ask on indium phosphide given the importance of that revenue stream here. You're talking about the strength in data center, but hadn't mentioned anything about consumer telecom or some of the other markets here. So you're going to kind of delineated by the submarkets that are driving that? Is the fourth quarter you still expecting data center to grow? And I guess specifically I wanted to touch on the fact that I think your large customer in that area has transferred that transceiver business to another buyer. And so want to get a sense the degree to which that business will sustain.

好的。然後我想具體來說，考慮到這裡收入來源的重要性，我想詢問磷化銦的情況。您談論的是資料中心的實力，但沒有提及消費電信或其他一些市場。那麼您將按照推動這一趨勢的子市場來劃分？您仍然預期第四季資料中心會成長嗎？我想我特別想談談這樣一個事實：我認為您在該領域的大客戶已將該收發器業務轉移給另一個買家。因此想要了解該業務將持續到什麼程度。

Gary, you want to take that or, (multiple speakers)-- ?

加里，你想接受這個，或（多個發言者）--？

Sure, I can start and you can join if you want. So data center is a strong sector for indium phosphide. Our business development guy, Tim Bettles is it kind of upbeat about it, frankly. So that's a positive. The Jabil transaction we talked about this with Tim today, and he actually feels it's a good decision.

當然，我可以開始，如果你願意，你也可以加入。因此，資料中心是磷化銦的強勢領域。坦白說，我們的業務開發人員蒂姆·貝特爾斯對此表示樂觀。所以這是積極的。我們今天和提姆討論了捷普的交易，他其實覺得這是一個很好的決定。

So basically, it will allow Intel to hit in his view, okay, to focus on their core strengths and it shouldn't it shouldn't detract at all from our revenue stream to Intel and if they grow and improve, it will increase. So Jbil becomes basically a systems integrator or that's what they do is assemble stuff. So on and on, Tim thinks it's a good shift in the business model. But of course, it's our opinion from AXT, clearly, it's Intel's decision so that we don't see it as a negative at all, we see that as a positive sign.

所以基本上，這將讓英特爾在他看來，好吧，專注於他們的核心優勢，它不應該，它不應該減損我們對英特爾的收入流，如果他們成長和改進，它就會增加。因此，Jbil 基本上成為一個系統整合商，或者說他們所做的就是組裝東西。如此等等，蒂姆認為這是商業模式的一個很好的轉變。但當然，這是我們 AXT 的觀點，顯然，這是英特爾的決定，因此我們根本不認為這是負面的，我們認為這是一個積極的信號。

Okay, fair enough. Maybe just the last topic on indium phosphide here. Just wanted to get a sense of continued traction with the consumer electronics applications, whether it's your big historical customer, any new ones coming in here, just some thoughts on how they-- how you expect that to go over the next few quarters?

好吧，很公平。也許這只是關於磷化銦的最後一個主題。只是想了解消費電子應用的持續吸引力，無論是您的大歷史客戶，還是任何新客戶，只是對他們的一些想法 - 您預計在接下來的幾個季度中會如何發展？

Yeah, we continue to work with our customers, although this is still early but we have sent samples to at least two customers who potentially is going to decide how much the ramp and what's the timing for ramping. But we are in the early stage of qualification. But that application I understand, is one consumer applications and is scheduled to launch if it is successful in Q3 of 2024. So I think you know that activity is still, I believe, is still I mean, given the market is so dire, I think, is accurate and people are planning for next-generation application for indium phosphide.

是的，我們繼續與客戶合作，儘管現在還為時過早，但我們已經向至少兩名客戶發送了樣品，他們可能會決定增加多少以及增加的時間。但我們正處於資格認證的早期階段。但據我了解，該應用程式是一個消費者應用程序，如果在2024 年第三季度成功的話，計劃推出。所以我想你知道，我相信，活動仍然是，我的意思是，考慮到市場如此嚴峻，我認為是準確的，人們正在計劃磷化銦的下一代應用。

Okay, fair enough. Two more questions from me, I'll jump out of line. First one, just following up on the comments and micro LED, I may have missed something in there with the spotty line here. But I guess my general question here is how is the environment here and the importance of this to your certain customers out there relative to last quarters? Are things holding in there in terms of time frame and size? Are there is there more uncertainty here in as the macros certainly seemed to get worse over the last 90 days?

好吧，很公平。我還有兩個問題，我就跳出來了。第一個，只是跟進評論和 micro LED，我可能錯過了一些東西，因為這裡的線條參差不齊。但我想我的一般問題是，與上個季度相比，這裡的環境以及這對您的某些客戶的重要性如何？就時間範圍和規模而言，事情是否有效？由於過去 90 天宏觀經濟似乎確實變得更糟，是否存在更多不確定性？

Well, I think the intention for customer to proceed is it's firming up. I do believe they're coming. I think the only question I have is, what's the volume is going to be and how fast it's going to ramp up to the next phase, et cetera? I mean, we're were given the initial ramp up volume production I think is somewhere around mid-2025. And of course, it's going to ramp gradually from around next year onwards and into the first stage of production is 2025, I think. But I think that timing, although it's slipped from early predictions, but nevertheless, I think the customer is committed to go ahead with it.

嗯，我認為客戶繼續進行的意圖是它正在變得堅定。我相信他們會來。我認為我唯一的問題是，交易量是多少，進入下一階段的速度有多快，等等？我的意思是，我們預計將在 2025 年中期左右開始批量生產。當然，我認為從明年左右開始，它會逐漸增加，並在 2025 年進入第一階段生產。但我認為這個時機雖然比早期的預測有所推遲，但儘管如此，我認為客戶還是承諾繼續這樣做。

Okay, and last question for Gary, is on cash flow. I think last quarter you're talking about and trying to generate some positive working capital here. And I see I think inventories are down slightly, but perhaps you're expecting or hoping for a little bit more, what's your general thought here as we look on operating cash flow and working capital benefits this quarter and into the near future?

好的，加里的最後一個問題是關於現金流。我認為上個季度您正在談論並試圖在這裡產生一些積極的營運資金。我認為庫存略有下降，但也許您期望或希望更多一點，當我們看待本季度和不久的將來的營運現金流和營運資本效益時，您的整體想法是什麼？

Well, first of all, in terms of inventory, and I've gone back with my coworkers sort of looked at some historic inventory levels when maybe we were doing $25 million a quarter, $30 million a quarter. So it illustrates to me that, we should be able to take inventory down. So I'm still targeting to do that. I think at a minimum, we should shrink it by at least $10 million.

嗯，首先，就庫存而言，我和我的同事回顧了一些歷史庫存水平，當時我們可能每季營業額為 2500 萬美元，每季營業額為 3000 萬美元。所以這向我表明，我們應該能夠減少庫存。所以我仍然致力於做到這一點。我認為至少我們應該減少至少 1000 萬美元。

It's reciprocally, it's easy to do that if our run rates are high and it's harder to do that when our run rates are so frankly, modest right now. So I feel confident that we can do it and that we will do it. So it's a in terms of -- if you look at our overall -- like I was looking at the cash generated from operating activities in our internal cash flow thing, its negative 280,000 for the first nine months of this year.

相反，如果我們的運行率很高，那麼做到這一點很容易，而當我們的運行率現在坦率地說，很溫和時，做到這一點就很難了。因此，我相信我們能夠做到並且將會做到。因此，如果你看一下我們的整體情況，就像我在看我們內部現金流量中的經營活動產生的現金一樣，今年前 9 個月的現金流量為負 280,000。

So because you know you're adding back depreciation, you're adding back stock comp and there are some low hanging fruit items on the balance sheet inventory is one, our accounts receivable is one. Specially in China we have pretty long day sales outstanding, so I'd like to bring that in. So yes, I think it's okay.

因此，因為您知道要增加折舊，要增加庫存補償，並且資產負債表上有一些容易實現的項目，庫存就是其中之一，我們的應收帳款就是其中之一。特別是在中國，我們的長日銷售額非常出色，所以我想將其納入其中。所以是的，我認為這沒關係。

I will, of course, be delighted to bank the IPO money. But in the meantime, I think we're say --

當然，我很高興將首次公開發行的資金存入銀行。但同時，我想我們要說的是——

That's all from me guys, I will jump out of line.

這都是我的，夥計們，我會跳出常規。

Thanks, Richard.

謝謝，理查。

Christina, any more questions?

克里斯蒂娜，還有什麼問題嗎？

Yeah, so there are no further questions at this time. So I --

是的，所以目前沒有其他問題。所以我 -

Thank you for your participation on this call. We will be presenting at the Needham Growth Conference in January. And looking forward to seeing many of you there, as always, feel free to contact me, Gary Fischer, or Leslie Green directly. If you would like to set up a call with us, we look forward to speaking with you in the near future.

感謝您參與本次電話會議。我們將在一月份的李約瑟增長會議上發表演講。一如既往地期待在那裡見到你們中的許多人，請隨時直接聯繫我、加里·費舍爾 (Gary Fischer) 或萊斯利·格林 (Leslie Green)。如果您想與我們通話，我們期待在不久的將來與您交談。

Thanks, Morris. Thank you all.

謝謝，莫里斯。謝謝你們。

Thank you. And this conclude today's conference call. You may now disconnect.

謝謝。今天的電話會議到此結束。您現在可以斷開連線。