SemiLEDs Corp (LEDS) 2011 Q3 法說會逐字稿

Ladies and gentlemen, welcome to the SemiLEDs fiscal third quarter of 2011 earnings conference call, which ended May 31, 2011. This call is being webcast live on the Events & Presentation page of the Investors section of SemiLEDs website at www.semileds.com. This call is property of SemiLEDs, and any recording, reproduction or transmission of this call without the express written consent of SemiLEDs is strictly prohibited.

As a reminder, today's call is being recorded. You may listen to a webcast replay of this call by going to the Investors section of SemiLEDs website and visiting the Events & Presentation page.

I would now like to turn the call over to Paul Cox of Sapphire Investor Relations, Investor Relations for SemiLEDs. Please go ahead.

Good afternoon. Thank you for joining us to discuss SemiLEDs financial and operating results for the fiscal third quarter of 2011. With me today are Trung Doan, Chairman and CEO, and David Young, CFO. Today Trung will begin with a brief overview of the industry and review of the third quarter. David will review Q3 fiscal financial results and provide fiscal fourth-quarter 2011 guidance.

On the call today you may hear forward-looking statements about events and circumstances that have not yet occurred. Actual outcomes and results may differ materially from the expectations contained in these statements due to a number of risks and uncertainties. Please refer to the Company's recent SEC filings at the SEC's website at www.SEC.gov for detailed discussions of the relevant risks and uncertainties.

The Company undertakes no responsibility to update the information in this conference call under any circumstance. The press release distributed today to announce the Company's results is available on the Company's website at www.semileds.com in the Investors section under Financial Press Releases. The current report on Form 8-K furnished with respect to our press release is available on the Company's website in the Investors section under SEC filings and on the SEC's website.

You will also hear discussions of non-GAAP financial measures. Reconciliation of these non-GAAP measures to the most comparable GAAP financial measures are contained in the press release distributed today and available on the Company's website.

Now I will turn the call over to Trung Doan, Chairman and CEO. Trung, go ahead.

Thank you for joining us on our call today. I would like to begin by talking about the industry dynamics that we are currently seeing. In the last quarter call in early April, I said that we expected a challenging market environment in our industry to continue until calendar Q4. I expect that the market remains challenging in Asia for LED chips and components. We saw weak demand in the outdoor street light market, continued pricing pressure and continue to have little visibility.

Due to the market environment, our financial results in third quarter came in below our estimates. Revenue was $5.6 million. Gross margin for fiscal Q3 was 9%. We recorded a GAAP net loss of $5.1 million or a loss of $0.19 per diluted share. The ASP erosion continued for LED chips, although at a slower pace. In fiscal Q2 ASP's declined by double-digit quarter over quarter. In fiscal Q3 ASP declined by less than 10%, so we are beginning to see price stabilize.

While the street light market has been weak, we believe there is demand in the outdoor and in the indoor lighting market. However, there are no efficacy space (inaudible) for indoor lighting products in China. And many LED chips sold in this market are LED chips with the frequency at the low end, typically 50 to 90 lumens per watt. (inaudible) will place more chips in a single package to meet the number of lumens required rather than using [high finance] chips.

While there is high demand in the indoor lighting market, some of that main focus has been on the indoor/outdoor street lighting market where high price LED chips are needed. In [midmarket] channel layout is a tough five-year plan, which include a commitment to drive energy efficiency and LED lighting adoption. We have not yet benefited from the 12-year, 12 five-year plan, and the street lighting market has been slow. However, we expect the market to rebound in calendar fourth quarter. The Foshan local government plans to upgrade 120,000 streetlights and 100,000 outdoor lights with LED lighting through the Guangdong energy saving project. We believe this will be beneficial to SemiLEDs as we are the high-performance LED local supplier.

In this current quarter, Chinese (inaudible) have received prior order from EMC, the Energy Management Contract project funded by the China government agency to promote energy efficiency industry. (inaudible) streetlight has basic requirements, and SemiLEDs is one of the few companies that can meet those specifications, deliver over 100 lumens per watt LEDs in following production.

Our cheap product, I-Core, has an efficiency of 100 to 125 lumens per watt. In March we introduced our newest high brightness LED chips product called I-Do, which can deliver up to 135 lumens per watt and is the second generation of the I-Core AK series of our LED chips. The I-Do chips went into solid production in April; however, we are currently seeing less demand and expect near to the current street light market dynamics I have described earlier.

However, we expect the streetlight market to rebound by the end of the year and expect to take advantage of the market opportunity with high performance I-Do chips and to our China SemiLEDs joint venture. China's SemiLEDs is one of a few local suppliers that can deliver the high finest, high-performance LED chips required by the China streetlight market. China's SemiLEDs is in a favorable position to prosper in lighting projects sponsored by the local governments. In fiscal Q2 we successfully brought out up 4-inch start in Foshan, China and began pilot production. In fiscal Q3 we were in the early stage of ramping up production and improve our yield. We began shipping products by the Foshan fab in China starting in May.

In an effort to improve our costs, we are converting our 2.5 inch fab in Taiwan to 4-inch technology at a more aggressive rate. By running 4-inch technology, the cost is approximately half of the current 2.5 inch technology. Our Foshan fab is running entirely at 4-inch wafer, and the yield and cost advantage are proven. By the end of this calendar year, we expect more than 50% of our chip output from our Taiwan fab to be coming from 4-inch wafer. We expect to see the cost reduction effect in the August quarter.

On our last earnings call, I said that Taiwan -- in Taiwan we are running at 80% to 90% of capacity due to a mature shortage of metal organic compounds. We have successfully resolved this issue by qualifying two additional suppliers. However, given current market conditions, we are running our Taiwan fab at 40% capacity, and we will focus on accelerating our 4-inch conversion, which will reduce our costs.

In May we hired VP of Business Development and General Counsel, Adam Lin. Adam has been a great addition to our team, and we believe he will mix in contribution while new business development and effort in exploring new strategies and partnership opportunities.

In addition, we are increasing our sales staff and establishing a sales office in Shenzhen, China to provide better support to our Chinese customers.

To summarize the next several quarters -- for the next several quarters, we are focusing on execution, cutting costs and supporting our customers by accelerating our efforts to convert from 2.5-inch to 4-inch wafers at our Taiwan fab in order to reduce costs, continue to ramp 4-inch production volume at our Foshan fab, and working with our customers in a continued effort to sustain our market share by increasing our customer support to maximize the benefit of our metal vertical chip structures, enabling our customers to reduce their overall costs.

Now I will turn over the call to David who will take you through our third-quarter financials and provide financial guidance for the fourth quarter. David?

Thank you, Trung, and thanks, everyone, for joining us today. I will begin by walking through the fiscal third-quarter financials and then proceed to the guidance for fiscal Q4.

For the third quarter of fiscal 2011, revenue was $5.6 million. This is a 43% decrease from $9.9 million in the third quarter of fiscal 2010 and a 44% sequential decrease. Revenue attributable to the sale of our LED chip sales normalized from the fiscal Q2 levels and represented 58% of our revenues. Revenue attributable to the sale of our LED components decreased 63% sequentially and represented 27% of our revenue in the quarter. The decrease in total revenue was primarily due to a slowdown in demand in the Asian general lighting market, which continued from fiscal Q2.

GAAP net loss was $5.1 million for the quarter. Computed GAAP net income was $3.2 million in the same period last year. On our last earnings call, we had guided to a GAAP net loss of $2.6 million to $2 million. GAAP diluted loss per share was $0.19. The Company recorded a foreign currency transaction loss of $181,000 in the quarter.

On a non-GAAP basis, the net loss was $4.3 million compared to non-GAAP net income of $3.3 million for the third quarter of fiscal 2010. Non-GAAP diluted loss per share was $0.16. Non-GAAP net loss excludes stock-based compensation expense of $848,000 net of tax.

We ended the quarter with $94.4 million in cash and cash equivalents, which is a decrease of $8.2 million from the prior quarter. We spent $4.9 million on capital expenditures in Q3, which resulted in a free cash flow of negative $8.2 million. We define free cash flow as cash provided by operations less capital expenditures. Cash used in operations was $3.3 million, which included $1.7 million of depreciations and amortization and $1.1 million of loss from unconsolidated entities.

GAAP gross margin was 9%. GAAP operating margin was negative 70%. Margins were negatively impacted by a charge of $1.1 million for the write-down of inventory. R&D expenditures increased sequentially $303,000 to $1 million as a result of our transition to 4-inch wafer in our Taiwan facility, while SG&A expenditures increased sequentially $1.1 million to $3.3 million. The increase in SG&A was primarily the result of increased professional services expenses, primarily in relation to litigation expenses and accounting-related services and stock-based compensation costs. Tax benefit for the quarter was $10,000 or 0.2% of loss before income taxes. The effective tax rate for 2011 is estimated to be close to zero.

Days sales outstanding was 119 days as compared to 94 days for the prior quarter. A slowdown in collection was due to us extending a longer credit period as a result of inventory backlog at some of our large customers. Inventory days on hand was 323 days as compared to 179 days at the end of the prior quarter. Inventory was $18.4 million for the third quarter of fiscal 2011, an increase of $3.2 million on the second quarter of fiscal 2011. Inventory on hand consists primarily of finished goods. The increase in inventory was primarily due to a buildup in inventories to support a higher forecasted demand than our actual results.

Now let's turn to guidance for fourth quarter of fiscal 2011. We expect Q4 revenue to be in the range of $5.5 million to $6.5 million. We expect GAAP gross margin to be negative for the quarter. GAAP net loss for Q4 is targeted to be $6.7 million to $6.4 million. GAAP EPS is expected to be negative $0.25 to negative $0.23 per diluted share. Diluted shares outstanding is estimated at 27.3 million.

This concludes our formal comments. Now I will ask the operator to open the line up for questions.

(Operator Instructions). Steve Milunovich, Bank of America,/Merrill Lynch.

Did you say that the Taiwanese plant was running at about 40% of utilization rates, and where do you expect that to be in the next couple of quarters?

Yes, currently we are running at 40% capacity, and we just look at our market and be very flexible with our capacity at this time. The market visibility is still low at this time.

Okay. So I guess you had a single-digit price decline sequentially. Your units must have been down 30% plus. In the past you had suggested that two quarters ago you had the distributor who went away and you were protecting margins and missed on revenue. Last quarter I think you said you really wanted to go for share. But this quarter you did not get share or margins. Are we going to see this kind of weakness at competitors like Cree, or what do you think specifically is going on with SemiLEDs to cause that kind of unit decline sequentially?

Steve, could you repeat -- you know, make the question more clear?

Sure. I guess, first of all, were units down 30% plus sequentially? And if so, it sounds like -- I mean I don't know -- but it sounds like the market probably will not be down that much. So it sounds like you're losing share, and yet last quarter you had said that you guys were pricing very aggressively to maintain share. So at least it appears to me that you lost share. So I wonder why that is? You mentioned lower end chips coming up, or are customers wary of doing business with you because of recent results?

There are multiple dynamics. One of the dynamics is that the expectations for 12 five-year plan does not come to fruit until recently, but we see -- start seeing some orders coming in. So that is one thing about streetlight market, and the other thing is that a lot of our packaged customers are doing -- start doing packet purchases so they are starting buying packaged parts to make their by chip and make their parts. So that is what is the dynamic we are seeing. But I -- we believe that with the streetlight activities will start coming in, we will start seeing some life of that aspect.

What gives you confidence that the streetlight business is going to pick up? Do you have some orders, or what do you think is -- why do you think that is going to happen?

As I mentioned in the call, we have China SemiLEDs have received some trial orders from EMC, the Energy Management Contract project. We started seeing some of that taking place at this time.

Okay. Great. And then just a couple of numbers. What percentage of your revenue was I-Do versus I-Core?

As I also mentioned in the call, the I-Do chip went to volume production in April. We expected to have a dot ramp-up very fast, but we are seeing a greater demand side. We see the demand of the high-end chip or the high finance chip is weak because of the streetlight market dynamics that I talked in the call earlier.

Okay. So I-Do is fairly small. But you're looking for a negative gross margins in the next quarter. Why is that if I-Do is going to be picking up and be a larger percentage of your business?

The main reason for us to have a negative margin in Q4 is because, as Trung mentioned, we are lowering our factory utilization down to about 40%. So I think as a result of that some of these unutilized costs associated with unutilized capacities will be charged against us as a cost of goods sold as a result of that.

Okay. And then finally, the inventory write-down in what product was that?

It was just focused on a couple of products that we have. It is a write-down. This is both mark-to-market, a lower cost of market, as well as some of the slow-moving inventories items we have. The majority is you know -- the majority of it it has to do with the mark-to-market of the items, lower cost of market.

And that is in the cost of goods number?

That is correct.

Jesse Pichel, Jefferies.

Could you repeat that prior answer? What was the amount of inventory or impairments that you expect or is baked into your fiscal fourth-quarter guidance?

No, it is actually that we mentioned that -- it is not for the fourth-quarter guidance. The charge was for the costs associated with our excess capacity basically.

There was an impairment?

No, no, no, it was not an impairment. It has to do with for accounting purposes. Any cost, any fixed cost associated with your excess capacity, you need to charge that off. And since we are lowering our utilization rate from 80% plus down to 40%, we need to report a charge-off.

So no inventory write-offs in your guidance?

Well, in my guidance we have written down inventory down to the market value of Q3, and for Q4 in our guidance we are still planning some write-offs with slow-moving items.

And what is that amount?

That amount is obviously right now we plan it for about $0.5 million.

$0.5 million?

Yes.

And could you talk, what type of price degradation assumption is built into your guidance if (multiple speakers) it was 10% this quarter?

Right. It was 10% this quarter, and as Trung mentioned, the actual blended ASP decrease was single digits, was a little bit less. And for next quarter, I think Q4 is about flat. I think that will remain at single-digit.

So same rate of decline?

Correct.

Can you talk -- was there any noticeable difference between the price degradation you had in the chip side versus the component side?

The chip side of the degradation is, as I said, stabilized, and actually you will see in single digits, and the component actually is not declining as much. Actually it is pretty much flat.

Okay. And of the 4-inch you are doing, how much of that is in Taiwan versus China?

China is 100% of running at -- our Foshan fab is running and product 100% as 4-inch. Taiwan is running today the majority is still at 2.5 inch, and as I said in the call, we expected by the end of the year more than 50% will be 4-inch wafer.

At what timeframe?

By the end of the year.

By end of the year? And do you have any tools experimenting with 6?

We are working on larger wafer, and I will not comment on the size at this time.

Got you. Thank you very much.

Jed Dorsheimer, Canaccord.

A quick question. I guess in terms of the capacity expansion or the transition to 4-inch, are you expecting that to drive down utilization rates to the 10% to 15% level due to the natural increase of capacity as you should demand stay the same?

No. No, it will be -- essentially what we bring up is 4-inch, and then we at the same time we bring now -- we are doing a conversion of our fab. So it is not like you are adding additional capacity by 4-inch additional. What you do is you do like essentially before your tire size, the tire size of your car is like 2.5 inch. Now you increase the size to 4-inch by replacing the tire, you know? It is not like you buy another car.

Okay. So you get a natural increase in your capacity when you go from 2-inch to 4-inch, right? So if you're going to be converting the 2-inch capacity over to 4-inch, that is going to increase your capacity in your Taiwan fab. And so if demand stays flat and you are currently at 40% utilization on 2-inch, I guess are you assuming demand is picking up?

Well, we expect that by the time that the demand -- by the end of the year, the demand has picked up, and we are essentially what we do is we increase our 4-inch wafer output and decreasing the 2.5-inch wafer output.

Okay. Just China SemiLEDs I understand how they are going to benefit from demand in China. Would you agree that they probably get the majority of the orders locally from the Foshan government? I'm just a little bit confused as to how that is going to benefit Taiwan SemiLEDs.

Actually China SemiLEDs is one company, and we look at -- that is why we have a Taiwan fab and a Foshan fab.

I'm sorry. I thought China SemiLEDs was majority-owned by a state-owned enterprise and that it is minority owned by Taiwan SemiLEDs. (multiple speakers) Is that correct?

That is correct, but we are running the operation 100%, and we control the output, we control the operation, and we control the board directors, you know, SemiLEDs as a company.

But as China SemiLEDs gets the business, I mean that basically is just going to flow below the line. It does not really affect the situation in Taiwan SemiLEDs?

But remember China SemiLEDs is ramping up now, and the two organizations are working together to do the sales. So while China SemiLEDs is -- and Taiwan's SemiLEDs actually all report to a similar corporation.

Okay. Thank you.

Daniel Amir, Lazard Capital Markets.

A couple of questions. One is a follow-up to the previous question. Can you give us an idea when you will actually start having a gain on the consolidated entity off of the China SemiLEDs? I mean it seems like you are still kind of in a negative territory. So can you give us an update on that?

Yes, for China SemiLEDs basically I think for probably the next quarter we are looking perhaps to have a possibility of breaking even next quarter, and we are not looking for a possibility from China SemiLEDs until basically until after that, afterwards.

So basically by your November quarter you should be profitable there?

Yes, about that timeline.

Okay. And then the second question is on the ASP commentary again, can you give us an idea what gives you the confidence now that ASPs are looking a little bit better on the margin than they did last quarter? It seems like that compared to your guidance that you had in the last conference call things ended up to be quite different than what you expected. So his visibility has improved as are you starting to see really orders picking up and your margin issue is largely because your lower utilization? Can you give us a bit better idea what sounds better now than it did three months ago?

Well, the last quarter we mentioned in our last earnings calls that we were anticipating the blended ASP to go down about 10%, and we ended up a little bit better than that. And for fourth quarter, we anticipate, as Trung mentioned, we believe the price has stabilized. And so I think the decline will still be about single digits going to the fourth quarter. So we are thinking basically the market conditions we anticipate that between the third and the fourth will be about the same. But I think for us we have maybe the move to basically lower our utilization, and that is why we have -- as a result of that, we need to take on this -- we need to write off, we need to charge off these fixed costs related to these underutilized capacities to our cost of goods sold, and that is why you have a negative margin for the fourth quarter. (multiple speakers)

Another way of asking, I mean is it fair to say that your August quarter, do you think at this point is your bottom quarter in terms of gross margins?

Yes, we think so.

And you could see -- and in November you should see positive gross margins at that point?

We are not giving guidance beyond the next quarter. So we will give you the update by next quarter.

Okay. And then final question, can you give us an idea how we should look at OpEx for next quarter considering that this quarter was a little bit higher, I think, because of the litigation side, so how should we look at kind of August quarter gross OpEx?

Well, the OpEx we will continue to incur litigation costs, and the number we have we are looking at for Q4 as far as SG&A is about CNY3.7 million. And on Renminbi this Q3 was about CNY1 million, and Q4 we are looking to incur about CNY1.4 million.

Yes, the majority of the cost of the SG&A is to make up the litigation costs.

And at this point you don't know when that would decline, I guess?

You know, I don't want to project beyond the next quarter into the future. But we see that it will continue for the next quarter for sure.

Olga Levinson, Barclays Capital.

Can you talk about for the China JV what -- did you see any revenues in the May quarter, and what are you assuming for the August quarter?

Right now the China SemiLEDs they recognize a very small amount of revenue in Q3. And for China SemiLEDs, we do not give guidance in terms of revenues.

Okay. Would you expect that to be -- (multiple speakers)

It should start coming up. It should start coming up.

Okay. And then in terms for the core Taiwan business, what was the mix in the quarter between interior lighting versus outdoor?

The majority -- some outdoor we sell, but the streetlight market is some, but we don't see much visibility doing the streetlights at this time. So the majority is actually going to the indoor with some outdoor, but there is no clear visibility at this time.

Okay. And then can you comment on the number of tools you currently have installed at the Taiwanese facility versus what you have installed so far in China?

Currently the capacity of Taiwan is still higher than China. We don't comment about our number two set, but we expect that right now, because we run at 40% capacity, so our volume of Taiwan is in the order -- about 6 million, and then China is probably about half of it.

Got it. Thank you.

Andrew Huang, Sterne, Agee.

Can you first clarify that last comment you made? Did you say that your capacity in Taiwan is about 6 million units and China is 3 million units?

Well, we say that we are running now at about 6 million output. Our capacity is much higher, you know. We run much more -- (multiple speakers)

Is that 6 million a quarter or 6 million a month or what is that?

I'm saying a month.

6 million per month? Okay. Thank you. And then the second question, can you give us the revenue breakdown again between chips, components and other for the May quarter this year and then the May quarter of the prior year?

Okay. So for the May quarter this year a chip was 58%, and the component was at 27%. And for 2010 the percentage breakdown for chip was 74%, and the components was 23%.

Got it. Thank you. Can you comment on inventory levels in the channel? Do you have an idea of where they are today relative to the prior quarter?

Actually this year is about the same. Yeah, not much change there, Andrew.

So for SemiLEDs at what revenue level do you think you can be breakeven on an operating profit level?

I think -- well, I think at this point we can just say that on a gross margin level I think it probably should be about $8 million.

$8 million in revenue?

Right. Until we transitioned completely to 4-inch wafer.

Right. But I think you said that when you go from 2.5 inch to 4 inch, that your costs should get cut in half. Is that correct?

That is correct.

Okay. I guess the next question is on the pricing, you said in your fiscal Q2 pricing was down double-digit sequential, and then in fiscal Q3 was down less than 10% sequential. So for your fiscal Q4, is it going to be down even less than in the prior quarter?

At this time at the rate we are seeing is about single digits.

Low single digits, I'm sorry?

About single digit. We don't want to pinpoint the exact number because the market now is very hard what we see in a single digit.

Why is it that you think the ASP environment is getting better?

I think the drops in the previous few quarters have been tremendous. We see some pickup also in terms of when our customers look at orders or supplier of parts from other companies, and they notice that the number that actually promised and delivered is not correct. For example, they say they can -- our competition indicates they can deliver high efficacy, and actually when you measure it, the number is not what our competition says and then we see some will return -- our customers come back to us and purchase our products.

Okay.

And Andrew, let me just kind of add -- just let me add that. As Trung mentioned, in Q4 we anticipate the China market will come back a bit in terms of streetlights. And typically ASP and the streetlight market is better than versus indoor general lighting.

Right. When you said that you expect China street lighting to return, was that -- I thought you said that that was calendar year Q4 or am I mistaken? Is that your fiscal Q4 or calendar Q4?

You know, we see some activities now, and I believe that by calendar Q4 it will be -- that is when we expect the return.

Okay. But that means that for your fiscal Q4 you are still not baking in any kind of ramp from China street lighting, correct?

Well, we see some improvement as I said, but not to the extent that we would have expected.

Right. Understood. Okay and then just one last question. I was under the impression that when you gave the SG&A guidance for this May quarter that you just reported that it had already factored in litigation expense, and it clearly came in higher than expected. So is it because litigation expense was higher than expected, or were your sales and marketing expenses higher than expected?

Well, mainly it was because of the litigations. It is always difficult to try to forecast litigation costs, and it really depends on what kind of level of activity that takes place, and we do the best we can. We consult our legal counsels. But the negative variance was largely due to legal costs, yes.

Yes, you know, the professional fee mainly -- (technical difficulty).

Okay. Thank you very much.

(Operator Instructions). Jed Dorsheimer.

I was just curious, China SemiLEDs, the decision to go with the PECVD tool, why did you decide to go ahead with that decision in China versus in Taiwan?

You know, in China we got a lot of assistance from the government, and that is clearly based on business decisions.

But I guess if the throughput is supposed to be higher and cost is lower, aren't you going to be -- isn't Taiwan SemiLEDs going to start competing with China SemiLEDs, and isn't this sort of putting them ahead of Taiwan SemiLEDs?

No, we work together as I mentioned before. SemiLEDs is a company. We worked together. We control both fabs. Both are in operation as you mean -- so I don't look at it that way. The piece -- you know, we book benefits from both sites. We really -- today the two fabs are really integrated.

Well, I hear you that they are integrated, but I guess what I'm struggling with here is I'm trying to understand the decision-making process. Because if you're invested in Taiwan SemiLEDs, you're only getting 49% of China SemiLEDs. So if China SemiLEDs starts to advance at a faster rate than Taiwan SemiLEDs, you are really at a disadvantage here. You start competing with yourself. (multiple speakers) So I'm wondering why you would think about putting new technology in China SemiLEDs versus Taiwan SemiLEDs. It seems to be an inherent disadvantage. Even though your umbrellaed as -- named as one company, you are really not from a financial perspective.

Actually I think in terms of technology, I don't look at it that way. The reason why is that when China SemiLEDs is coming up in 4-inch wafers or in full volumes, that experience is tremendous for SemiLEDs as a company, as a whole. And in terms of getting this piece through the tool to -- for our preservation is not for a MOCVD now, okay? It is for preservation. It does not really -- I don't see that as a problem, Jed.

Okay. Well, I mean China SemiLEDs started on 4-inch where Taiwan SemiLEDs has been on 2-inch. And so now -- it is irrelevant, I guess. All right. Thanks.

Ladies and gentlemen, that does conclude our question and answer session today, as well as our conference call. We do thank you for your participation and joining us for today's SemiLEDs presentation. You may now disconnect.