萊迪思半導體 (LSCC) 2012 Q2 法說會逐字稿

Good afternoon.

My name is David and I will be your conference operator today.

At this time, I'd like to welcome everyone to the Lattice Semiconductor second quarter 2012 conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question and answer session.

(Operator Instructions).

Thank you.

I would now like to turn the call over to Mr. David Pasquale with Global IR Partners.

Sir, you may begin your conference.

Thank you, Operator.

Welcome, everyone, to Lattice Semiconductor second quarter 2012 results conference call.

Joining us today from the Company are Mr. Darin G. Billerbeck, the Company's President and CEO.

Mr. Joe Bedewi, Lattice's Chief Financial Officer is on the line as well.

Both executives will be available for Q&A after the prepared comments.

If you have not yet received a copy of today's results release, please e-mail Global IR Partners using lscc@globalirpartners.com or you can get a copy of the release off of the of Investor Relations section of Lattice Semiconductor's website.

Before we begin the formal remarks, I will review the Safe Harbor statement.

It is our intention that this call will comply with the requirements of SEC Regulation FD.

This call includes and constitutes the Company's official guidance for the third quarter of fiscal 2012.

If at any time after this call we communicate any material changes to this guidance, we intend that such updates will be done using a public forum such as a press release or publicly announced conference call.

The matters that we discuss today, other than historical information, include forward-looking statements relating to our future financial performance and other performance expectations.

Investors are cautioned that forward-looking statements are neither promises nor guarantees.

They involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements.

Some of those risks and uncertainties are detailed in our filings with the Securities and Exchange Commission including our fiscal year 2011 Form 10-K and our quarterly reports on Form 10-Q.

The Company disclaims any obligation to publicly update or revise any such forward-looking statements to reflect events or circumstances that occur after this call.

Our prepared remarks will also be presented within the requirements of SEC Regulation G regarding generally accepted accounting principles or GAAP.

I would now like to turn the call over to Mr. Darin Billerbeck.

Please go ahead, sir.

Thank you, David, and thanks to everyone for joining us on our call today.

In terms of Q2, revenue was $70.8 million with a 52.3% gross margin.

Results for the second quarter 2012 reflect the continued effects of the macro headwinds and the impact of customer mix on our business.

From a high level, we continue to achieve new product growth.

Unfortunately, our strong new product growth is being offset by the continued weakness (technical difficulty), especially in Europe.

In addition to the weakness in Europe, we experienced softness in the North America consumer market.

Finally, growth from our strategic accounts was a positive, but adversely impacted our gross margin.

Can you guys hear us, by the way?

I hope so.

Okay.

On prior calls we mentioned that if revenue growth did not resume, we would take further actions to lower our operating costs.

During Q2, we reduced our overall head count by approximately 5%.

Reduction in work force was across the board and was intended to further streamline our cost structure.

I want to be clear, however, that we remain fully committed to executing on our product road map while continuing to provide excellent customer support.

A recent foundry partner announcement with UMC was another step to increase our new product innovation, lower our cost and further advance our non-volatile memory technology acquired for SiliconBlue.

Q2 highlights some developments included shipping our one millionth MachXO2 programmable logic device, production release of our iCE40 family, sampling our high-density ECP4 FPGA, releasing the latest version of our new power management architecture, and being recognized by [Haleiwa] as the only FPGA supplier to receive their coveted Quality Supplier award.

In terms of added color for the second quarter, the revenue mix of new, mainstream and mature was 20%, 60%, and 20% of revenue respectively in Q2.

Revenue from our new products were up 21% quarter on quarter, reflecting the strength in our ECP3 product shipment.

Mainstream products were up about 11% quarter on quarter.

Revenue from our mature products were down about 35% when compared to the prior quarter, primarily due to the softness in European distribution.

The revenue mix between FPGA and CPLD products is 35% and 65% respectively.

On a geographic basis, revenue from Asia, including Japan, was about 70% of the total revenue, an increase of about 7% to 8% on an absolute dollar basis.

Revenue from North America was about 13% of total revenue, a decline of about 24% compared to last quarter on an absolute dollar basis.

This reflects weakness in the consumer market segment, specifically non-iCE product shipments.

Europe was 17% of revenue compared to 19% of revenue in Q1, but declined 9% on an absolute dollar basis.

On an end-market basis, communications represented 52% of revenue in Q2 compared to 43% in Q1.

This reflects strength in our strategic [coms] account.

Computing declined to 12% of revenue in Q2 as compared to 13% in Q1 with further softness in the server market.

Industrial and other declined to 27% of revenue in Q2 compared to 28% in Q1 as a result of the weakness in Europe.

Consumer decreased 10% of revenue in Q2 from 16% in Q1 primarily reflecting non-iCE consumer market softness.

That concludes my initial comments.

I will now turn the call over to Joe.

Joe?

Thanks, Darin.

As noted earlier, revenue for the second quarter was $70.8 million, a decrease of 1.3% from the prior quarter and a decrease of 15.6% from the year-ago period.

Gross margin for Q2 was 52.3% compared to 55.1% in the prior quarter and 60.4% in the year-ago period.

The decline is driven by customer revenue mix combined with increased success in our new products.

The macro environment continues to be challenging.

We are driving operational improvement by leveraging our low-cost operations, implementing cost and prohibiting improvements and executing to our product cost improvement plans.

Total operating expenses for the quarter came in at $39.9 million.

This represents a near-term peak as we took additional spending reduction actions in the quarter.

Second quarter spending includes severance charges of $1.4 million associated with the headcount reduction.

Included in the second quarter spending is approximately $100,000 of restructuring-related charges as compared to $500,000 of restructuring-related charges included in the first quarter of 2012.

The restructuring of our R&D and operations groups under the 2011 restructuring plan is complete and we do not foresee additional charges under this plan.

Accordingly, cost allocations reflect our new structure.

Second quarter 2012 results include approximately $1 million of acquisition-related costs compared to $1.7 million in the first quarter of 2012.

Q2 net loss was $12.5 million or $0.11 per basic and diluted share as compared to a net loss of $7.7 million or $0.07 per basic and diluted share in the first quarter and compared to a net income of $13 million or $0.11 per diluted share in the year-ago period.

In the second quarter of 2012 we recorded a tax provision of $10.45 million or $0.09 per basic and diluted share.

This tax provision reflects the implementation of our new global tax structure.

The tax provision is primarily a non-cash related charge.

We expect our tax provision to significantly decline starting in Q3 of this year.

We expect diluted share count to be approximately 117.5 million shares.

The share count reflects the retirement of approximately 1.1 million shares valued at approximately $5.4 million in the second quarter.

Our year-to-date total shares repurchased is now at approximately 1.3 million shares valued at approximately $7 million under our previously announced 2012 stock buyback program.

We ended the quarter with cash, cash equivalence and short-term marketable securities balance of $184 million and we continue to have no debt.

Accounts receivable at June 30 were $60.4 million compared to $52.8 million at the end of last quarter and the day sales outstanding were 77 days compares to 66 days last quarter.

We experienced a shift in our receivable balance to accounts with longer payable terms.

Accounts receivable collections are current.

We have not experienced significant past due or reserve increases for bad debt.

Inventory at June 30, 2012, was $37.1 million compared to $36.8 million last quarter.

Months of inventory now stands at 3.3 months compared to 3.4 months at the end of Q1 2012.

We spent approximately $4.6 million on capital expenditures and $5.2 million on depreciation and amortization expense, including intangibles, during the second quarter compared to $3.4 million and $5 million respectively in Q1.

This concludes the financial review portion of the call and I will now turn the call back over to Darin.

Darin?

Thank you, Joe.

Overall, we are operating in a challenging environment.

We have excellent new product offerings and a solid product pipeline with continued economic weakness expected in many parts of the world, we must remain focused on lowering our operating costs while ensuring that we continue to win our fair share of the market opportunities.

We are confident in the value proposition of our products and our competitive position.

We are also confident that we can navigate through the current market volatility and emerge even stronger over time.

Let me now turn to our third quarter 2012 expectations.

We expect revenues to be approximately flat, plus or minus 2%, as compared to Q2.

Q3 gross margins are expected to be approximately 52% plus or minus 2 points.

Total operating expenses are expected to be approximately $38 million, including approximately $0.8 million in acquisition-related costs.

This concludes our prepared remarks.

Operator, we would now be happy to take any questions.

Yes, sir.

(Operator Instructions) Your first question comes from the line of [Nick Claire] of Baird.

Hi, guys.

I'm calling in for Tristan Gerra.

Hi, Nick.

How are you?

Good.

How are you guys?

Good.

So I guess, first, you kind of touched on it at the beginning of the call, but it was kind of -- I don't know, it was a little choppy on my end in terms of being able to hear, but given the weakening macro and kind of top-line outlook for the year, are you -- I know you kind of displayed it with the headcount reduction this quarter, but you originally given that $1.5 million reduction to OpEx from kind of the 1Q to 4Q.

Is that able to increase further and I guess in what ways if EPS to get it back into the black if the market continues to weaken?

Yes, we expect it to -- we were talking $1 million to $2 million.

We expect it to be closer to the $2 million plus range as we move in to Q4.

Okay.

And then for the quarter, how was 65 nanometer revenue during the quarter?

Was it above the $10 million kind of range and I guess what's the target moving forward?

Are you talking about overall being -- we have a lot of 65 nanometer.

Are you talking about ECP3?

I'm sorry.

ECP3, yes.

Yes.

ECP3 was very strong during the quarter.

Okay.

It was very close to that range.

Not quite to the top end, but it was getting there.

Okay.

Okay.

Are you guys seeing any strange pricing pressures, whether it be gross margin, and, if so, is it more in the CPLD or the FPGA side?

It's really more on the FPGA side I think than the CPLD side.

I think that is representative, it's pretty competitive and a lot of those products are also in very competitive products from our customer side.

You're seeing a lot of strategic accounts, pressures from different analysts looking at our end customers and some of the pressure that they're under, so I think that will continue, but I think in the mainstream products it's not that you don't see pressure, it's must more of a traditional decline.

Okay.

Okay.

And then, do you have any products that are close to being phased out, again either FPGA or CPLD?

At this point, nothing significant, nothing to write home about.

Okay.

Okay.

And then last thing.

Kind of just a quick housekeeping thing here.

So since the tax issue kind of significantly declines looking into the next quarter, do we see it kind of reverting back to what it has been before and kind of undertook this restructuring program?

After the restructuring, going in to next year, we're looking to be in the 14% -- 11% to 14% range is what we've been telling folks.

For 2013?

2013, right.

That's P&L related.

This is a -- basically a non-cash event.

We had $53K in taxes paid, cash taxes paid this quarter, so this is all non-cash related to the structure and movement of assets.

Okay.

So then moving forward it's 11% to 14% range?

Right.

And that again we still have NOL, the carry forward and we're going to see less than $1 million annually related to cash taxes paid.

Okay.

Great.

Thanks, guys.

That's it for me.

Thanks, Nick.

Your next question comes from the line of Ian Ing of Lazard Capital.

Hi, Darin.

Hi, Joe.

Good afternoon.

Hi, Ian.

First quest is this increase in strategic accounts.

Are these new sockets ramping in volume or return of existing business and is it sort of the same applications as before, things like wireless bay stations or some new type of coms applications?

Thanks.

Yes, it's really the same applications and some are new and some are existing.

Some sockets that we had before and some are new.

So, -- especially in ECP3, right?

ECP3 grew quite a bit and that's just an artifact of the work we did years ago.

Okay.

Great.

And then sort of the overall coms commentary from your competitors.

[I-links] yesterday talked about North America LTE being strong but sort of the rest of the world seeing a little -- some other OEMs seeing a bit of inventory work done.

Is there a sense that this new run rate business is sustainable or could fall off at some point?

Well, it's always rocky.

Coms are kind of interesting because the last two years in a row they ramped Q1 through Q3 and then it was down in Q4, so there is always a risk in coms that it is volatile, but it's different because what the big guys see and what we see are different applications because they play in the wire line all the way through the remote radio head.

We play in the last mile.

So, what's happening in the last mile can be slightly different than what they see in the overall build out.

Okay.

Great.

And then for Joe.

The restructuring charges for this headcount reduction, is that part of the SG&A in June, so does that go away going forward?

Yes.

The SG&A -- we absorbed the 1.4 in severance in SG&A throughout the OpEx charges.

We did not classify them as restructuring.

It was baked into that number.

It's a one-time event.

We will see a reduction in that normal payroll spending going through the next two quarters until the folks are gone.

Okay.

And again just to clarify this, $2 million plus savings you talk about in OpEx, that's from the first quarter 2012 levels, is that correct?

Correct.

Okay.

Got it.

Okay.

Good.

Good.

Okay.

And then last question.

This UMC foundry announcement.

It seems specific to the SiliconBlue one-time programmable process.

So, how do you see -- do you see that expanding perhaps to the rest of the families and how does that impact the relationship with like TSMC and (inaudible)?

Thanks.

Yes.

It really has no impact.

Everybody uses multiple supplier foundries, right.

It doesn't really have a big impact.

If you are thinking about supply long term, it doesn't have any impact.

I think what we did with UMC is we looked at a supplier that was more aligned to the technology that we have.

One is SiliconBlue, but remember that technology can also find its way in to our other product lines.

And we do plan on using both 40 and 28 long term to advance our technology on all of our product lines.

So, it's not just iCE, it's for all product lines.

Okay.

Thanks.

I'll re-queue.

And your next question comes from the line of Richard Shannon of Craig-Hallum.

Let me just ask kind of a big picture question on your guidance for third quarter in sales.

How should we view the relative growth rates by vertical market?

Coms did quite well in the second quarter and consumer probably not as good as you would like.

How should we look at the third quarter?

Yes, I think coms will continue to be healthy, at least from our standpoint we don't see anything.

You're going to see some -- we'll see a little bit of variance here and there because I think people are trying to understand who is gaining what share, where you see a little bit of flex between the customers.

Consumer will snap back.

I don't think it's going to get back quite as much in Q3, but I think by Q4 consumer comes back and is fairly strong.

Consumer comes back but not all the way and we should expect it to do quite well in Q4.

A lot of that is Christmas buildup and other things like that because we are starting to see people load up products later in the back half of the year.

Okay.

Consumers, is that related to any specific sector or even a specific customer in that area?

Can you detail that in any way?

Yes, specific sector and specific customer is as far as I can go.

Let's see here.

Darin, as you look beyond the current macro environment, clearly Europe is difficult and that's hurting distribution, but if you look at your distribution business outside of that, anything that can help that you view can help improve that because clearly that's a big chunk of your business?

Just want to hear your thoughts on any sorts of improvements that Lattice can have an impact on.

Yes.

I think the biggest challenge that we have is a lot of our products ship through distribution, especially we'll call our simpler products.

It doesn't mean that they're super cheap or anything.

Our XO, our MachXO and our MachXO2 do ship a lot through the distribution.

They are easier to design in.

Our customers are very familiar with them.

So, we are really driving the XO family through distribution today along with iCE.

Because, remember, iCE has never been driven through distribution because it was an OEM specific play for smartphones and for tablets, but a lot of things we're learning enable us to now play in more broad applications.

Specifically, we are starting to see people look at this for industrial, right, because it's [glue logic] in it's simplest form.

I think both XO2 and iCE through distribution are going to be our big growth engines along with just trying to get a kick back from distribution.

Distribution year on year is down significantly across all geographies, not just Europe, and so we really need to see some macro events that kind of prop us back up to even a natural run rate.

I think that helps our absorption and helps our gross margins because those are typically higher gross margins and it lowers our cost since we're shipping more, lower densities which are higher volumes and all that stuff.

So, we do need some snap back at distribution, albeit it doesn't have to be significant, but we also have to drive all the new product offerings through distribution in a big way and that's what we're focused on today.

Okay.

A couple more questions from me.

First on OpEx.

You gave us a number for the third quarter here after a small headcount reduction.

How should we think about your OpEx going forward in the context of largely flattish results if the economy continues to be poor, perhaps things start to improve and you can move towards that $80 million per quarter bogie that I know you've talked about before.

Where should we see the OpEx lay out quarterly in that kind of a context?

So, we're still on track to that $2 million reduction we discussed by the end of the year.

So, we're hitting 38.

We'll hit 38.

If we continue to see softness in the market, we're going to continue to aggressively drive OpEx.

So, we took this 5% headcount reduction this quarter as a result of seeing softness.

So, we're taking this as we can and we will continue to be aggressive on that moving forward.

So, we are managing OpEx very tightly as we finish all of our restructuring work.

We should see benefits from the Manila operations and the movement that we've got going there, so we've got plans to decrease costs in OpEx and that's on track.

We will drive them as hard as we can.

Okay, fair enough.

One last question for me on SiliconBlue.

Darin, I'd love to get your thoughts on (inaudible) activity and pipeline in the smartphone space and also relative to what you're seeing, we just saw Qualcomm results last night and they seem to be pushing out some of the expectations for this market in the second half of the year.

Kind of love to hear your thoughts on both those dynamics.

Let's not forget that we are in digital still cameras, tablets and also smartphones and then we are finding our way into car nav and things like that, so there's a lot of market opportunities that are available to us.

We do have quite a few design wins but remember most of those design wins that we have from the SiliconBlue acquisition were targeted at a few key OEMs.

It was really Taiwan and then Korea some major winners and we're continuing our progress there.

The challenge that we have, which I feel very good about, is all of the different opportunities that we are getting every place else because people are embracing the fact that there's a lot lower bar, if you will, with iCE, especially at the price points that we can offer that and the margin structure versus some of our other products.

So, it enables us to really differentiate between XO2 and iCE on a feature and also on a cost per I/O.

So, we're really starting to embrace the fact that anything we learn from tablets and smartphones and from navigation and digital still cameras we apply to the broad market and that's the big challenge with iCE is just getting people to recognize and understand how to use the low cost FPGA or you can just place (inaudible) and that's new for people.

So, as we are going to really teaching training and creating opportunities that didn't exist before.

What is that sales cycle, Darin, in terms of when people first see the value proposition to getting them towards designing in?

Is that a 3-month process, 12-month process, what -- ?

The design in -- typical cell phone design in if you're in a cell phone, so you can get from start to finish you can be in between 9 and 12 months you can find yourself going from the beginning to starting production.

Right now -- it takes them a while to ramp.

Usually it takes them three to six months to ramp, so you're at about half the time, if you will, of a normal FPGA if they're familiar with it.

And if it's a glue logic deal like I just want an [I2C to slimba], that can be faster.

Someone just walks in and says I just want to connect these two interfaces together.

That's a much faster deal.

They'll throw an FPGA on the board program and up and they're going.

So the key for us is to make it affordable, very, very low power and then enable them to very easily apply those to their application and that's the biggest challenge we have right now is just teaching and training, but a lot of people are getting it and they are getting it fast.

Okay.

Great, guys, I will jump out of line.

Alright.

Thanks.

Thanks, Richard.

(Operator Instructions).

Your next question is from the line of Bill Dezellem of Tieton Capital Management.

Thank you.

Had a couple of questions.

First of all, relating to MachXO2 and the ramp that you discussed in the release, how does that compare to prior product ramps?

The reason I ask is a million devices in four months seems pretty fast.

Yes, the nice thing is we brought the XO2 1200 out of the shoot which was one of the higher volume runners on XO.

I think the familiarity of that product helps us quite a bit.

We are ahead of the XO ramp by a little bit I think today and we expect that we will continue to ramp that.

Remember, it's slightly different application because it's a different voltage, but it has all the feature sets that XO has on it and it's actually on a more advanced technology.

So, we expect that to do quite well and we expect it to ramp faster than XO.

And relative to other products that have ramped quickly in the Company's history, how does this compare?

I think XO will be the fastest ramping product that we have only outdone by iCE.

Great.

Thank you.

And then relative to your gross margin guidance of plus 2% to minus 2%, what are the swing factors between being up 2 versus down 2 relative to this quarter?

It's very much customer mix and how quickly some of the (inaudible) comes back.

So, as we ship more into our strategic customers we have margin pressure with the strategic customers.

That's absolutely the biggest swing there is customer mix.

And then you mentioned distribution and something that I am confused about is that distribution as a percentage of revenue was up 3 percentage points in the quarter and yet you're referencing the weakness in distribution.

Is there something I'm missing that's creating a disconnect for me?

Let me add to that a little bit.

So, if you think about it, North America was relatively flat, say up a little bit, Europe is down.

Europe is most of our industrial and more our higher margin products and Asia is more your low margin products.

Distribution worldwide kind of looks flattish or slightly up.

You can get a different customer mix just by the geography.

And so the spot where you saw the real distribution decline would have been Europe then?

Yes, it was down 11%.

Great, thank you both.

Your next question comes from the line of David Duley of Steelhead Securities.

Just a couple quick questions from me.

When you look at your gross margins this quarter versus the June quarter of last year, there's a pretty big difference.

I realize a lot of that's volume related.

Could you just kind of review what the key reasons are that the margins are different versus what you printed last June quarter?

And what are the plans to improve margins going forward?

Thanks.

So, you hit on some of it.

It's volume is very helpful to us, so it helps on absorption of product costs.

We had a different mix of strategic products and we had -- didn't have as many new, brand new products running through the pipeline back in 2011.

So, it really boils down to as our new products ramp in strategic and we don't have the volume of revenue it really impacts margins.

So, it's kind of a broken record around customer mix, but that's really what it is.

And, so, what's the reasonable target for margins going forward I guess when we get back to an $80 million run rate with the current mix?

When we get back to $80 million, we see our way to the mid 50s again.

We have cost improvements that our coming in to play.

We've shifted our operations offshore to low-cost environments which helps us in terms of cost of goods sold.

We have product cost improvements with the gold to copper that will start flowing through strongly in the next couple quarters, and we see some absorption savings related to that.

So, we see our way back to this number set and as we start, as Darin mentioned earlier, moving our products out of the strategic and into the [disty] so as these new products shift out of our strategic accounts into a broader market, we will see some margin uplift on that also.

Okay, and just two housekeepers.

Is the ECP family, is that all classified in the [coms] section?

Not all of it because it does serve as some industrial video and some other places besides that so, yes, it is not all inclusive of coms.

Okay.

And what was the stock comp expense during the quarter?

$2 million, I believe.

We have a schedule attached to the back of the press release.

Okay.

It was $2.54 million.

Thank you.

Your next question comes from the line of Ian Ing of Lazard Capital Markets.

Just had to come back here.

Consumer being down on iCE products, is that more MachXO, XO2 and do you expect that type of business to come back or is that sort of more permanent?

It is not MachXO and MachXO2, it's a different product.

Some of that yes, we do expect to come back but I don't expect it to come back solid this quarter or maybe even next quarter.

It'll come back over time, but not to the levels it was at.

Okay.

Given SiliconBlue you acquired them back in December last year and you got some visibility now hopefully into the end of this year.

What are your thoughts on the yield in terms of the design win pipeline?

Is that sort of to your expectations or are there some changes in the dynamic of what's ramping and what's not?

Yes, I think in every acquisition you'll get some pluses and minuses and we certainly had some of those.

Most of them came in the terms of some push outs.

We haven't lost any designs from any of the iCE (inaudible) some have taken longer to get into production than we would've anticipated and that's fine because that's a natural thing.

I think what's impressed me more than anything is looking at our Salesforce.com data and how many opportunities there are on iCE outside of cell phones and tablets and all these other areas which is refreshing because the other part is when you go up against some of our competitor's parts with even XO and XO2 there are product lines that they have that are difficult for us to compete and iCE then enables us to compete quite aggressively and with decent margins.

So, that's the good news is we have that low cost, low cost per I/O product in small form factors that I think is world -- it's going to be the world's lowest cost FPGA over time.

Okay, great.

That's all I had for now.

Thank you.

(Operator Instructions) Your next question is from the line of Paul McWilliams of (inaudible).

Hi, guys.

Thanks for taking my call.

I was following you right along on the gross profit conversation that you had with the previous analyst until then you said to the second guy that at $80 million you would be back in the mid-50s.

We were looking at mid 50s guidance at $73.1 million mid point of original guidance for Q2.

Why the disconnect there?

Will we see mid-50s at $73.1 million?

It's possible but it really is mix dependent.

Once we get to the $80 million we see our way back there pretty, I don't want to say easily, but it's simpler with the absorption side.

Depending on the mix, we can be there at $73 million, $75 million also.

Got you.

Okay.

I just want to make sure I didn't miss something there.

Within your COGS as you have it reported, was there any acquisition charges, amortization of intangibles, reserves or anything of that nature?

No.

Okay.

What was your cash flow from operations?

I think we had a negative 2.

2 million?

On a GAAP basis.

Cash flow from operations.

Sorry.

I'm looking at the cash flow statement right now.

Trying to.

It is a negative 3, I believe.

I'm sorry, I'm trying to -- I don't have it in front of me.

On a GAAP basis.

Hold on, Paul.

Sorry.

That's okay.

Negative 3.

Minus 3 and then your CapEx?

It is minimal.

Well, it was 4.2 -- 4.6, excuse me, this quarter.

That's the fit up in Manila and the movement of our R&D and operations to Manila as we fit Manila with testers and so forth.

Yes, I neglected to consider that.

What is your full-year target on CapEx then?

CapEx full year it's close to $20 million.

Got you.

I appreciate your help very much.

Thank you.

Sure.

Thanks.

(Operator Instructions).

And there are no additional questions in queue at this time.

Okay.

I will go ahead and close.

It's clearly a tough market.

We have a lot of great products that we have to sell, we just need to control that which we can control, things like right-sizing our cost structure, developing new and innovative low-cost and low-power product offerings, continuing our exceptional customer service and support, and profitably winning the markets where we have all the advantages.

Thanks for joining us on the call today.

Ladies and gentlemen, this does conclude today's conference.

Thank you for your participation.

You may now disconnect.