慧榮科技 (SIMO) 2013 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter Silicon Motion Technology Corp.

Q4 2013 earnings conference call.

My name is Edwin, and I will be your conference moderator for today.

(Operator Instructions)

Before we begin today's conference, I have been asked to read the following forward-looking statements.

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended.

Such forward-looking statements include, without limitation, statements regarding trends in the semiconductor industry and our future results of operations, financial condition, and business prospects.

Although such statements are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on them.

These statements involve risks and uncertainties, and actual market trends and our results may differ materially from those expressed or implied in these forward-looking statements for a variety of reasons.

Potential risks and uncertainties include, but are not limited to, continued competitive pressure in the semiconductor industry and the effect of such pressure on prices; unpredictable changes in technology and consumer demand for multimedia consumer electronics; the state of and any change in our relationship with our major customers; and changes in political, economic, legal, and social conditions in Taiwan.

For additional discussion of these risks and uncertainties and other factors, please see the documents we file from time to time with the Securities and Exchange Commission.

We assume no obligation to update any forward-looking statements, which apply only as of the date of this press release.

I would now like to hand our presentation over to our host, Mr. Jason Tsai, Director of IR and Strategy.

Please proceed.

Thank you.

Good morning, everyone.

Welcome to Silicon Motion's fourth-quarter 2013 financial results conference call and webcast.

My name is Jason Tsai.

With me here is Wallace Kou, our President and CEO, and Riyadh Lai, our Chief Financial Officer.

The agenda for today is as follows.

Wallace will start with a review of some of our recent business developments.

Riyadh will then discuss our fourth-quarter financial results and provide our outlook.

We will then conclude with Q&A.

Before we get started, I would like to remind you of our Safe Harbor policy, which was read at the start of this call.

For a comprehensive overview of the risks involved in investing in our securities, please refer to our filings with the US SEC.

For more details on our financial results please refer to our press release, which was filed on Form 6-K after the close of market yesterday.

The webcast will be available for replay on our website, www.siliconmotion.com, for a limited time.

To enhance investors' understanding of our ongoing economic performance, we will discuss non-GAAP information during this call.

We use non-GAAP financial measures internally to evaluate and manage our operations.

We have therefore chosen to provide this information to enable you to perform comparisons of our operating results in a manner similar to how we analyze our own operating results.

A reconciliation of the GAAP to non-GAAP financial data can be found in our earnings release issued yesterday.

We ask you that you review it in conjunction with this call.

With that, I would now like to turn the call to Wallace.

Thank you, Jason.

Hello, everyone, and thank you for joining our earnings call.

2013 was an important transition year for Silicon Motion, for both our controller business as well as our LTE products.

We have previously communicated that end market for our controllers was shifting from mature removable storage market to a growing embedded storage market, and that we have been increasingly investing in SSD plus embedded products to rapidly enlarge our mix of revenue that target growing embedded storage markets.

In 2013, we delivered on this strategic objective by growing our SSD plus embedded revenue by about 100%, to where they have become our largest product line.

And by the fourth quarter, SSD plus embedded sales already account for about half of our total global storage sales.

We scale our SSD plus embedded revenue from under 10% of total mobile storage sales in 2011, to about 20% in 2012, and last year to almost 50% of all controllers.

The primary driver of our SSD plus embedded growth has been our controller for eMMC, the SSD for mobile devices, widely used in the vast majority of all smartphones and tablets.

We have been supplying our eMMC controller for both Samsung and SK Hynix since early 2012, as well as a third NAND flash customer in the first quarter.

Our flash partners are supplying eMMC memory solutions using our eMMC controller to 8 out of the top 10 non-iOS smartphone OEMs for smartphones ranging from global model to lower-cost phones, whether running Android, Windows 8, or Blackberry OS.

In 2013, 15% to 20% of all eMMC devices were using our controllers, up from 5% to 10% the previous year.

In the fourth quarter alone, our eMMC 4.5 controllers were designed into 18 new devices, including two Window 8 tablets and numerous Android smartphone and tablets.

Technologies underlying eMMC solutions have been advancing rapidly, because consumers are seeking richer user experience for a more sophisticated multimedia applications running on smartphones and tablets, with greater processing power, more interactivity, and faster connectivity.

Meeting consumers' escalating need for richer and richer user experience requires continuous improvement in embedded memory solutions.

We have been developing controllers that meet the eMMC memory solution that need progressively larger storage capacity, significant improvement in random and sequential data transfer rate, lower power, faster responsiveness [from] lower data latency and better multitasking, enhanced data security, and lower cost.

We have developed an increasingly broad portfolio of eMMC controllers for our OEM customers.

In addition to our first series of eMMC 4.41 controllers [seeing] the second quarter of 2013, we have been ramping our eMMC 4.5 controller, which has 2 to 3 times faster IOPS performance.

We will be shipping the TLC version of our eMMC 4.5 controller in the first quarter of 2014 to our third NAND flash partner, targeting more cost-sensitive markets.

Our eMMC 5.0 controller, with 2 to 3 times faster IOPS performance over eMMC 4.5 and targeting premiere performance markets, are expected to start shipping this quarter.

We also have a USS 2.0 controller on our product roadmap.

We regularly develop new eMMC controllers to meet escalating performance requirements of our OEM customers.

Separately, every 12 months also NAND flash maker are introducing new generation of increasingly cheaper and higher density flash components.

And each generation of NAND flash is progressively weaker from perspective of product endurance and data reliability.

For the controller developer, one of our key jobs is to manage and bridge the widening gap between the requirement for faster storage device performance and the push to use cheaper but worse quality NAND components.

We believe we are the only meaningful merchant supplier of eMMC controllers in the marketplace.

Our market leadership is a result of our focus on high-performance hardware architecture, cutting-edge firmware solution, especially key algorithms, and extensive engineering support infrastructure.

We believe these key leadership factors are unmatched by other merchant controller makers, and we also believe our OEM customers find value in these factors, as our eMMC controllers help them competitively in expanding their market position, which in turn leads to our own market share gains.

Let me now turn to our other key SSD plus embedded product, our SATA 3 client SSD controller.

Our SSD controller is mainly promoted for use in primary storage SSD and in cache storage for PC, both for OEM and channel customers.

Independent third-party testing and benchmarking show that our SSD controller offer very competitive performance, but with power consumption that is substantially lower than any other SSD controller available in the market today.

We have been making steady progress towards scaling our SSD controller sales.

We have been shipping small volume to market makers, selling SSD to Chinese PC OEMs and channel markets.

More recently, we have secured key platform wins at an important OEM that is developing SSD with our controller targeting global Tier 1 PC OEMs.

If our OEM partner were to secure the anticipated wins in the PC OEMs, material revenue should begin in the second quarter.

We believe the market for client SSD is growing rapidly, and we are investing to bring other innovative differentiated controllers to the market.

We are seeing a growing proportion of notebook and ultrabook PC coming to the market with SSD, because SSD are increasingly affordable and consumer increasingly prefer high-performance devices with longer battery life, instant-on capability, and thinner form factor.

In the second half of this year, we will be introducing a controller with SATA 3 SSD using TRC NAND that is designed for 1Y or 1Z geometry, a controller solution designed for OEM targeting more cost-sensitive segment of the PC market.

Later this year we anticipate rolling out our PCIe gen-2 SSD controller and next year our PCIe gen-3 SSD controller.

These controllers are designed for the premiere end of the market that require higher performing storage solution.

Let me wrap up my comments on our SSD plus embedded product line by reiterating that I am generally pleased with the success that we have achieved so far.

I am also pleased to know that, because of rapid revenue growth of our SSD plus embedded sales, we have likely become the leading supplier of controller for this type of solution.

And we are increasingly confident that with embedded memory finding growth beyond smartphone, tablet, and PC, and moving to other consumer electronic devices, including industrial and commercial application and into automotive solution, our controller will also grow into more diversified end markets.

Our controller can now be found in point-of-sale system of Taiwan's leading convenience store chain, in the [premiere] system [plus] produced by several leading Japanese OEMs, and in the car manufactured by the world's leading electric car vendor.

Now let me turn to our LTE transceiver business.

As you know, 2013 was a year of transition for our LTE transceiver business.

Revenue for 2013 was about $12 million for this segment, driven primarily by wins which we had secured in 2012 that remain in production in 2013.

In the second half of 2013, we released our new LTE-Advanced transceiver, which was specifically designed to be paired with Samsung new LTE-Advanced baseband.

Our LTE-Advanced transceiver is notable in being the world's first single-chip LTE-Advanced transceiver.

Since the release of this product, our new transceiver has been in extensive testing at Samsung with their new LTE-Advanced baseband.

We believe we are currently in the final stage of testing; and if Samsung completes their testing satisfactorily, we should be in at least one of Samsung first wave of next-generation flagship handsets, which should be launched in the first half of this year.

We are also targeting other non-flagship handset program for later on this year, and any win will add to our current LTE transceiver revenue expectations.

We look forward to updating you on the progress and additional wins we achieve throughout this year.

To conclude, while 2013 was a transition year it was also investment year.

We successfully add new products and customers to better round out our product and customer portfolio.

We expand into more new growth products, with investment in developing new eMMC customers, new client SSD controller, and new LTE transceivers.

These investments are beginning to pay off and should return Silicon Motion back to growth in 2014.

I look forward to updating you on the progress that we have been making and the new wins for our products throughout this year.

I will now turn the call over to Riyadh to discuss our financial performance and outlook.

Thank you, Wallace.

First I will outline our financial results for the fourth quarter, and then I will provide our first-quarter and full-year guidance.

In the fourth quarter, revenue declined 8% as expected, with our controller sales declining a milder 3% and RFID sales declining significantly faster due to the end of life of our previous-generation LTE transceivers and weak overall TV SoC sales.

Our SSD plus embedded sales declined due to seasonally weak eMMC controller sales.

Our SSD plus embedded sales, however, increased about 70% year-over-year and accounted for about half of all controller sales.

This quarter, our removable storage controllers for cards and UFDs increased modestly sequentially due to better availability of flash to our module maker customers.

Our corporate gross margin was unchanged at 48.8% in the fourth quarter as compared to the prior quarter.

In the fourth quarter, our operating expenses decreased to $13.8 million as compared to $14.9 million in the third quarter due to lower compensation expenses.

We ended the fourth quarter with 731 employees, 20 more than at the end of the previous quarter.

Our corporate operating margin decreased to 22.5% in the fourth quarter from 22.7% in the third quarter.

Earnings per ADS in the fourth quarter were $0.30, a slight decrease from the $0.32 in the third quarter.

Stock-based compensation in the fourth quarter was $4.9 million, significantly higher than the $1.5 million in the third quarter.

The larger stock-based compensation amount this quarter was a catch-up payment to offset the unsustainably low amounts in the first three quarters.

For the full year our total stock-based compensation was $10.3 million, an amount comparable to the $11.8 million in 2012.

I will now move to our balance sheet and cash flow.

Inventory days increased to 105 days in the fourth quarter from 91 days in the third quarter.

DSO increased to 53 days in the fourth quarter as compared to the 50 days in the third quarter.

Payable days increased to 48 days at the end of fourth quarter, compared to 46 days in the third quarter.

Our cash, cash equivalents, and short-term investments decreased to $162.5 million in the fourth quarter, as compared to $163 million in the third quarter.

Primary sources of cash in the fourth quarter were $10.2 million from net earnings; and an increase in payables generated $1.1 million.

An increase in inventories consumed $4.9 million, and our dividend payment consumed $4.9 million.

We invested $3.1 million for the purchase of testing equipment, software, and design tools.

I will now move on to our guidance for the first quarter and for full-year 2014.

For the first quarter, we expect our revenue to fall in the range of zero to 10% sequentially, primarily because of seasonally weak card and USB flash drive sales.

Gross margin is expected to be in the 48% to 50% range.

Operating expenses are expected to be in the range of $16 million to $18 million.

For the full year we expect our revenue to grow 5% to 15%.

Gross margin is expected to be in the 48% to 50% range.

Operating expenses are expected to be in the range of $70 million to $75 million.

We expect stock-based compensation expenses of $1.5 million to $2.5 million for the first quarter, and $8 million to $10 million for the full year.

Our model tax rate remains at 18%.

Let me now provide some additional color on our business outlook and assumptions included in our guidance.

We expect our SSD plus embedded products to grow strongly in 2014.

Within our SSD plus embedded products, we have three key controllers for eMMC, SATA 3 SSDs, and industrial SSDs.

In 2013, SSD plus embeddeds were almost half of our global mobile storage revenue; eMMC controllers accounted for a significant majority of our total SSD plus embedded sales; SATA 3 SSD controller revenue was negligible and immaterial.

Last year we had about $15 million to $20 million of industrial SSD revenue.

First on our eMMC, for the full year we are expecting the eMMC market to grow about 25%.

And based on the current procurement plans of our two flash partners, our eMMC sales should grow as fast as the market.

We are expecting our third NAND flash partner to begin initial contribution of revenue in the first quarter.

But as our sales to this flash partner is in advance of their sales of eMMC solutions to their customers, and this is a brand-new TLC eMMC business, at this moment we are not assuming any revenue contribution in our guidance from our third flash partner.

Our business with this third flash maker should be significant.

But until we have visibility of sales to their customers, we will not include anticipated revenue into our guidance.

Turning to our SSD controllers, we believe our industrial SSD controllers should grow 20% to 30% this year, based on our solid traction with our OEM customers.

Our solutions are already widely used in industrial PCs, office automation, networking equipment, point-of-sale systems, and other applications.

Many of our sales involve long design cycles.

For our SATA 3 SSD controllers, as Wallace had previously mentioned, we have recently secured a significant win at an important OEM that is developing SSDs with our controllers, targeting global Tier 1 PC vendors.

We believe that if our OEM customer can start shipping their SSDs with our controllers to these PC OEMs, our revenue could be significant.

But until we have better clarity in terms of expected sales, we will not include these anticipated SATA 3 SSD revenue in our guidance.

Our other major new growth product is our LTE transceiver.

As Wallace had previously discussed, the testing of our new LTE-Advanced transceiver paired with Samsung's new LTE-Advanced baseband is nearing completion for our first flagship win at Samsung.

While there is no guarantee that we will pass this final phase of testing and qualification, and we still do not have confirmation of a project win, we are reasonably comfortable of passing testing and securing a confirmation and believe a first new flagship project could generate revenues of at least as much as our 2013 LTE revenue of $12 million.

This expected revenue is included in our 2014 guidance, and sales should begin in the second quarter.

We will revise our guidance if there are other major design wins.

Let me now turn to our removable storage controllers.

We believe our card and UFD controller sales should be relatively flat in 2014.

We believe our card debundling risk has largely played out and there remains solid demand for high-performance SD 2.0 cards.

While there is no compelling driver of growth for USB flash drives, demand remains stable from consumers in emerging markets, back-to-school sales, and game markets.

Building UFDs also remains an attractive outlet for flash makers to dispose of downgrade flash inventory.

Based on our best view of our removable storage customers' controller procurement plan and card UFD build plans, we believe our removable storage controller sales could fall 10% to 20% in the first quarter and snap back sharply in the second quarter due to seasonal factors, the improved availability of flash, and our introduction of new controllers.

For our other products you should expect no revenue growth.

We will now open the call for your questions.

(Operator Instructions) Anthony Stoss, Craig-Hallum.

Hi, guys.

Good morning.

Riyadh, if you wouldn't mind, your full 2014 guide, if you can give us a sense on -- as a percentage of each of the categories.

I know you threw in a whole bunch of info on this isn't included and that is not included.

But can you just give us a sense on the guide as a percentage of each of the divisions?

Also secondly, your share buyback has been a pause.

Nice guide for 2014.

Any thoughts about re-initiating the share buyback?

Thanks.

Well, let me just quickly go through again the color on the guidance that we have provided.

Beginning first on eMMC, we are expecting our eMMC to grow about 25% this year.

This is based on our current existing two flash partners' business and does not include anticipated revenue from our third flash partner.

This third flash partner's sales should begin in first quarter, but the sales numbers are not baked into our eMMC revenue.

Now turning over to our SSD controllers, on the industrial SSD part of our business we are assuming 20% to 30% revenue growth.

For our SATA 3 SSD controller business, last year we had fairly negligible sales; and this year, until we start securing -- or rather our OEM customer starts securing wins at major global Tier 1 PC vendors, we are also assuming negligible revenue.

So negligible revenue or zero revenue has been included in our SATA 3 SSD numbers, which are rolled up into our overall guidance.

On the LTE side of our business we are assuming revenues similar to what we had achieved for last year.

This is based on the potential win that we are in the final leg of testing.

So if this testing is completed at Samsung satisfactorily, we should be expecting with our first design win revenues comparable to what we achieved last year, which was roughly $12 million.

For our removable storage controller business, that is our card plus UFD controllers, we are expecting flat revenue this year compared to last year.

And similarly for our other products, we are expecting no revenue growth.

Your other question about a buyback, we remain optimistic about our future and strongly believe our stock is undervalued.

And our Board will continue to look at improving fundamentals and our return to growth as some of the metrics for considering a share buyback program.

However, let me emphasize that our primary means of returning capital to our shareholder is from our dividend payments.

But we may consider again to opportunistically return capital from a share repurchase program, if the metrics that our Board is considering are met.

Okay, thank you.

Suji De Silva, Topeka.

Hi, guys.

Good morning.

Thanks for taking the question.

Of the three segments, you guys have guided conservatively into 2014 the third partner, SSD, SATA SSD, and LTE-Advanced.

Which one do you have the rank-order confidence that you have the most confidence in, that could provide upside, of those three?

We believe our third eMMC NAND partner business is very solid.

I think just -- they are sending their product into the customer design qualification.

So we are shipping small volume in first quarter; I think entering second quarter we should see the meaningful revenue ramping up, from second quarter.

Regarding SATA 3, I think because we also have very high confidence we should grow SATA 3 product this year, but we really cannot anticipate the scale and how large it will be.

But we are engaging at these three NAND maker for qualification at this moment.

For LTE, because the most important is, first, LTE qualification.

After, if [sense] are complete, there is I think [channel] solution we believe we have a much better opportunity to gain other model designs.

Okay.

That's very helpful.

Thank you.

Then for eMMC, what kind of share do you think you achieve in 2014, versus what you did in 2013?

And can you help us understand that 18 wins you have?

Put that in perspective versus how many wins a [day] you have for prior quarters?

Thanks.

Last year in 2013, we had 15% to 20% global market share for our controllers going into the global eMMC market.

Right now based on the revenue projections that we have, based on just our first two flash partners, then excluding the revenue expected from our third flash partner, we are expecting our eMMC revenue to grow 25%.

And 25% is well in line with the expectations of the eMMC market growth.

So right now based on the 25% revenue growth we are expecting to keep our market share at 15% to 20%.

Naturally, if -- when the revenue from our third flash partner relating to the PLC eMMC memory solutions, when these start ramping and we start rolling the anticipated revenue into our guidance, then our market share could be larger.

But for the time being, until we have more -- better visibility on that part of business, sticking to 25% revenue growth, we should keep our market share at 15% to 20%.

Thank you.

Rajvindra Gill, Needham & Company.

Yes, thanks and congrats on the good outlook for the year.

On the LTE side of the business, Wallace, wondering if you could characterize what is going on in the marketplace for the adoption of LTE-Advanced, and any thoughts on what the carriers are doing, what the handset OEMs are doing, to try to promote this new type of baseband.

I think that what we can say is that we are nearing the very final stage of testing with Samsung in terms of qualification.

We do have high confidence that, because our design is paired with Samsung LTE-Advanced modem and their latest application processor, we believe we can complete -- high confidence to complete the first [fraction] model.

So we also believe Samsung has intention to continually using internal solution to consume their fab facility and to show the differentiation to other competitors.

We believe Samsung should expand internal solution for broader module in 2014.

Just switching gears to the embedded side, so there is a lot of growth coming in, coming from the flash partners, the two flash partners and potentially from the third flash partner.

Do you see any risk down the road of the flash partners developing their own internal eMMC controller?

I think that while we may be perceived to be competing with our NAND flash partner internal controller team, but we are more of a partner than a competitor.

We help our flash partner to extend their already rich (inaudible) R&D capability and product portfolio and market competitiveness.

I think that NAND flash maker, they tend to use internal R&D for high end, (inaudible) us to mainstream market for high-volume call center (technical difficulty).

Thank you.

Mike Crawford, B. Riley & Co.

Thank you.

I am curious regarding your next-generation SSDs, where you're designing a PCIe gen-2 controller for this year and also a gen-3 for next year targeting higher-end solutions.

Could you say what types of NAND flash you are expecting these controllers to work with?

So first, for our gen 2 PCIe, they support [HVI].

They support majority for MLC as well as 1Y nanometer TLC.

For our next year Q1, launching the PCIe TLC SSD controller, we do support [MBNV] and HVI.

They support both MLC and TLC, including 1Y and 1Z.

It also support the upcoming 3D NAND TLC.

Okay.

Thank you, Wallace.

Just further on the buyback, so last year I would say your buyback was wildly successful given that you were able to -- although you only invested $10 million -- to return to shareholders, you were able to acquire the shares at a very nice price, well below where the Company's trading today.

Now you are saying that the Board's thoughts on the buyback are contingent upon not only good performance but also a return to growth, which that's fine, but that philosophy also makes it more difficult to buy back shares when it's maybe at the most attractive to shareholders, getting the best return on that invested capital.

Is my understanding of their belief in this regard correct?

Or am I missing something?

Mike, as we have talked about, our Board looks at two key metrics for engaging in a share buyback program.

Those relate to our fundamental valuation of our Company as well as the visibility of our growth.

But that said, the primary means that we -- our Company has decided to take in returning capital to our shareholders is through our dividend program, which we have designed to be -- for an amount to be payable through our business cycle, the ups and downs of our business cycle; and then layer on top of that a buyback when it is opportunistically convenient for us to do from a perspective of meeting valuation and visibility metrics.

Okay, thank you, Riyadh.

Bob Gujavarty, Deutsche Bank.

Great, thank you.

Hey, Riyadh, this question is probably for you.

CapEx in 2013 was pretty elevated.

How should we think about it in 2014, 2015?

Is it still an investment year, or -- you have kind of more averaged previously to 2013 $4 million to $5 million.

So just kind of ballpark it for the next couple years.

Appreciate it.

Generally we don't have much in terms of CapEx.

Every quarter we just have a couple million dollars relating primarily to design tools, software design tools that we capitalize.

That is kind of it.

Every once in a while when our headcounts scale to a certain level we also need to acquire the building space to house our engineering team.

And this is important, especially recently we have added quite a lot of headcount for the various teams involved in scaling up our SSD plus embeddeds.

And when you are dealing with OEM customers they all expect dedicated teams and these dedicated teams need to be firewalled from one another to service their dedicated OEM customers.

So that also adds to the CapEx from a facilities perspective.

Got it.

Perhaps for Wallace, Wallace, we have had a lot of crosscurrents in the smartphone/tablet space.

We have had some crosscurrents at one of your major customers.

What is your sense of where the mobile market is headed in 2014?

And how does that impact your business?

I think there is a lot of debate about high-end versus low-end.

And from your perspective it seems like unit growth is what is really important, and you don't care so much about the mix.

So if you can address what you see happening in 2014, I would appreciate it.

Bob, you're absolutely right.

We are unit growth.

We don't count just smartphone growth, high-end smartphone or low-end; we grow whatever smartphone can grow as a unit.

But we also see our embedded, especially eMMC product, enter beyond in smartphone and tablet, such as smart TV.

And we see probably 80% of the new smart TV all use eMMC right now.

And eMMC also moving to automotive, car infotainment systems, and a lot of the gaming devices.

We are going to see quite a lot of new market for us to develop and to penetrate.

So we count on unit growth, so that is why we are very confident for our new growth for 2014.

Great, thank you.

Tom Sepenzis, Northland Capital.

Thank you for taking my question and congratulations on the results and news.

Just two questions.

One, is there any major difference with the new eMMC customer in terms of margins given that it is lower-cost NAND going into the low and mid-range phones?

We do see eMMC pricing become very competitive in the market, because the smartphone customer has a lower and lower price every year, actually almost every quarter.

So we continually develop a new controller which we can shrink the die size and maintain even better performance.

We have dedicated software algorithm development team, so we continue launching the new algorithm and to utilize smaller [asran], general asran, but maintain good performance.

We -- for certain partners we develop dedicated 4.5 controller and also dedicate 5.0 eMMC controller, because we have to fine-tune our [edger] for the TLC NAND.

Tom, let me also add, you should assume our gross margin to be fairly stable for our eMMC product lines going forward.

And these gross margins from these products are, on average, above corporate average.

Great, thank you.

Then as far as the transceiver and the LTE, you mentioned that you are in the final stages of qualification there.

Are there any other options for Samsung?

Are there any other transceivers that are also in the final stages of qualification, or are you the only one?

I think we can only say for the internal solution we are the only one.

And our marking will be Samsung logo, too.

That's great.

Thanks very much.

(Operator Instructions) As there are no further questions at this time I would now like to hand the conference back to Mr. Wallace Kou.

Thank you.

Please continue.

I would like to thank all of you for joining us today and your continuing interest in Silicon Motion.

We will be (inaudible) this quarter.

In March We will be presenting at Susquehanna Semiconductor and LED Summit in New York; Northland Capital Market 2014 Growth Conference in New York; UBS Technology 101 Conference 2014 in London; Bank of America Merrill Lynch Taiwan Technology and Beyond Conference in Taipei.

Details of these events are available on our website.

Thank you and goodbye for now.

Thank you.

Ladies and gentlemen, that does conclude our conference for today.

Thank you for participating.

You may all disconnect.