Ladies and gentlemen, thank you for standing by, and welcome to Hua Hong Semiconductor second quarter 2019 earnings conference call. Today's call is hosted by Mr. Junjun Tang, President and Executive Director, and Mr. Daniel Wang, Executive Vice President and Chief Financial Officer. Please be advised that your dial-ins are in listen-only mode. However, at the conclusion of the management presentation, there will be a question and answer session, at which time you will receive instructions on how to participate. The earnings press release and second quarter 2019 summary slides are available to download at our company's website, www.huahonggrace.com. Without further ado, I would like to introduce you to Mr. Daniel Wang, Executive Vice President and Chief Financial Officer. Thank you.
Good afternoon, everyone. Thank you all for joining our second quarter 2019 earnings conference. Today, we will first have Mr. Junjun Tang, our Executive Director and President, to make some remarks on our second quarter performance. President Tang will address in Chinese, and we will have Kathy Chien, our IR, help to translate the English. After that, I will highlight our financial performance and give guidance for the next quarter. This will be followed by our question and answer session. I now turn the call over to our Executive Director and President, Mr. Junjun Tang.
[Non-English content].
Good afternoon, everyone. Thank you for joining our earnings call. [Non-English content] Despite a prolonged global slowdown in the semiconductor industry, Hua Hong Semiconductor continued to make strides in our effort to become a stronger and better company. Our second quarter revenue of $230 million was at the same level as a year ago, but a 4.2% increase over Q1 2019. Here are some highlights. Power discrete continued to show tremendous strength, and demand increased for all products, in particular for super junction, IGBT and general MOSFET. We expect growth for discrete to continue into the future. Additionally, revenue for analog and power management IC was up nearly 41% quarter-over-quarter, primarily due to strong demand for those products in China, North America and the rest of Asia.
[Non-English content].
Gross margin for the second quarter was 31%, 2.6 percentage points lower than Q2 2018 and 1.2 percentage points lower than Q1 2019, primarily due to increased depreciation expenses, partially offset by increased capacity utilization. Net profit margin was an impressive 21.7%, 1.7 percentage points over Q2 2018 and 0.6 percentage points above Q1 2019. [Non-English content] As I said in our last earnings call, we continue to be positive about the overall semiconductor industry. Although we are concurrently dealing with many challenges, including market, technology, customers and the new 12-inch fab that will soon go live, our hard work has paid off. With our team's effort and tremendous support from our customers, our overall capacity utilization has now risen back to 90% and above. We are very confident that the second half of 2019 will be even stronger than the first half.
[Non-English content]
The 300 mm project is moving according to plan. We have completed construction of the building and clean room. At this time, most of the equipment and tools required for the first 10 capacity have been moved in and are currently undergoing installation and testing. Our Hua Hong Wuxi fab will begin risk production of 300 mm wafers in Q4 2019. Our engineering team is working closely with our customers on a number of tape outs, which will be part of the initial production ramp-up. We are looking forward to this moment with great anticipation.
[Non-English content]
Now, I would like to hand the call over to our CFO, Mr. Daniel Wang, for his comments.
Thank you, Mr. Junjun Tang, for the great comments. Now, let me begin with the summary of our financial performance for the second quarter, followed by an outlook, our revenue and margin for the third quarter 2019. Then we will move on to the question and answer session. First, let me summarize financial performance as of the second quarter. Revenue was $230 million, flat to the prior year, but 4.2% above Q1 2019. Cost of sales was $158.6 million, 3.9% above Q2 2018, primarily due to increased depreciation expenses and the unit cost of raw wafers, and 5.9% above Q1 2019, largely due to increased wafer shipments. Gross margin was 31%, 2.6 percentage points below Q2 2018, mainly due to low capacity utilization and increased depreciation expenses.
1.2 percentage points lower than Q1 2019, primarily due to increased depreciation expenses and change in product mix, partially offset by improved capacity utilization. Operating expenses were $35.4 million, 3.9% above Q2 2018, largely due to increased labor expenses, partially offset by impairment provision in the second quarter 2018. 11.4% higher than Q1 2019, primarily due to increased labor expenses. Other income net was $24.6 million, 53.1% up year-over-year, primarily due to increased, one, foreign exchange gain. Two, fair value gain of financial assets at a fair value through profit or loss. Three, interest income partially offset by decreased share of profit from an associate. 351.1% up quarter-over-quarter, primarily due to foreign exchange gain after loss in the previous period. Two, increased fair value gains on financial assets at a fair value through profit or loss.
Income tax expenses was $10.8 million, 19.5% lower than Q2 2018 due to decreased taxable profit. Profit for the period was $49.9 million, 8.7% over Q2 2018 and 7% above Q1 2019. Net profit margin was 21.7%, 1.7 percentage points above Q2 2018 and 0.6 percentage points over Q1 2019. Basic earnings per share was $0.034, $0.01 lower than Q2 2018 and $0.03 cent lower than Q1 2019. Annualized ROE was 8%. Now, let me provide you with more details on our revenue from Q2 2019. From geographical perspective, revenue from China was $127.3 million, contributing 55.4% of our total revenue, and a decrease of 5.3% compared to Q2 2018, chiefly due to decreased demand for smart card ICs, partially offset by increased demand for super junction products.
Revenue from the United States was $42 million, an increase of 5.6% compared to Q2 2018, mainly driven by increased demand for general MOSFET products. Revenue from Asia was $28 million, a decrease of 3.4% compared to Q2 2018, primarily due to decreased demand for MCU and logic products, partially offset by increased demand for super junction and general MOSFET products. Revenue from Europe was $18.2 million, an increase of 10.3% compared to Q2 2018, primarily driven by increased demand for general MOSFET products. Revenue from Japan was $14.4 million, an increase of 43.9% compared to Q2 2018, primarily driven by increased demand for MCU and logic products. With respect to technology platform, revenue from embedded non-volatile memory was $79.6 million, a decrease of 10.2% compared to Q2 2018, primarily due to decreased demand for smart card ICs, partially offset by increased demand for MCU products.
Revenue from discrete was $92.5 million, an increase of 21.7% compared to Q2 2018, mainly driven by increased demand for super junction and general MOSFET products. Revenue from analog and power management IC was $33.4 million, a decrease of 11% compared to Q2 2018, mainly due to decreased demand for LED lighting, other PMICs, and analog products. Revenue from logic and RF was $21.6 million, flat compared to Q2 2018. Revenue from standalone non-volatile memory was $2.7 million, a decrease of 50.1% compared to Q2 2018, primarily due to decreased demand for flash and EEPROM products. Now, let us move to the balance sheet. Cash and cash equivalents decreased to $834.7 million on June 30th, 2019, compared to $1.155 billion on March 31st, 2019.
Restricted and time deposits increased from $800,000 on March 31st, 2019, to $14.7 million on June 30th, 2019, primarily due to $13.9 million restricted deposits for the portion of dividends not paid yet on June 30th, 2019. Other current assets increased from $20.4 million on March 31st, 2019, to $72.1 million on June 30th, 2019, primarily due to advanced payments to suppliers and increased VAT deductible tax. Property, plants, and equipment increased from $853.8 million as of March 31st, 2019, to $1.037 billion as of June 30th, 2019. Other non-current assets increased from $299.9 million on March 31st, 2019, to $363.2 million on June 30th, 2019, primarily due to advanced payments for capital expenditures. Total assets increased from $3.5204 billion on March 31st, 2019, to $3.5449 billion on June 30th, 2019.
Our total bank borrowings decreased from $31.2 million on March 31st, 2019, to $28.4 million on June 30th, 2019, primarily due to repayments of bank borrowings. Let's now take a look at the cash flow statement. Net cash flows generated from operating activities were $20.7 million, down by 16.2% year-over-year, primarily due to increased payments of VAT deductible tax. Capital expenditures were $223.1 million in Q2 2019, including $182.4 million for Hua Hong Wuxi and $40.7 million for HHGrace. Other cash flow used in investing activities were $57.7 million, including $63.2 million of the investment in financial assets at fair value through profit or loss, partially offset by $5.5 million of interest income.
Net cash flows used in financing activities were $53 million, including $51.9 million of dividend payment, $2.2 million of repayments of bank borrowings, $200,000 of lease payments, $100,000 payment of interest expenses, partially offset by $500,000 proceeds from issue of shares. Finally, let me give you a very top-level outlook for the third quarter 2019. We expect revenue to be approximately $238 million and the gross margin to be approximately 31%. This concludes my financial remarks. Now, I would like to open the floor for question and answer. Operator, please help. Thank you.
Ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad for your name to be announced. If you wish to cancel your request, please press the pound or hash key. We have the first question, comes from the line of Randy Abrams from Credit Suisse. Please ask a question.
Yes. Thank you. I wanted to ask the first question on the outlook for third quarter for the $238 million. Could you maybe talk about the growth areas, if you think from the similar areas that have been driving the business, so the discretes, MCU, and recovery from the analog, or if you expect some recovery from the embedded flash in smart card ICs?
Randy, I think, we had a very strong quarter, in my view. Q2, I think, in terms of the revenue, not only we hit the target, it has been a strong quarter for us. I think in terms of growth, I think we are probably amongst one of the top companies. First, let me just say that. In terms of Q3, I think some of the strong areas will be MCU. MCU would definitely recover. I think Q2 has been a slow quarter for MCU, but MCU would definitely a strong driver for Q3. I think Power Discrete will continue to grow. Super junction, IGBT, SGT, and the general MOSFET. When I say SGT, it is the split-gate trench MOSFET. So we see strong growth for these areas as well.
I think smart cards probably is going to be weak for Q3, but the increase will mostly coming from MCU and discrete.
Okay. Maybe to follow up on the new fab, I think was originally targeted to be the more advanced smart card MCU. I think now, since we are going through the slowdown, as you start up the new fab, would it still be those areas, or are you starting to consider a different product mix for the new capacity?
Well, initially, the new capacity will still be for the SIM cards and bank card ICs. Definitely, the reason we have not been taking that much demand from bank cards and SIM cards because, they are not most desirable in terms of price. But I think the 12-inch fab will open the opportunity for both the design house as well as for the foundry, us. I think by moving them to the next technology nodes, for example, 90 nm or 55 nm, in fact, it is going to have better efficiencies. We are going to have more dies on a wafer. So I think we definitely, yes. The question is, yes, initially, it will be for smart card ICs, in particular SIM cards and bank cards. But eventually, yes, the new fab will also have plan, for example, discretes as well.
Okay. The new fab for discretes. I guess the ASP is usually lower on discrete. If you do discretes, I guess, maybe it is a two-part question, but how you see the profitability if discretes were to go in. From the new fab initially, because you will get some offsets or some grants to support the initial ramp-up. From a corporate gross margin as we go into next year, is it kind of the target to kind of like or reasonable to kind of keep these above 30% range, or is it realistic also to have a bit of dilution during the initial phase?
Well, I do not expect the depreciation expense impact will be huge initially. Especially this year. We are definitely going to make sure it be minimized. But the ramp-up will start in Q4. We will have some depreciation expenses. It is not going to be much. It will be minimal. Initially, it would be trial production, basically, but we still plan to have some revenue from the Hua Hong Wuxi fab. That is our target. We will make sure we are going to have some revenue, we are going to have some shipment from that fab this year. Once it starts, it is not going to stop. But in terms of the depreciation expense, it will be minimized. So I do not think it will have major impact on the gross margin.
Okay. I guess I was thinking more just into next year, as you start to bring on more depreciation, but you will also be bringing up more output. So if you can keep the 10,000 reasonably utilized or ramp that, if you see kind of still ability to achieve the type of margins, or at least close to those margins above 30%.
Well, the plan is we are going to have 10,000 this year. We will immediately start to procure equipment for the next phase, which is mostly going to be for Power Discrete because we have huge demand for power discrete, in particular IGBT and super junction. You have to realize that Power Discrete actually absolutely has the best margin now at this point. Overall, their ASP per wafer is lower than, for example, MCUs and smart card ICs, but they also have less layers. But once you get into the high-end, the IGBT and super junction, you have to realize, nowadays, for the discrete, we are running more than 40% gross margin on 8-inch fab. So yeah, there will be some depreciations. The depreciation for the next two years, as we said earlier, are going to be very critical for us. We have to reach the break-even point.
That is going to happen in the next two years. Whatever capacity we are going to build, we have to make sure we are going to fill it right away. We still have a strong demand, in particular the discrete, and we can fill more the smart card ICs, and we also try to get into the MCU segment as well in the other regions.
The last question I just wanted to ask for this year, if you still think target to grow for 2019, and the second part is just for the OpEx, if you can cover the new fab with the similar OpEx base, or we should expect some increase in the OpEx as well to bring up the new fab?
Well, as far as the growth for 2019, Mr. Tang just said earlier, we expect we are going to have a better second half than the first half. Our number has already shown that because our first half was virtually $450.8 million. Our Q3 definitely is going to be better than Q2. We expect we are going to have a stronger second half. We would like to see some growth for this year compared to a year ago. Overall, this is now being a very good environment. I think the semiconductor industry went through a slowdown. As Mr. Tang said earlier, our utilization rate has already gone beyond 90% overall. We want to continue to move that number up, hopefully get to a full level. It is not going to be too far from that.
We expect we are going to fill the fab for the next two quarters. We do everything we can to make sure that the utilization is up and hopefully, so that gross margin will be better. The second question is about?
The depreciation, t he operating expense.
Yeah. Well, the operating expenses will go up slightly, in particular for Hua Hong Wuxi. Hua Hong Wuxi, I think for the year, we are going to have overall, I think we are close to a break-even point for Hua Hong Wuxi. The operating expenses will slightly go up because of Hua Hong Wuxi, because we have additional personnel. But overall, I think Hua Hong Wuxi will overall close to break even, at the P&L level. If it is anything, it would be a small negative number for the profit and loss at the net profit level. Hua Hong Wuxi is also generating a lot of other income because, through the investment that we made by investing in financial products.
Okay, great. Thanks a lot, Daniel.
Thank you. The next question comes from the line of Szeho Ng from China Renaissance. Please ask the question.
Hi, Daniel. Two questions from my side. First one, also regarding the JV fab. I think in the press release, you mentioned the fab will be starting risk production in Q4. When should we expect the revenue contribution? Is it in the same quarter you mentioned earlier on the call?
Yeah. We expect we are going to have some revenue from the Hua Hong Wuxi fab this year.
Oh, okay. That is quick. Okay.
We have some shipments. Internally, we have a target, and that is a hard target we set in the beginning of the year, and we want to make sure we deliver, and there is demand for it. Right now, there are about five products that is going through, let us say, trial production.
Okay, good. When I look at the 8-inch installed capacity capacity, it was perhaps less in Q2. Should we expect some capacity build towards the end of the year in your 8-inch fab?
Yes. In fact, you know what? I will let Mr. Tang answer that question. The answer is definitely positive.
Yeah. Please. Yeah.
[Non-English content] We have moved the three scanners in in June and completed almost 97% tools for the first stage. For the overall process tools, we almost complete over 30%. The 12-inch fab in Wuxi is moving very fast according to our previous plan.
Szeho, you have more questions?
Oh, yes, the last one from my side. When I look at the non-operating line, the fair value gain on financial assets seems to be running at a high level. Just want to get your take on how we should model that line going forward.
Well, for the equity money we received from the investors, we actually put that money into secured financial products in the Chinese banks. For the year, we are looking at close to $30 million-$40 million overall. Just the gain from the investment as well as the interest income. I think, the interest income is probably around $10 million - $15 million. I think the gain from financial investment in the financial products, it is about close to $40 million. But this money will be used in the next 6 - 12 months. It gradually come down.
But at this point, we still have over $1 billion, basically. They either deposit in a U.S. dollar account or they invest in some secured financial products.
Hmm. Yeah.
The gains, the interest rate, we are talking about close to 4%, which is a very good investment.
Right. I know. But how about the fair value gain? Would that be unwind when you exit those financial products?
No.
No. Okay.
No.
Okay. All right. Got you. Okay. Thank you.
Thank you. The next question comes from the line of Sunny Lin from UBS. Please ask a question.
Hi, Daniel. Hi. Thank you for taking my questions. I have a few questions. Number one is on the inventories. I think in this earning season, Europe here in Taiwan and also a few 8-inch IDM in Europe are all guiding a slower than expected inventory digestion for 8-inch, especially in automotive and industrial related. I am just wondering, what is your view on the inventory level for your customers versus seasonal as of Q2, and when it will be returned to normal? Specifically, what kind of products are with higher inventory?
Sunny, honestly, this is the same question we got from the last earnings call. Basically, other than a few things, for example, SIM cards and bank card ICs, we see some inventories before. Maybe there is still some inventories now. Most of our other products, we do not see any inventories. The SIM cards and the bank card ICs, yes. But other than that, our customers are I think, their inventory is pretty normal.
I see. My second question is regarding competition for Power Discrete. I think there are more players investing into 8-inch power discrete, given the strong outlook for next few years, including foundries in Taiwan and also Korea. I wonder, within Hua Hong's power discrete business, what's the sales split between IDM and fabless, and how do you see the intensifying competition impact your outlook for next maybe one to two years?
We're very confident with the power discrete. We have been doing this for so many years. Up to this point, we're probably the largest foundry for power discrete. We start with the general, the universal MOSFET, which is the low- voltage ones from 0 volts to 60 volts. Then we've been aggressively going after the IGBT and super junction for the past three, four years, and we have gained a very good market. In particular, we're winning a lot of design houses. They're basically replacing a lot of imports. Mr. Tang has already said we have a plan for discrete for our 12-inch fab, which is going to be pretty much the high-end ones, for example, the IGBT and the super junction. We're very much ahead in China amongst our peers.
I think globally, yes, there are some top players, but I think we're pretty confident we'll continue to gain market share. I think we'll continue to move into more invest discrete. That is something we will do, in particular for automotive, for industrial. Industrial and automotive has become the second-largest market now other than consumer electronics, because of power discrete. We understand this is a very attractive area. There are a lot of peers who are trying to get into that area, but you know what? We're ahead of them. We continue our effort in R&D, and that is something we're going to do. I'm going to pass on to Mr. Tang. I think he's been actually spending a lot of time on that in the area recently because of the 12-inch fab.
[Non-English content]. We will be putting many resources into the new technology development, power discrete DMOS, super junction, and IGBT. We also do many new technology developments in the 12-inch fab, and we expect there will be a big growth in the second half of 2020. We also communicate a lot with our domestic customers and Japan customers and the European customers.
I see. That is very helpful. I just want to clarify. You said for your second phase expansion for your 12-inch fab, it will be for high-end MOSFET. I think my understanding is that for power discrete, the capacity on a comparable basis should be higher than the normal MCU product or the normal logic product, because power has fewer masks. Let us say if your Hua Hong Wuxi fab has 40,000 planned capacity, if now we are bringing in some power discrete product, what might be the total capacity?
[Non-English content]. Our Hua Hong Wuxi fab development is basically based on two aspects. First is IC, and the second is power. [Non-English content] Our sales and marketing team and the TD team are working very closely on those areas. [Non-English content] We are very confident there will be a good result.
Sunny, I think, you are absolutely right. You can basically have 10,000 capacity of MCU, but literally you can potentially build close to 20,000, 30,000 of discrete. That is correct. The equipment mid-setup might be a little bit different, but in terms of the investment, yes, with 10,000, the regular MCU investment, you can potentially build 20,000, 30,000 of power discrete. That is positive.
I see. Thank you very much. At this point, do we have initial allocation between MCU and power for this new fab?
We're going to be doing maybe 50/50 . Initially, we talked about 40,000. It could eventually be 20,000 of ICs, and then the other 20,000 could be equivalent to 60,000 for power discrete.
Got it. Okay. Thank you very much, Mr. Tang and Daniel. Appreciate it.
Thank you.
Thank you. We have the next question comes from the line of Andrew Lu, Sinolink Securities. Please ask a question.
Thank you. Can you hear me?
Yes, Andrew.
Mr. Tang and Daniel, two questions from me. For this year, is that CapEx roughly about $700 million-$800 million?
Yes, that is positive. For the Hua Hong Wuxi fab, it is going to be roughly the PR and PO is about $700 million - $800 million. This is a year for pretty high investment for Hua Hong Wuxi. For our Shanghai fab, it is going to be about $100 million, the most would be $150 million. Most of the capacity, the 6,000 - 8,000 wafer capacity, is going to come out in the next two quarters, in Q3 and Q4. For our HH Fab3, for the 8-inch business for power discrete. Yes, Hua Hong Wuxi, as I said, I think that the first 10,000 are done. We are moving to the next phase, which is going to be mostly for the power discrete.
Yeah. Based on my calculation, your cash flow for this year, cash inflow roughly about $300 million - $400 million. That $300 million means where are the money coming from?
For the investment?
Yes. The investment, the cash outflow. The cash inflow, we calculate roughly about $300 million, $400 million. $300 million lower than your CapEx.
Well, Andrew, for the Hua Hong Wuxi fab, I think if you're familiar with our Hua Hong Wuxi financing structure, it is $2.5 billion the investment. Let me say that again. $2.5 billion investment. $1.8 billion is on the equity. Okay? $700 million is going to be a loan. We're still spending money from that equity money from the three investors, which is us, we own 51%, and the China Integrated Circuit Industry Investment Fund, they own 29%, and the local government, they own 20%. All of us together, we've contributed $1.8 billion. We own 51% of that. Okay? The Hua Hong Wuxi government owns 20%, and the China Integrated Circuit Industry Investment Fund would be 29%. We have gotten all that money. The money's in the bank. Okay? In our bank accounts, and we still haven't spent all of that money. Only a small portion of that.
Most of the equity money has been invested in some bank products, security bank products.
Thank you, Daniel. Second question I have is the depreciation cost.
Yep.
In the last conference call, you mentioned the depreciation cost in Q4 will be jumped to about $50 million. But earlier, you say the depreciation cost in Q4 might not be increased that much. You say try to minimize. I want to understand, is that changed?
Yeah. Look, overall, as I said, the depreciation expenses for this year, I expect for the 8-inch fab, it's going to be overall around, the depreciation is about $128 million. It's going to be less than $130 million. This is the 8-inch fab. The Hua Hong Wuxi, the new fab, the 12-inch fab, Hua Hong Wuxi fab, yes, there'll be some depreciation expenses, but it'd be very small. It'd be just land and building. Maybe just small portion of the equipment, very small portion. So overall, the depreciation expenses for Hua Hong Wuxi is going to be maybe around $10 million - $15 million overall.
Yes. We have about $30 million something in the first quarter as a depreciation. Second quarter, $30 million something, $33 million , $32 million . In Q3, if we assume $35 million , then roughly about $40 million , $50 million in Q4.
I think for Q3, it would be less than that. It's going to be running at the same level as Q2. Q4, yeah.
Q3.
Q3.
Similar level like Q2.
Yeah. That's right.
That's roughly about $100 million. Then you have $130 million plus $145 million something.
That would be, yeah.
Q4 is about $45 million.
Yeah. That would be $140 million -$ 145 million . That would be good estimate.
Yeah.
You know what?
Coming to my final question, yes.
We are very careful with these depreciation expenses, okay? Initially, it is going to be this year, where I will start in Q4, but it would be mostly land and building, a little bit equipment. Okay? Next year really have a true ramp up. At that point, we expect volume will also start to ramp up.
Daniel, if I use a full $35 million in Q4, that's roughly taking about 7%, 8% to 9% of revenue. Sorry, 8% - 9% cost of goods sold. If we are just putting into that number, additional cost will take out about 8% - 9% margin. As an analyst, should we factor in 8% - 9% margin drop in Q4? That's my question.
I would say it's not going to be that much, but there'll be some impact starting Q4, and it's going to start at some point. We cannot hide the depreciation expenses. We also expect starting from Q4, revenue should also start to go up as well.
Because we certainly expect there'll be some revenue in Q4 from that. We're starting the Hua Hong Wuxi Fab. You have to realize that the 12-inch fab for us, it's just going to be ramp up. We're not going to have that fab as a R&D fab. Starting from Q4, we're going to just make sure whatever capacity we're going to build, we're going to start using. So it is much better scenario than any of the other 12-inch fabs that you have seen in the past. But that is the thing we have to do. I mean, in the next two years-
As an analyst, how do we value, how do we estimate the Q4 gross margin will be from Q3 31%?
Well, I think you would get-
Consensus is about 28%. Do you think that number is reasonable, reachable, or-
What?
-is too high?
For what? The what?
The gross margin.
For this year?
Gross margin. Yes. Bloomberg consensus for Q4 is 28%.
Well, I think you have a better picture at our next conference, earnings call. I think it's a good number to assume. I think we still want to have a good growth margin, solid growth margin for the year. But the reality is we're going to have a new fab. Next two years, we will be hit with some depreciation expenses. But it's a positive way to grow. As long as we deliver, as long as it's seeing a model, we still want to make sure we have good profits for the next two years.
Thank you, Daniel.
Ladies and gentlemen, that is all for the time we have for questions. I will now hand back to Mr. Daniel Wang for closing remarks.
Well, again, thank you all for joining us, everyone. We hope you will join us again next quarter. I personally look forward to meeting you again in the investor meetings and our NDRs throughout the quarter. Thank you, and we continue to wish you enjoy a wonderful summer.