Hi. Good afternoon, everyone, and thank you for joining us today for Yageo's second quarter results webcast. Yageo is the world's largest supplier of chip resistor and tantalum capacitors, as well as a top three supplier for MLCCs and inductor. My name is Howard Kao, and I'm the coverage analyst here at Morgan Stanley.
We are very honored again to have Mr. David Wang, CEO, Mr. Eddie Chen, CFO, and Mr. Claudio Lollini, Head of Global Sales and Marketing of Yageo here with us today, and we look forward to their insights and comments on the company as well as the market. The management team will first walk us through second quarter results and also provide some forward-looking commentary, and after that, we will open it up to questions. At any time during the webcast, you can send in your questions in the text box on your screen. Now I would like to turn it over to Eddie. Eddie, please go ahead.
Thank you, Howard. Let me start off today's conference with some financial recap. Second quarter, the company has reported TWD 31.4 billion sales, which is 10.2% growth sequentially. This is actually a better performance than our guidance from last conference. The market has actually gone better than we had expected, predominantly from the AI related sales momentum as well as some consumer products.
The gross margin also improved to 35.1% or TWD 11 billion . That's about 1.3 percentage points better than the previous quarter. This is also for the past two years, the first time we were able to go back up to the 35% gross margin. On the OpEx, we were able to exert a good control on the operating expenses in the second quarter, in terms of both the absolute dollar terms as well as the percentage compared with the prior quarter.
TWD 4.5 billion spending OpEx dollars compared to TWD 4.6 billion in the previous quarter, and 14.5% versus 16.4% in the first quarter. The operating margin comes in at slightly above 20% or TWD 6.5 billion compared to close to TWD 5 billion last quarter. On a non-op coming in at TWD 9.23 million, slightly less than the previous quarter. If you recall, first quarter we had some one-off divestitures of our investments in Japan. We netted in some capital gain in the first quarter.
Taking that away, I think we're seeing a pretty similar performance on a non-op quarter-over-quarter. The net income comes in at TWD 5.5 billion or 17.5% net income margin. The EPS at TWD 13.02 per share versus TWD 11.02 in the previous quarter, so quite improvements from there. EBITDA at TWD 8.6 billion or 27.6% EBITDA margin, also better than the previous quarter. If we compare cyclically versus last year second quarter, we were talking about 17.4% year-over-year growth over the second quarter.
Obviously, we don't really have the Telemecanique in second quarter of last year. Again, I think the other line businesses are showing improvements as well. Gross margin also improvement in-- by about 1.9 percentage points versus last year. OpEx percentage-wise, slightly-- than the last quarter in 2023, largely because of the addition of the new acquired entities in Telemecanique. Operating margin at 20.6% versus 19% also improved by about 1.7 percentage points.
Non-op pretty decent last year because of some foreign exchange benefits that we had. Net income or EPS last year second quarter at close to TWD 9 per share versus TWD 13 this quarter. If we compare the first half this year versus first half last year, you'll see that the top line for the first half of 2024 comes in close to TWD 60 billion , which is about 13.4% growth from first half last year. Gross margin improved as well from 33.1%-34.5% in first half this year. Again, operating profit slight better as well, 19.1% versus 19% first half last year.
Non-operating first half this year slightly better than the previous. So, the net income for the first half comes in at slightly over TWD 10 billion or close to 17% net income margin versus TWD 7.8 billion last-- first half last year or 14.8%. EBITDA is comparable at 26.6% EBITDA margin percentage-wise. But EBITDA dollars first half this year comes in at about TWD 15.9 billion or close to TWD 16 billion. EPS first half this year TWD 24.04 versus TWD 18.8 first half last year. You can see sequentially or cyclically I think we're seeing a much better performance first half this year.
Let's take a look at the sales mix by different perspectives. Product-wise, you can see some slowing down the momentum in the MLCC segments and sensors quarter-over-quarter. This is largely from the softer momentum in some industrial applications that we're seeing. In certain cases, the auto is kind of flattish as well. You can see Telemecanique is picking up in momentum. Sequentially, we're seeing about 2% quarter-over-quarter change in terms of the product mix.
Region-wise, you can see that Europe is probably suffering more than the rest of the world. We're seeing a decline of 3% quarter-over-quarter in terms of our sales mix. U.S. And China is picking up momentum here. Kind of like offsetting the decline in the Europe region. Next page. In terms of the sales by channel, not much difference there. There's swap between the Global [inaudible] and the EMS, but just very marginally. The display is pretty much intact here. In terms of the segment, I think we're seeing kind of some softness in the industrial sectors, whereas the others are either maintaining its dynamics or some improvements, especially on the computing and the consumer sectors.
Let's take a look at the balance sheet. We'll continue to increase the cash level. You can see that the TWD 92 billion in cash and cash equivalents on hand as of the end of second quarter this year. That compared to TWD 83 billion or TWD 84 billion in the previous quarter, increased by about 10%. Compared to same period last year, we're talking about 25% growth in terms of the cash balance that we have on hand.
On the receivable as of the end of June, we're having about TWD 23.6 billion receivable balance. That's up about 10% from the previous quarter. That's pretty much in line with the sales growth. Inventory is kind of flat in terms of the absolute value. The turnover day has actually come up a little bit because of the increase of the sales in second quarter. We're probably talking about the improvement of the turnover days from about 130 days to about 120 days.
Liability side, payable at TWD 14.8 billion versus TWD 13.6 billion in the previous quarter. If you include the receivable inventory and payable, then you are seeing a better cash conversion cycle in the second quarter. On the equity side, again, increased by about 5.4 percentage points sequentially, about TWD 146 billion in dollars on the total net equity.
The gearing is improving as well as the liquidity. The net debt to equity is standing at about 16.7% versus 18% last year. This is still higher than the 11.2% that was before we leveraged our acquisition in Telemecanique. I think we're on the right track to continue to see the continuous improvement of the gearing or the use of gearing.
The net debt to EBITDA is slightly less than 80%, better than the 86.4% in the previous quarter. ROE -- quarterly or annualized, holding through marginally from the previous quarter or from last year. That wraps up the financial performance in first half. I'll let David comment on guidance.
Thank you, Eddie. For next quarter three, for revenue, we will guide it to low single-digit growth. A couple of reasons. First, we still see the AI computing communication consumer-related segment still in a positive growth momentum. Secondly, we see the channel inventory, and they are in a healthy condition, so we do expect that they might still replenish their inventory. However, we don't see that there will be a V-shaped, a very sharp increase, but a very reasonable mild demand.
This is the reason we guided the low single-digit growth. In terms of gross margin percentage, we also guided the low single-digit percentage improvement. The same, a couple of reasons. First, we see in the market currently the pricing is relatively stable.
Second, very important reason is that we see the utilization in quarter three was slightly improved. In terms of commodity, the utilization rate we expect from the quarter two around 55%, then up to quarter three, 65%. Premium segment, premium product, the utilization will be from quarter two, 70% to next quarter three, 75%. We do still have a number of continuous cost improvement programs in hand. All this will contribute our guidance a low single-digit percentage improvement.
Operating expense will be still under control, and then consequently, the operating income percentage. We will guide the low single-digit percentage improvement. Thank you, Howard.
Thank you, Eddie for the comprehensive second quarter review and thank you David for your third quarter guidance. Again, as a reminder, if you have any questions, please type in your questions in the text box on the screen, and we will get to them shortly. While we wait for questions to come in, maybe I can start with the first question. Second quarter obviously came in quite a bit better than expectation.
Can you talk a little bit about this, the demand coming from AI and consumer that you saw, and what changed during the quarter that caused revenues to come in roughly 7%-8% higher than expected? Maybe a follow-up to that is, do you think something like this could happen again in Q3?
Yes, Howard, I can add some color to that. The AI in general, the AI specifically and computing segment in general has been very positive this calendar year. We saw that trend already in Q1, and it accelerated a little beyond our expectation in Q2. We continue to see very solid demand generated by AI-driven application server, but also notebook, laptop.
Greater China in general as a region has performed a little better than we anticipated. So far, the indicators that we have point at a similar trend for the remainder of the year. Obviously, we have other regions and other segments that counter that effect, hence the guidance that we just shared with you.
Got it. When we look at your second quarter revenues, it came in 7%-8% better than expected. You said a majority of this is driven by AI. Is it safe to assume that AI revenue as a percentage of your total revenue is maybe around mid-single digit contribution currently?
It was not just AI. It was also driven by other segments that were quite depressed last year, consumer as a whole. We noticed that segment, including the laptop and notebook, just personal computing space improving. Within that, certainly there is an AI component. We do not track revenue linked to AI specifically, so it is hard for us to comment and give percentage related to an AI segment. We know certainly that inside those segments, the component usage is increasing due to AI, but we do not track specifically how much revenue comes from an AI segment for us.
Got it. Thank you. I feel like I ask this question every single quarter, but I guess I do have to try. In terms of your tantalum capacitors business, you guys mentioned that it was a little bit stronger than expected in the second quarter. Is this mainly coming from the PC segment or automotive? Do you expect this to continue to improve into the second half of the year?
Largest portion was notebook, PC, laptop, but also SSD, solid-state drive. Along with that also, the server space. Tantalum polymer is predominantly used whenever there is a requirement for high performance and high energy within a tight space. Because of that, laptop, notebook, SSD, but also in the server space and automotive for EV segment has seen a continuous increase of adoption for tantalum polymer. All of these segments were doing really well in Q2.
Got it. Can we expect this to continue to improve going into the second half of the year? Is that something that we can expect?
Yes, so far we've seen positive momentum in the bookings, not just the billing for tantalum. We see we're building backlog, which is something that we did not see for the most part of last year. We were actually drawing backlog, so that has been good to see. Those are positive indicators. End demand is always dependent on market, and that tends to change very rapidly, right? But for now, I can say book-to-bill has been positive, booking is stable, and backlog is slightly building.
Got it. Thank you. In terms of your third quarter revenue guidance, there's a question here, comparing what you guys are guiding for versus the total seasonality. Can you just talk a little bit about why the third quarter kind of top-line outlook is looking slightly weaker than your historical seasonality?
As I said, there are pockets of growth, and then there are pockets where we notice the market being a bit more slow. Certainly, I would include the European region, and within that, the industrial segment as two areas, as an example, where we have not seen the end demand being as strong as last year, for example.
Whenever you combine all of these different inputs, being a global business, we have areas that are continuing to do really well, and then we have areas that may go through a period of rebalancing of the end demand. When you combine this together, I think that's how you come up with the Q3 guidance for growth, but low single digit.
Got it. Thank you. If we dig into the details a little bit in terms of inventory, I know you guys mentioned that inventory levels are healthy. Would you say that maybe some of the better revenue momentum that led to the outperformance in the second quarter, some of this was inventory stocking, which is why third quarter revenue outlook maybe is not as strong from a seasonality perspective?
When it comes to inventory held by our channel partner, that decline has been actually stable for more than a year now. The channel as a whole accumulated a lot of inventory over the last year, and then we work diligently with them to help digest that inventory. That trend has been very stable, very much under control. It will continue in Q3.
I don't expect Q3 to come in anything different because of a different trend. That will be the same. There are other pockets of inventory that are sitting on our end customer or our EMS partner where we have less visibility. In general, the channel has been placing more orders. They notice their inventory level to be in some product, in some area, to a point where they need to do some stronger restocking, and we've seen some of that in Q2.
If the market holds in the same way that it was so far, that inventory restocking will replicate in Q3 as well, although it's very difficult to model at the moment.
Got it. In terms of the utilization rate targets that you guys mentioned just now, the commodity increasing from 55% to 65% in Q3 and premium of 5 percentage points to 25% in the third quarter. How should we think about, those increases on UTR versus the low single- digit revenue guidance? Does that mean, from a blended ASP perspective, we're expecting a decline sequentially?
I think in the up quarters we have tried to balance or control our inventory carefully. There are two things. One is consider the overall our inventory. The other one is the stock availability. Now, by the end of Q2, actually the whole Q2, we see the inventory level, especially in the commodity, is getting lower. That's why we want to increase the utilization, trying to build up our healthy inventory. Not only to support that revenue, it's really building our healthy inventory level.
Got it. That plays into the margin guidance that you guys have provided just now, because higher utilization rate overall will help lower the average cost per unit. Is that the right way to think about third quarter?
Yes, that's correct.
Got it. In terms of the end segments, for third quarter, I think you guys mentioned, Industrial is still relatively weak. Automotive may be still not doing so well. In terms of smartphones and PCs and server, for these three end segments, from your perspective, is there any one particular segment that are stronger than the others? Or how would you rank the kind of growth outlook for these three end segments?
Q3 in a similar way as year -to -date. Consumer, laptop, notebook, smartphone, SSD, server. This block so far has performed very well, and we think that will continue. On the other hand, you have Industrial in particular in a couple of particular regions that was not growing as fast as the other segment I just mentioned, and we believe Q3 will follow a very similar trend now, but no major changes there.
I see. Got it. In terms of Automotive and Industrial though, is there any expectation on when things can start to improve from your perspective? S hould we expect this to continue to be weak going into Q4, or should we expect some recovery towards year- end?
Automotive has been very dynamic. When you look at the segment specifics, you will see that certain customers continue to grow year-over-year, even from Europe. We have tremendous performance with some of the largest European OEMs in automotive. The Greater China segment in automotive is also performing well.
I would say that for automotive we've seen some program a little bit postponed or redesigned, but in general, the segment is not weak. It's also in the middle of an electrification, which makes the segment very, very dynamic. Now, Industrial is more traditional, to some extent more predictable, and the majority of that production comes out of Europe for us.
For that particular customer and segment point of view, I believe that the remainder of the year will be pretty much the same as the first half. We'll probably look at next year for the stock to digest and demand to pick up stronger.
Got it. Thank you. In terms of your OpEx ratio, you guys have done, I think, a tremendous job in the second quarter, both from, as you mentioned, from an absolute dollar perspective, but also from a OpEx ratio percentage perspective. Is there any kind of new targets that you can share with us, something we can kind of track over the next couple of quarters? For example, we're at 14.5% now. Is there like a period of time where you think this could fall to 13% or 13.5%?
Well, I think the structure of the OpEx is such that we will continue to see the sequential improvements over time, especially with regards to certain transactional costs that has something to do with the acquisition last year. I think with that continuing to dissipate, we should be able to see certain improvements on the OpEx front. I don't have a long-term targets for per se for that matter. I think gradual improvements is what we're pretty much seeing right now, and we will be able to continue that trend.
Howard, the other way to look at the operating expense is, if you see the entire OpEx, only a small percentage, the distribution cost is highly linked to the revenue. This we've considered a variable cost. All others, relatively, they are a very stable fixed cost. We will ask a percentage. What we are trying to do is control or improve the operating expense spending, but the percentage really come out very much on the revenue momentum. That's why we cannot give you an exact or the OpEx percentage guidance.
Got it. Thank you. I think that's a very kind of good point you guys raised. Is there further color you guys can share on, like, what percentage you guys mentioned only a small percentage is linked to revenue, but kind of any color on what range that would be within the OpEx that has been to revenue?
Around 2%-3%. This is the distribution cost. We got a variable cost linked to the revenue.
Got it. Thank you. On the pricing, I know this is something that we do have to touch on every quarter as well. First on MLCC pricing, I think there's been some news that pricing for MLCCs are moving up. I know you guys mentioned that you know, pricing is still stable just now in your prepared remarks, but any particular color you guys can share on different end segments maybe, the pricing trends? Maybe AI is seeing better pricing trends versus consumer.
Not really. We haven't really detected any significant price change for MLCC or for the segments you mentioned. We continue to monitor. Obviously, we know, especially in the consumer segment and for commodity, that can be very dynamic. We are always ready to monitor and adjust depending on the market, the supply and the demand. For now, I would say 50/50.
I see. What about for inductors? I know I think some of your Japanese peers recently have raised prices for inductors due to an increase in terms of their cost for silver paste. Is this something that you guys are also looking to do, or is it something that you guys have already done?
No. Also for industrial, our policy is to engage with our customer for long-term relationships. If you think about our customer base in that segment, in particular, the type of platform that we support, in many cases, those are multi-year platforms and engagement and in quite a few cases are governed by multi-year agreements and we work with our customers to honor those agreements. We haven't noticed any desire to adjust pricing one way or the other, despite the demand being, in some cases, softer than anticipated.
I see. If it's a matter of increase in terms of the cost structure, does that mean you guys will just, I guess, take on that margin hit yourselves?
See any cost impact. We haven't really suffered a large cost impact in that segment, Howard.
I see. Okay. Got it. I guess maybe another way to try to ask this question is, historically, what is Yageo's policy on the pricing front when a certain product's cost structure is increasing at a slightly faster than expected pace?
Well, certainly we had seen in the past examples where we no longer could absorb or find ways to digest a significant increase in cost. Therefore, we start reflecting that different cost structure in our conversations with our customers, mostly from new negotiation and new contracts. In some case, depending on the customer or the engagement, also on the running business. We are not in that situation at the moment.
Got it. Thank you. Very clear. There's a question here on your BB ratio in Q2 and how that is expected to change in Q3?
The direction was positive in Q2, around one or slightly better across all products and all segments really. As I said, some of that was driven by the channel restocking and seeing their inventory level getting really healthy. We believe Q3 will follow the same trend.
In terms of building your own inventory in the third quarter, is there any particular end segments where inventory levels are substantially lower for you guys?
When we build up the inventory, we don't really build up for segment. Certainly, the segment, the end demand will influence the inventory control. But we see the overall inventory, especially that in the commodity type, we see the inventory level today is a little bit lower. That's why we increase the utilization in commodity will be higher from 55% to 65%. But the inventory level is in general, not for particular segment.
I see. Got it. Thank you. There's another question here on Automotive. I guess the question is, across the supply chain for Automotive, we've seen a lot of companies suffer more significantly than Yageo, for example. From your perspective, why do you think Yageo kind of saw a downturn that is less steep compared to some of your automotive peers?
A lot of that is also driven by design-in activity and platform and technology adoption. Yageo had a position in automotive that was built over many years, but was not as strong as the one that for example KEMET brought. Over the last few years, we were able to leverage the relationship and the presence that KEMET had in those large automotive customers and use that to introduce more products from the Yageo group portfolio.
It takes years to build that position and I believe now after we are approaching the fourth year anniversary of the acquisition of KEMET, we now see in many new platforms the adoption of more products from Yageo. In some case, that helped to counterbalance some slowdown of the segment. We were gaining share for sure in certain technologies within automotive.
Got it. Very clear. Thank you. There's a question here on from a cycle perspective. I think you guys mentioned that you are not expecting a V-shaped recovery. Is there any kind of guidance you guys can provide for when you think utilization rates can reach above 90%?
Well, this is a very good question. That depends on actually, the end market demand, also our inventory. Certainly, we do hope that gradually because of the higher demand, then we can increase the utilization rate. Today, I cannot give you an outlook, a forward-looking forecast to 90%. Because of the end demand, if the end demand is improving, certainly we will gradually build up our utilization.
Got it. Thank you. In terms of your CapEx and kind of capacity plans, over the next one to two years, Eddie, could you help us review that, your CapEx guidance for this year and maybe next year, and where you guys are planning on adding capacity?
Yes. I think we're not really aggressively expanding capacities obviously because of the UTR. It's more like maintenance CapEx and whatnot. All in all, I think we're still spending about like 15%-20% of our EBITDA in the CapEx, maybe slightly higher depending on the market situations. We're not deviating too much from that path.
Got it. If I recall, you guys have a new factory in Kaohsiung that is ramping up. Is that still on track for second half of this year?
Yes. I think we're still ramping up and we're prepared with that obviously for some new products and some customer audit and whatnot. I think we're preparing capacity in anticipation of the market comeback. That phase one expansion is still on track.
Got it. Do you guys have any views on tariffs potentially if they were to come back again?
I'm sorry. Come again, Howard?
Do you guys have any views on potential tariffs? How that would impact your business?
Tariff. Oh, tariff.
Yes.
Well, obviously the complexity is such that we don't know how to expect yet. I mean, there are different scenarios and different simulations going on. So far we would like to expect that the tariff impact shouldn't be too much yet. But then given the dynamics that's happening in the geopolitical situations, it's hard to predict, honestly. We just have to stay flexible.
Got it. A re you guys thinking about, or does your customers want you guys to have capacity outside of both Taiwan and China? Is that a conversation, you guys are having with your customers, or does that not come up at all?
The whole industry has been discussing resiliency plans and sometimes those resiliency plans have to do with you know different geographies or more related to natural disaster preventions and sometimes more to do with geopolitical tension. Obviously the one we are discussing now has more to do with the geopolitical scenario between China and the United States.
We have the ability to serve our customers from a multitude of factories for all the technology or almost all the technologies we produce. Some customers are a bit more forward in requesting specific country of origin for our products. Some other customers just want to know that we have the flexibility. Some customers don't care at the moment.
Across all customers, I would say that even the ones that request some flexibility, they also have a market in China, and they still need to serve that market. There is quite a focus also to continue to make sure that we stay present in that region and serve that region, maybe more locally. We have those conversations ongoing, yes.
I guess based on your conversation, would you say there is a bigger percentage of customers who don't care versus the customers who do care?
Depends on segment. Without giving out names, but if you look at certain segments that have to do with telecommunication and the installation of 5G base stations and 5G network in general, those types of customers tend to be much more preoccupied with the source of the product. As you move towards more consumer-related segments, I would say that tension is. Anything in between is depending, case by case.
Got it. Thank you. Very clear. Maybe just coming back to AI again. I guess when we look at your second quarter revenue results, would you say that the outperformance is purely driven by just overall better than expected demand and pull-in and restocking? I guess you can describe this in many ways. Would you say it's also a factor of maybe you guys qualifying for a new project that previously you guys were not expecting to qualify for, and that started to ship in the second quarter?
There was nothing that we didn't expect that happened to the degree to drive the quarter to end better than expected. I think it was an overall demand that performed better than we anticipated, and within that, a variety of programs where we got design-in, and some of them accelerated, some of them happened earlier than we thought. Nothing unexpected in terms of a particular design that we didn't know was coming in.
Got it. Thank you. Lastly, maybe just want to touch on a few questions regarding kind of you guys' vision and progress into the power semi space. Can you just quickly remind investors of your rationale on the uPI investment, and how does this fit into the vision that you guys have to build onto your power semis kind of product roadmap?
Yeah. Thank you, Howard. I think you can take that as an extension of our investment strategies, since the inception of the investment in XSemi. Following that, we have APEC investment, and now we have uPI. You could follow a consistent track there that will continue to develop into this power IC management, this MOSFET world. Obviously, we're trying to find new momentum for our premium exposures, so to speak. Right now, we're having about 20% in uPI.
We can't say that we're taking the full advantage of it, but we're learning and we're trying to be part of that growth momentum and try to build on that basis to continue to expand our portfolio. I think that's just an investment strategy we continue to practice in the past year or two.
Got it. Right now, all of these like uPI and APEC, they're all coming into the Yageo financials in non-op. Is that correct?
Yes. Oh, that's the equity income. Yes.
Okay. Can you know, at the AGM, I think the Chairman, Pierre Chen, talked about how you guys want to compete against some of the bigger players in the power semiconductor space like TI. Within your vision and roadmap, what else are we missing here?
Well, I would say this is still very in its initial stage, right? If you look at the investments in this field, we can't say that we're up there against the big shots or the top guys. I think we're learning along the way and try to find a synergy of those products, with our general portfolio. T hat's where we're at right now.
Got it. Maybe just one last question here. Just coming back to kind of a cycle question and overall inventories for your passive component business. You guys have been in a down cycle since the second half of 2021, so it's been some time now. In the past, I guess two years or a little bit more than two years, was there any kind of write-off that you guys had done? If there is, as demand gets better, is there any chance to see some of that recovery in over the next couple of quarters?
However, I don't know how to phrase your question. If you're looking into the potential growth along with some of our investments in the past several years, I think you could see that Yageo has been trying to seek a stable growth type of strategy, right? For the investments that we made, I mean, it's all pretty relevant to our overall portfolio. In terms of the growth momentum, it adds to our portfolio, but it adds in a very, call it harmonious way. I don't know if that's what you're asking.
I guess my question is a bit more on, for example, like inventories. Maybe there were some inventories that were a bit aged, and so you guys figured, these weren't going to sell, and so you guys wrote it off. But ultimately, demand came back and, customers were still wanting these inventories that you guys wrote off. So, you guys can now recover it. I s this something that we potentially could see over the next couple of quarters?
I don't see a huge change of that. Well, if you look at inventory trajectories or development of the inventories in the past several quarters, in the past six to eight quarters, you continue to see that we're taking a very conservative approach in controlling our utilization rate as well as the mix of the inventory. Right now, we're sitting at about 120 days. This is probably, well, the lowest point in the past, if I recall, like five or six quarters consecutively. We're taking a pretty consistent approach in monitoring the production momentum as well as the market ability to digest those inventories.
With that practice, I don't see a huge change of inventory dynamics in the, in the coming quarters other than, continue to see very stable improvement and try to meet the market conditions.
Got it. Thank you very much. I think we have run through all the questions that are in the queue. Maybe let me pass it back to you guys to see if you guys have any closing remarks.
Thank you, Howard, and thank you for everyone's participation this afternoon. Again, for Q2 performance, we are happy to see that the final results is up to our expectation. Actually, revenue is slightly better than what we forecast. We see this is really a good positive momentum. Just remember a couple quarters ago, the last year or two years ago, it was starting the downtrend.
We see maybe it reached the bottom. Now it did. We see now we have the gradual recovery. We still see this positive momentum extended to next quarter. Hopefully that the guidance we gave there, we will see a good growth for the next quarter. Thank you.
Thank you.
Thank you. This concludes our webcast today. Thank you, David, Eddie and Claudio. Thank you everyone for joining us. We will see you guys next time.
Thanks.
Thank you.
Thanks.