Earnings Call: Q1 2021

May 5, 2021

This call is not for the purpose of sharing or receiving non Good day, and thank you for standing by. Welcome to the conference call with AdvanTek. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question I would now like to hand the conference over to your to your first speaker today, Mr. James Huang. Thank you. Please go ahead. Thank you. Hi, everyone. Thanks for joining Eruditus' 1st quarter earnings conference call hosted by Goldman Sachs. This is James Huang, Technology and Industrial Analyst at Goldman Sachs. The speakers today are Mr. Eric Chen, Aventis' President of General Management Ms. Linda Cai, Aventis' President of IoT and Ms. Grace Liao, Investor Relations Manager of Eventech. At this point, I'd like to turn the conference over to Ms. Grace Liao. Grace, please go ahead. Thank you. Thank you, James. Good morning and good afternoon, ladies and gentlemen. Thank you for participating in Advantech's Q1 2021 results conference. The presentation material is ready to download on our IR website at ww. Advantek.com/investorandtaiwanmops. This is Grace Liao, the IR Manager of Advantek. During the meeting today, I will give 10 minutes briefing regarding our Q1 2021 results and the Q2 guidance and leave around 30 minutes for Q and A section. Luckily, today, we have 2 senior management to join us in the Q and A section. Welcome Mr. Eric Chan, the CFO and President of General Management and Ms. Linda Kai, the President of Industrial IoT, to share their views regarding business strategy and industry trends during the meeting today. Now let's start with the presentation. Please go to Page 2. As usual, please take a few seconds to read the Safe Harbor notice. Please go to Page 3. The Q1 financial results. Q1 sales revenue reached NT13.2 billion, increased 17% year on year and 3% quarter on quarter. Gross margin rate was 39.6%, improved both year on year and quarter on quarter basis. Operating expenses rate were 22.2%, declined 2.1% year on year. Operating profit rates were 17.4%, increased 2.7% year on year but slightly down quarter on quarter. In non operating side, Adabantec booked a $72,000,000 for fixed asset disposal gain in Q1 for one time with effective tax rate of 20.2%, net income reached NT1.9 billion dollars in Q1, increased 48% year on year. Earnings per share were NT2.48 dollars in Q1. Please go to Page 4. The Q1 performance by region. In terms of U. S. Dollar, Q1 revenue increased 20 4 percent year on year. Most market has reported year on year revenue growth. The major three markets account for almost 70% contribution of total revenue. North America increased 11% year on year. Europe market increased 80% year on year, while Greater China increased 76% year on year, which is the best performer in Q1. So overall, North Asia increased 13% year on year. Both Japan and South Korea market increased 17% and 40%, respectively. However, Advantech Technology Japan ATJ declined 12% year on year in Q1. Other Asia and intercom market total increased 36% year on year. Almost all the individual market enjoyed double digit growth, mainly due to the strong macro rebound across the board. Please go to Page 5, the Q1 performance by Strategic Business Group. The Industrial IoT Group increased 54% revenue increase year on year. The revenue of embedded IoT and service IoT increased 7% 18% year on year, respectively. The Cloud IoT year, mainly due to major project ended and ATJ underperformed. Please go to Page 6. The working capital and the balance sheet. Advantech generated TWD7.8 billion in Q1 for cash. We reached a record high cash level indicating we are quite sufficient in supporting capital. The cash conversion cycle, CCC, is back to normal level under 100 days in Q1, mainly due to the improvement of inventory turnover days, which is also a healthy improvement on the balance sheet. Please go to Page 7. The guidance of Q2 of 2021. While this is on the basis of the exchange rate assumption of US1 dollars versus US28.3 dollars we expect Q2 revenue in the range of US480 $1,000,000 to US500 $1,000,000 while the gross margin would be in the range of 37% to 39%. Operating margin was between 16.5% to 18.5%. Looking forward, the demand remains strong due to infrastructure opportunities and IEM smart upgrades in the semiconductor sector. Though the supply chain remains tight recently, however, with early action and the design flexibility, we will strive to minimize the impact of our supply chain issue. That's all for the briefing of our Q1 financial results. Let's open for Q and A section now. Thank you. Okay. Thank you so much, Grace. Let's start the Q and A section now. And as a reminder, please feel free to raise your questions in English or Mandarin. And management will answer the questions in English. Operator, we are good to take questions now. Thank you. Thank Okay. Thank you. And while we're waiting for some questions from investors on the line, let me just quickly ask a few quick questions, if I may. So my first question is regarding the order momentum. So could you please share with what's the advantage current BB ratio? And also how sustainable will the order sort of order momentum be? And if you could also sort of like highlight a few key applications that's seen the stronger demand in the coming few quarters, that will be great. Thank you. Thank you, James. Okay. Thank you, Tian. This is Eric speaking. Actually, our PPE ratio turns to strong in the Q1 of last year. In the Q1, the BP ratio reached to 1.66. BP ratio from 3 regions include China, the U. S. And Europe or larger than 1.6. This is the first time we encountered before. In the past 2 or 3 years, the PPP ratio was around 1.1. In last year, the PPP ratio was lower to 1.0 x. The reason for BB ratio in our internal study becomes quite high at 2. The first one is a material shortage impact. All customers want to get their product from advantaged as early as possible. But since they have a brilliant project on hand, without the supply of our IoT or E IoT product, their project might cause a delay. And the second reason is the price up issue. We informed our customers that we will increase our selling price in quarter 2 due to the component price up. This action also triggered the customer demand to prep their order in advance to avoid the price up. So from our analysis, the 1.3BB ratio should be a reasonable figure to reflect our organic growth and customer real demand. For the surplus portion, 80% order belongs to 3 booking and the rest of the 20% will come as a store hold booking. So, this is the whole picture for our BB ratio. KPI want to let you know, for the 20% double booking orders, most of the purchase items belongs to standard products and half selling items. So, in the supply chain point of view, the inventory risk is quite low. So, let's just let you know, we have around 20% double bookings orders, but list of all belongs to standard products and processing items. Okay. So this is my answer from the order bookings status. Okay. Thank you so much, Eric. And also I have very quick follow-up questions, especially regarding the COVID-nineteen. So just wonder that if the COVID-nineteen situation improves globally in the coming few quarters, which we expect a pretty significant demand uptick in the short period? Or do you think it would be a more long lived, but more moderate sort of like demand resumption? So it would just be great to hear your view. Dan, also could you also share with what approaches would Evinced take to sort of like make sure your customers can be the sort of like better service? Thank you. This is Linda speaking, the President of Industrial IoT. At this moment, some of the countries, they might have different progress of maxing. But as Eric mentioned, we have high BB ratio. Of course, some of the reason is because of the lead time is getting longer, customer pays the PO earlier than before and second is because of material shortage and the price up. But on the other hand, we do see some of the market is coming back compared to last year. That's also one of the reasons that we have higher booking. Last year for the Ventec, I think our business is going like really minor decline because we are last year, we are strong in semicon in some of the medical application, not all of them. We are strong in smart manufacturing or the warehouse logistics. Those applications that I mentioned previously still go strong this year. So this year, at the beginning, that we see some of the low light of the market that the other side of the medical or the gaming is slowly coming back. At the beginning of the year, we have the project with that they have lower volume last year, but they said they're coming back. That related to dental or eye or any kind is not really life related. Those medical are coming back. And secondly, we do have some of the gambling project or lottery project. We are receiving the order that will be shipped by the end of the year. I believe some of the applications some of the market has a low sales last year. Those are expected coming back at the second half. Of course, still depends on the vaccine situation. In USA, it's going very well. So, you will see that USA will have a good booking and revenue momentum. And Europe, we got different countries, right now, it's still on this recovery, but the strong is not that high. But in China, we have strong rebound. So I want to particularly focus on China after COVID. In addition to one I'm talking about that for the gambling lottery that could be from U. S. And Europe, but in China, we see that we have the strong demand because the EV car, it's not that the Venta is doing any EV car, but the factory is a key element for EV car. And we know that the largest factory manufacturer for EV car is in China. So on the first half, even quarter 1, we see the strong demand from the battery related manufacturing on China. And secondly, as our previous China growth momentum is Apple related equipment, that including iPhone and AirPod. And iPhone demand is okay. It's not that strong because there's no really big new iPhone this year, but AirPods still have very strong demand. In addition, for China, another growth momentum this year and the coming year is their energy strategy. They are talking about carbon 0 carbon net 0 emission. So we see the demand of energy, renewable energy from wind power and solar. So, aligned with China 14:5 strategy, so also sort of explain why China on the first half, even quarter 1, received strong booking. So I hope I answered your part of your question is that what will be the more new demand post COVID, where those market is coming back, as I mentioned, around like medical and also gambling and gaming related. Okay. Thank you. Okay. Okay. Thank you so much. And that is pretty comprehensive answer. Operator, we are going to take questions now. Thank you. Thank you. We have the first question coming from the line of Hung Hu from China Life Insurance. Please go ahead. Thanks for taking my questions. I would like to ask first question about how do we see the infrastructure and the plan in China and U. S. To affect our business prospects. As far as we know, most of China's new infrastructure is already under construction or maybe in effect in the 2021. And if U. S. Is going to have more EV charging business plans, how do we see ourselves in how do we see our revenue contribution in such areas? Thank you. For the revenue contribution, it's hard to give the number right now, but I want to share for China and USA for the infrastructure, the demand. Some of them are similar, some are different. But in China, I'll address a little bit since the last year, 45 projects. For infrastructure on the transportation wise, this transportation is the important market for Advantech. And this year, we'll continue to invest on that one. But currently, the transportation, we haven't seen the biggest infrastructure on railway or on road. I know 2 years ago, there's a big infrastructure on road traffic for the ETC. But on the other hand, for China for energy, the investment and the opportunity for the Ventec, I think they will bring us that new demand, especially on renewable energy. As Venntech provides the controller and the end to end gateway and IO communication product, especially for the wind power or solar related range of energy. So that will be the one. And regarding for China, for the EV car, we focus on the automobile manufacturer that their manufacturer will be upgrade to require to have the new device and the product on the DimTek. The other one I mentioned is that for the EV car, some of the components are new, especially factory is a key element. We have receiving a lot of new demand on the battery related manufacturer. So that's also very important key momentum for us. In the USA, their new infrastructure, again, on energy and also on transportation. But on transportation wise, we may particularly focus on the rolling stock because the investment is particularly related to Amtrak. So for that one, we will work with the Rolling Stock and those system integrator together for the Rolling Stock investment, and they're including many kind of system. And on the energy wise, again, on the renewable energy, even though that infrastructure is in USA, but for the energy, big giant, the big five, some of them are in Europe, like ABB, Schneider or GE is in USA. So on energy, on renewable energy, we are designing not only in USA, also from Europe, since like 5 or 6 years ago. And we will pay attention to exactly that which type of energy, no matter it's wind or solar or any power station we will work. So hope to wrap up on your question is that both China infrastructure, I think energy will be the key this key market that we are focused on. And as for the infrastructure on transportation in China and USA, we'll be slightly focused differently. Okay. So thank you. Thank you for your answers. And my second question will be regarding the sorry, about our revenue recognition delay. As per our previous as we previously mentioned that there will be like 10% to 15% of revenue delay from Q1 to Q2 and due to the component shortage. Do we see this trend to continue from the Q2 to Q3? Or do we think that the Q2 will possibly deliver most of our delayed order? Thank you. Let me answer your question. So because the component, they have mature surprise on many concentrates in the audio codec and then also power matching, IP At present, we only get around 40% to 50% of the order quantity in the quarter 2. According to our procurement head feedback, the supply allocation variation will be bigger in the quarter 3, but this time for new orders, it's longer than 30 weeks. So probably for the second quarter, the revenue is in a flat, but in the quarter 3 and quarter 4, the situation will be better than better if the component shortage issue can be solved. So, it's my answer regarding the quarter by quarter guidance. Okay. Let me paraphrase this. All you mentioned is that only 40% to 50% of component could be delivered in the Q2. So we will see continuous delay in the second half of this year, but we see better supply in component size. So we think that delay will be less and less. Is that correct? Yes. Okay. Thank you. My last question will be regarding the gross margin. As per our forecast, we can see that the 2nd quarter gross margin in the 2nd quarter is a little bit lower than the Q1. May I ask the reason it's due to the product mix, material price increase? Or do we see some other factors that may affect our margin? Thank you. Yes. When we encounter the material cost of operations, last quarter, I rise there by around 10% to 50%. This will lead to our cost of goods sold increase of around 1.8% in our estimate. However, we do transfer the cost ratio into our customers. We already issued announced our price adjustment guidance in the quarter 1. And in general, we have up our selling price for 3% for 4 network products and 6% for system products. So follow-up results such as CPU, memory and batch, the selling price were caught by market price as per a certain markup rate to reflect the price change. So, we do expect a price adjustment will be our gross margin pressure has fixed our gross margin target. So, this is quite important because we the component already priced up in quarter 1, so we will adjust on price up in quarter 1, but we will adjust on same price in quarter 2. So they have the time there. So we expect in the quarter 2, the gross margin will slightly down in the business. But for the 4 years, we still have the confidence to maintain our gross margin in our plan as our plan. So for the quarter 2, it's the most challenging season in terms of margin performance. This is my answer. Understood. May I ask that do we have guidance for the full year gross margin range? 4 years. 4 years. 2021. 2021, 4 years margin guidance, right? Yes. Our target to stick on 40% of the gross margin, our plan. 40%. I see. Okay. My last question was about the service IoT in the industry. Since that we see multiple demand recovery from multiple industries. Do you think that there will be potential operating margin hike in service IoT area? Or do we think that we will have to expand our like R and D so that the operating margin will remain the same? Thank you. For service IoT, this is one business group that they have 3 focus area. And operating margin, I think for service IoT is improving year by year. And this year, if you look at the business, I think the medical will grow, as I mentioned previously, and largest warehouse because that is still booming because lots of the goods need to be transported. Retail, we're not so sure yet for the second half. So with all the combination on the high side of the medical and logistics, We believe that service IoT performance this year for the operating margin should improve. And I will not say, but it should better than last year. And depends on what will be the target compared to other business group, maybe not yet to the level, but the operating margin for service IoT is improved year by year. Thank you. I have no further questions. Thank you for your comprehensive answers. Operator, next question please. Thank you. Thank you. We have a next question coming from the line of Willie Chen from JPMorgan. Please go ahead. Thank you for taking my question. Just want to clarify some numbers first. So Eric, you mentioned your BB ratio in the Q1, is it 1.6 or 1.3? Just want to clarify first. 1.6 6. 1.6. Okay. And then can you talk about the April order condition? Yes. In April, you mean April, BB ratio is very high. We will release the revenue announcement, press announcement in this Friday. I see. Okay. But do you think the order backlog in April continue to remain strong? Is that the number is that the direction we are expecting? Yes. I see. 2nd question is, you mentioned about ASP hike for your product. So I heard it's 3% to 6%. Is that correct? Just want to clarify. Yes. 3% to 6%. Okay. 3% price up for the core level product. For the system product, the price increased around 6%, but it depends on the distribution market competition. I see. So I think the Q2 guidance, if you take the midpoint of the revenue, it's probably implied about 5% growth, so which means that the volume will probably be negative year on year. So I think previously you mentioned I think in the previous analyst meeting you mentioned that delay will be 5% to 10%. So is that better than our previous guidance or slightly weaker than our previous guidance regarding to your component shortage condition? I think the guidance, quarter 2 guidance is more definitive with our estimate internally. So in the quarter 1, we in the first half IRB, we announced the quarter 2 revenue impact of 5% to 10% because of the future earnings. So the guidance is matched with our estimation. I see. And then next question is regarding the condition in China. I think Linda mentioned about some of the strong EV orders from automotive OEMs. Can we quantify what's the contribution for this EV related incremental battery or auto OEMs sales in China? Is it low single digit, mid single digit or double digit? Just direction wise numbers will be fine. Okay. If we talk about the new demand of the on the EV related business, it's hard to tell you the growth rate because last year is almost at a very low level. So it's I don't know how to like spread the wider growth rate because that will be a very high number. Regarding the contribution in revenue wise, because some of demand are from channel partner and some of the are from our direct customer. But it's not easy to give you the run up number of that, why the percentage of the China revenue come from that. But that's why I shared previously, this year this quarter 1 and even the first half, China strong is because that, 1, first one is that business as usual, we are strong on the equipment for the electronics for Apple. But the new growth momentum upon EV related manufacturing debt. So I hope I answered your question even though I did not give you the number you want, But that will I will discuss that how we can provide that, but that is the growth momentum for us we have and we see it will stay last of the year. And also the other one on the share, because you asked China, the same growth the new growth momentum, we also see that from Korea because another big manufacturer for battery, rechargeable battery, not only for EV car or for any battery also in Korea. And we also have very good performance in Korea for not just only because of battery, also for the semi com. Yes. I see. I see. My last question is regarding to the demand for North America and also Europe. I think previously in the previous Analyst Meeting, you mentioned that growth in Q1 will be a single digit for U. S. And Europe. But I think apparently that was doing better, right? So what's the outlook in the for those markets in the Q2? Are we going to expect a growth there? You're asking Europe and North America. Okay? For North America, because this is our biggest market share over there and our business diversified in U. S. As well, but our expectation for North America, I think the second half will be better than first one. First still, I mean, semicon is the biggest market we have. And secondly, on the cloud IoT, the data management and data backup and storage still remains strong, then that will be another growth engine. And the third one I mentioned about the medical. Medical related, the industry we have, the market share also is a strong portion for us in USA team. Lastly, last year, we have very good business on warehouse logistics because a lot of the e commerce related business going up and we supply a lot of the product for warehouse logistics. And this one is still keeps very good growing momentum. So on the North America, on the quarter 1, the growth rate is okay. And in the quarter 2 and Q3, we expect will be slightly higher. One of the reason is because in USA, on the vaccine, I think probably it's one of the countries in the world, that has very good progress on that one. Regarding Europe, because there are many countries in Europe, the performance of the Europe may differ from different sales team. On the infrastructure wise for the energy or the equipment, we see the strong momentum is still coming back. On the other side, on the first half on the gambling, it's not there yet, but we are receiving the order of the lottery and the gambling for the second half shipment. And on the medical wise, some of the medical for dental or for that surgery wise also coming back. So on the euro second half, I still look at the bright side, but the risk will be in euro will be on the COVID-nineteen. The risk on the COVID-nineteen euro is higher than in USA. So that is the one is uncertainty. Thank you. That's very clear. No further questions. Operator, next question please. Thank you. Thank you. We have the next question coming from the line of Liz Gafford from Jupyter Asset Management. Please go ahead. Hi, hello. Thank you very much for the presentation. That's very helpful in this session and thanks for taking my question. So my first question is just regarding the competitive dynamics currently, how you're seeing the competitive environment and how you see this evolving longer term? Okay. Competition landscape, Adveta is a diversified company, so we have many kind of competitors. It's not easy to name anyone as one sole competitor to Adventech. So may I know that which market or the region you particularly want to ask? Yes, of course. So I guess, previously, we'd heard a lot about Inacon doing quite well and also when they purchased Contron doing quite well. So just trying to understand if you're seeing those competitors being a little bit more aggressive in trying to get clients or whether that's not really an issue anymore? Right. I see. Okay. Thank you. Regarding Indocho, Kongtran S&T, the most the related countries or region is Europe and China. Besides these two regions, we don't see much about the competition with Innocor or Contron SMT. And these two regions have different competition with them. In China, a few years ago, indeed, we see the competition because they are coming after our customer. But on the recent year, even last year, we are getting less competition with InnoCourt. In China. Perhaps, we have that perhaps that they are going to the different market than us, even though it's still on IPC, but as Venkat is doing value proposition business, we are now like driving for the revenue without considering the margin. So in summary, on the China, we haven't compete against with Inoco I'm sorry, Inoco and Inoco, yes, only on few accounts, but that's not much of the competition. But on the other hand, in Europe, because of Kongtron S&T, their homeland is in Europe and Kongtron is a respectful company in Europe. They have very good brand awareness over there. So indeed, the alliance of the Innocomm, Control and SMT do have a do clear the strong competition against Adeventa in Europe, especially on the embedded market. And so with the brand, the brand awareness of Control, they leverage Enelco on their low cost manufacturing and SMT as the IT consulting service. For Adeventa, in addition of our Adeventa footprint over there, we also have a design center in Germany to service the customer who might require customization locally. So even though the competition is very strong in Europe against Kongtrong SMT, but Zeventa is not just product selling, we also invest the design team in Germany to work and compete against Kongtrum for local design in business. Thank you. Thank you. That's really clear. And so I guess longer term, you're hoping to be at the same level as Contron and S&T in Germany in terms of the design you're offering? Or do you think that the product you offer is on the same level as Contron S&T already? For Adubenta and Contron, because I'm talking about Adubenta embedded team, but one of the strengths from Adubenta is that we not just only have embedded in for edge computer audio modules, we also have the connectivity product, data acquisition gateway, the end to end gateway from industrial IoT team. I think that made Adevantai Europe as one company provide the complete solution from the sensing to data acquisition to edge computer and to the solution we are talking about that some of the solution partners we have working there. I think that's one our value proposition as the total solution. On the design service on the long run, that's also the strength of Kongtron over there because that's a homeland. As I shared that, the design center we have in Germany, we already have that team since 3 years ago already. So in the long run, we are offering the wide range of the Ventai product portfolio and also the local design service in Europe. This is not just only that we do that to compete with Contron, not just because Contron, because we have many competitors in Europe, that's Contron, but that's the advantage of the investment in Europe to grow local business. Okay. That's clear. Thank you. And my second question is regarding services IoT. Could you perhaps provide any outlook on how much services IoT might contribute to revenues in the next sort of 2 to 3 years? Okay. For service IoT, there we our expectation I mean, the projection for the service IoT for the revenue wise on the gross rate actually is higher than others. And on the percentage wise right now it's around like 8% of revenue for the service IoT, around 8%. Seems that we want all the business group to grow healthily very, very healthy in double digits, but our projection for service IoT, the growth rate is higher than IoT embedded. And in the coming 3 years, the expectation is for the revenue portion for service IoT, we hope they can reach double digit of the Deventer revenue. Okay. That's great. Thank you. That's all from me. Operator, next question. Thank you. Thank you. We have our next question coming from the line of Jia Wang from Diamond Asia Capital. Please go ahead. Hi. I have two questions. My first question is the I think your component shortage and strong book to bill ratio has been there for a while. But can you talk about whether you believe there is any double booking or double ordering at your customer end? And in terms of how do you actually maybe mitigate the situation of customers potentially giving you duplicate orders and in the future that could result in some kind of sudden order disappearing when the situation changes? Maybe like do you accept like some customer prepayment for order, etcetera? That's my first question. I think previously Eric mentioned that the estimation for Daho booking or like long term PO could be that 20%. Yes. Yes. And secondly, that what do we do that to ensure that those orders that can I mean, will not create the risk for the FinTech? Most of the product we sell are standard product. So as Eric mentioned previously, we estimate even though there's 20% of the double booking, but they are standard product. So they will not create a high risk for us. For some of the ODM project, they are not standard products. Our sales will generally ask for the NCNR. Even though some of our customers may not able to agree with the NCNR, then we will have a letter of intent for the liability of the special component we reserve for them to minimize advantaged risk. So at this moment, this is the communication with customer. And for the ODM product we have, not just because this year's material shortage, even in the past year, when we discussed those that ODM project with a special part only used for this customer, the contract and the lack of intent or the NCR order are in the discussion to ensure minimize advantage of risk. So this still continue this year. Of course, we become stricter because right now become material shortage, we have to ensure that the order will not be canceled. And even though they will be rescheduled for the shipment up on customer request, our stores still will confine the rescheduling into the minimum time frame. I hope that answers your question. Okay. That's good. Okay. Thank you very much. The next question comes from the line of Han Ku from China Life Insurance. Sir, please go ahead. Thanks for taking my questions. My question is about LIDMS sector. As far as we can see, the sector is having a very you can say the growth rate is getting slower. And I'm just wondering that do we see that in the second half, we will see a potential recovery in the Allied DNS revenue? Or is it the component shortage continue to track it and maybe lower the total revenue growth of this year? Thank you. So, online DM is there are 2 business groups. 1 is the online computing, the other is called IoT. So, I think you're referring to applied computing. As Eric, what you mentioned earlier, also Grace, is that online computing, they are one of the portion is from Advantage Japan ATJ, and the big project is ended. So that is our that plan is that one of the project big project will end this year. Second one for applied computing is last year because COVID, so we have like really high demand for patient terminal project on USA, on Europe. So that year, Applied Computing has outperformed the business growth for Advantech. And so in terms of the Y o Y, because they have a very high revenue last year, even from quarter 1 already. So they are the reason that the decline right now. If you look at the coming quarters, as mentioned, even though on the patient terminal project, it could be slowing down right now after COVID. But on the other side of the medical for the medical equipment for less life related, as I mentioned, a lot of surgery or the eye, the dental, those kind of the medical equipment, the demand is coming back. And on the second half, the shipment, because of material issues, so we are unable to ship on the quarter 1 and only partially in quarter 2. But private computing on the medical wise will pick up in the coming quarter. Yes. Actually, private computing group set a low digit growth in this year because the reason is they have a very good performance in last year. So in a year on year comparison base, they just set a single digit store for this year. I have no further questions. Thank you for your comprehensive answers. I think that's all of the questions we have for today's call for now. And I have two quick questions here, if I may. So the first question is regarding the MMA strategy. So could you just remind us what Advances' future MMA strategy? And also what region or what segment or what products or technology would be the key focus for Advances in the future, sort of like to complement your overall like product and also the technology portfolio? That's my first question. Thank you. Regarding the MS strategy, let me answer your question, then maybe I'll just have some comments. All MMA target many devices into 3 categories. Let's say, the S1, S2 and S3. For the S1 category, we treated as technology platforms for the regional expansions. Actually, in the past 10 years, almost over Atlantic MMA a BB smartphone for industrial network communication. In H1, we still search for the right market for specific segments. Also, we will keep going on the regional expansion, especially in the emerging countries. As for the S2 category, the target will focus on the Rousin oriented, rather than our platform provide only. But still now, we don't have a clear M and A of candidate campaign. So, I don't expect we will have a new deal this year for the year 2022. At Sohrab S3 category, we define it as our co creation partner business area. We believe the co creation partner will take the most share of AIOP value chain by integrating the software hardware via IoT platforms and providing value added service in a specific domain, such as smart manufacturing, intelligent healthcare and intelligent transportation, something like that. Therefore, this is a category of our M and A strategy is to invest by minority share. 100% emerged is not our intention since it might cause conflict with our customers. So, this is our M and A set devices, S1, S2 and S3. But right now, as you know, we don't have a clear MMA topic. So my answer is for this year or even the next year, we don't expect we have a new deal for the MMA. Okay. Thanks for that. That is great. Thank you for the very clear answer. And my last question is a pretty straightforward one. So just want to know that how should we think about Avintech's OpEx trend going forward? So I think the plan for you guys OpEx has sort of like contract a lot from the Q1 2020 due to COVID. But I think moving forward for the coming 1 to 2 years, how should we think about event that's like OpEx trend? Do you think the OpEx will again be in a very strong expansion mode once the work is settled no more again? Or any sort of like target for the OpEx amount or the OpEx ratio? Thank you. On the open side, the OPEX, in our plan is expected to increase 5% to 6% year on year. But the OPEX ratio will be keep flat due to the top line growth. So in the long Okay. Thank you so much. And since there are no further questions to Eric or Linda or Grace, anything you would like to highlight before we end the call? I think we would like to refocus on our dividend policy as we share the same mindset that we try to share the profit with all the investors. So the Ventech keep a high dividend policy for the past. Therefore, the dividend payout ratio was over 75%. I think most of the investors are very long term and value focused partners and it is very appreciated for our high payout policy for now. And we will keep on going with the high policy with the investors. Okay. That's great. Thank you so much. Is there any point for Eric or Linda to highlight? Just to remind you, we have a press release regarding the airport revenue. Yes. April monthly revenue will be announced in this Friday afternoon. Yes. Cool. Okay. Thank you so much, Eric, Linda and Grace for your time today. And also thanks everyone for joining the call today. Thank you. Thank you. Thank you. Thank you, everyone, for participating. Thank you. Thank you. Bye bye. Thank you. Thank you. Bye bye.