Earnings Call: Q4 2019

Apr 25, 2019

Citizen, gentlemen. Thank you for joining us for FY2018 Advantage Corporation Information Meeting. Since it is time, let us begin the meeting. 1st, Mr. Fujita, the Managing Executive Office will provide the financial results for FY2018. Next, President Yoshida will provide the FY 2019 outlook and a midterm business plan progress of report, then it will take questions. The meeting is expected to end at 5 pm Now, Mr. Fujita, please. Let me provide you with the FY 'eighteen results. In response to the increase in demand for higher semiconductor performance and stronger reliability assurance, robust tester demand continued throughout the year. Supported by these trends, The business environment deteriorated in the second half with semiconductor inventory adjustments appearing yet we were able to post record high orders We achieved record high sales by strengthening our production and the support system to meet high demand. As a result of efforts that to improve operational efficiency, net income, ROE and annual dividends also reached record highs Let me give the FY2018 result numbers. Orders plus 11.1% year on year 1,000,000,000, sales up by 36.3 percent at 1000000 operating income 2.6times64.7000000000netincome3.1times57 point 1,000,000,000. Smartphone related to tester demand have remained at a higher than expected level in Q4 pushing a year result higher than our January forecast, influenced by our February acquisition of the system level test business of U. S. Company Astronics, backlog increased by 1,000,000,000. FY2018, Q4 resolved the Sunrise. 3 months ago, Q4 orders were expected to decrease compared to Q3 but strong SLC Tester demand that drove orders higher than Q3. Fy2018 Q4, the orders by segment, Semiconductor And Component Test Systems. 46,100,000,000 -5.8percentqonq. In SLC testers, demand for semiconductors used in the smartphones, such as application processors, display driver ICs, and the image sensors pushed orders to 1,000,000,000 in memory testers Orders for high speed DRAM and unmanned flash testers drove overall orders to 1,000,000,000 up by 1,000,000,000 Q on Q. Mechatronics assistance. 9,200,000,000, up by 37.0 percentqonq. Orders where nanotechnology products for advanced processes grew. Services, support and others 400,000,000, up by 45.6 percent of Q on Q orders for maintenance contracts grew. Sales by segment. Semiconductor and the component test assistance, 1,000,000,000 minus a 12.1% Q on Q. SoC tester sales were 1,000,000,000 another quarterly sales record. Memory tester sales stay at billion due to the finding orders in Q3. Make attorney for system, 1,000,000,000 minus 35.8 percent of QOQ, Device interface sales shrunk in staff with Memory Tester Sales Services support orders JPY 7,300,000,000, flat Q on Q. Orders by regions. South Korea and Taiwan, You've been such as the ramp up of advanced processors and the rise of a locals and conduct supply chain in China over wrapped. Made this important having some changes in overall situations. Orders in China are growing. South Korea could be associated with the memories and conductors, but with the backdrop of higher performance of smartphones. So seen our testers were on the stronger than memory testers as well as on FN18 full year is concerned. Q4 sales by regions, sales side, sales in Taiwan, primarily in memory. Gross margin was 53.8 percent. Products mix was slightly worse than Q3, and the period end inventory evaluation also contributed to the decline over Q3. SG and A was 1,000,000,000. The substantial overall, the real SG and A was flat. Actually an increase by 1,000,000,000 from the third quarter. When we posted a profit of 1,000,000,000 due to the shifting of a portion of the company's pension system to the defined contribution system. That's what happened. So this could explain the operations. Operating income was JPY 10,200,000,000. Down by JPY 10,500,000,000 quarter on quarter due to the declines in sales and the gross margin. As well as the one time profit effect due to the pension plan transition. Operating margin was down 11.7 points becoming a 15.9 percent quarter on quarter. As for the full year on operating income for FY18, As shown in the table on the right hand side, the operating income went up significantly by reducing the growth of SG and A and expenses as the increased sales. The so called core operating income, deducting the temporary and operating profit loss was 1,000,000,000, core operating margin was 21.6%. As for R And D And Expense and others, R and D expense for Q4 was 9,500,000,000. R and D to sales ratio was 14.8% and CapEx was 1,000,000,000. Depreciation and amortization was 1,000,000,000. As for the full year R and D, the investments were in line with our plans. As for the cash flow situations, with the acquisition of the Astronics SLT business, Cash flow expenditure in the 4th quarter increased thus making the free cash flow negative. As for the balance sheet as of March end 2019, total assets 1,000,000,000 Cash and cash equivalents 1,000,000,000, up 1,000,000,000 from the end of the previous fiscal year. Goodwill and the intangible assets, 1,000,000,000, up 1,000,000,000. This was caused by the acquisitions of the Astronics SLD business, which I explained to you earlier. May I remind you that the numbers are yet to be finalized since we are still working on the application of the costs needed for the deal? Bonds and the current liabilities and convertible bonds and the maturing in February 2019 were fully converted. Equity attributable to owners of the parent was 1,000,000,000. The ratio of equity attributable to owners of the an apparent was 65.2 percent, up 16.2 points from the previous year. This concludes my presentation. Thank you indeed. Welcome, ladies and gentlemen. This is President Yoshida. Let me provide you with the FY 2019 outlook and the midterm business plan progress report. Cy2019 tester market outlook, Semiconductor Performance will evolve in CY19 as well. As a result, it is expected that various semiconductor manufacturers will continue to rank in their test capabilities. However, the trade friction between the US and China has not been resolved and inventory adjustments continue in the supply chain of many products. For the time being, we expect a slowdown in tester demand to continue. Each customer will differ, but we're currently assuming a recovery in the tester market from October. Recovery in terms of orders. Our SOC Chester market forecast is about $2,000,000,000, the same as the estimated 3 months ago This is CY calendar year. We estimated $2,000,000,000 is a market size between January December. Our memory tester market forecast has been lowered since January. Based on the present conditions, we estimate it at 1,000,000 to $150,000,000. In addition, we studied the size of the market in CY18 and revised our January SoC and the memory test and market estimates upward As a result, the rate of the decline year on year has increased compared with our previous January estimate. We, for as the 20% year on year decline for SoC and 40% to 50% for memories. This illustrates how high the CY18 demand for testers was both for Adventist and for our competitors. However, we do not see CY18 as a peak The trend towards a strengthening, testing and reliability assurance in line with higher semiconductor performance will continue The adoption of 5G and AI will push the tester market in CY20 higher than in CY19. We expect the demand protesters to expand in line with this trend while there may be ups and downs along the way. Based on such market assumptions, Here's our FY19 forecast. Affected by the market slowdown, FY19 results are expected to line compared to FY18. Orders are expected to hit bottom in the first half and recover in the second half. Due to our backlog, we expect that the sales will be higher in the first half Then in the second half, despite headwinds, Our forecast is still higher The development of higher performance semiconductors will buttress our performance The semiconductor market is expected to enter a major growth cycle from 2020, driven by 5G The testing market will slow down this year, but it is expected to recover in 2020. And 5G AI IoT will continue to support a mid to long term expansion. Our midterm management plan targets are 3 year averages We take a mid to long term perspective, not influenced by the environmental changes and a performance fluctuations from year to year. Our FY18 sales reached an 18 year high but our business was very different back in 2000. When we last set a sales record, then it is now We have transitioned from a structure reliant on a memory testers to one that emphasizes SOC testers. For your reference, in FY2000, memory tester sales was about 100 1,000,000,000 and SoC sales was 1,000,000,000 the ratio has reversed since then. Adventist has responded to the market environmental changes and it transformed its management and business structures over the past 18 years. Compared to the memory tester business, the SoC tester business addresses more customers a more diverse device types and the supply chain composed of the fabless foundry OSAT companies is more complex For us, it is a more stable business in a large market, but compared to the memory, SoC customers require more comprehensive support. For FY19, we forecast at year on year rate of decline in profit exceeding a debt over sales, but this is because our forecast factors in broad personal investments in R&D SE and its sales support and industry academic partnerships, as well as other research costs that focus on the topics relevant to the future of the test business, including a the utilization of AI and the IoT, which will enable Aventis to maintain and expand their market share in 2020 thereafter. Now let me provide the outlook for each business. 1st, the SOC tester business outlook, Although the impact of inventory adjustments will restrain demand below the level of FY18, FY19 will still see advances in the semiconductor performance that support SOC tester demand. Sales will hinge on the testers for semiconductors such as application processors and image sensors that support new higher performance smartphone models. Although there are concerns about smart won't market slowdown, demands for testers do not necessarily correlate with the smartphone unit growth. As seen in the FY18 results, the smartphone embedded semiconductors grow more complex with more items to be tested resulting in higher demand for testers, In FY19, the full scale launch of EUV will also support high end processor test demand. Display driver IC tester demand will also continue even if not at the level of FY18. 5G related test business has already emerged and meaningful demand is expected in CY20 and thereafter, this will be discussed later as you may be interested, now Memorytester Business Outlook Under the influence of memory inventory adjustments, demand for memory testers is sluggish, but we expect it to recover in the second half. In DRAM, we anticipate opportunities related to miniaturization, the shift to DDR5 and increase the demand for high speed products for high performance computing, non volatile memory is expected to be primarily driven by Chinese NAND manufacturers is in the operation and we have been receiving orders. Next, electronics and end of services and others. Due to the slowdown in memory investment, DIM products are expected to decline. However, with the launch of EUV nanotechnology and products and are projected to see higher sales, mechatronics related businesses and are expected to decline slightly year on year. Regarding the services and other businesses, we anticipate state. Revenue growth in light of the unexpected solid sales in the field services and the effect of incorporating system level test business of Astronics Inc. Acquired in February. Here, I would like to briefly go through the mid- and long term management policy we announced last year. Which direction are we plan to go from the mid and long term perspectives? Last year, we formulated a 10 year long term plan as well as 3 year midterm plan starting from 2018. And now now we are working on them for the entire company United. FY19 is the 2nd year of this midterm management plan. We undertook initiatives targeting mid to long term growth as described here. This is what we did in FY18. As a result, we received orders from major customers for business related to 5g Applications Processors and 5gmodems. And going forward, our customers are asking for a big corporation from us because those technologies are quite challenging customers. So we and the customers are having the joint engagement in the space of development. To ensure the growth of our Tesla business. This year, we will focus on reinforcing our engagement with particularly the leading customers in the industry and our top priority is to maintain and expand our market share. In parallel, we will also establish our foundations for growth. In addition to strengthening our personnel in terms of mid to long term growth. Yes, we will strengthen our human resources department. And furthermore, we'd like to improve and maximize the efficiency of a business operations by utilizing ROIC. Talking about the headcount increase, since the end of FY 2017, We already increased the headcount by about 200 and we intend to go for the same number. If I'm not wrong, the fall FY 2019. Even in FY 'eighteen, when sales grew strongly, our investment in factories and production equipments remained minimal. Although we do not plan to make large scale production capacity investment in FY2019 either, But we plan to upgrade our factories and IG systems in order to improve production and the development efficiency. It will be about 10,000,000,000 from the previous year. Last year, we started with the sales forecast of 1,000,000,000. And we had our production capacity becoming quite tight. We did almost no hard investment and may I remind you again, going forward, we intend to do the same. Here, and I would like to emphasize that the most important investment that we can ever make is the investment into people and critical technologies. Next, I would like to briefly go through our market share. Our ground design and midterm and long term plan are aiming at an annual increase of as small as 1% in market share. To give a conclusion first, we achieved a significant growth in calendar year 2018. This was mainly driven by an associate testers. Our share of associate testers market was about Tahoe. 30% in calendar year 2017, but, we jumped up to almost 50% in calendar year 2018. In the memory test markets, our customers' investment in all devices and the processes has increased particularly in the 1st half And we are able to we are so happy being able to do so. In calendar year 2019, we aim to retain our share gains and expand our share even through even further over on our calendar year 2018. The competition has not disappeared competition among the major players and also competition coming from emerging markets. We have to be careful as to the competitive factors. And, when it comes to the calendar year on 20, we believe that demand for the communications and contractors will expand in conjunction with the growth of 5G. It is also, highly probable that, the demand for the semiconductor test, test in these scenarios means we will get significant opportunities. And for us, to further increase our share. Here, I would like to expand on the benefits and we may get an out of 5G. What's this 5G meaning to us? It is that 5G is not just another advancement of communication technologies rather it is here to stay true technological foundation to redefine our information oriented society. With that, on high speed, low latency and large capacity, 5G will definitely advance the progress of the digital transformation as simple as by keywords like ADAS or autonomous driving IoT, smart devices and AI. As a result, It will continue to boost semiconductor and demand over the next 10 years to come. It will definitely have a spillover effect on the cash flow market. This slide depicts the relationship between 5G and the Tesla demand. Based upon the study we have conducted internally, It is in the area of communication, semiconductors test that the interaction of 5G is directly related to test the demand. Compared to 4G and 5G, the increased transmission speeds and transmission distance becoming much shorter and directivity becomes much stronger. Also on the 5G is a multi channel. This will lead to an increase in communications and contract production volume. In terms of direct impact on the Tesla market, it is estimated that the 5G transition both the market from 200 up to US400 million dollars per year. This is our estimation. We will gain 50% in market share. So I would like to get 1 half out of this space. However, the impact of the 5G transition on the tester does not end there. Due to packaging our smartphones and data centers, we'll need a higher performance in order to process higher volumes of data. This will spur the further geometry and authentication of our processors and DRAM. In addition, to the speed and the capacity capacities of DRAM and nonvolatile memories, we need to have further increased capabilities. This is a must. In response to this, on the future test challenges, customers are already on the increasing their request for test solutions with us. Starting from this early in 5G era, we believe it is necessary for us to make investment into our workforce. We believe that this our capabilities, to our extent, we're going to support and our customers is going to give us the determinant differentiation factor for years to come, particularly for next 10 years to come. Finally, I would like to summarize the progress of our midterm management plan in its 1st year starting from FY 'eighteen to last 3 years. We were able to deliver on the results that exceeded the target of value for all KPIs in the base scenario of our midterm management plan. Thanks to the expansion of the Tesla market and our significant share gains. I believe we had a good impact record of Wahgnion our journey to our goals. On the other hand, we expect to have declines both in revenue and profit in FY 'nineteen which may disappoint you to some extent. As of now, we have those in forecast which indicate all the KPIs are going to be below the target values of the plan. Customers and CapEx budget will not increase in a stable fashion. When figure has an increase more so on and down, we had estimated, there's going to be always rebound decrease This is why we believe that we need to have the target values for our midterm plan as 3 years in average. However, the market trends that support our mid to the long term growth with our brand design, including higher semiconductor performance and increasing importance of testing remain unchanged. We expect there will be a recovery in FY2020. So we have not changed our numerical targets of our midterm management plan. And we will continue to further strive to achieve them. This concludes my explanation. Now we'll take questions. If you have a question, please raise your hand and please first state your name and the name of the company you work for, Thank you. I'm Wataghi with Nomura Securities. Let me ask you 1 or 2 questions. The industry has been going through kaleidos topic changes. Have you seen any recent signs of recovery I heard that a certain company received a huge order from the Chinese company. I also heard a couple of days ago that sizable inquiries, it came from a Taiwanese memory manufacturer also from a Korean equipment manufacturer. So I hope that's the the semiconductor market is picking up. Maybe detesters start picking up a half a year later, but do you see any signs of a recovery these days? Let me talk about different categories of the memories regarding SOC Product Effort The 7 nanometer node semiconductors are becoming mainstream. We've been receiving orders since Q3 last year. We expected new orders to keep increasing in Q1 this year. Regarding your memories, to go with that, we hear things similar to what you just mentioned regarding equipment for the front end processes, but not for the back end processes. We're awaiting you for good news. After all, the Chinese NAND launch seems to be going smoothly, and we're receiving orders, When the next step, 64 stack product manufacturing launch goes well, we should receive additional orders. Furthermore, we see demands for LP DDR5 and DDR 5 coming earlier, increasing the demand for their high speed testers as well as those for G DDR6 for which we're negotiating deals and we expect to receive orders Hi, Nikhirakawa. Merrill Lynch, Japan Securities. I have two questions. A question on Q4 gross margin. The product mix appears to have improved, but you mentioned that the inventory disposal loss impacted. So it was all in Q4, which reduced the gross margin. How big was the impact in terms of the yen amount or the gross margin percentage? And how big was the impact In the previous period, the period ended March 31, 2018, And what is the forecast of your gross margin if for the period ending at March 31, 2020? The first part of the question, how big was the impact of the inventory disposal loss In FY18, it was about 2,000,000,000 yen of valuation loss, not disposal loss, of inventories. And what was the other question? Sorry, JPY 2,000,000,000 that you mentioned, appears to be a typical annual amount, and it was all in q 4. Is that right? Yes. Right. It was all in Q4, worsening into Q4 numbers. And what about the gross margin for the period ending at March 31, 2020? We don't expect FY 2019 gross margin to be a lot different from the fy2018 number. Thank you very much. Let me ask you another question. FY2018, your SOC in a memory market shares improved significantly, what is your forecast for them in FY2019? Well, let me add to Mr. Fujitsu's response about the gross margin. FY2019 number may be slightly less than FY2018 say by two points simply put, it's because of the product mix But the real answer is the competitive environment. Pricing and competitions against the competitors that wish to regain their market shares against the Korean emerging country manufacturers, we took them into consideration. About your question on the market shares, our plan assumes that we are able to maintain our FY2018 market shares in both SoC and the Memories. Thank you very much for the presentation. I'm Segura, Daiwa Securities. Me ask a question about your comment on the recovery of orders. Recovery to begin in October, you mentioned Does the recovery being at the same time in the second half for both SOC testers and memory testers? Or in different timings? Well, for memories, we estimate are a back end order, orders based on a front end player's order situation. Based on the current situation, we anticipate some recovery to begin between this June September For SOC in conjunction with the 7 nanometer EUV launch, we expected the news the new 5G baseband to launch around October leading to recovery of our the business. Let me ask a confirmatory question on SoC. I understand that you expect the major foundries operation rate to bottom out between April June and recover between July September, do you expect that your orders should follow with slight delay? Yes, we do. Let me also add two questions on 5G. Cheap makers and your competitors that tester makers say that they see some moves around obesity stations. You mentioned no demand for such. What is your current situation in this regard? You also talked about test demand size the 1000000 to 1000000 with a 50% market share. When it comes to FPGA for base stations and a baseband, I thought that your market share could be a bit higher than that. Are you going to lose some share? Would you elaborate, please? Regarding FPGA and SLA is the chips that use for base stations. Major FPGA Companies have our assistance installed, and we expect increasing orders from them. Regarding RF chips for base stations at transceivers and the baseband transceivers, top 2, the 3 manufacturers are using Avantis assist themes as well as the competitors systems, we assume our shares within such customers to be 50%. And then all in all, do you expect to have more than percent market share. If you maintained a current share, our target is more than 50%. I see. I'm Miyamoto, Mitsubishi UFJ Morgan Stanley Securities. So let me ask you three questions. First, about FY 2019 operating and margin. R and D expenses is down by JPY 900,000,000 depreciation and amortization up by 1,000,000,000, totaling almost 0. And there is a 9.9% decline, 2% of which is the gross margin, then the remaining 7.9% comes from a additional 200 human resources and additional costs associated. Could you provide the breakdown of the 7.9% Well, the most impactful is the personnel expenses and that the DNA As I mentioned earlier, we had 200 new hires in a single year, which has been of significant impact If we wish to hire 200 and more and succeed in hiring them, all as soon as we hope then we should see the number that we're talking about. If the hiring gets delayed, the gross margin might slightly goes up, but we do wish to secure necessary human resources who are in high demand worldwide. Therefore, if we plan accordingly, if we have averaged 300, if not all 400 new hires, 10,000,000 per person total of totaling 1,000,000,000, approximately in additional expenses should be expected. Let me ask another question on the CY 2020. You said a CY 2020 should be a better year than in 2019. Would you be as good as you were in 2018 or clearly not as good as you were in 2018 What level of recovery would you expect for SoC or memories separately? Early and I said, we will try to achieve our midterm 3 year plan. That's what I said. And the number was 1,000,000,000 on average. And that is going to be my target, minimum target. After achieving 1,000,000,000, then 1,000,000,000 Then next, if I could achieve 250,000,000,000, you may say, yes, I would be achieving the target. Well, Yes, we are assuming the market would recover. Yet, I think you understand what I'm trying to indicate here, in the past, we always miss the assumptions. And actually, in 2000 and 30, Novartis, 2018, And we started with the 230. And whether or not we will get the 280 again, these numbers are going to be the moving targets. How about FY 2020? Yes, we are sensing something based upon the recent experiences, for FY 2019. And we do believe that something is going to come up in FY as a kind of new generation. In that sense, If you ask me whether or not, and I will not aim at 280,000,000,000, then, definite, I would like to say, yes, I like to go for it, but I simply cannot say, that yes, I will do that because the market is moving. The market is moving. So I simply cannot say and have something for sure. With authority. This is my response. My apologies. Thank you. My thought and last question is about MRAM testers. Appreciate if you could share your thoughts with me on when the testers could be developed and ramp up and contribute to your revenue. Please? As for the MRAM, But we are already measuring using our notation in our collaboration between the industry and academia. And the Once the market ramps up, there is no doubt that our test on how we should be able to make the measurement. But if you ask me, if we need to have the special equipments for MRAM, since this is a device to test, measuring memory functions, so we do not need to have a special development. Of course, in regard to the interface and all around the consumable association will be different. We do believe that out in the current discussion with its capability, we should be able to do the measurement fully. Once the product is launched, when the Embra market as well established, we should be able to do a good measurement. Well, thank you. This is my Caravan, Credit Suisse. I have three questions. My first question is very simple. Please let me know what is your visibility for memory and SOC demands, please? If you're asking me now how surely or clearly now we can get to see in terms of revenue basis, I would say definitely and we can get to see in the 3 months ahead. In terms of orders, if you ask me if we can see clearly in 3 months in ahead, I have to say no, that is the case. That is my true answer. But having said that, There could be an opportunities coming up in 6 months in our head. And those opportunities may turn into the Verada specific deals possible for the close. Yes, sir, we have track record in the past. So based upon the track records by referring to this past performance, we should be able to actually come the certain clarity. So probably 6 months in general speaking, on the sales side. And of course, Arunis Ireland is looking into the longer Navios. My second question is about gross margin for the new fiscal year. You told us that it will come down by two point you mentioned about the price competition. But looking at your focus for sales for FY 'nineteen, memory would come down But, so Cigna side is still relatively and I show it in our firm growth. If I'm not wrong, And having a firm associate, that will improve overall positive effect on operating income as a whole. If I'm not wrong, you are assuming, for the somewhat lower gross margin, for memory, particularly due to the competition, the visibility in South Korea, But you are telling us that net net, you are going to have a down by the two points. Does that mean that, and are you going to any pain points in sourcing as well. May I remind you that our products do support diverse device types And furthermore, our customer side is moving to change and their supply chains. By that, what I mean is that a customer, so far has purchased a product from the supply chain, but now he's buying the product on his own. So we already seen a slight change in the power balance. And we start going on, even as we've seen, the margin would come down for sure. With all of these factors and take into account, we have made our plan for profit with a slight decline. My third question is about your conservative number of 1,000,000,000, you are showing in near midterm plan, operating margin being 15% or operating income itself being JPY 34,500,000,000 And this time, you are showing your sales being 1,000,000,000 and profit being 1,000,000,000, does that mean You can achieve growth just through the entire mixture or do you intend to make a further internal efforts such as in cost reductions as much as 1,000,000,000 within your midterm plan. It is going to be in our orientation And furthermore, since you are the same margin situations, including SLC, and if that's the case, are you planning to do any measures to cope with this situation? At this time, last year, yes, we made plan for JPY 230,000,000,000 and JPY 34,500,000,000 in profit, yes, that was a plan we had assumed and we made The biggest difference comes from the fact that we have become a lot more aggressive based upon our own observations in 2018. If we are in 2019 and also further decline in 2020. If that will be the case, we probably in any kind of draft cost reduction efforts, but we do not believe that will be the case. Rather it's the other way around, this is the basis for the JPY 30,000,000,000 in scenario. If we are to take, well, how to put it, if we are to and act naturally, we could reach for JPY 34,500,000,000 or around rather unless we make some summer big investment now and moving toward a 2020 and onward, we may be missing her to catch a bigger game With this point in mind, we have come up with these numbers. Thank you for the explanation. This is Yoshira with the Deutsche Security Zinc. I have two questions. First, concerning the system level testing with Astronics, I would like to know now if, how its numbers is included in the current number, you are showing to us in terms of orders and sales. You are asking about our sales forecast for the current fiscal year, right? We are now expecting about $55,000,000 to $60,000,000, for the current fiscal year. Since the unit price is rather high, the volume is not going to be that large. That, we are here, and just looking at the there are existing customers in our booking, for orders and sales. But going forward, in our sales activities, we will definitely go for marketing activities with our customers, not their customers, So I believe the orders and number now may increase from now on. So we have expectations for increased sales for the next year and onward. Any comments in regard to the profitability? Well, compared with our gross margin, I think, you know, they are on partner to us. That's the kind of level. But if sales level comes down, since we have to build in fixed cost, Well, when we bought it, it was on the positive side, but since we are going to put our resources in there, If the sales comes down gradually or how to put it, if our sales numbers are declined, then we may end up with a negative number Am I right assuming that for the current fiscal year, they are reflected as positive numbers in your latest plan? Yes, you're right, positive. If you could give me more information in terms of scale? Well, in terms of scale, since it is around 1,000,000 or so in sales, so it is going to be above 10%. Thank you. Moving on to my second question on 5g Moving on to my second question on Faxin on Slide 23. I believe you are showing here on both the beginning as well in future demands. Could you elaborate on the timeline, so to speak? Whether or not you do believe that these things are not going to develop as shown in this order or You believe that some of the things may come up to the surface and all of a sudden in parallel, for example, in China, actually, and they are planning to provide subsidies for 5G toward the end of the year. So under some of the things that may actually get started much earlier than you are expecting and any thoughts in this regard this? Well, several points. Smartphones and to be launched This year need to both support 4G and 5G. So the key here is going to be the base stations, our infrastructure So again, our phones to be launched this year as new phones. Again, those phones need to be supporting 4G and 5G. And if that's the process business is expected to further grow, should be able to actually get to see revitalizing our marketplace. But it all depends upon the time required in order to advance the infrastructure on the side of base stations. It all depends upon the initiation and the specific country in question. So I think we need to have a better insight in this regard. You may have more questions, but we are running out of the time. So allow me to conclude the here now for Advantes and FY2018 Information Meeting. I would like to thank you again for your participation despite your busy schedule.