Earnings Call: Q4 2019

Feb 11, 2020

Good afternoon, and welcome to Diodes Incorporated Fourth Quarter And Full Year 2019 Financial Results Conference Call. At this time, all participants are in a listen only mode. As a reminder, this conference call is being recorded today, Tuesday, February 11, 2020. I would now like to turn the call over to Leanne Sievers, of Shelton Group Investor Relations. Leigh Ann, please go ahead. Good afternoon, and welcome to Diodes Fourth Quarter And Twenty Nineteen Financial Results Conference Call. I'm Leanne Sievers, President of Shelton Group, Diodes' Investor Relations firm. Joining us today are Diodes' President and CEO, Doctor. Keishi Lu, Chief Financial Officer, Brett Whitmire, Vice President of Worldwide Sales And Marketing, Emily Yang, and Director of Investor Relations, Laura Murrow. Before I turn the call over to Doctor. Lu, I'd like to remind our listeners that the results announced today are preliminary as they are subject to the company finalizing its closing procedures and customary quarterly review by the company's independent registered public accounting firm. As such, these results are unaudited and subject to revision until the company files its Form 10 K for its fiscal year 2019. In addition, management's prepared remarks contain forward looking statements which are subject to of the Safe Harbor for forward looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today and therefore, we refer you to a more detailed discussion of the risks and uncertainties in the company's filings with the Securities And Exchange Commission, including Forms 10 K and 10 Q. In addition, any projections as this company's future performance represent management's estimates as of today, February 11, 2020. Diodes assumes no obligation to update these projections in the future as market conditions may or may not change, except to the extent required by applicable law. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information and GAAP and non GAAP terms. Included in the company's press release are definitions and reconciliations of GAAP to non GAAP terms, which provide additional details. Also throughout the company's press release and management statements during this conference call, we refer to net income attributable to common stockholders as GAAP net income. For those of you unable to listen to the entire call at this time, a recording will be available via webcast for 90 days in the Investor Relations section of Diodes website at www.diodes.com. And now I'll turn the call over to Diodes' President and CEO, Doctor. Keh Shew Lu. Doctor. Lu, please go ahead. Thank you, Diane. Welcome everyone and thank you for joining us today. 2019 was another record year for Diodes across all financial metrics. Generating solid revenue growth as well as increasing profitability and cash flow. Additionally, our record performance in the automotive and the natural market command with record sales from our telecom IC products continued to be key contributors to our growth and margin expansion. We have also been able to strengthen our balance sheet and significantly reduce long term debt to below $100,000,000. Our full year revenue growth of 2.9% Once again, outperformed our server market, which was down 6.6% in 2019. This consistently above market performance It's a Nidec result of our target sales strategy to serve as a total solution provider leveraging our expanded product portfolio and the volume customer relationships. Our approach has also results in increased market share and content gains across key end equipment, while also and tracing new application area. Looking forward to the coming year, We expect to maintain our strong performance and continuing achievement of good results as we take further steps toward our long term finance goals of 40% gross margin and 20% operating margin with the automotive and industrial markets approaching to our target of 40% of total revenue. We are well positioned to further drive growth and margin expansion. Our focus remains on increasing content across the growing end markets of automotive, industrial, high end servers and storage 5G as well as IoT. Before I turn the call over to Brett, I would like to take a moment to comment about the coronavirus outbreak in China. 1st and foremost, our top priority is our people and Diodes is taking proactive measures to protect the safety, health and well-being of our global associates as well as their family and the communities. Brett will discuss this further as part of the first quarter 2020 outlook. Additionally, I would like to provide a brief update on our proposed acquisition of Nion Semiconductor. As we announced in January, Nionsemiconductor approved a resolution in which they saw more than half of their holding of owned by electronics or 16.5 percent of outstanding to offers. An entity in Fitch, Ombre will become a wholly owned subsidiary This stock transition was completed on January 14th at NT $2.21 per share, upon approval and the completion of the merge between on price and offers, direct owned semiconductors, the remaining 14.69% of owned price shares will be exchanged for $80 $2.30 per share on the record day of the merge. As we stated in our announcement, Those actions were taken in order to help facilitate the review by the relevant Chinese authorities. We remain confident our acquisition of biomonsemiconductor will close as planned. Once the final regulator approval has been secured, which we anticipate will be in the second half of the year. With that, let me now turn the call over to Brett to discuss our fourth quarter and full year financial results. And our first quarter 2020 guidance in more detail. Thanks, Doctor. Lu and good afternoon everyone. As part of my financial review today, I will focus my comments on as well as was $301,200,000 as compared to $323,700,000 in the third quarter of 2019. For the full year 2019, revenue was a record $1,250,000,000, an increase of 2.9% from $1,210,000,000 in 20 18 and well over the growth of our served markets. Gross profit for the fourth quarter was $109,400,000 or 36.3 percent of revenue, compared to the third quarter 2019 of $122,000,000 or 37.7 percent of revenue, For the full year, gross profit increased or 37.3 percent of revenue as compared to $435,300,000 or 35.9 percent of revenue in the prior expenses for the fourth quarter 2019 were $48,100,000 or 16 percent of revenue and on a non GAAP basis were $65,200,000 or 22 percent of revenue, which excluded a $24,400,000 pre tax gain on the sale of land, $4,500,000 of amortization of acquisition related intangible asset expenses, $1,600,000 loss on asset impairment and a $1,200,000 acquisition related costs. GAAP operating expenses in the prior quarter were 73.3 only $1,700,000 for the quarter, including $2,400,000 of foreign currency losses, $1,700,000 of interest expense, partially offset by $2,000,000 of other income and $409,000 of interest income. Income before taxes and non controlling interest in the fourth quarter 2019 was $59,600,000. Compared to $48,700,000 in the previous quarter. Turning to income taxes, our effective income tax rate for the fourth quarter was approximately 20 point was $47,200,000 or $0.90 per diluted share compared to GAAP net income of 38,100,000 or $0.73 per diluted share in the third quarter 2019. The share count used to compute GAAP diluted EPS for the fourth quarter 2019 was 52,100,000 shares. GAAP net income for the full year 2019 was a record $153,300,000 or $2.96 per diluted share. Compared to $104,000,000 or $2.04 per diluted share in 2018. Non GAAP adjusted net income in the fourth quarter was $33,800,000 or $0.65 per diluted share. Which excluded net of tax $19,200,000 gain on land sales, $3,700,000 on noncash acquisition related intangible asset amortization costs and $1,300,000 of asset impairment charges. This compares to non GAAP adjusted or $0.81 per diluted share in third quarter 2019. Non GAAP adjusted net income for the full year 2019 increased 24.6 percent to a record $151,100,000 or $2.91 per diluted share. Compared to $121,300,000 or $2.38 per diluted share in 2018. EBITDA for the fourth quarter was $88,300,000 or 29.3 percent of revenue, compared to $78,300,000 or 24.2 percent of revenue in the prior quarter. EBITDA for the full year improved over or 25.1 percent of revenue compared to $261,100,000 or 21.5 percent of revenue last year. We have included in our earnings release adjusted net income and GAAP net income to EBITDA, which provides additional details. Cash flow generated from operations was $52,100,000 for the fourth quarter 2019. And $229,800,000 for the full year. Free cash flow was $29,700,000 for the fourth quarter which included $22,400,000 for capital expenditures and $131,300,000 for the full year which included $98,500,000 of capital expenditures Net cash flow in the fourth quarter was a positive $39,800,000, which includes the paydown of $22,600,000 of long term debt, in the 4th quarter and a positive $17,700,000 for the full year, including paydown of approximately 117 $300,000 of long term debt during the full year 2019. Turning to the balance sheet, At the end of fourth quarter, cash and cash equivalents plus short term investments totaled approximately $263,000,000. Working capital was $524,500,000 and long term debt, including the current portion, was $98,000,000. In terms of inventory, at the end of the 4th quarter, total inventory days increased to 112 in the quarter compared to 104 last quarter as we prepared for the Chinese New Year. Total inventory dollars amounted to approximately $236,500,000 which reflects a $3,200,000 increase in finished goods and a $2,400,000 increase across raw materials and work in process. Finished goods inventory days was 29 in the quarter compared to 27 in third quarter 2019. Capital expenditures on a cash basis for the fourth quarter 2019 were $22,400,000 or 7.4 percent of revenue, and $98,500,000 or 7.9 percent of revenue for the full year. We expect CapEx for the full year 2020 to remain within For the first quarter of 2020, we expect revenue to be approximately $290,000,000 plus or minus 3 percent. At the midpoint, this represents a reduction of approximately 3.7% sequentially, which is better than the typical seasonality. We expect GAAP gross margin to be 35.0 percentplusor-1 percent. These guidance ranges reflect the delayed start to manufacturing production following the extended Chinese New Year holiday due to the coronavirus outbreak in China. All production, including wafer fabs and assembly test facilities in China, resumed on February 10, but we anticipate it to take longer to return to full production. At this time, it is difficult for us to fully determine the potential impact to the supply chain Diodes does not have a manufacturing facility in the affected areas of Wuhan and Hubei province as our primary facilities are located in Shanghai and Chengdu. Similar to many other companies, we will continue to closely monitor the situation. Continuing with our first quarter guidance, non GAAP operating expenses, which are GAAP operating expenses adjusted for amortization of acquisition related intangible assets are expected to be approximately 22.5 percent of revenue, plus or minus 1%. We expect net interest expense to be approximately $2,000,000. Our income tax rate is expected to be 20 percent plusor-3 percent, and shares used to calculate diluted EPS for the first quarter are anticipated to be approximately 52,900,000 Please note that purchasing accounting adjustments of $3,700,000 after tax for Pericom and previous acquisitions are not included in these non GAAP estimates. With that said, I now turn the call over to Emily Yang. Thank you, Brad, and good afternoon. As Doctor. Lu and Brad mentioned, we had a record year in 2019 with revenue growth once again outperforming our served markets. Looking more closely at the fourth quarter, revenue reflecting the seasonal softness in inventory adjustments that are typical of our industry at the end of the year. POS was down slightly mainly driven by the slowdown during Christmas holiday in North America and Europe Distributor inventory in terms of weeks was flat in the 4th quarter, which is within our normal range of 11 to 14 weeks. We expect distributor inventories to remain within our normal range of 11 to 14 weeks in the near term. Looking at the global sales for 2019, Asia represented 75% of revenue, Euro 15% and North America 10%. In terms of our end market distribution for the whole year, the industrial market represented 28% of total revenue consumer 23%, communication, 23%, computing, 16% and automotive 10% of revenue. Now let me review the end markets in greater details. For the automotive market, we continue to see significant growth in this market as we capture both increasing market share and content gains, despite the overall challenges with the decreased unit output of autos during the year. Revenue in this end market grow more than 14% in 2019 to 10% of the total revenue, representing a 29.4 Percent CAGR since 2013. Our ability to secure an increasing number of design wins have been a key factor to our success, in particular for application in connected driving, including ADAS, telematics and infotainment as a result of the record increase of electronics in today's highly connected cars. In addition, robust ES protection is becoming increasingly more important and our production products offer high reliability and high performance solutions in ESE protection that covers the entire spectrum for connected driving applications. We are also seeing continued success with our proprietary SBR technology. These products are optimized for high search capability to ensure greater protection against negative spikes and inductive low surge, thereby yielding increasing ruggedness and reliability in often noisy automotive applications. This product series is suitable for a wide range of applications in connected driving powertrain, battery management, lighting, body control and central infotainment display. Additionally, we continue to expand our contact in comfort safety and lighting area. Our new Zener Diodes product family is gaining momentum in automotive lighting applications and we also have strong momentum for bipolar transistors in lighting, LiDAR, radar and wireless charging. Also in the automotive space, Diodes leading PCI Express gen 2 package switch solutions were broadly adopted in the next generation telematics design and will start to ramp this year. During the quarter, we also continued to expand our leadership position by releasing additional Peritone products including a PCI Express Gen 2 package switch family that meets the AECQ100 grade 2 for higher temperature requirement and low standby power consumption to care, revenue grew 14.7% for the full year over 2018, representing a 6 year CAGR of 14.6%. Brushford's DC motor LED lightings are key industrial application for Diodesmosset product We have TrenchMOS technology for better safe operating areas. We are also addressing e meter applications with our SAS and YN LDOs with direct adoption of high speed interfaces across multiple end applications in the IoT industry ESC protection is increasingly more important for this data links. Diodes data line platform features ultra low capacitance with industrial lithium search handling and ESD protection characteristics. For the industrial DC fan and lighting market, our SBR and Shopee products offers cost performance in a high temperature operating environment that is ideal for these applications. Shawke Diodes offers low and stable leakage under the high thermal stress, while our rectifier package in the ultra thin CST package are growing in popularity for the space saving in DC fan applications. We're also seeing our latch and Omni polar haul sensors gaining momentum in the security cameras, fans, e bikes and power tool applications. Turning to consumer space, quick charges and direct charges have gained momentum in the response to the market need to reduce the charging time of batteries. The ultimate solution of USB power delivery is to propel the output power to a higher level. With Diodes Advanced SGT technology, 40 to 100 World MOSFET offers synchronized rectification and secondary synchronized rectification to support a wide voltage range power charging also gained momentum because of the convenience of use to increase the wireless transmitter power 20 to 30 volt MOSFET in smaller package are required, which Diodes offers. Also in the consumer market, Diodes protection products including TVS, DCDC, LDO, SBR, and Shopee families are gaining traction in panels. In the communication market, mobile communications have profoundly changed people's life with a 5G emerging as a key solution to meet the significant speed upgrades and large bandwidth requirements. Diodes seeing increasing demand in this area for our products that helped improve 5G amplifier performance both the power in the base stations and also safe on power consumption. Diodes PCI Express Gen 2 Packet Switch family are designed into 5g mobile routers and 5g CPE home routers. Diodes also released our next generation Meety221 switch for cell phone applications with higher resolution capability and superior performance under crosstalk further delivers the higher system performance for camera picture quality supporting 5G phones, which are expected to hit the mainstream market in 2020. Lastly, in the computing market, our SASP products saw a resurgence of revenue growth in notebook PC applications in GPP rectifiers and bridge rectifiers as well as TBS products. As local and PC markets continue to adopt USB Type C, This application is emerging as the next big growth engine for power protection. We have current solutions to protect all pins on Type C connectors and are also developing custom solutions for customer specific usage on Type C applications. Additionally, Diodes comprehensive product portfolio for docking stations continue to provide customer solutions for interface and switching needs. Our newly released PCI Express Gen Four crossbar switches offers a bike best performance with high bandwidth and low signal loss, while also being designed in for connecting the notebook to dark port at major OEMs. In summary, our achievement of record annual results and growth that exceeds our served market is further testament to our success of our total solution sales approach that has resulted in market share gains and content expansion at key customers. We are well positioned to continue driving further growth and margin expansion in the coming year, and looking forward to reporting our ongoing success and milestone achievements towards our long term financial goals. With that, And our first question comes from the line of Gary Mobluk of Wells Fargo Securities. Your line is now open. Afternoon everybody. Thanks for taking my question. I want to start by asking about your Q1 guide. It sounds as if your inventory your own inventory days were sufficiently high enough heading into the issue started the first quarter. And so therefore, I'm assuming that the fewer workdays among your employee base is not really having too much of an impact on your sales outlook for the first quarter, but really more so on the gross margin side. And correct me if I'm wrong there. But my question is, can we see some reversal of this impact in the 2nd quarter as presumably your manufacturing utilization rates would be higher in the 2nd quarter and thus some fairly sharp improvement in the overall gross margin? Okay, Gary. Let me answer those questions. First, you are 100% correct. In the end of in fourth quarter last year, because we know we're going to have a Chinese New Year slowdown as usual. So we fill up additional finished goods inventory to prepare for Chinese New Year. And then Now due to, unfortunately, due to the occurrence of virus, our factory in Chinese, in China actually slowed down the opening for more than we expect it, okay? And we plan. We don't typically, we only plan 3 to 1 week shutdown. And this time, we actually get over 2 week of the Chinese delivery shutdown. So, you know, it's unfortunately, we have finished good, built up And therefore, if you look at our guidance of 290,000,000 It already reflect the manufacturing slowdown and the inventory flush and all those to defect at least $290,000,000. The reason we put up a wide range of the revenue, change from typically 2 plus mass 2% to plus mass 3%. It was due still cannot fill out or we still don't know the supply chain. Our protein material, most of them coming from outside of China, but some of the supply chain material, is coming locally and that we don't know what will be happening, okay, even we have some inventory, but we still cannot figure out what will be the old pictures. And most uncertainty is our customer because our customer get the same reaction or the same restriction such that they cannot open until February 10. And some of the factories as some of our customers even extend that shutdowns. And if you as a factory in Hawaii, that still don't know what going to happen. And so from all this one, we opened up our range for the revenue. Then you're talking about gross margin. The gross margin because it stands shut down and therefore we guide for 35% And the best since from that point of view, we think we already know or at least we can view up how many people return and what kind of run rate going up from week to week how many people will return to work from week to week. Therefore, we guide that's usual, plus minus 1%. So basically, this is the reason we give that kind of guidance we already, you know, we already anticipate the revenue and wafer fab and stem read function. And I think my speech we always tell you, we do not have our factory in, you know, Wuhancourt or FoodPay Province And most key manufacturing factories is in Shanghai, including Hwafer fab and assembly and Intendu, those are the key manufacturing area And that and virtually our wafer fab is not that much it's surprised by China, but we still have a lot of wafer support from like OFAD in Oregon, we have foundry from Japan, Don't move and that Taiwan mix shift and negative chip in Korea, okay? And then then Venga and Next ship in Taiwan and even FinTechs in Japan. So we have a lot of wafer supplies. So our XFET is a very small portion of our wafer fab support, okay? And if AT is more concentrated in China, Okay. And so, but from the guidance point of view, we still better than seasonality even we in a down 3.7% is still better than seasonality and is already putting the consideration of the factory slowdown and the only thing we don't know will be supply chain and customer requirement. Now you're talking about, yes, and then you after the second quarter, if the demand stratification trend is mainly the demand, okay? We should have enough capacity and we already know by end of 1Q, our walker should be already back to normal. See, today, our CAT today is already main power is up to 85% Now SAT in Shanghai, yes, it's only 45%, but they already have a control know who will be back, who cannot be back, who will be need to be corner at home. So we contact with all our employees to understand where they are and how quick they go back to work. So, we believe by the end of this month, February, we should be up to 60%, 70% then by end of March, we should be up to 90%. So I think you are right. In the second quarter, we should be fully up to to run-in the manufacturing. Then the only question would be, is our customer can fully back or not? So that is the one we don't know. Brett, a couple of quick questions for you. I noticed your first quarter non GAAP OpEx guidance is flat sequentially. And correct me if I'm wrong, but don't you normally see some sort of a merit increase in the 2nd fiscal quarter in could you sort of quantify what that may be and as well what your full year 2020 OpEx growth may look like if there's any growth at all? Well, actually, let me answer that for Brett. Okay. We have 2, 2 times. We have 2 different time period for the condensation in Greece, okay. In the seminary, Then is China, NetKing Function And Officer, compensation increase. Then in July, 1st, will be the compensation in increase for the rest of the people, okay. So the NPE for the gross margin Actually, in the 1Q, you can see some, but it's not a major significant GP burden. The GP modem, more is because the extent is the Chinese new year slowdown. And especially this year, that's more than usual slow down, okay? And that is what caused our GP. And another reason caused the GP is the revenue If because the revenue is down, then your GP will be down because building rate in our factory typically will be slow down. So utilization will not be full. Okay. What about tax rate for the year? Are you going to stay around this 20% mark that you're starting the year with? Yes, I think 20% is a good assumption. Thank you. Our next question comes from the line of Sean Harrison from Longbow Research. Hi, Sean. Hi. Is my math right that the extra week of shutdown is maybe costing you within the guidance $2,500,000 or $3,000,000 of cost. Is that the right way to think about it on a dollar basis that that type of drag wouldn't repeat itself into the June quarter? I really don't know on that because it depends on the mix. If from Raymond point of view, it depends on the mix and we do have the inventory, we can ship it out. Okay. So I don't have the numbers. I took the data, okay. And I do I remember the number we try to ship it out from the our warehouse we call SDC in Shanghai, Shanghai distribution center, which is our warehouse currently we plan to ship out that inventory 900,000,000 units. But I do I don't know what would be the ASP and what would be the the GP increase due to that. But I know the number, but I do not get into how much That will be. Okay. You're not seeing anything abnormal in the pricing environment right now, though, Doctor. Louis, it's pretty benign still. I actually do not want to drop the price because if the demand is the issue No, that's for us, okay. Surprise. We Yes. Let me answer the question. We have on releasing anything at normal price pressure or price change going through this time period at this moment. Okay. We did have, yes, we did have 1.5% to 2% reduction buffered into our business. Mobile. Model. Our biggest model typically is once quarterly ASP dropped 1.5% to 2%. We still see in that kind of model, but we don't see unusual price pressures. Okay. And then one final question, let's exclude maybe the virus unknown for a second, but you grew fantastic double digits in the industrial and auto business last year. Do you think you have the kind of the product wins or share gains or whatever that would allow those businesses to see that type of robust growth again in 2020? Yes. Okay. Now I'd say it's a tough financially yes. Because we've done the whole industry will be done anyway. If the demand really slow down, not because it's due to some key component or some level, the the factories our customer cannot get enough labor to building the units or due to the key component cannot supply. The whole industry will be done anyway. So we are in the position because of product portfolio and because our solution sales and all this one I just don't think I don't see a reason why not. We have really good pipeline right now. Really the result for all this, commitment and the demand creation from the past. So we're pretty confident that we'll continue to grow in the automotive area. Especially some, for example, the next generation telematics adopted like telecom side of the product. So we really come than that, the momentum will continue. And our next question comes from the line of Tianyan Gohner from Sidoti. Hi. Thank you for taking my questions. So I just wanted to get some sense about the revenue in 2020. So you know, because usually the revenue kind of in the first half and the second half are pretty evenly split. So for this year, probably we should say some second half loaded. Is that a Well, for sure this year will be because 1Q is going to be so much trouble or uncertainty due to the coronavirus and I believe It will be thrown under impact in second quarter, but I still don't have any information are they going to be complete, recover by endofsecondquarter? I don't know. That will be the case or not. But if that happens, then third quarter4thquarter will start to to booming. So I definitely agree first hand will be the 2nd half of twenty twenty. Next one, maybe some color on the end markets, for example, communications and consumer computing. So in 2020, I know industrial and automotive will be still strong, but so when we look into 2020, how should think about those 3 remaining in the markets? Right. So let me address this. This is Emily. I think for communication, you know, I did mention a little bit that right. 5g installment is actually going to be especially on the mobile side from the start renting. And we believe that will be definitely boost up some of the areas, this area. On top of that, also the routers and switch related to the 5G. So we think this is going to be a bright spot for us. But the computing as well, right? If you really think about, we talk about the data rate, we talk about the speed. So we believe the computing, especially higher server and router and storage, we continue to drive some of the upside momentum and opportunities for us, right? I think for consumer side, right, the IoTs even related to 5G that's actually going to drive some of the new demand in this area. So we're pretty are confident, we continue to focus on the, you know, areas we've been talking about, right, 5g's within community patient, you know, high end server storage with things, you know, the computing area and IoT on the consumer side on top of the industrial automotive that we showed significant performance in both of these areas already, right? So that's been continue to focus and that's not going to change in 2020. Okay. But in 2019, I think all 3 and the markets were down like a single digits or low single digits. So should we expect that the trend would be very similar in 2020? When you say single digit, you mean the growth in single digit? Yes, correct, yes, correct. Right. But if you consider overall market in Brett's comments, the overall market with our participated area 6.6% drop, right? So even with the single digit growth from dials, that's still outperformed compared to all our other peers in the industry, right? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Well, if you look at minus 6.6+2.9 then actually it's almost 10%. And then also for example in the computing area, we're all aware of the Intel chip slash shortage and stuff like that. We believe in 2020 the situation will improve based on Intel's, you know, announcement so that the other area that you know, it's also driven by the market and also you know, driven by the other vendors that you know, tracking market as well. Okay. That's very good. So my last question, if I may, would it be for Brett, you know, on the CapEx, you just mentioned that in the prepared market, would be the good assumption. So I'm wondering considering, you know, in the third quarter 4th quarter, that capital intensity was like a 7.9% should we assume at the higher end of a 5% to 9% or just let me point? Well, let me answer this because I will not allow, okay, the CapEx above our model because our model is 5% to 9%. So, I will not it. But only one case, if we out of the space in Chengdu, then we did build a turn to another big building, another facility and and the command and all this. So when we out of the capacity of space for them to we do need to fill the buildings then that will boost up our CapEx, a little bit darker, a little bit more, but fortunately they are not depreciated in 5 years. Here in 15 years. So, it's not a big depreciation. Okay. So, We will still try to keep it at 5% to 9% mobile Okay. Thank you. So that's all for me. Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Doctor. Lu for closing remarks. Okay. Thank you for your participation on today's call. Operator, you may now disconnect Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.