Earnings Call: Q2 2021

Aug 5, 2021

Quarterly report

Welcome to the Diodes Incorporated Second Quarter 2021 Financial Results Conference Call. My name is Vanessa, and I will be your operator for today's call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. I will now turn the call over to Leanne Sievers of Stoughton Group Investors. Good afternoon, and welcome to Diodes' I'm Leanne Sievers, President of Shelton Group, Diodes' Investor Relations firm. Joining us today are Diodes' Chairman, President and CEO, Doctor. Keh Shew Lu Chief Financial Officer, Brett Whitmire Senior Vice President of Worldwide Sales and Marketing, Emily Yang Senior Vice President of Business Group, Gary Yu and Director of Investor Relations, Laura Merle. Before I turn the call over to Doctor. Liu, 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 Q for Q2 2021 ending June 30, 2021. In addition, management's prepared remarks contain forward looking statements, which are subject to risks And management may make additional forward looking statements in response to your questions. Therefore, the company claims the protection 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 ks and 10 Q. In addition, any projections as to the company's future performance represent management's estimates as of today, August 5, 2021. 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 in GAAP and non GAAP terms. Included in the company's press release are definitions and reconciliations to GAAP to non GAAP items, 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 atwww.diodes.com. And now, I'll turn the call over to Diodes' Chairman, President and CEO, Doctor. Keishi Liu. Doctor. Liu, please go ahead. Thank you, Lian. Welcome everyone and thank you for joining us today. Our record Q2 performance across all functional metrics is a testament To our strong execution and the global manufacturing footprint, enabling us to meet the growing demand for our product. Our growth was once again driven by record global POs revenue, As well as record revenue in the automotive, industrial and the consumer end markets, Especially in IoT, combined with record revenue in the computing market, Swerved in by our Pericom product for iNPC, server and datacenter applications, Diodes' continued success in those markets contributed to gross margin expansion In the quarter of 270 basis points sequentially and also reflected The continued improvement in the rolling at the Dione Semiconductor Facility. In fact, loading at the LC facility reached 87% in the quarter, which is approximately 6 months ahead of the original planned ramping schedule. Further highlighting our results was the achievement of weaker GAAP And non GAAP net income as well as EBITDA, which increased 22% sequentially to almost 23% of revenue. The highly accretive AOC acquisition, together Our significant operating leverage drove adjusted earnings per share for the 1st 6 months of 2021 to more than double the adjusted EPS reported in the same period of 2020. And with our expectation for another quarter of record results in the 3rd And internal manufacturing expansions and improved product mix, we are all positioned To deliver continued growth, increasing profitability and shareholder value, Our achievement of year over year revenue growth of 53% and the gross profit increased 57% This quarter representing a major step toward our long term goal of 2,500,000,000 In the revenue and $1,000,000,000 in gross profit by year 2025. With that, Let me now turn the call over to Brett to discuss our Q2 financial results and our Q3 2021 Thanks, Doctor. Lu, and good afternoon, everyone. As part of my financial review today, I will focus my comments on the sequential change for each of the line items and will refer you to our press release for a more detailed review of our results as well as the year over year comparisons. Revenue for the Q2 2021 was a record $440,400,000 an increase of 7% from the 413 point a record at $159,800,000 or 36.3 percent of revenue, increasing 15% or 270 basis points from $138,600,000 or 33.6 percent of revenue in the Q1 20 21. I would also like to point out that the gross profit increased 57% from $101,500,000 In the Q2 2020, GAAP operating expenses for the Q2 2021 were $94,400,000 or 21.4 percent of revenue and on a non GAAP basis were $90,400,000 or 20.5 percent of revenue, which excludes $4,100,000 of amortization of acquisition intangible asset expenses. This compares to non GAAP operating expenses in the prior quarter of $86,400,000 or 20.9 percent of revenue. Total other income amounted to approximately 5,400,000 For the quarter, consisting of $5,300,000 of unrealized gain on investments, dollars 1,800,000 of other income and $818,000 of interest income, partially offset by $2,000,000 of interest expense and $500,000 in foreign currency loss. Income before taxes and non controlling interest In the Q2, 2021 was $70,700,000 compared to $50,000,000 in the previous quarter. Turning to income taxes, our effective income tax rate for the Q2 was approximately 17.1%. GAAP net income for the Q2 of 2021 was a record $55,400,000 or $1.22 per diluted share compared to GAAP net income of $39,500,000 or $0.87 per diluted share in the Q1 2021. The share count used to compute GAAP diluted EPS GAAP adjusted net income in the 2nd quarter was a record $54,600,000 or $1.20 per diluted share, which excluded net of tax $3,400,000 of acquisition related intangible asset costs, $100,000 of acquisition related costs and a $4,200,000 gain in value on certain LSC investments. This compares to non GAAP adjusted net income in the Q1 of 20 21 of $42,000,000 or $0.93 per diluted share and a significant improvement from the $28,600,000 or $0.54 per diluted share in the Q2 2020. Included in the Q2 2021, GAAP net income And non GAAP adjusted net income was approximately $6,800,000 net of tax of non cash share based compensation expense. Excluding share based compensation expense, both GAAP earnings per share and non GAAP adjusted EPS would have increased by $0.15 per diluted share for the Q2 2021 and $0.11 for Q1 2021. EBITDA for the 2nd quarter was a record $99,400,000 or 22.6 percent of revenue compared to $81,700,000 or 19.8 percent of revenue in the prior quarter. On a year over year basis, EBITDA increased 80% from $55,300,000 in the Q2 of 2020, further to non GAAP adjusted net income and GAAP net income to EBITDA, which provides additional details. Cash flow generated from operations was $93,900,000 for the Q2 2021. Free cash flow was Net cash flow in the 2nd quarter was a negative $36,200,000 which included the pay down of $114,200,000 of total debt. Turning to the balance sheet. At the end of the second quarter, cash, cash equivalents, Restricted cash plus short term investments totaled approximately $302,000,000 Working capital was $582,000,000 and total debt including long term and short term was $301,000,000 Total cash this quarter is greater than our total debt, demonstrating our significant cash generation that has enabled us to be back in At the end of the Q2, total inventory days decreased to approximately 96 in the quarter as compared to 98 last quarter. Finished good inventory days also decreased to 26 from 27 in the Q1 of 2021. Total inventory dollars increased $14,200,000 to approximately $304,100,000 Total inventory in the quarter consisted of $8,200,000 increase in raw materials, a $6,900,000 increase in work in process and a $900,000 decrease in finished goods. Capital expenditures on a cash basis for the Q2 2021 were $27,900,000 or 6.3 percent of revenue. We expect to remain within our target model of 5% to 9% for the full year. Now turning to our outlook. For the Q3 2021, We expect revenue to increase to approximately $467,000,000 plus or minus 3%, which represents a record on both an organic and a consolidated basis for a combined increase of about 6% sequentially At the midpoint, which is better than typical seasonality, we expect GAAP gross margin on a consolidated basis to be 37% Plus or minus 1%. Non GAAP operating expenses, which are GAAP operating expenses adjusted for the amortization The acquisition related intangible assets are expected to be approximately 20% of revenue, plus or minus 1%. We expect net interest expense to be approximately $1,200,000 Our income tax rate is expected to be 18% 45,800,000 shares. Please take note that purchasing accounting adjustments of $3,400,000 after tax Pericom and previous acquisitions is not included in these non GAAP estimates. With that said, I will now turn the call over to Emily Yang. Thank you, Brett, and good afternoon. As Doctor. Lu and Brett mentioned, 2nd quarter revenue was a record and increased 7% quarter over quarter, which was at the high end of our guidance due to strong demand across all target end markets and geographies. POS revenue was at a record, driven by record revenue in all regions. Distributor inventory in Looking at global sales in the Q2, Asia represented 80% of the revenue, Europe 12% and North America 8%. In terms of our end markets, computing represented 30% of revenue, industrial 22% consumer Industrial, consumer as well as computing end market, which was driven by record Pericom revenue. Now let me review the end markets in greater details. Starting with automotive, revenue increased 83% year over year to Other quarterly record and contributing to an increase in our 8 year CAGR to 29% since Established the Automotive division in 2013. We continue to see significant growth in this market as we capture both increasing market shares and contact gains despite the overall supply challenges. This growth reflects the success of Diodes' solution sales and demand generation efforts in penetrating new and existing automotive customers and applications. We are securing an increasing We're also gaining traction for our dual and quad channel Op Am in multiple applications as well as LED drivers in DI running light, Rear brake light, lamp control applications, automotive DC to DC converters continue to see strong growth With newly released product targeting applications such as infotainment power supplies, forward lighting, taillights, instrument clusters, Telematics and Advanced Driving Assistance. In ADAS specifically, we continue to increase our in this area with our 4 channel low capacitance TVS products for automotive data line protection due to increased demand for electric vehicles. Additionally, with strong demand in the automotive intelligent applications, we have successfully secured design ins for Pericom IO Expenders in Smart Copic and ADAS system. The Pericom product have gained increasing contact opportunities with new design for our low jitter CMOS buffer in infotainment and other in cabin applications. SBR Schottky devices also delivered Solid revenue across several applications, along with new design ins for battery management systems, instrument panels, infotainment, headlights, Drive for monitor system and sell a vehicle to everything applications. In the industrial market, revenue increased 53% year over year to a quarterly record as we continue to view strong momentum across our product portfolios. We saw strong demand for LDOs for power tools, e meters and other industrial applications. Our IoT, security, servomotor, smart grid energy and power supplies. We're also Increasing design wins for our LED drivers in air purifiers with UV C light disinfection and Internet camera in Industrial IoT and Embedded Applications. In the consumer market, revenue was also a record as we continue In addition, home appliances are starting to use higher energy conversion efficiency for their rechargeable batteries, And we have a leading AC to DC product platform for light low high efficiency features. We're also seeing a strong demand for cameras, smart light bulbs, smart door locks, streaming boxes, cable modems, monitors and televisions. Our discrete product also being designed into home security system and gaming console applications. In the communication market, we continue to focus on mobile, smartphone and especially 5 gs applications. We are seeing traction for Schottky Diodes in Access Point Router, Schottky's and Superfast rectifier in Power over Ethernet Adapters and Hyperfast rectifier in 101 open frame designs. TVS product revenue is also growing as our unidinational TVS product A design into USB Type C, a new generation smartphone equipped with a quick charging feature. With the demand for the higher working voltage And higher search capability, TVS demand has been on the rise for the most smartphone manufacturers as the quick charging and wireless charging feature become mainstream. We also enjoyed revenue growth and design wins for LDOs in smartphones, fast recovery rectifiers and glass passivated rectifiers in applications like mobile phone charging, sustainable energy and telecom power supplies. Additionally, we continue to experience increasing demand for our Pericom product in the communication market. As mentioned in the last quarter, Pericom Frequency Control Products, ultra low jitter small sized crystal oscillators family has Several design ins into optical modules. Pericom's packet switch also saw increasing demand and design in activities in both PCI Express 2 0 and PCI Express 3.0 products in applications such as set top boxes and consumer premises equipment. Lastly, in the computing market, revenue grew 141% over the prior year period to a record, In part driven by record Pericom revenue, our strong growth in this market has been supported by continuous demand for notebook, crumpled and high end PCs, surfers and data center applications, overcurrent protection USB power switch And Compaq Load Management Switch continue to see strong demand and revenue growth from Chromebook and notebook applications, Along with design ins and design wins for CSP rectifiers, Omni Polar Hall Sensors, Dual Output Unit Polar Hall Sensors, DC to DC converters and USB charging type detector in new notebook, educational notebook and desktop PCs. Also in the PC market, we continue to see new design wins for our 1.8 volt redrivers, surfacing USB Type C and DisplayPort applications. We also have strong growth for HDMI DisplayPort Redrivers for high resolution displays and also released DisplayPort and HDMI 3rd consecutive quarter of record revenue, coupled with record performance across all financial metrics, Our increasing content expansion and market share gain in key target markets like automotive, industrial and computing are contributing to our growth as well as margin expansion. Additionally, the LSC integration continued to progress well and Customer, product portfolio synergies. With our expected for other quarter of record performance, We look forward to reporting our continuous progress. With that, we now open the floor to questions. Operator? And thank you. We will now begin our question and answer We have our first question from Gary Mobley with Wells Fargo Securities. Please go ahead, sir. Good afternoon, everybody. Congratulations on another strong quarter. I wanted to start off by asking about inventory in the channel. You, I think, mentioned And below trend for distribution, I'm assuming you're probably a couple of weeks below the low end of the normal range And you're heading into a seasonally strong quarter. So I presume that we might see another sequential dip And distributor inventory, correct me if I'm wrong there. But what I'm leading up to is a question about seasonality in the Q4. I would imagine And what is normally season slow Q4, that is perhaps when you're going to have the opportunity to rebuild some inventory. And so should we assume that you're going to see a very atypical seasonal 4th quarter? Hi, Gary. Thank you. This is Emily. Let me address the question. So you are absolutely correct. Our number of weeks The channel inventory went down this quarter, definitely below our normal range of 11 to 14 weeks. I think at this moment, it's difficult for us to predict the Q4, but we don't expect in the short term there will be Internally, we might want to build some inventory Because 1Q typically is a Chinese New Year quarter and From our manufacturing side, we might have the worker shortage or the Chinese New Year shutdown. Therefore, By past experience, the best way is build up internal inventory to support customer need In 1Q, because we still believe the market should be still strong and We cannot we need to have some inventory to support our customer. Right. Got it. Okay. Appreciate that. I guess this falls under the umbrella that investors always want more. You had A decent beat for the Q2, but perhaps not by as much as some other competitors. So my question to you is, Were you constrained at all by supply, supply of things like silicon wafers or anything like that, that may have constrained the 2nd quarter revenue? I think, Gary, let me address that question. I think, first of all, we really need to look beyond So if you look at our result, this is actually 3rd consecutive record revenue for Diodes, Right. So we definitely are seeing a supply and demand imbalance. And what we've been doing is actually Working through different challenges and also working with the customer very closely understanding their true demand, right? At the same time, we also see this It actually gives us a good chance to work with the executive team and continue to expand our We're showing a great result, right? So even you look at the guidance, our seasonality is 5%, and we actually guided So this is definitely above the seasonality and we're still seeing really, really strong overall demand. And if you look at we even have everybody know that supply It's a very constrained and shortage, but fortunately, we have several opportunity To improve our demand our supply, fortunately, we purchased the TFAB from Texas Instruments Back to 2019, and that it give us Tremendous of the capacity to supporting us and at the same time When we consolidate LAC, when LAC, the wafer fab is only half loaded. And so due to the last almost 12 months of the effort, we are qualified Our process into nylon semis wafer fab and because of that you can see we ramp it up Almost 6 months ahead of time. We start from 50% at the end of this last year. Then now in the end of Q2, we were up to 87% and that will continue Going to be improve our output, the volume, at the same time, We are putting up more expense some of the facility. So therefore, we believe We are better than our competitors in the supply point of view. All right. Appreciate it. Thank you, everybody. And thank you. We have our next question from Matt Ramsay with Cowen and Company. Yes. Thank you very much. Good afternoon, everybody. I guess this is a question for Doctor. Lu and then Emily, if you have anything to chime in. My observation has been that with the industry and many of your competitors' Supply constrained that this might be an opportunity for diodes, as a smaller supplier versus some larger competitors And this is an opportunity where you have supply and maybe some of your competitors do not, that you could win some new customer logos. That's the first question is, Doctor. Lu, is that in fact happening? And Emily, if you feel like you have opportunities to Sort of land and expand at those customers that might be won for the first time. Thanks. Yes, definitely that. We like I mentioned Earlier, right? We believe this is actually great opportunity for Diodes and working with customer closely, Building the stronger relationship, make the business and the partnership deeper, expanding the print position is definitely something we focus And that's also part of the reason you're seeing a really strong Q3 guidance and also Q2 performance, right? Got it. That makes sense. I guess as my follow-up question, I don't know if this is for Emily or for Brett, but if you could Give us a little color and detail maybe on what you expect from the different segments sequentially as we go into the September quarter guide that would be helpful for think everybody modeling. Thank you. Okay. So maybe let me start addressing that with the end market, right. So we're seeing pretty much Strong demand across all the regions and all the end market segments. Automotive, we're still seeing a lot of demand Opportunities and also momentum in the ADAS area, we call that connected driving, ADAS telematics infotainment. We Continue to see comfort, safety and lighting being adapted with a lot of new functions and feature. Electrification continues. We're definitely seeing the volume of electric cars output increase, right? So overall, we've seen really strong automotive Across all different areas that we focus on. Industrial, we're also seeing very strong demand and industrial crossover to a I would say some of the personal PC or motherboard definitely Grow a lot, right, throughout the last few quarters. We're still seeing good momentum, but we're definitely seeing stronger more into the server The data center area, but overall, it's still strong. Consumer Q3 is always a strong quarter for Because of holiday bills and stuff like that. And we really focus more on the IoT related area, and we For communication, smartphone is part of the communication. This is also a strong cycle. We're also seeing Continuous good momentum on the 5 gs area. I did talk about the CPEs and the routers and stuff like that. So I would say all in It's really across all regions and all end markets. Well, another test mode is we have the record Over record of the POS. Right. Okay. And that is the demonstration of our capability to grow Our revenue and the capability of pushing and gaining market shares. Right. We have also record revenue So should I just assume, I guess, for everyone's models that each of the different segments will be up sequentially and then I mean, some will be more than others. I just wanted to clarify that. Thank you for taking my questions. Congratulations. Thank you. Yes. Thank you. Thank you. Our next question is from Tristan Gerra with Robert W. Baird. Hi, good afternoon. Given you mentioning that the utilization rate at the Lydon fab If I heard well, 87% exiting Q2, and I believe you're getting about 10% incremental capacity from the GFAB from TI every year. Assuming that the supply constraints Continuing to next year, it sounds like you probably need to add even more capacity. And Aunt Semi mentioned this morning at their Analyst Day, they're going to cut in half 25% Their total revenue, which is non target products. And I know Diodes is more focused on gross margin than just Pure growth nowadays. However, do you see this as a market share potential opportunity for diodes in terms of Picking up products, some of the products that On Semi is going to deemphasize perhaps in your automotive business? And then could you even see value in some of the fabs that On Semi will be setting? Because it seems to me that you ramped already a lot Very quickly in terms of the available capacity you have relative to the competition. Right. Tristan, this is Emily. Let me answer first. Anytime there's a strategic change with my peers, It's always a good opportunity for Diodes to really gain more of the market share and pick up some of the business, right? Related to whether it's a value for the fab or some of the products, I believe we really need to understand more to answer that question, but I would say overall, as a company, we continue to expand our capacity. Doctor. Lu mentioned about the GFAB, And based on what we see as a strategic need in the longer term. So I hope I answered your questions. And then a quick follow-up. You've mentioned that Pericom is Starting to gain traction in communication, is that the early innings of that and how should we look at the potential Of that opportunity for Pericom, is it the type of percentage adoption rate that we've seen Pericom, Gating and Data Center, for example, if any way you could quantify that opportunity? Right, Tristan. I think Pericom overall is gaining traction actually across multiple end markets, right? So it's not just one. Think I just highlight some of the key design wins and momentum in my speech. But overall, right, If you look at the Paracom revenue, we have other record. It was a record the previous quarter. It was a record previously as well, right? So overall, All right. In the communication segment, we definitely see, I mean, a lot of opportunity in the data center, In the networking area, especially when the speed and the requirements is getting higher, and for example, the crystal crystal oscillator and Clock IC, the timing area supporting the new requirements is definitely giving us even more opportunity than before, right? The 5 gs, the CPE, the set top box, so I would say across even in the automotive, I talk about Pericom in the previous So computing has always been strong for compute I mean, Pericom product. So I think all in all, Even in the industrial, so we're actually seeing good momentum for the Pericom demand and also the demand creation across If you see, we have continued several quarters. I even I don't remember how many quarter we said, record telecom revenue, 8 quarter after quarter, Probably for several years. And so this is again, this is the testament of how That's great. Very useful. Thank you. And thank you. Our next question comes from William Stein with Truist Great. Thank you for taking my question. First, I'd like you to comment on the cyclicality of the business, In particular, your results and even more so your guidance show a very good Expectation not only above seasonal revenue next quarter expected, but a good uplift in operating margin. I'm wondering how much of that strength you believe is coming from pricing and other cyclical factors Versus some structural benefits perhaps from the line of Fannie transaction. And I have a couple, maybe at least one follow-up if I can. Hi, William. This is Emily. So I think when we look at this kind of margins We've Talking about the new product, right, giving us better features and functions that improve our overall margin and better product mix is other Important milestone that we've been driving over the last few years, not just this quarter, right? I think the other portion we Talking about manufacturing operational improvement and that will continue, right? So LION definitely is part of it, but I would say all in all, it's really Summarizing all different areas, right, so improve the productivity overall as a company. Yes. But one thing, You remember from we acquired LAC, we laid out 4 Synergies, right, and the manufacturing synergy is the first one We can mature that and it's not even finished yet. That's just at the first one we can gain, Okay. Then we still have more synergy, which is the market synergy, product synergy and customer synergy, We're yet to get it yet, okay. And so we have a hope and we can continue Improve our margin because after inventory over time loss synergy, that's give So in addition to what Emery talking about all this operational and product mix synergy, Operational synergy and the product mix synergy, another big one is going to coming from The AOSC Acquisition Synergies. That's a good segue into my second question actually. How far Is the company into this integration? You talk about 87% utilization. On the surface, it might seem okay, we're done here, but I'm sure you're not done. You just mentioned that you're not done. What should we think about from a modeling perspective when we consider The uplift from both the revenue and profitability perspective that could come from this deal? That's I would agree to answer, obviously, but from the gross margin model on those, I need to say we do not separate the gross margin improvement from Diodes only or LHC only, we consolidate altogether because one of the things we really don't want to separate Yes. AOC product, we qualify using Diosyn to push To the marketplace. And those you cannot say that's AOC or that's Diodes. But that's When we're talking about the synergy, we talk about market synergy, we talk about product synergy, all those customer synergy, Those really is intended to do is Diodes brand and cordless recorded AOC product using Diodes brand to push to the marketplace, so that We intentionally don't want to separate the improvement based on AOC or Diodes. We all report consolidated Numbers, right. And then I'll let Gary answer the rest of the question. Yes. This is Gary. Let me address the question about your The LAC related question, okay. So we have been driving the manufacturing synergy since With Lyondo Semi, which including the second source, offload from internal and external wafer fab. At the same time, and we also improved our year cost reduction and the bottleneck action in many place. So productivity can be improved a lot. Okay. At the same time, by leveraging the product synergy, as Emily mentioned about, we are able to drive much better product mix to support our customer. Those kind of activities we continue to do and that will be probably improve our GP and the revenue Very, very quickly. That's why you see for the past three quarters, we see the rare OEC from losing money to breakeven. Now we are making money. Great. Thank you. Thank We have our next question from David Williams with Benchmark. Please go ahead. Hey, good afternoon. Thanks for taking my question today. First, congrats on the solid execution and the growth, very good to see. I guess my first question would be on the margin side and just how sustainable do you think that is as we start to get to a more normalized environment? And have you taken any opportunity maybe to rationalize the portfolio in terms of just where you're contributing your capacity to maybe higher margin products? Yes. Hi, David. Like I mentioned, right, product mix is an ongoing effort that we've been driving. It's not just Building a stronger relationship, expanding our print position is definitely a sustainable approach as well. And To drive the manufacturing operations improvement will also be sustainable, right? So I think doing the right thing at the right time And taking the opportunity to continue to expand, it definitely paved a really strong path for us to work towards our 2025 goal, right, is $2,500,000,000 $1,000,000,000 gross profit. So I think we are definitely on the right track. Okay, Great. And then just kind of thinking about you're obviously marching towards the $2,500,000,000 top line goal pretty quickly here and we're in a very strong But I guess if you kind of think about the stickiness of that revenue, maybe what you picked up from competitors and because you are able to supply, do you think that revenue stays fairly sticky? Is there any concern with maybe some of that reversion of some of the revenue that you picked up more recently? Well, I really think, right, when you build a stronger relationship with a customer and you really expand the relationship, It definitely gives us more of the print position to compete in a longer term, right? So I personally believe this is actually Our long term strategy we've been always driving. And so I don't think that will change. Market is always up and down. I think we all live through few cycles. There's no surprise over there. But I think the foundation is important to build Right now, and we believe we are building a stronger foundation and we want to continue to expand our market share. Yes, especially customer relationship, if support them, when the tough time, I guarantee you, they won't forget about it, okay? And I understand if you are able to support, then they would know Next time when the markets tie again, they can turn to us instead of They cannot get help. So and another thing is they all know Diodes have Capacity, and we continue improve our capacity. So if they design in our product, They don't need to worry about we shut them down. Now they might be hand them out when the market is very tight, They might, but at least we will not let them down. And they were still able to ship Their product to their customers and that is most important relationship and the trust We build up during these cycles. So yes, actually in my mind, this is a good opportunity for us To build up the solid foundation for the future and therefore, we will Diodes, since Long time ago, we have been continue gaining the market share, our growth in our peer. And during this tough time, we will even one start stronger than before. Thank you. Well, congrats again on the quarter and looking forward to seeing the Q3. Thank you, David. Thank you. And thank you. We have no further questions at this time. I will turn the call over to management for closing remarks. Thank you for your participation. Operator, you may disconnect now. And thank you, sir. And thank you, ladies and gentlemen. This concludes our conference. Thank you for your participation. You may now disconnect.