Earnings Call: Q1 2019

May 2, 2019

Good day, ladies and gentlemen, and welcome to the Monolithic Power Systems First Quarter 2019 Earnings Conference Call. At this time, As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Bernie Blegen. Chief Financial Officer. Please go ahead. Thank you very much. Good afternoon and welcome to the first quarter 2019 monolithic power systems conference call. Michael Singh, CEO and founder of MPS is with me on today's call. In the course of today's conference call, we will make forward looking statements and projections that involve risk and uncertainty, which could cause results to differ materially from management's current views and expectations. Please refer to the Safe Harbor statement contained in that could cause actual results to differ are identified in the Safe Harbor statements contained in the Q1 earnings release and in our SEC filings. Including our Form 10 K filed on March 1, 2019, which is accessible through our website, www dotmonolithicpower.com. MPS assumes no obligation to update the information provided on today's call. We will be discussing gross margin, operating expense, R and D and SG and A expense, operating income, interest and other income net income and earnings on both a GAAP and 2.4 or superior to measures of financial performance prepared in accordance with GAAP. A table that excuse me, a table that outlines the reconciliation between the non GAAP financial measures to GAAP financial measures is included in our earnings release, which we have filed with the SEC. I would refer investors to the Q1 2018 q44 2018 Q1 2019 releases, as well as to the reconciling tables that are posted on our website. I'd also like to remind you that today's conference call is being webcast live over the internet and will be available for replay on our website for 1 year along with the earnings release filed with the SEC earlier today. NPS had another record first quarter with revenue of $141,400,000, 9.5 percent higher than the comparable quarter in 2018. MPS continues to benefit from our technology leadership and diversified multi market strategy. Looking at our revenue by market, first quarter 2019 communications revenue of $22,200,000 rose 6.4000000 percent of MPS's first quarter 2019 revenue compared with 12.2% in the first quarter of 2018. The year over year increase primarily reflected initial 5g networking sales as well as higher sales in the residential gateway and router market. First quarter 2019 industrial revenue of $21,300,000 increased 21.6% from the first quarter of 2018 and accounted for 15.1% of our total 1st quarter revenue. Up from 13 point sources and security applications. First quarter 2019 automotive revenue of $20,500,000 grew 15.7 percent over the same period of 2018 and represented 14.5 percent of MPS's first quarter 2019 revenue versus 13.7% in the same period of 2018. This growth primarily represented increased sales of infotainment, safety and connectivity application products. In our computing and storage market, revenue $39,200,000, increased $8,200,000 or 26.5 percent year over year. 1st quarter 2019 computing and storage revenue represented 27.7 percent of MPS's 1st quarter 2019 revenue compared with 24.0 percent in the first quarter of 2018. The year over year revenue increase primarily reflected sales growth for notebook and servers. Compared with the first quarter of 2018, revenue from consumer markets decreased $9,000,000 or 19.1 percent The year over year revenue decrease reflected across the board reductions in traditional consumer markets. Consumer revenue of $38,100,000 represented 27.0 percent of our Q1 revenue compared with a 36.5% contribution in the first quarter of 2018. GAAP gross margin was 55.2%. 10 basis points higher than the fourth quarter of 2018 20 basis points lower than the first quarter of 2018. Our GAAP operating income was $21,700,000 compared with $22,000,000 reported in the first quarter of 2018. For the first quarter matching the fourth quarter of 2018, the 30 basis points lower than the first quarter of 2018. Our non GAAP operating income was $39,600,000 compared to $37,200,000 reported in the first quarter of 2018. Let's review our operating expenses. Our GAAP operating expenses were $56,300,000 in the first quarter of 2019, compared with $49,500,000 in the first quarter of 2018. Our non GAAP first quarter 2019 operating expenses were $39,000,000 up from the $35,000,000 reported in the first quarter of 2018. The differences between non GAAP operating expenses and GAAP operating expenses for the quarters discussed here are stock compensation expense and income or loss on unfunded deferred compensation plan. For the first quarter of 2019, total stock compensation expense, including approximately $531,000 charged to cost of goods sold, was $16,000,000 compared with $15,000,000 recorded in the first quarter of 2018. Switching to the bottom line. First quarter 2019 GAAP net income was $26,200,000 or $0.58, per fully diluted share compared with $21,900,000 or $0.49 per share in the first quarter of 2018. First quarter 2019 non GAAP net income was $37,900,000 or $0.84 per fully diluted share compared with $35,000,000 in or $0.79 per fully diluted share in the first quarter of 2018. Fully diluted shares outstanding at the end of Q1 2019 were $45,200,000. Now let's look at the balance sheet. Cash, cash equivalents and investments were $362,300,000 at the end of the first quarter of 2019 compared to $380,500,000 at the end of fourth quarter of 2018. For the $16,300,000 in the first quarter of 2018. First quarter of 2019 capital spending totaled $59,400,000. Accounts receivable ended the first quarter of 2019 at $58,900,000 or 38 days of sales outstanding, up 5 days from 33 days the end of fourth quarter of 2018 4 days higher than the 34 days posted in the first quarter of 2018, reflecting the back end weighting of shipments within Q1 2019. Our internal inventories at the end of first quarter of 2019 were $142,500,000, up from the $136,400,000 at the end of the fourth quarter of 2018. Days in inventory increased to 205 days at the end of 1, 2019 compared with 180 days at the end of the fourth quarter of 2018 100 77 days at the end of first quarter of 2018. The 25 day sequential increase is primarily due to an unexpected delay in customers new product ramps and legacy business push outs. As we've said in the past, we are comfortable carrying a higher than normal level of inventory during a downturn given that most of our products are not customer or application specific and carry minimal obsolescence risk. Having said that, while inventories are likely to remain elevated through the second quarter, we do not expect meaningful reductions until early 2020. I would like now We are forecasting Q2 revenue in the range of $147,500,000 to $153,500,000. We also expect the following: GAAP gross margin in the range of 54.9% to 55.5%. Non GAAP gross margin in the GAAP R and D and SG and A expenses between $55,500,000 $59,500,000. Non GAAP R and D and SG and A expenses to be in the range of $38,500,000 to $40,500,000. This estimate excludes stock compensation and mitigation expenses. Total stock compensation expense of $17,600,000 to $19,600,000 including $550,000 that will be charged to cost of goods sold. Litigation expenses ranging between $300,000 to $500,000. Interest and other income is expected to range from $1,400,000 to $1,600,000 before foreign exchange gains or losses, fully diluted shares to be in the range of 45.1000000 to 46.1000000 shares. For the second half of the year, we still we will continue to adapt to the changing market conditions and execute as planned. I will now open the phone lines for questions. Thank Our first question comes from the line of Matt Ramsay with Cowen. Hey, this is Josh Buckhalter on behalf of Matt. I was hoping to dig a bit into the computing and storage portion of the business. Year over year growth is still solid, but it is below your expectations heading into the quarter. Given the overall weakness we've seen across the board in datacenter storage and PCs. I was wondering if you could provide a little more granularity there and how that dynamic between units and your content increases on new platforms plays out? Thank you. Sure, Josh. And good to hear from you. I think what we're seeing is in Q3 of 2018, there was a stepped down in SSD revenue and that's essentially stated that lower plateau, in each of the two following quarters. And then in Q4 of last year, we also saw a decrease in server content. And the belief is that, certain of the hyperscales have overbuilt the data centers and are taking a pause I think as an overall, all the design win activity is still the same. And, we compare the last couple of quarters on the on the server side, we still gained shares and I think the revenues also increased. The momentum is the same. Got it. Thank you. And then more broadly, given the soft start to the year, I was hoping to hear some thoughts on your seasonality into the second half and sort of how your multiple content verticals are playing off on this the soft macro that we've seen throughout the entire industry? Thanks for taking my questions and congrats on the solid results. Well, second half, we don't have we prepare the last year, we prepared a lot of inventories. And I mean, we expect to have a huge ramp 2019. And up to now, we're still not very certain. And our customers give us different signals and that came in. So we just wait and see. Yes, I think that you're aware that MPS didn't specifically guide beyond the current quarter. But certainly these are unusual market conditions. If you look at our seasonality going from Q1 to Q2, over the last 5 years, you'd probably see a trend that we've increased it between 10% 12% sequentially. Currently, and we're forecasting revenue to grow slower at a slower 7% rate, which I believe probably indicative of a more gradual broad based recovery in the macro environment. So I don't see any one catalyzing event that will necessarily turn the tide for us As we said, MPS expects to see a more gradual improvement in demand through the remainder of 2019. And overall, we still expect to grow and just because of share market share gain. And But how much growth, okay, I mean, it's very difficult to tell now. Got it. Thank you guys and congrats again. Yes, thank you. Thank you. Our next question comes from the line of Tore Svanberg with Stifel. Your line is now open. Yes. Thank you. A couple of questions. Maybe we can start off with some of the end markets for Q2 specifically. So yes, Bernie, you mentioned the growth is sub seasonal, but it's still growth. So Are you seeing all segments recovering or are some still a bit slower than others? Well, I think that we're actually very well positioned across the board. And I think that speaks well of our diversification If I had to pick out a high runner as we look at going into for Q2, I think communications, which took a big step up as a result of initial 5G investments, will continue, at a little bit elevated level over what we saw in Q1 and certainly that represents a significant improvement over the prior year. I think that computing, you're going to see that also is expected to take a step up, but recognizing that it's been at a fairly, I don't want to say depressed, but lower level as the data centers have sort of hit the pause button. I think also that automotive I don't see an immediate turnaround there, but I do see an uptick as we go from Q1 to Q2. And then industrial, which has really been at a very elevated level for a number of quarters, will probably return to its normal cadence and consumer, again, is still being impacted by soft demand? I think the worst one is, as Bernie even said, the last one is the consumer. And all the other one is we gain market shares. And actually in the Q2, we see better than Q1. Very good. And Bernie, I don't did I did you say CapEx was $59,400,000 in the quarter? I'm sorry. CapEx? Yes. Yes. Can you maybe elaborate a little bit on what what that money was spent on because that's a little bit higher than usual. Sure. We purchased a building in Kirkland, Washington, which we will be using as both our regional executive offices as well as, this is going to be our center for e Commerce. Which will give us the opportunity to recruit software engineers with this experience in their background. And if you take sort of a larger view, because if you look back, we have been purchasing office space over the course of the last 2 years. And this is part of our geographic diversification program, which allows us to draw from draw talent worldwide for specific end market applications. So as we look forward, We also completed the purchase here a couple of weeks ago of a building in Detroit, which will allow us to create a center of excellence servicing automotive. And we're in the process of buying office space in Barcelona where we have a design center. And then also we're going to be building a another location a couple hours out of Stuttgart, Germany in the Rhine Valley. So not only do these moves aid our future growth, But, we believe that owning the buildings is accretive to the P and L versus the alternatives of running facilities. And those money is a and we get a better return than we put in the bank. Yes. It really helps it. It's all EPS plus and we and particularly in Washington, we need a more space. And so we can acquire building the EPS plus, actually. Very good. Just one last one for you, Michael. The e commerce business, I always look for updates there. Could you maybe give us the latest and greatest there, please? We're still learning. I think so. Overall, We launched the websites and that came in. We launched the website frankly and it's in the activities is not as high as we think. But on the outlook distributed website, our product sale well. And so obviously we're still in a learning stage. And and also, all the programmable parts, all the modules If we give them a floppy disk, they can download them and that is doing really well. And we had to somehow had to link to our e commerce, okay. How do we provide a better usage for our websites and how to they solve their current problem of using those programmable parts. And We're still learning, but the product itself, not selling through e Commerce. And we're doing really well. It's better than we really expected. And there's some glitch on the website because then maybe our way we're told is too confusing, okay, and how to use it to program the parts. And we every other week, we have we are upgrading in our website. But the concepts from feedback feedback from our customers. These are revolution parts. These are revolution way of of designing power supplied and they all like that. And obviously, they still have some missing link. Very helpful. Thank you. Okay. Thank you. Our next question comes from the line of Rick Schafer with Oppenheimer. Your line is now open. Thanks. And I'll add my congrats on a solid quarter in a tough environment. Maybe my first question on server. I know you're Whitley, we've talked about anyway your Whitley content going from, I think, something like $50 with early to $70 or something all in. I think most of that increase is QS mod, I believe, Is there any sense or can you give us any sense of how much incremental server content you'll see as AI accelerator attach rates grow and we migrate to 48 volt. I mean, I would assume that those 2 things would be incremental for you guys to that to that move to $70 of content, but I'm just curious what that looks like to you guys? Yes. We have all the design wins that came in, 48 volts, we now started selling many customers. So we start selling designing the modules. And we expect the second Q2 have some kind of ramp. And it didn't happen. And but we'll still hold the second half. And some projects, we understand it has an engineering delay. Other ones, we were not very sure. But we're for sure is we're winning all these projects. And Michael, to be clear, it is you're not including 48 volt or GPU accelerator or FPGA accelerators in that move. No, no, no, no, I, no, I include those GP or those are separate. Those are and also the AR, these are the content that are much higher, much, much higher. And and the same kind of things for ADAS, Jim, 4 or 5. And These are essentially the same product and we are winning on many of these sockets now. Okay. Okay. Thanks, Michael. And then my follow-up question, and this is something I haven't asked in a while on gross margin. But as you guys ramp 55 nanometer, and I know this is a multi year progression or transition, but as you ramp 55 nanometer on 12 inches wafers, and your mix favors increasingly favors server, auto, industrial, and eventually, you know, SMB Or E Commerce, Could we see a kind of a similar scenario that we saw on your top line over the last couple of years where you saw the revenue top line actually accelerate? Could we see an acceleration in your gross margin expansion or just give us some maybe some color there on what those puts and takes are as you see them? Yes. I think I mentioned it before. We are not going to the current margin is not our it's not we we don't plan to use we don't use this as our long term models. Okay, long term model, the margin will go up And because we're going after all these high value products, these are with a higher margin associated with it. In the next couple of years, these products, obviously, Bernie mentioned in the especially in the industrial automotive and part of the servers. And even a high value consumer, the consumer product line, the margin steadily move up. And the move kind of slower. But all the other ones, industrial, automotive and particularly e commerce. When those things taking off, I think that our margin will in a few years later was you will see a dramatic improvement. Okay. Thanks a lot. Thank you. Our next question comes from the line of William Stein with SunTrust. Your line is now open. Great. Thanks for taking my questions. I want to offer congratulations in weathering a tough demand environment very well. I'd like to first ask, as it relates to the cycle, though monolithic was a little bit later to see the downturn, I think your company was still presenting this 20% through the cycle as also sort of the current environment situation a little bit longer, or you saw the downturn a little bit later, should we likewise see the recovery a little bit later for monolithic as well? Is that a reasonable I think it's because you said, as you said, there's a delay. I don't see a delay because all the all these activities, these are green fields. We didn't have it in the 4, 5 years ago. And that design cycle takes 2 or 3 years. And all we see is a either enter the new product market segments or share gain. And when it recovers, when the market recovers, I think we'll accelerate the growth. And I think that we'll grow faster, much faster than everybody else. And as I said, okay, we'll what would beat the market by 15% at least? Yes. I think that's the key ingredient there, Will, is that part and parcel to our belief that we can, you know, model revenue annual revenue growth at 20%, is that we will outperform the market by 10 to 15 percentage points. So when you look at full year 2018, the market grew at about 11% and we grew at about a little over 24%. So that, that metric works out. When I look at the guidance for some of our largest, peer companies, and you aggregate it, there's a sort of an acknowledgement really in just the last quarter that full year 2019 probably is going to shrink by about 4% to 5%. So if you look at us as being able to perform a 10 to 15 percentage points better, that gets you into the middle single digits, which is not our historic growth But again, that margin of how we can outperform the market remains intact. So to your questions, I don't see how and why we can delay the recovery. So that's my Okay. I appreciate that answer. Maybe 2 of the real quick ones. First, I think last quarter, inventory at distribution increased a little bit at the end of the quarter. I'd love an update on that and also on e motion please. Thanks. Yes. Okay. I'll take the first question and Michael will take the second. So on the channel inventory, and you have to kind of look at the cadence of how this quarter played out In January, we actually had a very good month both as far as new business that we booked the business that we sold as well as sell through by the distributors. I think a lot of that was in advance of earlier than normal Chinese New Year. February was a little lackluster what that ended up doing is making the quarter was really back ended loaded, which did not allow the channel time to sell that inventory through. So, again, we went up a couple of days partly because of the ordering or the shipping pattern and ordering pattern as well as you have a lower denominator for the quarter. And a lot of that increase did occur in China. Okay. The e emotions and actually the product is doing great. And if you notice that we have online NPS to selling small models, including the models now. And I think these are meant to be for demonstration purpose. Actually, we sell quite a bit models now. And overall, it's still too soon to break out the product line. And it's a meaningful. It's a move the needle now. It's a move the overall revenue needle. Yes. Thank you. Our next question comes from the line of Ross Seymore with Deutsche Bank. Your line is now open. Hi guys. I want to ask a couple of questions. The first one is on the inventory side of the equation. You mentioned that there were some push outs in obviously the end demand is weak as well. But when you talked to Bernie about you didn't expect it to come down until early 2020. Is that mainly on a days basis? Or are you talking a dollars basis? And is there some level at which the dollars become worrisome to you and any sort of obsolescence risk or anything like that that we should be concerned about? So when you look at the increase that we had in Q1 inventory, Again, a lot of it, reflected wafer starts that began in earlier periods and we're now going through WIP finished goods. And so, that in conjunction with the fact that, we did have delays in some of the our customers' new programs and there were some legacy business push outs, particularly in consumer, accounted for much of the increase. We are taking steps as far as lowering wafer starts and the impact of that should be visible here in Q2 in terms of dollars But again, the reason we're not expecting, the days in the inventory necessarily to come down rapidly is again partly reflection of the continued weakness or the slower uptick in a recovery here. So, I don't think that there is a dollar or a day's quotient that, would really get me concerned. Towing, and then with the opportunity as the recovery gains steam to come down. And as I said in my prepared comments, that's more likely to be into next year. Current market conditions, let's say, if it's the same as the second half of the year, we don't plan to to write off a bigger, bigger chunk of inventory because these products are all good. We made those products a way created these inventory for prepare for a big ramp. And may still happen for Q3. If you look at the inventory 200 days, okay, 200 days is based on What is the Q1's number or Q2's number? Q1. Yes, Q1's there. And if you're looking at a ramp to somewhere 170,000,000 dollars, $180,000,000, that's nothing. And so we still don't know. Whether they're going to recover or not. We need this inventory. But these are inventory under the uncertain environment, it is too high to looking. Got it. And I guess on the comp side of things, great growth year over year. You mentioned in the past, there was some of the gateway in the router side. And then you also mentioned the 5G side of things. Can you remind us on 2 aspects of the 5G side of things? Roughly, what size is that as a percentage of either the segment or total And then the content that you have in 5G, if you could just remind us of how to think about that? I think the increase of both the similar dollar amount And, 5G, Ross, if you remember, is a few quarters of goals and a year ago or so, our communication was to go sidelines, like go sideways. And I mentioned that we have some killer products comes out and that came in also we're waiting for a new product cycle And these products hit the market and now move the revenue needles now. In the gateways and it's very price competitive and under the current current situation, we want the revenues and we just grab those market shares. Yes. I think this is actually a terrific story that Michael didn't necessarily take full credit because, we have remained very committed to the comms market. But what Michael had just said is we never had a killer application to go after it. And, I think that that's the reason that for years, this segment is underperformed, you know, really at going sideways between $15,000,000 $16,000,000 per quarter. But now so we basically missed out on a lot of the 4G wave But we've recognized the significance of this market and we've developed new products that are exceeding our customers' expectations and their requirements And I believe that we're very well positioned at a time when the 5G infrastructure investments are about to explode. So, as Michael said, that we're about fiftyfifty as far as the mix between the lower margin gateway and the infrastructure networking. But I think that that's going to tip very much in favor of the higher margin networking and infrastructure as this rolls out over the next 2 years. Got it. And then one last one from me. Given the current market environment, you talked about what the implications were for inventory and revenue, etcetera. How do you guys think about the implications on your OpEx growth related to the aftermarket? I think that we are very selectively for hiring. Our hiring plan, we changed. We were much reduced. And that's our biggest our biggest expense. And so we we but we're still hiring and only hire for the best talent. And overall, for the company growth, we've reached. Thanks guys. I think just to add to that real quickly is that we also are continuing our investment with the 12 inches 55 nanometer, which will continue through this year because we believe that's a strategic goal that we want to have in position by 2020. Thank Our next question comes from Hi guys. Wanted to, first follow-up on some comments you made last quarter about the new product slips given the slower environment. I think you had mentioned a number of areas: China new model automotives, smart meters in China. And then sounded like a few things in the data center GPU server segment. Can you give us some sense when you think those programs may now start to ship? It's a smaller amount. We expect even more, but there's not as much. And All the however, all the activities and and especially these are 1st tier customers. And we engage a lot more than than before. And we're engaging with even the executive levels And before, like a couple of years ago, nobody knows who is the MPF sockets. And announce and all these activities went up a lot in the infrastructures and as well as the servers server market segments. Yeah. And I'd just like to emphasize something is that, if you look at automotive where the growth rate is definitely taking a hair cut as a result of a slowdown, particularly in China, but also, it's been actually geographically almost every region, was down this quarter. But I really don't want to, I want to avoid putting too much stock on a single quarter on quarter deviation and really focus as Michael did on sort of the macro view that in these areas where we have invested and we have new greenfield opportunities, we're still having a very high level of customer engagement. We're still achieving at the same pace our design win activity. And, there have been delays in some of our customers going into markets But we're not losing any competitive position out of it. And particularly in the areas that We've said there are going to be growth areas, for example, ADOS and lighting and infotainment in automotive. Those are on track. Obviously, we saw the initial results in the comms market with 5G. So, I think that the basic cadence of the business, remains very strong And it's just a matter of, and I think we're going to be very well positioned when the market returns to a more normal level. Understood. And that's a second question. If the analog mark is down 4% to 5% this year and you can grow 10 to 15 points faster. It seems like that should get you somewhere between 5% to 10% year on year growth, which if if I'm doing my numbers, right, you know, kind of puts you around where the street consensus is looking for 20 but I guess street consensus probably has you growing, at your normal rate of seasonality in the 3rd quarter. And that's, I think, typically your biggest quarter on quarter increase. And then the Street is actually up a little bit in December, which is an atypical pattern. You mentioned in the prepared comments, that you still see, you saw limited visibility, the industry is still sort of not yet fully recovered. And so I guess I'm trying to get a sense. Do you think an expectation for normal seasonality in Q3 make sense? Or would you say that may be aggressive where you stand today? Yes, again, if you use Q2 as an example, even Q1 as an example, our normal seasonality for Q1 would be down sequentially by 4 percentage points. And we came down at about 7.9 or 8%. So there was a 4 percentage point delta from our normal sequential movement. And then if you look at what we've guided here, again, if you look back the last 4 or 5 years, the growth between Q1 to Q2 would have us going up somewhere in the neighborhood of 10% to 12%, 11%, just call it And we've guided revenue to grow at a slower 7% rate. And again, I referenced that as being more gradual broad based recovery in the macro environment. So I'd probably suggest that the sequential growth rates for the second half of the year are probably are likely to also be about 4 percentage points below their seasonal norms. All these ones are still unknown. And And some of our products, we some of the applications and market segments, we see pooling. And other ones push out. So it's a as Bernie said in a script, it's okay. It's uncertain. And So in terms of what's the numbers, okay, why don't you make a number lower? Let us beat it. Understood. Last question for me. In the first half of the year, it looks like you're benefiting from a revenue perspective from this residential gateway business. It is a lower margin business for you. Can you give us any thoughts, how long do you see residential gateways, continuing at sort of an elevated level, which was maybe part of the reason why margins are lower than where they were second half of last year or third quarter of last year? Yes. Okay, man. These are okay, I want revenue. Now our revenues. And these kinds of things, half a year ago, we're a little bit aggressive on it. And that's reflecting the announcement. Okay, And we also try to consumers, but didn't have any effect, okay. I mean, So within the increase, we're still losing we're still have a this quarter, we have a significant lower than last year, right? And But it's not because if we lower the price, okay, we can could not get the more market shares. And we made a decision stay as is. Okay. And the key is we don't lose up bigger major sockets. In a consumer side. Comes back to the comms to the router business side. We stay aggressive in this period and it still makes a very good money. And but the margins is lower. As we graduate everything else, as it recovers the speed ups, all the new products and a ramp up and we may go less aggressive on that. Yeah. And I think specific to the residential gateway, you remember that products stepped up in sales beginning in Q3 of 2018. And, if we hold with our forecast will have pretty much fulfilled that opportunity by the end of Q2. So I think that there is an opportunity within communications to see a step up in the, a more favorable product mix But again, you know, Michael has said it three times, so all of it is right now, there's remains uncertainty And so it's really hard to say, how our margins are going to improve in the near term I think when we look longer term, certainly there will be an accelerated impact on our margins But timing that right now, again, is uncertain as timing the return to normal to revenue. Yes. Actually, there's a other reason why we do this, okay. We want to ensure our supply have a continue, have a continuity. And so we actually is doing the part of a for our wafer fab. And we ensure they are constant loading. Got it. Thank you. Okay. Thank you. This concludes today's question and answer session. The call back to Bernie Blagen for any closing remarks. Great. Well, I'd like to thank you all for joining us for this conference call. I look forward to talking to you Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect.