ASE Technology Holding Co., Ltd. (ASX) Q4 2020 Earnings Report, Transcript and Summary

Hello. I am Ken Hsiang, the Head of Investor Relations for ASE Technology Holdings. Welcome to our Fourth Quarter and Full Year 2020 Earnings Release. Thank you for attending our conference call today. Please refer to our safe harbor notice on Page 2. All participants consent to having their voices and questions broadcast via participation of this event. I would like to remind everyone on this call that the presentation that follows may contain forward-looking statements. These forward-looking statements are subject to a high degree of risks and our actual results may differ materially. For the purposes of this presentation, our dollar figures are generally stated in New Taiwan Dollars unless otherwise indicated. As a Taiwan based company, our financials are presented in accordance with Taiwan IFRS. Results presented using Taiwan IFRS may differ materially from results using other accounting standards including those presented by our subsidiary using Chinese GAAP. I am joined today by Dr. Tien Wu, our COO and Joseph Tung, our CFO. For today's call, I will be going over our financial results, Tien will be providing a business recap, and Joseph will provide financial highlights and our guidance. We will have a Q&A session following the prepared remarks. Please turn to Page 3, where you'll find our fourth quarter's consolidated results. Intercompany transactions between our ATM and EMS businesses have been eliminated during consolidation. For the fourth quarter, we recorded fully diluted EPS of NT$2.30 and basic EPS of NT$2.35. Consolidated net revenue increased 21% quarter-over-quarter and a 28% year-over-year. We had a gross profit of NT$23.2 billion with a gross margin of 15.7%. Our gross margins declined by 0.3 percentage points sequentially and 1.4 percentage points, year-over-year. Both margin declines are principally the result of higher EMS business mix. Our operating expenses increased by NT$1.5 billion during the fourth quarter to NT$12.1 billion, as the result of higher profit-sharing expenses issued during the strong quarter. Despite the absolute dollar increase, our operating expense percentage declined, 0.5 percentage point sequentially and 1.5 percentage points year-over-year to 8.1%. Operating profit was op NT$2.1 billion, sequentially and NT$2.5 billion year-over-year. Sequentially, operating margins increased 0.2 percentage points to 7.6% and increasing 0.1 percentage points, year-over-year. During the quarter, we had a net non-operating gain of NT$1.4 billion. This amount primarily consists of gains related to the sale of our Fujian plant at NT$0.8 billion, gain on sale of operating assets of NT$0.5 billion and net foreign exchange investment income of NT$0.2 billion. This amount was offset in part by net interest expense of NT$0.6 billion. Tax expense for the quarter was NT$1.8 billion. The effective tax rate for the fourth quarter was 15%. The decline in the effective tax rate this quarter was the result of research and development tax credits that are able to be recognized during the quarter. Net income for the quarter was NT$10 billion, representing an improvement of NT$3.3 billion sequentially, and an improvement of NT$3.6 billion year-over-year. At the Holding Company level, we estimate that the strengthening NT dollar and 0.9 percentage point negative impact to gross margin sequentially and at 2.3 percentage point negative impact year-over-year. As a rule of thumb, for every percent the NT dollar appreciates, we see a corresponding 0.4 percentage point impact to our Holding Company gross margin. On the bottom of the page, we provide key P&L line items, without the inclusion of PPA-related expenses. Consolidated gross profit excluding PPA expenses would be NT$24.2 billion with a 16.2% gross margin. Operating profit would be NT$12.4 billion, with an operating margin of 8.3%. Net profit would be NT$11.2 billion with net margin of 7.5%. Basic EPS excluding PPA expenses would be NT$2.63. Please refer to Page 4, here you'll find is that 2020 consolidated full-year result. Fully diluted EPS for the year was of NT$6.31 while basic EPS was NT$6.47. For 2020, consolidated net revenues grew by 15% as compared with 2019. ATM revenues grew 10% while EMS revenues grew 23% annually. In 2020 our gross margin improved 0.7 percentage points to 16.3%, principally as a result of stronger loading. This margin improvement was achieved despite higher EMS product mix and the negative impact from the strong NT dollar. Operating expenses increased NT$2.3 billion for the year and came in at NT$43.1 billion. We were able to lower our operating expense percentage by 0.9 percentage points to 9%. Operating profit for the year was NT$34.9 billion, improving by 48% to NT$11.4 billion. Operating margin improved by 1.6 percentage points as a result of increased gross profit margins with a lower operating expense percentage. Total tax expense was NT$6.5 billion. The effective tax rate for the year was 18.1%. During the year, we confirmed the deductibility of certain Holding Company level expenses for tax purposes. This resulted in a catch up of tax assets during the year, leading to a lower effective tax rate. For ongoing purposes, we believe our current effective tax rate to be about 22%. Net income increased by NT$10.7 billion to NT$27.6 billion. On a full-year basis, we estimate that the strengthening NT dollar had a 1.8 percentage point impact to gross margin. Removing the effect of PPA depreciation, our gross margin would be 17.1%. Our operating margin would be 8.3%, our EPS would be NT$7.60. On Page 5 is our ATM P&L. It is worth noting here that the ATM revenue reported here contains revenue eliminated at the Holding Company level related to intercompany transactions between our ATM and EMS businesses. During the quarter, we did see three major challenges. First, the most important challenge was the strengthening NT dollar, appreciating 2.3% from Q3 to Q4. The strengthening NT dollar environment is generally negative for us. As a rule of thumb, for every percent the NT dollar appreciates, we see a corresponding 0.5 percentage point impact in our ATM gross margin. Second, the strength in the current market has created tightness across large parts of the semiconductor manufacturing chain. They're seeing longer delivery times for many products including lead frames, substrates, components, capital equipment, as well as upstream wafer supply from our partner foundries. As a result, we have seen some higher manufacturing costs. But for the most part, with the positive ASP environment, we have been better able to pass along these cost increases. Finally, the current COVID environment continues to make operations and logistics difficult. However, being mostly Asia based, we have been less impacted than many operations elsewhere in the world. And to a certain extent, because of our ability to provide supply chain stability during COVID, our businesses have been performing relatively well. From the business perspective, throughout the entirety of the fourth quarter, most business lines within our ATM business ran pretty much at full capacity. Strength was across the board in all product categories, wirebond and advanced packaging, consumer communications and computing. Even our test business recovered more rapidly than expected. Heading into the first quarter things are loaded and running fairly smoothly. We continue to see a strong loading pattern with a positive ASP environment, more on this from Dr. Wu, a bit later. For the fourth quarter 2020, revenues for ATM business were NT$17.8 billion, up NT$1 billion dollars from the previous quarter and up NT$3.5 billion from the same period last year. This represents a 1% increase sequentially and a 5% increase year-over-year. Our ATM revenues came in ahead of our expectations due to higher-than-expected loading and a more positive ASP environment offset in part by a stronger NT dollar. On a U.S. dollar basis, our ATM revenues grew by 3.7% sequentially. Gross profit for our ATM business was NT$16.5 billion, up NT$2 billion sequentially, and NT$0.8 billion year-over-year. NT$0.9 million of this increase was due to a one-time inventory related write off during the third quarter. The remaining sequential and year-over-year improvement in gross profit are primarily the result of higher loading levels. Gross profit margin for our ATM business was 22.6%, up 2.4 percentage points sequentially and down 0.1 percentage points, year-over-year. The inventory write-down in the third quarter accounted for 1.2 percentage points of gross margin improvement in the fourth quarter. The remaining improvement was the result of stronger loading and a positive ASP environment, offset in part, by the strengthening NT dollar. During the fourth quarter, operating expenses were NT$8.5 billion, up NT$0.7 billion sequentially and NT$0.2 billion year-over-year. The sequential and year-over-year increases were primarily driven by higher employee bonuses tied to corporate performance. Operating margin was 11%, improving 1.5 percentage points sequentially and 0.4 percentage points, year-over-year. We estimate that the strengthening NT dollar had a 1.2 percentage point negative impact to our ATM gross margin sequentially, and a 2.9 percentage point impact year-over-year. Without the impact of PPA-related depreciation and amortization, ATM gross profit margin would be 23.9% and operating profit margin would be 12.6%. On Page 6, we have our ATM full-year P&L. We're fairly proud of our 2020 full-year ATM results. On this page, you can see that we saw significant improvement in all aspects of our business. And bear in mind, all of this achievement was done despite the loss of a 20% run rate customer in September. Revenues for ATM business increased by 12% with our packaging business and test businesses, up 12% and 11%, respectively. At the outset of the year, we did expect to see our test business to significantly outgrow our assembly business. However, the EAR impact was much more harshly felt by our test business. And as a result, we did have to rebalance our tester capacity. Gross profit for the year improved 19% to NT$59.4 billion dollars. Gross margin was up 1.3 percentage points, primarily as a result of higher loading, offset in part by NT dollar appreciation. Operating expenses were up for the year by NT$0.9 billion. The increases in operating expenses are related to bonuses tied to ATM business performance. Meanwhile, our operating expense percentage declined 0.9 percentage points. Operating Income improved 45% to NT$27.6 billion, with operating margin improving 2.2 percentage points to 9.8%. On a full year basis, we estimate that the strengthening NT dollar had a 2.3 percentage point impact to gross margins. Without the impact of PPA expenses, gross profit margin would be 22.5% and operating margin would be 11.5%. On Page 7, you'll find a graphical representation of our ATM P&L. And despite the significant impact of U.S. EAR, we took a hit on our third quarter margins and have recovered. However, we do believe, the appreciating NT dollar has flattened out our recent year margin performance. Without such NT dollar appreciation, gross margin would have otherwise made a more pronounced move up into the right on this chart. On Page 8, is our ATM revenue by market segment. We understand that this may run contrary to recent interpretations of the overall market environment. But we would like to point out here that our communication segment has actually been trending down, as a percentage of our overall business. So communications demand is healthy. What we're actually seeing is our automotive, consumer and other business segments rebounding. On Page 9, you will find our ATM revenue by service type. As mentioned previously, we rebalanced our test capacity after the U.S. EAR went into effect. Here you can see the negative impact that the U.S. EAR had on our test business with its revenue share declining two percentage points. As expected, our wirebond business has picked up. Meanwhile, our advanced service type declined two percentage points. On Page 10, you can see the fourth quarter and full-year results of our EMS business, USI. The information we provide in regards to USI may differ materially from the information directly provided by our subsidiary as they report independently using Chinese GAAP. For our EMS business, demand was stronger than anticipated driven by strong SiP demand. During the quarter, we completed our acquisition of Asteelflash Group or AFG. Their results are being fully consolidated as of December 2020. Currently, AFG represents about 10% of our ongoing EMS revenues. We do not expect to report AFG details in future earnings. During the fourth quarter EMS revenues increased 49% sequentially, primarily because of our seasonal business ramp and strong demand for SiP products. EMS revenues increased 52% year-over-year as a result of stronger demand for SiP products. Gross profit margin for the EMS business unit came in at 8.8%, which is a decline of 0.9 percentage points sequentially and 0.1 percentage points, year-over-year. The market declines are primarily the result of product mix changes. Our EMS business unit's fourth quarter operating expenses were NT$3.5 billion, increasing NT$0.7 billion sequentially, and NT$0.8 billion year-over-year. Operating Expenses increased primarily as a result of increased employee profit sharing. Our operating expense percentage was 4.5%, down 0.8 percentage points sequentially, and 1.2 percentage points year-over-year. Our EMS operating profit improved NT$1.2 billion sequentially, and NT$1.9 billion year-over-year. These improvements were primarily due to increased seasonal demand for SiP products. Our EMS operating margin was 4.4% which is flat sequentially and up 1.2 percentage points, year-over-year. On a full-year perspective, our EMS business delivered a banner year, driven by strong SiP sales. On a full year perspective, our EMS business revenues increased 23%, gross profit increased 29%. Gross profit margin also improved 0.4 percentage points to 9.2%. Operating margin increased 0.9 percentage points to 3.8%. On Page 11, you will find a graphical representation of our EMS revenue by application with sales increasing 49% sequentially. Interpreting this chart gets a bit tricky, what is fairly straightforward to see is that our communication segment increased by five percentage points as a result of product seasonality. Other categories generally grew in absolute dollars. However, their growth was not as pronounced as that of the communication segment. On Page 12, you will find key line items from our balance sheet. At the end of the quarter, we had cash, cash equivalents and current financial assets of NT$56.4 billion. Our interest-bearing debt decreased NT$15.5 billion to NT$209.1 billion. Total unused credit lines amounted to NT$275.2 billion. Our EBITDA for the quarter was NT$26.1 billion. EBITDA for the year was NT$90.9 billion. Our net debt-to-equity ratio for the quarter dropped to 65%, the higher and of our targeted range. As of the end of 2020, our ownership of USI listed on the Shanghai Stock Exchange under the ticker number 60231, is 73.4%. On Page 13, you will find our equipment capital expenditures. Machinery and equipment capital expenditures for the fourth quarter totaled NT$379 million, of which NT$296 million were used for packaging, NT$16 million for testing, NT$19 million for EMS and NT$4 million for interconnect materials. For the full-year, machinery and equipment capital expenditures were NT$1.7 billion. NT$1.1 billion was on packaging, NT$0.4 billion on test and NT$0.2 billion on EMS. We continue to provide our EBITDA in U.S. dollars here, as a reference. We believe that the company's EBITDA relative to our equipment CapEx serves as a key financial performance metric for the company. I'd like to turn the floor over to Dr. Tien Wu.

Hi everyone. To begin with, I would like to wish all of you, a Happy Chinese New Year. Here I would like to provide two updates. The first one will be a business recap, mainly addressing some of the comments which I made at our Q3 earnings call back to October 30 of last year. First item, the EAR affected ATM business has been recovered by Q4 of last year versus our previous commentary and expectation to be fully recovered by end of Q1 of this year. That is a good news. Second item, capacity remains tight. Last time I made a comment that the wirebond shortage will be at least to Q2 of this year. Right now we're slightly adjusting our view. We believe the wirebond shortage will be throughout the whole year of 2021. The machine delivery schedule, last time we talked about between six to eight months. Right now we're slightly elongated. The machine delivery lead time now is more like six to nine months. CapEx, the whole for 2020 on machinery CapEx was 1.7 billion U.S. dollars versus our previous estimate of NT$1.8 billion. The NT$0.1 billion was mainly due to the machine delivery schedule tied to the machine lead time. For this year, we believe our machinery CapEx will not be lower than NT$1.7 billion. The actual number depending on the business landscape and how do we collaborate with our customers as well as the machine delivery schedule. 2020, the Group SiP business grew nicely 50% year-on-year to U.S. NT$3.5 billion. We made a common target. Our incremental SiP revenue from new customers or new project should exceed our target of NT$100 million. In Q3 timeframe, we made a comment that it will be three times of NT$100 million target, the actual came in NT$386 million. That is in year [2000], from new SiP customers and projects, we have accrued NT$386 million of revenue. I will later make a comment on SIP momentum. For 2021, this year, we do believe the momentum will continue. And we will have new SiP customers and new SiP projects in the north of NT$400 million. That will be a very, very nice momentum and ramp. With that note, I would like to turn to the next page. I would like to give you highlight for the 2021 business outlook. For this year, we expect quarter-to-quarter growth at a local level. In other words, after Q1, we expect sequential growth in Q2 followed by Q3 and Q4. The second message here is for this year, we expect at the Group level, our operating margin will further expand by 1.5 percentage points to 2 percentage points. Next, let me make some comments on the ATM and also the EMS separately. The semiologic market growth, we estimate between 5% to 10%. We're seeing a very strong ATM run rate. As matter of fact, we just closed our January in our Q1, our run rate actually is the same as Q4 of last year. Just for your information, we have never seen this kind of run rate in the last 30 years in semiconductor industry. The ATM 2021 full-year growth, we were targeting at two times of semiologic market growth in U.S. dollar terms. This is the current expectation. The 2020 ATM operating margin that Ken just went through with you has improved 2.2 percentage points to 2.3 percentage points. For 2021, we expect this margin expansion will continue. As a matter of fact, our margin expansion 2021 will be better than the 2.3 percentage points, mainly from profitable synergy, economies of scale, efficiency improvement as well as technology leadership. Despite the foreign exchange impact for NT dollar against U.S. dollar, the EMS business shall have a higher year-on-year growth rate than our ATM business with operating margin targeting at 4%, another slight improvement. Future growth engines to drive the riding trend into the next five years, I put five years here with some optimism. From where we stand right now, I think the 2021 loading is very strong and we're quite confident of that. Right now, our optimism has expanded into 2022. I would like to make a comment about next five years with our growth strength and growth strategy. I think in 2020 as well as in 2021, we will demonstrate efficiency in ramping up and the overall supply chain management to all of our key customer and to our shareholder and our investors. In 2020, we have pandemic as well as supply chain constraint at all levels. The ramping up at such a dramatic rate was not a simple challenge. Also, we have replaced one our higher runner due to the EI effect. The retooling, recalibration, readjustment of our manufacturing portfolio, as well as requalification, for many of the products asked by our customers, was not an easy task. So in 2020, we have clearly demonstrated our capability to ramp up as well as procure necessary materials in a very adverse and challenging environment. We're confident we will repeat the same thing in 2021. And that will give a boost of confidence to our key customers, and securing the future business based on that performance. Following that comment, we do see very strong loading agreements, mostly two years, as well as very strong MPI pipeline, which covers a wide variety of application, namely 5G, SiP, sensors, and very strong ramp in automotive, as well as for our devices and edge devices. We made a comment previously talked about our factory, or the fully automated line. At the end of 2020, we have a total of 18 LiDAR factories. In this year, we have more than 25. The comment I would like to make here is those LiDAR factories are proving to be very efficient, and very usable in ramping up new volume, particularly with customers who have to do this remote. All of the LiDAR factory, or the automated lines are in very, very high demand from two types of customers, ether high reliability seeking, or data seeking, for a variety of reasons. Our LiDAR factory can provide real-time information in a very detailed manner to our customers, either in medical, automotive, or a high reliability applications. We're seeing more volumes, demanding multiple dies and sensors. And we believe this will fall into ASE sweet spot. In other words, since 2013, we have been building a portfolio covering multiple dies, as well as different packaging algorithm, methods, process, tool set for all kinds of sensors, that we're seeing huge demand due to the IoT edge device and smart device enabled by the 5G. In net, what ASE is trying to do, is to build a pervasive foundation and to be the preferred choice for all high-volume application. We do see that the pandemic, learn-from-home, play-from-home, work-from-home, had created a slight uptick on the overall semiconductor demand. With the high-performance computing, the cloud, e-commerce as well as the 5G load latency and high data rate, we're seeing more application released into the smart device electrical vehicle, and all of the IoT application. With that, the traditional packages will be expanding to multiple die and sensors. We believe in OSAT market, we are taken clear leadership. Also because of our performance in comping scales, we have better traction with all of our key customer and this describes why we're having such a demand curve in 2020, as well as 2021. With that, I would like to pass the floor to our CFO Joseph. Joseph?

Okay, Happy New Year to everybody. And before I go into our financial highlights, let me give you a guidance for our first quarter. Like Ken just mentioned, fourth quarter last year was a very exceptional strong quarter for us. And we were able to recuperate whatever excess loss that we had from the EAR impact. And this strong momentum will continue into first quarter. So we're going to have an unprecedented first quarter performance. And from the ATM perspective, in U.S. dollar terms, ATM first quarter 2021 business should be similar with fourth quarter 2020 level. Consequently, the gross margin should also be kept at a similar level with fourth quarter of 2020 as well. In terms of EMS, in U.S. dollar terms, EMS will follow the seasonality. First quarter 2021 business should be similar with third quarter 2020 levels whereas EMS first quarter operating margin should be slightly below the whole-year 2020 level. That is the guidance that we're providing. Now, let me move into some of the financial highlights we have, going through 2020. In the beginning of the year in 2020, we set out to say that we've set an operating expense ratio. We want to lower it to 2018 level which is 9.4%. And we have actually achieved ahead of that target. In 2020, our whole year operating expense ratio was managed to be held at 9%. And we will continue to put a very tight control over our OpEx ratio. And we're expecting to maintain the same OpEx ratio for 2021 as well. Also in 2020, we also set a target to say we want our operating margin to improve by 2%. From the reported operating margin, we stood at 7.3% which was 1.6% higher than previous year. But still in all fairness, we have to look at the FX impact in 2020. The operating - if we narrow the currency impact, the operating margin would be 9.2%, which is 3.5 percentage point higher than 2019 level. Therefore, we believe that we have actually achieved our goal to have the operating margin improvement. For 2021, with the strong business momentum, we're targeting another 1.5 percentage points to 2 percentage points, operating margin improvement for the year and also to support the strong business momentum in 2021. In the last quarter, we were saying that we were expecting our CapEx for the year to be lower somewhat from 2020 level. With the strong business momentum, we are actually raising that expectation in our CapEx to be similar to 2020's level, which was at NT$1.7 billion. Having said that, I think we want to dive a little bit more deeper into the CapEx number. As we mentioned, in 2020, because of the EAR restriction, we actually disposed some of our capacity, up to the amount of around NT$300 million. And for this year, we need to recuperate that capacity. So part of the CapEx that we're going to spend in 2021 will be to recuperate that capacity that we sold, and we will reconfigure the capacity to fit the current demand. Also, and in 2020, we said we want to - we set a goal to have our net debt-to-equity ratio down to 60% to 65% level. And I think we have reached that goal ahead of time. In fact, at the end of 2020 we have - we already reached the 65%, or the high-end of the target. And this we will continue to monitor very closely. And hopefully we can drive it further down in 2021. In terms of dividend, we are raising - actually raising our dividend payout, we expect to raise that from no less than NT$3 a share, as I previously mentioned, to no less than NT$4 a share. So to give our shareholders - have our shareholders to share more of the benefit that we have coming out of this strong performance that we had for 2020. With that, we are opening the floor for questions.

Ladies and gentlemen, we are now in Q&A session. [Operator Instructions]. Thank you. The first to ask question is Randy Abrams, Crédit Suisse.

Okay, yes. Thank you and congratulations on the results and outlook. I wanted to ask the first question on the wirebond tightness, the change in view from mid-year to full year. Just how much, you mentioned the equipment lead time push out but just how much the factor of demand and maybe what demand changes you saw to push that out to end of year? And if you could talk about how much wirebonder capacity you'll be adding to keep up to that demand.

So the first question is the demand has not slowed down at all. And the machine lead time is getting longer. That's why we're confident that wirebond capacity will remain tight to the end of this year, at least, if not longer. In terms of the number of wirebonder we're adding, I think last year we add 1800. And this year, we believe we will add to similar number of units. Right now we have confirmed delivery of 1200 and we're working on the other. But in terms of the wirebond tightness, but it's a combination of demand has not slowed down as well as the machine lead time. It's not just wirebonders, the whole line balance.

Okay, and if I could follow up on the demand for wirebonder, just the application, is it more PC consumer related, but also the other side automotive. I think since your last report, it got even more tight. If you could remind us just how big the automotive sector is and how you see that coming in and whether you need to even prioritize some capacity with that market, it seems like picked up quite a bit in the year end?

Right now, we have very high demand in automotive, mainly from the automated line as well as some high quality, the wirebonding process. The demand is actually getting to be very strong in terms of the percentage is actually very difficult to estimate because we do have a specific customer who are 100% engaged in automotive business but what we're seeing today is because of the admin of electrical vehicle, we have more customers getting into the design-in with the automotive guys. And therefore it will take us a while to really comprehend exactly where application is.

Okay. Okay, fair enough. If I can ask on the pricing, well you talked last quarter about raising price? How should we see the pricing in terms of magnitude? Like how much, and then how it's taking effect? Like because it looks like your expectations will be tight through the year, so would it be like sequentially you see ability to pick up pricing so we'd see it come in throughout the year? And I think you talked a bit about even two year, some two-year contracts, if you could talk a little more about what that involve, like how much of your business or what that's doing, what you're contracting in for pricing on those?

But the comment that I made the last quarter caused a lot of confusion and complaint. So I'm not going to comment on that anymore. The only thing I can tell you is, we do have a very friendly pricing environment. And the price adjustment, it's not - it's a science and its art. You have to really look at the business dynamics and how do you really collaborate with your customers? And how do you really support them in their total business portfolio? I think we have struggled the second half of last year and all the way to now, trying to accomplish the [indiscernible] and the balances. So the two comment that I made last time caused a lot of confusion. First, I gave a very quantitative number on the wirebond shortage, I'm not going do that again. And then I talked about the pricing environment and I won't to do that again.

Yeah, sure.

I apologize.

Okay. The last question I want to ask for now. On OpEx, I just want to clarify, I think, Joseph, you made a comment about managed the OpEx to keep at 9%. But I think the sales you are guiding up, double digit. So is it expectation, the OpEx would be growing in line with the revenue run rate?

I will say that, there's still room for the - for further improvement. But with the - with growing probability, I think the bonuses in this area assessments will start to kick in a little bit more. So at this point, I want to stay a bit conservative, although I'm not precluding any possibility of further improvement in OpEx ratio.

Okay, is the bonus expense tied to a percent of net income or is there a way to think about how we should model that structure?

The OpEx?

No, like the bonus expense, like back when bonus expensing first started, it was a percent of - is it a percent of like pretax income or is there a way to think of that? Or that goes up with more profit sharing if you get more profitable?

Yeah, it goes up with the profit that we're making in terms of the profit margin.

Okay, all right. Great and thanks a lot, Joseph.

Yeah.

Next one to ask question is Gokul Hariharan, JPMorgan.

Yeah, hi. Congrats on the good results. Thanks for taking the question. First of all, could we talk a little bit about advanced packaging and testing? How was the kind of backfill and recovery from the impact? I think we did have some impact in Q4 for both these areas, I think it was lower than Q3. How should we think about those areas? If you think about double digit growth for IC ATM this year, if we were to rank wirebond versus advanced packaging versus testing, how should we think about the growth ranking for these three components of IC ATM?

Okay, 2020 especially Q4 was kind of painful process for us, mainly because EAR affected customer which happens to be very high run rate on our - the fan out and some of the advanced packaging facility as well as the advanced testing facility. We have fully recovered that. We have disposed some of the assets, as Joseph already talked about it. The remaining assets, we have to retool, recalibrate, reconfigure to accommodate the other customer who might not have exactly the same configuration requirements, comparing to our EAR affected customers. That has been largely done. In terms of the - now after that recalibration in 2021, we do expect the advanced packaging, as was testing to resume the growth curve.

Do you feel that it'll grow faster than overall average or its probably still going to be in line with the overall average or slightly lower?

It will be in line with our overall growth.

Understood. My second question, Dr. Wu, you mentioned, work-from-home, stay-at-home and some of these new demand drivers that have emerged as a result of the pandemic, when you think about your increased confidence in demand, not just for this year, but also for next year and that is kind of reflected in your CapEx increase as well. Do you feel or you kind of bake in some kind of mean reversion here in terms of demand going back once we get into some kind of a recovery or you think that this is a new normal, and new customers are basically expecting the demand to basically stay at these levels or even go from here rather than I mean revert back?

Right, of course, that that is an educated guess. Assuming that the vaccination and also the pandemic situation, is the largely under control. The question now is, we will still see the current demand curve to continue. My belief is the answer is, yes, mainly for the following reason. Now, once you once you are adjusted to - once you're accustomed to, using a Wi-Fi, using the smart device, using multiple computer - that there is no turning back. And also, I think for you, myself, as well as many of the other semiconductor veteran, we're used to travel, flying around. I think 18 months to 24 months' time, is enough to change a lot of the human behavior. For example, the automobile customers who have not been travelling since the last 12 months, in future, there will be increasing percentage of people working from home, having conference at home, to replace some of the travel, face-to-face meeting. In that regard, I think the IT equipment, the bandwidth, and the quality and also the number of units people are willing to stand by, as well as the age group, which covers the older age group as a younger age group, I think that effect is there. Of course, we actually do not know how much that slope is going to change. But I believe the slope will be better than pre-pandemic days.

Understood. That's very helpful. Maybe if I could ask one more question to Joseph. Joseph, when you about margin expansion on the - it looks like a lot of the margin expansion is going to still come from gross margin even you're expecting OpEx to remain largely flattish, at least the starting point of your expectation. Is it, given that except for maybe one quarter, we were recently fully utilized all through last year, is it mainly a pricing translating into gross margin expansion because of capacity tightness and the different kinds of pricing or are there any other variables? Is it more of the build synergies starting to kind of come in when we think about the gross margin - into margin?

Well, I think it's a combination of many different factors. Of course, a friendly pricing environment certainly helps but I think we will continue to improve our efficiency through further automation in our factories. Also the synergy that we can be creating with the co-operation with SPIL will continue to benefit us in terms of margin improvement. And there are other measures that we're taking at this point to like Tien just mentioned, there are a lot of the ways that we do business will be different and will be more efficient. So all these and plus the continuing technology investment that we're putting in our factory in terms of making new products and creating new projects, particularly in the SiP area. Those all put together, we'll definitely have a positive impact on our margin.

Got it. Maybe one last question. Could you also talk a little about how much of our EMS revenues were SiP last year and could you talk a little bit about what are the new projects? Like what kinds of products, are they still 3C products that we are looking at in terms of this NT$400 million revenue stream coming in this year? Or are we also seeing some diversification of this into other verticals? Thank you.

We're seeing the whole wide variety of new SiP projects that covers the optical, the audio and silicon photonics, as well as the smartphone, edge devices. So we are kind of pleased to see that finally the SiP project start to gain momentum. And one of the things I always like to tell people is, when I talk about the heterogeneous integration, I'm really not addressing the silicon, all-silicon type of integration. I think the ASE sweetspot for the SiP will be the traditional silicon, all-silicon, multiple die, as well as optical sensor integrated in a very packaging manner. I think that, we are looking at a huge growth rate ahead of us. And I can't really give you a number. But over the last few years, we have been basically collaborating with a lot of our key customers, and trying to come up with design applications that can improve the efficiency, leverage the success of the HPC bigger brain and also the success of very powerful network in cloud with the 5G data rate and low latency. I think we're seeing more application in all areas, but all of the little devices for the mass market, that is really the sweet spot that ASE has been designing for, and with our key customers, with our early success, I think ASE today almost become the first choice. For example, in the 5G, most of the unique SiP, ASE has always been the first one to engage with our key customers. And I think that trend, hopefully will repeat in 2021 that we will have an even higher confidence. And maybe we'll be able to give you a projected market size based on the effort. But in the last few years, we couldn't give you that number because we're primarily working with few customers. But now we're seeing a broader, more diversified portfolio. And we gradually understand the design rule, the value, the fiscal and electrical, the cost performance. So we're just building the database to that. Our fully automated factory really was part of the overall architecture to accommodate that because if we don't understand how the sensor interact physically and electrically with one another, it's very, very difficult to build high multiple die, high level integration with overriding sensor using different materials, different configuration. And I think that is something have become more obvious to us through the effort of the last few years. That's a long answer, but I think it's a key answer - is the key message I would like to deliver to all of our partner investors.

Got it. Thank you very much, that's very helpful. Thanks.

Now the line is open to Roland Shu from Citigroup.

Hi, good afternoon. I think the first question still for the gross margin. So look at your IC ATM gross margin in fourth quarter. It improved by 2.4 percentage points with the overall IC ATM revenue was slightly better than Q3 of last year. However, I look at this testing revenue, actually it's been declined a lot in 4Q. So but SPIL, your gross margins improved a lot. So Joseph just said, you have a lot of these efficiency improvements, and some also with a better pricing environment. Question is, is this improvement of gross margins way off or are we expecting the gross margin improvement for this IC ATM will continue even though our testing business, the kind in 4Q?

With the higher loading that's continuing with very strong business momentum and the continuous effort that we're putting in terms of improving our overall efficiency, and also with the closer collaboration with SPIL to create further synergy, I do believe that in 20 - this year, we'll continue to see margin improvement at the gross level.

Okay, Yeah.

Although there are some headwinds in front of us including the strong NT dollar and also, as you mentioned, the - we're still trying to - we're in the process of recuperating some of the lost test business, which tend to have a higher gross margin. But all - putting all of these together, I think that there are some plus and minuses. But we still, we're still fairly confident that we will continue to see margin improvement going forward.

Understood. Yeah, and for your testing business, actually in past couple years you had a big amount of the testers and then you also would like to increase this testing business. However, I think in 4Q, the revenue for the testing was the lowest quarter in last year. It was even lower, like 4Q last 2019. We think, the year probably was the reason for this lower testing revenue, except for this EAR, is there any other issue that caused this testing revenue declined in 4Q last year?

No I think that is really the main reason why we're up because of this, this customer that are impacted by the EAR. It unfortunately has a very high turnkey ratio with us. And we are - now that this part of the business will take some time for us to bring back and but I think fortunately, I think the current market environment does allow us to have more capability in terms of raising our overall turnkey ratio with our customers. So, I think by second half of the year, we should be seeing a full recovery of our test momentum.

Second half this year, 2021?

Right. And it does take some time, not only to bring in new business but also to re-equip ourselves with suitable testers does take some time for us to fully recover.

So what is the utilization for the testers, at this moment?

For fourth quarter, in terms of fourth quarter, I think the overall test utilization has come down a little bit to below 80%. It was around 80% this quarter.

Okay, yeah. How about for IC ATM for packaging?

Packaging was, we're running at full capacity. And typically, we'll say it's 80% plus.

Okay. So I - is that in first quarter, this utilization of packaging and testing in first quarter probably will be similar as for 4Q?

It will - like I mentioned the run rate of our business remains the same as in fourth quarter. So the utilization should be very similar.

Okay, so previously you have that target for testing revenue to be - to reach one fourth or one third of the total IC ATM revenue. So now, do you still keep the same goal for this testing revenue? And when do you think you will reach this goal?

Yes, I think the test business is still a very, very lucrative business for us to build further. And we're setting a high goal for us and we'll continue to work very hard on it.

Okay, so you don't have the time frame for when to reach this one fourth or one third the total IC ATM revenue?

Oh, well let's take one step at a time.

Yeah, okay. Okay. Lastly, for you said you have this, a two-year loading agreement with customers. I just would like to know, is this for all customers or applications or this is just for some specific customer's products? And is this, your loading agreement are at fixed price, are this valid for two years? Thanks.

We have 90% of the customers covered, two years term.

90%?

Yeah.

90% of all IC ATM customer, right?

Wirebond.

Sorry, I'm sorry.

Wirebond customers.

I thought you were referring to wirebond?

Okay, 90% of the wirebond customers.

Right, that covers the NPI, audio, as well as pricing.

Okay, so this is a fixed pricing and the fee is valid for two years?

Yeah.

Okay, thanks.

Next one to ask question, Rick Hsu from Daiwa.

Yeah. Hi, good evening, guys. And thank you so much for taking my question. I just have a one simple question. Could you run through the details again, about your Q4 non-operating gains because I kind of missed this part at the beginning?

Oh, Rick, we had. Alright, let's get to the page here. The majority of the gains relates to the disposition of the of the Fujian plant, about NT$800 million. We also thought asset disposition gain, so we did have to reshuffle testers and such. So we didn't sell testers. But we did get gains on those.

How much is gain of that?

That's NT$0.5 billion of that.

0.5? Okay.

And then we have net interest expense.

Right.

0.6.

And we also have some forex.

We have forex and investment related content. Well, it's income this time around. So it's about NT$200 million, So NT$0.2 billion.

Okay, all right. Thank you so much. Yeah, that's all I have. Thank you.

Thank you.

Now we're having Charlie Chan from Morgan Stanley, for questions. Go ahead, please.

Thanks. And congratulations for the great results and Happy Chinese New Year. So my first question is really about your wirebond capacity expansion. So first of all, Dr. Tien, go through your three strategies thinking behind it, because if you - [indiscernible] maybe that kind of jeopardize your pricing power, and if you don't expand that maybe you cannot capture the business opportunity? So that is the question number one. And secondly, I'm a little bit curious about your machine lead time, right? Last year, you add 1800 units, and this year it's the same, but why last year there was wasn't a shortage and now you have such a lengthy time for those machines? And I know now you are probably more depend on corrugated sulfur as the major wirebonder vendor, and is that kind of lonely time only apply to the KNaS and do consider to also buy more wirebonders from [indiscernible]? Can you talk about all those topics? Thank you.

Okay, we have reported, we added 1800 wirebonder last year. And some of the PO that we placed in the second half of last year has not been delivered yet. And some of the PO that we issued last year, will be delivered throughout this year. We are also issuing new POs, based on the loading agreement and also the requirements as well as many of the other equipment will compose to the full manufacturing line. So it's not just wirebonder. You also have all the other equipment that go with the wirebond requirement in a different configuration based on the product. When I talk about the longer machine lead time, you have to go back to the machinery CapEx of the whole industry. If you go back to 2018, and 2019 and 2020 number for the OSAT, you will see that ASE was one of the company that spend more money in 2019 and 2020, compared to all the other OSAT. So some of the orders that we placed in '19 and '20 in the capacity we build up and that was the leverage we had versus a lot of our customer in the delivery in the capacity crunch. We do have a better negotiation position based on our spending power as well as our strategic alliance to all of the customers. However, given the 2020 capacity crunch, I believe all of our competitor are placing order for all of the equipment that are required to meet customer demand. So in 2021, we do believe that delivery will not be as smooth comparing to '19 and '20. And this explains why we don't believe the - but I will not be able to comment on the particular vendor that we use, and also the number because this will cover a lot of the instrument and equipment that we need. We also need to co-operate with the substrate, the lead frame and all of the other material supplier and it is not just wirebonds. And I appreciate how tight every things are. Okay?

Yeah, that should be very, very helpful. So I guess the, that kind of long lead time well this is kind of a cross ball, maybe not just a single equipment or single vendor. But Dr. Tien, would you think this kind of, a greatest spending, not just your company, but also just as you mentioned, your competitors would ruin the displaying of the wirebonding markets, and next year, you'll probably see kind of some pressure from customers on the wirebonding price?

The something we learned in 2020 that's slightly different than before. Before we talk about capacity, and the customer will come in, the leverage, the underutilized capacity versus the pricing. But in year 2000, I believe a few things have changed, right? First, people cannot travel. Therefore, the customer needs to arrange capacity qualification via remote, somehow relatively speaking. So for the company that have a track record of consistent delivery, as well as plenty of data, demonstrate integrity of the process will give higher confidence to the key customer and their end customer to use our capacity. Now, in 2020, I do not have the detail number of our competitor but I do not believe our competitor were as full as ASE. Having said that, we still have a lot of customer who need high reliability or consistency in delivery or more so in the speed of ramping up or the, so called time to market. So in 2020, even though we're very, very tight, but we have more customer coming to ASE demanding a longer-term service agreement such that we can provide the data to serviceability, the fast ramp up as well as the quality expectation, or the liability that go with the high-quality requirements. Then you have to understand that we were running full in 2000. You know run full and another 10%, 20% ramp up, is a huge challenge. Without a fully automated line, without a careful landscape planning for the last few years, you simply cannot achieve this kind of time to market. So I think 2020 is a very good confidence boost to my sales team, to my manufacturing team. And based on all of the dialogue that I have with my key customer, they really appreciate how Taiwan was managed throughout the pandemic, how the Taiwan semiconductor companies were managing the delivery in a very adverse supply chain environment throughout the whole 2020. And I believe that would carry us far. For the partner that we support, they're gaining market share. And I think this is another reason that I believe not only we will grow or capture a huge chunk of semiconductor growing logic space, we will also force and enable more outsourcing for IDMs. That I believe that in the next few years, we will enjoy a higher growth rate as a result of all of these factors.

Thanks for the insight, for the insight and again I think that's very clear. I mean I also have a follow up, Roland's question about your gross margin. And I'm sorry, I am not sure if you did give the gross margin guidance for this year? Can you kind of breakdown by your ATM business and EMS business, the gross margin trend in 2021? And also, I know you don't go comment about the pricing, right? But may I know for flip chip and testing, you expect the price to go up this year?

Joseph, you will comment on the gross profit?

As I mentioned earlier on, I think the - for 2021, I think we will continue to see margin improvement at the gross level with the steady or improving OpEx ratio. I think also on the operating margin, we'll continue to see improvement that comes from a lot of the efforts that we put in, in terms of improving our efficiency, creating synergy with SPIL and also the higher loading facility, of course it helps, a friendlier pricing environment also help. I think all of these put together give us a very high confidence that we will be improving our margin going forward for ATM. As far as EMS's perspective, I think the more relevant margin is at the operating level, because of the different product mix, it will have quite a bit of fluctuations on the growth level. So the more relevant or more meaningful benchmark is really on the operating level. For that, we are targeting a 4% operating margin for EMS business. That's slightly up from what we achieved in previous year which was at 3.8%.

Okay, for the other line of business, flip chip, the fan out and all of the others, we're also seeing a more friendly environment, but not as friendly as wirebond, you know, they're friendly. Okay, I will not comment anymore.

That's okay.

Okay, thanks, gentlemen. It's very helpful, thank you.

Next one to ask question, Sebastian Hou of CLSA.

Thanks for taking my questions. So just follow on the pricing and the margin, that part. Just if I look at your Q4 2020 margin that has improved, I think there is a combination of the utilization rate improved, synergies and then pricing but looking now into your 1Q guidance, revenue and margin will be similar to last quarter. So can we say that the pricing is not a factor anymore in this quarter to drive the margin for improvement?

I think it's you know, to have a similar margin for first quarter compared to last quarter is quite a bit of a challenge in itself already, because we are facing further edgy appreciation, which will have an over 1% impact on the margin. We are going through Chinese New Year and some of the factories are going are going through annual maintenance. So then will we will have less working days. And also throughout the - there's a lot of homework that needs to be carried out. The overall compensation expense is going to be higher for the first quarter. So all those things put together, I think we're doing a pretty good job in maintaining our margin a similar margin from fourth quarter.

I mean, just for clarification, the so-called seasonality too, yeah. In other words, some of the key customer run their high-volume device for consumer or a wireless application, and this do go through seasonality in Q1. As you can see in our EMS business, now we'll go through some sort of a seasonality pattern. So to offset the vacuum created by the seasonality of loading, we have to go figure out how do we add capacity? How do we enable other customer and ramp up that volume? In Q3 of last year, when I made a comment that our high run rate, our customer who got affected. We expect the end of Q1 to fully recover that vacuum. So in fact we had the EAR vacuum, we also had the normal seasonality vacuum in Q1. So what we're making a statement is that we actually replenish two vacuums created by the unavoidable forces. Now how much of that is through efficiency, the product mix and also pricing environment? I cannot get into the detail. But what we're telling you is, at a macro level given that we have three to four days shorter working days, because February as well as the annual maintenance, on top of that we have foreign exchange, that hopefully we can deliver a very strong Q1 which will be a new record in my career time and a revenue level in Q1 as well as the margin level. I hope that clarifies our current view about how unique Q1 is.

Okay, thanks. And the second question is on the two-year contract you have with wirebonding customers. So, if I may just want to understand the pricing schemes you have. It is that the customers already agree with you have to elevate the price one-time and from now on in the next 24 months the customer will sit on that fixed price already or schemes also cover some price increase this year another part of the price increase will happen next year within the next 24 months?

I will not comment on that. I'll only tell you that we have validated the baseline and then there will be other calibration based on business dynamics. But I will not go into any more details on that because everyone's different.

Okay, but so it's fair for us to assume that I think seen every customers have different scheme and so which means that the price adjustment may not end yet?

I won't comment on that, you know I won't.

Okay. And then another part of question is that I think that, Dr. Wu, you have mentioned that aside from wirebonding, the other business the pricing environment also getting more friendly right now. So do you see the possibility that customers will also get onboard with maybe some long-term agreements like bonding or flip chip, is it?

I won't comment on that right now.

Okay.

Sorry.

No, no worries. The next question I have in terms of the wirebonding equipment availability, I know that the lead times get extended because everybody wanted to buy those equipment right now, but do you see if there's any intrinsic bottlenecks or intrinsic limitation of the wirebonding equipment for the industry or for you to buy?

I don't think there's any other. It is over delivery, you need to have a line balance. You don't buy one type of equipment in excessive way, it will come in with a line balance optimization as well as your substrate, the epoxy and all of the other material supply. And I mean, mind you, the floor space, the training, IT system, I mean, I can just go on and on about what do you need to do. On top of that the wastewater, the air, I mean there is a whole lot of things that you cannot react just in time. The manufacturing floor takes years of planning to do and we're just giving you at a macro level of what the estimated number in terms of increments that we will be able to achieve.

Okay. All right, that's fair. Last question from me is for the EMS business. I think the company comment that I think this year, the EMS business growth will be higher than IC ATM this year. So what is the - can you give us some examples of them or give me more colors about what's driving that? Thank you.

You have the Asteelflash acquisition.

Oh, it will do that?

Well, then you will have a combination of growth in all sectors now in a highly constrained environment. The traditional EMS business will grow because everyone is looking for parts.

Okay, thanks. Thanks for mentioning that. If we exclude the acquisition, would EMS still be growing above IC ATM or below?

I think the overall organic growth of - the overall EMS growth comes from both organic growth as well as the addition of Asteelflash, which represents about 10% of the overall EMS going forward. So, we did mention that we are expecting to ATM to grow of two times of logic market growth. So you can do the math from there.

Okay. All right. That's all for me. Thanks.

Next one to ask question, Bruce from Goldman Sachs.

Hello, good afternoon. And thank you for taking my question. I think my question is for the overall ATM growth in 2021, which is two times higher than the semi growth? So, for the mean point is about 15% which is very, very good, can you give us a little bit breakdown in terms of like which one will grow faster or what are the growth driver? How much is coming from the share gain? How much is coming from SiP or how big is wirebound, flip chip, testing? What kind of rank in terms of their growth rate for 2021?

All right, 5G is at the onset. So we're seeing a lot of the 5G volume and then you probably know the number better than we do. So our key customer in the 5G space that cover the whole slew of application for our module power amplifier and the 5G chipset, the payments that go with it, as well as - because of 5G and the lot of the customer need to upgrade their infrastructure, Wi-Fi. So the Wi-Fi is there. We're having a lot of demand from the automotives and the electrical vehicle. And I talked about the smart devices and the edge device, so we're seeing more SiPs. And I just comment, in year 2000, we have NT$386 million of new SiP business. And we believe in 2021, on top of that, we get another NT$400 million of SiP business, and they're mostly audio, optical oriented. And all of these are new. And, honestly, I think we're the first mover in the - I think in all of these applications. So I don't think its market share. It's just a brand new market, enabled by the pandemic, or more specifically, enabled by the brainpower, the HPC and AI, the cloud data center, and the e-commerce. And you're seeing a lot of smart devices, and IoT being enabled. We'll not comment any more details, but I think over time, you will see a higher semiconductor growth rate reported by many of the semiconductor companies. And the I think ASE has got the right infrastructure and the know-how, and the reputation to facilitate the high volume, ramp up and time to market, in a very, very timely manner, particularly in a challenging environment. So I think 2021, at this point of time, we're very, very optimistic about a baseline that covers all of the loan agreements, as well as the MPI. And we look at the pipeline and the MRP application. So our eternal judgment is that those volumes are very real. And they will have longer life and stronger lead in the next few years.

I see. Okay. Oh, can I dig a little bit more into the SiP business? I mean, you just mentioned that SiP, the total group revenue is worth NT$3.5 billion. But as analysts, we have difficulty right now to break down, how much is coming from EMS, how much is coming from ADM because some of the projects we shall be computing our perspective. So can you give us a breakdown between the SiP business, between the EMS and ATM? And also for the growth rates, if the SiP business, the new project is about NT$400 million this year, most likely it's for like 10 plus percent of the worldwide growth for 2021. So which is somehow slower than the overall corporate growth rate, does that sound right?

Well, if I can give you the breakdown, which I'm pondering, I don't think I will give you the breakdown this time. The growth rate is much higher than our corporate growth rate. Because a lot of the growth rate are in the ATM range. All right. My apology, I don't have the breakdown right now. We will think about it. How do we give you a better breakdown for better clarity, but not this round?

Okay. Okay. One last question for me is that if the whole year revenue growth is 2x then semi growth, which is more like 15% for the midpoint. But your first quarter ATM business is, the year-on-year growth is somewhere around 6% or high single-digit. Does not imply that you have a very strong second half seasonality?

We already comment that we will - we are expecting quarter-to-quarter growth for the whole year of 2021. So yes, it's 1Q, 2Q, 3Q, 4Q, each quarter is better than the previous quarter.

Right, well again, thank you.

Thank you.

Thank you. Now we're taking a last question. Szeho Ng from China Renaissance Securities. Go ahead, please.

Oh, hi, gentlemen. Congratulations. Two quick questions from my side. First one, regarding the net gearing target, looks like you're pretty ahead of schedule. So are you happy with your current 60% to 65% or internally, you're looking for a more aggressive target right now?

Short answer is, yes, I'm happy with that. 65% is, it's a reasonable number that we have already achieved, particularly when we achieve it ahead of schedule. And in terms of whether we want to further improve that? I think, really depends on how the market shapes up going forward. I think there are plenty of different opportunities in front of us. It could be something organic, it could be something that's external. So I will rather leave it open at this point, we'll leave some flexibility for myself. If, by the way, if we look at the current forecast that we have for the year, I think there's going to be further improvement in terms of the net debt-to-equity ratio.

Okay, definitely. And a second question on the ATM and GPS gross margin. Keeping the company revenues upward outlook for the next few years, is it fair to assume that the ATM gross margin can be back to mid-to-high 20% level, like what we saw back in 2014 or '15, when the company was dominating the copper wirebonding market?

Well, that's certainly be the ideal level that we want to go after. I think, we're going to be patient and we're going to take one step at a time and just checking from all angles of our operation. See how much improvement we can continue to have. So yes, I think that's a longer term - from a longer-term perspective. That is something we want to we want to pursue.

Okay, sounds great. Okay, thank you very much and congratulations again.

Thank you.

Okay. Thank you, everyone for attending our call. We'll see you next quarter, hopefully at an earlier time spot. Talk to you then. Bye.

Thank you, Happy New Year.