Diodes Incorporated (DIOD) Q3 2020 Earnings Report, Transcript and Summary

Good afternoon, and welcome to Diodes Incorporated Third Quarter 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of today's conference call, instructions will be given for the question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded today, Monday, November 9, 2020. I will now like to turn the call over to Leanne Sievers of Shelton Group, Investor Relations. Leanne, please go ahead.

Good afternoon, and welcome to Diodes' third quarter 2020 financial results conference call. I'm Leanne Sievers, President of Shelton Group, Diodes' Investor Relations firm. Joining us today are Diodes' Chairman, President, and CEO, Dr. Keh-Shew Lu, who is joining us from Taiwan; Chief Financial Officer, Brett Whitmire; Vice President of Worldwide Sales and Marketing, Emily Yang; and Director of Investor Relations, Laura Mehrl. Before I turn the call over to Dr. Lu, I'd like to remind our listeners that the results announced today are preliminary, as there are subject to the company finalizing its closing procedures and customary quarterly review by the company's independent registered public accounting firm. As such, these results are unaudited and subject to revision until the company files its Form 10-Q for its third quarter 2020. In addition, management's prepared remarks contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, and therefore, we refer you to a more detailed discussion of the risks and uncertainties in the company's filings with the Securities and Exchange Commission, including Forms 10-K and 10-Q. In addition, any projections as to the company's future performance represent management's estimates as of today, November 9, 2020. Diodes assumes no obligation to update these projections in the future, as market conditions may or may not change, except to the extent required by applicable law. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in GAAP and non-GAAP terms. Included in the company's press release are definitions and reconciliations of GAAP to non-GAAP items, which provide additional details. Also, throughout the company's press release and management statements during this conference call, we refer to net income attributable to common stockholders as GAAP net income. For those of you unable to listen to the entire call at this time, a recording will be available via webcast for 90 days in the Investor Relations section of Diodes' website at www.diodes.com. And now, I'll turn the call over to Diodes' Chairman, President and CEO, Dr. Keh-Shew Lu. Dr. Lu, please go ahead.

Thank you, Leanne. Welcome, everyone. And thank you for joining us today. Third quarter revenue was better than expected and increased 7.2% sequentially, driven by strong recovery in Asia, followed by North America, contributing to record revenue in automotive, consumer and computing end markets. Total worldwide point of sale revenue increased 19% sequentially and reached a record in the quarter, driven by driven by record POS revenue in Asia at 20% and 16% growth in both Europe and North America. Our record sales in the automotive market grew 18% sequentially and over 5% year-over-year to 11% of total revenue, reflecting Diodes continued success in expanding application opportunities across new and existing customers while further increasing Diodes semiconductor content per vehicle. Additionally, we continued to gain strong momentum with our Pericom IC products in both the automotive and computing markets, and we also saw a resurgence in the consumer market, which has increased approximately 30% from the first quarter of this year. In fact, our total revenue has increased 10% from the first quarter of 2020 at the onset of the pandemic with net income increasing approximately 35%, demonstrating both the resiliency of our business as well as the solid leverage in our operating model. We expect to further extend our growth momentum as we continue to see broad based improvements across our target end markets and geographies, which at the mid-point of our fourth quarter guidance represented the highest quarterly revenue in the company's history. These expectations exclude any contribution from our proposed acquisition of Lite-On Semiconductor that is expected to close at the end of November. With that, let me now turn the call over to Brett to discuss our third quarter financial results and our fourth quarter 2020 guidance in more detail.

Thanks, Dr. Lu, and good afternoon, everyone. As part of my financial review today, I will focus my comments on the sequential change for each of the line items, and will refer you to our press release for a more detailed review of our results as well as the year-over-year comparisons. Revenue for the third quarter 2020 was $309.5 million, an increase of 7.2% as compared to $288.7 million in the second quarter 2020. Gross profit for the third quarter was $111.1 million or 35.9% of revenue, an increase of 9.5% or 70 basis points compared to the second quarter 2020 of $101.5 million or 35.2% of revenue. GAAP operating expenses for the third quarter 2020 were $73.2 million, or 23.7% of revenue. And on a non-GAAP basis were $68.9 million, or 22.3% of revenue, which excluded $4 million of amortization of acquisition-related intangible expense and $0.3 million of acquisition related costs. This compares to non-GAAP operating expenses in the prior quarter of $64.5 million or 22.3% of revenue. Total other expense amounted to approximately $4.6 million for the quarter, including $2.6 million in foreign currency loss and $3.7 million in interest expense, partially offset by $1.6 million of other income and $138,000 of interest income. Income before taxes and non-controlling interest in the third quarter 2020 was $33.3 million compared to $26.1 million in the previous quarter. Turning to income taxes; our effective income tax rate for the third quarter was approximately 17.7%. GAAP net income for the third quarter 2020 was $27.2 million, or $0.51 per diluted share, compared to GAAP net income of $21 million or $0.40 per diluted share in the second quarter 2020. The share count used to compute GAAP diluted EPS for the third quarter 2020 was 52.7 million shares. Non-GAAP adjusted net income in the third quarter was $32.8 million, or $0.62 per diluted share. We excluded $3.3 million of non-cash acquisition-related intangible expense and $2.4 million of acquisition related financing and other costs. This compares to non-GAAP adjusted net income of $28.6 million or $0.54 per diluted share in the previous quarter. EBITDA for the third quarter was $63.3 million, or 20.5% of revenue, compared to $55.3 million, or 19.2% of revenue in the prior quarter. We have included in our earnings release a reconciliation of GAAP net income to non-GAAP adjusted net income and GAAP net income to EBITDA, which provides additional details. Cash flow generated from operations was $39.7 million for the third quarter 2020. Free cash flow was $21.9 million for the third quarter, which included $17.8 million of capital expenditures. Net cash flow in the third quarter was a positive $85.2 million, including an additional $105 million draw down of debt and the pay down of long-term debt by $49.7 million. Turning to the balance sheet. At the end of the third quarter, cash and cash equivalents plus short-term investments totaled approximately $591 million. Working capital was $893 million and long-term debt including the current portion was $346 million. Both our cash and debt balances increased in the quarter as a result of actions we took to prepare for our pending acquisition of Lite-On Semiconductor, which is expected to close at the end of November. Similar to last quarter, we took advantage of the low interest rate environment and drew down on our credit line as we continue to purchase new Taiwan dollars as a natural hedge against the US dollar, since the transaction will be funded in new Taiwan dollars. As of the end of the third quarter, we had borrowed and converted the equivalent of $305 million, resulting in our debt and cash balances increasing accordingly. In terms of inventory at the end of the third quarter, total inventory days increased slightly to approximately 120 in the quarter, compared to 119 last quarter. Finished goods inventory days were 32 compared to 30 in the second quarter 2020. Total inventory dollars increased $4.5 million to approximately $260.3 million, which reflects a $2.6 million increase in raw materials and a $2.1 million increase in work-in process and a $200,000 decrease in finished goods. Capital expenditures on a cash basis for the third quarter 2020 were $17.8 million or 5.8% of revenue, which remains at the low end of our target model of 5% to 9%. Now, turning to our outlook. Building on our growth momentum in the third quarter and record POS results, we expect fourth quarter revenue to increase to a record of approximately $324 million, plus or minus 3% which at the midpoint represents growth of 4.7% sequentially and 7.6% year-over-year, which is significantly above typical seasonal results over the past five years of down 4%. These revenue expectations exclude any contribution from Lite-On Semiconductor acquisition, which is expected to close at the end of November. We expect GAAP gross margin to be 36% plus or minus 1%, non-GAAP operating expenses, which are GAAP operating expenses adjusted for amortization of acquisition-related intangible assets, are expected to be approximately 22% of revenue, plus or minus 1%. We expect non-GAAP net interest expense to be approximately $1.5 million, our income tax rate is expected to be 18%, plus or minus 3% and shares used to calculate diluted EPS for the fourth quarter are anticipated to be approximately 53 million. Please note, that purchasing accounting adjustments of $3.3 million after tax for Pericom and previous acquisitions is not included in these non-GAAP estimates. Also not included is $3.3 million of Lite-on acquisition-related financing costs. With that said, I will now turn the call over to Emily Yang.

Thank you, Brett, and good afternoon. In the third quarter, revenue increased 7.2% sequentially, which was at the high end of our guidance due to better than expected demand recovery in Asia, followed by North America. Of particular note, worldwide POS revenue increased 19% sequentially, led by record POS in Asia at 20% and up 16% in both Europe and North America. Channel inventory is the lowest been since the end of 2018, with distributor inventory in terms of weeks decreasing quarter-over-quarter and within our defined range of 11 weeks to 14 weeks. We expect distributor inventory to remain within our normal range of 11 weeks to 14 weeks in the near term. Looking at the global sales in the third quarter. Asia represented 79% of revenue, Europe 13%, and North America 8%. In terms of our end market, consumer represented 27% of revenue, mainly driven by consumer pre-Christmas builds; industrial 22%, communication 21%, computing 19% and automotive 11% of revenue. We achieved record revenue in automotive, computing, and consumer end markets. Now, let me review the end markets in greater detail. Beginning with automotive market, as mentioned, Diodes achieved record revenue increasing 5.2% over the prior year period and 18% sequentially. Driven by strong sales growth in Asia, followed by North America and Europe. This growth reflects the success achieved by Diodes total solution sales approach and demand creation efforts in penetrating new and existing automotive customers and applications, in addition to the steadily increasing semiconductor content per vehicle. We are also able to secure several new design wins and grow our automotive business for products, including SBR, Zener diodes, switching diodes, power transistors, and TVS. High demand applications including battery management system, Powertrain, [indiscernible], 48-volt battery power, automotive lighting and lighting controllers, as well as emergent applications like mini electric vehicle and micro hybrid also drove our growth. Newly released automotive compliance 40-volt and 5.5-volt product family and LDO has gained increasing market attention with new opportunities and design-ins for infotainment to ADAS applications. Gate driver ICs and new data line protection products compressing single new and quad channel TVS in small package has been successfully designed into various end applications including infotainment system, wireless chargers, USB charges, and user interface system. Also during the quarter, we continue to gain market share in brushed DC motor controllers, wireless charging, reverse battery, and protected low switching applications. We are seeing strong momentum on the signings for our bipolar junction transistors, and LED drivers in LED-based automotive retrofit lamps to replace halogen lamps. We are also seeing design wins in both interior and exterior vehicle lighting, with applications ranging from headlight to the tail light and like modules. In the industrial market, revenue increased over 7% sequentially as customer factories begin to reopen throughout the quarter in both North America and in Europe, but yes, still remain below full production output compared to a year ago. One area of focus for Diodes in the industrial market is providing innovative solutions to support customers in reducing their carbon footprint. Additionally, our switching diode products continue to be used in personal protective equipment by the first responders and healthcare providers. Similarly, our MOSFET diodes, crystals, and crystal oscillators have been adopted in a number of medical applications ranging from testing equipment to ventilators, especially those to fight COVID-19. Our switching diodes are also being used in many additional industrial applications, including smart power, high efficiency HVAC security and controls, smart energy metering, factory automation, elevators and control system. In addition, we've seen strong growth for our LDO product family, as we continue to see new design wins in industrial, LED lighting, e-meter and power tool application. We also secured several new design wins for our linear LED drivers in applications such as the factory automation, and LED lighting. Our SBR and gate driver products also saw a high level of design activities in embedded systems and in high performance expense using telecom power systems, medical equipment, and industrial control system. In the consumer market, we achieved record revenue in the quarter as a result of strong recovery in Asia. We saw strong demand for our both LED drivers for applications such as earphones, [indiscernible] and handheld devices. We also saw tremendous growth for our AC-DC products, mainly driven by 25-volt phone chargers, small appliances and power adapters as well as new design wins for LDOs, rectifiers, and BJTs in charging, TV, and set-top box applications. We also achieved significant revenue growth for our heavy amplifiers products in portable gaming and consumer speaker applications. We also continue to see strong demand for our TVS and switching diodes in the consumer segment where growth was driven by the white goods, including high efficiency washing machines, dishwashers, dryers, vacuum cleaners and stoves. Turning to communication market. 5G infrastructure, continue to be a key focus area and we continue to see expanding opportunities for our products. Due to 5Gs high frequency and limited distance, small cell has become increasingly common to improve the coverage and capacity of the network. Our low-jitter high performance crystal oscillator are needed in certain modules for precision timing needs. In the CPG space, our PCI Express packet Switches and clock buffers are finding wide acceptance in many 5G boxes. We also saw strong momentum for PMOS in remote radio unit and NMOS for 1 KV for large boost power in 5G base stations to save power consumption. TVS and LDOs also saw increasing design-ins and design wins in smartphone and 5G router applications. Lastly in the computing market, revenue increased over 7% sequentially and also 14% year-over-year to record levels as work-from-home and shelter in place continue to drive momentum in notebooks, motherboard, surfers and storage applications, in particular for our Pericom product family. This quarter we released 20 output PCI Express Gen4 and Gen5 clock buffers, building up on our previous released family of clock buffers and clock generators and enabling us to now offer the most comprehensive cost solutions for server and data center applications. This cost solutions and our frequency control products, position us well for the next major server platforms with PCI Express Gen for deployment. Momentum for our Pericom product continued in the quarter and revenue remained at the second highest quarterly levels since the acquisition. This product continue to dominate in signal integrity space with PCI Express Gen 4 redrivers, USB 3.0, Gen 2 interface in PC and motherboard applications. We're also seeing tractions for our fully integrated active month for PCI Express Gen 4 and USB 3.2 [ph] Gen 2 by two redriver solutions for USB Type C applications. We also continue to increase market share for switching diodes and TVS products using desktop and mobile applications as notebook, PC business continue to be strong, primarily driven by work-from-home, remote education and e-learning demands due to COVID-19. Our USB power switch product line achieved record high quarterly revenue and we are seeing more USB Type C adoption with many design wins, using our popular crossbar switches product. We have also seen growth momentum for SBR, MOSFET, and SKY product in applications like USB Type C and power delivery and ATX power charging and adopters. In summary, we're very pleased with another quarter of strong results and continued growth despite the current environment. Our record results in the automotive, consumer and computing market, combined with record worldwide POS are setting the stage for Diodes to potentially set a new quarterly revenue record next quarter in what is typically is down quarter. We look forward to reporting our continued progress and closing our Lite-On Semiconductor Acquisition at the end of November to further enhance our future opportunities. With that, we'll now open the floor to questions. Operator?

[Operator Instructions] Our first question comes from the line of Gary Mobley of Wells Fargo Securities. Your question please.

Hey, everyone. Hope all is well. I want to start out asking for clarification from you, Emily. You mentioned that point of sale was up 19% versus revenue being up only 7%. But I think you mentioned that distributor channel inventory was up sequentially. I'm just trying to reconcile that difference?

Right. Gary, good morning. Definitely POS increased globally 19% and Asia, is actually increased 20%, and North America and Europe increased 16%. Our channel inventory as actually decreased to our lowest ever, since the end of 2018. So it's really at the lower end that we define as a normal range.

Okay, miss heard that. All right, and as it relates to your gross margin outlook for the fourth quarter, roughly 36% and that's on a record quarterly revenue level. And so you've been at 37% or 38% gross margin in the past at a lower revenue level. So I'm wondering what difference is there? Is it lower utilization? Is at a lower mix of industrial?

Gary, let me address this question, right. So if you really look at region shift, from the regional point of view changed a little bit compared to I would say 2019 Q3, Q2 range. Asia is definitely contributing lot more and usually this region also have a little bit lower gross margin percentage. And you know this also directly impact pretty much the automotive industrial because automotive industry usually have -- more allocated to Europe and also North America. So as COVID-19 continue to improve, North America and Europe recover more, we believe that that will help us.

That's helpful. Thank you. I'll hop in the queue. Thanks everyone.

Thank you. Our next question comes from the line of Shawn Harrison of Loop Capital. Your question please

Hi, good morning and good evening everybody. My first question has to deal with distribution. I'm just wondering if you're getting any signs from distributors, let's say in Asia first, and then in the western world next, if they like to add additional inventory given that you're seeing strong demand. I don't know what your lead times are doing, maybe you could discuss that? And channel inventory is at the lowest level in two years. So it seems like there is the potential for restocking to occur at some point in time in the near future.

Hi Shawn. Nice to talk to you. So, definitely if you look at our channel inventory is really more on the lower end. As you can see based on the Q4 guidance, we actually definitely look closely to our booking trend, to our backlog situation as well as channel inventory and the POS trends. So that's the reason we actually guided Q4, you know, what you're seeing right now. So definitely would look closely to other things combined. And you take the strategy from there.

And do you think distributors will continue to work down your inventory in the fourth quarter or will they try to at least hold it steady?

Our strategy is keeping within the normal range 11 weeks to 14 weeks. And definitely if the inventory at channel is too low it is not beneficial to Diodes. So we definitely not planning to lower more of the distribution inventory. So again we try to maintain within the 11 weeks to 14 weeks range that we define as a normal range.

Great. And then as a follow-up. Brett, if my math is right, I think you said you borrowed $305 million so far. So, is there another, I don't know $125 million, $150 million that you still have to borrow or transfer over for the deal to close and that's what we should base kind of the go forward interest expense off of?

Yes, Shawn that's right, yes, you got it exactly right.

$100 million or $150 million, sorry.

It's $150 million is what we expect to borrow in fourth quarter.

Okay, thank you.

Thank you. Our next question comes from Matt Ramsay of Cowen. Your line is open.

Thank you very much. Good morning and good evening everybody. I don't know for Dr. Lu or Emily, maybe you could walk us through a little bit in more detail by end market segment, the strength of your fourth quarter guidance. It's up pretty materially versus where the consensus had modeled it? Obviously the POS revenue is strong and you call that out, but maybe you could walk us through a little bit by division particularly talking a little bit about automotive where we've seen a market acceleration as that industry has recovered? Thank you.

Sure. Hi, Matt. Yes, let me start with automotive segment. We definitely see very strong momentum in Asia and we definitely see that momentum will continue into our fourth quarter. We also start seeing North America and Europe regions, start with a good momentum of recovering and that we do expect that momentum continues. At the same time, we've been working on the content expansion and that will continue to be our strategy to expand our dollar content. And then I will go into the industrial, I think overall factory closure in North America and Europe, we started seeing a lot of improvement. We also started seeing the production output. It's getting close to a 100%. And we also -- I mean from all this data, with regional improvements from North America and Europe, we are also pretty upbeat about the industrial for the fourth quarter. And then for communication, like I explained before our smartphone is actually aimed at communication and with smartphone especially 5G smartphone market. The cycle shifted a little bit. So we actually seeing continued strong momentum into this together with 5G infrastructure. We continue to see a really strong designing and also design win momentum in this area. And then for the computing, this is the area, a lot of shelter in place, we've seeing a lot of good result in the third quarter and second quarter already, and we do expect some of the momentum will continue to carry through. And for the consumer right, usually fourth quarter is not a strong quarter, but we also noticed the shelter in place, continue to drive some of the gaming consoles I talked about last quarter and also anything related to a fitness and health, I think the IoT related, I would say applications that we are still seeing good growth momentum in this area. So across the board we are seeing almost every single end market segments showing some momentum to grow and also across all the regions.

Thank you, for the detail there. That's really helpful. I guess the next follow-on question to that is, as we go into maybe the first half of next year and we wouldn't -- you guys aren't going to guide that yet obviously, but if you can maybe remind us what would normal seasonality look like in the first and second quarters for your business and if there is any particular things given we're still in the recovery from COVID and maybe you could talk a little bit about if there's anything that might be different this year that we should flag for seasonality in the first half of next year? Thank you.

I think right now it is very difficult to predict seasonality. We will still go ahead assume this seasonality like before which is 1Q will go down, probably let's say 3% to 5% then 2Q going back up 5% to 10%. 3Q, following 5% then 4Q going down. We just go ahead assume that normal seasonality. Now it may be very strange, in fact 4Q this year instead of going down average 4%, 5%, we are actually going up 4%, 5%. So if you go to look at it is very difficult due to this the virus issues. And other thing is the Europe and US, the virus is not really settled down yet and but at Asia, the virus is more settled now. Okay, so at this moment we are just thinking the synergy will be the same. But since the Diode majority of our business is in Asia, and therefore we even automotive, industrial, we still have a lot of the business in Asia. Therefore, our thinking will benefit more than our competitors.

Thank you, Dr. Lu for that. Just one more quick one from me and then I'll jump back in the queue. I noticed that the folks at Lite-On have reported their revenue for the September quarter and I think it's up 3% year-over-year, maybe 4% sequentially versus the June quarter. For the pieces of the business that you plan on acquiring by the end of the month Dr. Lu, anything unusual or different to call out in their business conditions. Just -- I know it's a volatile time for everyone, so I just -- if there was anything unusual there that was worth calling out, we'd appreciate it. Thank you.

I think when we acquire LSC, we have certain assumption and -- then, when we see it now we really didn't see that much of different. Okay, the one we took in for more is a downturn. I think from that synergy point of view, we have much long-term view for instance like market synergy, product synergy, customer synergy, and manufacturing synergies. And the from the first three synergy it take a long time, much longer time to be able to mature or to get it. Okay, because you are talking about design in and all those activity you take one year to two years, especially, automotive, it could get two years to three years before we can get that synergy. So the one short-term one, we can get the synergy is that diodes [ph] manufacturing synergies, if you'd -- currently their manufacturing is way under loaded, probably 40% to 50% loaded and we are quickly try to qualify our Diode product to be able to manufacture by their manufacturer and we think that ramping will be start from second quarter next year and probably up to about 70%, loaded by the end of next year. Okay, so this is a much quicker we can bring the synergy in, but one think you know we know the product shipping due to loading issue where GP is about 13%, 14%. So it really pulled down our total GP next year. But we will try to bring it up and one thing is it is accretive immediately. This is the key thing even GP is not as good as Diodes GP and but bulk of that manufacturing is under loaded. But we still hope in or we still can see, there will be breakeven next year at the end or the total year will be breakeven with the improvement of the manufacturing and the total [indiscernible] from the share purchase back and the interest payment. Those two at the end we should be able to -- probably improve our EPS about $0.30, 2021.

Thank you, Dr. Lu. Really appreciate the help.

You're welcome.

Thank you. [Operator Instructions] Our next question comes from the line of Tristan Gerra of Baird. Your line is open.

Quick question on your manufacturing overall. What do you expect your utilization rates to be in Q4? And are you looking at acquiring more capacity, given the trends that we see, low inventories, some buckets of price increases?

Can you repeat the question one more time?

Yes. So the question is, what do you expect your utilization rates to be this coming quarter? And also given the back-to-up very lean distributor inventories and we're also seeing some pockets of price increases for products like MOSFET, which all point to strong demand, so are you looking at acquiring potentially more capacity ahead given those trends?

So Brett, do you like -- go ahead Dr. Lu.

Well, is really the growth for next year. We're going to focus on is entire growth, okay. And the reason is, I always see gross margin is very low. Okay, so next year, we will focus on design-ins for both diodes and LSC product, but for the revenue we are thinking most of them will be coming from the growth of entire product. We don't think the LSC product will grow that much, okay. And therefore due to diodes manufacturing will be improved. Because if we see the growth and we see that diodes utilization will be improved. For the LSC manufacturing, what we want to do will be qualified some product capable produced by LSC product capable produced by LSC and majority of the utilization improvement will be coming from diodes manufacturers. We still have a doubt wafer and some [indiscernible]. And therefore, that is the portion -- that will be the product, we're going to focus on is bringing in those loading form outside diodes operation into LSC operations to improve their used direction.

So Tristan, let me -- yes, let me add a little bit there on top of Dr. Lu's comment. So remember we actually acquired GFAB in Scotland. And we also ramping of additional capacity SFAB [ph] in-house as well. And addition to what Dr. Lu just mentioned LSC you know, both in the fabrication capacity and also assembly capacity, we believe with all this combined plan that we have in place, should be really good to support our 2021 target growth year. So that's pretty much our internal capacity, our strategy for longer-term. So we have done really well with our past few acquisitions and position really well for our growth.

Okay, great. And then quick follow-up. You mentioned Pericom ramping in automotive, are we at the early inning of that ramp? And what's the content and market share implications? Because Pericom has had over the past, I would say in 24 months, a very successfully wanting server so is automotive incremental at this point?

Yes, I think like I mentioned before all this applications is really at a very early stage of adoption and a lot of new application, I talked to before related to Pericom product family are more in the next generation of ADAS, infotainment system and stuff like that. So, yes, to answer your question is, at the beginning of this whole cycle.

Great, thank you.

Thank you. At this time, I'd like to turn the call over to Diodes' management for any closing remarks.

Thank you for your participation on today's call. Operator, you may now disconnect.

Thank you, ladies and gentlemen. This concludes the conference call. You may disconnect your lines at this time.