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spk07: Good afternoon and welcome to the DODACE, Inc. Second Quarter 2024 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. If anyone needs assistance at any time during the conference call, please press the star key followed by the zero in your touchtone phone. And as a reminder, this conference call is being recorded today, Thursday, August 8th, 2024. I would now like to turn the call over to Leanne Sievers of Shelton Group Investor Relations. Leanne, please go ahead.
spk02: Good afternoon and welcome to DODACE, Second Quarter, Fiscal 2024 Financial Results Conference Call. I'm Leanne Sievers, President of Shelton Group, DODACE Investor Relations firm. Joining us today are DODACE President Gary Yu, Chief Financial Officer Brett Whitmire, Senior Vice President of Worldwide Sales and Marketing, Emily Yang, and Director of Investor Relations for MeetDollyWall. I'd like to remind our listeners that the results announced today are preliminary as they are subject to the company finalizing its closing procedures and customary quarterly review by the company's independent registered public accounting firm. As such, these results are unaudited and subject to revision until the company files its Form 10Q for its fiscal quarter ending June 30th, 2024. 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 for the Securities and Exchange Commission, including Forms 10K and 10Q. In addition, any projections as to the company's future performance represent management's estimates as of today, August 8th, 2024. Dowd's assumes no obligation to update these projections in the future as market conditions may or may not change, except to the extent required by applicable law. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information and GAAP and non-GAAP terms. Included in the company's press release are definitions and recommendations affiliations 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 Dowd's website at .dowds.com. And now I'll turn the call over to Dowd's president, Gary Yu. Gary, please go ahead.
spk06: Welcome everyone. Thank you for joining this conference call today. As reported earlier today, second quarter results exceed our prior expectations as Dowd's demand began to recover from the low point in the first quarter, especially in the computing market in Asia. Additional positive indicators included improvement in distributor inventory levels, with a sequential decrease in channel inventory weeks. Demand improvement during the quarter was most prominent in our computing end market, where DOWDs is increasingly participating in the growth of AI servers. In fact, POS across the 3C market increased significantly over the prior quarter, and DOWDs was able to maintain automotive and industrial product revenue at 41% of total, due to the content increases in both markets, even though the recovery remains low due to the ongoing inventory adjustments. As we look to the third quarter, we are guiding for strong revenue growth of over 8% at the midpoint, supported by overall POS growth of more than 7% in the second quarter. Our near-term expectation for growth margin continue to reflect factory unloading, related to our waiver service agreements, as well as our internal demand. However, we expect to continue margin expansion to our target model of 40%, as loading improves combined with the resumption of growth in the automotive and industrial end markets. As global demand strengthens, we remain focused on driving further operational improvements to deliver increased earnings and cash flow. With that, let me now turn the call over to Brett to discuss our second quarter financial results, as well as our third quarter guidance in more detail.
spk05: Thanks, Gary, and good afternoon, everyone. Revenue for the second quarter, 2024, was $319.8 million, compared to $302 million in the first quarter of 2024, and $467.2 million in the second quarter, 2023. Gross profit for the second quarter was $107.4 million, or .6% of revenue. Which reflects factory underloading at our manufacturing facilities, related to our way for service agreements, as well as internal demand. This compares to $99.6 million, or 33% of revenue in the prior quarter, and $195.4 million, or .8% of revenue in the prior year quarter. Gap operating expenses for the second quarter were $103.7 million, or .4% of revenue. And on a non-GAP basis were $90.9 million, or .4% of revenue, which excludes an $8.3 million restructuring charge, 3.9 million amortization of acquisition-related intangible asset expenses, and $0.6 million for officer retirement. This compares to GAP operating expenses in the prior quarter of $86.6 million, or .7% of revenue. And in the second quarter, 2023, of $105.8 million, or .7% of revenue. Non-GAP operating expenses in the prior quarter were $87.6 million, or 29% of revenue. Total other income amounted to approximately $9.1 million for the quarter, consisting of $4.2 million of interest income, $4.4 million in unrealized gains from investments, $0.8 million of foreign currency gain, $0.6 million of other income, and $0.9 million in interest expense. Income before taxes and non-controlling interest in the second quarter of 2024 was $12.8 million, compared to $18.8 million in the previous quarter, and $101 million in the prior year quarter. Turning to income taxes, our effective income tax rate for the second quarter was approximately 20.6%. GAP net income for the second quarter was $8 million, or 17 cents per diluted share, compared to $14 million, or 30 cents per diluted share last quarter, and $82 million, or $1.77 per diluted share in the prior year quarter. Share count used to compute GAP diluted EPS in the second quarter was 46.3 million shares. Non-GAP adjusted net income in the second quarter was $15.4 million, or 33 cents per diluted share, which excluded net of tax, $7.2 million in restructuring charges, $3.5 million in non-cash -to-market investment value adjustment, $3.1 million of acquisition-related and tangible asset costs, and $0.5 million in officer retirement. This compares to $13 million, or 28 cents per diluted share in the prior quarter, and $73.3 million, or $1.59 per diluted share in the second quarter 2023. Excluding non-cash share-based compensation expense of $3.4 million GAP and $2.8 million non-GAP net of tax for the second quarter, GAP earnings per share would have increased seven cents per share, and non-GAP adjusted EPS by six cents per share. EBITDA for the second quarter was $41.1 million, or .8% of revenue, compared to $48.3 million, or 16% of revenue in the prior quarter, and $133.5 million, or .6% of revenue in the second quarter 2023. We have included in our earnings release a reconciliation of GAP net income to non-GAP adjusted net income, and GAP net income to EBITDA, which provides additional details. Cash flow provided by operations was $14.4 million for the second quarter. Free cash flow was a negative $3.5 million, which included $17.9 million for capital expenditures. Net cash flow was a negative $2.9 million, including the pay down of $22.2 million of total debt. Turning to the balance sheet, at the end of second quarter, cash, cash equivalents, restricted cash plus short-term investments totaled approximately $277 million. Working capital was approximately $860 million, and total debt, including long-term and short-term, was approximately $47 million. In terms of inventory, at the end of second quarter, total inventory days were approximately 191, as compared to 184 last quarter. Finished goods inventory days were 79, compared to 67 last quarter. Total inventory dollars increased $32.2 million from the prior quarter to $461.5 million. Total inventory in the quarter consisted of a $27.1 million increase in finished goods, a $3.2 million increase in raw materials, and a $1.9 million increase in work and process. Capital expenditures on a cash basis were $17.9 million for the second quarter, or .6% of revenue, and within our target range of 5 to 9%. Now turning to our outlook. For the third quarter of 2024, we expect revenue to be approximately $346 million, plus or minus 3%, representing an .2% sequential increase at the midpoint, which is the highest sequential growth in the last 14 quarters. Gap gross margin is expected to be 34%, plus or minus 1%. Non-gap operating expenses, which are gap operating expenses, adjusted for amortization of acquisition-related and tangible assets, are expected to be approximately .5% of revenue, plus or minus 1%. We expect net interest income to be approximately $2.5 million. Our income tax rate is expected to be 18.5%, plus or minus 3%, and shares used to calculate EPS for the third quarter are anticipated to be approximately 46.6 million. Not included in these non-gap estimates is amortization of $3.1 million after tax for previous acquisitions. With that said, I will now turn the call over to Emily Yang.
spk03: Thank you, Brett, and good afternoon. Revenue in the second quarter increased .9% sequentially and was higher than the midpoint of our guidance. Our global POS increased more than 7% in the quarter, and our distributor inventory decreased. As Gary mentioned, we are excited to see continuous improvement in the demand going into the third quarter with stronger beginning backlog and -to-bill ratio, especially in Asia. Looking at the global sales in the second quarter, Asia represented 77% of revenue, Europe 15%, and North America 8%. In terms of our end markets, industrial was 23% of DIOS product revenue, automotive 18%, computing 26%, consumer 19%, and communications 14% of the product revenue. Our automotive industrial end markets combine total 41%, which is comparable to the last quarter on the percentage basis, but slightly higher on the dollar basis. This is the ninth consecutive quarter above our target model of 40%. Now let me review the end markets in greater detail. Starting with automotive market, revenue was 18% of our total product revenue, which was flat to the last quarter on the percentage basis, but .6% sequential increase in product revenue. Inventory rebalancing continued in the second quarter, and we expect this will extend into the third quarter. However, we're also seeing some customers inventory getting into healthier levels, and demand is more stabilized with some new programs starting to ramp, so we expect a gradual recovery throughout the second half of the year. Our demand creation momentum remains strong throughout the quarter, with expanding design ins and design wins across all focus areas, including connected driving, comfort style safety, and electrification. From a product perspective, our LDO product family, DC-DC buck converters, transistors, and gate drivers receive strong demand from power supply, wireless charging, infotainment, telemetry, and lighting applications. We also secure design wins for USB PD Type-C charging and video controls for EV cars. Our silicon carbide shocky dials and MOSFETs are also gaining traction for inductive charging systems. We're also seeing traction for our linear LED controllers, Intel lights, and aftermarket applications. DIOS SBR products continue to experience strong momentum from our car display, headlight systems, infotainment, and sensor lighting applications. Also during the quarter, our TVS dials and transistors win designs and are ramping up volume in DC fans, protection, ADAS, and battery management systems. We also continue to see opportunities for automotive clock buffers and PCI Express clocks along with USB Type-C switches, USB Type-C display port re-timers, and active crossbar moxes in real-seat entertainment, infotainment, ADAS, smart cockpit applications. Additionally, our hot sensor growth momentum continued this quarter with wins in multiple applications, including fans for the car seat, engine cooling system valve, and window lift motors. DIOS also continued to focus on expanding our product portfolio with the introduction of 130 new automotive compliance products in the second quarter, covering power protection, battery management system, brushless DC motors, motor control, infotainment, smart cockpit, ADAS, data line IO, ESC protection, power management, back lighting, and LED lighting applications. In the industrial market, second quarter revenue represented 23% of total product, which was flat to the last quarter, but up on the dollar basis. Similar to the auto market, the recovery remains low due to ongoing inventory rebalancing and slower than expected demand recovery, which may last until the end of the year. While the overall demand still soft, we are also seeing pockets of growth in areas like medical and aerospace, which are experiencing improving demand. Despite the market softness, we continue to make progress and gain momentum across a number of products, including our silicon carbide products that are gaining traction in the power factor correction energy storage system, heating, validation, air condition, as well as surfer power supply applications. Also in the industrial market, our shocky and ratified products are winning in the power products, while bipolar transistors are being designed into solar inverter applications. And our LDO saw solid demand for fans, power tools, and e-meter applications. We also secured a number of design wins for our contact image sensor product in the automated optical inspection, printers, panels, printed circuit boards, and battery film inspection applications. In the computing market, revenue increased approximately 12% sequentially with healthy channel inventory and signs of stronger backlog in Asia. A key highlight in the computing market is style-scrolling content in the AI surfer area. As the AI data center volume continues to expand, we are excited to share that our PCI Express package switch has been designed into tier one AI data center projects, along with our PCI Express clock buffers, less-flow translators, standard logic, as well as other discrete products that started to ram into production. Recently, a tier one EMS customer also named DIOS as one of the key suppliers supporting their AI ecosystem. Due to the rapid increasing power requirement in the AI data center applications, we also have additional content opportunities with our power MOSFETs and other discrete products that are being designed into power supply units, backup battery units, thermal DC fan, as well as DC-DC bricks and hybrid switched capacitor units. DIOS timing solutions, including crystal oscillators, PCI Express clock ICs, and power management solutions are also seeing traction in AI computing applications. As one of the industry major suppliers of PCI Express Gen 5, Gen 6 clocks, DIOS has been benefiting from the worldwide data center infrastructure built out. Our SSD switches and power switches both have solid demand from SSD, HDD in the storage and in the data center applications. We are also seeing increased adoption of our HDMI redrivers, USB crossbar MOCs, and MIP redrivers for laptops, desktop PCs, while our linear redrivers are being adapted for GPU cards and gaming notebooks. Also in the computing market, our Schottky rectifier has been receiving strong demand from notebook adapters, think DC fans, and power applications, while our high-cert TVS and ESC protection devices are winning designs in the DRAM modules. Turning to communication market, on the enterprise side, due to slower than expected demand, the image depletion rate has been slow, and we expect this may last into the second half before returning to the healthy levels. Within the smartphone market, even though inventory is clean, the recovery will likely be graduated over the coming quarters due to slower than expected demand. On the design wings in the communication market, our ultra-low jitter crystal oscillators are being designed into gigabit switches and optical modules for AI networking and data center applications, and DIOS protection devices are being adapted in the mobile phone application, while our low-voltage MOSFETs are also being designed into mobile phone for battery management applications. And lastly, in the consumer market, similar to the PC market, inventory is relatively clean. Although the overall demand in this market was not as strong as we expected, we anticipate some of the new designs will start to ramp in the third quarter. In terms of design momentum, our adjustable current limits, power switches and LED controllers saw solid demand in the large-screen TVs as well as USB HDMI applications in TVs and monitors. We're also seeing solid traction for our boost converters in -of-sale machines and portable devices. Additionally, we are securing increasing design wings and ramping production of our LED and low-power PCI Express clock generators in sports cameras, smartwatches, and home security cameras. In summary, as indicated by our comments today, we are encouraged by the signs of improving demand, especially in Asia and in the 3C markets. Coming off the low point in the first quarter, we are guiding for continuous strengthening of demand into the third quarter, which at the midpoint of our revenue guidance represents over 8% growth and the highest sequential increase in the last 14 quarters for dials. And when combined with our strong design momentum across our end markets, we are well-positioned for increasing growth and margin expansion as the global market recover. With that, we now open the floor to questions. Operator.
spk07: Thank you. And ladies and gentlemen, at this time, we will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phones. If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. And at this time, we'll pause momentarily for the first question. And our first question today will come from William Stein with True Securities. Please go ahead.
spk09: Great, thanks so much for taking my question. Congrats on the good quarter and especially the above seasonal revenue guidance. That's what I wanted to ask about. The sequentials that you're guiding to are, you know, as you highlighted, strongest in a while and certainly above typical seasonality. It sounds like either all of that or the majority of it is in the compute and market, specifically for data center AI applications. Is that the right way to interpret the guidance or is the better than seasonal guide more broad-based
spk03: than that? Hi, Will, this is Emily. Let me address the question. First of all, thank you. I think that 8% guidance is actually based on couple area we look at, right? So we did mention that in quarter POS came in very strong and we expect a similar momentum into the third quarter. We look at beginning of the backlog. We look at book to bill ratio. I think you are right. Majority of the growth is driven by the computing, especially on the AI server data center area with some of the design wings and the ramping of the production. But at the same time, right, if you look at consumer, usually three Q is the peak for consumer because the holiday bill. And then if you look specifically under communication, the smartphone area, it's also follow a similar pattern, right? So based on all these assumptions, that's the reason we actually came up with .2% guidance growth for the third quarter.
spk09: Thank you. And then a question about channel inventory. Can you maybe offer us a bit more detail in terms of what that level of inventory is currently and maybe where you expect it to be at the end of next quarter and how long before it's normalized and it's less of a, well, let's say no longer a drag on new performance. Thank you.
spk03: Yeah, definitely. So I mentioned, right, first of all, we have a strong POS growth and we also have a decrease in terms of channel inventory. And it's still higher than our defined normal range of 11 to 14 weeks. So we actually definitely want to continue to focus the POS growth for the third quarter and continue to drive the channel inventory down to the normal level. It is a little bit hard to estimate the timeframe, but on the other hand, just assume the inventory dollar is the same amount. As soon as the POS starts growing, the channel inventory weeks will change or decrease significantly, right? So that's really where our focus. At the same time, because of dynamic market situation, we also start seeing a lot more urgent order or short lead time orders, right? And in order for us to better serve our customer, we also feel like a little bit higher channel inventory or internal inventory actually better position us and giving us the flexibility to gain this kind of quick order and market share.
spk09: The expedited horse.
spk03: Sorry, so you said expedite? Yes, we start seeing a lot of expedite pull-ins of the orders and also a very short lead time orders or urgent orders from customer more now than before, right? So we view that as also a very positive indicator of the market turning around.
spk07: And our next question will come from David Williams with Benchmark, please go ahead.
spk08: Hey, good afternoon. Thanks for letting me ask the question and congrats on the execution and the growth here. It's good to see that return and the strength there. Thank you. I guess maybe, yeah, maybe first, Emily, just kind of thinking about the strength that you're pointing to in AI server, particularly in Asia, do you get a sense that we're seeing any maybe orders that are stockpiling ahead of other restrictions that may come down later on this year? Or do you feel like you are shipping maybe to end consumption for consumption that's happening more near term and not something for that's just being built?
spk03: Yeah, so David, we actually work with the customer very closely and we manage closely with their actual forecast, right? So we believe this is actually an actual real bill instead of an advanced bill or stuff like that. So we also have the forecast more than just this month, next month, the forecast extended to next year so we do see a good momentum. This is just the beginning of the RAM so we're actually pretty confident that this will continue.
spk08: Great, and then maybe just on the computing side, if you kind of look across the demand trends you're seeing there, obviously AI server is doing well, but if you kind of think about your AI, or your server versus client side mix, how do you think about that? And then maybe as well if you think about growth, not just this, in the coming quarter, but longer term, how do you see those two performing over the next several quarters? Thank you.
spk03: Yes, I think overall, AI server or data center ramp up the volume definitely faster than the regular server, right? I think even with the regular server we see a lot of stability and it's gonna be a slower RAM, but taking into account that inventory is really clean so any of the improve from the demand is gonna drive additional momentum of the orders and the backlogs and the revenues, right? So overall AI server still a very small percentage amount of the overall server market, right? And we also see the continuous of increasing the percentage overall. So I think the next big one would be more into the edge AI area, and that would definitely continue to drive a lot more momentum as well as a faster refresh of the generation. So that's really what we are counting on.
spk08: Thank you again.
spk07: And our next question will come from Matt Ramsey with TD Cowan, please go ahead.
spk01: Thank you very much, good afternoon. Emily Nusser, we can't have three sentences on an earnings call this day without talking about AI so I'll double click on that again. I wonder if you could spend a little bit of time, it's kind of one thing to do, to emphasize maybe unit dynamics and demand dynamics for AI servers, but I wonder if you might be able to be a little bit more granular and talk about content. Just what, is this AI server content with one or two server makers or ODMs or is it much broader than that across the board? Maybe you could give us a little bit of an idea of the specific components that you're selling in and if you think about at the server level, what kind of dollar content are we talking about ballpark? Just anything to sort of calibrate investor expectations because when folks hear AI server wins, they can let their imagination do a lot of different things and I just wanted to be a little bit more precise there if we could, thank you.
spk03: Yes, definitely, right. We're components, right, so we definitely support the, I would say, complementary chips surrounding the main chipsets and the memory modules and stuff like that. So I did mention a little bit earlier, we are really, really excited, especially for a key win that is actually on the PCI Express, we call the PECA switch. Some of the other competitors are called the PCI Express switches. So this is actually with the function to expanding additional PCI Express ports. So this is really exciting, it's actually definitely a new momentum that we didn't see before and so this is definitely more on the content expansion. So on top of the PCI Express package switch, we're also seeing our PCI Express clock, clock generators and buffers, crystal oscillators, and there's a wide range of different discrete products being used, right? And this is not just on the GPU card or the main board, this is actually beyond, it can be a power supply unit supporting the AI servers, it can be a backup battery unit, thermal DC fans, or even a DC DC brick. So this is really expanding more just on one board. I think that's really exciting, right? So like I said, overall AI servers or data center, still a small percentage overall, but we do expect the percentage will continue to ramp and when the GPU supply continue to improve, we actually start getting a lot of momentum on the inquiry as well as the design ins and design wins and all of this will be ramping next year. So like I said, this is the initial traction that we've seen and we do expect this will continue to expand.
spk01: Got it, thank you for that additional color. I guess as my follow-up question for the team, I'd like to dig in a little bit to gross margin. We've had obviously a period where the cyclicality of the industry has been pretty violent over the last, I don't know, 36 months. We went way up and then we went way down and now we're coming back out, which is great to see. Has there anything changed at all with the sort of rules that's on about ways to model gross margin as the revenue continues to recover for the company? Any newer different variables there? Any comments on utilization? Just wanna make sure we're understanding how the margin impact will be as the company grows forward from the recovery here.
spk05: Yeah, Matt, hey, this is Brett. Make a few comments, I think Gary may follow up on it. I think that some of the principle things we've used in the past still definitely apply. The biggest knob that clearly is a part of what we're driving is the mix of our product and the influence that has on margin. And I think something to point to that you see is that we've kind of reiterated foundationally, we've gotten and provided stability to this over 40%, this auto and industrial. But if you look back a year ago, that percentage was probably 6% or 7% higher than we are today and kind of understandable given we're still kind of going through that auto industrial correction. And we're actually quite pleased that in the midst of that, we've been able to maintain that above 40%. And as we go forward, what our expectation is, is that there'd be multiple tailwinds that would support our margin improving over time. You'd have the mix of auto and industrial that continues to maintain and grow. The regions that drive a lot of that will continue to strengthen. We're continuing to see the correction and the strength that's particularly in Asia today. I think we'll see that more broadly as we go forward. We also will see that overall demands and the volumes that we're driving be able to increase that will improve our utilization. And we're also making a lot of progress in getting a more broad portfolio of things qualified in some of the factories that we've bought over the last four or five years, particularly pointing to our SPFAB and our GFAB, which is really to get flexibility across our hybrid model, across our analog portfolio and our discrete portfolio. And I think each of those elements has a fairly significant impact to fire in on all cylinders and continuing to drive growth as we march back to our business model in total. So, Gary, you want to follow that? Yes,
spk06: actually, I think Brad bring a very good point here is actually for the automotive industry. I think we're driving a lot for the content increase in those two areas. And we release a lot of new products quarter by quarter in those two areas which can increase our content in the near future. I'm very confident on that. The second here is for the loading. As Brad mentioned about, the on-process and product porting from external foundry is what we're driving for the couple of quarters already. And so far, the qualification progress is very well and achieved several key milestones. So we do see our product and also qualifying several key customer size and we're starting to receive the PO in short time. So I've got a pretty good confidence on the loading for those two major wafer fairs in the future.
spk01: Thank you very much for all the detail, Guy. I really appreciate it.
spk07: And once again, if you would like to ask a question, please press star then one. Our next question will come from Tristan Guerra with Baird. Please go ahead.
spk04: Hi, good afternoon. So for Q3, you talked about AI content and PC demand. How do you, and PC demand notably in Asia, you also talked about consumer potentially picking and part of that is seasonality. How do you see the overall demand environment in China? There's been some companies this week talking about incremental weakness in the automotive China market. Are you seeing those trends and what are kind of the divergent trends that you see in Asia currently from an enderman standpoint for this coming quarter?
spk03: Yeah, hi Tristan, this is Emily. So let me address this question, right? In Asia, in China specifically, we continue to focus on content expansion, especially on the auto industrial side as well, right? So overall, the demand is a little bit soft, especially on the 3C area from the end consumer consumption point of view, but we're also seeing some improvement as well. So I would say all in all, right? We actually view China still a really good potential territory for us. And we actually, looking at the customer, they really look at, it's called cost performance value, CP value. As long as dials continue to focus and driving the technology and introducing new products, focus on features and functions, walking away from a lot of deep commodity product, which we see most of the competition from the local suppliers, we still see there's a really strong and positive path for dials overall to be successful in China and also in Asia overall.
spk04: Okay, that's great. And then in the past, I think it's fair to say that most of the M&A that you've done was centered around increasing capacity and I'm assuming that it's probably not on the table even for next year. Are there any technologies where you feel that could be incremental from a mixed standpoint and how should we be looking at your M&A strategy overall medium term?
spk06: Well, actually no. Hi, Tristan, this is Gary again. Nice to talk to you. So basically, as you know, there's two wafer FAT we're acquiring in the past couple of years. One is the GFAT in Scotland, the other one is PFA in US. And basically, we identify our GFAT as our discrete, wafer FAT and as well as SPFAT as our analog wafer FAT. So we got quite a few technology like speed clay, the battery FAT and the change most FAT kind of porting from our external wafer foundry into this wafer FAT in Scotland. And also a very advanced kind of analog process from the foundry as well externally and porting internally into the FAT in South Portland. So I would say that those two kinds of big project program will be the most important project in BIOS, try to make sure that technology and process wise and we can tap that internally. At the same time, our design team also develop a newer process and the product within this to wafer those two wafer FAT, okay, instead of just a porting process.
spk05: Well, and I think Tristan, to add to that in terms of the M&A that you would most likely see us looking at would be things that would help enable top line and be complimentary to the manufacturing footprint we can provide. And so I think over the past we've had a combination of organic and acquisition related growth, that activity of Gary and Dr. Lu continues and we actively are continuing to look in that area.
spk06: Yeah, actually, we are very, very careful about selecting the right target for the M&A and not only looking for the size, we're also looking for any synergy can help that BIOS to perform more gross revenue and achieve person wise like that. So definitely we're looking forward to that.
spk04: Great, thank you very much.
spk07: And this will conclude our question and answer session. I'd like to turn the conference back over to Gary Yu for any closing remarks.
spk06: Well, thank you everyone for participating on today's call. We look forward to reporting our progress on next quarter's conference call. Operator, you may now disconnect.
spk07: The conference is now concluded. Thank you for attending today's presentation and you may now disconnect your lines at this time.
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