Good afternoon, and welcome to Diodes Incorporated First Quarter 2022 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. As a reminder, this conference call is being recorded today, Wednesday, May 4, 2022. I would now like to turn the call over to Leanne Sievers of the Shelton Group, Investor Relations. Leanne, please go ahead.

Good afternoon and welcome to Diodes' first quarter 2022 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; Chief Financial Officer, Brett Whitmire; Senior Vice President of Worldwide Sales and Marketing, Emily Yang; Senior Vice President of Business Groups, Gary Yu; and Director of Investor Relations, Gurmeet Dhaliwal. Before I turn the call over to Dr. Lu, I’d like to remind our listeners that the results announced today are preliminary as they are subject to the company finalizing its closing procedures and customary quarterly review by the company’s independent registered public accounting firm. As such, these results are unaudited and subject to revision until the company files its Form 10-Q for its 2021 fiscal quarter ending March 31, 2022. 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 a 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, May 4, 2022. 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 you 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. The first quarter represented a continuation of outstanding execution by the Diodes team, especially considering the quarter is typically down seasonally and the recent COVID-related lockdown in China, most notably in the Shanghai area. We once again set new records across key financial metrics, including the sixth consecutive quarter of record revenue and gross profit, record gross margin that exceeded 40% for the first time in the company's history, and the fifth consecutive quarter of record non-GAAP earnings per share. Before continuing, let me first take this moment to extend our well wishes to those affected by the lockdowns in China, in particular our employees and their families. We have been providing relief assistance for impacted employees, including sleeping and shower arrangements at our local facilities. In addition to providing one full meal a day, we consider all our employees family members, and it is important to the company to be part of helping them get through these difficult times. Turning back to our result, our strong revenue and margin performance in the quarter continued to be driven by record achievements in the automotive end market which reached 13% of revenue. The industrial market, as well as our Pericom products, gross margin expanded 720 basis points year-over-year due to a greater mix of higher margin products along with expanded factory utilization and loading. Another key factor to our ongoing success has been our content expansion initiatives, and our total solution sales approach resulted in expanding customer relationships and encouraging design wins and momentum. When combined with our diligent expense management, we delivered almost a 90% increase in adjusted earnings per share over the previous year period. During the quarter, we were also pleased to announce the proposed acquisition of ON Semiconductor's South Portland, Maine Wafer Fabrication Facility and Operations, which will provide additional 200 millimeter wafer capacity for our products to accelerate our growth initiatives in automotive and industrial end markets. We expect this transaction to close in the second quarter. The U.S.-based facility, together with our existing facilities in Asia and Europe, will further enhance our global manufacturing footprint and greatly increase our internal capacity to support our future growth. Looking forward, the growth in demand for all products remains at high levels across all target end markets and geographies. We are guiding for our ninth consecutive quarter of growth and our seventh consecutive quarter of record revenue in the second quarter, while also anticipating another solid year of strong growth and profitability for Diodes.

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 would 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 first quarter 2022 was a record $482.1 million, an increase of 0.4% from $480.2 million in the fourth quarter 2021. Gross profit for the first quarter was also a record at $196.7 million, representing a record 40.8% of revenue, increasing 3.1% or 110 basis points from $190.7 million, or 39.7% of revenue in the fourth quarter 2021. GAAP operating expenses for the first quarter 2022 were $103.6 million, or 21.5% of revenue, and on a non-GAAP basis were $99.5 million or 20.6% of revenue, which excludes $3.9 million of amortization of acquisition-related intangible asset expenses and $0.3 million of acquisition-related costs. This compares to non-GAAP operating expenses in the prior quarter of $100.1 million or 20.8% of revenue. Total other income amounted to approximately a negative $2.2 million for the quarter, consisting of a $5.5 million unrealized loss on investments, $1.1 million in interest expense, $1.9 million of other income, $1.7 million in foreign currency gains, and $800,000 of interest income. Income before taxes and non-controlling interest in the first quarter 2022 was $90.8 million compared to $108.8 million in the previous quarter, due primarily to a couple of non-GAAP items that included the gain on the sale of a manufacturing subsidiary last quarter and unrealized loss on investments in the first quarter. Turning to income taxes, our effective income tax rate for the first quarter was approximately 18.3%. GAAP net income for the first quarter 2022 was $72.7 million, or $1.59 per diluted share, compared to GAAP net income of $65.5 million, or $1.43 per diluted share in the fourth quarter 2021. Net income per diluted share in the first quarter increased 82.8% year-over-year from the $0.87 per diluted share in the first quarter of 2021. Share count used to compute GAAP diluted EPS in the first quarter 2022 was 45.9 million shares. Non-GAAP adjusted net income in the first quarter was a record $80.3 million or $1.75 per diluted share, which excluded net of tax $4.2 million non-cash mark-to-market adjustment of investments, $3.2 million of acquisition-related intangible asset costs and $0.2 million of acquisition-related costs. This represents a 9.4% improvement from last quarter of $1.60 per diluted share, or $73.3 million, and an 88.2% improvement from $0.93 per diluted share, or $42 million in the first quarter of 2021. Excluding share-based compensation expense of $6.4 million for the first quarter, both GAAP earnings per share and non-GAAP adjusted EPS would have increased by $0.14 per diluted share for the first quarter. EBITDA for the first quarter was $118.2 million, or 24.5% of revenue, compared to $139 million, or 28.9% of revenue in the prior quarter. On a year-over-year basis, EBITDA increased 44.8% from $81.7 million in the first quarter of 2021, highlighting our continued improvements over the past year. 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 $72.3 million for the first quarter 2022. Free cash flow was $33.8 million for the first quarter, which included $38.5 million for capital expenditures. Net cash flow was a negative $60.8 million, which included the pay down of approximately $67.6 million of long-term debt. CapEx and a deposit on the proposed acquisition of the ON Semiconductor Wafer Facility. Turning to the balance sheet, at the end of the first quarter, cash, cash equivalents, restricted cash plus short-term investments totaled approximately $315 million. Working capital was $689 million and total debt, including long-term and short-term, was $232 million. In terms of inventory, at the end of the first quarter, total inventory days were approximately 113 as compared to 107 last quarter. Finished goods inventory days were 34 compared to 32 last quarter. Total inventory dollars increased $21.4 million to approximately $370 million. Total inventory in the quarter consisted of a $24.3 million increase in raw materials, a $1.9 million decrease in work in process, and a $1 million decrease in finished goods. Capital expenditures on a cash basis for the first quarter 2022 were $38.5 million or 8% of revenue, which is within our target model of 5% to 9%. Now turning to our outlook. Backlog and demand remains very strong going into the second quarter, but due to the COVID-related lockdowns in China, especially in the Shanghai area, capacity was impacted at our local facilities during the first month of the quarter. With our excellent execution and recent improvements, we are guiding for sequential growth and expect revenue to be approximately $500 million plus or minus 3%, and GAAP gross margin to be 41.0% 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 21.0% of revenue, plus or minus 1%. We expect net interest expense to be approximately $1.2 million. Our income tax rate is expected to be 18.3%, plus or minus 3%, and shares used to calculate diluted EPS for the second quarter are anticipated to be approximately 46.3 million shares. Please note that amortization of $3.2 million after-tax for previous acquisitions is not included in these non-GAAP estimates. With that said, I now turn the call over to Emily Yang.

Thank you, Brett, and good afternoon. First quarter revenue increased slightly quarter-over-quarter, which is better than typical seasonality and above the midpoint of our guidance, primarily driven by strong demand across all regions. We could have achieved even a higher level of performance, if we had not been impacted by the China lockdown and COVID-related transportation challenges that limited the product delivery to the customers. Looking more closely at first-quarter revenue, we achieved record worldwide POS revenue due to the strength in Europe and in America, both of which have record revenue. Asia also continued to have very high demand, but POS was impacted slightly due to the China lockdown and the associated product delivery challenges late in the quarter. As a result, distributor inventory in terms of weeks increased slightly quarter-over-quarter due to our distributors not being able to ship products to our end customers, but it still remained at the low end of our defined range of 11 to 14 weeks. Overall demand and backlog remain very strong across all regions and end markets. Looking at global sales in the first quarter: Asia represented 76% of revenues, Europe 13%, and North America 11%. In terms of our end markets, Computing represented 27% of revenue, Industrial 26%, Consumer 18%, Communication 16%, and Automotive 13% of revenue. We achieved record revenues in Automotive, Industrial, and Communication markets. Our Pericom products also set a new revenue record, marking seven consecutive quarters of growth. I would also like to point out that our automotive and industrial end markets combined total 39% of revenue, which is one step closer to our 2025 target of having automotive and industrial represent 40% of total revenue. Now, let me review end markets in greater detail. Beginning with the automotive market, revenue increased 26% year-over-year and 9% sequentially to set a new record for the seventh consecutive quarter. This is particularly noteworthy considering the extremely supply-constrained environment. Our ongoing success in this market can be attributed to our content expansion initiative over the past several years. Additionally, our design win momentum has also been a key contributor to our growth, particularly with our three focused application areas that include connected driving, comfort, safety and style, and powertrain. In connected driving, which consists of ADAS, telematics, and infotainment systems, we continue to expand our contact demand with new design wins for oscillators, crystals, clock ICs, video switches, USB Type-C drivers, LDOs, power switches, TVS, and DC-DC converters. Additionally, USB charging controllers, TVS, MOSFETs, and bipolar products continue to see higher demand for in-vehicle USB Type-C charging ports and wireless charging applications. For comfort, style, and safety, we continue to gain traction for LED drivers, SBR, and DC-DC converters for applications including headlights, daylight running light, rear lights, exterior lighting, and side view mirror detection for major automotive manufacturers. Also during the quarter, our newly introduced products continued to gain strong interest for LED lighting, seat heating, window powered lifts, and infotainment subsystems. Diodes also continue to offer competitive edge GT MOSFETs to support automotive brushless DC electric motor applications like power steering, field, oil, ABS pump, power seats, and mirrors. In powertrain, which covers conventional hybrid and electric vehicles, the increasing provision of 48-volt battery systems is driving additional demand for 80 Volt and 100 Volt MOSFETs. We're seeing designs with USB 2.0 switches and SBR products inside the central control unit and the EV inverters along with rectifiers and TVS in electric motors, including battery management systems and EV chargers. Now turning to the industrial market, revenue growth was 38% year-over-year and 9% sequentially, setting a new record for the fourth consecutive quarter. We saw a large number of designs for motor controls, home automation, and industrial IoT applications, particularly for our high voltage non-isolated AC-DC converter family. We also continue to see broad design interactions for industrial and commercial building lighting, power supply applications, as well as power to DC-DC fan brushless DC motors, window electronics, and industrial HV-AV systems. Additionally, green factory automation and power distribution system drove rectifier and TVS sales higher in applications including sensors, control panels, power distribution, and charging systems. Our contact image sensor product line continues to see momentum from several applications such as check scanners, ID card scanners, document scanners, and field automated optical inspection or AOI. In the computing market, revenue increased 5% year-over-year but declined 6% sequentially, primarily due to typical seasonality in the quarter and slower demand in the low-end PC market. We continue to gain strong traction in this market, especially for our Pericom products. We secured numerous design wins for personal switching and analog mocks in servers, data centers, AIOTC, and monitor along with DisplayPort MUX in the graphic cards. We also saw strong demand for SSD MUX driven by enterprise high-capacity SSD modules and SSD controllers. We are also gaining momentum in the data center and high-performance computing applications with our PCI Express 5.0 clock generators and buffers, switches, and read drivers. Additionally, we expanded our wins in mobile stations, gaming, and laptop, notebook, and desktop applications with our USB Type-C downstream-facing port power switches, Hall sensors, buck converters, as well as HDMI ReDrivers. During the quarter, we also continue to see increasing interest for combo switches and ReDrivers in docking stations, dongles, active cables, and TVM applications. Rectifier, TVS, and switching diodes also posted higher revenue in sales in DC fence and compact power supply applications for both notebook and desktop PCs. In the communication market, revenue grew 10% year-over-year and increased slightly from the prior quarter to set a new revenue record. PCI Express buffers are gaining traction in five CPE applications. We also saw new design wins for our high PSSR or LDOs in smartphone applications with solid revenue growth. Strong design win momentum in optical modules has been the leading driver for our crystal oscillator business. Bipolar products have also achieved new design wins in a variety of applications, including headsets, routers, IP phones, and IP cameras. Power TVS product sales are increasing in educational support products and safety-critical communication systems for hospitals, schools, and universities. Lastly, in the consumer market, revenue increased 11% year-over-year, but was down 6% sequentially, primarily due to typical seasonality combined with slower consumer demand in the China region. During the quarter, our linear LDE driver won numerous designs as one of the largest consumer vendors for phones, smartphones, and IoT devices. We are also seeing adoption of HDMI 6 gigabit per second and 12 gigabit per second ReDrivers in major PC chips that reverend designed for IoT applications. Our DC-DC buck converter family continues to see strong demand from the consumer and home appliance market, while our stereo headphone drivers and pistol sound drivers see increasing demand for smart speakers and Bluetooth tracker systems application. We also saw revenue growth from applications such as smoke detectors, sensors, and electronic home applications for our rectifier and TVS products. In summary, with another quarter of record results and a high level of demand and backlog, Diodes is starting out a new year very well positioned for continued strong growth throughout the year. With the future addition of the ON Semiconductor Wafer Fabrication Facility and Operations, we have increased available capacity to meet this growing demand, which is proving to be a strong competitive differentiation for Diodes in this supply-constrained environment. With that, we now open the floor to questions. Operator?

Our first question comes from Matt Ramsay from Cowen.

Congratulations to the team on the results, especially considering the operational challenges in China right now. My first question for the team and Dr. Lu is whether you can provide some quantification of the impact on your results, both for the first quarter and the second quarter guidance, due to the COVID lockdowns and the operational situation there. Is there a way to quantify that? It's quite remarkable that you were able to raise guidance given everything that's happening. I'd like to understand that better. Thank you.

I can't provide an exact number, but Shanghai is a key operation for us along with other sites where we utilize contract manufacturing for packaging. We have additional facilities for our Pericom product, including crystal and assembly. The Shanghai lockdown hasn't significantly affected our operations. In the fourth quarter and the first quarter, the lockdown began at the end of the quarter, so the impact was minimal. This is reflected in our record revenue and profits. For the second quarter, however, we experienced the lockdown in the first month, which gave us insight into its effects. This is why we're adjusting our guidance from the usual 5% seasonality to 3.7%. Looking ahead, the situation remains unclear, as the Shanghai area is still not fully operational, with around 50 million people affected. Our operational capacity is reduced to about 50-65%. However, our execution team responded swiftly to the lockdown, enabling us to maintain production and secure special government permissions to access essential materials. We do not foresee major operational issues from our side, but we are more concerned about the impact on our customers, as we are unsure of their operational status. Despite this uncertainty, our demand remains strong, our backlog is solid, and we are confident in meeting our guidance.

So, as you can imagine, right, the situation is extremely dynamic. The team has been very creative and aggressive in minimizing the impact.

I would also like to emphasize that the key question is how can we come back quickly, prioritizing our employees. We are taking care of our employees, not only for them but also for their families, which is important for morale and productivity. Our employees appreciate our efforts, and they work very hard to meet our goals.

I understand it's a very fluid situation all the way around. My follow-up question, Emily, I think you've touched on it at the very end of your prepared script, which is the ability to continue to add capacity. I know you guys are going to be adding capacity at GFAB in Scotland over time, and now you've gotten the deal to acquire the fab from ON Semiconductor, I guess it may support some of the products that they're walking away from in some parts of their business. So if there's any way we can get a quantification on magnitude and timing of the additional capacity, you're going to be able to bring online sort of outside of Asia, that would be really, really helpful.

That is separate; one is wafer fab, one is AT, because we are both very tight on capacities. If you look at the GFAB we purchased in year 2019, that facility supported Texas Instruments, and their support is coming down 10% a year while we ramp up 10% a year to align capacity needs. So you can see when demand falls or our commitment to Texas Instruments decreases, we respond by ramping our own demand. So that is GFAB. Obviously, as you already know, our acquisition of the wafer from ON Semiconductor is expected to close next month or by the end of this month. After that, we will start to move in our technology, and while we may not ramp up immediately, we expect to significantly increase our wafer capacity in about one year. We are ramping it up almost immediately, so if you look at the continued output, then it should be much better than last year. This gives us good potential to continue to grow for our own needs. From an AT point of view, they are not fully loaded, and we are going to use that to offload some of the needs. Overall, capacity is very tight, but we believe we can continue to increase it and support our strategic customers. By doing this, we are able to develop strong relationships with them, which is how we can continue to grow our own business.

A quick follow-up question regarding your acquisition of the South Portland, Maine fab. Could you remind us if that's a 4-inch, 6-inch, or are you planning on making 8-inch upgrades? And also, are you into a foundry service commitment, or is the production going to go straight to your product? How long does it take to qualify your own product, if you could talk a little bit about the transition you expect there?

Okay, hi. This is Gary. The wafer is actually an 8-inch equipment. In the short term, we do have a plan to continue supporting our business, just like we did for our GFAB. At the same time, we will qualify and transport our technologies to the new wafer fab and qualify our products, especially analog devices to this wafer fab. It will probably take one to one and a half months to get our product qualified for production at this wafer fab, while services will be simultaneously ramping up. So, that's probably our plan.

We have the amendment to fully support for one year. And our loading will not be reduced. We will implement our process and technology to support our own product while notifying customers, and then start to ramp it. So, the timing is just right; we support them when they slow down, and we can ramp up concurrently. This is like what we did with them; we are committed to supporting GFAB, which comes down by 10%. So we ramp it up each year, and we know how to manage this transition.

Okay, great. And then how should we look at the analytic pricing plans? Obviously, there were a number of price increases last year industry-wide. Do you see those price increases slowing a bit later this year? How do you view that for your company relative to the whole industry?

I think overall, the market situation didn't change much from the last time we talked. The demand and backlog are still extremely strong. Therefore, there is still an imbalance between supply and demand overall. During this kind of market condition, usually you don't get much of the price pressure, but rather more on the supply pressure. So we don't really expect the price pressure to come down. As to price increases, Diodes always take a more strategic view. We work closely with customers and only pass down the cost to them. In return, we can expand our customer relationship and continue to grow our content within them. We are seeing good traction and success, which will continue to be Diodes' strategy moving forward.

Thanks for taking my questions. Congrats also on very good results and outlook, considering all the disruptions happening right now. I want to follow up on that topic regarding the COVID lockdowns. Are you experiencing this effect on your business more as a supply of materials and parts disrupting your ability to manufacture? Or is it just simply a disruption capacity in the plant? Or is it more of a disruption in your ability to ship to customers or your customer's ability to take the product? I'm trying to figure out if this is more a supply issue or a demand issue.

Well, the most significant effect is the manpower situation. While we've been able to secure the supply of materials because we've planned ahead, we were able to negotiate special permissions with the government to ensure we received our wafer shipments and building materials. To date, I don't believe we've been significantly affected by the supply of building materials. I think credit goes to our management team on-site as they have closely monitored the situation and proactively acquired critical materials ahead of time to prevent any manufacturing shortages. But the key issue is certainly the manpower when you have a lockdown if people can't come in to work. Although we had around 40% of our staff present, we built in shifts so that our workers can come in every two hours, provide them with meals, and maintain sanitary facilities at the site. Fortunately, our team has reacted quickly to manage our labor force. We are at about 50%-60% of our staff currently. Even though we are not yet at 100%, we are effectively producing the bulk of our needs.

Yes. Let me add additional context. From our perspective, I'd say both supply and demand have been impacted. So from the supply side, as Dr. Lu mentioned, reduced manpower has indeed impacted output overall. But on the other side, as noted, some of our customers have also reduced their output capacity, further affecting our logistics and inventory. That is the reason I mentioned that Asia POS was not a record, but still was very robust, thanks to our overall global performance.

I appreciate that. If I have one follow-up, I would imagine factory utilization is extremely high right now. But I wonder if you can quantify that maybe across your network of factories; if that’s a sensible thing?

Well, I think one of the things we are seeing is that across our fabs, we are running mid to high 80%, which we consider full. Some are higher than others, with the highest being in the mid-90s. As we address this, we are taking multiple approaches to increase capacity as Dr. Lu previously mentioned.

Just to mention, I am more concerned with our customers. I just received test reports about a company in Shanghai area announcing that they will shut down for a week starting today. This is becoming more troubling for us since while we can manage our production, if our customers are unable to use our products in their processes, that will have an adverse effect.

Indeed, navigating these uncertainties in customer operations can complicate our ability to deliver. However, we are working diligently to ensure that we manage our production and backlog effectively.

If I can squeeze one more question in here. Does your guidance contemplate the potential for these ongoing shutdowns; or if we see further news such as what you just described, should we be more concerned about your guidance?

We have indeed built in everything that we know as of today into our guidance. Should the lockdown situation in China worsen or we see dramatic changes overall, we still consider the strong backlog, strong book-to-bill ratio, and the solid performance from Q1, which is why we have provided strong guidance for Q2.

To summarize, our current guidance is based on what we see at present. We closely monitor the situation in Shanghai, particularly as they have begun to reduce restrictions in the last week. I mentioned earlier, 15 out of 26 million people in Shanghai are now cleared from lockdown, and we track daily. Our guidance reflects the current assumptions based on this data.

Additionally, despite any challenges in China, we are extremely strong in Europe and North America. From a sector standpoint, our automotive and industrial segments continue to show robust performance. All our devices can be utilized across multiple applications, regions, and customers, which helps us diversify risks. Thus, our guidance remains based on the information available today.

Good afternoon. Thanks for taking the questions, and congrats on the continued progress. I wanted to ask maybe first, Dr. Lu, if you have seen any changes in customer order patterns or any shifts in behavior there? Are you seeing anyone being more cautious or conservative in terms of their inventory stocks or their production, given the backdrop that it seems like we are heading into with inflation and slower consumption?

David, this is Emily. To answer your question, we did not see any significant changes overall in order behavior. Our backlog remains extremely strong and our book-to-bill ratios are very high. If I look at the POS record revenue at the end of Q1, it tells a good story. So the market remains robust. There are some pockets of slowness, particularly in low-end PCs and a bit of subdued consumer demand in China, but overall, the demand is strong.

Okay, fantastic. If I think about your revenue guidance, which reflects a nice sequential step up of about $18 million, is this growth driven more by the capacity resources you're bringing on or is it fueled by pricing? Given that you've expressed capacity constraints in the past, I’d like to clarify what’s contributing to that revenue increase.

If you think about it in terms of product mix, that's a critical strategy we're enforcing: to continue expanding our product offerings into new applications and to various customers. We are indeed ramping up capacity due to ongoing expansions as previously mentioned by Dr. Lu, whether that be in FCI or assembly sizes. Thus, overall, we expect revenues to reflect our expanding business for Q2.

To add to that conversation about margin progression, particularly considering that we are now above that 40% mark: one of the main driving factors behind this performance is indeed product mix improvement. Our ongoing execution and showcasing of results strongly suggest continuity in margin improvement as we go forward. We believe our products are stickier than ever, particularly with the strong relationships we've built with our customers.

As for our 2025 plan, we have represented it very openly. The plan is modeled essentially to achieve a gross profit of $1 billion with a reasonable target of 2.5 billion in revenue at a 40% margin. Our current focus remains on gross profit in dollar terms while we expect margin traction to continue.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Dr. Keh-Shew Lu for any further remarks.

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

Thank you. Ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.