Earnings Call Transcript
CHIPMOS TECHNOLOGIES INC (IMOS)
Earnings Call Transcript - IMOS Q3 2020
Operator, Operator
Greetings, and welcome to the ChipMOS Third Quarter 2020 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Mr. David Pasquale with Global IR Partners. Thank you. You may begin.
David Pasquale, Host
Thank you, operator. Welcome everyone to ChipMOS' third quarter 2020 results conference call. Joining us today from the company are Mr. S.J. Cheng, Chairman and President; and Ms. Silvia Su, Vice President of Finance and Accounting Management Center. S.J. will review business highlights and provide color on the operating environment. Silvia will then review the company's key financial results. We are also joined on the call today by Mr. Jesse Huang, Spokesperson and Vice President of Strategy and Investor Relations. All company executives will participate in the Q&A session after management's formal remarks. If you have not yet received a copy of today's results release, please email Global IR Partners or you can get a copy of the release off of ChipMOS' website. We have also posted a PowerPoint presentation on the IR site to accompany today’s conference call. Before we begin the formal comments, we must make a disclaimer regarding forward-looking statements. During this call, management may make forward-looking statements that involve known and unknown risks, uncertainties, and other factors. Such forward-looking statements may differ from the actual performance, financial conditions, or results of operations of the company. Further information regarding these risks and uncertainties is included in the company's most recent annual report. At this time, I'd like to now turn the call over to the company's Chairman and President, Mr. S.J. Cheng. Please go ahead, sir.
S.J. Cheng, Chairman and President
Yes, thank you, David. We appreciate everyone joining our call today. We are pleased with our results for the third quarter of 2020 and continued progress. The quarter's development is in line with our expectations. Demand in our end market remains strong with positive utilization rates. This was an important quarter for us, as we drive Q3 revenue to five years' record highs. Revenue was up 4.8% compared to Q2 and grew 5.3% compared to Q3 2019. Even more impressive is the 13% revenue growth we achieved for the first nine months of 2020, with a gross margin up 290 basis points to 20.9%. Let me give some color on this. Our Q3 assembly utilization rate significantly increased to 80% as we benefit from demand in gaming, consumer electronics, and slightly rebounding auto and industrial sectors, which led to tightened utilization of assembly wire bonds. Our 8-inch COF utilization remains soft; however, this was more than offset by strong TDDI demand, which drove utilization of our middle to high-end wafer testing platform to full utilization. We are also pleased to see DDIC utilization increased to 76% in Q3 after a decline in Q2. We continue to benefit from higher bumping demand led by our emerging bumping technologies and others in our driver business. Our overall utilization level was 79% in Q3, up from 74% in a year ago and higher than 76% in Q2. Regarding our manufacturing side, assembly represented 25% of Q3 revenue. Package testing and wafer sort represented around 32%, and wafer bumping represented around 23% of Q3 revenue, up from 19.1% in Q2. On a product segment basis, our DDIC, including COG and COF segment, was around 30% of revenue, and gold bumping increased significantly to represent around 19.5% of revenue. Revenue from DRAM and SRAM represented 19.2%, and our flash segment grew significantly to represent 23% of Q3 revenue. Mixing on segment revenue increased, representing around 8.5% of Q3 revenue. In terms of adding colors, our memory product revenue grew more than 3% and represented around 42% of total Q3 revenue. DRAM revenue was up 15% year-over-year but declined 10% compared to Q2. This reflects broader inventory level adjustments in the channel. Total price revenue grew 18% compared to Q2, benefiting from significant growth and strong demand from gaming. Lastly, our NAND flash business continued to grow and represent about 29.5% of total Q3 product revenue. As for driver IC-related products, we continue to benefit from new 5G smartphone launches, particularly large HD-grade panel models. Driver IC-related product revenue increased around 10.7% compared to Q2 and represented around 49% of total Q3 revenue. Revenue grew significantly, around 26% compared to Q2. Overall, DDIC revenue grew in Q3 compared to Q2 due to strong demand for DDIC, noted the high penetration of HD-grade panels. As a result, TDDI business represents 34.3% of Q3 DDIC revenue with middle to high-end wafer testing currently fully utilized. When we look at our target end market, revenue increased in both smartphone and consumer segments, while TV declined, and both computing and automobile sectors remained stagnant compared to Q2. As we look forward into the fourth quarter of 2020, we are encouraged by the end market and inventory trend. Long-term opportunities like the ongoing 5G buildout are positive for the industry and ChipMOS. New smartphones are likely to drive higher volume demand, while the global work-from-home trend has increased demand for consumer electronics and gaming. We expect revenue from two major product segments, memory and DDIC-related, will continue to grow, with growth of the DDIC-related product outpacing that of the memory segment. We benefit from increased demand, capacity addition, and higher testing pricing in Q4. In memory, we expect DRAM to maintain similar momentum from Q3, and our product business, including NOR flash and NAND flash, will continue to grow owing to the global work-from-home trend. We are investing in some wire bonders due to the patent wire bonder capacity. We expect assembly deceleration could maintain healthy utilization rates because the new increases in wire bonders are all booked by our customers. In DDIC, we expect demand from middle large-sized panels for TV to remain healthy in the fourth quarter. For small-sized panels, demand is driven by increased interest in middle and low-end new 5G smartphones and strong demand for TDDI, linked to the higher penetration ratio of HD-grade panels. I mentioned earlier that the wafer testing platforms are fully utilized. We expect to maintain this level into 2021 based on customer forecasts. We are carefully investing in the new high-end testing platform capacity to meet strategic customer requests. Finally, given the tightened capacity and utilization levels along with related wafer testing price increases effective October 1, we anticipate benefits for our DDIC revenue growth and profitability in Q4 2020. We are collaborating with our customers and are committed to providing the capacity they need, similar to the situation in the second half of 2018 and 2019, and our new testing capacity additions are all secured by customer contract guarantees to minimize investment risks. Before I turn the call over to Ms. Silvia Su, I would just like to highlight a comment we made in our Q3 results conference call held last month. Starting in calendar year 2021, ChipMOS will be hosting only one conference call to ensure transparency and better comprehension of the financial results and operating environment for English-speaking investors. We plan to provide an English-translated audio following the Mandarin call on East West side. Silvia, please go ahead.
Silvia Su, Vice President of Finance and Accounting Management Center
Thank you, S.J. All dollar amounts cited in our presentation are in NT dollars. The following numbers are based on the exchange rate of NT$28.95 against US$1 as of September 30, 2020. All figures were prepared in accordance with Taiwan International Financial Reporting Standards. We have provided a PowerPoint presentation on our investor relations website that will follow my comments on the call today. For the third quarter of 2020, total revenue was US$196.4 million. Net profit attributable to the company was US$14.6 million in Q3. Net earnings for the third quarter of 2020 were $0.02 per basic common share or $0.40 per basic ADS. EBITDA for Q3 was US$61.5 million. EBITDA was calculated by adding depreciation and amortization to operating profit. The return on equity for Q3 was 8.5%. Compared to Q2, total revenue increased by 4.8%. Q3 gross profit was US$37.8 million with a gross margin of 19.3%, compared to 20.7% in Q2. Our operating expenses for Q3 were US$13.6 million or 6.9% of total revenue, which is about a 1% improvement compared to Q2. Operating profit for Q3 was US$24.8 million, with a Q3 operating profit margin of 12.6%, compared to 14.5% in Q2. Net non-operating expenses in Q3 were US$6.2 million. The difference between Q3 and Q2 is mainly due to an increase in the share of loss of associates accounted for using the equity method of US$1.8 million, which was partially offset by a decrease of foreign exchange loss of US$0.3 million. Basic weighted average outstanding shares were 727 million shares. Compared to Q3 2019, total revenue for Q3 2020 was up 5.3%. Gross margin decreased by 2.1 percentage points compared to 21.4% in Q3 2019. Operating expenses were mostly flat compared to Q3 2019. Operating profit margin decreased by 2 percentage points compared to 14.6% in Q3 2019. As noted earlier, the difference in net non-operating expenses compared to Q3 2019 is mainly due to an increase in the share of loss associated accounted for using the equity method and the increase in the net foreign exchange loss, which was partially offset by a slight increase in the gain on valuation of financial assets. Total assets at the end of Q3 2020 were US$1.18 billion. Total liabilities at the end of Q3 2020 were US$486.2 million. Total equity at the end of Q3 2020 was US$693.2 million. Accounts receivable turnover days in Q3 2020 were 74 days compared to 78 days in Q2. Inventory turnover days were 44 days in Q3, compared to 50 days in Q2. As of September 30, 2020, our balance of cash and cash equivalents was US$165.4 million, which increased by US$2.9 million since the beginning of 2020. Free cash flow for the first three quarters was US$45.9 million, compared to negative US$4 million for the same period in 2019. The difference is mainly due to a US$29.4 million increase in the operating profit of US$28.3 million, a decrease in CapEx, partially offset by a US$15.1 million increase in cash dividends paid. Free cash flow was calculated by adding depreciation, amortization, interest income to operating profit and then subtracting CapEx, interest expense, income tax expense, and dividend from that sum. In Q3, we invested US$14.6 million in CapEx. The breakdown of CapEx was 10.6% for bumping, 43.4% for LCD driver, 30% for assembly, and 60% for testing. Depreciation expenses were US$36.7 million in Q3. As of October 31, 2020, the company's outstanding ADS number was approximately 5 million units, which represents around 12.5% of the company's outstanding common shares. Operator, that concludes our formal remarks; we can now take questions.
Operator, Operator
Thank you. At this time, we will be conducting a question-and-answer session. Our first question comes from the line of Scott Bishins with Caffeine Holdings. Please proceed with your question.
Scott Bishins, Analyst
Hi, S.J. and Silvia. It looks like a great quarter. It looks like a lot of things have been accomplished this year. Just a couple of things I want to go over. I saw the October revenues this month and they are $72 million approximately, a brand new high, up about 9% year-over-year or so about 9% quarter-over-quarter. Do you see that sustainable going through the rest of the quarter?
S.J. Cheng, Chairman and President
Scott, this is S.J. To answer your question, in the May conference call, we were asked the same question. I will add Silvia to answer how our gross margin will reduce 1.4% compared to Q2, okay. And…
Scott Bishins, Analyst
That was my next question; why don’t you answer that?
Silvia Su, Vice President of Finance and Accounting Management Center
I’ll answer you later.
S.J. Cheng, Chairman and President
I will let her answer your question, okay?
Scott Bishins, Analyst
Okay.
S.J. Cheng, Chairman and President
Let's give you the October revenue, which we already announced today; revenue was growth of almost 9% compared to 2019. November and December are expected to maintain the strong momentum similar to October. Starting from October 1, we increased the pricing for DDIC due to the fully utilization rate. Thus, both revenue and gross margin will be better than Q3. In the whole year, beginning of this year, we forecasted for whole year's growth – revenue growth compared to last year to be high single digits. However, based on the October results and first nine months results along with existing strong demand from customer side, our revenue growth for the whole year is larger than 10%, and gross margin will be higher than 20%. Earnings will be better than last year, meaning our cash dividends for next year will be better than this year because our results are much better than last year. This means our shareholders can enjoy higher cash dividends compared to last year.
Scott Bishins, Analyst
Well that’s incredible news.
S.J. Cheng, Chairman and President
Yes. But I will ask Silvia to answer your question.
Silvia Su, Vice President of Finance and Accounting Management Center
Yes. Regarding the gross margin, the Q3 gross margin is around 19.3% and it decreased around 1.4 percentage points as compared to Q2. There are three major factors. The first one is that for Q3, there was a higher electricity rate for the summer season, which impacted around 0.9 to 1 percentage points. That's the first one. The second is U.S. dollar depreciation, which had an impact of around 0.5 to 0.7 percentage points. Lastly, higher gold prices, which influenced around 0.1 to 0.2 percentage points. These are the major three factors.
Scott Bishins, Analyst
What was the first one again? I missed the 1%, the first one.
Silvia Su, Vice President of Finance and Accounting Management Center
Yes, the first one is higher electricity rate for the summer.
Scott Bishins, Analyst
Okay, okay. So in other words, you would have come in assuming that would have been normal charges and you would have reported a higher gross margin than the second quarter.
S.J. Cheng, Chairman and President
The answer is yes.
Silvia Su, Vice President of Finance and Accounting Management Center
Yes, you can say that.
Scott Bishins, Analyst
Okay.
S.J. Cheng, Chairman and President
If you look at Q4, we are heading into the winter season, which means not only will the negative factors dissipate, but we also expect continued growth in Q4. Additionally, we have increased our pricing, so forecasting that 2021 will be a good year for the company. November and December are looking stronger.
Scott Bishins, Analyst
Okay. Don’t crank the heat up too much; we don’t want to spend a lot of money heating the fourth quarter. Try to keep it down.
S.J. Cheng, Chairman and President
But all wafer just highlighted in front of my office…
Scott Bishins, Analyst
Right, let me see just a couple of other questions. Any news on the negotiations with the China factory?
S.J. Cheng, Chairman and President
We are making good progress, but once everything is clear, we will inform everyone.
Scott Bishins, Analyst
Okay. Do you think there is a chance we might know that before the end of the year? Is there a possibility?
S.J. Cheng, Chairman and President
I think Q1 would be safer to say.
Scott Bishins, Analyst
Okay. Let’s discuss a couple of things. Since you will no longer be holding the New York time conference calls, will there be any opportunities during the year for an update for the IMOS investors through a brief Q&A, perhaps not a full conference call, but a way for interested parties to dial in?
S.J. Cheng, Chairman and President
I will let David Pasquale to answer your question.
Unidentified Company Representative, Company Representative
We recognize the need for our investors in the USA, and we can coordinate through David Pasquale, our IR representative in the USA, to arrange such a follow-up Q&A. However, as S.J. just mentioned, right after our formal Mandarin Conference Call, we will make sure that all the information will be provided to ensure all US investors get equal information during the Mandarin conference call.
Scott Bishins, Analyst
Is there any chance if we have some questions prior to your first call in Taiwan that we could email in to David or directly to Taiwan that could possibly be asked during the conference call?
S.J. Cheng, Chairman and President
We’ll take your request into consideration and work with David to see how we can facilitate that.
Scott Bishins, Analyst
Okay. I'm sure between myself and David and a couple of other investors, we could come up with some questions, maybe just even after we read the report, the quarterly report, and maybe just a couple of questions that could be asked on that call this way, when you translate it into English, we’ll be able to see your question and what the answer was. So that would be very helpful, I believe. Let me just see anything else. I didn’t see the Taiwan dollar strength, and it’s been coming down dramatically over the last four quarters, which has been incurring a foreign exchange loss. How do you see that going forward? Do you feel now with the U.S. with the change in government, do you think that there’ll be a change in how the Taiwan dollar acts?
S.J. Cheng, Chairman and President
Sure, Scott. To answer your question, we use a very conservative foreign exchange estimation based on the Central Bank announcement for next year's outlook. So as far as our understanding right now, the gold price is more than $1,950 for us and foreign exchange is 28 point something. So I think that could be a stabilizing effect. We're pretty conservative.
Scott Bishins, Analyst
Okay. Let’s see. Just one more question. I guess the change in the value of the facility, I imagine the charge for lowering the value; the equity loss was that attributed to the China factory or was that attributed to something else?
Silvia Su, Vice President of Finance and Accounting Management Center
Yes, that's related to the China factory.
Scott Bishins, Analyst
Okay. Is that also – was that affected also by JMC, the last 10 million shares we have? I’m not sure…
Silvia Su, Vice President of Finance and Accounting Management Center
Yes, the JMC was a gain for JMC investment.
Scott Bishins, Analyst
JMC was a gain.
Silvia Su, Vice President of Finance and Accounting Management Center
Yes.
Scott Bishins, Analyst
Okay.
Silvia Su, Vice President of Finance and Accounting Management Center
Regarding the actual cash position, we have a strong position and also have sufficient short-term and long-term loans, especially syndicate loans and credit lines. Yes, I think our future investments should not be an issue. In terms of CapEx for 2020, we aim to control it under 20% of our total revenue. That’s the best bet.
Scott Bishins, Analyst
That’s the plan for 2021 also?
Silvia Su, Vice President of Finance and Accounting Management Center
For 2021, the board has set a target of 20% to 25%, but we will strive to keep it lower, as we aim to control it under 20%. Yes. But it still depends on the business.
Scott Bishins, Analyst
Okay.
S.J. Cheng, Chairman and President
To answer your question, the significant difference depends on whether the business is strong enough to warrant expanding our capacity. If sufficient space is available, there may not be a need for facility expansion, just a CapEx increment can maintain around 17% to 18% of total revenue for next year.
Scott Bishins, Analyst
Okay. Well, that sounds great. Do you have a building in mind right now that you’re negotiating on?
S.J. Cheng, Chairman and President
Right now, it's not a good time as prices continue to rise.
Scott Bishins, Analyst
Okay. And just the last question, just to verify what I think this is, the GAAP earnings came to $0.58 for 8150, correct?
Silvia Su, Vice President of Finance and Accounting Management Center
You mean the share price?
Scott Bishins, Analyst
No, the GAAP earnings – the earnings per share.
Silvia Su, Vice President of Finance and Accounting Management Center
Earnings...
Scott Bishins, Analyst
Earnings per share on a GAAP basis was $0.58. Is that correct?
S.J. Cheng, Chairman and President
Yes.
Scott Bishins, Analyst
Okay. And then also, if I just do a little non-GAAP number, it looks like the $6.2 million with a reference would add another $0.24 cents in earnings, which would have brought us on a non-GAAP basis to $0.82. Does that sound correct?
Silvia Su, Vice President of Finance and Accounting Management Center
Could you clarify? Is it in non-GAAP or can you explain?
Scott Bishins, Analyst
You mentioned there were about $6.2 million in charges associated with the third quarter. Part of it was the write-down in the equity value and some foreign exchange losses, which I think you said totaled $6.2 million. So if you take the $6.2 million converted back into Taiwan dollars, then per share, it would be about another $0.24, which would have brought earnings up to $0.82.
S.J. Cheng, Chairman and President
You're indiscernible.
Silvia Su, Vice President of Finance and Accounting Management Center
Can you provide your calculation, and I will double-check that for you?
S.J. Cheng, Chairman and President
Okay. The earnings that you posted that I saw on the MOPS was $0.58 per share for 8150, correct for the third quarter?
Silvia Su, Vice President of Finance and Accounting Management Center
Yes.
Scott Bishins, Analyst
Yes.
Silvia Su, Vice President of Finance and Accounting Management Center
Yes.
Scott Bishins, Analyst
Okay. And then you also mentioned that there was a US$6.2 million loss on foreign exchange loss and also the value of the equity – using the equity method of the assets that we hold that are non-operating that totaled $6.2 million. So if you take the $6.2 million converted back into Taiwan dollars and then divide it by the number of outstanding shares, I see it should be about another $0.24.
Silvia Su, Vice President of Finance and Accounting Management Center
Yes, yes.
Scott Bishins, Analyst
That would bring us – that would have brought us up basically on a non-GAAP basis of $0.82.
Silvia Su, Vice President of Finance and Accounting Management Center
Yes, yes.
Scott Bishins, Analyst
I just want to confirm that. The only reason why I’m saying that is because I just looked at some of the reports that just came out, and they’re saying that I most missed on the price per share, the earnings per share. But if you factor in the $6.2 million that was taken out from the GAAP earnings, actually, you would have had an earnings. I think the street was looking for $0.71. So now coming in at $0.82, actually, you did better even with a lower third quarter gross margin percentage, which means that assuming that we had another 1% or 2% in gross margin percentage, we have looked much better.
Silvia Su, Vice President of Finance and Accounting Management Center
Yes, you can exclude the one-time expenses like foreign exchange loss or investment loss to calculate.
Scott Bishins, Analyst
Yes.
Silvia Su, Vice President of Finance and Accounting Management Center
Okay.
S.J. Cheng, Chairman and President
Thank you for your question. We have the visibility.
Scott Bishins, Analyst
It’s not too high; if you need help, just let me know. Again, thank you very much. This has been great. The last 15 years for me anyhow, I’ve been an investor since 2004. It’s been a great ride. I’m very happy to see how things are going. I love waking up and seeing all brand-new highs on revenues, gross margins, profitability, and raising dividends. So keep up the great work. And yes, again, I would love to be able to, if possible, sometimes send some questions into David and maybe some other investors that could be asked on the Mandarin call, and then we’d be able to actually see the translation the same day and have our questions answered.
S.J. Cheng, Chairman and President
Okay, okay. We take your message. Thank you.
Silvia Su, Vice President of Finance and Accounting Management Center
Thank you. Thanks.
Operator, Operator
Thank you. Our next question comes from the line of Vipul Sagar with Blash Capital. Please proceed with your questions.
Vipul Sagar, Analyst
Thank you. Good evening, S.J., and Silvia. The first question I have is about free cash flow. It seems like you had a negative free cash flow in Q3. Is that right?
Silvia Su, Vice President of Finance and Accounting Management Center
Yes. Because we paid our dividend in Q3.
Vipul Sagar, Analyst
Perfect. And then for Q4, please continue.
Silvia Su, Vice President of Finance and Accounting Management Center
I mean, the dividend payout for Q3 was around US$45 million. That’s the reason why we had negative free cash flow in Q3.
Vipul Sagar, Analyst
Okay. So my next question is, for Q4, do you expect to return to positive free cash flow?
Silvia Su, Vice President of Finance and Accounting Management Center
It depends on the CapEx, but I think, yes, there may be a chance, but it still depends on how much CapEx we spend in Q4.
Vipul Sagar, Analyst
Okay, okay. But right now, Q3 was down because of the dividend, and then Q4 is going to depend on how much you spend on CapEx in Q4, correct?
Silvia Su, Vice President of Finance and Accounting Management Center
Yes, yes.
Vipul Sagar, Analyst
Okay. You said your Q4 revenue is going to be sequentially higher than Q3. What about Q1 2021? Do you see above-seasonal better than seasonality in Q1 2021?
S.J. Cheng, Chairman and President
To answer your question, concerning our Q3 gross margin not being as good as Q2. Based on Scott's previous inquiry, let me clarify. Q4 is really strong; we also increased the unit price. All the negative one-time events have disappeared, so revenue will be higher, and the market will significantly improve, not only because of price increase but also due to the absence of those negative one-time events. As for the first half of next year, based on current orders, we are still very optimistic; only the second half holds some uncertainty. All our new CapEx was secured by two-year contracts, thereby reducing investment risk, and guaranteeing revenue growth. Does that answer your question?
Vipul Sagar, Analyst
Yes, thank you for your explanation regarding the decline in gross margin. I appreciate your insight into the guidance for revenue, EPS, gross margin, and even cash dividends for next year, which is expected to improve compared to 2020. I would also like to ask about the price increase that began in October—was it around 5%, 10%, or even higher? What was the specific percentage?
S.J. Cheng, Chairman and President
For the testing, water testing for driver, it's around 5% to 10%. As a summary, it means we are going to pass the gold price increases to the customer side, which will be around 1% to 3%.
Vipul Sagar, Analyst
There was a fire at AKM recently.
S.J. Cheng, Chairman and President
Yes.
Vipul Sagar, Analyst
Does that help ChipMOS bring in more business?
S.J. Cheng, Chairman and President
Yes, we actively support them during this critical time and will do our utmost to accommodate the additional capacity needs. However, I can’t make any comments regarding a single customer until AKM’s statement is released.
Vipul Sagar, Analyst
Now. Here’s the thing: your revenue is growing; your free cash flow will be better than the previous year. And I know you’re going to pay a little better dividend than in 2021. Here’s my question about the value of your company. It’s close to book and it’s barely above one time revenue. I see Chipbond has about a 1.4 book; it’s trading above at least almost two times its revenue. What is management going to do about something like, let’s say, share buyback? Because if your growth is coming and the stock is near the lows, what does management think about that cash that comes down the road?
S.J. Cheng, Chairman and President
Actually, we don’t engage in aggressive repurchasing. We are talking mainly about how to manage our fair market value and share price. First, I believe we will continue to deliver our performance along with a stable cash dividends approach, enabling shareholders to enjoy higher premiums. I think the recognition of our stock price will depend on delivering results.
Vipul Sagar, Analyst
What do you mean by repricing? I didn’t understand that.
S.J. Cheng, Chairman and President
It means we will remain committed to delivering quarterly results while maintaining a stable cash dividend policy that could yield around 6% to 7% per year.
Vipul Sagar, Analyst
Yes.
S.J. Cheng, Chairman and President
I believe shareholders should see an uptrend in share price as a result. We have sufficient cash reserves and won’t pursue buybacks.
Vipul Sagar, Analyst
Okay. Thank you, S.J. Thank you, Silvia. You answered all my questions. Let me see if I have any more questions saved up. Now, it’s a seasonality; Q4 and Q1 2021 are going to be better. There’s a possibility of a higher dividend next year. Q4, everything is going to be up from revenue to margin to free cash flow. Yes, that answers all my questions. Thank you so much.
S.J. Cheng, Chairman and President
Thank you.
Silvia Su, Vice President of Finance and Accounting Management Center
Thank you. Thank you. Ladies and gentlemen, that concludes our question-and-answer session. At this time, I’ll turn the floor back to Mr. S.J. Cheng, the company’s Chairman and President for any final comments.
S.J. Cheng, Chairman and President
Yes. Thank you everyone for joining our Q3 conference call. If you have any questions, you can directly contact our IR team. Thank you very much. Bye-bye.
Silvia Su, Vice President of Finance and Accounting Management Center
Thank you. Bye-bye.
Operator, Operator
Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.