ChipMOS TECHNOLOGIES INC.
Q1 2015 Earnings Call Transcript

Published: 11 Aug 2015

[Operator:]

Greetings, and welcome to the ChipMOS Q2 2015 Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, David Pasquale with Global IR Partners. Thank you, Mr. Pasquale, you may begin.

[David Pasquale:]

Thank you, operator. Welcome, everyone, to ChipMOS' second quarter 2015 results conference call. Joining us today from the company are Mr. S.J. Cheng, Chairman and Chief Executive Officer; and Mr. S.K. Chen, Chief Financial Officer. S.J. will review highlights from the second quarter 2015, and then provide ChipMOS’ third quarter 2015 business outlook. S.K. will then review the company's key financial results. We will then have time for any of your questions. If you have not yet received a copy of today's results release, please email Global IR Partners at [e-mail], or you can get a copy of the release off of ChipMOS' website, www.chipmos.com. Before we begin today’s prepared remarks and Q&A, we must make a disclaimer regarding forward-looking statements. During this call, management may make forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual performance, financial condition or results of operations of the company to be materially different from any future performance, financial condition or results of operations implied by such forward-looking statements. Further information regarding these risks, uncertainties and other factors is included in the company's most recent Annual Report on Form 20-F, filed with the U.S. Securities and Exchange Commission and in the company's other filings with the SEC. At this time, I would like to now turn the call over to Mr. S.J. Chen. Please go ahead, sir.

[Shih-Jye Cheng:]

Thank you, David. Welcome everyone to our second quarter of 2015 conference call. Hopefully, you all had time to review our earnings release. I want to start with thanking everyone who joined on the call today. We understand your frustration with the share price. As a management team, we fully share in your frustration. We have worked very hard over the passing three years to strengthen our financial position and to simplify our structure. We had consistently outperformed from a business standpoint, but the market has failed to give our share a premium valuation. We are not happy [ph] with this, but we cannot consider the market. Our focus is on running our business and on completing the structures planned we started previous year, and then while we are not finished with the structure effort, we have made significant progress. We had eliminated cross ownership labor in combined subsidiaries. We have been laying the groundwork for top level compression, but it has not happened yet. This, the next step is one that our growth market evaluate and trend. We are fully committed to the real value of our compression [ph]. It makes sense for our [indiscernible] our dividend. There was a 20% equity holding on money payout from Taiwan to Bermuda. That’s directly impacted our shareholders and our valuation. We ask that you remain patient during this process. It has been though my belief that anything is achievable and we are committed to seeing this truth. We have also received many calls and email regarding to the repurchasing program. We listen and work out to build shareholders value. In this case, there was a long holding [ph] period while the latest repurchasing program was announced. We went back and resolved our shelf period. We now expect to enter the market and repurchasing share of ChipMOS Bermuda, five business days to enter into the repurchasing plan with the broker, which is anticipated to be a one business day after the release of our Q2 ‘15 results after this call. And with $25 million repurchasing plan authorization, we believe this will have a positive impact and will then market know we proceed that share of the company are undervalued. The ChipMOS Bermuda program was followed with a repurchasing program at ChipMOS Taiwan. The ChipMOS Taiwan Board authorized the repurchasing of 20 million share of under Taiwan Stock Exchange. This refrain the view that share of the ChipMOS Taiwan are also undervalued in the market. The repurchasing program are stream for good financial management and partly used of our balances for shareholder values. Another area we received another [indiscernible] was the dividend declaration. Our Board declared $0.14 dividend per share, payable on October 30, 2015 to all common shareholders of record at the closing of the business of October 16. This amount is consistent with our prior dividend, and we are able to put a dividend to impress our repurchasing program was impressed. At this level, we are able to maintain cash stable for potential Bermuda compression and maintain this for our ongoing business operations. Our management and Board regularly evaluate our case and our revision. By maintaining a strong balance sheet, we are able to secure better than [indiscernible] and we are able to pursue growth opportunities. We will now be able to, if we do not had a strong balance sheet, we have been in the past with over extended balance sheet. I had no intention of growing back to that [indiscernible] our goal. And our shareholders, usually now understood. So yes, we think our shares are undervalued at present in the market. We continue to take measure to benefit shareholders. This had been result in a more favorable valuation while we must be then patient. We must focus on running our business and this should growth and profitability our business is capable of. We remain fully committed and are continued to execute on the structured opportunities, but it is investment process that take time [ph]. Another question we are receiving is about our customers. The lower share price at these assets close to seeing, we lost a key customer. We did not. Our lost share and a key customer, we did not. We are seeing the same macro headwinds as everyone else, but to a less degree. It had been hard this Q2 earnings season to find anyone saying anything positive for ChipMOS. Our results were in line with guidance and our outlook is positive. Yet, we believe to expect continued headwind in the second half, but we expect our business to remain strong by our LCD driver business in small panel and growth in our non-IC driver business. For Q2 specifically, revenue was $164.2 million, a decrease of 2.9% compared to Q1 ‘15. This was in line with our guidance of flat to down in the low single-digit. Our margin was - it was expected to be at 22.4% for Q2 ‘15. Overall utilization rate running at 68% as we observe capacity adds. CapEx revenue was $32.8 million, which was lower than we budgeted. In terms of product segments, revenue from assembly and testing service for LCD driver was flat in Q2, compared to Q1; represented 27% of our Q2 sales, reflecting macro demand trend. Revenue of our driver for large panel decreased 6.8%, while small panel driver was up 12.7%. Our bumping business decreased 11.3% in Q2, compared to previous quarter to represented 18% of Q2 revenue. Although in line with record trends, revenue in our DRAM business decreased 6.2% in Q2 ‘15 compared to Q1. This represents about 32% of our Q2 revenue. We also showed nice growth in our business on flash and wafer level chip scale package in Q2, which increased 7.7% and 33.8% respectively, compared to Q1 ‘15. Flash revenue including Mask ROM represented 14.6% of our Q2 revenue. Mixed-signal products contribute 6.6% revenue in Q2. SRAM was flat in Q2 compared to Q1, represents 2.2% of our total sales in Q2. So we are not immune to macro headwinds, [indiscernible]. This is the low line initiatives. The DRAM for ChipMOS is up, we have diversified customer base. We have leadership in the LCD driver business. We have many growth opportunities in the non-IC driver business and we have balance sheet to fund our growth. Finally, a note at the stock. We continue to execute on the structured opportunities that we are seeing with throughout for building shareholder value. Let me now turn to our Q3 outlook. Based on our current outlook, we expect cyclically our 2015 revenue would decrease 2% to 7% as compared to the second quarter of 2015. This reflects the macro headwinds I know that are continuing into Q3 from Q2. We expect gross margin on the consolidated basis to be in the range of around 17% to 21% for the third quarter of 2015. In summary, we have clear presented forecast, our focus and growth strategy in the slowing global environment. Our CapEx range is straight forward relative to the overall conservative of the most figure [ph] and are continuous corporate streamline initiatives are moving forward. Finally, before turning the call over to S.K., I want to touch on the growth in China. We had discussed a potential of future growth for us in China during the last conference call. We are evaluating opportunity where we can leverage our market presence and valuable as one of owning two companies to specializing LCD driver segment. We are looking at one option that will allow us to restart our LCD driver turnkey business in China. We will update you as we are able to conclude any decision. I want to point out this evaluation process is not expected to have any impact on our Board Special Committee or potential for later compression. This is just another area we are working on that could become a big growth catalyst for us. Let me now turn the call over to S.K. to review second quarter financial results. S.K., go ahead.

[Shou-Kang Chen:]

Thank you, S.J. All dollar amounts cited in our presentations are in U.S. dollars. We have provided both U.S. dollars and NT dollars in our press release. The following numbers are based on the exchange rate of NT$30.88 against US$1 as of June 30, 2015. As S.J. reviewed our revenue and margins, I will provide details on the rest of our second quarter 2015 results. Please note that our Q2 2015 net earnings were negatively impacted by a $7.5 million dividend distribution withholding tax and $1.7 million of foreign exchange loss. This totaled approximately $0.32 per basic common share and $0.32 per diluted common share in aggregate. We are tracking that negative impact net income for the second quarter of 2015 was $2.4 million, an $0.08 per basic and $0.08 per diluted common share compared to net income of $12.2 million and $0.43 per basic and $0.42 per diluted common share in the first quarter of 2015. Our operating expense in Q2 was $13.4 million or 8.2% of our Q2 revenue compared to $12.0 million or 7.1% of our revenue in Q1 2015. Other operating income in Q2 was $0.8 million and non-operating expense in Q2 was $1.9 million. Foreign exchange represented a loss of $1.7 million in Q2 compared to a loss of $0.7 million in Q1. Income tax provision for Q2 was $11.7 million compared to $4.9 million in Q1. Our Q2 income tax expenses included $7.5 million for the withholding tax of dividend excluding from ChipMOS Taiwan and two companies. The non-controlling interest for the second quarter of 2015 was $8.2 million as compared to $9.9 million in Q1. On the segment basis, Q2 revenue spread down was; 24% in testing, 31% in assembly, 27% in LCD driver IC business and 18% in bumping. Total capacity utilization for 68% for second quarter of 2015 compared to 71% for the first quarter of 2015. Our Q2 testing capacity utilization decreased to 65% from 68% in Q1. Assembly capacity utilization was running at 62% in Q2 as compared to 64% in Q1. LCD driver IC capacity was running at 75% utilization in Q2 and 71% for bumping. We spent $22.8 million on CapEx in Q2 compared to $32.7 million for our first quarter 2015. The breakdown of CapEx for the second quarter was 22% for testing, 29% for assembly, 30% for LCD driver IC and 19% for bumping capacities. Depreciation and amortization expenses were $24.1 million or approximately 15% of revenue in the second quarter. This was slightly higher compared to the first quarter of 2015. EBITDA for Q2 was $48.6 million or 29.6% of revenue. EBITDA was calculated as earnings before income taxes, foreign currency gain or loss, net interest expenses, depreciation and amortization expenses and special charges. While EBITDA is not defined by Generally Accepted Accounted Principles, I would believe it is a helpful way to measure our financial strength. The free cash flow in Q2 was $5.4 million, which was calculated by adding depreciation, amortization, interest income together with operating income and then subtracting CapEx, non-controlling interest, interest expense, income tax expense and dividend from the sum. We ended Q2 with a strong balance of cash and cash equivalents of $475.1 million compared to $524.4 million at the end of Q1 2015. As of June 30, 2015, we maintained our net cash position at $200.6 million, which resulted in a net debt-to-equity ratio of minus 41.4%. This is after we spent $22.8 million on CapEx in Q2, compared to $32.7 million for our first quarter 2015, and this is after we paid $46.8 million in cash related to third-party merger as well. Our total short-term debt including the current portions of long-term debt was $87.3 million at the end of second quarter 2015, as compared to $89.6 million at the end of the first quarter. Long-term debt is the same as $187.2 million at the end of the second quarter, as compared to $187.2 million at the end of the first quarter 2015. Our accounts receivables days sales outstanding in Q2 were 75 days, compared to 79 days in Q1. Inventory turns were 41 days in Q2, compared to 39 days in Q1 2015. Our interest expense was $1.1 million in the second quarter, which was approximately the same as that of the first quarter 2015. Finally, we were just given approval by a regulator of our restricted share program. This program would help the issuance of 15.7 million restricted share in ChipMOS Taiwan to employees by August 31, 2015. This was resulted in the ChipMOS ownership in ChipMOS Taiwan declines slightly to 57% from 58%. The ownership will then increase to 58.2% if the ChipMOS Taiwan repurchase program is completed in full. Operator, that concludes our formal remarks. We can now take questions.

[Operator:]

Thank you. Ladies and gentlemen, at this time we will be conducting a question-and-answer session. [Operator Instructions] One moment while we poll for questions. Okay. Our first question comes from the line of Jerry Su from Credit Suisse. Please proceed with your question.

[Jerry Su:]

Hi, S.J. and S.K. I just have two questions. The first one is on the business outlook. I think you guided revenue to decline 2% to 7% sequentially. Could you help us to understand which - by segment, testing, assembly, LCD and also bumping, what is the revenue of each category? And my second question is more related on the commodity DRAM assembly side. I think one of your competitor is looking with your customer to set-up a facility in China. How do you view that? Do you think there could be any risk in terms of allocation decline in 2016? Thank you.

[Shih-Jye Cheng:]

Yes. Jerry, this is S.J. To answer your question, for Q3, we guide 2% to 7% revenue decline. That may be coming from both memory and LCD driver. And for flash memory, it maintains flat. This is caused by lot of inventory and as the inventory will digest, I see there were back to the lowest in the [indiscernible]. And regarding to DRAM, we’re working with our customers. So far we don’t see any impact yet, and you mentioned about our Asian operation, that is expected to start from next year. So we keep working with our strategic customer very closely.

[Jerry Su:]

Okay. Thank you. And just one follow-up on the - you mentioned LCD business is seeing a soft Q3. Is it mostly up from the TV side or up from the small panel side?

[Shih-Jye Cheng:]

Yes, it may be from TV side because the high inventory in TV. Small panel still is slightly up.

[Jerry Su:]

Okay. Thank you.

[Shih-Jye Cheng:]

You are welcome.

[Operator:]

Our next question comes from the line of Richard Shannon from Craig-Hallum. Please proceed with your question.

[Richard Shannon:]

S.J. and S.K., thank you for taking my questions. I guess my first question is obviously with your guidance a bit below what people are expecting here after second quarter of in line, I guess, at the low end of your guidance. Curious on the pattern of bookings you saw exiting the second quarter and into the third quarter so far? On a weekly bookings basis, have you seen the bottom yet, or can you give us a sense of how that has trended here in the last several weeks?

[Shih-Jye Cheng:]

Richard, this is S.J. I think we had a similar discussion in last conference call. 2014 Q4 is a bad Q I ever had for all passing seven years. This year the business pattern is quite flat. Q1 and Q2 starts and Q3 also had a headwind. And the visibility only two to three months and many customers had a lot of inventories and they also slowed down with loading. So I think once the inventory will digest, that will be back to normal utilization rate and business standpoint.

[Richard Shannon:]

Okay. So just to be clear, have you seen the - do you think you’ve seen the bottoms of those booking patterns yet, or is there still not clear yet?

[Shih-Jye Cheng:]

I think we are in the process, but how many percent will increase in the Q4, that would depend on agile market derivation and inventory digested.

[Richard Shannon:]

Okay. From what you can see right now S.J., would you anticipate the fourth quarter being at least flat, if not, up sequentially, or is that little bit too hard to tell at this point?

[Shih-Jye Cheng:]

I think it will be very similar like Q3 and vis-à-vis up. That depends on the - because we received some urgent order [ph] which without any focus on our customer side.

[Richard Shannon:]

Okay. Fair enough. Maybe couple other questions and I’ll jump back in the queue. You gave us some guidance on the press release, as well as your prepared remarks. You bought CapEx for this year. Can you give us an upper limits, and I’m wondering how fungible those CapEx numbers is, and I’m wondering if you can give us a sense of what your CapEx might look for 2016?

[Shih-Jye Cheng:]

Yes, Richard, this is S.J. Inside the management team, we already set the guidance. All are factored it to manager [ph]. We don’t want to invest any capacity increase at the current stage. We are focused on the new product development and all equipment replacement and automation. That is set-up rightful. And you can see in Q2, CapEx is $22 million, which is the lowest in our past. I think we will maintain the same in Q3 and Q4.

[Richard Shannon:]

Okay, great. And then one last question, I’ll jump out of the line. What do you expect for your utilization running in the third quarter, and I guess, I’m just trying to figure out what that number is baking into the gross margin guides, because it looks like it’s a little bit low given normal variable cost trends that I’ve been tracking. So curious whether you’re going to run the utilization lower than normal this quarter?

[Shih-Jye Cheng:]

Yes, I think it got utilization rate, it would be about 68%. I think the Q3 level drop 2% to 3%.

[Richard Shannon:]

Okay. Fair enough. I will jump out of line guys. Thank you.

[Shih-Jye Cheng:]

Thank you.

[Shou-Kang Chen:]

Thank you.

[Operator:]

[Operator Instructions] Our next question comes from the line of David Steinberg from DLS Capital. Please proceed with your questions.

[David Steinberg:]

Hi guys. I just wanted to give you comment that I think it was proactive for you guys to increase the buyback, and it’s the right thing in a difficult environment, and I think you’ll probably get well rewarded. I think we all as shareholders, I know we’ve all been frustrated and I know you’ve gotten lot of correspondence and some criticism over the capital structure, but I think you should know that I think we all appreciate and I’m speaking for myself and I’m sure a bunch of others that you are listening to your shareholders. Only question that I have is the cash that is sitting in Bermuda still, is there anything mathematically that you can do better with that, or any reason that there needs to be much there, and if any and how much is the bear minimum that requires? And I do understand that you’re going to try to streamline the company between now and some future day. That’s the question. And as I said, want to just complement y’all listening to shareholders.

[Shih-Jye Cheng:]

So David, this is S.J. I appreciate. We received a lot of input from all the shareholders. So in the start of conference call, yes, we know our shareholders are very frustration of our share price. As a management team, we share it and we had a self-feeling about it. Regarding to - I think the most important for the company, as I mentioned to you in the conference call, we would like to maintain the strong balance sheet for further streamline the company structure and also maintain our operation. And we already organize a Special Committee to evaluate our brand for streamlining the company structure. So right now they are both going to maintain those cases to speed up the process. But honestly right now, we cannot have firm answer to you, how much cash needed for the streamlining the company structure.

[David Steinberg:]

Great. I appreciate it. Keep doing god job, and we’ll all get through all this messy stuff in the marketplace. So anyway, good job. Thank you for taking my comment and question.

[Shih-Jye Cheng:]

Thank you, David.

[Shou-Kang Chen:]

Thank you.

[Operator:]

Our next question comes from the line of Charlie Chan from Morgan Stanley. Please proceed with your question.

[Charlie Chan:]

Hi, S.J., S.K. Thanks for taking my question. So my first question is regarding the pricing pressure. I know you’re in quite a tough environment and that your key customers such as Nova Tech and Himax. They are guiding for gross margin erosion into second half. So do you see any pricing pressure from these key customers? Do you think you can hold up your pricing into next two quarters?

[Shih-Jye Cheng:]

Yes, this is S.J. Let me answer your question. The price erosion in the semiconductor is already happened. And the only thing we can do is we could increase our efficiency, material cost saving and also use that integrally to offset those price erosion. And especially under this kind of very conservative industry environment, the price erosion pressure was higher than the normal season. Managing in a company at this level, we can stay into the minimal rate in order to maintain those gross margins.

[Charlie Chan:]

Okay. So do you think the industry duopoly outside of Korea still holds up in this environment?

[Shih-Jye Cheng:]

Sorry, I cannot follow you. Can you repeat it again?

[Charlie Chan:]

Yes. So do you think the industry duopoly because there is a key argument for the healthy pricing for your business, do you think that’s still valid during this kind of tough environments, meaning you can really defense your ASP?

[Shih-Jye Cheng:]

I think currently our customer base is pretty solid and yet there is also the new comer from Korea side, which is pretty aggressive. But so far, we still maintain same market share and we still had a very good strategic relationship with our key customer. So I think we don’t some problems by other company [ph].

[Charlie Chan:]

Okay. Thank you. And my next question is regarding your comments on third quarter outlook. So just want to follow-up Jerry’s question. So you mentioned that you see some TV inventories. So can you elaborate a little bit how high is the inventory you are seeing in the end-products and in TV panels and how this is compared to the normal inventory days?

[Shih-Jye Cheng:]

Yes. To answer your question, I’m seeing that from two viewpoints to answer your question. One is application viewpoint. Think right now TV price continues to drop. So more and more 2K, 4K panels are generated much faster than we expected. That’s everywhere increased the consumption rate of our driver. But on the other hand, take the inventory is higher. So once the inventory was absorbed, then the TV sales are getting back to normal.

[Charlie Chan:]

Okay, thanks. And lastly, if I may, I know you cannot really disclose very clear timing of the potential streamlining.

[Shih-Jye Cheng:]

Yes.

[Charlie Chan:]

But do you think it is possible you may be able to announce potential China investments by the end of this quarter, and maybe also the merger with IMOS and ChipMOS Taiwan by the end of this quarter?

[Shih-Jye Cheng:]

Yes. To answer your question, I think that - regarding the Special Committee progress, I would likely share with you is the Special Committee right now working pretty aggressive to interview all the professional advisor. Those will be come-through inspected end of August or beginning of September. So later our committee will engage for all advisor. And after that, they will do the evaluation process. I think that we are on the right track by position of the Special Committee’s responsibility. I cannot give you exactly answer, but we had a consensus committed. We are trying to complete the streamline structure. This is always potential for shareholder, for management team and also among our consensus understanding among our book. Regarding the China one, we’re still under the evaluation process and due diligence process. I think we can complete it within this year.

[Charlie Chan:]

Okay. So just lastly, which one do you think you can complete earlier?

[Shih-Jye Cheng:]

It is two subjects?

[Charlie Chan:]

Yes.

[Shih-Jye Cheng:]

It’s - how to say. That’s beyond my control.

[Charlie Chan:]

Okay. So for the China investment, what would be the key roadblock, or what is the key issue now? Is there anything to do with valuation or China stock markets volatility recently?

[Shih-Jye Cheng:]

Yes, that’s not related to China stock market. I think this is related to the due diligence process, the detailed company budget [ph].

[Charlie Chan:]

Okay, understood. Thank you very much.

[Shih-Jye Cheng:]

Thank you.

[Operator:]

Our next question comes from the line of Brian Grad [ph], a Private Inventor. Please proceed with your question.

[Unidentified Analyst:]

Hi guys. Thank you for accelerating the stock buyback. It’s the appropriate thing to do. And I know you’re going to do a good job with that. Get us some stock, while it’s down as low prices. A bunch of my questions have already been answered, but I am curious, how do you see the Micron/PTI tie-up in China affecting your business? Is that going to potentially put pressure on margins from Micron, or is some of that business that you’re doing now going to be replaced, or is that just going to be maintained - are they going to be a second - is that going to be like a second vendor for them? I know it’s a joint-venture, so they probably have a little more skin in the game. What do you expect to see from that?

[Shih-Jye Cheng:]

Yes. Just share with you, I cannot comment to single customer. But regarding the overall business arrangement, we do with our key customer just assembly only. And that’s maybe we focus on commodity DRAM. That’s the reason out of those three stories impact us. I can tell you, we’re working with Micron as long enough and we maintain a strategic relationship. We don’t see any change up to now.

[Unidentified Analyst:]

Okay. But that could potentially change in the future? That’s not - right now, there is nothing different?

[Shih-Jye Cheng:]

I try to maintain the same.

[Unidentified Analyst:]

Okay. Well, listen guys, keep up the good work. I completely appreciate everything that you’re doing and will ultimately be rewarded.

[Shih-Jye Cheng:]

Yes. Any potential feedback [ph] as well, we will try our best to running the business as we can and also try to carry the best balance sheet for all our shareholders.

[Unidentified Analyst:]

I know you will. Okay. Thank you.

[Shih-Jye Cheng:]

Thank you.

[Operator:]

Our next question comes from the line of John Rolfe from Argonne Capital. Please proceed with your question.

[John Rolfe:]

Hi guys. Could you give any guidance in terms of what your expectations are for the minority interest line in third quarter and possibly fourth quarter?

[Shou-Kang Chen:]

Yes. Non-controlling interest line for Q3 is around $7 million and about $5 million for the fourth quarter.

[John Rolfe:]

Okay. And was the amount of income attributable to equity holders of the company - was it so small relative to the non-controlling interest this quarter because of that, because the $7.5 million dividend withholding was only attributable to the equity holders of the company?

[Shou-Kang Chen:]

The smaller amount in Q3 and Q4 is because that we completed a ThaiLin mergence.

[John Rolfe:]

No, I’m talking about in Q2, only $2.4 million of the profit was attributable to equity holders of the company and $8.2 million was attributable to the non-controlling interests and I’m wondering if that had to do with the $7.5 million tax withholding?

[Shou-Kang Chen:]

Okay. For the Q2, I think that we see a need to allocate some of the margin interest to ThaiLin’s - other investors in ThaiLin that before we consolidate ThaiLin. And in Q2, we also need to accrue the - I think the tax expenses for the cash dividend distribution. We said that we sold in 20%. We mentioned that as far $7.5 million. So I think that’s the one-time expenses every year during Q2.

[John Rolfe:]

Okay, great.

[Shou-Kang Chen:]

While we distributed cash dividend, then we need to accrue this expenses.

[John Rolfe:]

Okay. Thanks very much.

[Shou-Kang Chen:]

Yes.

[Operator:]

[Operator Instructions] There are no further questions in queue. I’d like to hand the call back over to management for closing comments.

[Shih-Jye Cheng:]

Yes. Thank you everyone for joining our Q2 conference call. Thank you very much.

[Shou-Kang Chen:]

Thank you.

[Shih-Jye Cheng:]

Bye-bye.

[Shou-Kang Chen:]

Bye-bye. Have a nice day.

[Operator:]

Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.