Q3 2019 Earnings Call
Good afternoon, everyone in Washington, <unk> third quarter 2019 financial conference call.
Leading the call today, Dr. Morris Young Chief Executive Officer in Gary Fischer, Chief Financial Officer.
My name is and that will be a coordinator today.
At this time, all participants are in listen only mode.
Later, we'll conduct a question and answer session and instructions will follow at that time.
If anyone should require assistance during the conference. Please press Star then the numbers you're on your touched on telephone.
I'd now like to trying to pull over killed Leslie Green Investor Relations for any excuse me.
Thank you and good afternoon, everyone before we begin I would like to remind you that during the course of this conference call, including comments made in response to your question, we will provide projections or make other forward looking statements regarding among other things the future financial performance of the company market conditions and trends including expected.
I was in the markets, we serve emerging applications using chips or devices fabricated on our substrates, our product mix, our ability to increase orders and succeeding quarters to control costs and expenses to crude manufacturing yields inefficiencies to utilize our manufacturing capacity the schedule in timeliness regarding our relocate.
And the growing environmental health and safety and chemical industry regulations in China, as well as global economic and political conditions, including trade tariffs on my end restriction, we wish to caution you that such statements deal with future events are based on managements current expectations and are subject to risks and uncertainties that.
Could cause actual events or results to differ materially. These uncertainties and risks include but are not limited to overall conditions in the markets in which the company compete global financial conditions, and uncertainties potential terrorists and trade restrictions increased environmental regulations in China.
Market acceptance and demand for the company's products the financial performance of our partially owned supply chain companies and the impact of delays by our customers on the timing of sales of their products. In addition to the factors that may be discussed in this call. We refer you to the company's periodic reports filed with the Securities and Exchange Commission.
These are available on our online by link from our website and contain additional information on risk factors that could cause actual results to differ materially from our current expectations. This conference call will be available on our website at <unk> Dot com through October Thirtyth 2020 also before we begin.
I want to know that shortly following the close as market today, we issued a press release reporting financial results for the third quarter. This information is available on the Investor Relations portion of our website at <unk> Dot Com I would now like to turn the call over to Gary Fischer for a review of our third quarter results Gary.
Thank you Leslie and good afternoon, everyone [laughter] total revenue for the third quarter 2019 was 19.8 million.
By comparison revenue in the second quarter of 2019 was 24.8 million and revenue in the third quarter of 2018 was 28.6 million.
Our total revenue substrate sales were 16.0 million compared with 20.6 million in the prior quarter.
Revenue from where raw material joint ventures was 3.9 million in Q3, compared with 4.2 million in Q2, and 5.8 million in Q3 2018.
More can give you some color on overall revenue, but just as a reminder, last year, we were consolidating the results of Threed <unk> raw material joint ventures as of this year, we're consolidating only two companies into our quarterly results.
In the third quarter 2019 revenue from North America was 9% Asia Pacific was 66% in Europe is 25%.
In the third quarter, one customer reach 10% of revenue in the top five customers generated approximately 40% of total revenue.
Gross margin over the third quarter was 29.0% down from 34.3% in the prior quarter. This decline was primarily the result of lower volume and product mix.
Total operating expenses in Q3 were 6.2 main approximately flat from the prior quarter.
Total stock compensation expense for the third quarter of 2019 was $584000.
Operating loss for the third quarter of 2019 was 478000 compared with an operating profit of 2.3 million in the previous quarter at 4.3 million for Q3 of 2018.
Interest income net for the third quarter of 2019 included interest income $41000, a net loss of a 0.2 million. It's on the partially when companies in X.P. supply chain accounted for under the equity method and the foreign exchange gain in other income tolling 0.2 million.
Income tax for the third quarter 2019 was a charge of 29000 compared to the charge of 597000 in Q2.
Our Q3 results includes approximately 234000 tariffs as a result of the 25% tariff charged on importing wafers into the United States from China.
For Q3, 2019, we'd have a loss and loss of $898000 or a loss of two cents per share.
By comparison, we had a net income of 1.5 million.
Dolphin, a four cents per diluted share in the second quarter of 2019.
The net income of 3.9 million or profit of 10 cents per diluted share in Q3 2018.
The basic share count for Q3.
2019 was 39.466 million shares.
Cash cash equivalents in investments increased to 38.5 million as of September thirtyth.
Comparison at June 30, it was 37.5 million.
Oh, we also have a $10 million on credit at Wells Fargo Bank, which was not utilize and this quarter, we established a bank loan of approximately $5.8 million in China.
We expect to spend approximately $5 million on a relocation in Q4 in line with our expectation for the year of approximately 21 million.
Depreciation and amortization in the third quarter was 1.3 million.
Capital expenditures were 4.69.
Accounts receivables net of reserves were 17.4 million at September Thirtyth 2019, compared with 18.2 million at June Thirtyth 2019.
Net inventory at September Thirtyth decreased by 1.2 million to 49.1 million compared with 50.3 million in inventory at June Thirtyth.
Ending inventory consisted of approximately 47% in raw materials, 46% in work in progress and only 7% in finished goods.
As we noted previously the reduction in or inventory has been a focus for us in 2019.
This concludes our financial review I'll now turn the call over to Dr. Morris Young for review of our business Morse.
Thank you Gary and good afternoon everybody.
Finally, promising beginning.
Q3 turned out to be particularly challenging quarter for us.
But it really was proven to be quite poor ended demand environment weakened considerably between July and September .
Revenue from every one of our product categories came in lower than expected.
Indicating broad based market decline.
We saw it negative shifting customer sentiment regarding I expect it sick.
As expected second happy boom and applications across our portfolio.
So just beat Us interconnectivity.
Oh, okay.
Hey, led lighting lasers, and that's how I solar cells.
Geographically the you wish buckets for compound semiconductor substrates was particularly hard hit it possible impact of tree tenders.
Amidst the backdrop, we continue our strong focus and execution about relocation in China and made important progress.
After a lengthy process I'm very pleased to report that we have reached a significant milestone in completing the necessary permitting requirements for both our dishing in casual locations.
In addition, we all have sufficient capacity online in both facility to be able to handle large volume production.
What is particularly exciting for US is that these are speed of dogs facilities.
They all the newest getting all on compounded the landscape.
Yeah, Bill to try and those exacting environmental standards.
And optimized for best practice manufacturing processes for crystal growth and wafer processing.
This Abu <unk> in both facilities for capacity expansion.
Which positions us to be able to quickly and efficiently a comedy <unk> strong gross predicted in the application we sure.
Well the in the time that particular to make a careful and methodical dresses and to the new facilities.
We have also placed significant focus on the recruitment.
Training.
Oh relocation of our employees.
We're encouraged by the quality of talent, we being able to attract and retain.
And believe we now have order usage from components in place to meaningfully wrap up production in both locations over the coming quarters.
As such.
That we are prepared for renewed growth when the demand environment improves as expected in 2020.
Now turning to our end markets.
29 team has proven to be a challenging here given the turbulent geographical.
Oh political and.
Global economic conditions.
Indium phosphide why you may recall.
The demand the bottom in the Q2 datacenter connectivity and Paul application would week by comparison to the prior year actually result, Oh persists and micro economic challenges.
However, our revenue results in Q2 was strengthened by the completion of in large order from the telecommunication customers in nature.
That we did not expect to repeat Inc. second half.
Coming into Q3, all customers in data center and Paul markets. We're predicting a pull me you maybe by the Nadeem element, which would have result in the new wells in demand falls substrates.
However, dishing Truman indeed, handyman did not materialize.
He doesn't there was particularly soft compared to expectations, which may be a result.
Again, U.S., China trade contentious [noise].
Ultimately, our indium phosphide substrate revenue for data center and Palm remains fairly steady sequentially in Q3, but.
We were not able to make up for the absence of the telecommunication order that we had in Q2.
Despite these near term challenges environment.
We remain optimistic about an underlying large scale technology trend that few that demand for all products.
Data center upgrade cycle is well underway to accommodate massive growth in bandwidth requirements at Hyperscale large enterprise data centers.
We believe that the silicon Photonics block it will continue to grow reasonably by the technology transition to wander Gi and beyond two that Oh for energy.
Related to the data center, a great. It's a nascent fiveg infrastructure roll off.
And the continued build out and upgrade a massive optical network worldwide.
The increasing video streaming new services enabled by Fiveg is strong growth in data intensive cloud based services will continue to drive increasing demand for optical components that would require indium phosphide substance.
Now in gallium arsenide.
Ladies and lasers.
Being slow.
To recover.
From the true downtrend over recent quarters.
Automotive applications have been particularly hard hit.
And continued to be week in Q3.
Wireless application is holding steady.
The or reduced rate.
As we look ahead, however, the galley Austin market holds a significant opportunities we believe that outlook our traditional applications were recovering 2020.
How do we see great promise applications, such as power lasers for industry welding and cutting.
Pixels for a variety of customers.
Industrial and automotive applications and micro studies, we choose Galileo asked I wouldn't read portion of the that Green Blue light spectrum.
Gallium arsenide, he's not going away and D D actually diverse and broad number of applications.
Turning to germanium substrates, Oh cells took a step back in Q3 in the softer demand environment.
It is expected to remain soft in Q4, this excess inventory as surgeon customers is digested.
Overall.
This otherwise wholesale market is expected to grow in the coming here.
With the number of set a launches increasing we're wise.
Well that you were also sequentially down in Q3 by about 8% compared to Q2.
Revenue.
The sluggishness in the substrate market.
Appear to have a negative ripple effect on the raw material companies that would cause all of it.
Now in closing.
This is a difficult quarter had difficult market environment.
But despite the near term market softness.
We're confident that the underlying technology trend fueling applications that drive our success on intact.
In the meantime.
Yeah ticking down to me to effectively execute the old relocation.
We are pleased to have not significant milestones.
Permitting and watering production readiness.
These will allow us to support that expected customer volume.
Over the next couple of quarters.
That's Wallace new business opportunities when the demand environment stresses.
This concludes my prepared comments I will now turn the call back to Gary fall will fourth quarter guidance, Gary. Thank you Morse.
As Morse discussed he demand environment remains challenging and is not expected to approve in Q4 as such we expect to see revenue in Q4 between 19.5 million to 20.5 million.
We believe our loss per share in Q4 will be in the range of six to eight cents.
Based on 39.467 million shares outstanding.
This concludes our prepared comments morson I'd be glad to answer your questions now an operator.
Yes, we definitely ladies and gentlemen, if he had a question at this time. Please press Star then there number one on your touched on telephone.
My question has been answered Oh, you wish to move yourself, you beef brisket bounty.
Your first question comes from the lineup kills me from Craig Hallum. Sir Your line is help them.
Hi, guys.
I was wondering if you could walk us through the.
And take some of different businesses within the guys there.
And maybe comment on.
It looks like but lower gross margin that you're seeing on.
On.
Flat to slightly up revenue I, then you could offer would be great.
Yeah, I think there's no gross margins, it's probably coming from the lower along that we have as well as some of the product mix change that we had I mean remember we had a very strong quarter in Q2 old any phosphate business and the volume.
Dan was bigger than what we have this quarter. So boes a compound into keeping this lower gross margins this quarter and what was your slides as part of the question.
The other they've just environment, yes.
Like I did give any visibility at all or like do you see any keep market or.
Like product group in particular being able to recover faster than the other others.
Or is this one up on.
Certain right now.
As we guided for next quarter, our revenue is probably going to be flat.
So being business, we probably would expect.
Ah El show de gummy offset to be a little bit stronger in Q4 than Q3.
Wireless is probably going to be flat.
ER Dumanian this can be stronger in Q4 than Q3.
And Ah you need phosphorite, it's going to take on the stepped up in Q4 than Q3.
And Joe we don't really have a lot of visibility out into 220 20.
So.
However, I think you know, we do expect indium phosphide bounced back yeah, we do see.
There are some humans are issue in the pipeline and currently currently and we do see that went all the customer I was telling us they are having a product transition. So the long to bleed out did present inventory to build new products.
So when the new product starting rent, we expect and.
<unk> increased demand downside.
So I I think yeah.
I'll just quick follow up on that Ah comment.
Sounds like deal.
These were orders like most largely.
Like about to be place until the customers reverse course do you think the.
Eventual reversal will be pretty significant on a couple of big just.
Hi volume orders.
The.
Would get us back to.
Kind of a nice growth years, we're seeing before.
Well.
Obviously, we don't have that kind of visibility as I said I think.
We go through a one quarter or the time, but obviously watching constant contact with all customers as I said I think we're disappointed about the pull for much of this quarter and the the visibility we see next quarter. It doesn't look bad grade from what we can see now but omniab.
They had if you look at the reason why we are.
In terms so revenue.
Mostly I think it's because of.
Reasons other than.
For uses that market is seeing tech data center stupid to grow I mean, there's a lot of fiber optics.
The new business is that it's going to basically the lab, but at this particular moment they saw softness but.
But on the other how we're talking to finish this customers.
At the telling US a you know we expected next year to be volume of such but as you know that kind of prediction, we will never want to conquer until it stocking materialize and a one fighting example was data center I think.
Everybody was expecting second half to be much stronger in demand.
Again, the first half.
I I [noise] other ones [laughter], but also we see from all customers as well as form I noticed you, but he just didn't materialize and you cannot say hey, you know you give us the projections such that you didn't do that.
Okay. Thanks, that's helpful and then.
Oh, we're wondering if you could expand on the.
D. milestone of the up permit.
That you mentioned on the call.
Maybe just talk about the significance of.
Of this and.
And any other details that.
You can provide the be helpful.
Yes, Oh, yes, we were very pleased this too to report that we have finished the all the milestone Oh getting all the necessary permits for volume production I want to emphasize you know that when we.
Finishing construction of a project usually in China. They allow you to do pilot production and that's how we start to send samples to customers and see if they would we need to do any proven but when you do start to do volume production that they want to make all the checks all.
You know, whether youre waters going your ears clean I mean, just youre, making all the construction according to cold and those are more significant Ah you know.
Checks that the government requires and I I also want to emphasize China is no government is placing a law the emphasis environmental protection. So us we are starting to get a whole new factory build especially that we're dealing with scally Austin half would choose.
Pacified this toxic material poisonous. So we have to really very carefully crossed the t. and powder die and a you know where the please that boasts facility has now getting deployment to do I want to emphasize bought in production I think it's that's a very very important.
Ah, Yes, we mark.
And how such has just any conversation feedbacks go into their customers are they.
<unk> more open it to a no definitely.
As opposed to.
Oh, no back few months ago one.
Well, there's decisions about bucket in half there.
Inventory at for after wafers and two spots.
Yes, I ill, let me try to explain to you know the we obviously have a very diverse customer base. Some customers, we usually say they don't probably care, especially now small customers as some customers will look at your qualification wafers. They don't see any reason why.
The they were not there was thought to accept wafers from that Duke location. That's fine. However, there are certain customers, who are especially large volume customers.
They are more who.
Product revenue out of what you grow.
Chris So from the location that they walk away from to be finished processed in new location as well. Okay. So, but then our ability to do let's say a crystal growth Oh facility and new wait for wouldn't process I knew you facility.
We'll be accepted by law, because the bus, but major customers or some customers, especially the of all of these large.
Our we can't sit the milestone and goals and negotiating lease out with major customers as as we speak now we have.
Two major customers that were low working with and say you know look all the worries and Oh, we're ready for you to to ramp up the volume that no new locations. So you know what we hope to do that volume shift to new locations in the next.
Quarter or too.
Okay, Great that's all for me.
Thanks, Joe.
Thank you. Your next question comes from the line up how midcourse tend to be double U.S. financial your line is now open.
Hi, I'm, so just will not in the move on the new locations I mean, the prior calls you've been talking about you know some activity at those facilities is that still ongoing or was this permitting the you preventing you from ramping.
Well, so could you just provide a little bit more insights.
Uh huh.
Hi, Matt I I think as I explained and you know I I think.
So I think customers need actually is a slightly different.
You know song.
Customers.
In particular, they want they don't want to qualify twice. So they said well you know I can look at your product yeah, I can sort of.
Qualify it.
But what you ramp up in Bali might want to make sure you have the volume volume to supporting me and so when you talk about Marlin definitely permit is a pro requisite. So I think I want to differentiated side do you know what you said the.
Qualification samples.
Good requirement and the it's limited for phone to fully permitted facilities I think what's the difference is that we have all the permits at we now have utilized.
The time to build up the volume capability of both facilities. So we're ready to ramp and as I said we are.
We're working with two particular large customers to shoot yeah.
Demand from the new locations in the coming quarters. Although you know the process was to take time, because they don't want to shift it'd be seeing right away. It was still want to goes and stages, but I think wouldn't know much more confident that we can push set our goals and.
And the taught timeline to to be able to shift the production to the new facilities.
Okay, and then just given the current environment that you're reporting in the no visibility.
How sort of can argue that you haven't lost any customers or any orders.
Oh.
That's a very good question I I think you know, we can probably look at a different product categories.
We're very confident that we're not losing anything he need OSFI in fact, when we were talking to all or a shelter people as they even saying to me that we're gaining market share.
But any thoughts fight in particular is that several customers either one.
Well, a dexcoms was that they are having pilot transocean to new product they want to deplete the old wallet cold and ramp up in the future for that new products. So they are using inventory and one other was that they said they have inventory there Ah I blood they want to complete it.
Oh and some of them are telling us they are tree tension related issues and a you know I can also come in the other thing it's about polished market in China.
Usually the Polish pocket can't go very Crazy I mean, when the ball in comps, it's like Big wall.
But China market.
Economies sort of coming down so that's I I do know how much is affected by that wawa in ZT because you know.
Fiber optic devices are.
Great portion of it is made in China. So you know when did the the end markets start to creep vanda demand could be delayed but I think the good thing that we view that is that you know no matter. What if you go to make apology. If you go to make it. They this into five optics you needing you fall.
<unk>, yeah, only three of us in the world, making indium phosphide, we have the best part with the best quality and would check which all customers, they're not telling us that we were not give me. This all that are you will get.
We are going to somebody else, okay, so that see new boss fun.
I think your mainly in I.
I don't think we're losing waukesha either there.
Again.
The China market economy, getting solved is not.
Helping us we have yet to other European customers, who just called Us yesterday.
Actually told us well Gee, we have too much inventory, we don't want you to ship.
In November December .
Neil.
But they're not telling us they're buying for somebody else. Okay. That's for sure.
Oh Baby is.
Particularly I expect it impacted by the slowdown in China.
And ER.
But I think we're seeing it coming back we think that LD D market is coming back or actually is gonna be stronger in Q4 than Q3, Okay wireless I think the market. This has been doll.
But.
I don't think we're losing market share, but with another major major supplier in the <unk> wireless market would probably having.
15% to 20% Mark this year.
I can see we're losing market share, but I think is there a wholly demand environment, it's just visibilities poor.
Okay I do want to make one other comment is that I think we are impacted somewhat by the relocation.
Because there are some customers who.
He is taking extra long time and they want to make sure. All public is qualified so some of the customers are buying less from us because we have a good location issue and you know.
For instance, we also had we've been telling tell everybody well missing the opportunity of qualified into big so business because.
Our customers are telling us you're gonna moving the next year, we don't want to qualify you into low Oh location, we want to qualify unit newpage.
Now we're ready okay. So I think we can remove that.
Hindrance ahead of us too so I couldn't be if you say I, we're losing any marketshare all business I think the relocation definitely in the past has making a negative impact on us hopefully bye bye bye bye, finishing up the relocation we can remove that.
Yes.
Obstacle to.
Yeah, and this is Gary I would add was really yet.
In in our business model.
Because the nature of what we're producing and delivering his technical with specs, there's a and because the the.
The competitive sort it was pretty small.
We're pretty close to the customers. Our sales guys are very close to the customers and so he.
<unk>.
There's not a lot that's withheld there's not a lot of secrets or or you know.
Admitted lead their estimates sometimes are not very accurate as we experience.
Severely in Q3.
But but they're not like line to us are proceeding or so so you know if there's an issue.
We pretty much a confident we know about because we're close to the customer so well dearer I can we see all predicting just not they are lacking but the custom content and money yeah I as we always say they give us the order that they think always say hey, holding your shipping.
Even pick product.
If there.
We're not selling to the end application, we're selling through the food chain. So.
Their visibility as always is because we want us to be.
Okay. Thank you.
Yeah. Thanks Simon.
Next question please.
Your next question comes from the line up to break a theme fan financial your line is now open.
Oh, yes, good afternoon.
Could you first off to start off by addressing you know intermediate to longer term plans in Beijing, I mean, clearly three facilities as a drag on gross margins and could you kind of quantify what.
Amount of the gallium arsenide business.
In Q4 ships from Beijing versus doing thing.
Ah Okay. Let me try that I think it's good news Sicily, I, probably want to separate this into two parts. One is course crystal growth and this is the other is wafer processing and as you know that we take galley analysis and thesis I seem to poly crystal.
And then would gross crystal was it's become a single quarter. So now I'll quoting we process. It according to the customer spec and that's you know that cultural was mostly Christian grows facilities.
That we're ramping up very rapidly and I I'm as we speak most of the Christo now can come from possible okay.
Diminishing I think where processing about maybe.
Up to 20% of customer demand from finishing facilities.
And into next quarter or two was going to start to qualify major customer.
Requirements from Dishing facility. So I think by end of Q1 of next year.
It's hard for me to give it real number but I think.
Definitely expect the two major customer to complete their shift all taking the public funding new ditching facility in the next two quarters, Okay and those are very sick. They took a large customers I think also it brings benefit at all.
A lot of customers Wednesday, CEO very busy you have really haven't all activities and I will also encourage other customers to believe that.
You'll you, okay youre very steady.
We kicked trust the quality coming from the new facilities, so as far as cautious constant savings is concerned and I think I won't probably give it to Gary to comment but from my perspective, I think you know we definitely includes some extra costs I know in operation. Following says we have new.
Operators, we hired from the new facilities or when we trained and.
At the beginning we while the training in Beijing, So we actually provide them room and board as you know those are not cheap and so they did crowd out our Beijing facility to be trade, but that's necessary right. So now the new facilities opened up and it could go home and.
To be still be all operator, and so you're right away you read the extra costs, a room and board and also you know.
We can start to think about you know reorganization in all Beijing facility, we start to ramp down in the Beijing or Labor Force Us wells costs.
Gary.
Well.
[noise] on the operating expenses anymore, so to summarize it if it did get.
The pushed up a bit because of what he just described and if no more recently, it's trending back down and so we're pleased to see that on the overall manufacturing process.
Yup.
We haven't taken any of the footage in Beijing out of service, yet and when we do that then you start depreciating it but that's not going to that's not going to begin to happen until 2020.
And then gradually over the course of the year will.
And then maybe several years, but we will take various portions of the for the facility out of service.
And you know we're already in the process of sort of obviously beautifying. It when I go over there I was walk both sides of the street and checks and check on how we're doing.
It is as we said publicly before eventually we want to monetize all or some of the Beijing side, we don't have any anything in the works right now it's premature because we're not ready.
And then we will ultimately we may wish to just retain even the vacant side until we can bundle it with the occupied side.
And have it.
In India and in the theory that one big lot would be more valuable than selling it up into two installments. So so we will have extra costs.
Because of this we are looking closely one of the things that that happened because of the relocation as we had to make decisions about whats equipment to move and not move in the result of that is accordance to the rules of genomics of accounting principles periodically you should review your useful life estimates and.
We've always been very concerned on that.
So we would depreciate stuff for over five years, but indeed, some of its less 15 or 20 or so so we're looking at ways to revise the useful life estimates, which will have a mathematical benefit as well.
I think we can be more specific on this going forward.
We're right in the customer sort of having hard numbers and drilling down so.
Fair enough. Thank you and then secondly.
Do you have anything you anything you didn't comment during the call at all about six or opportunities.
I mean, there is still a lot of talk in the marketplace about.
Various new Vixel opportunities out there is there anything you can add there and then my thirds where market related question is with regards to this recently announced.
10 billion dollar when the JV program going surprisingly to is your instead of either U.S. does that have any impact on you could talk about.
Last one was the Microsoft as or.
New Cloud award from the government ice and whether that will that give us any opportunities. So yeah. I would tend to think it's a very much we moved from our E media customers. I mean, I think you know we are this material supplier I mean, you've got to look at.
Who supply into the device, who is doing the IP and so where did the material provider. So as long as stays lot of data center activity build eventually they all need indium phosphide, especially when you go from coaxial cable more towards fiber optics.
Then that's.
Good demand for indium phosphide material.
We are probably the losses shareholder of the market share of union qualify substrates. So we should benefit from it, but specifically, which casino wings that business.
I think it's very much.
We move from us that we don't have much visibility so what was your.
The other question Middle question. Your second question drew.
Vixel any.
Never EXL Oh, there has been.
I guess, maybe we intentionally trying to avoid that question I mean, big So honestly is a disappointment to us to me.
I think you know we believed that we have good public.
The U.P.D. requirement that we can feel very easily but for one reason all the other a you know for one or was that we hear customers are telling us we don't want to look at your product because she wouldn't in that in the process moving to new locations. These product you definitely needs qualification why we want to qualify you twice.
Okay, but we are.
Yes were busy engaging customers and we we want to what now we have all facility build.
We would try to be you know knocking on doors again, and say, Hey, you know come and visit us and qualify or new facility product and so so I I think you noted our review all were I mean, that's if I next year, that's by wall My target goals that we want to getting to the victory Mark I think.
The other thing I want to comment is I think the actual actually was sort of.
Slow to start I mean, he didn't grow to the X, but expected volume and you know in the beginning we call Hey, you know this for this business Oh face I'd is going to ramp up and is going to go to old facing so the demand is going to increase dramatically.
So you know when the ball and goes up very rapidly maybe it'd be easier for us to get even included into the market participation.
But that didnt happen, but I think if you read overall you know the automotive applications and we are engaging with number of Oh different customers. So you know I think the answer is in the short term when we don't have anything good to report.
We're not getting into a lot of fixture business.
But I think the good news is now we moved the loss obstacle with Alex and New facility. We can start to qualify funding facilities, Eric Yeah, just one other comment.
Look too.
As we've said before even though it's a slow start we think vixel is gonna be.
The game changer for gallium arsenide and some.
Inevitably will will spill over not only to a Ics t., but also to freiberger. So right now sumitomo sort of carrying all in all the weight second comment is a less it passed me a note that she reminded me that Intel is a supplier to a zohr. It's a good it's a good customer for them. So so.
Well no one has.
Called us up and informed us that there's a some upside because of this announcement.
If indeed Intel remains a good supplier to a zoo or then that's that's going to be positive race t. So yeah. It's Intel a good supplier day W. <expletive> .
I don't know.
Okay. Thank you for that and I'm not sure so.
Okay. Thanks drew okay. Thank you very much.
Thank you I'm showing no further questions at this time I would like to take back deducted wife young for any Friday comment.
Okay. Thank you for participating L. conference call today I do in Q4, we will be participating attendance and new credit Helen Alpha select coffers in New York on November 12, we look forward to see many of your there as always please feel free to contact me.
Gary Fischer, our Leslie Green directly.
He would like to meet with US we look forward to speak English you in the near future.
Ladies and gentlemen. This concludes today's conference call. Thank you for park dissipating and have a wonderful day you may all disconnect.