ASUSTeK Computer Inc. (ASUUY) Q2 2023 Earnings Call Transcript

ASUSTeK Computer Inc. (OTCPK:ASUUY) Q2 2023 Earnings Conference Call August 11, 2023 4:00 AM ET

Company Participants

Nick Wu - Chief Financial Officer

S.Y. Hsu - Co-Chief Executive Officer

Samson Hu - Co-Chief Executive Officer

Operator

Hello. Welcome to ASUS' Online Investor Conference for the Second Quarter of 2023.

Today's conference will be hosted by Mr. S.Y. Hsu, Samson Hu, and our CFO, Nick Wu. First, our CFO, Nick Wu, will talk about the financial results for the quarter. And then, our two co-CEOs will talk about our strategy and outlook. This will be followed by a Q&A session. [Operator Instruction]

Now let's welcome Mr. Nick Wu, to report on our financial results.

Nick Wu

Thank you. Please look to Slide 5. This is our brand income statement for the second quarter of 2023. As you can see, our net revenue was NT$107 billion for the quarter, a quarter-over-quarter growth of 5% and a year-over-year decline of 7%. We earned a profit of NT$1.2 billion, which is a return to profit after two quarters of losses. The net profit is NT$2.59 billion and the EPS is [NT$3.5] (ph) per share.

As you can see at the bottom of the slide, we are disclosing two unique items, which is sales allowances and inventory allowances. Due to some adjustments in sales channels and inventory, we had an increase in sales allowance from minus 16% in the first quarter to minus 17.7% in the second quarter. But due to successful inventory management, the inventory allowance returned to positive to positive 2.6%, a growth of 1.7 percentage points compared to the first quarter. So these two items, sales allowance and inventory allowance, approximately canceled each other out in terms of quarter-over-quarter changes.

In fact, our gross margin for this quarter grew from 8.1% to 12.5%, and our operating margin improved from minus 3.6% to positive 1.1%, showing that our main product lineups and prices and sales momentum have all improved, which we are very happy to see, and this is all due to the hard work of our teams. It has beaten our expectations.

Now, please look to the next slide, Slide number 6. This slide discloses our non-operating items. In the second quarter, we had investment income of NT$571 million, and our investment income was NT$351 million. The total non-operating income was NT$1.2 billion.

Looking to the next slide, Slide number 7, this is our brand balance sheet. So you can see that in the second quarter of 2023, our inventory value was about NT$117.5 billion, approximately flat from the last quarter. This is due to our expectation of further sales growth in the third quarter, so -- and the beginning of a new product cycle in the next half of the year for PC and components. So, we are preparing the inventory. In terms of days of inventory, the number of days peaked last year in the second quarter at 180 days, and now it is at 103 days. So, this reflects a return to normal for our inventory. Inventory is at normal levels.

Now, please look at the next slide, Slide number 10, which is our product mix in terms of revenue. So, you can see that PCs accounted for 64%, components accounted for 34% and phones, due to the launch of new products, accounted for 2%.

The next slide is our region mix. For the second quarter, you can see that Europe accounts for 30%, Asia 48%, and the Americas 22%. Notably, in the second quarter of last year, Europe was experiencing geopolitical conflict. So the base was very low. This year, European demand has returned to normal. And the revenues are back to the normal share.

Looking to the next slide, which is our outlook for the third quarter. We are forecasting 20% quarter-over-quarter growth for PCs and 10% quarter-over-quarter growth for components.

So overall, as I said, ASUS has completed our operating transition, and we are now returning to normal profits in our operations. So, we will -- we anticipate entering a growth stage in the coming quarters. More specifically, for the second half of this year, we are forecasting the first stage of growth as market demand returns and new products and platforms launch in the next year. In addition, ASUS' market-leading introduction of the ROG Ally handheld will drive enough growth momentum to achieve stable growth for the next half of the year.

Looking forward to 2024, we are looking at even faster and more accelerated growth, driven by factors, including our organizational restructuring strategy and our investment in newer, faster-growing strategic sectors. We expect that these factors will drive further growth in 2024.

So, to sum up, in the second half of this year, we will see stable growth. But in 2024, we will see more significant faster growth.

This will conclude my presentation. Next, let me introduce our co-CEOs to discuss our operating strategies and outlook. Thank you.

S.Y. Hsu

Good afternoon to our friends from the investors and the media. Thank you for participating in today's conference. I am co-CEO S.Y. Hsu, and I will talk to you next.

In 2022, the end of the pandemic brought a slump in the market. But in the first quarter of 2023, ASUS has completed our inventory, and we have returned to profit in the second quarter. We are seeing a return of market demand, and we are seeing gradual improvement in revenues and profits in the first and second quarters. However, the speed has been slightly slower than we've expected.

ASUS' innovation and execution will continue to drive revenue and profit growth for the second half. And on this basis, we improved -- we expect an improvement in margins and we are seeing positive trends, and we will continue to work hard to achieve this.

This June, ASUS began a reorganization of our PC-related business units as has been the media. So, now I will give a more in-depth exploration of this topic. This reorganization is based on our One PC strategy. Our two major focus is on consumer and commercial sectors. So, our original gaming and consumer business units will be integrated into one consumer-facing business units, which will be led by Mr. Chang Yang-kuang.

We have decided to integrate these two units, because from a value stream perspective, these two units provide several -- similar products and share supply chains and retail channels. So, we hope that by integrating these two units, we will be able to maximize coordination internally for R&D as well as with our upstream suppliers and strategic partners. This will allow us to better respond to consumer demand and maximize our synergy, our value stream and strength in ASUS' leadership position in the PC market.

We expect the new business unit to flexibly respond to market and user needs and use design thinking to respond to the opportunities and challenges of the future. For example, in 2024, it is expected that AI-power PCs or AI-aware PCs will bring new experiences in productivity and entertainment.

In terms of commercial PCs, our mobile BU head Mr. Chang Kai-shun will add this to his portfolio of responsibilities. And he will also bring in outstanding managers to head up this BU. His team has done very well in the mobile division in terms of design thinking and innovation. With his addition to this BU, we hope that he will strengthen our product and development and improve operations so that the unit is more agile, more flexible, more teamwork focused and creates maximum synergy.

This restructuring is part of our continuous transition and evolution. We hope that it will help us accomplish our One PC strategic goal so that we can become a leading PC brand in both brand strength and market share.

AI has been a hot topic recently. And in this sector, ASUS is one of the few companies that can provide comprehensive solutions and become a total solution provider. As a provider of these solutions, our R&D strength and industry experience allows us to cover everything from AI infrastructure, cloud computing and on the edge IT OP software integration capabilities. The media reported a few days ago that the leading AI server provider NVIDIA has introduced the L40S GPU OVX server. ASUS is one of the first suppliers for this product, and this proves the trust that our partners have in us.

In terms of end-user computing devices, as I said, AI-powered PCs will bring new user experiences. ASUS is working with industry partners and we are confident in becoming a leading brand for AI PCs. The AI-driven industry revolution will bring good growth opportunities for ASUS. Despite uncertainties in the market, we will work to seize the opportunity and step up our strategies in terms of retail channels, products and the industry as a whole.

The goal of our organizational restructuring is to achieve our growth targets. Looking at our 2022 revenues, gaming accounted for 45%, consumer products accounted for another 45%, and enterprise products accounted for 10%. So looking at these numbers and looking to multiple drivers of growth, we are focusing on growing our commercial PC and server sectors. We are looking to achieve significant over the five years. For commercial PCs, we are looking to achieve a CAGR of about 50% -- 15% rather, so that we can achieve growth 2 time growth in 2027, and for servers, we are looking for a CAGR of 40% and a growth of 5 times by 2027.

In terms of gaming, we are also looking for continued growth. This year, we have reached number one in market share for gaming, but we will continue to innovate and reach out to new customer communities so that we can expand to new blue ocean markets. The ROG Ally is a good example. We are seeing that many of our peers are introducing similar products, which proves that we have a very precise handle on the market. We will continue to use our product innovation, our brand position and our user value to achieve long-term growth.

Now let me introduce my co-CEO, Mr. Samson Hu. Thank you.

Samson Hu

Thank you, S.Y. Good afternoon to our friends from the investors and the media. I am Samson Hu. And I will talk about our various business groups and our outlook.

Looking at our System Business group, in the second quarter, we are still facing a poor consumer confidence and cautious IT spending from enterprises. So, the demand from end users remains at a low level. The System Business group saw a decline of 5% to 10% year-over-year this quarter. However, in gaming PCs, we have continued to strengthen our leadership position in the market. Our market share has grown for three consecutive years in gaming. And in the first half of this year, we have reached number one in market share for gaming PCs at over 25%.

We are also continuing to improve our product lineup to provide more high -- or rather to increase the share of high added value products. The share of high added value products is now over 60%, which far exceeds our peers on the market. So, this will allow our business in these sectors to become healthier.

We will also continue to leverage our in-house advantage in R&D to cooperate with our key strategic partners and expand our strategic planning, for example, into AI PCs, as S.Y. mentioned. This will change and improve the experience for users, both in terms of productivity and entertainment. And we believe that this is a huge growth opportunity for the industry and for ASUS.

Looking to the next slide, it's on the Open Platform Business group. The second quarter is a traditional low season for this business group. And we are now facing a transition phase for platforms. So this business group saw a 5% decline year-over-year. But we can see that shipments for motherboards actually grew by 10% year-over-year. But for graphics cards, the shipments declined by 12%. However, a silver lining is that ASP grew by 5%. However, in terms of components, ASUS is still the market leader.

In addition to our gaming product lines in terms of components, we are also expanding into the creator segment. So, we have introduced the Pro Art series of motherboards and graphics cards. All of this will drive further growth in the future.

The market response to these products both in terms of graphics cards and communications have been very well reviewed. And as S.Y. said, we have been aggressively expanding into server products. In the second quarter, revenue in the server segment grew by 40% year-over-year, including AI servers. And as we said, we are looking for growth of 500% in the next five years.

In terms of our AIoT Business group, revenue grew by 60% year-over-year in the second quarter. We are continuing to take strategic measures to accelerate the growth of this business. First of all, we have used 5G plus AIoT to improve smart manufacturing. We are working towards customer-centric, data-centric and demand-driven AI solutions to drive a transition in manufacturing. This has been used in our own plants, for example, through digital twinning and through the establishment of factory war rooms. This year, we also held our first partner alliance conference in Europe, connecting over 60 partners, including system integrators and other partners in various domains to build deeper relations in AIoT and to establish a strategic alliance in the market so that we can expand ASUS' brand influence and future opportunities in the IoT field.

Please look at the next slide. Our gaming product lineup extends across several business units, and it has been a major strategic focus for ASUS. For the previous quarter, the gaming product line continues to account for over 50% of our revenues. The ROG brand position our total solutions and our community engagement continues to be our golden triangle as we lead the industry. The new products, including RTX 40 Series graphics cards and gaming laptops continue to perform excellently in the second quarter. They continue to be market share leaders in this quarter.

In terms of innovation, as you all know, we have launched our first gaming handheld, the ROG Ally. The market response has been tremendous. Since the preorder period, the product officially launched in June, which touched off another sales craze in one of our major retail channels in the United States, it reached number one in terms of PC gaming products in June. Our gaming product lineup will continue to explore new communities to broaden our influence in the sector.

In terms of sustainability in our daily operations, sustainability and ESG remains a major topic and we also believe that it brings new business opportunities. Over the years, ASUS has used data-driven metrics and technology management to achieve sustainability through our core competencies. As we've said, we have four major focuses on climate action, circular economy, responsible manufacturing and value creation. And this is a major part of daily work for all of our business groups. For example, introducing friendlier -- more environmentally friendly materials, improving energy efficiency, establishing recycling systems around the world, et cetera, all of these efforts have now borne fruit and have been recognized.

If you look at the next slide, you can see that ASUS has been recognized through major ratings and awards. For example, this year at COMPUTEX, ASUS received nine major Experts Choice Awards. The ExpertBook won a special award for sustainability. And for two consecutive years, ASUS has been deemed by the Financial Times and Statista as one of the Asia Pacific climate leaders. And also to ensure that we can communicate our performance in sustainability, ASUS has published very detailed sustainability reports this year, including our TCFD, the Climate-related Financial Disclosures report and the Environmental Profit and Loss report. These sustainability reports have received recognition from the Asia Sustainability Reporting Awards for three consecutive years as well.

So, this concludes my presentation on our performance and outlook.

Question-and-Answer Session

Operator

Thank you to our co-CEOs and CFO. Now, we will begin our Q&A session. [Operator Instruction] So, we're seeing the first question is from DIGITIMES and KGI. The question is, India has now placed new restrictions on PC imports. How is ASUS responding to these restrictions? And are there any plans for local manufacturing or collaboration with local manufacturers?

Samson Hu

Okay. I'm Samson Hu. Let me answer this question. India is a very important market for ASUS. And in fact, we are now the number one in terms of market share for gaming. And for overall consumer laptops, we are number two in market share. So, it's a very important market. In India, ASUS has always worked with local OEMs to manufacture laptops and desktops. And we are complying and participating in local PLI programs. And we remain in a very close communication with local governments in India. So, regardless of whether we're talking about existing PLI policies or the new import license rules or any other factors that will require us to adjust local manufacturing share, we can quickly respond. So these new restrictions will not affect our business in India. This is a quick update on this issue. Thank you.

Operator

Okay. Thank you. Okay. So, let us look at the next question. It's asked by several participants, including JPMorgan and Morgan Stanley. What is the outlook and plans for AI servers for ASUS? And currently, AI server chips are facing a shortage. How will ASUS respond to this? And what are the shipping targets for ASUS? Looking at the current AI server demand and prices, does ASUS expect that perhaps the 500% growth target might even be exceeded?

S.Y. Hsu

Okay. Let me answer this. ASUS has been in the PC industry for a very long time. So we have very good relationships with all of our upstream suppliers, including NVIDIA, which is facing shortage issues. As well as AMD, which is going to introduce new chips for AI servers later this year. And of course, Intel also has a solution as well. So all of these companies are long-time partners of ASUS. So, ASUS is now in a good position to obtain these chips. And of course, because ASUS has an excellent reputation in terms of our internal R&D engineering capabilities, we are sure that we will be able to innovate and differentiate our products.

As for the speed of growth in AI servers, as I said, we have set an internal goal of over 40% in terms of CAGR. Of course, AI server prices are very high right now, but that's because it only has a single supplier. We believe that as more suppliers enter the market and there is more supply, prices will line. So, the high prices currently are not what our planning is based on. That's why we set the goal of 500% over the next five years.

Operator

Okay. The next question is from [indiscernible] Investment Fund. So what is the difference in AI-powered PCs from regular PCs? Are there any changes in terms of hardware design?

S.Y. Hsu

Okay. This is an excellent question. Let me give a brief answer. So as you all might know, AI really works in -- there are two parts in how AI works. The first is training. And then after the AI is trained, you can now do inference. So, when we talk about AI PCs, usually, the focus is on inference. Specifically, improving the PC's capabilities for inference so that this can be done on the client side. This will improve the experiences for the users in both productivity and entertainment.

So, in terms of component and specification changes, the capabilities for inference must be built into the PC. So this means that CPU or silicon vendors will need to provide a dedicated computing unit that is dedicated to inference. So this new unit, some people call it the IPU, the inference processing unit, some call it the VPU, the vector processing unit, because essentially AI inference is a form of vector computing.

So, in terms of architecture, the main difference will be a dedicated unit in the CPU. And in terms of the software the user experience software-wise, future OSs and third-party apps will also see some changes so that to better use the improved inference capabilities in PCs. This will improve the overall productivity and entertainment experience.

Operator

Okay. The next question is from EE Times. ASIS mentioned that the orders for new AI server products are full until 2024. So, can you comment on what the clients are and what regions? And when will the NVIDIA shortages resolve?

S.Y. Hsu

Okay. Let me answer this question. In an investor conference it's probably not appropriate to comment on customers. So unfortunately, I cannot answer in specifics. However, you can see that a lot of this has been reported on the media already. So you can refer back to these reports.

So as for the NVIDIA GPU shortages, a lot of this is because of the limits on TSMC's advanced packaging capacity. And I'm sure that TSMC is working to solve this issue. But this is beyond ASUS' control, so we can't comment on this either. However, we do know that AI servers is a very hot product segment right now. So, any part of the supply chain that can get on this train, we'll see higher profits. So I'm sure that everybody will be working very hard to resolve these issues.

Operator

Okay. The next question is from Morgan Stanley. So it seems that the ROG Ally is seeing excellent sales and demand. So, will ASUS adjust the outlook for shipments and margins upwards? Is there -- are there any further updates?

S.Y. Hsu

Okay. Thank you for your interest, the ROG Ally. We will continue to maintain the outlook that we disclosed last time, specifically that the ROG Ally will account for NT$5 billion to NT$10 billion in revenue per quarter. This remains unchanged. So the future the revenue will fluctuate based on seasonal factors, but it will continue to fall between NT$5 billion to NT$10 billion. As for margins, we expect -- continue to expect that the ROG Ally's margin will fall within the range of our ROG gaming laptops.

Operator

The next question is from The Economic Daily. In addition to India, are there any plans for ASUS for manufacturing outside of China? Will ASUS invest directly in any overseas manufacturing plants?

S.Y. Hsu

Okay. Let me answer this. So, in terms of non-China manufacturing, during the U.S.-China trade war with the erection of new tariff barriers, all companies, including ASUS have been required to do to make some response to these changes. So, ASUS and partners have already begun our efforts to build up our manufacturing capacity outside of China. This is established practice for us already.

More specifically, in terms of motherboards and other component products, a lot of them are already manufactured in Vietnam. And as for PCs, we have manufacturing in India, as I mentioned. So a certain share of our PC products are already manufactured in India, and we will continue to evaluate based on the political, economic and geopolitical environment to continue to share of manufacturing in and out of Mainland China.

Operator

Okay. The next question is from UBS. So, ASUS' gross margin has improved in this quarter, but we also see that the sales allowance remains at a relatively high level, which is 17% of revenue. So, when will the sales allowance return to a more normal level?

Nick Wu

Let me answer this. It's true that in terms of -- due to the needs of logistics and sales channels, we will continue to face the need for sales channels to adjust their inventory. So, in the short term, we will need to make allowances for this. But we do believe that the sales allowance rate has peaked in the second quarter and that it will gradually normalize over the next two quarters. In the second half of this year with the traditional high season, with our new platforms and new products and other sources of sales momentum, such as the ROG Ally, the demand will grow and the revenue and profit will see stable growth over the next half of the year.

Operator

Okay. The next question is also from UBS, which is, it seems that ASUS has a better outlook for the third quarter compared to other companies. So, what is expected to drive the sales momentum? Are there any regions or specific products? And also, is there a clear visibility for fourth quarter shipments?

S.Y. Hsu

Let me answer this. ASUS' growth momentum will continue to come mostly from gaming and consumer products, because commercial PCs continue to account for a relatively low share of our shipments. So, the growth momentum is still in gaming and consumers. This is for a few reasons. First of all, in our regionals, inventory has been significantly reduced. As our CFO said, our sales channel inventory reduction has been proceeding as we planned. And also the third quarter has always been a traditional high season. There are seasonal factors for higher demand. So, we are foreseeing higher shipments compared to the second quarter. And of course, ASUS' internal goal has always been to outperform the market average. So, our business units will provide more competitive products for the market, which will help us achieve better shipment growth than our competitors.

As for our fourth quarter shipments, visibility remains low at the moment. We will have more specific update in the next conference.

Operator

Okay. The next question is from [Ching Yi] (ph) Investment. Market research firms are forecasting a wave of PC upgrades in 2024 and 2025, and this will result in higher PC shipments. How does ASUS see this issue?

Nick Wu

Okay, let me answer this. I think our outlook for 2024, we can approach this from two perspectives. From the macroeconomic environment, we believe that in 2024, the economic climate will improve compared to these two years. So this is obviously a positive factor. Another approach we can take is from the PC industry. So, trends, including, for example, the AI PCs, we believe that this market segment will mature by the third quarter next year. So this will become a factor for the market by then. And also, after the pandemic-driven demand in 2020 and 2021, in 2024, these products will enter a replacement cycle. And this is also a positive driving factor.

So both in terms of the macroeconomic environment and the PC industry are seeing good growth factors, so we do believe that 2024 will quite possibly grow even further compared to 2023. However, to put a number on this growth is still quite difficult at this point in time. Currently, we are seeing growth of high-single digits in terms of percentage. And whether we can achieve double-digit growth, I think that remains to be seen. Thank you.

Operator

Okay. The next question is from Morgan Stanley. So, you mentioned that in your organizational restructuring, the head of your mobile business group will also lead your commercial PC business group. So, how will this change your mobile business strategy?

S.Y. Hsu

So, in my presentation, I mentioned that the new commercial PC business unit will be headed by the mobile business unit head, but this will be in addition to his portfolio of responsibility. So, he will continue to be in-charge of the mobile unit. So in terms of mobile, we have two major product lines, ROG and Zenfone phone, and we will continue to provide these two product lines. But internally, we will improve the leveraging between these two product lines, so that both lines can be supported with more streamlined R&D resources. So that these resources can also be used to support our commercial PC unit. So, from the end user perspective, there will be no change in our phone lineup. Thank you.

Operator

The next question is from several investors, including KGIB and CTBC. So, the question is, what is the current share of revenue for the server product segment? And what are the prospects of future growth? And what is the range of the margin for AI servers? And what contribution it will make to profits?

Nick Wu

So yes, it seems that there's a lot of interest in our server business. And obviously, we are very ambitious in this domain. As we've repeated several times, we are aiming for 500% growth in five years. Currently, servers account for a relatively low share of our revenues. It's in the low single digits in terms of percentage. And you -- there's also a question on the margins of the server products, and this is very important to us. Servers is a very -- is a strategic business for us, and we hope that in the future, it will bring both revenue and profit growth for ASUS. So, ASUS will use our core competence in R&D, and we will also choose our customers and channels wisely for our server products, so that we can build a healthy profit margin in this sector.

Operator

The next question is from KGI. In the long term, will ASUS maintain its goal of 10% growth compared to -- 10% higher growth compared to the market as a whole?

S.Y. Hsu

Let me answer this. Over the past few years, we've emphasized that our ambition is to beat market growth by 10 percentage points or more. And this ambition will continue for the next few years. So, what supports this ambition is our abilities -- the expectations regarding our capabilities. For example, as we've emphasized many times, we have the biggest in-house R&D team in the industry. So, in terms of innovation, we can definitely support this ambition.

As for our individual product lines, we definitely see the gaming product line, supporting our growth momentum in the future. And the consumer laptops with our OLED product line and the Creator product line, they're all doing very well. So that's a very solid foundation as well.

So, as for the commercial segment, in the past few years, it's been a major focus for us. We've invested a lot on this. So, we are very optimistic in terms of its contribution to ASUS' growth.

So overall, whether we're talking about R&D, channels, our overall product lines, we are very confident that our ambitious goals can be continued to be reached in the future.

Operator

Okay. Thank you. It seems that all of the questions that have been asked have been answered. [Operator Instruction] Okay. We have one question from Morgan Stanley. So, ASUS is going to invest in new businesses, including commercial PCs, servers, et cetera. So, is R&D expenditure going to increase? And so can we expect a higher R&D operating expenses in the future?

S.Y. Hsu

Let me answer this. I think to answer this question, we need to once again discuss how we set goals internally and how we control expenditures. So, regardless of whether we're talking about the strategic business units or the business units that are already in stable operations, we use the same management practices, which is by the end of each year, every business unit must set goals for the coming year, including for revenue and profit. And to calculate the profit, they need to calculate their expenditures as well. So, their need for staffing will depend on their operational goals. And this is how we can control the expenditures for each business unit.

Of course, when a new business unit is just starting up, when it's in the growth stage or the investment stage, we can -- we may be able to allow for some mid- or long-term investments. But eventually, there must be business results to justify the increased expenses and staffing to the company. So, under this system, we are able to control the expenditures of each unit. And we believe that there would never be a business unit that loses control over its R&D expenditures. Thank you.

Operator

Thank you. So it seems that we've answered most of the questions that have been asked through the web interface. And you are also welcome to contact our IR team for more in-depth discussion or for topics that have not already been addressed. Now let's invite our co-CEOs for some closing remarks.

S.Y. Hsu

Okay. First of all, I'm very happy that all of you took the time to participate in today's conference. This year, due to the uncertainty in the economic outlook and the post-pandemic slump, it's been a challenge for the PC industry, but we're also seeing opportunities in AI-aware PCs and AI servers. So, ASUS has responded to this through our organizational restructuring and long-term investments so that we can seize these opportunities. And we hope that you will continue to provide ASUS with support and encouragement.

Samson Hu

Okay. I'm Samson Hu. Thank you to all of you for your long-standing support and advice for ASUS. As S.Y. said, the macroeconomic climate and the PC industry are in a time of transition, at least for this year. But we do believe that in addition to responding to these short-term challenges, I do think we've already passed the bottom of the valley. We will continue to improve our competitiveness and make the investments necessary to seize future opportunities. So, as we said, we have reorganized our core business, our PC business, and we have accelerated our strategic businesses in servers and AIoT. And I believe that all of this will create new momentum for ASUS' operations in the future. Thank you.

Operator

Thank you. This concludes our investors conference for today. Have a good weekend.