Exhibit 99.3
DIODES 4Q 2013 EARNINGS CALL
QUESTION AND ANSWER
Operator
(OPERATOR INSTRUCTIONS)
ITLOOKSLIKEOURFIRSTPHONEQUESTIONWILLCOMEFROM STEVE SMIGIEWITH RAYMOND JAMES.
Steve Smigie—Raymond James & Associates—Analyst
DR. LU, IJUSTWANTTOSAYCONGRATULATIONSONAPRETTYSOLIDYEARTHERE,ANDSOMENICEMARGINPERFORMANCEASWESTARTEDTHISYEAR. IWASHOPINGYOUCOULDTALKABOUTGROWTHFOLLOWINGUPONTHISPASTYEAR. GIVENTHENEWPRODUCTSTHATYOU’VEBEENRELEASINGANDDESIGNWINS,WOULDITBEFAIRTOSAYTHATYOUWOULDANTICIPATE 2014TOBEANOTHERYEARWHEREYOUCOULDLIKELYOUTGROWTHEMARKET?
Keh-Shew Lu—Diodes, Inc.—President and CEO
STEVE,FIRST,THANKYOUFORYOURCOMMENT. SECOND,THATISOURGOAL.
WEALWAYSSAIDTHATOURGOALTOGROWTH 2XFASTEROFOURCOMPETITORS. SOTHATISOURGOALAND ITHINKWEAREONTHETRACKTODOINGTHAT. ANYWAY,YES.
Steve Smigie—Raymond James & Associates—Analyst
GREAT. THANKS. ASWETHINKABOUTBRINGINGINORFILLINGUPTHECAPACITYAT BCDPLUSUTILIZATION,HOWSHOULDWETHINKABOUTGROSSMARGINTHROUGHOUTTHEYEAR? IKNOWYOUONLYGUIDEONEQUARTER,BUTITWOULDBEFAIRTOARGUETHATIT’SLIKELYTHAT,GIVENTHOSEFACTORS,WESHOULDSEEGENERALLYIMPROVINGGROSSMARGINSTHROUGHOUTTHEYEAR?
Keh-Shew Lu—Diodes, Inc.—President and CEO
WELL,YES. ITISDEFINITELYYES. ANDITISEXPECTEDWHENWEBUY BCD,WEKNOWTHEYJUSTSTARTTORAMPTHEIRFAB 2IN FEBRUARYLASTYEAR. SOWHENYOUHAVEANEWFAB,STARTFROM ZEROOUTPUTANDYOURAMPITUP,YOUALWAYSGOINGTOHAVEAGROSSMARGIN — GPMPERCENTPROBLEM.
ANDWHATWEDOORWHATTHEYHAVEBEENDOINGISTRYTOMOVESOMEOFTHEFAB 1LOADINTOTHEFAB 2AND DIODESCANLOADINFAB 1. ANDTHISPROCESSHASBEENVERYSMOOTHLY EXECUTED,ANDEVENWESAY,INOURSPEECH,WEACTUALLYNEGATIVEIMPACTBYTHE BCD,ANDTHEMAJORITYISREALLYCOMINGFROMTHEFABLOADING.
BUTTHESESITUATIONSCANBEIMPROVEDQUITEABIT,ANDFAB 2CONTINUESRAMPINGUP,ANDWHILENOWWEARENOTREALLYABLETOTRANSFEROURLOADINTOFAB 1YET,DUETOTHECUSTOMERQUALIFICATION. BUT IEXPECTTHISYEARWEWILLSTARTTOMOVETHAT,ANDATTHESAMETIME,THECROSS-SELLINGBY DIODESTEAMTOSELL BCDPRODUCTGOINGPRETTYSMOOTHLY,ANDIFWE —WHENWECONTINUERAMPANDGAINTHEMARKETSHAREWITH BCDPRODUCT,THENOBVIOUSLYITWILLBEHELPTHELOADINFAB 1.
Steve Smigie—Raymond James & Associates—Analyst
GREAT. THANKYOU. ANDTHENJUSTACOUPLEENDMARKETORPRODUCTQUESTIONS. ONTHEENDMARKETSIDE,AUTOISAFEWPERCENTOFREVENUENOW,BUTITSOUNDSLIKETHERE’SSOMENICEWINS.
ANYCHANCEAUTOCOULDGETTOSOMETHING, 5%ORMOREOFREVENUETHISYEAR? ANDTHENONTHELOGICSIDEITSOUNDSLIKESOMEGOODSUCCESSTHERE. WHENDOESLOGICBECOME 5%OFREVENUEASWELL?
Mark King—Diodes, Inc.—SVP, Sales and Marketing
I’LLTAKETHATONE. ONTHEAUTOMOTIVESIDE, IDON’TTHINKWEAREGOINGTOBEABLETOGETTO 5%THISYEAR.
BUTWEHAVEAVERYDETAILEDANDLONG-TERMPLANTOGROWOURAUTOMOTIVEBUSINESSOVERTHENEXTTWOTOFOURYEARS,SIGNIFICANTLY. SOWEPUTATEAMTOGETHERTHATFOCUSESONAUTOMOTIVEANDDRIVETHATBUSINESSAREAINVERYSPECIFICPRODUCTAREAS,SOWEHAVEALOTOFEMPHASISINTHATAREA. SOWETHINKTHATWILLBEAGROWTHDRIVERGOINGFORWARD.
REGARDINGLOGIC, ITHINKWECONTINUETOMAKEPROGRESS. WECONTINUETODESIGNPRODUCTS. WEHAVESOMEOFTHENEWESTANDSTATE-OF-THE-ARTPRODUCTSOUTTHERE.
ITHINKIT’SJUSTAMATTEROFTIME. IT’SAVERYMATUREMARKET,SOMATUREMARKETSTAKELONGERTOMAKEABIGIMPACTIN.
BUT IWOULDSAYTHATWILLBEAMAJORPLAYERINTHELOGICMARKETOVERTHENEXTFEWYEARS. ITHINKTHEPROGRESSWILLCONTINUETOADDVALUEANDIMPACTOURREVENUEOVERTIME.
Steve Smigie—Raymond James & Associates—Analyst
GREAT. THANKYOU.
Operator
OURNEXTQUESTIONWILLCOMEFROM GARY MOBLEYWITH BENCHMARK.
Gary Mobley—The Benchmark Company—Analyst
CONGRATSONSOMEGOOD OPEXMANAGEMENTINTHEFOURTHQUARTER. I’MASSUMINGTHATISWHATHELPEDDRIVEMUCHOFTHE EPSUPSIDE.
IKNOWYOUWEREFORECASTING OPEXTOBEABOUT 22.7%OFREVENUE,WITHTHEMIDPOINTOFREVENUEGUIDEHIGHERTHANWHATYOUHIT. SOITLOOKSLIKEYOUMIGHTHAVEOPERATINGEXPENSESABOUT 5%ORSOBELOWYOURFORECAST. WHATDROVETHATNEGATIVEVARIANCE?
Rick White—Diodes, Inc.—CFO
WELL IDON’TKNOWABOUT 5%,BUTWEWEREDOWNALITTLEBIT,BYJUSTMAINLYCONTROLLINGEXPENSES. TRAVEL,ANDWEHAVEN’TREPLACEDPEOPLETHATWEDON’TREALLYNEED,SOWE’VEHADAREALTIGHTCONTROLONOPERATINGEXPENSESFROMOVERHEAD,ANDFROMAPEOPLESTANDPOINT,FROMOVERHEADSTANDPOINT.
Gary Mobley—The Benchmark Company—Analyst
OKAY. IKNOWYOU’VEBEENINDISCLOSING BCDREVENUEINYOUR SECFILINGS. DOWEHAVETOWAITFORTHE 10-KTOCOMEOUTTOGETTHENUMBERFORTHEFOURTHQUARTER,ORCANYOUSHARETHATWITHUSONTHECALL?
Rick White—Diodes, Inc.—CFO
YOUWILLNEEDTOWAITUNTILTHE 10-KCOMESOUT.
Gary Mobley—The Benchmark Company—Analyst
OKAY. BUTMEASKITTHISWAY. WASADOWNALIKEAMOUNTFORTHERESTOFTHEBUSINESS?
Rick White—Diodes, Inc.—CFO
BCD. HANGONJUSTASECOND.
Keh-Shew Lu—Diodes, Inc.—President and CEO
WEARENOTREALLYTRACKINGTHATCAREFULLYBETWEEN DIODESAND BCD,BECAUSEWHATWEREALLYWANTTO DOISONECOMPANY,SOWHEN ITALKEDTOTHESALESGUY,WHENWE’RETALKINGABOUTTHEDESIGNWIN,WETRYTONOTSEPARATE BCDVERSUS DIODES. WEENCOURAGEOURPEOPLE,ESPECIALLYACROSSOUR USAND EUROPESALESTEAM,TOTRYTOSELL BCDPRODUCT. BUT RICKCANGIVEYOUTHENUMBER.
Gary Mobley—The Benchmark Company—Analyst
IHAVEACOUPLEFOLLOW-UPQUESTIONSIFYOUDON’TMIND.
Rick White—Diodes, Inc.—CFO
ITWASDOWNABOUT 4%.
Gary Mobley—The Benchmark Company—Analyst
OKAYVERYGOOD. THANKYOUFORTHAT.
Rick White—Diodes, Inc.—CFO
SIMILARASTHEWHOLEBUSINESS.
Gary Mobley—The Benchmark Company—Analyst
ANDTHINKINGABOUTYOURGROSSMARGIN,IT’SUNDERSTANDABLEWHYYOURGROSSMARGINDECREASED 220BASISPOINTSSEQUENTIALLYINTHEFOURTHQUARTER. IKNOWYOUHADLOWERLOADING,BECAUSEYOUARETRYINGTOBURNOFFSOMEINVENTORY,ANDONTOPOFTHAT,YOUHADLOWERSALES. BUT I’MASSUMINGTHATYOUWILLBEOPERATINGWITHAHIGHERLOADINTHEFIRSTQUARTER,INANTICIPATIONOFASEASONALUPTICKIN Q2REVENUE,SOWHYISTHEGROSSMARGINFORTHEFIRSTQUARTERNOTEXPECTEDTOBEUPMORETHANASEQUENTIALBASISORWILLTHATBENEFIT,AS IJUSTMENTIONED,SHOWUPINTHESECONDQUARTER?
Keh-Shew Lu—Diodes, Inc.—President and CEO
GARY,LETMEANSWERTHISQUESTION. ITHINKIFYOUREMEMBER,LASTQUARTERWHENWEDOTHECONFERENCECALL,WEMENTIONED 4QREVENUE — IMEANGPGOINGTOBEDOWNBECAUSEWEDEDUCEDTHATWAFERFABLOADINGSWEREINLINETO 4QAND 1QOFMIX.
THENAFTERTHAT,WESEETHAT 1QISNOTASBADASWHATWEEXPECTED,BECAUSETYPICALLY,WEHAVEBEENTALKING 1QIS ZERO TO 5%ANDNOWWEGETTHEGUIDANCEOFMIDPOINTISDOWN 1%,SOYOUCANSEE,WESTARTEDREALIZING 1QREVENUEISNOTASBADASWEEXPECTED. THEREFOREWETURNEDONMOREWAFEROUTPUTINTHEWAFERFAB,ANDTHATISTHEREASONWEKEEPTHEUPDATEDGUIDANCEOFINCREASEOUR GPMPERCENT.
THENYOU’RETALKINGABOUT 1Q. 1QISMOREINTHEBACK-ENDBECAUSEOURBACK-ENDISALLIN CHINA,ANDTHE CHINESE NEW YEARISABIGFACTOR, CHINESEAREDOWN,ANDPEOPLEWENTDOWN,PEOPLETAKEALONGVACATIONISALWAYS,EVERYYEAR,ALWAYSIMPACTOURPERFORMANCEINOUROUTPUTINTHEBACK-END.
SOITSTILLISGOINGTOBETHESAME,THISYEAR — CHINESE NEW YEARCOME,ANDWEHAVEPEOPLETAKEALONGVACATION,REDUCEPEOPLE,ANDTHEOUTPUTWILLBELOWERTHAN 4Q,ANDTHEREFOREYOUGETHITBYTHEOUTPUT,LOWEROUTPUT,ANDTHAT’SWHYTHE GPWENTDOWN. SOWHENYOUWAFERFABLOADINGWENTUPIN 1Q,YOURBACK-ENDLOADINGWENTDOWN,ORGODOWNIN 1Q.
THATISWHYWEFORECASTTHE GPPERCENTISFLAT. IFWAFERFABLOADINGWILLGOUP,BUTBACK-ENDLOADINGGODOWN.
Gary Mobley—The Benchmark Company—Analyst
OKAY. IWASJUSTREVIEWINGSOMENOTESAND IKNOWITISYOURGOAL,ASYOUSTATEDINTHEPRESSRELEASE,TOACHIEVE $1BILLIONINANNUALREVENUE. IT’SMYUNDERSTANDINGTHATYOURGOALISTOACHIEVEA 35%GROSSMARGIN,PERHAPSATTHATREVENUELEVEL.
BUTINORDERFORTHATTOHAPPEN,YOUNEEDTOHAVEABOUT 85%UTILIZATIONATYOUR BCDFABS 1AND 2. AND IWASHOPINGTOGETAGAUGEONWHEREWESTANDNOWWITHTHEUTILIZATIONRATEOFTHOSETWOFABSANDWHEREYOUMIGHTEXPECTTOBEBYTHEENDOFTHEFISCALYEAR.
Keh-Shew Lu—Diodes, Inc.—President and CEO
OKAY. YES,THATISOURGOAL. ONESEASONDOWNINREVENUEWASTOTAL GPMPERCENT,WHICHISAT 35%. BUTIFYOULOOKATTHELOADINGTODAY, ITHINK RICKCANGIVEYOUTHATNUMBER —
Rick White—Diodes, Inc.—CFO
INTHEFOURTHQUARTERTHE SFAB 1,WHICHISTHEOLDERFABIN SHANGHAI,WASBETWEEN 75%AND 80%. ITHADASHUTDOWNFORMAINTENANCE,ANDWEHADPLANNEDTHATIN,ANDTHAT’SPARTOFTHEREDUCTIONTHAT KEH-SHEWTALKEDABOUT. INTHEFIRSTQUARTER,WETHINKIT’SGOINGTOGETBACKINTOTHEMORENORMALRANGEOF 80%TO 85%.
Keh-Shew Lu—Diodes, Inc.—President and CEO
THAT’SFAB 1,RIGHT?
Rick White—Diodes, Inc.—CFO
YES,THAT’SFAB 1.
Keh-Shew Lu—Diodes, Inc.—President and CEO
FAB 2—
Rick White—Diodes, Inc.—CFO
FAB 2ISJUSTCONTINUALLYGOINGUP,ITDOESN’THAVEAUTILIZATION,BECAUSETHEOUTPUTHASJUSTCONTINUEDTOGOUPFROMWHENITSTARTEDINTHEFIRSTQUARTEROF 2013,UPUNTIL,THROUGHTHEFOURTHQUARTER.
Keh-Shew Lu—Diodes, Inc.—President and CEO
THESEARETHEONES I’MTALKINGABOUT,WETRANSFERREDTHELOADINGFROMFAB 1TOFAB 2,ANDTHENBACKFILLFAB 1,WETRYTOMOVESALES,TRYTOGETMORESALESFORFAB 1. WEARENOTREALLYABLETOTRANSFERANYINTERNAL —ANYOFSUBCONFABFROMEXTERNALLYTOINTERNALYET.
BECAUSETHATNEEDSCUSTOMERAPPROVAL. NOWFORTHENON-CUSTOMERAPPROVALPORTIONWESTARTLOADINGITBUTTHECUSTOMERAPPROVEDPORTIONCANNOTMOVEIN.
Gary Mobley—The Benchmark Company—Analyst
I’VETAKENENOUGHTIMEUP. IAPPRECIATETHEANSWERS. THANKS.
Operator
OURNEXTQUESTIONCOMESFROM CHRISTOPHER LONGIARUWITH SIDOTI & COMPANY.
Christopher Longiaru—Sidoti & Company—Analyst
WHATITSOUNDSLIKEHERETHOUGH,ISYOURUTILIZATIONAT SFAB 1ISGONEUP,YOUROUTPUTSCONTINUETOGROWATFAB 2. PARTOFTHEREASONFOR IGUESSTHEMARRIAGEBETWEEN BCDAND DIODESMADESENSE,WASTHATYOURPACKAGINGFACILITYWASUNDERUTILIZED,ANDYOUTALKEDABOUTGROSSMARGINPERMITSOVERTHECOURSEOFTHEYEAR. CANYOUTELLUSALITTLEBITHOWTHATMOVEOF BCDINTO DIODESMANUFACTURING,SORRYPACKAGINGFACILITY,ISGOING,ANDHOWYOUEXPECTTHATPROGRESSIONOVERTHECOURSEOFTHEYEARTOCONTINUE?
Keh-Shew Lu—Diodes, Inc.—President and CEO
OKAY. FROMTHEPACKAGINGMOVEFROMSUBCONOR BCDPRODUCTSTO DIODESINTERNALLY, ITHINKBYENDOFFOURTHQUARTERWEALREADYQUALIFIEDFORWHATEVERWEWANTTO —WEWANTTOMOVE. MAYBESAVEACOUPLEOFTHEKEYCUSTOMERS,BUTYOUKNOW,IN BCDTHEYHAVEMOREINTHESMALLCUSTOMERS,THEYDON’THAVETHATMANYOFTHEKEYCUSTOMERS.
SO ISHOULDSAYMOSTOFTHEONESWEWANTTOTRANSFERWEALREADYQUALIFIED. NOWWESTARTTHERAMPIN 4QAND 1QBECAUSETHECAPACITY,PEOPLECAPACITY,NOTEQUIPMENTCAPACITYLIMITATION.
WECANNOTREALLYMOVEEVERYTHING,ANDTHEREASONLIKE IMENTIONEDISTHE CHINESE NEW YEARANDALOTOFPEOPLEGOHOME,ANDNOTCOMINGBACKYET. SOTHE 1QCAPACITYISREALLYDRIVENBYPEOPLE,NOTLIMITEDBYEQUIPMENT.
Christopher Longiaru—Sidoti & Company—Analyst
ITSOUNDSLIKETOMETHENTHATYOUHAVEASITUATIONWHEREYOURUTILIZATIONISIMPROVINGSEQUENTIALLY,YOUAREREADYTOMOVETHINGSIN-HOUSE,BUTTHE CHINESE NEW YEARISKINDOFINHIBITINGTHATMOVE,AND AXTHE CHINESE NEW YEAR,YOUPROBABLYWOULDHAVEGUIDEDTHATGROSSMARGINUPSLIGHTLYSEQUENTIALLY. DOESTHATMAKESENSE?
Keh-Shew Lu—Diodes, Inc.—President and CEO
YES. IN 2Q,IT’SALREADY —IT’SAPICTUREOFIF. WEDON’TKNOWYET. WEARENOTGUIDINGIT.
BUTIFTHEBUSINESSISGOINGUP,LOADINGGOUP,OBVIOUSLY,YOUWILL,IFYOULOOKATOURHISTORY,SECONDQUARTERALWAYSSTRONGERTHAN 1Q. 1QWAFERFABISSTILLUNDERLOADED,IT’SNOTFULLYLOADEDYET. BUTASSEMBLY,EQUIPMENT-WISEISSTILLNOTFULLYLOADED.
BUTPEOPLE-WISE,IFFULLYUTILIZED. THENGOTO 4Q,WEHAVECAPACITYTOSUPPORTUPSIDE. EQUIPMENTCAPACITYTOSUPPORTUPSIDE.
Christopher Longiaru—Sidoti & Company—Analyst
ANDJUSTDIDYOUGIVEABOOKTOBILLATTHEENDOFTHEFOURTHQUARTER?
Rick White—Diodes, Inc.—CFO
NO,WEDIDN’T. BUTITWASABOVE 1.
Christopher Longiaru—Sidoti & Company—Analyst
ABOVE 1. GREAT. I’LLJUMPBACK. THANKYOU.
Operator
OURNEXTQUESTIONWILLCOMEFROM VERNON ESSIWITH NEEDHAM & COMPANY.
Vernon Essi—Needham & Company—Analyst
CONGRATULATIONSONTHEQUARTER, DR. LU. WASWONDERING,NOTTO IGUESSREHASHTHISGROSSMARGINQUESTIONOVERANDOVER,BUT I’MMORECONCERNEDABOUTTHELONGER-TERMPICTUREGROSSMARGIN,ANDWANTEDTOJUSTADDRESS — ISEETHESTORYOFCOURSEISBEINGAUTILIZATION-BASEDSTORY. INMYVIEW,THEHIGHERYOURTOPLINEISGOINGTOBE,THEBETTERYOURGROSSMARGINISGOINGTOBE.
ONETHING IAMWONDERING,THOUGH,AND IGUESSIT’SJUSTLISTENINGTO MARKGOONABOUTALLTHEDIFFERENTPRODUCTSTHATYOU’REINTRODUCING,ALOTOFTHOSEWOULDBESORTOFINTHE 40%GROSSMARGINPLUSBUCKET. WONDERINGHOWMUCHMIXCOULDPOSSIBLYIMPACTYOURGROSSMARGININ 2014,ORISTHEREVENUECONTRIBUTIONFROMTHESEPRODUCTSSONOMINALTHATTHISISREALLYMOREAN 18MONTHSATWO-YEAROUTSORTOFSITUATION,WHEREMIXMIGHTBEABIGGERFACTOR?
Keh-Shew Lu—Diodes, Inc.—President and CEO
OKAYFIRSTLETMEANSWERTHECAPACITYISSUE,ANDYOUKNOW,IFOURMARGINISSIGNIFICANT,ANDAFFECTEDBYWAFERFABLOADING,BYASSEMBLYLOADING. IFYOUREMEMBERBACKTOTHIRDQUARTER,WEACTUALLY — GPMUPTO 31%INTHIRDQUARTER,ANDTHATREALLYSTILLHASTHE BCDLOADINGISSUES. OKAY,SOIFYOUARETHINKINGTHATINTHIRDQUARTER,WE’REUPTO 31%.
WEGODOWNTO 28.8%,BECAUSEWAFERFABLOADING,WECUTITDOWNINTENTIONALLY,ANDTHENTHISQUARTER,WEGUIDEINTO 28.8%,ANDIT’SBECAUSETHE CHINESE NEW YEARAGAIN. SOMOVINGFORWARD,THOSEFACTORSSHOULDBEIMPROVEDBECAUSEOF CHINESE NEW YEARISGONE,LOADINGSHOULDBECONTINUEDBECAUSEBUSINESS, “IF”THEMARKETCOOPERATESANDTHEBUSINESSGOUP,OURLOADINGWILLGOUP,ANDATTHESAMETIME BCDFABLOADINGWILLBEIMPROVED.
THENTHEGROSSMARGIN,IFWEGOBACKTOTHIRDQUARTER,THENTHIRDQUARTERLASTYEAR, 31%. ITSHOULDBEABLETO — I’MNOTGIVINGANYGUIDANCEYET,BUT I’MJUST —TOLETYOUKNOW,IFOURREVENUEGOESBACKTOTHIRD-QUARTERREVENUETHEN GPSHOULDBEBETTERTHANTHAT,BECAUSETHELOADINGFACTORSHOULDBEIMPROVED. OKAY,FROMMIX, I’LLLET MARKTOANSWERTHAT,BUT —
Mark King—Diodes, Inc.—SVP, Sales and Marketing
SOWEHAVEASIGNIFICANTAMOUNTOFNEWPRODUCT,WITHDEFINITELYABETTERMARGINPROFILETHANSOMEOFOURHISTORICPRODUCTS. SOWEOBVIOUSLY,BEYONDUTILIZATION,WEAREWORKINGONOURMARGINSTHROUGHMIXIMPROVEMENTANDNEWPRODUCTS,ANDJUSTBETTERSTUFFTHATWILLDRAWHIGHER ASP,WILLDRIVEAGREATERMARGIN.
SOWEFEELLIKEWEHAVEALOTOFDIFFERENTDRIVERSOFOURMARGINGOINGFORWARD. BUTTIMINGOFTHOSEQUARTER-INANDQUARTER-OUTISNOTNECESSARILYCLEARYET,BUT ITHINKWEHAVEALOTOFOPPORTUNITYAHEADOFUS.
Keh-Shew Lu—Diodes, Inc.—President and CEO
ADDITIONAL,DON’TFORGET,WEHAVEREDUCEDOUR CAPEX,ANDLASTYEARWEDROPPED 4%OR 5%FROMOURHISTORICAL 10%TO 12%OFTHEREVENUE. LASTYEARWEGODOWNTO —ANDWESTARTEDGUIDING 5%TO 8%OR 9%OFOURREVENUE.
SOWHENYOUSTARTTOREDUCE CAPEX,YOURDEPRECIATIONISGOINGTOBERELATIVELY —ASAPERCENTOFREVENUE. GOINGTOBEREDUCED,THENAUTOMATICALLYYOUWILLIMPROVEYOUR GPMPERCENT.
SOIFWESTARTEDCHANGINGOURBUSINESSMODELFROM 10%TO 12%OF CAPEXTO 5%TO 8%,OR 5%TO 9%OF CAPEX,THAT CAPEXREDUCTIONWILLAUTOMATICALLYIMPROVETHEDEPRECIATIONASAPERCENTOFREVENUE,ANDTHENYOUWILLIMPROVETHE GPMPERCENT. SOTHISEFFECTS,ASWEAREWORKINGVERYHARDTOWORKOURMODEL 35%AND IBELIEVEWESHOULDBEABLETOGETTHERE.
Vernon Essi—Needham & Company—Analyst
AND IAPPRECIATEBYTHEWAYTHEANSWER. ISEETHEMATH. I’MNOTDOUBTINGTHATYOUCAN’TGETTHERE,ESPECIALLYONTHEREVENUETARGETSYOU’VEOUTLINED,AND ITHINKTHEMATHWORKSFORYOURGROSSMARGINSINTHEFIRSTQUARTER.
THISISADELICATEWAYOFPROVIDINGFEEDBACK,ITMIGHTBEHELPFULFORUSTOKNOWWHATPROPORTIONOFREVENUEISSORTOFNEWPRODUCTRELATED. IDON’TKNOWHOWYOUWANTTODEFINETHAT,HOWEVER,SOWECANTRACKTHEPROGRESSOFTHATANDTHEREVENUEMIX,TOSEEIFIT’SACTUALLYIMPACTINGTHEGROSSMARGIN,ORIFITSTILLJUSTBASICALLYAFUNCTIONOFLOADINGSANDTOPLINEVERSUSOVERHEAD?
Mark King—Diodes, Inc.—SVP, Sales and Marketing
WEUSEDTOREPORTOURNEWPRODUCTREVENUEBUTTHENWEDETERMINEDTHATSOME —EACHONEOFTHEPRODUCTSHADADIFFERENTPERIODTORAMP,ANDTHENSOMEOFOURPRODUCTSTHATWOULDLOOKLIKETHEREVENUESARERAMPINGVERYHARD,TOOKTHREEYEARSTORAMP,THENTHEYRAMPANDARESTILLRAMPING. OKAYSOWETHOUGHTTHATFIGUREBECAMEALITTLEBITDISTORTED,SOWESTOPPEDREPORTINGTHAT.
WEHADASIGNIFICANTNEWPRODUCT,ANDTHEONEOTHERAREATHAT —WITHTHEREDUCED CAPEX,REDUCED CAPEXANDREDUCEDUNITSDRIVESMIX. OKAY,SOWE’VEBEENPRETTYFREEWITHUNITSFORAFEWYEARSHERENOW,ANDTHEUNITSPROBABLYAREGOINGTOSTARTTOGETTIGHTERANDTIGHTERASTHEYEARGOESON,IFTHEMARKETGROWSATEVENAREASONABLERATE. SOWE’REHOPINGTHATTHECHANGEINTHESTRENGTHINOUR CAPEXWILLHELPUSDRIVEABETTERMIX,WHICHWILLDRIVEABETTERMARGINRATE.
Keh-Shew Lu—Diodes, Inc.—President and CEO
INTHEPASTWHENYOUHAVEEXCESSCAPACITYTHENYOUTRYTOSAY INEEDTOMOVETHEMIXDOWNWARDTOCAPTURETHOSECAPACITY,THEYIELDLEVELSATCAPACITY. ANDSINCETHELASTYEAR, IMAKEADECISION IDON’TWANTTOCHASETHEVOLUMEANYMORE,BECAUSEATTHEEND,WEAREREACHINGOURGOALOFONEBILLION,SOWEDON’TNEEDTO —THATCHANGEINTHECAPACITY. THATISWHYWECHANGEOURBUSINESSMODEL,ANDWITHTHAT,THENYOUDON’THAVETHATMUCHOFCAPACITY,ANDTHENYOUHAVENONEEDTOCHANGETHEMIXTOLOADINGTHEFACTORY.
Vernon Essi—Needham & Company—Analyst
OKAY, IAPPRECIATE,THAT’STHELONGESTFIRSTQUESTION ITHINK I’VEEVERHAD, IAPPRECIATEALLTHEANSWERSTHERE. MYQUICKFOLLOW-ON, DR. LU,ANYOUTLOOKYOUHAVEONTHEHEALTHOFTHEELECTRONICSMARKETIN CHINA.
YOU’REPROBABLYONEOFTHEBETTERCRYSTALBALLSTHANANYONETHATWEUSUALLYSPEAKTO. SOWHATISYOURTAKEONHOWTHEOUTLOOKISTHEREGOINGINTOTHEFIRSTHALFOF 2014?
Keh-Shew Lu—Diodes, Inc.—President and CEO
WELLIFYOUSEEOURGUIDANCEOFMIDPOINTMINUS 1%AGAINSTATRADITIONALLY 1QISDOWN 0%TO 5%. THATISWHAT ITHINKEVERYTIMEWHEN ITALKTOYOUGUYS, IALWAYSSAY 1QISDOWN 0%TO 5%ORSOMETIMEEVENMORE. BUTWITHTHAT,YOUCANSEE IFEELVERYGOOD.
ANDSORIGHTNOW, ITHINKTHEFEELBACK IGETFROMTHE CHINESE,POST CHINESE NEW YEARISQUITEPOSITIVE. ANDTHATISWHATWEGUIDANCETHAT. SO ITHINKTHATISMYANSWER.
Vernon Essi—Needham & Company—Analyst
OKAY. GREATTOHEAR. THANKYOU.
Operator
ANDNEXTQUESTIONISCOMEFROM HARSH KUMARWITH STEPHENS.
Harsh Kumar—Stephens Inc.—Analyst
CONGRATULATIONS. VERYGOODQUARTER,VERYGOODGUIDANCE. IHADACOUPLE —FIRSTOFALLLETMEASKTHEEASYONE. MARK,COULDYOUREPEATTHEBREAKDOWNOFREVENUESBYTHEENDMARKETS?
Mark King—Diodes, Inc.—SVP, Sales and Marketing
YESITWAS I’VEGOTITRIGHTHERE — 34%CONSUMER, 23%COMMUNICATION,COMPUTING 22%,ANDINDUSTRIAL 18%ANDAUTOMOTIVE 3%.
Harsh Kumar—Stephens Inc.—Analyst
THANKSSOMUCH. DR. LU, IHADAPRETTYSIMPLEQUESTION. INYOURPRESSRELEASEYOUMENTIONEDTHATBASICALLYWASNEGATIVEFORYOUFORTHEWHOLEYEAR.
AREYOUWILLINGTOTALKABOUTMAYBEEXITINGTHEFOURTHQUARTER,ORMAYBECURRENTLY,IFTHATSTARTINGTOTURNFORYOUIFIT’SPOSITIVE. HOWMUCHPOSITIVEIMPACT,ANYKINDOFCOLORYOUWANTTOGIVEUS.
Keh-Shew Lu—Diodes, Inc.—President and CEO
IDON’TTHINKIT’SPOSITIVEYET,IN 1Q,OKAY? BUTIT’SGETTINGCLOSETOHELPINGUS,ANDTHEREASON ITHINKIS,FAB 2ISRAMPING,ANDFAB 1BECAUSETHATFAB 1ISUNDERLOADED.
WEHAVEGRADUALLYFILLEDFAB 1,BUTWHENWEAREABLETOGETFAB 1TOTHEORIGINALLOADINGANDFAB 2ISTHERE,THEN ITHINKWEWILLBEPOSITIVE. TODAY,ITISSTILLNEGATIVEIMPACTUS.
Rick White—Diodes, Inc.—CFO
IT’SNEGATIVEONTHEMARGIN. ONTHEGROSSPROFITPERCENT,NOTONTHEDOLLARS.
Keh-Shew Lu—Diodes, Inc.—President and CEO
YES.
Rick White—Diodes, Inc.—CFO
SOTHEIRGROSSPROFITMARGINSARELESSTHAN DIODES’.
Harsh Kumar—Stephens Inc.—Analyst
UNDERSTOOD. TOTALLYUNDERSTOOD. THANKSFORCLARIFYINGTHAT.
DR. LU,ANOTHERQUESTIONFORYOU. YOUBROUGHT ANACHIPAWHILEBACK,SIXORSEVENYEARSAGO. YOUBOUGHT BCDRECENTLY. IF IWASTOASKYOUOFYOURTOTALBUSINESS,HOWMUCHOFYOURTOTALBUSINESSISANALOGTODAY,WOULDYOUHAVEABALLPARKNUMBERFORUS?
Keh-Shew Lu—Diodes, Inc.—President and CEO
WELL IPROBABLY —WEDON’TTALKABOUT, ICANGIVEYOUMAYBE 60/40. BECAUSEDISCRETEGROWANDPROBABLYSOMEWHEREABOUT 60/40,RIGHT?
Harsh Kumar—Stephens Inc.—Analyst
SO 60%DISCRETEAND 40%ANALOG?
Keh-Shew Lu—Diodes, Inc.—President and CEO
SOMEWHEREAROUNDTHERE. IDON’THAVETHENUMBER,WHAT IGIVEYOUABALLPARK. SODON’TTAKEME —
Harsh Kumar—Stephens Inc.—Analyst
UNDERSTOOD. ANDTHENANALOGTYPICALLYHASBETTERMARGINSTRUCTURE,CORRECT?
TYPICALLYMYUNDERSTANDINGISANALOGFORYOUIS 30%TO 40%OR 45%. ISTHATACCURATE?
Mark King—Diodes, Inc.—SVP, Sales and Marketing
IWOULDSAYTHATIT’STOOMUCHTOGENERALIZETHAT. WEHAVESOMEREALLYSTRONGDISCRETEPRODUCTSTHATRUNASGOODORBETTERMARGINS.
WEMIGHTHAVESOMEPRODUCTSINTHEDISCRETESIDETHATMIGHTBEMOREDRAININGINMARGINTHATWEWILLEVENTUALLYMIXOUTOF. BUT IWOULDN’TSAYANALOGISALWAYSBETTER.
Harsh Kumar—Stephens Inc.—Analyst
OKAY. ANDTHENONEMOREFORYOU, DR. LU. YOUTALKEDABOUTSOLIDPIPELINE,BOTHINYOURCOMMENTARYANDTHEPRESSRELEASE.
PARTICULARLYDESIGNWINS. I’MCURIOUSWHATOTHERAREASMAYBEYOUARETHEMOSTEXCITEDABOUTTHENEXT 12MONTHSOUTOFYOURENDMARKETS?
Keh-Shew Lu—Diodes, Inc.—President and CEO
WELL, ITHINKWEHAVESEVERALAREAS. FOREXAMPLE LEDDRIVER, ACTO DC,ANDWHENWETALKABOUT ACTO DCWEAREWORKINGONTHEFIRSTCHARGER.
WEAREWORKINGONTHEWIRELESSCHARGER. THOSEARETHEANALOGPORTION.
BUTTHENWHENYOUARETALKINGABOUTDIGITALPORTION,MOSTFABSARESTILLGOINGQUITEWELL. SBRISSTILLGOINGQUITEWELL. ANDTHOSE,AGAINFROMADISCRETEPOINTOFVIEW,THEYAREGROWINGQUITEWELL.
SOREMEMBER IJUSTMENTIONEDBUY ANACHIP,BUY BCD,THOSEAREANALOGPRODUCT. BUTTODAYWESTILLHAVE 60/40. ITMAYBESOMEWHERE 30/70.
AROUNDTHATRANGE. 70/30, 60/40,SOMEWHEREINTHATRANGE. SOYOUCANSEEDISCRETEORGANICALLYISSTILLGROWINGVERYFAST.
Harsh Kumar—Stephens Inc.—Analyst
GOTIT. ANDTHENMYLASTQUESTIONFORYOUWAS,WHYTHEDECISIONTOPAYDOWNDEBT? JUSTTOBOLSTERTHEBALANCESHEETORWASTHEREANYPARTICULARREASON?
Rick White—Diodes, Inc.—CFO
WILLTHEMAINREASONISTHATINTERESTEXPENSEIMPACTSOUREARNINGSPERSHARE,ANDWELIKETOHAVETHEBESTEARNINGSPERSHAREWECANHAVE.
Keh-Shew Lu—Diodes, Inc.—President and CEO
SOWHENYOUWANTMONEY,ANDYOUHAVEENOUGHMONEY,ANDBANKPUTINTERESTANDTHEMONEYWEBORROWGENERATESINTERESTCOSTS. SOIT’SBETTERJUSTPAYITOFF.
Harsh Kumar—Stephens Inc.—Analyst
THAT’SFAIR,THANKS. I’LLJUMPBACKINTHEQUEUE. CONGRATULATIONSAGAIN.
Operator
OURNEXTQUESTIONISFROM VIJAY RAKESHWITH STERNE, AGEE.
Vijay Rakesh—Sterne, Agee & Leach, Inc.—Analyst
GOODJOBONTHEGROSSMARGIN. IHADAQUESTIONGOINGBACKONONEOFTHEPREVIOUSQUESTIONS. DOYOUHAVEANIDEAOFWHAT,PARTICULARLYTHELASTSIXMONTHS,WHATPERCENTOFREVENUESCAMEFROMNEWPRODUCTS,ANDASYOUENDOF 2014WHATPERCENTOFREVENUESCOMEFROMNEWPRODUCTS,ANDDESIGNWINS?
SOALONGER-TERMPERSPECTIVEONTHAT. ANDALSO,YOUTALKEDABOUTHANDSETDESIGNWINSINYOURPREPAREDREMARKS,IFYOUCOULDGIVEMORECOLORONTHAT?
Mark King—Diodes, Inc.—SVP, Sales and Marketing
WHATWASTHELASTTHING? MORECOLORONTHEWHAT?
Vijay Rakesh—Sterne, Agee & Leach, Inc.—Analyst
ONTHEHANDSETDESIGNWINS,THATYOUWERETALKINGABOUTINYOURPREPAREDREMARKS.
Mark King—Diodes, Inc.—SVP, Sales and Marketing
OKAY. FROMASMARTPHONEANDTABLETPERSPECTIVE, ITHINKWEJUSTCONTINUETOMAKEPROGRESSATMULTIPLEPLAYERSAROUNDTHEWORLD,INABROADMIXOFDEVICES.
NOTTOOMUCHMORETOSAYABOUTTHAT. SO IDIDN’TGETYOURFIRSTQUESTION,EITHER.
Vijay Rakesh—Sterne, Agee & Leach, Inc.—Analyst
IWASWONDERING,IFYOULOOKATTHENEWPRODUCTRAMPS,IFYOULOOKAT — I’MWONDERINGHOWMUCHREVENUESCAMEFROMNEWPRODUCTRAMPSINTHELASTSIXMONTHS,ANDHOWMUCHDOYOUTHINKTHISNEWPRODUCTRAMPS,LET’SSAYSECONDHALFOF 2014?
Mark King—Diodes, Inc.—SVP, Sales and Marketing
IREALLYDON’THAVETHISINFORMATION —CLEARLYSOMEOFOURDISCRETENEWPRODUCTRAMPSRAMPEDFASTERTHANOURANALOGNEWPRODUCTRAMPS. BUTTHEFIGURESSTARTEDTOBECOMEDISTORTED,ANDRAMPTIMES,ANDTIMESFORPRODUCTSTOACTUALLYDEVELOPFROMAREVENUEPERSPECTIVE,SOWEJUSTSTOPPEDLOOKINGATTHATASAWHOLE,AWHILEBACK.
WEDOLOOKATITINDIVIDUALLYASAPERCENTAGE,ONCERTAINPRODUCTLINES. BUTWEDON’TREALLYLOOKATITASAWHOLE.
Keh-Shew Lu—Diodes, Inc.—President and CEO
DISCRETE,ESPECIALLYINDISCRETEAREA,IT’SKINDOFACUSTOMERSAY INEEDYOUPUTTHISFUNCTION,THISSTYLE,ORTHIS SBR,ORTHIS MOSFETINTHISPACKAGE. WHENACUSTOMERTELLSYOUTHATYOUPUTTHEOLDDIEINTHEOLDPACKAGE,BUTIT’SDIFFERENTDIE,DIFFERENTPACKAGE,IT’SCONSIDERANEWPRODUCTANDYOURAMPTHATRIGHTAWAY.
FORTHEANALOG,IT’SVERYDIFFICULT,BECAUSEANALOG,YOUDON’TDOTHAT. SOYOUDESIGNTHEDEVICEANDTHEDIEANDTHENYOUPUTINTHEPACKAGINGYOUWANTEDANDGETITOUTASASTANDARDPRODUCT. THANTHERAMPISVERYSLOW.
ANDSOFORUS,TRACKINGNEWPRODUCTREVENUEORNEWPRODUCTRAMPSISVERYDIFFICULT,ESPECIALLYDISCRETE. EVERYDISCRETE —MOSTOFTHEDISCRETEPRODUCTSAREEASIERTOBECONSIDEREDASANEWPRODUCT. WHATYOUSAYISDIFFERENT.
Vijay Rakesh—Sterne, Agee & Leach, Inc.—Analyst
OKAY. ONTHE OPEXLINE, RICKYOUMENTIONEDA $900,000INCREASEDUETORETENTION. IFYOULOOKATTHECORE OPEX,EXTHOSERETENTIONBONUSES,DOYOUSEETHATFLATINDOLLARSFOR 2014? ANDONTHERETENTIONSIDE,DOYOUTHINKTHISROLLSOFFIN 3QTHISYEAR,ORANNUAL,ORHOWDOESTHAT OPEXLAND?
Keh-Shew Lu—Diodes, Inc.—President and CEO
LETMEGIVEYOUTHEDATE,THENHECANGIVEYOUTHENUMBER. THEDATEISDUETO BCD. BCDRETENTIONSTARTWITHMARCHLASTYEAR,AND 18MONTHS,SOITISSOMEWHEREAROUND 3QTHISYEAR.
BUTSOMEOFTHEPEOPLE,ESPECIALLYHIGH-LEVELPEOPLETHERETENTIONBONUSISFORTWOYEARS. THENYOUWILLBEUNTIL 1QNEXTYEAR. THENYOUCANEXPLAINTHIS.
Rick White—Diodes, Inc.—CFO
GOAHEADANDTELLME —ASKTHENUMBERQUESTIONAGAIN?
Vijay Rakesh—Sterne, Agee & Leach, Inc.—Analyst
IFEXTHERETENTIONBONUS,WASTHECORE OPEXDIPPINGBACKTOFLATINDOLLARSFOR 2014?
Rick White—Diodes, Inc.—CFO
NO, IDON’TTHINKSO. BECAUSEWHAT’SGOINGTOHAPPENISTHATTHEREVENUEISGOINGTOINCREASE. WE’REGOINGTOTRYANDGROWFASTERTHANTHEMARKET.
SOYESISFLATINTHEFIRSTQUARTER,BUTASTHEREVENUEGOESUP,WEWILLSPENDMOREON R&D. WE’LLPROBABLYSPENDMOREONFREIGHTAND SG&A. ITWON’TSTAYFLATINDOLLARTERMS.
Keh-Shew Lu—Diodes, Inc.—President and CEO
IFYOULOOK —THISISBUSINESSMODEL,ALWAYS. WHENREVENUEGROW,OUR R&DWILLGROWASAPERCENT,SIMILARTOTHEREVENUEGROWTH.
OUR SG&AWILLONLYALLOWGROWHALFOFTHEREVENUEGROWTH. SOTHAT’SOURRULEOFTHUMB,ANDWE’REGOINGTOINSISTONTHAT,BUTTHEKEYTHINGISWEWANTTOGETOUR R&DAND SG&AASAPERCENTOFREVENUEGODOWNTO 20%. SOITWILLQUICKLYGETINTO 20%BUTTHEYWILLGOTOOURBUSINESSMODEL.
Vijay Rakesh—Sterne, Agee & Leach, Inc.—Analyst
GOTIT,THANKS. ONELASTQUESTION,HERE,AND I’LLGETOFFTHELINE.
WHENYOULOOKATTHETAXRATE,ITOBVIOUSLYJUMPEDUP. WHATARETHE —VERSUS 2013,ITCAMEUPALITTLEBIT,OBVIOUSLYYOUHADGUIDEDTOTHAT,BUTWHATARETHEPUTSANDTAKESTOIT?
WHATMAKESITGOUP,ANDWHATWILLBRINGITDOWN,ASYOULOOKATTHISYEARANDNEXTYEAR? THANKS.
Rick White—Diodes, Inc.—CFO
WE’RENOTSAYINGIT’SGOINGTOGODOWN. IT’SGOINGTOGOUP,PROBABLY. IT’SJUSTBASICALLYTHESPLITOFPROFITINTHEVARIOUSCORPORATEENTITIES.
ANDSO,ANDYOUSAY,OKAY,WELLTHE TAIWANESE,THE HONG KONGPEOPLEHAVELOWERTAXRATES,BUTTHERE’SALSOINCOMEOVERTHERECALLEDSUB-PART FINCOME,WHICHISTAXEDATTHE USRATE. SOALLOFTHATCOMESIN —INTOPLAYINTHEEFFECTIVETAXRATEFORTHEYEAR.
SOIFYOUTAKEOUTALLTHEADJUSTMENTSWEHAD,THETAXAUDITADJUSTMENTINTHEFIRSTQUARTER,ANDGOODWILL,ANDTHEREASONYOUHAVETOGOODWILLOUTISTHATGOODWILLISANON-TAX-DEDUCTIBLEEXPENSEINTHE US. SO ITHINKOURTAXRATEWAS,FORTHEYEARWAS 20.6%. SOITWASRIGHTWHEREWESAIDITWASGOINGTOBE,INTHE 18%TO 24%FORTHEYEARANDNEXTYEARWESAIDIT’SGOINGTOGO 19%TO 25%SOIT’SONLYUP 1%.
Vijay Rakesh—Sterne, Agee & Leach, Inc.—Analyst
OKAY,GREAT. THANKS.
Operator
OURNEXTQUESTIONISFROM LIWEN ZHANGWITH BLAYLOCK ROBERT VAN.
Liwen Zhang—Blaylock Robert Van, LLC—Analyst
CONGRATULATIONSONYOUROVERALLQUARTERLYRESULTS. IHAVEALITTLEBITCONCERNABOUTYOURCOMPUTINGBUSINESS.
GIVENONE JAPANESEPLAYEREXISTINGINTHEMARKET,ANDSOMEOFYOURPEERS,ANDTHEY’RESHOWINGSHAREGAINS,ANDYOU’REDOWN 10%QUARTEROVERQUARTER. WOULDYOUPLEASEEXPLAINTOMESOMEOFTHEDYNAMICSWITHINYOURCOMPUTINGBUSINESSES?
Keh-Shew Lu—Diodes, Inc.—President and CEO
WHATIS 10%?
Mark King—Diodes, Inc.—SVP, Sales and Marketing
SHEISMEASURINGOURREVENUE. WETHINKWEARETRACKINGRELATIVETOEVERYONEELSE.
WEHAVESOMESTRATEGIESLONG-TERMFOROURCOMPUTINGSEGMENT,THATWILLCOMPLETELYCHANGEOURMIXWITHINTHATSEGMENT. SOWEFEELWEAREONTRACKTOIMPROVEOURPOSITIONINTHATMARKETPLACE,BUTWEDON’TFEELTHATWEARESUFFERINGMORETHANTHEMARKETPLACEOVERTIME.
ITHINKWEKNOWTHEMARKETPRETTYWELL. WE’RENOTAS PC-BASEDASWEARENOTEBOOK-BASEDBUTWEMANAGETHEUNITS,ANDOURSHAREINTHATUNITS. ITMAYBEPOSSIBLEWELOSTSOMESHAREONTHEREALLYLOW-ENDPRODUCTSINTHESECONDHALFOFTHEYEARBYCHOICE,RATHERTHANBYTHIS,BUTWETHINKWEARETRACKINGINOURMAJORAREAS.
Liwen Zhang—Blaylock Robert Van, LLC—Analyst
THANKYOU. THAT’SALL IHAD.
Operator
ATTHISTIME I’MSHOWINGNOADDITIONALQUESTIONSINTHEPHONEQUEUE. I’DLIKETOTURNTHEPROGRAMBACKOVERTO DR. LUFORANYADDITIONALORCLOSINGREMARKS.
Keh-Shew Lu—Diodes, Inc.—President and CEO
THANKYOUFORYOURPARTICIPATIONTODAY. OPERATOR,YOUMAYNOWDISCONNECT.
Operator
THANKYOU,SIR. THANKYOULADIESANDGENTLEMENAGAIN,THISDOESCONCLUDETODAY’SCALL. THANKYOUFORYOURPARTICIPATIONANDHAVEAWONDERFULDAY. ATTENDEESYOUMAYNOWALLDISCONNECT.
