Integrated Micro-Electronics, Inc. (IMI) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to IMI's Financial and Operating Results First Quarter 2022. With us this morning is our President, Jerome Tan, who is going to talk about the operating environment and the highlights of operations during the first quarter; to be followed immediately by our Chief Finance Officer, Laurice Dela Cruz, who is going to discuss the financial in the first quarter. After the presentation, we're going to open the briefing for your question. Thank you.

Good morning, everyone. I'll kick off as usual, to give an overview on the global economy, going on to the next page. Yes, economic damage from the Ukraine Russia conflict and rising rates to fight the inflation, contributed to a significant slowdown in the global growth. Also the recent lockdown in China in the different trade and manufacturing hubs is adding to this global slowdown that we expected in 2022. Global growth is projected to slow from 6.1% in 2021 to 3.6% in 2022 and 2023. Beyond 2023, global growth is forecast to decline to about 3.3% over the medium term. If you look at the United States, the economy was in overdrive in 2021 at 5.7%, but the growth is expected to slow down as well to 3.7%. The German economy is at risk of shrinking to nearly 2% this year, and if the Ukraine war escalates or due to the escalation of the Ukraine war, embargo and the Russian oil and coal and gas, leading to restrictions on power providers in the industry. In China, as mentioned, it reported the biggest decline in consumer spending and worse unemployment rate since the early months of the pandemic, as the COVID lockdown continued to put a strain on the economy for China. For us, for IMI, we do anticipate slowing growth and rising costs. However, we continue to work on looking at how we can navigate through this very challenging environment. We are looking at ways to be able to be more conservative in terms of our new project wins and also being more selective in new projects and capital investments. Next page, please; on the manufacturing, global manufacturing growth also has lost momentum further in March, falling to a 1.5-year low in March of $56.6 million. This is on the left-hand side of the chart, the negative consequences of the Ukraine war and new lockdowns in China also intensified the supply chain delays, heightening the price pressures and a renewed fall in global trade. On the right-hand side, the global electronics PMI was unchanged compared to February, but it's at the 15-month low, at 54.8% second time in a row for February and March. For the first time since July 2020, global electronics producers [ sported ] a decline in output. Raw material and component shortages were compounded by staff absences due to COVID-19. Despite the decline in production with global electronic manufacturers, there is continued growth in new orders, often attributed to greater demand in Europe, U.S. and some parts of Asia. And for IMI, we are seeing this in the different electronics segments. There is some stabilization of growth or slowdown in growth in the consumer electronics side of the business, but in our industrial and mobility, we continue to see very strong demand. So in a way, it's a mixed bag in terms of the different segment of the industries. Next page is just to give an up -- on the EV, sorry. Electronic vehicle growth continues to increase significantly. If you look at the Q1 2020 results of Tesla, for instance, it grew 81% versus last year. The Volkswagen Group grew by 65% versus last year. A lot of this is driven by government efforts to push renewables to fight climate change. And if you look at the chart, March 2022 -- sorry, 2022 estimates for EV is expected to be at $10 million, about almost 3x 2020 level, mostly driven from the China market, which is the orange bar, and the Europe market, which is the blue bar. For IMI also, we continue to see significant opportunities, not only related to EV projects from the traditional automotive companies, but we are seeing a number of project wins as well as opportunities from new electric vehicle companies, particularly those in the U.S. that are coming on stream. Next page; just to give a quick update in terms of the top EMS. As you see, the industry continues to consolidate. If you look at IMI, IMI growth in 2021 is approximately 15% growth, much higher than the overall electronic growth of 9.9%. So that bumped IMI from 21 -- first place in the previous year to now at 19. So I now is #19 in terms of global EMS company. Next page, just a quick update on the supply chain issues. So we continue to see very tight supplies in Q1. We are, however, seeing some easing, especially starting -- especially for our Q2 projection. There are improvements as the -- I think the market and also our customers, the OEMs and our suppliers continue to work through these challenges. We have improved significantly in terms of working together with the different parties and also in terms of planning, and how we plan for our production and supply chain management. That and also improvement in some supplies in some of the key components, also give us an indication that in Q2, there might be better easing, but just at the same time, it's still -- it's still very tight, and there's still a lot of uncertainty around, as I mentioned, in the global economy and the lockdowns in China. So assuming it doesn't get worse, we hope to see improvements in Q2. Labor costs and material costs also remains high. What we're doing, is we're continuously looking at ways to improve our efficiency by looking at cost reductions across all our different sites. For instance, in 2021, we are able to mitigate a lot of the cost increase through efficiency improvement, hitting around $8 million of improvements in 2021, in which we expect to continue focusing on this, to help offset some of the costs -- and rising costs in our operating components. We are also looking at ways we can share the pain with our customers, renegotiating some of the prices that's driven by higher energy costs, higher labor costs and also component increases. So I think we have been successful. So you'll see some improvements in our operations -- in terms of our operating results, because of this mitigation plan that we put in place to combat the rising costs in our business. And the effect of that is really declining profitability. The margins are getting squeezed. But as I mentioned, we're hoping that -- Q1 seems to be better versus Q4, and we expect to continue working on efficiency improvement to try and mitigate continued decline in the margins, and hopefully turn the business around. And again, one of the challenges also is recruiting and retaining skilled talent, which, in effect -- cost has also increased in, labor costs, because of the retention. So all these are -- continue to be challenging in our space, and we continue to work to as much as we can to mitigate the impact on profitability. Let's move on to the next page on just segment updates. In Q1, you'll see in terms of our 2 main focus segments, automotive, industrial, we are still growing year-on-year despite significant backlog that we're experiencing in Q1. Our backlog in Q1 is approximately $80 million compared to backlog in Q1 2021, it's about, I think, $20 million. So because of the component shortage issue, our backlog continues to build up. So -- but despite that, we're still seeing recent -- or healthy growth in our automotive and industrial segment. The demand remains to be there. It's just now really chasing after the component shortage to see how we can fill the demand. The Aerospace and Defense have dropped significantly versus the prior Q1 2021, mainly due to the component shortage -- in Aerospace and Defense, it's more difficult to switch to alternate components, because of the component challenges and the geopolitical effect that we had in the beginning of the year, also have an impact on the volumes of the aerospace and defense industry. The other drop is on medical and telecommunications. On Medical, it's mainly due to the normalization, I would say, on the demand for medical products. coming off the COVID pandemic year that we have in 2021. And in the telecom, the continued impact on U.S. sanctions on some of the components to China, have an impact on the growth also of our telecom business in Shenzhen. Next page, please. On a region -- in the regional updates, you see Philippines is down by 7%. It continues to be hampered by component shortages. It has a backlog of about $42 million. So quite a big challenge we have in the Philippines, trying to get the components in and to be able to fulfill the demand of the customers. In China, growth is driven by our -- or despite the challenging environment, our Chengdu facility, where we have our EV charging business and the automotive focus sites in Jiaxing continues to grow. For instance, Chengdu growth is about 45% quarter-on-quarter -- sorry, Q1 this year versus last year. And Jiaxing is up 19%, despite challenges in component shortage and supply chain disruptions in China. Shenzhen, as I mentioned, the telco business have dropped in Q1, having a negative effect with a negative 5% growth. In BG, Serbia as well as in Czech Republic, the muted growth is mainly, I think, 2 things. One is the foreign exchange. If you recall for these sites, most of our contracts are in euro contracts. And with the weaker euro to U.S. exchange rate, we are seeing much slower growth in terms of U.S. dollars. If you exclude the FX impact, [ besides ] actually BG, Serbia, actually would grow closer to 9% or 10%. The other impact is on, again, the component shortage since these manufacturing sites have mainly been automotive customers. And automotive customer continues to be a bit more challenging in terms of searching for components as it's more -- it's less easy for the automotive segment to switch or to have alternate components, unlike the Industrial business. Mexico as well, the impact is also on the component shortage and a lot of our focus in Q1 is really renegotiating the prices with our key customers. And so we expect continued improvement in our margins, as we are able to incorporate the price increases, as we negotiate with our customers. For [ VS ] and STI, it's a mixed performance, while our VS subsidiary continues to show strong growth. STI is, as I highlighted earlier, in the Aerospace Defense segment, has been impacted by that segment and therefore declined in the Q1 2022 versus last year. Next page; on the new program wins, you'll see that there is a significant decline in our Q1 2022 program wins. I think it's partly due to the focus of the customers in trying to secure components, to be able to fulfill existing demand. So less time spent in terms of identifying new programs and pushing for new program wins. Similarly, for us, our focus is really trying to renegotiate the price. So in Q1, a lot of the efforts are focused more on price renegotiation. I think at the same time, we believe the pipeline remains healthy, and we have a number of projects that are close to being won, approximately $50 million of ARP new projects that we expect to close in Q2 -- or close soon, so it will be in Q2. We are, however, still -- we are, however, seeing some slowdown in terms of the pipeline. So we continue to watch that space to see whether 2021 -- sorry, Q2 2022 is a start of a slowdown of new projects being sent out for bids. Or is it more because of the price renegotiations, component shortage issue. So we continue to watch that pipeline, to see if it will continue to dip in Q2 this year going forward. But so far indications that we have is, it's still very healthy for the rest of the year. Okay. I'll turn it over now to Lau, on the -- for the Q1 financial performance.

Okay. Thank you, Jerome. Good morning, everyone. So I'll give more details on the financial performance of the company for the first quarter of the year. So revenues improved 2% versus the same period as last year, better than the same period as last year and also 2% better than the previous quarter. The improvements are really coming from the stable growth in our China factory and also Serbia, despite some lockdowns we have experienced with our Shenzhen -- in Q1. And also -- and later on also affecting our other China factories sometime in Q2, for Jiaxing and Suzhou. However, most of the sites continues to endure the impact of the shortage, and this is resulting to further increase in the backlogs. As mentioned by Jerome, it has already reached $80 million as of end of Q1. Our Europe factories were also affected by the euro depreciation, because last year, the average Euro to U.S. dollar rate is around EUR1.22. The average for this year is EUR1.12 Euro-U.S. dollar conversion. The estimated impact of that to our revenue is approximately $7 million. The decline in margins and operating income versus [Technical difficulty] 2021 were highly driven by material costs, as the material price increases started to rise beginning third quarter of last year, while the Q1 of last year still benefited from the cost reductions that we have for our purchases on the -- during the late 2020, before the impact of the component shortage. Also, in addition, the higher backlogs are causing some labor inefficiencies and lower utilization. And for some factories, we are already experiencing some increase in the electricity costs, that's mainly driven by the Russia-Ukraine conflict. But we are -- like, for example, for our Bulgaria factory, we are getting some compensation for some increases in the electricity prices. Comparing to the previous quarter, however, we are showing improvement of approximately $7 million, as we try to manage the shortage by recovering some of the unfavorable purchase price variances to temper the impact on the direct material ratios. And we also continuously exert efforts to drive the efficiency improvements and some cost reduction initiatives. In addition, as mentioned by Jerome, we consistently negotiate some price increases, and as of Q1, around less than $2 million are already realized in our financials Okay. So for -- however, yes, the low utilization of some of the factories due to the backlogs, still resulted to an operating loss for the quarter of $2.4 million. For the net loss for the bottom line, it was narrowed further by -- based on technology incentives that we continue to receive from the China government. Next slide please? Just on the split between our wholly owned and non-wholly-owned subsidiaries. As mentioned for the core business, it's still showing some growth, although somehow muted by the ForEx or weakening of the euro. And that's -- yes, that's muting our -- muting the growth in the Europe revenues. Our active price negotiation efforts and passing on of the cost to the customers, are starting to be realized, being the core net income to a positive $3.3 million. For the non-wholly owned subsidiaries for VIA, while the company expects revenue growth year-on-year from the ramp-up of the new projects. The operations continues to be impacted by a range of challenges like the COVID-related restrictions in China affecting the Suzhou factory, which is close to Shanghai, and that's also causing high increase in raw material and logistics costs. For STI, on the other hand, they are still challenged by the material issues and long lead time parts due to the specialized nature of the products of STI. Well, the Russia and Ukraine conflict is also affecting the Europe side. But for now, we are not seeing significant impact yet, except for some disruptions in the logistics in the -- well potential energy price increases. It's creating an opportunity for STI, with the anticipated increase in the defense spending brought by the ongoing geopolitical issues. Next slide please? On our capital structure, the only change from December of last year, is the additional $12 million loans. Although this is not really additional, but we just have some principal cleanup in December, which later on, was rebuilt in Q1. So not really an additional loan. The decrease of the equity was only driven by the euro weakening, resulting to cumulative translation adjustments in the equity portion. With those 2 changes, the debt-to-equity ratio slightly increased from 0.69 to 0.73. Next slide, please. Despite the current market situation, we ensure that we continue to improve our facilities through line upgrades and further space utilization. For Q1 of '22, we spent $3.4 million of CapEx versus $9 million of Q1 last year. For this year, we expect to spend probably at the same level of 2021 or slightly higher than 2021, as we prepare to ramp up the new projects that we have won from 2021. Next slide? I'll turn it over again to Jerome for the key takeaways.

Yes. Thanks, Lau. So I think the key takeaways at least for us, when we look at the situation is -- the poor supply chain continue to cause disruption in our revenue growth, with a backlog of $80 million. As I mentioned also, however, that we are starting to see some pockets of improvement on the long lead time components and looking at Q2 to be improved versus Q1 in terms of being able to source some of the shortages, some of the components that are in allocation. We continue to improve on our margins by price renegotiations, cost efficiency improvements. and mitigating a number of the increases in headcount costs and our costs. So we continue to push for that -- to the extent that we can share with the customer, we pursue that. And the good thing is, a number of our customers do understand the rising inflation and they are open to adjusting the price. And as you can see, Lau has mentioned that we are -- we have some positive impact in Q1, and we expect that to continue for the rest of the year for IMI. As I mentioned, pipeline win also is quite less in Q1 2022. We had several projects, 2 big projects in Q1 last year, so that kind of distorted the new wins in Q1 2021. Our normal run rate Q1 -- sorry, normal quarterly new wins is about $70 million. So we're slightly below that. The pipeline is still healthy, but we are seeing dips in commercial activity. So we -- as I mentioned, we will continue to look at this space, to see if it's a Q1 effect because of all the price negotiation and securing of components that are short, to be able to deliver the current demand. But I think a lot of the uncertainty in the macro environment does have an effect on future pipeline, so we will continue to watch this space and update in the next quarterly review. Again, the -- and the last point, is there's a lot of uncertainty in macro disruptions going on, with the geopolitical tensions in Europe and the lockdowns in China, which may have a worsening effect on the situation. But with our, I think, 1 year of working through a lot of these issues, we, in a way, have -- together with our customers and supplier, have established a way to see how we can escalate quickly and mitigate a lot of the issues, particularly on the supply chain issue. While on the geopolitical tensions, also, although it's not -- although it's bad for the world, we do see some opportunities for our STI subsidiary in the aerospace and defense business, where commercial activity has picked up in that space. So that's our Q1 analyst presentation. We'll open it up to questions.

Thank you, Jerome. Thank you, Lau. Before we open up the briefing for your questions, I'd just like to acknowledge our CEO, Arthur Tan, who joined us this morning. Maybe Art, you can share your insight on what you are seeing in the industry, and what do you see in the next few months or for the rest of the year?

Thank you, Anthony, and thank you, Jerome and Lau. Yes. Basically, most of the items have been clearly articulated already by Jerome, as far as the current economic situation that we're seeing. I think from our perspective, what is the positive news that we're seeing is, number one, is that the demand cycle for the trend that we have picked for a decade now, which is the electrification of the mobility sector, that is converging with the infrastructure communication, and the industrial side of the businesses, are all happening at a quicker pace. Yes, the costs and logistics issues are near term, due to the geopolitical situation we have in Ukraine as well as the continuing tail of the COVID effects that each country is handling on its own, particularly for China. However, the upside here is actually accelerating now the digitization, as well as the move into this carbon neutrality for everybody. And that's coming on all fronts, both from the private sector side that's driving the business and the technology, as well as from the government side and the people's side, who are using the policies and the political platform in order to accelerate that change. And we're seeing it, because the parity for the total cost of ownership for an electrified vehicle, especially in a fleet management and in a mass transport situation, is now getting close to parity given the oil situation that we have. And clearly, the demand, what we're seeing is dependent on external supply for energy and that each country will have to have its own strategy for energy independence is coming forth. And for that, there is no way to be able to achieve that, without the use of technology and electrification, and the use of electronics. And so for that -- and so IMI plays very well in that as a catalyst for all these different types of technology that touches all those different segments. I think that's the headline that I would like to walk away from. Yes, we have near-term issues that we're dealing with, but this is not just IMI, this is actually a global phenomenon where all of us are actually managing. The positives are, of course, that the direction that the world is going and the need for the world to get to this space is very much aligned to the strategies that IMI has put forth, both in technology, engineering and in manufacturing processes. So I think that that's the takeaway that I would like -- the people that have taken time and effort to [ go ] and listen to our analyst meeting today. Thank you.

Thank you, Art. We opened the briefing for a question we have been receiving already from the chat box. I'll read the first one, will IMI be participating in drone technology?

From -- when you say drone technology, that's a wide scope. So the drone itself is anchored on the camera system. And so as you already know that we have cameras. Although the camera system that we're using, is using not in the drone segment, but in the other forms where the camera sensor system is used. What IMI is engaged with in terms of drone, is more on the defense side through STI, because that's where a lot of the current issues of using drone in the conflict situation, is where we are now actually engaged with. Unfortunately, I cannot disclose the technology that we're involved with directly, as far as the drone is concerned, but that's the segment where IMI is involved in. I don't know if Jerome wants to add anything to that?

No, I think you've covered it, Art.

All right. Next question. Does high cost of oil accelerate the shift from oil to renewable energy, and can IMI participate in the renewable space, such as solar energy?

At least from IMI new wins and existing projects, we do see a strong increase in projects related to the renewables, right, particularly in electric vehicles. I mentioned earlier that, in terms of EV charger, we have a customer that is showing significant growth. I think our year-on-year growth is over 50% in that space. We also have a lot of new wins related to EV last year, and we expect that to continue this year. And we have also started to engage with new customers, that are nontraditional automotive manufacturers. So that indicates, as I mentioned earlier, the shift of a lot of the governments to focus more on renewables and a lot of the incentives given, help propel this industry to invest and we expect a very significant growth in this space, and we're seeing continued new projects and partnerships with a lot of these new players as well. Arthur, if you want to add...

Yes. No, I completely agree with that, and that's really where IMI has positioned itself over the last 10 years. And I just want to reiterate what I mentioned earlier, that the situation where we're seeing now that the trade and access to oil has been weaponized, has clearly woken up every country to have a specific policy for energy independents. And if we are going to look at that, then clearly, if you are a country that doesn't have ability to extract oil, natural gas or have a growth economy that does not sustain your own natural resources, the only viable position for you is to use renewable, wind and [ solar ]. So from a wind perspective, then there's no way that you're going to be able to capture that without turbines. And without turbines using motors, then that plays directly into IMI's capability, as far as providing power modules, because there's no wind turbine that doesn't work without a power modules. And then it cascades from there, the generation part of it to the switches and everything else, again, uses inverters, IGBTs and power modules, which IMI provides for that particular sector, including micro inverters and junction boxes for solar panels. But aside from that, the technology itself, IMI works directly with one of the ace industrials subsidiary company, which is Merlin Solar of which we have a specific IP and technology that actually allows us to be able to apply solar in non-traditional and that basically very, very unique and now growing part of the segment, which is the mobility segment as well as in infrastructure projects, where in the past, solar was not capable of providing or being applied to. And this technology, this grid technology is actually produced in IMI for Merlin Solar. So that's one overlap that we're having significantly, both on the power module side, as far as technology [indiscernible] to use the renewables into the main power supply chain. And then for the solar itself, which is the production of the intellectual property product of Merlin Solar inside. So that's how we touch on those particular segments.

Thank you. For the next question, could you give examples of improvements in efficiency?

What we focus in on, is really how do we increase the throughput without adding additional headcount, right? So given that because of the challenging environment and uncertainty, we have also froze our headcount increase. So because of these restrictions, a lot of the processes, we have to revisit and review to see, are they streamlined, are there ways to automate it, so that you don't have to add additional headcount to process. So a lot of that is driven by continuous process improvement, which is part of our operations program. These are very small individual projects that -- different levels participated and provide improvement in efficiency. So that's one thing. The other one is because of the limit in terms of the headcount that's being hired, we also try to combine certain functions, so that you don't need to have, let's say, or have people wear multiple hats instead of having 1 person for each function. So that's the way of streamlining. And the other area that we're looking at is in some of the locations, for instance, in China, we're looking at how we can actually flatten the organization. So we have some regional positions, so we're trying to see if there's opportunity to combine the regional functions with some of the local functions, and have the local functions take on more responsibilities. I think those are -- and then the last thing is, we continue to look at among -- at least among our sites, which is the best-in-class among the IMI operating sites. And with the revised organization where in the operations is in charge of running all our manufacturing sites, they're able to standardize the process and also aim to move a number of sites into the best-in-class, in terms of value-add per employee, indirect labor -- sorry, direct labor to indirect labor target efficiencies. So these are some of the examples that we're looking at.

Thank you, Jerome. Next question, I think, this is directed to Lau. Maybe, Lau, you can comment. Should we expect a goodwill impairment under VIA Optronics?

Yes. Okay. So we are [ prefacing ] the goodwill for VIA Optronics annually every year. And as of December 2021, we have no impairment assessed for VIA. Although we know that the share price of VIA has dropped significantly, but we're not using the share price as basis -- of the fair value. We're still using the 5-year discounted cash flows, because we're seeing that the forward [ guide ] is still -- we're seeing some improvements towards the next 5 years, and because -- this is because of the ramp-up of the new projects that we're expecting. It's just that the macroeconomic issues and the geopolitical issues are hampering the ramp-up of this -- of the VIA -- of the operations of VIA. So it's not solely based on the share price.

Another one, is IMI considering selling non-wholly owned businesses since they are suffering losses?

Let me answer that. So wholly owned businesses, so there's a couple of us -- the subsidiaries that we have. Now again, I think what we need to do is, understand the strategy of why we had those businesses to begin with and what were the rationale for having them. And each one actually has played its feature. Of course, the dynamics of the pandemic and the current situation and then the challenges of the supply chain has created this challenge that we have. But like I said, does it affect this individual company only or does it affect the entire segment in all the businesses that are actively playing within it. And we can see that it actually affects everybody and not just this company. So yes, we are constantly tracking on being able to rationalize and see how we can bring everything back to profitability. But at the same time, I think it is -- we have to think prudently, that if the main strategy has changed or the trends that we were trying to achieve and the value proposition that we were trying to achieve as a company, IMI, as a whole has changed that this no longer viable in being able to provide that expanded portfolio that IMI has. And so we constantly test for that. So we have to understand. Like, for example, do we believe that in the future, that people will no longer need displays for human-machine interface? And is that -- the touch technology for being able to do that with any interface, whether it would be a car, in medicine, in industrial, it's in tractors, in factory automation in home computing, will that go away? So if it does not, then does that not mean that VIA with its technology and its ability to interface directly with all the different segments and products that IMI produces, still is valuable at a synergistic level, right? So that's something that we have to rationalize. In the same manner, is that given the geopolitical situation that we have, are we comfortable to think that this situation that we have in Ukraine is a onetime event, and it's not going to repeat itself anymore in the future, that the need for being able to put the highest level of technology for defense or for aerospace or for moving goods and transporting high level of communication, both on a satellite and at a cellular basis, will go away; because if the answers to those are no, then again, I challenge the validity of the value of the synergies that these particular assets will bring to us. Yes, they are currently creating some challenges on an operating basis, but we have to be prudent in deciding how we're going to be. One option that we see, is that there are other entities and partners there, who actually are aligned with what we see and the value proposition that the whole prospect -- and the subsidiaries bring. And maybe what we need to do is, be able to then bring those together more aggressively and then be able to then scale at a faster pace, as the economy moves out of these issues. And that's how we view it right now.

Thank you, Art. Next question, is the recovery story in the second half still on track? Or are you seeing a delay in the recovery in the second half?

I think we still expect the supply situation to improve and therefore recovery is -- at least from what we expected in Q1, so far, still on track. But there are a lot of uncertainty. So let me just put that caveat, that we are still not certain what the rising interest rates would have an impact -- how would that have an impact on the demand going forward, and as well as the China COVID zero strategy, how is that going to further affect the supply chain if there's going to be additional lockdowns across China. So assuming things are -- remains the same, we do see improvement in the second half of this year.

Any update on the factory affected by the China lockdown?

And we have, I think, 2, right, in Shenzhen, although Shenzhen was a very brief lockdown. I think it only lasted a week. We have minimal impact on that lockdown, and we are able to recover in -- I think the lockdown was in March, we were able to recover those volumes in April. In Shenzhen, we're operating at around -- sorry, in Jiaxing, we're operating at around 70%, 75%, and I think things are improving. So we do see a gap in April due to the lockdown, but we also expect that to ease and therefore, we can catch up within Q2. The challenge there is, it adds delay also to the supply chain to the other parts, not only in China, but outside of China. So that impact, we are -- it's more indirect. So we don't see -- at least be difficult to quantify what is the direct impact related to that.

Thank you, Jerome. There's no more question in the chat box. Maybe before we close, if you have something to say, Jerome, Lau?

I just want to thank the executive and the management team again and for everybody who has participated in this morning's analyst briefing.

Thank you. Yes, me too. I think I've shared my thoughts, and thank you to each and every one of you for joining the call.

Okay. With that, we're going to close the first quarter briefing for IMI. We are going to upload the materials in our website. Please do visit our website for the materials and other activities of IMI. Thank you very much and stay safe.

Thank you. Bye-bye.

Thank you.

Thank you.