Techwell, Inc. Q2 2008 Earnings Call Transcript

Aug.30.08 | About: Techwell, Inc. (TWLL)

Techwell, Inc. (TWLL) Q2 2008 Earnings Call July 30, 2008 5:15 PM ET

Executives

Beverly Twing – Investor Relations – Shelton Group

Mark Voll – Vice President – Finance & Administration & Chief Financial Officer

Fumihiro Kozato – President & Chief Executive Officer

Analysts

Christopher Chaney – Stanford Group Company

Christopher Longiaru – Sidoti & Company, LLC

Quinn Bolton – Needham & Company

Gary Mobley – Piper Jaffray

Jay Srivatsa – Roth Capital Partners LLC

Heidi Poon – Thomas Weisel Partners

Olga Levinson – Lehman Brothers

Operator

Welcome to the Techwell second quarter 2008 financial results conference call for period ending June 30, 2008. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call, Beverly Twing of the Shelton Group Investor Relations.

Beverly Twing

Welcome to Techwell’s second quarter 2008 financial results conference call. The press release and financial tables associated with today’s conference call were distributed after the close of the market today. If you do not have a copy you may find them on the company’s website at www.TechwellInc.com. This call is being broadcast live over the internet and may be accessed in the investor relations section of Techwell’s website.

Before management begins the discussion of the second quarter’s results, I would like to remind you that this conference call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 which include without limitation statements that relate to future events and include but are not limited to the company’s belief that demand for its products will continue to grow, the company’s ability to better address customer requirements, leverage technology capability and integrate additional functionality and achieve greater market share, the timing, anticipated benefits and acceptance of new products, statements related to future opportunities, continued growth and its anticipated revenue, gross margin, operating expenses and tax rate for the third quarter of 2008, its anticipated annual revenue for 2008 and anticipated trends and growth in the company’s business and end markets in which it operates.

Any forward-looking statements made during this call are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Additional information concerning factors that could cause actual results to differ materially from any forward-looking statements made during this call are contained in the company’s quarterly report on Form 10Q filed with the Securities and Exchange Commission on May 8, 2008. Techwell undertakes no obligation to publicly update any forward-looking statements for any reason except as required by law even as new information becomes available or other events occur in the future.

Thank you for your time and attention. I will now turn the call over to Mark Voll, Techwell’s Chief Financial Officer.

Mark Voll

With me today is our President and Chief Executive Officer, Hiro Kozato. I will begin today’s call with the review of our quarterly financial results and conclude with an outlook for the third quarter of 2008. Following my remarks Hiro will provide an update on our business. We will then open the call for a question and answer session.

Please keep in mind that all reported financial results, unless otherwise noted, are presented on a GAAP basis. The second quarter ended June 30, 2008 we reported total revenue of $17 million which was mid point of our revenue guidance range of $16.5 million to $17.5 million. Revenue for the second quarter compares to $14.7 million in the same period a year ago representing year-over-year growth of 15%. Revenue in the second quarter for each of our product lines consisted of security surveillance revenue of $12.9 million representing 76% of revenue, LCD display revenues of $2 million or 11% of revenue, video decoder revenue of $2.1 million or 13% of revenue and other revenue of approximately $44,000.

Security surveillance revenue grew 41% year-over-year and increased 11% sequentially. LCD display revenue increased 29% year-over-year and increased 16% sequentially. Video decoder revenue declined 45% when compared to the same period last year but increased 2% sequentially. In the second quarter we had two customers that each represented more than 10% of total revenue. Sales to our distributor in China represented 34% of total revenue in the quarter which included shipments to multiple end customers and we had another customer that represented 10% of total revenue. Combined, our 10 largest customers represented 83% of total revenue in the second quarter of which eight of these customers are distributors.

Gross margin for the quarter was 62% and continues to exceed our long term target of 55%. This compares to gross margin of 59% in the second quarter of 2007 and 61% in the prior quarter. Our second quarter gross margin was positively impacted by our transition of new products to the .18 micron manufacturing process. During the second quarter, 54% of total net revenue came from products fabricate in .18 micron. In the next several quarters we expect to realize the full benefits from the cost reduction associated with this transition.

Operating expenses were $8 million in the second quarter representing 47% of total revenue. This compares to operating expenses of $5.7 million or 39% of revenue in the same quarter last year and $7.2 million or 46% of revenue in the first quarter of 2008. Of the $8 million of operating expenses in the quarter, research and development expenses totaled $4.2 million which included more than $600,000 of tape out expenses related to new product development. Operating expenses also included approximately $1.8 million of pre tax stock based compensation expenses under SFAS 123R.

Net income for the second quarter totaled $1.8 million or $0.8 earnings per diluted share. Net income includes pre tax stock based compensation expenses of approximately $1.9 million equating to a $0.09 per diluted share charge. Full diluted earnings per share for the quarter were calculated using 22,098,700 shares. Earnings per diluted share of $0.08 for the second quarter compares to $0.12 in the second quarter of 2007.

Our second quarter net income was impacted by the reduction from the prior quarter of $215,000 in non-operating income as we recorded $540,000 in the second quarter compared to $755,000 in the first quarter. Reduction in non-operating income reflects lower interest rates available on cash, cash equivalents and investments.

Second quarter net income of $1.8 million or 11% of total revenue compares to approximately $2.6 million for the second quarter of 2007 or 18% of total revenue. Our tax rate for the second quarter was 40%. This was slightly higher than the guidance as we were not able to claim any tax benefit for the Federal Research and Development Tax Credit during the quarter. In the future these credits will only be available if the underlying legislation is renewed and approved. This quarter’s tax rate compares to a tax rate of approximately 30% in the same quarter last year. Our non-GAAP tax provision for the second quarter was $1.7 million.

Now turning to the balance sheet, accounts receivable were approximately $2.5 million at the end of the second quarter compared to $2.2 million at the end of the first quarter of this year. Historically, we have sold on credit terms only to OEM customers and as a result our accounts receivable balance have been low in comparison to overall revenues. In the second quarter, revenue from the direct sales to OEMs represented 22% of our revenue while sales to distributors represented 78% of total revenue.

Net income as of June 30, 2008 was $5.3 million unchanged from the close of the first quarter. Our cash, cash equivalents and both short and long term investment balance as of June 30, 2008 was approximately $73.8 million compared to approximately $71.2 million as of March 31, 2008 and $68.4 million as of December 31, 2007. At the end of the second quarter we had 151 employees, 66 of which are in research and development.

In terms of guidance for the third quarter of 2008 we continue to see revenue growth in both our security and automotive markets. As a result, we expect total revenue to be in the range of $18 million to $19 million. The mid point of our guidance range represents year-over-year growth of 22% and sequential growth of 9%. Gross margin for the third quarter is expected to remain comparable to our second quarter results. Total operating expenses will be slightly higher than the second quarter and are expected to range between $6 million to $6.5 million, excluding stock based compensation expenses. The tax rate in the third quarter should remain unchanged from the prior quarters this year unless legislation is enacted that will renew the Federal Research and Development Tax Credits.

This concludes my prepared remarks. Now I will hand the call to Hiro for additional comment.

Fumihiro Kozato

I would like to spend most of our time today discussing our security surveillance business and then touch on our automotive and consumer and PC businesses. At the conclusion of my remarks I will update you on our revenue guidance for 2008.

As our second quarter results illustrate, our security business now represents over 75% of our overall revenues with growth of more than 40% year-over-year. This growth continues to outpace our expectations as demand is increasing across all geographic regions in particular with China and Taiwan increasing significantly. At the same time margins and profitability remain high. ASPs are relative stable due to our ability to sell more highly integrated product that command higher ASPs while also not having to provide significant price breaks to our customers on existing products.

We have also migrated our latest generation products from the .25 micron process to the .18 micron process. We reduce cost and we keep margins high. We believe the combination of healthy end market for the surveillance equipment and our regions that reach surveillance IC product portfolio is driving our current success. Based on our own market study and third party research we believe the security market will continue to grow rapidly.

In addition, new Techwell products with higher levels of integration are due to hit the market staring Q4 this year and will allow us to address a larger portion of the overall video IC market for surveillance equipment.

As a result we are confident that over the next several quarters our security business will continue to grow at or above our previously stated four year guidance operating a growth greater than 25%.

With this as a backdrop let me provide a little detail on the market and our product rollmap. As I just discussed, we believe demand for surveillance equipment, including DVRs and video encoders will remain strong. In fact, a recent report by Multimedia Intelligence, the market research firm based in Scottsdale, Arizona addressed that the number of DVR and video encoder channels will surpass 30 million in 2008 and will grow to nearly 50 million by 2012.

Mark Kirstein, President and co-founder of Multimedia Research has recently reported that digital video recorder segment has been among the key growth drivers for surveillance as BCS have large been displaced. Moving forward the key growth categories will be the product leveraging networked video surveillance, wireless outstanding compatibility with CCTV cameras. Multimedia Research also highlighted that within the DVR and video encoder segments the firm expects that the per channel counts will increase with DVR equipment migrating from four and eight channel DVRs to eight and 16 channel DVRs. These observations are consistent with what we see in the market.

Then into our security rollmap, I believe we are entering a very exciting period for Techwell. As most of you are aware, we have developed a significant new chip in the front end mid signal video decoding segment, achieving what we believe now is roughly 75% to 80% market share of video decoder based products.

Our strategy is to leverage our leadership position in the technically challenging video decoding segment and add additional silicon content that will continue to increase our market opportunity. With that end, we plan to announce two significant products: one in the fourth quarter of 2008 and the other in the first quarter of 2009. [Inaudible] advanced multi-channel display and graphic [Inaudible].

These products are designed to enable our DVR customers to quickly and cost effectively upgrade their systems who natively support high definition display. As a result, customers will see a significant improvement in video quality which we believe would add material volume to their product. We plan to tape out the first of the two products this quarter and look forward to disclosing more details on these products over the next several quarters.

Let me now spend a few minutes on our automotive and consumer end PC businesses. Within automotive, the industry is currently facing a very challenging market environment. In particular SUV and truck sales are slowing. We believe this is negatively impacting our business in near term. First, a large portion of our current LCD revenue is derived from rear seat entertainment applications that are typically sold into SUVs and trucks. That being said, the extent of the impact is difficult to judge because the number of new Techwell based projects continues to increase and the attach rate for LCD display panels is also increasing.

In fact, we are experiencing an uptick in design activity and expect to announce a number of previously awarded design wins that are plan to go into production over the next 12 months. With this in mind we think the long term prospect for our automotive business are quite favorable but in the near term it is reasonable to expect our automotive growth would be constrained by the difficult market conditions within the industry. As a result we would now expect our automotive revenue to grow at approximately 50% growth rate in 2008 as opposed to our previously forecasted 80% growth rate.

In terms of our consumer and PC business, our video decoder sales were marginally higher from the first quarter to the second quarter as expected. While this business has becoming less material to our overall revenue, we are now selling nearly 1 million video decoders per quarter across a large number of consumer and PC accounts. With ASPs now well over $2, the market for stand alone video decoder products has largely stabilized. As a result, we would expect sales from this business to continue to track through our previous expectation.

Turning to our full year revenue guidance, we are tightening the range to between $70 million and $73 million. As we have discussed, we do have some reservations about how fast we can grow the automotive business in the short term based on the current market challenges. However, we remain confident that our growth prospect in our two key markets, surveillance and automotive, are strong and our consumer and PC business has stabilized.

That concludes my prepared remarks. Operator, we will now open the call for question.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Christopher Chaney – Stanford Group Company.

Christopher Chaney – Stanford Group Company

I’m curious to hear more about the automotive space. I know it’s not a huge percentage of your revenues yet but can you update us on perhaps the number of new customers that you expect to enter the mix this quarter? Has that changed or has just the volume of units with those customers changed? Have they pushed out any projects or pushed out any new design wins and have, I’m assuming that prices for those devices haven’t really changed much given that they’ve been negotiated before I believe but if you, what has filled out as well.

And then the second question I had which is unrelated to that was in this quarter, you’re going to be taping out a device in security that will be available in Q4 and I’m wondering, should we expect a tape out expense related to that in the R&D line for Q3?

Fumihiro Kozato

Yes, hi, this is Hiro. First of all, we have not yet lost any design wins but we are seeing a little bit push out on the schedules of the productions and within this quarter, Q3, we’re expecting one of the large auto maker going into production and Q1 next year, another large Japanese auto maker going into production with two of very popular models, car models. So we seen a little bit slowdown in quantity and a little bit push out in the schedule but we have not yet lost any new design wins. In fact, the design activity is getting very active.

Did I answer your first question?

Christopher Chaney – Stanford Group Company

I think so but just to get a little bit more clarification so I believe you were currently shipping to six or seven automotive customers currently and then that number was going to be somewhere around 12 by year end. Is that number now going to be eight by year end or nine by year end or will it be the full 12 by year end? And then should we add to that this one barge OEM that you just mentioned for Q1 09?

Fumihiro Kozato

I think the number is decreasing and we think we will only grow approximately 50% compared with last year instead of 80% previously forecasted.

Christopher Chaney – Stanford Group Company

Well, has pricing remained stable and will that affect your gross margin much?

Fumihiro Kozato

It has stayed stable, yes. And to answer your second question, the comment –

Mark Voll

Regarding the tape out. The tape out activity will be increased so we said that our guidance on operating expenses will increase slightly in Q3 over Q2. I would expect most all the increases would be in R&D and are related to additional tape out expenses but we don’t think that the operating expenses will be material higher. Again under the guidance, would it be slightly higher but still within a range of $6 million to $6.5 million.

Christopher Chaney – Stanford Group Company

So you’re six point, this past quarter you had $6.2 million in non-GAAP op ex and then if we, you said $6 million and $6.5 million so we could probably model $300,000 to $400,000 for a tape out expense in there?

Mark Voll

I would say that’s probably a little bit high. We would only see a slight increase over Q2 levels.

Operator

Your next question comes from Christopher Longiaru – Sidoti & Company, LLC.

Christopher Longiaru – Sidoti & Company, LLC

Can you fill me in again on what percentage of your business automotive was this quarter?

Mark Voll

I believe it was 11% this quarter.

Christopher Longiaru – Sidoti & Company, LLC

So you have this percent number growing at 50% this year. Now do you expect, because you know, basically, you just talked about lowering the number of automakers that from it was supposed to be 12, now it’s nine. Are those 12 going to pick up in 09? The difference?

Fumihiro Kozato

Yes, we think so.

Christopher Longiaru – Sidoti & Company, LLC

So you’re planning on just pushing them out. How many quarters do you think, at this point, you’re pushing that out?

Fumihiro Kozato

Well, one to two quarters. I would say more like one.

Christopher Longiaru – Sidoti & Company, LLC

The only other thing was the tax rate for the remainder of the year is going to hover around this 40% mark, you think, Mark?

Mark Voll

It will unless Congress approves the R&D tax credit which I believe most people expect that they will at which time we would see our tax rate go to a 35% tax rate.

Operator

Your next question comes from Quinn Bolton – Needham & Company.

Quinn Bolton – Needham & Company

Wanted to ask first about just the security business here in the third quarter. Obviously, we’ve got the Beijing games occurring. Is that going to cause any hiccups in the security business, especially in China in the third quarter? I know you’ve talked about continued growth so it doesn’t sound like it’s going to have a major impact but was just wondering if you could talk specifically about what you’re seeing in the China market in the third quarter, in the security area.

Fumihiro Kozato

Yes. Third quarter was definitely, we will be shipping more through third quarter, more than what we shipped in Q2. I think we will grow approximately 10% from the Q2.

Quinn Bolton – Needham & Company

In the security business?

Fumihiro Kozato

Security, yes.

Quinn Bolton – Needham & Company

And that’s overall or that’s specifically within China?

Fumihiro Kozato

It’s overall but mainly from China.

Quinn Bolton – Needham & Company

So it doesn’t sound like the games are having any real negative impact on the third quarter security demand.

Fumihiro Kozato

Exactly. It’s more, it’s not only for Olympics as we stated before. It’s more for overall safety program.

Quinn Bolton – Needham & Company

No, I was just wondering if it, it sounds like there’s lots of disruptions in China clearing customs, transportation issues, things like that but it doesn’t sound like that’s having any impact.

The second question I have here, you touched on some of the new products coming out. You teased us. I was wondering if there is any more color you might be able to provide in terms of what additional functions you might be integrating into the two new security chips. You talked about introducing one in the fourth quarter of this year; one in the first quarter of next year. And you also mentioned the ability to support high definition video so is there anything more, capabilities you can talk about today or should we just stay tuned for the next earnings report?

Fumihiro Kozato

I don’t think I want to get into the detail specs in the conference call because we’re still only talking to a small number of customers, our key accounts, on these two products so if it’s okay for you I would like to –

Quinn Bolton – Needham & Company

No, no, I understand the sensitivity. Would you might be able to comment then, a rough increase in –

Fumihiro Kozato

I can give you a rough idea, the chip will have 4-in-1 video decoder with audio ADC and our max and video encoder and VGA, the insulator for VGA output. This would have three gig insulator built in and the many other new features. We don’t want to comment at this moment but I will say it’ll be a very powerful chip. The ASP will be at least 2X of our current max chip that we’re selling at low teens.

Quinn Bolton – Needham & Company

That’s what I was ultimately driving at. That’s perfect. The last question, Mark, just trying to think about the op ex going forward. Sounds like you had $600,000 of tape out expenses in Q2, sounds like you’ve got more tape out expenses coming in Q3 and maybe again in even Q4 because I know you talked about introducing another chip in Q1 but just trying to get a sense, is that going to be pretty consistent or do you think we have a lot of tape out expenses schedule for the second half and we might actually then see R&D tick back down a little bit once that tape out pace has slowed down a little bit?

Mark Voll

I think Hiro’s got a full slate of new products he’s looking to bring to the market so we would probably expect to see the tape out expenses increase in particular in Q3/Q4. But again there are going to be slight increases over Q2 levels.

Quinn Bolton – Needham & Company

So this is a good, steady state, that $6 million/$6.5 million, a good steady state to think of op ex going forward.

Mark Voll

That’s correct.

Fumihiro Kozato

Excuse me, may I add one more comment?

Quinn Bolton – Needham & Company

Absolutely.

Fumihiro Kozato

About those two chips. Actually, both chip have similar functions, similar specs except one is for high end market or 16 channel higher channel market and the other one is for low-to-mid end market. We are not focus in only one market, we focus in our other segment: low end, mid end, high end segment.

Operator

Your next question comes from Gary Mobley – Piper Jaffray.

Gary Mobley – Piper Jaffray

Just a followup on the last point Hiro made. It sounds like the new chips are going to be broadly applicable to all your customers. Is that the strategy, to sell the product and just to hit all of them and drive the ASP higher and as well, what the margin profile look in this particular product compared to your current?

Fumihiro Kozato

Margin will stay similar and again we want to address all the different segment from low end to mid end to high end.

Gary Mobley – Piper Jaffray

Question for Mark Voll. I think you mentioned in your prepared remarks the stock based compensation tax is that for the quarter was roughly, what, $500,000?

Mark Voll

That’s correct. The difference between the non-GAAP I gave at $1.7 million and the GAAP of $1.2 million, correct.

Gary Mobley – Piper Jaffray

Do you recall what it was in the first quarter?

Mark Voll

I believe it was about $400,000.

Operator

Your next question comes from Jay Srivatsa – Roth Capital Partners LLC.

Jay Srivatsa – Roth Capital Partners LLC

In my first question, could you help us understand what percentage of your revenues was from China this quarter?

Mark Voll

34% of our revenues were from China.

Jay Srivatsa – Roth Capital Partners LLC

That’s up from 28% last quarter? Is that right?

Mark Voll

That’s correct.

Jay Srivatsa – Roth Capital Partners LLC

As you look at the video surveillance market, beyond China, are you getting any meaningful traction in other countries, specifically Japan? Can you speak to that? What’s the situation?

Fumihiro Kozato

Yes, we think we’re getting a good traction from Taiwan and of course from Korea; Japan too. Well, we believe that the growth rate from Japan and Korea are not too high. I think China and Taiwan is growing faster now.

Jay Srivatsa – Roth Capital Partners LLC

Hiro, as you look beyond 2008 as you get into the first quarter, you’ve had typical seasonality in the past. Given the automotive strength that you are hoping to get in the first quarter, coupled with the video surveillance business, do you hope to be able to mitigate seasonality or what’s your expectation as you look at the March quarter?

Fumihiro Kozato

In Q1, next year?

Jay Srivatsa – Roth Capital Partners LLC

Yes.

Fumihiro Kozato

I think automotive market is not really impacted by the seasonality. It’s less seasonality. It all depends on the automakers’ product schedule. Once it’s fixed, it’s very difficult to change their schedule so it’s, yes, it’s not really seasonality at issue.

Jay Srivatsa – Roth Capital Partners LLC

How about the video surveillance?

Fumihiro Kozato

Video surveillance, yes, yes, Q1 usually we see a slower Q1.

Jay Srivatsa – Roth Capital Partners LLC

Maybe I’ll ask a question on your plans with cash. In the past, you’ve talked about looking at small technology acquisitions. What’s the situation there? Can you give us an update?

Fumihiro Kozato

Yes, we’re talking to multiple companies at this moment and I think it’s still too early to make further comment.

Jay Srivatsa – Roth Capital Partners LLC

Can you share with us which areas you’re looking at?

Fumihiro Kozato

In security area.

Jay Srivatsa – Roth Capital Partners LLC

And maybe a last question, on the IP camera market. What’s your position there? Are you developing products to address that market? Where are things at? When do you expect to have products available for that market? When do expect that to be material to your revenues?

Fumihiro Kozato

Yes. We have a 10 man team in Japan developing on the IP camera chip set but instead of developing a radio IP camera, we integrated fish eye camera, ISP. And fish eye covers 180 degree wide angle and our chip can correct the distortion so we can make the screen flat and by doing this, I think we can replace multiple cameras with just one fish eye camera. And the chip has been, we tape out the chip and have received the chip about two weeks ago. At this moment, the chip is working and we will make slight modification so in Q4 this year I think we will tape out another fish eye chip. So we will probably not see the revenue until end of next year.

Jay Srivatsa – Roth Capital Partners LLC

The end of next year you said?

Fumihiro Kozato

Right.

Jay Srivatsa – Roth Capital Partners LLC

And then last question on the plain .18 micron transition, I think I heard 54% of your revenues in the June quarter from .18. What is your expectation as you look at the September and December quarters in terms of .18 products?

Mark Voll

Well, I would believe by the end of the year we’d be somewhere about two-thirds to three-quarters of our revenues would be in .18.

Operator

Your next question comes from Heidi Poon – Thomas Weisel Partners.

Heidi Poon – Thomas Weisel Partners

Just want to get a sense of your backlog and what goes into your full year guidance. Given the automotive condition and I think one of your major customers holding on to the second half for a forecast but being more cautious. How secure is that backlog especially as it pertains to you Q4?

Fumihiro Kozato

Backlog in Q4. I’m sorry that I don’t have the exact number but usually one to two months. And it’s not that the customer holding purchase order, it’s more that the sales slowing down. The first rear seat entertainment unit usually will go into trucks or SUV and we think SUV and trucks are not selling well but starting from next year we think the volume will pick up because we’ll be shipping to sedans for rear view camera purpose instead of the rear seat entertainment.

Heidi Poon – Thomas Weisel Partners

When will the sedans models start shipping? Next year?

Fumihiro Kozato

One next month in small volume and two more models will be shipping in Q1. Also Japanese auto makers and both are in the front console.

Heidi Poon – Thomas Weisel Partners

Also, getting back to the security surveillance business, could you also give us a sense of the business condition in other regions, particularly if you saw any weakness related to the U.S. retail market?

Fumihiro Kozato

We don’t see the –

Heidi Poon – Thomas Weisel Partners

DVR box type of thing.

Fumihiro Kozato

Yes, I think it’s some.

Heidi Poon – Thomas Weisel Partners

I think Quinn asked the question earlier but I wasn’t clear if I got the sense of where you get the sense that Q4 in the China projects would still be holding up. Could you give me a sense of how the China business would be like in Q4 as well?

Fumihiro Kozato

Yes. In Q4 we think we’ll grow 5% to 10% compared with Q3. So it’s still going strong in China.

Heidi Poon – Thomas Weisel Partners

So you were saying that Q3 would be up 10% from Q2 and then –

Fumihiro Kozato

Yes, then another 5% to 10% in Q4 from Q3. Approximately 5%. Approximately 10% growth in Q3 and then another 5% to 10% in Q4.

Operator

Your last question comes from Olga Levinson – Lehman Brothers.

Olga Levinson – Lehman Brothers

Most of my questions have been answered but can you remind me, or I don’t know if I missed it earlier on how many auto customers did you ship into this quarter?

Fumihiro Kozato

This quarter. Up to date we shipping to several, at least five. I would say five to six. Let me count again. Yes, five to six.

Olga Levinson – Lehman Brothers

And then when you said that some of your auto customers are reducing their volumes due to the current environment, is that in every single one of these customers or – ?

Fumihiro Kozato

Yes. It’s very average now.

Olga Levinson – Lehman Brothers

How recently have they revised their numbers/outlook at that? How frequently do you get updates for them?

Fumihiro Kozato

Since last quarter. End of the last quarter?

Olga Levinson – Lehman Brothers

And you suggest that you’re going to announce several more design wins before the end of the year?

Fumihiro Kozato

Yes, we think so.

Olga Levinson – Lehman Brothers

So that would bring the total to about 14?

Fumihiro Kozato

Yes, more than 12.

Operator

There are no more further questions at this time.

Mark Voll

We encourage you to visit our website at www.TechwellInc.com to view our latest announcements as well as our calendar of events. In August, we will present at financial and industry conferences including the RBC Capital Markets Technology, Media and Communications Conference on the 7th in San Francisco. Additionally, if you have questions or would like more information please contact Shelton Group or me directly.

Thank you for joining us today.

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