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Edited Transcript of 2357.TW earnings conference call or presentation 13-Nov-19 8:00am GMT

Q3 2019 Asustek Computer Inc Earnings Presentation

Taipei Dec 4, 2019 (Thomson StreetEvents) -- Edited Transcript of Asustek Computer Inc earnings conference call or presentation Wednesday, November 13, 2019 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Hsien-Yuen Hsu

ASUSTeK Computer Inc. - Co-CEO & Director

* Nick Wu

ASUSTeK Computer Inc. - CFO

* Samson Hu

ASUSTeK Computer Inc. - Co-CEO & Director

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Conference Call Participants

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* Angela Hsiang

KGI Securities Co. Ltd., Research Division - Research Analyst

* Jerry Su

Crédit Suisse AG, Research Division - Director

* Jianfa Wei

Yuanta Securities Investment Consulting Co., Ltd. - Equity Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to ASUSTeK 2019 Q3 Investor Conference. Today's conference is divided into 2 portions. The first will be presented by CFO, Nick Wu. The second will be presented by co-CEOs, S.Y. Hsu and Samson Hu. First, let's welcome Nick Wu.

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Nick Wu, ASUSTeK Computer Inc. - CFO [2]

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Ladies and gentlemen. Let's first look at Page 5 of our slides. I'm very pleased to say that in Q3 of 2019, we have achieved very positive growth. Net revenue in 2019 Q3 reached TWD 88.5 billion with 24% Q-o-Q. Operating profit reached TWD 4.36 billion. We grew 3x over last quarter, with 95% growth year-over-year. Net profit reached TWD 56.3 billion (sic) [TWD 5.63 billion], with 235% Q-o-Q and 69% growth Y-o-Y. In the third Q, EPS reached TWD 7.6.

Our net revenue of TWD 88.5 billion far exceeded expectations. There are a few positive factors. First of all, our products in Asia and Europe have reached very good positive growth and shipment. The second factor is that our gaming products and notebooks have reached very good performance in all regions. In addition, our main products in PCBs as well as new products have stimulated our positive growth year-over-year.

Our gross margin in Q3 reached 15.3%. Operating margin reached 4.9%. This also far exceeded last quarter. The main reasons are the new product cycle as well as the product mix improvement. These have greatly improved corporate profitability. The second is in our revenue scale, and we have achieved quite good economy of scale. In Q3, the cost of raw materials fell, meaning that in terms of our inventory control, we were more conservative in Q2 in raw material inventory. Therefore, in Q3, as we increased shipment and reduced inventory, we have reached a turnaround and achieved better profitability.

On next page, on Page 6, we have our brand income statement with and without our old and new phone models. Without our phone models, we can see that net revenue is TWD 84 billion, and operating profit is TWD 6.63 billion, meaning that gross margin is 17.5%, and operating margin is 7.9%, which means very good growth for us. In terms of phones, our old phones are currently -- we are getting rid of inventory until we can clear it out. In new phone models, due to our company strategy, we have been more aggressive in terms of investment and deployment. Of course, this brings about financial pressure. But according to our users and our sale channels, we have received a lot of recognition, and we believe that it will be a very good effect on our phone business.

This next page shows our non-OP items. In Q3, the largest item is our dividend income reaching TWD 2.3 billion. We also have a minor exchange loss of TWD 141 million. In investment income, we have TWD 45 million -- TWD 44 million. So total non-OP items is TWD 2.64 billion.

On next page, we have our balance sheet. Generally speaking, we have a very stable and healthy situation. We have improved our inventories. Currently, inventories account for a TWD 73.5 billion, which is a reduction of 2% Q-o-Q and 14% Y-o-Y. This also reflects the company's inventory control and quality control and our efforts and achievements in this area.

Next, we have listed some of our revenue sources for your reference. On Page 10, you can see our revenue mix. By product group in Q3, about 71% came from PC products and 29% came from components and other products. By region, Europe accounts for 32%, Asia accounts for 48%, and the Americas account for 20%.

On the next page, we can see our outlook for Q4 2019. Currently, we expect that PCs will drop 0% to 5% Q-o-Q, and components will drop 5% Q-o-Q.

Generally speaking, we have a very positive outlook on company operations. From last year to this year, we have said that ASUSTeK, our foundations lie in our products and our user experience. So in our management, we have made great efforts to improve our fundamentals, and our fundamentals have returned to positive growth. We are very positive, and we firmly believe that in the next 2 quarters, we will be able to achieve positive growth in revenue and profit Y-o-Y.

In the fourth quarter of this year, there are some short-term factors, including the U.S.-China trade war as well as its uncertainty. So we have decided that in the China area, we will more aggressively control our shipments and inventory. So this will affect our shipments and our revenue in Q4. In addition, the processor shortage in Q4 may continue. So this is another issue that may cause uncertainty.

Lastly, I mentioned earlier that in Q3, some of our revenue came from the turnaround in terms of raw material costs. In Q4, this will not continue. So overall speaking, in Q4, our operations is positive in the long term. However, compared to Q3, the revenue and profit may slightly reduce compared to Q3. So this is our general business outlook.

Next, I would like to introduce our co-CEO, to introduce our strategy and outlook. Let's welcome S.Y. Hsu.

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Hsien-Yuen Hsu, ASUSTeK Computer Inc. - Co-CEO & Director [3]

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I am S.Y. Hsu. I would like to introduce our key business objectives. Currently, we have 3 key business objectives, and they are the same as the last quarter. The first is how to manage market dynamics; second, expand in addressable markets; and third, focus on areas of growth.

In terms of market risk factors, we have a lot of economic uncertainty as well as consumer confidence. In Europe, we also faced pricing competition. In the second half of this year, we also see that certain components like DRAMs have improved -- increased in price. Internally, we are working in terms of innovation and efficiency to face these competitions and these risk factors. The good news is that the CPU shortage is easing as well as the easing of demand for graphic cards due to bitcoin mining. Also in PC products, we are entering a new cycle, and our gaming phones have exceeded our shipment expectations and received very good reviews.

Also, in terms of operating strategies, we have focused on differentiating product segments, aggressively devoting ourselves to gaming PCs and thin and light PCs. Also, starting in 2011, we started deploying in the creator product and creator market. This year, at EVA, we announced a new product line, a creator product line: monitors, desktops, netbooks, peripherals. And we announced our new line ProArt. We hope that through product innovation and understanding user needs, we can design a new competitive edge in terms of market strategy. We want to create value and product differentiation. So in addressable markets, we are working on commercial PCs for professionals, corporations and stock markets. Those are our main focus areas in the next quarter.

Next page, please. On this page, we can see that in our 2 different areas, open platform products and system products, in terms of Y-o-Y growth, we have pretty good growth. System products has 3% growth and 9% growth for open platform products. As for gaming PCs, we can see that, in units, we have grown 17%. The industry average is less than 10%. So we are outperforming the industry average. Next page, please.

On this page, we can see our key objectives by products. For open platforms, we hope to maintain our #1 brand position and maintain consistent market share growth. In PC products, we are working on expanding our products for gaming and for new segments. We hope -- in terms of PC, we want to create new market value based on innovation, for example, expand use of ScreenPads and thin bezels and create the best user experience. Lately, the PC market has been declining. However, ASUS has been outperforming the market. In the second half of 2019 to 2020, the year-over-year growth for PCs, we hope, to break even or even achieve positive growth. We hope that in terms of gaming to become the #1 brand for gamers. So in terms of PCBs, PCs, phones, peripherals and even gaming themes, I feel that only ASUS has the advantage in creating this whole ecosystem. So in markets worldwide, we have very good performance. We also work closely with content providers, communities and gamers to promote our products.

In creator products, this is a very hot new topic. For content makers, we are making creator PCs and creator notebooks. We expect double-digit growth in the future. And as I mentioned earlier, in 2011, we started deployment in this area. And we started with ProArt display. This year at EVA, we have announced our new product line, and we hope to create the total solution for our creator products. In commercial products, we are working on dedicated users. And in terms of commercial and creator products, we hope to exceed 1 million units in the near future. As for phones, we are focusing on power users and gaming phones. We hope to enable and create new smartphone categories to maintain our market role and create profitable growth.

Next, let me introduce Samson to talk about our product strategy and market development.

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Samson Hu, ASUSTeK Computer Inc. - Co-CEO & Director [4]

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Good afternoon. I will talk mainly about product strategy as well as late -- recent market development. On this page, this is what we announced at EVA, as S.Y. Hsu, just announced. We announced the full line of Pro Art products, including desktops, Studio Book and monitors.

In the creator market, we expect ASUS to be a total solution provider and work closely and become partners with creators. In 2020, we will continue to work in this area to provide better solutions, and we hope that the ProArt product line can create a new impetus for ASUS in terms of profit, revenue and brand position. Next page, please.

Here, I want to talk about the entire PC industry. In about 2012, it started to decline and, even in terms of consumer products, it declined. So we have been thinking about how to stimulate growth in the PC industry and to stimulate our revenue and profit growth in our PC products. So in 2018, we launched the first generation of ScreenPad. This year, we launched the second generation of ScreenPad, and we will soon launch ScreenPad Plus. So we are aggressively deploying these products from high-end products, and we are moving down to mainstream products. In 2020, we will expand our efforts in this area to push this idea into a full product line and continually evolve. We hope that this area will not only stimulate the whole PC industry. We define this as the laptop of tomorrow. This is what we hope for the PC business. And we firmly believe that in 2020, this will continue to drive ASUS' PC business growth in profit and in revenue. So this is another main issue that I would like to share with you all. Next page, please.

Next, I would like to talk about the development of our main products as well as their in-house share. First, in thin and light notebooks, in order to continue to grow, we believe that thin and light notebooks will continue to grow market share. So in in-house share, in 2018, thin and light products accounted for 42%, and in 2018 -- 2019, it grew to 58%. In Y-o-Y growth, we exceeded the market growth of 28%, we achieved 37% Y-o-Y growth. So in 2020, we will continue in this area. Next page.

So in terms of market share across selected countries, we have reached #1 in many countries, including, for example, here, we can see many Southeast Asia countries and France. We are not only #1, we dominate the market. Next page.

In gaming notebooks, in the in-house share of gaming products, our gaming notebooks, we achieved double-digit growth. And this year, in 2019, we achieved 15% growth. In terms of Y-o-Y growth, the market growth has slightly moderated to only 9% whereas ASUS, due to our product innovation and our sales channels and deployment, we reached 17% Y-o-Y growth. Next page.

So gaming notebook. In about 15 countries, we reached #1 market leader position. In 6 countries, we completely dominate the market with more than 40% market share. So for example, in Indonesia, we have 55%; and France, we have 33% market share. So gaming notebooks in ASUS account for a very large portion of our products, and we will continue in 2020.

That ends our strategy and outlook.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have not received any questions online yet. (Operator Instructions) The first question is from Crédit Suisse.

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Jerry Su, Crédit Suisse AG, Research Division - Director [2]

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In Q3, because of the turnaround in inventory, the profitability accounts for how much of gross margin?

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Nick Wu, ASUSTeK Computer Inc. - CFO [3]

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As we reported, because of our adjustment, we have focused on product and operation improvements. So because of our new products and our product mix, it has driven our revenue scale and improved our operations. As for inventory in the first half of this year, at that time, because there was uncertainty in our supply and because of fluctuating prices, therefore, we made some more preparations, and we were more conservative in our preparations. Therefore, based on the timing of the inventory and the market price at the time, in Q3, we have to recognize these prices. And so with the improving shipments and reduce -- reducing inventory, we have achieved turnaround. But from another aspect, in Q1 to Q3, our operating profit is very healthy and trending positive. Our inventory shows that in the first half of this year, it was a loss, but it turned around into a profit in Q3. So roughly speaking, from Q2 to Q3, our gross margin, about 1/3 of it is contributed from inventory.

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Operator [4]

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Our second question is from KGI.

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Angela Hsiang, KGI Securities Co. Ltd., Research Division - Research Analyst [5]

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The gross margin and operating margin for phones in Q3 trend negative, and the result is negative. So how does ASUS view this trend? And how does it position the phone business?

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Unidentified Company Representative, [6]

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Let me take this question. In Q3, the reason for the downturn is because in Q2, there was less shipment, and there was more shipment in Q3. Therefore, the loss is also magnified. So when we were discussing ROG Phone development, one of our main strategies is that we have to enable and activate gaming phones. This is not something that is achievable in only 1 or 2 quarters because there are a number of external factors, and we have to change user habits. Therefore, we set our goal in 3 years because this year is actually the first year or, technically speaking, the first half year because we only just launched the ROG Phone. Therefore, to expect great performance in the first year is not very reasonable. Therefore, we believe that this trend is acceptable and reasonable, and this conforms to our early expectations. So we will continue to push and promote our ROG Phones.

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Operator [7]

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Our next question is also from KGI.

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Unidentified Analyst, [8]

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There are 2 questions. First is in terms of creator products, what is the goal for percentage of revenue into 2020? As for gaming PCs, what will gaming PCs account for in the percentage of revenue in 2020? And what is the shipment outlook?

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Unidentified Company Representative, [9]

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So first, in terms of creator products, when we look at product line, as I said, we focused more on monitor because in 2011, we started deployment. So in terms of sales channel and in terms of coverage, we are very ready, and we are very complete in this area. As for desktops and studio books, although we have advantage in terms of our product line, however, we need to work on sales channels and on our users. This will take some time in terms of deployment. So from a more conservative view, our creator products in 2020, we aim to achieve high-single-digit growth in revenue or high-single-digit percentage of our internal -- of our ASUS products.

In gaming PCs, the entire industry is very similar in next year as this year, which is probably single-digit growth. However, we hope to exceed market average. Therefore, we hope to achieve double digits. So in 2019, we had 17% growth. Next year, in 2020, we want to achieve high-double-digit growth between 15% to 20%. That is our goal. To achieve this goal, we will continue to work on product innovation, and we have some concrete plans for next year. In May or June, we will make an official announcement. And in Q1, we will have some product launch, so please await our developments. We believe that product competitiveness will drive growth, and so we will continue to work in this area. And we have high confidence in our products.

As for the larger environment of the industry, even though it is experiencing low growth, we believe our excellent product will outperform the industry and we will achieve 15% to 20% growth next year.

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Operator [10]

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The next question is from First Financial Holding.

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Unidentified Analyst, [11]

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Have you resolved the phone shortage because at the beginning, the supply was a little spotty? Have you resolved this issue?

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Unidentified Company Representative, [12]

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Indeed, at first, the supply was inconsistent because there were some defects. So we had to work on our supply in the very beginning. However, now we have satisfied the early orders. And we are also contemplating this issue internally. I believe that this is because we need to work both in terms of design and production. In design, we want to make a product as perfect as possible. However, perfection comes at a cost. We have to consider factory capabilities in -- and how it will affect cost and yield rate. So we have had a lot of internal discussions. And so in the future, we need to think about construction method in the design process, how to work with early suppliers in order to bring this time line forward. Also, we need to consider if we want a more perfect construction method, how do we achieve or how do we trade off with a product yield. So these are all issues that we are considering. And in the future, we will work on how to achieve a smooth supply of products at the beginning of its launch.

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Operator [13]

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The next question is from Nikkei Asian Review.

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Unidentified Analyst, [14]

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Currently, what is the situation with the Intel CPU shortage? Will this continue into the first half of next year? What is the extent of the shortage? And how is ASUS going to respond?

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Unidentified Company Representative, [15]

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Let me take care of this question. The Intel CPU shortage began in Q4 of last year and continued to Q1 of this year. In Q2 and Q3 of this year, the situation is easing and the messaging from our partner tells us that in Q4, we still face some shortage. This is not something that is unique to ASUS but affects the entire PC industry. As for 2020, currently, the information transparency lets -- allows us to know that in Q1, we will have some -- we will not have CPU shortage. However, there is not enough transparency for Q2 because this is a situation that has continued from Q4 of last year. ASUS has found some ways to respond to the situation. We have developed and deployed alternative solutions. These are all ready, so we can respond immediately and flexibly. We are also working with frontline sales and frontline consumers. We are communicating with them as to how alternative solutions can work in terms of power and in terms of efficiency. And we can see that they are becoming better received by the market, so I feel that alternative solutions can lessen the impact of the Intel CPU shortage.

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Operator [16]

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Our next question is also from Nikkei Asian Review.

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Unidentified Analyst, [17]

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In light of the U.S.-China trade war, what is ASUS' percentage of sales in the U.S.? Also, what are your plans and schedule for the transfer of production base?

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Unidentified Company Representative, [18]

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In the U.S., our PC products account for about 20% because the U.S.-China trade war has continued for quite some time. So I'm sure everybody understands that in this process, the U.S. decision-making is very dynamic. So we are also very prepared for this reality, whether it's good news or bad news, we have prepared our production base in the third country. Now in mid-November, we are completely prepared and deployed for a third-country production base. So based on the situation of the U.S.-China trade war, we can ship from China or ship from the third country. We are very ready. As for where our production base is, currently, we are working with partners in Taiwan.

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Operator [19]

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The next question is from Yuanta Securities.

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Jianfa Wei, Yuanta Securities Investment Consulting Co., Ltd. - Equity Research Analyst [20]

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ASUS' phone business continues to record a loss. When do you expect the phone business to break even or to turn around?

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Unidentified Company Representative, [21]

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In the beginning, when we reorganized our phone business, we had an internal discussion of our strategy because we refocused on power users and gaming, so this will definitely affect our revenue and profitability. So we set our goal for 3 years. We hope that in the 3 years, we can refocus on these 2 segments. As this market grows, we can build on our early investment and early position to create a competitive advantage in this market. So we hope that in 3 years, we can turn around. That's our goal.

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Operator [22]

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The next question is from Yuanta Securities.

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Unidentified Analyst, [23]

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Askey's loss is lessening. When do you expect Askey to become profitable?

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Unidentified Company Representative, [24]

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Let me take this question about Askey. Since the beginning of 2019, there have been a number of adjustments. First, in products, they have scaled back products that show low growth in the future, such as cable modem, DSL and set-top box. In addition, they are deploying products such as 5G products, LTE routers and small-cell products. In addition to making product adjustments, there are a number of adjustments made in human resources. So reflecting on the first 3 quarters of this year, we have reduced losses by 50%. And in Q4, we hope to break even. So we foresee that in 2020, we will be able to at least break even. That is our expectation for Askey. Based on their deployment of 5G products, we believe that this is the right strategy, so that next year, we can break even and even create a profit.

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Operator [25]

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The next question is from JPMorgan.

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Unidentified Analyst, [26]

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We see that in Q3, new phones account for a negative gross profit margin. So what is the pricing strategy in the future? And with such competitive pricing, is it hard to turn a profit? Will ASUS consider reducing the price in the future?

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Unidentified Company Representative, [27]

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This year, we have been very aggressive in terms of pricing of gaming phones. However, in terms of ZenFone, the ZenFone 6 is the -- priced the highest of all of our ZenFone products. The reason we have such competitive pricing for our gaming phones is to enable the gaming segment. Therefore, with new-generation phones, how can we effectively raise the ASP, this is -- there's a very important factor, which is that in 2020, we believe that all new phones will have 5G features. So with 5G technology, we have a higher complexity and as well as key pass technology. Therefore, with 5G phones, the ASP will be higher than 4G phones, significantly higher. And I believe that this will help us turn a profit.

In terms of OpEx, our CFO showed how our income statement is different when we exclude phones. So we have controlled our resources or our use of resources so that they are more effective. I believe that we have done very well so far. And in the short term, unless we make further adjustments in terms of product development, we will not make further changes.

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Operator [28]

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The next question is also from JPMorgan.

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Unidentified Analyst, [29]

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In terms of commercial PCs and Chromebooks, what is the status of development currently and in the next 2 years? Also, what is the profitability of these 2 products compared to original PCs?

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Unidentified Company Representative, [30]

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Let me quickly respond to this question. In our last investor conference, I reported to everyone that the commercial segment is growing whereas the consumer segment is shrinking. In the past, ASUS deployed fewer resources in the commercial segment. However, starting last year, we became more aggressive in this area. We expect that in the second half of next year, we will see better contribution in terms of profit and revenue.

As for Chromebooks, our strategy is that we are going to focus not only on entry segment but also on mainstream and premium products. We believe that Chromebook should not just be an entry product. We want to improve the quantity as well as the quality of Chromebooks, especially premium products. So we have been working very closely with our partners, and we have finalized some collaborations in 2020. So we are going to work on Chromebooks in the entry, mainstream and premium segments.

As for commercial desktops and commercial notebooks, with our great efforts in the past 6 months, we believe that we have created a very complete product line. So in Q1 and Q2 of next year, we believe that it will be finished, and we will have deployed our sales channel. In our last investor conference, I also reported to everyone that we are completing our sales channels in not only China and Taiwan, our home markets, but also in Southeast Asia because our consumer PCs perform very well in Southeast Asia and even dominate many of these markets. We can leverage this brand position and our domination in these markets to very quickly launch commercial products in these local markets. Therefore, because of our complete product line and the deployment of our sales channels, we believe that in the second half of next year, we can see contributions from these segments. So as for desktop, notebooks and Chromebooks, we believe that their profitability will be higher than average. So that is our strategy for commercial products.

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Nick Wu, ASUSTeK Computer Inc. - CFO [31]

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Next, I want to explain a little bit about -- a question about our operation margin. Our operating margin in Q3 reached 4.9%, which is a new high since 2014. What is the cause for this? Also, do we see an easing of competitive pressure in the PC market? Please see our financials on Page 5 of our slides. We can see that in Q3, our gross margin grew from 13.8% in Q2 to 15.3% in Q3. This is because of our product mix and our innovative design. As for operating margin, it grew from 1.4% in Q2 to 4.9% in Q3. This is because of our revenue scale improvement and economy of scale. Therefore, in Q3, we can see that our shipments and revenue exceeded expectations based on better economy of scale and better product mix. We will continue to improve our product mix. We have worked on it in the past, and we will continue, too, in the future.

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Unidentified Company Representative, [32]

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As for shipments, if we continue in this direction, we believe that ASUS can continue to drive positive growth. As for the industry competition, we maintain a neutral position, there is always competition. However, in terms of product operation management, inventory and quality control, we have made a lot of efforts and improvements. These fundamentals have improved, meaning that some of our special product innovation, including ScreenPad and Nano Edge, these thin and light and thin bezel products have been very well received by the market. Therefore, our main advantage is improving our own product competitiveness.

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Operator [33]

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The next question is from First Financial Holding.

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Unidentified Analyst, [34]

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AMD CPUs, are they slower in terms of PC usage? Or do they overheat?

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Unidentified Company Representative, [35]

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Let me handle this question. I believe that you are very understanding of the industry. I think that in the early days, AMD CPUs indeed have these problems and even some problems in performance. And generally speaking, AMD's brand image is inferior to that of Intel, so they have made slower progress. But this year, they have the new generation of CPU, and they have the leverage with TSMC. Next year, they will launch the 7-nanometer CPU. So in terms of performance, power efficiency, they are comparable to Intel. Add into the mix the recent Intel CPU shortage, we can see that AMD has a very good opportunity. And their market share is increasing, not only in ASUS but also across the whole industry, in the IT industry. Marketing may be important, but the product is the most important, and AMD products in the past 2 years have increased greatly in terms of competitiveness. I believe that next year, AMD will make great progress in the PC market.

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Operator [36]

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We have answered most of the questions that have been submitted. (Operator Instructions) The next question is from JPMorgan.

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Unidentified Analyst, [37]

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In the clearing of inventory of old phones, what is the time line?

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Unidentified Company Representative, [38]

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Currently speaking, we expect that the sale of old phones will continue to Q1 of next year or, at the latest, Q2 of next year. This is because in Brazil, some of the sales are a little slower than expected. So we expect that in Q2 of next year, at the latest, that we can clear all of the inventory.

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Operator [39]

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The next question is from KGI.

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Angela Hsiang, KGI Securities Co. Ltd., Research Division - Research Analyst [40]

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I would like to ask about the OP margin for Q4 of 2019 and 2020. What is the goal or the expectation?

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Unidentified Company Representative, [41]

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I would first like to remind everyone that based on Taiwan's legal requirements, we cannot give an exact number or an exact prediction. However, based on our report, we believe that our strong fundamentals in product development, inventory control as well as our addressable market, we feel that after our efforts, we have made a lot of improvement. So in terms of mid-term to long-term goals, we feel that in the next few quarters, ASUS will continue to have positive growth in 2020. We believe that we will continue to have positive Y-o-Y growth for each quarter of 2020. That is our goal.

In Q4 of 2019, as we reported, there are some short-term factors in the industry as well as our own internal strategic plans. These include, for example, the China-U. S. trade war. This has impacted the industry as well as impacted the demand. So in response, we have adjusted operations in China, strategically reducing our shipments and inventory in China. So we expect that after adjustments in Q4, we will return to a healthy and competitive situation.

We also mentioned the CPU shortage and supply shortage. These factors, generally speaking, allow us to have a neutral-to-positive outlook for Q4. I would like to also mention that of all of our sales regions, excluding China, ASUS is performing very well in Asia, Southeast Asia and Europe, and we have come back to positive growth. We hope to continue positive growth in the future.

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Operator [42]

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I believe that we have answered all of the questions online.

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Nick Wu, ASUSTeK Computer Inc. - CFO [43]

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I would like to thank everyone for participating in our investor conference. I would like to turn the mic over to our co-CEOs.

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Unidentified Company Representative, [44]

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Thank you, everyone.

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Unidentified Company Representative, [45]

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I believe, just as our CFO mentioned, in our next few quarters, we will continue to work in product innovation as well as our sales channels and to continue to perform well next year. Thank you all for your participation.

Just as we mentioned in previous investor conferences, we have worked in product deployment, and we expected that we would have positive growth year-over-year in the second half of 2019. And based on the Q3 results, I believe that we have achieved our commitments. In 2020, we will work on product deployment in creator, commercial products as well as dual screen. We believe our innovation can drive growth of the whole industry as well ASUSTeK. We firmly believe that in next year, we have great confidence in our work. Thank you for your guidance and support.

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Unidentified Company Representative, [46]

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Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]