Asia Vital Components Aktie

Good afternoon, everyone, and welcome to Asia Vital Second Quarter 2026 Earnings Conference Call. We are pleased to have with us today, [ Mr. Eric Chen ], Vice President; [ Mr. Matthew Shen ], Executive Assistant to CEO; and Mr. Bill Chen, Senior Finance Manager, who will provide an overview of the company's operating results for the second quarter of 2026. [Operator Instructions]

And now I would like to turn the call over to Asia Vital management team.

Okay. Thank you. Good afternoon, everyone, and welcome to AVC's 2026 Second Quarter Investor Conference. I will now walk you through our financial and operating performance for the second quarter and the first half of 2026.

Before we begin, please take a moment to review our disclaimer on this slide. Today's presentation is based on information currently available, and the actual result may differ due to various risks and uncertainties.

Second quarter revenue reached TWD 49.1 billion, remaining stable and quarter-over-quarter and increasingly 66% year-over-year. The key point on this slide is gross margin, which improved to 32.57%, up to 2.8 percentage point quarterly -- quarter-over-quarter and 8.16 percentage points year-over-year. This improvement was mainly driven by a more favorable product mix and higher revenue contribution for server applications. Themes trending less revenue growth is translating into better earning quarterly. Operating margin reached [ 27.44% ] and EPS rose to 24.77, up 21% quarter-over-quarter and 137% year-over-year.

And let's quickly walk you through the first half 2026 income statement. And I will speak to the CAGR numbers here. The full presentation will be available on our website after the call for anyone who would like to review the details. Quarterly revenue entered a new growth phase in 2025 and remain at a high level of approximately 49.1 billion in the second quarter of 2026, although revenue was broadly stable sequentially. EPS Increased from 20 to 24, highlighting further improvement in earnings quality.

Full year 2025 revenue reached 139.6 billion, which -- with EPS of TWD 49.70. Both metrics increased substantially compared with prior year, and the earnings grow faster than revenue. And our thermal and chassis general combined revenue of 81.9 billion in the first half, accounting for 83.4% of the total revenue and growing 104% year-over-year. Thermal growth, [ 93% ] with chassis increased [ 1 3 4 % ], making then that the main driver of product growth. Second quarter thermal revenue remained strong at [ 30.6 billion ]. Chassis revenue increased sequentially from 9.9 billion to 10.1 billion. Overall, our core thermal and chassis business remained reboost, while site assembly and other product also recovered from the first quarter.

Server and network was the primarily growth driver in the first half. Revenue reached 54.9 billion, up [ 1 5 3 % ] year-over-year, and its share of total revenue increased from 48.4% to 66.1%. The higher server contribution not only support revenue growth but also improve our overall product mix, which was an important factor for the improvement in the gross margin. Looking ahead, as the demand for the high-power computing increase, we expect the liquid cooling application to become more widely adopted, further increase the importance of server-related products in our revenue mix.

Second quarter server revenue reached 32.4 billion, up [ 1 1 3 % ] year-over-year and represent 53% of total revenue. This struggle shift from also an important factor behind the continued improvement in the gross margin. As liquid cooling expand from select high-end platform into a broader range of server application, we believe server-related business will become increasingly important within our overall revenue mix.

And in non-operating breakdown, second quarter nonoperating income was 457 million, improving significantly from a loss of 40 million in first quarter. The main change was net interest income of 255 million and a shift from change in loss of TWD 305 million in Q1 to exchange gain of 49 million in Q2. First half nonoperating income was 417 million, lower than the same period last year. The main factor was a shift from exchange gain of TWD 759 million to an exchange loss of TWD 256 million. Higher net interest income, partially of sales change.

A consolidated balance sheet at the end of [indiscernible]. Cash and cash equivalents reached 77.7 billion, an increase of TWD 9.8 billion from the first quarter, equally attributable to parent also increased 22% to 55.2 billion. Inventory increased 14% sequentially, while account receivables declined 17%. And the balance sheet maintain and go liquidly.

And the key financial ratio, the current ratio and the credit ratio improved to [ 1 2 3 % ] and 59%, respectively, while the debt ratio declined to 58%. Account receivable debt improved to 20 days. Inventory days increased sequentially to 145 days, mainly because mismatched in the availability of components with different types and extend the customer pool in cycle for certain orders. So inventory debts remained below 174 days a year later -- a year earlier.

And our cash flow. First half operating cash flow reached 26.3 billion, up [ 1 7 6 % ] year-over-year after capital expenditure of 71 billion. Free cash flow reached 19.2 billion, approximately 3x the level of the prior year period. Strong operating cash flow was the key driver behind the higher end cash balance.

To conclude, AVC delivered significant year-over-year improvement in revenue scale, product and application needs profitably and cash flow during the first half of 2026.

This concludes our financial presentation. Thank you, and we will now open the floor for questions. Thank you.

[Operator Instructions] We have received several questions in advance. And the first question is 2026 and 2027 CapEx point and capacity expansion process in Vietnam.

Okay. This is Eric. We have a few questions we take before the meeting. So I will answer those questions first. And if you guys have any other question, feel free to enter it in monitor receiver and to ask. So I will also reply later. Thank you.

So the first question, 2026 and 2027 CapEx plan. Also, capacity expansion progress in Vietnam. CapEx of this year 2026 is around [ TWD 18 billion ] for next year. We are still working on the plant expansion plan to be above this table. And our operating cash flow and existing bank facility as a fit to find an expansion play already. So we have no financing [ plan ] this time. We will release, of course, if circumstance [indiscernible].

As a principle, CapEx is allocated against actual customer project requirement and customer demand where we order, we continue to expand capacity to meet client human demand.

Capacity expansion continue across the board. Detailed capacity figures are still being finalized internally. What we can confirm right now is that our new facility is already entering production for the next generation to view solutions and the working contribution revenue from third quarter of this year.

And our next question is liquid cooling penetration rate in [ ASIC ] in 2027 and roaming ultra time line.

Thank you, [ Annie ]. We don't disclose penetration rate also for a specific customer or specific project information. This is what we can last year. What we can assure right now here is liquid cooling penetration rate in a data center will continue to rise. And we believe it should be past more than 50% next year.

And the on the time trend of [indiscernible] our next generation product, our approach is very consistent. We discussed the road map with different clients, which is a very important client. We set priority together and that we put the best -- the more resources behind the program. Let's make the most [ mass ] is the most important one. So time will have the right solution in the -- when they go make production, it can miss products as missing. Diverse -- deliver return on other project, on any project is automatically driven by client, their own schedule. So what we can do is we follow the schedule, we make sure when we go miss production, is smooth, and we will be one of the major supplier. Thank you.

And the next question is ASIC demand accelerating enough to offset any future via digestion period?

Okay. Thank you. For AVC, it's not either or for GPU for [indiscernible] product. Both product need thermal and mechanical solutions, power consumption and [indiscernible] while in stage pricing on both solutions. So we continue to ship in both solutions, which means either way, it will benefit from them. ASIC decline will be one of the major growth and therefore, our company in the next stage. More broadly, we believe AI is real, but we observe this, clients continue to come in more. Put more people, put more money, put more resource. Continue, continue, continue. The trend is ongoing.

Yes. Thanks, Eric. I'm just going to pitch in and add to that answer. I think the question in itself signifies a slowdown of NVIDIA and/or a slowdown of NVIDIA's growth. As a matter of fact, on our end, we're continuing to see strength both in ASIC and in NVIDIA. And I thought it was important to make that clarification that, as Eric has said, we are committed to delivering the best thermal solutions, the best mechanical solutions for the leaders in tech. This was always our mission. That's what we've been doing, and that's what we'll continue to do.

And so if I -- yes, I think it was just important to clarify that. We're not particularly seeing a slowdown in NVIDIA. And I'm unsure what it means by the question by digestion period. But we are continuing to view NVIDIA as an important customer that we are in to continue to work with.

And the next question, can management provide an update on AVC's expected cooling content per rack and supply share for [ Vera Rubin ], Google TPU, V8, AWS [indiscernible].

Okay. Sorry. Again, we are not able to disclose share or content value for individual customers, individual projects. What we can share here is that we see continue to hold a major supply issue across both [indiscernible]. On how cost -- okay is generally a complexity judgment. According to you, your capability and capacity as the shipment [indiscernible] stability, quality, geographic diversity and of course, price, supply chain resilience. So our opportunity in every program is that we will -- we try to be the customers main source -- one of the main source, and that has been considered through all the projects we work with [indiscernible]. And not to the subsidiary project, overall, we do see a [indiscernible] will keep continue increasing, increasing, increasing the change for sure, on this way. Thank you.

And the next question of visibility of demand beyond 2026.

Okay. Thank you. As [indiscernible] adding more and more resource rather than going back, and this is was in form of our view, including transition rate in the data centers should pass 50% next year. Their liquid cooling margin drive most of our visible growth. The CAGR of the chassis rig and the other mechanical business is actually comparable. AVC, we always say, we are a total thermal and the mechanical solution provider. We are able to decide thermal and the mechanical part with clients in a season together at the same time. So there has always been our strength and our goal to provide a one-stop shop to all for our major clients, and we will continue to remain this strategy.

The mechanical also, overall, the mechanical business should maintain a stable strength growth in the coming quarter and the years along with our [indiscernible]. And our CapEx plan for next year reflects this view, that both of mechanical and thermal products will have -- in other phase of capacity expand for the next year.

And the next question, with first quarter gross margin at 29.8%, is a roughly 30% level sustainable as liquid cooling and new capacity ramp?

We don't comment on the margin of any individual product like any product itself. It is the company level, corporate level. [indiscernible] go into mass production is about in the second half of this year, which is right now. And we are also doing more and more automation equipment online, which will help us over to provide a base gross margin. This is the core we are in [indiscernible].

On the mechanical side, rising redensity specification of upgrading chassis today. It's not only the simple chassis. The chassis today has to carry [indiscernible] module, [indiscernible] fin oil still continue, meeting structurally airflow and the serviceability requirement of these requirements will still need to be meet in this area. So both decide difficulty in value content per [indiscernible], of course, moving up. Overall, we remain optimistic about the company's outlook.

And the next question, how's third quarter margin outlook?

We remain the outlook we have given previously. And the -- but of course, we are not guiding a specific gross margin number for this quarter and also next quarter. Duration-wise, the shift into mass production across other product portfolio, across all the thermomechanical product and the contribution continues introduction of the automation equipment should help benefit us to make the supportive of our margin trend.

And the next question, what is the sequential revenue growth outlook for second half 2026?

Okay. This is similar with the previous one. We maintain the outlook we have given previously. Of our product begin entering mass production in the second half this quarter and the next quarter. So second half of 2026 should be better than the first half. And this should be a reasonable expectation. That said, it depends on clients for [indiscernible]. Overall, our situation is broadly in line with the industry and we continue to build our company future optimistically.

And the next question, the ASIC market share outlook and contribution from switch trade for Vera Rubin, is the company holding a dominant position for switch trade?

Okay. Thank you. Again, we don't -- we are not able to answer specific project and the clients' information. What we can share is along with GPU market for the ASIC market share. We are also a major market share in ASIC part, including copay, including mentor. So this is the first question -- answer of the first question.

Secondly, we continue to hold a major -- main supplier -- major supplier position in the [ switch ] product from the Generation 1 until now. We are still the major switch thermal solution provider. Thank you.

And the next question, ASIC project update and competition.

Again, I can still only answer this question broadly in general. In general, price competition among different ASIC solution is getting more and more. So we see lots of different new ASIC product launch in different client sites. And AVC continue to be major thermal and [indiscernible] prior for those ASIC product. And we have high confidence about this product segment as well.

And we will now take questions from online participants. [Operator Instructions]

We have a question from [ Tim Stanley ].

Congrats on the really nice results. I guess, just a direction question or a big picture question of, beyond 2026, how should we look at your products in terms of specs and the direction of this sort of the co-play market going forward? Just a big picture in directional sort of deal.

Okay. So in general, both GPU, I mean, only -- I'm only referring to [ co-pay ] itself, in general, both GPU and ASIC product that decide complicatedly of copays getting more and more complicated. So in [indiscernible], it may be obviously one piece of [ co-play ]. It means achieve and it's really a simple piece of co-play. Now when we say [ one ] [indiscernible] of co-play, it may be contained like several pieces co-play and this may contain -- it has lots of different types. Maybe [ 1 2 3 1 2 4 ] maybe upside patent side, both sides are co-play [indiscernible].

So I mean, in general, the complexity of co-play itself become more and more completed. So that's why we are able to provide our [ g ] the value to start to work with client in a very early stage to contribute to our capability in the go through strength through the [indiscernible] passes and in the end, success for these mostly comes production and during the [ NPI ] phase. Of course, when the product is getting more and more complicated, more and more complicated, the [indiscernible], for sure, will increase. So this is a general trend we see in both GPU and ASIC margin for co-play itself.

Yes. Thanks, Eric. I'm Matthew. And I would just like to add to that answer. I think Eric already gave a very complete answer, but what I'd like to add is, when we look at spec in terms of thermal, we really are looking at a multitude of factors. So GDP would be one, voice would be another, form factor is another, system complexity, as Eric mentioned earlier, is another. And all of these have a direct impact on the design complexity of what we deliver to our customers.

Now we look past the '26 into '27, I suppose, already on very many exhibitions such as [ GTC ], such as [ Computex ], you, our investors and including ourselves would already gained some insight into the immediate next generation or next 2 generation. Past that point, our thermal is really heavily dictated by what the customer system-level solution looks like. And what that means is before our customers have decided what they want, specifically in what they want -- they want their system, they want their rack, they want their trade to look like, if it comes very difficult for us to share in a nonspeculative manner of what we think the future trajectory is.

Now that being said, I think history is always a good feature. And if we look at the previous generations leading up to this moment in time, what we will be -- what we can clearly see is that system complexity has continued to increase, from NVIDIA's HGX platform to their MGX platform, going from [ A ] cards in an HTS tray into 72 GPUs in the MGS system. So that massive step-up in complexity also was always driving a lot of our growth in the past few quarters.

If we look on the ASIC side, the same story is developing, where you need more complicated system-level solutions where customers are trying to put more components in the [ tray ], trying to put harder components in a tray, that's been driving a significant architectural change in the tray level design, which then gives us a boost not only in content but also on margins. We should continue to expect seeing this going forward.

Now I understand that was maybe a bit of a nonanswer. If we look at who we're working on right now and what we are trying and exploring right now with our customers, with our future -- on our future projects, the things that we're investigating right now include changing the [ TIM ] material, changing the material of the cold plate, controlling for weight, controlling for hotspot on the cold plate, continuing to push for higher GDP, continuing to push for higher flow speeds and also looking into 2-phase liquid cooling. So all of these directions are potential directions that customers will continue to want further improvements are on. And because every system is so different, we are having to look at all of these different aspects, look at these different development trajectories to really make sure that we can continue to stay on top of what our customers' future -- well, current and then future system architectures will look like. So just to add some colors there.

Yes. Now shifting gears to maybe more of a short-term question. Would you say you are more optimistic in terms of, let's say order demand on some certain projects versus say, a quarter ago or a couple of months ago?

I will answer this first and if, Matthew, you have other input, please go ahead later, yes.

Like what I mentioned previously that AI demand is real. The demand is still very strong and will continue to spend based on our clients real order, real focused that we even received some down payments first before our expenditure. So we are still after we speak for the overall AI -- general AI product and we have high confidence that we will be part of the journey growth with our client [ LCD ].

Yes. I would just like to add to that, if we're looking at the last few quarters, it always is the case where when we are further away from the delivery, the mass production date, we are more cautious about forecasts that our customers give us. And I think Eric mentioned a key point earlier, which is that we have received prepayment on our expansion or received prepayment on the capacity that we are delivering to our customers.

Ultimately, the forecasts have -- well, on select projects, have continued to be revised upwards. What really gives us the confidence that this forecast is real, that we can continue to expect strength in AI is customer willingness to pay us beforehand. And at this current moment, many of our customers are willing to do this for us, to prepay us for expansion, to prepay us for capacity, to prepay us for building buffer stock and inventory for them. And so as we approach the end of Q3, these are the signals that we are paying more attention to rather than just looking at the forecasted figures, which are historically always prone to change.

[Operator Instructions] [indiscernible]

I'm like so whether you can shed some light on the art and the science of setting ASP on products that are going through a significant capacity expansion. So is there any rule of thumb and say, for example, your ASP will go down x percent if capacity go up by y percent because you can then share lots of that value with your customers, and that will help you getting further orders because you are very competitive on capacity delivery and the price. So like how do you -- what's your philosophy offsetting that ASP right? Is gross margin a target or goal in doing so? Or is that just an outcome?

Thank you. Overall, I would say, it is our outcome is a result. We do not -- listen, there's no methodology or secret recipe that we can see. Okay, I do this percentage of expansion, and I can gain how many percent of the ASP. We do not. What we can do in corporate level is -- the only principle is, the more complicated product, usually, we can go more greater margin. And when it's a small margin budget, we also charge higher margin when it is a super big margin. And then this is, of course, this is negotiated. But there's no clear card, no methodology that how many percentage increase on capacity equal to how many percentage of ASP increase this might be.

Matthew, you want to add more color on this?

Yes. Thank you, Eric, and thank you, [ Pam ], for the question. It's truly one that is difficult to answer directly. And between it being a science and an art, it definitely is more of an art. And the reason it's more of an art is because when we do pitch an ASC or when we do work on a project with our customers, the ASP content is heavily dependent on a multitude of factors.

What can be said that is common across all sorts of different thermal solutions, whether it's fans, whether it's chassis, whether it's liquid cooling module is that we, as a company, continue to value a long-term partnership with our customers, right? So what we are trying to do is to be a long-term solutions partner with our customer.

What that means is the ASP price isn't something whereby we just try to intensively push up our price. We try to exploit market capacity gas. We are trying to pitch prices at a reasonable amount. That means we can cover the 100, 200 engineers that we put in on each project, but also means that we can continue to form a long-standing relationship with our customers to continue to be their main source to -- for our customers to continue to be happy for us to be their main source.

And it definitely is a balance between many things. It's a balance between how many engineers we have to put in. It's a balance between what time to market that customers want, system complexity, how much time -- the time lines that we have to work to as well as some of the other aspect that was mentioned earlier, waste, GDP, et cetera. And I suppose what is good for ASP is always higher spec, higher difficulty and higher complexity products will always be accretive to our ASP and margins, which is actually what we've seen in the past few quarters, and also why AI data centers and AI server solutions will continue to drive our margin profile upwards because it is fundamentally a more complex solution than the historical products that we made in laptops, in desktops, et cetera.

Okay. That's super helpful. I have 2 more, please, if that's okay. The first one, just that if you think about your supply chain and anything that's really important to delivering the capacity growth that you have planned for, is there anything that particular of concern? Are you supply chain ready? Do you -- or are you still able to recruit and retain the engineering tenants that you'd like to have? So that's the first question.

And the second question is I wonder whether you can comment a bit more on growth potential in China and AI customers or within that market in general?

Thank you for the question. It's a very good question. So I will answer the first one first. Yes, the question itself is also a good improvement to our overall capability. We will say capability is not only a [indiscernible]. It's an end-to-end, how we can make the product matters mostly use certain margin continuously. So for growth to us, co-play itself mean for itself, they are also a module, which contains lots of sub-tier components. So towards the [indiscernible] voice, first of all, I need to have the season defect capability of this module.

Secondly, I want to have in-house manufacturer capabilities for those important sub-tier components, to some example, co-play [ 2Ds ] are very important self. So that's why we have our subsidiary for detail. They are -- they have a talent team working on this. And other [indiscernible], the tube, the host. Lots of competitors lots of clients, they think the whole site. When you take a shower in your home, that's what is the normal stuff, but to us not, no. It's a very important product. You need to keep it very precise. It cannot have the [indiscernible] and you need to have a stable sufficient output. So [indiscernible], you can have the whole module, human smoothly.

So we also have the -- so we have those in-house capability, manufacture capability for those important components. And then the least is continues to be reviewed [indiscernible]. That's still the host itself. In a positive generation when we work with [indiscernible], almost, I would say, of the module makers, including AVC, the main capacity is [ outsourced ]. [indiscernible] it's a normal component but starting from the second generation to us, this is very important. So we [indiscernible] we urge to the management team and that will start to establish of our in-house capability. Before we already have the [indiscernible] capability, but then we adopt more manufacturer capability. So this is a very good case to help us overall to continue to improve our supply chain company to our shipment and also improve our cost structure. And those make us continue outstanding among the competition.

This is our first question. And the second one?

Yes. I think the second one was a question on our opportunity in China. But just before we jump to the second question, I'd just like to add to Eric's answer, Pam, which is on talent and talent retention, we are -- there are several things that we're doing. Number one, we understand that talent -- to acquire talent isn't always just to pay the big bucks. We continue to offer the best engineers in the field, an opportunity to be working on the most critical projects in all of technology right now. This is an edge that only AVC has. We are participating in absolutely every project that every CSP has, that NVIDIA has, and we're continuing to work on next-generation solutions even for robotics, space or autonomous vehicles.

So I suppose in talent retention, not only do we offer the first opportunity to work on, well, the most exciting projects. We are also setting up new offices, new locations to cater to different potential hires as well as, I think probably -- if we come back on the monetary part, we have about TWD 10 billion of options outstanding at this moment to continue to retain our best talent. And this is what enables us to have an engineering team that's more than 1,800 people to continue to have them build experience with us and continue to contribute their expertise into the most exciting project.

Now the next question on China. I'll let Eric answer first.

Thanks, Matthew. For China, what we can share right now is since day 1, even before pandemic, AVC was able to join all the major ASIC project with China-based client, and the trend is still ongoing. We continue doing those ASIC project development, not only the [ green ] product, but also there are still much and many projects. They are [indiscernible] quickly. So we participate both of land and also for -- not only co-play itself, but also other part, even [indiscernible] with those products, we are also part of that. So we believe we will continue to have healthy growth in China market.

Matthew? Thank you.

Yes. Thank you, Eric. To add to that answer, we have continued to be long-standing partners with China CSPs even before AI infrastructure, before AI ASIC took the spotlight of the tech road. So we are very familiar with China customers. We have continued to form, once again, a long-standing partnership relationship with Chinese suppliers. 5 of our 6 manufacturing facilities are in China, which enables us to supply to them relatively flexibly.

And the main difference between AVC and Chinese local producers is, number one, we are maybe 5x, 10x the size of our Chinese competitors. And number two, our Chinese competitors don't meet us in terms of the design capability, the architectural solution design capability that we are able to provide. Our Chinese competitors are, for the most part, really good competitors in their ability to manufacture. But the ability to design is something that needs to be built up over time and needs to be just up over working on very many projects. And as such, for Chinese CSPs and Chinese startups in AI, we continue to be #1 choice across the board.

Now in terms of our opportunity in China, once again, this is heavily dependent on what our customers want to do in their own ramp. We continue to remain committed to supporting their journey, but the growth trajectory and the forecast and the growth outlook, whether it's this year, next year, '28, is heavily dependent on what our customers' own strategic plans in AI are.

Are there any questions from other investors?

It's Pam again. I can always have one more if there's nobody else asking.

Sure, go ahead, please.

Okay. Well, just because you mentioned in the -- when we talk about talent, to attract them, you measure robotic state and autonomous. Just out of curiosity, to the extent that you could disclose, what would be your involvement or focus in the space?

Okay. Okay. For these parts, I can only share very wide, very roughly. Our client in space area, we do work with a few clients right now. And there are 2 supply [indiscernible]. First of all, [indiscernible] itself. Secondarily, the so-called AI data center on the space. We do work with clients, different clients in both areas. And the sum of client, they have -- they are under one big umbrella. So we work with the -- maybe the big [ PUA ] in the past.

Now we are able to work with the PUP, PUC, PUD together because you need them, it is a technology, it's a product. So we have a very good trader. We have a long future coworking with [indiscernible] in many product mini field. So when clients come from A to B to C, now we see no AVC can help them co-work with them together on the journey and the [indiscernible] product that they want and follow the regulation doesn't simple to your diversity. Some example, the requirement they have, either human itself either location, either on products, we can all spot in. So if you comfortable to work with us. Thank you.

Matthew, you want to add more?

I don't have much to add, but that -- I suppose what does excite us is the space piece because, well, it's -- going to space is objectively a very interesting segment. And as Eric mentioned, we continue to support our customers. We continue to leverage our long-term relationship with the leaders in tech to enable ourselves to continue to be #1 in any type generation. Maybe 5 years down the line, there's -- we're going to Mars. Over 10 years down the line, we're going to Pluto. We are fully confident that in any tech integration, in any solution integration, we continue to be our customers' #1 choice. Well, just to clarify, like going to Mars and Pluto is not currently in our pipeline. But just as I mentioned to say, we are committed to that long-term trajectory rather than just trying to win a project by project.

Okay. That's super helpful. And I know it's a tricky question. But I'm also more thinking about like what would be the cooling method in the space, if not conduction connection. So I'm just wondering, is there anything on the sort of science breakthrough front that you might be able to share? Or I'm also happy to wait and see when you move to product.

Very high labor speaking. It's a very advanced merging, super improved merging of existing product, existing technology. It's also conduction, it's also convection, it's also kind of evaporation. Those are all in review or in discussion. But in the end, it's just a more of the best version of existing products. Thank you.

Yes. I think to add to that, in space, our conduction, our convention, our evaporation can only happen in combined components. Ultimately, to expel the heat into space, we would have to rely on radiative cooling, which is the same way that the heat from the sun gets to the earth. This is less effective and more unavailable compared to, say, air cooling on earth. But this is exactly why we need to continue to work on finding the best way to run it, not only to dispel the heat, but also to run in a way that enables reliability because we are not able -- when something is sent into the space, there's no serviceability. There's no way to fix it if something goes wrong. So we are pushing our boundaries in multiple directions, not just in how do we expel the heat, but also how do you make some things that can be in space, that can last the lifetime of the said light -- of the space data center, and these requirements are higher, significantly higher than what we would expect on earth.

If there are no further questions left hand today's call, thank you all for joining us today, and thank you, Eric, Matthew and Bill, for your time and insights. Have a good day. Bye-bye.

All right. Thanks, everyone, and thanks, Pam. Thanks, Timson, for the questions, and everyone else who submitted early. See you in the next quarter.