Good afternoon. My name is Patrick and I’ll be your conference facilitator today. At this time, I would like to welcome everyone to the Cree, Inc. Fiscal Year 2015 Third Quarter Financial Results Call. [Operator instructions] I would now like to introduce Raiford Garrabrant, Director of Investor Relations of Cree, Inc. Mr. Garrabrant, you may begin your conference.

Thank you, Patrick, and good afternoon. Welcome to Cree’s third quarter fiscal 2015 earnings conference call. Today, Chuck Swoboda, our chairman and CEO, and Mike McDevitt, our CFO, will report on our results for the third quarter of fiscal year 2015. Please note that we will be presenting both GAAP and non-GAAP financial results in our remarks during today’s call, which are reconciled in our press release and posted in the Investor Relations section of our website. Today’s presentations include forward-looking statements about our business outlook, and we may make other forward-looking statements during the call. These may include comments concerning trends in revenue, gross margin and earnings, plans for new products, and other forward-looking statements indicated by words like anticipate, expect, target, and estimate. Such forward-looking statements are subject to numerous risks and uncertainties. Our press release today and the SEC filings noted in the release mention important factors that could cause actual results to differ materially. Also, we’d like to note that we will be limiting our comments regarding Cree’s third quarter of fiscal year 2015 to a discussion of the information included in our earnings release. We will not be able to answer any questions that would involve providing additional financial information about the quarter beyond the comments made in the prepared remarks. This call is being recorded on behalf of the company. The presentations and the recording of this call are copyrighted property of the company, and no other recording, reproduction, or transcription is permitted unless authorized by the company in writing. Consistent with our previous conference calls, we’re requesting that only sell-side analysts ask questions during the Q&A session. Also, since we plan to complete the call in the allotted time of one hour, we ask that analysts limit themselves to one question and one follow up. If you have additional questions, please contact us after the call by email or phone at 919-287-7895. We’re also webcasting our conference call and a replay will be available on our website through May 5, 2015. Now, I would like to turn the call over to Chuck.

Thank you, Raiford. Fiscal Q3 revenue was $410 million, which was in line with our targets for the quarter, as better than forecast LED demand offset worse than expected weather related seasonality in LED lighting. Non-GAAP net income was $25 million, or $0.22 per diluted share, as the lower tax rate offset reduced gross profit due to lower factory utilization, driven by inventory reductions and an unfavorable product mix. The sales trends for Q3 were as follows. Lighting revenue increased 27% year over year, but declined 3% sequentially to $224 million, as the severe winter weather in the Northeastern US delayed commercial LED fixture sales. Commercial fixture demand rebounded in late March and it’s targeted to grow in Q4. LED revenue decreased 23% year over year, but was better than expected at $154 million, as solid external customer demand offset the normal decline related to the Chinese New Year holiday. Power and RF revenue increased 13% year over year and was similar to Q2 at $31 million. Q3 non-GAAP gross margin decreased 250 basis points sequentially to 31.4%, due to lower LED and lighting margins. The margin declines were due to a number of factors, but the common driver was the impact of inventory reductions in LEDs and lighting. While we planned to reduce inventory, we burned $33 million or 10% of inventory in the quarter, which is faster than expected and resulted in a larger margin impact than targeted. The segment gross margin trends were as follows. Lighting segment margins decreased to 26%, due to product mix and factory under-loading in the first half of the quarter driven by inventory reductions and the timing of orders. Overall, product mix was unfavorable as LED bulb sales increased as a percentage of the total. Product mix was also unfavorable within commercial…

Thank you, Chuck. I will be providing commentary on our financial statements on both a GAAP and non-GAAP basis, which is consistent with how management measures Cree’s results internally. However, non-GAAP results are not in accordance with GAAP and may not be comparable to non-GAAP information provided by other companies. Non-GAAP information should be considered as supplement to, and not a substitute for, financial statements prepared in accordance with GAAP. A reconciliation of the non-GAAP information to the corresponding GAAP measures for all quarters mentioned on this call is posted on our website, along with a historical summary of other key metrics. For the third quarter of fiscal 2015, revenue was $410 million, which was on the higher end of our targeted range of $395 million to $415 million. GAAP earnings were $700,000 or $0.01 per diluted share for the third quarter of fiscal 2015, and non-GAAP earnings were $25 million or $0.22 per diluted share. Non-GAAP earnings exclude $24 million of expense net of tax, or $0.21 per diluted share, from the amortization of acquired intangibles, asset retirement charges, fair value accounting on our Lextar investment and stock based compensation. GAAP earnings per share were below our targeted range, due primarily to the $2.2 million decline in fair value of our Lextar investment which was caused by a reduction in Lextar’s share price during the quarter. Q3 GAAP gross margins were 30.6% and non-GAAP gross margins were 31.4% which excludes $3.2 million of stock-based compensation. Operating expenses for Q3 were $124 million on a GAAP basis and $102 million on a non-GAAP basis, both of which were down sequentially and better than targeted. Non-GAAP operating expenses exclude approximately $13 million of stock based compensation expense, $7 million of charges from amortization of acquired intangibles and $2 million for asset…

Thanks, Mike. We remain focused on four priorities to drive our business in fiscal 2015. Our first priority is to leverage Cree technology to lower upfront customer cost and further improve payback. Innovation is the key for Cree as we lead the market, creating value for our customers and driving growth. In Q3, we introduced XLamp MHD-E and MHD-G LEDs, high power LEDs that combine the high lumen density and reliability of a ceramic chip-on-board LED with the design and manufacturing advantages of a surface-mount package. We demonstrated a proof of concept 50 kilowatt string solar inverter prototype that utilizes our best-in-class silicon carbide MOSFET and diode technologies in a power module to enable previously unattainable levels of power density and ultra-high efficiencies at one-fifth the average size and weight of today’s silicon-based inverter units. This system delivers a remarkable 50% reduction in power loss and operates it three to five times the switching frequency of conventional silicon technology. We introduced the LED Rural Utility Light or RUL Series which is designed to deliver an unprecedented combination of price, performance and quality to accelerate adoption of LED lighting for the estimated 10 million to 13 million rural street and areal light fixtures currently installed in North America. Initial customer feedback is very good and underscores the unique nature of our vertically integrated approach to LED lighting product solutions. We expanded our leading LED bulb portfolio with the TW Series LED T8 Tube Replacement for consumers, making inferior linear fluorescent tubes a thing of the past. Designed for simple, wire-free installation, the Cree TW Series LED T8 Tube provides industry leading compatibility, besting the competition in light quality and performance, all at an affordable price. We provided another glimpse into the future of intelligent lighting with the introduction of the field-adjustable…

[Operator Instructions] Our first question comes from Brian Lee with Goldman Sachs.

First one I had was just on the mix impact that you mentioned on LED margins this quarter, can you elaborate on how much that was and was that just sell through on legacy products, or did you have a bigger shift to mid power outsourcing this quarter than you might have originally anticipated? And then the second question I had was also on the gross margins, what are you embedding into the view for June on LED factory utilization quarter on quarter because unless mix is changing a lot, it seems like you’re implying similar levels to what you’ve had in March, so wondering if that means you’re targeting another round of inventory work down to you over the course of the quarter?

On the LED margins, I think where you’re going in the first one is what was the pricing piece of the margin impact. What I would tell you is the majority was actually the lower utilization, I would say of the margin decline in the LEDs, a fraction of it was pricing. So it’s a very incremental piece and it’s really just older product that was in the channel that we are working with our distributors to help to move that a little bit faster. So I think that’s a relatively healthy long-term decision. The bigger one is really what we did in terms of slowing the factory down, the underutilization and the question I think is what is the June numbers. I would expect utilization to get a little bit better in June, but we are not targeting it to recover quickly. And then second is as we got a little over 90 days of inventory, so with having 90 plus days of inventory, whatever benefit we might get from speeding the factory up will have a lag effect. So I think if the lighting business continues on this trajectory and LED business does well or even gets incrementally better, I think the first chance we could see some of that leverages in Q1, but again, there’s a lag effect because of the inventory.

Our next question comes from Harsh Kumar with Stephens.

Chuck, I just wanted to again go back to the question that was just asked, we’re trying to understand how this inventory affects your margins, is this inventory at an inherently higher price, is that why you’re taking a big chunk, is that why you’re taking a big hit or is it just all factory utilization related and the inventory costs the same as the new product?

Harsh, the way to think about it is this, so essentially we have an inventory reduction, obviously we targeted some, we made more progress than we had intended that affects lighting more than the LEDs, but when it affects lighting, if we’re not building inventory on lighting or frankly reducing it, that also reduces LED consumption. So what you have is even though the LED business from an external customer standpoint was relatively stable, internal shipments were significantly lower to the lighting division. So you have the same fixed cost unless overall shipments, you’re going to have a significant margin impact in the quarter. So that’s what you see in LEDs, that was the bigger factor. It also affects lighting because in lighting while the revenues were kind of similar from a commercial lighting standpoint, we were reducing inventories. We also have an underutilization or under loading phenomenon in lighting and that was especially too early in the quarter when we have our inventory reduction and weather-related project delays, and so the factory is very lightly loaded early which also is an overhead spreading phenomenon that affected margins there.

And then my other question was on OpEx, I was surprised to see the $5 million OpEx increases, given the numbers and the results. Curious if as your lighting business grows, if you think you can attain some leverage where these kinds of variations simply go away and become meaningless, in other words what I guess I’m trying to get to the operating margins of the lighting business, are they meaningful enough or can they go up meaningfully enough once you achieve scale?

Harsh, first of all keep in mind that OpEx came in significantly lower than what we had planned for the quarter. I think it was $3 million to $4 million lower. Now, some of that just happens with the scale of the business and some of that is things we did to slow it down. So when we have it going back up to $5 million, it’s not significantly different than what we had budgeted for last quarter. Big drivers there are there is variable cost associated with higher sales, drive higher costs from a sales comp standpoint in some other areas. We do have higher litigation as well. I think I don’t have any concern with the long-term operating leverage of the lighting business, but we have a couple of compounding factors going on right now. And I think that – so I think it’ll be fine in the long run, I think we’ve got to get through this litigation phase which is a pretty expensive choice, but we knew that when we started it. If we’re going to make an investment in IP, then we need to work to make sure we get paid for it. I think long term we still believe that there is a return on that investment, but we just got to get through that phase. And then I think over time the lighting revenue should drive leverage, both for lighting and frankly even for our internal LED factory.

Our next question comes from Edwin Mok with Needham & Company.

First question on the LED component side, you said you expect stabilize in the fourth quarter, but historically you’ve had some seasonal uptick in fiscal fourth quarter. Do you have any pull in the demand, that's why you have the stronger 3Q and maybe just flattish on 4Q or any kind of color you can provide on that?

What I would say is that 3Q was a little better than targeted, so Edwin we didn’t get that benefit. So I think what you’re looking at, you should look at the two quarters together, demand is about where we expected. Keep in mind that behind-the-scenes the other thing we are doing is we are making some incremental reductions in channel inventory, we did that in Q3, we target that again in Q4, so one of the things, now that the business has kind of stabilized with these revenue levels, we’re looking at what the optimal inventory is and so we are making some adjustments there. And then the second thing we are doing is I think it would be a good time to refine what’s in the channel because we are getting ready for SC5 to start ramping up and going into production volume as we get into next quarter, and so think it’s a good time for us to lean out the channel a little bit and put ourselves in a position for the new products.

And then on the lighting product gross margin, you talked about partially because of the season related effect on that in the quarter. Does the mix of light bulb has an effect on that as well and how is the new light bulb coming along and should we expect that to have a positive effect on your gross margin?

If you think about the seasonal, really it was the weather and honestly it was worse weather than we had expected. I think if you spend any time in knowing and you know what I’m talking about, so if you look at the mix of commercial versus consumer, that’s really what’s driving that mix. Honestly if the weather doesn’t happen, the revenue probably comes in pretty close to what we are targeting. As far as mix of bulb, that’s actually tracking above what we have targeted for the quarter. So I would say that bulbs plus or minus was pretty close to what we have built into our targets. It was really more of a phenomenon of commercial, which without the weather we estimate would have grown enough that you wouldn’t have seen that significant mix shift. Keep in mind the weather is a second thing, as I mentioned in my comments it also hurt the mix even within commercial lighting. So it kind of had a double factor that we would expect to get those benefits this quarter and that’s what we built into our Q4 targets.

[Operator Instructions] Our next question comes from Sven Eenmaa with Stifel.

Just wanted to clarify LED product gross margin commentary for the next quarter, with lighting utilization improving and presumably having reduced some of the inventories already, why is that margin expected to be sequentially flat?

So with LED gross margins, remember that while we won’t have the inventory reduction effect, while the factory will start to incrementally wrap back up, it is about 90 plus days of inventory are in the factory today, so those costs are essentially here. And so you have to – essentially there is a lag effect of roughly about as many days in inventory plus or minus, it’s not an exact science that we think will impact that as we go to next quarter. And keep in mind that while lighting is going up, it’s going to drive some incremental utilization, but we are not moving the volume up significantly in the short term. And so really I think this is one of those things that we have to build the volume back over time in LEDs.

How should we think about the SC5 impact on margins on LED products side as we go into the next year?

Right now as much as anything I think it’s an opportunity to drive new design wins and drive revenue. What that does to the overall mix, it’s a little hard to predict right now. We would expect SC5 to be – it’s a newer generation or high performance stuff, usually it’s on the higher end of our mix within high power. But with that being said, we’re really a quarter away from getting any production volumes to see how that settles out. So I think if anything it should be – it’s an opportunity to drive some revenue on one side of it, at the same time, as I said earlier, the LED business is pretty competitive and we would imagine that the supply demand phenomenon in LEDs is going to be pretty similar here for the next year. So I think that I don’t want to get too far ahead of ourselves, we feel pretty good that the business is kind of stabilized in this level and we’re going to work from there at this point.

Our next question comes from Paul Coster with JPMorgan.

First one, in respect to incremental operating margins, you talked about being at the bottom of the cycle, is it a cycle specific to Cree or is it an industry cycle that you’re referring to? And then I have a quick follow up.

Paul, I wish I knew on the industry. I think for Cree, we seem to have – this will be the third quarter with similar revenue levels in LEDs, so that’s how I try to come to the bottom of the cycle. I think the LED business overall, it’s going to be a pretty tough market for the next year. As long as supply is ahead of demand, it’s pretty hard to claim that you can see the other side of the swing. I think we feel pretty good that if it stabilizes here we can at least manage around these boundary conditions right now. And what we’re hoping is that the new products offset the other factors in the near term. Obviously longer term getting that lighting revenue to drive our own demand and frankly trying to find some incremental LED demand, those are the levers we’re working on. But again, I think it’d be premature for the LED business to call the cycle, although it doesn’t seem to be getting any worse, I’m not sure it’s getting any better yet either.

So the LED lighting segment, how next generation products are moving up the value chain in some respects, and of course how you get there, it seems that your products are still in the high power category and thus for that’s proven to be a tough segment of the market. So can you explain what’s happening there in terms of value creation?

Paul, what I’m trying to describe there is if you look at how Cree goes to market today, we have a fairly aggressive approach to pricing. So Cree when we enter a business it’s essentially only LED lighting and we’re competing for projects typically against companies that offer both LED lighting and traditional lighting. But one of the ways we do that is we push performance really high so we tend to be the performance leader, but we also tend to price pretty aggressively to make LED the compelling value proposition. Other companies may let the customer kind of go, hey, we’ve got both options in place kind of both sides, traditional or LED. I think that that takes away some of our margin leverage in the short term, but I think as the market evolves and it becomes more and more LED centric, as those new products come out, I think we get to keep a little bit more on that margin. That’s essentially what we’re trying to model.

Our next question comes from Jed Dorsheimer with Canaccord.

I guess maybe just stepping away from some of the details in higher level, about a decade ago, Chuck, you and I spent a considerable amount of time talking about the benefits of vertical integration which in hindsight has certainly helped you through the second cycle between 2009 and 2011, but as we’re seeing more and more companies, I think Osram today announced that they will be looking to possibly spin out or break up the components in the bulbs business, Philips with Lumileds divestiture or a spin out I should say. Could you maybe elaborate on what the benefits are to Cree and why you see the need to continue to have or operate the components in the lighting business as they seem to be diverging more and more over time?

Jed, as you know, we’re in the semi business, the vertical integration looks really good as long as your factory is full; and if it’s not, it looks like a bad idea. So I think it depends, there’s really two factors. I think where you’re at in the semi cycle will expect people’s opinions both directions and clearly when the factory is underutilized, people don’t like it as much. If we really step back and you gave an interesting analogy, a 10-year view of the world, if product innovation is our key strategy and it is for our lighting business, what we see today is a benefit of having that internal LED capability to drive new products and new technologies to market faster. So it gives us a marketing advantage for how we go to market. Right now, with the fab being underutilized, it cost us a lot to get that advantage. So you can make an argument on both sides. But to give you a recent example, the new rural utility light that we came out with, that’s a great example of a product that has a very different approach to the market and it has an LED that if we were trying to sell that LED on the open market, it’s a pretty radical different approach and so by being vertically integrated, we are able to go after a segment and start competing in a segment that I think would have been difficult without that. So there’s plusses and minuses, clearly the cost to Cree right now is pretty significant. As you know, if anyone is measuring us in the short term, it looks like a less profitable way to do it. I think as the market goes the semi cycle I think we’ll see incremental financial leverage that comes from having it on the other side of it. And right now, it’s worth having that business because I think innovation is the most important factor to drive what we’re trying to do.

Our next question comes from Mark Heller with CLSA.

Chuck, I just had a question on the competitive environment in China, I know that the leading player there is having a lot of LED capacity. So I’m just wondering if you’re seeing increased competition in the China market. And secondly, would you consider using Chinese made the LEDs within Cree?

I think the competitive environment in China remains pretty interesting. See, obviously, have one very big player there that continues to make investments, you also have the large Taiwanese player that’s also talking about making capacity investments. I think to keep that a little bit perspective, I do expect both of their capacity to increase, but it’s probably not a one-to-one because I sense there is also some amount of retiring older generation equipment that just isn’t competitive anymore. So it’s a net add, but probably not one-to-one as maybe it’s projected sometimes. I also think that with the new announcement of the company buying Lumileds, the investment group out of China, I think it also creates an interesting competitive dynamic that we are going to have to see how that evolves over time. So I think that is kind of a new wrinkle that is coming because while you have Lumileds, it’s really a Chinese based investment group. So how that affects the market will be a little harder to predict. So I’m not sure that answers your question, but it’s kind of my sense in the two pieces that are going on there right now.

Our next question comes from Colin Rusch with Northland Capital Markets.

Can you guys just expand a little bit more on your thought process on your luminaires product expansion, it seems to me like there’s a big opportunity here with commercial construction growth to take a bit more share there, can you see yourself accelerating that product development in the near future?

I don’t think we sold down the product development, the business is growing at a pretty healthy rate year over year. One of the challenges in commercial fixtures is it’s not just how fast can you invent the products, but how fast can you scale up the business to sell them and support them in all of the pieces that go through it. Lighting is not a straightforward distribution or sales model or a support model. And so we’re pretty happy with the rate of growth in commercial lighting overall. I think that we have quite a good product pipeline and it’s really a matter for us of picking applications where we can add value. Lighting is a huge business with many different applications and it’s really the key for us finding the ones where our innovation solves the problem [indiscernible] expecting us to come out with a light to go after rural utility lights, but that’s an example of something that solves one problem. At the same time, last quarter we also announced a very high end fixture for commercial buildings that essentially a field programmable LED which is probably the extreme opposite end of what’s possible. So we’re exploring all parts of the market, I think that there is definitely room for more products and more applications to serve, but there is a finite rate at which we think is practical for us to scale the business right now, because it’s really about adding infrastructure as we go.

And then just as a quick follow-up, on the marketing spend, historically you’ve given some updates in terms of the effectiveness of those campaigns, can you just give us your quick thoughts on how those things are going at this point?

In the metrics we use, we saw a nice uptick in the spring. So what we had in the spring is it’s a combination really of three things. There is a marketing spend piece and so we had a pretty big program that was focused on NCAA Basketball that gave us some nice lift, but it’s in combination with some of the products. So we had great response to the Cree smart connected bulb as well as some of the things we’re doing on the commercial lighting. It’s really how do we blend those three pieces together that drives the activity. The advertising certainly is important, but it’s really the combination of three pieces. And I would say right now in terms of the metrics we are going after, it’s having the desire effect. It seems funny that it was only two years ago that pretty much no one in the lighting business had ever heard of Cree and I don’t think we had that problem. So it is a long-term investment, but one we still feel like is positioning us for success not just next quarter, but hopefully over the next several years.

Our next question comes from Krish Sankar with Bank of America Merrill Lynch.

I had a two-part question and let me ask both of them upfront. First, Chuck, within the lighting segment, can you give us some color on what the split is either qualitatively or quantitatively between the consumer bulb and the commercial lighting fixtures? And also a follow up either for you or Mike, it looks like you have $160 million left on the share buyback, and I think that buyback has to be used by June, but based on the share count guidance, it looks like you don’t plan to fully complete that buyback. So kind of curious on what the thought process is on using the rest of the buyback by end of the quarter?

Let me take the lighting one. So I think in the split, we don’t break out exactly, but the majority of that business is fixtures, I’d say the overwhelmed majority, so if you go back to the 10-Q, you can get an idea of the ratio of consumer to commercial, I don’t remember what that was, but you can kind of see what the Home Depot’s sales were. I’d say since then, commercial is growing faster than consumer and I would expect that to be the trend over time. High level on the buyback, I can tell you philosophically we said we’d be planning to continue buying shares. In terms of how does that work versus our share guidance, I’ll let Mike to give you some color on that.

So obviously we guided that we would be buying some shares back, but it’s really an assumption of where do we think the pricing goes within the quarter. So it’s a rough estimate. What I would tell you, even if the share count was down 2 million more on average, the EPS range doesn’t change.

And remember that it’s a weighted average is what we’re using, right, it depends on when they get bought and how that goes into the calculation and any dilutive effects of other shares that might be outstanding like options. So it’s not just buyback, its buyback plus assumptions about share price.

[Operator Instructions] We have a question from Hans Mosesmann with Raymond James.

It’s [Melissa] for Hans. I just had a quick one on – I’m not sure if you covered different trends that you are seeing by geography. I believe that some of the big downturn in lighting business a couple of quarters ago was related to big projects in China being pushed out. So just wondering what you’re seeing on a geographic level, if you could give some more detail on that.

When it comes to lighting, lighting is really only a North American business, so there is really no international geographic trends last quarter. What I would tell you is that if you want to look at it within the US, the weak spot was the Northeastern US, directly related to weather. You might be referring to our LED business, and in that, what I would say is the geographic trends did not change significantly last quarter, so Q2 to Q3 was pretty similar. If you look at on a year over year basis, the largest decline in the LED business on a 12 month basis is the China business is what changed year over year. That was the same as we gave last quarter, similar this quarter. So I’d say it’s not changing relative to Q2, but year over year that the place where I would say on a geographic basis the business declined the most.

Our next question comes from Mike Ritzenthaler with Piper Jaffray.

I know you don’t break out pricing specifically with the any of your businesses, but I’m wondering if you could at least qualitatively comment on pricing within lighting and the competitiveness that you’re seeing as you work on bids within the C&I channel in particular?

Lighting C&I, I would say that, there is some trending, I don’t have the specific numbers, but I would say that last quarter was pretty much as expected. There is a mix shift right, the margins had some mix changes, so when the weather slows down some kind of projects versus others, there is a mix within our product families. But I don’t have a good number. It’s down slightly, but it’s a relatively modest decline quarter over quarter. It’s very unlike the LED business which can have more significant erosion. And we haven’t seen a significant change in pricing trends in the stuff we are bidding on for at least the last few quarters.

And then I guess more of a philosophical question around R&D, I guess those progress year-on-year in any given quarter in revenue growth, what types of R&D project Cree engages in or how much is allocated to R&D? I know historically it runs 10% to 12% of sales, but as you look out not investing in projects for revenue a year from now, how does that – philosophically how does that change what you’re working on today?

I would say our history over the last 20 plus years is we got a pretty long term view about R&D, we are going to invest in things we think change the business more than next quarter, we are looking at things, some of the technology is not going to see for 2 to 3 years. I think you will see occasionally quarterly trends, but for example this quarter R&D is down a little bit, but that’s more of a function of how much we ran our factory and we slowed things down to burn inventory. And one of the things we also do in the same factory is run R&D. So we’re slowing things down, you’re going to see potentially incremental R&D. But I would say the general philosophy hasn’t changed. I would imagine similar percentage as it has been. With that being said, it typically takes less dollars of R&D in lighting to drive the business that does in LEDs. So the mix will slowly shift because the LED rate hasn’t changed significantly and the lighting rate is not changing. But as lighting becomes a bigger percentage of the business, you will see that mix shift a little bit. What’s interesting it doesn’t change the overall OpEx because lighting tends to be a little lighter R&D, a little heavier sales and marketing investment versus the LED business. So it kind of works out.

This ends our Q&A session today. I’ll turn it back to management for closing remarks.

Thank you for your time today. We appreciate your interest and support, and look forward to reporting our fourth quarter results on August 11. Good night.