Coherent Corp (COHR) 2012 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Coherent first-quarter 2012 earnings conference call hosted by Coherent Inc. (Operator Instructions). As a reminder, this call is being recorded. I would now like to introduce Ms. Leen Simonet, Executive Vice President and Chief Financial Officer. You may begin your conference.

Thank you, Stacy. Good afternoon and welcome to Coherent's first fiscal quarter conference call.

On today's call, I will provide financial information, and John Ambroseo, our President and CEO, will provide a business overview.

As a reminder, any guidance and any statements in today's conference call pertaining to future guidance, market trends, plans, events or performance are forward-looking statements that involve risks and uncertainties, and actual results may differ significantly. We encourage you to refer to the risk disclosures and critical accounting policies described in the Company's reports on Forms 10-K, 10-Q and 8-K as applicable and as filed from time to time by the Company.

The full text of today's prepared remarks, which will include references to historical bookings and sales by market, will be posted on the Coherent Investor Relations website, and a replay of the webcast will be made available for approximately 90 days following the call.

Let me begin by giving you the highlights of the first-quarter results. Bookings for the quarter were $201.8 million, and our backlog grew 2.5% sequentially, ending at $365.5 million. Revenues for the quarter were $190.8 million with a corresponding strong pro forma earnings result of $0.82 per diluted share. Our pro forma EBITDA percentage for the quarter was 19.3%. We ended the quarter with a cash balance of $203 million, which reflects stock repurchases of approximately 451,000 shares for $20.7 million. At the end of the first quarter, we had $4.3 million available for future repurchases under our previously announced buyback plan.

Net sales for the first quarter grew 4.2% compared to the same quarter a year ago and declined 8.3% sequentially.

As we indicated during our last conference call, the Thailand floods negatively impacted our first-quarter revenues by approximately $2 million to $4 million. Our contract manufacturers in Thailand have resumed production, and we anticipate no further revenue impact as a result of the flood.

Geographically Asia represented 50% of our first-quarter sales. On a trailing 12-month basis, Asia was 46%, US 25%, Europe 22% and the rest of the world 7%.

As previously mentioned, Asia continues to be our strongest growth region led by laser systems and related service revenue in the flat-panel display market. Our sales by market applications are as follows -- scientific $38.6 million, microelectronics $92.9 million, material processing $23.4 million, OEM components and instrumentation $35.9 million, for a total of $190.8 million.

The first-quarter gross profit, excluding stock compensation charges, was $80.7 million or 42.3% of sales and compares to 43.2% last quarter. The existing macroeconomic factors, which are primarily impacting the material processing and advanced packaging market applications, caused a disproportionately negative impact on volume and overhead consumption in one of our business units, resulting in a lower Company gross profit percentage. This gross profit percentage shortfall during the quarter was more than offset by lower operating expenses. Compared to last quarter, our first-quarter spending declined significantly in all categories across the Company.

Our cash and cash equivalents balance for the quarter was $203 million compared to $220 million last quarter. The sequential reduction of $17 million includes $21 million of stock repurchases. Cash flow from operations for the first quarter was $16.1 million, and capital spending was $8.1 million or 4.3% of sales. We continue to project 2012's spending to be approximately 4.5% of sales.

Let me give you the remaining components of the second-quarter guidance. We expect revenues to be in the range of $191 million to $198 million. Pro forma gross profit percentage is estimated to be similar to the first quarter, and we project the pro forma period expenses, which is excluding stock compensation cost, to be between 27.5% and 28% of sales. The sequential increase in operating expenses includes a step-up in R&D spending covering a number of new product development programs. The period expenses guidance is inclusive of $1.8 million in tangible amortization costs. Stock compensation charges are estimated to be approximately $4 million, which is similar to last quarter. We anticipate our nonoperating gains or losses to net to zero, and we are assuming a pro forma tax rate for the second quarter in the range of 33% to 34%. We estimate the diluted shares outstanding for the second quarter to be about 24 million.

I will now turn over the call to John Ambroseo, our President and CEO.

Thanks. Good afternoon and welcome to our first fiscal quarter conference call.

Macroeconomic factors seem to dominate the first quarter, but there has been a palpable shift in customer sentiment in the new year. The dialogue has improved in most of the commercial markets, which is the first step in a return to longer-term growth.

We are also very enthusiastic about the new products we have introduced in the last couple of months, and if there was ever a coming-out party, OLED TVs certainly had one in Las Vegas early this month. First-quarter bookings of $201.8 million were up 3.3% compared to the prior quarter and 13.9% lower than the prior year period. The book-to-bill for the first quarter was 1.06.

Scientific orders in the first quarter were $41.3 million, down 2.9% from the record-setting prior quarter and roughly flat compared to the prior year period. Orders for multi-photon spectroscopy applications were the largest contributor to first-quarter bookings. Our Chameleon product family continues to lead this market due to a combination of power, stability and tunability. We have benefited from significant investment in biological research in China, which is consistent with the country's five-year research plan.

MPE bookings were also strong in Europe where we outperformed the market. We introduced a number of new scientific products at the Photonics West Tradeshow taking place this week in the city by the bay. The Vitara S is a new short pulse C laser that combines performance and cost for low-end amplifiers. An enhanced elite dual amplifier producing the highest power in the market was also released. Both amplifier systems can be applied to physics, chemistry and materials science research. Rounding out the product introductions was the launch of the Verdi G18. Based on our highly successful OPS landform, the G18 completes the replication of the venerable Verdi V series.

Instrumentation and OEM component orders of $35.7 million were down 26% sequentially and 1.7% versus the prior year period. The sequential bookings swing can be traced to orders in the medical OEM market. During the fourth quarter of fiscal 2011, a number of customers placed large orders to address growth in Asia. While these orders were not repeated in the first quarter, market growth projections remain high, especially for China, due to the aforementioned government investment. We are making further inroads with our Genesis OPS lasers for eye disease management. The same is true for laser diodes applied to home-based aesthetic products.

We have broadened our product offerings for the instrumentation market with new versions of the Sapphire OPS laser and wavelength extensions of our OBIS platform. These lasers can be used in a wide array of applications including super resolution microscopy and cytometry.

At Photonics West, we unveiled an integrated, multi-wavelength platform with plug-and-play capabilities. We expect this package to become a cornerstone of our instrumentation portfolio.

Microelectronics orders of $100.3 million rose 34% sequentially and declined 22.6% versus the prior year period. We are seeing early signs of recovery in semi-CapEx. Orders were up for new systems and service, suggesting utilization rates have improved. Most product categories are affected, including Paladin for the most advanced nodes and [Enova] Systems and service for legacy lines. Customers are signaling expectations of further improvement in the market over the course of the year.

We are also fully engaged in next generation technologies to support higher throughput and higher accuracy. The robust demand for smartphones and tablets, tight credit in China continued to challenge the API market by making it difficult for customers to establish letters of credit for new equipment purchases. This has been confirmed by vendors supplying complementary equipment into the space, including imaging and dicing tools. Since inflation in China is seemingly in check, there are expectations that credit will loosen up following this week's Chinese New Year celebration.

With respect to future trends, thin wafers and 3-D packaging are firmly on our radar screen. Thin wafers are applicable to many devices, including MEMS, CMOS image sensors, interposers, memory, RF devices and LEDs. Traditional wafers of up to 500 millimeters -- sorry, 500 microns thick. By 2016 wafers are projected to be as thin as 40 microns requiring new fabrication, handling and packaging techniques. Lasers figure prominently into the list of likely solutions.

Flat-panel orders were significantly higher on a sequential basis. We received orders from a number of accounts, including two new ones, both of which had previously purchased tools from a competitor.

Service orders also increased quarter over quarter. The biggest news in FPD occurred early in January with Samsung and LG displaying prototypes of 55-inch OLED televisions at the Consumer Electronics Show in Las Vegas. If you have not seen these images, I highly recommend you do a Web search. The colors were brilliant. The image was bright. The contrast was spectacular. The display is very lightweight in the range of 10 to 15 pounds, not including a separate electronics box and really skinny at approximately 4 to 5 millimeters thick.

With both manufacturers expected to ship product later this year, many manufacturing decisions need to be made. Chief among them at least for us is whether laser annealing has a role in OLED television production.

For small format OLED displays, the relationship between viewing distance and resolution that has enabled through laser annealing is critical to the user experience. Small format OLED displays accounted for roughly 5% of the handset market and essentially 0% of the tablet market in 2011. The upside in small format is significant. Large format displays viewed from a greater distance are much more tolerant and do not necessarily require laser annealing, which adds costs including additional up and down stream processors. For these reasons, we have not included OLED TVs in our revenue projections.

Other transistor technologies have been touted as performance and cost competitive for large-format displays. The leading candidate appears to be metal oxide TFTs, which can be produced without laser annealing or additional doping. Successful implementation of metal oxide technology remains elusive, however.

There are three possible scenarios that allow OLED TVs to hit the market this year. One, production issues of metal oxide TFTs are quickly resolved. Two, laser annealing is used until metal oxide is ready, or three, laser annealing is the long-term solution.

Since manufacturing decisions need to be made rather soon, it is unlikely that metal oxide is broadly adopted this year. Similarly, given the price competitiveness in the TV market, annealing probably is not the long-term solution. Thus, the most likely scenario is for laser annealing to be used until a more cost-effective solution is production ready. Any lasers sold for TV manufacturing would be incremental to the capacity required for small format OLED displays.

As an update on our previously announced expansion plans, our new facility in Goettingen and Korea will be shipping product in the third quarter of fiscal 2012 as planned.

Materials processing orders of $22.8 million were down 18.4% sequentially and 9.9% versus the prior year period. Materials processing is very dependent upon Chinese and European markets. Both were under pressure in the first quarter, China from internal credit policies and Europe from a combination of China credit affecting exports and sovereign debt issues. As I already said, we are watching to see if China eases credit after the Chinese New Year.

We introduced several new products at Fabtech last November. The METABEAM 1000 is a new laser manufacturing workstation equipped with an E1000 carbon dioxide laser, which greatly enhances the tools capabilities without any significant change to its footprint. Customer response was very good, especially from job shop operators looking for flexibility, speed and cost.

The HighLight 8000L, an 8 kilowatt direct diode system used in precision remanufacturing, heat treating and welding, was also released. Again, this version increases throughput and reduces costs. We remain on track to release a kilowatt class fiber laser this year. Feedback continues to be positive, and field service ability seems to resonate well with OEM customers.

We will be presenting at the Stifel Nicolaus Conference in Dana Point on February 8 and the Deutsche Bank Technology Conference in Miami on February 15, and we look forward to seeing some of you there.

I will now turn the call back over to Stacy for the Q&A session.

(Operator Instructions). Larry Solow, CJS Securities.

I was wondering if you could just elaborate a little more on the gross margin issue and when do you think that can be resolved?

Yes, we highlighted the largest single component that contributed to the sequential drop, which was the drop in volume in one of our business units, and I highlighted that it was mainly in the advanced packaging and materials processing market. Given the low order rate we had in Q1, we anticipate this to be there for the next quarter, being the second quarter, and that is why I guided the gross profits -- (multiple speakers)

Got you. So it was demand-driven. I'm sorry I bounced off the call for a second. Okay. Got you.

Okay, and just a follow-up to that. I mean I know you guys don't want to give guidance too far out, but it sounds like at least in your prepared comments you are seeing some shift. And I realize it is only a few weeks, but it does seem like a lot of obstacles or the growth-limiting factors in the first couple of quarters seem to be easing. Is it fair to say at least your outlook for the second half of the year qualitatively is better than where you were a quarter or two ago?

I think you have to break it down by market. Certainly in semi, the conversations are better, and we do expect demand to improve there. Materials processing and packaging, as Leen just mentioned, have been hard hit over the last couple of quarters, and there we need a response out of China on the credit side because many of the end customers in this space are small to medium-size businesses that really rely on credit flows to finance their growth. And in the absence of that, they are not making those investments.

So a lot of it is going to swing on Chinese credit policies, and then, of course, materials processing also has implications in Europe. And while the situation there at least seems to be gaining a little bit of clarity, I don't think we are out of the woods yet. But those two things would need to be resolved before I think we will see a broad recovery across all markets.

Okay. And the last question on the OLEDs, is it fair to say sales up until now for you guys has basically been all in smartphones? Has there been a small -- is there any use of that in tablets yet? (multiple speakers) You said it was zero through 2011. Is it -- (multiple speakers)

There were no released -- no tablets released with OLED displays in 2011. At the CES show, they also showed some tablet devices, and I think it was Samsung. I think there was one other, but I know Samsung had a version of the tab that had an OLED display in it. So there was no OLED revenue, and I am not talking for us but for actual displays. There was no OLED revenue to speak of in 2011 that was tablet-related.

Jim Ricchiuti, Needham & Co.

John, you had mentioned I believe last quarter that you are anticipating some large orders in FPD. Did those orders come in? I don't know if you can quantify the orders that you received in the quarter. Was it a sizable portion of the overall microelectronics?

As I mentioned, microelectronics was up, and flat-panel is the largest component of that. So there were some good orders that came in, and most notably we took orders from two customers that we have not done business with in the past. So we see that as a positive.

I think the pipeline that I referred to last quarter is still in place, and orders will trickle in over the course of the year as those customers release funds.

Okay. And you are not quantifying the flat-panel, the two large orders that you did receive from your customers, whether they were OLED-related?

I can say that they were both LCD related, so LTPS LCDs. That does not mean they don't get retasked at some point in the future, but initially they will be used for LCD production.

Okay. And just with respect to your comments around the semiconductor market, that that conversations are better, I'm wondering how that ties in potentially to some improvement in the advanced packaging area. Would you anticipate that that is going to follow, and how soon might you see some recovery, or is that really going going to be a function of what happens in China on the macro level?

Well, historically there has been a lead lag between semi and packaging. Typically semi is the first responder, if you will. So that if this were following a normal trend, you would expect the packaging market to start to recover some weeks or maybe months after semi starts to recover.

The difference here is that we have a very different credit environment in China where a lot of the printed circuit board manufacturing is headquartered. And that's why I keep highlighting that we really need to see a noticeable shift in credit policies in China before I think that market opens up again.

And at this point, thus far in the quarter, obviously with the holiday it is way too soon, I guess, to tell what they are seeing.

It is not unusual every year around this time to see the Chinese business slow down as they head into the new year. Lots of companies experience fluctuations in workforce, etc. This year we have a bit of a benefit that the Chinese New Year came early in the quarter rather than in the middle of the quarter, but I would not be surprised if we start to hear from customers in the next few weeks as to what they are hearing from their banking representatives.

Ajit Pai, Stifel Nicolaus.

A couple of quick questions. I think the first one is just looking at the margins. I think you have attributed the gross margin drop to a drop in revenue in one particular product category. But you also had certain investments you are making in Germany and the Excimer plant expansion, as well as in Singapore, that certain other factors that are going to be impacting your margins. Could you share with us whether the downward pressure on margins from some of those actions are behind us, or how long those would continue? And where about two quarters out if your revenue is up 10%, whether the gross margins could be back up to recent peaks?

So the previous comments that we made around the investments in Germany and Korea is that we expected those to be revenue producing by the third quarter, and I reaffirm that in my comments today, which means that it remains in investment mode. That has been outlined I think for at least a couple of quarters now.

Singapore we have highlighted that it would be in investment mode for the first half of the year, and we expected it to move into profitability in the second half of the year. A lot of that will depend on volume and product mix, but we are working towards that as well.

So I don't think anything has changed from what we had previously outlined with respect to those entities. The big difference here is, as Leen pointed out, is we had one business unit that was disproportionately impacted by the slowdown in materials processing and advanced packaging that had the impact on the gross margin line.

Got it. And then the second question is just looking at your share buyback program, and you know you have been buying back your shares in this quarter as well. But could you give us some color as to where the stock is right now and where you are right now, whether M&A is going to be a bigger driver and opportunities for further consolidation are looking more attractive, or your shares are looking more attractive? How would you prioritize the uses of cash over the next six to 12 months?

I can always count on you to encourage us to spend our money. When we look at these things, we always evaluate the available options to us, whether it is acquiring businesses that complement our own or whether it is buying back shares, and both of those remain on the table.

When you start to get to very high share prices and that is obviously a relative term, but when you get to high share prices, you have to look at what the accretion numbers can do versus other uses of cash. Right now I would say that based solely on accretion assessment, you would look at M&A as being potentially a better use of cash. But that also comes down to the valuation that you are going to pay in any M&A deal. It is not acquisitions at any cost. That is a pretty bad policy.

Right. But is the pipeline for acquisitions richer now like after this slowdown that you have seen over the past couple of quarters, or is it the same as it has always been?

I would say that the pipeline has not changed very much. Lots of discussions, you evaluate lots of different options. There are some limited number of that will actually percolate to the top and satisfy both your business and financial objectives. So I don't think that is any different than it has been.

Got it. And then the last question would be just looking at the fiber laser product that you had a much more modular approach, so what kind of timelines can we expect in terms of your further introductions of next-generation product set or any kind of ramp for the modular approach?

We certainly realize that 1 kilowatt is a starting point, not an ending point. There will be other versions that will be released over time. I think it is prudent that we get some experience at the 1 kilowatt level before we jump into the deeper end of the pool. But I think if we follow historical product evolution, that it is 12 to 18 months after the first introduction there will be higher power versions available.

Jiwon Lee, Sidoti & Co.

I just wanted to first talk about the order flows. What were they like in January versus December, and is there any expectation for February and if you could focus on the microelectronics and the scientific and research market?

So the first comment is we typically don't discuss orders that are taking place in the quarter. Even if we were, there is only about two weeks -- two full work weeks in the quarter because the first week back, I think, for many companies is pretty slow. I would not base a lot on those numbers at this point in time. I focus more on what the customers are telling us and how that -- how their sentiment is changing, how the dialogue is changing. And, as I mentioned early in my prepared remarks, that is taking a turn for the better, and we do expect it to translate into longer-term growth.

I may have missed your comments on the conversations on the API side, the packaging side.

The packaging, we highlighted in the packaging business that it is still choppy there. We have cross-correlated our results with other publicly available results, and there is a consistent story here that things are tight. If you look at where the PCB market is sending -- the center mass of PCB is China pretty much -- an until the credit policies ease, we don't think that that market comes storming back because a lot of these printed circuit board manufacturers are small to medium-size businesses. And I'm repeating what I said earlier, but they really require credit to finance the growth of their businesses.

Is that your understanding that there definitely is a need or demand that is somewhat piled on?

Well, if you gauge it by the growth in smartphones as a percentage of the total -- of total handsets -- and depending on whether you look at sort of a minimalistic case or an aggressive case, both of those point to continuing penetration. And, again, depending on what surveys you look at, today's penetration of smartphones into the handset market is anywhere from the low 30s to 40%, and that is projected to grow to the mid-40s or maybe even the high 40s in 2012. And then you add on top of that, the growth of tablets, and there are recent reports out there that actually support the notion that tablets are not being predatory on the laptop market in any significant way, that it truly has created a new segment, all of those devices use the same kind of packaging technology, and then layer on top of that the 3G to 4G conversion, I think the underlying direction for the market remains unchanged. This is a financing issue that needs to work itself out.

If you then draw the line back to China, I think I'm trying to remember an article I read earlier this week that Chinese inflation came in somewhere in the vicinity of 6%, which is lower than it has been. So it appears that the government's policies, the credit policies have worked, and that they now need to ease up on credit to get the growth engine going again because growth has obviously come off as well.

So yes, we think there is alignment there, but until we actually see a change in the credit policies, it is hard for us to draw a conclusion that things are going to get better in a week, a month or longer.

Okay. I think that is fair. And John, you mentioned some share gains in the research market. Could you talk a little bit about that?

Well, we have been looking at the bookings trend in research for a number of quarters now, and we had a step function increase a number of quarters back. I don't remember exactly when. But it bounced up into the low 40s, even approaching the mid-40s, and it has been hovering around that level for a number of quarters. Of course, you always have some timing issues in an even quarter. But in the absence of stimulus money, they would suggest that either research funding globally has grown, and we don't see global evidence of that. We can see some regional evidence in places like China and Korea, but globally the number has not changed very much, which has led us to the conclusion that we are gaining share. And, again, we have looked at publicly available information from competitors, and their research business has not performed anywhere near as well as ours has.

I see. And then on the backlog, could you talk about how much is related to microelectronics or flat-panel displays?

We don't break it out to that level. We don't break down the backlog by market.

Okay, and one for Leen. Was there any currency impact on the bottom line during the quarter?

We had some benefit in the gross profit due to the weakening euro, but that was more than offset by the other negatives I mentioned earlier on.

Mark Miller, Noble Financial.

I have got a little bit of a bug, but hopefully you can understand me. GSI recently announced that they are going to go through a restructuring and, as you are well aware, they attained the assets of a firm that you hotly pursued. I'm just wondering your thoughts about that.

In what context? That they are restructuring? Not --

That they might be selling off part of their assets. Is that an opportunity at all?

My guess is that what they are selling is probably not what companies like Coherent would be interested in buying.

Okay. So they are not selling off the part that you were previously interested in?

In the scientific space, I'm just wondering, typically what we have seen is the US has been weaker, and other countries are picking up the slack, especially in government orders. Is that your sense, your belief also?

Well, we have not seen any kind of significant change in US funding. I mean I'm backing out the stimulus effect from 2009 through the beginning of 2011, I guess. US funding has been actually pretty stable over that period of time. We have seen increases in actual spending, as I mentioned in China and Korea, and we believe that we are seeing share gains in a number of European locations.

Do you see the conversion of the industry through three dimensional chips? Like (inaudible) was an opportunity for more laser sales. Things -- (multiple speakers)

We certainly do. I have been talking about 3-D packaging now for at least a couple, maybe three quarters, and at least I have been surprised at how rapidly it has been adopted at least for simple devices.

But, if you again look at where the lithography market is going, sort of the cost to get to EUV wavelengths and the like, going instead of focusing on further increasing the horizontal density -- and horizontal density is not the right word -- but the two-dimensional density, instead increasing the three-dimensional density makes a world of sense. And that is already happening with certain memory devices and certain logic devices.

So yes, we think it is a big opportunity. It's a very rational approach, and given that lasers have been used for lots of silicon-based applications, one would expect lasers would be one of the solutions that would be used for three-dimensional packaging in general.

No, I know Electro Scientific is marketing a tool. Is it more 2013 when it starts to ramp?

I don't know that I could put a fine enough point on that because we were one step removed from the end-user. I suspect that the equipment makers would be in a better position to answer that question.

Dave King, B. Riley.

First, a numbers question. What was the depreciation and amortization during the quarter?

The depreciation was $5.8 million, and the amortization $1.6 million.

Is it going to pretty much hold throughout the year or --?

I would assume the depreciation to go up as we are making large investments in production capabilities for our flat-panel display business.

Got it. And then, John, you talked about laser imaging. How big of a business is that for you right now and how big of an opportunity can it be in the next two or three years?

Well, it is a decent-sized opportunity for us. We don't characterize individual revenue pieces or technology buckets. But I keep looking at the flexibility and cost reduction that LDI brings to the end-users or the board manufacturers, and it is becoming a pretty good number, especially as the tool manufacturers and companies like Coherent as the laser manufacturers can increase the performance of those systems so that you are getting higher and higher throughput, which means a lower cost per board.

A few years ago when we tried to frame this market, I think there were somewhere on the order of 10,000 I call them contact lithography -- I don't know if that is the right term -- but contact printing systems for FPD and a few hundred laser direct imaging systems. I don't think that the LDI systems have crested 1000 units yet, so there is still a lot of conversion that can take place in that market.

And help me understand the dynamics behind it. I mean you talked about 3G to 4G, a difference of 2X in terms of interconnects. So what does that mean for you? I mean do they need different types of lasers or more lasers, or can you go over the dynamics?

So, if you look at 3G to 4G, there are two considerations. The first is what kind of material you are drilling, and that determines what kind of light source you want to use whether it is an ultraviolet light source or whether it is a CO2 light source, so 9, 10 microns versus 350 nanometers. So that is the first consideration, and that is typically related to the board material. Most of the boards today rely on CO2.

You then have to look at what the critical dimension is. Down to 60 microns, maybe even a little bit smaller than that, CO2 works just fine.

So when they go to 3G to 4G devices, they are increasing the number of layers and they are increasing the number of interconnects, but they are not changing the board material, and they are not changing the critical dimension. So what that suggests is more of the same types of lasers or potentially higher power lasers of the same type to increase the throughput.

Got it.

And we have been in this market for a long time, and the ramp in power has basically been nonstop. Every 18 months roughly you have to step up the power to increase the throughput to get the cost per board down.

Are there any formidable competitors in that space, LDI space?

Probably the largest competitor to our end customers is Mitsubishi that makes not only the tool, but a flowing gas CO2 laser that is incorporated into the tool. Most of the other via drilling suppliers are merchant market, meaning that they build the tool but they source the laser.

Got it. Got it. And then on your kilowatt fiber lasers, so it sounds like your strategy is to go up and not down to say 200 W to 400 W market. Is that correct?

Not initially. Initially we are going to focus on rounding out the portfolio for the light industrial market.

Okay. And then the last question is [the last] strategy is unlimited. They are forecasting that the market, the laser market will be flat this year. Your take on that?

You are asking me to give a comment on the year, and I'm not going to do that.

Okay.

Nice try, though.

Jim Ricchiuti, Needham & Co.

Leen, could you provide a full geographic breakout? I thought if you could just give us the percent of revenues from Asia, North America and Europe. I may have missed it if you did.

Yes, it was -- I mentioned it, but I will repeat it. For the quarter, Asia was 46 -- sorry, for the quarter Asia was 50%, Europe 20%, US 24%, and rest of the world 6%. That is for the quarter. I can also give you trailing 12 months, but that was in the --

No, quarter is good. And I don't know if you would be willing to share with us, but just in that you called it out as an area of weakness in booking certainly. Can you give us some color as to the percentage decline you might have seen in China? And given that it has been a big part of your revenue mix over the past 12 months, what level of revenues you are seeing from China?

We typically don't provide revenues by geography, except for the ones that we disclosed in the 10-K, the largest entities, so we typically don't do that. But the drop in volume was significant in that one particular unit. So that is all I can really comment on.

Significant from a shipment standpoint and also fair to say just a significant decline in bookings?

Yes.

And Jim, if I can chime in here, the reason that your question does not give you the answer that I think you are looking for is that the credit policies in China not only affect Coherent directly, they actually affect our OEM partners. So those revenues may not show up in China. They may show up in another jurisdiction. They could be in Germany. They could be in the US. They could be in Japan for example. It depends on where the equipment manufacturer is that then ships product into China.

Right. That is a good point, John. Thank you.

At this time, we have no further questions in the queue. I will turn the call back over to John Ambroseo for additional closing remarks.

Thank you, Stacy. I would like to thank everyone for joining us, and we certainly look forward to chatting with you again in a few months.

We thank you for your participation in today's conference. This does conclude your presentation. You may now disconnect, and have a great day.