庫力索法 (KLIC) 2012 Q2 法說會逐字稿

Greetings and welcome to the Kulicke & Soffa fiscal year 2012 second quarter results call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As are reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joseph Elgindy, Manager of Investor Relations for Kulicke & Soffa. Thank you, Mr. Elgindy, you may begin.

Thank you, Claudia. Good morning, everyone, and welcome to Kulicke & Soffa's fiscal 2012 second quarter conference call. Joining us on the call today are Bruno Guilmart, President and CEO, Jonathan Chou, Senior Vice President and CFO. Both are available for Q&A after the prepared comments. For those of you who have not received a copy of today's results, the release is available in the investor relations section of our website at www.kns.com.

In addition to historical statements, today's remarks will contain statements relating to future events and our future results. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our actual results and financial condition may differ materially from what is indicated in those forward-looking statements. For a complete discussion of the risks associated with Kulicke & Soffa that could affect our future results and financial condition, please refer to our SEC filings, particularly the 10-K for the year ended October 1, 2011 and our other recent SEC filings. I would now like to turn the call over to Mr. Bruno Guilmart. Please go ahead, Bruno.

Thank you, Joe, and thank you all for joining our call today. We are pleased with our business performance this quarter. Results came in above the high end of our prior guidance. Importantly, the revenue strength was matched by gross margin strength. Our continued success validates both our business strategy and our long-term road map. Our focus remains on expanding our technology and market leadership while pursuing areas that can reduce [instability] in our business. In medium-term, we continue to capture all opportunities possible related to the ongoing and broadening transition from gold to copper. We are still early in the transition based on market demand levels and capacity needs. This momentum gives us a distinct business advantage as we move forward.

In terms of strengths in the March quarter, we benefited from normal seasonal recovery as the December quarter's demand is typically lower. Unlike the prior quarter, we are fine to see encouraging data points. This is led by quality equipment inventory trends, capacity levels, and end market growth drivers like mobile applications. Although we continue to see clear signs of the improved demand in the short-term, our management team remains focused in strengthening the Company's fundamentals for long-term. This includes new product initiatives, ongoing gross margin improvements, operational efficiency gains, and overall cash generation. This ever-present focus on continual improvement has enabled us to better to manage our financial performance through the cycle.

Over the past three years, our gross margin exceeded 45%. Our operating margin has been over 17%. And, we generated nearly $300 million of cash. For the last quarter, we've achieved gross margin of 45.6% and an operating profit of $20.2 million, and we generated an additional $22.4 million of cash. All this during a period of relatively soft demand combined with the short quarter due to the Chinese New Year holiday.

During the March quarter, we experienced an improvement in our equipment business which was largely driven by higher ball bonder demands. The increase in ball bonder volumes was largely due to a rebound demand from our outside customers. 84.8% of wire bonders sold during this quarter were to outside customers, an increase from the prior quarter. Demand from copper capable wire bonders continues to remain strong. Approximately 70.4% of our wire bonders were sold as copper capable. We estimate around 25% of bonders in the field are copper capable. This implies that we are still at the early stages of the broadening transition.

We anticipate the current copper capacity in the field is dramatically lower than the approximately 30% of integrated circuits that make one go to copper. Considering this future capacity need in addition to our current product offering, some of that share and [sustainable] investments, we needed the copper transition will continue to be a meaningful demand driver for years to come. Over 8% of our ball bonders sold were configured for the AD market. We continue to work with AD customers where our products are technically best suited and where we have a competitive advantage. Turning to wedge bonders, revenues were softer in the March quarter compared to the December quarter due to lower demand in all markets of segments including [pos] semiconductors, automotive, and industrial. However, we have started to see an improvement in demand and we anticipate wedge bonder volumes to increase in the coming months.

In summary, we are pleased with our business performance in the March quarter. We continue to drive revenue margin and operational improvements. At the same time, our focus remains on expanding technology and market leadership while pursuing growth areas that can reduce the technicality of our business. I will now turn this call over to Jonathan Chou for a more detailed financial of the March quarter. Jonathan?

Thank you, Bruno. My remarks today will only refer to GAAP results. On today's call I will compare the March quarter to the December quarter. Net revenue for the quarter was $146.3 million, up $26.3 million from the December quarter. The net revenue change was driven primarily by higher equipment volume. Gross margin came in at 45.6% with gross profit at $66.7 million. Gross margin is down slightly due to higher sequential mix of [OTA cells] and also equipment in product mix. This strong and consistent gross margin performance is attributable to our flexible manufacturing model and our ability to provide a steady flow of new and differentiated products which support higher average selling prices.

Operating expenses were $46.4 million, up $3.5 million from the December quarter. This increase is partially due to the unique December quarter pension curtailment gain of $1.8 million, in addition to increased variable expense in the December quarter of $1.5 million associated with selling and employee incentives. Throughout the March quarter, we continue to maintain our copper wire cost savings initiative. Our efforts resulted in a savings of approximately $3.2 million over our budgeted expense. This cost saving initiative was wrote out in the December quarter as an aggressive yet sustainable way to limit our operating expenses during the period of softer demand. Collectively over the prior two quarters, we've identified approximately $6.8 million of savings associated with this initiative. This $6.8 million savings is a significant amount representing approximately 20% of our first half fiscal year's operating profit.

Income from operations from the March -- for the March quarter was $20.2 million and our tax provision came in at $1.6 million. We are continuing to target a long-term effective tax rate just under 15%. We continued the quarter with a stronger total cash and investment position of $426.1 million or $5.64 per diluted share. With this strong cash balance, we have ample financial resources to redeem our $410 million convertible note maturing this June -- this coming June, maintaining our ongoing R&D road map and continuing to explore other external areas of growth. Working capital is defined as accounts receivable plus inventory less accounts payable remained flat at $150.8 million. Account receivable and inventory were offset by accounts payable changes.

From a DSO perspective, our DSO outstanding remained flat at 83 days. With respect to inventories, our base sales of inventory decreased by 11 days to 72 days. Our accounts payable day increased by 26 days to 53 days. This concludes the financial review portion of our call. I will now turn the discussion back over to Bruno for the June quarter's business outlook.

Thanks, Jonathan. Before we moving on to Q&A, I want to take a minute to update you on the recent, new product developments. This is an exciting area for us given the Company's long history of innovation. As you all are well aware, our success as a technology innovator is central to our ongoing ability to maintain and grow our leadership positions and to further strengthen our competitive advantage. During the March quarter, we showcased an impressive product line at the SEMICON in Shanghai including the launch of a new capillary, [publife], and ball bonder equipment products. These new products have all been well-received by customers and clearly differentiate themselves in their respective markets.

Of note, our ConnX Plus bonder is initial second generation product release for our market leading Power Series [suite] of bonders. This new bonder is strategically targeted at lower to medium (inaudible) applications that offer a roughly 10% productivity gain over its predecessor while adding significant improvements to vision and looking functions. We remain very optimistic with our product portfolio road map. These successful product introductions are testimony to our corporate vision of leading our industry with competitive and innovative technology solutions.

In terms of guidance for our June 2012 quarter, we expect revenue to be approximately $220 million to $240 million. This would represent a growth of approximately 60% to 64% compared to the March 2012 quarter. The significant improvement largely stems from further strengthening of the overall industry which is obviously better to drive higher volume in our entire product offering. This concludes our prepared remarks. Operator, we would now be happy to take any questions.

(Operator Instructions)

Krish Sankar, Bank of America Merrill Lynch.

Hi, thanks for taking my question and congrats on the execution guys. I had a few of them. Bruno, I know you don't have the facility downstream, but can you tell us what type of end markets in your view are actually driving the demand for wire bonders? And especially in the wholesale, is this mostly mobile or is there other end markets too?

As you know, we had little visibility to our customers' customers, but I would say, generally speaking, what we can -- from what we can see it's -- I think there is a general recovery of the overall semi industry. I think the power and (inaudible) space is probably a little bit behind, but definitely mobile applications are one of the main drivers for the recovery of our business. What I can tell you is that the copper transition, which obviously started with a lot of public companies in Asia, is now becoming more and more pervasive with the US companies, and again talking with customers, a very large portion of the new take-outs that they are getting are requiring copper bonding. So that's I would say the seed of the joint market right now.

That's very helpful. And then my understanding on the copper wire bonding is that even though you use it for mobile applications, there seems to be some limitations from a frequency standpoint. Is there a certain cutoff at which copper wire bonders cannot be used or do you think that technology can still be extended for higher frequencies?

That is correct. That's the correct statement at this stage. Copper I would say doesn't behave, it's hard to handle in frequency I would say about 1 gigahertz or thereabouts, but as you know we have a very strong process development team in K&S to try -- to push that many further. You have the same limitation with gold by the way. Gold is challenging and it works up to maybe 4 or 5 gigahertz and it's becoming more challenging. And so while this is the trying to push the limit of both copper and also gold because gold is still used in the industry, as that [sheet] is still a more expensive alternative to wire bonding even at the current gold prices.

Got it. That's very helpful, Bruno. And then finally a question for Jonathan, you guys have definitely done a great job in cost management. When you spoke about the $6.8 million incremental opportunity to save, is it already being rolled into the March quarter or is there a savings that we'll see down the road?

I think these savings have already been captured. What we can say going down the road, in terms of softer demand quarters we'll continue to look at ways to -- areas of savings. In terms of going forward, just to -- one thing we didn't indicate in our script is that we do expect OpEx at the same level compared to this -- in Q2, which is about $46 million, $47 million to that OpEx.

Very helpful. Thanks a lot and congrats, guys.

Satya Kumar, Credit Suisse.

I was wondering if you could talk a little bit about what your lead times are at the moment for ball bonders and what type of visibility you might have at this point beyond June?

I would say we are pretty busy right now. Our lead time are in the range of 10, 12 weeks. That's about where we are. So again, we -- as you know, we focus on the current quarter. That's what we give guidance for, but I would say we are busy.

And just as a clarification, what's normal lead times?

Again, we are -- remember that we are mostly a system integrators, so we outsource roughly 70% of our models. Obviously, we own all the IP, all the technology and everything, but we rely on suppliers for about 70% of our -- we have a factory manager which supply us about 30% of what we need. I would say when the market is down, you typically see an eight weeks lead time. When market is going up, you typically see more like a 10 to 12 weeks lead time.

Okay. Can you give a sense what have portion of the copper ball bonder shipments are for conversions from gold to copper versus for new capacity at the copper nodes?

Well, we said in the prepared remarks, we shipped about 80% of copper capable bonders this quarter. That includes our pro copper, which is a dedicated copper solution, as well as gold copper with (inaudible). Going forward, I don't see that ratio changing significantly. The demand for copper is very strong.

Can you talk a little bit about the concentration of ball bonder shipments within the large OSAT customers between the two leading adopters versus the other subcons?

We do. About 77% of our ball bonder actually went to seven top customers in the quarter, and these are the usual suspects. We don't really usually list them out, but internally the two Taiwanese players are basically bringing top ten.

All right, thanks a lot. Good quarter, guys.

David Duley, Steelhead.

Just a couple questions from me. On the wedge bonder front, I think you mentioned that the shipments were down 45%. Do you expect them to rebound in the June timeframe and what impact will that have on gross margin?

Hi, David. This is Bruno. Yes, we had a great year last year with our wedge bonder business and definitely the December and March quarters were slow. However, we are starting to see a pickup in demand for this quarter, but definitely it won't be a year -- I see there were a lot of probably over capacity in various system order and over capacity in the field. And we won't have a year like we had last year of our wedge bonder business, however, what I want to mention is we are working very hard on new products. I can't say more than that for the time being, but we are investing heavily into that space. We believe that especially in the automotive application, the power management modules there is a lot of opportunities. And so, we expect I would say -- the recovery, I would say is probably is lagging a quarter or two behind the rest of the overall semi industry.

Okay. And do you think that the bounce in that business will be enough to help the gross margins in the second quarter or is that more of a second half phenomenon?

Dave, this is Jonathan. I think the gross margin improvement from the wedge bonder will be modest, if any. It's really going to come from our copper conversion kind of in terms of the ball bonding, selling more of the harder margins, equipment sales there.

Remember, Dave, we already (inaudible) with our fiscal year end in September -- end of September. So I don't anticipate to see any significant margin improvements due to the increase of business because, again, as a ratio, the personal stage of the total business, the wedge bonder business is obviously -- became a much more thought about business as the copper business is really doing very strongly.

Okay. I noticed your backlog took a significant uptick. I think the orders were up 100% sequentially. What was the key driver behind the big bulge in orders? Is that all the OSAT guys or the top two OSAT guys -- did you see that spreading out beyond that?

I think obviously the two OSAT guys are very strong, but as I said in previous call and this is -- the proper transition is now more and more pervasive and we see that across pretty much all the OSAT guys. So again, 80% plus of our business is coming from OSAT. So that's I think the trend now is that as we see more and more demand especially from US companies and also some IDM, most IDMs to transition to copper, it's really a -- I would say a necessary transition that the OSATs -- all the OSATs have to make if they want to capture the business.

Okay. Final one from me is you mentioned you didn't think the wedge bonder would be as big this year as it was last year. What do you think about the ball bonder business?

Again, we don't forecast for the full year. We concentrate on the current quarter. It's all going to depend on what's going to happen for the next quarter. We've given a pretty strong guidance for Q3. Again, as you know, our backlog, it's always to be taken with a pinch of salt and our orders are typically reschedulable and considerable. So if the business momentum keeps going, potentially we could have another good quarter next quarter, but again, I won't comment on next quarter. Right now we had obviously a more difficult start than last year in Q1 and Q2, so it's going to be difficult to do as well.

Tom Diffely, D.A. Davidson.

I was hoping you could help me out just to kind of understand what's involved with the conversion to copper? Is there much of a learning curve or a technology challenge that would maybe slow down some of these smaller players who move into copper or maybe some of the IDMs?

Yes, there is definitely a ramp-up as far as the technology curve is concerned. People have been -- our customers have been using gold for so many years that you can pretty much take a machine out of the box and plug it in and it will work. For copper, it's really being able to develop a process. And we provided a machine that has some recipes that obviously each device is different and behave differently. It's very application specific. And so there is definitely a learning curve.

Okay. So longer term do you think that will make the larger players larger in the copper space than they were in the gold space?

Well, if you look at -- I believe that if you listen to what [ACM Steel] are saying -- yes, if you believe the data that's coming from (inaudible) the overall demand from copper for all ICs will move to about 25%, 30% which is where we are today to about 70% in the future.

Okay. And then when you go to that 70%, does it get more difficult to convert the later chips to copper, are there more challenges involved? In other words, have we done the easy stuff, easy conversion and then we have tough stuff ahead of us or is this just a matter of getting the capacity out there?

No, it's more a matter of getting the capacity. Again, every conversion -- again, our strength is not in the -- doing a conversion for small to a medium device is fairly easy. And our strength is being able to convert complex devices with thousand wires, complex looking applications and make them work. So that's really why we are dominating the space because that's where also you get the bigger bang for the buck in terms of cost savings in terms of materials.

Okay, that's helpful. Also, do you have a -- can you give us a quick update on the die bonder business? Haven't heard much about that lately.

Die bonder business, I would say again, the solution that we have addresses a fairly small portion of the market. We're actually looking more now at leveraging the work that has been done in that business unit or development to see what we could do in more advanced interconnect technologies. The die bonder business is a fairly crowded market right now. There is a lot of established players, and so we believe that there could be more interesting opportunities with I would say more advanced type of interconnect technologies.

Okay. Sounds like the copper business is so robust right now, it's worse everything else. All right, thank you.

David Wu, Indaba Global Research.

I was curious about two things. Number one is when I look at the number of employees, net employees in the quarter versus the prior quarter, I notice there was hardly much of an increase at all, and given this strong revenue. And I was wondering, and obviously this is the outsource model, how should I think about incremental revenue growth versus incremental labor headcount growth?

Well, we've always had a model and that's kind of our strength of being more of a system integrator and trying to flex up and down through the cycle letting about 60% of our labor as contract workers, okay? So that's why you can see some fairly large variations in terms of number of headcount. However, I would say we have a pretty steady number of about 2,200, 2,300 employees, which is the core team I would say. The rest are contract workers that we bring in, mostly in our Malaysian and Singapore factories when we need them during the up term. And then maybe Jonathan can give you some more detail on the revenue versus cost.

Yes, David, let me just elaborate a little more, and I just also want to clarify one of the prior question asked by Krish of Bank of America. If you look at reported Q2 OpEx it's $46.4 million, and if you look at the fixed component of that, that's $36 million plus about 6% variable in terms of the variable costs of that. And looking forward to the current quarter, we're expecting $37 million of fixed, so it's about 5%. Obviously, this is a highly scalable business model in our opinion where if you get the more volume, the more fall-through it does. So it's really the incremental that's really the variable component of that percentage of revenue, 5% of revenue. So from an employee perspective, we will see some modest gain for next quarter, but these are still flexible enough where the contracts that we have will basically fall -- basically we'll finalize or terminate at the end of rent.

The other question I'd like to ask is you have significant amount of cash and unless you do an acquisition, I wondering what's your disposition or the board's disposition of how to return excess cash to the stockholders?

Well, we have -- we're going to repay our $110 million loan that is due in June, so that will definitely lower our cash balance quite significantly. At this stage, as I've mentioned, we're exploring a lot of strategic options to grow the Company to the next level and we want to keep the flexibility in our balance sheet to have this cash available should an opportunity arise to again take the Company to where we want to go in the next few years. So in other words, we have no plans for dividend payments. I think we have not had enough of try period so far to be able to -- when you have a dividend payment strategy, you need to be able to do that consistently and our business has been quite technical and we believe it's not the right time to do that. As for our share buyback, for the time being it is -- we joke about it, but it's something we may consider at some point, but we prefer to keep the flexibility in our balance sheet to create that strategic opportunity for growth which will provide better returns for shareholders.

Okay. The last question I have is you doubled your revenues from the quarter in roughly six months. And I was wondering how long would it take you to go back to your peak quarter? It looks like another double will get you back to where you were at the peak of the last cycle. I assume it will take more than six months to get there from this level?

Well, obviously this is cyclical. So it is very difficult to predict and to forecast which is why we seek to providing guidance on the current quarter. Again, we have the ability, as you can see from our current guidance to ramp up the revenue quite significantly from one quarter to the other. Typically, the last quarter of the year which is our first fiscal quarter, is a seasonally low quarter because everybody has made all their investments for the year and is able to provide sufficient capacity for the Christmas season and all that happens at the end of the year. But that our business model is such that we can scale our business up and down fairly quickly based on customer demand.

Okay, great. Thank you.

[Andy Schopick], private investor.

Is the Company still operating under a board mandate to become debt-free? I believe before Scott turned the reins over to you Bruno that was the objective. Is that something really the Company still intends to do?

Andy, this is Jonathan. Yes, we are planning to basically redeem our bond and by June 1, under that assumption we will be debt-free. Obviously if the bond does -- there's still a slight chance of actually converting given the fact that we are about a couple of dollars away from the conversion price, $14.36. We plan to basically repay the principal in cash and basically the upside, the premium in stock. That's the approach, but we are planning to be debt-free.

And to continue to operate on a debt-free basis under the foreseeable circumstances?

I think our capital structure when we are basically debt-free, we would have to look at the best cost of funding if there's an opportunity out there that we think it has a nice fit. We would have to look at what's best for the Company from a cost to capital perspective. We are global select on that, then we have access to capital markets. Then we have to evaluate what is the best way to fund any opportunities.

Fair enough. Question about the wedge bonder market. First of all, I'd like to ask what percentage of the current wedge bonder business is to the auto industry?

It's very -- I would say very small. I would say maybe -- I'm going to give you a rough number, maybe around 15% or so. The main driver in the auto industry has been the hybrid and electric vehicles, especially the power management pack for the batteries. So it's not a huge portion of our business. The certainly a piece of it, which is the power supplies for industry applications and so on is still the majority of our business.

Is the relative weakness for the year ahead in the wedge bonder business mostly tied to the auto or is it a more generalized situation? Or is it tied to one or two customers where the outlook has deteriorated?

We don't have -- the wedge bonder business, it's actually very different from the ball bonder business. These are, I would say much more expensive machines, very customized. You don't have, I would say, large customers. You have a lot of customers. A large customer for the wedge bonder business is maybe somebody buying 10 machines. A large bonder in the ball bonder business is somebody buying 500 machines. So we're kind of spread out, and so we have -- also, we are the largest in terms of market share. We have over 60%, 65% market share. So we have a good view of what's happening in the market. I would say right now it's more driven by the overall I would say industry. Automotive is doing a little bit better maybe but it's -- given that it's quite a small portion of our business, it's definitely not enough to compensate for the semi business which is 80% or so of our business.

Okay, thank you.

Amrish Mecca, Tenor.

Congrats on a good quarter. Help me understand, if we look at the CapEx spending by some of your largest customers, be it (inaudible), mCore, some of those guys, if you just look at their quarter to quarter increase in CapEx spent expectations for 2012, they seem to have gone up maybe incrementally by at least $500 million. What's really driving that increase and what percentage of that do you think you guys can capture?

Well, I think the increase is driven by demand in capacity. It's a mix of several things. It could be a tester or testing business has picked up. If you look at typically from again what I can read from a list or transcripts of our customers who are public, they spend about 30% or so of their CapEx in the wire bonding business. And most of that CapEx, as I've said, I think I made mistake earlier in the conference, I said we shipped 80% of copper -- actually, it's about 70% of our total ball bonders that we ship that are copper capable that we dominate that space. We have -- overall, we have 65% market share for all the bonders -- ball bonders business. And you can see that the large I would say -- the large portion of that business is going towards being copper capable because if you do not have the capability given all the new products that are coming from their customers that require to be bonded in copper, and it's not a trivial conversion going from gold to copper, they won't be able to capture that business which will go to the semi guy in Taiwan who has been very aggressive and are now well-established in that process and capability.

Okay. And so what I find interesting is looking at what some of your customers have publicly said that they exclusively use, if you look at Soffa on the copper wire bonders. So help us understand why is that the case? How long can that last?

The case is because we have the best solution on the market. So that's pretty simple. We have, as I've mentioned in several calls -- our differentiation is we first -- we were one of the first to work on that conversion, on that capability. We have a very strong team of process engineers in Fort Washington in Pennsylvania, as well as Singapore. So we want to maintain our lead. We hope that we can maintain our lead. And our strength is in the complex products. And so if you compare us to the competition, basically we are just better which is the reason why we're capturing so much business.

And so when you say you have 65% market share, how much has that increased in the last two years?

I don't have the data in front of me. That's available with the website. You can check on that. That 65% is for overall bonded products -- in copper we dominate. It's public information. You can read the transcript from [AC and steel]. We have 100% market share, pretty much with everything at AC. And we have 100% market share for all copper products at steel. Jonathan, maybe you have some data on --?

Amrish, I have the [ASLS] data as of April 2012 here and they published 2011 with 68%. If you look prior year to 2010, were at 57%; '09 is 44.6%; '08 is 40%; 2007, 46%. I think we really because of the copper conversion we have basically captured quite a bit of market share as a result of the product innovation, and we do consistently invest or reinvest our capital in our R&D spend. So that's really how we can stay ahead of the product innovation side.

Okay. If you look at your past revenue guidance, you have consistently been able to beat that by 8% to 12%. Help us understand what's going into how you are coming up with guidance, and how are you able to perform solidly at least for the last eight quarters?

We provide guidance at time where we have basically that, that's our view of the business, okay? There is a lot of variables in our business. First, as I mentioned we're a systems integrator, so we depend on suppliers. So it's I would say a big portion of -- how we manage our business is about supply chain management. So it's working very closely with suppliers on what they can do. Another portion is customers, another portion is product mix. Another portion is our ability to basically hire contract workers in a market in Asia which is very tight. There is close to 0% unemployment in the tech sector in Singapore and Malaysia. So all these coming through I would say into the context of providing guidance with also we have to receive from our customers. So we always try to better, the best we can, and when we provide the guidance this is what we see at the time we see.

Obviously, we're fairly conservative in terms of how we go about setting our guidance. The key is to make sure we meet it, but we have to build in enough basically consideration of the risks that are out there. So, so far we've been very -- we're able to actually narrow guidance and also exceed it and (inaudible) are very pleased with that.

Okay. And final question from me, and it pertains to your valuation. So if you look at where you are trading relative to your competition, it's a significant gap. And you are about four times EBITDA times P/E. On a forward basis, based on just the guidance you gave for June, you can do maybe $1 share per earnings. What is the market not understanding? And how are you thinking about thinking of that?

We've been basically -- we recognize the fact we're not being recognized on a valuation perspective by the market. We're actually focusing on basically transforming our investment base. Hopefully, we'll get more of the longer-term value players out there. But at the end of the day, we do have -- our business model itself is still -- it's cyclical. So generally, we have opportunities that in addition to growing our business organically, we are looking at some inorganic opportunities to hopefully have businesses or product offerings that would complement or smooth out our revenue profile. So hopefully, when we have that there is -- once you have a smoother EBITDA profile, you can -- certain investors will actually be more attracted to that. So we hope we can actually achieve that over the coming quarters or years.

Great, thank you very much.

(Operator Instructions)

David Duley, Steelhead.

Yes, just a quick follow-on. Jonathan, I think you mentioned what percentage of the business was LED. Could you fill that percentage out again?

8%.

Yes, we mentioned 8%. Generally, it's in the high single digits for our LED business.

And is the -- could you talk a little bit about where the DRAM business is at this point?

DRAM business is -- I don't have a personal attention off top of my head, David, but it's a fairly small portion of our business.

And have you seen any -- I'm just wondering in both those peripheral markets, LED and DRAM, what the direction of the business is?

I would say for LED, it's -- we are focused on the (inaudible) previous goal, more and more of the higher end, higher performance type LEDs until the really the general lighting market is going to kick in. We don't have a machine that is priced competitively. We do sell -- obviously 8% is not zero, but we do not have a solution that is addressing the low end of the market on price accordingly. As for the DRAM, we are not -- I would say we have not -- never been really through that market heavily. We are there, but this has not been again, a huge area of focus for us.

Gentlemen, there are no further questions at this time. I would now like to turn the floor back over to Joseph Elgindy for closing comments.

Thank you all for the time today. Before we end, I'd like to take this opportunity to remind investors that management will be presenting at the Jefferies Technology, Media, and Telecom Conference which will be held at the Westin in New York City on May 9, 2012. If you are unable to attend in person, a link to the webcast will be accessible from the investor events page of our website. Again, thank you all for the time today. Operator, this concludes our call, thanks.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.