庫力索法 (KLIC) 2012 Q3 法說會逐字稿

Greetings, and welcome to the Kulicke and Soffa third fiscal quarter 2012 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 a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joseph Elgindy, Manager of Investor Relations for Kulicke and Soffa. Thank you, Mr. Elgindy, you may begin.

Thank you, Claudia. Good morning, everyone. Welcome to Kulicke and Soffa's fiscal 2012 third 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 who you 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 related 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 and 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. Thank you all for joining our call today. Results for the quarter were above the high end of our prior guidance, driven by our market-leading copper position, as well as strong market demand for our AT Premium solution. The key themes to our continued success include our multi-segment leadership, flexible manufacturing strategy, R&D strengths, free cash flow generation, and improving debt-free balance sheet. Our continued (inaudible) effectiveness is allowing us to maximize the opportunities that can provide both near- and long-term growth. We are clearly the market leader in the segments we serve. We continue to carefully evaluate synergistic opportunities where we can further broaden our reach by leveraging our technology leadership position.

For the June quarter, revenue came in at $255.5 million. This represented a 75% revenue improvement over the March quarter, and was further strengthened by 230 basis points of gross margin improvements, which were attributable to strong demand for our AT Premium product, as well as ProCu equipment. Later on during the call, I will provide some insight to the markets served by this unique AT Premium solution.

Overall, our strong revenue and gross margin results, combined with continued operational cost control resulted in operating profits of $76.3 million. Our focus remains on expanding our technology and market leadership, while pursuing areas that can reduce the cyclicality of our business. We continue to capture all opportunities possible related to the ongoing and broadening transition from gold to copper, and look ahead at wedge bonder volume improvements, LED expansion, and advanced packaging growth opportunities.

We are effectively managing our supply chain efficiency, and keeping inventory at healthy levels. In the June quarter, we experienced an improvement of our equipment business, which was driven by higher ball bonder demand. 88.4% of wire bonding sold were to [LSAT] customers, an increase from the prior quarter. Demand for copper capable wire bonders continue to remain strong. Since the introduction of our ProCu machine almost two years ago, we have seen a steady increased demand for this market-leading solution.

Our considerable investment in R&D and process expertise continues to strengthen our competitive advantage through this transition. This remains one of the most compelling cost-saving options for our customers today. Approximately 79.7% of our wire bonders were sold as copper capable. From our perspective, the transition from gold to copper will continue for the foreseeable future, based on our current capacity levels and our understanding of our customers' demand. We also believe the significant secular driver is very unique in the industry, and will continue to give us a business advantage as we look ahead.

Slightly less than 5% of our ball bonders sold were configured for the ATE market. We continue to work with ATE customers, particularly in the high end of the market where our products are technically best-suited and where we have a competitive advantage.

Turning to wedge bonders, our sales improved in the June quarter compared to the March quarter, due primarily to modest improvements in the power semiconductor subsegments. Our sales to the auto and industrial segments were fairly flat. We anticipate our wedge bonder volumes to gradually increase over the coming quarters, as the existing capacity is being digested.

In summary, we are pleased with our business performance in the June quarter. We continue to drive revenue, margin, and operational improvements, and remain focused on expanding our technology and market-leadership positions. I will now turn the call over to Jonathan Chou for a more detailed financial review of the June quarter.

Jonathan?

Thank you, Bruno. My remarks today will only refer to GAAP results. On today's call, I will compare the June quarter to the March quarter. As Bruno mentioned earlier, net revenue for the quarter was $255.5 million, up $109.2 million from the March quarter. The net revenue change was primarily driven by higher equipment volume. Gross margins came in at 47.9%, up from 45.6%, with gross profit at $122.4 million. In addition to our competitive equipment position, the gross margin improvement was also positively affected by broader market acceptance of our AT Premier bonder and ProCu machines.

Operating expenses were $46.2 million, down slightly from the March quarter. For the September quarter, we estimate operating expenses to be approximately $51 million. This includes some addtional expenses associated with growth initiatives.

Income from operations for the June quarter was $76.3 million, and our tax provision came in at $6.8 million. We are maintaining a long-term effective tax rate target of below 15%, as we continue to simplify our tax structure.

We ended the quarter with a total cash and investment position of $380.7 million, equivalent to $5.01 per diluted share. This $45.4 million quarter-on-quarter cash reduction reflects our recent $110 million note repayment, eliminating roughly $8 million of annual note-related expenses. Since June 1, 2012, the Company is debt free.

We look forward to deploying a portion of our cash through new and existing internal product development, while continuing to explore other external areas of growth in order to maximize shareholder value. Working capital defined as accounts receivable, plus inventory, less accounts payable, increased $22.3 million to $173.1 million. This increase was driven by higher accounts receivable balance, considering our relatively steeper revenue increase from the March quarter. This highlights the cash generation capability of our business model.

From a DSO perspective, our days sales outstanding decreased by roughly 20 days. Our days sales inventory decreased substantially from 72 days to 44 days, due to our strong top-line performance and operational effectiveness. Our accounts payable days decreased by 6 days to 47 days.

This concludes the financial review portion of our call. I will now turn the discussion back over to Bruno for September quarter business outlook.

Thank you, Jonathan. Before we close, I wanted to touch quickly on our AT Premier products as just another example of the growth opportunities we are executing on. As mentioned in previous calls, the AT Premier is a wafer level stud bumper that allows for a wider bonding area, improved throughput, and presents customers with a significant valuable position [for all their] identity solutions. This product serves the ATE, MEMS and CMOS image sensor markets, where these units in consumer mobile devices including small forms of [debits]. This solution represents a sizable market opportunity for the current fiscal year, with the potential for growth prospects beyond that.

In terms of our guidance for the September 2012 quarter, we expect revenue to be approximately $250 million to $270 million. This guidance further demonstrates our technology leadership position in the key markets we serve. We will keep focusing on improving our flexible manufacturing model, R&D strengths, free cash flow generation, and balance sheet strengthening. This concludes our prepared remarks.

Operator, we will now be happy to take any questions.

Thank you.

(Operator Instructions).

Our first question is coming from the line of Krish Sankar with Bank of America Merrill Lynch. Please state your question.

Yes, hi, thanks for taking my questions. A couple of them, Bruno, as I look at your guidance, given the impressive guidance of roughly flat from September, how do you think the different segments will trend between the ball bonders, wedge bonders and LED?

It's probably going to look very much the same. We have maybe, as I said, the wedge bonder business is starting to recover. We had a great year last year, fiscal year, was always a business. I think there is some digestion going through the supply chain. So we would say, we do expect, based on the guidance on some modest growth, but we would say most of it will come from, again, our copper bonding solutions.

All right. And then, another thing I wanted to find out was if you look at what the foundries are saying in the second half, where they seem to be slowing, I understand OSAT utilization rates are pretty high right now. But I was trying to get a sense of how you look at the disconnect between what the foundries view in the second half, and what you hearing from your OSAT customers?

That's a tough question. I talked to a couple of Foundry people that I know in the industry, and it seems that, yes, you are right, that there is a disconnect I think, in -- I would say, maybe at the leading edge technologies. There is, maybe the demand is not that strong, as -- maybe the subs are not as prepared as they should be. But when you talk about, again the bulk of the core technology today, 65 nanometer node and also the 40 nanometer, the demand is pretty strong. And again, you have the secular trend of demand for copper wire bonding that is basically increasing now across all customers around the world. And we are seeing now a lot of demand, especially from US fabless customers. Which was not the case maybe one or two years ago, because of the lack of reliability data for copper wire bonding. But now that is pretty much behind us. We see that there is actually a growing trend from all the OSATs, big ones and small ones towards adopting copper processes because if they don't have it, they won't get the business.

Got it. Got it. All right. Then Bruno, the other question I had was, given that you are one-third of the way into the quarter and looking at your guidance, can you talk little bit about how you think the linearity of your revenue would be in the September quarter? Is it mostly front half loaded, or do you think it is going to be equally spaced for the three months?

I mean, again, we guide the current quarter, and you know that (inaudible) has always been like this. That's the nature of our business. We end our fiscal year on September 30. Most of the investments, these IDMs and OSATs that have been done in order to be able to supplies all the consumer groups for the Christmas season. So obviously, we, although I won't provide any guidance for Q1 for the timing, but we will we will see the natural seasonality that we have seen at Kulicke and Soffa for the last few years.

All right. Then just the last question from my end, what percentage of your copper capable bonders was from ProCu?

We don't disclose that. But what I can tell you is in the last two years, we have drastically increased the number of ProCu bonders that we sell versus a standard if you want, a gold wire bonder with the copper keys. It is now a very significant part of our business.

Got it. Thank you very much, and congrats on the good numbers.

Thank you, Krish.

Our next question is coming from Tom Diffely with D.A. Davidson. Please state your question. Mr. Diffely, your line is live.

Oh, sorry about that. Yes, great. First, I would like to talk about the margins. Typically when you have a very strong quarter, it means big customers came in. And typically, when a big customer orders big volumes, they get a little bit better pricing. So I am surprised that the margins were so strong in this quarter. Maybe you could just talk a little bit more about how you got that 200 plus basis point improvement?

Well, as we have said in the prepared remarks, the margin improvements was due mostly to -- I would say a higher mix of ProCu machines, and a fairly high of demand of our AT Premier stud bumping machines. That's the main reason.

Okay. I guess maybe then looking at the customer base itself, have you seen an expansion, if you will, of the number of different customers coming in during the quarter, whereas a year ago it was a couple large guys that dominated?

Yes, I mean we have seen an expansion of our customer base. As we were very focused, I would say on the two or three larger guys, now the transition especially to ProCu is fairly widespread across the majority of the OSATs As for the AT Premier, it is a little bit of a different animal. The subcontractors are -- it's not OSATs really, it's a different set of subcontractors. That is not a huge business for us, but it is quite a profitable business.

Tom, this is Jonathan. Let me add, basically it's still the usual top 10 list, in terms of our customer base. But the top 5 customers contribute to about 80% of our ball bonders business.

Okay, all right. What are you seeing from the IDMs? It sounds like you were still very heavily on the OSAT side, but are you seeing an increase in the adoption of copper by the IDMs as well?

Well, I see the IDMs are not investing a lot in backend capacity. But on the other hand, they tend to outsource more to the OSATs, which is a result of why our business is actually doing quite well, because there's more and more customers relying on OSATs for outsourcing. So yes, IDMs are adopting copper. But again, the trend here is for IDM to become more and more assets light, and for the OSAT to capitalize on these opportunities.

Okay. That makes sense. Jonathan, did you say the Op Ex is expected around $51 million in the September quarter?

Yes, we -- it's about that -- around that ball park range, slightly higher than this past quarter.

Okay. Does that include the intangibles as well, amortization and intangibles, that is everything?

Yes, it does.

Okay.

And I also included in my remarks there, there's some growth initiatives there, that basically allows to us spend a little more on some of these internal and external development.

Okay. Then Bruno, you talked about the stud bumper. How big is this market?

It is not a huge market. I think we can probably estimate it at $60 million to $70 million per year, I mean for this year. We also are trying to understand better that market and size it. One thing is clear, is that we dominate clearly, and why we are going to come up with a new version of our AT Premier that will be introduced in September at the Taiwan SEMICON show. So there is definitely a demand, because the advantage of that solution is, number one, is the throughput. Number two is, you can use either gold or copper. Number three, instead of using a soldering process, you can just basically bump the [good dies], and so there's some cost efficiencies as well for customers. As you know, tablets and mobile phone being consumer device, devices, the main thing is our costs. Okay? So we are just trying to see how sustainable, long-term. The core of the business today is [semo] sensor. But we are seeing some, actually new interesting application, especially in the LED and MEMS area.

Okay, thanks. And I guess, finally, you talked a little bit about the LED market, and you said that you did very well in areas where you had the competitive advantage. Which -- well, first of all, how big is the LED market, and which areas do your bonders work the best in?

Well, I mean, I don't have an idea exactly of the size of the LED market. I am sure you can find some data from analysts about that. But the solution we have, as you know, our strategies, we developed a platform for our ball bonder, wire bonders product, which is a high performance platform, and then we had [derivatives]. So we tried the ConnX plus, which kind of serves the, I would say, the more the low pin count, the medium pin count markets at SEMICON China. We have the Iconn, we have the ProCu and we have the LED versions. And therefore, because they cannot use the same platform, our bonders are aimed at high-performance LED, the high performance LED markets. That means automotive, that means industrial applications, and obviously when it picks up, home applications, home lighting applications. So therefore, and because again, of our price points, we do not recompete in, as I said many times during the calls, in low end (inaudible) LED markets that requires $30,000 ball bonders. This is not where we compete. We compete in the high end, where you need the high quality, high reliability bonding for long-term use.

Okay. Thanks for your time this morning.

Thank you.

Our next question is coming from the line of Lee Simpson with Jefferies. Please state your question.

Hi, good morning, gentlemen. Well done. Good set of numbers. I wonder if I could maybe we could maybe start off with a question on wedge bonding, the spend into the recovery here, and really how that pertains to power semis. As I understood in your comments at the start, their existing capacity now has been digested. But it seems clear to us that Chinese industrial spend is not going to go into recovery until we get a change on monetary or fiscal policy. And if you look at autos, a lot of (inaudible) analysts are talking about a slow down next year, in at least unit volumes. I know there is a disconnect with how the power train is developing. But I wonder if you could maybe put all those dynamics into some sort of shape for us to understand how wedge bonders might recover next year?

Well, again, it is difficult to predict the business a year down the road. I think that our wedge bonder business is recovering. I wouldn't say it's a major recovery, but it's getting better. We believe that there is applications, especially in the automotive space that could actually drive our wedge bonder business up. We have also a series of new products that will be introduced to the market in a few months that we hope will help capitalize on our market share position, which again, in this space we are dominating. So in summary, we do not anticipate the wedge bonder business to grow like crazy over the next quarters or so. But it is going to be a modest recovery as last year was an exceptional year for the power semi space and new install capacity.

Maybe quick follow-on to that question. Can you give us a sense for the key apps, maybe on a medium or long-term perspective that we should be looking for in automotive that could be a driver for the wedge bonders business?

Well, for wedge bonders, I mean it is a hybrid vehicle application, electric vehicles, this type of -- when this really picks up, that is good for our good wedge bonder business.

Okay. Great. And then --

Especially electric vehicles

Especially electric vehicles. Maybe just a wider question. If you look at cycle on cycle, the progression there for Kulicke, it's a lot more stable now with debt free, $370 million net cash. You have effectively become the market now for bonders. I think about a 70% market share, more so with copper bonders. So as we look out the next couple of cycles, it seems the challenge is, how do you outgrow your market? And it's tempting as investors to think the cash pile has to be used to look for, if not a transformative acquisition, something of a new strategic direction. Is there anything you can share with us as far as early thoughts might be emerging in that sense?

Yes, I mean, particularly by the way, on copper, we have way more than 70% market share, although there is no official data I think we clearly dominate in the space. But there is no doubt that we are looking, as Jonathan mentioned, there will be an increase in operating expenses, although modest. And so we are looking at advanced packaging solutions. This is definitely an area of interest for us. We want to leverage our copper (inaudible), which is again presently generating, 2.5 D, 3 D, the kind of application where we are very active looking into organically, and also through technology acquisitions.

Great. Maybe if I could have one final follow-on. It's becoming aware that maybe one of your competitors is fast developing a copper bonding solution. I wonder if you or anyone at your team have had a chance to have a look at what's in the market there? And perhaps share with us, what your in the customers think of that tool set when it compares next to yours in the factory?

Well, as you know -- it's no secret that we have 100% market share at [ASE] at all bonders pretty much, and definitely on all copper. [Speel] made a public announcements, I believe last quarter that for copper they would have only one supplier, which is K&S. We have had a chance to, there is really only one competitor who has introduced a solution, but it's really a solution that is aimed towards, I would say more lower pin counts to medium pin count devices, which we can address by the way, we have a solution for that as well. But our ProCu dedicated solution is really for complex stack dies, thousand wires type of application where you get the bigger return on the investment, and you get bang for the buck, in terms of savings for your customers.

So we haven't had really a chance yet, because there the, our competitor's machine has not been greatly deployed, and I guess also accepted by the market yet to do, what we call, an apple to apple comparison. But we do believe that our solution is far superior. We have had the product on the market for almost two years, and working on the next generation one. So we are not resting on our laurels. We have spent a lot of money on copper, we have been working on copper for many, many years. And it's not just the matter of the machine, it's really a matter also, on understanding the process.

Great. Maybe if I could squeeze one last question and apologies to other people on the call waiting. If we look to the order book build for the September quarter, does it speak more to the usual December sales seasonality? Or does it talk to some of the commentary that ASE and Speel have talked about, where the CapEx might may slow down in to the back half of the year.

Well, I mean, we are halfway, or not half way, we are one-third through our fourth quarter fiscal, and again, our backlog as I have said many times is not really a good indication of the health of the business because it's all risk [endurble] and considerable. And we all know that historically, in the capital (inaudible) business, it may be a little bit different in the full [time] space, but this is equal to the back end. The last quarter of the year is typically a lower quarter for investments, as most of the investments have to be made by the end of September, in order to be able to produce all the devices that would be needed for the holiday season.

Great talking to you again. Thanks so much.

Our next question is coming from the line of Satya Kumar with Credit Suisse Group. Please state your question.

Thanks for taking the question. I was wondering if would you talk a little bit about some of the larger subcon customers. It seems like they reached about 50% mark, with the copper conversion. How high can this copper conversion go at the larger companies? And can you also remind us where you think we are on the overall industry copper conversion?

Well again, on an individual customer basis -- I think it's better that you read the public reports that are available. What we think is that we are roughly, slightly less than one-third through the copper conversion. Our estimation roughly, is that about four or five years down the road -- again, because it's driven by costs. Because all of the consumer demand about 70% of all IC assembled, 70% to 80% of all IC assembled worldwide will still be wire bonded. So Flip-Chip is increasing, but fairly slowly. And you only use Flip-Chip if you need the performance. Advanced packaging it's very exotic, and it will only pick up if you can reach the right price points. And if you look at the bulk of the market, it is going to be wire bonded, and if you take this market and you look at it, we estimate that 70% of the total IC that are going to be wire bonded, will be copper wire bonded. So in other words, we believe that we have quite a bit of runway ahead of us.

Got it. You mentioned that you are increasing your OpEx in December. Could you talk about any particular product areas that is going to be focused on? And as you move into December and next year, is this sort of a permanent step up in the OpEx, or will it sort of come back down?

Well, again, we it's kind of -- it's R&D. So I am not going to give you too much detail about that, but it's primarily advanced packaging applications

And beyond September, is this the level -- the new level of OpEx or would that sort of --?

Yes. Yes, that will keep going. I mean, this is a -- the decision was made. We want to participate in this market. We have identified it as a sizable market in the next three to four years. There are not that many players yet. This is definitely a space where we see that we have the knowledge and the technology, not all of the technology by the way. So it's doing to be a combination of organic growth, working with technical institutes and consortia, as well as possibly making some strategic or technology acquisitions.

Got it. Then, on the LED business, you mentioned that 5% of the bonders in the quarter were from the LED. Do you expect the mix would be about the same in September? There has been some talk of higher utilization rates in the LED space. I was wondering if you could talk a little bit more about the trends that you are seeing. Is there a possibility of more meaningful recovery in the ball bonder demand for LED over the next few quarters?

Well, again, I won't guide beyond the current quarter. But for LED, as I have mentioned, we are very, very focused on the higher-end LED. Until really, the home lighting market picks up, I don't think we should anticipate a significant uptick I would say, of our LED bonders. I would say obviously, depending on the revenue, it tends to be a little bit more stable quarter-over-quarter than the rest of the business. So the percentage -- as a percent of the revenue tends to change, the growth will really come when LED lighting starts to pick up, which in our view it's probably about two years, if not more, down the road.

Our next question is coming from the line of David Duley with Steelhead. Please state your question.

Yes, just a couple quick housekeeping questions. Did you have any 10% customers during the quarter?

Yes, we do. We have two 10% customers.

Can you break out what the percentages were?

I'm sorry, we don't break that out, in terms of the 10%, but clearly -- the usual suspects are the two top 10%.

Okay. What should we expect from the other income line now that we don't have any debt?

Well, it should be very minimal in terms of income, in terms of going forward. Other income is basically a --.

It will just be other income, I was just wondering if you could just give us an idea of what this line should look like going forward, for modeling purposes.

We spend about $200,000 on interest income in the line. (Multiple Speakers).

Okay. Bruno, could you just talk a little bit about -- you mentioned that you have a broader swath of customers, US fabless customers, I guess, is what you mentioned, moving to copper. Could you talk about which segments are -- seem to be moving to copper now? And maybe just talk a little about the cost savings that some of these customers are recognizing by moving to copper?

So I would say, basically broad based. I think most of the large fabless companies in the US that you know, are now moving to copper. The savings that can represents, be represented to them varies on the complexity of the device and the gold content, and it's basically anywhere from 15% to 25% versus the gold equivalent wire bonded products. Even some, I would say, customers in -- I won't name any of them but I'm you can figure them out, in infrastructure communications are coming up with wire bonded products instead of Flip Chip, because they need to serve some large customers in China that deployed their infrastructure in, I would say emerging countries who required a fairly low cost, from a [price structure] perspective.

So again, as I have said several times over the course of these calls, there is some limitation in terms of performance with copper. Copper doesn't behave very well above 1 gigahertz. With gold, you can probably go, maybe up to, I would say 6 to 10 gigahertz depending on the application. Then above that, then you would use Flip-Chip. But the bulk of the applications again, I mean unless you talk about LTE and these type of things, which are not deployed broadly across the world, yes, you can use copper wire bonding.

Okay. Could you talk about what areas that you are focusing in on, on the advanced packaging area, internally or externally? What are the types of applications we should think of that Kulicke would like to get involved in, the 2.5 packaging trend?

That's something that definitely we are not prepared to disclose. But basically, just wafer level packaging, 2.5D, 3D packaging, this is an area of interest for us. But again, leveraging on our core competencies, we are not convinced we are not [presently generating]. So you're not going to see us very likely moving into a space that we cannot leverage on our current core competencies. But again, this is a very confidential and strategic, I would say, efforts within K&S. And I can't tell you more than that. Okay. Inside K&S, what products do you currently have that address this market, it's only the stud bumper that you're referring to? Today, yes. But today, I mean, this market is less than 1% of the total market. So I mean -- it's just -- that is why -- and there is many, many solutions to address wafer level packaging. Which is why it's the right time today, to start the work with customers, and understand exactly what they want. So I think, again, the key point here is this exotic type of packaging is only going to make it, if it gets to the right cost points. If it's going to be like the Flip-Chip, which is today about 25%, 30% more expensive than the gold equivalent of a wire bonded product, it is not going to pick it up as fast as everybody is hoping.

So the whole key here is as this industry is now primarily driven by the consumer, it needs to get to the right cost points. That's why we are working with customers. That's why we are working with technical institutes and try to figure out exactly what are the requirements. So we put a team together in R&D to look at that. But right now, I mean, it's really we are exploring the possibilities. And what the attraction for us is, as you know K&S has always been -- we want to be the number one in the market we serve, and that's the same approach for advanced packaging. So we want to make sure that what we are going to address in wafer, in advanced packaging, we can be positioned as the leader in terms of technology.

One final thing from me, Bruno. You have a lot of experience in the OSAT market. I was just wondering, as we move to these 2.5D and 3D packages, do you think the foundries are going play a bigger role, or will they turn over the business to the OSATs? In other words, are you going to have to start to focus on different set of customers, or do you think it will be their traditional customers, when these new packages really ramp up?

I think it remains to be seen. Again, there are solutions that could be developed entirely by a foundry, which may not be the most cost effective. I think the OSAT players are going to fight obviously to get a piece of this pie because that's the only sizable market that is obviously able to grow for the foreseeable future. And from a customer perspective, because I have been also on the other side of the fence, you do not want to rely solely on one partner or one supplier to do everything. So my view is that, at least for the time being, that this will be shared. There might be some opportunities for the foundries to do some total solutions. But by and large, this will be shared between the foundries and the OSATs.

Thank you very much. Congratulations on nice numbers.

Thank you.

Our next question is coming from the line of Clint Coghill with Coghill Capital Management. Please state your question.

Hi. Great quarter, and even better guidance. I understand your desire to diversify the business for the long-term. However, with $5 in current net cash and soon to be over $6 a share, that equates to roughly over $450 million in cash. It looks like you are trading at about 2 times EBITDA, and less than 3 times earnings if you strip out the cash. As I try to think about things from your standpoint, I can't imagine you being able to find a business to buy that has as good a position and as inexpensive as you are. And so I just wanted to kind of get your thoughts on uses of cash over the course of -- over the course of the next 6 to 12 months? And I had one other question regarding listing on the Hong Kong Exchange.

I didn't quite catch your second question --

Sorry about that. I had another question. I'll ask it after you wrap up the first one.

Okay. Let me address the --I think I mentioned our key focus here, is really how do you actually use the resources that we have to deliver a good return for our shareholders? So where we are going through a lot of planning, a lot of analyses, in terms which is the best way to use it, at least for now, we are looking at basically organic and inorganic type of opportunities, but at the same time, we are looking at different things. So we continue to look at that on a regular planning basis -- and the key focus is generating a return for our shareholders. And that is how we're measured against. So it's hard for me to give you any specifics, in terms of what we plan to do with the cash, but we certainly have an approach to it.

Okay. I guess, the second question just -- and it's a great problem to have, by the way. It's just you generating enormous amounts of cash. The balance sheet continues to grow and grow, and a compared to where you were three years ago, it's a -- or four years ago, you are in a great position. I guess the second question is just -- it has to do with your relocation to Singapore, your proven flexible manufacturing model where you have shown your ability to make money in trough quarters. You are kind of looking more and more like perhaps ASM. And again, I noticed that ASM trades at roughly 20 times earnings on the Hong Kong Exchange. You are trading at a third of that, and not including all the cash on your balance sheet. Have you thought about listing on the Hong Kong exchange? It doesn't seem like your business is being properly valued in the US

Well, certainly, the Hong Kong Stock Exchange where our peers actually is listed, it is a different market. But this is, again, one of those things that we continue to look at as well, as part of our yearly planning process. Certainly for now, I think we're getting the right recognition. At least, the right investor pays for us right now in the US. Our volume right now, that we have seen over the last couple days has actually picked up quite a bit. But even with the average 200 moving day volume, where we're still trading at a reasonable basis. So we will continue to look at what will makes sense. So I think the Company has already made some fairly significant strategic moves, in terms of relocating our global headquarters. We will continue to actually look at what is right for the Company and our shareholders for that. I certainly recognize the fact that the multiples are very different, but I think we can actually address the business model through what we can do organically and inorganically. And hopefully that will smooth out the cyclicality of our business model, and hopefully that will basically, have more investors that will actually recognize and provide the kind of premium that we have that our peers are currently commanding in Hong Kong.

Got it. Thanks. Great quarter again.

Our next question is coming from the line of David Wu with Indaba Global Research. Please state your question.

Yes, good evening. I'm sorry I was late getting on, and I have a lot of questions answered already. But there's one, that's in the June quarter, a number of the semiconductor companies have seen their business fall off especially in the month of June. I was wondering if that's going to spread to more companies? When is the earliest you would see it in your own orders from OSAT, or fabless or IDMs?

Well, again -- so we obviously, we don't sell any equipment to fabless companies, so our customers are primarily OSATs, about 80% of our customers are OSATs. Actually, second to that, the rest are IDMs. We have seen if you look at the trend, quarter on quarter of our business over the last few years, excuse me, is that of, usually all fourth quarter, sort of fourth quarter, are trough quarters. Our fourth quarter being the current one ending at the end of September, because that's where all the CapEx needs to be invested and in place for the production of all the electronic, especially mobile devices for the holiday season. So usually our first quarter, which I mean our December quarter and our March quarter, are seasonally lower the previous quarter, which is the fourth quarter. I do not expect to see any change that year from that pattern, okay? It's just the way our business behaves.

Okay. Just one clarification. I missed when you said your top five customers account for what percentage of your business in the last quarter?

David, this is Jonathan. I mentioned 80%. Basically, the ball bonder revenue came from the top five.

Okay. Fantastic. Thank you.

You're welcome.

Our next question is coming from the line of [Andy Shopic], a private investor.

Thank you, two quick ones. Jonathan, how will the calculation of fully diluted shares in the September quarter be impacted by the repayment of the convertible debt? Will we see a little bit of a dip in the fully diluted share count?

Basically, by us repaying the note, we basically eliminated the dilution. There's no dilution at all. We basically re --

I understand. So my question is how will that fully diluted share count be affected in the September quarter from the 76 million reported for this quarter?

Yes, not much at all. Actually, we still -- continue to be about 74 million shares, total outstanding.

On the basic?

Yes.

And the diluted share count really won't be affected at much at all then?

No, not much at all. That's correct.

Okay. Did you make any commentary about fixed versus variable costs in the quarter, and whether there was any material change over the course of this fiscal year?

Yes, our cost structure remains to be about 30 -- $36 million fixed and 6% to 7%. And I have mentioned 6% to 8%. It's probably 6% or 7% that is tied to revenue on the variable cost side. So that remains the same.

Okay thank you.

You're welcome.

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

If there are no further questions, thank you all for the time today. Operator, this concludes our call.

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