庫力索法 (KLIC) 2014 Q3 法說會逐字稿

Greetings, and welcome to the Kulicke & Soffa Third Fiscal Quarter 2014 Results Call (Operator Instructions). As a reminder this conference is being recorded. I would now like to turn the conference over your to your host, Mr. Joseph Elgindy, Director of Investor Relations and Strategic Planning for Kulicke & Soffa. Thank you, sir You may begin.

Thank you, Melissa. Welcome, everyone, Kulicke & Soffa's fiscal 2014 third quarter conference call. Joining us on the call today are Bruno Guilmart, President and CEO; and Jonathan Chou, Senior Vice President and CFO. Both are available for Q&A after the prepared comments.

For those of you who have not yet received a copy of today's results, the release, as well as our latest investor presentation, are both available in the Investor Relations section of our website at 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 September 28, 2013, 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. Revenue in our third quarter of 2014 was just over $180 million, nearly 60% above the March quarter and above our reported guidance range. During the June quarter, we generated $85 million of gross profits, which puts us just over 47% for the Company. The top line strengths was driven primarily by our core wire bonder solutions, but was further supported by sequential quality improvements in other equipment businesses, including stud bumping, wedge bumping and also LED offerings. We were able to meet this aggressive shift in demand by working closely with our supply chain partners and also increasing our employee base nearly 15% in the quarter. This translates to over 300 new headcount from the prior quarter. These headcount additions were overwhelming highly skilled, temporary direct labor employees.

I will provide some additional commentary to each business momentarily, although from a high level perspective normal seasonality of our business generally drives higher demand of our products for the second half. While seasonality likely plays a role in June quarter, based on specific customers applications we believe a portion of the demand was also driven by growth in utility and basic smartphone and tablet segments.

These end devices are largely targeted for emerging markets and are expected to reach fairly aggressively gross targets over the next few years. In March 2014 Gartner issued a report showing that the utility and basic smartphone market was already the size of the premium smartphone market and expected to grow at a nearly 16% CAGR during 2013 through 2018. Similarly utility and basic tablets are already much larger than the premium tablets market and are expected to grow at nearly 19% CAGR during that same time period. While we participate in all these smartphone and tablet markets, premium, utility and basic, we expect the most cost effective markets will have a larger content of wire bonded chips than the premium market. The continued resilience in the smartphone and tablet market combined with the recent up beat expectations regarding the PC industry and our growing anticipation of the Internet-of-Things help to instil additional confidence in the broader semiconductor market as we look ahead.

Turning back to our specific equipment dynamics for the June quarter revenue from wire bonding was up over 70% from the prior quarter. With copper capable unit sales representing approximately 69% of wire bonder sales which is in line with our historic copper capable unit sales since fiscal 2010. While we are fast, the rapid adoption base, we expect the current allocation of copper capable shipments to continue going forward. Our market dealership which has driven the industry current level of capability in terms of process and application remains a key tailwind in our business. We continue to serve a very broad market for this core business and have enjoyed some heightened level of sale in China and some renewed support from key customer. In addition to our normal semiconductor wire bonding business, we have also enjoyed stronger demand for our LED product offerings in the June quarter. I will provide some additional insight shortly.

Our ATPremier Plus is our latest wafer level stud bumping solution that serves fast growing niche application including MEMS, SAW filters and optical sensors. Since this underlying segments have a slightly higher growth trajectory than the broader end market, we continue to remain opportunistic in the stud bumping business as we look ahead. Also from operations perspective this solution has strong commonality and synergies with our higher volume wire bonding business which shall enhance our overall manufacture efficiency.

Moving on to wedge bonding equipment. June quarter revenues were up over 80% from the March quarter. The majority of these sales were driven by continued market strength combined with share gains in the automotive and power module segment. Quarterly performance was further heightened by what seems to be a more widespread recovery in the power semiconductor market combined with the broader acceptance of our new PowerFusion family of products. We continue to anticipate this higher level of sales will persist through September quarter.

LED bonders sold for the June quarter represented over 14% of our ball bonder shipments. Considering our historic run rate of just over 6% in LED sales the additional June quarter volume represented fairly significant increase. June quarter LED sales were focused towards backlight LED production for developing markets. We continue to look ahead at the LED market very selectively with cautious optimism anticipate the transition towards general lighting will provide incremental business opportunities.

Overall our market dealership and availability to flex our personal capacity enables us to drive and meet demand for our broadening solutions. This business model also allows us to invest heavily in new product developments with the intimate goal of driving long-term financial performance.

Finally as an update to our Advance Packaging program the development team continues to execute and achieve key milestones beyond expectations. As mentioned last quarter, we recently shipped a high throughput dual head thermo-compression bonder or chip to substrate to a key development customer and plan to ship out several additional systems to new customers in the September quarter. While we are targeting the September SEMICON Taiwan show as the official product release, we continue to utilize our portfolio management process which enable us a reduction in development time, flexibility of future set and addition product variation. We are now working aggressively on bringing to market a high performance high thermo-compression bonder for chip to wafer within the next year. We believe this flexible approach is critical in ensuring that our commercialized offering incorporates the right amount of features at the right price points to drive existing and future customer demand.

I will now turn the call over to Jonathan Chou for a more detail of the financial review for the June quarter. Jonathan?

Thank you, Bruno. My remarks today will only refer to GAAP results and we will compare the June quarter to the March. Net revenue for the quarter was $180.5 million up $66.3 million or 58.1% from the March quarter. Gross margin came in at 47.2% with $85.2 million of gross profits. Gross margins were down slightly from March quarter as expected considering the shift of products and customer mix in the June quarter and the exclusion of favorable March quarter COGS related provision adjustment of approximately $800,000. We generated $31.6 million of operating income, $26.6 million of net income and $0.34 EPS. June quarter operating expense closed at $53.6 million up $6 million from the March quarter. As mentioned on our last call, incremental operating expense were largely related to event packaging related investments, more specifically short-term prototype expense which will continue into the September quarter.

For the June quarter R&D spending came in at $223.5 million, and we are currently targeting -- I'm sorry. $23.5 million. Excuse me. And we are currently targeting R&D spending in the September quarter to come in at an elevated $21.3 million and return to our historical run rate by the December quarter. We ended the quarter with total cash and investment position of $600.1 million up $3.8 million from the March quarter. From a diluted assured standpoint this cash position is equivalent to $7.73 which increases our book value equivalent to $9.79.

As expected a significant portion of our June quarter operating income has transitioned to short-term working capital used to support current level of operational activity. Considering this robust and heightened level activity the June quarter modest cash flow increase actually to our earlier expectation reflecting solid management working capital usage. Working capital, defined as accounts receivable plus inventory less accounts payable, increased $39.4 million to $142.1 million. From a DSO perspective, our day sales outstanding remained unchanged from the prior quarter at 77 days. Our day sales of inventory decreased from 69 days to 51 days, and days of accounts payable increased 61 days to 63 days.

Our effective tax rate for the quarter came in just under 15%. This sequential increase is largely due to specific discreet items within a specific entity. We are currently targeting a long-term effective tax rate of 10%.

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

Thanks, Jonathan. In terms of our guidance for September quarter we expect our business to remain strong with revenue in $185 million to $195 million revenue range. While our core business remains quite robust, we remain committed to leverage our strong balance sheet to support long-term opportunities in the core markets such as copper, (Inaudible) but also in the new market such as Advance Packaging. While M&A has been and continues to be a key focus for additional growth we continue to periodically review alternative options to leverage our cash balance to drive returns for our shareholders.

This concludes our prepared remarks. Operator, we will now be happy to take any questions.

Thank you. (Operator Instructions). Our first question comes from the line of Brett Piira with B. Riley & Company. Please proceed with your question.

Great. Thanks for taking my question, and nice job on the results. In the LED market you have had some nice growth there. Can you just talk about the broader competition there. I think one of your competitors is more focused on that market. So what do you think the growth opportunities there? What do you think your advantages are, and any target you are trying to meet there?

Okay. So our focus on the LED market does not change. We have always been actually very selective in the LED market, and we do not want to complete in the low end of the market. As it turn out there is an opportunity that comes up with emerging companies for backlight LED and also more LED in the automotive and beginning of a start of I would say of a more demand for home applications. So what we are doing is before if you want, we were I would say maybe too selective in looking at LED applications and now we are taking a more aggressive look. I am not saying that we will take every opportunity that we have. Our bonders are high performance bonders and they must fit the application. But we are definitely taking a much more focus especially in China with specific customers so that we can advice in the proper way this growing market.

Okay, great. Thanks. And then maybe on your core wire bonder side there was an OSAT company last nigh talking about the acceleration of Advance Packaging down into the mid-tier range. Do you guys think that you will still have some of the low end there in the tablet and smart phone? Can you just talk about the progression you are seeing there, and what the overall drivers you think are?

The driver right now are the emerging economies as we have all talked about. Therefore emerging economies mean I would say mean less sophisticated smartphone and tablets and more use of wire bond parts. Just a point to remember, it took 20 years for flip chip to come from zero to about 14% or 15% market share today. While there is no doubt that high-end applications Advance Packaging and actually (Inaudible) if you put that into Advance Packaging which it is not really Advance Packaging it's some form of I would say more Advance Packaging then ball bonders that not the Advance Packaging we, K&S, are talking about. We do believe that actually there is quite a bit of runway for us to get more business.

In addition to that, in terms of seeing very simple devices, wearable watches, wearable bracelets that give you the number of steps or your heartbeat or whatever linked to your smartphone do not require very sophisticated processor and so on using Advance Packaging technology. So hence obviously there is no doubt that over the years when we reach a plateau from a ball bonder perspective we do believe that especially from a copper perspective we are about halfway through the conversion rate. And anyway since most of the new products except for very specific application come in copper we do still have some runway for copper for many years to come. Nonetheless, the growth will be with Advance Packaging, at least what we qualify as Advance Packaging, which is where we are putting a lot of investment dollars and bringing new machines as fast as we can to the market.

Great. Thanks, Bruno.

Thank you. Our next question comes from the line of Krish Sankar with Bank of America Merrill Lynch. Please proceed with your question.

Yes, hi. Thanks for taking my question, a couple of them. Bruno, how many customers are you involved with today in Advanced Packaging, and when do you expect your first revenue for the product?

We don't disclose the number. But I mention we had, I would say, another IDM customer that we have worked closely with. If you'll remember, we stop it with thermo-compression bonder for (Inaudible) substrate that was the first machine we worked on about a year ago that was ship to an IDM because it was essential for us to ship it to these type of customers to get as much feedback as we could on the machine. And we did ship the basically the version that the will be essentially commercialized which is a high throughput machine, which is a dual head machine and that has been actually shipped and is actually working at the customer. For this quarter we plan to ship several other customers and it is confirmed dual head machines to customers that we have chosen I would say primarily in Asia, okay? Again I can't disclose the name of the customers. I can't disclose either also the location. But please do remember these are not revenue generating machines, okay?. They are (Inaudible) machines. And we do anticipate that after the official launch in September we will start to see revenue generating Advance Packaging probably in the late part of the first half of FY 2015 which is for us around the March time frame, but more likely in the second half of FY 2015, and these revenues will be fairly modest. We are also working as I mentioned on the new machine this time to address the chip to wafer aspect which is a lot more complex. And really FY 2016 will be I would say the benchmark year where we can really see some revenue from both of these products and some others that we have in the pipeline.

Got it, got it. Very helpful. And then two other questions. One is what do the LED as a percentage to wire bonder sales this time?

I'm sorry. Say that again.

How much is LED as percentage of wire bonder sales in June?

16%.

14%.

14%. Usually we do (Inaudible), okay. So what we did for LED is that I think in the past maybe we were not aggressive enough. Our platform, our strategy for LED as far as wire bonding is concerned is we have one plus form and several varieties, okay. We have never produce on developing a specific platform for LED. Hence the LEDs, the low-end LEDs that do require very cheap wire bonders were never an attraction for us because the margin we had been totally unattractive. On the other hand, the backlight LED TVs or LED displays not only TVs, the (Inaudible) as well as the generally lighting seems to be picking up. And we have been taking I would say a more aggressive approach with specific large customers in China into the LED space, okay, rather than I would say being maybe too complacent about it. And hence the problems for us is the overall corporate margin and by being able to play a little bit depending on the machine and the pricing to address specific markets because we actually have reorganized our wire bonding lines by a market and applications as opposed to have just high performance and cost performance we are able to play a lot more into direct market and direct applications and actual the results have been paying dividends for us.

That is very helpful. Final question, I noticed that the wedge bonder ticked up quite a bit. Is there something going on there or you think it is just normal seasonality?

No, there is something going on. We have been working on that business line for quite sometime. Last year was a very, very difficult year for wedge bonding. The previous year I think they were probably -- or two years ago, I forget, they were an over buy in terms of capacity. So what we did is we really restructured and refocused our wire bonding activities. The first thing actually that is starting to pay off and where we are getting market share if you remember last year we introduced the PowerFusion family of products, and that is getting an excellent performance -- excellent acceptance from a performance perspective from customers. And we are regaining market share and that directs mostly the Power (Inaudible), and the Power (Inaudible) line to, I would say, regain some momentum. As well as we are gaining a lot of market share in the (Inaudible) segment as well as the module segment which will have also a newer machine coming shortly to address this segment, and again try to bring a better solution to customers. So the (Inaudible) really two years of hard work. We have a new leader in place who is driving the business. So I would say yes we have a little bit of tailwind, but it has been hard work to bring back that business line in to where it is today.

Okay. Thanks, Bruno.

Thank you. Our next question comes from the line of Tom Diffely with DA Davidson. Please proceed with your question.

Good afternoon. First question, I guess going back to some of the newer markets, the LED and wedge and (Inaudible). So the sequential decrease in the gross margin was that mainly a mix issue with obviously coming off of very high levels in the March quarter. But the sequential decrease do they need mix or is it volume discounts to certain customers?

I think it is a combination of product and customer and I mentioned the provision that we had in the March quarter of $800,000. So generally when ball bonder volume pick up the average for gross margin will actually come down (Inaudible). This is reflective of what we are expecting in terms of the gross margin level.

Yes, if you look at historically when our volume goes up, typically the gross margin goes down a little bit that is pretty normal in our business.

If I can just add a little bit more, is in terms of our -- compare this to one or two years ago where we do have actually some fairly large customer (Inaudible) under volume discount. Our customer base is much more diverse these days and that has allowed us to maintain a higher gross margin over time.

Okay, that makes sense. And then you talked about how the wedge bonder obviously very strong in the quarter and will remain strong. Do you expect the LED business to remain strong as well in the out quarter?

It is more difficult to predict the LED because as I mentioned in my remarks we are very (Inaudible), okay. So you may see in the future I would say higher (Inaudible) depending on whether we decide to go for that piece of business or not. We do expect that there is a potential for opportunity with general lighting but this is still a couple of years away because the price point from a consumer perspective is too high. So there is definitely opportunities, but our strategy is basically to leverage our common platform for ball bonders and we are not going to go and design a specific platform to address LEDs. So you will see very likely more fruition in that market than for instance the wedge bonder recovery or the normality seasonality of our overall had business.

Okay. And this year when you look at the combination of a little bit more diversified wire bonder customer base and a little more diversity in your products is there any change to the normal seasonality because of the diversification or most of the customers still act on a very seasonal business with the fourth calendar quarter falling off quite a bit?

That has in a conscience effort since we have not depended as much or at all from the two large customers we had in the past to really reorganize ourselves and redeploy our resources and especially reorganize ourselves by application and by market to try and grab more customers, more applications and capturing more business at the same time. China for instance has been really strong for us this quarter and will be next quarter. So we are making great progress in this area. So I think the fact that we are not relying anymore on a couple of large customers but on the other hand multiple customers in multiple markets and application and also in multiple regions has enabled us to be more efficient and get more results and increase our market share while the overall (Inaudible) generally speaking the wire bonding market is not growing as fast. If you look at again historically, we have guided fourth quarter up versus the third quarter and it is typical not a normal packing for K&S. We usually tend to see a fourth quarter flatish to down versus the third quarter, so that again is a demonstration that by diversifying our base we are able to get I would say somewhat more (Inaudible) in the distance. But don't forget that this is a seasonal business. This is highly volatile depending on demand and that is just the nature of the beast.

Okay. Thank you.

Thanks, Tom.

Thank you. Our next question comes from the line of David Duley with Steelhead. Please proceed with your question.

Thank you. Can you give us an idea of what you think the size of the overall wedge bonder and the LED bonder markets are?

We don't disclose these numbers. You can find -- there is plenty of data available from various analysts that we do not disclose the data. You can get it easily from Gartner or VLSI and they will give size. (Inaudible) size of the market for all these different devices.

Do you want to take a rough cut about what your market share is in either one, or just give me idea. I don't pay for Gartner information, so that is why I am relying on you to tell me how big it is.

Well, I (Inaudible) disclosing information. The point is we are still number one by far in terms of overall market share for wire bonders, that is how we disclose it. We are by far dominating the copper space, but we are definitely not the dominate player in the LED market. We are a dominate player or large player in the (Inaudible) market.

Okay. And then could you talk about over the next year or two what you think the trajectory of just the pure copper wire bonder business is going to be?

Yes, as I mentioned the copper transition has probably gone faster than we first anticipated which had given us three great years of our business. And if you look at by the end of this year, if you estimate the overall install base roughly of about 130,000 machines also 50% of these machines are copper capable. We have always said that we believe that the end number will be somewhere around 70%, so 70% maybe 75%, because you always have a portion of the wire bonding market that will utilize gold and also silver, so it will not be 100% copper market. So as you see there is still some runway ahead of us just to (Inaudible) reach the market is going to grow compared to the last three years where we basically overtook the market and grabbed the majority of the market share is just going to be different which is why we need to be versified in other areas of growth such as Advance Packaging.

As far as the Advance Packaging products go what applications or end market products do you think are you going to be first to truly adopt this chip to substrate or chip-to-chip thermo-compression bonder technology? Obviously it is going to be mobility, but what types of chips do you think are going to be the first to roll into production with this type of technology?

It is difficult to say what type of chips because there is Advanced Packaging there is quite a number of solutions to put chips together, okay, from 3D packaging with (Inaudible) and (Inaudible). There is a number of different way of doing it, some companies are already doing it. But as far as the end application it is definitely going to be the big drivers for that are going to be mobile device, application processors, potentially DRAM and especially for the high-end smart phones and tablets initially. Once we cross points basically becomes more I would say attractive, that means that the volumes go up these technology obviously will move towards more I would say more cost performance type application that I have talked about for the emerging economies. But right now the main drivers is all this apps processors and as I said potentially DRAM for all this mobility devices.

Okay. Final thing for me is did you have any 10% customers in the quarter?

No, we don't.

Thank you.

Thank you.

Thank you. Our next question comes from the line of Steven Pelayo with HSBC. Please proceed with your question.

Okay. Actually a follow-up just quickly on the customer concentration. This diversity themes seems pretty interesting to me. I've watched you for years and with the (Inaudible) you did have a couple of -- well, it seems like each year you had one person over 10% of revenue, maybe you didn't in the quarter. I am just curious is that do you think the new trend now where you are not going to have any 10% of revenue customers?

Well, actually moving forward we do expect one 10% just not at this time. But obviously less concentration basically is more diversified within the more maybe perhaps non usual (Inaudible) that we had in the past, more tier two. If you can refer to (Inaudible) tier two.

(Inaudible) way to help us quantify this a little bit. I don't know. Top two, top three, top five customers what are the percentage of revenues? What has that done the last couple of years and what do you think it is this year?

I think the concentration is built fairly similar where we do get probably 60% of our ball bond revenue coming from five or six customers. But they are a different customer base compared to a year ago. They are (Inaudible) out. Let's just say that each of these customers are at a different point of their conversion point from copper --

There are a lot more medium size customer who buy I would say anywhere from 50 to 100 machines which we didn't have as much in the past. So when you add up all these customers it all adds up, okay. So from, I would say, the situation two years ago it is totally different than the situation of today where we have very high or multiple of customers and less dependency on the two previous large customers we had in the past.

So that leads to my last question which is, some of your cycle thoughts. If you are more diversified yet I guess I can give notice that the market is observing almost $400 million in shipments from you guys in a two quarter period. What are your initial thoughts as you go out to the December quarter in terms of -- not specific guidance but just thinking about maybe on a year-on-year basis do you think diversity allows you to still grow year-on-year where you don't need to see a 50% pull back like you saw last year?

Again, we only guide the current quarter, okay. This is a business, a number of customers it's great but doesn't improve your visibility, okay? What we are trying to do is working with upstream customers, but that is really more so for Advance Packaging, but we are trying to do the same thing for ball bonders to try to have a better concentration of our business. But the reality is that there are customer no matter who they are want to have their equipment in place by the end of September for the holiday season, and we will always have a first quarter fiscal which is a Q4 calendar lower than the last quarter of fiscal year no matter how many customers we have and no matter how we are diversified and diversified in terms of application. Remember that overall the wire bonding market is not a size growing market anymore. It is a market that is going to reach plateau in a few years and become slowly a replacement market. Now devices will be wire bonded for, I don't know, many, many more years to come, but hence I would say the essential push for us to get into Advance Packaging because that's what's going to take us to the next level in terms of revenue perspective for the years to come.

And then just one more quick clarification, when you are looking at third quarter (Inaudible) revenues up a bit, I think you were suggesting LED was going to be kind of lumpy. What do you think LED does with the percentage of your wire bonders in the September, and then does that mean all the other ones kind of grow in line? Help me understand the mix of the third quarter -- third calendar quarter. Sorry.

Yes, we do not disclose type, I mean I would say this type of application in our guidance. We just disclose the top line. So as I just said LED is something that we take on a very specific opportunity basis. We'll see how it handles this quarter. But basically our estimate at this point in time is that it is going to be flattish to probably down versus this quarter. Okay, that's the best information I can give you.

Thanks appreciate that.

Thanks, Steve.

Thank you. Our next question comes from the line of David Wu Indaba Global Research. Please proceed with your question.

Thank you, good evening. Jonathan, I've got a couple of questions for you. Number one, I didn't hear you, you gave some guidance on the R&D number for the first half of fiscal quarter. What was that?

Yes, that was about $21.5 million.

$21.5 million, so that's down $2 million from the third quarter?

Yes, it's already down from this quarter basically, from the Q3 reported quarter.

Right. Is that related to R&D spend in one piece fashion on your Advance Packaging?

Yes it is. It's actually mostly the prototype material which was expensed in the last quarter as well as this current quarter that we're anticipating. So yes it is.

Okay, can you give me an order lag to the cost? How much of loss making are you sustaining in developing your Advanced Packaging machines. In other words if you look at the R&D line as well as possibly cost line, I don't -- since it's no machine. So I assume that's all in the R&D line. So the R&D number in the third quarter, how much of that was due to development expenses for Advanced Packaging?

I think if you look at a normal run rate, it's -- what we have actually suggested as you model is that after Q4, this current quarter we'll resume to our historical run rate which is about $18.5 million, $19 million level. So with our Advanced Packaging, that's -- what's beyond that is mainly what we've been actually investing in terms of material cost an so forth. But we do actually try to maximize our resources that we have in terms of people within our R&D department.

I see. Okay. So assuming nothing change in first quarter fiscal 2015 I should be looking at another $20 million of total R&D spend?

Yes, roughly there unless we want to accelerate some other development, for example we might -- right now we have chip to substrate, we have chip to wafer and it might be in something else.

Okay. Thank you very much. Have a good evening.

Thank you.

Thank you. (Operator Instructions). Our next question comes from the line of Sandy Mehta with Value Investment Principals. Please proceed with your question.

Congratulation on a solid set of results. You mentioned in your press release about continuing to actively seek supplamental opportunities to further enhance shareholder value. Can you expand a little bit on that? Are you referring to acquisitions or where are you in terms of looking at buy-backs or possibly paying a dividend? Thanks.

As we said in our prepared remarks, our first priority to create shareholder value is looking at acquisitions. Not any kind of acquisitions, acquisition in a very specific space which is complementary to, or will be complementary to our offering, especially in the Advanced Packaging. Obviously we can't give you any more detail as far as where we are, or what kind of size and so on, this is something which is strictly confidential. As well as we have a Board meeting in a couple of weeks, we will review other options such as dividends, but as you know for a company our size, dividends if they're not done on a regular basis do not make a lot of sense. A one time dividend is also not very meaningful. Remember that a lot of cash is outside of the U.S., okay. So it would not be a very good return to the shareholder to do this type of, I would say, action.

On the other hand, we will again talk and we have some recommendation. We'll have a discussion with the Board about potential share buyback and this type of activity, okay. So we are looking basically our goal as management is to maximize shareholder value. Right now we've kept this cash because as I said our primary objective is to add to our business because we know that this business is going to reach a plateau and we do not have all the core competency inside K&S to be able to basically address all this new medium market of Advanced Packaging which is going to be the only growing market for equipment companies in the next five years. If you look at in terms of equipment companies, (Inaudible) is going to go down, (Inaudible) is going to be flat to down and (Inaudible) has already started to go down. So the only strength is Advanced Packaging, okay, so that's the area we're going to play in. And we have some core capabilities but we don't have all of them. And so we believe that if we can lead the Company, that basically has the highest provision of (Inaudible) from ball bonders to Advanced Packaging and as we are today for wire bonding, number one supplier that will be the best return in terms of investment for our shareholders.

In terms of acquisitions would you look at a narrow or specific product line or would it be more along the lines of buying an entire company?

As I have said, we have no preconceived idea. It could be a small technology acquisition to buy some skill sets or some technology we don't have or it could be buying an entire company, okay, and anything between.

Okay. Thank you.

Thank you. Our next question is from the line of Steven Paleo with HSBC. Please proceed with your question.

Yes, I just had one more quick financial question. You mentioned about working capital continuing about $40 million or so. (Inaudible) September quarter or do we have to wait until December? Talk to me a little bit about your direction of working capital what do you think your cash balance would be at the end of September or likely at the end of the calendar year?

Steve, there's always a lag in terms of the working capital. Once we actually head into -- once we finished Q4, obviously the ramp that we're currently experiencing is going to come down. So we should be able to collect those DSOs over time. So without guiding on the cash number, but we do expect to accumulate more, continue to accumulate cash.

Okay, I was just trying to size the magnitude. Don't want to quantify it at all?

Yes, we haven't really guided on the number, on the cash number in the past. We kind of give it directionally. So I'll keep that position.

All right. Thanks a lot.

Thanks.

Thank you, ladies and gentlemen at this time we've come to the end of our question-and-answer session. I'd like to turn the floor back to Joe Elgindy for any closing and final remarks.

Thanks, Melissa. And thank you all for the time today. Please feel free to follow up after today's call with any additional questions. Melissa, this concludes our call. Thank you.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.