庫力索法 (KLIC) 2015 Q4 法說會逐字稿

Greetings and welcome to the Kulicke & Soffa fourth fiscal quarter 2015 results conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joseph Elgindy, Director of Investor Relations and Strategic Initiatives for Kulicke & Soffa. Thank you. You may begin.

Thanks Christine. Welcome, everyone, to Kulicke & Soffa's fiscal 2015 fourth quarter and full year conference call. Joining us on the call is Jonathan Chou, CFO and interim CEO. For those of you who have not received a copy of today's results, the release as well as the 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 recent SEC filings specifically to 10-K for year ended September 27, 2014. For today's call, I will assist in facilitating the financial discussion and Q&A but first, I will turn the call over to Jonathan Chou for the business overview. Please go ahead, Jonathan.

Thank you, Joe. While the current market environment continues to be challenging, I am pleased to share that our global sales team exceeded our adjusted revenue guidance of $100 million to $110 million issued in early September. This positive improvement was achieved by aggressively pursuing all possible sales opportunities during this softening quarter.

I'll provide more insight from a market and business standpoint shortly, but first, I want to take a few minutes to speak about the recent departure of our CEO. Effective October 5, 2015, Bruno Guilmart has decided to retire from the Company as President and CEO as well as from his Executive Director position.

While his departure is clearly a loss, we would like to remind investors how our functional organization is structured, with the strength of the management team built by Bruno and how we are inherently prepared for changes like this. The effective management team has and continues to be functionally organized.

This global leadership team includes all of our key functional leads as well as our business heads who represent the voice and direction of their respective business lines. This approach has provided us the opportunity to standardize our global processes and drive operational efficiencies at the functional level while securing sales and marketing opportunities at the business level.

The additional benefit with this approach is that our leadership team is highly capable to continue business and operational execution throughout transitions such as this. While Bruno will clearly be missed, I am very confident that the management team who has been intimately involved in developing the current corporate strategy under Bruno 's leadership will continue to pursue and execute on, on current strategy as well as make the refinement as needed under our strategic planning process.

With that said, I'd like to switch topics to our fourth quarter business results. During the fourth quarter we booked revenue of $119 million. While still relatively soft, this is above our adjusted revenue guidance range of $100 million to $110 million. Since our adjusted guidance, our ball bonder business pulled through and with the main drivers that helped us exceed our revised revenue outlook.

Copper capable ball bonders still accounted for 72.6% and LED ball bonder account for 16% of total ball bonders. Our capillary business had increased by 9.1% over the June quarter as we continued to capture additional share and target specific growth markets. Our wedge and APMR businesses also had some late wins in the quarter, bringing them in towards the higher end of our revenue expectations.

Sequentially, both of these businesses performed relatively well. APMR, up slightly, while our wedge bonding equipment increased by 8.5% over the June quarter. Overall, we continued to operate under a very soft market environment which we believe is centered on the lackluster PC, smartphone and tablet segments as well as generally soft emerging market consumer demand.

These conditions are evident through our interactions with customers, higher inventory level, changes in CapEx forecast across the supply chain and the weaker outlook reported by many of our peers. Some of our industry research providers expected cyclical softness to come in during calendar year 2016 although it seems to have started earlier.

While we don't see extremely high level of macroeconomics concerns, which impacts customer demand and is a key driver of semiconductor output, it is always uncertain how long this downcycle could last. Regardless, as part of our strategic process, we have prepared in advance by identifying a range of operational improvements to drive additional efficiencies across our functional organizations to further enhance the flexibility of our operating model. These changes largely went into effect at the beginning of our fiscal year 2016 which started October 4 and resulted in organizational restructuring, a lower dependency on outside services, service providers and ultimately, cost reductions throughout the organization.

In addition to these cost reductions, which I will touch on shortly, we also -- we have also reprioritized resources and focused on those development initiatives exposed to the most meaningful opportunities. These changes have allowed us to improve our breakeven and through cycle performance and while maintaining a strong focus on our meaningful long-term and growth-centric opportunities.

Growth through ongoing product development initiatives to drive share and market expansion across our diversifying business lines is central to our broader corporate strategy. These opportunities are not limited to the rebound of our traditional back end market but are meaningful within the sizeable and growing advanced SMT segment as well as other -- as well as the many new interconnect technologies developing within advanced packaging.

Our most recent cost reduction efforts through the Company has allowed us to sharpen this focus and we are situated to emerge from this downturn stronger, better positioned, and more agile organization. As a result of these corporate initiatives, we would like to provide an update to our operating expense model which helped to explain the scalability of our operating structure.

Over the current fiscal year 2016 period, excluding prototyping expenses related to advanced packaging development and one-time charges, we anticipate quarterly expenses to include a fixed component of approximately $45 million, plus a variable component of 6% to 7% of revenue. Collectively, these fixed and variable expenses have a floor of approximately $51 million.

In addition to this base level of operating expense for the December quarter, we are also anticipating an additional $4 million of advanced packaging prototype expense and $2 million of restructuring-related expense. Looking ahead to the March quarter, we anticipate the base levels of fixed and variable components plus an additional $6 million of prototyping expense.

Taking the additional prototype and restructuring expenses into account, our breakeven level is anticipated to be approximately $125 million in both December and March quarters. This is down from breakeven revenue of approximately $135 million implied from our prior operating expense expectations. Beyond the March quarter, we anticipate our breakeven to fall to approximately $115 million.

At the point of reference, our previously disclosed operating expectation was $50 million of fixed quarterly expense plus 6% to 8% of variable expense tied to revenue with $7 million of prototyping expense in the December quarter. I would now like to turn the call over to Joe Elgindy, who will cover the quarter's financial overview in greater detail.

Thanks, Jonathan. My remarks today will only refer to GAAP results and will compare the September quarter to the June quarter. Net revenue for the quarter was $119.2 million; strong gross margins of 48.9% generated $58.2 million of gross profit. We also generated $1.6 million of operating income.

We ended the September quarter with a total cash and investment position of $498.6 million. Despite ongoing cash outflows associated with our repurchase program, we increased our cash position by $22.7 million as we continue to convert working capital to cash.

From a diluted share standpoint, this cash position was equivalent to $6.84 and our book value equivalent was $10.59. Up until very recently, we anticipated a non-cash tax benefit of approximately $20 million as a release of deferred tax liabilities from our balance sheet. Upon finalization we were only able to release $9.6 million of these deferred liabilities.

While this is slightly disappointing from an EPS standpoint, we were able to offset this with better-than-expected operational performance. To reiterate, the additional $10.4 million tax benefit would have been a non-cash item. From a cash tax standpoint over our fiscal 2015 period, our cash tax outflows were approximately $4.8 million, or equivalent to roughly 12.8% of our pre-tax income.

Looking ahead to fiscal 2016 due to the potential shifts in global customer demand patterns, that would impact our income distribution between tax jurisdictions, we are increasing our prior target of 15% effective tax rate to a target in excess of 20%. On a quarter-to-quarter basis, our effective tax rate can deviate further from this target range due to customer mix, future acquisitions and changes to our legal entity structure.

Working capital, defined as accounts receivable plus inventory less accounts payable decreased by $40.6 million to $162.2 million. This decrease was largely due to the change in business volume and collections of accounts receivable.

From a days perspective, our days sales outstanding decreased from 94 to 82 days. Our day sales of inventory [increased] from 81 to 117 days and days of accounts payable decreased from 50 to 38 days(corrected by company after the call).

Throughout the September quarter, we have continued to take advantage of the soft market valuation and continued to execute towards our repurchase program. During the September quarter, we repurchased an additional 1.8 million shares at an average price of $9.38. This accounted for approximately $17.2 million of cash outflows.

From the program's inception through the September quarter, we have repurchased 6.4 million shares, or just over 8% of our diluted share count. As of the end of our fiscal year, we had approximately $22 million remaining under the current program. As a reminder, the potential for near-term opportunities that would require the use of US cash can affect the execution rate of our repurchase program.

This concludes the financial review portion of our call. I'll now turn the discussion back over to Jonathan for the December quarter's business outlook.

Thanks, Joe. As disclosed in this morning's press release, due to the continuing market softness, we are targeting revenue to come in between $90 million and $100 million. As discussed earlier today, and also in prior calls, we believe this market softness is overwhelmingly due to broad-based industry cyclicality. This has been more and more evident over the past several weeks, with CapEx cuts throughout our industry's value chain.

As we have in the past period of softness, we will continue to execute on our broad corporate strategy and deploy capital in a prudent manner to drive long-term shareholders' value. This strategy clearly includes our share repurchase program as well as ongoing investment expected to enhance and expand our available market reach.

From a business standpoint, we continue to cautiously -- to be cautiously optimistic for improvement throughout our core SMT and advanced packaging lines. Within our core businesses, stabilizing utilization rates and wire bonding, share gain in capillaries, and specific niche opportunities in which combined with expectations on a longer-term industry recovery, all add confidence to our optimism.

Additionally, while our share is relatively small within the growing advanced SMT space, this sizeable market represents real growth and diversification opportunity, specifically, within our automotive and industrial segments. We are continuing to increase investments in the areas to -- in this area to participate in the anticipated growth of this market over the coming years.

Finally, our advanced packaging development in both mass and local retail continues to gain traction with a variety of customers who are eager to take advantage of new and higher growth packaging techniques, such as fan-out wafer level packaging, system and package, and thermal compression. Our overall integration and customer traction is continuing smoothly with our mass reflow business and our recently introduced chip-to-wafer local reflow solution has also gained very strong customer interest and continues to be a promising solution to the industry's future high density fan-out needs. We look forward to shipping our first commercially accepted local reflow machine over the coming six months.

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

Thank you. We will now begin the question-and-answer session.

(Operator Instructions)

Thank you. Our first question comes from the line of Krish Sankar with Bank of America Merrill Lynch.

As long as I look at your core -- your big customers at ASE, in the last couple of quarters, your ball bond additions has almost dried up. And you've never seen this level of low pendulum. I'm curious, has anything fundamentally shifted in the business in the last six months or do you think is just you should have been slow from cyclical business?

Well, I think obviously they were one of the first, I would say, adopter of the fact on copper. So in the earlier years, they basically invested in copper capacity fairly aggressively and that was in 2010, 2011, 2012. At this point in time from a copper and gold mix perspective, they actually have reached their -- closer to the end state, probably about 70% potential higher in copper so we are continuing to see actually purchases in practice.

This past quarter, we had 73% of copper capable bonders and we are seeing purchases from the non -- the two usual suspects from Taiwan continue to basically buy copper machines over gold. So the conversion from that, obviously, it is actually progressing to a sort of a late stage in terms of the gain but you are still seeing some non-big Tier 1's basically layers to continue to actually buy copper machines.

Krish, just to add on, too. Usually in lower volume quarters, our OSAT shipments usually shift down a little bit relative to our IDM shipments and I think that this is mostly just because OSATs usually tend to be a little bit more associated with the cyclicality because they deal with that over at customers (multiple speakers) --

So in this quarter, the mix in terms of IDM and OSAT is actually 60/40 and much more skewed towards the IDM.

Got it, got it. Couple other questions. Should we expect thermo compression bonder revenues out in the 2016 for you guys, too?

Well, we are actually working, in fact, we are actually shipping out additional machines. We are expecting to ship them now to the end of the year. We expect to have actually a total of 10 machines out there for going through the qualification process by year end, so we are working diligently with our key customers, selected customers on the qualification process and our aim is to actually bring us some PO towards later this year, this fiscal year.

Got you, so at the end of this fiscal year, there will some rev rec on it?

Yes.

Got it, got it. All right and then another question is it looks like you guys are coming towards the tail end of your buyback program. Jonathan, I'm curious your view on capital returns. Do you still think that buyback is the way to go or you would have to buy some acquisitions or how do we think about it?

Well, I think this is a topic that I actually review regularly with our Board in terms of capital allocation so buyback is part of that. And we still continue to prioritize our capital allocation towards our organic extra initiative, development within our business, within our R&D space. And currently, we are also interested potential basically an opportunity on the inorganic side to basically do either tuck-in or something a little bit more interesting from a -- within our adjacency space.

So would you be --

Buyback will be part of the mix. Buyback will be part of that capital allocation strategy.

Got you, and in terms of acquisition and direction that you can say, would you opt for time permitted acquisition or would you be more open to bolt-on, tuck-in like what you yourselves have done in the past?

Well, we've been pretty conservative in terms -- so we were just very careful in terms of the acquisition we would do. So our planning process, which actually we've gone through our fifth year so far, looking out three years to understand really where we want to be in three years' time so we do look at adjacency.

We do have some white space we look at but obviously, we need to make sure we understand what that space is about and how we can actually translate our core competencies into basically adding value in that space, so we are continuing to do that but obviously, the adjacency will come first before the white space.

Got it, got it. Thanks, Jonathan. Thanks Joe.

Thank you.

Our next question comes from the line of Tom Diffely with DA Davidson.

Yes, good morning or good afternoon. So first question is on just the marketing outlook. Obviously, things are a little soft right now but I'm curious. How does your current utilization rates of your tools in the field compare to just a normal seasonally slow fourth quarter?

Well the utilization that we are currently looking at is probably about 70% level at this point in time and if you look at historically, at least in the last, say 12 months or so, anything closer to 80% level, I think, we would basically get some pretty good rap on that. So we're hoping -- obviously, it's hard to forecast in this wire bonding space as well as actually in this sector.

We hope that it's actually at the shorter cost cycle, of course, but according to VLSI and some of the other outside basically analysts, in 2016 is a soft year, based on those reports. The subsequent years would be better.

Okay, well, I'm just curious though, I mean, normally, your business is pretty soft until Chinese New Year. What is the standard utilization rate for this time of the year normally. Is it at 70% today and then 80% when we start to order equipment again or tools again? What's a typical cross period (multiple speakers)

Well, I would say this is an unusually lower year, lower cycle year compared to the previous because we certainly have not had to basically revive our guidance in the Q4 fiscal year. And the December quarter, yes, that is actually seasonally low, so I would say utilization rate at this point in time is pretty similar to the prior years in this quarter, in the seasonal quarter, but this particular year, we are aware of the fact that there is a lot of inventory of basic build out there that needs to be digested in the marketplace before utilizations can actually move up.

Okay, and then you look at the $20 million benefit you were expecting. Why -- what happened that it only came in about half that? And does that other $10 million expect to come at a later date?

Well, we -- this is something that we actually been working on for some time and basically, our position was not finalized until actually towards the end of our closing process. And this is -- how to solve is actually quite complex and it generally has a lot of different considering elements working with our advisors and then our auditors on that.

So in terms of whether or not that will eventually come out, it really has to do with basically how we continue to plan, how we can reorganize and simplify our lean organizational structure. That's why we actually have to wording and suggestion in our script on that on the tax side.

Okay and then on a similar vein, that's why the taxes went up from 15% to 20%-plus is just the structure you're creating with the combined companies?

Yes, that has to do with the fact that we are seeing different type of -- we're selling different jurisdictions and although we do have a lower tax rate here in Singapore, we are selling more in the US and other higher tax jurisdictions, so therefore, our tax, effective tax rate does actually fluctuate based on where we sell our equipment and solutions.

Okay and that 20%, is that a view for 2016 or is that a view kind of on a long-term basis as well?

Yes, we believe long term could be lower than that and so what we're guiding is just 2016.

Okay, and then looking at the different regions you're in, did you have any kind of a meaningful FX impact this quarter?

Well, FX, we manage that pretty tightly. We do actually hedge about six months at a time and so this is just on our single dollar expenditure, so I would say given the strength of the dollar plus really how we sell, it is -- does even out at this point for the past quarter.

Okay, and finally, when you look at the results of the just reported quarter at $119 million, or $0.13, if you take out the tax impact it looks like you're about breakeven at $119 million in the quarter. I'm just curious what's the difference between the just reported quarter versus the new breakeven at $125 million?

Yes, we do have some prototype expenses in there, in the December quarter.

Okay, so that $125 million was inclusive of the $6 million -- $4 million to $6 million of prototype --

That's why it's higher. We have actually a total of about $10 million, split into $4 million and $6 million in terms of the current quarter that we just guided to and Q2 fiscal is actually $6 million. That's why the break -- revenue breakeven is higher. Once we actually are done with the prototype expenses, then they will actually come down to $115 million.

Okay. Thank you.

Our next question comes from the line of Craig Ellis with B. Riley.

Thanks for taking the question, guys. The first is just a clarification that was a nice sequential improvement in gross margin in the quarter. Sorry if I missed it in the prepared remarks but what was that and is it a one-time item or is that sustainable?

The gross margin improvement is largely due to basically a product mix and customer mix. We have one customer that is within our higher tax jurisdiction that basically help us basically pick up the gross margin.

Thanks, Jonathan and then looking ahead to the breakeven commentary, beyond March breakeven is expected to fall by $10 million to $115 million. Can you identify what's driving the incremental $10 million benefit and is that $115 million a sustainable low or would you expect to make further improvement on that level?

Yes, Craig, this is Joe. Just to clarify for the December quarter and also for the March quarter, we have about $6 million each in those quarters. In the December quarter, we have about $4 million prototypes plus about $2 million of restructuring cost and in the March quarter, we have about $6 million of prototyping expense. Beyond that, we don't expect additional prototypes to come through and that $6 million basically bridges that $10 million gap in breakeven.

Got it, thank you. Then lastly for me, just looking at the business there was some helpful commentary earlier about strategic moves and things that you could do with adjacency's versus whitespace that, just taking a step back and looking at the very significant cash balance, the Company is active with the buyback. Jonathan as you look ahead and as you work with the Board, can you help us understand how you're prioritizing buybacks versus M&A and growth through diversification, either adjacently or whitespace opportunities that you have? Thank you.

Well, I think this is something that is always actually discussed. The prioritizing may shift but our priority is to ensure that we are continuing to invest in our business, to grow our portfolio of actually products and solutions to our customers and that there's actually acquisition opportunities that's actually within our planning process that appears on our radar that we certainly would be interested in. From a return on capital to shareholder, it hasn't really changed in terms of the rationale that went in three years -- two years ago when this actually program was launched is the same way. We do need to just basically maintain enough basically financial resources to actually meet those higher priority items first before we can consider actually a return on capital to investors.

Craig, does that answer your question?

Our next question comes from the line of Mohit Khanna with Value Investment Principals.

Thank you. Just one question here. The improvement in gross margins, I think I might I have misunderstood it. This is geared to the new customers that you have started selling to in different geographies; am I right?

Mohit, the question, I mean, the -- we -- in the lower volume quarters, obviously, the product mix as well as the customer mix can actually shift the gross margin pretty nicely. And in this particular quarter, as I mentioned in my script, we had some nice wins towards the later part of our quarter and this particular is customers that basically were, I mentioned, a higher jurisdiction, tax jurisdiction. This is actually in the US that basically allow us to basically have a nice pick-up in terms of gross margin.

Okay, so when you say about your tax rate going up for the next year, you think that you -- the gross margin should also be going up; would that be a fair assumption?

Well, the taxes really reflect -- it's more of a projection on where we may sell our solutions. There's really a lot of the revenue that could be booked outside Singapore. We obviously love to book as much as we can here in Singapore at a 5% rate and the gross margin really depends on -- is really depends on the product that we're selling or solutions and the type of customers. We do have an internal kind of aim or target to maintain at 45% gross margin which we have achieved in the last, I would say, five years since I've been with the Company, so we believe that, that is achievable and it could be maintained.

All right, and talking about the customers. What kind of traction or new industries that you're experiencing right now. Can you talk a little bit about the newer growth opportunities? Do you see potential complex technologies going ahead? And how do you see clicks coming up with advanced packaging solutions for certain we can expect? Thank you.

Yes, I would say, generally to touch on the advanced packaging story first. We have basically a solution for almost every advanced packaging, inner connect technology today with our mass flow AP business as well as APLR local reflow business. And also it's expected a little later on with thermal compression as that takes traction to probably the second half of 2016.

So we have a pretty good footprint, I would say, generally within these new technologies where two years ago, largely we were a wire bonding story and these new products and services, while they give us traction and reach into the advanced packaging stage through the 15% to 20% of semiconductors that don't use wire bonding, we also have access to the advanced SMT market through the assembly acquisition which is a fairly sizeable market with room for market share gains and additional traction at higher performance side where the assembly and our APR market business plays in.

When we look ahead at other acquisitions, there's obviously a lot of different areas where we think we can add value but the two biggest are probably in the technology space where we can reuse our R&D competencies and also where we can potentially leverage our customer sale of outreach and distribution network. So those two depending on what you look at, we would say, let's say, in closer adjacency's and there's a lot of smaller, I'd say, bolt-on acquisitions that come into play here.

But there are could also be some a little farther outside of that space and our team continues to look at things. I think we've been pretty prudent with the assembly on acquisition and these other opportunities and targets still are a pretty broad range but generally, that's the criteria. It's not really a tight financial control criteria but it's more on what value we could bring to that solution.

All right. Thank you so much.

Our next question comes from the line of David Duley with Steelhead Securities.

Yes, thanks for taking my question. One of the questions I had was, could you talk about the size, Jonathan, I think you mentioned the size of the wire bonder market being down next year, calendar 2016 according to VLSI. Could you help us understand what the size of the market was in this current calendar year and what the delta will be next year? How much will it be down?

Yes, hi, David. Based on the projections that we have, 2015 is actually just shy of $600 million in terms of the ball bonder market in terms of TAM. 2016, probably just shy of $550 million. And then basically, 2017 and 2018 is really when we are going to see above $600 million and $650 million in 2018, roughly.

So it is basically 2016 will be sort of a softer year with 2017 and 2018, also, will be basically a higher cycle year before it comes into 2019. (multiple speakers) It's quite hard to forecast that far ahead, too, but that is actually what we're reading and how we are actually interpreting it.

And Dave, sorry, but we tried to call this out on the script from a third-party market data we look at. They basically call 2016 to be the down year and we think that might have came out a little bit towards 2015.

So 2015 was a down year as well, right? So 2016 could be another down year for the market?

That's right.

And why do you think it would start to recover with most of the new parts that are being built now in 28- and 20-nanometer growing a huge step, I'm a little curious why you think the overall market would grow?

I would say, Dave, our -- from the huge amount of new machines that we put into the install base from 2010 to 2013, largely associated with the copper replacement cycle, we think in a lot of ways we front-loaded our normal replacement business and that largely, we think, is replacement type market. We still think that there's growth from units but as you know, unit count has from semiconductor units were higher over the last few years than they are projected to be over the next few so we'll have a little less incremental capacity requirements that are driving the TAM over the next few years.

I think the unit count in our space for guys in the 200 to 1,000 IO count range are in the 6% unit count forecast over the next two years where they were closer to 9%, I believe, over the last two or three years. So I think that's the big one and the copper replacement piece that was front-loaded also drives some of that but overall, from a longer term standpoint we, along with some of the third-party market guys think that this business isn't going to disappear any place and it's going to continue to grow at small single digit CAGR.

Exactly, just to enforce the single digit based on this type of projection in front of us is a 3% CAGR for the coming years. And from our perspective, we've actually took out some costs out and while investing in our advanced packaging applications for our business we are continuing to basically watch our costs very closely so that in case, that this soft cycle is actually more than two or three quarters, we can still basically ensure that we hit the breakeven.

So as far as the assembly on acquisition and product lines go those are geared to mostly advanced packaging applications and it sounds like it's helping you bridge your business until you can get your thermo compression bonder product line up and running, which sounds like that's the second half of 2016. Could you help us, just remind us what's the level of revenue on a quarterly basis, or annual basis assembly on is doing now because that's the main -- I guess what I'm asking for is, what really is your true advanced revenue packaging revenue now?

Well, let me just comment on the assembly on -- when we acquired the company, we bought it as one-time revenue of $100 million US but that's under the historic exchange rate between euro and US dollar. We say the run rate at this point in time is about $85 million level when you actually do that calculation to US dollar and the revenue mix is about 70% in the SMT and then the balance is in the advanced SMT, so you're right.

Our aim is to advanced packaging, advanced SMT, so we do want to basically continue to win more actually businesses in the events SMT side which is part of our advanced packaging. We call it advanced packaging mass reflow and it has a lot of synergy in terms of what we're doing on the local reflow side. In fact, it's common customers and there's actually ways for us to improve the customers' cost of ownership from basically from the stuff before the wire bonder side.

Okay so the advanced packaging contribution now is about 30% of $85 million?

Yes, if you count the APMR line, yes.

Okay thank you very much.

You're welcome.

Our next question comes from the line of Rishabh Jain with Singular Research.

My questions is basically -- hello?

Hello. Hi, Rishabh.

Hi good morning. My question is basically on the assembly on acquisition did you do this year -- this quarter, I'm sorry. How did the revenues look like for the assembly on?

I think assembleon, the acquisition is a good sense for us in terms of our acquisition. It is a transitional year. We are still in the process of actually integrating the business into it and we also are investing in the business itself to basically capture more market.

So we are going to go through that and hopefully, we'll basically, based on the additional investments we're making, second half of FY16, certainly FY17, we're going to see actually big growth coming out of that and contributions to notch up our margins as well as bump up our earnings in the future.

Okay and so do you have any other products in the advanced packaging part and the thermal compressor bonder because I know I can point 2016 rolling out the thermal compressor bonders; is there anything else in the advanced packaging line that's probably going to get the revenue to boost in the next few years?

Yes, well this is one of the highest priority in terms of getting some additional tractions on the packaging local reflow with our APR and since we actually launched the APAMA platform, which started out chip to substrate. It is now basically we go into a qualification level and the number of customers on a chip to wafer side there's actually two additional kind of applications or solutions that we're actually working on that are non-thermal compression is actually high accuracy as flip chip well as thin out wafer level packaging.

So these are the kind of four application and four flavors, I call it, where the APAMA machine platform and based on this, if you look at the traction that's taking place on thermo compression, we mention the memory side is clearly gaining traction in terms of the adoption for that thermo compression machine in terms of the potential basically POs that were coming for that.

But because of the fact that everyone is very focused on -- our customers are focused on really cost of ownership, there are actually other ways to do this besides thermo compression so that's where the fan-out wafer level packaging as well as high accuracy flip chip will basically come into use eventually.

Okay, and what exactly, if you were eventually to follow the signs of the advanced packaging market, you left here to thermocompressor bonders and the flip chip side of the market, what kind of market size do you see annually in the advanced packaging segment that you guys cater to?

Well, obviously, it really depends on how fast the adoptions and in terms of this particular solution or space but we believe that by 2017, it should be about $300 million and that could be viewed as conservative but it really depends on really the adoption.

What kind of share do you guys see having in the advanced packaging market of $300 million?

Well, in the past, we actually said we were always talking at least 30% and trying to move up from that.

Okay, okay, so does the utilization level into clients' facilities for wire bonders, bonding equipment stay below 70% this time around?

Sorry, Rishabh, we missed that.

Sorry, I was just asking if the utilization rate at your clients' facility for the wire bonding equipment were to stay below 70% at this time around in this quarter?

No, right now, our utilization rates, I mean, this is a mix of our customers which we try to track with our service guys in the field are in that 73% to 76% range right now which we think, for a downturn, from a cycle standpoint, it seems pretty healthy. Usually from the way we track utilization once we hit 80%, our volumes generally pick up pretty quickly and depending on who the customer is, there could be pockets of customers when we're still on average under 80% that or above that, right? So --

Another indicator is really our consumables. The capillaries business and we are seeing that there is still pretty nice purchases or demand for our capillaries to catch another angle.

Okay, and do you see the utilization rate thicken up on the 2016 is going to be a year going into 2017, do you see over 80% utilization rates going forward in 2017 and 2018? Or do you see the buying volume market being replacement market and mostly, there will be a low single digit growth in the market. Do you see it replacing the market?

I think if you look at the utilization, if you -- we update it going back the last 12 months, it really, it varies -- touches about the 80% level and even at that higher closer to 80% level, we should be able to actually capture the demand out there and maintain our market share, so I think it doesn't have to be above 80% is what I'm trying to say in terms of to have a reasonable basically year and maintain our market share within the wire bonding space.

Okay, sounds good. Thanks guys.

Okay.

Mr. Elgindy, we have no further questions at this time. I would now like to turn the floor back over to you for closing comments.

Thank you all for the time today. As usual, please feel free to follow-up directly with any additional questions. Christine, this concludes our call. Good day.

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