庫力索法 (KLIC) 2016 Q1 法說會逐字稿

Greetings and welcome to the Kulicke & Soffa first fiscal quarter 2016 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.

Thank you, Christine. Welcome everyone to Kulicke & Soffa's first quarter fiscal 2016 conference call. Joining us on the call today is Jonathan Chou, Interim CEO and CFO. Similarly to last conference call, I will be assisting with the financial and Q&A portion of this call.

For those of you who have not received a copy of today's results 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, these 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 conditions 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 the 10-K for the year ended October 3, 2015.

I would now like to turn the call over to Jonathan Chou for the business overview. Please go ahead, Jon.

Thanks Joe. While the current market environment continues to be challenging. I am pleased to share that with $108.5 million of quarterly revenue, we have exceeded our revenue guidance of $90 million to $100 million. This performance, facilitated by our global sales efforts and flexible manufacturing capacity, was supported by better-than-expected end market demand.

Despite our better-than-expected performance, the typical December quarter seasonality was further impacted by ongoing and broad-based industry cyclicality which has continued to limit the industry's need for equipment capacity additions. Overall inventory at ship manufacturers seems to be stabilizing and utilization rates for our core ball bonding install base continued to be relatively healthy in the 75% range.

For our first quarter business results, our top-line revenue of $108.5 million drove $50.4 million of gross profit, a 46.5% gross margin and a breakeven net income. This was much lower than our previously anticipated breakeven revenue level of $125 million, driven by primarily by lowering operating -- lower operating expense. During the first quarter, as inventory digestion has clearly limited the industry's short-term need to invest in new capacity, we have continued to invest in new development and have released new solutions throughout this period of softness, to further expand our market reach among our Advanced Packaging programs as well as throughout our traditional offerings.

In our Ball Bonding business, we have recently released new features to expand and better serve both existing and new customers. These efforts extend our breadth of offerings by targeting static and dynamic MEM applications and also the power devices that require high throughput, extremely low looping and overall quality improvement for thin stack and overhanging-die applications.

Sales in Ball Bonding were down slightly quarter-on-quarter, which is normally expected due to seasonality in December. Copper shipment accounted for 93% of machine and LED shipment accounts for -- accounted for less than 5%. Through excellent teamwork and coordination, we were able to capture late in the quarter demand, exceeding our initial expectations for the Ball Bonding business.

Wedge bonder sales continued strong from prior quarter, with new traction on emerging applications for energy and storage. This continued to be an interesting area that is progressing well and demonstrate our execution in applying our technology to expand and diversify our served markets. We look forward to sharing new information regarding this effort on future calls.

Within APMR, our Advanced Packaging Mass Reflow business line, revenue were -- was down sequentially; this was partially due to a push out within auto and industrial but also related to market seasonality within the semiconductor space. Growth surrounding and applications that leverage our specific Mass Reflow solutions continue to be promising as we look ahead.

While this line covers growing opportunity within the high accuracy SMT and placement market we are also targeting a specific near-term opportunity addressing our high throughput Mass Reflow system and Packaging solution. We have continued to allocate R&D resources towards these and other meaningful growth opportunities within both the SMT and Advanced Packaging space. Again, we look forward to providing more details in upcoming calls. Finally, for APLR, our Advanced Packaging Local Reflow business line, we are receiving increasing inquiries from customers as well as seeing industry commentary, providing further support to our view that the market traction is gaining on Thermo-Compression and our other APR solutions.

I am pleased to announce, in line with this morning's press release, we have recently received our first purchase order for one of our Thermo-Compression Chip-to-Wafer machines. This PO came in one quarter head of our initial expectation from a June ending quarter deal. This Chip-to-Wafer variant was released September 2015 and is one of several Thermo-Compression solutions we offer under our APAMA platform.

We continue to anticipate growing market acceptance of the Thermo-Compression process and our APAMA platform to be a critical enabler to draw power efficiency, package scaling and performance for leading semiconductor applications. This continues to be a significant underlying expectation supporting our long-term development efforts.

I would now like to turn the call over to Joe Elgindy, who will cover the quarter's financial overview in greater detail. Joe?

Thank you Jonathan. My remarks today will only refer to GAAP results and will compare to December quarter to the September quarter. Net revenue for the quarter was $108.5 million. Strong gross margins of 46.5% generated $50.4 million of gross profit.

We ended the December quarter with a total cash and investment position of $492.9 million. From a diluted share standpoint, this cash position was equivalent to $6.97 and our book value equivalent was $10.67. Throughout the December quarter, we continued to operate under rigid focus on cost control. Due to this coordinated effort in addition to some equity compensation reversals, lower prototyping expenses and R&D tax credits, our collective expenses were approximately $6 million below our anticipated model, which has greatly reduced our December's quarter breakeven. As Jonathan mentioned during last quarter's call, we previously anticipated a breakeven level of approximately $125 million.

Looking ahead towards the March quarter, we are maintaining our existing operating expense model estimates, which include approximately $45 million of fixed expense plus an additional variable expense of 6% to 7% of revenue. This base level model, in addition to some expected prototype expenses as well as incremental discrete tax expense, is expected to bring the March quarter's net income breakeven to approximately $130 million, slightly above our expectations from last quarter.

Turning back to the December quarter, working capital, defined as accounts receivable plus inventory less accounts payable, decreased by $17.7 million to $144.5 million. From a days perspective, our days sales outstanding increased from 82 to 90 days. Our day sales of inventory decreased from 117 days to 108 days and days of accounts payable increased from 38 to 52 days.

Throughout the December quarter, we have continued to take advantage of the soft market valuation by further executing towards our repurchase program. During the quarter, we repurchased 1.2 million additional shares at an average price of $10.34, which accounted for approximately $12.8 million of cash outflows. From the program's inception through the December quarter, we have repurchased nearly 7.7 million shares, or 9.9% of our initial diluted share count when the program was initiated.

We continue to believe this average price is at a substantial discount to our intrinsic valuation. As of the end of our fiscal year, we had approximately $8.6 million remaining under the current program. While the current industry and macro conditions provide a short-term opportunity to further reduce our average repurchase price, our US cash position is extremely limited and remains a major constraint.

The limited US cash balance has driven us to consider adding a credit facility to provide for incremental US liquidity. While a credit facility can help to buffer the limited cash balance, we continue to only use available on-hand US cash to fund the repurchase program.

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

Thanks Joe. As disclosed in this morning's press release, due to the continuing market environment, we are targeting revenue to come in between $130 million and $140 million for the March quarter. While we've continued to see lower semiconductor output over the past several weeks, with inventory returning to a more normalized level, we need to be ready to ramp production while we continue to execute on our aggressive development initiatives in parallel.

While our outlook for 2016 continues to be very cautious due to both macro and industry uncertainty, down cycle eventually turns and we will be ready to ramp production and participate in the next wave of semiconductor growth. We continue to be increasingly optimistic, as it has in the past, semiconductor unit growth will continue to draw incremental capacity requirements into the long-term.

More importantly, our current development efforts are further extended our reach into the sizable and growing market. With nearly half of all semiconductor unit production being dedicated to consumer and communications segment, visibility into market adoption of new consumer devices plays a role engaging future -- featured requirements and demand for our equipment solutions.

To draw some connection to this year's Consumer Electronics Show in Las Vegas, major themes were related to automotive and connected home. Within automotive, the growing infotainment options and widespread adoption of more advanced driver-assisted systems are expected to further increase the semiconductor content of each automotive -- automobile produced.

Although automotive is a smaller portion of the global semiconductor segment, this segment requires high reliability in semiconductor, power modules and sensors produced by many of our customers and addressed by nearly all of our solutions. The other big thing was a growing base of device supporting standardization communication protocol which are providing the infrastructure to bring the connected home within reach.

At a high level, we expect that as mobile devices drove the last wave of semiconductor growth, IoT devices will drive the next. Considering our market leadership in traditional semiconductor productions equipment and our broadening base of solutions, we are well-prepared to support this anticipated next phase of industry growth.

We continue to demonstrate fundamental long-term and sustainable business improvement by expanding our solutions, drive cost reduction efforts, focus on critical development projects and prudently deploy capital throughout this period of softness. We look forward to sharing progress on our development efforts as we move forward.

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

Thank you. We will now be conducting a question-and-answer session.

(Operator Instructions)

One moment please while we poll for questions. Krish Sankar with Bank of America Merrill Lynch.

Thanks for taking my question. I had a few of them.

Jonathan, the December quarter number wasn't what I expected. So I'm just curious, was there any -- do you think there was a lot more pull-ins in the December quarter? Or do you think that was better alignment last quarter for your products?

Actually, these demands that we've experienced were late in the quarter. As you know, we guided $90 million to $100 million when we announced the last earnings -- during our last earnings call. So we did actually expect to get into the midpoint -- that range. But late in the quarter, we are getting some additional demand, and there were certainly demand coming across -- not just China, as well as Taiwan -- and basically were pretty broad-based. So we were able to capture them and we ship them out within the quarter. So no pull-ins, which is -- we are expecting, based on what we see, we set the current quarter at -- that's what we see right now as well.

Got it. And then on the gross margin side, it seemed like the $10 million for the (inaudible); is it just that it makes it within more IDM than OSAT or --?

I would say, yes, it is mainly, if you look at our OSAT mix this quarter, this past quarter, the reported quarter, it's about 85% OSAT versus IDM. So when you see that -- and this is also what drives the copper, the copper mix as well versus gold.

Okay. One of the [sections] on the balance sheet, you mentioned that the US cash tax position is limited. Curious, what -- how much of your cash is onshore? And how much do you need from an operational perspective?

Well, most of our cash are offshore, outside the US. And we do actually sell to some US customers, so our onshore cash generation is limited. And that's the reality. And we are able to actually, of course, meet operating requirements and so forth. But in terms of the actual cash accumulations, that's limited. And that's why we're setting up a credit facility to have actually some additional cushion. But we are always continuing to look at ways to bring back cash with minimum tax leakage. And perhaps there may be some changes in terms of the corporate tax code going forward that may allow us to bring some cash back.

The final question, the breakeven -- did you guys say that the March breakeven is going to be about $130 million this side? The secondly, what is the breakeven once you look past the March quarter?

Okay. As previously guided, we do have actually some prototype expenses of about $6 million for the APR business for the current quarter, and some discrete items. So past this current quarter, which means getting to the Q3, we expect that to come down to about $115 million to $120 million breakeven level.

Got it. Got it. All right. Thank you very much. Thanks a lot guys.

No problem. Thanks for the questions.

Tom Diffely with D.A. Davidson.

Yes, good afternoon.

So when you look at the breakeven for the third fiscal quarter, $115 million, $120 million. Is that viewed as the go-forward breakeven beyond that point as well? Or are there one-timers in there?

Yes, that's actually an ongoing, based on our current fixed cost, as well as variable cost, which we're at about $45 million of fixed and 6 to 7% variable tied to revenue. As you may have actually seen in our filings, we have actually done some minor -- well, modest restructuring, where we took out some headcount as well as reduce our fixed cost. So this is all the benefit that we are actually getting from that modest restructuring towards the end of last year.

Okay. And then in regards to the US-based cash, have you brought cash back in the past? And what was the penalty for doing so?

We have not repatriated cash because it's 35%, and obviously we do sell to some customers in the US. And that's where we are able to accumulate cash balances in the US.

Okay. So on a go-forward basis for the new revenues, what percent then would be typically US-based versus offshore?

About 5%, I would say US. The rest are offshore, mainly in Asia.

Okay. And then what you think the utilization rate is for your tools in the field today? And how does that compare to where they normally are during this period of time going into Chinese New Year?

It's currently about 75% utilization rates in terms of what we see in the field. At this point in time, it is hard to say. Typically around this time of the year, if you go back a number of years, it's before Chinese New Year. We get very limited visibility. What we are at least seeing this year is that we are getting a bit more visibility than in previous years. And that's actually good news. So utilization should pick up from this point forward because they are ordering machines, and as mentioned in the past, that when you get into the 80% range you really have to start planning for new capacity.

Okay. With the somewhat healthy utilization rates and a little bit more activity, why you more cautious for 2016 than you have been recently -- in recent years, based on activities what we see today?

Well, because the -- I would say most of the market outlook by analysts are all showing a flattish year, and we just want to be cautiously optimistic in terms of what we're looking at here. There are also a lot of macro industry volatility that we're seeing; the equity markets certainly are very choppy at this point in time. All these things could actually impact our customers' CapEx decisions in terms of investing in new capacities.

Okay. And then finally on the Thermo-Compression -- we see a good first order today -- what would you expect to be the follow-on to that? Is this customer going to require a certain number of tools to build out a fleet? Or how do you view the Thermo-Compression going from here?

Well, we have obviously a number of these tools out there; in this particular case, it's a strategic customer and so we are working with them to make sure that they're -- this particular machine is -- it goes through the acceptance process since we just got the deal. We have other, I would say, customers that we are working with that hopefully will also cross the line from a deal perspective in the coming months and quarters.

Okay, so what are the -- of the end markets' chip types that are first moving towards this technology?

What we're seeing more are still coming from the memory side for APAMA solutions. I mentioned on the last call, there, we have four flavors in terms of the Chip-to-Wafer and Chip-to-Substrate; and plus, we have Fan-Out Wafer Level Packaging as well as High Accuracy for the chip. And the base -- we're getting a lot of inquiries for these different flavors that we produce. The challenge that we have is to meet all these inquiries and prioritize which customer that we work -- we allocate more resources to. And that is something that our team is diligently working to try to satisfy, or meet all the inquiries out there.

Okay. So how many tools are in the field at this point?

At this point in time, we have six, and we have three that's going out in the next few days, in a week.

Great. Okay, thank you.

Yes, no problem.

Mohit Khanna with Value Investment Principals.

Good morning, guys.

I have a question on Advanced Packaging here. What do you think should be the next step with the current customer? And then, after memory dies, do you see the trend extending to other types of applications? And if you do, what should be the next set of applications adopting for TCBs? Thank you.

Yes, I think based on what the, at least the various publication what we are seeing, it seems like there is definitely a lot of interest and some traction that is taking place within -- certainly within the memory players. We certainly are very interested to gain further traction with our memory customers that's coming from either the OSATs and IDMs. Both of those, and hopefully to get into more of the volume-type of repeat purchase order for our multiple sets of machines, purchase orders. And that's something that we are continuing to work with. There's a lot of different end applications that our customers are currently looking at, and once our machine to go through a qualification process for different type of memory type of, including the high-bandwidth memories or game console memory chips.

Mohit, after memory, the market expectations are that logic will start mid- to higher-end logic applications will start adopting more of a 2.5D type approach that would likely leverage either Thermo-Compression or High Density Fan-Out in a lot of places. Beyond logic, sort of system and package, or system-on-a-chip type of applications like a package-on-package with a memory die and a logic die are the likely higher-volume type of runners that would adopt TCB. But this is a few years out, probably. But this is the expectations from some of our third-party market.

All right. And talking on the breakeven level -- given a $110 million to $120 million, and the most recent quarter, March quarter is for $130 million -- do you think it would be fair to say that it is quite conservative breakeven level given by you? I mean, after doing breakeven of $108 million, $130 million looks -- I mean, if we're still talking like $130 million in the current quarter, do you think it would be fair to say that this is a very conservative communication?

Well, I would say that it's a balanced view because, as you can see in the past, historically, we are able to manage our costs pretty effective if we need to. Our aim here is not to really provide some kind of a guidance on our breakeven level, but I prefer not to go through some extreme cost-containment measures, but allow our team to basically to really leverage off the budget they have to pursue business opportunities. So there are ways to tighten our belt if we need to and we certainly have done so in the past. But I think the $115 million to $120 million in terms of how we actually guide the cost structure -- it is a balanced approach.

All right. And just the last one for my sake -- what was the cash generated from operations during the first quarter? And what are the expectations for the current quarter or so?

Just one second. Cash generated is about $6 million for the last quarter.

That is from operations, okay. All right. Thank you.

(Operator Instructions)

David Duley with Steelhead Securities.

Thanks for taking my question.

Will Thermo-Compression Bonding be a major revenue contributor in calendar 2016? Or do you expect there to be a meaningful revenue contribution and how big is that market now?

Well, I think we believe this market is -- depending on the solutions that we're pursuing for each of the flavors that we are actually pursuing. It's about probably $120 million or so or higher in each of the solutions. But we think there is -- it is now just trying to taking traction. And the size of the market -- it really depends on the adoption rate from our customers. For this particular year, since it is just starting out, I would say from our perspective, we set our budget fairly conservatively from what we want to achieve. So I don't -- just to answer your first question, it will have large tracking revenue but it's not going to be a significant level of revenue compared to the rest of the Company. But the key is actually we need to be well-positioned if the track -- if basically adoption takes place, and then it's really the 2017 year that we need to be prepared for.

So meaningful revenue is 2017, I guess, is what you just said.

Yes.

And the size of the calendar 2016 -- is that the $120 million you're referring to? Or is that next year?

Dave, our gauge is that in 2016 so it will -- what we -- the Advanced Packaging, that's Chip-to-Substrate, Chip-to-Wafer, Fan-Out, and High Accuracy Flip chip are, collectively, about $230 million, up from about $130 million in 2015. And again, this data is mostly our interpretation of the collection of third-party market groups.

And who accounts for most of this $100 million or $200 million market now? Who are the two biggest contributing competing companies to that size of the market?

Well, a chunk of it is High Accuracy Flip chip, so the typical flip chip players will also be there as well as some of the -- potentially the larger Japanese conglomerate that has initiated some of this Thermo-Compression adoption a few years back.

Okay. And when you guided to the March quarter, a fairly substantial increase in revenue, which are the -- it's mostly the Ball Bonder business that is providing the big chunk of uptick? Or are there some other pieces that are growing?

That's the Wire Bonding business is really what we refer to as our core business; so, yes, the pickup in terms of volume and the revenue guidance is mainly from that business.

I guess I was wondering if there was going to be incremental new product revenue in the upcoming quarter -- more Thermo-Compression Bonding revenue? Or if this was just all a recovery from the core business.

Well, I think there is going to be a small portion of it, but especially, the fact that the machines that we will be, in terms of we are able to recognize revenue on these machines, the fall-through is quite good because the fact that we have expensed these machines already. So the fall-through on the net income is going to be quite high. But the top line revenue is also still a majority coming from Ball Bonding, and to a smaller extent, the Wedge Bonding business.

Okay. Now just to change topics slightly -- there is just lots of talk about companies moving to a Fan-Out type advanced package. TSMC investing $1 Billion in Fan-Out; and you have all the test and assembly guys allocating higher levels of their CapEx budgets, which are growing this year towards Fan-Out packaging. I was wondering -- I think it's through an acquisition you made some time ago -- but what is your exact exposure to that particular trend? Because it's a pretty powerful trend right now.

Dave, we have two different platforms that address this Fan-Out Wafer solution; and it's definitely a hot topic right now with customers. But with the assembleon acquisition and what we call our APMR solution, that has a more of a panel-based approach for Fan-Out devices that don't necessarily require the accuracy. And there are a few different flavors of Fan-Out out there. And then for higher accuracy, High Density Fan-Out Wafer-Level packaging solutions, we have the APAMA, the Thermo-Compression base of the machine. That works in that effort in the Fan-Out solution, but it uses the APAMA architecture and falls under the APAMA series of Thermo-Compression Bonders. So that's, again, our organic development initiative, so we have those two different pieces that target the market collectively.

And the piece from the assembleon -- would -- I think that's the one that is more near-term-oriented, capable of growing with the Fan-Out trends this year. Do you expect that product line to show substantial growth? Or how should we look at that? Because there's certainly a lot of growth in Fan-Out spending this year.

For APMR, collectively, I mean, there are a lot of opportunities and it continues to be a pretty serious R&D allocation priority discussion that we have quarterly. But there's a lot of opportunities within other hot areas, too, but there is assembleon machines in production doing Fan-Out today. And we continue to receive customer feedback on Fan-Out and continue to distribute evaluation machines and demo machines to customers. It's -- we're almost, to some point, slightly inventory-limited with our APMR business. But again, it's sort of an ongoing prioritization.

Let me just add a little bit to that. For APMR, we are still going to integration process and we set a reasonable budget for them for this year. We are expecting more growth that comes from the subsequent year from this year. But I can say that there are actually a lot of interest in terms of their solutions on the Mass Reflow side. So the nice challenge is the fact that we need to ramp and be more scalable, while addressing the fact that they mainly sell in different currencies and where the KNS side do sell in US dollars and source in US dollars. So there's some integration-related activities that we need to finish for the rest of the year. But the team is working well together with us in terms of the integration process and we expect great things from that acquisition.

Okay, thank you.

You are welcome.

Rishabh Jain with Singular Research.

Steven Pelayo with HSBC.

Great. I'm curious -- you had said that the late in the December quarter pick-up, you said China as well as Taiwan contributing fairly broad-based. And as you look into your March quarter, you're looking at, I guess, about 25% quarter-on-quarter growth at the midpoint. Is there any concentration there? Or is that also fairly broad-based regionally?

Well, I would say if you look at the trends and we are seeing some steady pick-up in terms of demand coming from China. And late in the quarter, we are seeing basically from Taiwan as well. So China, as you look at -- I look at our top 10 list, basically our -- we sell through a distributor in China, but (inaudible) most of the top OSATs in China and they are steadily investing. We're also seeing some steady investments coming from second-tier OSATs as well in China. So the fact that China wants to be a leader in 10 years' time, I would say there's exceptionally, definitely increased investments in diverse -- a lot of different players on demand.

Two more questions as clarifications again.

Would you remind me -- you mentioned that you had a bit more visibility this time ahead of Chinese New Year than previously. But remind me how the seasonality worked? Does everything just go quiet this week? What's the milestones? When do things come back on, and when you get better visibility? How does it normally work?

Sure, sure. Our normal seasonality, as you know, December quarter is typically the lowest quarter. But we have seen the past five years sometimes the second quarter would be lower. And the fact that people don't like decisions until after Chinese New Year. But this year, we are seeing priorities. We have seen basically -- base POs from our customers earlier on. So that's why we were able to actually guide a little higher. So it's a little different than previous years for that culture.

And then the last question is, you just made the passing remark about LED being less than 5% revenue. Do you have any more visibility in there for -- I don't know -- things to improve more, or just general thoughts coming out of the market -- or deteriorate, for that matter? Any updates on LED?

Well, we are seeing some inquiries and we are expecting some of the LED players to further invest in this area so it seems like it's an up trend. The question then is, it's all about pricing and how do we actually maintain our market share space. As mentioned in the past, LED is generally about 5% or less. But we are selective in terms of the customers we serve and we are seeing some bigger players inquiring that they're building the new plants and capacity and we will selectively participate in this. So we're -- in terms of outlook, I think -- this current quarter could be higher than 5%.

Okay, thanks a lot, Jonathan.

No problem, Steve.

(Operator Instructions)

Rishabh Jain with Singular Research.

So my question is basically on Thermo-Compression Bonder business. What kind of revenues you see coming from Thermo-Compression Bonder going forward when the market matures in 2017 and 2018? A couple years down the line, when there is some maturity in the market? What kind of market share specifically do you see for yourselves?

Well, Rishabh, we don't guide past the current quarter. But we have provided roughly what the size of that market was, which Joe just mentioned. And the Advanced Packaging size is probably $250 million and it could grow at a fairly high CAGR -- the chart on that could grow as much as 40% CAGR over the next several years. The question is really the adoption of -- by our customers, and I did mention in terms of this current year, we are actually just trying to at least get a position in there so that in the long term, we could be at least a 30% player in the market that we are serving.

Okay, so $250 million for Thermo-Compression Bonders or Advanced Packaging?

We are talking about Advanced Packaging. And the Thermo-Compression -- when I mentioned the four flavors, it's really -- there are two flavors are the Thermo-Compression Bonders, Chip-to-Substrates, Chip-to-Wafer; and then there are two other flavors, which is Fan-Out Wafer-Level Packaging and that doesn't use Thermo-Compression Bonder, and High Accuracy Flip chip, which also does not use TCB.

Okay, and also you guys are investing quite significantly in Advanced Packaging initiatives, so I know the wire bonding market is becoming more replacement market now. So what type of revenue composition do you see from Advanced Packaging and from the traditional Wire Bonding business going forward, say, about four or five years down the line? What kind of revenue composition from Advanced Packaging do you see? I'm asking because I'm just seeing the lost investments into Advanced Packaging.

I think it is a good question. We have different models that we run on our corporate -- we run a five-year corporate model, and there is actually scenario where it could actually be -- it could grow to a reasonable size. So really again, it really depends on our customers basically adoption of this. But one thing for sure, in our opinion, is that the traditional of the core business, while it is mature, it is not going away anytime soon. The question is really Advanced Packaging could be a meaningful contributor in terms of revenue as well as bottom line to our business.

All right. Okay. And also on the Wire Bonding side of things -- so your utilization rate was 75% this quarter. So when you see the utilization, do you see the utilization rates going up in the next few quarters? And finally, rates in the 80% ballpark? Or do you actually see the demand going up in the Wire Bonding product time?

This is where we're cautiously optimistic. We are obviously, after this current quarter, we hope there will be a ramp in terms of the Q3 and Q4. But that's something that we have to look at one quarter at a time. But we are always ready. We are pretty flexible, as you know, with flexible manufacturing. So we're ready. If the demand is there, we will definitely try to capture as much as we can.

All right. And what is the CapEx guidance for FY16? Is it still around $11 million? Or is there a large CapEx guidance for FY16?

CapEx is actually generally -- we're low --

Our CapEx is generally $2.5 million for the quarter, so it's (multiple speakers) -- same level.

All right. Got it. All right. That's all from my side. Thanks so much, guys.

Thank you. Thanks for the question.

Havard Chi with Quarz Capital Management.

Good morning, Jonathan and Joseph. Thank you very much for the call. I have a first question on the demand side and then probably a follow-up.

So given that, as you mentioned just now, the majority of sales for Wire Bonding equipment has pointed to the replacement demand cycle. And given that we've actually pretty slow sales in the fourth quarter 2015, first quarter 2016, do you actually see this pent-up demand appearing in second half 2016 or even the first quarter of 2017? Just so I understand, have you actually seen it happening in the past? Thank you.

Yes, Havard. Thanks.

I think generally, whenever we're in a downturn kind of environment, there is some impact of demand, but we -- this is six months out. It is outside of our comfort zone in giving guidance. So I think, generally, on the analyst consensus and what I've been reading over the last week or two, whenever we're in a downturn situation, it is always second-half 2016. Based on our guidance, it seems like that, that's developing that way. But again, our visibility doesn't go out that far.

Okay. Sure. And my second question relates more on the capital return policy side. Given the stock market correction, as you mentioned just now, and then the eventual recovery in the semi-cycle, I think the beat is probably how many quarters from now. And the cash position is actually at about 60% to 70% of market cap. So I think the latest share price was actually trading at extremely attractive level. So just want to understand if you have any plans to launch a bigger share buyback program. Because I didn't -- earlier on in the conference call, you have also talked about adding more sales in FY16 would be booked in the US, and you also mentioned the amount of the credit facility that you can take. Thank you.

Sure. Let me address that. The topic of capital allocation is regularly discussed at the management level as well as the Board level and this is something that we review almost on a quarterly basis. So while we actually are open to continuing with the share repurchase program, the question, then, is really to address the cyclicality of the business, in terms of broadening the business revenue streams that we believe is actually a higher priority at this point in time. But I think, even if we want to actually increase the size of the program, just keep in mind, if we are actually borrow a -- basically a number of onshore in the US, we have to pay that back at some point. So we still need US dollars to eventually service that debt. So we are very cognizant just to ensure that our cash, then, onshore in the US, will need some cash flow sources to meet that. So that's something that we are continuing to analyze and also update on a quarterly basis, basically.

Okay, sure. Thank you very much.

Thank you. We have reached the end of the question-and-answer session. Mr. Elgindy, I would now like to turn the floor back over to you for closing comments.

Thanks Christine. Thank you all for this time today, as usual. Please feel free to call us 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.