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Operator
Good day and welcome to Kopin Corporation's second-quarter 2010 financial results conference call.
Today's call is being recorded for Internet replay.
You may access an archived version of the call on Kopin's website at www.Kopin.com.
With us today from the Company are Chairman and Chief Executive Officer, Dr.
John C.C.
Fan, and Chief Financial Officer, Mr.
Richard Sneider.
For opening remarks I would now like to turn the call over to Mr.
Sneider.
Please go ahead, sir.
Richard Sneider - Treasurer, CFO
Welcome, everyone, and thank you for joining us this morning.
John will begin today's call by discussing the highlights of the quarter and our business outlook.
I will then take you through the financials and then we'll be happy to answer your questions.
Before we begin let me remind everyone that during today's call, taking place on Tuesday, August 3, 2010, we will be making forward-looking statements as defined in the Private Litigation Reform Act of 1995.
These statements are based on the Company's current expectations, projections, beliefs and estimates and are subject to a number of risks and uncertainties.
Potential risks include, but are not limited to -- demand for our CyberDisplay and III-V products; market conditions; foreign currency exchange rates; availability of raw materials and other factors discussed in our most recent annual report on Form 10-K and our most recent quarterly report on Form 10-Q and other documents filed with the Securities and Exchange Commission.
The Company undertakes no obligation to update these forward looking statements made during today's call.
And with that I'll turn the call over to John.
John C.C. Fan - President, CEO, Chairman
Thank you, Rich, and good morning, everyone.
Let me provide you with some commentary on our most recent activities and then Rich will provide a little bit more detail on our financial results.
As we noted in today's morning release Kopin and Skyworks Solutions have renewed their strategic purchase and supply agreement for two more years, continuing a partnership that has lasted well over a decade.
This renewal and the significant increase in demand we have seen for other top-tier III-V customers, including RFMD, TriQuint, and [TAWSC] is testament to Kopin's leading technology, capacity and capability.
As global demand for smart phones and other wireless mobile devices continues to accelerate, Kopin's heterojunction bipolar transistors are enabling the rapid adoption of advanced 3-D and 4-D [as] 3G and 4G technologies.
As we have mentioned before, a 3G handset often contains at least three times more of our HBT content than a traditional handset.
It's also important to understand that the new smart phones require ever increasing complex HBT structures, whereas 10 years ago the HBT we sold may have been produced with a stack of 10 semiconductor layers.
Today's HBT is up to 30 layers.
This considerable increase in capacity has profound consequences for the industry, both in the complexity of design and the ability to produce these products cost efficiently.
A major key to our success has been the ability to produce hundreds and thousands of these complex HBT wafers per year, defect free, customer application-specific and with well-controlled layers only nanometers in thicknesses, only being a fraction of the thickness of an average human hair.
The ability to produce these HBT wafers day in and day out requires investment in technology, in people, in most advanced equipment and a constant focus on quality control.
To financially support this investment you must also have scale.
It is clear from our strong performance that business is migrating to industry leaders such as Kopin which has the scale and advanced production capability.
Anticipating these trends during 2009 we have increased our investment in Kopin Taiwan Corporation.
We have placed orders for leading edge equipment and increased both our technical and business personnel both in the United States and Taiwan.
With these strategic investments put in place by the end of this year we will have significantly increased our capacity since the beginning of 2009.
This added capacity and capability should enable us to sufficiently meet the demands of our customers through the next couple of years.
Just to give you a sense of perspective, industry analysts forecast that global smart phone demand will grow at a rate of 35% to 40% per year for the next few years.
Turning now to CyberDisplay.
Kopin continues to advance micro-display technology with this quarter's announced production of our full -- new full VGA and [YVGA] shrink devices and displays measuring only about 0.35 and 0.4 inches diagonal respectively.
These products are already being shipped for Samsung's new hybrid digital SLR style camera and Vuzix Corporation's 3-D radio eyewear.
The two key Kopin patent inventions designed to achieve low power consumption continued in those new products.
Moreover, we just showcased the world's smallest color [YVGA] display, an ultra compact 0.32 inch diagonal product that is 45% smaller than the new shrink LCD display I just described and we just brought into (inaudible) production in this quarter.
With this extremely positive -- with this extremely small display and our response from our customers, the volume production for this 0.32 inch display is now scheduled to begin in 2011.
This new product further distinguishes our technology and creates new growth opportunity for our company.
I should emphasize, for micro-display, unlike a traditional flat panel LCD display, the relentless innovation is for smaller and denser displays; Kopin is leading the way.
On a related display topic, 3-D technology is just beginning to go mainstream.
Flat-panel television producers, videogame console designers and film producers who are incorporating 3-D capabilities into their latest products only validate this trend.
With our innovative (inaudible) technology Kopin is also well-positioned to benefit from this next-generation 3-D viewing experience.
We are currently developing a number of 3-D reference designs and optical modules to bring to market with strategic partners much like our expectation with Golden-i which I will discuss shortly.
On the military display front second-quarter revenue increased sequentially.
First half 2010 military display revenue was impacted by the Department of Defense comprehensive review of all major military programs conducted against a backdrop of recovering technology -- economy and federal budget deficit.
We are pleased that the thermal weapon site program emerged from this thorough and comprehensive review as a strategic and vital system for the war fighting capability of our soldiers.
It is now deposited into the must have bucket.
Kopin's high-performance advanced LCD display is central to this TWS program.
The two large new -- the two large production orders we had received and announced in the second quarter underscore the need for this high power high-priority program.
Now for the update on Golden-i.
Our revolutionary (inaudible) in mobile [near i] voice activated cloud computer.
The key is the integration of a Kopin developed operating system that controls the hardware as well as the integration of all the software including (inaudible) voice control and Microsoft Windows 7.
This represents Kopin's first efforts to enter the multibillion-dollar ruggedized industrial computing device market.
To say the device is an extension of our display product is actually an understatement of our capabilities in the technology of that device.
Current Golden-i efforts are going on multiple fronts.
First, the device was designed to demonstrate the functionality and utility of the hardware and the software.
We are now in the process of reviewing the device form factor based on the feedback we received from our partners including those who have received our development kits.
Second, we continue to work with our partners to develop the optimal business model for Kopin which we believe will include a combination of component sales and licensing revenue.
Studies indicate the market for Golden-i is very substantial.
Our goal is to have this program generating significant revenues starting in the second half of 2011.
I would like to emphasize, we have noticed a quick window of opportunity for Kopin during this great recession.
We have been investing aggressively during this period in people, in technologies, in [IP], new products, equipment and marketing.
We intend to come out this recession much stronger and we are succeeding.
In summary, our III-V Golden-i display products only have a common technology heritage.
Kopin's patented protected proprietary nanotechnology core technology.
This common architecture has allowed Kopin to cost-effectively develop high-performance mobile media products for a wide range of applications including smart phones, wireless devices, micro-displays and in consumer eyewear.
As this market accelerates Kopin is strategically positioned to meet the demands of these customers.
In both III-V and the various displays we're strategically well-positioned for a strong second half of 2010.
We're also very encouraged by 2011 which is shaping up to be an excellent year for us.
With that let's turn the call to Rich for the financial overview.
Richard Sneider - Treasurer, CFO
Thank you, John.
Total revenues for the second quarter were $30.2 million, up 7% year over year and up 19% sequentially from $25.5 million in our first quarter.
III-V revenues, upheld by strong smart phone adoption, increased 54% year over year to $15.9 million from $10.4 million in the second quarter of 2009 and 10% sequentially from $14.5 million in the first quarter of 2010.
As expected, display revenues for the second quarter were down year over year and higher sequentially as a result of the timing of the government procurement cycle within our display product line.
Display revenues totaled $14.3 million in the second quarter compared with $17.9 million in the year ago period and $10.9 million in the first quarter.
Within the display segment military displays accounted for $10.1 million of second-quarter revenue, a 62% sequentially increase over the $6.3 million in the first quarter of the year.
As John noted, the Department of Defense commenced a thorough review of all military programs to determine if each program was a must-have or a like to have.
Thermal Weapon Sight programs came through as critical programs and order flow has once again commenced.
Clearly this review process resulted in revenue delays for Kopin in the first half of the year; we are ramping up to make up the shortfall.
Turning to consumer applications, camera and eyewear combined for $3.2 million of display revenues in the second quarter.
This represented a year-over-year increase of 39% over $2.3 million in the consumer revenue in the second quarter of the prior year, reflecting some improvement in the economic climate.
Our overall gross margin declined modestly to 25% in the second quarter of 2010 from 25.7% in Q2 of 2009, this change reflects lower military display revenues which carry a relatively higher gross margin.
Research and development expense increased from $3.8 million in the second quarter of 2009 to $4.90 million for the second quarter of 2010.
The increase is primarily attributable to the development of HBT structures in support of future 3G and 4G phones and display development programs for the military and eyewear products.
SG&A expense totaled $4.2 million or 14% of sales in the second quarter of 2010, up from 9.1% of sales in the year ago period.
The operating increase includes additional labor expense of roughly $300,000 and additional marketing expense of $200,000.
Q2 of 2010 also includes $200,000 of KTC SG&A expense.
For 2009 Kopin recognized no KTC SG&A expense as we did not consolidate KTC at that time.
Also affecting the comparison is the fact that the Q2 2009 had a credit to bad debt expense of approximately $600,000 related to receivables they had previously written off but were subsequently collected in Q2 of 2009.
Kopin's second quarter 2010 results included a $1.9 million investment gain on the sale of securities and a $0.7 million gain related to foreign currency fluctuation.
Our second-quarter 2009 results include a $1.5 million gain on the sale of several patents that the Company was no longer using partially offset by a $0.7 million loss from foreign currency.
Net income for the second quarter was $1.90 million or $0.03 per diluted share based on 67.4 million weighted average common shares outstanding.
This compares with net income of approximately $3.7 million or $0.05 per diluted share for the second quarter of 2009 based on 67.5 million weighted average shares outstanding.
Cash and marketable securities at June 26, 2010 increased $0.8 million to $115.3 million from $114.5 million at the end of the fourth quarter 2009.
The increase in cash and marketable securities is primarily attributable to $1.1 million generated from operating activities, $4.2 million of cash received from the sale of investments partially offset by $4.3 million spent for capital equipment purchases.
Stock compensation expense for the second quarter was, $670,000 comprised of $156,000 in cost of sales, $98,000 in R&D and $416,000 in SG&A.
Accounts receivable days sales outstanding at June 26, 2010 stood at 45 days.
We continue to have no long-term debt.
Depreciation and amortization was $3.7 million for Q2.
We expect capital expenditures for the next 12 months to be in the range of $10 million to $20 million in support of 3G adoption and new display rollouts.
Turning to our guidance, we believe that we remain on pace to achieve our full year 2010 revenue guidance of $120 million to $130 million based on expectations of continued strong smart phone demand and increased military display sales in the second half of the year.
With that I'll turn the -- we're ready to take your questions.
Operator?
Operator
(Operator Instructions).
Matt Robison, Wunderlich Securities.
Matt Robison - Analyst
Good morning.
Rich, can you talk a little bit?
Those were six month numbers you gave for CapEx and cash flow from operations, right?
Richard Sneider - Treasurer, CFO
That's correct.
Matt Robison - Analyst
Can you give us a little bit more flavor, what were the dynamics for the second quarter?
Richard Sneider - Treasurer, CFO
Honestly, Matt, I don't have those right in front of me.
Let me go get them.
So if you have a second question while I'm fishing that out I'll --
Matt Robison - Analyst
Yes, I guess the second question would be you had pretty good sequential comparisons in both segments of your business, even with military.
Yet it looks like product margin was down sequentially a fair amount.
Can you comment on that?
Richard Sneider - Treasurer, CFO
Sure.
I mean, a lot of it has to do with the ramp that we're doing for the military products.
During the quarter we added 19 new people, so that supported some of the sequential revenue growth, but obviously there are some inefficiencies as we've added people and capacity to really the second half.
And so that -- those inefficiencies had impacts on the quarter.
And then within that there is some mix issue related to display -- excuse me, military displays.
As you know, we sell both displays and systems.
And so, the weighting of those can affect the margin in the quarter.
Those were the principle impacts.
Matt Robison - Analyst
So the -- the military mix that you had in the quarter from a product standpoint was more at the system level where you're reselling other people's components to a greater degree?
Richard Sneider - Treasurer, CFO
Yes.
Matt Robison - Analyst
And so, if we look at the kinds of margins you achieved in the June quarter, how should we be thinking about that going forward?
And I guess the other question obviously on the revenue side is, how much of it can you make up versus what you sold to the military last year?
Richard Sneider - Treasurer, CFO
Well, our goal is to get back to the full guidance and that's what we're going to keep working towards.
And as of right now we think we can still get there.
So, as it relates to the margin, with the orders that we have received in the April timeframe, which will now allow us to sell in the second half, we think we'll get to a more traditional product mix, which potentially has a higher margin.
So (inaudible) the gross margins expand.
Matt Robison - Analyst
Have you gotten orders yet from your third military customer?
Richard Sneider - Treasurer, CFO
No.
Matt Robison - Analyst
Okay.
And so the second batch is more the higher margin products that are less system level, is that right?
Richard Sneider - Treasurer, CFO
Yes.
Matt Robison - Analyst
Okay, so -- and then Dr.
Fan, can you comment a little bit on the III-V business where you -- how you see the middle of the year here going?
Your customers reported pretty decent sequential growth in the June quarter, is that the kind of trend we should expect from you guys as you supply them in the September quarter?
John C.C. Fan - President, CEO, Chairman
Well, I don't want to comment quarter to quarter, but overall wise the business is growing very rapidly.
In fact, I think our continuation with the extension of the contract, the prior agreement with Sky really makes us all reviewing how much capacity is needed.
So we're reviewing the order, the personnel, equipment and the like.
I think III-V will enjoy very good years for the next few years.
Matt Robison - Analyst
Your prior agreement with Skyworks, wasn't that three years?
You mentioned this one is two years.
Anything we should think about in that regard?
Richard Sneider - Treasurer, CFO
The prior agreement was two years.
Matt Robison - Analyst
Okay, I apologize for getting that wrong.
So can you confirm on the margin story?
So you had more absorption with more III-V volume which should have been positive.
Is there any pressing issue there or is it just 100% the military mix that we should -- and additional labor?
John C.C. Fan - President, CEO, Chairman
Our goal is of course to absorb the Kopin Taiwan as quickly as possible.
And that would really help us.
They have a lot of capacities, but they have some capacity but you need to be qualified.
And we're qualifying their systems.
Once they're in place it will be good.
Richard Sneider - Treasurer, CFO
Okay, Matt, actually jumping back to your original question, I fished it out.
So the CapEx at the first quarter, we stood at about $800,000.
So we had about $3.5 million of CapEx in the second quarter.
Operating net cash in Q1 was $2.5 million, so it was actually a negative of $1.2 million in the quarter.
Most of that is attributable to an increase in accounts receivable of about $4.7 million offset by about $3 million in accounts payable.
So, that's really because of the military sales ramping up, the accounts receivable increased, so the working capital went that way.
Matt Robison - Analyst
Dr.
Fan, you mentioned KTC absorption that you need to -- that you're looking to achieve.
But did the overhead in Taiwan increase quite a bit in the second quarter or -- because obviously you were consolidating that also in the first quarter.
John C.C. Fan - President, CEO, Chairman
Yes, Richard can answer that question on the absorption of the KTC right now.
Richard Sneider - Treasurer, CFO
Well, in both locations we've been adding personnel.
So from that standpoint there's always some inefficiency because of training and all that good stuff.
The physical plant did not change.
There is -- we are making changes here in Taunton for expansion, but right now those have been the -- it's been primarily people oriented.
John C.C. Fan - President, CEO, Chairman
Yes, but I think to add also we are more defining improving some of the equipments over there in KTC and get it qualified by our big customers.
So all these things are ongoing and we're actually happy with the whole progress.
But Rich is correct, I mean, we're increasing inefficiency in the second quarter because of absorbing the (inaudible).
Matt Robison - Analyst
Okay.
And one more question and I'll let you guys talk to someone else.
Did you ship any Golden-i in the quarter or -- what direction did that go relative to the first quarter?
John C.C. Fan - President, CEO, Chairman
In second quarter I don't remember if there are any substantial shipments.
In fact, what we're doing is that we are finishing up our gen -- I don't know what gen now, gen three maybe, gen two -- on the development kit and that is anticipated to be ready to start shipping October this year.
And that will be the one just before the final product coming out.
Matt Robison - Analyst
Okay, thanks a lot.
Operator
(Operator Instructions).
Rajvindra Gill, Needham & Co.
Rajvindra Gill - Analyst
Yes, thank you.
Drilling down again on the gross margins because that was a little bit of a disappointment quarter over quarter, especially given the expectations of margins expanding on your prior conference call.
I just want to get a better sense of the transition over to the six-inch wafer on the HBT side.
Did you receive any margin tailwinds from that?
And will that increase your margins on the HBT side as you move most of the production over in the second half?
John C.C. Fan - President, CEO, Chairman
To answer -- I will answer that; the answer is yes.
We anticipate that on semiconductors once you convert a system from four-inch to six-inch you do usually generate a 10% to 15% improvement in margin.
But you still have to get the increments running at full steam and get the year stable.
And we're in the process of finishing all this.
So we anticipate there is improvement in the margin from that.
Rajvindra Gill - Analyst
Right.
So I mean, margins have kind of [troughed] if I look at the consolidated margins at around 28%.
And do you see going above 30% over the next couple quarters?
Richard Sneider - Treasurer, CFO
I don't know we'll hit 30% in the third quarter, we'll hit it over in the fourth.
Just so you understand that the six-inch -- as Skyworks has announced, they've essentially switched all their operations to six-inch.
So all our domestic customers at this point to my knowledge are six-inch.
We still have some foreign customers who are four-inch.
I believe their timetable is sometime mid next year to convert.
So all the games that we're going to get from six-inch will be continual yield improvements as we get -- as we just generate more volume and get smarter on how to do six-inch in larger volumes.
So, the first -- so I guess my point is it's going to be more of a step function.
We've already done the one step by getting up to Skyworks this year, it will be some incremental improvements because of yield, but then next year there will be another step function as the Asian customers switch to six-inch.
Rajvindra Gill - Analyst
All right.
And what were the gross margins by segment?
What were the gross margins for III-V and for military?
Richard Sneider - Treasurer, CFO
They were both relatively close to each other -- and relatively close to the corporate average.
Rajvindra Gill - Analyst
Oh, so that -- I mean, typically you get like a 40% to 45% gross margin in military.
So you're saying that the military margin was around 28%?
Richard Sneider - Treasurer, CFO
In the quarters it was around 30%.
Rajvindra Gill - Analyst
Okay.
Richard Sneider - Treasurer, CFO
I mean, keep in mind though, obviously when we're cranking out a lot of product there are a lot of allocations involved in all of those numbers.
So, I'm not sure I would put too much weight into slicing and dicing to that level --.
John C.C. Fan - President, CEO, Chairman
Yes, I think the second quarter is [fair].
The full first half is very unique because of this military situation where we push out for six months.
So a lot of inefficiency and the other stuff in the mix are totally different.
This is a one-time thing, I don't think we should put too much effort in trying to decide that first half.
But the key matter is the review is over and we are now in the must have bucket.
Richard Sneider - Treasurer, CFO
Right.
John C.C. Fan - President, CEO, Chairman
So I think we should look in the future.
The first half was kind of strange, but even that we still came out very well.
Rajvindra Gill - Analyst
Right, right.
So just switching to the military side then, the TWS bridge program that I guess was saved by the military, is that now a two-year -- is that a two-year program?
And have they -- any details in terms of how many soldiers it will cover?
Does that change any -- any of your military projections?
And what about -- and you had mentioned potential follow-up on orders and addition of a TWS bridge program that you're pursuing, any details on that?
John C.C. Fan - President, CEO, Chairman
Yes, well obviously we cannot go through fine detail until we can announce it, but we anticipate another series of orders coming up by the government.
And you can see that we are very optimistic what's going to happen next year.
Rajvindra Gill - Analyst
And do you think you'll be able to have year-over-year growth in military in 2010 or should we be looking at more of that ramp in the second half and then bleeding over (multiple speakers)?
John C.C. Fan - President, CEO, Chairman
With the number of people we're adding into both sectors I think it is pretty clear that we anticipate growth in both sectors next year.
Rajvindra Gill - Analyst
What about 2010 for military?
John C.C. Fan - President, CEO, Chairman
2010 now is just everything shoveled to the second half.
So you're going to see a spike.
Rajvindra Gill - Analyst
Okay, got it.
And great HBT revenue, I mean that year over year very impressive.
Relative to the smart phone market you're probably growing twice the rate of that.
How should we be looking at it in terms of diversifying away from Skyworks.
Any -- you mentioned a little bit briefly on the call.
Any traction with some of your other customers or other power amplifier customers?
RFMD (multiple speakers).
John C.C. Fan - President, CEO, Chairman
Yes, I would say because we love Skyworks, Skyworks has been with us over a decade and we have such a close relationship.
On the other hand, we're also now having very close relationships with other Tier 1 customers and they like us and we like them and we continue diversifying the situation.
It's not that much of a diversification, it's just that we increase our capacity and capability.
So we're still shipping a lot, a lot of product to Skyworks, but we're shipping also a lot more now to the other guys.
So the ratio is coming -- to Skyworks coming down and it has been coming down for years, a couple years now.
And it will continue to do so.
Rajvindra Gill - Analyst
Okay, thank you.
John C.C. Fan - President, CEO, Chairman
Remember, our extension is two more years, so everything is -- and Sky is doing very well indeed.
Rajvindra Gill - Analyst
Yes, that's correct, thank you.
Operator
(Operator Instructions).
Betsy Van Hees, Wedbush Securities.
Betsy Van Hees - Analyst
Good morning, thanks for taking my call.
I was wondering if we could talk a little bit about the expenses as we're looking at the second half of the year.
SG&A and R&D continue to be on a GAAP basis about 14% and 16% of sales.
Is that something that we should be modeling for you in the third and fourth quarter?
Richard Sneider - Treasurer, CFO
Our target is that SG&A should be around 12%.
And R&D typically runs something around 16%.
So right now we're a little and heavy on the SG&A and we're looking into all of that good stuff.
In the R&D is essentially on track to what we would anticipate it to be.
As John indicated in his prepared remarks, we're facing a lot of opportunities right now and so there's significant investment going into R&D.
And we think that these are critical for having a very successful 2011.
That's where really our focus is, making sure that all the -- everything is set up properly for a great 2011.
Betsy Van Hees - Analyst
So then we can expect that even though your target for SG&A is in the 12% that we're looking more towards a consistent 14% which you've been running at?
Richard Sneider - Treasurer, CFO
Well, I think that as revenues ramp the absolute dollars in SG&A should stay relatively flat, so that will drive the percentage down.
But I think that R&D expenses may continue to increase.
Betsy Van Hees - Analyst
Okay, thanks.
That's helpful.
Richard Sneider - Treasurer, CFO
So the R&D will stay around the 16%, but the SG&A will come down as a percent just because revenues increased.
Betsy Van Hees - Analyst
Okay.
And then on the tax rate what should we be looking at for the backpack of this year?
Richard Sneider - Treasurer, CFO
We think for the year we're going to end up around 8%.
Betsy Van Hees - Analyst
Okay.
And then as we're looking at modeling the Q3 and Q4 timeframe, should we be looking at more of a backend loaded Q4, how should the cadence be in terms of growth to get to that -- the midpoint if you were to get to the midpoint of your target range for the year?
Richard Sneider - Treasurer, CFO
No, I think that the Q4 and Q3 should just continue to show growth (inaudible) four over three.
I mean, we've been reviewing this over the last few weeks about whether there would be any seasonality in Q4 which traditionally occurs.
But we don't see anything to say that's going to happen this year.
So we think that Q4 will be continued growth.
Betsy Van Hees - Analyst
Okay.
And then going back to the question on the gross margins, so you're thinking that gross margins for this current quarter are going to be similar to what they were in Q2 and then you believe that you're going to get back to around 30% for the Q4 timeframe?
Richard Sneider - Treasurer, CFO
I think we'll get a couple percentage points increase in Q3 and then we should continue to increase in Q4.
Betsy Van Hees - Analyst
Okay.
And then when can we get back to the type of gross margin levels that you had in the back half of 2009?
Richard Sneider - Treasurer, CFO
2011.
Betsy Van Hees - Analyst
And will that be in the first part of 2011 or the back half of 2011, how should we be looking at that?
I understand you guys are investing for the future, but when can we start to see those investments materialize into better gross margins?
Richard Sneider - Treasurer, CFO
I'm going to refrain from answering that; you'll have to give me one more quarter.
We really have to understand when all of the equipment sets that we're installing now will be producing revenue.
Betsy Van Hees - Analyst
Okay.
And then, I'm sorry, can we go back to one of the first questions which was in regards to the CapEx spend?
Can you please repeat what you guys said your expectations were?
Richard Sneider - Treasurer, CFO
So, right now we're in the $10 million to $20 million range.
I understand that's a wide range, but we're looking at potentially procuring additional equipment and we're talking with manufacturers right now about when it might be potentially delivered and such.
So, as John said, we have more than enough capacity through 2011, the question is going to be there after.
And so we would be procuring that equipment within the next 12 months for 2012 and beyond.
So we're really looking at delivery time.
Betsy Van Hees - Analyst
Okay.
And so just to make sure I understand, that's for your entire year?
Your CapEx guidance, correct?
Richard Sneider - Treasurer, CFO
That's the guidance for the next 12 months, which would actually go into 2011.
Betsy Van Hees - Analyst
For the next 12 months, okay.
Richard Sneider - Treasurer, CFO
Right.
Betsy Van Hees - Analyst
Okay.
And so this has changed from the guidance that you gave I believe on the fourth when you said CapEx is going to be $6 million to $8 million?
Richard Sneider - Treasurer, CFO
Yes, I think initially -- I think in revenue we were $6 million to $8 million, then we went to $8 million to $10 million and now we've upped it.
Betsy Van Hees - Analyst
Okay, all right.
Well, thank you.
Operator
(Operator Instructions).
Matt Robison, Wunderlich Securities.
Matt Robison - Analyst
Yes, Betsy hit most of what I was looking for, but just for clarification.
Do you think you'll be able to get that equipment in time to spend $10 million this year or you've already spent I guess $4.3 million.
So how should we look at this year?
Richard Sneider - Treasurer, CFO
Yes, we will hit the low end of the range for sure.
The question is, I just don't know how much between $10 million and $20 million we'll hit based on the deliveries.
Matt Robison - Analyst
So you're basically trying to put this gear in place as soon as you can and you'll use it to achieve more market share, is that the way we should look at it?
Richard Sneider - Treasurer, CFO
Yes.
Matt Robison - Analyst
Thank you.
Operator
Rajvindra Gill, Needham & Co.
Rajvindra Gill - Analyst
Yes, thank you.
So, in order to hit the midpoint of your annual guidance it implies about 25% second-half growth versus the first-half growth.
Just wanted to find out what are the -- what are the piece parts, what do you think will be driving that more in terms of ranking, will that be more military or HBT or a combination of both?
Richard Sneider - Treasurer, CFO
Military.
Rajvindra Gill - Analyst
Okay, got it.
Richard Sneider - Treasurer, CFO
There will still be some growth in III-V, but it will be military.
Rajvindra Gill - Analyst
Okay.
Rajvindra Gill - Analyst
Okay.
All right, that's it, thank you.
Operator
Ladies and gentlemen, at this time we have no further questions and I'd like to turn the floor back to Dr.
Fan for any closing remarks.
John C.C. Fan - President, CEO, Chairman
Well, I thank everybody for joining us this morning.
We look forward to keeping you updated on our progress.
This concludes today's call.
Thank you.
Operator
Ladies and gentlemen, that concludes today's conference call.
Thank you for joining us today.