Q3 2019 Earnings Call
Please standby.
Good day and welcome to the Cyberoptics third quarter 2019 earnings call Today's conference is being recorded.
This time I'd like turn the conference over to doctors.
Arnie President and CEO Cyberoptics. Please go ahead Sir.
Thank you.
Hello, and thanks for participating in Cyberoptics third quarter thinking 19 Holdings conference call.
Joining me is just burdensome.
Yes, one chief operating officer.
You ought operating to search in some detail.
Well what have you all 40 cents performance.
And then be pleased to answer your questions at the conclusion of 40 marks.
In keeping with the regulation FD, you'll make forward looking statements regarding our outlook in this afternoons earnings are these.
These forward looking statements to reflect our outlook for future desires to subject to a number of risks that are discussed in our Form 10-K for the year ended December 31st when do you Dean.
<unk> filings with the Securities and Exchange Commission.
<unk> or did you do reviewed these discussions all risk factors.
She was third quarter wasn't difficult for your first Cyberoptics as we continue we'll see seem to head Vince conditions.
In the surface Mount technology, and semiconductor capital equipment markets.
As we listen sort and you'll see utilization, but China.
Based on performance sharp declines in sees itself legacy inspection systems and OEM sensors.
Despite near term headwinds, we are continuing to invest in research and development before they go to strengthen notably due to capitalize on strong growth opportunities.
TD, a modest and they were censored inspection and metrology systems and semiconductor census.
He knows our confidence in Cyberoptics future is undiminished.
Cyberoptics reported sales of $1.4 million for the toward for Girlfriendy 19 ended September Thirtyth don't really 6% from $16.7 million into toward for girlfriend D.
You also reported a net loss of $250000 or five cents per share in this year's toward Florida.
Compared to what it takes a $1.1 billion or 15 cents per diluted shares into third quarter all three D.
Sales of sensors and inspection and metrology systems based on T.D. at modest technology.
Declined to $4.5 billion into third quarter, Afridi 19 from $6.4 million into your only appeared.
Just say modest broad based products combined with semiconductor sensors.
Accounted for 66% of children revenue in towards Borderfree to 90 <unk>.
<unk> from 59% into Europe , you got to Peter.
Sales of legacy sensors and systems, excluding it makes 600, maybe more do you inspection systems.
47% Yodle, what do you already in the third quarter offering to 90.
[noise] suddenly Nols with what is the off all product lines.
Simon do you have semiconductor sensors.
The prevailing market weakness by posting 6% Yodle, what do you see as crude to $2.7 million see the toward core Girlfriendy 19, and increased by 18% on a sequential quarterly basis.
This year and productivity enhancing sensors are forecasted to post double digit yodle what are your crude in this year's fourth quarter.
In self inspection and metrology systems declined 29% year or what are your into toward core girlfriendy $19 million to $5.5 million.
But in this category since all T.D., a modest and they weren't sq Tito's an inspection systems.
24% Yodle, what do you have to $2.2 million.
Oh My God.
Selecting the demonstrated competitive I'd want they just whole fix to your modest technology.
Skewed he tells US sales have increased 14% yodle, what do you ever for the first nine months of Freaky 90.
Given the outlook for robust fourth quarter sees Sq T cells and soon schools are forecasted to exceed where people are saying for all afridi 19.
You know promising development during the third quarter, we received an order for $1.2 million for shipment office Q2 thousand C.M. systems.
It was a second quarter girlfriend, Eutwenty, which would be used into production of micro LCD displays.
Micro displays consume this fall.
Doug to not later than in Cds old age and can be deploying that age of markets, including consumer electronics automotive applications and outdoor signage.
But he said he says you bought from your development estimates that Apple that spend $1.5 billion to $2 billion on this technology over the last five years, why such panel makers that Samsung display edgy display you and you know looks I was increased as he said you refer to this ATM.
All of this makes us believe that micro did you take what would you just because it's a significant potential growth opportunity for cyberoptics.
During the third quarter. He also they seem to 1.2 million and all that order for TD Sq Tito's at C.M. systems for use in manufacturing process for printer cartridges.
The majority of to say when he was that it was nice into fourth quarter Girlfriendy 19.
Also during the third quarter did it seemed customer acceptance for automating backlog if it makes extended memory module inspection systems.
The same customer list a new it makes order during the third Florida with acceptance expected in the first quarter of integrity.
In addition, customer evaluation, so far new high precision Threed memory module inspection systems have started and we are cautiously optimistic that initial seats with all cutting 2020 .
They self inspection and metrology systems I'd expect it to post strong growth on a sequential basis in fourth quarter offering to 19, given our forecast for solidly highest himself excuse he told and systems during disappeared.
However, the impact of like lagging legacy sees the decided it lot fourth quarter inspection and metrology system sales on the Yodle, what do you ought to be says.
Finally, I'd say its a whole you ever since I have spent 41% yet or do you go into third quarter of thinking 19.
People are $2 million.
But in this category since Ltd at modest and there were sensors were down 30% year or what do you.
Due to ongoing market weakness.
So things are forecasted to decline in the fourth quarter, both sequentially and to the Yodle, what do you ought to be says.
We believe revenue from our two d. and modest PC OEM customers, but did you bone nicely starting already 2020 .
It go do you for legacy OEM customers may take longer you wouldn't difficult conditions in the because at least markets. Although we do expect revenues from these customers to eventually into after that.
As an update you just do not and modest based noticed solutions and so forth semiconductor before they will then I've lost packaging inspection and metrology applications remains very high.
He said lead it seemed appeal from a new OEM customers bought it ought not notices we shouldnt census, and how many other potential that we image system integrators evaluating this product.
Given these high degree of interest we ought adding seats that sees engineering resources.
Opportunities for this important new product.
We believe inspection I told you for semiconductor before there was an advanced packaging applications.
Isn't promising long term growth opportunities.
Cyberoptics ended the third quarter of thinking 19.
Backlog of $14.4 billion compared to $13 million at the end of second quarter.
On a quarter ending backlog includes a significant order for T.D., a modest sensors from an existing OEM customers that are scheduled for delivery I believe <unk> Oster tricky 19.
We are forecasting sales of $13.5 million to $15 million for the fourth quarter ending December 31st when do you 19.
Looking ahead, we believe the third quarter marked a bottom of the don't does for us empty and semiconductor capital equipment markets.
Along with many industry observers they believe conditions would strengthen as we progress through continued Wendy.
We believe that already industry, leading to de a modest and semiconductor sensor technologies have positioned cyberoptics to capitalize upon a fluid Angel fortunate. These you know it ought to get end markets.
Well this is a highly confident about cyberoptics future.
Thank you know, Jeff Bertelsen to review, our third quarter numbers in greater detail.
Thanks to both since the bone is already covered our sales result in some detail I will provide additional information regarding other aspects of our third quarter performance.
Our gross margin percentage in the third quarter of 2019 was 44.4%.
From the second quarter of 2019, roughly equal to the year earlier period.
Our gross margin percentage in the third quarter was impacted by obsolescence charge for legacy OEM sensor product and incremental warranty expenses.
These two factors combined to reduce our gross margin percentage in the third quarter 2019 by over one percentage point.
Looking ahead, we expect our gross margin percentage in the fourth quarter of 2019 to prove by about one percentage point.
The sequential basis from the third quarter level.
Total operating expenses of approximately 6.3 million in the third quarter 2019 were up modestly from a level in the year earlier period, mainly due to increased R&D expense.
Reflecting our confidence in Cyberoptics future investment in R&D is continuing as we pursue significant growth opportunities for our Threed Emirates and semiconductor technologies.
Depreciation and amortization expense totaled $744000 into third quarter and stock compensation expense was $244000.
Total operating expenses in the fourth quarter of 2019 are expected to be virtually unchanged on both a year over year quarterly sequential basis.
Our effective tax rate a 40% for the third quarter 2019 includes a non cash benefit from a reduction in income tax reserves.
We anticipate an effective tax rate of approximately 25% in the fourth quarter of 2019.
Cash and marketable securities up 25.3 million at September Thirtyth were down slightly from 25.8 million at the end of the second quarter.
During the third quarter, we used cash of approximately $353000 to acquire approximately 26000 shares.
Cyberoptics stock under our existing $3 million share repurchase authorization that as effective through June 30 2020.
Our capital resources are adequate for achieving our growth objectives, given our available balances of cash and marketable securities.
Thank you we would now be happy to take your questions.
Well. Thank you if you would like to signal with questions. Please press star one three touchtone telephone if your choice today is a speaker phone. Please make sure you knew function is turned off to why your signal to reach our equipment.
Again that will be star one to signal was questions.
Our first question will come from Jason Smith with Lake Street.
Hey, guys. Thanks for taking my questions I, just want to start with the order for the micro L. E. D market is that from a current customer or in new customer.
No actually older age isn't to support the order this from a new customers.
Is it actually is effectively a contract manufactured and that is making the displays for a larger couldn't do it at cagny customers Sixtyl arteries funded contract manufacture.
So it's a new customer.
Okay. That's helpful. And then know your visibility doesn't fully extend into 2020, but can you discuss some of the commentary body language, you're getting from some of your customers in regards to how they're viewing next year I know some of your prepared remarks makes it sound like you believe you've seen the trough in some of your.
Businesses here in Q3.
Yeah. That's a good question, we definitely disease that Q2 was the thought when they feel the sent me into Cindy can get bigger markets right now.
Clearly based on our guidance.
Fourth quarter expecting sequential growth.
And all indications that I'd now like liquidity should be.
Decent here for sent me an SMB lot of games.
External people see that.
Semi cap market is expected to cool about 5% to 7%.
You can think <unk> and doesn't really change no I know this start expecting 2020 , one significant built into semiconductor market almost on.
35% to 30% driven by Fiveg deployment, but then I assume you may have seen some press releases.
Companies like DSMC last week seen deployment for Fiveg may happen sooner rather than they do it and if those kinds of woman's happen.
Thank you thinking numbers could be better than I just for semi cap. So all these seems pretty good about semicap into simply want to get into <unk>.
Okay and final one for me and I'll jump back into queue. When do you guys, adding to address the nano resolution Mark good is that really in anticipation of demand do you have the pipeline and visibility to a pipeline to really.
Is that really the driver behind wanting to build out the team today or is this early to drive future demand.
Yeah, It's it's really to drive future demand I mean, we've we've shown the sensor took quite a few customers were getting a high level of interest.
And so the.
Resources.
Really are to you know flush those opportunities out to make sure. We continue to push them forward. So it's really based on that.
On the interest in reception that we've seen but I would say mainly for the future.
Okay. Thanks, a lot guys.
Thanks, Jason.
And moving on our next question will come from <expletive> Ryan with Dorothy.
Thank you.
It's small it looks like your delivered the last piece of the memory business in Q3, how much was in Q3, and then you talked about an additional order from the same customer what was the size of that and is that two d. or three d. related.
Yes, so the the amount of revenue from Amex and the third quarter was roughly $600000 and that was the final piece of the order that we had gotten last year. The new order was for a one system.
From our current customer it is to be.
So so that'll be in the same ballpark range.
Roughly $600000.
And that's Q4.
No. He said he was looking at Q, Yeah, I think well Q1 Q1, okay for <unk> for the new order in Q1.
Okay, and Subodh, you mentioned, you're adding staff field staff for the Oh, the nano can you.
Give us a sensible you know kind of the ads, you're looking at and what particular areas your staffing up in.
I know, it's just a handful of people I think I think that adding key resources in <unk>.
You're getting 80, they need to do this demonstrations.
Looking at some additional scenes People's right now in California, I don't see Nishio and most of these customers look good so don't expect a big number but it is more.
Sits in those regions.
Okay, I am sorry, I didn't catch what your expectation was four.
Wafersense and in Q4.
So the embedded they sometimes to see good sequential growth and who you are what are your test.
Yes, so we're looking for.
Tend to have a 10% growth in wafersense.
<unk> revenue.
Year over year correct.
No how does the customer called look there and are you, adding is that driven by new applications or haven't you introduced anything yet and not on that front.
Let me introduce some new applications is beginning of the euro.
Because its.
That makes in the party consensus.
And a couple of the smaller things, but do you.
Overall group that we are seeing since continues to be existing portfolio.
Bye.
Location.
He's just really just seems to still.
MCC Samsung does.
Lam research continues to be as it goes to watch.
He is Sam and a few of those.
Okay. So overall portfolio is doing pretty well.
Okay, great. Thank you.
Thanks.
Next we'll be Greg Palm with Craig Hallum.
Hi, guys. This is actually a Danny Haggard, John for Greg Palm today, Thanks for taking the questions.
Hi.
I'm just in general hours I was wondering about your total visibility throughout 2020 at this point and and over last few months how has that changed.
Well as I've mentioned earlier they.
Certainly couldn't get ready looks like.
For the old on Mockups deeply he's playing with the SMB instead, he couldn't get because markets.
No and stuff forecasting a five to 7000 gold.
When do you think he I'd just like you find it.
This numbers have been change as equal.
I am just keep you'll do good.
So given that backdrop.
It's a very good has the dynamic.
Absolutely.
Yeah.
<unk>.
I couldn't do you get to gain market share in India as they compete come to get those things at the line like it.
Differentiated mosquitoes and systems.
So what are they feel fairly good up all thinking.
He wanted this time given the backdrop.
As it answered your question.
Great.
And then and then going back to that Amex you said.
The new order was with that same customer and you have mentioned having conversations with.
Those additional customers before.
How are those additional customer conversations progressing.
Oh, good auto they declared as we mentioned in her comments the existing customer ordered one more so that's kind of takes care of all that aligns the D and mix at this time.
And the other two there's so many teams argument legal stores left in the way. It's another two we are talking to them.
Net interest is more in the T.D. version all day makes Florida. So it's basically the same concept.
Using a lease instead of using or.
I'm honest answer.
And they seem to like that concept, demonstrating and as we disclosed yeah cautiously optimistic that started booking season like utility.
Her to customers.
Great great.
And then I guess, just jumping over to the auto and market I'm, obviously, a lot of companies have been highlighting a weakness in this market, it's and it's not anything really new but I'm just kind of curious what you guys are seeing right now and and how what do you think there your your exposure isn't and what the direct or indirect impacts on the week.
Yes, and auto you're seeing.
We have some exposure it's fairly small good exposure is more.
Putatively fund.
<unk> into Cpqd Gpus these moves in the auto, but obviously we have some exposure.
Because I really thought is <unk> startups.
Be to be honest, just any significant change in their buying patterns over the last few months.
So the haven't seen anything sort of slowing down so again keep in mind engines and T.D. why market is growing in auto because a lot as our existing onto Monica is using the Eagle life science fiction and do you do need to TD, that's what he plane so the mitigating the been difficult.
Transitioning to a gene onto a and b Vicki exposed to the old ought to listening cycle.
Autos.
Somebody say at least photos and guess what is auto exposure is concerned.
And from what you can see if you haven't seen any significant differences between lost it endicia.
If you went back something.
No I I would agree I mean, I think the main driver there as a growth in Threed Yale wise.
We've seen.
With the Sq product.
Alright, great Oh, that's all for me thanks, guys.
Thanks, Thank you.
And next Toby Eric Slade with ACMI analytics.
Eric.
So.
And getting your line is open go ahead. Please.
Hi, Good Eric Swayed. Your line is open. Please go ahead with your questions.
Okay and hearing no response that line will go to next question Ross <unk> well.
For me.
We can now my answer.
Sorry.
Okay here we go.
Okay, well one question.
Jeff What did you I bought by those shares back out what was the average prices are up your buyback.
The average price that we acquired the math was about $13 and 67.
Okay.
Nice no so really as we wrap the year up if you your guidance is 13 have to 15.
Correct.
So, let's say you're going at 14.
So with that what would that be pretty or.
Well I for the first nine months, we were at a 42.4, so that would get you to 56.4 of the numbers 14.
Well I'm willing <unk> the difference between this year or lost here what is your more your legacy product to know we estimate was not your <unk> not your wafer sensor Amar Ross.
Well that's up yeah, I mean, if you look at our key growth drivers.
To the Wafersense products, which are our semiconductor sensors, there they're up through nine months and we're projecting to have a really good fourth quarter. There and then sq products are up 14% through nine months and we're projecting never really strong quarter there.
You know so the main areas you know, where we are soft this year, our legacy products and the OEM sensors.
Okay. So that question I thought you might know Jefferson about the capital equipment.
Industry or not the stocks, but a lot of stocks, but as far as just.
Contraction Brooklyn, good the semiconductor equipment.
At this pace by the end of year contract about what 15 per sub so that Robert.
I think it's closer to 20 people are saying, let's see I mean, as these companies unknowns, but wouldn't be sort of plays window.
Oh semi cap.
Sure about it when people are some contraction from last year.
So, but your new products were flat which is.
The said those the sharp.
Yeah. When you started <unk> grueling right our radar Sq product is.
That said is growing so that that you know well, we'll be up for 2019 Wafersense will be up for 2019.
Let's now comes up.
Go ahead.
On the OEM side.
And also the.
I guess some of the legacy product.
The only I don't they will come back at some point right I mean always goes that way they there.
That's a very well come back in 2020, because they pretty much stickier off right.
Well, yeah, our mean, our expectation would be that they will rebound.
Okay.
And.
No not to the mill so those Tailwinds you got a the more.
I guess that I'll start with the one that looks like it's obviously a lot bigger part so that's the ER.
The way so what's working right.
Yes, I mean do either technology dividends.
Likewise.
Tom Subcontract contract manufacturers for large.
Yeah, I think here.
You're referencing Mike Micro AG and as we had indicated you know there's a really good growth potential for us assuming that technology gets adopted.
You know fixed away.
No.
Right now a lot more than <unk> now.
Well he me.
Who is your competition or get inner harvest.
But oh he process. If you are familiar with his you'd see it so you need to pay to process to them, taking existing like really de dies and leasing them.
Thanks, so substitute using 60 processes, so that exit or I mean.
They are licensing that it would you can be used different.
Knowledge manufacturers like now and that's where you got to getting August on those manufacturers are down in contract manufacturers.
I guess my questions you, you're doing me enlighten spectrum cookies. So they don't make people at a multiple steps into any process.
Inspection like inspecting the guys that are coming in.
Looking at Doe Sargent bags that though is that going to be pleased in place that dice look at the position of the days with respect to decided to find things into though I want to fix them then do a force inspection effectively that 60 leases that.
Little any process you need to be inspection and I know sq cm is 45 or six steps.
So I guess my question is and that's just.
My question did you have competition could get design, that's or was this just saw her at your you I want who does the study.
No that is comedy there's always computation some applications that the sq cm is significantly superior. So they really haven't bought that doesn't get any of the company does that have some ideas.
Good.
The departments or they can do this stringent and and it is even see some competition.
It's not like but mostly the.
Definitely the micro Oh, the micro LNG could go I guess every other as far as like a displays on on phones like Apple all that to go on.
Scoreboards, we've sought out without products.
Big screen tend to be nice.
I'd like to other demand I mean, the expected within like that it is projected to be fairly high over the next decade also I mean that I've made easy foods like really de and then if it's something like 80.
Do we have a good starting position.
Any and debt licensees and we definitely tend to capitalize on died.
Over time clearly this is going to be a big 80, maybe they have some competition. So they definitely have the first one and one thing if he was right now and.
These actions needed.
We expect to be a significant contribute as its even though it's a good some competition.
Well now the other one you've got the inks that.
I would assume it wasn't like Hewlett Packard, one of the Topicals and not area.
<unk>.
If you get on my right now.
If you don't have listened to comment on this customer Oh, no I know guy, but I know that but sometimes it's not separate industrial jobs.
Yes.
Okay, each company and it isn't large public outreach company.
Yeah, Hi.
But what what kind of pencils and law.
Market. So again it shows the though what they have started doing is they make millions of cartridges.
Right no doubt inspecting.
On a sampling basis, using Oh conventionally technology, they cannot because they had been Marty.
They want to school in line and inspect all of this millions of cartridges.
Seeing sq cm and that's what people do you play for the product for sort I know just starting it's it's a few units that's what authorities about I'd be up listing it in their different locations worldwide, assuming that they get good ROI on on those measurements, they really definitely scaled up from there and of course, we are approaching that completed dosing.
The customers who use those kinds of.
Names.
Okay. So the tightest together both these products that would you know we know about <unk> MSR assets Q Wafersense. The memory, that's been pretty much articulate you've got business already going on these two wins that you got I had you know maybe I just fell asleep, but I had no idea you're working on these two or you know these two.
Industries, I guess, you know in ink jet and also micro Alley D [noise].
Is this something you've been working on for how long.
Yeah, I mean, it's.
We launched Sq cm anymore.
In the U.S., Shedlin, though and fundamentally as I've said before it is the words flows in line C. M M.
Two.
And it is kind of.
They did I heard of its starting to some extent and I think you have been talking to many customers I did on many interesting applications like that but it seems like now because they didn't go in line CMS that exist in the work today.
Do they skew CNN came about I mean, we ought inspecting and it puts into other dimensions in 10 seconds on this and what did it have seen anything like that before so just kind of creating something interesting opportunities photos and be able to king one application entertain get a relatively small company as you know together because it's already so sick.
And how many opportunities you can see so they try to do that it took us to move into putting shows the sizes opportunity and worked with those customers as you have seen.
<unk> cost in most cases in micro duty on dislodge picked a company.
Pretty good cartridges and be able to feel though things like died in the hopper.
This is pretty good about sq cm and things like CRM capability and most of the next decade or so.
So really so so we might see more this stuff coming at us because of the well basically the technology right.
Exactly so they unique differentiated technology and it is opening the interesting opportunities for us that.
But it does take time to Oh, I don't think acquisition customers.
That's right so well I think.
That does it for me thanks for craft for all those questions.
Thanks anything there.
Yeah.
And once again, if you would like to set goals questions. Please press star one getting star one for questions. Our next question come from Ross Strehlow with private Investor.
Hey, Subone, Jeff how are you.
It'll tanks or do you might Ross.
Good.
So I'm surprised that the OEM sensor business still remains soft.
Is it your customer sales softness or did they just get too much inventory.
And you're not completely sure what how much effect was inventory that people are just towards the end of last year that ethane to clear and home, which is auto itself is this because clearly this complements a board.
They just did soften as via toward the end of last year and they may not have anticipated. So they may have for just some and then they backed off quite a bit.
If it Didnt Oems that are types of Oems one is the legacy sensitive Oems.
And did the softness is much more than modestly yet.
And a modest Williams, we expect them to start picking up relatively soon.
It was the industry's turning the corner, we clearly see that.
The legacy OEM struggling because they do your own gonna be suspect because of the China trade war going on intrinsically that because these markets seems to be soft right now.
And say and little bit of that is because off although excitement we are seeing be done adelson sitting back last packaging 80 or so.
So let's packaging is essentially stacking.
<unk> chips passive components.
All of that stuff together in the back age and that's why didn't need an animal and what is sensitive to the inspection, but do you think about what that is it listening to some extent. It is if this in conventional PCB.
And that's what our legacy Oems do play in that market. So I think I lost packaging is.
I think that they get rid of ordered in the conventional DCB 80, a and B. Our legacy Oems are definitely seeing the thing Jordan does that has answered your question.
Little bit Subodh.
I was referring to three D. OEM sensor business. When you look at when you look at your backend semiconductor industry customer that is the dominant player I mean, how much are theirselves down for this year any idea.
Quite a bit I mean, we cannot disclose because that would be giving away some valuable information for them.
They are down quite a bit they definitely are telling us that do you expect them to pick up as the as described in Florida continues and next year, that's sitting pretty bullish right. Now so we expect vodafone or modestly ins to pick up nicely 2020 .
Okay, that's great.
You and I talked about this earlier and I'm just surprised still remain soft, but that's the way cycles go and get on with the overall industry.
Okay, that's great the other when you're talking about your no.
No sensor business, how many new customer engagements are you guys involved with right now.
We are dealing with about 10, new customers OEM so system integrators.
What do the current generation that modest census, as well as the new national modest since a and B everything I'm wondering.
How about that customers potential customers.
Oh, sorry.
How many of those are the on the new OEM side.
About half of them on newly and the new 40, nano and about half off one of the current generation.
Roughly five Nash.
Okay, good and.
What type of so so based upon those conversations when do you expect to have some revenues really starts to ramp with that new sensor.
Well, we definitely expect revenues to start ramping in 2020 I used to be still I mean, they wouldn't be buying one then too because many of this people like we have so system integrators. So typically they buy one or two cents. It's all those predictive men, which takes a couple of three months then deal showing that it was meant to their customers.
And usually that's another two to two month cycle, so you're not expecting that ones when somebody buys from us. It typically we expect to see to use feedback from them about the potential at least six months. After we have sort of four cents or to them. So we expect second half what predict when do you feel good.
Indicator of what happens.
Customers, we are sitting in that sense it pretty do.
Okay. So how many of those five new Oems in the no nano sensor. So board how many of those have actually purchased one or two so far to get that test.
We have sort of that and what to do so far in being just to see whether that order for almost 200 watts of is shipped in the third since that he owes me. The next couple of weeks. So so far we have to customers for minimal we expect to get out of the few over that group of five or so they are talking too.
So you probably have four to six handle customers in the next few months.
And then if that person how successful they are at their customers.
Oh, that's great Yeah, that's really good.
Okay.
Yeah.
Yeah, I was talking about nano right.
Okay and then my final question is when you look at this older to de systems, you know what you call your legacy business.
What do you think that overall market you know on a multiyear basis is doing it sounds like the golf is actually negative am I right about that and if that's or what do you think how much is it isn't negative and by about how much.
But clearly this year has been a negative you that's one of the legacy.
Well, if the fed set as well as inspection system business.
Assuming the auto semis safety market is gross 5% to 7% next year.
We expect that legacy business to be flattish I don't think it's going to continue at than they could do indeed.
[noise] like this year this year the market did decline by I saw that 20% and we definitely saw that into legacy business.
The next year, assuming the older Monica is decent.
It would be flattish I don't know you did give you want that or something yeah. I mean, it's it yeah. I mean, I think it's going to recover but obviously, it's not going to be a growth driver for us.
There.
But but definitely it's down pretty good this year.
Well as Nick.
He has become one of the a turn it off our business right now.
No I understand just trying to get a good feel for everything so okay. So that's the so that was obviously down this year and you're expecting it to be to improve but would you say that overall I mean do you know over the next few years is that business slowly.
Decreasing or do you think that market's gonna stay relatively flat over the years.
We think there'll be some small decline I think it would be fair to say that is going to be some smaller declines coming in Denmark at all and legacy business and see some small decline regarding the question of Holistically I don't think they're talking double digit decline to be honest <unk> legacy business. I mean, you thought began police machines.
You know the page of customers be how about you key isn't Pacific technology.
Candice I mean, it's us other industrial companies, having that often along thing.
And I don't write them to change it <unk> portfolio ought to disappear by any means.
So I didnt than the S.P.I.N.V. why business.
Some decline into to the why business, maybe some decline in this business.
Getting nothing nothing significant and then goes into the conventional scanners and scanning services in the legacy and that's actually going into the head of the business, that's the kind of flattish.
So all I, even our automotive that they've done as long as at least get predicting a flattish business over the next five to 10 years.
Maybe a small decline, but nothing significant.
Okay. That's great Hey, that's all for me guys. Thanks very much.
Thanks, Thanks Ross.
And next will be built designation with Titan capital.
Thank you I have a a couple of questions here and I'll I'll try to let you Oh I answered before I ask my next one.
My My first one is it is in response to an earlier question you referenced and that there are six steps that are involved in the micro Alley D market.
<unk>.
How many of those steps did you say that you were involved in.
All of them.
Anymore insight that he would like to hear beyond that.
Oh, it basically as you see in them has been qualified for all the steps that out in Florida and likely the inspection.
Some of them are very demanding that as far as we know sq cm of is on the qualified inspection to this time somewhat less demanding then there is some competition.
That means does that 80.
Well discuss even get pretty much do the job for all the inspection steps and switching that didnt do they didn't micro duty Sydney.
And of those six steps abode, how many I would would end up in the category up more demanding a that only SQM would be qualified for and how many would be a less demanding that others may or may have an opportunity to address.
That's really depends on applications that have some applications in like who are the D that relatively less demanding.
For instance of back light.
That is it a blessing because it anything other than that or somebody else that that discussion is more demanding they could detect display in an auto 80.
So depending on what exactly the customer is making.
The six stepson does quite make changes quite a bit.
We ought to as I said yeah.
Suited for all of them.
On a completion, if there's any didnt have some challenges to overcome.
So before I give you obviously want my comment if you go after the most demanding application so that really quite like.
That would be.
Victory for us, but clearly we have moved to get some competition in some steps.
Lets demanding applications.
And for the Oh for the.
Application that you announced in the released today, how many of those six steps would would be more demanding.
And how many would be less demanding.
Again that I'm are deeply customers, they're not even what at this point in some cases, all the steps out of demanding and took this is about half of them already my they [noise].
Oh, I'm, sorry, I misread the press release I thought the a the order with her one one specific.
Contract manufacture that we're selling to one consumer electronics company.
I just cutting that is just the one order that we disclose but we are talking to people customers had disappointing.
Fair enough and that one customer that you disclosed the contract manufacturer.
The consumer electronics company or end customer that they're selling to is that a new or existing customer.
Oh, the contact them anything could it is a new customer for us.
Consumer electronics customers, an existing customer for us.
Great and then Oh, yeah exposed my ignorance here.
Yeah, the legacy business.
That the dramatic decline that you saw there is that a function of just the general uncertainty that that the trade environment has created is it because of capacity.
That the that these mark and markets have or is it a switched to a new technology are you able to broadly address what's what's behind that decline.
I think you know there there's a couple of things going on so the the capital equipment market. So as we said they clearly I've been in a downturn and then when you look at our legacy products.
You know a greater percentage of that revenue bucket tends to be OEM type customers. So there you also have this inventory interplay, where there they haven't need to rebalance their their inventories so.
Those are a couple of reasons why that bucket gets hit harder and then you know with our newer products like like Sq that has yet morass technology, which good gives us competitive differentiation and then also the three D.A.O. like market in general is a growth market, even even in a in a tough.
Global environment.
Thank you both.
Thanks Bill.
And next will be AERC Slade with ACMI analytics.
Yeah, one more question.
Oh, that's your knowledge of Samsung.
And on the I would imagine they would be the micro LNG D side Samsung Huh.
Player.
It really cannot comment on the specific customers who are exciting vendetta.
Oh, not your customer no not your customer just in general as Samsung approaching or they are they in not would do that so.
Engine that if you get microwave Judy.
Category clearly Samsung.
Really interested in that in fact into recent guns, you would affect on the show in Las Vegas displayed the biggest displayed me that likely he technology. So you know Samsung is pretty much interested in micro duty and has significant blends into city.
Yeah, I say that I just wanted to okay that that doesn't hurt me. Thanks, a lot again.
Thanks, Eric.
Moving onto miles Jennings, a private investor.
[noise] and good afternoon. Thank you.
I was just curious if you could give me the depreciation accrue the third quarter I see that your after tax losses $353000.
And I I seem to remember.
Seem to be about the same amount is your depreciation accrual, but I can't see that in your report.
Our depreciation and amortization amortization expense in the third quarter was $744000.
So you you were cash flow positive in in the third quarter.
Well, we are cash as I just thought.
As I decided to attest the simple net income.
Net loss plus the depreciate cruel <unk>.
I guess, if you're a if your calculation is to take net income and add back.
You know.
Initiation and amortization was that that would yield a positive number that's the way the math would work about $400000.
I wasn't side right.
Yep, three 353 negative plus 744 would get you a positive.
Good yeah.
Well this quarter was difficult for a lot of companies on its good to see that you were.
Cash flow positive.
But way thank you.
Thanks.
And that does conclude the question answer session now now turn the conference back over to you for any additional remarks.
Well. Thank you for your interest and questions. They look forward to updating you and ended the year. Thanks again.
Well, thank you and that does conclude today's conference. What do you think you for your participation have a wonderful day.
Thanks.