Q3 2021 Kulicke and Soffa Industries Inc Earnings Call
[music].
Greetings and welcome to the Kulicke and soft for 2021 third fiscal quarter results call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded and is now my pleasure to introduce your host Joseph <unk> Senior Director Investor Relations for Kulicke and <unk> Joseph you may begin.
Welcome everyone to cure and sauces fiscal third quarter 2021 conference call.
Joining us on today's call Us foods, and Chen President and Chief Executive Officer, and Lester Wong Chief Financial Officer.
For those of you who have not received a copy of todays results the release as well as our supplemental earnings presentation are both available and the Investor Relations section of our website at Investor day at K and S Dot com and.
In addition to historical statements today's remarks will contain statements relating to future events and our future results. These statements are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, our actual results and financial condition may differ materially from what is indicated and those forward looking statements.
For a complete discussion of the risks associated with Covid itself for 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 3.2020, and the 8-K filed yesterday.
With that said I would now like to turn the call over to Susan Chen for the business overview. Please go ahead Susan.
Thank you Joel we continue to be a period of dramatic capacity expansion. So.
All of the semiconductor industry, which gives us support, but doable and that structurally sustainable and market trends.
While this approach and challenge.
And I expect it to continue.
Our global operational and the engineering team and have done and all sent and job to mitigate challenge and we get all the control while supporting our customers aggressive growth plan.
Well go and demand for our capital equipment and the EPS solution remains very strong and is supported with multiple long term driver, which further enhanced our visibility and the outlook.
And that was the.
Probably not and the fundamental technology transitions.
This includes the.
And the increasing capital intensity cutting through all the semiconductor assembly space.
The very significant and the long term transition within the automotive market and the operating environment. So already.
Industry adoption of new disparate technologies.
In addition to this from the Minto and the structural growth driver.
And also extended market reach sort of question for R&D investment.
These are opportunities supported with ongoing development investments.
And the new product introductions tug and new opportunities within the automotive electronics Assembly and the display market.
We will provide for the update to this specific opportunities over the coming quarters.
And finally, we are in a very dynamic expansion on the face of semiconductor consumption and production.
This expansion and appear to have.
In roughly 10 years increments.
For semiconductor.
Yeah.
And the nineties, let's try but it was the global adoption of Pcs.
2 global Internet access Inc.
And then.
And over the last 10 years mobility and <unk>.
There are semi conductor demand.
And then we have several new and EMEA and for and applications, but also a medically zurich and semiconductor production capacity.
The and applications driving significant capacity and need today and grow.
The wide adoption of connected devices.
The growth of <unk> infrastructure.
And the next generation of computing power driven by Big data and the Occupancies Your intelligence.
The combination of structural.
And the largest transfusion and the industry trend significantly enhancing the demand for our products.
Just on market opportunities and the ability to generate value for investors and the communities we serve.
During the June quarter, we have begun and you.
For a long term planning process.
Yes.
And when Europe U.
And how it gets driver you're expected to pay for Liberty benefit our business.
And then maybe high level over the coming years, we anticipate annual semiconductor unit growth to continue enrolling and significantly above the long term historic 6.5% growth rate.
Additionally, we are very confident in our ability to support a new higher growth technology transitions and about further extend our market reach and provide new vector of growth.
We currently expect to lose $1.5 billion of revenue this fiscal year and are confident underlying business conditions will extend through fiscal 2022, supporting a multiyear industries extension.
Beyond 2022.
Ongoing execution with a specific and new opportunities.
Supporting advanced display.
But the plastic packaging Inc.
Yes.
And the new adjacent opportunities, we are continuing to growth and the support and new sustainable level of revenue and the profitability.
Considering this broad nacco industries and the execution expectations.
The net worthiness strong support and average annual revenue of $1.5 billion over the coming years.
And so do you mind this and more table revenue is significantly higher and also more sustainable than what we share during our 2018 and is safe.
This is and will provide some additional detail on how this long term outlook translate into new label on a sustainable shareholder value for <unk>.
We will also provide many more details regarding our business prospect and attraction, giving our upcoming analyst day scheduled for September 20 <unk>.
For today's discussion I would now like to provide some commentary commentary.
For the June quarter's fulfillment and the end market review.
During the June quarter, we exceeded the high end of our revenue expectation and the TV for $424.3 million over revenue.
46, 1% gross margin and the non-GAAP EPS of $1 and 87.
Once it was up 48% sequentially.
This significant sequential improvement highlights our operating on language and that was driven by strong and the ongoing demand across all end market.
And the channels and conduct this space, they're mainly new sustainable trends supporting this margin expansion.
Our comprehensive underlying trend is related to broadening adoption of IC.
This significant transition is increasing and chip content and the smartphone and table.
And also increasing demand for new connected devices.
Additionally, this transition is also demanded new Hyatt.
Assembly solution for next generation optical networking and the logical applications.
Our development program.
Customer engagement and the recent market wins have increased excess twist to be civic and high growth and application, including mobile and mobile application processor.
And you come photonic and on next generation display driver for virtual and <unk>.
And then take the oddity.
Looking into next year, although we anticipate an incremental $14 million of revenue stemming from this and market.
We continue to be very early into global adoption and anticipate this transition will continue providing a tailwind and the new equipment and needs for the coming years.
In addition to our amendment with the least positive and a long term market trends. We are also supporting and benefiting from the growing need for more complex packaging.
As mentioned and overlaps vehicles.
Strong market demand for advanced <unk> solution, that's simple greater transistor density and the picture for enable.
Rising for MTS on cost and the ear challenges.
We have slow the cadence of knoll shrink and are directly contributing to the higher level of assembly complexity.
And then pushing the capital intensity of course, all Brooke soft market.
And this underlying margin needs.
And additional long term technology, driven demand for our higher volume businesses.
Such as ball and wedge bonding.
This transition is also ASO radio and adoption of our higher growth most specialized packaging techniques, thus far and extend our significant market presence across semiconductor applications.
Approximately 40% of our capital equipment revenue.
And for all at advanced packages, Inc.
Adding system in package multi chip module.
Curious if free chip and a similar completion days and devices.
And this mix has changed materially over the past year and we anticipate this will continue growing low income along with our value proposition.
Finally, we didn't general semiconductor we are focusing on the investment to expand market reach and also to expand profitability level across our large and established market.
We have a similar exciting product announcements to share over the coming quarters.
Yeah.
Equipment sales in the energy market suffers Saturday in June and lower remain very strong and our.
To increase further in September.
We continue to support ongoing demand for general lighting application, while we are actively supporting on the long term immediate and Michael and the transition.
<unk> solar system continue to be in high demand and we anticipate strong demand.
Through fiscal 'twenty, and 'twenty, 2 and beyond.
We also intend to further capitalize on this new higher growth market by expanding our portfolio of advanced display solution.
There is a strong market demand for.
For more efficient and more capable assembly solution once you pull back and opportunity to significantly broaden our customer base.
Existing and the new customer interest has been very strong for our next generation system.
We expect to ramp qualifications with multiple customers over the coming 2 to 3 quarters.
Additionally.
And this next generation system also allow us to address multiple process steps required immediate and the microalgae.
What are the current piece of it ex <unk>.
Very comprehensive.
For critical final Christmas debt.
And there are several additional touch points necessarily for Muni, <unk> assembly, including mixing silicon and the pan or.
Pitch adjust module assembly.
This additional process that will all be supported by our new mini and micro Leds Houston, English and our potential within this fast growing and new market.
Progress on the next generation LTE system with net.
And on check.
And I look forward to providing additional updates on this exciting product previous over the coming quarters.
The automotive and the industrial market also remained strong through the June quarter.
And with the Arabian neither on the elevated March quarters on.
Underlying demand is being driven by the growing and need for semiconductor in both traditional and the emerging automotive applications, such as electric vehicle and autonomous driving features.
We continue to extend the market reach of our automotive solutions, which support higher growth pulse storage.
For distribution and Ascension application nature, certainly to support that.
Congress and the electric vehicle transitions.
We are well positioned to support this and long term transitions across our broad customer base.
Finally.
And that we Didnt memory has improved sharply with the June quarter sales above our long term average.
And like all other sales and market mainly configuration and label.
Sequentially improve driving the need for additional capacity, we anticipate memory strength to continue into September quarters.
Over the past several weeks our business outlook has improved.
We have continued to mitigate a broad range of dynamics approach and challenges as we have significantly grown our production capacity.
Our internal operational and the engineering and Eva.
And with the key market trends and I covered earlier.
Enable us to increase our September quarter outlook dramatically.
After market close yesterday, we provide our revenue outlook for September of 465 D and installers.
Which would mark our third.
Sequential quarter of record revenue and profitability.
I would like to also note that we continue to operate in a very dynamic global supply chain environment, and I'm very pleased and let our organization's collective response.
Allow us.
To mitigate challenges continued aggressive development effort and enhanced supply chain flexibility unit is period of rapid industrial expansion.
In summary, the past several years of our R&D investment and the market expansion for have extended our competency and our solutions to better support several significant long term and structural market opportunities.
These opportunities.
And we're ready and demand within our broad portfolio of solutions and.
And provide access to new high growth opportunity in the semiconductor.
Automotive and that is free market.
As we execute on this long term strategy, we are enhancing our ability to create long term value for customers and ultimately for shareholders.
I would now like to clinical over the rest of the Wong who will cover this quarter's financial overview in greater detail.
Mr. Thank you per.
My remarks today will refer to GAAP results unless noted.
As Susan indicated we continue to be in a period of dramatic industry expansion, which is supported by our alignment with several structural transition. This combination of industry expansion and market alignment are providing the opportunity to maintain a similar revenue run rate and a new sustainable level of operational cash generation over the <unk>.
Coming years.
During the June quarter, we delivered revenue of $424.3 million.
Up nearly 25% sequentially. We have worked very closely with our supply chain partners operational team and engineering groups to better enable customers capacity needs. While also exceeding the high side of our revenue guidance growth.
And its margin during the June quarter also came in better than expected at 46, 1% product mix expediting fees and surcharges have all weighed on our gross margin during the June quarter. We accept these temporary effects as they help us support our customers during this period of industry expansion.
Looking ahead, we anticipate near term gross margin improvement as incremental supply chain costs and ultimately long term gross margin expansion as we execute on our development programs and new product introduction.
Overall non-GAAP net income came in at $118.8 million or $1 and 87% of non-GAAP EPS during the June quarter, which highlight the leverage and our model.
Considering this operating leverage new product traction and outlook, we expect to continue generating strong operating cash flow over the coming years.
Operating expense and the June quarter came in line with our expectations, despite our better than expected revenue performance.
On a non-GAAP basis, we are maintaining our quarterly operating expense model, which represents roughly $48 million of fixed expenses, plus 5% to 7% of variable expense tied to revenue.
Tax expense for the quarter came in at $7.2 million, which is better than previous expectations. This favorable benefit was driven by a partial relief for a valuation allowance previously recorded against a net deferred tax asset.
This favorable benefit is directly related to the strong market success of the Pixar solution for.
Considering the 1 time nature of this benefit we continue to target and 18% long term effective tax rate through fiscal 2021, we continue to anticipate the effective tax rate will come in at around 15%.
Turning to the balance sheet working capital efficiency has improved overall days of accounts receivable decreased from 81% to 78 day days of inventory decreased from 66 to 60 day and days of accounts payable decreased slightly from 58% to 57 days.
With ongoing efficiency combined with the underlying market drivers, we have associated with allow us to and the June quarter of a total net cash and invest and position of $635 million.
12, 5% or $77 million sequentially, representing $10 per diluted share.
This sequential increase the cash investment and highlight the long term cash generation potential on new multiyear outlook.
As touched on earlier, we are operating and new level of heightened demand, which is flowing through very positively to operating margin.
Non-GAAP operating margin for the June quarter came in at 49, 7% representing over an 1800 basis point improvement from the same period last year.
As Susan mentioned over the coming year, we now anticipate annual revenue to average 1.5 billion.
This outlook provides many more opportunity and demonstrate our leverage and cash generation potential.
For the September quarter, we expect revenues to be approximately $465 million plus or minus $20 million, a nearly 10% increase over our most recent record revenue in the June quarter.
Gross margin expect to improve to approximately 47% and the September quarter, plus or -50 basis points due largely to product mix pricing improvements and easing of incremental supply chain costs.
Non-GAAP operating expense is expected to be approximately $73 million, plus or -2% and non-GAAP EPS to be $2 plus or -10%.
Over the long term, we remain very in line with several high growth prospect and the semiconductor display and automotive market, which are generating opportunities for above average growth. Additionally.
Additionally, we continue to be extremely focused on multiple path takes and reach into our existing served market and also provide access and meaningful new market opportunities we.
We see tremendous potential for built from our current baseline revenue and FY 'twenty 1 as we continue to execute on our multifaceted growth strategy. We look forward to sharing additional information regarding these new opportunities over the coming quarters.
This concludes our prepared comments operator, please open the call for questions.
Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star 1 on your telephone keypad, a confirmation tone will indicate your line is and the question queue. You May Press Star 2 if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick.
For your handset before pressing the star keys, 1 moment, please while we poll for questions.
Your first question comes from the line of Craig Ellis with B Riley. Please proceed with your question.
Yes, thanks for taking the question and guys. Congratulations on the very strong results and the robust outlook for you.
And I wanted to start at a high level and.
And just look at some of the parameters that debt.
And you are providing as we look ahead. So very helpful to get the company's view that spending can reset to a $1.5 billion dollar levels for the question is this from.
From.
Levels of spending at the current quarter Skype 461, $65 million is 186 billion annualized from from that level to what would be the $1.5 billion or $375 million a quarter, how long do you see current spending and intensity.
Sustaining and and when does that.
And when does that business really modulate down to about 1.5 billion or would that be and the first half of next year and more so the second half of next year.
Okay.
Craig you 8.
Q3, we are.
And just to announce at this moment and the Q4 guidance actually I think.
On the lumber.
This year, we will finish.
FY and we were already finished at $1.5.
Opinion.
So maybe I'll just quickly walk through.
The base business.
Function how.
And how will you be charges.
$1.5 billion.
So Colin and semiconductor revenue growth in the industry and for 'twenty, 1 and 22 are forecast to be very strong and.
And about 10% respectively for the on and 22.
So you add the full quarter, our tequila inquiry and the 1 on which of the Guy we couldn't.
And expect to reach $1.5 billion revenue this fiscal year FY 'twenty 1.
And for the FY 'twenty 2.
And on a colon and market data and our customer feedback and we also share a very high level of utilization rate and the industry.
And also very strong demand from the end market.
And we actually not expect FY 'twenty 2 revenue to be assuming on FY 'twenty 1.
Revenue of about $1.5 billion and.
And we also see that you have a collar industries chip shortage situation continue.
FY 'twenty 2.
And we might see additional upside in the second half of <unk>.
'twenty 2.
22, now we expect similar revenue on label FY 'twenty 1.
And you also mentioned.
And this will be a margin growth and we believe our $1.5 billion can.
Can be sustainable and.
Because what we believe a colon and semiconductor market expansion will continue for multi year our way.
Into our 2020 for.
So a follow of 2020 for.
Between 2020 for.
From all our organic growth.
Project, we are working on.
We do expect to 8.
About 200 towards the $100 million.
And over new revenue.
In 'twenty 3 to 'twenty for.
These are from <unk>.
And this display and.
The advanced packaging.
Also our electronic assembly.
And also our EPS.
So we.
We actually and not only very positive about.
For the new revenue.
And they bring in.
The project we are working on.
Advanced packaging advanced display SMT.
<unk> EPS actually day.
Huge.
At this moment huge semiconductor capacity on the planning and the world bring to production in the next couple of year from all of our customers.
And we expect roughly.
Next 3 years.
Production and bringing into Eni.
Lovely hub will.
It will be from China.
And the majority of these and new capacity from China will be 28 nanometer and above and the low already.
Benefit.
Our core business.
Great.
So in short summary, I think our this year.
And the 1 we'll finish at 1.5, we see share on label.
For the 22.
And for all the study, we have and the customer feedback and a 423 and beyond.
And we actually do expect on new revenue on label.
Come in and around $200 million for $70 million.
That will continue to fund comprehensive growth and for the new products and also for our core business.
And new capacity.
Particularly in China, and a huge capacity is going to coming on line for next couple of years.
And they really will benefit a great weighted for our core business. So.
And in terms of spending.
And listen to it.
Customer spending.
So correct.
To answer your questions.
Yes, I think that that helps and I can follow up on some of the segway from that day.
And <unk>.
Correct.
Annualized run rate with the September guide, which is for 65 debt to the 375, but Lester let me follow up with you on.
On just gross margin so great to see that the 47% gross margin and the outlook for question is this.
Do you think that's a sustainable number or or are there some product mix dynamics for <unk>.
Customer or other dynamics that are providing.
Some kind of 1 time help and and that would mean that gross margin as we look beyond that and that fiscal 'twenty 2 what would move back closer to a 45% to 46 range for us This 47 and sustainable.
We think 47 and sustainable I mean.
As you know product mix and CASM ex are very key to our gross margin, but I think there's also other things that come into play which is nowadays are on the product mix side, we are selling more.
Higher asps higher margin products.
Partially due to the capital intensity that foods and has taught out before which we believe will continue into 'twenty 2 and beyond I think also as the new product that we as I mentioned.
Talked about particularly maybe advanced display as well as advanced packaging.
Those products also have higher margin and then for our core products. We have a very robust program in terms of cost reduction both on the supply chain side as well as for engineering.
We believe we can also.
Cost reduction to our core business, which again will help with the gross margin.
Very helpful. Thanks, guys.
Okay great.
Your next question comes from the line of Tom definitely with D. A Davidson. Please proceed with your question.
Yes, good morning, and good evening, and a boy fantastic results here.
So I guess first big picture question for Fusin, when you look at.
The big demand level today, and you get a very good job of Atlanta, all the drivers and all the different margin.
But a little surprised that you are seeing it today versus maybe a year from now and all the spread and semi cap equipment. That's been ordered today is up and ready to those units coming out of the new lines. It seems like this all this demand that you've got and it's come into a situation, where we're already kind of tight on chips and it just.
It seems like business will get even better down the road once all this recent capital spending is turned into actual production.
So Tom we always on it you have.
Business forecast 2 will go and.
And they are constrained in terms of our priority and the resource. So yes. We are we feel very positive into the futures.
For example, <unk> for example, we broke and not do right away like on 1.
10% on and kind of go forward basis on a quarterly basis is that what you were saying.
No I'm, saying for this year will probably coming close to 15%, but for long term if youre modeling for 22, and 23 and beyond based on a lot of things happening and attacks or as you know.
The effective tax rate should be 18.
Great. Thank you and congratulations on a great quarter and outlook.
Thanks, Tom.
Your next question comes from the line of Krish Shankar with Cowen and company. Please proceed with your question.
Thanks for taking my question and congrats on the really from the closed some guidance on the first question on how does the whose and it's really impressive to see you know and there's 1 point per 1 billion run rate for next year I'm, just trying to reconcile what you're seeing with what some of your customers and said you know ESP publicly and said.
No on the curve.
And 1 quarter it might be the peak wire bonding purchasing quarter I'm trying to reconcile that for the number that you're seeing because you said that some of the new products will drive upside to revenues in FY 'twenty 3 and beyond.
So I'm just trying to curious to see what is really driving the strength in FY 'twenty 2.
Uh huh.
So if for 'twenty 2.
And basically.
And so this woman.
For the industry and really still have a shortage.
Ofer and capacity and you need to you know a lot of it.
Equipment and all.
And from Us.
So actually.
We do see strength.
We are into.
Sure.
Colin and also quarters right. So as time goes on we do believe.
The FY 'twenty 2 can be as good as a 'twenty 1 line.
And actually the.
And market is quite strong I was a lot of driver and we can see.
A lot of our multi day trip and Iot and then allow driver and we also have advanced display. So actually that's what we are seeing I think.
And chip shortage extra is continuing.
So with all this.
And we feel like 'twenty 2.
For us I think for industry will still be a good year.
Got it got it and then this is a follow up.
And I'm kind of curious what you.
Lead times on <unk> number last time, it was almost 9 months it seems like that and stretch to 9 months to 12 months now if that is the case.
Do you think the.
December or March quarter.
And will not see any typical seasonality and other words.
The revenue should be stronger do you think you'll still see seasonality December and March.
Okay. So.
Chris I was on the day off.
Driver balance each other number 1 I think on we still have a shortage right.
Issue and.
And also I think our customer even if demand is strong and they have they will pay for.
For delivery schedule and.
So currently and what we target. The next market capacity is a 450 per quarters. Although you know Ken is quite efficient, we can always a stretch and additional 10% by 18 and some variable.
So I.
And I mentioned already.
The industry is still or have a strong shortage.
For the equal net we are providing.
Next few quarters, we do see there will be few quarter.
Revenue will be about 450 alone will not be any quarter lag on that.
And.
And these are the 2 redeemed a shortage of our equipment in the industry and also it depends on our customer's needs.
Got it thank you Angela and I appreciate it and congrats.
Your next question comes from the line of David Duley with Steelhead Securities. Please proceed with your question.
Thanks for taking my question and congratulations on excellent results.
Especially on the gross margin and operating margin improvements.
Along those lines you mentioned on gross margins that you have.
Longer term plans to improve the gross margins and the core business I was just wondering if you could elaborate on that a little bit more if there is some expectation of.
How much you can improve gross margins there and then just remind us.
How big do you think the wire bonder market is and.
And this current calendar year.
So Dave on the gross margin I mean.
We obviously have internal targets and we're not going to disclose that but we believe that.
On from there.
Some of that.
And the things I was talking about in terms of cost reduction and alternate sources reengineering.
Continue to keep the gross margin at the high forties and start drifting back towards the mid <unk>.
Okay, and then the size of the wire Bonder market.
So.
Actually I think this year easily.
More than double.
And.
Previous years.
So.
And.
I think on a quarter right now at the peak we ship.
From a solid and systems.
Okay and then.
You talked about and opportunity and the automotive space I think.
And transition that's happening there.
I'm guessing that might be.
And opportunity for surface Mount technology.
On <unk>.
Shipment I guess I was just wondering if you could kind of give us an update on some of the other assembly equipment.
And that's kind of percolating.
SMT stuff the catalyst for you Palmer.
Just kind of help us understand what the progress points on all those new products. Thank you.
Sure sure so.
David You know this year is a very strong for our core business.
As I, just mentioned and for the Palmer and the high equity income.
And for Egypt, and let's talk about overall E&P, we cannibalize the AP.
As a side.
So and also multi dye free chip PCB, so, particularly feature and the tissue.
Our dedicated advanced packaging. So next year along these 2 products ex.
We are going to see next year will be a fast growing year for our dedicated advanced packaging.
And I mentioned in the VR part in on next generation and logic.
Optical.
Sure.
And all this.
Advanced program with our customers next year alone our dedicated advanced packaging.
And about $40 million. So next year will be very fast growing year for our advanced packaging dedicated tool.
So that's a fall of 'twenty 2.
And we do believe <unk> will continue to grow so our dedicated advanced packaging, we expect probably will reach about $80 million to $100 million by.
And by 23, so let's the AP.
For a day spread we have a piece of Lux and.
Uh huh.
It's been a very successful product launch.
We wish you a vertical feedback.
We target.
Yearly revenue this year is $60 million to $80 million.
<unk>.
We will meet the commitment so we even have a pea or into next year. So next year piece alone.
All still target $60 million to $80 million.
Uh huh.
And also mentioned in my script, we have on next generation Av.
And you know media and microbial detour. Thanks for your line that we call.
Moving next.
Next 2 to 3 quarters, we are going to ship coupled to our customer for qualification.
Upon successful qualification Winston and that's our expectation.
We expect the revenue will come in second half over 'twenty story.
So next year I think our peso lost we still target 60 to 80, and hopefully we will see it as a new tool.
About $10 million to $20 million revenue. So next year as you know we are targeting probably $70 million to $100 million just for our advanced display.
And.
In my script I also mentioned current to a piece of that.
Immediate and on micro fabrication only surf 1 step is our final placement.
And.
But our new tour actually will serve multiple step line, including.
So within mixing and also Ah repeat Chen.
This is a much much bigger market much much multiple purpose and.
Many more customers. So we do believe.
<unk> sexual qualification of alumina.
And moving next in 'twenty for <unk>.
And can reach about $150 million and will grow even faster beyond 'twenty for.
So.
Okay for the S&P system.
Actually we are quite excited.
We actually.
And for very innovative idea to improve accuracy and to put actually and modification overall system to become a new system and.
On the development and for order comparison.
A bit about.
This opportunity and this is a huge market several billion dollar Tam. So we believe SMT, we core electronic Assembly will also bring us vehicle growth for next couple of years.
Thank you.
As a reminder, if you'd like to ask a question. Please press star 1 on your telephone keypad as a reminder, if you'd like to ask a question. Please press star 1 on your telephone keypad 1 moment. Please while we poll for more questions.
Your next question comes from the line of Charles <unk> with Needham and company. Please proceed with your question.
Thank you for taking my question and congratulations Susan and.
And last day.
On the nice results.
Wanted to start with with a little bit clarification on the gross margin and application.
You have given the answers earlier.
When I look at your gross margin and for the quarter.
46 per.
And at.
And I looked at your historical.
Margin for Aps, and the capital equipment, Aps and <unk>.
And.
And mid to high Fifty's Clinton Capex.
Capex for many low the forties.
There seems to have been not up.
No way for me to really get to 46, 2% unless I assume EPS has a huge uptake here unless there is for some favorable product mix or customer mix going on.
On the equipment side I'm wondering if you can give us a little bit more color what is that really the moving parts and your gross margin performance for the last quarter. Thank you.
So the main drivers for the better.
Gross margin is product mix within the capital equipment, both ball Bonder and wedge bonder.
In the quarter actually have much higher gross margins than the previous quarter, mainly due to product mix as well as customer mix and so thats. The main driver Aps effect on the gross margin obviously is much less this quarter as the only.
And for less and 13% of our overall revenue.
Got it got it thank you.
And maybe my second question.
Is is around <unk>.
And thank you so much that you actually gave a little bit longer term outlook for the balance display going into next year and you're operating.
I understand that the pixel <unk> vessels illumina ex all the dynamics that you're talking about.
Just wanted to.
Ask.
How many.
And it takes Alex have you.
So for last quarter, you said it was about on more than 136 tonnes.
That's the first part of my question and I'll follow up quickly on this.
Okay. So.
So you're asking how many systems piece or a ship sofa actually.
Yes.
So I.
I think 130 for roughly in high volume, we ship for about for quarter right.
Roughly a full quarter.
So everybody I think.
We got a $60 million to $80 million, so roughly a quarter is about 15 million. So every quarter.
The ballpark probably is about.
Maybe certain for detour, so roughly let's say average.
Okay.
Okay.
Got it and product. So my last question I think that this probably that's the 1 for the.
Most important and question and I believe.
So a quarter ago you did.
Gave a number for <unk>.
For 22, 1111, 2 billion next year and non <unk>.
For you you did say, it's not really a forecast and that's what the scenario you think that could happen.
Didn't rule out other possibilities so I just wonder.
I mean over the last quarter and now you're possibly seeing a average run rate over the next few years as 1.5 early on and on that you believe maybe next year could be flat could be up.
I Wonder what has changed your view over the last quarter I understand you did say.
You did a little bit on longer term planning.
Over the last quarter, and and maybe your cosmos and a little bit longer term planning for.
Just wanted to I understand that the visibility and maybe improving but I really would appreciate that give us some color what were really change growth view here.
So.
Chuck I think.
We really have a serious problem about supply chain challenge.
So part of the reason I think.
And we tend to be conservative because of supply chain dynamic we work on almost every day.
So, but the difference compare this quarter to last quarter.
Remember what I mentioned the difference is about <unk>.
10%.
So if we mentioned.
Number 1 and 101.4 billion on $1.8 billion, 10% is roughly about.
100 <unk>.
$50 million right. So thats a ballpark we believe.
Really really high growth year possibility to pull back.
Is it possible and.
And last time, I think we took a while and maybe $1.3 billion I remember.
No.
And for all.
And.
Last quarter to now I think.
The intention really did not change and landmark.
10% really is not really very much like we just put it on a risk factor over here in case I think the industry and are really.
BD.
It really.
And not able to.
To achieve continued strong growth for 2 years.
Right now as we see.
The chip shortage continue.
And we still have.
And.
Some system customer.
And need to get it and from.
Lots of 1 or 2 quarter continued to carry back.
So that actually gives us confidence I think on next year can be as good as this year.
But and Latam and Canada.
Sales.
And <unk>.
2 will be lower actually is like a 10% lower and thats our intention to guy. So this 10% actually.
No.
Compared to you.
Colin.
And I think we.
We will be able to manage on that.
<unk>.
So thats our view.
Okay.
Thank you. Thank you Hussein.
That's all my questions. Thank you so much congrats again.
Thanks, Sean.
So and.
Sure I think we are going to you have.
And our analyst day, there will be a lot of on more detail.
If you have a more question as Ingo will be happy to provide more detail.
Thank you Sir.
Gotcha.
Your next question comes from the line of Eric Greg with TIAA. Please proceed with your question.
And last year this was a tremendous quarter and great outlook really appreciate it.
Maybe I missed this but between $10 per share that you have and cash on the balance sheet evaluation, that's less than 50% of your peers on a price of sales basis, and my radar and discount on a p/e basis and.
And a really great outlook that you just outlined why isn't the company buying back a lot more stock at these levels.
Your line.
We constantly look at our capital allocation program and I think with the new outlook, we will again look at it again and we did increase.
Share repurchase in the last quarter.
Quite significantly more than Q2, and I think with the.
<unk>.
And the new outlook as well as our confidence and for sustainable $1.5 billion and over 25% operating margin I think we will look at the best use of the capital and to return value to shareholders. We also obviously have the dividend, which pays about $8 million per quarter. So we will continue to discuss it for the board and.
To figure out the best way to use the <unk>.
Our resources, we generally look at it in terms of.
The dividend and share repurchase Thats, 1 bucket. The second bucket is on organic growth, which obviously now has filled out into the future with advanced display as advanced packaging. So this is a continued competition we have with our board and we look at this very closely.
Thank you very much.
Ladies and gentlemen, there are no further questions at this time I would like to turn the floor back over to Joseph <unk> for closing comments.
Thank you Hector and thank you all for joining today's call, we will be presenting at several upcoming conferences over the coming months, including those with Oppenheimer Jefferies and credit Suisse.
Additionally, we will be sharing many more details regarding our long term opportunity strategy and financial expectations during our analyst and Investor Day is scheduled for 830, a M. Eastern on September 23.
As always please feel free to follow up directly with any additional questions have a great day, everyone. Hector This concludes our call. Thanks.
This concludes today's conference you may disconnect your lines at this time and thank you all for your participation.
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