CyberOptics Corporation
Q2 2015 Earnings Call Transcript

Published: 30 Jul 2015

[Operator:]

Good day, ladies and gentlemen. And welcome to the CyberOptics Second Quarter 2015 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Dr. Subodh Kulkarni, President and Chief Executive Officer. Please go ahead, sir.

[Subodh Kulkarni:]

Thank you. Good afternoon, and thanks for joining CyberOptics second quarter earnings conference call. With me today is Jeff Bertelsen, our CFO and COO, who will review our recent operating results, following my brief overview of our second quarter performance. Jeff and I will then be available to answer your questions at the conclusion of our remarks. In keeping with Regulation FD, we have made forward-looking statements regarding our outlook in this afternoon's earnings release. These forward-looking statements reflect our outlook for future results, which is subject to a number of risks that are discussed in our Form 10-K for the year ended December 31, 2014, and other filings with the SEC. We urge you to review these discussions of risk factors. Turning now to our recent operating results, CyberOptics second quarter performance although up sequentially from the first quarter as initially forecasted was softer than expected. Revenues totaled $10.3 million compared to $13.3 million in second quarter of 2014. We also reported a net loss of $761,000 or $0.11 per share versus the net loss of $315,000 or $0.05 per share in the year earlier period. While encouraged by sales of products based on our new 3D Multi-Reflection Suppression or MRS inspection technology, including MRS sensors and SQ3000 3D AOI systems, these revenues were not sufficient to offset the greater than expected $3 million year-over-year decline in sales of legacy 2D AOI and special systems. We believe there will always be a need for 2D AOI but our revenues from this market are declining faster than we expected due to the rise of 3D AOI, our market growing at an approximate 40% compounded annual growth rate. Supported by our state-of-the-art MRS technology, we fully expect to more than offset the market share from 2D to 3D AOI and grow our overall AOI sales going forward. CyberOptics second quarter was also affected by reduced sales of electronic assembly sensors due to soft demand from OEM customers, and by the delayed customer acceptance of our first MX600 Memory Module Inspection System. CyberOptics MX600 order backlogged totaled approximately $3.4 million at the end of second quarter and we believe most, if not all, of this backlog will be recognized as revenue during the second half of 2015. Sales of semiconductor products principally the higher margin WaferSense/ReticleSense product lines grows modestly in the second quarter and we are forecasting stronger sales in the third quarter as these products gain further attraction in the semiconductor market. Our third quarter semi sales should also benefit from a new fab addition by one of our customers. Earlier this month we introduced an auto multi-sensor line, the first wireless sensors to combine leveling, vibration and humidity measurements. We believe this all-in-one solution should be accorded a positive reception by semiconductor manufacturers. The auto multi-sensor is a good representative example of how we continue to evolve and expand the WaferSense product lines. I would like to now add a bit of color to our initiatives involving 3D MRS which constitutes the technology platform to which CyberOptics is transitioning. We completed substantially all of the engineering on our SQ3000 AOI system in the second quarter which paved the way for our initial sales of this important product. The SQ3000 is designed to expand CyberOptics presence in the Smartphone and tablet markets, as well as other high precision applications where identifying defects is critical due to smaller electronics packaging and increasing components density on circuit boards. During the second quarter, we also recorded additional sales of MRS enabled 3D sensors to KLA-Tencor under our long term supply agreement. KLA has incorporated our MRS 3D sensors into their semiconductor package inspection systems and sales to KLA are expected to increase steadily going forward. We also established a supply agreement with another OEM customer while 3D MRS sensors and believe this relationship has strong sales potential. Interest in our 3D MRS technology remains high and the product differentiation enabled by this technology should allow us to gain a growing share of the 3D AOI market and new OEM customers in both SMT and non-SMT markets. In all, our vision and strategy for our 3D MRS technology remains intact. In another favorable development, our MRS equipped CyberGage 3D scanning systems will enter beta testing in the third quarter reflecting the significant progress we have made at developing this complex product. CyberGage is a 3D general metallurgy inspection systems that will be used in a wide range of industrial applications. We believe there is no viable competitive product for CyberGage at this time which has made customer interested in this product quite high. For this reason we believe CyberGage could be a significant contributor to our future growth and we believe our initial CyberGage sales should be realized in this year's fourth quarter. Looking ahead, the lower than expected revenue generated by older inspection and electronic assembly products during the first half likely will not allow us to achieve the 2015 sales growth that we previously projected. However, the positive feedback about our MRS enabled products and their anticipated sales growth causes us to remain very excited about our long term prospects which we believe will be driven by our 3D MRS technology and products, including the CyberGage scanning systems, solid OEM relationships, and the WaferSense and ReticleSense product lines. In short, we are well on our way towards becoming a 3D sensor and inspection company supported by best-in-class MRS technology platform. Thank you. Now, Jeff Bertelsen will review our second quarter operating results in greater detail.

[Jeff Bertelsen:]

Thanks, Subodh. I will lead up by briefly reviewing the performance of our product lines. Sales of inspection systems declined 44% year-over-year, as the initial sales of our SQ3000 3D AOI system were unable to offset the approximate $3 million decline in sales of 2D AOI and [indiscernible] inspection systems. Second quarter system sales also were affected by the delayed in customer acceptance of our first MX600 memory module inspection system. We believe all or most of our $3.4 million order backlog of MX600 systems will be recognized as revenue in this years' second half. As Subodh commented, our revenue from 2D AOI systems is declining faster than we initially expected due to the rapid growth of 3D AOIs although we believe there always will be a market for 2D products. We are forecasting improved sales of SQ3000 systems in the third quarter as our transition to 3D MRS technology makes further progress. Sales of electronic assembly sensors declined 15% from last year's second quarter due to soft demand from OEM customers. Finally, sales of semiconductor products, principally the WaferSense/ReticleSense products declined growth [ph] 3% from last year's second quarter, and we are forecasting strong sales in the third quarter as these products gained further traction in the semiconductor markets. As Subodh mentioned, our third quarter semi sales should also benefit from a new fab addition by one of our customers. Moving down the P&L, CyberOptics second quarter gross margin of 45% was virtually unchanged from the year earlier period as the higher proportion of sensor products in our second quarter sales mix offset the lower sales volume for this period. Total operating expenses were down 15% or $900,000 from last year's second quarter, reflecting reduced R&D spending as projects were completed, lower commission and incentive compensation expense and the benefit from various cost control measures. We plan to maintain a sharp focus on cost containment during our technology transition. Cash and marketable securities totaled $17.8 million at the end of the second quarter compared to $18.4 million at the end of the first quarter. Our cash reserves are more than ample to support our growth initiative. Thank you. I will now turn the call over to the conference call operator who will pool you for any questions.

[Operator:]

Thank you. [Operator Instructions] We'll take our first question from Ross Streflow [ph] with RBC Wealth Management. Please go ahead.

[Unidentified Analyst:]

Hi, Jeff and Subodh. How much revenue did you actually do with the 3D AOI system?

[Jeff Bertelsen:]

If you look at our 3D MRS revenue in the third or in the second quarter, it was $1 million.

[Unidentified Analyst:]

Okay. And your revenues were down in your systems business by $3 million, altogether?

[Jeff Bertelsen:]

Correct. Yes, so that would be just to clarify, so that million dollars would principal be made up of our 3D AOI product and then also the sensor subsystems that we sold at KLA.

[Unidentified Analyst:]

So you basically went from – in your systems business you went from – is this accurate from – well, you were $3 million less but you did a $1 million in the 3D AOI which you did not have last year?

[Jeff Bertelsen:]

Yes, it was – just 3D AOI was a little bit less than $1 million but essentially you're on the right track. The last year in the second quarter for SMT systems our revenue was $5.6 million, this year it's $3.1 million. So we're down $2.5 million year-over-year in the second quarter. $3 million of that was 2D AOI and SPI.

[Unidentified Analyst:]

Okay. Now you made a comment that you felt you were gaining in your previous quarters, you were gaining market share back in that systems area. It doesn't sound like that's the case anymore?

[Jeff Bertelsen:]

Well, I think with our 3D AOI product right now there is a lot of change going on in the market right now, a lot of customers transitioned to 3D AOI. Our product just got launched this year and we just got our initial revenues in the second quarter. So I think as we commented over time, we expect our 3D AOI product to enables us to gain share until substantially more than equipped our 2D AOI revenue.

[Unidentified Analyst:]

So what's your backlog right now in the 3D AOI product area?

[Jeff Bertelsen:]

Our backlog right now of 3D products – right now it's above $1.5 million. And as I've said there is a lot of sales momentum in the market right now, so we continue to quote and get orders for that product.

[Unidentified Analyst:]

With the overall weakness that we're seeing in the technology area right now, and some other companies have commented about this. Do you think that's affecting the overall AOI business including the 3D? Has that slowed down because of this weakness too from what you expected?

[Subodh Kulkarni:]

I mean we won't see the concrete picture Ross, this is an external numbers from independent agencies. It is concerning to see the 2D AOI declined that quickly. Now it maybe purely because 3D is taking off very quickly and just replacing that or I think we may have had a share loss. So we need some time to analyze the data and decide what the situation is.

[Unidentified Analyst:]

I guess what I'm driving at Subodh is that if only the 2D is softened up quite a bit because this conversion of 3D – but your revenues in that sector are $1 million with a backlog of $1.5 million, is everybody down or is it just that these other companies in the 3D sector have had – they got involved with the 3D AOI product earlier and so they've got more momentum?

[Jeff Bertelsen:]

I don't think there is one thing that I think is a fact Ross is that our 3D products is just coming out now, most of the competitors have had a 3D AOI product for a while, so they've had a head start, they have momentum in the marketplace, there is no debating that. So that's clearly part of the issue, they have a backlog of – and a sales funnel of 3D AOI. So that clearly is part of the issue, is that the whole issue or is there share losses in 2D AOI. And our part, that we still need to get through the data as Subodh said to figure that out.

[Unidentified Analyst:]

All right. So explain to all the listeners the difference between your 3D AOI with this new MRS technology compared to what's out there right now, if you could in terms of performance.

[Subodh Kulkarni:]

Sure, Ross. I mean our 3D AOI, the SQ3000 system uses our proprietary MRS sensor technology which enables significantly better images, image quality and speed, both at the same time. So compared to many of the competitors out there our system does standout and we see that forth standing demos and evaluations where it gets a lot of tractions and we show the systems. So we clearly feel that we have a differentiated superior offering even though we are late in the marketplace. As we discussed earlier, we believe that with SQ3000 overtime we should be able to gain shares fairly quickly. We feel really good about the product and how it is positioned with the new technology compared to competition.

[Unidentified Analyst:]

What's the typical sales cycle to really ramp a product line up in this area, Subodh?

[Subodh Kulkarni:]

Typically three to six months, and that's really the issue and I'm glad you asked that question Ross. We just launched a product couple of months ago and we are in that three to six months window right now where customers are seeing the product, they are expressing strong interest but they do want to do demos and evaluations, they do want to compare as to whatever other competitors they are looking at. So it does take some time for us to start seeing the lift off from a new product in this area. And we are in that window right now.

[Unidentified Analyst:]

Okay, very good. So overall for the company what's the backlog?

[Jeff Bertelsen:]

Yes, our backlog at June 30 was $7.9 million.

[Unidentified Analyst:]

Okay. And where was that compared to the previous quarter Jeff?

[Jeff Bertelsen:]

Are you talking March or year-over-year, Ross?

[Unidentified Analyst:]

March.

[Jeff Bertelsen:]

March, it was $6.8 million.

[Unidentified Analyst:]

Okay. So your backlog is up?

[Jeff Bertelsen:]

Our backlog is up, yes.

[Unidentified Analyst:]

Quite a lot of that is in the memory module area I presume?

[Jeff Bertelsen:]

Correct, that is correct, our both numbers of the $7.9 million, $3.4 million is MX.

[Unidentified Analyst:]

So do you have a lot of evaluation systems right now in the 3D AOI with potential customers?

[Jeff Bertelsen:]

Yes, there is a lot of evaluation activity going on and a lot of interest in that products still lining up a lot of evaluation and demos.

[Unidentified Analyst:]

Okay. So it's just a matter of time in your view with your products superiority, I'm told that starts to translate into some real order momentum.

[Jeff Bertelsen:]

Basically yes, I mean as we've said in the release, we remain very optimistic about our future and where we're going, we think the strategy and vision remain intact. Obviously, it's sales of the older products were disappointing but where we're going relative to MRS we feel very good about that. We heard that the momentum now that we've seen as we said with the MRS products.

[Unidentified Analyst:]

All right, very good. Now what about in the Cyber piece inspection systems, how much was that down versus a year ago?

[Jeff Bertelsen:]

Pace would have been down, right on par with the overall decline in systems so pace would have down, call it even 50% Ross year-over-year, Q2 2015 to Q2 2014. Along with 2D AOI we saw some significant revenue declines in the sorted pace.

[Unidentified Analyst:]

And what's your anticipation for that particular product? I know you refreshed that product not too long ago and head some momentum but what's going on in industry with that particular product area?

[Subodh Kulkarni:]

That's the point we need to understand and figure out because clearly, I don't think that we believe the market declined by that much, so why we saw an unusual decline in this we need to figure out and decide what the next steps are because you are right, we refreshed the product portfolio towards the end of 2013, it's a good solid competitive portfolio right now in SVI. We don't quite know why we declined that much in Q2 year-over-year.

[Jeff Bertelsen:]

I mean that's not a market decline.

[Subodh Kulkarni:]

That's not a market decline.

[Unidentified Analyst:]

Okay. And then when we get to the sensors, the regular to these sensors, how much down was that versus year ago?

[Jeff Bertelsen:]

Overall, our mobile is down about 15% Ross. That, as you know from our history, we spent a lot of our traditional laser aligned OEM customers, made them to cycle up and down, all those relationships remain solid and we continue to work with them to move the product forward, I mean that has tended to be a little bit of our history there.

[Unidentified Analyst:]

What are those customers telling you about business conditions for them as it would relate back to the sale of your sensors to them?

[Subodh Kulkarni:]

Certainly, China is a big factor, I mean some of our large OEM customers in that area have a fairly high exposure to the Chinese and Japanese customers, and they are reporting slowdown in China. So I think consistent with what we are seeing externally, the electronics market in China is seeing a slowdown and that is what they are telling us the reason behind why they are buying less sensors from us in the traditional product categories. [Multiple Speakers] Go ahead.

[Unidentified Analyst:]

Yes, and I was just going to say that's consistent with what's happening throughout the debt sector right now.

[Subodh Kulkarni:]

Yes, exactly. I think the slowdown in China, particularly in electronics is showing up in our traditional OEM sensors. It maybe also a factor as we discussed earlier in SVI decline although we don't know – our decline looked a lot bigger than the market decline. So but certainly not traditional OEM legacy sensors, China is the factor.

[Unidentified Analyst:]

Okay. Now let's talk a little bit about the new 3D sensors and your relationship with KLA and Tencor seems to be starting to give some traction. Do you expect a steady growth or you're looking for that acceleration?

[Subodh Kulkarni:]

Certainly this year we expect a steady growth, we are looking at partnering with them in several different ways to see how we can accelerate the growth going forward. I'm pretty sure long term it's going to be a significant contributor to CyberOptics topline and bottom-line but these kind of things do take time. I mean we started the relationship towards the end of last year, and this year, and systems are being sold through their channels right now, it is taking the typical 3*6 month evaluation. So the systems are being commercially used now, that's a good news, but it has taken time and it is ramping up now.

[Unidentified Analyst:]

And you announced a few labs [ph], can you disclose the customer?

[Subodh Kulkarni:]

Not at this point, the customer will likely announce the product with our MRS sensor technology in the fall time period, and certainly as soon as we are allowed to disclose we will disclose. But we feel really good about the long term potential opportunity with this customer.

[Unidentified Analyst:]

Can you give us an idea of the potential size compared with a KLA-Tencor with this customer?

[Jeff Bertelsen:]

I would say it's comparable, I mean it's – the potential certainly is there, we're just getting started working with them to get a product commercialized but all the OEM relationships have significant potential. But even as we've seen with KLA, there is a ramp period here, so you need to –

[Unidentified Analyst:]

Great.

[Jeff Bertelsen:]

No, and that's great, that has got the similar potential as KLA because I'm aware what that is, so that's great news.

[Unidentified Analyst:]

How many other relationships are you currently negotiating on in that 3D sensor area right now Subodh?

[Subodh Kulkarni:]

We are certainly being selective given the size and bandwidth, we don't want to overwhelm ourselves with too many OEM opportunities. This one that we announced, we haven't announced the name, we are getting very close to launching of product so we are announcing it now. We are giving one or two OEMs of fairly large substantive nature that could be transformative to CyberOptics if we manage to get those kinds of OEMs but we are not opening ourselves upto a plethora of OEMs, we just won't be able to handle because each OEM does have a certain amount of fine tuning of the technology if you will for their particular applications. It takes time and therefore it is on our side to make sure that OEMs applications are meet correctly.

[Unidentified Analyst:]

Okay.

[Subodh Kulkarni:]

And that initial period we went through the KLA-Tencor, we are going through it right now with other OEMs and we will probably look at one or two more – adding one or two more OEMs in the next 12 to 18 months. But we have to be careful that we don't over them.

[Unidentified Analyst:]

Okay, very good. And then finally the CyberGage, when do you – are you actually in the beta testing with the customer now?

[Subodh Kulkarni:]

What we are announcing is that we are – we will be in beta testing in Q3, as of today we are not otherwise we would have said that but we are getting very, very close. We are doing – we feel very good about the accuracy, the speed of the features and other aspects of the product but we haven't commenced beta outside yet.

[Unidentified Analyst:]

Have you got any accuracy down to the 25 micron level yet?

[Subodh Kulkarni:]

In our lab we are getting accuracy in that range right now, so that's what we feel pretty good about that we have both speed and accuracy with the need that is meeting the requirement, we are working on things like the stable day-to-day, week-to-week. This we are dealing with very, very fine dimensions here, even the smallest deviation in temperature and other factors has the tendency to impact accuracy. The 200 tests that we are doing making sure everything is robust and before we ship the system out to customers. The issue we had earlier this year when we had talked at the end of Q1, significantly far off from accuracy, vis-à-vis we have overcome that issue and we are in the 25 micron, or actually below 25 micron accuracy range right now. So we feel really good about the progress we have made on the accuracy front.

[Unidentified Analyst:]

Okay, very good. That's all for me, thank you.

[Subodh Kulkarni:]

Thanks, Ross.

[Jeff Bertelsen:]

Thanks, Ross.

[Operator:]

[Operator Instructions] We'll take our next question from Miles Jennings, Private Investor. Please go ahead.

[Miles Jennings:]

Good afternoon, and congratulations on solving some of the complexity issues in the CyberGage 360, that's very good news. I know that the company had some sort of technical disquality and get to the bottom of before you released it to the market.

[Subodh Kulkarni:]

Yes, potential funding is out, fundamentally, I think we have mentioned that at the end of Q1 or at the end of Q4. Our MRS sensor technology and the [indiscernible] technology using it today, the way we use it in our 3D AOI is what technically the term we use is, what we call telecentricoptics which means the light is coming vertically down and the camera that has an angle, and that's how we designed our match. In CyberGage we are looking at a three dimensional object with different kinds of shapes, we have to basically scan any object inspite of the volume envelope and for that we had to meet the optics non-telecentric, and the non-telecentricity is a significant complexity in the math and that's where it took us quite a bit of time to make sure that algorithms are right to give us the speed and accuracy. It did take significant work, you are right in pointing that out.

[Operator:]

[Operator Instructions]

[Subodh Kulkarni:]

We may have lost Miles.

[Operator:]

[Operator Instructions] We'll take our next question from Dennis Levers, Private Investor. Please go ahead.

[Dennis Levers:]

Thank you. And I apologize as I joined late but I wanted to ask this question if I could Subodh, in terms of let's say last quarter and maybe the next quarter or two going forward, and maybe I'll ask it going backward. The market share that we're in – what percentage let's say for the last quarter of the market did CyberOptics gained versus the competitors we have in the space? And that's a difficult question for you, you just may not know the answer.

[Subodh Kulkarni:]

Well the tricky part Dennis – I wish I could answer the question smoothly but because we are in four different areas, the four areas being itself sensors directly to OEMs such as scale or assembly on, we really don't have competition for sales, our long term agreements that we design and develop, customize sensors, the concept of market share is not quite relevant in that business. Secondly, we are in as a semiconductor center we really have a very strong proprietary position there and again the concept of market share doesn't quite – is not relevant there because there is no legitimate competitor we deal there. The third and the fourth area; the third area being the SMT inspection systems area, the followed base inspection and the automated optical inspection area, clearly we have competitors and the notion of market share is relevant and I will get back to that. And the fourth area is the 3D scanners and scanning services area where again market share concept is relevant. Let me handle the fourth point first. The 3D scanners and scanning services, we are really a very small player in a fairly large complex industry, so we really don't track market share as much the business was slightly – grew slightly compared to Q1 and last year but overall the market is growing back as to – we have maintained our small market share in that business. Now coming to the more important SMT inspections systems area where we have a lot of competitors, they do have fragmented market of $0.5 billion, that's the discussions we were having earlier with Ross. We think the market dynamics are interesting there, the 2D AOI market is disappearing, the 3D AOI market is growing clearly because we didn't have a 3D AOI product in the market, last year we grew our share but to a very small number, obviously we just launched the product. 2D AOI market, we are not quite sure whether we maintained shares or we lost shares. I don't think we gained share in that market for sure. And then the solid based inspection market is the area where we are concerned right now, we seem to have lost some share and we need to understand why despite the portfolio we have. So overall, I think as a company again to summarize, I think the notion of share is not relevant in our OEM sensors or the semi-sensors area. In scanners we probably maintain shares and whether we formed number in the large market. And then AOI, 3D AOI, we gained share by definition with a new product. SPI, we are not sure but we may have lost some shares. Does that help?

[Dennis Levers:]

Yes. And thank you again, I don't mean to ask something that's duplicate as a nature where Ross may have asked the question before. So, my apologies.

[Operator:]

And we will take a follow-up from Miles Jennings, Private Investor. Please go ahead.

[Miles Jennings:]

Sorry, some interrupted my line. I want to ask this question, in the next delay of your memory product exceptions, could you comment on the nature of that delay, I realized that the first order that you had in this area and so I thought to just understand result. But perhaps you could give us a little color on the nature of the reason why it was delayed?

[Subodh Kulkarni:]

Sure, Mike. I think we have disclosed our - we have shown the picture of it in our Investor Presentation, and if you take a look at it, it's a fairly complicated system, it's almost 2.1 meters, 2.4 meters by a meter in height. So it's a fairly complex system with mechanical parts in it and what it does effectively is it takes – this memory modules are coming at a fairly fast pace down the line and you are – the robot is speaking of all these memory modules and inspecting both sides at the same time and taking the fast pace in one end [ph]. It's all simple but the rate at which these modules are coming is typically a thousand complicated modules per hour, and we have to instant check, keep up with that. So at a high level there is a mechanical handling part and then there is the inspection part. Our inspection part is working great, there is absolutely no problem, we are getting very low false contraries and we are getting zero escapes so the customer is very, very happy with what we have accomplished. Then we have run into some challenges, the different kinds of memory modules that are there and then there are so many types of memory modules like DRAMS, there are different versions of the DRAMs, SSDs, the different versions of SSDs. And some of these modules have differentiated into five and the way we pick those – the robot picks up those parts – once in a while we get a hang-up and particularly in picking the part up and that basically we have to do a soft boot if you will as we set the machine. So it takes only a minute or two to do the soft boot but it does take that and that's what the customer is objecting doing and saying six times before we fully accept. So it's a relatively minor engineering thing to do and get it done but if we unfortunately couldn't get it done in time for Q2.

[Jeff Bertelsen:]

Right, but I would add if they are fully using the machine in production and it's in use, so –

[Subodh Kulkarni:]

We definitely expect that acceptance anytime but we couldn't get it done in Q2.

[Miles Jennings:]

That's good – and many thing can fight the challenge there. Congratulations, I hope you can provide the other options as they need sometimes soon. Just one thought on this OEM that you announced today, if it's in the – it's not in the backend area but it is in the front end area?

[Subodh Kulkarni:]

No, not really because back end as you probably know well, we have an exclusive agreement with key calling [ph] by definition we will not have anywhere else. Front end drove the MRS sensor technology as accurate as it is, I don't think we can compete with inter raw metric kinds of things quite yet, we're still dealing with a few micron for XY dimension and tenth of a micron from the three dimension, and for front end you do need to be sub-tenth of a micron for already mentioned. So I don't think – don't expect us to do anything with MRS let the front end quite yet. This will be outside the semi area.

[Miles Jennings:]

I see, this is the area outside the semi area?

[Subodh Kulkarni:]

Yes.

[Miles Jennings:]

Good. Wow, that's it. Thank you.

[Subodh Kulkarni:]

Thanks, Mike.

[Operator:]

[Operator Instructions] It appears there are no further questions in the queue at this time. I will like to turn the conference back to speakers for any additional or closing remarks.

[Subodh Kulkarni:]

Sure. Thank you. Although the lower than expected revenue from our inspection and electronics products in the second quarter, this is very good about our long term prospects with MRS technology and the sensor technology. So we are quite excited about our future. Thank you for your interest.

[Operator:]

Thank you. Ladies and gentlemen, this does concludes today's conference. We appreciate your participation.