Kulicke and Soffa Industries, Inc.
Q1 2014 Earnings Call Transcript

Published: 28 Jan 2014

[Operator:]

Greetings and welcome to the Kulicke & Soffa Fiscal 2014 First Quarter Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Mr. Joe Elgindy, Director of Investor Relations and Strategic Planning for Kulicke & Soffa. Thank you. You may begin. Joe Elgindy Thank you, Mellissa. And welcome everyone to Kulicke & Soffa's fiscal 2014 first quarter conference call. Joining us on the call today are Bruno Guilmart, President and CEO and Jonathan Chou, Senior Vice President and CFO, both are available for Q&A after the prepared comments. For those of you who have not received a copy of today’s results, the release, as well as our latest investor presentation, are both available in the Investor Relations section of our website at kns.com. 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 in these forward-looking statements. For a complete discussion of the risks associated with Kulicke & Soffa that could affect our future results and financial condition, please refer to our SEC filings, particularly the 10-K for the year ended September 28, 2013 and our other recent SEC filings. I would now like to turn the call over to Mr. Bruno Guilmart. Please go ahead, Bruno. Bruno Guilmart Thank you, Joe and thank you all for joining our call today. Revenue in our first fiscal quarter 2014 was just over $79 million which was a high-end of our $70 million to $80 million guidance range. During the December quarter, our operations group adjusted our manufacturing capacity quickly and efficiently to reflect current market conditions. This flexibility has allowed us product mix to drive gross margin to 48.5%, up 200 basis points from September. Looking beyond gross margins, operating expenses were again very tightly controlled at $40.6 million. Jonathan will provide some additional insight on these items during his financial review. Our copper capable bonder sales in the December quarter represented 81.5% of our total number of bonder sales, up from 80.2% in the September quarter. We maintain our position of the copper capable bonders account for approximately 40% of the overall sale capacity today and it will take several more years for copper capable bonders to reach the anticipated 75% of installed base. With an average useful life of about 10 years, we anticipate there to be a meaningful realm on the replacement demand towards the tail-end of the copper transition. Switching to LED about 5% of our ball bonders sold were configured for the LED market which continues to present moderate growth opportunities. As mentioned last quarter the cost and performance benefit of consumer devices are becoming more and more compelling which continues to drive LED adoption. The LED business continues to provide attractive gross profits and an additive revenue stream beyond our traditional core business. Turning to wedge bonder equipment, revenue in the December quarter was up by 7% over the September quarter. Quarter-on-quarter we saw a pickup in demand here for the automotive segment and we anticipate the power semiconductor segment to continue recovery throughout the fiscal year. While we seem to be a recovering from a seasonal drop, we want to take a second to remind investors of the underlying strength of our core business. Due to the ease of configurability, lower manufacturing cost and significantly full capacity, wire bonder semiconductors are expected to remain as a process of choice for the overwhelming majority of semiconductors. Looking ahead cost will continue to be a compelling driver for the broad industry and definitely for the consumer-based devices in both developed and emerging markets. Earlier this month, the Consumer Electronics Show has helped to support the expectations for the ongoing roles of semiconductor units by showing innovative products that are driving adoption of the Internet of things. There were a significant number of connected devices such as wearable electronics, smarter vehicles, Wi-Fi enabled centers containing relatively basic wire bonder semiconductors and/or micro-electro mechanical systems or MEMS and this is very positive for our core business as this specific application drives overwhelming use of wire bonders and/or state bonders in their manufacturing process. During the December quarter, we successfully shipped our first alpha version of our advanced packaging products which is a thermal bonding compression machine to a key strategic customer. Overall feedback from this customer was very positive and we are currently targeting an additional Wi-Fi customer as well as another shipment towards the end of June 2014. This continues to be an exciting opportunity and we look forward to sharing additional information as it becomes available. I will now turn the call over to Jonathan Chou for more detailed financial review of the December quarter. Jonathan? Jonathan Chou Thank you, Bruno. My remarks today will only refer to GAAP results and will compare to the December quarter to the September quarter. Net revenue for the quarter was $79.1 million, down $94.5 million from the September quarter. Net loss for the December quarter was $2 million. From a GAAP EPS perspective, we lost $0.03 per share in December versus a gain of $0.39 per share in September. We generated $38.4 million of gross profit with strong gross margins of 48.5%. Gross margin was up from the 46.5% reported for the prior quarter. This was primarily due to a shift and product mix with expandable tools becoming a larger portion of our total December sales. While product mix clearly plays a larger role, this gross margin improvement would not have been made possible without the relentless execution of our flexible manufacturing model by our operational team. During the December quarter, we were able to keep operating expenses exceptionally low at $41 million compared to $46 million in the prior quarter. With the help from our performance enhancement actions, we were able to reduce our operating expense by 12% while increasing our R&D spending by more than $2 million over the September quarter. For the December quarter our operating loss was $2 million as mentioned earlier and we had a tax benefit of $91,000. As noted in our prior calls, we continue to target long-term effective tax rate of approximately 10%. We ended the quarter with a total cash and investment position of $557 million, up from $525 million. From a diluted share standpoint this cash position is equivalent to $7.34 which increases our book value equivalent to $9.46. We continue to evaluate the uses of cash that will maximize shareholders’ value. Working capital defined as account receivable plus inventory less accounts payable decreased by $36.4 million to $127.4 million. From a DSO perspective, our days sales outstanding increased to 129 days, compared to 84 days in the prior quarter. Our days sales of inventory increased from 37 days to 80 days. Our days sales of accounts payable increased from 36 days to 49 days. This concludes the financial review portion of our call. I will now turn the discussion back over to Bruno for the March quarter’s business outlook. Bruno Guilmart Thank you, Jonathan. In terms of our guidance for the March quarter, we expect our business to improve and to be in the $110 million to $120 million revenue range. Despite softness in the short-term outlook, we remain optimistic for several reasons. From a macro standpoint 2014 semiconductor unit forecast has been improving as inventory is being digested through the supply chain, analysts are expecting a 9% to 10% year-on-year growth in units versus 4% growth in 2013. Also our competitive position remains very strong in all products of course for these trends. We continue to make great progress on our advanced packaging developments as mentioned earlier. Customer feedback has been very positive and our R&D team continues to execute on all our initial timeline. This completes our prepared remarks. Operator, we are now happy to take any questions. Question-and-Answer Session

[Operator:]

Thank you. (Operator Instructions) Our first question comes from the line of Krish Sankar with Bank of America Merrill Lynch. Please proceed with your question. Krish Sankar - Bank of America Merrill Lynch Yes thanks for taking my question. I had two quick ones, first and foremost good job on the gross margin. I’m still trying to figure out is this the new norm for gross margin going forward? What kind of gross margins do you expect for the March quarter? And also as a follow-up, any changes in your view on capital allocation, or is it still focused on organic and inorganic growth? Thank you. Jonathan Chou Hey Krish, let me answer that question, our gross margin as you know historically has been on the average about 45%, and the reason why the gross margin actually has picked up about 190 basis points are actually of that 2% came from the lower volume of the ball bonders. So based on product mix generally that will go up. Once volume comes back in the later quarters, we expect the gross margin to be in line with our historical trends. And to your other question, in terms of use of cash, we continue to evaluate actually how best to actually handle shareholder value at the same also evaluate the later technologies, like advanced packaging and other type of technology that will actually position us well in the future. So we do actually as mentioned to many of the investors during conferences, we do evaluate these options with our Board on an annual basis and we will continue to do that. Bruno Guilmart Yes if I can add to Jonathan a few words, as you know we have as Jonathon mentioned we have increased our R&D spending even as our revenue went down in the first quarter and so we are extremely committed to basically R&D developments and especially advanced packaging. If you look at advanced packaging as mentioned one machine which we have publicly disclosed, or which was publicly disclosed about a year ago actually we are not looking at one machine we’re looking at a family machines which will basically use a platform label concept based which will enable us to basically provide a multiple number of solution for customers. In addition we believe that again as described and yet one of the most strategic turning point in its history in terms of what’s happening in the wire bonding industry, in the technology, the limitation we know that there will be a 20 nanometer and beyond. And right now again as Jonathon said, we believe the best use of our cash is to maximize shareholder value is to basically be conservative, keep the flexibility because as you can read all the analyst reports are mentioning now about the mid-end space that I have been talking about for one year and that’s the only space which is going to grow for the foreseeable future, everything else is going to go down. And basically our goal is to take a significant portion and play a significant role in this mid-end space. Krish Sankar - Bank of America Merrill Lynch Okay, thanks Bruno.

[Operator:]

Thank you. Our next question comes from the line of Tom Diffely with D.A. Davidson. Please proceed with your question. Tom Diffely - D.A. Davidson Yes thank you. First question is in regards to the Internet of Things; obviously we see a lot of expansion in this area with recent shows. And I am curious how do you view that affecting your business? Is that going to drive the copper adoption or do you see just the units, the actual unit growth is going to be the need for extra capacity? Bruno Guilmart - President and CEO I think it’s a little bit of both, basically I mean you have a combination of unit growth as I have mentioned during the prepared remarks and also more and more copper adoption as more and more units are either converted or coming our basically in copper. The good thing about all this Internet things is that they are in terms of complexity when you compare it to a tablet or a smartphone launch that complex devices, that therefore the need for more advanced packaging or interconnect technologies is less and therefore we believe that will provide an opportunity for growth for K&S in the future once all these products start to really pickup. Tom Diffely - D.A. Davidson Okay, do you actually see in the initial designs go straight to copper instead of going to… Bruno Guilmart - President and CEO Yes, I mean basically most of the initial designs, unless they are automotive or medical or in the space of military are basically now going to copper, okay very, very few are using another type of material. And so it’s really now a trend which is upcoming from Europe, from U.S., I mean there is such I would say a benefit in terms of cost to come up and designing first in copper that the majority of new products either from in wire bonding technology with copper or switch it. Tom Diffely - D.A. Davidson Okay, so when we look at the new nodes, you’ve talked in the past that how a lot of times the new node comes in, a lot of times it’s the advanced guys that do it first and so it’s flipped shipped and then converts over to wire bonding later. Have you seen any of the 20 nanometer capacity move to wire bonding at this point? Bruno Guilmart - President and CEO We have I would say some customers using wire bonding at 20 nanometer, not I would say in high volume production, because remember that the core of the wafers that are leading the market today are still 90, 65 and 40 nanometer so at 20 nanometer, you start to see some opportunities. But we do believe that beyond 20 it will become because mostly of the real estate and some other technical challenges it will become more and more difficult to use wire bonding alone. And advanced packaging where we actually, a combination of a number of technologies in which wire bonding will play a role that’s also other technologies will play a role. As you know right now it’s a very small market in constant movements there is no standard and… Jonathan Chou - SVP and CFO Okay. Sorry, Tom I just want to make sure your question is really about 28 nanometers, is that correct? Bruno Guilmart - President and CEO 20. Tom Diffely - D.A. Davidson 28, but 28 initially, but I like to hear about the lower number as well. Bruno Guilmart - President and CEO 28, yes, okay. So I mean definitely yes. We have customers 28 I understood 20, okay, so I was answering at 20. There is right now also we’ve done some demonstration at 20 nanometer that’s where along it can be used I was talking beyond 20 nanometer. Tom Diffely - D.A. Davidson Yes, okay. That’s all helpful. Jonathan looking at the tax rate you talked about a long-term tax rate of 10%, is that what you would use for this year as well, are we in a transition period? Jonathan Chou - SVP and CFO Yes, I think using 10% will be good in terms of our long-term -- in terms of the effective tax rate for this year. Tom Diffely - D.A. Davidson Okay. And what’s your current onshore/offshore cash? Jonathan Chou - SVP and CFO About 80% offshore. Tom Diffely - D.A. Davidson Okay. Alright, and then finally when you look at the thermo bonding, I just wanted to clarify, you said you shipped the first one during the quarter and you expect to second ship it in the June quarter? Bruno Guilmart - President and CEO That’s correct. Tom Diffely - D.A. Davidson Okay, and is that to different customer or same customer? Bruno Guilmart - President and CEO Different customer or same customer, it’s a different customer and a same customer, yes both, not very, it’s obviously a different customer. Tom Diffely - D.A. Davidson Alright... Bruno Guilmart - President and CEO A different, either way that’s for advanced packaging one thing which is critical is to get excellent feedback. And therefore we are very selective as to whom we directly ship the machine so that we can maximize the feedback so that the machines can go into data and then obviously being commercialized. So the choice of customer is very important for us. Tom Diffely - D.A. Davidson Okay, and have you seen any reasonable competitive products out there at this point? Bruno Guilmart - President and CEO They are I would say you can comment competitive or alternatives okay, there are a few numbers because I mean you are not talking about the lot of suppliers out there that have tried to push beyond the limits of what their existing machines can do. Okay, so as you know there is two parameters that are very important in advanced packaging, one is accuracy two is speed okay, so you can push speed and you lose the accuracy. You can slower the machine and you get more accuracy okay. Same thing is about new okay, but to make the physical accuracy in fixed sheet has been 10 micron, 20 micron, we’re also hearing about 1 micron, 2 micron accuracy. Tom Diffely - D.A. Davidson Okay. Bruno Guilmart - President and CEO So there is a handful of very small companies that they can deliver I would say our new machines at -- with this type of accuracy but are incapable of going into manufacturing okay because they are way too slow. There are also other suppliers which have been established in fixed sheet business for quite some time that are trying to push their machines beyond what they can do and as a result what happened is that you get a machine that is very unstable and a process which is also very unstable and require constant babysitting. And obviously customers won’t like that too much. Okay, so our machine was designed from scratch and we hope that we will have the best solution available on the market that directly will go for these two major requirements of speed and accuracy for the advanced packaging markets starting with the first machine because as I’ve said it’s stunning which is a thermo compression die bonder. Tom Diffely - D.A. Davidson Great. Okay, thank you.

[Operator:]

Thank you. (Operator Instructions) Our next question comes from the line of Kevin Niggli with Lista Capital. Please proceed with your question. Kevin Niggli - Lista Capital Hi. Thank you for taking the call. I would like to touch on net capital allocation question again. I understand and appreciate the need to continue to invest in organic growth going forward in technology changes. And the significant R&D that you guys spend your reference I believe was all financed through operating cash flow. And I just don’t really understand the need to have as much cash on the balance sheet as you do? If you’re at the point mostly that was enough growth through operating cash flow. And it seems a little imprudent to not at least have a share repurchase program in place so the offset solution that’s issued to employees and management, especially with these valuations. I mean you mentioned that you have $7.39 in cash and that represents 70% of your share price. Jonathan Chou - SVP and CFO Kevin, this is Jonathan. Let me address that question. You’re absolutely right, we have actually talked about this and have analyzed this. It is just at this point in time, our Board has asked us to prioritize in terms of the organic initiatives and looking at potentially technology acquisitions or other forms that will actually have compliment our portfolio. But, rest assured that this is a topic that was actually talked about quite regularly, currently more than just annually as I mentioned earlier. In terms of how best to use cash and enhance shareholders’ value, so at the minimum in terms so that we actually launch to address the burn rate which we just mentioned in terms of the additional dilution from our equity program for our employees, that is definitely something that we have looked at and we continue to analyze that hard going forward. Bruno Guilmart - President and CEO Yes and I just want to -- just to add on to Jonathan, I mean it’s not like the Company has been holding cash for the last 20 years, okay. The Company has only been net cash positive for about 3 years. As I’ve said we are at a strategy turning point in cash today, because we know exactly what’s going to happen long-term to the wire bonding, okay. It’s going to become a nice cash cow replacement market. As mentioned about advanced packaging which is critical to the success of the Company for the future, as far as when we look at M&A, we are not reckless as you can see, we have not done any so far, it doesn’t mean that we are not looking, if you are familiar with what’s happening in the technology space today, you will see that actually good acquisitions come few and far between and some can be actually quite expensive because we trade at a very high premium and that’s the way it works in this business. And so we do want to keep that flexibility at least until for a little bit more time before -- and that’s basically a discussion we have with the Board I mean every quarter, what do we do with our cash, okay. Does it make sense to do a share buyback? Does it make sense to do a one-time dividend? Does it make sense to keep the cash a little bit longer because when we know that if we want to get a greater share of this fast growing mid-end market, which is going to be the only semiconductor equipment growing market, we are going to have to make non-organic moves, okay. We cannot just do it alone and right now we are at this point where we believe that strategically it is the best for the shareholders to be a little bit patient, and obviously there is a point that it’s -- nothing comes where we look at options to return that cash to the shareholders. But I think now is not the time. Kevin Niggli - Lista Capital Yes. I don’t mean to be critical and I really -- I’m not going to go of what you guys have done initially and like you said, the massive tax balance is something it’s a rather new phenomenon and that’s why I’m saying is that, I think that obviously we’re not in a position to have a share repurchase program in place in 2008, 2009, 2010 it’s gotten to a point where things have changed so dramatically, but I think we are in a enviable position to be able to be buying back, stock and I’m not saying go out and buy I mean you don’t have to go buy back $200 million worth of stock in a month or something like that but you should have a ongoing program at this point where you’re at least out there buying back from stock. Jonathan Chou - SVP and CFO Yes, Kevin, that’s well noted, we certainly are looking in this and we will continue to look at this. Kevin Niggli - Lista Capital Yes. I just don’t think it has to be one or the other, I just don’t understand what the Board’s resistance is to, it seems like they are saying choose what you want to do and I don’t know that going out and doing a massive acquisition carries a significant amount of risk. Like you said, they come along when they come along, and I think you should be able to do that even if you had a share repurchase program in place so trying to some sense in there. Okay, thank you. Jonathan Chou - SVP and CFO Thank you, Kevin.

[Operator:]

Thank you. Our next question comes from the line of David Duley with Steelhead. Please proceed with your question. David Duley - Steelhead Securities Yes, thanks for taking my questions. Do you have any idea of the numbers and how big was the wire bonder market in 2013 and do you expect it to grow in 2014 and where is the growth going to come from? Bruno Guilmart - President and CEO Well, there is some publically available data on the market, in 2013 I don’t have it in front of me I mean if you want to know in dollars, it’s roughly about ball bonders and wedge bonders you want both? David Duley - Steelhead Securities Sure. Bruno Guilmart - President and CEO Okay. So, it’s roughly about 90% of our turnover, okay both were between 80% and 90% of our turnover. Analysts actually are forecasting that number should go up in 2014. Now, whether you want to believe them or not that’s a different question. Now, some saying also that happened last year is we had a drastic change in our customer make up, it is now as you know surprised and it’s public information and speed have made clear that they will not make significant ball or wedge bonder acquisition this year. So in other words that has given us the opportunity because they were our large customers and very resource functioning to look and expand actually quite significantly our base of customers. And so a issue of for instance we had customers in China that we have never had before, we have customers in Taiwan that are actually increasing their demand, we have customers that are among the large ones who has been slow to come to copper that all of a sudden have decided to accelerate their move to copper. So that’s the general business that’s why actually what you are seeing is viable still to grow despite fairly the Q1 our front line is because that’s what I keep saying the thing, there is life without the ASE & SPIL of course they have been a large portion of our business but going forward we have to live with the fact that they will not be a large portion of our business because they already are pretty much 75% penetrated from a copper perspective so the latest average for our next five years which doesn’t include LED is basically about $860 million a year, okay that’s kind of where the market is forecasted to be. Before it will start the next phase where it will obviously further go down and if you ask me a guess that is stabilized around the $500 million-$600 million market and become a replacement market. David Duley - Steelhead Securities Okay and I think it was roughly what 700 million or 750 million in size in calendar 2013? Jonathan Chou - SVP and CFO Calendar year, okay our fiscal year ’12 was 781. Bruno Guilmart - President and CEO No, our revenue… David Duley - Steelhead Securities Well… Bruno Guilmart - President and CEO It’s a sizable market. David Duley - Steelhead Securities Not your revenue, I’m asking for the size of the market on a calendar year basis. Jonathan Chou - SVP and CFO I think we had close to a 1 billion. Bruno Guilmart - President and CEO And we did about $750 million which basically matches with our market share, okay. David Duley - Steelhead Securities Okay, great, and just can you give us an idea of the relative size of the wedge bonder business for you guys and do you expect that segment of business to grow going forward, I would imagine it was given what you said but I am just trying to kind of size up your commentary? Bruno Guilmart - President and CEO It’s a relatively small market, always has been, if you are looking at bonder depending on the year maybe a $100 million to $150 million market. But it’s an important market because I mean all the power devices needs that technology and we see that there are some growth opportunities as well in everything in battery, I mean battery like anything, vehicle and so on operated, they have been slower to come than we anticipated. Our market share in there it is a 60%, okay so it’s not a market that is growing at double-digit per year, and therefore I mean we do -- we basically are in a recovery phase and we do not anticipate that market to grow in any big fashion in the coming future. You want to add to that Jonathan? Jonathan Chou - SVP and CFO Yes David, I actually have some Gartner’s data as far as and Gartner has basically the wire bonder tam and just over a 1 billion in 2013, they have 1.022, it is going, according to their forecast 2014 will grow to 1.087. This is based on the September 2013 forecast by Gartner. Bruno Guilmart - President and CEO And that’s calendar by the way okay, so it doesn’t really match with our, I mean you have to correlate it back because we are -- to our fiscal. David Duley - Steelhead Securities Okay and could you talk about roughly when you look at your R&D budget how much is it are you spending on your historical business and how much are you spending on the new opportunities that you’re looking at? Bruno Guilmart - President and CEO We usually don’t disclose that, but I’d tell you roughly, half and half okay, very roughly okay, the reason why is because it is still critical for us to continue to invest in the ball bonder and wedge bonders which is why we try to develop some new products, last year in the ball bonder space and also in the wedge bonder space. As you know we dominate the market in copper, we have a huge headroom over our competitors, when that market comes to a replacement market it will be a significant cash cow for K&S. This market continue to evolve technologically, okay. So, you need also to invest in that market to continue to keep your market share, and then increase your market share. So, it’s important that I would say to continue to invest in and enable us actually to look at other opportunities. And therefore we want to keep and continue being in the leadership position both in wedge and ball bonders, wedge may change on the other hand, due to the cadence at which we introduce new products, okay but it still requires quite a bit of investment. On the other half what I can tell you to give you an idea of our investment in advanced packaging is the modern , year plus ago we had may be five people and now we are probably at about 120, so I mean we hit a significant move. And one of the main reason we decided to do it internally because we couldn’t find anything attractive, accelerating. And so as you know the measurement of buy versus make and we have made the decision that there were nothing out there that was interesting and we decided we had all the key expertise and when we didn’t have it we recruited and that’s where we have actually have been able to progress extremely fast. And as I said we are on time Dave on the initial timeline on advanced packaging area. David Duley - Steelhead Securities So, on that front Bruno, I am assuming that the 20 nanometer node the one that’s going to ramp-up in the middle of this upcoming year is going to be the first node where you really need one of the these thermo-compression bonders. And I am not sure if your unit is going to be ready for prime time production mid-year this year. I was kind of wondering is that the right way to think about it, the 20 nanometers is the first node that you want to address with your system or are you really targeting 14 or whatever the next node is for the introduction of the system? Bruno Guilmart - President and CEO It depends on the end application that I think if you want to take some sort of benchmark, 20 nano is probably a good benchmark but again it will not start in any big volumes until next year and which will basically match with our first product that we will bring to the market on a commercial basis. David Duley - Steelhead Securities And so with -- your product is scheduled to be available when again just remind me, commercial basis? Bruno Guilmart - President and CEO We have not announced that okay, because this is really a competitive question. What we said is we have shipped last quarter our first Alpha machine. What I can tell you is that it will most complex product developed in K&S’ history from start to scratch it was less than 12 months for -- at the machine. Again we are not talking about of selling $70,000 bonder this is a more or like a $1 million piece of equipment and there is a lot of moving parts. And we are on the time schedule that basically we fix ourselves for commercialization which obviously we want to do as soon as possible. But as I said we are on time and I cannot publicly reveal our time-table because it’s a information that I don’t want the competition to have. David Duley - Steelhead Securities Thank you very much. Bruno Guilmart - President and CEO Thank you, David.

[Operator:]

Thank you. Ladies and gentlemen, we have come to the end of our allowed time for questions. I would like to turn the floor back over to management for closing remarks. Joe Elgindy - Director, IR and Strategic Planning Thank you all for the time today. Additionally, we’d like to mention that the Company will be presenting at the 2014 People, Technology, Internet and Media Conference in San Francisco on February 10th and 11th also the Bank of America Merrill Lynch Taipei Conference on March 19th and also the Morgan Stanley Asia Conference in Hong Kong on March 20th and 21st. For those unable to attend in-person, a webcast will be available on the Investors section of our website at kns.com. Please feel free to follow-up after today’s call with any additional questions. Again thank you all for the time today. Mellissa this concludes our call. Thanks.

[Operator:]

Thank you ladies and gentlemen. Thank you for your time. Today’s call has ended. You may disconnect your lines at this time.