David Li - President and CEO William Johnson - EVP and CFO Trisha Tuntland - Director of IR.

Y. Edwin Mok - Needham & Company Chris Kapsch - BB&T Capital Markets Jairam Nathan - Sidoti & Company.

Good day, ladies and gentlemen, and welcome to the Cabot Microelectronics’ Third Fiscal Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions].

I would like to introduce you host for today’s conference call, Ms. Trisha Tuntland, Director of Investor Relations. You may begin, ma’am..

Good morning. With me today are David Li, President and CEO; and Bill Johnson, Executive Vice President and CFO. This morning, we reported results for our third quarter of fiscal year 2015, which ended June 30.

A copy of our earnings release is available in the Investor Relations section of our Web site, cabotcmp.com, or by calling our Investor Relations office at (630) 499-2600. A webcast of today’s conference call and a script of this morning’s formal comments will also be available on our Web site.

Please remember that our discussions today may include forward-looking statements that involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from these forward-looking statements.

These risk factors are discussed in our SEC filings, including our report filed on Form 10-K for the fiscal year ended September 30, 2014. We assume no obligation to update any of this forward-looking information. I will now turn the call over to David..

Thanks, Trisha. Good morning, everyone, and thanks for joining us. This morning, we announced financial results for our third quarter of fiscal 2015 and our results are consistent with the update we provided in our press release last week.

As reported then, we experienced soft industry demand conditions during the quarter and a couple of company-specific headwinds.

The softness in demand is generally consistent with what we described when we reported results for our second fiscal quarter in April and also in line with recent reports by some of our strategic customers and industry analysts. We reported revenue of $97.2 million, gross profit margins of 50% and diluted earnings per share of $0.39.

Our results include a 140 basis point adverse impact on gross margin margins based on our decision to write-off inventory related to raw material that we determined does not meet our quality requirements, and a higher effective tax rate primarily related to the jurisdictional mix of our earnings.

The combined effect of these is an adverse impact to our diluted earnings per share of approximately $0.07. Despite this performance in the third fiscal quarter, year-to-date we have increased revenue by roughly 2%, gross profit margins by 370 basis points and net income by approximately 26%.

In addition, we are raising our full fiscal year guidance for gross profit margins to a range of 50% to 51% of revenue. Bill will provide more detail on our financial results later in the call. Let me start with our perspective on the global semiconductor industry environment.

This year, seasonal demand trends have deferred from the trends the industry and our company have experienced over the past three years. We experienced stronger than normal seasonal demand in our first and second fiscal quarters but weaker than normal seasonal demand in our third fiscal quarter.

When we reported results for our second fiscal quarter in April, we described softening of orders for our CMP consumables product that we were seeing at that time.

Our third fiscal quarter performance reflects continuation of that softness through the rest of the quarter and this is also consistent with what a number of others in the semiconductor industry are now reporting.

Further, reports from some industry analysts and strategic customers indicate that semiconductor device inventory levels remains somewhat elevated, due to weaker than expected demand for smartphones, particularly in China and further declines in demand for PCs.

In addition, it appears that the slowing demand for some electronic devices is being compounded by weaker foreign currencies and challenging macroeconomic conditions. In response to this, IC manufacturers seem to be appropriately monitoring and adjusting utilization rates.

Based on all of this, some industry reports and certain customers are now calling for continued inventory adjustments and therefore soft near-term demand. We think that this means that we may see weaker than normal seasonal demand during our fourth fiscal quarter.

Recall that traditionally the September quarter has been a seasonally strong quarter for us. Later in the call, Bill will provide some commentary on recent order patterns. Despite the potential for continued soft near-term demand, expectations for IC demand for the full calendar year appears stable.

Industry analysts continue to forecast low double-digit growth for smartphones and for the automotive and industrial markets, and low to mid-single digit growth for the enterprise and IT markets, driven by cloud computing and demand for data centers, partially offset by continued contraction of the PC market.

Reports and commentary at Semicon West earlier this month confirm this view for the automotive and industrial segments, and sources also cited demand for solid-state drives and specific smartphone product launches as additional IC demand drivers for this calendar year. Now, let me turn to our core IC CMP consumables business.

We continue to experience strong demand for our tungsten slurry products across a wide range of applications and technology nodes, and year-to-date our revenue from this product area is up approximately 13% compared to last year.

We have been working closely with our strategic customers to support their transitions to 3D memory and FinFet for advanced logic IC devices. These applications require additional CMP steps mainly in tungsten and dielectrics, which we have confidence will benefit our company. 3D memory and FinFet were prominent topics for discussion at Semicon West.

Based on what we heard and know, there appears to be widespread confidence in the adoption of these technologies, although varying opinions on the timing of adoption. Reports indicate that IC manufacturers are actively investing for these transitions and planning for 10 and 7-nanometer technologies.

We are closely engaging with our strategic customers in support of their adoption of these emerging applications.

Within this environment, we continue to see highly engineered materials and highly formulated products, like our CMP solutions playing an increasingly important role in the continued growth, development and advancement of the semiconductor industry.

In support of this and our strategic business initiatives of technology leadership in close collaboration with our customers, we are adding 300-millimeter polishing capability to our Clean Room facility in Taiwan.

This will supplement the existing similar capabilities we know have in both the United States and Japan, and will enable us to conduct product demos and development work faster and more efficiently and partnership with our customers.

We continue to believe our global capabilities, resources and infrastructure and unmatched and differentiate our company as the leader within the industry. During the quarter, we remain focused on the broad transformation of our dielectric slurry product area.

More specifically, we made further progress on commercializing our new higher performing dielectric solutions within our D9200 product series.

We are now seeing validation of these efforts as a number of customers are evaluating and qualifying these solutions and we are encouraged by the positive customer feedback on performance across a range of technology nodes and on both 200 and 300-millimeter platforms.

Our customers are seeing better performance through significantly improved defectively, and we believe they should also realize lower cost of ownership through greater dilutability.

We believe we are beginning to gain traction with these new products as we secured several new business opportunities during the quarter, and we look forward to support our customers’ ramps in the future. Over time, we also look forward to securing more business in this product area.

We anticipate that these new products can be a key growth driver for us and also should improve the overall profitability of our company. In the CMP polishing pads area, after achieving five consecutive quarters of year-on-year revenue growth, we experienced a decrease in revenue this quarter compared to the prior year.

Despite the quarterly decrease on a year-to-date basis, revenue from our pads product area is up nearly 6% from last year. We continue to view CMP pads as an important growth vehicle for our company. However, this continues to be a highly competitive CMP application area.

We are actively exploring other CMP polishing pad technologies to expand our product portfolio to address our customers’ needs. In addition, we are also collaborating with our customers to provide optimized slurry and pad consumables steps, such as for barrier and dielectric applications, which we believe can provide additional value to them.

In summary, despite the challenging quarter, we believe that our business fundamentals remain strong. Our focus is on continued profitable growth through close collaboration with our technology leading customers to provide higher performing and lower cost CMP solutions.

We believe we are unique in our ability to offer a combination of innovation, quality systems and local expertise to help enable our customers’ technology advancements and that we are well positioned for continued success. With that, I will turn the call over to Bill for more detail on our financial results..

Thanks, David. Good morning, everyone. Revenue for the third quarter of fiscal 2015 was $97.2 million, which represents a 10.3% decrease from the same quarter last year. This reflects soft global semiconductor industry demand and business loss in certain dielectric slurries, which we previously discussed.

Year-to-date, revenue of $314 million represents a 1.8% increase from the prior year. Foreign exchange rate changes, primarily the weaker Japanese yen versus the U.S. dollar reduced year-over-year revenue by $2 million for the quarter and $4.5 million year-to-date.

Drilling down into revenue by product areas, tungsten slurries contributed 44.8% of total quarterly revenue with revenue up 3.2% from the same quarter a year ago. This represents the sixth consecutive quarter of year-over-year revenue growth in tungsten with particularly strong demand from the memory segment.

Dielectric slurries provided 22.9% of our revenue this quarter with sales down 24.9% from the same quarter a year ago. The revenue decrease primarily reflects the loss of the lower performing legacy dielectrics business we previously discussed.

As Dave mentioned earlier, we continue to make progress on the commercialization of our new family of much higher performing dielectrics slurry products, which we believe will enable us to profitably grow this product area in the future.

Sales of slurries for polishing metals other than tungsten including copper, aluminum and barrier represented 17.4% of our total revenue, and decreased 13.8% from the same quarter last year. We believe the revenue decrease is primarily due to customer efficiencies and repurposing capacity for the next technology node.

Sales of our polishing pads represented 8% of our total revenue for the quarter, and decreased 11.7% from the same quarter last year. This decrease follows five consecutive quarters of year-on-year growth. Data storage products represented 3.1% of our quarterly revenue.

Our data storage revenue was down 29.5% from the same quarter last year on continued soft PC demand and some business loss. Finally, revenue from our Engineered Surface Finishes or ESF area, which includes QED, generated 3.8% of our total quarterly sales. Our ESF revenue was down 4.3% from the same quarter last year.

Our gross profit this quarter represented 50% of revenue. This is up 230 basis points from 47.7% in the same quarter a year ago. Compared to the year ago quarter, our gross margins benefited for a richer product mix with relatively more tungsten revenue and less from legacy dielectrics products.

Other factors affecting gross margin were the benefits associated with foreign exchange rate changes, partially offset by lower sales volumes and $1.4 million or 140 basis points and higher costs associated with inventory write-offs related to raw material quality that Dave discussed.

Year-to-date, gross profit was 51% of revenue, which represents a 370 basis point improvement year-on-year including a 45 basis point adverse impact of the material quality costs.

Factors contributing to the increase in gross profit percentage were product mix, benefits associated with foreign exchange rate changes and the absence of an asset impairment charge recorded last year.

Taking into account our results through nine months, we currently expect our gross profit for the full fiscal year to be between 50% and 51% of revenue including the material quality costs. Previously, we had expected to achieve the upper end of our prior guidance range of 48% to 50% of revenue.

Now, I’ll turn to operating expenses, which include research, development and technical, selling and marketing and general and administrative costs. Operating expenses this quarter of $33.4 million were slight higher than the $33.2 million reported in the same quarter a year ago.

Year-to-date, total operating expenses were $103 million, which is 6% higher than last year primarily due to higher accruals for incentive compensation and costs associated with certain executive officer transitions that occurred earlier in the fiscal year, which we’ve previously discussed.

We currently expect our operating expenses for the full fiscal year to be between $135 million and $137 million. Previously, we had expected our operating expenses for the full fiscal year to be toward the upper end of our prior guidance range of $132 million to $137 million.

Our effective tax rate for the third fiscal quarter was 29% compared to 24.1% in the same quarter last year. The increase is primarily related to the jurisdictional mix of our earnings. We currently expect our effective tax rate for the fourth quarter and the full fiscal year to be within the range of 20% to 22%.

Previously, we had estimated 16% to 18% for the full fiscal year. Diluted earnings per share were $0.39 this quarter. This includes the adverse impact of the material quality costs of approximately $0.04 per share and approximately $0.03 per share related to the higher effective tax rate compared to the same quarter last year.

Diluted earnings per share were $0.53 in the third quarter of fiscal 2014. Year-to-date, diluted earnings per share were $1.75, including the combined $0.07 per share adverse impact of the material quality costs and higher tax rate.

This represents an increase of 25.9% compared to $1.39 last year, which included a $0.06 adverse impact associated with the asset impairment charge. Turning now to cash and balance sheet related items, capital investments for the quarter were $3.6 million, bringing our year-to-date capital spending to $8.9 million.

For the full fiscal year, we currently expect our capital spending to be within the range of $12 million to $15 million. Previously, we had indicated a range of $10 million to $15 million. Depreciation and amortization expense for the quarter was $4.6 million.

We purchased $15 million of our stock during the quarter and we have approximately $85 million of authorization remaining in our share repurchase program. We generated cash flow from operations of $25.2 million and we ended the quarter with a cash balance net of debt outstanding of $172.4 million.

I’ll conclude my remarks with a few comments on recent sales and orders. During the third fiscal quarter, we saw a 5% decrease in revenue for our CMP consumables products compared to the second quarter of fiscal 2015.

Examining orders early in our fourth fiscal quarter, we see that orders for our CMP consumables products received in July are trending in line with the average rate in our third fiscal quarter. However, I would caution as I always do that several weeks of CMP-related orders out of a quarter represent only a limited window on full quarter results.

Now, I’ll turn the call back to the operator as we prepare to take your questions..

[Operator Instructions]. Our first question comes from Edwin Mok with Needham & Company..

Good morning, Edwin..

Good morning. Thanks for taking my questions. So first question on the gross margin, can you help me understand the benefit of the foreign exchange rate that you mentioned? And I also noticed that your tungsten mix has continued to increase, obviously it’s very [indiscernible] at tungsten buy rate.

If I look at year-over-year as opposed to year-to-date, right, is that a conjuring factor for your gross margin?.

Yes, that is. If you look at year-over-year gross margin improvement, around 100 basis points is attributable to foreign exchange rate changes and that’s mainly the weakening yen versus the U.S. dollar since we have more yen-based costs in manufacturing than yen-based revenue, so around 100 basis points due to foreign exchange rate changes.

And then a large significant factor was also product mix, the richer product mix was a strong contributor..

Okay, great. That’s helpful.

And then I guess just trying to stay with the FX, given that you have a number of competitors that are based in Japan, have you seen them becoming more aggressive on pricing and other geographic region as a result of weaker yen?.

The weaker yen is a relatively recent phenomenon, I guess, the last 18 months or so, the weakening. And that does have some impact. But if you look at the qualification time, the bases on which we compete in our business, sort of near-term fluctuations in foreign exchange rate haven’t been a significant impact in the past.

We price our products based on performance and I think our customers recognize the value of the technology. So foreign exchange on pricing has not been that big a consideration..

Edwin, this is Dave. Just in general, I’d say the competitive intensity has been about the same as we’ve seen in the past..

Okay, that’s actually very helpful. Quickly on the tungsten, which obviously is very successful, and I think David you talked about potentially some of the newer device structure like NAND or FinFet, right.

Any way you can quantify how you think about your tungsten TAM can grow as those newer technologies go into production?.

Thanks, Edwin. We’re really excited and encouraged by the new technologies you mentioned, those 3D memory and also FinFet for logic and both of those we think will require additional tungsten and dielectric polishing steps.

For the FinFet it’s polishing a tungsten gate material and I think that’s in early stage of ramp up based on what we’ve heard from the industry leaders, customers like Intel, TSMC.

With 3D memory, there are few customers out there, Samsung in particular is already in high volume manufacturing with 3D NAND and that requires additional tungsten CMP polishing steps. We would say three to five additional steps for tungsten.

And then I think some of the newer technologies, for example, Micron and Intel this week came out with a pretty exciting announcement around 3D memory. I think that’s really in the ramp-up stage, so too early to tell.

But I think there’s definitely a confidence that this memory industry at least on the NAND side is moving towards 3D, so we look forward to participating in that growth..

Okay, all right, great.

Can I ask you about the capital structure, any thoughts about increasing capital return and how much do you have left on your buyback and any thought about maybe a permanent dividend?.

Yes.

Obviously, given the strong cash balance in the balance sheet and given the cash generating capability of the company, you can understand that capital deployment is an ongoing topic within management and with the Board, and on a regular basis we’re looking at the broad range of alternatives for capital deployment from share repurchases to dividends, mergers and acquisitions, things like that.

Our priorities continue to be the same as we’ve described most recently to fund organic growth, share repurchases and M&A. But I will tell you we have an ongoing active discussion about a much broader range of those. We invested in $15 million for share repurchases this quarter. So I think $40 million for the year.

We still have $85 million of authorization remaining under that program. Over time, we repurchased around $335 million of our stock and you’ll recall we did a special cash dividend in 2012 of almost $350 million. So nearly $690 million of capital to shareholders either through share repurchases or dividends over about a 10-year period..

Okay, great. That’s all I have. Thank you..

Thanks, Edwin. We’ll take our next question please..

Our next question comes from Chris Kapsch with BB&T Capital Markets..

Good morning, Chris..

Good morning. Just to follow up on that capital allocation discussion. I understand you guys have been looking at different options, but given the cash balance, the net cash balance and given the stock price, which has been weak reflecting what everybody understands to be sort of sluggishness in the inventory.

You guys had some formal comments about it. It’s pretty obvious to everybody.

But against that backdrop of an industry that typically goes through these cycles, whether it’s an inventory cycle, whether it’s a node transition, which is amplifying the seasonality here, why wouldn’t you guys be much more aggressive on your capital allocation? You guys are a prolific free cash flow generator.

You’ve basically generated positive free cash flow every year since you were IPO-ed including the dot-com bust and the global financial crisis when the world came to kind of a halt.

So given where your stock price is and knowing that this is a seasonal sort of funk that the industry will come out of and you feel strongly about your positioning on future nodes, why won’t you be much more aggressive on capital allocation here?.

Thanks, Chris. This is Dave. We also would agree, we have a strong cash generation business model and it’s something that we think about often. I think Bill could comment more on the stock buybacks, but I don’t think we try to climb the market but it’s something that, in terms of the capital deployment, we talk a lot about with our Board..

Is there any expectation on when – this discussion with the Board has been going on for, I don’t know, probably at least six quarters, probably more.

Is there any sort of expected timeline and when something conclusive might be expected?.

Let me put the current situation in perspective. In 2012, when we did the leverage recapitalization and paid the $15 per share special cash dividend, we had $300 million of net cash, no debt on the balance sheet. Now given debt on that recapitalization, we have a net cash balance of $172 million, so significantly less on a net cash basis.

We have a strong balance sheet. We have strong cash flow. I agree with you completely. But we continue to like the flexibility of an ongoing share repurchase, because there are also M&A opportunities out there. We’ve seen some consolidations.

We continue to have a corporate development effort in trying to identify and pursue attractive acquisitions in related areas. And so we continue to put a high priority on that..

Okay.

If I could follow up just on the commentary about the order patterns thus far into July, which are consistent with the June quarter I guess, but can you get more granular? Are those orders comprised of a mix that would suggest the most advanced semiconductors are indeed ramping their 14 and 16-nanometer nodes because publicly and I think this was discussed quite a bit at Semicon West.

Samsung is, like you said, at the high volume manufacturing for their advanced node. I believe they’re expanding that. TSMC just apparently started ramping their 16-nanometer node and has talked about a very steep ramp at that node.

So I’m just wondering if the order patterns so far reflect this node transition that’s ongoing currently?.

Yes. So we don’t have that kind of visibility to specific applications or lines within specific customers. But I would say that if you – through four weeks of the month, the orders are in line with the average of the prior quarter. So it’s a little flattish heading through the first month of the quarter..

Chris, just to comment on the industry right now, you kind of pointed out two of the brighter spots, which are the ramp up of 16 nanometers on the logic side by some of the technology leaders and also 3D memory. But some headwinds that other customers are also talking about are the increased or elevated chip inventory.

There’s concerns about smartphone demand particularly in China and also just the overall challenging macroeconomic conditions. Those are kind of some of the headwinds right now.

And if you look at what some of the customers are out talking about in terms of outlook, they are a bit more cautious especially in the near term and I think they’re hopeful for things to turn up more towards the end of the calendar year. And obviously we’ll follow along with that..

You also have to differentiate between activity on the capital equipment side of the industry and the consumables space. So as our customers prepare that ramp and as they start those ramps, they’ve invested in CapEx in the preceding quarters. And so the capital equipment suppliers have seen that and there’s a lot of discussion and dialogue about that.

From a consumables standpoint, it’s a wafer start [ph] driven business. And so we’re going to enjoy the benefits of those ramp as they ramp, and we’re early in both of those ramps..

Okay. If I can just follow up also just in your formal commentary you talked about the increasing importance of I believe CMP and innovative CMP solutions to help customers open the lid here to the roadmap at 10 nanometers and now 7 nanometers.

And I cannot be construe as you feel like your products are getting a look or getting qualified at those nodes at this stage.

Can it be interpreted – your comments being interpreted as you feel like you’ll be gaining share at those advanced nodes or is it really too early to say?.

Yes, we wouldn’t comment on specific processes of record, Chris. But I think as the requirements get more demanding, for example, a 10 and 7-nanometer that plays into our strength. We mentioned, for example, we’re increasing our capabilities in Taiwan with a 300-millimeter tool.

We already have development teams in Taiwan, South Korea, Japan, also Singapore. So as the customer requirements get more difficult on the CMP side, that’s something that we welcome and we think plays into our strength..

Okay. Thank you..

Thank you, Chris..

[Operator Instructions]. Our next question comes from Jairam Nathan with Sidoti..

Good morning, Jairam..

Hi. Good morning. Thanks for taking my questions.

Apologies if you already answered this before, but with respect to your dielectrics, now the – is the [indiscernible] older lower margin dielectric products going to be gradual or is there a possibility given the good margin differential that it might make sense to – just much more quickly?.

Thanks, Jairam. So we talked about dielectrics a bit in the prepared comments but we’ve talked about in the past is a piece of more legacy dielectrics – low margin dielectrics that was loss and I think that loss was pretty much behind us.

And what we’re really looking forward to in the dielectrics area is this transformation of our portfolio to a higher performing, also more profitable solution. And we’re going to continue to update, but we really get a lot of encouraging feedback from our customers. We secured several new business opportunities this quarter.

And we think this can really be a powerful growth driver not only to replace ourselves in place where we have lower margin dielectrics products in place but also to displace competition. So it’s really something that we’re excited about and look forward to updating you all in the future about..

Okay. Thanks. That’s all I had..

Thanks, Jairam. We’ll take our next question please..

Our next question is a follow-up question from Chris Kapsch with BB&T Capital Markets..

Hi, Chris..

Hi. Just a follow up on the dielectric opportunity there. Is there any way to quantify what the TAM is for that particular new slurry? I mean, you said that you’re getting qualified at 200-millimeter and 300-millimeter tools, so I assume that means it’s applicable to both legacy nodes and advanced nodes.

So just wondering if you could quantify what the opportunity there is? And then in terms of the qualifications that you’ve seen to-date, are they more focused in mature applications or are they balanced between mature and advanced applications? Thank you..

Thanks, Chris. So you’re right. We think this product family is broadly applicable across different segments, nodes and across 200 and 300-millimeter. And what I would say is we have several significant customers in various stages of qualification right now and they are across different segments as well.

So that’s why we continue to be really encouraged. The feedback that we get is the product is providing significantly improved performance through improved defectively, and also lower cost of ownership through greater dilutability. So it’s really been broadly – it’s a broad product rollout and we’re getting broad market acceptance..

But is there a way to quantify the total available market.

I mean effectively, could this product ultimately replace legacy dielectrics in every applications where they play?.

We think it would be applicable to just about everywhere legacy dielectrics is being used today. And as you know Chris, dielectrics polishing market is probably the biggest CMP polishing area in terms of all the polishing applications..

Okay, great. Thanks..

Thanks, Chris. We’ll take our next question please..

Our next question is a follow-up question from Edwin Mok with Needham & Company..

Hi, Edwin..

Great. Thanks for taking the follow up. Just a quick follow up on the pad business. David, I think you mentioned on your prepared remarks that you guys are looking for other pad technology as well.

Is that an indication that this – whatever you guys have on the current platform, the 200 [ph], have some limited ability to penetrate the market or any kind of way you can explain why you’re probably looking at products?.

I don’t think that’s anything new for us, Edwin. I think it’s just reflective of our ongoing development efforts in pads.

We want to complete our portfolio, and obviously it’s a market where there’s one large incumbent, and so anything we can do improve our offering whether it’s making a product that’s easier to qualify and drop in, I think that was what our remarks were reflective of rather than a very new approach.

We continue to put a lot of emphases on research and development in the pads area because we think it’s a really important growth opportunity for our company..

I see.

Is there any kind of regional players or regional – is there a local supplier in Asia that you might be able to go after on an M&A perspective?.

Yes, I think in terms of the pad market, as Bill mentioned we’re always looking at acquisition opportunities especially that are closely related to our area. But in terms of pads, I think we’re competent in our portfolio. But obviously if there was an opportunity that was available, we’d take a look at it..

Okay, great. That’s all I have. Thank you..

Thank you, Edwin. We’ll take our next question please..

Our next question is a follow up from Chris Kapsch with BB&T Capital Markets..

Hi, Chris..

Hi. Just a follow up on the pads.

The decline in the quarter despite the fact that you guys I guess continue to get more process of record wins for your advanced pads, just wondering if there’s a way to sort of qualify why this might have happened? Can you see that it just correlates with these advanced chipmakers throttling back to utilization rates or is there something more dubious here? Was there any instances of having lost a piece of business or is it really just reflected the low in the end market demand? Thank you..

Thanks, Chris. So as we mentioned, we’re coming off of five consecutive quarters of sequential year-on-year growth in the pads market and year-over-year we’re also up. So we think, as you mentioned, primarily the decline is due to the softer industry conditions particularly in the foundry space..

Okay. Thank you..

Thank you, Chris. That is all the questions we have this morning. Thank you for your time and your interest in Cabot Microelectronics..

Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day..