Joseph Elgindy - Director of IR Fusen Chen - President and CEO Jonathan Chou - EVP and CFO.

Tom Diffely - D.A. Davidson David Duley - Steelhead Securities Craig Ellis - B Riley and Company Sandy Mehta - Value Investment Principals Greg Eisen - Singular Research.

Greetings and welcome to the Kulicke and Soffa First Fiscal Quarter 2017 Results Call. At this time all participants are in a listen only mode. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Joseph Elgindy, Director of Investor Relations and Strategic Initiatives for Kulicke and Soffa. Joseph, you may begin..

Thanks, Melissa. Welcome everyone to Kulicke and Soffa's first quarter fiscal 2017 conference call. Joining us on the call today is Dr. Fusen Chen, our President and Chief Executive Officer; and Jonathan Chou, our Executive Vice President and Chief Financial Officer.

For those of you who have not received a copy of today's results, the release, as well as the 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 those forward-looking statements.

For a complete discussion of the risks associated with Kulicke and Soffa that could affect our future results and financial condition, please refer to our recent SEC filings specifically the 10-K for the year ended October 1, 2016. I would now like to turn the call over to Fusen Chen for the business overview. Please go ahead, Fusen..

Thanks, Joe. We are very pleased to have exceeded our guidance, with $149.6 million of revenue in the December quarter. While this reasonably suppress our expectations, it represents a 38% improvement over last years of December quarters. This strong pipeline performance result in a stronger December quarter earning per share over the past eight years.

While we continue to execute against our Advanced Packaging roadmap, this improvement is largely related to a strengthening environment within our core wire rates and the consumable business, facilitate through our significant alignment in memory, automotive and the industrial applications.

After meeting with many investors over the prior months, it has become evident that additional certifications regarding our core business will be helpful. I want to take a moment to clarify the strength and resilience of this sizeable as a dynamic market.

Within wire bonding, our leadership position continue to facilitate the most challenging high IO count in the stacked-die applications.

While some Advanced Packaging variations are derived from a mass reflow approach, a material portion of SiP and effectively all 3D package in modern production are addressed by our existing more bonding product family.

The alignment with our historical IR presentations, and the upcoming quarter – quarterly filings, I will like to highlight our three advanced packaging platform, APAMA, hybrid and AT Premiere Plus. AT Premiere Plus is our wafer label stuff bonding platform.

Within our advanced packaging family, we have a dominant market position with this dedicate advanced packaging solution, serving a growing microelectromechanical systems in the CMOS market segments. 2017, we are targeting that our collective advanced packaging related offering, we already present around 15% of our total increment business.

In addition to our advanced packaging target, we anticipate an improving environment for our high performance wire-based solutions, where we have dominant market shares.

With heavy utilization rate, and improving semiconductor forecast in the short term environment to major industry trend, within our core business, we are also examining ways to better serve cost sensitive applications and ensure we are best position to maximize all recurring revenue opportunities.

For December quarters, wire bonding sales increased by 5% over September quarter. Wire December quarter are typically seasonally soft, this performance was largely due to general strength in demand for our wire bonding equipment, including LED, but also our ability to identify the significant memory opportunity and deliver leading solutions.

The current memory opportunity is due to an aggressive view of capacity to meet growing market requirement for solid-state storage across consumer, enterprise and the mobile applications.

In many cases, this wire-based application content arguably the most complex high volume and the chances against packaged in production, namely 3D stacked-die for NAND. To be probably clear, this is an advanced package that relies heavily on all wire bonding technology.

We continue to anticipate NAND memory to be a major demand driver for our other digital advanced wire bonding solutions throughout fiscal 2017. Moving on to our wedge equipment business.

The sequential revenue improvement was nearly 36%, similar to focused development of our DD memory wire bonder, we have continued to target high gross applications, in general, automotive, automotive power storage and industrial applications. Geographically we continue to see a strong demand from our China-based customers.

We remain extremely focused in growing our advanced packaging solution, by driving feature and the functional release into 2017 and anticipate winning shares with new hybrid customers, while we anticipate 2018 to be a more meaningful year of adoption for our APAMA solution.

As a reminder, this platforms in addition to AT Premier cover a risk of advanced packaging technique, not supported by our core business, including mass reflow SiP, Fan-Out Wafer Level Packaging and the thermal compression.

When we look out through 2020, we anticipate our self advanced packaging opportunity to grow significantly as we continue to execute against our development roadmap. Lastly, our electronic assembly business, continued to perform well, which we opened automotive and the industrial customers.

With a goal to meet for higher accuracy placement, we feel there is a sizeable and max need in Asia for communication infrastructure applications. Accordingly, we have recently engaged with a variety of Asia based customers and will continue to aggressively drive business development effort going forward.

I would now like to turn the call over to Jonathan Chou, for coverage for the financial overview in greater detail.

Jonathan?.

Thank you, Fusen. My remarks today will only refer to GAAP results and will compare it to December quarter to the September quarter. Net revenue for the quarter was $149.6 million. Healthy gross margin of 45.7% generated $68.3 million of gross profit.

During the quarter, we generated $17.3 million of operating income, $15.6 million of our operating income and $0.22 of EPS, a very strong performance considering the typical seasonal softness of the December quarter.

As Fusen highlighted, this has been our best per share December quarter performance in eight years, well before the initial copper replacement ramp. The current strength and outlook enhance our optimism on improving wire bonding market after several years of capacity digestion.

During the December quarter, we incurred a favorable foreign exchange impact related to the strength of our functional currency, as well as a discrete insurance claim which collectively contributed $2 million to our bottom line. Turning to the balance sheet, we ended the December quarter with a total cash and investment position of $577.4 million.

From a diluted share standpoint, this cash position is equivalent to $8.05, up more than 15% from a year ago. On a book value per share- basis, we ended the December quarter with $11.43. Working capital defined as account receivable, plus inventory, less accounts payable decreased by $19.5 million to $156.4 million.

From a DSO perspective, our day sales outstanding decreased from 81 days to 72 days. Our day sales of inventory decreased from 99 days to 93 days and days of accounts payable increased from 48 days to 51 days. This concludes the financial review portion of our call.

I will now turn the discussion back over to Fusen for the March quarterly business outlook..

Thanks, Jonathan. As disclosed in this morning's press release, we are targeting revenue to come in between $185 to 1 $95 million for the March quarter. This current guidance range represent nearly a 40% increase from our Q2 '16 guidance, making this the strongest Q2 guide in well over 10 years.

This improvement indicate further support that overall business outlook is becoming more favorable, after several law under the gross year and the capacity digestion, related to the copper replacement cycle, which began fiscal 2010. There are several significant driver which are all currently and positively impacting our business.

I wanted to take a few minutes to summarize some of the most significant trend into 2017, also of our advanced packaging opportunities. First, we continue to be very positive on the new power storage applications, supported by growing electrical vehicle market and demand for our wedge bonding offering.

Looking back at fiscal 2016, this new power storage business became 15%, a significant portion of our wedge equipment sales and is anticipate to continue being a material opportunity. Next we anticipate to continue benefiting from the growing requirement for more advanced and high accuracy pick and press tool.

Our recent effort and engagement with Asia best manufacturers has confirmed this market evolution is gaining traction. We continue to be optimistic and look forward to sharing additional updates as we proceed. In addition, the strength and the size of recovering ball bonding market is significant.

We have been discussing this over the past several earnings calls, and a major underlying driver has been the other the investments in the past several years, due to capacity digestion, coupled with a low single digits, semiconductor unit growth.

While utilization rate are strong, there continues to be many growing application driving core wire bonder demand. Looking to further release at this years Consumer Electronic Show in Las Vegas. The main headlines was around virtual reality, self-driving cars, and the broadening proliferation of connected home devices.

While they are clearly several advanced packaging opportunity, a significant amount of this new feature and the product relies on our core wire bonding opening.

As discussed in the past many of these devices require LEDs, LED drivers, discrete drivers, sensor microcontrollers, as well as Wi-Fi and Bluetooth connectivity, where production costs are most critical. We anticipate high-efficiency wire bonded package and the variation of SiP to continue, feeding Internet or Things grows.

Finally, as touched on earlier, solid state drive growth is supporting dynamic and NAND fresh capacity requirement and will continue to a significant demand driver in the near term. According to Gartner, the compound annual gross rate for solid-state drives is anticipate to be .24% through 2020.

Collectively, we continue to be well positioned to benefit from many emerging opportunities, through our growing business. This conclude our prepared remarks. Operator, we will now be happy to take questions..

Thank you. [Operator Instructions] Thank you. Our first question comes from the line of Tom Diffely with D.A. Davidson. Please proceed with your question..

Yes, good morning. Well, good evening too. So, first, just a question on the level of business today.

When you look at the overall prospects going forward, do you get the sense that this is just a -- kind of a step function increase in business levels as opposed to a pull in or a timing difference on a year-over-year basis?.

So, you know, as I mentioned in my previous remark, I think we are in alignment with many industrial trend and our company is currently exposed to market for industry, other than just PC or semiconductor. So we see the strength actually come from many front and are impacting our wire bonding, wedge bonding and also our spares and consumables.

So we don't believe this is a seasonality and we also don't feel this is a bubble, a big bubble ahead of us. So Tom, I don’t if I answered your questions..

Yes. So maybe I can add a little bit, in terms of the – its definitely the – those are the drivers that Fusen just listed, but I think in terms of the way the volume have come through has actually shifted in the past, where we're guiding after you know, a nice guidance for Q2, this kind of quarter.

So without guiding ahead ourselves, it is possibly that this could be a third year that will have a similar pattern as previous two years..

Okay. Yes, over the last….

Yes, if you look at year-on-year it’s pretty healthy from a growth perspective..

Okay. Yes, if you look at the last few years, it seems like the normal fourth quarter slowdown started a little earlier than it had previously, started more in the third calendar quarter versus the fourth calendar quarter. But this is extremely unusual, to have strength -- sequential growth in the December quarter..

Yes..

Okay.

So, I guess when you look at the drivers, and you laid out a lot of them between IoT and the NAND business and just the overall kind of automotive and other, can you kind of prioritize which of those are the bigger drivers that you're seeing this year and which ones you think are the biggest long term drivers?.

Well, I think memory for sure, I think is sustainable and in a big way, particularly in NAND, 3D NAND, and printed NAND, also wire bonded SiP, as well as our hybrid SiP is quite favorably impact our business and we believe, I think LED we are gaining market shares in ball bonder.

We also see quite favorable impact from out auto industry in the power storage, as well as traditional automotive devices. In the meantime, we put our focus in spares and consumable and see a good result..

Okay.

When you look at the fleet of cooper wire bonders that you've installed over the last five years or so, are they capable of all these new drivers that you talked about, the IoT, the NAND, the LED, or is that a different type of ball bonder that's required?.

Yes, I think so – I think for certain die IoT type of devices which is very cost sensitive, they definitely can do the job. But as I mentioned in earlier calls, when it comes to basically more sophisticated looping for the SiP, being used by the utility smartphone customers, that requires kind of the latest wire bonder that we have..

And we believe there will be more and more very complicate wire bonded product required in the market and which – we have a very close relationship with our customers..

Okay. Great..

Another data point for you, is really 73% of all the ball bonders has actually, is copper capable with kits – this past quarter..

Okay, good.

And then finally, when you look at the electronic assembly part of the business, how do you view that on a go-forward basis? Is that a growth avenue for you as well at this point?.

Of course, we do believe this is going to be gross past for us. This is a market very competitive, but we can believe we have good opportunities, by putting proper resource and I think we are again in summer catching, we don’t need to put even more R&D to compete in this market..

Okay. Thank you very much..

Thanks, Diffely..

Thank you. Our next question comes from the line of David Duley with Steelhead Securities. Please proceed with your question..

Good morning, or good evening to you guys. Congratulation on a nice quarter and good guidance. Maybe you could help me just a little bit frame the size of some of these markets. You've talked about the 3D NAND market.

Could you help us understand, for K&S, how big a piece of business that is on a quarterly or annual basis? And what do you think the growth trajectory will be for you guys?.

I think this market, as I mentioned, anticipate growth even for the solid state drive, is more then 20% per year.

I had a discussion with some customer, many working on the NAND, they gave me a number if all hard disk drive need to replaced by NAND, Flash, this industry need to have not only market fab, its going to be tens and even hundreds of fab to make it. So I think this is a significant market.

And NAND, I think high end is toward NCROW [ph] application and also solid state drive. So we do believe this is very big market..

Yes, and just to give you a little bit of kind of reference points, its from percentage perspective, I think historically its been 20%, our total ball bonder business is now about 30%. So it’s up about 10% from historical level..

Okay. And I guess another just question kind of on the year-over-year growth. I think it's surprising that in the March quarter you're looking at this kind of -- I guess on a year-over-year basis it's like $30 million or $35 million. And I guess in your prepared remarks you highlighted that most of this is coming from your core wire bonder business.

Is that the way to look at it? When you look at the $35 million or whatever the dollar number is on an annual basis, on a year-over-year basis, where is the growth coming and what is giving us the upside in the quarter?.

David, we also mentioned which bonder is very strong, and especially in the power storage in electrical vehicle demand and I think this industry going a bigger way and this is a good trend for us and not only – start from US, I think they will main region, start to put all focus in this power storage - always bonder not only a power storage and auto, we see applications start to be in automotive energy, which our customer make DC and AC inverter.

And we also customer need to make IGBT devices, this is for high power transmission base station. So here and there, actually this industry actually start to – actually more diversified and we are seeing different impact from multiple industry..

So, when you look at that $35 million or $40 million growth on a year-over-year basis, I guess obviously there's multiple pieces of the wire bonder or wedge bonder business that are accounting for most of that growth.

Is the advanced packaging business growing on a year-over-year basis?.

We actually in our last earning call, we gave guidance that this year our advance packaging occupy roughly 15% of our total revenue. And we are working hard and we do believe we can achieve this goal..

Okay. And I guess one of the things that struck me during this earnings season and listening to lots of companies report, particularly the large test and assembly house, they started off -- they also had a better December quarter and gave better than expected March guidance, I think, on a seasonal basis.

And one of the key things that struck me on their conference call is essentially they're talking about overall IC unit volumes I think growing from 2% to 3% in 2016 to 5% to 7% in 2017, so kind of a doubling, I think, of the IC unit volumes. And I all of a sudden -- that seems like it's translating directly into your business.

So, is that one way to look at why things are so strong is it's fairly simple, we have a lot more units that need to be packaged?.

Yes, you know, the overall population is increasing and the number of device per person is increasing and connectivity between people to people or people to stuff this is increasing. So overall, I think this industry need to have more package capacity to deal with a increasing semiconductor demand..

Okay..

If I could – in terms of our [indiscernible] is inline with what you heard from OSATs, in terms of 6.5%, 7%, but we believe our stand will actually grow at a higher rate per year in the future because we are focusing on some of these higher growth mark, kind of the space..

Okay.

And I mean, are you comfortable at this point to talk about, kind of on an annual basis, for your -- maybe perhaps your fiscal 2017, what you think the growth rate would be for overall?.

Well, we give our quarterly guidance, but I think it’s not a secret, it looks like the end years [ph] average above 650?.

655.

I think we feel comfortable..

Yes. I guess given the numbers that you've just posted, it would appear that the current estimates for the Street are a little conservative on the top line growth rate. I guess it's -- and I had to try to ask on the annual basis, so thank you..

Okay. Good try. Thanks..

Thank you, Dave..

Thank you. Our next question comes from the line of Craig Ellis with B Riley and Company. Please proceed with your question..

Hi. This is Peter calling in for Craig Ellis. Thanks for taking the question.

Just on the cash balance, how much of this is onshore? And how do you plan to prioritize using your cash?.

Yes. The current cash is about 12% onshore and the rest are actually offshore. And we have actually been continue to plan ahead in terms of how we can actually have some flexibility in the future.

So, so you know, in terms of future movement and so for obviously, this also has to do with the new administration that’s in the offence, we believe there is going to be some pretty good flexibility going forward, not just from a administration's, new tax flow perspective, but I think we are in a pretty good shape for that.

The prioritization of our capital continues to be pretty consistent in terms of how we can - how we can basically grow our portfolio. We are investing more internally on our organic initiatives.

So going forward, that Fusen mentioned that some of our platforms or product groups require some additional R&D and which we are continuing to do that to be - to be more competitive in the market that they serve.

And after the organic side, if a good opportunity come through that’s more adjacency that make sense for us, as you know we're every conservative in our evaluation from an inorganic kind of opportunity perspective, but if something come through we will actually consider that.

We're also going to basically continue to buyback our shares, as you know, we have a small res – balance left on our $100 million repurchase program which will continue and you know, in due course we are planning to propose another program to our board and let them evaluate based on ou8r discussion that we believe that they will support it..

Okay.

Another question I have is, just based on the semiconductor of mid to high single digits in advanced packaging and the double digit growth, against that backdrop, are you kind of going to be growing in line with this, or are you going to be growing above these rates?.

We are hoping we can grow above the growth of the industry IC unit, which the earlier caller basically said was 7% by some of their customers, we're looking at for more 6.5 in terms of TAM growth, but our SAM that we're looking to be actually higher than that.

And with that – as you know, we guide just current quarter but this is not a guidance per say, internal long-term, but we do believe our SAM to grow probably more on a double-digit 12% level..

So Peter, again, you are asking advanced packaging, so want to assure you on advanced packaging, in terms of product, it’s the most focused product in our product portfolio.

We put effort to defend and also grow wire bonder, but advanced package I think in our futures and we do believe that we have good program and we believe we are making traction in advance packaging..

Thank you. That’s all I had..

Thanks, Peter..

Thank you. Our next question comes from the line of Sandy Mehta with Value Investment Principals. Please proceed with your question..

Yes, thank you. Congregations, guys, on a very strong quarter and very strong guidance. So very well done. You had mentioned on your comments that the customers had underinvested during the past couple of years.

And I was just wondering if -- does that imply that there is sort of some pent up demand for your products and perhaps the capacity utilization or obsolescence of your products at the customer level -- your customer’s levels is very high? Could you just maybe expand a little bit on your comment, please? Thank you..

I think if you see say, five years ago, five, six years ago there was a lot of investment in our copper products, so we mend there was a view of over capacity. So capacity digestion is maybe due to you know digestion of the capacity they brought up in couple years ago. But as a number one unit annually required increase.

I think our customers is needed to purchase the new equipment. And the annual gross rate was changed from single digit to more percentage, I think that also helped our situation..

Yes, maybe I can add a little point, a few points here.

So Sandy – we track the – we monitor our customers utilization rate quite closely, we do this on a monthly basis and the current utilization that we see its about in the high 70% level and this up about 5% from last year at this time and as we have said in early – in the past, when it gets about 80% then they have to trade a new purchases.

So these new purchase is obviously is to add the capacity and we also have seen basically additional orders come from basic because of the complication of the package itself, they need to buy new wire bonders and other equipment.

So – I think the –I see unit growth rate, plus these utilization all kind of come together how we can see that things are you know, on a more positive trend..

Okay. And one follow up question. Could you just maybe comment a little bit on the outlook for your SiP business and also for your LED packaging business? Thank you..

I think that we have – I guess, SiP at the least moment, our understanding is the biggest growers in advanced packaging. And we have a true product to deal with, one is our hybrid, which we can have customer to put both passive and active in that same package. In the meantime, I think our ball bonder is also very capable to SiP.

So it depends on customers and need and we do believe SiP is the strongest growth in terms of package at this moment for us..

And the LED packaging?.

LED, actually you know, LED is a very competitive market and we have a model and focus on LED market, I think in the past two quarter we are probably gaining a couple point of market shares. And we do believe this is a bigger market and we start to put our effort probably few months ago and we have seen the result..

Yes, because it’s very cost sensitive and our LED bonders basically is the highest accuracy in terms of best performance, but we need to compete in the – this cost sensitive market. So we have a lot of efforts in terms of how we take market share and protect our margins..

Okay. Thank you very much and congratulations, again. Thanks..

Thank you..

Thanks, for the question..

Thank you. Our next question comes from the line of Greg Eisen with Singular Research. Please proceed with your question..

Thanks and good morning. Can you talk a little bit about gross margin this quarter, the factors that drove it year-over-year and versus last quarter, and kind of versus your longer term average over the last few years. It seems -- I guess at 45.7%, it's at the lower end of the range.

Could you talk about what's driving that?.

Sorry, Greg. Can you just repeat your question, again..

Okay. I'm sorry. I was asking about gross margin and what are the factors that were driving it this quarter, because it's at the lower end of the long term range that you've been running at over the last few years..

Yes, I think, you know, we have been basically indicating that, while we actually target about 45% in terms of what historic actually gross margins, we are actually trying basically kind of be in a range of 40% to 45% from a gross margin kind of range perspective on a longer term basis.

However, the fact that we are actually selling more products and solutions and there is actually some basically – some of their cost sensitive markets, we are seeing basically that gross margin level to be around so 45%. In the past quarter, it has actually gone up to about 46%, 47% in some of the quarter.

Historically, when basically the IDM makes to the sub cons kind of – or IDM picks up, the margin tend to get better because of the volume purchase agreements on some of the OSATs that will drive the gross margin lower.

But we are continuing to kind of target that 45%, you know, it could be actually slight over depending on the volume, the mix of the customers that we have are going forward..

Okay. Okay. And talking about your overhead levels, just looking at the variable overhead, using $48 million as your fixed cost base -- tell me if I did my math wrong. But I'm guessing that variable overhead came in at a very low single digit number, more like 2% on top of that $48 million, which is kind of below where you've been in the past.

Could you talk about what factors would drive that?.

Yes.

So the way we – I would guide, how you model is still $48 million, plus about 4% to 6% variable in terms of the – this per quarter, in terms of the fixed cost it would be 48 and variable would be 4% to 6% tied to over revenue and if we look at the actual OpEx that came this quarter is lower at $451 million and this is something I mentioned in my prepared remarks in terms of the favorable foreign exchange thing that we had, as well as the discreet to one time insurance claim that was about $2 million that fell through the bottom line that helped, that’s why you're seeing our cost all lower..

Okay.

That insurance gain, the $2 million, was $2 million just for the insurance after tax?.

Insurance and the favorable foreign exchange gain, the insurance claim was about 800,000..

$800,000, and combined it was $2 million..

Yes, so 1.2 for Forex and 800,000 for insurance..

Okay. Okay. And it sounds like you didn't buy back any stock in the quarter.

Am I correct in that assumption, or any meaningful amount of stock?.

Yes, yes, that’s correct. But we do – we do have a plan out there. So we do plan to buy some buybacks momentarily..

Right. And just turning back to the advanced packaging business, I guess in prior quarters you had said the expectation was that it could -- your target contribution, 15% to 20%. I think -- did I hear you correctly? 15% is an expected contribution this year, this fiscal year, from the advanced companies.

FEBRUARY 02, 2017 / 1:00PM, KLIC - Q1 2017 Kulicke and Soffa Industries Inc Earnings Call packaging products to the revenue line? Is that really more of a function of being at the low end of that range because of the strength in the core business?.

I think its – I think what we said is, 15% of the total equipment will be advanced packaging, and that’s really where we are aiming and that’s really where we our setting our self to grow year-on-year in the future from a percentage mix perspective from a total equipment side, again other non-AP equipment that we sell..

Got it. Okay. I'll let someone else ask. Thank you..

Yes. Thank you..

Thank you. [Operator Instructions] Our next question comes from the line of Tom Diffely with D.A. Davidson. Please proceed with your question..

Yes, thanks. Just a quick follow up. Just curious what the mix was between the IDMs and the OSATs during the quarter, and what -- if either group was the growth you're seeing year-over-year.

And then when you look out on a go-forward basis, is it the large customers or the small customers that you think drive a lot of the growth this year?.

Yes, the mix were basically for first quarter, it’s about 65, 35 sub-cons to OSAT to IDMs..

Okay..

And that’s really you know, that’s somewhat normal. And from a types of customer perspective, you know, it think its – the usual, the current – this was, if you look at our K, there is actually a top l0 list, that list is pretty – is still pretty consistent.

You'll see Haoseng, which is our China distributor and lot of our purchases were sold, purchased by Chinese OSATs, we'll becoming through there and they've been consistently on our top – of our top 10. So smaller – our customer list is not that long. So we say they are all pretty sizeable..

Okay. I wasn't sure if, when we moved to IoT and NAND and LED, if you'd get a nice broadening out of the customer base versus the big three or four OSATs that dominated in the past. companies..

You're right, they already - LED space definitely has a smaller customer, but we still – we're still somewhere continue to be selective in terms of you know focusing on those LED customer that has actually, lets just say they have more sustainable and kind of competitive strength over time..

Okay. Thanks..

Thank you. There are no further questions at this time. I'd like to turn the floor back to Joseph Elgindy for closing comments..

Thank you all for the time today. As always, please feel free to follow up directly with any additional questions. Melissa, this concludes our call. Good day..

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation..