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Rofin-Sinar Technologies, Inc. (NASDAQ:RSTI)

F4Q13 Earnings Conference Call

November 7, 2013 11:00 AM ET

Executives

Günther Braun – President, Chief Executive Officer & Director

Ingrid Mittelstaedt – Chief Financial Officer, Treasurer, Executive VP & Administration

Analysts

Patrick M. Newton – Stifel, Nicolaus & Co., Inc.

Mark Miller – Noble Financial Capital Markets

Shawn Lockman – Piper Jaffray

Jiwon Lee – Sidoti & Company

Operator

Welcome to Rofin-Sinar’s Fourth Quarter and Fiscal Year 2013 Financial Results Conference Call. Today’s call is hosted by Mr. Günther Braun, Chief Executive Officer; and Ms. Ingrid Mittelstädt, Chief Financial Officer.

Following management’s comments, you will have the opportunity to ask questions. Please go ahead.

Günther Braun

Thank you. Good morning or good afternoon to everyone. I’m here in Plymouth, Michigan together with Ingrid Mittelstädt, our CFO. I hope you all got the press release containing our fourth quarter 2013 results. We will give you some comments about our business and performance and then we will open it up for questions.

Now, before we start, I would like to make the usual statement about the information you are getting in this conference call Safe Harbor statement. Our discussions may include predictions, estimates, or other information that may be considered forward-looking. While these forward-looking statements represent our best current judgments on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. Throughout our discussions, we will attempt to discuss important factors relating to our business that may affect our prediction. You may also want to review our last 10-Q and 10-K filings for a more complete disclosure of financial risks. The company disclaims any obligation to update any forward-looking statements.

Okay, overview, I think we have delivered a good fourth quarter and fiscal year performance which [indiscernible] guidance. The net sales, net income earnings per share [indiscernible] better than our projected estimates while our gross profit was challenged by less favorable product mix towards the larger portion of fiber lasers, and Ingrid, of course, will talk a little bit more about that.

We experienced the strongest quarter for sales in 3Q 2013 in the medical device industries and the solid quarter in sales to machine tool Consumer Electronics and Semiconductor industry.

On a geographical basis, sales to all countries within Europe were strong. North American business was stable and Asian sales were weaker mainly due to softer sales in China. And this is somewhat the condensed summary for the quarter, but let me now continue with our standard review of the fourth quarter ended September 30, 2013. And if you have seen from our press release, we reached sales in the fourth quarter of $147.6 million, which is $100,000 higher than in the comparable quarter in fiscal 2012.

And you remember, our top line guidance was $140 million [indiscernible] achieved that by 7.6 million. We delivered the sales pattern, where usually the strongest quarter in sales is the fourth quarter, and again, it was interesting, because towards the end of the quarter we were able to recognize a significant portion of the quarterly sales, which helped us, of course, to overachieve this forecast.

The sales in our Micro and Marking business mainly reflect the reasonable semiconductor business, a very slow solar business, a good smart cards and electronic business, and we have to say remarkable medical device business in compared to last year’s fourth quarter. Net sales decreased by 2% to $73.9 million or they contributed 50% of sales in the fourth quarter.

Sales in our Micro business decreased 3% compared to the fourth quarter 2012 and reached $53.5 million. The Micro business contributed through the 50% of quarterly sales and the major changes came from the decrease in business to the machine tooling industry and automotive industry whereas military business in comparison to last year of course increased.

Our component business increased 19% and reached $20.2 million in the quarter, representing 14% of quarterly sales and this time it was a strong quarter again for our laser diodes from [indiscernible], but also our beam delivery products from Orthoscan contributed nicely. Inside the way, our service and parts business was $39.1 million and approximately 26% of quarterly sales very good. And as usual, we don’t see any indication for reduced business levels at the customer side given these numbers.

Now, coming to the breakdown of our quarterly laser sales by industry, Automotive contributed 5% versus 8% in 2012; Machine Tool contributed 37% versus 33%; in semiconductor electronics 22% versus 28% and clearly there we missed the Solar business and semi [indiscernible] 1,293 lasers, which is approximately 5% more than 71 or 71 lasers compared to last year’s fourth quarter.

So our macro applications we shipped 535 versus 438 last year. There is clear trend, higher volume of lower power due to laser compared to last year plus 50% a unit, and high power fiber lasers plus 190% compared to last year’s fourth quarter, that to left high power CO2 lasers we have seen minus 32% down. And then coming to Marking and Micro the comparison was 829 lasers versus 855 lasers. And you still may be remember, we had last year a large volume business with EMS manufacturer in China.

Now some comments to the 12 months figures, the realized sales of $560 million in the 12 months period versus the $540.1 last year. The result was an increase of 4% or $19.9 million from the comparable quarter – from the comparable period in fiscal 2012.

Net income in the 12 months period was, of course, impacted by the change in technology and product mix to our fiber lasers and amounted to $34.8 million, or 6% of sales. And for the 12 months, the sales allocation was Micro 38%, Marking and Micro 49%, and our component business 13%.

Now, let’s get to the annual geographical split, Europe was somehow at the same level 45% versus 44%, but many systems end up in Asia, but that’s what we invoice directly to the customer here. U.S., North America we have 20% versus 22% in 2012, and Asia we have 35% versus 34%.

And the breakdown of the 12 months laser sales by industry is as follows: automotive 8% versus 7% in 2012. And I have to say, we have seen also a good Micro and Marking business to automotive in first year suppliers. Machine tool was 37% versus 35% in 2012. And you remember we have a large here to order out of China for all type cutting which basically disappeared.

Semiconductor, electronics flat 27% also in 2012, what we have seen so far the trends that semiconductor was lower solar was really down in comparison 2012, and electronics was up. And others 28% verus 31% in 2012, and I would say besides medical device also military goes up in comparison.

During the 50 year we shipped the total of 5,380 lasers versus 4,338 lasers, and this is our 1,032 lasers more compared to last year and then, we go into micro and marking – 2,125 lasers versus 1,682 for macro applications. As I mentioned higher volume on the lower power two lasers side and on the fiber laser side and 3,255 lasers versus 2,656 units were for marking and micro application.

And now, let me hand it over to Ingrid who will further comment on the financials. Ingrid, please?

Ingrid Mittelstaedt

Thanks, Günther, good morning and good afternoon to everyone. Our quarterly revenues of $147.6 million were above our expectations and nearly at the same level as in Q4 of fiscal year 2012, compared to the fourth quarter of last fiscal year the growth profit decreased to 34% from 34.7% mainly due to an unfavorable product mix in all three ends and of course our Günther already mentioned a larger portion of fiber lasers and we have also comparing to last years fourth quarter, higher fixed costs related to the manufacturing and qualification of new components for our high power fiber laser.

SG&A including intangibles amortization for the fourth quarter represented 16.8% of net sales compared to 17.2% in the corresponding period last fiscal year, in absolute figure SG&A decreased by $0.6 million to $24.1 million for the quarter, and this decreased in SG&A expenses is mainly a result of the decrease in lower of doubtful accounts and our lower IT expenses. R&D expenses for the fourth quarter amounted to $10 million or 6.8% of total revenues compared to $10.5 million or 7.1% of total sales in the comparable period of fiscal 2012.

Quarter growth spending was in both quarters $11.1 million. The main R&D activities are still related to the expansion of our fiber laser and ultrashort-pulsed lasers product portfolio and the manufacturing cost reduction program for the high-power fiber lasers. Coming to other income and expense the quarterly net other expense amounted to $1.5 billion, compared to $0.7 million in the comparable period of fiscal year 2012 and the increase in the other expense is mainly relates to higher net exchange losses generating few in the reporting quarter our main part of that exchange losses are unrealized.

Our effective tax rate on income before income taxes and minority interest for the fourth quarter was 28.9%, compared to 31% for the same period last fiscal year, and the lower effective tax rate is a result of the generation of taxable income in countries with lower tax rate and the utilization of R&D credits in the U.S.

Even with the lower gross profit, and the negative impact of exchange rate fluctuations we were able to manage of our operating expenses and generate net income that was higher than expected. The net income for the fourth quarter amounted to $9.8 million and resulted in diluted earnings per share of $0.35 based on $28.4 million weighted average shares outstanding.

Now, coming to the balance sheet, the weakening of the U.S. dollar mainly against the euro comparing the exchange rate from September 30, 2013 versus September 30, 2012 resulted in a change of approximately 4.7% but other currencies like the Japanese yen and fluctuation between 15% or 25% in the same period, therefore the impact on the balance sheet officials [ph] could be differ and depending on the geographic cash distribution of the corresponding balance.

Trade accounts receivable net amounted through $110.7 million and increased $2.7 million compared to last fiscal year, mainly due to the impact of the exchange rate fluctuations of $2.1 million. The days sales outstanding slightly decreased to 72 days compared to 73 days last fiscal year.

Net inventory decreased by approximately $3.6 million to $198.6 million in fiscal year 2013. We were able to reviews inventory by $9.5 million, mainly in working profits to adapt to the lower backlog, but this was partially offset by higher demonstration inventory related to our new fiber laser products.

And these high decrease was partially offset by the impact of exchange rate fluctuations that increased inventories by $5.9 million. Based on the cost of goods sold figures, inventory turned approximately 1.8 times during the year. Total debt decreased again by $3.9 million and amounted to $18.6 million, compared to $22.5 million of September 30, 2012 and this is mainly due to repayments to bank loans.

Now I’d like to give you some information related to the cash flow. Cash and short-term investments increased by $35.8 million to $137 million during fiscal year 2013, the impact of exchange rates fluctuations was to increased cash and short-term investments by $2.9 million.

During the fiscal year, the company generated $57 million from its operating activities, we used $15.5 million an investing activities mainly due to capital expenditures of $16.2 million, $9.4 million were used in financing activities mainly for the purchase of non-controlling interest or through Chinese subsidiaries amounting to $4.3 million, net repayments of that of approximately $4 million, and for the purchase of treasury stock under the share buyback program amounting to $4.1 million. These was partially offset by the issuance of common stock amounted to $2.9 million.

As I’ve just mentioned, and you have seen in our press release, during the reporting quarter, we completed a share buyback program authorizing August 2012, and as of September 30, we purchase 684,340 share for a total amount of approximately $14.8 million was resulted in an average share price of $21.6 per share.

Now coming to our earnings guidance. As a result of the backlog situation our current market judgment and the global economic environment we want to give you the following guidance for the financial performance of the first quarter of fiscal year 2014.

Due to the low beginning backlog in the Christmas holidays, we currently focused revenue for the first quarter in the range $122 million to $127 million. Of these decline in revenue we estimate gross profits for the first quarter in the range of 31% to 32% of net sales. And the period expenses including intangible amortization at approximately or in the range of 29% of net sales income before income taxes and minority interest between 2% and 3% of net sales. And the effective tax rate was depends mainly under over mix of results in the different countries on the non-deductible expenses for tax purposes should be in the range of 31% to 32%.

Intangible amortization and fixed assets depreciation are estimated between 3% and 3.5% of net sales. And now I have to say that due to delays in many projects and different industries and regions especially in Asia. And the more crucial sentiment of our investor customers we’re not able to provide every liable guidance for the whole fiscal year 2014 yet. So, we will update this next quarter. This guidance is only an estimate and again subject to all the risks of our Safe Harbor statements.

And thank you for listening and let me hand it back to Günter.

Günther Braun

Thanks, Ingrid. Of course other updates here, and let’s continue this quarter of course was also merged by this slower level of all the entry across all the geographical reason. In August and September our entry was below our expectations, and mainly due to a lack of bigger volume order from China towards electronic industry, and let’s order from the medical device industry in North America, but also other industries like the solar and semiconductor industry was lower maybe one positive comments here when we take our October order entry. So far the number is bigger than August and also the September order entry. So, October to start is I would say okay in this quarter in terms of order entry.

European orders improved slightly quarter-on-quarter, but could not compensate for the reduction in other geographic regions. Our backlog end of September 2013 resulted in $180 million to which of course the challenging starting to the new fiscal year, current backlog includes $48.7 million dollars for macro business decided last quarter with $53 million and $57.4 million for micro and marking and we started last quarter with $71 million and $12 million backlog for components, which and the starting from last quarter were $17.7, when you see slower starting point for us and this is reflected of course in the quarterly sales.

So, the quarterly order entry as you’ve seen was $123.5 million and below our expectations, the order entry by region in North America in compared to last year’s fourth quarter decreases by 14% and Asia about 17% and European order entry decreased only 2% when we compared those quarters.

Another comment on the North American order entry, what we have seen – we have seen good business without multiyear, one supplier for the marking business. Otherwise there is no specific industry to main on the other sides, we have seen slower orders in military and defense and for micro applications to the medical device industry maybe the outcome and the effect of medical device tax here in the address. Because the rest of the goals medical device business was good.

Asian order numbers decreased mainly due to mixing bookings in consumer electronics and semiconductor industry, bookings from the machine tool industry in China we’re okay, but we get very causes time at the moment from the market and by the way this week is a machine tool exhibition in Shanghai, where we should get more clarity on the trend.

On Asia I have to complement Japan we have seen best order quarterly order entry in fiscal year and it seems like the Japanese economy has improved and our guys do the good job. On European orders, they were approximately at the level of last year first quarter, but increased sequentially so last quarter it was lower. Orders booked across the industries they want know one time larger order and this means just of business with the machine tool, automotive first tier suppliers smart card electronics and also medical device industries.

Now coming to the outlook by our main industries from on machine tool I talked already little bit we effect from slower demand from the machine tool industry in China especially from the Chinese yen for high power fiber lasers demand, I think it’s good. But of course there is a limitation for us due to fiber laser market pricing. The European team and U.S. demand should be stable, but I don’t see so far a very big upside potential.

The lower power field to laser, we expect to continue as in the past and or is expected to continue as in the past and dominates of course the organic material for 13 applications. We believe to see higher order entry in Q1 due to timing of OEM order replacements. So I think there is some positive upsides.

On automotive, sub suppliers, we had a very good project base for new micro applications. We expect some orders this quarter, but also expanded marking our volume projects should contributes to order entry. So we expect improved order entry from these sectors.

On the semiconductor side, there we have the sort of split opinion of what’s going on. On the back end marking side, where we have our largest activities, there order entry could be better. If you look to other activities like ITBT a new link project, they are in the pipeline and there are potential to close such projects.

And coming to the electronics, there again the project base is good. Our new opportunities for the laser manufacturers of course even when you read the press currently, as you know demand in customers were short lead time requirements. New consumer device is driven new investments and some laser manufactures apply to get this business. So applications are marking of course cutting of different material electronics at fire. Of course as the plastic and metal and the standard is of course start welding tool. So let’s see who wins such projects for competition phase.

Then coming to the solar business, solar industries sales, we expect some business for efficiency increase of solar cells and we also waiting for new tech project in China. So we see most likely positive bookings in this quarter, which would have us also from this industry.

Then we have the medical device industry. There I mentioned already that the U.S. business is impacted by the medical device sales increase due to new loss require in tracking of the intense. European demand is stable and Asian activities should grow. So in the medical device tax, when risks comes back, we should have decent $50 million.

Then on the Military and Defense, there we see really no change at the moment and there mainly we depend on the U.S. program. And that’s what I would call is outlook of our main industries and I think everybody is waiting now on the update on our fiber laser or especially high power fiber laser activities. There as part of our technology roadmap, we have decided to move in production to the 200-watt pumping modules and 1.5 kilowatt fiber laser modules.

So the biggest cost reduction over the next quarters, we will seen in our 3 kilowatt and 4 kilowatt fiber lasers. It also allows us to introduce the 6 kilowatt fiber laser beginning of next year where we have already some customer requests. We have built already for 6 kilowatt fiber laser, and it is less testing, so its not just I would call it a prototype. So this is on the way, we are on track with development of our fiber laser modules and fiber laser combined to increase output power to fiber laser modules to kilowatts.

So two important steps on our AP activities. There we have not yet designed this for our very first manufacture data, our NDA or [indiscernible]. We still work to improve the laser efficiency life time and we expect the next results pretty soon mid of November, and we will then decide the next steps. So coming to the numbers of our fiber lasers what we did. You realized sales with fiber lasers or fiber laser related products in our first quarter of $26.5 million, which $389 million.

Order entry was only 267 units and 23.8 million, but this is more towards the low-power fiber lasers. For our low-power fiber lasers, we are still working on new customer wins for a broader allocation of production volumes. So order entry was a little bit slower than expected, but it looks to me its much of, it's all of within the industry.

Our mid power range has gained momentum. And it is mainly in consumer electronic applications and in medical device industry, of course that is the normal price pressure in the markets, but I feel good sectors and multiple orders in this area. To the high-power fiber laser, I think I mentioned it already the units increased by 190% compared to last year fourth quarter. And the order entry, if you compare to last year 85% and when you compare sequentially, orders units increased 33% to the third quarter.

So you will see that if the trend towards more units, impact our fiber laser. And the backlog ending September 30 was $29.1 million and approximately 50% of this backlog dollar value is for high-power fiber lasers. Then I think that these are my comments, I’m sure you will ask more about fiber laser later on. So we feel that the European and U.S. economy is I would say more stable than before we get some signs out of China which are not very encouraging.

And as the global markets continue to be challenging especially on fiber laser business, of course on the pricing side for us and the slow pace of the GDP growth in China, this might influence the business in the coming months. As previous mentioned it’s show time you have this week the BLECHEXPO in Germany, the never working in CNC machine to show in Shanghai and then two weeks [indiscernible] in Chicago. So, all exhibitions they should give us better sentiments for the business trends of the next quarters.

Despite the low beginning backlog we believe that book-to-bill ratio will improve based on current sales projects and new product introductions especially in ultrashort-pulsed lasers. And, you’ve heard from we did not give you full-year guidance in terms of sales I think we’re a little bit more cautions and would like to wait and see really the order entry of the first quarter and then we’ll come up for this guidance for the full-year. But, the target is not sure to below fiscal year 2013. As always thanks to the Rofin team for their commitment and contribution and again for better than performance in the first quarter, great job.

Thanks for listening and now we’re prepared to answer you questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) One moment please while we poll for first question.

Günther Braun

Thank you.

Operator

Our first question come form Patrick Newton with Stifel. Please proceed with your questions.

Patrick M. Newton – Stifel, Nicolaus & Co., Inc.

Yeah, good morning, Günther and Ingrid.

Günther Braun

Good morning, Patrick.

Patrick M. Newton – Stifel, Nicolaus & Co., Inc.

So, one housekeeping question from me I guess, can I get the macro, micro and marking and components orders in the quarter?

Günther Braun

Okay, let me see in the quarter.

Patrick M. Newton – Stifel, Nicolaus & Co., Inc.

Yep.

Günther Braun

Macro order and through the quarter 48.9 macro, 40 micro, 60.2 components. Around from the price direction sorry

Patrick M. Newton – Stifel, Nicolaus & Co., Inc.

And then, I guess I’m little bit surprise by lack of visibility of the machine tool side, and especially in China relative to some periods that seems to have pretty good result out of China. I guess could you help us understand maybe what’s driving some this delta you think perhaps has been and acceleration of fiber laser adoption especially in China, that’s impacting your high-power two sales and maybe I think solar definitely place a role can you help us understand relative side of our solar business?

Günther Braun

Okay, on the machine tool side as I said the order entry was too bad in this quarter. Also from China, we had also nice order entry in high power fiber lasers out of China. So, I can get invest. We had a little bit less order entry for CO2 lasers. So, that is also trend towards more fiber lasers. What’s we tell to you and to the market is that the signs and the comments of our OEM customers in China. So, they tell us that’s they feel that the whole market is a little bit slower, and they’re left bullish from machine tool in China. And that’s what we communicate, so we will see if this really comes down to the numbers in our first quarter, but I think it’s fair if we tell this to the market in my opinion.

So, and let see what we learn this week from the machine tool exhibition in Shanghai, because our sales guys are there, our Chinese guys are there, they talk to our large OEMs. And I hope, I get some better signs than what I got the last week basically. So, that’s the trend I know what you’re talking about that’s what we see.

Patrick M. Newton – Stifel, Nicolaus & Co., Inc.

Okay.

Günther Braun

Then what was the second question solar.

Patrick M. Newton – Stifel, Nicolaus & Co., Inc.

Solar.

Günther Braun

On the solar side last quarter in the Q4, the sales were even not $1 million, and also the order entry was slow in this area. And we’re working on one set where we believe we can sell notable lasers at least we believe, that we’re qualified and we have some projects were efficiency increased, and I think we mentioned that already that in China they have some rules now, that certain solar cell types have to deliver certain efficiency cell from 20%, 18% and 12% across to thin film solar cell, and so the companies have to improve the production equipment. And there we believe at least based on the project situation that’s we can book some orders.

Patrick M. Newton – Stifel, Nicolaus & Co., Inc.

Okay. That’s very helpful. And I realize that you do not want to give full-year guidance at this time, but given the base that we in the December quarter, do you think that it’s that Rofin has a chance to grow year-over-year or should we expect year of contraction on a revenue basis. And then Ingrid, there is big part of the investment pieces in Rofin has been gross margin expansion as you move through this kind of vertical integration phase with fiber lasers, can you help us or give us a framework of how we should think about gross margin as we move through fiscal ’14.

Ingrid Mittelstaedt

Of course the gross margin should improve over the years, the question will be the timing for that, because as we have seen also in this quarter is highly difference on the product mix we have each quarter. And we have really very, very good project situation, I would say, but we have a bit problem as we – the timing of getting this orders and realizing the revenues still a bit a question mark for us. And that’s the reason we would like to give you a reliable guidance.

So, of course we target at least to be at the same level as this year, and if we get better information from our customers and hence we could then give you a better information also next quarter.

Günther Braun

Maybe I can add Patrick, if you compare the first quarter was $147 million in the first quarter based on the order in terms of backlog was $137 million, $20 million top-line growth or top-line is missing and we have to allocate fixed costs to less units and of course and stand your combined with shipped of course to those more high power fiber laser is leads to in the first quarter to lower gross margin. And then of course the question is how successful we will be over the next quarters.

Patrick M. Newton – Stifel, Nicolaus & Co., Inc.

I understood. And then just one last one for me you eluded to this a little bit, but the fiber laser pricing environment, can you please comment on kind of the range or pressure that we’re seeing currently?

Günther Braun

Okay. Let’s call it, when we are in competition of course, we see a good flexibility from the market participants, no doubt about it. And but I listen and referencing that somehow we can expect more stable pricing, which I would appreciate in this market and in this business. So there is still flexibility there when of those European clearly there quoting our fiber lasers. And flexibility, we are still tried to manage it’s roughly 5% difference in pricing until we have our manufacturing costs down really over the next quarters.

Patrick M. Newton – Stifel, Nicolaus & Co., Inc.

Great, thank you for taking my question.

Günther Braun

Thank you, Patrick.

Operator

Our next question comes from Mark Miller with Noble Financial. Please proceed with your question.

Mark Miller – Noble Financial Capital Markets

I’m seeing some constructing side, I think a lot of peoples feel solar is going to be surprise add in a solar industry next year, I heard fully megawatts and I believe a few weeks to go to Chinese government I think you should some sort of mandate costs in people that adding capacity and looking for consolidation among solar soft producers. So I am just wondering if you can give us some more color there?

Günther Braun

What I know, we are working as a company, I think we will be one of the companies we’ve survived and so continues in investments, I’ve still roadmap over the next years what they want, and need to introduce on new trends, so I think that’s an advantage – for us. And I would agree on your comments that there will be a sort of consolidation in the Chinese market.

Mark Miller – Noble Financial Capital Markets

You’ve mentioned higher efficiency do you see more opportunities for the Houston in lasers as we move up to 19% or is maybe the same opportunity?

Günther Braun

I would say it’s the same story in op technology is principle to same what you will try to do. You get try to get a larger space for the sun. So it’s one thing and you try to change basically to surface that it’s collect more sun power basically, and that’s you get, yeah, better efficiency. And so it’s nothing, where I would say you need completely new lasers for that, what I see is that is this direction the companies are forced to invest to do something. That the production line from an absolute and they can make for money, and we have seen slow investments over the last quarter towards this direction, so it has to come.

Mark Miller – Noble Financial Capital Markets

So just one final thoughts, so as a lot people are anticipating on semiconductor CapEx and we’ll see a healthy increase, currently most on the second half of next year, and what’s your feeling there in terms of semiconductor are you starting to see roll off its been flattish way?

Günther Braun

I will say its more flattish as a said we are somehow split – here, on the one side our great important business what I would call back-end marking is really and that not at top level, but there others opportunity like I said, [indiscernible] the newest things, latest things where there are opportunities, and this was also one reason why our last quarter was bad in semiconductor, but it was somehow a little bit of shift within the application what we told, and dealing system, is more in $2 million plus dollar range and for this $2 million we have to sell many back-end laser marking lasers.

So its tough I have listened to other colleagues they believe semiconductor will improve will increase, I hope it does that so far, I can must give you a better insight from us, we’re such in working clouting its amounts that we can say yes its really gloomy.

Mark Miller – Noble Financial Capital Markets

And Ingrid, I think you’re suffering from call you have…

Ingrid Mittelstaedt

Thank you.

Günther Braun

Thanks Mike.

Operator

Our next question comes from Shawn Lockman with Piper Jaffray. Please proceed with your question.

Shawn Lockman – Piper Jaffray

Hi. Good morning and good afternoon.

Günther Braun

Shawn, it’s a very bad connection somehow can you get further.

Shawn Lockman – Piper Jaffray

Oh! Yes sorry this better.

Günther Braun

Wonderful! Now you are…

Shawn Lockman – Piper Jaffray

Sorry about that, I just wanted to get check details two couple of quick questions. I just wanted to get kind of your quick thoughts on what you’re seeing for on what you’re expectations after growth in the laser industry and in sound of 2014 it kind fiber laser in the mix there?

Günther Braun

I would go that for the whole industry, of course depending that we don’t see a downturn in Asia, especially in China we should be able to get close high lets apologize what we both see is of course a double digit fibre laser allocation growth in my opinion, if you’ll see two laser in terms of dollar value reduction on the unit size, it’s a question mark its lower power due to laser can make up in numbers that’s maybe possible, but overall see a two laser will come down.

I would guess more in the higher single digit percentage numbers, but on the other side there is also opportunity on solid state technology and there I also see in the high single digit an improvement or increase then you go and talking about all the different links which are necessary in this business from getting in deep but when you think about artificial calculators most of them are still solid state laser-based and the opportunity is there. So that would be my prediction for the industry in 2014.

Shawn Lockman – Piper Jaffray

Great helpful. And could you give us an update on just kind of your cost of what it is now, what you guys are targeting at this point for year end 2014?

Günther Braun

Again the cost there for it was bad connection. George?

Shawn Lockman – Piper Jaffray

Yes, yes.

Günther Braun

Can you hear me now?

Shawn Lockman – Piper Jaffray

Yes what’s the cost for [indiscernible]?

Ingrid Mittelstaedt

The cost for watt now and what you expect it to be by year end 2014.

Günther Braun

Okay thanks for it. Again same answer as usual, we never talk about cost per watt like others do. Sorry for that.

Shawn Lockman – Piper Jaffray

Very good, thank you very much.

Günther Braun

Sorry, thank you.

Operator

[Operator Instructions] Our next question comes from Jiwon Lee with Sidoti & Company. Please proceed with your question.

Jiwon Lee – Sidoti & Company

Hi thank you. First off all the Ingrid could we did well above the fiscal 2013, for fiber laser revenue?

Günther Braun

For quarterly or monthly?

Jiwon Lee – Sidoti & Company

Quarterly.

Günther Braun

Year end you have?

Jiwon Lee – Sidoti & Company

Yes.

Ingrid Mittelstaedt

Okay, revenue in total fiscal year was $87 million. Okay.

Jiwon Lee – Sidoti & Company

Say again.

Ingrid Mittelstaedt

Compared to $56.5 million last fiscal year.

Jiwon Lee – Sidoti & Company

Okay that’s very helpful. And then just wanted to talk a little about that watt modules whether or not you guys are ready for the next volume, and how does that affect your margin profile by sometime in second half of fiscal 2014?

Günther Braun

We are introducing this you’ll be getting this into production but we decided on this one and we go shift for the three kilowatts, four kilowatts lasers because they have the biggest impact. We will introduce by the way 1.5 kilowatts fiber laser and hope we should correspond before December or within December or end of December into China.

So that’s the roadmap to end if they contribute I think the fullest bigger impact we will see then in our next quarter, on this 200 watt modules and if there are any calculation on impact yield on percentage on the gross profit margins working on this we could come back on this one.

Ingrid Mittelstaedt

Yes it really depends on this on the part of this again in the three kilowatts we have there and major impact but it will depend on the part of it.

Jiwon Lee – Sidoti & Company

Okay good and in terms of the order timing that you highlighted and obviously even in the electronics side alone there are potentially some large projects that you guys are buying for but the order timing and the lack of visibility is that more to do with the economic situation or is there’s some competitive angles that putting back on from me on the guidance front.

Günther Braun

On the electronic side of course you know that’s a usual competition between some players for structuring application. And the customers of course they try to get the best product, the best result and then they decide and then the usual thing is quick delivery. And when you go and think about the next product introduction was blank in this industry then there should be some decisions I would say by end of – already by end of this year for some larger orders, if not by end of this year beginning of 2014. Otherwise it is not much the old there’s typical introduction cycle of those companies.

Jiwon Lee – Sidoti & Company

And lastly for me Günther, you highlighted some declines in this CO2 laser, but I understand correctly that part was more of the low power side.

Günther Braun

No it was more on the high-power.

Jiwon Lee – Sidoti & Company

Okay.

Günther Braun

The lower power side we had just in order entry a slower quarter in Q4, but that’s due to the timing of larger OEM orders, placement of larger OEM orders. So first quarter it looks that this turns out pretty good.

Jiwon Lee – Sidoti & Company

Okay. So a majority a lot of our best high power decline was high tool choice in machine tool?

Günther Braun

Yes.

Jiwon Lee – Sidoti & Company

Okay, which some of them you are looking to convert into your new fiber laser platform?

Günther Braun

Of course, of course.

Jiwon Lee – Sidoti & Company

Okay, I’ll sit back for now thank you.

Günther Braun

Thank you Jiwon.

Operator

There are no further questions in queue at this time, I would now like to turn the call back over to Mr. Braun for closing comments.

Günther Braun

Thanks for listening. I think we completed the fiscal year better than we expected. And you remember last year we took the full year guidance was $540 million to $560 million last quarter we reduced that and finally we delivered $500 million. I think you understand that based on this order entry in fact of the first quarter is a little bit more challenging. But we really are working and focus on order entry get up our book-to-bill ratio. And with what’s going on in the industry I strongly believe that we can deliver better numbers over the year. So thanks again I hope to talk to you all soon and have a good time, see you. Good bye.

Ingrid Mittelstaedt

Good bye.

Operator

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

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