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LTX-Credence Corporation

F1Q2011 (Qtr 10/31/10) Earnings Conference Call

November 23, 2010 10:00 AM ET

Executives

Mark Gallenberger – VP and CFO

David Tacelli – President and CEO

Analysts

C.J. Muse – Barclays Capital

Vernon Essi – Needham & Company

Dave Duley – Steelhead Securities

Patrick Ho – Stifel Nicolaus

Tom Diffely – D.A. Davidson

Atif Malik – Morgan Stanley

Operator

Good morning and welcome to the LTX-Credence Corporation’s first quarter Analyst conference call. During the presentation all participants will be in a listen-only model. After the presentation we will conduct a question-and-answer session. (Operator Instructions) At the request of LTX-Credence, this conference call is being recorded. Speakers for today’s call will be David Tacelli, Chief Executive Officer and President; and Mark Gallenberger, Vice President and Chief Financial Officer.

At this time I would like to turn the conference over to Mr. Mark Gallenberger. Sir, you may begin.

Mark Gallenberger

Thank you and welcome to LTX-Credence Corporation’s first quarter fiscal year 2011 conference call for the period ended October 31, 2010. Joining me on today’s call is Dave Tacelli, CEO and President.

After my introductory comments, Dave will discuss the company’s performance for the first quarter and discuss the business outlook. Then I will provide further detail on the company’s financial performance during the first quarter as well as provide guidance for the second quarter of fiscal year 2011. We will take your questions after our prepared remarks.

A replay of this call will be made available through December 23rd by dialing 800-642-1687, and the pass code is 22684263, or you can visit our website at www.ltxc.com. As a reminder, the only authorized spokespeople for the company are Dave Tacelli, Rich Yerganian and myself. Also LTX-Credence will be participating in two upcoming investor conferences. On December 9, we will be presenting at the Barclays Global Technology Conference in San Francisco and in the second week of January we will be presenting at the Needham Growth Conference in New York.

Now, for our Safe Harbor statement. During the course of this conference call we may make projections or other forward-looking statements regarding LTX-Credence’s business outlook or the future financial performance of the company. We wish to caution you that these statements, such as projected revenues, net income, earnings per share, operating expenses, gross margin, cash flow and non-GAAP measures as well as breakeven targets are only predictions and that actual events or results may differ materially.

The guidance provided during this call represents the company’s estimates as of this day and the company assumes no obligation to update this guidance. Please refer to our Safe Harbor statement in our earnings release for more information on important factors that could cause actual results to differ.

Now onto the call. Dave?

David Tacelli

Thank you Mark, and good morning everyone. I want to start today by saying I won’t be offering any comments in my prepared remarks regarding our announcement last week to merge with Verigy. We believe in the positive impact in this merger and what it’ll have for the combined business on it shareholders. But for now the next step is to continue to run LTX-Credence until the merger closes. Until that time, there is not much more to add on what we discussed on the conference call last week.

I’d like today to focus on the outstanding results for our first fiscal quarter, our recent ASLx product introduction and our view on how we see this cycle playing out. There are three key components to the strategy for our company. The first continuously improve on the business model that we’ve designed for a cyclical business. To aggressively see growth opportunities through competitive takeaways, and finally a strong pipeline of new cost optimized products designed with innovative technology with the ultimate goal of lowering our customers cost of test.

First, a review of our quarterly financial results. Revenues were up 3% over the previous quarter at $76 million we achieved the highest revenues for any single quarter since the merger of LTX-Credence. But while revenues were at the low-end of the range, all other financial metrics including EPS exceeded the high-end of the range. The business model continues to perform better than expected with another strong quarter of industry leading gross margin performance.

Our guidance for the second fiscal quarter reflects a softening in the market that many had been predicting for some time now. We have been consistent in our comments on the business cycle and have confidence in the independent market research firms that forecast a positive business environment over the next several years. We have also been consistent in commenting that not every quarter will be up until the right due to the possible effects of seasonality or capacity absorption causing a short-term pullback in business levels.

We believe we’re at one of those points in this cycle. There is no indication that this is anything more than a combination of seasonality and a small component of capacity absorption. The long-term fundamentals of our industry and our business remains strong. We remain highly confident that our business model can continue to generate positive EBITDA throughout an entire business cycle. The general guideline we’ve been communicating to our investors is that for every incremental revenue dollar above breakeven about $0.60 should go to the gross margin line and about $0.50 of that should drop to the bottom line.

Because of this variable cost structure we’ve put in place, we believe this formula is valid for both periods of growth and decline. On the business development front, we’ve made significant progress with several of the competitive situations I mentioned on the last conference call. We believe initial revenues from at least one of these opportunities will occur in the current quarter. These new business opportunities are in a combination of potential new customer wins and our core target markets as well as additional expansion into our new market initiatives.

In each competitive situation we are able to demonstrate compelling cost for test advantages compared to the existing solutions and remain confident we’re well positioned to win in most of these opportunities. Another major component to the LTX-Credence’s strategy has been to sustain in a strong pipeline of product development.

After launching several new products earlier in 2010, we’ve recently introduced the ASLx. The ASLx is an extension of the ASL product which has approximately 3,500 units installed worldwide. A real workhorse for the analog market including power management devices. The ASLx is the first tester to leverage technology between two of our test platforms the X-Series and ASL.

The new ASLx we use a combination of instruments currently in production on our X-Series product line and all of the existing instruments and software from the ASL. By adding these new instruments to the ASL platform, we fill a price performance gap between the X-Series and ASL products, thus expanding our total addressable market. While expanding the addressable market by ASL is an important part of the story, we view it as – we view an equally important part to develop a product where existing customers have a path forward to test their next generation devices.

We charged our engineers to develop a product that maintain the same low cost infrastructure and capital cost our customers are attracted to the ASL. But wanted also supported newer instruments with higher performance and increase multi-site capability. We also challenged our engineering team to develop a product that would allow customers to use thousands of applications already developed for a wide range of analog, power management and mixed signal devices on the ASL. And seamlessly move them to the ASLx.

We see this as a win-win for our customers. They could benefit from gaining access to new and improved ASL test system, while preserving the investment they’ve already made in existing applications. And it’s a win for us because leveraging the existing investment increases the already high value of incumbency. Our engineering team did a fantastic job meeting all of the design criteria. Initial ASLx systems are invaded now with multiple customers and we expect the beta phase to be complete in January.

In closing, we can’t control the dynamics of the business cycle, but what we can do is build a strong portfolio of customers in our target markets, implement a business model that can flex with the inherence applicability of our industry and continuously fund in R&D effort that delivers innovative cost optimized products for the market. Our progress on all of these points has placed us in a position of strength and when combined with the strength of Verigy, put the combine company in a leadership position in the SOC test market.

I’d like to now turn the call over to Mark for his detailed comments on the quarter. Mark?

Mark Gallenberger

Thanks Dave. Revenue for the quarter was $75.6 million, up 3% from the prior quarter. Gross margin expanded to 62.5%, up from 60.2% last quarter, mainly due to better than expected variable margins on our product mix. R&D spending was $13 million, which is essentially flat from the prior quarter.

SG&A was $13.2 million, down from last quarter due to a decrease in variable expenses that are tied to revenue mix such as sales commissions. Amortization of purchased intangible assets related to the Credence merger was $1.5 million, which is down from $2.7 million in the prior quarter. The new amortization expense will be approximately $1.5 million per quarter throughout this fiscal year.

There was a $116,000 restructuring charge which is related to a change in sublease assumptions on our Milpitas location. Net income for the quarter was $19.7 million, or $0.39 per diluted share on a GAAP basis. Excluding amortization of $1.5 million and the $116,000 restructuring charge, our non-GAAP net income for the quarter was $21.3 million or $0.42 per diluted share, despite the fact that revenue was at the lower end of the original guidance of $75 million to $80 million, the non-GAAP EPS was $0.03 better than the high-end of our original guidance of $0.33 to $0.39, primarily due to our business model performing better than expected.

Our EBITDA for the quarter was $25.1 million, or 33% of revenue, which excludes stock-based compensation expense of $900,000. Next, I’ll provide a breakdown of revenue for the quarter. 72% of revenue came from IDMs, while 28% came from subcontract, test, and fabless companies. 86% of revenue was for products while 14% was for service. For the quarter, we had three customers represent greater than 10% of revenue.

Now, on to the balance sheet. We ended the quarter with gross cash of approximately $117 million and net cash of approximately $116 million. For the quarter, net cash increased approximately $23 million as we generated better than expected operating cash flow driven by a strong profitably and a reduction in both accounts receivable and inventory balances. We finished the quarter with trade accounts receivable of $41.7 million. DSOs decreased to 50 days from 56 days in the prior quarter as we were successful in efficiently managing the collections process.

Inventory was $19 million, which was down $2 million from the prior quarter, driven by consumption of existing inventory used for revenue shipments. Net capital expenditures during the quarter is $1.6 million while depreciation expense was $3.2 million. We ended the quarter with accounts payable of $18.7 million and stockholders’ equity of $197 million.

Guidance for Q2 is as follows. We expect revenues to be in the range of $53 million to $58 million, and non-GAAP earnings per share to be in the range of $0.11 to $0.16, assuming 50 million fully diluted shares outstanding. The non-GAAP earnings guidance excludes amortization of purchased intangible assets of $1.5 million and any one-time expenses related to the proposed merger with Verigy including legal and financial advisory expenses. We also expect gross margin to be approximately 57%, and for EBITDA, excluding stock-based compensation expense, to be approximately 20% of revenue.

In summary, although our industry is experiencing a period of weakness, we’ve designed the company’s business model to adapt to the inherent volatility of the semi cap equipment cycle. By streamlining the operations and outsourcing our manufacturing, we successfully lowered our breakeven to a point where we believe we can generate profitability throughout the cycle.

This concludes our prepared remarks, and at this time we will take your questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And our first question comes from C.J. Muse with Barclays Capital.

C.J. Muse – Barclays Capital

Yes, good morning. Thank you for taking my question. I guess, first question I’m curious to hear your thoughts on how you see the cycle playing out and I guess as part of that can you comment on when you a see a trough and how you see the shape of the recovery from there?

David Tacelli

Hi C.J, this Dave. The first point I’d make is customers we deal with Europe, Asia, the United States, Japan. Still a pretty bullish on their prospects for 2011. So I would say that we talked about this being a slowdown related to capacity absorption and some seasonality. The reason we see that not only for their bullishness but also its not a market slowdown across all the markets we serve. We’re seeing a slowdown in areas like consumer digital, some of the PC markets which we have little exposure to and some real low-end analog. But at the same time we continue to see strength in areas like microcontrollers, automotive, standalone RF or things like power amplifiers.

I don’t think and well I say I don’t think we don’t really make predictions beyond the next quarter. But it’s not unlikely to see the slowdown continue for a period of time probably going into the next quarter. But again the bullishness by our customers for 2011 actually gives us a lot of confidence that this thing will pick backup pretty quick.

C.J. Muse – Barclays Capital

And then as a quick follow-up question, if I look at the SOC test market for 2010, it looks like it’s going to come in around $2.6 billion and look at your revenue guide here for the January quarter, it looks like your share is coming in about 10% versus the 11% you did last year. So I was just curios there, has there been some shift in share over the last 12 months or is it really more of a mix related issue in terms of who is spending this year?

David Tacelli

I think you’ve hit the perfect point, I think who’s spending the dollars. If anything we’ve made progress in a lot of the areas that I talked about, not only in our core accounts, but the new market initiatives. So I would say that its more who is spending the dollars at this point.

C.J. Muse – Barclays Capital

Very good. Thank you.

Operator

Our next question comes from the line of Vernon Essi with Needham & Company.

Vernon Essi – Needham & Company

Thank you very much and congrats on that strong cash generation. Mark, wondering if you could reconcile this EBITDA target of about 20% of revenue relative to your EPS guide. If I sort of run through the numbers I’m winding up towards the higher end of that EPS range. I guess to make a long search, are you giving us a very rough EBITDA number when you say $20 million, give or take like $2 million there or are you expecting depreciation to increase a lot next quarter?

Mark Gallenberger

Yes, actually I misspoke, I apologize, it was actually 20% not $20 million.

Vernon Essi – Needham & Company

I mean that’s what, I’m sorry, that’s what I meant to say, 20%.

Mark Gallenberger

All right. Yes, 20% percent basically take the midpoint of $55 million. It gives you approximately in the range of $10 million EBITDA. So if you kind of look at our past performance, it’s pretty consistent with our current model. So there is really no change to what we’ve been delivering at similar revenue levels. So if you kind of go back to our April quarter of last fiscal year, we did about I think it was $56 million of revenues and I think what you’ll find is pretty similar EBITDA performance. And that’s actually despite the fact that we restored the pay type [ph] we actually did pay increases this fall.

So we’re maintaining the business model that we’ve talked about for the last year or so in trying to keep that breakeven model intact even as we do other things to help grow the business.

Vernon Essi – Needham & Company

And I sort of failed to my attempt corner you on the OpEx here, but you brought it up. So if you go back to last year your OpEx range within the $27 million range on that $56 million. Should we be looking for sort of a similar number perhaps even lower?

Mark Gallenberger

Yes, you should probably expect to see similar numbers, I would say that the R&D line is probably going to be up a little bit from our April quarter, because I’m using that as the quarter just because that’s the revenue quarter that’s closest to the guidance that we’ve given. And I think SG&A probably going to be down a tick, from that quarter. So net-net OpEx is probably going to be about the same.

Vernon Essi – Needham & Company

Okay, and then – and I apologize if you’ve said this already, what was your cash flow from operations for the quarter?

Mark Gallenberger

We did not say cash flow from operations. We did say that the net cash grew about $23 million. If you add back about $1.5 million for CapEx, your cash flow from operations was closer to $25 million.

Vernon Essi – Needham & Company

And then finally just commentary on the industry in general from Dave question here. If you look at competitive landscape and in the dialogs with your customers as you go through sort of this rigid softness. Do you have any – can you just show that sort of indications from your competitors as to what the arrangements have been. Do you get the sense that everyone is still playing sort of rational basis in terms of ordering and delivery schedules and what not and there is no – and what I’m concerned about is if there is any discounting that might occur to sort of prop-up market share in this rigid softness, I mean how do you feel that’s wearing out?

David Tacelli

I haven’t seen any additional discounting above what I call normal business levels Vernon.

Vernon Essi – Needham & Company

Okay, all right. That’s helpful [ph]. Thank you very much.

Operator

Our next question comes from Dave Duley with Steelhead Securities.

Dave Duley – Steelhead Securities

Congratulations, nice quarter. I was wondering when you look at your guidance statements for the current quarter, can you talk about might translate into the products, you kind of gave us a look into the end markets but how does that align across your three major products?

David Tacelli

Dave, over the last few quarters, the product mix has been evenly distributed let’s say between Diamond, ASL X-Series. I think if you were to kind of snap forward, you’d see a stronger mix of Diamond and X-Series and a little bit lighter on the ASL. You’d also see a little bit lighter kind of in the geography of Taiwan and China.

Dave Duley – Steelhead Securities

Okay. And could you talk a little bit more about your initiatives in the microcontroller space and how you see things unfolding there. It seemed like you mentioned some revenue that’s coming in, in this current quarter versus coming in last quarter. I was wondering if those were related to each other.

David Tacelli

Not specifically to the microcontroller space. We are competitive with two new initiatives in the microcontroller space, but the revenue that I mentioned coming in this quarter is not from that initiative or those initiatives. It’s actually from precision analog and wafer or consumer digital.

Dave Duley – Steelhead Securities

Okay, and how do you kind of see unfolding maybe just talk a little bit more about the microcontroller space and how you see that your position in that particular market unfolding over the next year or two?

David Tacelli

Again the situation where we’re competitive, I would expect to win our share of those. So we’re now competing in multiple situations, I think we have a compelling story in every one of those cases. Everyone is different. And I would expect that over the next six months, we’ll win our share.

Dave Duley – Steelhead Securities

Okay, great. And final one from me is on the new product the ASLx, I guess, seeing it’s kind of two-fold, it’s an upgrade path for the current ASL guys and then kind of an extension. I was wondering if you might be able to give us an idea how much more time that you’re kind of addressing with this new product?

David Tacelli

Yes, it’s interesting. If you – if I’ll call look between the cracks between the kind of where ASL stops and where X-Series begins, it probably opens up somewhere in the range of $50 million to $100 million of additional market to serve. That was not served or that we could serve but you’d have to do some interesting discounting to the X-Series product again there. And now we don’t have to.

Dave Duley – Steelhead Securities

Thank you.

Operator

Our next question comes from Patrick Ho with Stifel Nicolaus.

Patrick Ho – Stifel Nicolaus

Dave, I think you mentioned the outlook is driven both by seasonality as well as capacity absorption. Can you just give a little more color of what maybe the bigger driver? Is it kind of 50/50 or do you see one of those two aspects being I guess a larger driver in terms of the near-term environment?

David Tacelli

I think that the number one driver is seasonality. I think capacity absorption plays a role, because Patrick, if you go back the last couple of quarters, there has been a lot of product shipment to the marketplace by myself, and by my competitors. So I think seasonality plays a much more significant role than capacity absorption.

Patrick Ho – Stifel Nicolaus

All right. Just going back to the ASLx product, and I guess with hand that you just mentioned, do you see that more as going up from some of the lower end devices that the ASL targets or is it coming down for X-Series or is it combination of both?

David Tacelli

Combination of both, but I would say more of the ASL product is going upstream as designers and manufacturers have moved the technology of some of their lower end products up. You start to break compatibility, you actually break the technology or you can’t do as much multi-site. And by having an ASLx where you’re combining the instruments for both, a customer today can take ASL instruments and plug them into the new ASLx. They can take X-Series instruments and combine them and reuse their current programs.

So it gives the designers the ability as they move up the technology curve to keep multi-site or additional multi-site in play and be able to test their parts.

Patrick Ho – Stifel Nicolaus

Great. And final question maybe for Mark in terms of the business model. You mentioned a lot of the variability is there. Can you just comment on specifically what are some of the flex items that will keep your margins at the relatively high-levels both on the gross and the operating margin side?

Mark Gallenberger

Yes, I can start with the operating margin side first. There is a couple of things that really do flex up and down more formulate [ph] than anything and that’s profit sharing for all of our employees which is absolutely tied to profitability. So as we approach breakeven that will just goes to zero. So that’s directly linked to the profitability to the company. The other thing which is more tied to revenue are commissions, in particular, distributor commissions will flex up and down with the revenue. And so that will naturally increase and decrease and that hits down below the line. So it affects operating margins.

So those are the two biggest areas that you’ll see flex up and down with revenues as well as profitability and then with above the line, above gross margin a lot of that’s really dependent on the product mix that goes up the door but as you can tell by the gross margin performance, we do have a lot of variable costs that are just naturally built into our outsource model. And we’ve tried to continue to grind down the fixed cost component and make sure that that fixed cost component as a percentage of the total cost is as low as possible. And we continue to make pretty good success throughout the last year and a half or two years to continue to grind down that number.

Patrick Ho – Stifel Nicolaus

Maybe just as a quick follow-up to that. Is that mainly on the fixed cost side of things, a supply chain related?

Mark Gallenberger

It would be on the outsourced manufacturing side, yes.

Patrick Ho – Stifel Nicolaus

Great. Thanks a lot guys.

Mark Gallenberger

Yes.

David Tacelli

Thanks Patrick.

Operator

Our next question comes from Tom Diffely with D.A. Davidson.

Tom Diffely – D.A. Davidson

Yes, good morning. So if you could talk a little bit more about the current health of the industry from a utilization rate point of view of your tools?

David Tacelli

Let me give you a couple of specifics, if I go to some of our major customers which is the easiest thing to access in different markets right, its microcontrollers, digitally based products, analog based products. And our major customers it’s in excess of 85%. If I were to go geography based, now you don’t mix the bag overseas in some of the subcontract assembly and test. I’ve seen for certain market segments as high as 80% to 85% and I’ve seen some market segments right now in the kind of mid 60s. And mainly the mid-60s are consumer digital or anything we do to that touches the PC.

Tom Diffely – D.A. Davidson

Okay. And so are you seeing the sub-cons at a lower levels and the IDMs as well then?

David Tacelli

Certain markets that we serve, yes.

Tom Diffely – D.A. Davidson

Okay, and when you look at to the second fiscal quarter, the January quarter, do you see your IDM shift getting – percentage getting larger then?

David Tacelli

Based on the roadmap and the plan we have now I would say that that’s a fair assumption.

Tom Diffely – D.A. Davidson

Okay. And then just finally on the gross margin side, the 62 plus percent, you talked about mix, was there anything in there. Was it any other one-timers or is that truly a margin you can get to at these revenue levels with certain mixes?

David Tacelli

That’s the kind of margin we can get to if we get the right sort of mix inside the quarter. And typically we talk about 60% drop through incremental revenue to the gross margin line and clearly for us to get an excess of 60%, you have to hit the right product mix. But to answer your question there wasn’t anything any one-time unusual items that were in there that kind of inflated the margin for this quarter.

Tom Diffely – D.A. Davidson

Okay, great. And can you give us any sense of what you think the cash flow might be for next quarter?

David Tacelli

It’s a good question. When we originally guided our October quarter, we thought we’d probably be about $10 million to $12 million up in net cash. We’ve really blew through that estimate by significant amount, we went up to $23 million. And a lot of that quite frankly, was driven by the fact that our receivables on a dollar basis went down quarter-over-quarter. Quite frankly, I was not expecting that to happen when we originally gave guidance. Even though revenues went up modestly 3% quarter-over-quarter, I wasn’t expecting my AR dollar balance to actually decline that much.

We just did a very, very good job on the collections side which probably gave us about $10 million or more than we expected. So I don’t expect that to repeat next quarter. And so right now my rough estimate on net cash growing, we’d probably in the $8 million to $10 million range.

Tom Diffely – D.A. Davidson

Okay. And then you mentioned you thought that perhaps the softness could continue in other quarter but if your sense that – if we’re not at the bottom we’re pretty close to the first quarter guidance?

David Tacelli

Yes.

Tom Diffely – D.A. Davidson

Great. All right, thank you very much.

Operator

Our next question comes from Atif Malik with Morgan Stanley.

Atif Malik – Morgan Stanley

Hi thanks for taking my questions. And this might just be an apples-to-apples comparison but your mix is pretty similar on the analog and microcontroller unit side to paradigm given your customer overlap, TI than maximum [ph], but if I look at your guidance your sales down dropped to 27% and paradigm sales down 38% with an extra month of January. My question is what are you seeing in terms of linearity for January, I mean I’m surprised that your revenue guidance was up in line items is down quite sharply, but an extra month of January, I mean are you seeing signs of recovery there or you still seeing shipment push outs?

David Tacelli

We’re not seeing shipment push outs. What we are seeing is slowing demand that is going right through the January period. Typical of this last fiscal quarter and last quarter of the year, customers kind of wait to see the sell-through of their products through distribution in their channels. And then they come back in January it’s likely that they could come back and start ordering again in January or February for that matter.

So we’re not seeing any significant difference from what I think our competitors are seeing. It’s just the slowdown of seasonality.

Mark Gallenberger

Yes, and I think it’s also a combination of end markets still made reference to us having some overlap with paradigm and with customers and so forth. And I agree with that but it’s not perfect overlap. So for some market segments that works those and so they may be holding up a little bit better relatively speaking. So I think you’re going to have a little bit of those disconnects in a volatile markets like the semi cap equipment space.

Atif Malik – Morgan Stanley

Thanks and one follow-up, if you can quantify for us the size of the MCU analog markets this year, my understanding is and based on your commentary it seems like there was a lot of supply added in this market in first part. So if you can quantify for us the size of these two markets, this year and next year or just the size of the SSE [ph] market this year and next year?

David Tacelli

Let’s say coming into 2010, we were anticipating for all test for purchases going into the MCU market to be somewhere in the $150 million to $175 million. I think if you were to snap a chalk line midway through that year that number was up – we were probably on a pace to do close to $250 million and I think we’ll end up probably somewhere overall market slightly south of that probably $200 million to $225 million for the MCU market in general.

Analog market is a much more difficult thing and its far more fragmented in to host of different areas. When we’ve talked about analog, we’ve talked about our new initiatives into what’s called precision analog. So high bit count A-to-D, D-to-A converters. In that market, we anticipated coming in looking at about $50 million total market this year. I think that has stayed about the same kind of right through the year and probably end up somewhere between $50 million to $60 million as an overall market.

I think the analog market kind of going into 2011 will probably go up on the precision side. And I would expect the microcontroller/touch screen display that whole market to be about flat or probably slightly up going into next year as well.

Atif Malik – Morgan Stanley

Thanks.

Operator

(Operator Instructions). And we do have a follow-up from C.J. Muse with Barclays Capital.

C.J. Muse – Barclays Capital

Thank you. Just quick housekeeping, I was hoping you could share what actual D&A and CapEx were in the October quarter and what you’re expecting for the January quarter?

Mark Gallenberger

Sure. Yes, the A is $1.5 million, that’s the amortization tied to the Credence merger, the D was $3.2 million and the CapEx was $1.6 million. And for Q2, I would expect A to be the same and D to be about the same maybe a tick below $3.2 million maybe $3 million to $3.1 million. And then the CapEx I am expecting that to remain in check as well, so that’s probably going to be between $1 million and $1.5 million.

C.J. Muse – Barclays Capital

Great. And in terms of your 10% customers, can you share with us who they were?

David Tacelli

Yes, you’re going to unfortunately you’re going to have to wait till the annual numbers come out, because we’ll only disclose those names on an annual basis.

C.J. Muse – Barclays Capital

Okay.

David Tacelli

We don’t actually – we don’t actually do it on a quarterly basis.

C.J. Muse – Barclays Capital

It sounds good. Thank you guys.

David Tacelli

Yes.

Mark Gallenberger

Thank you.

Operator

And at this time I’m showing no further questions.

David Tacelli

Okay. Well thank you very much for joining us today. And look forward to seeing you at either the Barclays Conference or the Needham Conference in January. Have a good day.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program, you may all disconnect. Everyone have a great day.

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