Rofin-Sinar Technologies' (RSTI) CEO on Q3 2014 Results - Earnings Call Transcript

Rofin-Sinar Technologies (NASDAQ:RSTI)

Q3 2014 Earnings Conference Call

August 7, 2014 11:00 PM ET

Executives

Günther Braun - President and CEO

Ingrid Mittelstädt - EVP, Finance and CFO

Analysts

Patrick Newton - Stifel Nicolaus

Mark Douglass - Longbow Research

Mark Miller - Noble Financial

Operator

Welcome to Rofin-Sinar's Third Quarter of Fiscal Year 2014 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. As you know, we are here in Plymouth, Michigan together with Ingrid, Ingrid Mittelstädt, our CFO. I hope you all got the press release containing our third quarter 2014 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 predictions. 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, fine, let’s start. As you can see from our press release, we delivered solid financial results which are within our guidance. On a sequential basis we experienced a rebound in quarterly sales to the machine tool industry with main contribution from China as well as significantly improved business levels in the semiconductor industry. Sales to the automotive and medical device industries were stable whereas consumer electronic sales were significantly below last fiscal year's third quarter level.

We have reached sales into third quarter of $134.3 million which is $4.8 million or 3% lower than in comparable quarter in fiscal 2013 but approximately 4% higher compare to our second quarter this fiscal year. Sales in our micro and marketing business mainly reflect almost no solar business, a slow consumer electronic business, a reasonable jewelry watch business, an acceptable somewhat mixed medical device business, a descent flexible packaging business and a substantially improved semiconductor business.

Net sales deceased compared to last fiscal year third quarter by 6% or $3.6 million to $59 million and this is only 4% of our total sales. The sales in our macro business decreased 1% compared to the third quarter last year fiscal year and reached 456.4 million. Macro business contributed 42% to quarterly sales and main reason for the decrease was still the machine tool industry and military and defense industry. We had less units of high-power CO2 laser. If you remember last year we had the Chinese oil pipe cutting project for CO2 lasers and less high-power fiber lasers for advanced application but this was compensated by increased volume of lower-power CO2 lasers and high-power fiber lasers for industrial application.

The automotive macro business was at a comparable sales level to last year’s third quarter. Our Component business decreased 2% to $18.9 million representing 14% of quarterly sales, again comparison to last fiscal year third quarter. Strongest contributors were Nufern, fiber product portfolio, laser diode from Dilas, and the product portfolio from Optoskand.

Now coming to the breakdown of our quarterly laser sales by industry, automotive improved to 10 this quarter from 7% last fiscal year, good business across all the applications basically, machine tool 44% versus 41% in 2013, and you have heard it already; Asia, China recovered clearly. Semiconductor electronics 20% versus 28% in ’13 and there you see already where we are missing basically more sales and it’s basically no solar or low solar business, less electronic consumer electronics, but very good semiconductor business.

And others 26% versus 24% in 2013; flex pack, jewelry, watch, and medical I would say still okay and good M&D means merchant and defense, is slow compared to last fiscal year third quarter. During the third quarter, we shipped a total of 1214 lasers versus 1364 lasers. It’s approximately 11% or 150 lasers less compared to last year's third quarter and split 664 versus 627 units were for macro applications, lower power CO2 lasers of course significantly passed last year’s numbers and we had 570 units versus 737 units for marking and micro application and there of course we did not have to pick volumes from last year to the electronics industry.

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

Ingrid Mittelstädt

Thanks Günther. Good morning and good afternoon to everyone. Compared to the third quarter of last fiscal year revenues decreased by 3.5% and the gross profit slightly decreased to 34.8% from 35.5% of total sales last year. The improvement in the manufacturing cost of our high power fiber lasers were offset by unfavorable product mix during this quarter with significantly less micro business as well as the very low absorption of fixed cost related to the production of our own chip material.

SG&A including intangibles amortizations for the quarter represented 19.8% of net sales in the third quarter of fiscal year 2014 compared to 19.5% in the corresponding prior year quarter. In absolute figures, SG&A decreased by $0.7 million to $25.8 million for the quarter, mainly due to lower commissions and exhibition cost, 0.1 million on higher amortization expenses resulted from the acquisition of FiLaser's intangible assets.

Research and development expenses increased by $0.9 million to $11.3 million representing 8.4% and 7.5% of total sales in the third quarter of fiscal year 2014 and 2013 respectively. Quarter gross spending was $11.8 million in the reporting quarter compared to $11 million Q3 2013 and the main R&D activities are still related to the expansion of our ultrashort pulse laser product portfolio and the manufacturing cost reduction program for high power fiber lasers.

Now other income, expense the quarterly net other income amounted to $0.6 million compared to $0.3 million in the comparable period of fiscal year 2013 and the increase in net other income mainly related to higher net exchange gains realized during this quarter.

Our effective tax rate on income before income taxes and minority interest for the third quarter was 31.3% compared to 27.1% for the same period last fiscal year and the higher effective tax rate result generation of taxable income mainly in countries with higher tax rates and because the R&D tax credit legislation has not been reenacted here in the U.S. Even with lower revenues and gross profit and the higher amortization expenses related to the acquired glass cutting technology we were able to manage our operating expenses and generate net income of $6.5 million and earnings per share of $0.23 based on $28.2 million weighted average shares outstanding, that is in our guidance.

Now coming to the balance sheet, the weakening of the U.S. dollar mainly against the euro comparing the exchange rates from June 30, 2014 versus September 30, 2013 resulted in a change of approximately 1% but other currencies in Asia like the Japanese yen or the Korean won had fluctuations of approximately 4% or 5.5% in the same period, and therefore the impact on the balance sheet positions could be different depending on the geographical distribution of the corresponding balances.

Due to the lower business level comparing the fourth quarter of last fiscal year with third quarter of this current fiscal year trade accounts receivable decreased by $7.9 million and amounted to $102.7 million at June 30, 2014 and the impact of the exchange rates fluctuation was to increase accounts receivables by $0.6 million.

The day sales outstanding was 73 days compared to 72 days last fiscal year. Net inventory increased by approximately $7.5 million to $206 million during the first nine months of fiscal year 2014. Inventory increased by $1.1 million due to the impact of exchange rates fluctuation and as a result of the high order entry level in holiday time, especially in Europe we had higher stock of raw materials and work in process at the end of June. Additionally the stock of finished goods at the end of this quarter included some systems which deliveries were postponed into the fourth quarter.

Based on the cost of goods sold figures, inventory turned approximately 1.6 times. The intangible assets increased by $8 million during the quarter due to the closing of the acquisition of FiLaser's assets that enabled us to use this unique technology for cutting brittle material.

Total debt increased by $3.7 million and amounted to $22.3 million compared to $18.6 million as of September 30, 2013, mainly due to additional short-term debt partially offset by the forgiveness of $1 million on a long-term loan with the state of Connecticut.

Now, I would like to give you some information related to cash flow statement. Cash and short term investments increased by $7.7 million to $144.7 million during the first nine months of fiscal year 2014. The impact of the exchange rate fluctuations was to increase cash by $1.5 million.

During the nine months, the Company generated $20.9 million from its operating activities. $18.1 million were used investing activities mainly due to capital expenditures of $6.3 million, the acquisition of FiLaser’s assets of $5.9 million and the net purchase short-term investment of $6.1 million. $4.2 million were used by the Company in financing activities, mainly due to purchase of approximately 277,000 shares on our actual stock buyback program for 6.2 million, payments to minority shareholders of 4.9 million related to the acquisitions of the remaining shares at the German and Japanese subsidiaries. These were partially offset by the net increase of the debt of 4.6 million and issuance of common stock with $2.3 million.

Now coming to our earning guidance as a result of the backlog situation, our current market judgment and the global economic current environment, we want to give you the following guidance of the financial performance for the fourth quarter of fiscal year 2014. The Company currently forecast revenue for the fourth quarter in the range of $142 million to $147 million and this represents the growth of 6% to 9% when compared to the previous quarter. We estimate gross profit for the fourth quarter in the range of 35% to 36% of net sales, the period expenses including intangible amortization in the range of 26% to 27% of net sales, income before income taxes and minority interest between 8% and 10% of net sales, the effective tax rate to be in the range of 31% to 32%. Intangible amortization and fixed assets depreciation are estimated between 3% and 3.5% of net sales. This guidance is only an estimate and again subject to all the risk of our Safe Harbor statement.

Thanks for listening and let me hand it back to Günther.

Günther Braun

Thanks Ingrid. Let’s do a summary on our operations in Q3 of course including an outlook. I would say on the regions the economic situation in Europe is robust I would say, even with all the politically irritation we read in the newspaper the U.S. business for often [ph] and in general is somewhat still mixed, how we started, and Asian business improved significantly in sales and order entry by plus 20% on the sequentially basis for us. China we recovered with strong machine tool business. Singapore and Taiwan benefited mainly from improved semiconductor demand. Quarterly order entry in China was back up 19% of total bookings, of course including the stronger machine tool business and volume EMS orders for low power fiber laser marking setups.

China is main contributor of course for our CO2 and high power fiber laser business. The CO2 laser interest has stabilized but demand for high power fiber laser is still increasing so the current average production rate or allocation between the two technologies in the high power range is getting closer to 50/50 in our production. High power fiber laser main volume OEMs are of course in Asia China, but we got orders from European but also from new Asian OEMs. Booking in Q3 was strong, I would say for industrial higher power fiber laser is the best quarter. European and U.S. orders are still more semi orders and more for welding application. So we will work to get more traction in high power fiber lasers of course and promote more the sales of high power fiber lasers in specific power ranges where the margin profile is better and reasonably good.

To the low power CO2 lasers from Howell, there we still see high demand in China and Europe, Europe especially Turkey, Italy and Spain. We had a record quarter in shipments with more than 450 plus lasers and still a remaining strong backlog. And I want to complement our team in Howell, a great job in this product portfolio.

Consumer electronics business, as I mentioned already is still triggered by the food company demand for the new products. Projects are more difficult to win due to local Asian competition of course. Partially we were successful in getting all the four approximately 200 plus units, low power plus fiber lasers including scanning kits from an EMS supplier, but of course margin is always a sort of challenge there.

Another expected mid-power fiber laser order from Taiwan has been shifted to Q3 for some reason while last quarter was not so favorable business from the consumer electronic industry. But in general of course it was a slower quarter in sales to this industry for us and maybe some information if you compare the nine months fiscal year 2013 with nine months 2014 business. In this industry segment we had reduced sales of $18.6 million and of course that’s one of the reasons that we are behind fiscal year 2013 sales.

Of course we look into the cutting of brittle materials, you have heard us already glass sapphire [ph] with our IP protected FiLaser technology which should be a big opportunity in the mid-term range for us. Certain fundamental patents should be granted in the foreseeable future and the patent for using the burst mode should create of course some protection in specific regions. So we count clearly on this technology and this application.

We had good business with the automotive and sub-supplier industry for high power lasers for powertrain application especially Asia and Japan; even with CO2 laser technology because of volume quality. Micro and Marking business with Tier 1 sub-suppliers was very good, thinking about labels for day and night design but one CDI drilling project with ultrashort pulse lasers we had the revenue slipped into Q4 and if you would have had this revenue recognition, I think we would have had then perfectly the earnings guidance or the sales or the expectation of the markets.

Then coming to the solar business, nothing new there. We’ve recognized revenue for PERC system delivered last year, quoting activity mainly in China is of course third but strong local competition, with a lot of pricing pressure and here again if you compare last year’s nine months business with this year’s nine months business there we are missing more than $15 million in sales and if you add up consumer electronics and solar business then you have the explanation on the difference on our nine months top line numbers.

The semiconductor business level in Q3 was very nice, increased three times sequentially and reached more than 7.5 million in sales, that’s great. Orders from Asian OEMs Taiwan and Southeast Asia [indiscernible] marking improved a lot. There still we have one challenge, the IGBT annealing projects which are in the pipeline, they seem to be less predictable when it comes to bookings because there are certain closeouts and count from certain bookings but then they slip away.

Then coming to the medical device business, it’s approximately 1 million below previous quarters in average but in line with expectations. Stent tube cutters are stable but we saw lower quantity of ultrashort pulse lasers and marking products. But I would say U.S. medical business what we see showed some revitalization.

And last but not least our advanced applications military, defense they look promising from new programs. We received the first order in Q3 but deliveries are more towards 2015 and I did this statement already, maybe the political environment will support our efforts to gain more traction of course here in the U.S.

So a condensed summary of the quarter would be like this, sequentially machine tool business in macro increased by $5.6 million to $29.7 million that’s just macro whereas micro marking decreased 800,000. Highlight of course I mentioned lower power CO2 lasers which sales are excellent. Solar, a lot of talks, quotations, negotiations but no sizeable order. Semiconductor marking business has improved, not only on the sales, but all the different group order entry. IGBT annealing project has slipped into next quarter. Consumer electronic sales are down I would say less traditional laser technology order and some shifts of potential spot welding orders out of Asia which are delayed and at the end no really big backlog.

Automotive, first year supplier sales have improved for welding and marking application. Our quarterly service and spare part business was excellent with $37.7 million and sequentially component sales compared to the second quarter increased to $18.9 million excellent level supported by very strong new front Nufern, good Optoskand, and Dilas component sales.

Now let me update you on some important developments, our backlog end June 2014 was $146.1 million up from end of March by roughly $10 million which is a solid base for Q4. The current backlog includes $57.7 million for macro business, a nice level $72.9 million for micro and marking business and $15.5 million for components.

The quarterly order entry was $144 million came in as protected. Again I have to emphasize on the rebound in China. Incoming orders have improved as I said substantially on a sequential base. So order entry in Europe increased 3% indicating the stable business environment. North American orders improved 19% mainly supported by M&D business and Asian orders by 27% mainly supported by the machine tool and semiconductor industry.

Now an update on our fiber laser activities. The realized sales with fiber laser related product in the third quarter of $17.8 million, book to bill ratio was 1.4, order entry was $24.9 million, industrial higher power fiber laser volume increased, low and mid power fiber laser slower than expected. The backlog end of June was $38.7 million, another increase an approximately 44% of the solar backlog value is for industrial high power fiber lasers.

We expect the advanced application business with high power fiber laser to return in 2015. The majority of units of high power fiber laser this quarter were based on the 200 watts pumping modules but also remaining 135 watts modules, pumping modules were used to clean the inventory. So Q4 production should be only the 200 watts pumping module version.

And last quarter I gave you an update on the next generation of 300 watt and 200 kilowatt fiber laser modules out of one box. So we are still working towards end of summer to have this product development completed. The new 300 watts or IS68 [ph] how we call it pumping modules demonstrate minimum the same quality and lifetime than the 200 watt pumping modules and should start to be phased in, in Q1 2015, means further cost reduction on existing product portfolio. The communicated 2 kilowatts fiber laser project is within the predicted timeline with some smaller optimization in progress and for our own chip activities, first product will be phased in our product this quarter.

So again, let’s have a sort of outlook summary. In general the Chinese economy has improved a lot. Overall order entries significantly improved in Q3 and we expect a good Q4; good volume orders for high power fiber lasers and lower power CO2 lasers as well as active and passive fibers. High power CO2 laser business has currently settled around 100 plus units a quarter. We’ve gained new OEM in Asia and Europe for high power fiber lasers and European business I would say is very robust but North America somehow still sluggish. Midterm micro business needs to capitalize on brittle material application based on our acquired fiber laser technology and deploy this application into the markets.

Marking business has improved, mainly due to the semiconductor demand and should further benefit from the introduction and launch of the Powerline Pico lasers. EMS and food company business is difficult, but we got as I mentioned a volume order from an EMS for lower power plus fiber lasers. Of course margins are somewhat less attractive.

Our Q4 2014 guidance of course is based on the backlog and the lead time of our orders. Overall bookings were good in Q3 but slow in the micro business. We are working to book the slipped micro project in Q4. And based on the current global economy and the 10 million increased backlog at the end of June we’re confident in delivering again improved results for the fourth quarter. By the way we have a good July entry, so far a good start into this final fourth quarter of fiscal year 2014.

So during the remainder of the calendar year of course we continue to optimize the cost structure of our fiber laser product portfolio to the benefits of our profitability and the new product introduction in the ultrashort pulse technology space should help us of course to grow the business.

So these are my comments and as always thanks to the worldwide Rofin team for their contribution. Thanks for listening, now we’re prepared to answer your questions.

Question-And-Answer Session

Operator

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions). Our first question comes from Patrick Newton with Stifel. Please proceed.

Patrick Newton - Stifel Nicolaus

My quarterly housekeeping question is could you give us orders by macro, micro marking, and components in the quarter, please?

Günther Braun

Ingrid is looking for that.

Ingrid Mittelstädt

Order entry macro business $68.6 million, margin micro $64.4 million and components $21 million.

Patrick Newton - Stifel Nicolaus

Then I guess just jumping right in to a gross margin question, your fiscal 4Q guidance midpoint of gross margin implies a 35.3% gross margin for the full year, which is below your original target. And if we look at this lower benchmark exiting the year, are you still standing by your 40% gross margin target for fiscal year 2015?

Ingrid Mittelstädt

The target for next fiscal year is to improve quarter-over-quarter, so at the end of next fiscal year we should be close or at 40%. So not for the complete fiscal year as we already said in the past quarter-over-quarter we should be able to improve the gross margins. And when we have all this technical improvement in our manufacturing of our high power fiber lasers with our own chip material and also some additional new products in the micro business, we should be back to our old good gross margin.

Günther Braun

I think Patrick you have seen the second quarter we were at 36%. It was a different product mix this quarter. Clearly we’re missing a bigger bunch of micro application products and otherwise we would have been at the same level for sure.

Patrick Newton - Stifel Nicolaus

And then I guess, Gunther, if we look at your CO2 laser revenue; which I get to by taking your full revenue, backing out spare parts and components and also your fiber laser revenue; it's been declining year-over-year for 11 consecutive quarters. And I guess my question is do you see a scenario where CO2 should return to sustainable growth? Are we in a period where the industry shift to fiber is too aggressive to stem this negative trend?

Günther Braun

I think we have to split here. On the high power CO2 lasers of course we have seen this reduction especially because we had last year one large project out of China for pipe cutting. The last two quarters you have seen an increase or we have seen an increase in high power CO2 lasers. So improvement. And on the low power side we have seen nice increases in quantities and in dollar values. So demand has improved for lower power CO2 lasers.

So it’s a mix. On the high power side I would say it has improved. It has sort of stabilized at least for us in the 100 plus unit range for the quarter. And on the other side, the high power fiber laser, industrial fiber laser and there I split because at Nufern we do the advanced application high power fiber laser and in Hamburg we do the industrial version. And those business has of course over the quarters now increased and order entry was nice last quarter.

Patrick Newton - Stifel Nicolaus

And then last one, I guess multi-part fiber laser question is. Can you, one, discuss how the current pricing environment looks, two, update us on any progress or milestones you have pertaining to your NBE and then three, for your 300 watt shipments, you mentioned 1Q ‘15. I wanted to confirm if that was a fiscal or calendar year projection and then how many quarters until we get to 300 watt being the majority of your fiber laser shipments?

Günther Braun

Okay let’s start; many questions. The easy one is phase-in starting in fiscal Q1. We have already now in this quarter Q4, we use our own chip material for certain products. So there is already a certain phase-in but not the level what we want to have of course. So that’s now a continuous process I would say. What else? Sorry Patrick.

Patrick Newton - Stifel Nicolaus

And then the ramping, when will that be the majority, the 300-watt packages? Are we talking a three-quarter ramp, four-quarter?

Günther Braun

I think that’s for sure three quarter.

Patrick Newton - Stifel Nicolaus

Okay. And then I guess one of the other questions was the fiber laser pricing environment, if you could discuss that?

Günther Braun

So overall of course there is certain pricing pressure but I think or the feeling is that it more -- has come down more in a way than in previous quarters or previous years. So what you see currently of course in certain situation, there is of course pricing pressure but it’s not anymore, that you see big decreases. What we see of course as you’ve heard also from other market participants that on the low power fiber laser side, the Chinese guys of course get very aggressive, no doubt about.

Patrick Newton - Stifel Nicolaus

And then just an update on NBE benefit?

Günther Braun

On NBE as I said, we are starting to use our own chip material at M2K and delivering those to Dilas for production units. So it’s running full power. We do still certain qualification. But we have started to phase-in M2K chip material into our production at Dilas already.

Operator

Thank you. Our next question comes from Mark Douglass with Longbow Research. Please proceed.

Mark Douglass - Longbow Research

Gunther, the fiber laser sales you said were $17.8 million?

Günther Braun

Yes, that’s right and high power was up, and mid and low power was below previous quarter.

Mark Douglass - Longbow Research

Okay. So looking back the last few quarters, it's still very lumpy; the sales in fiber lasers up and down. Can you talk to when you think you might see a more smooth sales trajectory and a consistent growth in the sales trajectory?

Günther Braun

Mark, what I see or what we deliver is, on the high power side there, we continuously increase the numbers and the lumpiness is of course more on the low power, mid power side. I think you that on the low power side there are new market participants with crazy pricing in certain regions and that there to push the sales -- of course it’s more challenging to get the orders. And on the mid power side, the same stories or certain projects, one project slipped as I mentioned into another quarter. So there is the slugginess. I would say industrial high power fiber laser, currently we have seen improvement quarter-over-quarter in units and of course dollar at the end.

Mark Douglass - Longbow Research

That's helpful. And then with the glass sapphire cutting in the Q -- so first, what was the step-up in amortization because of FiLaser?

Günther Braun

Ingrid, step-up in amortization?

Ingrid Mittelstädt

Yes only $100,000 in the quarter.

Mark Douglass - Longbow Research

Okay. And is that going to go up or is that the new run rate?

Ingrid Mittelstädt

Per quarter it would be in a range of $100,000 to $200,000, so not big amount.

Mark Douglass - Longbow Research

Okay. But with the addition of FiLaser, are you shipping units for cutting right now or are you still developing and just getting quotes?

Günther Braun

We’re starting to do quotes. We have a lot of -- we had a lot of visitors looking at into this technology. We did a lot of samples. And the response of all those guys is amazing positive and we did already quote and now the starting phase basically of course to get certain fractions and get helpfully first orders.

Mark Douglass - Longbow Research

Okay. You don't think you're too far behind? Other laser companies have already been shipping product for the glass and/or sapphire cutting.

Günther Braun

We have shipped products in the past. Here I'm talking about the FiLaser process just.

Mark Douglass - Longbow Research

So you are shipping some products, but this should improve your market position going forward?

Günther Braun

Yes. I think FiLaser process, if you get a chance we will show you what we do. Then I think you know the industry, it’s really amazing at the end, the outcome of the applications.

Mark Douglass - Longbow Research

Finally, solar was a significant headwind. You said a lot of quoting activity. How confident are you that the solar companies are actually going to add more lasers to production?

Günther Braun

We have specific projects. So we have done our analysis, how many systems they need and this is information from those customers. So what we are looking for at the moment is really doing systems, PERC systems -- where the price is, I would call it -- it depends on the setup, $0.5 million up to $600,000, $700,000 of course and there you have local competition and is pretty tough of course at the end of the day. But there are opportunities out where we could generate some millions in turnover.

Mark Douglass - Longbow Research

Actually one more question. You mentioned Asia and Japan were using your high power fiber lasers for transmission welding, is that correct?

Günther Braun

It’s CO2, mainly CO2.

Mark Douglass - Longbow Research

Mainly CO2. Any of the transmission companies moving to your high power fiber at this point?

Günther Braun

There are some who are using our fiber.

Operator

Thank you. Our next question comes from Mark Miller with Noble Financials. Please proceed.

Mark Miller - Noble Financial

I just was wondering, you are projecting sequentially growing margins in 2015. Is that driven by more mixing in the fiber and also greater internal diode production? Is that one of the primary drivers?

Günther Braun

One of the primary drivers of course is the optimization of the cost structure of the fiber lasers, no doubt it. So that’s on the diode side. But all the increasing output power per module that I said 2 kilowatt fiber laser model out of one box and then the scaling 4 kilowatt does not need three boxes, only two boxes. So this is clearly one of the basis. Then of course to be precise we have also certain revenue calculated for the FiLaser process. For the FiLaser application in next year with ultrashort pulse lasers. That’s also an important part of next year for sure.

Mark Miller - Noble Financial

In terms of the solar market, other solar companies said that things have kind of stalled or were stalled because of the concern about U.S. tariffs. Have any of your customers indicated that and now that kind of the tariff thing is out of the box, do you see any improvement in their forecast?

Günther Braun

What we see mainly is or our context and efforts mainly I would say in Asia and China. And clearly they have all the pressure on efficiency increase. So it’s less capacity story, it’s more that they improve efficiency of the solar cells with some additional adoption of lasers like the PERC systems I mentioned. And there we see the opportunity. Otherwise I think additional volumes I don’t see really around the world.

Mark Miller - Noble Financial

I just want to confirm this. You said, you have an order for 200 low power pulse lasers, is that correct?

Günther Braun

That’s right, 200 plus.

Mark Miller - Noble Financial

And you mentioned that other people are seeing that?

Günther Braun

To an EMS company of course.

Mark Miller - Noble Financial

Other companies, and I think you mentioned previously had seen pricing pressures mainly coming from Chinese internal. I think you noted that also is that correct that that market is still pretty price sensitive?

Günther Braun

That market is pretty price sensitive, no doubt about it. So I can confirm that.

Mark Miller - Noble Financial

And then finally, could you give me the total unit number of fiber laser chips for this quarter?

Ingrid Mittelstädt

200 units.

Operator

(Operator Instructions). There are no further questions at this time. I would like to turn the floor back over to Braun Günther for closing comments.

Günther Braun

Thanks for listening. Maybe one comment. You know that the first quarter, our last quarter in our fiscal year, if I tell you last year’s guidance for the fourth quarter was basically $140 million we did at the end $147 million. So let’s see what we can achieve this quarter. Typically fourth quarter is our best quarter in the year and I hope we can deliver even better numbers than we guided. So thanks to everyone for listening and have a good summertime. Talk to you to soon. Thank you.

Operator

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

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!