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Kulicke & Soffa Industries, Inc (KLIC)

F3Q11 Earnings Call Transcript

August 2, 2011, 8:00 am ET

Executives

Joseph Elgindy - Manager, IR

Bruno Guilmart - President and CEO

Jonathan Chou - SVP and CFO

Analysts

David Wu - Indaba Global Research

Lee Simpson - Jefferies & Company

Krish Sankar - Bank of America Merrill Lynch

Tom Diffley - D.A. Davidson

David Duley - Steelhead

Mahesh Sanganeria - RBC Capital Markets

Operator

Greetings and welcome to the Kulicke & Soffa third fiscal quarter 2011 results call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions).

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Joseph Elgindy, Manager of Investor Relations for Kulicke & Soffa. Thank you, Mr. Elgindy. You may begin.

Joseph Elgindy

Thank you, [Jackie]. Good morning, everyone. Welcome to Kulicke & Soffa's third fiscal quarter 2011 conference call. For those of you who have not seen the results announced this morning, they are available in the investor relations section of our website at kns.com.

An audio recording of this entire conference call may be accessed from the Kulicke & Soffa website for a limited period of time.

In addition to historical statements, today's remarks will contain statements relating to future events and/or future results. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our actual results and financial condition may differ materially from what is indicated in those forward-looking statements.

For a complete discussion of the risks associated with Kulicke & Soffa that could affect our future results and financial condition, please refer to our SEC filings, particularly the 10-K for the year ended October 2, 2010, and our other recent SEC filings.

For our call today, we are joined by Bruno Guilmart, President and CEO, and Jonathan Chou, Senior Vice President and CFO. I would now like to turn the call over to Mr. Bruno Guilmart. Please go ahead, Bruno.

Bruno Guilmart

Thank you, Joe, and thank you all for joining our call today. We are pleased with our financial performance in the June quarter. We achieved revenue of $294.4 million, which was, again, above the high end of our guidance and roughly 40% higher than our prior quarter.

Our quarterly net income of $70.7 million surpassed the company's historic record. Importantly, our flexible and efficient manufacturing model enabled us to increase production and meet our customers' record demand while balancing our inventory and expenses.

Our recent efforts to improve efficiency while increasing the capacity of our supply chain allowed us to operate at a higher earning level and maximize our profitability.

While our gross margin declined slightly sequentially, we achieved a 660 basis point improvement in our operating margin. At the high level, June quarter results reflect the strong demand generated from our market leadership position, specifically with our [ball and wedge bonding] equipment line.

By providing work less solutions to our customers, we continue to strengthen our [ball and wedge bonding] market positions, while [not resting on our] [inaudible]. We continue to work closely with our customers to understand their need in order to develop our R&D roadmap.

This has been and remains a strategy in our ability to maintain our industry position in providing next generation solutions to our customers. While demand for our wedge bond equipment continues to be strong, revenue in the June quarter decreased about 32% from the record level achieved in the March quarter.

This decline was due to a more normalized sales level in the power semiconductor space while demand in the hybrid and [inaudible] markets remained relatively flat. Our [inaudible] business benefited from gains across a wide range of customer [salutations].

As you would expect, demand from our OSAT customers was particularly strong, representing 78% of total ball bonder machines here. From an applications standpoint, approximately 30% of our ball bonder shipments were sold as proper capital bonders.

With respect to copper, we tried to maintain our leadership position by offering the best equipment and tool solutions available in the market in terms of profit capability, cost of ownership and overall turnkey solutions.

We continue to receive broad customer acceptance of our new introduced IConnPS ProCu ball bonder and our CuPRA 3G [power] Capillary products. As [a test] of our copper capable solutions, at the end, our customers continue to drive for [inaudible] and highlights our leadership in this significant solution.

The industry solution to copper will continue to drive considerable savings in the packaging trust of [wide honored] integrated services. These cost reductions further enhance the value proposition of our products by sharpening our customer [stay back] period and including their [inaudible] capabilities. We anticipate this copper transition trend to continue for several years.

In addition to copper, we continue to benefit from ongoing replacement demand from customers ordering our next generation of gold on the ball bonders, which enable our customers to handle the latest leading technologies in terms of bondage and ball [inaudible]. Moreover, we continue to see strong market acceptance of our large [inaudible] machines.

These options are available in all our power service models and allow our customers to gain added efficiencies by increasing throughput and reducing [inaudible] times. [ADD] ball bonders have made up about 5% of this quarter's ball bonder shipments.

While this is really small in comparison to our record June quarter shipments, we continue to view this space as an attractive, profitable and great market. [ADD] bonders [inaudible] synergies with our traditional [IC] ball bonders.

We remain focused on participating on future developments in the [ADD] market in the commercial and [gel writing] applications. I will now turn the call over to Jonathan for more detailed financials for the June quarter. Jonathan?

Jonathan Chou

Thank you, Bruno. My remarks today will only refer to GAAP results. On today's call I will compare the June quarter to the March quarter. The net revenues for the quarter was $294.4 million, up $87.7 million or 42.4% from last quarter.

The net revenue change was driven by a $93.9 million increase in ball bonder equipment, partially offset by a $14.3 million reduction in wedge bonder equipment volume.

In addition, our [ATE] premier line and our expandable tools business were both up sequentially. Gross profit was $134.1 million, up $35.1 million from last quarter. Our gross margin was 45.5%.

While still strong, gross margin was slightly below our March quarter primarily due to product mix changes relating to the sharp increase in ball bonder demand.

Operating expenses were $54.4 million, down $2.9 million from the March quarter. This underscores the flexibility of our business model as we were able to support the 42% sequential revenue increase while reducing our operating expenditures.

With an operating margin of 27.7%, we generated $81.7 million of income from operations, nearly twice that of the previous quarter. Looking ahead to the September quarter, we're estimating total operating expenses will decline by about 5% to $50 million.

Our tax provision for June came in at $9 million with an effective tax rate of 11.3%. Looking beyond fiscal 2011, we anticipate our longer term effective tax rate to improve to 5% to 10% level.

Turning to the balance sheet, we generated $53.7 million of cash flow, ending the quarter with total cash and investments of $335.5 million. This represents an increase of $172.5 million over the past 12 months.

Working capital -- defined as accounts receivable, plus inventory, less accounts payable -- increased by $34.1 million sequentially to $204.7 million.

From a DSO perspective, due to changes in customer and product mix, our day sales outstanding decreased five days to 66 days. With respect to inventories, our day sales inventory decreased by 21 days to 48 days. Our accounts payable day decreased by nine days to 54 days.

This concludes the financial review portion of our call. I will now turn the discussion back to Bruno for the September quarter development.

Bruno Guilmart

Thanks, Jonathan. Looking forward to the September quarter, we expect our overall business to soften relative to June quarter, although remain strong from a historic standpoint.

Specifically, we forecast revenues in the September quarter to be approximately $155 million to $175 million. This reflects lower ball bonder demand [setting] primarily from our [offset] customers.

However, we continue to see newly introduced product [that sales for copper] and not ball bond area offerings contributing significantly throughout all growth future financial performance.

In the last 12 months, we have worked hard to build a highly-efficient and flexible manufacturing model and to optimize our research and developments and business operation organization [through which] compared to the situations of our customers demand in an effort to maximize our financial performance.

Going forward, we will strive to maintain our focus on new and existing market opportunities while continuing to improve our efficiencies in our business model.

This concludes our prepared remarks. Operator, we will now be happy to take any questions.

Jonathan Chou

I just wanted to add one thing. I did say the OpEx is $52.4 million, not $54.4 million. I just want to correct that.

Bruno Guilmart

Operator, we'll now be happy to take any questions, thank you.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of David Wu - Indaba Global Research.

David Wu - Indaba Global Research

My question really is the visibility beyond the September quarter. When we listen to [QSMC], their wafer shipments would indicate the "inventory correction in Q3." I was just wondering at this point do you have any feeling whether the December quarter is going to be a second sequential down quarter or not.

Also a follow-up, can you remind us why did wedge bonder -- I didn't hear very clearly -- decline on a quarterly basis in the June quarter?

Bruno Guilmart

First, we only provide guidance for the term quarter, which is our fourth fiscal quarter and we will not comment further than providing guidance for the current quarter.

As for the second question regarding wedge bonders, as you know, we have been through a transition from manufacturing wedge bonders in Irvine, California to Asia. I think as we've seen I would say a catch up in the process of this transition, we are now back to more normalized levels in terms of what the demand looks like from a wedge bonder perspective.

Again, there is no secret here that the industry, the semiconductor industry generally is being cautious. There is a lot of microeconomic factors that are not too preferable right now. I think everybody is taking a [fairly prudent] stance on technical equipment.

So I would say our wedge bonder quarter was still very good but obviously not as good as what it was in the previous quarter. Again, coming to guidance, we will only provide revenue guidance for the current quarter, which is our fourth quarter.

David Wu - Indaba Global Research

Can I have a quick follow-up? In terms of the -- is there any indication that you can give on the utilization rate of your OSAT customers, particularly [beyond] copper or bonders?

Bruno Guilmart

Well, again, as far as utilization is concerned, I think it's better that we do business with most of the OSAT guys and they represent [inaudible] of our business. I think you can get [inaudible] from OSAT customer base, especially the guys in Taiwan provide the data on a monthly basis.

Operator

Your next question comes from the line of Lee Simpson - Jefferies & Company.

Lee Simpson - Jefferies & Company

Just wanted to maybe explore wedge bonders again if I could; it seems, after all, that the slowdown is ahead of that for why bonders [alone] for the copper transition, of course. But can you give us an update, really, as to what you expect will be the order interest here going forward? I know you talked about a new normalized level but can you give us a sense that this is a level for the next two, three quarters now?

Also can you frame the answer with respect to gross margin? I know we've talked about it in the past that a gross margin peak for this business area is 55% to 60%. Are we at that level just now or how should we share from there if you like?

Bruno Guilmart

You have -- again, I want to reiterate that we only provide guidance for the current quarter and we won't provide any sort of visibility or indication of what's going to happen past the current quarter.

But from a gross margin perspective, we've obviously -- because we had for I would say a couple of quarters both manufacturing in the states and in Asia -- we have not benefited as much as we should have on the gross margin improvements that we are anticipating from moving the manufacturing from US to Asia.

Now that this is done, that obviously is going to have a benefit going forward. The key to our model from a gross margin perspective is really the product mix. So as our ball bonder -- and I would say more the traditional ball bonder -- volume decreases and we have a better mix in copper ball bonders, [Algeria] ball bonder and wedge bonder, we should see I would say a positive impact on gross margins.

Now, having said that, again, we do not provide guidance on gross margin because it's pretty hard to anticipate, again, what's going to be the mix for even the current quarter. Jonathan, are there any other June comments on the margins?

Jonathan Chou

I think if you look out [inaudible] historically has always been the 40% plus, so 48.4% to basically the current quarter. So as what Bruno said, it is about mix, which bonder is [inaudible] that he talked about in terms of the near 50s.

But really it depends on the volume of the ball bonders. So it's also depending on the types of customers that will buy these ball bonders as well. So I think throughout innovation, throughout basically our technology leadership in this area, we will continue to basically cap the pricing park to basically maintain our gross margin level.

Bruno Guilmart

Again, I want to reemphasize that the bulk of the decline, the sequential decline in revenue is really attributed to our ball bonder business and especially from our OSAT customers being more conservative and rescheduling orders to [full-year] quarters or reducing their capital expenditure plan for the rest of their fiscal year, which varies with the calendar year.

Lee Simpson - Jefferies & Company

Maybe just one last question on LEDs; I know we can't look to [cree] and some solidarity but the book to bill is at $1.3 million for [inaudible] and the guiding -- well, I think you're guiding a growth quarter.

We see the [MOCV] reactors shipping sometime six months ahead of what we see in bonders. Can you give us any sort of indication that you might be seeing a turn in LED bonders over the next few months?

Bruno Guilmart

Again, the area we participate in in the LED bonders, it's more the higher end I would say application of the market, so we are not -- we basically leverage the ball bonder technology that we have and use that for our LED bonders. So our LED bonders are not I would say -- cannot be widely sold to the larger market, which were presently LED market that you may refer to.

So we -- again, we are very focused on the higher end, which is more like in [district] lighting, the LED lighting for flat panel TVs and hopefully as the -- more of the [inaudible] pickup, that's the space we will probably stay in.

Lee Simpson - Jefferies & Company

You mentioned OpEx being down I think you said 5% Q-on-Q. The mix therein, would we be holding $16.5 million for R&D or should we expect some of the savings to come from there?

Jonathan Chou

Well, I think if you look at our OpEx [inaudible] $15 million, it is keeping the R&D consistent and basically keeping our fixed cost somewhere between $36 million and $37 million.

Our variable cost is still about 68% of the revenue, so we are basically keeping all these things fairly steady and basically continue to invest for the future from an R&D perspective.

Operator

Your next question comes from the line of Krish Sankar - Bank of America Merrill Lynch.

Krish Sankar - Bank of America Merrill Lynch

Bruno, do you think the wedge bonder business is going to decline in September or is it all coming from the ball bonder business?

Bruno Guilmart

As I said, the majority of the decline is coming from the ball bonder business. We don't really provide specific data and guidance for business units. What I can tell you is that it's relatively flattish from the wedge bonder perspective versus the current quarter, relatively flattish.

Krish Sankar - Bank of America Merrill Lynch

Then just a longer-term question; I mean, looks like the ball bonder business has more of a seasonality than -- but if I'm right it says the wedge bonder business is more cyclical. So what gives you the comfort that the June quarter was more a reset of normalized levels and not a beginning of a multiquarter downshift for the wedge bonder business?

Bruno Guilmart

In terms of volume, you are looking at several magnitudes compare -- I mean, wedge bonders compared to ball bonders. I mean, we sell several thousands -- in a good quarter, we sell several thousand ball bonders. In a good quarter, we sell maybe over 100 and something wedge bonders. So obviously the variation on the ball bonder has a much larger impact on revenue than variation on wedge bonder.

Even the [HD] wedge bonder is obviously significantly higher than a ball bonder. That number cannot overcome the swing in volume that you have in ball bonders and try to offset that with the volumes that we see in the wedge bonder business.

Krish Sankar - Bank of America Merrill Lynch

Should we assume that the mix of proper capable ball bonders should increase in September given that the overall -- the volume is going down but [inaudible]?

Bruno Guilmart

I think we probably can expect the mix to be about the same as the current quarter.

Jonathan Chou

I mean, if you look at historically, the mix has been tracking about 50% of ball bonders sold, copper capable, and even with [it being] basically lower than just a volume, revenue still [pulling up at that] percentage level.

Krish Sankar - Bank of America Merrill Lynch

What is the backlog in June? I think we had $125 million. I just wanted to make sure that's right. What percentage of ball bonder shipment was to the memory customers?

Jonathan Chou

Say the last part again, Krish.

Krish Sankar - Bank of America Merrill Lynch

Do you know what percentage was for memory customers of ball bonders in June?

Bruno Guilmart

We don't disclose that mix. But I think to confirm your first question on the backlog, yes, the backlog for June was $176 million. But, again, I want to stress that our backlog is risk capable and [inaudible]. So that's a correct number.

Operator

Your next question comes from the line of Tom Diffley - D.A. Davidson.

Tom Diffley - D.A. Davidson

What's driving the non-copper portion of your ball bonder business right now?

Bruno Guilmart

Well, it's the same as what has been driving that in the previous quarter. I mean, as we see from the [inaudible] technology perspective, 65 nanometer is becoming more of a mainstream technology.

There is a need -- the ball bonders, which are all the [five] generations, four or five years [inaudible] bonders, are not necessarily able to give you the same productivity that you would get from the latest and greatest ball bonders in terms of hitch and ball size.

So I'm not saying it's impossible to use a five-year-old bonder to bond 65 nanometer technology but that you would probably lose quite a bit of productivity. So therefore, that's still the drive that's happening in the industry that to be able to be more efficient get more productivity out of the ball bonder and there is still a significant portion of the [IT]s that are assembled today that cannot be and probably will never become [various] to copper despite gold prices going up.

So that's the main drive. It's replacement of the older generation bonders with newer generation bonders to be able to handle the more mainstream technology of the 65 nanometer and beyond.

Tom Diffley - D.A. Davidson

So the gold copper wire bonders -- actually the gold wire bonders -- still have capabilities above that of the copper wire at this point or is it more just a productivity issue?

Bruno Guilmart

I'm sorry. Say that again.

Tom Diffley - D.A. Davidson

As far as stuff like pitch goes, does the gold wire bonder, does that still have capability advantages over the copper wire bonders?

Bruno Guilmart

Yes, yes, yes. We actually have varying capabilities with gold than we have with copper right now from a pitch.

Tom Diffley - D.A. Davidson

Is there a gross margin impact whether it's gold or copper?

Bruno Guilmart

Well, it depends how you look at it. If magically you buy a gold ball bonder and you buy a kit because most -- you have two options [basically]. You can buy a gold enabled ball bonder and buy a kit to be able to do copper, which will not give you the same [data] in terms of efficient productivity and efficiency, as indicated.

Our copper ball bonders, which is [a pro copper], then I would say, the margins are more or less the same. But if you decide to go for a machine that is optimized for copper process, which we call the [pro copper] machine, then we have a flexible margin on our [pro copper] machines than we have on our standard gold ball bonder machines.

Tom Diffley - D.A. Davidson

What are you seeing right now as far as the proliferation of copper into the IDM specifically? It sounds like a lot of business comes from the OSATs; just wondering how the IDMs are transitioning right now.

Bruno Guilmart

Well, IDMs are transitioning to copper. There is no doubt about that. But what you have to keep in mind is more and more IDMs are using OSATs for their assembly and test. So I mean, definitely there is a move that is I would say across the overall semiconductor industry to move to copper as gold prices keep going up.

So whether you are an OSAT or an IDM, it doesn't change much the business [now]. I mean, you have -- you try to ride your costs out. So I mean, yes, we do see more and more IDMs moving to copper.

Tom Diffley - D.A. Davidson

Where do you think the industry average is right now for copper? Are we at 20% copper across the board?

Bruno Guilmart

Actually, I don't have that data point. So actually you can probably say that from industry data to an altogether more better figure than what I would be able to give you.

Tom Diffley - D.A. Davidson

Then just finally, you [effect] our taxes being 5% to 10% longer term; was that the guidance for the out-quarter as well or did I miss something there?

Jonathan Chou

Well, we're currently at 11.3% and we think long term [on the] next fiscal year. We're still in the process of going through some basically legal entity restructuring, which is actually allowing us to basically reduce our effective tax rate. So once we go through the -- get through the phase two of this project, we should be in the 5% to 10% range.

Tom Diffley - D.A. Davidson

Is the out-quarter at or below what we just reported?

Jonathan Chou

I'm sorry?

Tom Diffley - D.A. Davidson

For the September quarter, still at or below what you just reported, the 11.3%?

Jonathan Chou

Well, it depends on timing. We could basically get to the longer term range. It depends on how the -- right now I guess we are looking at somewhere between the current level. The next fiscal year basically we'll get to below 10%.

Operator

(Operator Instructions). Your next question comes from the line of David Duley - Steelhead.

David Duley - Steelhead

Yes, I was wondering if you could talk a little bit about what you think your market share is both in wedge bonders and in ball bonders.

Bruno Guilmart

So I mean, I think there is some data that just came out which is publicly available. We have from the ball bonder perspective, we are way over 50% and that -- I mean, the data tracks about a quarter or two behind. So I am not so sure exactly [inaudible] on that but there is some data that came out of -- I believe out of [inaudible] market share.

In wedge bonder, we are basically significantly higher than that and for copper, as I've said many times, we are dominating the space. There is no official data for copper but largely, I mean, we have a very significant market share. We have the best solution available in the market that provides the best cost of ownership for customers and their performance.

David Duley - Steelhead

Would you say at the high end of copper wire bonding spectrum are you still pretty much the sole source guy at most of the customers?

Bruno Guilmart

I wouldn't say sole source but I would say we dominate.

David Duley - Steelhead

One of the questions I think a lot of people are trying to figure out is your guidance in September, I think you did better in June than people expected and then your guidance in September is down probably a lot more than people expected. Typically -- like last year that happened in the December quarter.

So I'm just trying to figure out why it's happening in the September quarter this year and if there's anything, any color or help that you can give us about why September is down so much. You did mention that things -- people were scheduling orders. Maybe you can talk a little bit about that.

Bruno Guilmart

Well, I mean, we started to see in the second quarter calendar a lot of I would say industry news from companies seeing a lot more I would say I think a more cautious outlook on the second half of the year.

I think that's really what's driving our term quarter. There is -- at the macro level, there is a lot of incentive in the economy, whether you're looking at Europe or the US. There is a lot of talk in Asia about potential of property levels that have been built over time maybe in China and some other part of Asia and, therefore, this industry is driven primarily by the consumer demand. That is just an area which there are sentiments of being cautious when it comes to increasing capacity or spending capital for the rest of the year.

So, again, we will not provide guidance beyond the current quarter but I think the general sentiment that we can relay in the news is the sentiment of caution from the consumer demand, which is not only in Europe and the US but also in Asia. That's what's driving slowdown in our demand primarily for the ball bonders in our fourth fiscal quarter, September quarter.

David Duley - Steelhead

Now, you mentioned the OSAT -- I think it was the OSAT that rescheduled orders. Were those reschedules from the September quarter into the December quarter?

Bruno Guilmart

Well, again, they can reschedule whenever they want and they can also pull back orders, so which is again the reason why we don't want to provide guidance beyond the current quarter. So we'll see how our first quarter develops and we'll provide guidance at that time once we have better visibility. So what we've seen is definitely a series that would say a slowdown in demand for the current quarter.

Remember that we've had -- I mean, if you look at a year-on-year basis, I mean, we are going to still have 6% to 8% year-on-year growth. I mean, and everything taken into perspective, even at that level, I mean, Q4 is going to be financially a pretty decent quarter.

So it's a cyclical business. We all know that and I think that you cannot just take [inaudible] just every quarter. I mean, we had a record quarter in the history of the company in the June quarter, so the quarter before was also very good.

We had a very big drop from last year from the fourth quarter into the first quarter. So it makes it -- which is the main reason why we want to keep guiding for the current quarter because things can change very rapidly. We still believe that there is a lot of runway for the copper condition.

We still believe that we are in leadership position from a technology perspective but it's just how is the [credit] going to happen beyond the current quarter.

David Duley - Steelhead

One financial question; you're forecasting a pretty significant dip in the September quarter similar to the December quarter of last year. It may even look -- be around the same revenue level. I don't have the numbers to compare in front of me.

But one thing you could help us with is can you compare the September quarter to last December's quarter on an operating margin basis? Would it be better than last December or worse? Maybe just give us comparisons to that particular quarter because it looks at awful lot like that quarter.

Jonathan Chou

Actually, I do. It's about the same in terms of looking at the revenue. We've been keeping our fixed cost levels very consistent. The beauty about this model is [felt] that it really follows through when the volume picks up.

David Duley - Steelhead

So we could make the conclusion then that profitability levels will be similar to the last time you dipped $155 million.

Jonathan Chou

Yes.

Operator

Your next question comes from the line of Mahesh Sanganeria - RBC Capital Markets.

Mahesh Sanganeria - RBC Capital Markets

Just wanted to get a little bit more color on what you just talked about; so from the end demand perspective you started hearing some weakness in the May and June timeframe. So if you can just talk about when did you start to hear about the rescheduling? Was that [tunnel] in June-July timeframe? Some color on that will be helpful.

One more question; can you give some color on what end market or your geography might be driving [PC]s or memories. That's another helpful hint we can get to understand what's going on.

Bruno Guilmart

So I would say basically we started to see sudden signs of softening pretty much like everybody else saw these signs, which were around I would say the June-July timeframe. I mean, if you follow foundries, if you follow the OSATs, if you follow all the industry, generally speaking, I mean, you can see that there were signs of less optimism than there was a few months before that.

As far as the end market, because we sell mostly, again, about close to 80% of our business goes to the OSATs, we do not control and we do not know exactly what [inaudible] applications.

So that's really a question that's more for our customers to be asked to rather than for us because we are kind of agnostic as to where our ball bonders are being utilized. Of course, the proper migration started with IT [inaudible] with logic and analog and so on more than with memory.

That [inaudible] is a lot more widespread, which is why it's difficult to really give you -- or quantify applications that may have a lower demand or seeing some slowing demand as opposed to another application because, again, we do not control the end applications.

We do [inaudible] where for ball bonders, where it's going for wedge bonders, it's going for power city connectors and the hybrids and so many and so we've seen again, as I've mentioned in the prepared remarks, that for power city conductors, there were definitely a correction and a return to more normalized level as typically these type of companies have been more conservative when it comes to CapEx.

But other than that, I mean, we do not have good visibility on the end application.

Mahesh Sanganeria - RBC Capital Markets

Just one follow-up question and I think the previous caller asked a similar question. If we compare this to what happened in September, December, is there any color you can provide as you talk to the customers? Are their behaviors similar to when they lower their orders in the December quarter because [I noticed] the [inaudible] seems to be up similar nature.

How would you compare that decline to the current decline? If you can share your thoughts on how do you think as the cycles -- have they changed from what used to be a historical, like a -- this looks like a much smaller cycle than what you've seen in the past, longer and deeper and here we're seeing more frequent cycles. So if you can provide your thoughts on that that would be very helpful.

Bruno Guilmart

Yes, I want to reemphasize that for FY10 [inaudible] was a record year. FY11, based on the guidance that we've given, will be another record year. The demand in our business can change very rapidly. It's the nature of the business.

If you look at the same quarter a year ago, it was the very same quarter. It's typically the case because a lot of the OSAT companies want to add usually a very strong order book because it's the pre-Christmas season where there is a lot of demand for [proximities].

Now, we've seen -- actually, we had a fairly significant drop from our last Q4 into Q1 and we recovered very quickly and we -- so next generation of these transition from gold to copper. So I think that that's a problem is that it's very difficult to linearize the business.

I want to bring back again the point of mentioning earlier is that if you look at it -- try to linearize it on a year-on-year basis, it's going to be -- if you take the current guidance, it's going to be a 6% to 8% growth versus last year, which was already a very good year. But we can [top that].

So it's hard to [inaudible] economy. The cycles, yes, they seem to change. Sometimes everybody seems to see that the last quarter is [inaudible] because a lot of customers build up capacity in the first three calendar years. Maybe this time capacity will be maybe a little bit ahead of time and there is some correction that are being made.

Again, I will reiterate that we just provide the guidance for the current quarter. So as we come to our first fiscal quarter, we'll provide guidance at that time.

Operator

(Operator Instructions). Your next question comes from the line of David Duley - Steelhead.

David Duley - Steelhead

Just a couple questions from me; did you have any 10% customers in the quarter and what were the rough percentages?

Jonathan Chou

We actually have three that were the top over 10% customers, David.

David Duley - Steelhead

Bruno, one for you; in aggregate, do you think that the case of the copper migration has slowed -- or is it moving along at the same pace as normal? The reason I say in aggregate is one of your customers, [Siliconware], talked about pushing its targets out just a bit for when it would achieve 50% copper revenue. It wasn't really a big deal, like a quarter or so. So I'm just wondering in total what you're seeing with the case of copper migration.

Bruno Guilmart

I think in aggregate, as I've said, we have still quite a bit of runway ahead of us. The adoption of copper -- I mean, you have the leaders, right, who are [inaudible] in Taiwan that we've seen the latest adoption [inaudible] in the other OSAT players and I think this is going to continue.

I mean, I think that the gold prices were above $1600 an ounce this week and so I don't think there is any communication that this is going to come down. Again, once [you've been] through the effort of converting a product from gold proper, even if gold goes back to $20 an ounce, you're not going to go back to gold because it was just so much work to convert from gold to copper in the first place from what you get from a design qualification perspective.

So I think we will continue to see this space that we've seen in the last three years for the foreseeable future and which is why we're going to continue to invest in R&D and at the rate we've been investing in the past and maintain our leadership position in copper solutions because we believe that this is the future for where the industry is going.

Operator

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

Joseph Elgindy

Thank you all for the time today. Before we end I’d like to take this opportunity to remind investors that management will be presenting at the Oppenheimer 14th Annual Technology Conference, which will be held at the Four Seasons hotel in Boston at approximately 3:05 pm Eastern on August 10, 2011.

If you are unable to attend in person, a link to the webcast will be accessible from the investors events page of our website. Again, thank you all for your time today. Operator, this concludes our call. Thank you.

Operator

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

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