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

F3Q12 Earnings Call

August 2, 2012 11:00 AM ET

Executives

Günther Braun – President and CEO

Ingrid Mittelstädt – EVP, CFO and Treasurer

Analysts

Patrick Newton – Stifel Nicolaus

Mark Douglass – Longbow Research

Jagadish Iyer – Piper Jaffray

Mark Miller – Noble Financial

Operator

Welcome to Rofin-Sinar’s 2012 Third Quarter Financial Results Teleconference. 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 ask questions. Please go ahead.

Günther Braun

Thank you. Good morning or good afternoon to everyone. I’m here in Plymouth, Michigan together with our CFO, Ingrid Mittelstädt. I hope you all got the press release containing our third quarter 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, we would like to make the usual statement about the information you are getting in this conference call. Safe Harbor statement. Our discussions may include projections, estimates or other information that may be considered forward-looking. While these forward-looking statements represent our best current judgments on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. Throughout our discussions, we will attempt to discuss important factors relating to our business that may affect our prediction. You may also want to review our last 10-Q and 10-K filing for a more complete disclosure of financial risks.

Now, let me start. As we mentioned in our press release, the first quarter was influenced by the uncertain economic environment which we currently face. Traditional laser technologies were impacted by this development, even stronger than latest technology fiber laser. In general, business is somewhat shaky. There is no clear direction to the positive or negative side.

Now, let me go with the standard of the review for the quarter ending June 30, 2012. And as you’ve seen from our press release, we delivered sales in the third quarter of $131.7 million, which is within our guidance, but $23.3 million or 15% lower than in the comparable quarter in fiscal year 2011.

Ingrid will tell you the currency impact on our third quarter sales numbers later and I think you will be surprised how high the number is. Sales in our Micro/Marking business mainly reflect excellent business with the semiconductor, flex tech and automotive industry when comparing to last year’s third quarter, where the consumer electronic industry was one of the highlights. Net sales decreased 19% over the comparable periods to $61.9 million or $47 million of our overall sales.

Sales in our Macro business decreased 16% to $53 million comparing to the third quarter of fiscal year 2011. And this is mainly caused by the lower demands from the machine tool industry in China from our OEMs. Macro business contributed 40% to quarterly sales. Our Component business increased by 11% to $16.8 million, representing 13% of quarterly sales. And I have to comment that the laser diode product had a really strong quarter again.

Here are other statistics where the geographical split sales to Asian countries decreased by 24% to $43 million and resulted in 33% of quarterly sales. The strongest countries this time were China, Taiwan and South Korea. And our Chinese business contributed 17% to quarter sales. North America increased 18% and contributed $32 million or 24% of quarterly sales, supported this time by the automotive medical device industry as well as Marking applications and I mentioned already the Component business.

Europe was responsible for the remaining 43% of the quarterly sales. Sales decreased 20% to $56.7 million comparing to last year’s third quarter and there is no specific industry responsible for the reduced sales. Then our spare parts and service business decreased by 2% or $800,000 and accounted for approximately 28% of net sales for the quarter. I would say it’s a very stable business and demonstrates stable utilization of equipment in the factories.

Some other statistics, breakdown of our quarterly laser sales by industry. Automotive 11% within the quarter versus 8% last year in 2011. Machine tool 37%, last year 39%. Semi electronics 24% this year and 27% in 2011. 2011 very strong consumer electronic industry by the way. And others 28% this time versus 26% in 2011.

During the quarter, we shipped a total of 1,068 lasers versus 1,264 lasers, approximately 16% less compared to last year’s third quarter. 437 versus 549 units were for Macro applications and 631 versus 715 units were for Marking and Micro applications.

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. Our quarterly revenue of $131.7 million were in line with our projected guidance even under the impact of the strong U.S. dollar that reduced our quarterly sales by an amount between US$8.5 million and US$9 million. On a sequential basis, gross profit remained stable at 37.5% of total sales. Compared to the third quarter of last fiscal year, gross profit decreased to 37.5% coming from 39.2% last year, mainly due to lower absorption of fixed costs due to the lower level of business and favorable product mix and 2% lower service on spare parts revenue.

SG&A including intangibles, amortization for the quarter represented 19.6% of net sales the third quarter of fiscal year 2012 compared to 19% in the corresponding period of last year. In absolute figures, the SG&A decreased by $3.5 million to $25.3 million in the quarter. The decrease in SG&A expenses is mainly a result of lower label cost as well as lower commissions and exhibition expenses. Additionally, you have seen that the intangible amortization decreased by $0.1 million compared to Q3 2011.

R&D expenses for the third quarter amounted to $11.5 million or 8.7% of total revenues compared to $9.5 million or 6.1% of total sales in the comparable period of fiscal 2011. Quarter gross spending was $11.8 million versus $10 million in the prior year. The increase mainly reflects our activities related to the expansion of our fiber laser product portfolio and the manufacturing cost reduction programs for high power fiber laser, as well as R&D projects for short pulse lasers and lower R&D grants realized during the quarter.

Coming to other income expense, the quarterly net other income amounted to $1.1 million compared to $0.4 million in the comparable period of fiscal year 2011. The increase in other income mainly relates to the higher net exchange gains generated during the reporting quarter. As a result, the over-proportional generation of taxable income in countries with higher tax rates and additional taxes for repatriation of earnings, our effective tax rate on income before income taxes and minority interest for the third quarter amounted to 34.7% compared to 30% in the third quarter of fiscal year 2011.

Even in a difficult global industrial environment and the uncertainties due to the European debt crisis, we were able to reach our expectations in revenue, manage our SG&A expenses and achieve net income of $8.4 million in the third quarter. And this resulted in diluted earnings per share of $0.29 based on 28.8 million weighted average shares outstanding.

Now coming to the balance sheet. The strength U.S. mainly against the euro comparing the exchange rates from June 30, 2012 versus September 30, 2011 resulted in a change of approximately 7%. Trade accounts receivable net amounted to $95.4 million and decreased $24 million compared to last fiscal year, mainly due to lower level of revenue in the nine-month period ended June 2012 compared to Q4 2011 and the impact of exchange rate fluctuations that decrease this amount also by about $3.2 million.

The day sales outstanding decreased to 66 days compared to 73 days as average of last fiscal year. Net inventory increased by approximately $15.8 million to $204.6 million during the first nine months of fiscal year 2012, mainly due to higher demonstration inventory, spare parts and raw materials related to our new fiber laser product, while we are expanding manufacturing capacity at several of our locations.

Additionally, we are holding products for some projects in Asia that are expected to be delivered in Q4. This is partially offset by the impact of the exchange rate fluctuation of $8.6 million. Based on the cost of goods sold figures, inventory turned approximated 1.6 times. Total debt decreased by $6.5 million and amounted to $16.4 million compared to $22.9 million as of September 30, 2011 mainly due to repayments of bank loans and the impact of exchange rate fluctuations of $1 million.

Now, I would like to give you some information related to our cash flow. Cash and short-term investments decreased by $33.4 million to $97 million during the nine-month period ending June 30, 2002, and the impact of the exchange rate fluctuations decreased cash by $2.5 million.

During the nine months ended June 30, 2012, the company generated $11.3 million from its operating activities. We used $33.9 million in investing activities mainly due to the final earn-out payment for the finished subsidiary. That resulted in an increase of goodwill. You remember the amount $13.4 million, capital expenditures of $20 million and $5 million were used by the company in financing activities, mainly due to the repayment of bank loans.

Coming to our share buyback program, as mentioned in our press release, the Board of Directors yesterday authorized the company to initiate a share buyback program of up to US$20 million over the 12 months ending August 10, 2013 subject to market conditions. We will repurchase the share from time to time in open market transactions or privately negotiated transactions at the company’s discretion.

And now, coming to our earnings guidance. As a result of the current market judgment, the backlog situation and the impact of the exchange rate fluctuations on the reported figures in U.S dollars, we want to give you the following guidance of the financial performance of the fourth quarter and also for fiscal year 2012.

The company currently forecast revenues for the fourth quarter in the range of $125 million to $130 million. We estimate gross profit for the fourth quarter at approximately 38% of net sales, period expenses including intangible amortization in the range of 28% to 29% of net sales. Income before income taxes and minority interest between 9% and 10% of net sales. And the effective tax rate that depends mainly on the overall mix of results in the different countries. And the non-deductible expenses for tax purposes should be in the range of 33% to 34%. Intangible amortization and fixed assets depreciation, our SG&A approximately 3% of net sales.

And now, the guidance for fiscal year 2012. We estimate our annual revenues for the current fiscal year in the range of $518 million to $523 million. Gross profit is expected to be around 37% of net sales. Period expenses at approximately 28% of net sales, income before income taxes in the range of 9% to 10% of net sales, and the effective tax rate to be approximately 34%. Depreciation and amortization are estimated in the range of 2.5% to 3% of net sales. This guidance is only an estimate and again subject to all the risk of our Safe Harbor statements.

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

Günther Braun

Thanks, Ingrid. As you have heard from Ingrid, we lowered our guidance in sales for the fiscal year to between $518 million and $523 million based on the market dynamics and the order entry over the last quarter. The expectation we have put into certain markets did not materialize, but also the currency translations are strengthening last month impacted negatively our sales figures.

Geographically, during the quarter, we expected that the positive sentiment of the machine tool industry in China we experienced in March was turning to larger orders and sales levels for us. The reality proved to be a steady and stable business at no big upturn. Book-to-bill ratio for China in the quarter was 1.15, not enough to support the higher sales number in Q4. Overall, Asian book-to-bill number was 1.17, so positive. Order entry in Asia was mainly supported by consumer electronics application for pulse fiber laser and conventional end-pumped solid state laser technology.

European sales fell sequentially 6% impacted by the general economic environment in the European countries. Spain and France business turned to be slower, whereas Germany, UK, Switzerland are acceptable. Books-to-bill ratio was 0.96. North American business developed different. Sales increased sequentially by 14%, totaled $32 million with a book-to-bill ratio of 0.95. Sales in North America included good business not only for automotive and medical device industries, but also for component business or laser diode improved.

Our backlog end of June 2012 increased sequentially by $3.7 million to $157 million solid base for Q4. Current backlog includes approximately $56 million from Macro business, approximately $86.2 million for our Micro and Marking business, which is approximately $10 million higher on a sequential basis and one of the highest numbers we have seen so far in the company’s history, and $14.7 million for Components.

Our quarterly order entry of $135.3 million was lower than expected, of course also influenced by the currency translation that’s influenced mainly by lower order entry from Asia roughly $13 million lower, as well as Europe $17 million, $18 million lower. But in North America, orders improved by $2.6 million and that’s compared to last year’s third quarter.

And last but not least, I’m sure you want to know some figures about our fiber laser-related sales and order entry. So fiber laser-related sales and order entries were $38.3 million sales and $54.6 million in order entry respectively for the nine-month period, leaving a backlog of $38 million at the end of June 30, 2012. Order entry for the quarter was, by the way, $24.5 million, so a nice number. Sales were $14 million.

We got larger orders for low power fiber lasers from the electronic industry which were booked and of course already partially shipped during the quarter. The target to achieve the $80 million in fiber laser-related in sales will not to be achieved. But order entry most likely can come close to this number.

We continued to work on cost reduction for our high power fiber laser, taking cost out for diode pumping power and working towards increasing output power of our fiber laser modules, which is essential to be competitive in the market. We continue to license our 200-watt models before introduction. We have set internal objectives. We are close, but have not finally reached them.

And now, let’s go to the outlook by our main industries starting with the machine tool industry. In China, we expect above normal levels business due to one specific infrastructure project where laser demand could be up to double-digit unit numbers. We had already some bookings in June and in July. So I think it should materialize this project.

European business expected to maintain current volumes also for welding projects. We still see good demand and interest for our high-power fiber laser products. But of course, pricing is challenging. And again, we should not forget our CO2 lasers in the low-power range, which continues to be a success story for us. Automotive sub-suppliers a reasonable good level of project for welding application containing both fiber lasers and still CO2.

Marking and Micro is also stable business where see some opportunities. So semiconductor industry Q3 was an excellent quarter in sales. But we feel and believe that the demand is somewhat slowing down in the semiconductor industry. Of course, you all know our main application is still the marking of chip material.

Consumer electronic working on some projects where new application besides the successful spot welding business last year, but slower business for our Micro product range compared to last year. Marking laser products are currently our highlight, multiple orders from EMS companies and hopefully, this will continue.

On the solar side, we expect reasonable bookings for scribing, marking, and etch-dilution applications in Q4 from China. European U.S business continues to be on the financing pressures of course as everybody knows, so more difficult. If you go to medical device, the industry got new laser technology for cell cutters in the labs. So they need to further qualify it before we see growing demand. We predict stable business in all the key regions or in the key regions of North America and Europe. But we believe and we see that increased demand from Asia. So overall, we’d say its stable continuing business.

And military and defense continues to be attractive in the U.S. That’s my only comment on military and defense. So these are my comments on the outlook of our main industries. I think if I’d note at the end, of course we need to watch the stronger U.S. dollar, which will put pressure on our top line results from foreign currency translation, if the dollar stays where it is. And this should be taken of course into account when we’re evaluating our Q4 or you evaluating our Q4 guidance.

As always, thanks to the Rofin team for their contribution in this challenging environment. And thanks for listening. And now, we are 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 the line of Patrick Newton with Stifel Nicolaus. Please proceed with your question.

Patrick Newton – Stifel Nicolaus

Yeah. Hello, Günther and Ingrid. Thank you for taking my question.

Günther Braun

Good morning.

Ingrid Mittelstädt

Good morning.

Patrick Newton – Stifel Nicolaus

So Günther, I guess could you update us where your backlog and orders are in the quarter on a fiber laser unit basis? I think you said you had 86 units last quarter and received orders for...

Günther Braun

In the quarter, yeah. Ingrid has – Ingrid, how many? I assume 500 units or something order entry.

Ingrid Mittelstädt

Yeah. Order entry 565 in the quarter. And this means that we have an ending backlog of 554 units.

Günther Braun

And shipments in the quarter, Ingrid?

Ingrid Mittelstädt

218 units were shipped during the quarter.

Patrick Newton – Stifel Nicolaus

I was asking specifically on the fiber laser units.

Günther Braun

Yeah. These are all fiber laser units including the low-power.

Patrick Newton – Stifel Nicolaus

Okay. So how about in the high-power?

Günther Braun

On the high-power side, I think order entry was...

Ingrid Mittelstädt

44?

Günther Braun

44 and shipments in the 20 to 25.

Günther Braun

Yeah. 20 to 25 were the shipments, yeah.

Patrick Newton – Stifel Nicolaus

Okay. And I guess, Günther, as we look at the customer base for these fiber laser units, are the majority of these new customers and new application or is it typically driven by current customers? And for the most part, do you view these orders as additive or a replacement of your Tier 2 units?

Günther Braun

So your last question, it’s hard to tell if it’s replacement or not or additives. At least these are customers who buy still CO2 lasers but also take fiber lasers on one side. And I would say 80% existing customer of these and mostly OEMs but also single units for, I would say, not just cutting application also in welding we sold some lasers to 2 kilowatts.

Patrick Newton – Stifel Nicolaus

Okay. And then thanks for the update on the 200-watt diode packages. I think originally, you were expecting to have them shipping by the end of last month. So are we looking at kind of an August...

Günther Braun

No, introducing in this quarter. So not shipping out last month, introducing this quarter. What we have done in the lifetime test that we have set pretty high objectives and targets to reach on hours. And we are close to these hours, improving that but we are not there. So therefore, we want to be sure that everything is right before we really jump and start full production there.

Patrick Newton – Stifel Nicolaus

So by the end of this quarter?

Günther Braun

That’s the background.

Patrick Newton – Stifel Nicolaus

But still by the end of this quarter?

Günther Braun

I hope. I cross my fingers.

Patrick Newton – Stifel Nicolaus

Okay. And then I believe that you were targeting another cost reduction. I wondered if it was in cabinet control by the end of the calendar year, I believe. Is that still on track?

Günther Braun

The next quarter introduction, that’s the target. And so far, it’s in line. This is our target. So there is no hurdle so far that would delay it.

Patrick Newton – Stifel Nicolaus

Okay. And Ingrid, I wanted to make sure I understood the foreign exchange impact correctly. I believe you said it was a negative impact of $8.5 million to $9 million to revenue.

Ingrid Mittelstädt

Yeah.

Patrick Newton – Stifel Nicolaus

Was that on a trailing nine-month basis or was that on a sequential basis? I just wanted to make sure I understood that.

Ingrid Mittelstädt

This was of course compared to last fiscal year numbers on the quarter.

Günther Braun

$140 million instead of $131 million what we delivered.

Patrick Newton – Stifel Nicolaus

Okay. And that was at that kind of year-over-year basis?

Ingrid Mittelstädt

Yes.

Patrick Newton – Stifel Nicolaus

All right. Perfect. Thank you for taking my questions.

Günther Braun

Thank you, Pat.

Operator

(Operator Instructions) And our next question comes from the line of Mark Douglass with Longbow Research. Please proceed with your question.

Mark Douglass – Longbow Research

Good morning, Günther and Ingrid.

Ingrid Mittelstädt

Good morning.

Günther Braun

Good morning, Mark.

Mark Douglass – Longbow Research

Günther, looking at the guidance, it’s a pretty sizable downshift from what you were expecting before. You said currency was part of that. Were there any larger orders that you are anticipating that just didn’t flow through or was a pretty broad market weakness that also contributed to it? It seems like something maybe more specific you had in mind that just didn’t (inaudible).

Günther Braun

No. One reason clearly was, when we were in springtime in China that was a recovery. And the sentiment we got was really positive and we thought this would turn into orders in a faster way. And so, we counted to have or to get more machine tool orders and this was one of the basics, I would say, for our guidance we gave in May. If you compare Q3 2011 just machine tool versus machine tool, this year we are $10 million below what we did in the third quarter last fiscal year, and we had roughly the same pattern. We hoped for the same already pattern this fiscal year.

So this was the main reason for our guidance, not other really specific big projects. And overall of course, we thought that the strengthening or the U.S. dollar, the currency impact would not be there. The currency would be stable. And as Ingrid mentioned, the same currency and not this decrease in – or strengthening of U.S. dollar the last, I would say, three months then we would have shown $140 million, and of course higher order entry and somewhat higher backlog. So this was the reason why we had this higher first quarter. It was a little bit challenging and it did not turn into reality.

Mark Douglass – Longbow Research

Okay. And then on the currency. If currency rates stayed where they are now, would you expect about the same type of impact? Is that what you’re baking into fourth quarter, roughly $8 million to $9 million?

Ingrid Mittelstädt

Yes, because it will compare then to last fiscal year’s exchange rate. The impact probably, yeah...

Mark Douglass – Longbow Research

Great, okay.

Ingrid Mittelstädt

Will be also high. That’s also a part of the lower guidance for the fourth quarter.

Mark Douglass – Longbow Research

Okay. Can you repeat the operating cash flow in the quarter again (inaudible)?

Ingrid Mittelstädt

Yeah. It was, let me see, $11.4 million.

Mark Douglass – Longbow Research

Cash flow from operations?

Ingrid Mittelstädt

Yeah.

Mark Douglass – Longbow Research

And the CapEx?

Ingrid Mittelstädt

In the nine months, right?

Mark Douglass – Longbow Research

Well, nine months or in the quarter, either.

Ingrid Mittelstädt

No. For nine months, we normally give the accumulated amount.

Mark Douglass – Longbow Research

(Inaudible).

Ingrid Mittelstädt

$20 million is CapEx over the nine months.

Mark Douglass – Longbow Research

And $11.4 million operating cash flow in nine months?

Ingrid Mittelstädt

Yeah.

Mark Douglass – Longbow Research

Okay. Is that working capital challenges there that you’re negative free cash flow?

Günther Braun

Yeah, the inventories...

Ingrid Mittelstädt

It’s high. Yeah.

Günther Braun

Would be reviewed and reduced for lift. I think that’s the major challenge, I would say, or the next step what we need to do.

Mark Douglass – Longbow Research

You’re going to be focusing on that. Okay. And then finally, the big orders from the new firm. Have those started shipping yet on those high power fiber modules?

Günther Braun

Not yet. Few only.

Mark Douglass – Longbow Research

A few only?

Günther Braun

It should start this quarter.

Ingrid Mittelstädt

This quarter, Q4.

Mark Douglass – Longbow Research

But would you say the more plurality of the – or maybe majority of the systems would probably get shipped in fiscal 2013?

Günther Braun

I would not say plurality. There is a schedule behind for the next month. And I don’t have the exact a number, but I would say 50/50.

Mark Douglass – Longbow Research

Okay. Thank you.

Günther Braun

Thank you, Mark.

Operator

Our next question comes from the line of Jagadish Iyer with Piper Jaffray. Please proceed with your question.

Jagadish Iyer – Piper Jaffray

Yeah. Thanks for taking my questions. Two questions for Günther. First on the – if you look at your historical revenue run rates, the numbers that you have guided for the next quarter, does it suggest that are we at the bottom or can you comment on that how we should be thinking about it?

Günther Braun

Yeah. What we have – okay. I think we are more cautious in doing our forecast. And of course, we have put all the same currency pressure into this forecast. And given the order entry and I have no indication that order entry should be reduced in this quarter, therefore it should be on the lower level side.

Jagadish Iyer – Piper Jaffray

Okay. So how should – and second – thanks. Second, I wanted to understand how was the overall automotive segment in the second half versus the first half calendar year. Do you see a recovery there? Any thoughts on that? Thanks.

Günther Braun

I think that we got more business across all product lines, I have to say, all the three Ms, even in Macro. Our fiber lasers are purchased for welding application. So what we can offer, of course, our power range. So that’s positive. And we have had a very stable or increased business on the marketing side. So overall, our automotive business improved and you have seen that in the sales numbers. It was 11% this quarter. The quarters before, it was not double-digit of course.

But the question is how this will continue. You know that especially in Europe, the car manufacturer for the smaller cars are somewhat under pressure. Luxury car manufacturer business is still okay because of their sizeable business in Asia. North America is good. I would say that it’s not bad, but let’s see how this develop. But overall, we are not pessimistic on automotive and sub-suppliers there.

Jagadish Iyer – Piper Jaffray

Just one quick, if I can squeeze one quick thing, Günther. I just wanted your thoughts on how the pricing environment is in a competitive environment right now. Thank you.

Günther Braun

I would say two-fold. Traditional laser technology, usual price pressure. And for fiber laser technology, of course, a little bit more pressure in the market.

Jagadish Iyer – Piper Jaffray

Thank you.

Günther Braun

Thank you, Jagadish.

Operator

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

Mark Miller – Noble Financial

Good afternoon, Günther and Ingrid. Maybe I missed it, but could you tell me what the orders were from Macro and Micro and Marking?

Günther Braun

We can do, of course. If we have to – I need to go back here in the (inaudible). The orders for Macro were $50.7 million in the quarter. The Marking/Micro $71.6 million and Component $13 million.

Mark Miller – Noble Financial

Thank you.

Operator

(Operator Instructions) Our next question is a follow up question from Patrick Newton with Stifel Nicolaus. Please proceed with your question.

Patrick Newton – Stifel Nicolaus

Yeah, Günther. Just kind of as I pick apart these geographic numbers, obviously Macro playing a large role. But I see Europe sales down in the current quarter from peak levels down about 20%, Asia down about 37%. So obviously, Macro playing a role. But how much would you attribute to competitive pressures, especially in Asia as you’re seeing some competitors put up some really solid numbers there?

Günther Braun

I have seen that. Are you talking now the European?

Patrick Newton – Stifel Nicolaus

No. I’m talking Asia (inaudible).

Günther Braun

No, Marking and Micro. Of course, there is some pressure. No doubt about it. What I have to say is that what we see on one side, as our machine tool customers, where we sell our CO2 lasers that there is no real impact with fiber lasers, I have to say. So it does not mean that we have lost their market share in the machine tools. So for us, the overall market is somehow, and business, the same to such customers.

On Marking and Micro, what we see is a specific product and project for example. In the first quarter where we did the $72 million, we have one larger specific project where we recognize the revenue. That’s the reason why it was in the range of $72 million. Now, we are in the $62 million range for Marking and Micro. So it’s depending really on certain projects. But on Marking and Micro, I see less competitive pressure. Let’s call it that way. It’s more system-specific product and specific project.

Patrick Newton – Stifel Nicolaus

And how about on the Macro side?

Günther Braun

On the Macro side, as I said, that’s mainly machine tools. And if you look last year and this year, we are $10 million below this. I will say on the Macro side for the OEMs, our existing and current OEMs, I have not seen a peak or really a switch to more fiber laser from CO2 laser especially in China.

What’s clear on the Macro side that fiber laser take more shares on the welding side in the mean time from the CO2, especially in automotive. And on the cutting side, I think it’s clear that for thin metal sheets, the fiber laser is the ideal equipment. So therefore, for us, it’s clear that this is fiber laser business and we also strive to go for this business. So clear picture, I cannot give you with clear numbers but that’s what I see basically.

Patrick Newton – Stifel Nicolaus

All right. I appreciate the details. Thank you.

Operator

As there are no more questions at this time, I would now like to turn the floor back over to management for closing comments.

Günther Braun

Okay. Thanks for listening. I know there was a little bit different expectations for the third quarter. And of course for the fourth quarter earnings guidance on one side, of course the strengthening of U.S dollar put some pressure on our business, on the other side, the market. And we continue to fight for orders. I think we have some ideas and projects that we hopefully can materialize over the next quarters, which support our business, and we can come back and grow our business. At least that’s the target. We are working on the fiber lasers still. It’s challenging, but we all know that. So that’s basically my wrap up. Thanks to everybody. Have a nice summer, and talk to you in November. Thanks.

Operator

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

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