Greetings, and welcome to the Kulicke & Soffa F2Q 2013 Results Call. (Operator instructions.) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joseph Elgindy, Director of Investor Relations and Strategic Planning for Kulicke & Soffa. Thank you, Mr. Elgindy, you may begin.

Thank you, Claudia. Good morning everyone, and welcome to Kulicke & Soffa’s F2Q 2013 conference call. Joining us on the call today are Bruno Guilmart, President and CEO; Jonathan Chou, Senior Vice President and CFO. Both are available for Q&A after the prepared comments. For those of you who have not received a copy of today’s results the press release is available in the investor relations section of our website at www.kns.com. In addition to historical statements today’s remarks will contain statements relating to future events and our 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) of the year ended September 29, 2012, and our other recent SEC filings. I would now like to turn the call over to Mr. Bruno Guilmart. Please go ahead, Bruno.

Okay, thank you Joe, and thank you all for joining our call today. Revenue in our F2Q 2013 was $106 million compared to $114 million in F1Q 2013. This exceeded the high end of our F2Q revenue guidance of $90 million to $100 million. In terms of color on our business dynamics in F2Q ball bonder volumes slightly increased although remained soft. This primarily reflects the ordering patterns of selected OSAT customers as it was a shorter quarter due to the Chinese New Year holiday. During our March quarter, 85% of bonders sold were sold to OSAT which is an increase from the prior quarter. We do not attribute our volume (inaudible) to a market share lull, nor do we view this as an indication underlying slowing in the copper transition. Rather, OSAT [volume] picked up later in the quarter largely due to broader macroeconomic drivers. While consumer demand lowered somewhat in the quarter, and in fact as many suppliers have [mentioned] as well, we believe the main reason that drove our [profits] were lower demand from our OSAT group of customers and also IDNs generally reduce their OSAT requirements in softer quarters. Although this ordering pattern increases operational challenges the volume benefit of supporting their work such as OSAT clearly outweighs the downside in such circumstances. In addition, the flexibility of our operational model greatly optimizes our ability to handle these ordering patterns and remain profitable. While we still do not have a high level of visibility into the nature of our customers’ orders we continue to have confidence in the longer opportunities for our business. Wire bonding remains as a significant process step for the overwhelming majority of global semiconductor products. We do not expect this strength to drastically change over the foreseeable future as wire bonding is…

Thank you, Bruno. My remarks today will only refer to GAAP results and will compare the March quarter to the December quarter. Net revenue for the quarter was $106 million, down $8 million from the December quarter. As Bruno noted earlier, we are pleased to exceed the high end of our revenue guidance. Net income for the March quarter was $7.3 million. This compares to $3.6 million in the prior quarter. From an EPS perspective, we achieved $0.10 per share in F2Q compared to $0.05 per share in F1Q 2013. Gross margin remained healthy at 46.0% with gross profits at $48.8 million. This compares to a gross margin of 45.2% and gross profit of $51.5 million in the prior quarter. Operating expenses were $41 million compared to $47 million in the prior quarter. While we remained focused on our cost containment initiatives throughout both December and March quarters, the $6 million quarter-on-quarter expense reduction was primarily due to recognition of the Research Incentive Scheme for Companies, RISC grant, for receivables related to prior-year product development activities. This amounted to a net delta benefit relative to the December quarter of $5.4 million. This benefit positively impacted our March quarter R&D expense line. Without this one-time item our EPS would have been $0.06 for the March quarter. Our operating expenses in the current June quarter are anticipated to be $46 million. Excluding the RISC grant adjustment this is in line with our March quarter. For the March quarter, income from operations was $8.2 million and our tax provision came in at $1 million. As noted on the prior calls, we continue to target our long-term effective tax rate at 10% as we further simplify our tax structure. As Bruno mentioned earlier, we ended the quarter with a total cash and investment position…

Thank you, Jonathan. In terms of the items for our F3Q, we expect revenue to be approximately $120 million to $130 million. This reflects a modest increase in demand while general softness continues at major OSAT customers. Despite this near-term outlook we remain well positioned given our operating leverage, technology leadership, continued growth in the copper transition, and attractive long-term growth opportunities. We continue to have a clear leadership position in the markets we serve with the financial strength to support our customers’ R&D roadmaps. We also remain fully committed to pursuing internal and external growth opportunities. This concludes our prepared remarks; Operator, we are now happy to take any questions. Operator?

Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. (Operator instructions.) Our first question comes from the line of Tom Diffely with D.A. Davidson. Please state your question. Tom Diffely – D.A. Davidson: Yeah, good morning. Bruno, first I want to look at your long-term view of the gold-to-copper transition. The data that you look at, does that come directly from the customer base or from third-party research houses? How is it that you accumulate the data?

So we basically have two ways of looking at the data. We have the official data which is provided by Gartner and VLSI but the problem, especially we tracked I would say VLSI a little bit closer as they tend to come up also with the data we cover, lagged by about a quarter. So if you want right now we have data that is actually about a quarter old, as well as we do track on a biweekly basis utilization at our customers. As you know, we have had significant penetration movement I would say in the two largest OSAT, or maybe not the two largest OSAT but two of the largest OSAT in the last three years in Taiwan. And what we are seeing I would say is somewhat opposed to just [ramping up] capacity to the demand but on the other hand, what we are seeing is also a pickup in the other larger OSATs and also in some tier two and tier three OSAT customers that especially in the tier three case tend to demand more efforts as they order lower quantities and are scattered I would say around a larger geographic area. Tom Diffely – D.A. Davidson: Okay, I mean is it your big picture view that we’re maybe just halfway through the big gold-to-copper transition at this point?

I think are view has not changed. We are probably about halfway through. We do not believe that gold prices now, hovering at $1500, are going to change anything in the equation because again, this is a major technology change. Recently in the US we’ve been talking to some key customers, customers of our customers who are in the mobility space and they’ve started the conversion on virtually all their new products that will go wire bonded, because as I mentioned during the call wire bonding is still the most cost effective solution in the market. So when they can do it through wire bonding they will do it through wire bonding, and they are not [still fulfilling] the [newer] product because it’s not cost-effective but all the new products that are being launched; and as you can imagine it’s quite often that the technology evolves fairly quickly that are going to be launched in copper. In addition to that we are talking more I guess since the NASDAQ conference. We’ve started to be a lot more open about our views and what we are doing in the advanced packaging market, and as I think many others, a lot of you’ve started to realize it’s far from a trivial area. A lot of people use it as I would say some kind of a buzz word. We have a very I would say strict definition of what advanced packaging means to us. We have close to 70 people now in R&D working on it so that’s for real. We have a number of I would say discussions and pre-engagements with various partners to make sure that we develop the best possible machine, because there are solutions to the under market there is not really a standard. And by the way,…

Actually our margin improved but let me just give you a little bit more details. I mean we did have actually a provision in F1Q which was a [bad guy] of $2.34 million or $2.35 million when you round off in terms of the bad guy; and then we did have actually a release of those provisions and also unrecognized basically receivables of about $3.04 million or so. And really that’s, when you double that up it’s actually $5.4 million. But actually from a market perspective we have actually improved and we are through our cost containment so it does fall down pretty well. And we did end up with $0.06 per share. Tom Diffely – D.A. Davidson: Okay, so what is the right R&D number to use going forward? You’re still in the $17 million to $18 million range or is that ramping?

The R&D number, R&D, the way you should model it is around $16.5 million R&D per quarter. Obviously we do actually manage that pretty well. It does range from $16.0 million to $16.5 million but we use $16.5 million instead of $16.0 million. Tom Diffely – D.A. Davidson: Okay. And then finally, Bruno, when you look at the replacement market you talked about 7500 advanced tools kind of on an annual basis in a few years. I assume that you guys are having a much higher percentage of that business going forward just because of the copper you’ve had in the last couple of years. So I guess I’m assuming that you’re going to have a nice increase in kind of the replacement business over the next five years call it, that it looks like it can be upwards of $400 million just for replacements alone.

Right. This has been an exercise that we’ve been through and that we are currently going through internally. As we are coming up to our F3Q this is the time of the year where we start looking to our next fiscal year and annual operating plan. This is the time of the year where we look at project planning, and we are trying to decide where are we going to land. And obviously that’s what I said – let’s be careful when we talk about advanced packaging, and that’s why we wanted to give you some idea about the size of the investment that we are making in that space. It’s still a very small market today. Wire bonding is still the dominant market for us. We are making huge investments in wire bonding, whether it’s ball or wedge, to maintain and if possible even increase our market share, to grab as much as possible of this replacement market because we all know that this replacement market is going to be the business that’s going to enable the cash generation to form other businesses in the future. So it is not something that we’re saying “Just forget about that.” We think it’s important to actually maximize and even I would say move further away from the competitors on technology, on [UPH], on new materials so that we really come to even a more dominant position if we can than we are today in that ball bonding replacement. Wire bonding will continue to grow as [its usual] rate but it’s a much smaller market. Particularly for the ball bonding market we want to have the lion’s share of that replacement market. Tom Diffely – D.A. Davidson: Great, thank you.

Tom and Bruno, let me just add a few points to give a little more granularity to where we think the copper conversion, and this refers to Tom’s earlier question. And referring again to the replacement market, we basically have 120 machines basically out there and we believe it’s going to go to 70% of the copper base converted among the overall install base. So basically roughly 31% in terms of the field capacity at this point in time at the end of F2012 – it’s about 31%. So we believe at the end of this F2013, this number will basically go from 37,000 of copper capable to about 46,000 copper capable machines which is 37% by the end of this fiscal year. So while our large customers are actually early adopters of this breakthrough technology we still think there’s a lot more legs to the conversion cycle in terms of for the smaller-type OSATs out there. So it has actually a least a few more years to go before we get into the replacement cycle. The other point is I’d actually like to point out that there is a new presentation on the website as well. You can refer to Slide 14 which talks about that. Tom Diffely – D.A. Davidson: Great, thank you. That’s very helpful.

Yeah, we are not yet there. We still believe that for copper we still have at least two years, a minimum of a two-year runway ahead of us before… Because that’s the key here: how big is it going to be, the effected market, and when is it going to happen? And we are not there yet. We still have some [off power] driving the copper market that’s going to degenerate growth over the years. The question is when is it going to become a replacement market (inaudible). Tom Diffely – D.A. Davidson: Okay, thank you.

Thank you. (Operator instructions.) Our next question comes from the line of David Duley with Steelhead Securities. Please state your questions. David Duley – Steelhead Securities : Thanks for taking my question. As far as your guidance in June, what do you think is going to grow in June as far as LED, ball bonders, and wedge bonders? Which segments are going to be the key drivers in growth in June?

This is Bruno, good morning. My view, and it’s… We don’t really break it down by segment what’s growing, but my view is it’s going to be mostly ball bonders.

And Dave, I can just provide a little bit of color in terms of the LED side. Just historically our LED basically represents about 5% of our total revenue but this past quarter we did actually have, from a unit perspective it did actually nearly triple. However these are basically coming from spots or I would say some demand where it’s spotty demands that we were actually able to capture, which drove that percentage up from an LED percentage perspective. But I agree with Bruno – ball bonder will actually drive the volume for this current quarter. David Duley – Steelhead Securities : So the key reason that your sequential guidance in June is not up as much as the last couple of years is… What’s the key reason for that?

Well, as I mentioned at the beginning of the call, Dave, I think that we’ve had three great years especially with the two big guys in Taiwan. The other big guys in Korea and Singapore have not been as, I would say, aggressive on converting their install base into copper. Now they are a lot more aggressive but their install base is obviously smaller because their customers are asking for it which was not really always the case in the past. So I think that, I mean we still do business with our two large copper consumers in Taiwan but not to the extent that we’ve done in the last years as they’re basically I think digesting and redistributing all this capacity that they have [effectively placed]. David Duley – Steelhead Securities : Okay. And how long do you think (inaudible) that you have with your two biggest customers?

Yeah, we can expect that to last probably until the end of our fiscal year. But again, it’s difficult to predict. The business change to pick up for the [bad], and one of the Taiwanese customers is probably going (inaudible) but they’re very much behind advanced packaging, so they basically redirected a lot of their focus and equipment investment into that space. As I said, in that space there are not as many solutions. You have solutions that are very slow but very accurate and do not work in a manufacturing environment; and you have solutions that are very fast but very inaccurate and that are not good for advanced packaging solutions. So everybody’s kind of scrambling right now to get this ideal machine that would be able to provide a solution at the right price point. David Duley – Steelhead Securities : Okay. And at the run rate you’re expecting into June, what will be the rough cut on the gross margins?

We don’t provide guidance on gross margins, David, you should know that. I mean typically as you can see, our historical gross margins do not vary usually from one quarter to the other. David Duley – Steelhead Securities : Sometimes you give us an up or a down based on the mix – that’s kind of what I was looking for. That’s it from me, thanks.

We just don’t do it. We just don’t guide on gross margins because it’s very predictable. I mean it depends on customer needs, on customer product mix and everything so you know, some products enjoy higher gross margins or lower gross margins. And we are very healthy in the quarter and so you know, we just don’t provide guidance on gross margins. That’s been the policy of the company for a few years.

David, if I can just add one point, too – I guess your question is really what’s the outlook. I just wanted to point out that sort of historically and in terms of the past few reported quarters, ASE & SPIL, actually they just recently announced and they had added 2200 bonders during the second half of 2012. So I think we’re starting to see some signs of actually improvement in terms of the outlook. David Duley – Steelhead Securities : Who had the 2200 bonders?

2200 wire bonders. David Duley – Steelhead Securities : I thought ASE had 29 wire bonders during the quarter, and so I don’t know how many SPIL… Is that what you’re referring to?

You have to be careful when you read the reports. There are different ways to account when you have the costs. You may have the machine but it’s not accounted for as added yet simply because you have commissioning time and everything, so you can play around a little bit as far as when you decide to add it to your balance sheet. David Duley – Steelhead Securities : Okay.

(Operator instructions.) It appears there are no further questions at this time. I would now like to turn the floor back over to Joseph Elgindy for closing comments.

Thank you, Claudia. Thank you all for the time today. Please feel free to follow up with us after today’s call with any additional questions. Before we go I’d just like to inform investors that K&S will be participating in several events in the June quarter. We will present at the Jefferies Global Technology Media & Telecom Conference in New York City on May 7th, the Credit Suisse Annual Semi Cast, EDA and LED Conference in Boston on May 29th; and finally we’ll participate in D.A. Davidson’s 4th Annual Technology Forum and also the Cowen Group’s 41st Technology, Media and Telecom Conference, both in New York City on May 30th. For those who can’t make these events in person please reference the webcast replays which will be available on our Investors site. Again, thank you all for the time today. Claudia, this concludes our call. Thanks!

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time and we thank you for your participation.