Joseph Elgindy - Director of IR & Strategic Planning Fusen Chen - President & CEO Lester Wong - Senior VP of Legal Affairs, General Counsel & Interim CFO

Greetings, and welcome to the Kulicke & Soffa 2018 Preliminary Second Fiscal Quarter Results Call. All participants will continue to be in listen-only mode and there be -- there will not be a question-and-answer session during this earnings 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 Initiatives for Kulicke & Soffa. Joseph, you may begin.

Thank you, Hector. Welcome, everyone, to Kulicke & Soffa’s Second Fiscal Quarter 2018 Conference Call. Joining us on the call today are; Fusen Chen, President and Chief Executive Officer; and Lester Wong, General Counsel and Interim Chief Financial Officer. 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 recent SEC filings including the risk factors in the 10-K for the year ended September 30, 2017. As well as the disclaimers to our forward looking statements contained in our preliminary earnings release. We want to remind investors that comments during today’s discussion represent preliminary financial information which may be subject to change. I would now like to turn the call over to Fusen Chen for the business overview. Please go ahead, Fusen.

Thanks, Joe. Before discussing this quarter’s business overview, I wanted to share some specifics regarding our delayed filing. Following the end of the fiscal quarter, we lend off certain upholster rate transactions by a senior finance employee. We immediately initiated investigation of this transaction with assistance of outside advisors. In the course of this investigation this was discovered that certain warranty accrual in prior periods had been accounted for incorrectly and therefore misstated. Although this investigation is ongoing, at the present time we believe certain amount that should be -- should have been included in our results for future warranty expenses plus instead not reservedbut expenses has incurred. We currently believe that this errorwas not intentional. However considering the timing and scope of this review, more companies are required to back our current understanding. At this time we anticipate that we will need to restate fiscal year 2017 into inconsistency impacting our warranty accrual, affecting both cost of goods sold and a selling, general and other miscellaneous expenses. We do not currently anticipate the specific and identified adjustments could be materially to the company. While this is an extremely critical issue, we are working closely with our external advisers and internal team to aggressively remediate and file as soon as possible. The company is committed to addressing the issue identified and are establishing company financial reporting as soon as possible. While the information I have just provided is the company's best estimate at this time, the investigation is not complete and the impact of the restatement when finalized may be different, perhaps by our maturity amount. Certainly I would like to now to discuss our ongoing business prospects. From a very high level, despite our delayed filing our favorable end market [ph] near term tactical share gain opportunities and the…

Thank you, Fusen. My remarks today will refer to GAAP result. Based on our primarily growth margin anticipated to be in line with our previous expectation of slightly below 45%. Looking ahead in the remaining two quarters of fiscal 2018 we anticipate gross margins to improve to around 45%. Over the past year, we have driven a renewed focus on cost and supply change which are increasing our competitiveness and margins and more price sensitive market. We're currently anticipating net income of approximately 36 million or $0.51 of EPS. Our cash outflows at approximately $628 million. This increase of overwhelmingly due to the quarter's more aggressive share repurchase program and also increases to working capital largely related to our ongoing operational risk. Looking ahead operating model the target is still intact. Incredibly expect to maintain existing quarterly operating model of $52 million of fixed expenses from 5% to 7% of variable expenses tied to revenue. We are still ultimately evaluating the US tax reforms, we currently expect to maintain our long term 15% effective tax target going forward. This concludes the Financial Review portion of our call. I will now turn the discussion back to Fusen for the June quarters business outlook.

Thanks Lester. Looking into June quarter business. We are targeting revenue to be between $255 million to 270 million and are anticipating another very strong revenue year. Overall, strong unit growth with our products with nearly LED profit growing end market, including LED, Automotive, memory, 3D printing and advanced packaging all by us with additional confidence. Moreover we continue to optimize our business and drive meaningful change within the company this has already borne fruit in LED and also has set the foundation for ongoing in our recurring revenue business. We also have new opportunity among our growing advance packaging portfolio. In additions which have recently initiated several new development effort to further expand this operating and also in certain market. We appreciate your ongoing support. And we look forward to sharing our progress as we continue to execute our low income strategy. This concludes our prepared remark. I would now like to turn the call back over to Joe for closing comments.

Thank you, Fusen. Before closing we wanted to inform investors that we will be participating at several upcoming investor events in Santa Monica, Boston, Chicago, New York and Toronto. Additional details on past and future events are available on our corporate website at investor.kns.com. Thank you all for the time today as always please feel free to follow up directly with any questions. Hector, this concludes our call. Good day.

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

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