Kulicke and Soffa Industries Inc

NASDAQ:KLIC

Earnings Call Transcript 2020-Q2

[Operator]

Greetings, and welcome to the Kulicke and Soffa's Second Quarter Fiscal 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A 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, Joe Elgindy. Please go ahead, Joe.

[Joe Elgindy, Senior Director, IR and Strategic Initiatives]

Thank you. Welcome, everyone, to Kulicke and Soffa's Second Quarter Fiscal 2020 Conference Call. Joining us on the call today are Fusen Chen, President and Chief Executive Officer; and Lester Wong, Chief Financial Officer.

For those of you who have not received the copy of today's results, the release as well as the latest investor presentation are both available in the Investor Relations section of our website at investor.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 and Soffa that could affect our future results and financial condition, please refer to our recent SEC filings, specifically the 10-K for the year ended September 28, 2019, and the 8-K filed yesterday.

Before moving on to our prepared comments, I'd like to make an additional announcement. Beginning on today's call, we will provide additional details and updates to our end market categorization. These end market categories will now refer only to our capital equipment segment and will isolate the general and advanced LED market from the general semiconductor end markets and advanced packaging IC market. Additional information regarding these end market categories are available within the latest investor presentation and will be reported in the Management Discussion & Analysis section of our quarterly and year-end SEC filings.

With that said, I would like to turn the call over to Fusen Chen for the business overview. Please go ahead, Fusen.

[Fusen Chen, President and CEO]

Thank you, Joe. This is clearly an unprecedented period for our industry and the world. First, I hope your family, friend and colleagues remain safe and healthy through this unique period. Before reviewing our quarterly business update, I would like to briefly discuss our response and the status relating to the global COVID-19 situation.

Over the past 6 years, our global development and the manufacturing side have designed and carry out detailed business continuity planning and a testing exercise. This effort have streamlined and prioritized critical communication flow and allow our individual site management team in affected area to operate site in the best interest of employees, customers and business partner, while allowing decisive response to local and the regional guidelines and orders.

More recently, over the past few months, we have also taken many precautionary steps, including significant travel reductions, increased site cleaning, biggest social distancing practice, visitor limitations and an increased use of a virtual collaboration tool and software. Where it is in the best interest to employees and the local community where we operate, we have also reduced our physical presence in the office and facilities to provide a safe working environment for essential staff. Our IT infrastructure has provided adequate bandwidth to support the need of this temporary remote working environment.

Despite this working from home transition, we continue to make progress on our development initiative and do not anticipate significant disruption to critical customer commitments. From a manufacturing standpoint, all operational sites in Singapore, Europe and China remain fully operational. Our operation in China returned to 100% capacity within the March quarter. Regarding supply chain, there continued to be disruption in many part of the world, although we believe the situation remain manageable. We experienced temporary disruption of supplier within China, although production gradually recover in March.

Therefore, U.S. and the European vendor are longing at the reduced capacity. Currently, the situation in Malaysia may create additional disruption in the June quarter. Again, we believe this current situation is manageable, and that we are mitigating this identified supply chain risks through close partnership with customers and also with new and existing suppliers. Overall, I'm very proud of our organization's resilience, dedication and effort in navigating this unique situation.

Turning to our business dynamic. Demand challenge and uncertainty will trigger by mandate customer shutdown early in the quarter. Demand has recovered rapidly in certain area like China and has softened in other region, currently implementing social distancing practice, such as Europe, Southeast Asia and the U.S.

During the March quarter, revenue came in at $150.7 million, a sequential increase from the December quarters. We generated $11.9 million of net income and earnings per share of $0.19.

On the December quarter, the capital equipment segment revenue increased by 11%, with stronger demand for our high-volume ball and wedge bonding system. The APS segment decreased by roughly 11% sequentially. This change was largely due to the lower customer utilization rate in the week following Chinese New Year.

Considering a higher portion of capital equipment sales, gross margin of 46% came in better than expected, generating $69.3 million of gross profit. Within capital equipment, general semiconductor increased the most dramatically by nearly $17 million, over 33% from the December quarters. Automotive and industrial also improved, while LED, advanced packaging and the memory declined sequentially.

During the June quarter, we continue to anticipate demand improvement to stem primarily from general semiconductor and the LED market, although anticipate ongoing shelter-in-place order to create regional demand disruptions.

I would now like to turn the call over to Lester Wong, who will cover this quarter's financial overview in greater detail.

Lester?

[Lester Wong, CFO]

Thank you, Fusen. My remarks today will refer to GAAP results unless noted. Net revenue for the quarter was $150.7 million. Gross margins of 46% generated $69.3 million of gross profit, and net income of $11.9 million or $0.19 per diluted share. As Fusen mentioned, despite the lower relative APS contribution, gross margins of 46% were stronger than expected. This stronger performance is largely due to product mix within equipment and a higher proportion of feature-rich equipment. Looking into the June quarter, we anticipate gross margins to be lower due to an increased demand of LED wire bonding system.

Operating expenses again came in more favorably than our expected target range. This is largely due to a sustained focus on cost control, prior restructuring efforts, but also due to lower travel expense. Travel expenses were approximately $550,000 lower in the March quarter versus the December quarter. As we continue to prioritize order fulfillment and near-term project development, we expect June quarter operating expense to, again, fall on the lower side of our target operating expense range. As a reminder, this GAAP operating expense target range consists of $53 million of fixed expense, plus 5% to 7% of variable expense tied to revenue.

Turning to tax. We booked a net tax expense of $1.2 million. We continue to target a long-term average effective tax rate of approximately 18%, although anticipate our fiscal 2020 period to come in below that long-term target.

Regarding the balance sheet. We ended the March quarter with a total net cash and investment position of $524.7 million or $8.17 on a diluted share basis. Considering our long-term perspective on the repurchase program, we view the recent market dynamics as an opportunity. During the March quarter, we increased our repurchase activity by over three times and deployed $18.5 million to repurchase 872,000 shares. Over the trailing two years, we deployed roughly $191 million to repurchase 8.5 million shares. Since initiating the program in 2014, we have repurchased 18.3 million shares, which is equivalent to over 28% of our diluted share count in the March quarter.

We continue to take a long-term and very structural approach to this repurchase program. At the end of the March quarter, we had approximately $73.3 million remaining under the existing share repurchase authorization. On a book value per share basis, we closed the March quarter with $11.89.

Working capital, defined as accounts receivable plus inventory, less accounts payable, increased slightly to $255.4 million. From a DSO perspective, our day sales outstanding decreased from 124 days to 119 days. Our day sales of inventory increased from 116 days to 117 days, and days of accounts payable increased from 55 days to 56 days.

This concludes the financial review portion of our call. I will now turn the discussion back over to Fusen for the June quarter's business outlook.

[Fusen Chen, President and CEO]

Thanks, Lester. This is clearly a unique and a dynamic period in our history. While we cannot predict the futures, our strong fundamental position, expectation of core business improvements and the growing market prospect for our new products provide confidence and optimism as we look ahead.

Fundamentally, we continue to have adequate cash on hand to support our operational ramp, maintain the path of development, while supporting shareholder return through the dividend and our opportunistic repurchase activity. Also, our served market have diversified over the years and that we continue to aggressively expand our market reach.

Next, despite supply chain challenge throughout the world and the ongoing uncertainty, there continue to be pocket of the strong demand for our core high-volume systems. After several low volume quarters, many customers are beginning to demand incremental capacity. This is primarily evident in the general semiconductor and the LED market, although we continue to anticipate gradual improvement in automotive and memory as well.

Finally, I'm happy to report the adoption and the progress of all APAMA and Katalyst, advanced packaging system, and also PIXALUX, our advanced LED system, continue as planned. Customer feedback continues to be positive, and we are aggressively working toward increasing production and also additional customer acceptance. This new product that enable new packaging capabilities is an additional layer of diversification to our business.

I will provide a brief update for each of this new system. Katalyst, our High Accuracy Flip Chip tool, continues to be in several payroll evaluations, which are progressing according to plan. We have attained the first Katalyst PO and acceptance from our OSAT in April, supporting high-volume logic application.

This first market acceptance of Katalyst highlights our ability to rapidly develop a competitive flip-chip solution and expand our market reach further into leading-edge logic market, a market where the wire bonding was historically less dominated. We are currently building multiple Katalyst tool to be shipped over the coming quarters. APAMA, our Thermo-compression system, is qualified for production for several high-end mobile chipset at a major OSAT, and that we are also actively working towards several additional qualifications supporting new feature in mobile sensor applications.

Our progress and expectation on PIXALUX, our advanced mini and micro LED system, remain consistent and optimistic. We expect higher volume production to begin in the June quarter and the majority of the calendar year sales to ship in the September and the December quarters. We anticipate consistent demand for PIXALUX through fiscal year 2021, largely driven by backlighting application in the display market.

Despite a challenging working environment globally, we have maintained focus on our longer-term market expanding development effort. These initiatives are increasing our prospect for next-generation display and also leading-edge logic integration. Considering the current dynamic environment and the ongoing impact of regional, state and home order on semiconductor assembly production and our customers' equipment capacity plan, we are guiding June quarter revenue of $140 million to $160 million. While this production challenge across the industry may linger, we are reassured by the resilience of the general semiconductor and the LED market in areas like China, which are not less effective by the current global pandemic.

Again, we believe the recovery is partially due to ongoing demand improvement within select end market, but also achieve a relatively strong and improving utilization rate we have seen in the December quarters. Utilization rate recovered quickly in China, and we are hopeful other region will resume a higher level of productivity once social distancing practice begin to ease. Longer-term, ongoing technology transitions within the automotive market, display market and within advanced packaging are driving the need for new equipment capabilities. Ongoing progress of this technology transition will further diversify our unit-driven businesses. We continue to believe this improving condition and a longer-term opportunity will be much more meaningful to our business than the near-term headwinds.

In summary, the strength of our fundamental resilience of our core market and the progress of new growth initiatives provide a positive outlook and ongoing confidence as we look ahead. I'm very proud of the dedication and the adaptability of our employees through this dynamic period. I'm confident we will exit this current environment as stronger and an even better positioned organizations.

This concludes our prepared remark. Operator, we will now be happy to take the questions.

[Operator]

[Operator Instructions] Our first question today is coming from Craig Ellis from B. Riley FBR.

[Craig Ellis, B. Riley FBR]

Gentlemen, congratulations on the execution in the quarter despite a very dynamic environment. Fusen, I just wanted to start by following up on some of the trends in the quarter. I think I heard you say that memory was down quarter-on-quarter, but auto was up. We've heard from some other companies that memory utilization rose through the quarter. So can you give us your view of how memory looks as we move into the latter part of April? And secondly, on auto, there are a lot of concerns about auto units sequentially in the second quarter. What's your view of the automotive market as it stands today?

[Fusen Chen, President and CEO]

Okay. So Craig, let's talk about, I think you asked about memory and auto, right? So let me talk about memory first. I think in the recent months, we see actually a price of both NAND and DRAM start to form up. So I do believe recovery is ongoing and will go even stronger in the next couple of months and quarters. I think the memory is a very important component for the whole food chain. And I'm a fan to believe it's going to go bigger compared to our current level because of 5G, because of many AI, a lot of technology. So for us, I think we're a little bit slow. Our quarterly revenue compared to average revenue is still low, that's why I think we say it's a little bit softer. But I do believe the recovery is ongoing. I think in the next couple of months and the quarter, we will see the stronger revenue contribution from memory. So that's a question about memory.

[Craig Ellis, B. Riley FBR]

Okay. And then on the automotive market?

[Fusen Chen, President and CEO]

So automotive, I think for us, I think we still have room to grow. Relatively, I think the whole war, the quarter was still a little bit low. But I think auto also going through some revolution, right? I think like electrical car and a lot of change, information and also memory content in the auto will continue to increase. So hopefully, I think we're going to see that recover, I think, in the next couple of quarter as well. But relatively to us, I think it's a little bit slow. We see upside in the memory and auto.

[Craig Ellis, B. Riley FBR]

Great. That's helpful. And the next question is really a follow-up on a point in the press release and an artifact of the guidance range. So I think a quarter ago, the guidance range was $30 million. It's back to $20 million. So does that signal just increased confidence with the way the supply chain is working? And I noticed from the release, backlog ending the fiscal second quarter was $136 million, so about 90% of the guidance midpoint. How would you characterize the strength of the backlog? And would you expect to be building backlog as you go through the fiscal third quarter given the view for gradual sequential growth through the year?

[Fusen Chen, President and CEO]

Okay. So, Craig, let me put this way. We believe our customers are under-indexed in 2019, right? So currently, I think the utilization rate in the industry is quite healthy, and we see many technology driver, like 5G and AI, many things. And we already experienced a few quarters of sequential growth, right? So we can see that fundamental demand for our core business, I think, is very strong. And coupling with our new product introduction in AP and LED and also new customer we are engaging. I think that we are quite optimistic for 2020 and beyond. But unfortunately, I think that we have this pandemic situation, it's just not practical for some of our customers to them just appearto come to give us a PO and then for us to enable the system and then service the system in their fab. So this pandemic actually weakened a little bit of our outlook. But fundamentally, I think the situation will improve and our growth will resume.

So at the beginning of this coronavirus, I think I'll start probably in China, end of January. Actually, LED alone is much, much more than more than we expected. So that's why I think we give a little bit wider range. And fortunately, I think it's a lot of effort. We almost hit the center point, right? So with a lot of effort with the team putting together, we believe we know how to respond to a lot of dynamic much better. But where I think this time, we actually tightened the range, right? So at least you have --

[Lester Wong, CFO]

Craig, it's Lester. Just to give you a little more specificity around the backlog. We are seeing backlog growing over the last couple of quarters. So over each the last 4 quarters, the backlog of the capital has increased.

[Craig Ellis, B. Riley FBR]

That's great color on both fronts, guys. And then my last question before I hop back in the queue. Fusen, it was really helpful to get your perspective on some of the emerging product growth drivers for the company, Katalyst, APAMA and PIXALUX. And I know we've had a view that PIXALUX could potentially generate $50 million to $100 million in revenue. So the two-part question is, first, is that still a reasonable revenue expectation for PIXALUX this year and next year? And if you look at the 3 new products, Katalyst, APAMA and PIXALUX, which would be the most significant growth drivers this year and next year? Thanks so much for the help guys.

[Fusen Chen, President and CEO]

Okay. So I think I talked about a piece of that in my script. So currently, I think we expect about $40 million for the calendar year revenue, so roughly $40 million. And some of the system is going to be shipped in June, but the majority of the system is going to be shipped, I think, in September and December. So altogether, I think we are looking at roughly $40 million because we only have half of the year to run these products. So the number actually is due to the shipment schedules and is not a change in end demand. We continue to expect the demand for PIXALUX to increase further in fiscal 2021, right?

So compared to a lot of global market disruption. Actually, this performance, $40 million, is a very good performance. So in short summary, I think the piece that is on track and on schedule, and we are quite happy with it. So that's PIXALUX and the next year will be bigger. And the AP, I think we are also quite confident. If you look at the AP, I think increasing the transistor density is very important, right? So most of them actually increased the transistor taking density at the wafer level by level. But AP actually increased taking density in transition level, then it's much more affordable and much more effective, right? So this actually are very favorable to our TCB and free chip. And we are aiming at high-performance logic, high bandwidth in memory and also next generation of imaging sensor.

So AP, I think many players, and we are actually a little bit late, but we are quite confident. So we are in the process to gain the market shares, establish a good foundation. So to see AP getting much bigger, probably will be 2021. And we are quite confident 2022 will be much, much bigger. But we will see the sizable increase, I think, in 2021. So that's PIXALUX and AP. And the other one is the APS. I think we are much stronger in the APS, putting much focus. So we, hopefully, we will see from now to 2022, we can contribute probably close to $200 million in AP plus advanced LED and maybe additional $50 million for the APS.

[Operator]

Our next question is coming from Krish Sankar from Cowen and Company.

[Krish Sankar, Cowen and Company]

I had a few of them. First one, Fusen, you spoke about supply constraints, which seems to be a common theme across most companies. Just curious, if you did not have any supply constraints, what does the June quarter guidance have been?

[Fusen Chen, President and CEO]

Okay. So actually, Krish, June quarter actually has a constraint both on supply chain and also the shelter in place, right? So I mentioned it's also not practical to expect some of the customer to place a PO and during this period of time, and we deliver a system in their fab when they are shut down. So I think we are impacted both by supply chain disruption and also the shelter in place. I would say shelter in place actually, will actually impact more the supply chain disruption. Our operating team, I think, has done a very, very good job, right? So if you want to me to quantify, I think that probably these 2 adding together probably about 15% of our total revenue outlook. But I think this is temporary. This order did not disappear. I think it's going to show up in the next couple of quarters in our revenue.

[Krish Sankar, Cowen and Company]

Got it. That's helpful, Fusen. And then I think you mentioned about auto coming back. I'm just curious, is there a function of what your customers are telling you? Or is it just the fact that auto has been weak for a while so it's expected to have a cyclical rebound?

[Fusen Chen, President and CEO]

Well, so Krish, let me rephrase it. Actually, memory will come back much faster than auto, right? With the current financial situation, I think auto actually will be weak for a while. So this will be a little bit longer-term opportunity. But actually, I'm quite confident there will be a lot of innovation. And electrical car will get much, much bigger. And in the B2B area, there are many things, information, the display, the semiconductor content. So the auto will come back. But let me modify a little bit. I think this will take a while to come back. So this will be our longer-term opportunity.

[Krish Sankar, Cowen and Company]

Got it. Got it. All right. And then just a final housekeeping question for Lester. I might have missed it in the prepared comments. What did you say in March quarter the semiconductor revenues, auto revenues, China exposure was?

[Lester Wong, CFO]

Sorry. I don't think I specifically said that. Are you asking what regional sales in China? Is that your question, Krish?

[Krish Sankar, Cowen and Company]

Yes. Regional sales in China. And also, out of the total sales, how much was semi and auto in March?

[Lester Wong, CFO]

So out of the total sales in China for the quarter, it's about 63%. And for capital equipment sales, auto was -- we do auto and industrial together, so it's about 80% of total capital equipment sale. And what was the other one you're asking? Sorry.

[Krish Sankar, Cowen and Company]

Semiconductor, like your general semi exposure?

[Lester Wong, CFO]

The general semi is about 60%.

[Operator]

Our next question is coming from David Duley from Steelhead Securities.

[David Duley, Steelhead Securities]

Could you just repeat what you said? Was China 63% of revenue in the quarter? Is that what you said, Lester?

[Lester Wong, CFO]

Yes. 6-3.

[David Duley, Steelhead Securities]

63, okay. And general semi was 60%. So therefore, advanced packaging would be the other 40%?

[Lester Wong, CFO]

No, no, no. We break it out general semi, LED, advanced packaging, memory as well as auto industrial, right? So...

[David Duley, Steelhead Securities]

Okay. And could you just review those percentages?

[Lester Wong, CFO]

Sure. So general semi was 60%. LED was about 9% to 10%. AP is around 6% to 8% or so. Memory was around 8% to 10%. And auto industrial is about 18% to 20%.

[David Duley, Steelhead Securities]

Okay. And what do you think the overall utilization rates are now? And I'm assuming utilization rates in China are higher than in other regions. If you could help us understand what the difference is, that will be great.

[Lester Wong, CFO]

Sure. I'll take that, Fusen. So utilization rate actually is quite healthy. I would say, again, globally, it's close to 80%. China, we see it above 90%. Obviously, it's much softer in Europe as well as in the U.S. and Korea and Japan. So in general, I think -- Taiwan is actually also pretty strong as well. So I would say Taiwan and China, the 2 leading ones right now in utilization.

[David Duley, Steelhead Securities]

Okay. And did you mention what the specific supply disruptions are that you're seeing, I guess, in Malaysia? If you could just help us understand what it is that's in short supply for you.

[Lester Wong, CFO]

I think for us, we're still, as Fusen indicated, we're working with our partners, our suppliers throughout the world, first in China, now Malaysia as well as in the U.S., to manage the supply chain disruption. We're also looking for new partners, second source and so on. But I think for Malaysia, yes, obviously, there's a loss of control order in place. Even though some of the semiconductor companies have gotten exceptions as well as suppliers, but it's always -- and it's being renewed every 2 weeks in terms of the MCO. So I think for us, right now, it's still definitely manageable. It did not have a huge effect on the March quarter, but I think it will have some effect in the June quarter, as Fusen says, with both shelter in place and with the control orders.

[David Duley, Steelhead Securities]

Okay. Final question for me is, as far as the LED product goes going forward, how many -- you talked about doing $40 million in the back half of this calendar year. Is that -- could you help us understand how many customers that is? And what are some of the end market products that you would expect to be behind this ramp?

[Fusen Chen, President and CEO]

Okay. So I think I mentioned this in my script last time. Actually, we do a part in there with LED mini. Actually, together, we identify our customers. So they also have a networking, for example, in consumer electronics, auto industry and the display industry. So actually, we have numerous customers, about 4 sizable customers, I think we can probably have 2, 2 or 3 sizable customers. And at this moment, yes, it's quite a little bit concentrated on a few other customers, but we do have multiple customers.

[David Duley, Steelhead Securities]

Thank you.

[Operator]

Thank you. [Operator Instructions] Our next question is coming Tom Diffely from D.A. Davidson. Your line is now live.

[Tom Diffely, D.A. Davidson]

Yes. Good morning and good evening. Following up on Dave's mini LED question. We've been talking about a $30 million to $70 million market, midpoint of $50 million. Now you're saying it's $40 million. Is it just the timing of when the shipments happen in the second half that's gone, you have changed the midpoint of that guide?

[Fusen Chen, President and CEO]

Okay. So, I think, first, I think we talked about this probably long time ago, 1 year ago. So personally, actually, I am quite happy with the program. We talk about maybe second half of this year starting rent. So actually, the demand actually is originally expected. And the revenue really depends on the shipment schedule, right, which is mainly when the customer needs the system, right? So -- and due to a recent customers' request, I think that we are seeing is about $40 million from now to end of year. And we see next year, our demand will be stronger than the current level.

So it's really not demand issue. It's really a shipment schedule, right? And we need to make a system and according to customers' request, when the system reached the customer side and we ship out from this and we come as everything.

[Tom Diffely, D.A. Davidson]

Okay. So the shipment schedule is dictated by the customer, not your supply capabilities?

[Fusen Chen, President and CEO]

That's correct. I don't think it's our manufacturing constraint, and not demand constrained. I think demand is very healthy.

[Tom Diffely, D.A. Davidson]

Okay. Great. And then, Lester, I was hoping to get a little color on the utilization rates and how they've changed over the last quarter. Because I remember, going into the year, China was really strong at the end of last year, maybe dipped up in the beginning of this year. But curious, as this quarter has gone on, how have the different utilization rates changed?

[Lester Wong, CFO]

I think the utilization rate, frankly, probably hasn't changed that much. I think it will probably change more, maybe a little bit in the June quarter, particularly as more shelter in place, depending on what gets listed. China was pretty strong even in Q1. I think it's stronger even Q2. I think Taiwan also has remained pretty robust. I think Southeast Asia has fluctuated a little bit, but most -- I think Europe and the U.S. have -- they were soft before and they continue to be soft now.

[Tom Diffely, D.A. Davidson]

Okay. That's helpful. And then finally, when you look at the operating expenses, obviously, some very good cost controls going on right now. Are those just temporary measures? Or has anything changed structurally that would change the operating expense equation going forward?

[Lester Wong, CFO]

Well, Tom, cost control is a subject near and dear to Fusen's heart, so we always look at it. But I think, as I indicated, some of the reduction is due to, for example, reduction in travel because of, obviously, COVID-19. Obviously, our rate of hiring also slowed down a little bit given the difficulties of hiring. So I would say, at this point, I would not say it's structural in the model. I think 53 plus 5 to 7 is still what we're seeing. But we are coming in on the low side of that, both for last quarter, this quarter, as I guided, probably for next quarter as well.

[Operator]

Our next question is coming from Christian Schwab from Craig-Hallum.

[Christian Schwab, Craig-Hallum]

Great. Fusen, I just want to make sure I understand on the supply chain with disruptions. That's really like movement controls and shelter in place that's causing supply chain disruptions, correct? There is not components that you're waiting for that are in short supply some place in the supply chain. Is that correct?

[Fusen Chen, President and CEO]

Yes. It's many things, right? Sometimes, they cannot go to the office to make a part for us. So this is really a lot of things tied together, right? So sometimes, we are short on parts. We continue to find the second supplier. So actually, this is quite time consuming to manage all of the disruption.

[Christian Schwab, Craig-Hallum]

Okay. Okay. And would you say that given the economic dislocation due to the COVID-19 environment that the business, a couple of quarters here, we're kind of stable at $150 million, should we begin to reopen successfully globally? Can you give us any idea about how big a recovery or snapback in your revenue could be 2 to 3 quarters out?

[Fusen Chen, President and CEO]

So we don't guide more than 1 quarter. But if you ask my feeling, I can tell you my feeling, right? So I already mentioned, I believe our customers, they are under-indexed in 2019. And at this moment, actually, if you look at the utilization rate, it's quite healthy. We already have a few quarter sequential growth. Unfortunately, I think we really want to guide higher, but we really need to avoid the risk for the pandemic. Fundamentally, I think the demand is there. So hopefully, I think this will not go for more than 2 quarter. And hopefully, we can see data, Q4. If you look at it, all customer actually concentrate in China and in Asia, like Europe.

So Europe, already impact. U.S. already impact, and they're opening up. And I think this quarter, actually South Asia, Southeast Asia impacted us a lot. But I really don't think this will be more than another quarter, right? So all the semiconductor company looks like it is already, most of them are impact already. If there is no second wave of the infection, hopefully, we can see better Q4 coming back. So hopefully, after Q3, we can see the bigger revenue.

[Operator]

Thank you. We’ve reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

[Joe Elgindy, Senior Director, IR and Strategic Initiatives]

Thank you, Kevin. Thank you all for the time today. As always, please feel free to follow-up directly with any additional questions. Have a great day, everyone. Operator, this concludes our call.

[Operator]

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.