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Kulicke and Soffa Industries, inc (KLIC) Q3 2021 Earnings Call Transcript

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Kulicke and Soffa Industries, inc (NASDAQ:KLIC)
Q3 2021 Earnings Call
Aug 5, 2021, 8:09 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Kulicke & Soffa 2021 Third Fiscal Quarter Results Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Joseph Elgindy, Senior Director, Investor Relations for Kulicke & Soffa. Joseph, you may begin.

Joe ElgindySenior Director of Investor Relations & Strategic Initiatives

Welcome everyone to Kulicke & Soffa’s fiscal third quarter 2021 conference call. Joining us on today’s call is Fusen Chen, President and Chief Executive Officer; and Lester Wong, Chief Financial Officer. For those of you who have not received a copy of today’s results, the release as well as our supplemental earnings 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 & 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 October 3, 2020 and the 8-K filed yesterday.

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

Fusen ChenPresident & Chief Executive Officer

Thank you, Joe. We continue to be amid period of dramatic capacity expansion throughout the semiconductor industry, which is supported by durable and structurally sustainable end-market trend. Water supply chain challenge broad and expected to continue.

Our global operational and the engineering team have done an outstanding job to mitigate challenge within our control, while supporting our customers’ aggressive growth trend. Ongoing demand for our capital equipment and the APS solution remained very strong and that is supported with the multiple long-term drivers, which further enhanced our visibility and the outlook. Structurally, we are on that with the steady prominent in the fundamental technology transitions. This includes the increasing capital intensity occurring throughout the semiconductor assembly space. The very significant and the long-term transition within the automotive market and our direct involvement in already industry adoption of new display technologies. In addition to this fundamental and the structural growth driver, we are also extending market reach through aggressive R&D investment. These opportunities supported with ongoing development investments, and the new product introductions target new opportunity within the automotive, electronic assembly and the display market. We will provide further update through these statistic opportunities over the coming quarters.

Finally, we are in a very dynamic extensive phase of semiconductor consumption and the production. This extensive period has occurred in roughly 10 years increments as new use for semiconductor [Phonetic]. In the ’90s, the driver was the global adoption of PCs. In 2000s global Internet access, increased demand. Then over the last 10 years, mobility drove a new layer of semiconductor demand. Today, we have several new and the meaningful end applications automatically accelerating semiconductor production capacity. The end application driving significant capacity today improved the worldwide adoption of connected devices, the growth of 5G infrastructures and the next generation of computing power driven by Big Data and the Artificial Intelligence. The combination of the structural technology transition and the broad industry trends are significantly enhancing the demand for our products, our adjacent market opportunities and our ability to generate value for investors and the communities we serve.

During the June quarter, we have begun our annual long-term planning process, which provide a more granular view into how these drivers are expected to favorably benefit our business. At the very high level, over the coming years, we anticipate annual semiconductor unit growth to continue long and significantly above the long-term, historic 6.5% growth rate. Additionally, we are very confident in our ability to support new higher growth technology transitions that further extend our market reach and provide new vector of growth. We currently expect to lose $1.5 billion of revenue this fiscal year and are confident underlying business conditions will extend through fiscal 2022, supporting a multi-year industry expansion. Beyond 2022, our ongoing execution with the specific new opportunities supporting advanced display, advanced packaging, APS and the new adjacent opportunities will continue to grow and support a new sustainable level of revenue and the profitability.

Considering these broad macro industry and execution expectations demand volume is strong supporting average annual revenue of $1.5 billion over the coming years. As a reminder, this new level of revenue is a significantly higher and also more sustainable than what we shared during our 2018 annual sales. This will provide some additional detail on how this long-term outlook translates into new label of sustainable shareholder value shortly. We will also provide many more details regarding our business prospects and attraction during our upcoming Analyst Day, scheduled for September 23.

For today’s discussion, I would now like to provide some commentary for the June quarter’s performance and the end-market review. During the June quarter, we exceeded the high end of our revenue expectation and deliver $424.3 million of revenue, 46.1% gross margin and the non-GAAP EPS of $1.87, which was up 48% sequentially. This significant sequential improvement highlights our operational leverage and was driven by strong and ongoing demand across all end-markets.

We [indecipherable] conductor space. There are mainly new sustainable trends supporting this multi-year expansion. A comprehensive underlying trend is related to broadening adoption of 5G. This significant transition is increasing chip content at the smartphone level and also increasing demand for new connected devices. Additionally, this transition is also demand in new high bandwidth assembly solution for next generation optical, networking and the larger applications. Our development program, customers’ engagement and the recent market wins have increased access to specific high growth and application, including mobile sensing, mobile application processor, silicon photonics and our next-generation display driver for virtual and augmented realities.

Looking into next year alone, we anticipate an incremental $14 million of revenue stemming from this end market. We continue to be very early into global 5G adoption and anticipate this transition will continue providing a tailwind and the new equipment needs for the coming years. In addition to our alignment with his very positive and a long-term market trend, we are also supporting and benefiting from the growing need for more complex packaging. As mentioned, over the past few calls, there is a strong market demand for advanced KNS solution thus support greater transistor-density at packaging level.

Rising front-end design cost and the year challenges have slowed the cadence [indecipherable] are directly contributing to the higher level of assembly complex fee, which is increasing the capital intensity across our broad served market. This underlying market need create an additional long-term technology driven demand for our higher volume businesses such as broad [Phonetic]. This transition is also accelerating adoption of higher growth, more specialized packaging techniques that further extend our significant market presence across semiconductor applications. Approximately 40% of our capital equipment revenue came from advanced packages, including System-in-Package, Multi-chip module, high accuracy flip chip in the thermo-compression base devices. This mix has changed materially over the past year and we anticipate this will continue growing long time along with our value proposition.

Finally, within General Semiconductor, we are focusing on the investment to expand market reach and also to expand profitability level across our large and established served market. We have several exciting product announcements to share over the coming quarters. Equipment sales in the energy market shuttered slightly in June although remain very strong and are expected to increase further in September. We continue to support ongoing demand for general lighting application while we are actively supporting the long-term media and the micro-LED transition.

Our PIXALUX system continued to be in high demand and that we anticipate strong demand through fiscal 2022 and beyond. We also intend to further capitalize on this new higher gross market by expanding our portfolio of advanced display solution. There is a strong market demand for more efficient and the more capable assembly solution, which provide an opportunity to significantly broaden our customer base. Existing and the new customer interest have been very strong for our next-generation system. We expect to ramp qualifications with multiple customers over the coming two to three quarters. Additionally, this next-generation system also allow us to address multiple process steps required in mini and the micro-LED, while the current PIXALUX tool is very competitive within the critical final [Phonetic]. There are several additional touch points necessarily for mini-LED backlight assembly, including mixing [Phonetic] PAM or pitch adjust module assembly. This additional process step will all be supported by our new mini and the micro-LED system increasing our potential within this fast-growing new market.

Progress on the next-generation LED system remain on-track. And I look forward to providing additional updates on this exciting product reviews over the coming quarters. The automotive and the industrial market also remained strong through the June quarter with the revenue near elevated March quarter’s. Underlying demand is being driven by the growing need for semiconductor in both traditional and emerging automotive applications such as electric vehicle and autonomous driving features. We continue to extend the market reach of our automotive solution, which support higher gross power storage, power distribution and the sanction application necessary to support the autonomous and electric vehicle transitions. We are well positioned to support these long-term transitions across our broad customer base. Memory, demand within memory has improved sharply with the June quarter sales above our long-term average. Like our orders of end market memory utilization level has sequentially improved driving the need for additional capacity. We anticipate memory strength to continue into the September quarter.

Over the past several weeks, our business outlook has improved. We have continued to mitigate a broad range of dynamic supply chain challenges, as we have significantly run our production capacity. Our internal operational and the engineering effort combined with the key market trend, I cover earlier, have enabled us to increase our September quarter outlook dramatically. After market closed yesterday, we provided a revenue outlook for September of $465 million, which would mark our sequential quarter of record revenue and the profitability. I would like to also note that we continue to operate in a very dynamic global supply chain environment. And I’m very pleased that our organization’s corrective response, which allow us to mitigate challenges, continue aggressive development effort and enhanced supply chain flexibility during this period of rapid industry expansion.

In summary, the past several years of our R&D investment and the market expansion ever have extended our competency and the solution to better support several significant, long-term and the structural market opportunities. These opportunities are also right in demand within our broad portfolio of solutions and provide access to new high growth opportunity in the semiconductor, automotive and the display market.

As we ask you on this long-term strategy, we are enhancing our ability to create a long-term value for customers and ultimately for shareholders. I’d now like to hand the call over to Lester Wong, who will cover this quarter’s financial overview in greater detail.

Lester?

Lester WongChief Financial Officer

Thank you, Fusen. My remarks today will refer to GAAP results unless noted. As Fusen indicated, we continue to be in a period of dramatic industry expansion, which is supported by our alignment with several structural transitions. This combination of industry expansion and market alignment are providing the opportunity to maintain a similar revenue run rate and a new sustainable level of operational cash generation over the coming years.

During the June quarter, we delivered revenue of $424.3 million, up nearly 25% sequentially. We have worked very closely with our supply chain partners, operational teams and engineering groups to better enable customer’s capacity needs, while also exceeding the high side of our revenue guidance. Gross margin during the June quarter also came in better than expected at 46.1%. Product mix, expediting fees and surcharges have all weighed on our gross margin during the June quarter. We accept these temporary effects as they help us support our customers during this period of industry expansion. Looking ahead, we anticipate near-term gross margin improvement as incremental supply chain cost fees and ultimately long-term gross margin expansion as we execute on our development programs, and new product introductions.

Overall, non-GAAP net income came in at $118.8 million or $1.87 of non-GAAP EPS during the June quarter, which highlights the leverage in our model. Considering this operating leverage, new product traction and outlook, we expect to continue generating strong operating cash flow over the coming years. Operating expense in the June quarter came in line with our expectation despite our better than expected revenue performance. On a non-GAAP basis, we are maintaining our quarterly operating expense model, which represents roughly $48 million of fixed expenses plus 5% to 7% of variable expense tied to revenue. Tax expense for the quarter came in at $7.2 million, which is better than previous expectations. This favorable benefit was driven by a partial release of a valuation level, previously recorded against a net deferred tax asset. This favorable benefit is directly related to the strong market success of the PIXALUX solution. Considering the one-time nature of this benefit, we continue to target an 18% long-term effective tax rate. Through fiscal 2021, we continue to anticipate the effective tax rate will come in at around 15%.

Turning to the balance sheet; working capital efficiency has improved overall. Days of accounts receivable decreased from 81 to 78 days, days of inventory decreased from 66 to 60 days and days of accounts payable decreased slightly from 58 to 57 days. This ongoing efficiency combined with the underlying market drivers we associated with, allow us to end the June quarter with a total net cash and investment position of $635 million, up 12.5% or $70.7 million sequentially, representing $10 per diluted share. This sequential increase of cash investment highlights the long-term cash generation potential of our new multi-year outlook. As touched on earlier, we are operating a new level of heightened demand, which is flowing through very positively to operating margin.

Non-GAAP operating margin for the June quarter came in at 29.7% representing over a 1,800-basis-point improvement from the same period last year. As Fusen mentioned, over the coming years, we now anticipate annual revenue to average $1.5 billion; this outlook provides many more opportunities that demonstrate our leverage and cash generation potential. For the September quarter, we expect revenues to be approximately $465 million plus or minus $20 million, a nearly 10% increase over our most recent record revenue in the June quarter. Gross margin expect to improve to approximately 47% in the September quarter, plus or minus 50 basis points, due largely to product mix pricing improvements and easing of incremental supply chain costs. Non-GAAP operating expense expected to be approximately $73 million plus or minus 2% and non-GAAP EPS to be $2 plus or minus 10%.

Over the long-term, we remain very aligned with several high growth prospects in the semiconductor display and automotive markets which are generating opportunities for above average growth. Additionally, we continue to be extremely focused on multiple path to extend reach into our existing served markets and also provide access to meaningful new market opportunities. We see tremendous potential to build from our current baseline revenues in FY ’21 as we continue to execute on our multi-faceted growth strategy. We look forward to sharing additional information regarding these new opportunities over the coming quarters.

This concludes our prepared comments. Operator, please open the call for questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Craig Ellis with B. Riley. Please proceed with your question.

Craig EllisB. Riley — Analyst

Yes, thanks for taking the question. And guys, congratulations on the very strong results and the robust outlook. Fusen, I wanted to start at a high level and just look at some of the parameters that you’re providing as we look ahead. So very helpful to get the Company’s view that spending can reset to a $1.5 billion level. So the question is this from current levels of spending at the current quarter’s guide $465 million is $1.86 billion annualized from that level to what would be the $1.5 billion or $375 million a quarter. How long do you see current spending intensity sustaining? And when does the business really modulate down to about $1.5 billion? Would that be in the first half of next year or more so, the second half of next year?

Fusen ChenPresident & Chief Executive Officer

Craig, in the Q3 we just announced at this moment, and the Q4 guidance. Actually, I think on a lumber this year, we will finish it. FY we were already finished at $1.5 billion. So maybe I’ll just quickly walk through that this assumption how we reach this $1.5 billion? So semiconductor revenue growth in the industry for ’21 and ’22, our forecast to be very strong at 20% and about 10%, respectively for ’21 and ’22. So you had the four quarter together including the one, which is a guide. We currently expect to reach $1.5 billion revenue this fiscal year FY ’21. And for FY ’22 based on the current market data and our customer feedback, and we also see a very high level of our utilization rate in the industry, and also very strong demand from end market. And we actually not expect FY ’22 revenue to be similar to FY ’21, revenue of about $1.5 billion. And we also say that if current industry chip shortage situation continue well into FY ’22, we might see additional upside in the second half of FY ’22, right? So FY ’22, now we expect similar revenue level as FY ’21.

And Lester also mentioned this will be a multi-year growth. And we believe $1.5 billion can be sustainable. And because we believe our current semiconductor market expansion will continue for multi-year well into ’23 and ’24. So for the ’23 and ’24, between ’23 and ’24, from all organic growth project we are working on, we do expect to hit about $200 million to $300 million over new revenue in ’23 to ’24. This is from advanced display and advanced packaging, also electronic assembly SMT and also APS. So we actually not only very positive about the new revenue we are bringing in, the project we are working on, advanced packaging, advanced display SMT and APS. Actually they are huge at this moment — huge semiconductor capacity underpinning and will bring to production in the next couple of years from all of our customers. And now we expect roughly next three years production bringing into roughly half overlap will be from China. And the majority of our — this new capacity from China will be 28-nanometer and above. And lot will really benefit our core business greatly.

So in summary, I think this year, ’21, we will finish at 1.5, we see similar level for the ’22 from all the study we have and the customer feedback. And for ’23 and beyond, we actually do expect our new revenue level we’re coming along $200 million to $300 million. That will continue to fund competency growth and for the new products and also for the core business, a lot of new capacity, particularly in China, huge capacity is going to coming online for next couple of years. And they really will benefit upgrade, ready for our core business. So, in terms of our spending, Lester, do you have anything to add?

Lester WongChief Financial Officer

No. You have covered already.

Fusen ChenPresident & Chief Executive Officer

That’s it. So Craig, do I answered your question?

Craig EllisB. Riley — Analyst

Yeah. I think that that helps. I can follow up on some of the segues from the current annualized run rate with the September guide, which is 465 to the 375. But Lester let me follow up with you on just gross margin. So great to see the 47% gross margin in the outlook. The question is this, do you think that’s a sustainable number or are there some product mix dynamics or customer other dynamics that are providing some kind of one-time help and that would mean that gross margins as we look beyond that into fiscal ’22, what would move back closer to 45 to 46 range or is 47 sustainable?

Lester WongChief Financial Officer

We think 47 is sustainable. I mean, as you know, product mix and customer mix are very key to our gross margins. But I think there are also other things that come into play, which is now days are both on the product mix side, we are selling more higher ASP, higher margin products. That partially due to the capital intensity that Fusen has talked out before, which we believe will continue into ’22 and beyond. I think also as the new products as Fusen mentioned, talked about particularly maybe advanced display as well as advanced packaging, those products also have higher margins. And then, for our core products; we have a very robust program in terms of cost reduction both on the supply chain side as well as for engineering. So we believe we can also bring cost reduction to our core business, which again will help with the gross margin.

Craig EllisB. Riley — Analyst

Very helpful. Thanks guys.

Operator

Your next question comes from the line of Tom Diffely with DA Davidson. Please proceed with your question.

Tom DiffelyD.A. Davidson — Analyst

Yes, good morning and good evening and fantastic results here. So I guess first big picture question for Fusen, when you look at the big demand level today, and you did a very good job of outline all the drivers and all the — it’s — but little surprised that you’re seeing it today versus maybe a year from now when all the front-end semi-cap equipment that’s been ordered today is up and running as these units coming off of the due lines. It seems like this — all this demand that you’ve gotten has come into a situation where we already kind of chips and it just — it seems like business will get even better down the road once all this recent capital spending is turned into actual production?

Fusen ChenPresident & Chief Executive Officer

So, Tom, we always need to have business forecast [indecipherable]. And they are constrained in terms of our priority in the resource. So yes, we are — we feel very positive into the futures. For example, they are things, for example, we probably cannot do right away like the one we see the industry under invest in ’19 and ’20, and we see actually our order come in literally and we just actually was not well prepared it and price supply chain shortage. So they are platform dynamic, we are not able to handle response or way. When we see since creating, we put all ever. So for the next few years, we do feel positive.

Tom DiffelyD.A. Davidson — Analyst

Okay. And it seems to me that a lot of the strength you’re seeing today has been enhanced by just the increased capital intensity of wire bonding of all bodies. Is there someone you can quantify what you think the impact of increase the capital intensity has been over the last few years?

Fusen ChenPresident & Chief Executive Officer

We are actually, yes. I think last time we discussed this probably we feel like about probably capital intensity, if I remember the number, we love to calculate.

Lester WongChief Financial Officer

I think. Sorry, Tom. I think roughly — and it’s very hard to kind of triangulate specifically, but we think as maybe at least another $100 million plus to our baseline.

Tom DiffelyD.A. Davidson — Analyst

Okay. Well, that’s helpful. Thank you. And then Lester, finally, you mentioned the tax rate of 18%, and then you mentioned it might be 15% this year and 18% on the kind of go-forward basis, on a quarterly basis. Is that what you’re saying?

Lester WongChief Financial Officer

No. I’m saying for this year we are probably coming close to 15%, but for long-term if you’re modeling for ’22 and ’23 and beyond based on a lot of things happening in the tax was — if I could tax, it should be 18%.

Tom DiffelyD.A. Davidson — Analyst

Great. Thank you and congratulations on a great quarter and outlook.

Lester WongChief Financial Officer

Thanks, Tom.

Operator

Your next question comes from the line of Krish Sankar with Cowen & Company. Please proceed with your question.

Krish SankarCowen & Company — Analyst

Hi, thanks for taking my question and congrats on the really strong results and guidance. The first question I had was, Fusen, it’s really impressive to see there is $1.5 billion run rate for next year. I’m just trying to reconcile what you’re seeing with what some of your customers have said, ASC publicly have said the current quarter might be the peak wire bonding purchasing quarter. I’m trying to reconcile that with the numbers that you’re seeing because you said that some of the new products will drive upside to revenues in FY ’23 and beyond. So I’m just trying to curiously see what is really driving the strength in FY ’22?

Fusen ChenPresident & Chief Executive Officer

So FY ’22, basically, at this moment, the industry really still have a shortage of backend capacity and still need a lot of equipment from us. So, actually we do see those trends well into current our third quarter. So as time go on, we do believe the FY ’22 can be as good as ’21. And actually the end market is quite strong. There was a lot of driver and we can see 5G in our — a lot of our multi-die chip and IoT and there is a lot of drivers. And we also have advanced display. So actually less than what we have seen, I think — and Chip shortage actually is continuing.

So with all these, we feel like ’22, you not only for us, I think for industry will still be a good year.

Krish SankarCowen & Company — Analyst

Got it. Got it. And then just as a follow-up, I’m kind of curious what your lead times are today or visibility is — I remember last time there was almost nine months. It seems like that it stretched to nine months to 12 months now. If that is the case, do you think the December or March quarter, we will not see any typical seasonality in other words revenue should be strong? Or do you think you’ll still see seasonality in December and March?

Fusen ChenPresident & Chief Executive Officer

So Krish, I think there are few drivers balance each other. Number one, I think we still have a shortage issue. And also I think our customer even demand strong — they have — they’ll prefer deliver schedule. So, currently, I think we target the next month capacity of 450 per quarters, a lot of is quite efficient. We can always a stretch additional 10% by 18 some variable. So I mentioned already the industry is still have a strong shortage for the equipment we providing. So next few quarters, we do see they will be few quarters revenue will be above $450 million a lot will not be every quarter again. And this is to relieve the shortage of our equipment in the industry and also depend on our customers need.

Krish SankarCowen & Company — Analyst

Got it. Thank you. Thanks a lot, Fusen. Appreciate it and congrats.

Operator

Your next question comes from the line of David Duley with Steelhead Securities. Please proceed with your question.

David DuleySteelhead Securities — Analyst

Thanks for taking my question and congratulations on excellent results, especially on the gross margin and operating margin improvements. Along those lines, you mentioned on gross margins that you have longer-term plans to improve the gross margins in the core business. I was just wondering if you could elaborate on that a little bit more, if there is some expectation of how much you can improve gross margins there? And then just remind us how big do you think the wire bonder market is in this current calendar year?

Lester WongChief Financial Officer

So Dave, on the gross margin, I mean, we obviously have internal targets and we’re not going to disclose that. But we believe that based on some of the things I was talking about in terms of cost reduction, alternate sources, reengineering, we could continue to keep the gross margin at the high ’40s and drifting back toward the mid-40s.

David DuleySteelhead Securities — Analyst

Okay. And the size of the wire bonder market?

Fusen ChenPresident & Chief Executive Officer

So actually I think this year, easily more than double of previous years. So I think AV quarter right now at the peak. We shipped several thousand systems.

David DuleySteelhead Securities — Analyst

Okay. And then, you talked about an opportunity in the automotive space; I think, and transition that’s happening there. I’m guessing that might be an opportunity for your surface mount technology equipment. I guess I was just wondering if you could kind of give us an update on some of the other assembly equipment that’s kind of percolating the SMT stuff, the catalyst and APAMA. Just kind of help us understand what the progress points are on all those new products? Thank you.

Fusen ChenPresident & Chief Executive Officer

Sure. So David this year is a very strong for our core business, as I just mentioned. And for APAMA and the high accuracy free chip, let’s talk about overall AP, we categorize AP as SIG and also multi-die flip-chip TCB. So particularly flip-chip and the TCB we call our dedicated advanced packaging. So next year alone these two products — actually, we are going to see next year will be the fast growing year for our dedicated advanced packaging. I mentioned we are part in our next-generation logic optical — what is advanced program with our customers. Next year alone, our dedicated advanced packaging will have about $40 million. So next year will be very fast growing year for our advanced packaging that get a tool. So lots to follow ’22. We do believe ’23 will continue to grow. So our dedicated advanced packaging, we expect probably will reach about $80 million to $100 million by ’23, right, so that’s $80 million.

For the display, we have PIXALUX and has been a very successful product launch. We received a very good feedback. We target our yearly revenue this year is $60 million to $80 million. We easily — we will meet the commitment. So we even have period into next year. So next year PIXALUX alone will still target $60 million to $80 million. But I also mentioned in my script, we have a next-generation of mini and micro-LED tool, actually one that we call Luminex. Next two, three quarters, we are going to ship couple of them to our customer for qualification. Upon successful qualification within our expectation — we expect the revenue will come in second half of ’23. So next year, I think, PIXALUX will still target $60 million to $80 million. And hopefully we will see this new tool have about $10 million to $20 million revenue. So next year, I think we are targeting probably $70 million to $100 million, just for our advanced display. And in my script, I also mentioned current tool PIXALUX in mini and micro-LED fabrication only serve one step as a final placement. But the new tool actually will serve multiple step, including sorting, mixing also pitching. This is a much, much bigger market — much, much multiple purpose and served many more customers.

So, we do believe upon successful qualification of Luminex in ’24 we can reach above $150 million. And we’ll go even faster beyond ’24. So — OK, for the SMT System, actually we are quite excited. We actually have a very innovative idea to improve our accuracy, and to put actually modification of the old system to become a new system and it is under development. And from all comparison, we will update about this opportunity. And this is a huge market, several billion dollar attend. So we believe SMT, we call it electronic assembly, will also bring us very good growth for the next couple of years.

David DuleySteelhead Securities — Analyst

Thank you.

Operator

[Operator Instructions] Your next question comes from the line of Charles Shi with Needham & Company. Please proceed with your question.

Charles ShiNeedham & Company — Analyst

Thank you for taking my question. Congratulations. Fusen and Lester on the nice results. I wanted to start with a little bit clarification on the gross margin. Forgive me if you have given the answers earlier. When I look at your gross margin for the quarter, 46% — but when I look at your historical gross margin for APS, and the capital equipment APS in mid to high-50s, capital equipment in low to 40s. There seems to be no way for me to really get to 46.2% unless I assume APS has a huge uptick here, unless there is some favorable product mix or customer mix going on the equipment side. I wonder if you can give us a little bit more color what is the — really the moving parts in your gross margin performance for the last quarter? Thank you.

Lester WongChief Financial Officer

So the main drivers for that better gross margin is product mix within the capital equipment, both ball bonder and wedge bonder in the quarter actually had much higher gross margins than the previous quarter, mainly due to product mix as well as customer mix. So that’s the main driver. APS effect on the gross margin, obviously, is much less this quarter as they only accounted for less than 13% of our overall revenue.

Charles ShiNeedham & Company — Analyst

Got it. Thank you. So maybe my second question is around mini-LED. Fusen, thank you so much. You actually gave a little bit longer-term outlook for the advanced display going into next year and the year after. I understand that PIXALUX versus Luminex and all the dynamics that you’re talking about. I just want to ask how many PIXALUXs have you shipped so far? Last quarter you said it was about more than 130 systems. That’s the first part of my question. I’ll follow up quickly after this.

Fusen ChenPresident & Chief Executive Officer

So you’re asking how many system PIXALUX shipped so far? Actually —

Charles ShiNeedham & Company — Analyst

Yes.

Lester WongChief Financial Officer

So, if you — I think 134 roughly in high volume we shipped for about full quarter, probably is a full quarter. So evidently, I think — you know, we guided $60 million to $80 million, so roughly EBIT quarter is about $15 million. So EBIT quarter, we — I — you know, the ballpark probably is about maybe $30 million to $40 million [Phonetic]; so roughly, that’s EBIT.

Charles ShiNeedham & Company — Analyst

Okay, got it. Got it. So my last question, I think that this is probably is a most important question, I believe. So a quarter ago, you did give a number for FY ’22, $1.1 billion to $1.2 billion next year and I heard you did say, it’s not really a forecast, that’s what the scenario you think that could happen that you didn’t rule out other possibilities. So I just wonder — I mean, over the last quarter, now you are possibly seeing an average run rate over the next few years as $1.5 billion and you believe maybe next year could be flat, could be up. I wonder what has changed your view over the last quarter. I understand you did say — you did a little bit longer-term planning over the last quarter and then maybe your customer also did a little bit longer-term planning for 2022. I understand that the visibility may be improving, but I would really — would appreciate give us some color what really changed your view here?

Fusen ChenPresident & Chief Executive Officer

So, Charles, I think, we really have a serious problem about supply chain challenge, right? So part of the reason, I think, we tend to a little bit conservative because of supply chain dynamic. We will come at almost every day, right. So — but the difference compare this quarter to a last quarter, if you remember, what I mentioned the difference is about a 10%, right? So if we mention like $1.4 billion or $1.3 billion, 10% is roughly about $150 million, right? So that’s a ballpark, we believe a very, very high gross year possibility to pull back if possible. And a lot of time, I think, we took about maybe $1.35 billion, I remember. So from last quarter to now, I think the intention really did not change a lot much. 10% really is not very, very much. We just put like our mix effective over there. In case, I think industry already really not able to achieve continued strong growth for two years, but don’t know as we see the chip shortage continues.

And, we still have some system customer have a urgent need to get it. And from last one or two quarters, continue to carry back. So that actually give us the confidence, I think next year can be as good as this year, right. But at that time, I think we say ’22 will be lower — actually this is like a 10% lower. And that’s of our intention to guide. So this 10% actually — compared to current industry opt — I think we will be able to managing that. That’s our view.

Charles ShiNeedham & Company — Analyst

Thank you. Thank you, Fusen. That’s all my questions. Thank you so much. Congrats again.

Lester WongChief Financial Officer

Thanks, Charles.

Fusen ChenPresident & Chief Executive Officer

And — so, I think we are going to have our Analyst Day. There will be a lot of more details. If you have more questions, I think we will be happy to provide you on more details.

Charles ShiNeedham & Company — Analyst

Thank you so much.

Operator

Your next question comes from the line of Eric Gregg with FTIA. Please proceed with your question.

Eric GreggFTIA — Analyst

Fusen and Lester, this is a tremendous quarter and great outlook really appreciate it. Maybe I missed this, but between $10 per share you have in cash on the balance sheet evaluation that’s less than 50% of your peers on a price of sales basis you may — greater discount on a PE basis and a really great outlook that you just outlined. Why isn’t the company buying back a lot more stock at these levels? Thank you.

Lester WongChief Financial Officer

We constantly look at our capital allocation program. And I think with the new outlook, we will again look at it again. I mean we did increase our share repurchase in the last quarter quite significantly more than Q2. And I think with the new outlook as well as our confidence in the sustainable $1.5 billion and over 25% operating margin, I think we will look at the best use of the capital and to return value to shareholders. We also obviously have the dividend, which pays $8 million a quarter. So, we will continue to discuss with the Board and figure out the best way to use the — our resources. We generally look at it in terms of the dividend and share repurchase, that’s one bucket.

The second bucket is our organic growth, which obviously now has few that into the future with advanced display as advance packaging. So this is a continued competition we have with our Board and we look at this very closely.

Eric GreggFTIA — Analyst

Thank you very much.

Operator

Ladies and gentlemen, there are no further questions at this time. I would like to turn the floor back over to Joseph Elgindy for closing comments.

Joe ElgindySenior Director of Investor Relations & Strategic Initiatives

Thank you, Hector. And thank you all for joining today’s call. We will be presenting at several upcoming conferences over the coming months, including those with Oppenheimer, Jefferies and Credit Suisse. Additionally, we will be sharing many more details regarding our long-term opportunity, strategy and financial expectations during our Analyst and Investor Day scheduled for 8:30 AM Eastern on September 23.

As always, please feel free to follow up directly with any additional questions. Have a great day, everyone. Hector, this concludes our call. Thanks.

Operator

[Operator Closing Remarks]

Duration: 53 minutes

Call participants:

Joe ElgindySenior Director of Investor Relations & Strategic Initiatives

Fusen ChenPresident & Chief Executive Officer

Lester WongChief Financial Officer

Craig EllisB. Riley — Analyst

Tom DiffelyD.A. Davidson — Analyst

Krish SankarCowen & Company — Analyst

David DuleySteelhead Securities — Analyst

Charles ShiNeedham & Company — Analyst

Eric GreggFTIA — Analyst

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