IIVI
#Okay, <UNK>, thanks a lot for your question.
I would say that, for the core of our strategy going forward, I would take it just as a straight line for where we come from.
It's typical for us as we did with the Oclaro acquisitions to go ahead and spend the time doing a real nice job planning it, getting it in-house, getting organized, getting it stabilized, putting the efforts into both the market and the product portfolio and the operations and then allowing the teams to grow.
And I would say that that's pretty much where we are at, where the most recent acquisitions that we've done, we are stepping up our organic investments on the belief that the long-term prospects for devices that can be made on that platform is very, very strong for II-VI in the long term.
We need to stick to the knitting and make sure that we get things done, get them done on time, get things in place.
However, we will continue to grow both by organic investments and by acquisition.
That's my belief.
So, we won't take our eye off the ball, both strategic planning for the long-range, so it will be as determined as we ever were while <UNK> was the CEO to make sure that we do things right, we do the right things, and that we get the absolute best deal we can for the II-VI shareholder in the short term, and that we can make real good on in the long term.
I would say ---+ this is <UNK>.
Certainly what <UNK> said is just right.
We think we are well-positioned.
We do want to integrate what we've bought and work on the organic opportunity in VCSEL platform right now.
At the same time, there are other things that we could be acquiring.
We are not right now imminent to do any.
But there are a couple near us, so if you had to say how we are leaning, we are two thirds on integrating and fix, and one third to look at other acquisitions.
We have to do that.
It's the type of business we are in.
We are materials suppliers, merchant suppliers, have to keep our eyes open and will continue to do that.
For the year.
Let me just first say this.
In this Company, we are very, very committed to a lot of things that are kind of run the Company by the basics, and that starts with if the money isn't made of the gross margin level, it's basically not made.
So, a continued focus on the management improvement of the gross margin is really important to us.
So I would say that we take even small changes in the gross margin pretty seriously.
And while I am actually not going to give you a range for the back half of 2017 or 2018, I would tell you the Company is very cognizant of the sorts of gross margins we've had in the past.
We focus on new products to improve or certainly not dilute the gross margin.
But volume does matter.
The single biggest thing that will affect gross margin is, aside from just natural yield, is what you sell off the yield.
So those things do make a difference and I think as <UNK> said, as we expand our capacity, our team that manages the manufacturing and engineering in this Company drop all the segments are very, very good at that.
And they look to be sure that that capacity addition, if they've done as <UNK> said with full view of how it's going to be used, productivity improvements, etc.
So, while we do have a pretty wide range for a few different reasons, not the least of which is just trying to be cautious on exactly how the optical communications cycle could go for the whole year, all four quarters, we certainly would strive not to be living at the bottom of it, I would say.
First of all, we continue to view the industrial market very favorably.
That's an important market to us.
We are very good at that.
But we are also very good at the rest of the markets.
I would say what makes optical communications more variable with respect to the gross margin is, in times such as we may be said to be seeing today, there ---+ where capacity is being constrained, orders are going out further, there may not be as much pressure on price decreases over time as we would typically see in a more down part of the cycle, where the quarterly reduction in prices is not only much more aggressive, it may not be limited to once a quarter.
So that, at the end of the day, it's really about demand.
But I would say where we see the cycle rate at the present moment, at the very least, people are not having as much time or really just as much supply chain capacity to be able to be pushing prices down as they have in the past.
<UNK>, would you like to add to that.
I would say we continue with a very, very strong dedication and focus on the industrial market, <UNK>.
As I mentioned in my comments, we had another record quarter for our 1 micron components, for the industrial materials processing market.
China seems to be in the last quarter, and maybe half of this third-quarter and powerful fourth quarter, very, very strong.
The demand is strong.
The demand for our current products was strong in the fourth quarter, and the demand for existing products at new customers, including for a very sophisticated beam delivery systems and cutting tools, has increased in the last two or three months beyond any interest in we've seen before that.
So we have ---+ we've reorganized salesforce.
We have increased our team both in China and Korea, and in Japan as well as supporting the team dynamics in Europe and in the US.
It will continue to be a very important market for us to invest and manage and grow in.
No, not particularly.
Obviously we do talk about the capital increasing, which to the extent that we have just say half of that in the beginning of the year, that will add to the depreciation, of course.
But those are probably the main ones that really affect the margin growth for next year, other than just changes in the topline.
Yes.
You have that right.
There is $12.5 million at the very least in there, just on one-time expenses.
Okay, well, we want to thank you all for joining us today.
Thank you for your support throughout this year, and we will see you on October 25.
Thank you for joining us.
