Q1 2021 Veeco Instruments Inc Earnings Call
You are currently holding for the Veeco instruments incorporated corporate hosted Q1, 2021 earnings call.
At this time, we are assembling our audience of will be underway in about two minutes, we think of your patience in holding and I think please remain on the line.
[music].
Good day.
And welcome to the Veeco instruments incorporated corporate hosted Q1 2021 earnings call. Today's call is being recorded at this time I would like to turn the conference over to Anthony Pennsylvania Head of Investor Relations. Please go ahead Sir.
Thank you and good afternoon, everyone. Joining me on the call today are Bill Miller, <unk>, Chief Executive Officer, and John Kiernan, Our Chief Financial Officer.
Today's earnings release is available on the Veeco website.
Note that we have prepared a slide presentation to accompany today's webcast. We encourage you to follow along with the slides on <unk> Dot com.
Call is being recorded by Veeco instruments and is copyrighted material it cannot be recorded or rebroadcast without <unk> Express permission your participation implies consent to our recording.
To the extent that this call discusses expectations about market conditions the market acceptance in the future sales of the company's products future disclosures future earnings expectations or otherwise make statements about the future.
Such statements are forward looking and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made including as a result of the COVID-19 pandemic.
These factors are discussed in the business description management's discussion and analysis and risk factors sections of the company's report on form 10-K, and annual report to shareholders in any of our subsequent quarterly reports on form 10-Q current reports on form 8-K, and the press releases.
<unk> does not undertake any obligation to update any forward looking statements, including those made on this call to reflect future events or circumstances. After the date of such statements.
During this call management may address non-GAAP financial measures.
The formation regarding such non-GAAP financial measures, including reconciliation to GAAP measures of performance is available on our website.
With that I will turn the call over to Bill Miller.
Thanks, Anthony and good afternoon, and thank you for joining the call I hope everyone's doing well.
Veeco delivered strong first quarter results, which is a testament to our team's resilience dedication and hard work were excited about the prospects of returning to more normal operations as more people are vaccinated. However, we're entering this phase cautiously and with the health and safety of our employees in mind before.
Before we get started I'd like to express my confidence in 2021 by letting you know, we'll be increasing our full year guidance for revenue and earnings as the result of our backlog position. So I don't have more detail on this in just a few minutes.
I'll begin by discussing our Q1 highlights a review of our markets and then turn it over to John for a financial update and guidance.
Q1 marked another quarter of solid execution with results above the midpoint of our guidance revenue of $134 million was driven by semiconductor and data storage sales. Our gross margin came in above 41% and we achieved non-GAAP operating.
Operating income of $16 billion, leading to diluted non-GAAP EPS of <unk> 25.
In addition, we generated $10 million on cash flow from operations and increased our cash and short term investments by $8 million.
We're seeing strong order momentum broadly across our semiconductor products. This is consistent with the healthy macro environment in the semiconductor equipment space.
The analysts are forecasting this improvement for example, Goldman Sachs recently revised our 2021 wafer fab equipment forecast for.
For the third time it is now forecasted to grow more than 20% in 2021, and then another 10% in 2022.
The survey of the large semiconductor companies in the U S Korea, and Taiwan, clearly demonstrates the commitment to investing in additional logic memory and advanced packaging capacity.
When we look further at the sources of demand for this capacity we find the continued proliferation of mobile devices with <unk> wireless high performance computing for graphics, AI and data center applications and the applications, such as automotive and cloud storage.
These market drivers and capacity investments made by our customers align well with our near term growth initiatives in laser annealing, five GRS and data storage and our long term growth initiatives and semiconductor and compound semiconductor markets and.
In addition to healthy market dynamics, we made more progress during the quarter engaging with our customers and shipping evaluation systems I'll explain how this positions veeco for longer term growth.
Now, let's turn to our specific market opportunities.
Beginning with our semiconductor market, we serve this market with three major product lines, our laser annealing products for advanced logic.
In beam deposition systems for <unk> mask blank production and our lithography products for advanced packaging.
Our laser annealing products enable high performance computing they are used by leading edge device manufacturers at the most advanced logic nodes and a memory customer is evaluating our laser annealing system for their manufacturing processes as well.
For logic applications, where current fleet production tool of record at multiple leading edge customers for their most advanced nodes, including a recent third application win at one of these customers.
And recently, we shipped multiple evaluation systems to both on existing customer and the new leading edge logic customer at their next nodes as the.
These evaluations close over the course of the next year, we hope to receive multiple tool orders.
So in summary, current product demand, coupled with ongoing evaluations for future nodes make laser annealing and important part of our 2021 and longer term growth plan and in support of the semiconductor growth plan I am pleased to report construction is well underway at our new San Jose manufacturing.
Facility.
The <unk> lithography is also an enabler for high performance computing as it allows manufacturers to further shrink their device geometries veeco. The ion beam deposition systems are used to make the mask blanks for <unk> lithography leader.
Leading edge Fabs are accelerating the adoption of EU the lithography at their advanced nodes, which is driving mass consumption and this is forecasted to continue.
We're experiencing this trend with continued customer engagement and in fact, I am excited to announce debt during the quarter. We received an order for two ion beam deposition chambers for EU the mask blank production.
Moving on to advanced packaging.
In order for electronic device performance to continue to improve our customers have incorporated advanced packaging techniques, such as fan out wafer level packaging. In addition to shrinking nodes along Moores law.
High performance computing, such as Cpus and graphics processors are driving advanced packaging demand.
Those lithography products are recognized by our customers for flexibility superior for process control and high productivity. In fact, we're seeing promising signs of improved demand during the quarter. We received the multi tool order from a large <unk> for our lithography products and we continue to see advanced packaging.
Is it healthy and steady business for the company.
We serve the compound semiconductor market, primarily with two product lines are wet processing of equipment for RF filters and power amplifiers, and most CVD equipment for power RF and photonics applications.
Our wet processing equipment offers excellent process performance for our customers in the RF market the frequency of empower demands of five GRS drives more content per mobile device.
Fortunately, we continue to see strong demand as customers add filter and power amplifier of capacity.
We are encouraged by customer feedback and demo results from our gallium nitride and arsenide phosphide Mo's CVD platforms. These products enable fast charging and other power management solutions five key RF devices and micro Leds recent early stage wins and in the evaluation.
<unk> positioning veeco to grow with these emerging markets as they gain traction.
Our third major end market as data storage. This market has been growing for multiple years, consistent with cloud and data center demand.
Our customers, who make thin film magnetic heads require additional capacity to keep up with increasing demand driven by a larger drives after multiple years of customers accelerating their capacity additions, including in 2021, our visibility into 2022 is limited at this time however.
<unk> with data proliferation, showing no signs of slowing we feel confident about the long term prospects of our data storage business and lastly, we're beginning to see signs of a potential recovery in our scientific and other market. This market is largely driven by sales to universities and research institutes.
Now for an update on our 2021 priorities.
We strive to maintain resiliency across all aspects of our operations overall I've seen remarkable teamwork and dedication throughout the organization. It's our people that put veeco on a position to succeed and meet our short and long term growth objectives.
Second we will continue to focus on profitability and we're off to a great start with our Q1 results third we expect to deliver near term growth with our laser annealing five GRS and data storage solutions.
And fourth we continue to make investments in evaluation systems and our service infrastructure.
Our goal is to win additional application steps leading to more multi tool orders that will position veeco for long term growth.
And with these four priorities the veeco team is committed to making a material difference and building a stronger veeco now I'll hand, it over to John.
Thanks, Bill and good afternoon, everyone.
I'll be discussing non-GAAP financial results and encourage you to refer to the reconciliation to GAAP results.
On our press release or at the end of the earnings presentation.
Turning to slide eight as bill highlighted our revenue for the quarter came in at $134 million, which was at the top end of our guidance range.
The markets exhibited year on year revenue growth underpinning, our full year revenue growth projections, which I'll update in a minute.
Semiconductor revenue was $52 million, which represented 39% of the total.
Driven by our laser annealing in lithography products.
Compound semiconductor revenue was $25 million and made up 18% of total revenue.
Driven by wet processing systems sold for RF applications.
Data storage revenue was $41 million and made up 31% of our total revenue.
And scientific and other revenue was $16 million in.
And made up 12% of total revenue with systems sold for a variety of applications.
Looking at our quarterly revenue by region, Our Asia Pacific region, Excluding China made up 41% of total revenue.
United States was 34%.
China made up 15%.
EMEA was 10%.
Finally rest of world made up less than 1% of revenue for the quarter.
Now turning to our non-GAAP quarterly results.
Gross margin came in at 41, 5%, which was towards the top end of our guidance.
Operating expenses for the quarter were $39 3 million or 29% of revenue.
Tax expense for the quarter was approximately $400000 with net income coming in at $12 6 million.
And EPS was <unk> 25 cents on the diluted share count of 51 million shares.
Now moving to the balance sheet and cash flow of highlights we ended the quarter with cash and short term investments of $328 million of sequential increase of $8 million.
From a working capital perspective, our accounts receivable increased to $87 million.
This drove dsos of 59 days.
Accounts payable increased to $43 million.
With <unk>, increasing to 49 days.
The inventory increased approximately $10 million to of $156 million to support our planned increase in volume in the second half of the year and investments in evaluation systems.
Days of inventory came in at 173.
Long term debt on the balance sheet was recorded at $325 million, representing the carrying value of $389 million in convertible notes.
Our capex during the quarter was $2 million and does not yet reflect any significant spending on our San Jose expansion project.
Now turning to our guidance.
For Q2.
Revenue is expected to be between $125 million on a $145 million with non-GAAP gross margin between $40 and 42%.
As a reminder, gross margins are influenced by a number of factors and we do expect quarter to quarter variations.
We expect Q2, non-GAAP opex to be between 38% and $40 million.
GAAP EPS for Q2 is expected to be between a loss of <unk> <unk> and earnings of <unk> 11 per diluted share.
Non-GAAP EPS is expected to be between 17 and 35 per diluted share.
Diluted non-GAAP EPS is based upon 51 million share count.
For reference we've included a table on the back of section of the earnings presentation to provide detail on the effect of the convertible notes on diluted share count.
Now for an update beyond Q2.
With growth expected in the second half of the year, we're increasing our view of full year 2021 revenue through a range of between $540 million and $560 million.
At the midpoint this corresponds to 21% revenue growth year on year.
Up from our previous guidance of 17%.
As a result, we expect non-GAAP EPS for the year to be between $1 10, and $1 30 per diluted share, which is of 40% increase year on year up.
Up from our previous guidance of 28%.
Yes.
And with that Bill and I will be happy to take your questions.
Thank you.
I'd like to ask a question. Please signal by pressing star one on your telephone keypad.
If you're on speaker phone. Please make sure that your mute function is turned off to allow your signal to reach our equipment.
And then it sort of one for questions and we'll pause just a moment.
And we will go first to Rick Schafer of Oppenheimer.
Hi, This is the way Mark speaking on behalf of Rick Schafer. Thanks for letting me ask questions.
So congratulations on the quarter on the guide so with the semiconductor supply chain constraints. It seems like there has been an increased sense of urgency of ramp capacity.
A lot of announcements recently on higher spending on the foundry area. So I was wondering if you guys can talk about the landscape are you seeing any demand pull in of any shift in the order of velocity.
Yeah. Thanks for the question way, we are seeing an uptick kind of aligned with the macro trends.
<unk> seen from all of the the market makers.
And we're really seeing of.
Paul on our laser annealing opportunities that Youre historically, we've been process tool of record with one of the application with two customers last quarter, we announced that we want a second application step with one of those customers and now we just announced winning of third step. So that's that's really quite positive and gives us confidence to take up.
Our 2021 numbers, but also it's important to note that we are.
Recently shipped an evaluation system to a third logic customer.
We have on ongoing evaluation.
On the DRAM memory customer so clearly we're seeing a lot of engagement in the semiconductor space.
The others more announcements that.
<unk> is going to be a more broad broadly adopted which is positive for our <unk> mask blank deposition systems, you can see ASML increasing.
The capacities for scanners.
Out into 2022 and beyond so we do see that as a solid business for us.
Between two to four systems per year, and I guess.
The ASML continues to increase their output, there's about 10% to 15 scanners per one of our systems. So.
That kind of puts us at the two to four range, but maybe that would tick up a little bit higher and then finally in advanced packaging, we serve that market with litho and wet processing equipment.
We are seeing a continued pull in demand. There. This has been a steady business what we're seeing.
Starting to see some modest growth.
We shipped the number of our systems.
Systems two of large <unk> this quarter and we are seeing demand pick up so.
Generally in the three areas, where we participate in the semiconductor space laser annealing EV mask blanks and advanced packaging lithography.
We are seeing those macro trends.
Okay.
Yes.
Alright I appreciate it.
Thanks for the color so as some of my follow up.
I know you provide us a little bit update on the EU.
On the eval tools, but can you give us a little bit of a summary of how many tools have been delivered so far of your customers and when can we expect what is the expected timeframe on when it's cool place to a customer to the design win.
Yes, that's the that's a really timely question.
We have we are planning to.
To have 10 of evaluation systems in the fields.
2021.
Today, we have six in the field.
For our plan to ship the rest of this year and really here, we are investing to win we're making large investments in 24 by seven service support.
So we're really.
Over supporting these.
And of those 10 tools.
Five of our laser annealing.
The two most CBD, particularly on eight inch power in micro OLED.
The two in advanced packaging.
One is our core technology of eco core technology in semi we're not really ready to discuss the most.
Most of these E valves are lasting one year post installation and so there may be a few that will be signed off late this year, but I would expect.
Not that not to be overly significant I would think mostly will be seeing those in the first half of 'twenty two.
Great. Thank you.
Thank you Ed.
Yeah.
And our next question from Patrick Ho of Stifel.
Thank you very much and congrats on the nice quarter on outlook.
The first for you in terms of the the strength Youre seeing in the advanced packaging market you mentioned that the logos that took the.
Orders this quarter.
As you look for the next couple of quarters do you see that demand being a little more broad based between growth chipmakers and all SaaS or is it still going to be heavily concentrated towards the <unk>.
So that's that's the solid question Patrick what we are seeing.
Is the customer base the interested.
Expanding.
Two.
Foundries and idms as well as <unk>, So we do see.
Of the opportunity broadening.
Great that's helpful and maybe as a follow up question for John.
In terms of COVID-19.
The Opex management and even capacity management debt you guys are are undergoing obviously as you become more and more of a bigger semi player.
I think Bill you mentioned 24, seven support it's a lot different from your other businesses previously.
He can provide a little bit of color in terms of.
How much more calls investments you need to make on the support side, especially on the semiconductor Ed.
The keep pace with the demand that's out there.
Sure Patrick and thanks for the for the for the question. So you know we are upping. Our Opex you know you know guide here.
You know a bit we did see opex for Q.
Q1 come in at the just over 39 million or 29% of revenue.
Quarter, one and were given a similar guide.
The fourth quarter, two and that the same same range. So you know.
We do expect to increase our opex as revenue increases and we support these.
Opportunities.
The opportunities.
But we expect debt as a percentage of revenue that opex.
We will continue to come down and that's that's our COO.
Current forecast.
And to your to your point also Patrick we're also investing in the area.
Of.
Spending and service infrastructure.
To support the growth in business as well as the support the the eval and those investment costs go into into our Cogs expenses.
And get included in in our gross margin a result so.
We're investing in there.
At the at the same same time as well. So we're currently guiding from a gross margin perspective gross margins in the in the same range for for Q2, as we experienced in Q1 and and expect the a little bit of gross.
June AR growth in the in the second half of the year.
Great. Thank you very much.
Thank you Patrick.
And we'll go to our net from Brian Lee of Goldman Sachs.
Hi team Sam careful on here on for Brian Lee just kind of quick one for you guys around supply chain. So with respect of the semi supply chain at large can you update us on on general on your exposure of any tightness, there weatherford raw materials or sub components.
What are your mitigation process that looks like.
No I would say at the beginning of the pandemic, we did have to resource a few hundred fabricated.
The metal components out of Asia back to the U S for continuity of supply chain.
But that was completed yield.
A couple of three quarters ago.
I would say right now.
Our supply chain is holding up pretty well and where.
It's not really a constraint right now we are obviously on top of it very very aggressively.
And but we are able to manage through the the supply chain issues.
Okay, great. Thanks, and then with respect to if you do have to qualify new suppliers of buildup of inventory of what does that timeline look like.
For the specific machine parts I was speaking of those are built to print parts and so.
The the process is really of first article process, it's not it doesn't take a long time to change for a larger controlled OEM component.
That would be a longer process of of becoming qualified.
With a customer who is the particularly of critical semi application, but we have not experienced that yet.
Got it okay. Thank you very much of the club.
Thank you.
And we'll move on to our next question from Tom O'malley of Barclays.
Good evening guys. Thanks for taking my question and congratulations on the really nice results.
My question really centers around the data storage business you guys had guided to some strength in the middle of this year, but it looks like a lot of that came in the March timeframe.
Would that lead time of about around nine months can you talk about what happened why you saw March come in a bit better and then maybe talk about you in your prepared remarks talked about the the visibility of that but just anything more on the visibility for the rest of the year after that strong March.
Yeah.
I'll take I'll take a shot at that Tom maybe John can Phil.
I would say just in terms of the March and the March revenue that number was within our expectations right. So we ship the.
In Q1, what we were.
Expecting to ship, we were expecting an increase based upon our backlog position compared to the Q4 and you know of.
The.
Some of the Asps of this these the systems are in excess of $5 million of more just moving around one or two units.
Shipments of <unk>.
Could could impact the quarterly trend, but the.
Q1 is the within within our within our expectations and then maybe Bill you want to talk about the the market just a little bit more detail yes.
Obviously, when we gave guidance for the year of 2021 that was based on our strong backlog position and that nothing has changed there. So we expect to have a strong.
Data storage year here in in 2021.
Okay.
Great that's helpful.
Two part question here one can you describe what kind of led revenue you got in the March quarter do you have any plan for the June quarter could you walk through what your expectations are for the four different segments headed into just the.
To get us to that mid point of guidance. Thanks, a lot guys.
Yeah.
Sure.
So in let me let me cover at the covered bye Bye Bye bye market here I'll start with the.
The.
That you know by market, we see a fairly flat quarter at the midpoint of our guide from Q2 and compared to Q1 and what we see is.
An increase in data storage is our expectation in our Q Q2 guide.
Flat to down in the in the other markets then more specifically on your question.
In our in our compound semi where we would include the day to storage, we don't see any significant the Leds sales in the in our Q2 numbers for for compound semiconductor.
Thanks, again, guys nice results.
Thank you thanks, Tom.
And we'll go on to our next question from Gus Richard of Northland.
Yes, thanks for taking my question.
Just real quick on on the data storage side.
Can you talk about the <unk>.
<unk> of passes or the intensity of the ion beam etch and Dep tools you know when you go from.
Perpendicular according to advance to hammer.
Each generation of how much more equipment as your customers need.
Yeah.
We've seen our customers have seen the amount of data stored continuing to grow at 35% annually.
And we're benefiting from from two factors first.
The the size of form factor of the drives is increasing significantly and the number of overall heads being produced are required to be produced is increasing and so.
The industry is looking at that as an 8% to 10%.
Growth in heads and then as you just alluded to.
As they move from Hercules perpendicular recording to energy assisted magnetic recording the call.
<unk> of the head increases significantly.
And that is expected to likewise increased by about 8% to 10% per year and so what I mean is.
The the number of passes that ahead needs to go through because equipment is forecast to grow at about 8% to 10%. So if you take.
Take those 8% to 10%.
Or they're supportive of of the market.
Okay got it so what youre, saying is.
All things being equal.
16% to 20%.
Growth.
Going forward for the intensity of assuming.
Heads per drive continues on.
And drives are effectively flat and you just have.
You know more more bits on the drive is that the way to think about it.
Yes that is I mean on.
I'll just add that the customer.
Customers buying patter patterns for capital equipment.
Don't work.
Eight to 10 narrative excuse me, 16% to 20% per year, and so that that could move around a little bit, but but generally over the longer period of time over many years debt.
On a good calculus, 60% to 20%.
Yeah got it got it that makes complete sense of unit, obviously of clinical and then on the compound semi side.
A lot of of emerging markets their micro mini led displays Lidar health.
Health monitors Gan.
<unk> power and RF.
Could you just walk through.
Which ones of those applications.
Sort of the opportunity first and which ones do you see come in later on.
Yeah. So.
Generally the compound semi we have two product lines one is.
Is wet processing, where we are seeing.
Significant demand from customers for RF filters and RF power amplifier is really driven by <unk> adoption in enhanced set so that's that's clearly happening now.
And in the CBD space.
Our business is at low levels.
After exiting the commodity led business.
We've obviously restructured that business and the like and we go to market with two products. One is the gallium nitride we of a single wafer reactor and that is really tuned for the power electronics.
<unk> and innovative silicon based micro OLED applications, what we're seeing now is.
Is growth in Gan power applications.
Particularly at eight inches. So customers are moving from six inch to eight inch format and those customers that are doing that are our.
Our choosing veeco. So that's that's a driver of growth. This year into next year and then if I were to think about longer term on.
Opportunities like micro OLED that you mentioned.
I would say that is still farther out on the horizon.
Like in the two plus 333, plus years out but could be could be a nice opportunity for us.
Okay.
Or is the.
Interest in arsenide phosphide.
Three five.
I think all I can do that.
Uh huh.
Yes, so we go to market with the.
Alumina batch tools.
And that's tuned.
Tuned for applications in photonics, such as indium phosphide lasers.
<unk> as well as as Red micro OLED.
We just recently.
Shifting of evaluation system for four of micro OLED.
This product so, but it's still still farther out, but that's certainly an opportunity for the company.
Got it got it and then.
On on the Eval tools I am sorry for the housekeeping questions.
Could you just.
Most of the.
How many of each type of tool alright in the email right now.
Sure so we.
We have a total of 10 net we're planning six are already in the field under evaluation of various stages of installation for our plan to ship the rest of of this year.
And so all of those 10 half of those are laser annealing for.
Logic and memory the.
The third largest customer of the the other two customers, but their next the most advanced nodes.
And as well as DRAM memory applications.
We also have.
Two of evaluation systems are one as I mentioned in.
Power eight inch power we're planning.
As well as micro OLED, so that 7%.
We have two in advanced packaging, that's a subset of semi and one is a core of veeco technology that we're developing for the semi market and planning to ship.
Later this year.
Got it got it so a lot of detail there.
Yeah, no it's sort of helpful.
And then spares and service in the quarter on I'll leave you guys alone.
Okay spares and service in the quarter.
You mean, the second here I believe was $38 million.
Yes.
$38 million.
Great. Thanks, so much.
Thanks Gus.
And we'll go to our next question from Mark Miller, the benchmark company.
Congrats on the quarter.
The disk drive industry is just starting to transition to hammer Amer heads and I'm just wondering you supplied.
Well, the deposition and etch tools.
For thin film heads.
How does the transition to the hammer anymore type of heads.
Does that require more of your tools less your tolls I'm just wondering as we transition over the next couple of years, what that means for veeco in terms of their data storage of women.
Yes, Mark that's a very timely question I would say.
That.
It's a positive overall very positive for veeco that technology transition to hammer mammer, because as the hedge become more complex.
It requires more passes through veeco is equipment and that's about 8% to 10%.
Due to the technology transition to asking what we're <unk> or.
We're figuring it to be right now.
And there's no earn out.
Overall positive.
So more of an opportunity for rich or for debt.
It's probably more depth, but I would have to probably go back and check that.
But.
I think the modestly more towards debt.
In terms of projecting your growth opportunities over the next.
So 12 to 18 months.
In terms of the mix of the tools, you'll be selling is it a higher mix of similar to what you did guide to somewhat higher margins I believe and the.
On the second half of the year are you seeing a mix up or do you expect mix to improve.
As the share goes on into 2022 will be similar.
So.
The market our expectations for for growth in the second half of the year Bill.
Bill mentioned earlier and taking up our our guide for the second for the second half of the year.
It was coming from the.
The semi side and particularly.
Laser annealing and and we are seeing a pickup in advance and advanced packaging as well now we also expect and what was included in our previous guide was increased revenue coming from from data storage in the in the second half of the year as well that we that we see.
There, we see growth coming.
In Q2.
And in the second the in the second half.
Half of half of the year.
How would you rank.
Of your tool margins.
So it used to be advanced packaging of litho tools for the highest.
All of by Ion beam tools, and then the laser anneal is that correct or are they all similar in terms of on margin contribution.
Yeah, I would say that you know.
Without going into too much detail about the about the products here, we could really get bogged down I think if we look at you know by these the.
The market components I would say that the gross margins are within a couple of percentage points up and down from the company average.
I'm sorry for the asking the question taxes for next year I think.
We were told you were running around $2 million for this year, we'll taxes looks like for next year.
How much will increase.
Yeah, I don't think we've given that outlook for for next year and you know if the taxes I would say, we still have you know the of the Nols.
So from a cash perspective, we are at this point.
Don't see a substantive change to our cash.
Cash taxes as we still.
Shielded with the.
With Nols.
Thank you.
Thanks Mark.
And as a reminder of the Star one if you do have a question at this time.
We'll hear next from David Duley of steelhead.
Yes, I'm sorry, my phone dropped off for a couple of moments there. So I apologize if I'm asking the question you already answered, but you mentioned that you had a strong backlog.
The second quarter could you help us understand what the what the size of the backlog is or give us the reference points on how much of grew or any sort of color there.
We can understand.
Why you are so confident about your backlog.
Sure so.
So thanks, Dave.
Yeah, We did report backlog at the end of the year last the last year.
<unk> gone away from providing quarterly of.
Bookings.
And backlog I would just say that the that the the trend has been positive.
And that as Bill mentioned and we talked about.
We saw or we entered the year with strength in.
In data storage and in our backlog, we are executing against that the against that backlog and.
You know we entered the year with the biggest contributor to the backlog was was data storage and followed by semiconductor and I would say that the trend is still in place.
And could you just remind us what the backlog was I guess.
Youre not going to tell us when it wasn't sure what was the.
So we'd entered the year.
Sure.
Yeah, we entered the year with backlog of $366 million, which was 100 million dollar increase in 2020 over where we ended 2019 and backlog.
And I was just assuming based on your commentary of the backlog was up sequentially in Q1.
You can read into that.
Okay. Thanks.
As far as the LSA business goes thank you for the update on all of the advanced nodes.
I think a big chunk of that businesses the trailing edge nodes could you talk about what youre seeing in fairly edge nodes throughout Asia, because that's mostly what that businesses. In fact, most of the visit us in China, Inc.
The.
This is the laser annealing question.
Yes.
Yes, I would say, 75% to 80% of the business right now is actually at the leading edge.
Logic customers, and I would say, 20% or plus or minus.
Is in the trailing edge nodes and.
And that it's staying at about that ratio I don't know if you can add more color of that John No. I think that's I think that's right Bill I think that's what we've seen over the last you know.
<unk>.
The trailing quarters number of trailing quarters in and.
And we don't currently see a change in net trend I would say that the growth that we've seen is really by the the leading edge nodes winning application steps at the leading edge nodes.
Okay and as far as.
Just a related topics on what are you, having any restrictions on shipping product to China.
A lot of people have been waiting for licenses and have a backlog of on ships.
Tools.
What are you seeing in this area.
Sure. So we're subject to those same export compliance.
Rules, what are what I would say David is that you know we.
We've seen our revenue as a percentage of business coming from China's stabilize exiting the the.
On the led the business at the end of 18, we were in a period of time, where we saw our business in China as an overall percentage declining and now it's about 15% or so of total revenue and that's for us is pretty broad.
In terms of both the products that we're selling into China and in the customer base and some of that requires export licenses. Some doesn't some customer base you know requires.
Export license and and others others don't so you know for.
For us.
We see this this business in this.
Current range and to the extent that export licenses are required and we don't have those export licenses. We don't include that in our backlog.
Or put that in our guidance expectations.
Have you all I'll just kind of.
Continue to elaborate on this particular topic I'm just kind of curious if you've seen if you have not been able to make shipments to China because of the export restrictions.
And if that's the case of kind of wondering what the size of.
What's been held back is because of eventually that might flow through on that could be of positive.
Right. So as an example, if you are specifically you know talking about of customer like you know you know Smick as an example, we've not obtained in the export licenses.
The shift to a company like Smith.
If that's what you're referring to.
And if you know we were able to get export licenses.
To accompany like Smith, we could see an increase in the business in China, It's probably also worth noting that since the those kind of requirements came from the government.
We have not booked P O of.
Subsequent to that into our backlog and so there's out of risk of backlog of operated much backlog evaporation either.
Okay. Thanks.
Thanks, Dave.
Yeah.
And there are no further questions on the queue at this time I would now like to turn the conference back of the presenters for any additional or closing remarks.
Thank you operator, and thanks for joining our call today, we are excited about 2021 and I want to thank our customers shareholders along with the the entire veeco team for their continued support as we execute our growth strategy I do look forward to updating everyone at upcoming conferences have a great evening.
And again that does conclude the call we'd like to thank everyone for your participation you may now disconnect.
[music].