Q2 2021 Veeco Instruments Inc Earnings Call
The Q2, 2021earnings call.
At this time last of mine safety and Samsung.
And the way shortly and we appreciate your patience and question from the line.
[music].
Yeah, Dan and welcome to the Veeco instruments, Inc. Corporate hosted Q2, 2021earnings call.
Today's call is being recorded at the.
And as time I would like to turn the conference over to Mr. Anthony M C.
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 I'm curious and our Chief Financial Officer. Today's earnings release is available on the Veeco website. Please note that we have prepared a slide presentation to accompany each day.
The webcast and we encourage you to follow along with the slides on Veeco Dot com.
This call is being recorded by Veeco instruments, and the copyrighted material it cannot be recorded or rebroadcast without <unk> Express permission your participation implies consent to our recording.
To the extent of this call discusses expectations about market conditions and market acceptance of and 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.
It really from the statements made including as a result of the COVID-19 pandemic.
These factors are discussed and the business description management's discussion and analysis and risk factors section of the company's report on form 10-K, and annual report to shareholders and it also.
Subsequent quarterly reports on form 10-Q current reports on form 8-K, and the press releases.
And 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 day Oh sorry.
During this call managements of the address non-GAAP financial measures the information regarding such non-GAAP financial measures, including reconciliations of GAAP measures of performance and is available on our website.
With that I will turn the call over to Bill Miller.
Thanks, Anthony and good afternoon, everyone and thank you for joining the call I'd like to start today by thanking the veeco United team for their continued dedication and hard work and they delivered exceptional second quarter financial results and.
And made excellent progress advancing our strategic growth initiatives, we continue to feel confident about the remainder of 2021, our near term growth plans are unfolding as expected and.
And the investments we're making today are also on track and giving us confidence and our longer term growth plans.
I'll expand on this and a few minutes, but first I will discuss our Q2 highlights then turn it over to John from a financial update and guidance.
Veeco continues to execute well with Q2 results at the high end of our guidance strong shipments from our semiconductor and data storage customers drove revenue of $146 million. Our non-GAAP gross margin came in at 42% and we achieved non-GAAP operating income of $21 million.
Leading to diluted non-GAAP EPS of <unk> 35.
Both of the top and bottom line results are sequentially better than last quarter and significantly improved from the year ago quarter.
In addition, we had generated $10 million and cash flow from operations and improved our cash position, we continue to improve our operating model, while making investments for future growth I'm, particularly excited about our semiconductor market momentum, which is led by our laser annealing and advanced packaging lithography systems obtained with our ultra.
The acquisition.
And we're pleased that the strategic rationale for the acquisition is now serving as a cornerstone to the overall veeco growth strategy.
Before we get into a detailed discussion on each of our 4 end markets, let's look at the Mega trends driving our business and.
The first of these mega trends this mobility with people and machines always on the move and always connected via devices like smartphones and sensors, a healthy market outlook is driven by exciting technologies like 5 G, which along with the edges of platform will enable many exciting new use cases for consumers and businesses.
Alike increases and mobility will drive leading of semiconductors advanced packaging and display technologies.
High performance computing is another mega trend driven by large scale data center applications and artificial intelligence.
The high performance computing creates demand for leading edge semiconductors and advanced packaging.
The third major market trend is the transformation of the automotive industry with electrification and autonomous advancements. This market trend is arguably and its early stages and is expected to be a driver of power electronics <unk> sensors artificial intelligence and <unk> communication.
And finally, the cloud is another mega trend driven by enormous amounts of data stored and processed forecast shows the stored data growing at a 35% CAGR for years and turn creating demand for hard disk drives and high speed communications.
These market trends are expected to be in place for some time driving our longer term growth initiatives.
Now, let's turn to our specific market opportunities.
Beginning with our semiconductor market wafer fab equipment spending has been revised up several times recently and analysts are now forecasting approximately $80 billion for 2020..1 this underscores the healthy equipment market today, and looking ahead longer term forecasts predict spending up to 100.
$1 billion annually.
We serve this market with 3 major product lines, our laser annealing products currently used in production at advanced logic nodes.
Our ion beam deposition systems for <unk> mask blank production and.
And our lithography products for advanced packaging.
Our laser annealing products are used by leading edge device manufacturers and their most critical process steps.
Currently production tool of record at multiple customers, which underscores the unique advantages of our laser annealing systems as device geometries shrink.
We continue to work with our semiconductor customers on their next nodes by supporting the evaluation systems in both logic and memory as we build sustainable long term relationships.
Our laser annealing is closely tied to the trends I talked about earlier mobility, along with high performance computing are mega trends that drive demand for advanced memory and logic devices. These devices and turn require of laser annealing solutions today and for the foreseeable future.
Furthermore, regarding our semiconductor market.
We're happy to see further evidence of EV adoption during the quarter as another memory manufacturer announced their commitment to each of the lithography.
This is not unexpected as device geometries continue to shrink.
With most leading semiconductor manufacturers now planning on adopting E. UV lithography, we expect continued demand for ion beam systems used for either of the mask blank production.
Moving to advanced packaging and.
And the context of Moore's law slowing down the semiconductor industry is turning to innovative packaging technologies to support system scaling demands and performance improvements our advanced packaging lithography and wet processing systems are used for advanced packaging technologies, such as heterogeneous integration and fan out wafer level packaging.
Graphics processing and artificial intelligence are examples of where advanced packaging is used to improve system performance.
We had strong order activity during the quarter for our lithography products and we see growth coming from advanced packaging into 2020.2.
We're experiencing strong momentum across all 3 products and our semiconductor market. This momentum is expected to continue and it's the reason, we're expanding our manufacturing footprint for laser annealing and lithography products and I'm proud to say, our San Jose capacity expansion remains on schedule.
We serve the compound semiconductor market, primarily with 2 product lines are wet processing and equipment for RF power amplifiers, and filters and M O CVD equipment for power and RF and photonics applications weakened.
We continue to see strong demand for our wet processing equipment from our RF customers 5 G. Communication is driving an increase and content per mobile device and our customers are responding by adding capacity for RF power amplifiers and filters.
In fact, we had strong shipments and order activity during the quarter for RF applications.
Our gallium nitride and arsenide phosphide M OS CVD systems enable fast charging and other power management solutions.
<unk> G RF devices and micro Leds these.
These markets have tremendous growth potential and what we're looking to build our market position.
Recent early stage wins and evaluations underway for power and micro Leds applications give us confidence will grow and these emerging markets.
Our third major and market as data storage.
This equipment market has been growing for multiple years consistent with the increasing amounts of data storage and server enterprise near line and surveillance applications and.
Hard disk drive exabyte capacity shipped hit a new record last quarter. This corresponds to an increase of the number of heads shipped and since our customers seek to improve their aerial density to enable larger capacity drives head complexity is also increasing these tail wins have been creating a robust market environment for our customers who are adding.
As of day to keep up with increasing demand.
After several years of capacity additions, including in 2021, and our data storage order rate has slowed and the first half and we believe 2022 will likely be a period of equipment digestion.
However, with the amount of data generated showing no signs of slowing we're confident about the long term prospects of our data storage business.
If there is the data storage decline, given our traction and semiconductor and compound semiconductor applications, we see multiple paths to growth at the company level.
Now for an update on our 2021 priorities.
First in addition to making safety a priority during the global pandemic, we sought to improve our veeco United culture. While this initiative has been ongoing a recent culture survey has shown remarkable improvements and we're focused on further improving throughout the year, our employees and the positive <unk>.
True that permeates our organization is essential to our success.
Second we continue to focus on profitability. Our Q2 results are reflective of this effort.
And we're on track to meet our 2021 financial targets.
Third we're on track to deliver 2021 revenue growth with our laser annealing.
<unk> G R S and data storage solutions.
And fourth we continue to make investments and evaluation systems and our service infrastructure. Our goal is to achieve additional evaluation and successes leading to lasting customer relationships and long term growth.
And with these 4 priorities the veeco United team is committed to making a material difference and building a stronger veeco and now I'll hand, it over to Josh.
Thanks, Bill and good afternoon, everyone I will be discussing non-GAAP financial results and encourage you to refer to the reconciliation to GAAP results and our press release or at the end of the earnings presentation.
Looking at revenue.
For the quarter was $146 million, representing a 9% increase sequentially and of 48% year over year increase the increased revenue from Q1, 2021 was largely driven by data storage, which grew 27% and the core.
The semiconductor compound semiconductor and data storage all contributed to a year on year increase and revenue from $99 million with the following details providing a little more color.
Semiconductor revenue increased by 43% of $54 million, which represented 37% of total revenue driven by our laser annealing and lithography products.
Data storage revenue increased by 84% to $52 million and.
And made up 35% of our total revenue driven by both capacity and technology additions by our customers and compound semiconductor revenue increased by 37% to $24 million and made up 17% of total revenue driven by wet processing systems sold for RF.
Applications.
A few comments on Q2 revenue by region.
The United States region made up 46% of total revenue and was driven by ion beam systems shipped to date of storage customers.
Our Asia Pacific region, excluding China was 34%.
China made up 14% of overall revenue and.
And we expect the revenue percentage from China to trend higher given our recent order activity and improving ability to obtain export licenses.
Now turning to our non-GAAP quarterly results.
Gross margin came in at 41, 6%, which was flat to last quarter and toward the top and of our guidance operating expenses for the quarter was $39.6 million flat to last quarter and 27% of revenue.
The reduction from 29% in Q1.
Operating income of $21.3 million for the quarter increased 32% sequentially.
And more than doubled from the same quarter last year tax.
Tax expense for the quarter was approximately $400000 with net income coming in at $17.9 million.
<unk> was <unk> 35 on a diluted share count of $51.8 million shares.
Now moving to the balance sheet and cash flow highlights we ended the quarter with cash and short term investments of $330 million of sequential increase of $2 million.
From a working capital perspective, our accounts receivable increased to $108 million due to the timing of shipments and the quarter. This drove an increase in DSO to 67 days from 59 days and the prior quarter.
Accounts payable increased to $55 million with most of the increase related to construction of invoices for our capital expansion project.
As a result, EPS increased 58 days from 49 in Q1 inventory.
The increased approximately $8 million to of $164 million to support increased shipment volume and investments and evaluation systems.
The increase volume days of inventory declined to 167 from $1.73, and Q1 long term debt on the balance sheet was recorded at $328 million, representing the carrying value of $389 million and convertible notes.
And our Capex during the quarter was $7 million. This includes $4 million for the San Jose expansion project, and approximately $3 million and other capital spending.
We expect capital spending on our facility expansion project to increase in the coming quarters.
Now turning to our guidance for.
For Q3 revenue is expected to be between $135 million and $155 million with non-GAAP gross margin between 41 and 43%.
We expect Q3, non-GAAP opex to be between 40 and $42 million.
The slight uptick for us as we add resources and R&D, along with increases in selling and marketing to support our growth.
We are on pace, however for full year opex as a percentage of revenue to decline.
Per to 2020.
GAAP EPS for Q3 is expected between <unk> and <unk> 20 per diluted share non.
Non-GAAP EPS is expected between 25.
And 44.
Per diluted share.
Diluted non-GAAP EPS is based upon 52 million share count.
For reference we've included a table and the backup section of the earnings patients and provide detail on the effect of the convertible notes on diluted share count.
Now for an update beyond Q3.
We expect Q4 to be in the same revenue range as our Q3 guidance, which at the midpoint would project full year revenue of around $570 million, which is above the high end of our previous provided guidance, we expect non-GAAP EPS for the year to be toward the high end.
And of our previously reported guidance, which was of $1.30 per diluted share.
I would like to add 1 quick announcement before we open up the call for questions.
We'll be hosting a virtual analyst day in September where we plan to share more detail about our strategy markets and technologies.
Please keep an eye out for a formal announcement and the coming weeks.
Hope you'll join us.
And with that Bill and I will be happy to take your questions.
Yeah.
Thank you and lines.
You may begin.
And 1 on your telephone.
Please make sure your mute function is true.
The adults.
Once again that is star 1.
The question.
And we'll now take our first question from.
Tom O'malley with Barclays.
Hey, guys. Thanks for taking my question and congrats on the really nice results and the update.
And for your guidance.
I just wanted to kind of dive into and update you normally give us traditionally bill you'll you'll dive into some of the equipment wins that you have or at least equivalent status of the LSA business could you update us on how some of those evaluation tools are going and where are you currently stand with your leading customers there.
Sure Tom.
And you know this has been a big focus for the company.
We're planning to put 10 evaluation tools out into the the field during 2021, and if you look back historically the company typically would only have a.
1 or 2 out and the field at any given time so as of today, we have 8 of those tend to shift into the field.
6 of those are in the semi space, specifically for our and laser annealing and 1 is with the current customer to support them in their next node.
1 is out of new logic customer to engage them to develop their next node and we have 2 DRAM.
Tools at the memory player.
And that are doing quite well evaluation tools doing quite well there. So we're really are pretty bullish on where we stand.
Specifically Ah.
And with LSA.
We also have a.
To compound semi conductor tools out in the field.
1 is for 8 inch Gan on Silicon power electronics at of foundry.
Pretty exciting opportunity of the world transitions from 6 inch to 8 inch.
That tool just recently shipped and we have another application for micro Leds and the compound semi space.
So.
Lot of good a good activity there I.
I mentioned, we have 6 semi tools I talked about for LSA.
And we do have.
2 and advanced packaging.
And as wet processing tool and and advanced packaging memory application and 1 is the litho application and an idea so.
Really are pretty excited about that so that covers the 8 that are in the field and we have 2 tools that we're planning to ship.
And throughout the second half of this year, 1 is of laser annealing tool and our current logic customer for their next node that's ready.
Ready to go and that we have 1 tool that's of Veeco core technology that we think has a lot of applicability in front end semi in memory as well as logic. So we are clearly making investments in front and semi expanding our service infrastructure and we.
Think it's critical to work side by side, our customers to build sustainable long term customer relationships to to entrench our position here. So I would say, we're pretty happy with the way things are going now, but you know we need the obviously keep focused here Tom.
Great. That's Super helpful. And then my follow up question was on the data storage business. So you guys have been pretty forthcoming with the fact that there may be there may be some slowdown and from the market next year, and and you can offset that with growth and other areas, but could you just update us on what youre seeing and that market youre up over 80% year over year, but some of the some of the players and the storage and.
History has seen some declines and the top line or at least some moderating growth can you help us square that where you're starting to see some slowdown there but in terms of your capacity and your shipments it still seems to be moving pretty quickly and the.
The timing that you would see some of that slowdown if you did.
Yeah, we carry.
Pretty long pretty big backlog and the data storage area and what we're seeing right now and the second and the third quarter of showing up and our revenue is we do have a customer of building of new all line, an 8 inch line and that equipment is going in in and of tranche here and the <unk>.
And and the third quarter.
But what's clear from talking with all of our customers is that the.
Data proliferation isn't slowing yellow data stored is forecasted to grow at 35% per year heads are forecasted to grow at 8% to 10% per year the con.
Plexi D of those hedge which is the number of steps are going through all of our equipment is forecasted to grow at 8% to 10% as well. So we feel very good about the long term prospects of the data storage business.
As the industry moves to 20 terabyte 30 terabyte.
Drives, but what we have seen in the first half of this year as we've seen our order rates slow in the first half and the given our lead time.
We can see a digestion period likely in.
In the first half of 'twenty 2.
And so what I will say, though is that even if the data storage equipment digestion does continue throughout 'twenty 2.
The veeco level, we've been making these investments and semi and compound semi markets to grow.
The next year to more than offset the decline and data storage. So.
Specifically in the semiconductor space, what we're seeing and our advanced.
Advanced packaging lithography space is we are booked out for the rest of this year and litho and and have a pretty good order book building for 2022, and I think this will be a growth engine for us our <unk> business remains strong and I think we have a good pipeline of activity queued up.
And laser annealing, so I think we're going to see strong growth next year there.
And and the compound semi space, we are seeing continued strength and 5 G. We.
And we see opportunities and power electronics as.
As well as photonics.
I think we have a pretty good we're seeing a potential digestion here next year and data storage, but I think we've <unk>.
Positioning the company to to continue the growth.
Great Thanks, and congrats again.
Thanks, Tom.
Well now take our next question from Rick Schafer with Oppenheimer.
Okay, Thanks, guys and I'll add my congratulations on the great quarter.
Maybe just 2 questions if I could.
Following up similar to what you were just talking about.
Obviously, the data storage I think you said is basically sold out this year and given the lead times and everything you just said about potential slowdown and the first half I guess, what I'm here.
What I'm trying to get to is where were some possible sources and the second half upside might bite lie and what sort of levers can you pull and maybe close whatever supply demand gap. There is out there what kind of flexibility do you guys have to pull and any additional supply.
Yeah.
So Rick just I understand your question. Your question is kind of more focused on the second half of 'twenty 1.
And this year I was looking for the next couple of quarters, because you guys, obviously have been pretty consistently beating and raising this year. So you've clearly found you found wiggle room for upside the firm.
First half and I was just kind of trying to dig and if it's not going to come from David storage and the second half kind of areas, where we might see.
The upside come from.
Is the incremental supply of lever that you could pull as well that Mike a lot of MVP.
And the tightness, that's out there and drive some upside as well.
Yes, so Rick.
Maybe this is John.
And I'll take that so when we just raised the revenue guide for the year at the midpoint to around $5.70 from what was previously the midpoint of $5.50.
As Bill indicated we're executing against that data storage backlog and and the increase in revenue EBIT for this quarter, even with the strong revenue coming from data storage, that's where we expected them.
To be so where we are driving a little bit of higher revenue right. Now is both in our semi business and as Bill mentioned with some strength and the and the litho side.
And <unk> where activity.
And as we previously reported we started to see that activity pick up a bit and that's and that's continuing and also with higher utilization at our customers driving you know higher higher service revenue so that really helped.
It helped us both in Q2 and as well as as we look out into the.
Into Q3 and into Q4 as well.
Okay. Thanks for that added color and.
And maybe my second question is kind.
More on margins and I know you guys. There's only so much you can talk about but I, new advanced products like LSA and easier creasing, the contributing to growth, becoming a bigger piece of the pie.
And what does that mean for long term margin outlook is 45% and maybe youre going to update us on at analyst day, and a month or so kind of just curious as 45% sort of still kind of where we were we talked about the long term target.
Is there any weight of should we think about that being biased to the upside as mix continues to sort of favor some of these more advanced products.
And I'm just curious you know long term what some of the puts and takes are on gross margin in particular, and maybe where they could go longer term.
Sure I think you know Ric as you mentioned and the analyst day, we are planning to have we would we would cover that and what our views are on the on the financial model, but.
To answer that shortly.
New year's out we do expect with our growth plans.
To get gross margins and the in the mid 40.
The percent I would just as the as a reminder, you know right now we're focused on growth and we're continuing to make investments and service infrastructure and for the manufacturing.
You know ramp.
Including supporting a number of you know.
And both of those items are impacting current the current gross margins as Bill said earlier, we've got.
A significant increase and the amount of E mails that we're supporting in the field.
As well as these semi applications.
And that we're driving today that.
And as requiring investments and our service and manufacturing so I think as we.
Move towards.
A couple of years out here and.
And we execute our growth plans.
The mid 40%, 45% gross margin.
Margin would be our target Rick.
Alright, thanks for the color of that.
Thanks, Rick.
And once again and that is.
And you would like to ask a question.
And I'll take a question from Patrick Ho.
The Stifel.
Thank you very much and congrats on the nice quarter and outlook.
Bill and maybe first stop in terms of your results and the outlook.
You've clearly delivered upside and the outlook looks really good the.
The industry and in particular on the semiconductor side of it is experiencing supply chain constraints.
And the ability to procure of certain parts allocation all of those issues are starting to really pop up and semi with the full understanding that you have different types of tools and even for different markets can you comment on any potential supply chain constraints, you're seeing or are starting to see and has it had.
Any kind of nominal impact on your revenue line again with the with the full understanding that you guys actually delivered upside and are providing of pretty strong outlook.
Patrick that's really a timely question and we are experiencing lots of constraints and the supply chain, but I will say our supply chain team has done an excellent job.
Of of mitigating that and taking some unique a unique approaches here is kind of interesting time and I'll just turn it over to John for a little more detail sure I think there's 2.
The carry on from what Bill just said.
No, we havent been immune to what's going on and the industry here we are seeing.
Some material shortages and longer lead time, and I would say the situation is pretty dynamic.
But we have been successful mitigating those risks and Patrick as you said, Matt or exceeding our revenue targets. So.
What we've done here, we've been working closely with suppliers to monitor.
They're upstream risks and trying to get out in front of of any issues.
We've been making selective buys ahead of demand and.
And extend you see that and the increased the inventory that we're carrying.
And I would say 1 of the other things that we've been successful we able to do is when a supply issue is identified we have been able to move quickly to execute alternative supply and we've been working in that regard with suppliers outside of the traditional semi base may be focusing on.
Competencies and defense and.
In aerospace so I guess overall I think our supply chain team is and the organization is performing well and in a tight market environment.
Great. Thanks.
And and Kudos to you guys on that and maybe as my follow up question I think your commentary and data storage is completely consistent with the potential the digestion period.
And maybe on a qualitative basis Bill can you comment.
Maybe the difference between the capacity by Youre seeing versus say the technology by particularly as you see the industry beginning its move to hammer and on the the WD and 2 the energy assisted.
And what types of drives how much of the technology buys are you starting to see related to those next generation.
Drives and heads.
Yeah.
I would say Patrick that.
We as I kind of look back over the last few years a lot of it over the last number of years has really been a volume driven and I think what we're seeing now is more of a transition to technology buys are specifically to enable hammer and particular steps within.
And hammer, but not and not yet and volume I would say so that certainly we've seen a bit of a a bit of a pivot here and if I look at the order rate not not for shipping.
Great. Thank you very much.
Thank you Patrick.
Okay.
Well now take our next question from Mark Miller with Benchmark company.
Let me add my congratulations on the quarter.
Wondering kind of following up on Patrick's question about the component.
No supply.
I know most of your IBD systems, our cryo pump, but there had been sort of reports of turbopump shortages by at least 1 major semi equipment manufacturer.
Manufacturer, how exposed are you to the turbo pumps.
We do have turbo pumps, and cryo pumps and our.
And beam deposition and etch tools and.
And I think John mentioned that we've been and taking a little more aggressive position in and some of these key components and.
And so yeah we're.
We have that fairly fairly covered.
You mentioned and the introductory remarks and my.
The Corona committed now the UV and they are increasing their capex.
And I expect the other DRAM manufacturers to follow suit very quickly and.
And if so what does that mean in terms of orders for your IBD for for mass blank debt positions.
Yeah, I don't want to really.
M.
Take a position of about what our customers are doing I know I know micron has been.
And very public about their EV adoption and I'm.
I think there's others that have a dot are adopting EV and that can be read out in the the shipments from ASML going from you know <unk>.
Shipping 30 systems last year to booking 44, and the first half of this year. So a lot of a lot of bids.
Business coming Asml's whey, they are of high productivity tool that theyre going to start shipping.
And that's obviously a positive for veeco.
And I would say at this point what.
What we're seeing is about a 1 of our systems for every 10 to 15, ASML scanners, which puts us at about 2 to 4 systems per year through other kind of.
A bit lumpy, but I think if you were the average that out.
That's about where we should be sizing it obviously as they take a leg up to say 50, plus system shipments and I believe 22, they're targeting and.
That continues onward.
That would put an upward bias towards our E. The mask blank tool shipments, but I don't we're not quite ready to take that up yet.
Thank you.
Thank you Mark.
Yeah.
Well now take our next question David.
And then Joey with Securities.
Yes, thanks for taking my questions.
Was wondering if you could just elaborate a little bit more out of your advanced packaging business I believe.
You said in response to the question that your capacity was booked out.
And you just talk about that a little bit more and then.
Where you are seeing demand in the back that the packaging business has a broad base. So as of the single customer and what the applications are thank you.
Sure David.
We serve this market with lithography as well as wet processing equipment.
The lithography area, we're typically seeing.
Actually I would characterize it as a abroad.
Abroad, and base of applications and customers.
<unk> like heterogeneous integration a fan.
Fan out wafer level packaging copper pillar and bumping.
And with foundries Idms and <unk>.
And so we have seen.
A significant pickup and order activity.
Which is of.
This out through the rest of this year and our current capacity levels are.
And clearly enough business activity, the kind of state that looks like we're going to see.
And some positive numbers positive growth then in 'twenty 2 over our 2021 business level.
And I know this is probably hard to gauge, but yeah I think it was 1 or 2 quarters ago.
And you weren't really calling this a growth driver and your business. So just curiosity.
Since its you got really broad based demand from foundry or SaaS and idea of what is there what was the switch that went off or is there something that's being adopted and the marketplace. That's all of the sudden forcing customers or causing customers to come in and.
And the order and much greater levels.
You know I would say what we're you know I would say and I look back a few quarters.
We were carrying.
Our visibility was only at about 3 months 4 months we were.
We're building a bit to forecast as opposed to a build to order and.
And that with the in a very in a pretty short period of time, we have seen broad.
Broad adoption I would say we've.
Are we seeing applications like heterogeneous integration.
The multi chip packaging.
Start start to happen in and out of pretty broad level, and so I wonder kind of pin it on something I might I might choose heterogeneous integration, but there's also.
And the OS at some of the the more basic steps, where theres just seems to be a volume of of equipment and I wouldn't want to speculate if that's automotive or chip shortages and general, but it does seem that.
And that the activity has picked up.
And I think listen.
We.
We're starting to get some idea of over the last 6 months or so we started to see.
The order.
Quoting and activity picking up a bit I would say that we were a little bit of courses and our outlook and then.
And then the order rates started to pick up a bit and and.
And we started to get a little bit more optimistic and and now I would say is as bill indicated where we would typically have 3 to 4 months visibility.
Given the current order rate right now, we're getting visibility 5 to 6 months out and maybe even a little bit more and some cases and so I think that's really given us a.
And opportunity to be a bit more parts of the peer.
So and just as the follow up when you talk about heterogeneous integration you know that's kind of a broad based term.
I think of that as modules and system and package and then some of these you know the idea of strategies like forever else of triplets.
So if this is being broadly adopted and I guess, it's a simple observation that.
A lot of the stuff is actually moving into production volumes and Thats, perhaps why you're seeing much level higher levels of orders.
Yeah.
David.
I agree with that characterization I think we are seeing broad and I don't really want to go much below heterogeneous integration, but I don't really want to disclose and without disclosing what we're dealing with with what customers. So, but yes, I think thats I think the way you characterized it is fine.
Okay. Thank you.
Thanks, David.
Well now take a question from Gus Richard.
And Richard with Northland.
Yes.
Yes, Thanks for taking my question and good execution and I know that's not random luck.
Just the follow on on the lithography.
There's some long lead time items the glass.
And was wondering how you are fixed for.
Basically you know raw glass and your lens fabricators is that.
Creating a M.
Is that a bottleneck and getting.
Pulls out the door.
No it's not gas out of our lead times are are particularly law and I mean, it's weaker of years of glass in various stages of of wet weather, its raw glass or partially process glass or fully processed glass and so.
And we.
You know.
We would start it's very hard to never run out of glass.
And so we carry enough inventory that.
Fair enough sorry to interrupt just real quick because normally those those tools are like book and ship in the quarter and I'm. Just wondering you know for destruction and deliveries is that just customer of slot dates or why why is the distressed debt.
We are a we are running out of our slots.
You know we are ramping our laser annealing business and our lithography business. We did announce that we are doing on expansion we leased the building.
About a mile away from our current facility.
And that's really doubling the the manufacturing footprint of laser annealing and.
And lithography and that's obviously critical for us to execute.
The business, that's pending in front of us and so what we're saying is we're going to spend about $40 million and capex between this year and next year.
Our lease and our current building and January 2023, we're going to have some overlap expenses, but we will be completely and the new building.
Q3 of next year, so really ramping.
Ramping and the second facility is really critical.
For us and I'm pleased to say, we're really on track with what is the and aggressive aggressive construction project.
Got it and then is that business getting debt the litho piece not the LSA second and the price.
Back to prior peaks.
Okay.
I don't know I don't think we're at prior peaks of like the 2016 and 17 level I don't think we're there yet.
No I wouldn't characterize the 2.
Of that level.
Got it that's helpful and then finally on the compound semi.
And number of potential applications for Gan power and RF and I was wondering.
Which ones of those of you you're seeing demand for.
In particular.
We're seeing demand and Gan power a lot of it is for Gan charging a rapid charging consumer applications, we have sold the tools or the number of customers for that application I.
And I did mentioned a few minutes ago that we've placed.
And 8 inch Gan on silicon tool at a out of foundry.
The industry has is that 6 inch today and we.
We believe that the industry is going to move to 8 inch.
Just for economies of scale and leveraging our 8 inch infrastructure as opposed to 6 inch infrastructure and so we think that's a that's a pretty exciting opportunity for us.
Got it and any gain.
And again RF business.
We do have a gan RF a number of come.
Companies are looking at multiple uses of the equipment for Gan on silicon and power as well as RF applications.
Okay, and then and.
And just.
And the on Photonics is there any.
The production revenue and the.
And the and visibility and all.
This is quote activity per photonics picking up at all.
We are seeing a I don't believe we of the orders yet, but I believe we are looking at a repeat orders from customers for photonics.
Photonics applications that we had an eval with over a year ago are we do have on top of that and eval system for micro Leds for arsenide phosphide applications, which is a.
Which is a pretty exciting as well.
You use the photonics application and gas.
Yeah.
No it's far from micro OLED it would be more of a.
Gallium arsenide substrate.
The red opportunity.
Got it alright.
Good day, thanks, so much for taking the questions.
Thanks Gus.
And that currently have no further telephone questions I'd like to turn the conference back over to Mr. Miller for any of this.
Closing remarks.
Thank you operator, and thank you for joining our call today, we do remain excited about 'twenty, 1 and I want to thank our customers and shareholders along with the veeco United team for their continued support as we execute our growth strategy.
We are excited to share more details and introduce you to keep some a few key members of our leadership team at our analyst day and September have a great evening.
And once again that does conclude today's conference and we thank you all for your participation you may now disconnect.
And.
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Yes.
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