Q4 2021 Veeco Instruments Inc Earnings Call

Oh instruments incorporated corporate hosted Q4 and year end 2021 earnings call. At this time, we're assembling their audience and will be underway in about one minute and we thank you for your patience in holding and I think please remain on the line.

[music].

Speaker 1: I.

Good day and welcome to the Veeco instruments incorporated corporate hosted Q4 and year end 2021 earnings call.

Speaker 2: corporate hosted Q4 and year end 2021 earnings call.

At this time.

Speaker 2: I would like to turn the conference over to Anthony Ben-Savenga, head of investor relations.

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. Please 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.

Speaker 3: Thank you and good afternoon everyone. Joining me on the call today are Bill Miller, Vico's Chief Executive Officer and John Kiernan, our Chief Financial Officer. Today's earnings release is available on the Vico website. Please note that we have prepared a slide presentation to accompany today's webcast. We encourage you to follow along with the slides on Vico.com.

This 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.

Speaker 3: This call is being recorded by VECO instruments and is copyrighted material. It cannot be recorded or rebroadcast without VECO's express permission. Your participation implies consent.

Speaker 3: To the extent this call discusses expectations about market conditions, market acceptance, 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 from the statements made, including as a result of the COVID-19 pandemic.

To the extent this call it discusses expectations about market conditions market acceptance 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 from the statements made including as a result of the COVID-19 pandemic.

Speaker 3: 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, and in our subsequent quarterly reports on Form 10-Q , current reports on Form 8-K and press releases.

These factors are discussed in the business description management's discussion and analysis and the risk factor sections of the company's report on Form 10-K , and annual report to shareholders and our subsequent quarterly reports on Form 10-Q current reports on form 8-K and press releases.

Speaker 3: VCO 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 statement.

<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.

Speaker 3: During this call, management may address non-GAAP financial measures. Information 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 our CEO , Bill Miller.

During this call management May address non-GAAP financial measures information 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 our CEO Bill Miller.

Speaker 4: Thank you, Anthony. Good afternoon, everyone, and thank you for joining the call. I hope you and your families are well.

Thank you Anthony.

Good afternoon, everyone and thank you for joining the call I Hope you and your families are well.

Speaker 4: I'm excited to talk to you today about the progress we made in Q4 and over the course of 2021.

I'm excited to talk to you today about the progress we've made in Q4 and over the course of 2021.

Speaker 4: I'd like to start by thanking the VECO United team for outstanding execution through the ongoing pandemic and dynamic supply chain environment. To begin today, I'd like to

I'd like to start by thanking the United team for outstanding execution through the ongoing pandemic.

And dynamic supply chain environment.

To begin today I'd like to share some exciting news.

Speaker 4: We recently won a laser annealing application at a new leading edge logic customer. This is a key milestone for us as we execute our growth strategy.

We recently won a laser annealing application at a new leading edge logic customer. This is a key milestone for us.

We execute our growth strategy.

More on that in a few minutes.

Speaker 4: But first, I'll take you through our 2021 and fourth quarter highlights.

But first I'll take you through our 2021 and fourth quarter highlights.

Speaker 4: John will provide a financial update and guidance, and then I'll discuss our markets and technologies before taking your questions.

John will provide a financial update and guidance and then I'll discuss our markets and technologies before taking your questions.

Reflecting on the year I'm proud of what our Vito United team has accomplished.

Speaker 4: Reflecting on the year, I'm proud of what our Vico United team has accomplished. I think of 2021 as an inflection point at Vico where we completed our transformation. And we're now squarely executing our growth strategy.

Think of 2021 as an inflection point that V go where we completed our transformation.

And we're now squarely executing our growth strategy.

We continued our focus on innovation with R&D projects supporting laser annealing ion beam deposition for semiconductor applications and most CBD for power electronics and photonics applications.

Speaker 4: We continued our focus on innovation with R&D projects supporting laser annealing, ion beam deposition for semiconductor applications, and MOCVD for power electronics and photonics applications.

Speaker 4: We now have a more robust evaluation program in place with systems installed and performing well at many customer sites.

We now have a more robust evaluation program in place with systems installed and performing well at many customer sites.

Speaker 4: We made great progress on our capacity expansion and shipped first systems from the new San Jose facility, and we enhanced both our service capability and our service offerings, focusing on our customers' needs for system uptime and spare parts availability.

We made great progress on our capacity expansion and shipped our first systems from the new San Jose facility.

And we.

We enhanced both our service capability and our service offerings, focusing on our customers' needs for system uptime and spare parts availability.

Results of our growth strategy are reflected in our P&L with significant revenue growth in 2021 and profitability growing faster than revenue.

Speaker 4: Results of our growth strategy were reflected in our P&L with significant revenue growth in 2021 and profitability growing faster than revenue.

Speaker 4: We had a record year in our semiconductor market, and we had a record year with our wet processing systems. We made further improvements in the last year, and we have had a record year with our wet processing systems.

We had a record year in our semiconductor market and we had a record year with a wet processing systems.

We made further improvements to our capital structure.

Speaker 4: Also, we issued a long-term model at our analyst day in September , demonstrating our optimism and confidence in our future performance.

Also we issued a long term model at our analyst day in September demonstrating our optimism and confidence in our future performance.

Speaker 4: And lastly, we continue to make great strides improving our governance.

And lastly, we continue to make great strides improving our governance.

Speaker 4: our commitment to corporate responsibility, and our VCO United culture.

Our commitment to corporate responsibility.

And our Veeco United Culture.

All in we're thrilled with our progress in 'twenty, one and equally as excited about our growth prospects going forward.

Speaker 4: All in, we're thrilled with our progress in 21s, and equally as excited about our growth prospects going forward.

Speaker 4: Switching gears to our full year financial highlights. 2021 was a significant year of growth for Vico.

Switching gears to our full year financial highlights 2021 was a significant year of growth for veeco.

Speaker 4: Revenue for the full year was $583 million, 28% growth over 2020, driven by semiconductor and data storage performance.

Revenue for the full year was $583 million, 28% growth over 2020, driven by semiconductor and data storage performance. This growth came with significant profitability driving $87 million in non-GAAP operating income and $1 43 or 66.

Speaker 4: This growth came with significant profitability, driving $87 million in non-GAAP operating income and $1.43, or a 66% growth in diluted non-GAAP EPS.

<unk> percent growth and diluted non-GAAP EPS.

Speaker 4: We had significant cash flow from operations of $68 million, a 58% increase over 2020.

We had significant cash flow from operations of $68 million or 58% increase over 2020.

Speaker 4: Our order intake grew faster than our revenue throughout the year as well. With bookings of $661 million and a book-to-bill ratio of 1.13, we ended the year with $440 million in backlogs.

Our order intake grew faster than our revenue throughout the year as well with bookings of $661 million and a book to Bill ratio of 113, we ended the year with $440 million in backlog.

Now for a look at our Q4 2021 highlights.

Speaker 4: Now for a look at our Q4 2021 highlights.

Speaker 4: Q4 marked another quarter of solid execution, driven primarily by strength in our semiconductor market. Revenue came in at $153 million, which was above the midpoint of our guidance. And diluted non-GAAP EPS came in at $0.43, which was near the high end of our guidance.

Q4 marked another quarter of solid execution, driven primarily by strength in our semiconductor market.

Revenue came in at $153 million, which was above the midpoint of our guidance and diluted non-GAAP EPS came in at 43.

Which was near the high end of our guidance.

Speaker 4: We achieved non-GAAP operating income of $25 million. In addition, we generated $17 million in cash flow from operations.

We achieved non-GAAP operating income of $25 million. In addition, we generated $17 million in cash flow from operations.

Speaker 4: With Q4's performance, we exit 2021 on a positive note with strong order momentum, increased backlog, and focus on execution.

With Q4's performance, we exit 2021 on a positive note with strong order momentum.

Increased backlog and focus on execution.

Speaker 4: And with that, I'll turn the call over to John for more details on our finances.

And with that I'll turn the call over to John for more details on our financials.

Speaker 5: Thanks, Bill, and good afternoon, everyone. Today I will be discussing non-GAAP financial data and would encourage you to refer to our reconciliation between GAAP and non-GAAP results, which you can find in our press release or at the end of the quarterly earnings presentation.

Thanks, Bill and good afternoon, everyone today, I will be discussing non-GAAP financial data and would encourage you to refer to our reconciliation between GAAP and non-GAAP results, which you can find in our press release or at the end of the quarterly earnings presentation.

Looking at full year 2021 revenue came in at $583 million or 28% increase from 2020.

Speaker 5: Looking at full year 2021, revenue came in at $583 million, a 28% increase from 2020.

Breaking down by market, our semiconductor revenue was $247 million, which represented 43% of the total and an increase of 49% over the prior year.

Speaker 5: Breaking down by market, our semiconductor revenue was $247 million, which represented 43% of the total and an increase of 49% over the prior year.

Speaker 5: On top of that growth in 2021, we expect significant growth in 2022 on strength across the board in laser annealing, EUV mass blank, and AP lithography.

On top of that growth in 2021, we expect significant growth in 2022 on strength across the board in laser annealing UV mass blank.

AP lithography.

Compound semiconductor revenue was $107 million flat from 2020 and made up 18% of the total.

Speaker 5: Compound semiconductor revenue was $107 million, flat from 2020, and made up 18% of the total.

Speaker 5: However, normalizing for about $20 million of one-time commodity LED sales of slow-moving inventory in 2020, the $107 million in 2021 represents underlying growth in the areas where we currently focus.

However, normalizing for about $20 million of one time commodity led sales of slow moving inventory in 2020.

The $107 million in 2021 represents underlying growth in the areas, where we currently focus.

Speaker 5: Furthermore, we expect significant growth in the compound semiconductor market in 2022, which is based on our backlog and visibility of MOCBD and other systems selling primarily into photonics applications and secondarily, GaN power.

Furthermore, we expect significant growth in the compound semiconductor market in 2022, which is based on our backlog and visibility of most CBD and other systems selling primarily into photonics applications and secondarily Gan power.

Speaker 5: Data storage revenue was $169 million, a 37% increase over the prior year.

Data storage revenue was $169 million.

37% increase over the prior year.

Speaker 5: and made up 29% of our total revenue as hard disk drive customers continued adding capacity for their magnetic head manufacturing.

Made up 29% of our total revenue as hard disk drive customers continued adding capacity for their magnetic head manufacturing.

And scientific and other revenue was $60 million, an increase of 6% from 2020 and made up 10% of total revenue.

Speaker 5: And scientific and other revenue was $60 million, an increase of 6% from 2020, and made up 10% of total revenue.

Speaker 5: And looking at full-year revenue by region, the United States made up 38% of the total revenue driven by data storage costs.

And looking at full year revenue by region.

United States made up 38% of the total revenue driven by data storage customers.

Speaker 5: our Asia-Pacific region, excluding China, made up 35% driven by semiconductor customers.

Our Asia Pacific region, excluding China made up 35% driven by semiconductor customers.

China made up 18%.

Speaker 5: And finally, EMEA was 9% of total revenue for the year.

And finally, EMEA was 9% of total revenue for the year.

Turning to Q4 revenue by market and geography.

Speaker 5: Revenue totaled $153 million for the quarter and was driven by strong performance in our semiconductor market, which made up 43% of our revenue, driven by multiple laser annealing and advanced packaging lithography systems.

Revenue totaled $153 million for the quarter and was driven by strong performance in our semiconductor market, which made up 43% of our revenue driven by multiple laser annealing and advanced packaging lithography systems.

Speaker 5: The compound semiconductor market contributed 23% of our revenue and was driven by multiple system shipments for 5G RF applications and shipments to photonic customers.

The compound semiconductor market contributed 23% of our revenue and was driven by multiple system shipments were five G RF applications and shipments to photonic customers.

Our data storage market came in at 24% of total revenue.

Speaker 5: Our data storage market came in at 24% of total revenue. And finally, scientific and other market made up 10% of our revenue. Now looking at our...

And finally <unk>.

Scientific and other market made up 10% of our revenue.

Now looking at our quarterly revenue by region.

The United States was 37% of our total revenue driven by data storage customers, Our Asia Pacific region, Excluding China made up 26% driven by semiconductor systems sales.

Speaker 5: The United States was 37% of our total revenue driven by data storage customers. Our Asia-Pacific region, excluding China, made up 26% driven by semiconductor system sales.

China made up 25% of total revenue, primarily driven by semiconductor systems with particular strength in trailing node laser annealing.

Speaker 5: China made up 25% of total revenue, primarily driven by semiconductor systems with particular strength in trailing node laser annealing.

Speaker 5: as well as compound semiconductor systems led by wet processing and ion beam systems for RF power amplifiers.

As well as compound semiconductor systems led by wet processing and I'm being systems for RF power amplifiers.

And finally, EMEA was 12% of total revenue for the quarter.

Speaker 5: And finally, EMEA was 12% of total revenue for the quarter.

Now turning to non-GAAP operating results.

Speaker 5: On a full year 2021 basis, we achieved gross margin of 42%, which was in line with expectation.

On a full year 2021 basis, we achieved gross margin of 42%, which was in line with expectations.

Speaker 5: Let me take a moment to further elaborate on our supply chain status.

Let me take a moment to further elaborate on our supply chain status.

Speaker 5: Throughout 2021, we saw increasing challenges as the year progressed and experienced higher logistics costs, other inflationary pressures on materials, and longer lead time.

Throughout 2021, we saw increasing challenges as the year progressed and experienced higher logistics costs.

Other inflationary pressures on materials and longer lead times.

Speaker 5: Our supply chain team has done a fantastic job of mitigating most issues they encounter, and overall, for the year, there was about a one percentage point impact to our gross margin. We expect the situation to be similar for a few more quarters, the impact of which has been incorporated in our previously provided guidance for 2022.

Our supply chain team has done a fantastic job of mitigating most issues they encounter and overall for the year. There was about a one percentage point impact to our gross margin.

We expect the situation to be similar for a few more quarters the impact of which has been incorporated in our previously provided guidance for 2022.

Speaker 5: Our annual operating expenses increased to $158 million, reflecting the R&D investments we've been making to drive future growth, as well as higher variable SG&A expenses associated with an increase in revenue and order intake.

Our annual operating expenses increased to $158 million, reflecting the R&D investments, we've been making to drive future growth as well as higher variable SG&A expenses associated with an increase in revenue and order intake.

Speaker 5: However, year on year, OpEx as a percentage of revenue declined from 32% to 27% and provided operating leverage to the company.

However year on year Opex as a percentage of revenue declined from 32% to 27% and provided operating leverage to the company.

Speaker 5: Our non-GAAP operating income increased 65% from $52 million in 2020 to $87 million in 2021.

Our non-GAAP operating income increased 65% from $52 million 2000, $20 million to $87 million in 2021.

Speaker 5: diluted EPS increased 66% to $1.43 for the year. And now I'll provide

Diluted EPS increased 66% to $1 43 for the year.

And now I'll provide a few additional full year figures.

Speaker 5: For 2021, amortization expense was $12.3 million. Our equity comp expense was $15.2 million. And our non-gasp depreciation was $13.4 million.

For 2021 amortization expense was $12 $3 million, our equity comp expense was $15 $2 million.

Our non-GAAP depreciation was $13 4 million.

Speaker 5: Cash interest on our debt was $12.5 million and net cash taxes for the year were not material.

Cash interest on our debt was $12 $5 million and net cash taxes for the year were not material.

Speaker 5: At year end, we had federal NOLs of $166 million and other federal tax credits of $32 million, which are fully reserved.

At year end, we had federal Nols of $166 million and other federal tax credits of $32 million.

Which are fully reserved.

And as a result of a strong year of order intake as Bill mentioned, we ended 2021 with $440 million in backlog of.

Speaker 5: And as a result of strong year of order intake, as Bill mentioned, we ended 2021 with $440 million in backlog, a 20% increase from 2020.

A 20% increase from 2020.

Speaker 5: We more than doubled our semiconductor backlog over the course of the year, and our compound semiconductor backlog grew by 47 percent.

We more than doubled our semiconductor backlog over the course of the year and our compound semiconductor backlog grew by 47%.

Speaker 5: Our data storage backlog decreased by 51% as customers slowed the pace of new orders for capacity addition.

Our data storage backlog decreased by 51% as customers slowed the pace of new orders for capacity additions.

Speaker 5: Switching gears to our quarterly results, gross margin came in at 42.4%, which was in line with guidance.

Switching gears to our quarterly results gross margin came in at 42, 4%, which was in line with guidance gross margins are influenced by a number of factors and we expect quarter to quarter variations.

Speaker 5: Gross margins are influenced by a number of factors, and we expect quarter-to-quarter variation.

Speaker 5: Notably, we were able to maintain this level of gross margin in spite of the challenging supply chain environment, while continued to invest in service capabilities in supporting our evaluation systems and appeal.

Notably we were able to maintain this level of gross margin spite of the challenging supply chain environment, while continuing to invest in service capabilities in supporting our evaluation systems in the field.

Speaker 5: Operating expenses were $40 million, flat to Q3.

Operating expenses were $40 million flat to Q3.

Speaker 5: On a non-GAAP basis, tax expense for the quarter was a benefit of approximately $500,000, with net income coming in at $23 million.

On a non-GAAP basis tax expense for the quarter was a benefit of approximately $500000.

With net income coming in at $23 million.

And EPS was <unk> 43 on a diluted share count of 53 million shares.

Speaker 5: and EPS was 43 cents on a diluted share count of 53 million shares.

Now moving to the balance sheet and cash flow highlights.

Speaker 5: We ended the quarter with cash and short-term investments of $225 million, a sequential decrease of $111 million. This decrease was primarily due to convertible notes repurchased during the quarter and was partially offset by $17 million in cash flow from operations.

We ended the quarter with cash and short term investments of $225 million.

A sequential decrease of $111 million.

This decrease was primarily due to convertible note repurchase during the quarter and was partially offset by $17 million in cash flow from operations.

Speaker 5: I'll explain the effects of the convertible note transaction in just a minute.

I'll explain the effects of the convertible note transaction in just a minute.

Speaker 5: From a working capital perspective, our accounts receivable increased to $110 million due to timing of shipments and when associated customer payments are due. DSOs for the quarter came in at 64 days, up from 52 in the prior quarter. Accounts paid will decrease sequentially to $44 million.

From a working capital perspective, our accounts receivable increased to $110 million due to timing of shipments and when associated customer payments argue DSO.

Dsos for the quarter came in at 64 days up from 52 in the prior quarter.

Accounts payable decreased sequentially to $44 million.

Inventory was $171 million and days of inventory came in at 173.

Speaker 5: Inventory was $171 million, and days of inventory came in at 173, both flat from the prior quarter.

<unk> flat from the prior quarter.

Speaker 5: Long-term debt on the balance sheet was recorded at $229 million, $102 million reduction from the prior quarter. This reduction is primarily due to the repurchase of a portion of the convertible notes due in 2023. In the fourth quarter, we repurchased $112 million in original principal amount for $117 million in cash.

Long term debt on the balance sheet was recorded at $229 million or $102 million reduction from the prior quarter. This reduction is primarily due to the repurchase of a portion of the convertible notes due in 2023.

In the fourth quarter, we repurchased $112 million in original principal amount for $117 million in cash.

Speaker 5: The remaining $229 million of long-term debt represents the carrying value of the $278 million of convertible notes.

The remaining $229 million of long term debt represents the carrying value of the $278 million of convertible notes.

Our capex during the quarter was $9 $2 million was 8 million used for the new San Jose facility build out.

Speaker 5: Our CAFX during the quarter was $9.2 million with 8 million used for the new San Jose facility build-out, bringing the CAFX total for the year to $41 million with 31 million used for this expansion.

The capex totaled for the year to $41 million with 31 million used for this expansion.

Speaker 5: Now turning to additional commentary on our convertible notes. As outlined on the slide, after the convertible note repurchase, the January 2023 convertible note principal amount is now $20 million.

Now turning to additional commentary on our convertible notes.

As outlined on the slide after the convertible note repurchase the January 2023 convertible note principal amount is now $20 million.

Speaker 5: There's been no change to the principal amount of the convertible notes due in 2025 or 2027.

There has been no change to the principal amount of the convertible notes due in 2025 or 2027.

Speaker 5: Our annual cash interest expense is expected to be $9.9 million on a go-forward basis, down from $12.9 million prior to the repurchase.

Our annual cash interest expense is expected to be $9 $9 million on a go forward basis.

One from $12 9 million prior to the repurchase.

Speaker 5: In 2021, we added financial flexibility as well by entering into a $150 million revolving credit facility.

In 2021, we added financial flexibility as well by entering into a $150 million revolving credit facility.

Speaker 5: With our improved balance sheet along with our credit facility, we have the flexibility and capital to focus on driving long-term growth across the business.

With our improved balance sheet, along with our credit facility, we have the flexibility and capital to focus on driving long term growth across the business.

Okay.

Now turning to Q1 guidance.

Speaker 5: Q1 revenue is expected to be between $145 million and $165 million with non-GAAP gross margin between 42% and 44%.

Q1 revenue is expected to be between $145 million and $165 million with non-GAAP gross margin between 42 and 44% we.

Speaker 5: We expect non-GAAP OPEX to be between $42 million and $44 million.

We expect non-GAAP opex to be between 42 million and $44 million.

Speaker 5: We expect gap net income to be between $7 million and $18 million.

We expect GAAP net income to be between $7 million and $18 million.

Speaker 5: non-GAAP net income is expected between $15 million and $26 million. We expect GAAP EPS to be between $0.15 and $0.32 per diluted share.

non-GAAP net income is expected between $15 million and $26 million we.

We expect GAAP EPS to be between 15 and 32 per diluted share.

non-GAAP EPS is expected between 28.

Speaker 5: non-GAAP EPS is expected between 28 cents and 44 cents per diluted share and is based upon a 64 million share count.

And <unk> 44 per diluted share and is based upon a 64 million share count.

Speaker 5: As we previously highlighted during our Q3 earnings call, the new accounting standard for convertible debt, ASU 2020-06, is effective January 1st, 2022, which will reduce our non-cash interest expense for GAAP purposes and change our method for calculating diluted GAAP and non-GAAP EPS to the if-converted method of accounting.

As we previously highlighted during our Q3 earnings call the new accounting standard for convertible debt.

<unk> 'twenty 'twenty Dash zero six is effective January one 2022, which will reduce our noncash interest expense for GAAP purposes, and change our method for calculating diluted GAAP and non-GAAP EPS to the if converted method of accounting.

We've added a new schedule to the guidance section of the earnings press release and backup section of the earnings presentation to illustrate how Q1 EPS would be calculated based on the guidance ranges provided and.

Speaker 5: We've added a new schedule to the guidance section of the earnings press release and backup section of the earnings presentation to illustrate how Q1 EPS would be calculated based on the guidance ranges provided.

Speaker 5: And now, put some additional color beyond Q1.

And now for some additional color beyond Q1.

Speaker 5: Based on our current visibility and backlog, we are reaffirming our recently provided revenue outlook for 2022 between $640 million and $680 million. The principal drivers of this strong outlook are 35% year-on-year growth in both our semiconductor and compound semiconductor markets.

Based on our current visibility and backlog we are reaffirming our recently provided revenue outlook for 2022 between $640 million and $680 million.

Principal drivers of the strong outlook are 35% year on year growth in both our semiconductor and compound semiconductor markets.

Speaker 5: And we continue to target diluted non-GAAP EPS for the full year to be between $1.50 and $1.70 per share. And with that, I'll turn it back over to Bill for a market update.

And we continue to target diluted non-GAAP EPS for the full year to be between $1 50, and $1 70 per share and with that I'll turn it back over to bill for a market update.

Speaker 4: Thanks John . Turning now to our technologies in the markets we serve, in the context of the mega trends driving many of today's innovations.

Thanks, John turning now to our technologies in the markets, we serve in the context of the Mega trends driving many of today's innovations.

Speaker 4: The demand environment for VECO's product is very healthy today. Enduring secular megatrends are driving demand for our product.

The demand environment for Vikas product is very healthy today enduring secular mega trends are driving demand for our products the.

Speaker 4: The first of these megatrends is high-performance computing and artificial intelligence, which is driving faster computing in processors and GPUs for large-scale data center deployments and machine learning.

The first of these mega trends as high performance computing, and artificial intelligence, which is driving faster computing and processors and Gpus for large scale data center deployments and machine learning.

Speaker 4: The second megatrend is mobility and the immersive user experience. It includes smartphones and communications infrastructure such as 5G. It also includes gaming, AR, VR, and a variety of sensing applications.

The second Mega trend is mobility and the immersive user experience. It includes smartphones and communications infrastructure such as <unk>. It.

It also includes gaming.

VR and a variety of sensing applications Tran.

Speaker 4: Transformation of the automotive industry includes EV and autonomous driving, is another major driver today requiring semiconductor devices in the form of AI processors, logic, memory, and power devices.

Transformation of the automotive industry includes EV and autonomous driving is another major driver today, requiring semiconductor devices in the form of AI processors logic memory and power devices.

Speaker 4: And finally, the cloud represents a seemingly endless source of demand for more powerful and efficient computing, higher speed communications, and higher density hard disk drive storage. Now, looking more specifically

And finally, the cloud represents a seemingly endless source of demand for more powerful and efficient computing higher speed communications and higher density hard disk drive storage.

Now looking more specifically at our growth markets.

In our semiconductor market. The overall backdrop measured by wafer fab equipment spending is extremely healthy there are several analysts estimating very strong <unk> growth in 2022, driven by node transitions as well as capacity additions for current and trailing nodes.

Speaker 4: In our semiconductor market, the overall backdrop measured by wafer fab equipment spending is extremely healthy. There are several analysts estimating very strong WFE growth in 2022 driven by node transitions as well as capacity additions for current and trailing nodes. While this backdrop is good news for VECO, remember that we expect to grow our semiconductor revenue faster than WFE growth.

While this backdrop is good news for Veeco remember that we expect to grow our semiconductor revenue faster than Wi Fi growth.

We expect to expand our served available market as our laser annealing technology is adopted for additional logic process steps.

Speaker 4: We expect to expand our server-available market as our laser annealing technology is adopted for additional logic process steps and by additional logic customers.

And by additional logic customers.

Speaker 4: and we've been engaged with a leading memory customer who is evaluating laser annealing for their DRAM manufacturing process.

And we've been engaged with a leading memory customer who is evaluating laser annealing for their DRAM manufacturing process.

During the quarter, we experienced broad poll for our laser annealing systems from a variety of customers with multiple multi tool orders to add capacity for advanced nodes as well as trailing node applications.

Speaker 4: During the quarter, we experienced broad pull for our laser annealing systems from a variety of customers with multiple multi-tool orders to add capacity for advanced nodes, as well as trailing node applications.

Speaker 4: Our efforts delivering and supporting our differentiated laser-dealing evaluation systems have recently paid off.

Our efforts delivering and supporting our differentiated laser annealing evaluation systems have recently paid off.

Speaker 4: I'm excited to announce that we won Production Tool of Record Status with another Leading Edge Logic Custom.

I'm excited to announce that we won production tool of record status with another leading edge logic customer.

Speaker 4: they'll be introducing laser annealing in their high-volume production process at their next node.

They will be introducing laser annealing and their high volume production process at their next node.

Speaker 4: this is great news for us as it further validates our laser annealing technology and demonstrates that as thermal budgets continue to shrink, Vico's annealing solution is becoming increasingly attractive to our customers.

This is great news for us as it further validates our laser annealing technology and demonstrates that as thermal budgets continue to shrink <unk> annealing solution is becoming increasingly attractive to our customers.

In addition to laser annealing, we serve the semiconductor market with our ion beam deposition systems for <unk> mask blank production.

Speaker 4: In addition to laser annealing, we serve the semiconductor market with our ion beam deposition systems for EUV mask blank production. EUV adoption is continuing its momentum. ASML is forecasting shipment of 55 EUV lithography systems in 2022 and over 60 EUV lithography systems in 2023 with both logic and memory driving demand.

<unk> adoption is continuing its momentum.

<unk> forecasting shipment of 55, <unk> lithography systems in 2022 and over 60, <unk> lithography systems in 2023, with both logic and memory driving demand.

Speaker 4: With approximately one of our systems required for every 10 to 15 EUV lithography systems in the field, we size this market at 3 to 5 systems per year for us.

With approximately one of our systems required for every 10 to 15 <unk> lithography systems in the field. We size this market at three to five systems per year for us.

Speaker 4: This market momentum is demonstrated by a recently received order for one of our ion beam deposition systems from a new EUV mask blank player.

This market momentum as demonstrated by our recently received order for one of our ion beam deposition systems from our new <unk> mask blank player.

Speaker 4: This new customer intends to use our ion beam deposition system to create the multi-level metallization stack in EUV mask blank.

This new customer intends to use our ion beam deposition system to create the multi level mineralization stack and EV mask blanks.

Speaker 4: Vico's ion beam deposition is the deposition process of choice for this highly sophisticated manufacturing process.

He goes ion beam deposition is the deposition process of choice for this highly sophisticated manufacturing process.

And advanced packaging demand remains high for applications, such as flip chip bumping.

Speaker 4: In advanced packaging, demand remains high for applications such as flip-chip, bumping, fan-out wafer-level packaging, and heterogeneous integration, with customers seeking performance improvements for their products.

Bumping fan out wafer level packaging and heterogeneous integration with customers seeking performance improvements for their products.

Speaker 4: We had a strong revenue quarter in lithography, and we saw positive order activity across our lithography products. We expect this trend to continue for some time.

We had a strong revenue quarter in lithography and we saw positive order activity across our lithography products. We expect this trend to continue for some time.

Speaker 4: Wrapping up our semiconductor market comments, we're currently experiencing strong demand from laser annealing, EUV mask blank production, and advanced packaging.

Wrapping up our semiconductor market comments were currently experiencing strong demand from laser annealing.

<unk> mask blank production and advanced packaging.

Speaker 4: and expect this demand to continue and drive significant semiconductor growth in 2022.

And expect this demand to continue and drive significant semiconductor growth in 2022.

Yes.

Moving to compound semiconductor.

Speaker 4: We serve this market primarily with our wet processing and MOCBD equipment.

We serve this market, primarily with our wet processing Mo's CVD equipment.

Speaker 4: Our wet processing equipment offers excellent process control and flexibility for many compound semiconductor applications. We ship multiple systems during the quarter to Photonics customers as well as RF customers, adding filter and power amplifier capacity.

Our wet processing equipment offers excellent process control and flexibility for many compound semiconductor applications, we shipped multiple systems during the quarter to photonics customers as well as RF customers, adding filter and power amplifier capacity.

Speaker 4: Looking at our MOCBD business, we're beginning to see traction in the photonics market with a recent announcement for a multi-system order for our Lumina platform.

Looking at our MLS CBD business, we're beginning to see traction in the photonics market with our recent announcement for a multi system order for alumina platform.

Speaker 4: longer term, we believe we're well positioned for the microLED and 8 inch GaN power opportunities with both our Lumina and Propel plots.

Longer term.

We believe we're well positioned for the micro OLED and eight inch Gan power opportunities with both our alumina and propel platforms.

Speaker 4: Going into 2022, we expect the compound semiconductor market to grow significantly.

Going into 2022, we expect the compound semiconductor market to grow significantly.

Now looking at our data storage market, which has grown for years.

Speaker 4: Now, looking at our data storage market, which has grown for years.

Speaker 4: We're expecting system deliveries to decelerate in 2022 as our customers absorb their recently added capacity.

We're expecting system deliveries to decelerate in 2022, as our customers absorbed that recently added capacity.

Speaker 4: Beyond 2022, however, as cloud and data center applications continue to expand, storage demand is expected to increase for several years.

Beyond 2022, however, as cloud and data center applications continue to expand storage demand is expected to increase for several years at.

Speaker 4: At the same time, disk drive manufacturers continue to develop their products with higher numbers of magnetic heads per drive, requiring additional VECO equipment.

At the same time disk drive manufacturers continue to develop their products with higher numbers of magnetic heads per drive.

Wiring additional vehicle equipment.

Speaker 4: It's these fundamentals of the industry and current customer activities that lead us to expect the market opportunities to improve in 2023. Now, turning to our

It is fundamental to the industry and current customer activities that lead us to expect the market opportunities to improve in 2023.

Now turning to our 2022 priorities.

We entered the year with great optimism given today's healthy demand environment, coupled with our strong backlog position.

Speaker 4: We enter the year with great optimism given today's healthy demand environment coupled with our strong backlog position.

Speaker 4: Therefore, it's incumbent on us to protect our ability to execute. Our first priority is to keep our employees healthy and safe and maintain the progress we've been making on our culture so we can maximize our potential.

Therefore, it is incumbent on us to protect our ability to execute.

Our first priority is to keep our employees healthy and safe and maintain the progress we've been making on our culture. So we can maximize our potential.

Speaker 4: Tactically, we have several initiatives in place to keep us focused on execution.

Technically we have several initiatives in place to keep us focused on execution.

Speaker 4: Keeping our supply chain moving, improving our quality and on-time delivery for our customers, and driving successful outcomes with our evaluation systems are all top of mind. Keeping an eye toward the

Keeping our supply chain, moving improving our quality and on time delivery for our customers and driving successful outcomes with our evaluation systems are all top of mind.

Keeping an eye towards the future is equally important.

Speaker 4: We're highly motivated to fully transition to the new manufacturing facility in San Jose, advance our R&D efforts with new technologies, and deliver them to customers as new evaluation systems.

We're highly motivated to fully transition to the new manufacturing facility in San Jose and.

Advance, our R&D efforts with new technologies and deliver them to customers as new evaluation systems and further enhance our service capabilities to support our semiconductor customers and.

Speaker 4: and further enhance our service capabilities to support our semiconductor customers.

Speaker 4: And lastly, we expect to grow revenue in 2022 while improving our gross margin as we make progress toward our long-term target model. With these priorities in mind, we're committed to making a material difference and building a stronger VECO that serves all our stakeholders. And with that, John and I will be happy to take your questions. Operator, please open the line.

And lastly, we expect to grow revenue in 2022, while improving our gross margin as we make progress toward our long term target model.

With these priorities in mind, we're committed to making a material difference.

And building a stronger veeco that serves all our stakeholders and with that John and I will be happy to take your questions. Operator. Please open the line.

Thank you.

If you would like to ask a question. Please press star one on your telephone keypad.

Speaker 2: If you would like to ask a question, please press star 1 on your telephone keypad. And if you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question.

Using a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.

So I wanted to ask a question we'll.

We'll pause just a moment to allow everyone an opportunity to signal for questions.

Yeah.

And we will go first to Rick Schafer of Oppenheimer.

Speaker 6: Hi, good afternoon. This is Wei Mak on the call for Rick. Congrats on the strong quarter and your recent LSA announcements. So under press release, you mentioned repeat multi-systems. I was wondering if you can expand on this. Like how many systems should we think about per year? And when do you expect it to start delivering?

Hi, Good afternoon. This is Martin the Kaufmann, Rick Congrats on the strong quarter and your recent LSA announcements.

So on the press release, you mentioned repeat multi systems I was wondering if you can expand on this like how many systems should we think about per year and when do you expect it to start delivering them.

Yes, thanks for the question.

Speaker 4: Yeah, thanks for the question. We were really excited that you mentioned that because our laser annealing business is going to be the largest business for us next this year in 2022. And yeah, we did announce multiple customers with multi system orders. And so we're going to see we're going

We're really excited that you you mentioned that because.

Our laser annealing business as is.

Is going to be the largest business for us.

This year in 'twenty two.

And yes, we did announce mulch.

Multiple customers with multi system orders and so.

We're going to see.

We're going to see.

Speaker 4: nearly 50% growth in laser annealing in 2022 over 2021. We're also very excited that we were named production tool of record from a leading edge logic customer where we had an eval system. And that's a huge milestone for the company. And in our opinion, kind of shows the kind of breakthrough technology that we have in our laser annealing technology.

Nearly 50% growth in laser annealing in 'twenty two over.

2021.

We're also very excited that we.

We were named production tool of record from our leading edge logic customer, where we had an eval system.

And that's a huge milestone for the company.

In our opinion kind of shows the kind of breakthrough technology that we have.

In our laser annealing technology.

Great. Thanks for my follow up it's on regards to the MLC BD. So.

Speaker 6: Great, thanks. As for my follow-up, it's in regards to MOCBD. So, it looks like you delivered an MOCBD tool to a customer, and in the past, this tool has been used for LED, but has been repositioned for a lot of emerging applications.

It looks like you delivered a denim OCD tool to a customer and in the past.

It's been used for led but F&B positioned for a lot of emerging applications.

Speaker 6: So I was wondering if you can, if you're seeing any specific particular application that's getting more or faster adoption.

So I was wondering if you can if youre seeing any specific particular application, that's getting more SaaS or adoption.

Okay.

We.

Speaker 4: We have two evaluation systems in the field. One is that 8-inch gallium nitride power electronics customer.

<unk>.

Two evaluation systems in the field.

One is at eight inch gallium nitride power electronics.

Customer and.

Speaker 4: We have put a number of tools into the field for revenue and we're starting to gain some momentum in power electronics.

We have.

<unk> put a number of tools into the field for revenue and we're starting to gain some momentum in power electronics also we have an evaluation system, our new alumina product.

Speaker 4: Also, we have an evaluation system, our new Lumina product that is capable of a lot of applications.

Is capable of a lot of applications.

Speaker 4: such as red micro-LED in this application, and that evaluation is going well. But the Lumina platform is also very capable beyond red micro-LED for applications like edge-emitting lasers, VCSLs.

Such as Red micro OLED in this application.

And that evaluation is going well.

But the Illumina platform is also look very capable beyond red micro Leds for applications like edge emitting lasers, VIX soles specialty red Orange yellow led applications as well so.

Speaker 4: Specialty red orange yellow LED applications as well. So both of those product lines

Both of those product lines.

Speaker 4: are doing fairly well, albeit from fairly low levels in 2021, but it's certainly going to drive incremental growth for our compound semi-market in 2022.

Doing fairly well, albeit from fairly low levels in 2021.

But we're certainly going to drive incremental growth for our compound semi market in 'twenty two.

<unk> CBD piece.

Great. Thanks.

Okay.

And our next question from Tom O'malley with Barclays.

Speaker 7: Hey guys, thanks for taking my question. I just wanted to ask a follow up there on the MOCVD business. I thought in the prepared remarks, you kind of went out of your way to mention the Photonics opportunity. For a couple of years now, you've been trying to get some more traction in that market. What's changing now? Is it just new tools that are proven better for customers or is that market starting to grow again? Because I know in the past you've mentioned the industry capacity was really full. Is that starting to loosen up a bit as well?

Hey, guys. Thanks for taking my question I just wanted to ask a follow up there on the Mo's CBD business.

In the in the prepared remarks, you kind of went out of your way to mentioned the photonics opportunity for a couple of years now you've been trying to get some more traction in that market. What's changing now is it just new tools that are that are proven.

Better for customers or is that market starting to grow again, because I know in the past you've mentioned the industry capacity was really full is that starting to loosen up a bit as well.

Okay.

Tom how are you I would say.

Our alumina tool has actually was actually fairly a bit late to the market for <unk> opportunity, but that being said, it's a very capable tool and we have now qualified at a number of applications beyond Vik.

Speaker 4: Our Lumina tool was actually fairly a bit late to the market for Vixel opportunity, but that being said, it's a very capable tool, and we've now qualified it at a number of applications beyond Vixel. And a few weeks ago, we announced a multi-tool order for our Lumina product, and that customer is using it for qualifying it for a number of applications. So...

<unk> and a few weeks ago, we announced.

A multi tool order for our aluminum product.

That customer is using it for qualifying it for a number of applications. So.

Speaker 4: We definitely are definitely seeing some traction with the Lumina as well as the Propel for Ganon.

We definitely.

Are definitely seeing some traction with the alumina as well as the propel for Gan on silicon.

Speaker 7: And then my follow-up is really for John on the gross margin side. You've seen a really steady progression throughout this entire year and are guiding to a better gross margin number as well. When you look at your long-term model, you're a little more cautious there. Can you talk about why things wouldn't progress at this higher rate? Can you just walk through the puts and takes of, you know, what may rationalize margins throughout the year or what may keep them here? Thank you.

Helpful. And then my follow up is really for John on the gross margin side.

<unk> seen a really steady progression.

Throughout this entire year and are guiding to a better gross margin number as well when.

When you look at your long term model Youre, a little more cautious there can you talk about why things would progress at this higher rate can you just walk through the puts and takes of what may be rationalized margins throughout the year or what may keep them here. Thank you.

Okay.

Speaker 5: Sure, so we did come in in 2021 at 42% gross margin within our expectations. We talked throughout 2021 about making investments in our service capabilities and also in supporting evaluation systems in the field. And we had undertaken a number of...

Sure so we.

It did come in in 2021 at 42 gross or 42% gross margin within our expectations, we talk throughout <unk>.

2021 about making investments in our service capabilities in <unk>.

And also in supporting evaluation systems in the field and we are undertaking a number of.

Speaker 5: you know, steps to improve gross margin and probably would have done a little bit better than that in 2021 if not for some of the unexpected supply chain, you know, challenges and inflationary factors there.

Steps to to improve <unk> gross margin.

And probably we would've done a little bit better than that in 2021, if not for some of the unexpected supply chain challenges in an inflationary factors there.

Speaker 5: You know, that being said, you know, we continue to forecast for 2022 not really significant or any improvement in these inflationary and higher supply chain costs, but we are...

That being said.

We continue.

To forecast for 2022, not really significant or any improvement in these inflationary and higher supply chain costs, but we are forecasting at the midpoint of our guide and improvement to 43% gross.

Speaker 5: forecasting at the midpoint of our guide an improvement to 43% gross margin as we take advantage of higher volumes and take advantage of some of the actions that we've taken to improve gross margin and make a step towards our longer-term gross margin goal of 45%.

Gross margin.

As we take advantage of higher volumes and take advantage of some of the actions that we've taken to improve gross margin and make a step towards our longer term gross margin goal of 45%.

And Tom did you have anything further.

Congrats guys.

Thank you thanks, Tom Thanks, Tom.

Okay.

Question for Patrick Ho Stifel.

Okay.

Speaker 8: Thank you very much, and congrats on the really nice quarter and the year. Bill, maybe first off, in terms of the advanced packaging litho business, you're seeing obviously strong activity based on the current environment. Do you believe that you're starting to see some of these next generation processes like heterogeneous integration and some of the more advanced processes that are for next generation devices, or are we still at the early stages of that adoption?

Thank you very much and congrats on a really nice quarter and the year Bill maybe first off in terms of the advanced packaging litho business.

<unk> seen obviously strong activity.

Based on the current environment.

Do you believe youre starting to see some of these next generation processes like heterogeneous integration.

Some of the more advanced processes that are for next generation devices or are we still at the early.

Early stages of that adoption.

I would say.

Speaker 4: I would say what you said is true, that we are seeing opportunities in heterogeneous integration. That being said, we're also still seeing business in our more traditional spaces like fan-out, wafer-level packaging, copper pillars, bumping, high bandwidth memory, etc. But yeah, heterogeneous integration is

What you said is true that we are seeing.

Opportunities when heterogeneous integration.

That being said, we're also still seeing business in our more traditional spaces like fan out wafer level packaging copper pillars pumping high bandwidth memory et cetera.

But yes heterogeneous integration is.

Speaker 4: is an opportunity for us. I think we've been able to take advantage and book a fair amount of business and gain some share.

There is an opportunity for us I think we've been able to take advantage.

Book, a fair amount of business and gain some share.

From a booking standpoint and revenue standpoint in 'twenty two.

Speaker 4: from a booking standpoint and revenue standpoint in 22, we're seeing more, instead of onesies, twosies, more multi-tool orders where customers are making fleet purchases, where tool matching and the like is very critical. And so I think that our position as the leader in the marketplace is holding up quite well.

Seeing more instead of onesie twosies more multi tool orders, where customers are making fleet purchases were tool matching in the lake is very critical and so.

I think our our position as the leader in the marketplace is is holding up quite well.

Great that's helpful and maybe as my follow up question for John in terms of the new San Jose facility, Youre, obviously ramping that up it seems like things are going well, there youre getting products shipped out of there, but given the strong demand environment is there any potential for incremental capex kind of dollars being put into that.

Speaker 8: Great, that's helpful. And maybe as my follow-up question for John , in terms of the new San Jose facility, you're obviously ramping that up. It seems like things are going well there. You're getting products shipped out of there. But given the strong demand environment, is there any potential for incremental capex kind of dollars being put into that facility to expand it a little more quickly, given the strong semi-conductive demand environment that we're seeing across the board? Or are you comfortable that this current demand outlook can kind of grow into your current capacity?

Facility so.

Expanded a little more quickly given the strong semiconductor demand environment that we're seeing across the board or are you comfortable that this current demand outlook.

To grow into your current capacity.

Speaker 5: Yeah, that's a really good question, Patrick. So we had actually accelerated, you know, our plan into in 2021, and we had previously mentioned, you know, that we were, you know, a little bit ahead of schedule, you know, despite, you know, challenging environment and COVID and getting stuff, you know, built. So we're really happy. And we did accelerate spending, you know, into this year.

Yes, that's a really good question.

<unk>. So we had actually accelerated our plan into 2021, and we had previously mentioned that we were a little bit ahead of schedule. Despite a challenging.

Environment, and Covid and getting stuff.

So we're really happy and we did accelerate spending into this year. So on an overall basis. We continue to expect the project to cost about about the same and about three quarters of the spending this year about 25% of the spending next year and we're going to ask.

Speaker 5: So on an overall basis, we continue to expect the project to cost about the same and about three quarters of the spending this year, about 25% of the spending next year. And we're gonna accelerate starting the move into the building. As you said that we started manufacturing product already, we shipped some systems in Q4, and we still expect to be fully transitioned into the new space by the end of Q3 2022. So things are moving along to plan and as we...

Hello rates starting to move into the into the building as you said that we started manufacturing our products are ready we ship some.

Some systems in Q4, and we still expect to be fully transitioned into the new space by the end of Q3 2022. So things are moving along to plan and as we previously mentioned that when we do get up and fully running in the new facility, it's going to have about double.

Speaker 5: Previously mentioned that when we do get you know up in fully running in the new facility It's going to have about double the manufacturing output as our current San Jose facility Great thank you

All the manufacturing output as our current San Jose facility.

Great. Thank you very much.

Thank you Patrick Thank you Patrick.

And we will go to our next question from Mark Miller of benchmark.

Congrats on another good quarter, you mentioned the two eval tools for compound semi also mentioned the DRAM.

Speaker 9: another quarter. You mentioned the two eval tools for compound SEM. You also mentioned the deregulation.

Speaker 9: eval tool anything on the other tools any any more color on the other evals you've got

Eval tool anything on the other tools any any more color on the other rebels you've got in the field.

We have.

Speaker 4: We have a number of evals in the field.

A number of E valves in the field.

Speaker 4: You know, as you know, we've talked throughout 21 that we were making a C state change going from.

As you know we've talked throughout 'twenty, one that we were making a sea state change going from one or two <unk> in the field to closer to 10 at any given time and very much aligned with the company's strategy of.

Speaker 4: one or two evals in the field to, you know, closer to 10 at any given time. And, you know, very much aligned with the company's strategy of...

Speaker 4: growing in semi and in compound semi, we have a very high concentration of tools in the semi space.

Growing in semi and in compound semi we have a very high concentration.

Of tools in the semi space and within that we have a high concentration.

Speaker 4: and within that we have a high concentration in laser annealing. And that's with existing customers at their next node, a third logic customer where we recently just said we want PTOR in the future, as well as a tool for DRAM manufacturing in laser annealing.

In laser annealing and that's with existing customers at their next node.

Third logic customer, where we recently.

Just said, we won <unk> in the future as well as a tool for DRAM manufacturing in laser annealing.

Speaker 4: These programs are moving on track, and we're really very content and excited of where we are at this point in the game. We also have, as you just said, two systems in MOCBD, one for 8-inch gallium nitride power electronics and one specifically for red microLED.

Programs are are moving on track and that we're really very very content and excited of where we where we are at this point in the game. We also have.

As you just said.

<unk> systems and MLR CVD.

One for eight inch gallium nitride power electronics, and one specifically for Red micro OLED.

In terms of the.

Speaker 9: next-generation logic chips are going to be more opportunities for a laser neal stuff

Thanks, Jen <unk> largest ships are going to be more opportunities for laser anneal steps.

I believe there there are mark and what we're seeing.

Speaker 4: I believe there are, Mark, and what we're seeing is as the nodes continue to shrink, the requirements on the thermal budget become more and more stringent, which actually plays to the strength of our laser annealing product.

His eyes.

As the notes continue to shrink the requirements on the thermal budget become more and more stringent which actually plays to the strengths.

Of our laser annealing product.

Speaker 4: And so we're hopeful, we're very much engaged with those customers on solving their thermal budget challenges as they anneal these advanced chips.

So.

We're hopeful we're very much engaged with those customers.

On solving their.

Their thermal budget challenges as they they aneel these advanced chips.

Thank you.

Thanks Mark.

And we'll move to your next question from David <unk> of Steelhead Securities.

Speaker 7: Yes, I was wondering, could you talk a little bit about the quarterly progression of revenue throughout 2018?

Yes.

I was wondering could you talk a little bit about the quarterly progression of revenue throughout 2022 is it.

Speaker 10: Are we just going to see continued kind of growth in quarterly revenue or is the back half stronger than the first half?

Are we just going to see continued kind of growth in quarterly revenue or is the back half stronger than the first half or how should we think about that.

Speaker 5: Good evening Dave. So we're expecting at the midpoint of our guide around a 13% to 14% increase in revenue year on year.

Hi, Good evening, good evening, Dave So, yes, we're expecting at the midpoint.

Our guide around the 13% to 14% increase in revenue.

Year on year.

Speaker 5: And I would say that from a progression standpoint, we would expect, you know, the back half of the year to be higher than the front half of the year. We guided, you know, Q1 in the 145 to 165 million range, so 155 at the midpoint.

And I would say that from a progression standpoint, we would expect the back half of the year to be.

Higher than the than the front half of the year, we guided.

Q1, and the $145 million to $165 million range to a 155.

At the midpoint.

Speaker 5: So we expect slightly higher revenue in the second half of the year based upon our full year current outlook.

So we expect slightly higher revenue in the second half of the year based upon our full year current outlook.

Okay and at the mid point you mentioned.

Speaker 7: OK, and at the midpoint, you mentioned growth of 13.

The 13% to 14%.

I'm just curious you know.

Speaker 10: Curious, you know, recently, I think the calibration of WFE market is in the 15 to 20% range.

Recently, I think the calibration of the Wi Fi market is in the 15% to 20% range.

Speaker 10: And I realize you put out these targets, you know, some time ago, do you think there's upside to your numbers?

And I realize you put out these targets some time ago do you think there is upside to your numbers.

Speaker 10: If the WFE market grows, let's say 17 or 18%, which I think is kind of consensus now.

If the Wi Fi market grows, let's say 17, or 18%, which I think is kind of consensus now.

Speaker 5: Yeah, so when we just recently put out that guide in that where we're reaffirming in that range and, you know, for ease of discussion here and say the, you know, the mid the mid point is that.

Yes, so when we just recently put out that guide and that where we're reaffirming.

That range.

For ease of discussion here in say the mid the mid point is that.

Speaker 5: the 660 million at the midpoint of our guide here. We're looking at roughly the number of people who are in the midpoint of our guide here.

600 in 2000.

$60 million at the midpoint of our guide here.

We're looking at roughly a 35% increase in semi business. So we're expecting with these recent wins that bill talked about in the in the laser annealing side and strength in.

Speaker 5: 35 percent increase in semi-business. So we're expecting with these recent wins that Bill talked about in the laser annealing side and strength in the EUV mass blank and lithography that semi will be up about 35 percent. Now we're also expecting

The <unk> mask blank and lithography that.

Semi will be up about 35% now we're also expecting.

Speaker 5: compounds that need to be up a like amount in 2022 as well. So around the 35%, you know, increase there.

Compound semi to be up a like amount.

In 2022 as well so around the 35%.

Increase there, which is driving the overall increase for the company and is more than offsetting the decrease that we're expecting in the data storage business. This year. After a number of years of solid growth and our expectation is that data storage will be.

Speaker 5: which is driving the overall increase for the company and is more than offsetting the decrease that we're expecting in the data storage business this year after a number of years of solid growth. Our expectation is that data storage will be down around 35%. Really strong on the semi and compound, semi-side. We enter the year.

Down around 35.

So really strong on the on the semi and compound semi side and we enter the year.

Speaker 5: you know, Dave, with an improved backlog position. So we're entering the year with about $440 million of backlog with the semi-backlog more than doubling year over year and the compound semi-backlog increasing by about 50%. So pretty confident, you know, where we are in the market there and the expectations for our growth rate in 2022. Thank you for that.

With an improved backlog position. So we're entering the year with about $440 million of backlog with the semi backlog more than doubling.

Year over year in the compound semi backlog increasing by about 50% so pretty confident.

You know where we are.

And the market there and the expectations for our core our growth rate in 2022.

Thank you for that color.

That really helps now just final thing for me is I think you just mentioned the hard disk drive business is going to be down 30% to 35% this year.

Speaker 10: really helps. Now, just final thing for me is I think you just mentioned the hard to strive business is going to be down 30 or 35% this year. And I guess you said also that it's probably grows in 2023.

And I guess you said also that it's probably grows in 2023 could.

Speaker 10: Did you take a guess as to which quarter we see the inflection point? Is the inflection point in this calendar year where things stop going down and they start going up? Or when should we see that transition to quarterly growth?

Could you take a guess at which quarter, we see the inflection point is the inflection point in this calendar year, where things stopped going down and then they start going up or or when should we see that transition from two quarterly growth in the business.

Speaker 4: Yeah, I would say, Dave, at this point, you know, given our lead times, we feel pretty comfortable with our 2022 guide. And the activity that we're working on now is, you know, probably right just at the back half of the 22, but most likely earlier in 23.

Yes, I would say.

Dave at this point.

Given our lead times, we feel pretty comfortable with our 2022 guide.

And the activity that we're working on now is.

Probably right just to the back half of the 22, but most likely earlier in 2003.

Speaker 4: So, but certainly we're seeing increased activity and that would probably start reading out in early 23. Thank you.

But certainly we are seeing increased activity.

And that would probably start reading out in early 'twenty three.

Thank you.

Thanks, Dave Thank you Dave.

As a reminder, it is star one if you do have a question. We will go now to Gus Richard of Northland.

Speaker 5: Yes, congratulations and thanks for taking my question. Hey, I was hoping you could give us a scorecard on, you know, the tenee values you had.

Yes, congratulations and thanks for taking my question.

Hey, I was hoping you could give us a scorecard on the <unk> you had.

Speaker 5: Set up for last year. How many of those have you wanted this point? How many are still?

Set up for last year, how many of those have you want at this point, how many are still open.

Speaker 4: Gus, I would say right now we have seven in the field and three have been signed off. And of those, four are in laser annealing.

So I guess I would say.

Now we have.

Seven in the field.

And three have been signed off.

And of those.

Four are in laser annealing.

Speaker 4: in advanced logic and DRAM.

In <unk>.

Advanced logic and DRAM.

Speaker 4: Two are in, and by the way, they're progressing well. We're supporting them.

Two are in <unk>.

By the way there.

They're progressing well we're supporting them.

Speaker 4: And we're now turning some of those evals that are open into business. So that's a positive. In the MOCBD area, we have

And.

And we're now turning those some of those E mails that are open into into business. So thats.

A positive in the most CBD area we have.

Speaker 4: tool for Ganon silicon power electronics at 8-inch at a foundry. That tool has been turned over to the customer. They've actually run wafers and have first

The tool for Gan on Silicon power electronics at eight inch foundry.

That tool has been turned over to the customer that they would actually run way.

Wafers and have first.

Speaker 4: first results are positive. Still early, just turned it over to them in the eval. But the fact that they were able to get positive results in a very short period of time is certainly a positive step. And the other MOCVD tool we have under evaluation is for red microLED. That's our Lumina product line. And that's progressing well as well.

First results are positive still early just turn it over to them in the email, but the fact that they weren't able to get positive results.

In a very short period of time is certainly a positive step.

And the other MLS CVD tool, we have under evaluation.

As for Red Micro OLED, that's our aluminum product line.

And that's progressing.

Well as well.

Speaker 4: We also have one wet processing tool evaluation underway, and that's really targeted at the RF filter market, and that's been in the field for some time and is progressing as well. So, I would say, Gus, that at this time.

We also have.

One wet processing tool.

Evaluation underway.

That's really targeted at the RF filter.

Market.

And that's been in the field for some time and is progressing as well so I would say Gus debt.

At this time our.

Speaker 4: evals are progressing better than than we originally thought.

<unk> are progressing better than than we originally thought or planned.

Okay and so.

Speaker 5: Okay, and so of the eval's you talked about in the beginning of last year, you've got three down and there's

<unk> talked about in the beginning of last year.

Three down and Theres still seven to go.

Speaker 4: Right. It's probably worth noting, though, that the one tool that we just announced, we want a third logic step. You know, we're PTOR, and they still are keeping the evaluation open and we're continuing to work with them on other challenging material challenges in annealing. So, it's open, but it's a profitable.

Right.

Probably worth, noting though that.

The one tool that we just announced we want a third logic step.

There were <unk> and they still are keeping the evaluation open to stick and were continuing to work with them on other.

Challenging materials challenges and annealing, so it's open but it's a profitable open.

Got it and I would add there.

Speaker 11: Got it. I would add there, I would add to that, Gus, so that we've had a few evals signed off. We expect a few more evals to be signed off in 22. But we also expect this program of refreshing with new technologies and new evals. So I think at any point in time, think about a program around 10 evals, just plus or minus when tools get shipped and signed off. But I think

Add to that so that we've had a few eval signs off we expect a few more valves to be signed off in 'twenty two but we also expect this program will refreshing with new technologies and new eval, So I think it.

Any point in time, you think about a program around 10, eval, just plus or minus one tools gets shipped and signed off but I think.

Speaker 11: you know, for us to continue to drive growth in SEMI and compound SEMI, the EVAL program will be a very, very important element for us.

For us to continue to drive growth in semi and compound semi the eval program will be a very very important element for us.

Speaker 5: Right. And you heat up my next question. I think the one tool that's probably going to go out this quarter is the ion beam depth tool.

Great right.

And you Teed up my next question I think the one tool that it's probably going to go out this quarter as the ion beam Dep tool.

Speaker 5: semiconductor application and not EUP mass blanks. And I was wondering, you know, is that tool still going to ship in Q1 and do you have other customers lined up for that tool for application?

For the semiconductor application and not <unk> mask blanks and I was wondering is that tool is still going to ship in Q1, and do you have other customers lined up for that for that tool for applications.

Speaker 4: Yeah, we're actually engaged with, as you might guess, all of the leading DRAM and Logic customers at this time. We're running a lot of demos. We have a few customers where they're running those down the line, if you will, and processing them as full loop wafers.

Yes, we have a few curve, we're actually engaged with.

As you might guess all of the leading DRAM and logic customers. At this time, we were running a lot of demos.

We have a few customers where they're running those.

<unk> down the line, if you will and processing them.

Full loop wafers.

<unk>.

We're making progress there.

Speaker 4: we're making progress there. It's maybe a little bit slower because it's such a new and novel deposition technique compared to PVD, CBD, or ALD. But the interest and engagement from the customers remains very high.

It's maybe a little bit slower because it's such a new and novel deposition technique compared to PBT CVD or ILD.

<unk>.

The interest and engagement from the customers remains very high.

Got it and then.

Speaker 5: Got it. And then, you know, is that Iovine tool, you know, priced like an hard to drive tool or is it priced like an EUV mask tool?

Is that tool.

Like in hard disk drive tool or is it price like in the <unk> pool.

Yes.

Okay.

I'd say, it's probably.

<unk>.

Somewhere in between.

Speaker 11: Okay. Yeah, I think, you know, Gus, depending upon the configuration, how many chambers and, you know, configuration and so on and.

Yes, I think Gus depending upon the configuration, how many chambers in.

Configuration and so on.

Yes, I mean, we would I would say we would target.

Speaker 11: Yeah, I mean, we would, I would say we would target, you know, you know, gross margins, you know, for that product and selling price that would allow for, you know, gross margins, you know, at or, you know, above the company's average gross margin.

Gross margins.

For that product and selling price that would allow for gross margins.

At or above the company's average gross margin.

Speaker 5: Got it. And then in terms of the, you know, Gannon silicon, I know you're working with somebody at eight and she working and you shipped Gannon silicon at 12. Are you working with anybody at this time on additional tools at 12 inch or any other, you know, you know, Gannon silicon for RF anywhere else?

Got it and then in.

In terms of the <unk>.

On Silicon I know, you're working with somebody who had <unk> working and you shipped Gan on Silicon at 12 are you working with anybody at this time on additional tools to 12 inch or any other.

Yeah.

Gan on silicon for RF anywhere else.

Speaker 4: We've recently sold a 300mm tool and that's for the disruptive approach to micro LED where the customer is taking a 12 inch wafer and...

We've sold recently sold.

300 millimeter tool and Thats for.

Disruptive approach to micro OLED, where the customer is taking.

12 inch wafer and.

Speaker 4: putting the blue, the green, and the red pixels on one wafer at the same time. And so, they have a number of 200-millimeter tools, and they've now bought a 300-millimeter

Putting the blue the green and the Red pixels on this on a one on one wafer at the same time and so they have a number of 200 millimeter tools and Theyre now looking they've now bought.

300 millimeter tool.

Speaker 4: I guess I failed to mention a little earlier, we have also sold Gannon silicon tools at 8-inch to a few other customers as well for their 8-inch applications. And, you know, it seems that the industry's looking to make a transition from 6-inch to 8-inch for Gannon silicon. And that's really where we're kind of targeting that wafer size transition.

I guess I failed to mentioned a little earlier, we have also sold.

On silicon tools at eight inch.

Few other customers as well.

Theyre eight inch applications and it seems that the industries looking to make a transition from six to eight inch for Gan on silicon and Thats really where were kind of targeting.

That wafer size transition and yes.

Speaker 4: And, you know, we have a number of tools in the field, but it's not a whole lot of follow-on repeat business, if you will, yet.

We have a number of tools in the field, but it's not a whole lot of follow on repeat business. If you will.

Okay.

Just for clarification, just so I can.

Speaker 5: care for some odd reason. Are those power or RF GaN on silicon?

Care for some odd reason.

Those power RF Gan on silicon.

Yes.

Both.

Okay fair enough. Thanks, so much.

Thanks, guys. Thank you.

Speaker 2: And with no other questions in the queue, I will now turn the call back over to the speakers for any closing.

And with no other questions in the queue I will now turn floor back over to the speakers for any closing comments.

Speaker 4: Thank you, operator. And thanks for joining the call today. We're excited entering 2022. And I want to thank our customers and shareholders, along with the VECO United team for their continued support as we execute our growth strategy.

Thank you operator, and thanks for joining the call today, we're excited entering 2022 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 I do look forward to updating you all at upcoming conferences.

Speaker 4: I do look forward to updating you all at upcoming conferences and have a great evening.

Have a great evening.

And so that does conclude today's call. Thank you for your participation you may now disconnect.

Okay.

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Okay.

Okay.

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Yes.

Sure.

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