Q1 2022 Veeco Instruments Inc Earnings Call
You are currently holding 40 Veeco instruments incorporated corporate hosted Q1 2022 earnings call. At this time, we are assembling our audience and will be underway in about two minutes. We thank you for your patience in holding enough that you. Please remain on the line.
[music].
Good day and welcome to the Veeco instruments incorporated corporate hosted Q1 2022 earnings call at this time I'd like to turn the conference over to Anthony Bencivenga. 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 are prepared.
A slide presentation to accompany today's webcast. We encourage you to follow along with the slides on Veeco Dot 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.
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.
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.
Veeco does not undertake any obligation to update any forward looking statements, including those made on this call to reflect future events or circumstances. After the date of such statements.
During this call management will 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.
Thank you Anthony and good afternoon, everyone and thank you for joining the call.
<unk> delivered another solid quarter during challenging times, the veeco, United team is performing well dealing with lingering COVID-19 issues and navigating a difficult supply chain environment.
Today I'll take you through our Q1 highlights and discuss our markets and technologies, John will provide a financial update and guidance and then we'll be happy to take questions.
Demand continued to be strong throughout the first quarter, we saw accelerated semiconductor order activity, which drove an increase in our backlog.
Our financial metrics were in line with or above the midpoint of our guidance from a top line perspective, we achieved revenue of $156 million driven by record semiconductor shipments.
With contributions from laser annealing advanced packaging lithography and <unk> mask blank systems.
Our solid execution led to non-GAAP operating income of $25 million.
non-GAAP EPS of <unk> 38 cents.
Achieved cash flow from operations of $25 million and ended the quarter with $232 million in cash and short term investments up $7 million from last quarter.
We recently published our first set of environmental social and governance goals for 2022 and beyond we continue to improve transparency.
Diversity and inclusion.
And our environmental responsibility because we believe this makes us a stronger company for all stakeholders.
We've been able to meet our financial targets for the first quarter and fulfill our customers' most critical demands. However, we are impacted by supply chain delays.
Similar to our peers, we're not seeing an improvement in material lead times, which is impacting our ability to fulfill demand in a timely manner.
Nevertheless, despite the supply chain challenges. Our previously provided full year guidance is intact and we are excited that 2022 will be a growth year.
Switching gears to our markets and technologies.
There are significant and lasting mega trends that drive our growth markets, we break them down into high performance computing.
<unk> transformation of the automotive industry and the cloud.
These mega trends are as strong as ever.
Evidenced by the continued pace of technological evolution in areas like artificial intelligence early stage augmented and virtual reality and electric vehicles.
Our customers and all of our growth markets semiconductor compound semiconductor and data storage are making investments in equipment to add capacity to address these growing demands.
Veeco is well positioned with exciting products to address these growth markets as we progress toward our financial targets of $800 million in annual revenue, which we shared last September at our analyst day.
Looking specifically at our semiconductor market.
According to industry research from semi.
Wafer fab equipment spending is forecasted to remain strong above $100 billion annually in both 2022 and 2023.
Much of this spend is concentrated at the leading edge, where veeco has a strong position, helping customers add cutting edge capabilities are.
Our world, leading laser annealing and <unk> mask blank systems are gaining traction and we expect to gain market share and grow faster than W. P.
And as I mentioned earlier, we had a record revenue quarter with our semiconductor products.
In laser annealing <unk> largest product line.
We're executing well with advanced nodes logic providers work systems, our tool of record at current and next nodes.
As an indicator of this demand during the quarter. We again received multiple multi system orders at the leading edge for our laser annealing systems. We continue to innovate and are working on advanced annealing solutions with shorter dwell times to enable our customers to use new materials and new geometries, enabling additional <unk>.
<unk> and their next nodes.
In addition to leading edge logic players a portion of our business includes trailing node customers, who are adding capacity to address component shortages for a variety of applications, such as consumer electronics and the automotive industries.
Beyond logic, we've been working to bring our innovative laser annealing solutions to the memory market and we're working with customers to introduce laser annealing to DRAM for their most advanced nodes.
These engagements are progressing well as we perform against milestones and we expect to have more to report in the coming quarters.
Overall, our laser annealing business is growing as we wouldnt process steps and win new customers.
Now looking at our advanced packaging lithography product line.
We continue to experience good traction in applications, such as flip chip bumping and fan out wafer level packaging driven by artificial intelligence and GPU production. For example, during the quarter. We had another multi tool order from an <unk> for a high volume manufacturing wafer.
Level packaging solution or.
Our AP litho product line is a key enabler for our customers as they seek to improve device performance.
Switching gears to the <unk> mass blank product line.
Our ion beam deposition technology has been identified as the technology of choice to deposit defect free material to create <unk> mask blanks you may recall.
Last quarter, we announced a third customer has validated our technology over others by placing an order for our ion beam system as they enter the EV mask blank market.
We expect a strong year as customers add capacity to keep up with the adoption of <unk> lithography.
<unk> is planning on shipping 55, <unk> systems in 2022, and Theyre working on capacity expansion plans to ship 90 systems annually by 2025.
With approximately one of our systems required for every 10 to 15 <unk> lithography systems. We currently size this market at three to five ion beam systems per year.
As we continue to work with the ecosystem and innovate our product line to improve performance will be ready for the industry's next steps such as high numerical aperture UV lithography.
All in all our semiconductor business is performing quite well and driving <unk> growth in 2022 and beyond.
Looking now at our compound semiconductor market.
We serve this market primarily with two product lines are wet processing equipment, which can be used in a variety of applications and most CVD equipment for power electronics and photonics applications.
We had a strong shipping quarter with our wet processing equipment as customers added capacity for RF devices.
This product line has wide appeal and we're starting to see adoption of wet processing systems and advanced photonics applications like micro OLED.
And augmented and virtual reality.
Our gallium nitride and arsenide phosphide Mo's CVD systems enabled several compounds semiconductor applications, including power management solutions and photonics. These applications have promising growth potential and we're looking to build our presence in these emerging markets.
During the quarter, we ship systems for micro OLED applications like AR, VR as well as Gan power electronics.
These early stage wins, along with evaluations, we have underway for power electronics and micro OLED increase our confidence will grow in these emerging compound semiconductor markets.
Our third major market these data storage.
Hard disk drive exabyte capacity shift is expected to grow for the foreseeable future as hyper scaler and enterprises upgrade their storage capabilities.
This corresponds to an increase in hard drive capacities and the overall number of heads shifts.
Based on discussions with customers, we forecast data storage equipment shipments will grow in 2023 after an absorption period this year.
Now, let's review our 2022 priorities.
We continue to be optimistic given today's healthy demand environment, coupled with our strong backlog position.
As always 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.
Mentioned earlier, our commitment to our culture and stakeholders with strength in recently as we released a comprehensive set of ESG goals related to climate change product responsibility and diversity and inclusion.
We're maintaining our focus on converting our evaluation systems into ongoing business managing our supply chain.
And improving our on time delivery for customers.
This focus is paying off enabling solid first quarter results.
We're on target ramping our new San Jose manufacturing facility, which we expect to complete by Q3 of this year and we're advancing our R&D efforts to innovate new products and deliver new evaluation systems to customers.
Lastly, despite the near term supply chain challenges being experienced across the industry, given our strong demand and robust backlog, we expect to grow revenue in 2022 and deliver on our previously provided annual guidance.
With these priorities in mind, we're committed to making a material difference and building a stronger veeco that serves all of our stakeholders with that I'll turn it over to John .
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.
Turning to Q1 revenue by market and geography.
Revenue totaled $156 million for the quarter and was driven by strong sales to our semiconductor customers, which increased 50% from Q1 2021 and made up 49% of our total revenue.
Contribution came from all of our major semiconductor products laser annealing advanced packaging lithography and <unk> mask blank systems.
The compound semiconductor market contributed 24% of our revenue.
<unk> increased 50% from Q1 2021.
This was driven by system shipments for five G RF photonics empower electronics applications.
Our data storage market came in at 14% of total revenue.
Finally, the scientific and other market made up 13% of our revenue.
Now looking at quarterly revenue by region.
Our Asia Pacific region, excluding China made up 37% driven primarily by semiconductor systems sales.
The United States was 30% of our total revenue driven broadly by sales to semiconductor compound semiconductor and data storage customers.
China made up 19% of total revenue, primarily driven by sales to semiconductor and compound semiconductor customers and.
And finally, EMEA was 14% of total revenue for the quarter.
Switching gears to our non-GAAP quarterly results.
Gross margin came in at 43, 1%.
Which was up from Q4 and in line with guidance. It should be noted that we expect quarter to quarter variations in gross margins due to the influence of a number of factors.
While gross margin for the quarter benefited from a favorable product mix, we're experiencing cost increases in a number of areas such as components.
Freight and logistics and labor.
Operating.
Expenses for the quarter were $43 million, an increase of $3 million from Q4, as we make investments in head count to support growth.
And as inflationary factors began to impact the P&L.
Tax expense for the quarter was approximately $500000 with net income coming in at $22 million.
And EPS was <unk> 38 on a diluted share count of 64 million shares.
Effective January one 2022, we adopted ASU 2020, Dash zero, six which changed the accounting for our convertible notes.
Among other changes.
Converted method of accounting for the outstanding diluted shares is now required.
As a result for the purposes of the EPS calculation the diluted share count is computed as if all the outstanding convertible notes were converted into common shares.
Net income as adjusted to add back interest expense from the convertible notes unless the results would be anti dilutive.
We provided a table in the press release and backup section of the earnings presentation that illustrates the EPS calculations in detail.
Now moving to the balance sheet and cash flow highlights.
We ended the quarter with cash and short term investments of $232 million, a sequential increase of $7 million.
This was driven by cash flow from operations of $25 million.
Which was offset principally by two items first capex of $10 $9 million.
$8 million of which was used for the new San Jose facility build out and second withholding tax payments on restricted share vesting.
From a working capital perspective, our accounts receivable decreased to $99 million and Dsos for the quarter came in at 57 days down from 64 in the prior quarter.
Accounts payable increased sequentially to $56 million with a corresponding increase in days payable to 57.
Inventory was $179 million and days of inventory came in at $1 74.
The slight increase from the prior quarter.
Yeah.
Long term debt, including the current portion of $20 million was recorded at $274 million on the balance sheet.
It represents the carrying value of our $278 million in convertible notes.
The increase in long term debt, including the current portion from Q4 2021 is due to the adoption of ASU 2000, Twenty's Dash zero six whereby the convertible notes are no longer separated into debt and equity components on our now solely recorded as debt on the balance sheet.
Now turning to Q2 non-GAAP guidance.
While our demand is quite strong we have not seen an improvement in inbound material lead times.
In this supply constrained environment.
We expect Q2 revenue to be between 150 and $170 million.
And with less favorable product mix and current inflation driving up material logistics and labor cost, we expect gross margins to be between 40 and 41%.
We expect opex to be between 44 and $46 million.
Net income is expected between 12 and $19 million.
EPS is expected between $22 34 per diluted shares.
And is based on 64 million share count.
Please refer to the schedule in the guidance section of the earnings press release and backup section of the earnings presentation, which illustrates how Q2 EPS is calculated based on the guidance ranges provided.
And now for some additional color beyond Q2.
We are operating in an environment with strong demand for our products and we have a robust backlog.
Although supply chain challenges persist we are reiterating our previously guided full year revenue range of $640 million to $680 million and diluted non-GAAP EPS range of $1 50 to $1 70 per share.
And with that Bill and I will be happy to take your questions. Operator. Please open the line.
Thank you.
Like to ask a question please signal by pressing star one on your telephone keypad.
Speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.
You can press star one to ask a question.
We'll pause for a moment to allow everyone an opportunity to signal for questions.
Okay.
And we will go first to Patrick Ho.
Well.
One moment.
Erez.
And we'll go to Patrick Ho with Stifel. One moment please.
Okay.
As you can buy them. Please go ahead your line is open.
Thank you very much can you guys hear me.
I can't even find Patrick.
Alright.
Right.
And then you got the execution in the challenging environment.
Maybe first off in terms of the semiconductor business and in particular, let's say it was really encouraging to hear the progress we continue to make on the DRAM side of things from an application standpoint are these DRAM opportunity.
The ones that you saw in logic.
Are there new opportunities new applications on the DRAM side.
Got it expands the reach of LSA.
Yes, thanks for the question Patrick.
I would say, yes, we are making continuous progress in our in the laser annealing space.
And in memory as you know we've engaged with.
A leading memory customer we continue to make.
Progress and I would characterize it as <unk>.
Quite a successful evaluation program, we have going on.
We are actually being evaluated for a few different steps.
One of them is similar to our bread and butter logic annealing step, but then there are other.
Other applications that are specific to memory. So there are.
A number of opportunities there for us over.
A longer period of time.
Great that's helpful and as my follow up question, maybe for John I know there are a lot of moving pieces right now in the supply chain locked.
Lockdown labor availability freight and logistics so.
Kind of throwing them all into the kind of the same bucket what is the.
Issue that youre confronting in the June quarter is it the supply chain or are there other types of issues that are like freight and logistics be extremely high right now what's the biggest issue and maybe from a gross margin perspective could you quantify how many basis points is it having an impact at least for the June quarter.
Yeah. Thanks for the question Patrick So yeah looking at the June quarter lead times are still stretched and we've yet to see.
<unk> and of course, our guide for revenue and gross margin for Q to incorporate the current supply chain challenges I would say revenue could be higher if there were no supply chain constraints.
And we built into our gross margin guide Patrick about 200 basis points for the impact of higher logistics Les.
Labor and material costs.
We built in initially when we were planning for the year about 100 basis point impact I would say the area that was you know immediate and surprising.
And impacted by war in the Ukraine, and Covid shutdowns in China, you know how drastically again in Q1, and what we're projecting into Q2 on freight and logistics costs, there Patrick quicker than we can pass along to customers.
At this point.
Great. That's really helpful. Thanks again guys.
Thanks, Patrick Thank you Patrick.
We'll go next to Brian Lee with Goldman Sachs.
Hey, everyone. This is miguel on for Brian .
I just wanted to follow up on.
The discussion on margins.
<unk>.
How should we think about the margin cadence through the rest of the year as it is.
<unk> the bottom or.
Yes.
What is your guidance sort of embed in terms of.
Now the the supply chain and the logistics and also the mix impact how those kind of flow through the rest of the year.
Sure. Thanks for the question so yeah.
We still feel that the range that we provided as a target for this year of 42% to 44%.
That range is achievable for two.
2022.
Our current view is that Q2 would be the <unk>.
Lower gross margin quarter.
Given.
There's the supply chain impact.
Impacts that we spoke about but a less favorable.
<unk> product mix and in Q2.
Okay. Thanks.
That's very helpful and and also I appreciate the extra.
The color on the I.
I guess the relative impact on you talked about the 200 basis point impact as it relates to the.
The supply chain and the logistics and the.
Cost inflation, so just taking the midpoint.
The guidance for the second quarter.
It is the right way to think about it is that true.
To measure the impact of.
Of the mix it sounds like it's like a little less than 100 basis points as the impact of the mix shift is that the right way to think about it.
Yes, I would say you know Magellan the 100 to 150 basis points that you can attribute to a mix there in.
In Q2.
And I would say I'd, probably just add you know mcgill as well. So you know, we're taking a number of efforts right.
Offset the impact of the supply chain.
You know additional cost and we've been working on various for more than a year now with teams on on on gross margin.
Movement.
And.
And one of our focus is now is in this current environment is looking at the ability to you know.
Increased prices, where we're adding where we're adding value.
But I would say that when we get immediate cost increases like freight logistics and some of these things that hit us immediately and we're working with nine.
Nine months or so of backlog.
Price increases will have an impact.
Later on down the down the road, we're not taking a position of looking at your current backlog and trying to renegotiate prices on the backlog with our customers.
Okay Awesome Thats very helpful extra color I'll pass it on thanks.
Thank you Mikael.
And we'll go to our next question.
Rick Schafer of Oppenheimer.
Yes, Thanks excuse me thanks, guys.
Compound semi are off to a pretty good start.
If I heard you correctly on both those segments.
I guess a couple of questions first I was curious maybe John if you could help us understand what's going on with mix just a little more granularity.
In QQ sort of give us a sense of which products or segments, you expect to lead in and which ones you expected maybe to lag a little and and as part of your answer I'd be curious as some of the lagging segments.
That's really supply related if you would expect.
Maybe some of those lagging segments to Reaccelerate in the second half.
Yeah, so right so we've been working.
Normalized our gross margins from product to product. So I think more in line with the company average and we've made great great progress there.
But having said that we do occasionally have a mixed impact to our gross margin on a quarter to quarter basis.
Q1 was a situation where we had a few high gross margin shipments that led to a slightly higher gross margin for the quarter.
And I think it's worth noting as at the revenue levels that we're currently at and having tools selling prices in some of our products six eight even $10 million range. Just a you know a couple of.
Products different from quarter to quarter.
It could impact the gross margin mix.
And the range that we're talking about I would say and it's not really market driven we actually expect.
Increases in revenue from the semi market in Q1.
In Q2 from Q1 and in <unk>.
Flat in data storage and and compound semi quarter on quarter. So it's really not a mix in the market change and what I would also say in our in our Q2 guide that we have.
A couple of eval system sign offs, where theyre special pricing that we expect to close out in Q2, so that has a bit of a and.
An impact there as well.
Thanks, a lot John and then maybe you kind of television for my next question you've talked about the last couple of years being sort of kind of out there.
I think Ken Eval tools on average and I'm just curious if that's the new normal as we kind of look forward for the next couple of years for vehicle I mean, obviously seems to be bearing fruit in terms of design wins revenue momentum all of that stuff. So.
Yes, I guess I'm curious as I think we saw some of the EV in wet processing wins, even most recently I didn't know if as those <unk> roll off.
And you deploy are you going to deploy new eval tools elsewhere to kind of fill that so we kind of stay at that 10 tool.
Rough number is that kind of a new annual I guess for a while.
Yes, Rick I would say you know if it's if it's not broken don't fix it and we are now have up it up at 10 kind of a range plus or minus a couple and as we have E valves being signed off.
Loading the gun behind it in terms of next generation products. So.
As the sign off start to happen.
Do have some new new products and new technologies that are going to be coming out in the coming quarter. So we are going to keep at this elevated level really kind of more focused primarily in semi.
And secondarily and compound semi with our E Mail program.
Thanks, a lot bill congrats.
Thank you.
This is Tom O'malley with Barclays.
Hi, Hi, guys. This is Adam on for Tom I. Appreciate the color you gave on just.
Just you mentioned the semi being up quarter over quarter, along with DC and compound semi flattish if I heard that correctly.
Just maybe how can we think about the back half of the year in terms of cadence by segment, if you'd be willing to give some color there that'd be helpful. Thank you.
Sure Adam.
So what.
What we had said and we are reiterating our guide so theres no significant changes there if were looking at a full year guide and the $6 40 to $6 80 range millions in revenue you take 660 towards the middle of our expectation is that semi for the full year will be up.
About 40%.
That we expect compound semiconductor to be up about 35%.
And we expect the data storage business to be down about 40%.
And scientific in the range of flattish.
So that's still our expectations, we've bumped up the semi.
Your growth rate up a bit from our previous rate of 35% to 40% now currently.
Thank you that's that's very helpful and if I could add one more I know you guys alluded to WSI for this year and next but.
I guess with expectations moving closer to 90 billion I guess from the 100 billion or at least entering towards that direction.
And potentially down next year should we see some sort of correction have you considered that downside scenario and if you have.
How would that impact you guys or theoretically how would you kind of expect to be impacted by by that kind of that kind of outcome.
Yeah, I would say.
Not so much I would say right now our demand in the semi segment is particularly strong I think our Q1 revenue was up year over year, 50% our backlog has doubled.
We actually $50 about 50% of our revenue in Q1 was semi with record shipments. So I would expect that trend to continue and I think certainly the industry is probably more supply constrained and are working in a supply constrained environment, if you will but.
You know whether W. A V has 100 billion or 90 billion. It's important to know that we are a very small piece of Wi Fi.
You know our growth story is really all about winning new applications.
And getting new products out in the field and so in this area I would say we are performing better than the strategy. We developed three years ago. So I would say and it's very much focused on our front end semi applications, leading excuse me leading node applications.
And we think that the investments will continue at the leading edge.
So I think we're.
We're not overly concerned about 10.
$10 billion change in Wi Fi.
Makes sense I appreciate it guys.
Thanks, Adam.
And we'll move to our next question Gus Richard with Northland.
Yes, thanks for taking the question.
Just wanted to ask you about the supply constraints you know there's been two major macro issues the war.
Lockdowns in Shanghai, and I'm, just wondering if you could sort of beyond logistics and freight.
How is that those events manifesting in your supply chain.
Is it causing problems with components is it can you not get.
Right metals for tools can you talk a little bit more about how it's impacting us.
Sure sure so I think what.
What we're seeing is really no improvement to these sort of stretched out lead times that we've seen over the last few quarters. So the type of you know.
Components.
Yeah chip shortages certain shortages in vacuum components.
You know O rings, and in valves and things of that nature.
Just really haven't seen it.
An improvement in the lead time with.
Lockdown in China, you know, perhaps we don't source a lot directly so we don't see immediate direct sourced, but if you know our Oems.
Or suppliers lowering the tier.
Get certain components from supply chain in China, I guess that would certainly.
Have an impact so where we're doing the same activities that we've been doing over the last number of quarters, staying very close to our suppliers.
A supply chain issue or component issue or a shortage or an allocation that comes our way we work extremely.
No diligently with the suppliers to try to alleviate that.
So really not seeing anything different there in terms of sort of war in Ukraine or shutdowns in.
And China, maybe bill wants to add something.
I would just add that.
Right after of Ukrainian War started we did an assessment of.
Our supply chain and we found that xenon gas is.
These largely.
Made in in developed in Russia, So we actually use it inside of our labs to run some equipment and so we just sourced over a year's worth of xenon gas and have it sitting available but.
I think the ripple of the China shut.
Shutdowns and the ripple of that through the supply chain is going to take some time.
To to impact us.
Got it so at this point it sounds like it hasnt gotten incrementally worse is that correct.
Yeah. It's.
I think John mentioned, it was probably about 10 to 15 million dollar hedge.
Headwind to revenue for this quarter.
Certainly.
Certainly an impact.
Yeah, it's more of the timing of the materials coming in and being on <unk>.
On allocations, which we years sort of comment at this point.
So certain materials and components.
Got it and then just turning to <unk>.
That being said.
Oh I'm, sorry go sorry, I was just going to add.
Ted.
For the last couple of quarters have been putting more materials on order earlier, so we do expect.
The pace of materials, you know given the fact that we've been working on this a number of quarters now so the pace of materials in the second half of the year to increase over the first half of the year.
Got it got it understand and then just turning to the data storage business. The lead times in that business are fairly long and should be.
Trying to get a little bit of visibility into.
2023 can you qualitatively.
Qualitatively talk about what you are.
Drive customers are thinking and how is it going to be.
What sort of recovery off of this year, you're going to get.
Yeah, I would say we are definitely seeing I guess qualitatively I.
I would say.
The order activity discussions we're having.
Clearly, increasing and I would say if I kind of.
Look backward a year I would say the funnel.
<unk>.
Projects has increased significantly and so.
Those are all positive signs I think it will take probably another quarter or so.
Two.
To get that totally into.
Yeah.
Confidence in that but I would say.
We are clearly seeing an uptick in in order activity.
Order discussions excuse me.
Got it alright.
I hand, it over thanks, so much.
Thanks, guys. Thanks Gus.
Yeah.
And we will hear next from Mark Miller with benchmark company.
I believe you indicated you expect to eval tools to be included revenues next quarter is that correct.
Yeah. We said we are expecting eval sign offs next next quarter and we've included that in our in our revenue guide that is correct Mark.
And how many eval tools remain after those two are signed off.
The moment after those two are signed off it's probably down in the seven.
Seven ish range, I'd say, but I think we're also going to be potentially putting some more on and I think it might just be a matter of.
A month or two before.
<unk> offset so I would say it's probably.
Probably more like.
Eight to 10 on average and just with the sign offs, they're coming down a little bit but there'll be.
The plan is to replace them.
And then all these tools will be revenue in this year.
They're typically one year he vows after installation so the typical installation could be as much as say three months. So they're top typically 15 month evaluation. So.
Many of these that are coming on will not be.
Revenues in the year.
On the overall year basis, Mark we expect about a handful of tools to be signed off this year into revenue in a handful of new E valves.
Two to ship out they won't be offset exactly in the same.
So quarters, but.
I think thats, a rough order of magnitude.
You indicated too that you had a couple of micro OLED shipments I was this for development system. So are you starting to see production orders.
We are these are four I would characterize for as pilot line activity for the.
Disruptive.
Micro OLED approach of 203 hundred millimeter.
Gan on silicon.
Applications.
Okay. Thank you.
Thank you Mark Thanks, Mark.
And as a reminder, this star one for questions and we will go to David Duley of Steelhead Securities.
Good evening, just a couple of questions from me I was wondering on the <unk> mask blank space, you've done really well there.
The tool of record for creating these mass I was wondering if there was other applications somewhat followed your inspection applications or.
Any other.
Tools that might go round the tool that you sell to these E E.
Like masks manual.
I would say that David the real opportunity for US I believe is we have a very unique core technology I'm beam deposition that you originally started in the data storage space for decades.
And then we found applicability for that in the <unk> mass blank space.
Does it could deposit very low defect films.
Now, we're seeing opportunities in front end semi for ion beam deposition systems for very low resistance.
Metallization films.
And those are the that's the next frontier, where we are working on taking our ion beam technology into the semi space and we will be.
Shipping and evaluation systems, there in the coming.
<unk> I would say.
The other steps around <unk> mask blank production.
Things like inspection or.
Are really not.
Core technologies of the company today and so.
We're very much focused on what we do really well and then exploiting that.
Okay, and then to follow on on <unk> question about the hard disk drive space. You mentioned that you thought that 2023 would be a growth year for the disk drive business and you're seeing a lot more order.
Actions now.
When do you think you know the rubber hits the road, so to speak and those customers would start to actually place orders or customer deposits.
Or when is the next.
You know whatever the next step is to come when will that happen and I guess what will it be.
It would be.
Order placements are deposits et cetera, I would expect that to.
To come back a bit this quarter as well as into the over the next one to two quarters, we will have a good visibility into next year.
Okay and then.
Could you just help us understand when you talk about component shortages for you guys.
What exact ships are short that are difficult for you guys too.
Yes, right now.
No. It's a you know there are a lot of it is actually a legacy you know older technology, where.
We've been buying this chip forever and then the cuts and then our supplier just.
Doesn't want to make them anymore and things like that.
For example, so that we have to buy them.
You know.
So that's a that's an area.
That's probably from a component standpoint, that's very challenging.
I think if you look at raw materials.
We use.
Use a lot of stainless steel the price of nickel has increased in the nickel is a key component in stainless steel.
It's a pricing impact but.
Yes, I'd say overall that's.
Some color I don't know John if you have anything else like that no I think our I think that's right bill in.
The complexity of the tools and how many individual parts or components go into tool any one right.
You know stopper completion of a of a system. So I mentioned earlier, if you don't have the overhangs you need right you could stop our system shipment just for for specialty type of overhangs or valves or mass flow controllers.
You know the type of components that are typically used in the type of equipment that we sell throughout the industry right. Those are the ones that everybody is sort of fighting their allocation fighting to get their allocations and supply to <unk>.
I will say, Dave that our supply chain group is doing a phenomenal job.
And reacting to the challenges as they they develop so.
I think we're doing pretty okay.
Okay last question for me is real quickly what is your current lead times for your tools and the second question is in the LSA business.
You have seen.
Seems like you're doing really it's kind of bifurcated between the high end and then the non leading edge foundry and logic business.
I was just curious you know how the non leading edge foundry logic business is doing for them in the LSA area and.
And if you've seen any slowdown from any of the Asian, guys or is there any change in demand.
China and other customers.
We aren't seeing a changes in demand we're seeing.
The trailing edge activity continue I would say.
It's probably a third of the laser annealing business is trailing edge I'd say and then regarding our lead times it kind of varies a bit by product line, but I would say now we're probably operating kind of in the nine months plus kind of lead times.
Thank you.
Thanks, David.
Yeah.
And with no other questions. Thank you I'd now like to turn the call back over to management for any additional or closing comments.
Thank you operator.
I also want to thank our customers and shareholders along with the Veeco United team for their continued support as we execute on your behalf have a great evening.
Okay.
Thank you for your participation you may now disconnect.
Okay.
Okay.
[music].