Q3 2023 Veeco Instruments Inc Earnings Call
[music].
Good afternoon, and welcome to the Veeco instruments Q3, 2023 earnings call.
Today's conference is being recorded.
Now at this time I would like to turn the conference over to Anthony postpone head of Investor Relations. Please go ahead.
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.
How would you to follow along with the slides on Veeco dotcom.
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 <unk>.
Second 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.
<unk> to differ materially from the statements made.
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.
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 such statements. During this call management will discuss non-GAAP financial measures information regarding such non-GAAP financial measures, including reconciliation to GAAP measures.
The performance is available on our website.
That I will turn the call over to our CEO Bill Miller.
Thank you Anthony.
Good afternoon, everyone and thank you for joining our call today today I'll take you through our third quarter highlights provide an update on our markets and discuss a few significant growth opportunities in more detail.
John will provide a financial update and guidance and then we'll be happy to take questions.
Veeco reported another quarter of strong top and bottom line results revenue totaled $177 million and non-GAAP EPS of <unk> 53 cents each above the high end of our guidance range.
Our solid financial results were driven by continued strength in our semiconductor business and sequential growth in our data storage business.
In addition to our strong results were also excited to share several key business wins.
We shipped multiple laser annealing systems to our leading tier one logic and memory customers.
We received our first laser annealing system order for a new application to serve the automotive market.
Third we received our first low defect density ion beam deposition system order for a new EV pellicle mask blank application.
And we continue to make progress with our nano second annealing.
And I am beam deposition products for wafer level semiconductor manufacturing.
As you may have seen in our press release today.
<unk> announced the shipment of our first nanosecond annealing evaluation system to a tier one logic customer representing a substantial milestone for our company.
Further advancement of our laser annealing roadmap is an exciting piece of our strategy I'll discuss this significant opportunity in further detail later in my prepared remarks.
I'll now provide an update on our markets and review several exciting growth opportunities.
Looking at the semiconductor market.
Laser annealing technology is growing in criticality at our customers most advanced nodes as traditional technologies struggled to meet performance requirements. For example, new gate all around architectures and shrinking devices require precise higher temperature annealing technology to increase performance and many.
<unk> damage.
In comparison to traditional lamp approaches our laser annealing system has several advantages. These include a lower thermal budget higher dope and activation and pattern in sensitivity to annealing.
Veeco is laser annealing system continues to be adopted by new and existing customers for new applications with recent wins validating our position.
Shipments remained elevated during the quarter due to broad based demand from logic and memory customers. Looking ahead, we're focused on gaining further adoption in new markets and applications.
He goes low defect density ion beam deposition system is the technology of choice to deposit defect free films for <unk> mask blank production and we're well positioned to serve growing demand from adoption of EU V lithography.
While we continue to see this market at about three to five systems per year, we see potential to expand our business beyond the current application space in areas such as pellicle deposition.
And advanced packaging, our wet processing solutions are used for photo resist strip solvent cleans and flux removal for high bandwidth memory and temporary bond material strip.
During the quarter, leading foundry and memory customers placed orders for several flux clean systems that support advanced packaging for AI.
Our strong year to date results and outlook, we expect our semiconductor business to outperform W. F E N be up about 10% for the year.
Moving to the compound semiconductor market the.
The market for epitaxy equipment provides veeco with a substantial growth opportunity.
Our silicon carbide CVD technology continues to advance and we're making progress towards demonstrating tool performance to our customers interest in our single wafer solution is strong with several evaluation shipments to tier one customers planned for next year.
Looking ahead, our unique system design years' of experience with epitaxy technology and extensive go to market infrastructure position us well to capture share.
Likewise, we're also investing in Gan power and micro OLED as the long term fundamentals in these markets remain positive.
Lastly, looking at the data storage market.
<unk> has the most advanced ion beam equipment in the industry with customers using our products to manufacture thin film magnetic heads for hard disk drives.
Equity is important our core ion beam technologies are providing significant value as we leverage them for advanced node applications in the semiconductor market.
Looking ahead, we're well positioned to capitalize on the proliferation of data stored in the cloud based.
Based on year to date and scheduled shipments during the fourth quarter, we continue to expect year over year growth in 2023 as previously forecasted.
Moving now to artificial intelligence and the role that veeco placed in the AI chip manufacturing process.
Growth of AI is having a profound impact on leading edge product roadmaps, requiring the most advanced technologies to manufacture higher performance AI chips.
As a result demand for our technologies is growing with adoption of our products in three main areas.
Beginning with GPU chips Veeco is laser annealing systems for transistor formation and ion beam deposition systems for E beam mask blank manufacturing are established as production tool of record at our customers most advanced nodes.
In addition to our laser annealing technology, we believe there are opportunities for a nanosecond annealing and ion beam deposition systems, and AI GPU applications, where traditional technologies are challenged.
Second.
Our laser annealing systems are used in manufacturing of high bandwidth memory or H B M. DRAM we've.
We've shipped to multiple systems. This year, playing to ship additional systems and are working to penetrate another tier one memory customers advanced nodes.
Equally important we see future opportunities for a nanosecond and kneeling and ion beam deposition solutions for AI memory applications and.
Third veeco wet processing systems for flux clean of micro bumps support advanced packaging for AI at both the sub module level for H B M and the system product level.
I'd now like to take a deeper dive into two of our largest semiconductor growth opportunities.
Beginning with nanosecond annealing.
Continued innovation is essential to maintaining product leadership as mentioned earlier, we shipped our nano second annealing evaluation system to a tier one logic customer, which if successful can significantly expand our served available market.
Compared with traditional annealing solutions, our nanosecond annealing system can achieve a lower thermal budget enabled by a dwell time that can be up to 1000 times shorter than today's most advanced in neil's.
Our nanosecond annealing system can rapidly heat the surface of the wafer and only affect tens to one hundreds of nanometers into the wafer.
This may enable new applications, such as backside power delivery and the contact Aneel for advanced nodes. It also may enable new applications, requiring material modification, such as void removal recrystallization and green growth.
Pull from tier one logic and memory customers is strong and we plan another evaluation shipping in the coming months.
As we look ahead, we see potential for initial high volume manufacturing orders in late 2024 or 2025.
Turning now to ion beam deposition for advanced node semiconductor applications.
Our core ion beam technology has been honed over decades, and as the technology of choice in the semiconductor industry for E V mask production.
This core technology can also solve our customers' high value problems and advanced semiconductor wafer level manufacturing.
Low resistance metals are becoming increasingly critical to maintaining device speed and performance as device geometries continue to shrink based.
Based on tier one customer data, our ion beam deposited tungsten and ruthenium films are demonstrating substantially lower resistivity as compared to traditional PV D.
For DRAM. This enables our customers to continue scaling down tungsten bit line thickness, while maintaining electrical performance of the device.
For logic resilient base metallization can enable new integration schemes at future nodes.
Pull from tier one customers remains strong and we're on track to ship two evaluation systems in the coming months to DRAM customers.
Although this opportunity is still in the early stages, we're quite excited to introduce ion beam deposition to the front end semiconductor market.
With that I'll turn it over to Jon for a financial update.
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 and at the end of the quarterly earnings presentation.
Starting with Q3 revenue by market and geography revenue for the quarter was $177 million, increasing 10% from Q2.
After a record in Q2 revenue from our semiconductor business came in at $98 million comprising 56% of total revenue.
In the compound semiconductor market revenue came in at 14% declining from the prior quarter.
In scientific and other made up 11% of revenue now.
Now turning to quarterly revenue by region.
Revenue from the United States totaled 33% of revenue an increase from 22% in the prior quarter due to an increase in shipments to data storage customers.
Revenue from our Asia Pacific region declined to 29% of total revenue as compared to 36% in the prior quarter, resulting from a decline in semiconductor sales.
As forecasted the percentage of total revenue from China decreased from 31% in the prior quarter to 23%. We expect an increase in China revenue in Q4, and expect full year revenue from China to be in the low 30% range and lastly, EMEA was 15% of revenue and.
<unk> from 11% in the prior quarter.
Yes.
Switching gears to our non-GAAP quarterly results gross margin came in at approximately 44% a sequential increase from approximately 43% gross margin was positively impacted by higher volume.
And a more favorable product mix operating expenses came in at $46 million in line with guidance as we maintain our focus on cost management, while also prioritizing investments for future growth opportunities during.
During the quarter the projected annual effective tax rate was reduced from 14% to 11% due to increased benefits from R&D credits and other deductions as a result tax expense for the quarter was $2 million, yielding a 7% effective tax rate.
Lastly, net income came in at $31 million and EPS was <unk> 53 on a diluted share count of 59 million shares.
Turning to the balance sheet and cash flow highlights we ended the quarter with cash and short term investments of $287 million in line with the prior quarter.
From a working capital perspective, our accounts receivable declined by $8 million to $122 million with dsos for the quarter decreasing to 62 days.
Inventory increased by $8 million from the prior quarter to $252 million, while days of inventory outstanding declined to 222 days accounts payable remained flat at $63 million, while days payable outstanding declined to 57 days and lastly.
Long term debt on the balance sheet was recorded at $275 million, representing the carrying value of our $282 million of convertible notes.
Before turning to our Q4 non-GAAP guidance I'd like to discuss the U S Department of Commerce is update to export regulations on October 17th.
While these new regulations are complex and still under our review at this time, we do not anticipate they will have a material impact to our business.
Now turning to our Q4 non-GAAP guidance Q4 revenue is forecasted between 155 and $175 million with gross margin between 43 and 44%.
We expect opex between 45 and $47 million.
Net income between 20 and $27 million.
And EPS between 35, and <unk> 45 on a diluted share count of 60 million shares.
Based on our year to date results and our fourth quarter guide our full year 2023 revenue guidance is now $648 million to $668 million.
Eitan and increase from our prior range of $630 million to $670 million.
Moreover, we are again, raising our profitability outlook for the year to account for higher revenue stronger gross margin and lower tax rate. We now expect non-GAAP EPS between $1 55, and $1 65 per diluted share.
And for some additional color beyond Q4 based on market conditions, and our visibility Q1 2020 for revenue is looking to be in a similar range to quarterly revenue in the second half of 2023.
With that I'll now turn the call over to Bill for closing remarks. Thank you John.
Before concluding our prepared remarks I'd like to highlight why veeco is a compelling investment opportunity.
We see significant growth opportunities for veeco in the coming years, and we're investing to take full advantage of these opportunities.
Our successful evaluation program has been foundational to our growth in the semiconductor market and is a top priority for 2024.
Likewise, we expect our strategic R&D investments in the semiconductor and compound semiconductor markets to further strengthen our unique portfolio of differentiated technologies.
As a reminder, our laser annealing technology is well established and our efforts to expand our footprint to new markets applications and products are gaining traction.
We're particularly excited for the opportunity to expand our served available market to new applications as we advance our laser annealing roadmap to nanosecond annealing.
And I am beam deposition, our decades of experience in core technology give us confidence as we introduced <unk> for wafer level advanced node semiconductor applications. We believe our ion beam deposition technology has unique advantages versus traditional technologies like P V D and <unk>.
Our team is laser focused on executing.
Lastly, we have a long term opportunity to capitalize on growing demand in the compound semiconductor equipment market for power electronics and photonics applications.
And with that we'll be happy to take your questions. Operator, Please open the line.
Thank you.
We'll now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Formation tone will indicate that your line is in the question queue.
You May press Star two if you would like to move your questions from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Please.
Thank you.
Our first question comes from the line of Charles <unk> with Needham. Please proceed with your question.
Hey, Thanks for taking my question good afternoon.
Maybe the first question about that and that's a tool you guys shipped out to the tier one customer.
Kind of curious because you mentioned, you're expecting maybe you repeat orders.
Early as late 'twenty four 'twenty five.
That seems to be a quite quite a turnaround from the first.
That promise with my thoughts are that the eval.
<unk> two <unk>.
Hi.
Can you provide a little bit of context.
Behind that.
Shall I mean.
The adoption of those tools.
Validation tool here.
You said, the swapping out replacing some existing application on the why you're expecting such a lack of deterrent.
From a ship to T. W. P pause.
Yeah.
Yeah, Charles that's a thoughtful lengthy question there I would say we are really excited about the shipment of this first evaluation system to a tier one logic customer I believe it represents a significant milestone for the company to introduce this technology.
After working on it for a number of years I think it's important for our investors to understand that this is really a complementary technology to our existing laser annealing technology and effectively we can.
We reduced the thermal budget significantly because we have about a 1000 times less dwell time, which opens up a new class of of applications. So that we can.
Compete for and then I think just to follow up on one of your first sub questions here. What we have done is we've shipped our assistant to a logic customer and these are one year evaluations and they usually start after the tool is installed.
Let's say we've shipped it now and we could have it installed by the beginning of the year that would start the clock on the evaluation cycle.
If this goes well and the integration runs smoothly it would not be unheard of for us to receive an order before the evaluation is signed off but you are right. It very well first orders could be in.
In 2025, very easily as well so hopefully that provides the clarity you're looking for it.
Yeah.
So maybe the second question I wanted to ask you who could.
Could provide a little bit more color.
A new application.
Pallet Kohls also kind of curious what do you think about the timing.
For you to receive.
High volume manufacturing orders or is it something that's more tied to the high end would be an option or.
Can you walk discussion with your customers do you kind of kicks back in maybe can be earlier.
That's my second question.
I would say Charles that a pellicle is are being introduced today and just for our investor heal power goals as you know our thin transparent membrane, it's mounted on the photo mask to improve yield and reduce.
Defect so.
This is a new application for us our traditional IBD ion beam deposition low defect density tool.
The industry needs one of these for every three to five ASML scanners shipped.
So we're still sizing that market at three to five systems per year is a function of ASML.
Scanners shipped so we see this as an incremental opportunity and.
Our thought is this first tool.
It will be used to make production.
Pellicle.
Over in due time.
One of our UV tools every 10 to 15 a.
I S ml scanners that are shipped into the market, which then turns into a three to five you know system a requirement for us.
Yes, Im sorry.
That's just really one follow up onto that.
Because.
So im with you we'd tools not yes.
Not not not not the heightened pools.
Tools that maybe just a few years still a few years down the road.
That's a fair statement.
I don't want to go into too much detail my understanding is for a small number of EU V.
Masks steps policies are being introduced.
I wouldn't want to really a hypothesis.
The size, what that percent and tap those two with high N a.
Thanks.
Thank you Charles.
Okay.
Our next question comes from the line of Brian Lee with Goldman Sachs. Please proceed with your question.
Hey, guys. Good afternoon, thanks for taking the questions.
I had two.
I guess the first one on the.
The data storage segment I know you guys have been talking about in recent quarters. You know you have enough backlog.
Hum.
Brett to kind of support revenues you had a nice quarter here as well can you kind of give us a sense of where you think the data storage cycle is today and as you think about you gave a little bit of a preliminary view here into Q1.
Is the backlog extending all the way into Q1, and then kind of maybe beyond that what what should we be thinking about.
In terms of.
That that business segment for you as we move into next year, and then I had a follow up.
Brian I would say the the data storage industry conditions remain challenging.
There is still an excess inventory across the across the channel that.
The industry is is trying to work off.
Have heard commentary from two of our public company customers are talking about maybe early stages of recovery, but clearly we would have they would have to see that.
For some time before we can call. It a sustained bottom I would say the one thing of interest when I look longer term both of our customers do.
Do project Exabyte growth over the next three to five years at about.
25% CAGR.
Clearly that would be a very good a good tailwind for veeco. So.
Your specific question on our view towards 'twenty floor I would say.
We're not going to really be able to give quantitative view of 24, but I.
Suffice it to say that we do have backlog.
Into 'twenty for and wouldn't think it would be substantially different from 'twenty three but.
We will give more more color here in the in the near future.
Okay.
Fair enough that's helpful and then.
Yes.
I did it off as well.
Paired remarks, but.
As you think about the China exposure I know, there's been incremental concerns of cross.
No difference in markets and industries with respect to the tighter macro and signs of weakness in industrial and maybe some other categories can you.
Kind of maybe level set us I know you are giving us sort of a real time.
Updates around where your exposure is and how you're navigating it but.
What are you hearing on the ground there and are you anticipating as you look into 2000 and for maybe a similar question Mike.
We.
Expect that China continues to fall as a percent of sales and you're making elsewhere in other geos in other end markets.
So stabilization here as you think about that preliminary accuse you gave out into Q1.
<unk>.
Sure sure Bryan I'll I'll take that this is John.
So we had.
Strong revenue in the first half of this year in China, and we had indicated that we would see China as a percentage of our overall revenue.
Not as high as the first half of the year, but that that being said is that we were also forecasting about 30% of our revenue coming from from China. This year, we continue to see that so we will see a bit of a pick up in the fourth quarter.
Compared to our third quarter for our business in China.
As we look into 2024 at this point in time, it's a it's a bit early and we're not really ready to call do we see that business at all.
What business levels that we expect to see therefore full year 2024, but what I can comment on is that you know the current activity with our customers are still pretty pretty strong we.
We do see ongoing demand for our China customers. We are aware that customers are continuing to make investments in several.
Areas for a mature mature nodes. So you know at this point in time we.
We still see a pretty pretty good.
Environment for our business with our China customers.
Okay. Thanks, guys I'll pass it on.
Thanks, Brian Thank you Brian.
Thank you. Our next question comes from the line of Tom O'malley with Barclays. Please proceed with your question.
Hey, I just wanted to follow up again on the China question. There. So depending on what you guys are defining as low thirties for the entire year you could have China revenue in the fourth quarter near record levels could you just describe where that's coming from it is that in.
In the semi business I know youre guiding that up for 10% on a year or so so are you seeing the mixing your semi business move back towards a majority of that revenue being in China or just any comments on that into the fourth quarter would be helpful.
Yeah, Tom I think that's a good question there so our expectations for where we expect it to be in the in the second half of the year is holding out just on scheduled delivery dates we had more scheduled deliveries in Q4 for these customers and then Q3. So I don't really think it's really a.
And you know the demand there just so happened on how the the.
The systems were scheduled to be shipped so yeah, we expect in the high 30% range of revenue in the fourth quarter I'm coming from customers in China.
Got it and just as just as a follow up to that one.
That all coming from the trailing edge could you just describe maybe the the disparity is it is it a little more leading edge than it was before has there been any change in ordering patterns. There just trying to figure out where that demand is coming from.
Yeah, Yeah, Yeah, so no change in our in the in the pattern there Tom what we've seen this year as revenue increased to about 30% of our revenue coming from China and over the past couple of years. It was about 20% of the company's revenue is principally been in our laser annealing product line is where the growth has been.
I've been coming from and that's where we see that continuing into the into the fourth into the fourth quarter and into the into the beginning of next year.
Got you and just one more quick one if I could sneak in and so you guys said Q1 your expectation I think the exact words you used were simple similar revenue rates to Q3 and Q4, there's obviously a big disparity between the September and December are you kind of saying split the difference for March and if you could just give any color on.
If you guys have any outlook that backs up that better than expected or at least that flattish guide into March that'd be helpful. Thank you.
Yeah, I think looking at the average time, we did get over the high end of our guidance revenue range in Q3, we shipped a one or two more systems. So but you know for the whole second half of the year. We were at a number where we expected we are expecting growth in revenue in the second half of the year. So yeah I think that's the.
Right way to look at it look at the average of Q3 and Q4.
Our commentary would be mean like sort of in the middle there.
That's what our expectation would be at this point somewhere.
A similar range in Q1 of 2024.
Thank you very much guys.
Hey, Sean.
Thank you. Our next question comes from the line of Gus Richard with Northland Capital. Please proceed with your question.
Yes, thanks for taking my questions.
Bill I think in your commentary you talked about semi being up 10% year on year.
And if I just plug in the number for Q4, you kind of got to do 111 $112 million to hit 10%.
In my doing the math right there.
Yeah, Yeah. So Gus this is a this is John Yeah, we expect full year semiconductor revenue you know at the midpoint of our guide to be somewhere around $405 million for the year, that's up roughly 10% so.
Q4 revenue number should be around 105 million in that range at the midpoint of our guide so I think youre in the right ZIP code there.
Okay got it and then.
Just shifting back to the.
<unk> mask.
Oh Im sorry.
Matt.
<unk> mask blank opportunity telcos.
A couple of questions first of all.
He is the pellicle customer the fabs or is it the.
Blank manufacturers and then as you go to high end.
Hi, and a <unk> you go to like a six by six inch by nine inch substrate.
Is that going to require.
Different set of tools one when we go do some modification of the existing tool to accommodate that larger substrate.
I would to answer the first part of your question I would say this.
This tool we sold for pellicle is not to our traditional mask blank customers and then I would say are moving to high in a with a larger.
Format size, we are engaging with the industry.
To be prepared for that.
On the <unk> mask blank deposition equipment. So we are a.
Working on that as well.
Okay.
Okay.
I'll take my question the rest of them offline. Thank you.
Thank you guys.
Thank you. Our next question comes from the line of Rick Schafer with Oppenheimer. Please proceed with your question.
Hi, This is the way mark on a like for like.
Thanks for taking the questions and congrats on the results and shipping the first NSA tool.
My first question is on customer order patterns did you see any customer orders for <unk> was there anything that was pulled from <unk> into <unk>.
My first inclination is no.
We did over shipped a little bit, but I don't think it was anything related to meet any related pull at the system level, maybe some upgrades and the like but I don't know John any more color. There no I think if you looked at the high end of our guide range that we gave that it had a couple of more systems in the high end of the Guy.
Range and essentially that's what we shipped out during the quarter was the biggest things that drove the.
<unk>.
On the revenue.
For the quarter, but not a new order activity.
I'll just use me I'll add that I think our on time delivery for our systems was if not 100% extremely close to 100% so far.
Factories, we're getting.
Closer to on time.
Great. Thank you I appreciate that.
My second question is on the NSA system. It looks like things are moving rapidly in this space. So I was wondering if you can.
Help us better understand this opportunity as it would be.
So I'll, let say.
Has there been more of a customer shifts.
All I'll say.
NSA and or do you see NSA has a separate greenfield opportunity or do you see NSA, you're taking some share from let's say.
I would say.
NSA is a really complementary incremental served available market opportunity for us in both.
Logic and memory I would say if I were to look like today.
Our LSA.
Served available market is totals about $500 million 400 in logic and about 100 in memory.
I would say if I were to click forward.
The 2027, I would say probably two thirds of our business will be in LSA, our traditional LSA, we're actually planning to put evolves out in the field all four customers.
Next node roadmap. So it's clearly an active product and about one third from nanosecond annealing and so were right now sizing that.
The 27 market at $600 million in laser annealing and about $300 million in this incremental NSA business.
Both kind of equally split between logic and memory.
I appreciate it thank you.
Thank you Wei.
Thank you. Our next question comes from the line of Dave Duley with Steelhead Securities. Please proceed with your question.
Yes, Thanks for taking my question and thanks for giving us the assortment of.
Helpful Information here.
First off on <unk> you mentioned.
That you were seeing potential for evaluation systems to be shipped into a second high bandwidth memory customer could you just remind us how big the high bandwidth memory.
Opportunity or Tam is now and how much bigger it might be with another customer.
If you had to guess when you might see production systems to customer number two when like when that might be.
Yes, so we see.
Numerous opportunities in AI overall.
Split between Gpus high bandwidth memory, and advanced packaging and so wouldn't in the totality, we've kind of size that all of that business.
At about 10% of Veeco as revenue this year and I think obviously as we bring on a second.
Memory provider Ah I would think that we would that would probably drive.
Incremental.
I don't have the number right at the tip of my life. Some here, but I would say probably $30 million to $50 million over a year two year period for that customer I would say Dave at this point, we are in the demo phase and not yet to the point of an evaluation.
<unk> agreement and so.
From the time, we place an eval that would probably be a year.
Evaluation plus integration so.
We I don't believe we would expect any revenue in 'twenty four and maybe this would probably be out more in mid 25 time frame.
And then can you just help us understand what.
How big do you think I understand there are several opportunities here, but I think the biggest driver of your revenue now is in the memory area.
Could you help us understand how big the high bandwidth memory opportunity is either in 'twenty three 'twenty four when ever you'd like to how much revenue veeco should get from that market.
Yeah, it's hard to say, David Here's here's why last quarter.
Became qualified with our first customer in HBM, we've now learned that Oh, we're qualified.
And they're more most advanced generic.
Memory and so for us.
We can't know know before I can say these shipments were going to high bandwidth memory, but now we don't really know what's the mix between high bandwidth and standard memory. So it gets very hard for us.
To look at it in totality.
But if I step back and look at it at a higher level in laser annealing.
We see ultimately the opportunity in aggregate.
For for.
Laser annealing to be at 900 million dollar market in 2007 and about half of that in memory.
Okay.
The mix between yeah.
Oh, sorry go ahead, Dave just to just to clarify so you basically said your first high bandwidth memory customer has now taken your LSA product not just the high bandwidth memory, but into standard DDR five in other products.
Yes.
Okay.
Okay.
Just to switch gears.
Or did you have something to add on to what you were saying because I interrupted you.
No I'm fine takes days, Okay and then.
No no LSA.
Tam information. Thank you very much that was awesome.
Do you think the applications in the foundry and logic business are going to be tied to backside power and.
All around or is that the way, we should be thinking about it and that's when we would expect the ramp of that type of revenue or or maybe just.
Elaborate a little bit more for us.
Yeah, I would say.
Yes, there are.
Opportunities in back side power distribution that customers are very interested and evaluating our nanosecond annealing tool for but there are also other applications.
That theyre, just starting to explore things like.
Void reduction recrystallization and really we haven't sized those markets, but when we talk to customers, they're very interested in it.
In trying those type applications out with this new product.
Okay final question from me just has to do with the on the epic tool for Silicon carbide could.
Could you just give us a little bit more elaborate update on when you expect demos and evaluations and whatnot and then just you mentioned that you have a single wafer approach I think the other guys in the market or a batch approach why are you pursuing this particular approach and what do you think the advantages are thanks, that's it for me.
I would say Dave that we are on track with our plan post our silicon carbide FTE equipment company acquisition in January of this year, we have tool operating in Somerset, New Jersey, we are running film.
<unk>.
We demonstrated high growth rate, we've demonstrated good film quality.
Good uniformity morphology et cetera, and we're building out our our demo bingo sheet, if you will and making progress there. Our plan is to be demo ready by year end and so we're.
Feverishly working toward that with the goal of putting a few <unk>.
Silicon carbide evaluation systems out in the field.
Next year.
Phil where we're on track with the original plan, we are we laid out.
Regarding your question on single wafer versus batch we've.
<unk> spoken to a lot of our tier one customers in the industry and.
We feel very comfortable.
With our single wafer approach.
Theres really no solution on the market today that meets all of our customers' needs and and they really from.
Introducing the tool to customers and having some customers.
Crawl over the tool.
They really like this.
The simplicity of the machine they like the.
The.
<unk> that the design has to be green, the green from going into a.
Maintenance cycle, and then coming out of a maintenance cycle.
And these tools required today, a fair amount of maintenance, which is a real detractor to the cost of ownership and also the fact that putting so many machines in these fabs they really needed to be they can't all be run by a Phd and it.
This is an area, where veeco has excelled in the past and putting large fleets of equipment in place and so we feel pretty pretty comfortable where we stand today in silicon carbide.
Thank you.
Thanks, Dave.
Thank you. Our next question comes from the line of Mark Miller with Benchmark. Please proceed with your question.
Thank you for the question and congratulations on another good quarter.
Im just wondering in terms of our data storage business are there opportunities as we transition into a hammer type technology.
For upgrades.
But you would expect next year.
We are this year also.
Oh, there might be some but I would say, it's probably not a major driver of our business what would be probably more interesting is as ham or becomes more broadly adopted the view is the complexity of the head increases and therefore the number of.
Deposition and etch steps increases as well.
Which hopefully should be.
Be a tailwind for equipment demand.
As ham or becomes more broadly adopted.
Okay.
So your guidance for this quarter and also last quarter margins have come up I'm just wondering about in current backlog what does the margin profile look like.
Similar to what you've been seeing the last two quarters.
Yeah I think.
Mark we've been working quite hard on improving our gross gross margins that's been a real focus for the company and you're right. We've we've increased our gross margin as the year.
Some favorable areas in terms of providing that gross margin.
Prudent.
And things like.
Getting better.
Efficiencies better utilized.
Utilizations.
As we think about our manufacturing our servicing of customers.
And we've spent.
Quite a bit of effort on that.
I'm not going to specifically.
You know give a you know a guide going into next year for gross margin, but I would say that.
We continue to make progress against our our target.
Margins and will give us much effort next year as we gave this year to improve gross margins going forward.
Thank you.
Thanks Mark.
Thank you there are no further questions at this time I would now like to turn the floor back over to CEO Bill Miller for closing comments.
Thank you operator, I do want to thank our customers and shareholders along with the Veeco United team for their continued support as we execute our growth strategy.
And have a great evening.
This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation.
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