Q3 2024 Veeco Instruments Inc Earnings Call
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Operator: www.youtube.com.au © BF-WATCH TV 2021 Good day, ladies and gentlemen, and welcome to the Veeco Instruments Q3 2024 earnings conference call. At this time, all participants will be in a listen-only mode. There will be an opportunity to ask questions later during the conference. If anyone should require operator assistance during the call, please press star and then zero on your telephone keypad.
Speaker Change: Good day, ladies and gentlemen, and welcome to the Veeco instruments Q3, 'twenty 'twenty four earnings conference call.
Speaker Change: At this time.
Vince will be in a listen only mode.
Speaker Change: It will be an opportunity to ask questions later during the conference.
Speaker Change: If anyone should require operator assistance during the call. Please press star and then zero on your telephone keypad.
As a reminder, this conference is being recorded.
Speaker Change: As a reminder, this conference is being recorded.
Anthony Pappone: I'd now like to turn the conference over to Anthony Pappone, the Head of Investor Relations. Thank you, and you may proceed, sir. Thank you and good afternoon everyone. Joining me on the call today are Bill Miller, Veeco's Chief Executive Officer, and John Kiernan, our Chief Financial Officer. Today's earnings release and slide presentation to accompany today's webcast is available on the Veeco website.
Speaker Change: I'd like to turn the conference event, Anthony Petrone, the head of Investor Relations. Thank you and you May proceed Sir.
Anthony Petrone: 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.
Anthony Petrone: <unk> earnings release, and slide presentation to accompany today's webcast is available on the veeco website to the extent that this call discusses expectations for future revenues future earnings market conditions or otherwise make statements about the future. These forward looking statements are based on management's current expectations.
To the extent that this call discusses expectations for future revenues, future earnings, market conditions, or otherwise makes statements about the future, these forward-looking statements are based on management's current expectations and are subject to the risks and uncertainties that could cause actual results to differ materially from the statements made. These risks are discussed in detail in our Form 10-K Annual Report and other SEC filings. 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 statement. Unless otherwise noted, management will address non-GAAP financial results.
Anthony Petrone: And are subject to the risks and uncertainties that could cause actual results to differ materially from the statements made.
Anthony Petrone: These risks are discussed in detail in our Form 10-K annual report and other SEC filings 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 unless otherwise noted.
Anthony Petrone: non-GAAP financial results, we 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 earnings presentation with that I will now turn the call over to our CEO Bill Miller. Thank.
We 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 earnings presentation.
William Miller: With that, I will now turn the call over to our CEO, Bill Miller. Thank you, Anthony. Veeco delivered solid third quarter top and bottom line results above the midpoint of our guidance. Revenue totaled $185 million, non-GAAP operating income $31 million, and non-GAAP EPS of $0.46. Our semiconductor business delivered record revenue, increasing 26 percent year-over-year and 13 percent sequentially, highlighted by an increase in shipments to leading-edge customers across several product lines. As announced in today's press release, a leading foundry, HBM manufacturer, and OSATs placed over $50 million in orders for our wet processing systems in 2024 driven by AI.
Bill Miller: Thank you Anthony.
Bill Miller: Veeco delivered solid third quarter top and bottom line results above the midpoint of our guidance revenue totaled $185 million non-GAAP operating income $31 million and non-GAAP EPS of <unk> 46 cents.
Anthony Petrone: Our semiconductor business delivered record revenue, increasing 26% year over year, and 13% sequentially highlighted by an increase in shipments to leading edge customers across several product lines.
Anthony Petrone: As announced in today's press release, our leading foundry H B M manufacturing <unk> placed over $50 million in orders for wet processing systems in 2024, driven by AI.
Our advanced packaging wet processing business is a key driver of growth in our semiconductor business in 2024, and recent orders are extending visibility into 2025.
Anthony Petrone: Our advanced packaging wet processing business is a key driver of growth in our semiconductor business in 2024, and recent orders are extending visibility into 2025.
I'll now provide an overview of Veeco's role in the semiconductor manufacturing process, as well as an update on key technologies driving business today. Veeco technologies are increasingly critical for several leading-edge semi-manufacturing process steps. The SEMI roadmap requires advanced annealing capabilities to meet enhanced performance requirements from new architectures and shrinking geometries. Key capabilities include solutions with lower thermal budgets and surface level precision. As a result, the opportunity for laser annealing is expanding as device scaling with incumbent technology becomes more challenging. Veeco is the market leader in laser annealing, with our LSA systems qualified as production tool of record for our logic and memory customers' most advanced nodes.
Anthony Petrone: I'll now provide an overview of egos roll in the semiconductor manufacturing process as well as an update on key technologies driving business today.
Anthony Petrone: We go technologies are increasingly critical for several leading edge semi manufacturing process steps.
Anthony Petrone: Any roadmap requires advanced annealing capabilities to meet enhanced performance requirements from new architectures and shrinking geometries key capabilities include solutions with lower thermal budgets and surface level precision as a result, the opportunity for laser annealing is expanding as device scale.
Anthony Petrone: With incumbent technology becomes more challenging.
Anthony Petrone: Because the market leader in laser annealing with our LSA systems qualified as production tool of record for logic and memory customers. Most advanced nodes equally as important our next generation nanosecond annealing technology achieves an even lower thermal budget at a nanosecond dwell time expand.
Equally as important, our next-generation nanosecond annealing technology achieves an even lower thermal budget at a nanosecond dwell time, expanding laser annealing capabilities to potentially enable industry inflection. During the quarter, LSA demand from leading-edge customers increased, including shipments to several leading-edge Logic and DRAM customers.
Anthony Petrone: <unk> laser annealing capabilities to potentially enable industry inflections.
Anthony Petrone: During the quarter, let's say demand from leading edge customers increased including shipments to several leading edge logic and DRAM customers.
Turning to ion beam deposition for EUV mass blanks, Veeco's IBD EUV system enables deposition of defect-free films for EUV mass blanks, making Veeco the market leader. Our Ion Beam Deposition Technology is a key enabler of the industry's roadmap, and we're in a strong position to support growing demand for EUV lithography. During the quarter, we shipped an IBD EUV system to a leading logic foundry for a new EUV mask blank application. This win provides opportunity for additional growth in the coming years and is a great example of the expanding use cases for ion beam deposition in the semi-market.
Anthony Petrone: Turning to ion beam deposition for easy mask blanks.
Anthony Petrone: It goes IBD UV system enables deposition of defect free films for E beam mask blanks, making FICO the market leader.
Anthony Petrone: Our ion beam deposition technology is a key enabler of the industry's roadmap and we're in a strong position to support growing demand for <unk> lithography.
Anthony Petrone: During the quarter, we shipped an IBD UV system to a leading logic foundry for a new <unk> mask blank application.
Anthony Petrone: This win provides opportunity for additional growth in the coming years and is a great example of the expanding use cases for ion beam deposition in the semi market.
As the leader in ion-beam deposition technology, Veeco is excited to expand adoption of the front-end semi-market.
Anthony Petrone: As the leader and ion beam deposition technology Veeco is excited to expand adoption of the front end semi market.
The SEMI roadmap is turning to new materials and technologies to scale and optimize performance and power consumption. As device geometries continue to shrink, traditional technologies are challenged to achieve resistivity requirements, driving Tier 1 logic and memory customers to evaluate new solutions. Veeco's recently launched IBD 300 system differentiates itself from incumbent technologies through its ability to achieve improved thin film properties and low resistivity with critical metals in logic and memory. Looking ahead, we're excited to continue working closely with our Tier 1 customers to solve their high-value materials challenge. In advanced packaging, our wet processing system is a production tool of record at a leading foundry, HBM manufacturer, and OSATs for select applications.
Anthony Petrone: The roadmap is turning to new materials and technologies to scale and optimize performance and power consumption.
Anthony Petrone: As device geometries continue to shrink traditional technologies, our challenge to achieve resistivity requirements.
Anthony Petrone: <unk> tier one logic and memory customers to evaluate new solutions.
Anthony Petrone: <unk> recently launched IBD 300 system differentiates itself from incumbent technologies through its ability to achieve improved thin film properties and low resistivity with critical metals in logic and memory.
Anthony Petrone: Looking ahead, we're excited to continue working closely with our tier one customers to solve their high value materials challenges.
Anthony Petrone: And advanced packaging are wet processing system as production tool of record at a leading foundry H b, a manufacturer and OS ads for select applications.
heterogeneous integration and 3D packaging for AI are driving strong year-over-year growth. Based on recent order activity, we're gaining confidence our wet processing business can continue its growth trajectory in 2025. In Advanced Packaging Lithography, we're seeing a pick-up-in-order and quoting activity from across the spectrum of Foundry, IDM, and OSET customers driven by capacity expansion for AI and mobile. As a result, we expect a recovery in this business as recent orders extend visibility into the first half of 2025.
Anthony Petrone: You're a genius integration and three D packaging for AI are driving strong year over year growth.
Anthony Petrone: Based on recent order activity, we're gaining confidence our wet processing business can continue its growth trajectory in 2025.
Anthony Petrone: And advanced packaging lithography, we're seeing a pickup in order and quoting activity from across the spectrum of foundry IDM and OS that customers driven by capacity expansion for AI and mobile App.
Anthony Petrone: As a result, we expect a recovery in this business as recent orders extend visibility into the first half of 2025.
Veeco's investments in core technologies targeting leading edge inflections has enabled our semi-business to outperform WFE growth for three consecutive years, and we're forecasting a fourth year of outperformance in 2024. In annealing, we have opportunity to grow our SAM from $600 million to over $1 billion, driven by industry inflections in logic and memory. In logic, gate-all-around architectures and new technologies such as backside power delivery are increasing laser annealing intensity. resulting in more steps requiring precise anneals and tighter thermal budgets. In memory, new technologies and architectures, such as high bandwidth memory and 3D devices, are driving customers to adopt laser annealing to address new challenges.
Anthony Petrone: He goes investments in core technologies targeting leading edge inflections has enabled our semi business to outperform wip growth for three consecutive years.
Anthony Petrone: And we're forecasting a fourth year of outperformance in 2024.
Anthony Petrone: And annealing, we have opportunity to grow our Sam from $600 million to over $1 billion driven by industry inflections in logic and memory.
Anthony Petrone: In logic gate, all around architectures, and new technologies, such as backside power delivery are increasing laser annealing intensity Reis.
Anthony Petrone: Resulting in more steps, requiring precise and meals and tighter thermal budgets.
Anthony Petrone: In memory, new technologies, and architectures, such as high bandwidth memory and three D devices are driving customers to adopt laser annealing to address new challenges.
In Ion Beam Deposition, we have opportunity to expand our SAM to $350 million for high-value front-end semi-applications requiring critical film performance.
Anthony Petrone: And I am beam deposition, we have opportunity to expand our Sam to $350 million for high value front end semi applications requiring critical film performance.
The SEMI roadmap is turning to new technologies and materials to enable continued device shrinks and address the growing need for energy efficient compute performance. our IBD 300 system can achieve lower resistivity through improved thin film properties for critical metals, potentially enabling HBM DRAM scaling, as well as new integration schemes at future logic nodes. in ion beam deposition for EUV mass blanks, leading logic and memory customers expect EUV and high NA EUV lithography to be integral to their future roadmap. The industry has historically required one of our IBD EUV systems for every 10-15 ASML EUV lithography systems shipped.
Anthony Petrone: Semi roadmap is turning to new technologies and materials to enable continued device shrinks and address the growing need for energy efficient compute performance.
Anthony Petrone: Our IBD 300 system can achieve lower resistivity through improved thin film properties for critical metals, potentially enabling H b M DRAM scaling as well as new integration schemes at future logic nodes.
Anthony Petrone: And I am beam deposition for E V mask blanks, leading logic and memory customers expect U V and high N. A UV lithography to be integral to their future roadmaps. The industry has historically required one of our IBD UV systems for every 10 to 15 a S. M. L E N V.
Anthony Petrone: Lithography systems shipped.
Given ASML's plan to expand EUV and high NA capacity in the coming years, as well as recent wins for new mass blank applications, we have the opportunity for our SAM to more than double to over $100 million. and in Advanced Packaging, we see SAM expansion opportunity for our enabling wet processing technology for an increased number of applications supporting AI and high-performance computing adoption.
Anthony Petrone: Given asml's plan to expand E V and high in a capacity in the coming years as well as recent wins for new mask blank applications, we have the opportunity for our Sam to more than double to over $100 million.
Anthony Petrone: And then in advanced packaging, we see Sam expansion opportunity for our enabling wet processing technology for an increased number of applications supporting AI and high performance computing adoption.
As we look ahead, we believe our portfolio of enabling technologies for key inflections is well positioned to drive our semiconductor SAM to grow faster than WFE.
Anthony Petrone: As we look ahead, we believe our portfolio of enabling technologies for key inflections is well positioned to drive our semiconductor Sam to grow faster than W. F E.
I'd now like to provide additional detail on our evaluation program and its importance in capturing several of our largest opportunities. Our evaluation program has been essential to penetrating new opportunities in the front-end semiconductor market, and we have several evaluation systems outstanding with Tier 1 logic and memory customers. Looking ahead, we're increasing investment in our laser annealing and ion beam deposition programs to capture our largest SAM opportunities. Many evaluations are targeting several applications, which can result in follow-on business between $30 to $60 million per application win, assuming 100,000 waiver starts per month. While the timing of adoption by system, customer, and market will vary, we're excited about the value proposition our technologies offer, and our team is highly focused on executing.
Anthony Petrone: I'd now like to provide additional detail on our evaluation program and its importance in capturing several of our largest opportunities.
Anthony Petrone: Our evaluation program has been essential to penetrating new opportunities in the front end semiconductor market.
Anthony Petrone: And we have several evaluation systems outstanding with tier one logic and memory customers. Looking ahead, we're increasing investment in our laser annealing and ion beam deposition programs to capture our largest Sam opportunities.
Anthony Petrone: Many evaluations are targeting several applications, which can result in follow on business between $30 million to $60 million per application win assuming 100000 wafer starts per month.
Anthony Petrone: While the timing of adoption by system and customer and market will vary we're excited about the value proposition our technologies offer and our team is highly focused on executing.
John Kiernan: With that, I'll turn it over to John for a financial update. Thank you, Bill. starting with revenue for the quarter. Revenue came in at $185 million above the midpoint of our guidance, up 4% from the prior year, and 5% sequentially. Our semiconductor business delivered record revenue during the quarter. comprising 67% of revenue, led by strength across several product In the compound semiconductor market, revenue declined from the prior quarter to $16 million. totaling 8% of revenue. Data storage revenue declined slightly to $33 million, comprising 18%, and lastly, Scientific and other made up 17%.
Speaker Change: With that I'll turn it over to Jon for a financial update.
Jon: Thank you Bill.
Jon: Starting with revenue for the quarter.
Anthony Petrone: Revenue came in at $185 million above the midpoint of our guidance up 4% from the prior year and 5% sequentially.
Anthony Petrone: Our semiconductor business delivered record revenue during the quarter, comprising 67% of revenue led by strength across several product lines.
Anthony Petrone: And the compound semiconductor market revenue decline from the prior quarter to $16 million.
Anthony Petrone: Totaling 8% of revenue.
Anthony Petrone: Storage revenue declined slightly to $33 million, comprising 18% and lastly, scientific and other made up 7%.
Turning to quarterly revenue by re... Revenue from Asia-Pacific region excluding China was 33% and the United States came in at 32%. In line with expectations, the percentage of revenue from China decreased to 30% due to a decline in semiconductor sales. We continue to expect China revenue for the full year to be around 33% of revenue. And lastly, EMEA was 5%.
Anthony Petrone: Turning to quarterly revenue by region.
Anthony Petrone: Revenue from Asia Pacific region, Excluding China was 33%.
Anthony Petrone: In the United States came in at 32%.
Anthony Petrone: In line with expectations the percentage of revenue from China decreased to 30%.
Anthony Petrone: Due to a decline in semiconductor sales, we continue to expect China revenue for the full year to be around 33% of revenue.
Anthony Petrone: And lastly.
Anthony Petrone: EMEA was 5%.
Switching gears to our non-GAAP quarterly results. Gross margin totaled approximately 44% in line with guidance. Operating expenses totaled $50 million, also in line with guidance. Income tax expense was approximately $3 million, resulting in an effective tax rate of approximately $1,100,000. Net income came in at approximately $28 million and diluted EPS was $0.46 on 62 million shares. Looking at our GAAP results, operating expenses declined by approximately $4 million from the prior quarter due to a $5 million gain from a change in estimate related to the Epi-LUVAC acquisition.
Anthony Petrone: Switching gears to our non-GAAP quarterly results.
Anthony Petrone: Gross margin totaled approximately 44% in line with guidance.
Anthony Petrone: Operating expenses totaled $50 million also in line with guidance.
Anthony Petrone: Income tax expense was approximately $3 million, resulting in an effective tax rate of approximately 11%.
Anthony Petrone: Net income came in at approximately $28 million.
Anthony Petrone: And diluted EPS was <unk> 46 cents on 62 million shares.
Anthony Petrone: Looking at our GAAP results operating expenses declined by approximately $4 million from the prior quarter due to a 5 million dollar gain from a change in estimate related to the <unk> acquisition.
Now moving to the balance sheet and cash flow highlights. We ended the quarter with cash and short-term investments of $321 million, a sequential increase of $16 million. From a working capital perspective, our accounts receivable increased by $40 million to $132 million, primarily due to timing of shipments as well as a change in customer mix. Inventory decreased by $3 million to $242 million and accounts payable increased by $3 million to $50 million. Customer deposits included within contract liabilities on the balance sheet increased by $1 million to $60 million.
Anthony Petrone: Now moving to the balance sheet and cash flow highlights we ended the quarter with cash and short term investments of $321 million, a sequential increase of $16 million.
Anthony Petrone: From a working capital perspective, our accounts receivable increased by $40 million to $132 million, primarily due to timing of shipments as well as a change in customer mix.
Anthony Petrone: Inventory decreased by $3 million to $242 million.
Anthony Petrone: And accounts payable increased by $3 million to $50 million.
Anthony Petrone: Customer deposits included within contract liabilities on the balance sheet increased by $1 million to $60 million cash.
Cash flow from operations came in at $18 million and CapEx $4 million.
Anthony Petrone: Cash flow from operations came in at $18 million in Capex $4 million.
John Kiernan: Turning to our Q4 and full year 2024 outlook. Q4 revenue is expected between $165 million and $185 million. We expect semiconductor revenue to decline in Q4 from record levels in Q3. Looking at the full year 2024, we forecast our semiconductor business to grow approximately 10% outperforming WFE growth for the fourth consecutive year and coming in at the high end of our original expectation for growth between five to ten percent. In the compound semiconductor market, we expect a sequential increase in Q4 revenue driven by shipments to photonics and solar customers. Turning to our data storage business, revenue is forecasted to decline in Q4 as we execute shipments in backlog.
Anthony Petrone: Turning to our Q4 and full year 2024 outlook.
Anthony Petrone: Q4 revenue is expected between 165 and $185 million.
Anthony Petrone: We expect semiconductor revenue to decline in Q4 from record levels in Q3.
Anthony Petrone: Looking at the full year 2024, we forecast that our semiconductor business to grow approximately 10% output.
Anthony Petrone: Outperforming wf fee growth for the fourth consecutive year and coming in at the high end of our original expectation for growth between 5% to 10%.
Anthony Petrone: And the compound semiconductor market, we expect a sequential increase in Q4 revenue driven by shipments to photonics and solar customers turning to our data storage business revenue is forecasted to decline in Q4, as we execute shipments in backlog.
And, in scientific, we expect an increase in shipments to several customers, including a shipment for quantum computing. We expect gross margin between 43 and 44 percent, OPEX between 48 and 51 million dollars. net income between $21 and $27 million, and diluted EPS between 35 and 45 cents on 61 million shares. Based on year-to-date results and our Q4 guide, our 2024 revenue guidance is now narrowed to $700 to $720 million from our prior range of $690 to $730 million. Correspondingly, we now expect diluted non-GAAP EPS for the full year between $1.68 and $1.78 per share from our prior range of $1.65 to $1.85 per share.
Anthony Petrone: And in scientific we expect the increase in shipments to several customers, including a shipment for quantum computing.
Anthony Petrone: We expect gross margin between 43, and 44% Opex between 48 and $51 million.
Anthony Petrone: Net income between 21, and $27 million and diluted EPS between 35, and 45 cents on 61 million shares.
Anthony Petrone: Based on year to date results and our Q4 guide our 2020 for revenue guidance is now narrowed to $700 million to $720 million from our prior range of $690 million to $730 million.
Anthony Petrone: Correspondingly, we now expect diluted non-GAAP EPS for the full year of between $1 68, and $1 78 per share from our prior range of $1 65 to $1 85 per share.
And now for some additional color beyond Q4. Beginning with the semiconductor mark. While demand from customers in China has been strong in 2024, recent engagement has moderated, resulting in expectations for decline in China revenue in 2025. Outside of China, we're seeing increased investment in AI and high-performance computing, including gate-all-around, high-bandwidth memory, and 3D packaging, providing the opportunity for revenue growth in 2025. In the compound semiconductor market, we continue to invest in long-term opportunities in power electronics and photons. In the silicon carbide market, while the transition to 200 millimeter production continues, weaker demand from a slowdown in EV adoption has resulted in customers delaying investment.
Anthony Petrone: And now for some additional color beyond Q4.
Anthony Petrone: Beginning with the semiconductor market.
Anthony Petrone: While demand from customers in China has been strong in 2024 recent engagement has moderated resulting in expectations for a decline in China revenue in 2025.
Anthony Petrone: Outside of China, We're seeing increased investments in AI and high performance computing, including gate, all around high bandwidth memory and three D packaging, providing the opportunity for revenue growth in 2025.
Anthony Petrone: And the compound semiconductor market, we continue to invest in long term opportunities in power electronics and photonics.
Anthony Petrone: And the silicon carbide market, while the transition to 200 millimeter production continues weaker demand from a slowdown in EV adoption has resulted in customers delaying investment.
In GaN power, emerging use cases have driven some traditional silicon power electronic manufacturers to consider adoption of GaN on silicon for 300mm production, which is an exciting opportunity. We're also seeing opportunities in solar and photonics.
Anthony Petrone: And Gan power emerging use cases have driven some traditional silicon power electronic manufacturers to consider adoption of Gan on silicon for 300 millimeter production, which is an exciting opportunity.
Anthony Petrone: We're also seeing opportunities in solar and photonics.
Turning to the data storage market, while customer utilizations are improving, they remain below peak levels from a few years ago, and customers have indicated they are not planning to invest in new systems to expand capacity in 2025. As a result, we expect an approximately $60 to $70 million reduction in data storage revenue in 2025. Taking the market outlook comments into consideration, as we look ahead to Q1 2025, we currently expect revenue to be in a similar range to Q4 2024.
Anthony Petrone: Turning to the data storage market, while customer utilizations are improving they remain below peak levels from a few years ago and customers have indicated they are not planning to invest in new systems to expand capacity in 2025 as a result, we expect an approximately 60% to <unk>.
Anthony Petrone: $70 million reduction in data storage revenue in 2025.
Anthony Petrone: Taking the market outlook comments into consideration as we look ahead to Q1 2025, we currently expect revenue to be in a similar range to Q4 2024.
William Miller: I'll now pass it back to Bill. Thanks, John. Despite near term headwinds in our data storage business, we remain confident our strategy can deliver long term value for shareholders. First, some industry analysts and leading equipment providers project growth of the semi-industry to over $1 trillion in the 2030 timeframe, contributing to expectations for long-term growth in wafer fab equipment spending. Second, Veeco has a portfolio of enabling technologies that are increasingly critical for several leading-edge semi-manufacturing process steps. Third, our strategy of investing in core technologies to enable industry inflections in advanced logic and memory continues to gain traction.
Speaker Change: I'll now pass it back to Bill.
Speaker Change: Thanks, John.
Bill Miller: Near term headwinds in our data storage business, we remain confident our strategy can deliver long term value for shareholders first some industry analysts and leading equipment providers project growth of the semi industry to over one trillion dollars and the 2030 timeframe contributing to expectations.
Bill Miller: For long term growth and wafer fab equipment spending.
Anthony Petrone: Second.
Anthony Petrone: Veeco has a portfolio of enabling technologies that are increasingly critical for several leading edge semi manufacturing process steps third our strategy of investing in core technologies to enable industry inflections and advanced logic and memory continues to gain traction.
Fourth, we believe our exposure to these high-growth areas of the market can enable our SAM to grow faster than growth in WFE spending. And finally, we expect our execution to generate long-term value for Veeco shareholders.
Anthony Petrone: Fourth we believe our exposure to these high growth areas of the market can enable our Sam to grow faster than growth in W. F E spending and.
Anthony Petrone: And finally, we expect our execution to generate long term value for veeco shareholders well.
Operator: With that, I'll now turn the call over to the operator to open up Q&A. Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star and then one on your telephone keypad. You may press star and then two if you would like to remove your question from the queue. Please hold while we pause for questions.
Anthony Petrone: With that I'll now turn the call over to the operator to open up Q&A.
Speaker Change: Thank you at this time, we'll be conducting a question and answer session.
Speaker Change: If you'd like to ask a question. Please press the star.
Anthony Petrone: And then one on your telephone keypad.
Anthony Petrone: The press Star and then two if you'd like to remove your question from the queue.
Anthony Petrone: Please hold while we poll for questions.
Mark Miller: The first question comes from Mark Miller from Benchmark. Please proceed with your questions, Mark. Recently, ASML gave a forecast that was somewhat below expectations. One concern was that their equipment is not being used as many process steps as previously thought. I'm just wondering if you're seeing any impact from that.
Anthony Petrone: The first question comes from Mark Miller from Benchmark. Please proceed with your questions Mark.
Mark Miller: Recently, ASML gave us a forecast that was somewhat below expectations.
Mark Miller: One one concern was that their equipment is not being used as the many process steps.
Mark Miller: Previously thought and I'm, just wondering if you're seeing any impact from that.
William Miller: Yeah, thanks for making some time for us today, Mark. Appreciate it. You know, our outlook for this year 24 is flat, very similar to ASML's outlook in the three to five. system range, and then looking forward to 2025, we also are expecting a three to five system range, as we've discussed, that the industry needs one of our systems for every 10 to 15 ASML scan or shipments.
Speaker Change: Yeah, Thanks for making some time for us today Mark appreciate it you know our our outlook for this year 24 is flat very similar to ASML outlook in the three to five system range and then looking forward to 'twenty. Five we also are expecting a three to five system range.
Mark Miller: As as we've discussed that the industry needs one of our systems for every 10 to 15 ASML.
Mark Miller: Scanner shipments.
We do expect some new application wins to provide the opportunity for revenue growth beyond that, and I would say that's probably, potentially, you know, one system every year or so, but so we're still very comfortable with our view of three to five on average going forward, and then, obviously, as ASML scanner shipments continue to increase as they're planning, our business would increase kind of in parallel with that.
Mark Miller: We do expect some new application wins to provide the opportunity for revenue growth beyond that and I would say, that's probably potentially you know one system every year or so, but so we're still very comfortable with our view of three to five on average going.
Mark Miller: Forward and then obviously as ASML scanner shipments continue to increase as they're planning our business way would increase are kind of in parallel with that.
William Miller: You mentioned that China will be down somewhat. Is that primarily driven by the slower EV market or other factors there? I'll take a shot.
Speaker Change: You mentioned that China will be down somewhat is that primarily driven by the slower EV market or other factors there.
Speaker Change: I'll take a shot at maybe Jon can fill it I would say.
Maybe John can fill in. I would say, largely, our China market is really in the semi-space. And so I would say, really, the demand for China has been strong in 2024. As John mentioned in our prepared remarks, our recent customer engagements have moderated, and we expect China revenue to decline as customers digest capacity. So, you know, it's a bit too early to definitely say how much China revenue will decline. You know, we generally have about six months visibility. And over time, we could see revenue moving towards more normalized rates.
Speaker Change: Largely our China market is is really in the AR in the semi space and so I would say.
Speaker Change: Really the demand for China has been strong in 'twenty for as John mentioned in our prepared remarks, kilroy reset our customer engagements have moderated and we expect a kind of revenue to decline as customers are digesting.
Speaker Change: Capacity, so yeah, it's a bit too early to definitely say, how much China revenue will decline.
Speaker Change: We generally have about six months visibility and over time.
Speaker Change: We could see revenue and moving towards a more normalized rates.
Thank you. Thank you, Mark.
Speaker Change: Thank you.
Speaker Change: Thank you Mark.
Speaker Change: Okay.
Ross Cole: Thank you. The next question comes from Ross Cole from Needham & Co. Please proceed with your questions, Ross.
Speaker Change: Thank you. The next question comes from Ross <unk> from Needham <unk> Co. Please proceed with your questions Ross.
Hi. Thank you for taking my question. I was wondering if you could provide any directional color for the different business segments for at least maybe the first quarter of 2025 or some guidance for the full year there. Thank you.
Ross: Hi, Thank you for taking my question.
Speaker Change: I was wondering if you could provide any directional color for the different business segments for our at least maybe the first quarter of 'twenty or 'twenty 'twenty five or some guidance for the full year there.
Speaker Change: Yeah.
John Kiernan: Sure, I'll take a stab at that, Ross. So, as we look into, you know, 2025, I would say for the full year, it's a bit early to provide, you know, detailed quantitative, you know, guidance. But we certainly can provide some qualitative commentary on the markets as we head into 2025. You know, you just heard Bill, you know, describe that recent customer, you know, engagements. If I'm talking about the semiconductor market here, that recent customer engagements in China have moderated a bit. And, you know, despite that view, we see the opportunity for growth in the semiconductor business in 2025, driven by AI growing from about 10% of our business to 20-plus percent in 2025.
Speaker Change: Sure I'll take a stab at that Ross.
Speaker Change: So as we look into 2025 I would say for the full year, it's a bit early to provide you know.
Speaker Change: Detailed quantitative guidance, but we certainly can provide some qualitative commentary on the on the markets as we head into 2025, you know you just heard Bill described that recent customer engagements if I'm talking about the semiconductor market here that recent customer engagements and <unk>.
Speaker Change: China had moderated a bit.
Speaker Change: And you know despite that our view, we see the opportunity for growth in the semiconductor business in 2025 are driven by a.
Speaker Change: Growing from about 10% of our business are two a 20 plus percent in 'twenty five.
This includes our web processing business, where we're seeing growth accelerating into next year. We also see a recovery in our AP lithography business that's been light as customers are adding capacity expansions for AI and mobile. We continue to be excited and see, you know, recent wins for our LSA business in both logic and memory. And as Bill also just, you know, mentioned, we see, you know, opportunities in our EUV mask business as well. So, we see opportunity for growth in the semi market in 2025.
Speaker Change: This includes a wet processing business, where we're seeing a growth accelerating into a into next year are.
Speaker Change: We also see a recovery in the in our AP lithography business, that's been light as customers are adding.
Speaker Change: The city expansion for AI in mobile we continue to be excited and see you know recent wins for our L. S. A our business in both logic and memory and as Bill also just mentioned, we see opportunities in our E. B, a mass business as well so we see opportunity.
Speaker Change: For growth in the semi market in them in 2025.
John Kiernan: If I move on to the compound semi market. In GaN power, we see emerging use cases have driven some traditional silicon power electronic manufacturers to consider adoption of GaN on silicon for 300 millimeter production, which is a pretty exciting opportunity. In the SICK power market, while the transition to 200 millimeter production continues, weaker demand from a slowdown in EV adoption has resulted in customers delaying investments there. We're also seeing some opportunities for several austin phosphide photonics and solar applications, and given that, we see potential for growth related to these activities in the second half of 25 and moving into 2026, but a bit too early to call the extent of that.
Speaker Change: If I move on to the compound semi.
Speaker Change: Market.
Speaker Change: In in and Gan power, we see emerging use cases have driven some traditional silicon power electronic manufacturers to consider adoption of Gan on silicon for 300 millimeter production, which is a pretty exciting opportunity.
Speaker Change: In the in the sic power market, while the transition the 200 millimeter production continues weaker demand from a slowdown in EV adoption has resulted in customers delaying investments there.
Speaker Change: We're also seeing some opportunities to several Washington, phosphide Photonics and solar applications and you know given that we see you know potential for growth related to these activities in the second half of 'twenty, five and moving into 2026, but a bit too early to call the extent of that.
Speaker Change: The one area, we see a headwind in 'twenty twenty-five isn't the data's AR and the data storage side. So our customers utilizations are improving but they remain well below peak levels from a few years ago and you know we generally work with about a year worth of lead time, you know with our customers.
The one area we see a headwind in 2025 is in the data storage side, so our customers' utilizations are improving, but they remain below peak levels from a few years ago, and, you know, we generally work with about a year worth of lead time, you know, with our customers, and in discussions with customers, they've indicated they're not planning to invest in new systems to expand capacity in 2025, and as a result of that, we expect about a 60 to $70 million reduction in our revenue from our data storage business in 2025 compared to 2024.
Speaker Change: And in discussions with customers they've indicated they're not planning to.
Speaker Change: To invest in new systems to expand capacity in 2025, and as a result of that we expect about a $60 million to $70 million reduction in our revenue from our data storage business.
Speaker Change: In 2025 compared to 2024.
Great.
Speaker Change: Great well I really appreciate the extra color there. Thank you.
Well, I really appreciate the extra color there. Thank you. Thanks, Ross.
Speaker Change: Thanks Ross.
Dave Duley: Thank you. Ladies and gentlemen, just a reminder, if you'd like to ask a question, please press star and then one. The next question comes from Dave Duley from Steelhead Securities. Please proceed with your questions, Dave. Yes. Thanks for taking my questions.
Speaker Change: Thank you ladies and gentlemen, just a reminder, if you'd like to ask a question. Please press star.
Speaker Change: And then when the next question comes from Dave Duley from Steelhead Securities. Please proceed with your question Steve.
Speaker Change: Yes.
Dave Duley: Thanks for taking my questions I guess first off on to eat up $50 million worth of orders.
William Miller: I guess, first off, on the $50 million worth of orders in the wet processing business, could you give us a rough cut how it's split between BPUs and high-bandwidth memory? Yeah, it's a Dave, I would say, you know, this is a lot of it's in our wet processing business. And clearly, we're seeing it as a key driver of business this year and continuing to see it strong in in 25. And I would characterize it as business from leading foundry, as well as high bandwidth, memory manufacturer, and as well as OSATs. So the exact breakdown of that is kind of hard to say, but clearly we have exposure in all those steps that you just asked about there.
Speaker Change: In wet processing business could you.
Speaker Change: Give us a rough cut.
Speaker Change: How it's split between D P use and high bandwidth memory.
Dave Duley: Yeah, It's Dave I would say yeah. This is a lot of it is in our wet processing business and clearly we're seeing it as a key driver of business this year and continuing to see a strong in in 'twenty, five and I would characterize it as.
Speaker Change: Business from our leading foundry as well as high bandwidth memory manufacturer and as well as Oh, Saks and so the exact breakdown of that is.
Speaker Change: Kind of hard to say, but clearly we have exposure are and in all of those steps that you just asked about there and yeah. We have about you know those 50 orders a quote you know we're about 20 systems of our business and from continuing discussions on.
And, you know, we have about, you know, those 50 orders equipped, you know, about 20 systems of business, and from continuing discussions on and planned orders, you know, we're getting quite confident 25 will be a strong year. And as John mentioned, you know, we're seeing AI-related business, whether that's in Foundry Logic, HBM, or OSET, kind of growing from about 10% of our business to 20% of our business plus in 25, so exciting opportunity. I'm just curious if you're calling this out now because you just got a big piece of the $50 million accumulative orders or has this been, you know, kind of ongoing split throughout the year?
Speaker Change: And planned orders are yeah, we're getting quite confident 25 will be a strong year and is as John mentioned you know we're seeing.
Speaker Change: Our AI related business, whether that's in foundry logic, H B MRO side, it's kind of growing from about 10% of our business to a 20% of our business plus in twenty-five so exciting opportunity.
Speaker Change: I'm just curious is that if you are calling this out now because you've just got a big piece of this $50 million of cumulative orders or has this been kind of ongoing split throughout the year with regard to the timing I guess.
It's regarding the timing, I guess. Yeah, it's been it's been ramping the business. Throughout the year, I would say we were kind of undersizing it previously, and now I think we're getting our hands around the opportunity now and have some good visibility into next year.
Speaker Change: Yeah, it's been it's been ramping the business.
Speaker Change: Throughout the year I would say, we were kind of under sizing. It previously and now I think we're getting our hands around the.
Speaker Change: City now and have some good visibility into next year.
William Miller: Okay. And then, you know, one of the hot buttons for everybody is China and what exactly is going to happen there. You know, I guess you characterized it as, you know, you expect the Chinese revenue to decline. And you said one other comment about normalizing. Maybe you could just help us understand, you know, where you would expect Chinese revenue to be. What is normal? And it sounds like normal is going to be sometime in 2025. So, I'm just kind of trying to figure out how much it's going to go down, what percentage it's going to equate to.
Speaker Change: Okay and then.
Speaker Change: You know one of the hot buttons for everybody is China, and what exactly is going to happen. There you know I guess you characterized it as you know you expect the Chinese revenue to decline.
Speaker Change: And then you said one other comment about normalizing maybe you could just help US understand you know where you would expect Chinese revenue should be what is normal and it sounds like normal is going to be sometime in 2020 five so I'm just kind of trying to figure out.
Speaker Change: How much it's gonna go gout what percentage it is going to Ah Ah Ah Ah quake too.
You know, I think it's a little bit more nuanced than that, Dave. You know, clearly, it's kind of too early for us to kind of call the year. We have only about six months of visibility. And so, I would say over time, I'm not exactly sure how that's going to roll off. Over time, I think it's probably safe to say whether that's the end of 25 or into 26. We'll probably get to what, you know, what I think John characterized as more normalized rates. And so, if you go back a few years, you know, China ran about 20% or plus or minus range of our business.
Speaker Change: You know I think it's a little bit more nuanced than that Dave you know clearly, it's kind of too early for us to kind of call. The year, we have only about six months of visibility and so I would say over time I'm not exactly sure how that's going to roll off over time I think it's it's probably safe to say whether that's.
Speaker Change: The end of 'twenty five are in the 26, we'll probably get to what you know what I think John characterized as more normalized rates and so if you go back a few years you know.
Speaker Change: China ran about 20% or plus or minus range of our business. So I would say yeah, we don't see that rolling off right away early on but are you know we would think that eventually would probably come back to normalized rates side at some point.
So, I would say, you know, we don't see that rolling off right away early on.
But, you know, we would think that eventually we would probably come back to normalized rates at some point. Okay, great.
Speaker Change: Okay, Great and then as far as your progress on your evaluation systems.
William Miller: And then, as far as your progress on your evaluation systems, you know, you gave us some pretty good detail on the segments of your business and the directions. I was just curious, do you expect, let's say, in the first half of 2025 for any of these evaluation systems to start to contribute to revenue? Or maybe do you think you have placed another evaluation system in the high bandwidth memory segment? And that's it for me. Thanks.
Speaker Change: You know you you gave us some pretty good.
Speaker Change: Detail on the segments of your business in the directions. I was just curious do you expect let's say in the first half of 2025 for any of these valuation systems.
Speaker Change: <unk> to start to contribute to revenue or maybe do you think you'll have placed a another evaluation system and the high bandwidth memory segment and that's it for me. Thanks.
Great. Thanks, Dave.
Speaker Change: Great. Thanks, Dave I'll give you I'll give you a brief update kind of in semi you know we have a the two evaluations and their nanosecond and healing.
I'll give you a brief update, kind of in semi. You know, we have the two evaluations in their nanosecond annealing in Logic. We're actually being assessed for multiple applications that the customers are evaluating us for. We've had some positive feedback. As a matter of fact, we actually have strong pull for a third evaluation at the third Logic customer, as well as a memory customer that we're trying to manage through our resources on. You know, I would say there are potential for NSA follow-on orders in late 25 at the rate we're kind of going here. So very positive there.
Speaker Change: And in logic, we're actually being a SaaS for multiple applications that the customers are evaluating us for we've had some positive feedback.
Speaker Change: As a matter of fact, we actually have strong pull for another a third evaluation at the third logic customer as well as a memory customer that we're trying to manage through our resources on <unk>.
Speaker Change: You know I would say there are potential for NSA follow on orders in in late 25 at the rate, we're kind of going here.
Speaker Change: So very positive there and I would say in the.
And I would say in the IBD 300 tool that we have for low-resistance metals in the memory applications, we're making good progress there. We continue to work with the customers. And we're working with them now at the point of trying to integrate this new kind of fourth deposition technology into the fab and helping them integrate this technology into their upstream and downstream processes. And once again, we are receiving strong pull from two Logic customers where we're considering probably putting one, at least one, and maybe two evaluations in the field in 25. And I would think here we're probably looking at initial follow-on orders late 25, but probably more like 26.
Speaker Change: The IBD 300 tool that we have for low resistance metals in the memory applications.
Speaker Change: We're making good progress there we continue to to work with the customers and we're working with them now at the point of trying to integrate.
Speaker Change: This new kind of forests deposition technology into the fab and helping them integrate this technology into their upstream and downstream processes.
Speaker Change: Once again, we are receiving strong pull from our two largest customers where we're probably we're considering are probably putting one at least one maybe two evaluations in the field in in 'twenty, five and I would think here, we're probably looking at initial.
Speaker Change: Follow on orders on a late 'twenty, five, but probably more like a 26.
We're also planning to put laser annealing LSA evals out to a second leading memory customer in the first half of 25 as well. So a pretty full slate of tools in the field that we're supporting and some planned incremental investments here in 25.
Speaker Change: We're also planning to put eval, Alice laser annealing LSA E mails out to a second leading memory customer.
Speaker Change: In the first half of 'twenty five as well so a pretty full slate of tools in the field that we're supporting and some planned incremental investments here in 'twenty five.
Hey, thank you very much. Thank you.
Speaker Change: Hey, Thank you very much.
Speaker Change: Thanks.
Speaker Change: Thank you ladies and gentlemen, we have reached the end of the question answer session. As there are no further questions I'd now like to turn the call back over.
William Miller: Ladies and gentlemen, we have reached the end of the question and answer session, as they are known for their questions, and I'd like to turn the call back to Mr. Bill Miller for closing remarks. Thank you, sir. Thank you.
Speaker Change: Miller for closing remarks, thank you Sir.
Speaker Change: Thank you I do want to thank our customers and shareholders along with the Veeco United team for their continued support and wish you all a great evening. This evening. Thank you.
I do want to thank our customers and shareholders along with the Veeco United team for their continued support and wish you all a great evening this evening. Thank you.
Speaker Change: Thank you, ladies and gentlemen that does conclude today's conference. Thank you very much for joining US you may now disconnect your lines.
Operator: Ladies and gentlemen, that does conclude today's conference. Thank you very much for joining us. You may now disconnect your lines.
Speaker Change: [music].
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Speaker Change: No.
Speaker Change: [music].
Speaker Change: Uh huh.
Speaker Change: [music].