Q4 2024 Veeco Instruments Inc Earnings Call
Ladies and gentlemen, greetings and welcome to the vehicle fourth quarter and full year 'twenty 'twenty full earnings conference call.
At this time all participant lines are in a listen only mode.
Brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host Anthony Popcorn.
Speaker Change: Head of Investor Relations. Please go ahead.
Speaker Change: Yes.
Speaker Change: Thank you and good afternoon, everyone. Joining me on the call today are Bill Miller, because 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: 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.
Speaker Change: Subject to the risks and uncertainties that could cause actual results to differ materially from the statements made.
Speaker Change: These risks are discussed in detail in our Form 10-K annual report and other SEC filings.
Speaker Change: <unk> does not undertake any obligation to update any forward looking statements, including those made on this call to reflect future events or circumstances. After the date of such statements.
Speaker Change: Unless otherwise noted management will discuss non-GAAP financial results. We encourage you to refer to our reconciliation between GAAP and non-GAAP results, which you can find our press release.
Speaker Change: And at the end of the earnings presentation with that I will turn the call over to our CEO Bill Miller. Thank you Anthony.
Bill Miller: 2024 was another successful year for Veeco, we reached several important milestones grew the business delivered solid profitability and strategically invested in several exciting long term growth opportunities.
Bill Miller: Beginning with strategic milestones as announced in our press release earlier today, we shipped an NSA system to a leading edge semiconductor company for high volume production of a two nanometer gate all around logic chips. We also reached an agreement to shipping, let's say evaluation to a second leading memory customer in 2025.
Bill Miller: Right.
Bill Miller: We shipped a 300 millimeter Gan on silicon evaluation system to a tier one power device customer with this customer having since provided positive feedback.
Revenue from our semiconductor business reached another record in 2024 outperforming WSB growth for the fourth consecutive year.
Bill Miller: Robust performance was primarily driven by record laser annealing revenue, including growth in the LSA shipments to mature node customers as well as leading edge shipments for high bandwidth memory and gate all around.
Bill Miller: Another key driver of growth came from what processing, where our system is production tool of record in three D packaging for AI.
Bill Miller: While investing for growth is core to our long term strategy expanding profitability is also important in 2024, we successfully grew non-GAAP operating income and EPS, while continuing to invest in our largest Sam expansion opportunities switch.
Bill Miller: Switching gears to our full year financial highlights Veeco delivered top and bottom line growth with results coming in above the midpoint of our updated 2024 guidance revenue totaled $717 million growing 8% from the prior year led by a 13% year over year growth in our semiconductor business non.
Bill Miller: <unk> operating income grew 6% to $116 million and diluted non-GAAP EPS grew to $1 74.
Bill Miller: Now for a look at our Q4 highlights.
Bill Miller: Revenue in the fourth quarter totaled $182 million, increasing 5% year over year.
Bill Miller: non-GAAP operating income $27 million and non-GAAP EPS 41 cents, our semiconductor business delivered another solid quarter of revenue highlighted by record laser annealing revenue, including shipments to two leading edge customers gate all around nodes.
Bill Miller: I'll now provide an overview of <unk> role in the semiconductor manufacturing process as well as an update on key technologies driving business today.
Bill Miller: <unk> technologies are critical for several leading edge semi manufacturing process steps, leading edge customer roadmaps required. The most advanced annealing solutions to address scaling challenges associated with shrinking geometries and new architectures.
Bill Miller: Device scaling with incumbent technologies is becoming more challenging and as a result, the number of steps available to laser annealing in both logic and memory is increasing.
Bill Miller: <unk> is the market leader in laser annealing with our laser Spike anneal Ing system qualified as production tool of record for leading logic customers and one tier one memory customer.
Bill Miller: Our recently launched next generation NSA system expands laser annealing capabilities to enable precise meals at a nanosecond dwell time and is under evaluation at two advanced logic customers for several new applications.
Bill Miller: <unk> was also the industry leader in ion beam deposition for E beam mask blanks with our IBD UV system, enabling deposition of defect free films for <unk> mask blank production.
Bill Miller: Our ion beam deposition technology is critical to the industry's roadmap and is expanding to adjacent mask blank steps as customers continue to explore new use cases.
Bill Miller: The growing need for energy efficient compute is driving the semi roadmap to consider new materials and technologies to scale optimize performance and reduce power consumption.
As device geometries continue to shrink incumbent technologies are struggling to lower resistivity, driving tier one logic and memory customers to consider new solutions.
Bill Miller: <unk> recently launched IBD 300 system differentiates itself from incumbent technologies through its ability to preferentially deposit low resistance metals. This can result in improved thin film properties and lower resistivity for critical metals in logic and memory, which directly impact.
Bill Miller: Device performance speed and battery life.
Bill Miller: Looking ahead, we're highly focused on working with tier one customers to integrate our technology into their manufacturing processes and evaluate new applications and advanced packaging are wet processing system is production tool of record at a leading foundry H b M manufacturer and <unk>.
Bill Miller: Our system's ability to support challenging process capabilities has enabled our strong position in three D packaging for AI, which drove strong growth in 2024 and expectations for growth to accelerate in 2025.
Bill Miller: And in advanced packaging lithography capacity expansions in the AI and mobile markets have led to expectations of a recovery in 2025, driven by a broad range of customers.
Bill Miller: Our strategy in the semiconductor market has been focused on expanding our served available market by investing in core technologies to enable industry inflections Veeco technologies have exposure to leading edge inflections in logic memory and advanced packaging, enabling technology transitions such as gate.
Bill Miller: [noise] around high bandwidth memory, UV lithography and three D packaging for AI.
Bill Miller: And annealing, we forecast our Sam to grow from approximately $800 million to around $1 $3 billion. We expect this to be driven by an increase in laser annealing intensity as logic and memory customers adopt laser annealing to address new challenges.
Bill Miller: And beam deposition, we project, our Sam to grow to approximately $350 million for high value front end semi applications requiring critical film performance growth.
Bill Miller: Growth in AI is accelerating adoption of new technologies and materials that enabled device scaling and address the growing need for energy efficient compute performance. We believe our IBD 300 system is unique capabilities that can address each of these high value challenges.
Bill Miller: And ion beam deposition for E beam mask blanks, we project, our Sam to increase to over $120 million as ASML expanse, EV and high in a capacity and customers adopt our systems for new applications.
Bill Miller: And then in advanced packaging, we see Sam expansion opportunities for our enabling wet processing technology for an increasing number of applications supporting AI and high performance computing.
Bill Miller: As we look ahead, we believe our portfolio of enabling technologies for key inflections positions, our semi business to outperform wf's E over the long term.
Bill Miller: I would now like to provide additional detail on our evaluation program.
Bill Miller: Our evaluation program is essential to expanding our position in logic and memory and we're investing in several evaluation systems to capture our largest sam growth opportunities.
Bill Miller: 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.
Bill Miller: While the timing of adoption by system customer end market will vary customers are excited about the value proposition our technologies offer.
Bill Miller: And we're highly focused on executing.
Jon: With that I'll turn it over to Jon for a financial update.
Jon: Thank you Bill.
Jon: With revenue for the year revenue came in at $717 million, increasing 8% over the prior year.
Jon: Our semiconductor business delivered $467 million in revenue up 13% year over year and comprising 65% of revenue.
Jon: Growth in the semiconductor market was largely driven by our laser annealing and advanced packaging wet processing systems comps.
Jon: Compound semiconductor revenue totaled $78 million a decline from the prior year, representing 11% of revenue Dave.
Speaker Change: Data storage revenue totaled $99 million, increasing 12% year over year, and comprising 14% of total revenue.
Speaker Change: And scientific and other revenue was $74 million a slight decline from the prior year, making up 10% of revenue.
Speaker Change: Moving to revenue by region.
Speaker Change: Anna comprised 36% of revenue.
Speaker Change: Up from the prior year driven by growth in sales to semiconductor customers, Our Asia Pacific region, Excluding China made up 32% of revenue led by shipments to semiconductor customers United States totaled 23% of revenue, primarily driven by data storage customers and lastly, EMEA was nine.
Speaker Change: Percent of revenue for the year.
Speaker Change: Our order backlog ended the year at approximately $410 million.
Speaker Change: Down approximately $80 million from the prior year, primarily attributed to our data storage business.
Speaker Change: Now looking at our full year 2024, non-GAAP operating results.
Speaker Change: Margin came in at 43, 3%.
Speaker Change: Relatively consistent with the prior year opt.
Speaker Change: Operating expenses increased 8% to $194 million, primarily driven by an increase in R&D investment.
Speaker Change: Operating income increased 6% from the prior year to $116 million.
Speaker Change: And net income increased to $104 million with tax expense of $15 million, yielding an effective tax rate of 12%.
Speaker Change: An increase from 10% in the prior year.
Speaker Change: Diluted EPS increased to $1 74 for the year on 61 million shares.
Speaker Change: I will now provide selected GAAP full year data.
Speaker Change: Amortization expense was approximately $7 million, our equity comp expense was $36 million depreciation and $18 million and net interest income was approximately $2 million.
Speaker Change: GAAP net income of $74 million included a $28 million impairment charge, resulting from our silicon carbide business not meeting our market expectations. This charge was offset by a $21 million gain from a reduction in the estimate of contingent consideration and $12 million and related tax benefit.
Speaker Change: That's resulting in a net benefit of approximately $5 million.
Speaker Change: Turning to Q4 revenue by market and geography.
Speaker Change: Revenue came in at $182 million up 5% from the prior year and down 1% sequentially in line with our prior forecast semiconductor revenue declined sequentially. After a quarterly record in Q3, comprising 62% of revenue.
Speaker Change: And the compound semiconductor market revenue increase from the prior quarter to $23 million totaling 13% of revenue.
Speaker Change: Data storage revenue declined to $14 million comprising 8%.
Speaker Change: And as previously expected scientific and other revenue increased to $33 million from $12 million in the prior quarter, which included shipments for quantum computing and research applications scientific and other made up 18% of revenue during the quarter.
Speaker Change: Yes.
Speaker Change: Turning to quarterly revenue by region.
Speaker Change: The percentage of revenue from China increased to 39% due to an increase in semiconductor sales rep.
Speaker Change: Revenue from the Asia Pacific region, Excluding China was 31% the United States came in at 19% and lastly, EMEA was 11%.
Speaker Change: Switching gears to our non-GAAP quarterly results.
Speaker Change: Gross margin totaled approximately 41, 5% below our guidance driven by a shift in product mix and additional spending for our evaluation programs.
Speaker Change: Operating expenses totaled $48 million at the low end of guidance <unk>.
Speaker Change: Income tax expense was approximately $4 million, resulting in an effective tax rate of approximately 14%.
Speaker Change: Net income came in at approximately $24 million and diluted EPS was <unk> 41 on 60 million shares.
Speaker Change: Now moving to the balance sheet and cash flow highlights we ended the quarter with cash and short term investments of $345 million, a sequential increase of $24 million.
Speaker Change: From a working capital perspective, our accounts receivable decreased by $35 million to $97 million, primarily resulting from the timing of when customer payments were due.
Speaker Change: Inventory increased by $5 million to $247 million and accounts payable declined by $6 million to $44 million.
Speaker Change: Customer deposits included within contract liabilities on the balance sheet decreased by $11 million to $49 million cash.
Speaker Change: Cash flow from operations increase from the prior quarter to $28 million, bringing our total for the year to $64 million.
Speaker Change: And capex totaled $5 million during the quarter and $18 million for the year.
Speaker Change: Turning to our Q1 outlook.
Speaker Change: Q1 revenue is expected to between 155 and $175 million, we expect gross margin of approximately 42%.
Speaker Change: Opex between 47 and $49 million.
Speaker Change: Net income between 16, and $22 million and diluted EPS between 26% and 36 says on 61 million shares.
Speaker Change: Turning to some additional color beyond Q1 based on market conditions, and our visibility we expect Q2 revenue to be in a similar range to Q1 levels.
Speaker Change: I'll now provide qualitative commentary for each of our markets beginning with the semiconductor market. We continue to expect a decline in investment for mature node customers in China outside of China growth in AI and high performance computing is driving an increase in leading edge investment in areas such as gate all.
Speaker Change: Round high bandwidth memory and advanced packaging as a result, we expect AI revenue to grow to 20% or more of revenue in 2025 from approximately 10% in 2024, we continue to advance our roadmaps and laser annealing.
Speaker Change: Beam deposition and advanced packaging and are well positioned to take advantage of growth and leading edge investment.
Speaker Change: And the compound semiconductor market, we continue to see opportunities in solar and photonics, which provide potential for revenue growth beginning in late 2025 into 2026. We also remain excited for the potential to expand in Gan power without 300 millimeter Gan on silicon solution.
Speaker Change: And data storage, our expectations are for approximately $60 million to $70 million decline in revenue in 2025.
Speaker Change: In scientific we're continuing to see strength in research areas like quantum computing, which have the potential to provide growth in 2025.
Speaker Change: Before we turn the call over to Q&A I'd like to highlight why we believe veeco is a compelling investment opportunity.
Speaker Change: First some industry analysts and leading equipment providers project growth of the semi industry to over one trillion dollars in the 2030 timeframe contributing.
Speaker Change: Contributing to expectations for long term growth and wafer fab equipment spending.
Speaker Change: Second Veeco has a portfolio of enabling technologies that are increasingly critical for several leading edge inflections third we believe our exposure to several high growth areas of the market can enable our sam to grow faster than growth in WSI spending and fourth we.
Speaker Change: Expect our investment strategy and execution to generate long term value for veeco shareholders with that I'll now turn the call over to the operator to open up Q&A.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.
If you'd like to ask a question. Please press star and one on the telephone keypad Alcon.
Speaker Change: A confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press star two if you'd like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the stock east.
Speaker Change: Ladies and gentlemen, we will wait for a moment, while we poll for questions.
Speaker Change: The first question comes from the line of Charles <unk> from Needham and company. Please go ahead.
Speaker Change: Hi.
Speaker Change: Good afternoon, a couple questions I wanted to start with the China.
China.
Speaker Change: I think that you guys provided that qualitatively China will decline. This year. That's the thank you you've had it for a while but wanted.
Speaker Change: Wanted to ask about Q1, because all.
Speaker Change: All the peers.
Speaker Change: Quoted before you are some of them seems to be guiding to flattish China in Q1 by some are probably seeing more of the immediate drop off the China revenue. So what do you see Q1 and.
Speaker Change: Since our I believe China, probably accounts for a good amount of our backlog supposedly you have good visibility of how much China can decline modern AC keep us a little more than quantitative.
Speaker Change: And anything you can provide it quantitatively that'd be great.
Speaker Change: Oh sure sure Charles I'm happy I'm happy to do so so we do have good visibility into the first half of China.
Speaker Change: And backlog and we expect our China revenue in the first half.
Speaker Change: Half of 2025 to be about 25% to 30% of total revenue.
Speaker Change: Down from last year, China for the full year was about 36% of our.
Speaker Change: Total revenue with that slightly more weighted to Q1 than Q2.
John Kiernan: Got it thanks, John that's very helpful color.
Speaker Change: The other question I do want to ask you more on the advanced packaging side.
Speaker Change: I did notice you talk about the wet processing product that looks like you.
Speaker Change: You already saw strong growth for last year, you think.
Speaker Change: Accelerate in 2025 mining can you provide us a little bit more color on what's driving that in may.
Speaker Change: Maybe a little more quantitatively do you see more acceleration in the first half.
Speaker Change: In the more immediate quarter or you are seeing something more coming up in the second half of the year.
Charles: Yeah, Good afternoon Charles.
Speaker Change: We're really excited about.
Charles: The advanced packaging opportunity.
Charles: We see this as an opportunity doubling in 'twenty five over 24, and that's largely driven by a wet processing. So.
Charles: So we're really kind of benefiting from capacity expansions at a leading foundry.
Charles: And H B M manufacturer as well as as multiple Oss and so.
Charles: Yeah, we see this is a multi year opportunity and also in litho. Our business hit 24 was pretty modest and were seeing that business.
Charles: Pick up with a lot of breadth and advanced packaging as well so as I said, our advanced packaging, including wet processing predominantly and secondarily.
Charles: Litho is is doubling so maybe from 75 million to $150 million.
That's a full year comment or I 70, <unk>, yeah, yeah yeah.
Charles: Okay.
Charles: Any any color.
Charles: Yeah.
Charles: Yeah, I would say John.
It's ramping but it's going to probably continue to grow from Q1 into Q2 and Q3 I think through the year, Yeah, and so we entered the year with a with a good backlog and maybe Charles this ties back to your first question.
Charles: A little bit as well about visibility into the backlog, we're entering 2020.
Charles: Five with virtually the same backlog in semiconductor than we started the year with the backlog is flat, but the composition of the backlog is different so at the beginning of the year, we had a higher concentration of backlog in.
Charles: With our China customers for their mature business as we enter 2025, a higher concentration and an increase in the semi backlog comes from area like two nanometer gate all around and.
Charles: In advanced packaging, so we've got a reasonable.
Charles: Ability there as well.
Speaker Change: Thanks, I really appreciate the color.
Charles: Thanks ill be back in the queue.
Charles: Thanks, Charles Thank you Charles Thank you.
Speaker Change: The next question comes from the line of Rick Schafer from Oppenheimer. Please go ahead.
Charles: Yeah.
Speaker Change: Hi, This is mark on the line for Rick Thanks for taking the question Congrats on your NSA shipments.
Speaker Change: Customer it looks like it's separate from the other two customers that you currently have on the NSA evaluation program. So I was wondering has this customer have been on the eval program before or and what gave them the comfort and the decision to make this purchased ahead of the other two that are still on email.
Speaker Change: So this this shipment came as part of a multi tool laser annealing system order from this customer.
Speaker Change: In 2024, and there our goal is to enter the market kind of at the two nanometer gate all around and so this this was not this is a new customer for us, but we did not provide an evaluation tool. So this was a straight a straight sale. So we're.
Now qualified at all four if you will.
Speaker Change: Advanced logic customers per gate, all around nodes for LSA and.
Speaker Change: We expect growth in gate all around.
Speaker Change: To really ramp in 2025 with these customers and I guess I'll just circle back on the NSA Eval. Since you mentioned it those emails are going well and we're actually looking the customers are looking at us for multiple applications.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Great. Thanks.
Speaker Change: I appreciate that I just wanted to go back to a question on China I know in the past you guidance on that.
Speaker Change: On your China exposure normalizing to around 20%.
Speaker Change: We're getting back there.
Speaker Change: In light of the export restrictions and everything the pulse of tariff. So I guess youre not seeing any direct impact on that in the first half of the year. So is it fair to say that your <unk>.
Speaker Change: Seeing more of that coming in in the second half of the year and anything has changed with that 20%, China bogey could it be lower.
Speaker Change: So thanks for the question.
Speaker Change: No way so yes, so what we what we've seen from changes in regulations. It really didn't have an impact to our near term view on China. We didn't have backlog with customers that were added to the entity list for systems backlog.
You know nor did any regulations come out that change licensing requirements for our products. So in the near term not an impact long term view of regulations, how regulations may change and you know what.
Speaker Change: No no impact there is our view on China had been that we were seeing less of these new opportunities or new Fabs and.
Speaker Change: And new projects coming.
Speaker Change: You know being funded or are invested in and Thats, what <unk> heard us say that we see our business.
Speaker Change: Slowing down for China as equipment purchases over the last couple of years get.
Speaker Change: Digested and that we have good visibility for about.
Speaker Change: Half a year so we.
Speaker Change: We see as I said in an earlier question that we see about 25% to 30% of our total revenue coming from China in the first half of the year and a lesser number in the second half of the year.
Speaker Change: Alright, thank you.
Wei: Thank you Wei.
Wei: Thank you.
Wei: Next question comes from the line of Mark Miller from Benchmark. Please go ahead.
Mark Miller: I was just wondering if you could provide some more color on high on memory, specifically high bandwidth memory.
Mark Miller: Also Oh Lam reported very strong sequential improvements in shipments the NAND customers.
Mark Miller: I'm, just wondering what youre seeing if youre seeing anything and then.
Mark Miller: We we don't have any position in Nan Mark I would say, we're at the point with our.
Mark Miller: Nanosecond annealing system, where we're doing some preliminary demos in in NAND, but we haven't placed an eval.
Mark Miller: At this time, so really not much exposure there and in high bandwidth memory. We actually have we are a production tool of record with our LSA systems.
Mark Miller: With one DRAM customer and we've been able to win their logic die and then the peripheral logic on each level of the high bandwidth memory stack I think we just announced on our call here that we have an agreement with the second DRAM customer.
Mark Miller: And we will be placing an eval, probably midyear mid 2025.
Mark Miller: Thank you.
Mark Miller: I'd say as I look at it.
Mark Miller: The continued business continues with HBM in 2025, and we were shipping volume in 'twenty four as well.
Mark Miller: Okay. Thank you.
Mark Miller: Thank you Mark.
Mark Miller: Thank you.
Mark Miller: Are you there.
Speaker Change: Our next question comes from the line of Gus Richard from Northland Capital. Please go ahead.
Gus Richard: Yes, thanks for taking my questions.
Gus Richard: On the LSA I want to make sure I understand have you been qualified for gate all around with LSI.
Gus Richard: Yes, all all the customers were qualified for their gate all around.
Gus Richard: Okay, and then is is NSA.
Gus Richard: Being looked at by the logic buys for is the incremental.
Gus Richard: Application backside power.
Gus Richard: They're looking at a number of applications.
Gus Richard: For a more kind of.
Gus Richard: Extending more of the more traditional front side annealing and they've also looked at back side as well, they're looking at a few different applications, there and I guess just to circle back on your gate. All around question. There you know when we look at growth drivers in 'twenty five.
Gus Richard: We see gate all around really starting to ramp and we think a gate all around has the potential to double for us and 25% over 'twenty for that.
Gus Richard: Would compensate for some of the China headwinds that John was mentioning a little earlier.
Speaker Change: Got it and then just in terms of your hard disk drive revenue at this point.
Speaker Change: I'm, assuming that that is just purely spares and service.
Speaker Change: Yes, yes correct.
Speaker Change: We didn't really have any significant systems bookings in 'twenty, four and given our lead time that that window is closed on 25 systems revenue.
Speaker Change: Got it and then.
Speaker Change: And I guess.
Speaker Change: Because nobody else will ask.
Speaker Change: On the scientific and other I mean, there's always a budget flush in the fourth quarter, you had a very strong quarter there.
Speaker Change: You know you're kind of looking at a similar revenue range for us.
Speaker Change: As quantum computing really starting to drive a little more incremental demand.
Speaker Change: Four.
Speaker Change: Tools that address that market.
Gus I would say we are seeing an increase in quantum computing activity year over year. So these are larger systems and so they're going to a show up kind of lumpy in our numbers, whether we have a system or to or we don't.
Speaker Change: On top of kind of our base scientific business. So worse work forecasting our scientific segment to grow in 2025.
Speaker Change: Okay, and I'm, assuming that's molecular beam epitaxy.
Speaker Change: Correct Yep and.
Speaker Change: They're kind of kind of Frankenstein type tools that may have an <unk> off the side of it or but largely they are predominantly MBE with modifications.
Speaker Change: Got it got it so that the price tag is.
Speaker Change: More than single digit millions.
Speaker Change: Are they when they are all packaged together they can be they can be over $10 million they might come in a separate bits, but yes. There are big opportunities Thats why they are they are pretty lumpy.
Speaker Change: Got it alright, thank you very much.
Gus Richard: Thank you Gus.
Speaker Change: Thank you.
Speaker Change: Next question comes from the line of Dave Duley from Steelhead Securities. Please go ahead.
Dave Duley: Yep. Thank you very much for taking my questions.
Speaker Change: I guess just.
Speaker Change: To start with you know you talked about the first half of the year could you give us an idea of what you think for total revenue is first half versus second half.
Speaker Change: And then the same thing for semi that would be very helpful.
Speaker Change: So yeah. So so Dave let me, let me try to cover that you know by the markets.
Speaker Change: For the full year and <unk>.
Speaker Change: And I'll start with data storage. So as we indicated we expect that the data storage revenue to be down about $60 million to $70 million year on year, representing we don't have expectations for shipping.
Speaker Change: Systems to customers and it's just the service and aftermarket.
Speaker Change: Our business there.
Speaker Change: If I look at the semiconductor market is really as we've described on this call. So far are really two elements to the semiconductor market for 2025, and we do see the opportunity for that market to have growth in 2025 on the one side we.
Speaker Change: We have.
Speaker Change: Expectation that China business.
Speaker Change: We will be down on the other side you know Bill has mentioned that we have expectation that our advanced packaging business and our business.
Speaker Change: Supporting gate all around has the opportunity to double.
Speaker Change: So you take that into consideration, we see the opportunity for growth in the semiconductor business.
Speaker Change: Despite the China.
Speaker Change: Headwinds and then in the compound semi side, we are coming off.
Speaker Change: Low volumes in 2024, we do see some opportunities in solar and photonics, providing.
Speaker Change: The opportunity.
Speaker Change: For revenue growth in the second half of the year.
Speaker Change: Here in the compound semi side and as Bill just mentioned the expectation with strength in areas like quantum computing on the scientific side that we do see opportunity.
Speaker Change: For growth there, so I'd say, David we're not making a <unk>.
Speaker Change: Wanted to take a call on the full on the full year and <unk>.
Speaker Change: First half versus.
Speaker Change: You know second half there.
Speaker Change: But that's.
Speaker Change: That's our view of the markets for 2025.
Speaker Change: Okay, and essentially you've already kind of taken the downdraft in the hard disk drive business. So.
Speaker Change: Now all of these moving parts really comes down to the semi growth outside of China versus the semi decline inside of China.
Speaker Change: Is that kind of correct and I think when you when you meld those together our views that's flat to up.
Speaker Change: Okay and it cleared the first half the second half.
Speaker Change: Not totally clear yet how that's going to go.
Speaker Change: Okay.
Speaker Change: And then.
Speaker Change: There's been a lot of you know cat are on H B M spending some customers seem to have been qualified and are moving forward with spending and some others aren't in.
Speaker Change: Total what would you expect your HBM business to do in 2025 versus 2024.
Speaker Change: I can't remember, if you've actually quantified how big it is but if you could help us understand how meaningful that would also be great.
Speaker Change: Yeah, I would say, we've been shipping high bandwidth memory laser annealing tools to one customer.
Speaker Change: Customer or we are qualified and our view is that we'll remain remain robust.
Speaker Change: For 2025, and as I said, we're just.
Speaker Change: <unk> entered into an eval agreement with a second customer that tool is going to ship in.
Speaker Change: Middle of 'twenty, five so thats not going to have any revenue impact on on 25. So I would say our HBM revenue is nearly flat and steady with this one customer.
Speaker Change: Okay and then.
Speaker Change: As far as the NSA.
Speaker Change: <unk> or really when you start to see NSA ramping into volume production will.
Speaker Change: Are some of these applications that help us understand how much of it is truly additive, but how much is somewhat cannibalistic from applications that you've already won that would've been addressed by an LSA tool.
Speaker Change: A lot of the I would say 80 plus percent are probably incremental a theres a lot of our.
Speaker Change: Applications.
Speaker Change: Where we're doing material modification, because we're only modifying the tops.
Speaker Change: <unk> surface of the of the structure and not heating up the the whole structure. So the way. The machine operates is a lot different than our traditional.
Speaker Change: Laser annealing system, what we are seeing though in some gate all around.
Speaker Change: Applications, where.
Speaker Change: There'll be an incremental step for gate, all around and healing that could be a nanosecond annealing and we'll keep the.
Speaker Change: The laser annealing steps Levine, Inc, possibly an incremental step there.
Speaker Change: So what I would say to the first order it's largely.
Speaker Change: Incremental not cannibalistic.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you Dave.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Mark Miller from Benchmark. Please go ahead.
Mark Miller: Just wanted to revisit where you're at on the ion beam for tungsten our films and I believe you were two customers any.
Speaker Change: New there.
Mark Miller: Yes, we have.
Mark Miller: To tools DRAM memory makers are we're continuing to work with them, we're probably going to continue that through two.
2025, there is a lot of customer engagement.
Speaker Change: Engagement and as you know Mark this is a pretty exciting opportunity to put up the fourth deposition technology.
Speaker Change: Into the fab, which is a pretty exciting and you know as I said the customers are engaged.
Jointly working together through.
Speaker Change: Integration issues downstream integration issues to to incorporate the ion beam.
Speaker Change: Deposition system into into their production lines. So I would say Oh I expect that evaluation to continue throughout 2025 at both customers with with high engagement.
Speaker Change: Can you can you give us.
Speaker Change: An estimate of the potential for follow on orders in that business.
Speaker Change: Yeah, we see.
Speaker Change: For memory type applications per 100000 wafer starts, it's probably 30 to 40 million.
Speaker Change: Dollars per application per node per customer.
Speaker Change: Thank you.
Speaker Change: Thank you Mark.
Speaker Change: Thank you.
Operator: The next question comes from the line of Dave Duley from Steelhead Securities. Please go ahead.
Dave Duley: Yeah I wanted to slip one more question here regarding the gross margins through through the first half of the year and perhaps in the second half given the mix that you expect from all your segments you sound like you have a pretty good idea about the directional.
Dave Duley: <unk> of the business, how should we think about gross margins progressing through the year.
Dave Duley: Yeah. So that's a good question. Thanks, Thanks, Dave.
Dave Duley: Yeah, we expect we ended.
Dave Duley: 2024 for the full year was 43%.
Dave Duley: Gross margin and our expectation for 2024 that gross margins would be more in the 40% to 42% range and the principal reason for that is as we see lower revenues coming from China customers.
Dave Duley: And data storage customers that gives us a mix headwind to gross margins because they typically have higher gross margins for those product lines and then we see additional business coming from the advanced packaging area in the Bakken you know typically has a bit lower.
Dave Duley: Margins there.
Dave Duley: We have a number of.
Dave Duley: Gross margin improvement initiatives that we have going on too.
Dave Duley: Partially offset the impact of the product mix as we improve manufacturing efficiencies efficiencies and installing warranty or tools and other.
Dave Duley: Efficiency objectives, there, but as we see it now.
Dave Duley: We're seeing gross margins are closer to the 42% range coming into 2025.
Dave Duley: And well do you think that 42% goes down with the mix of business as far as China, dropping and Theres basically no hard disk drive business systems business, well, that's what I'm, saying that's the that's the principal reason that we were seeing and calling about a 42% gross margin for 2002.
Dave Duley: Five coming down from about 43% in 2024.
Dave Duley: Okay. Thank you.
Dave Duley: Youre welcome. Thank you Dave.
Dave Duley: Thank you.
Dave Duley: As there are no further questions I now hand, the conference over to Bill Miller CEO for his closing comments.
Dave Duley: I'd like to thank our customers and shareholders along with the Veeco team for their continued support have a great evening.
Dave Duley: Thank you.
Dave Duley: The conference of equal has now concluded. Thank you for your participation you may now disconnect your lines.
Dave Duley: Okay.