Q2 2025 Veeco Instruments Inc Earnings Call
Inflation.
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As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Anthony per Peng head of Investor Relations. Thank you you may begin.
Thank you and good afternoon, everyone. Joining me on the call today are Bill Miller, <unk>, Chief Executive Officer, and John Kiernan, Our Chief Financial Officer, today's earnings release, 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 earned.
<unk> market conditions or otherwise make 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.
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 management will address non-GAAP financial results. We encourage you to refer to our reconciliation between GAAP and non-GAAP results, which you can <unk>.
Find in our press release and at the end of the earnings presentation with that I will turn the call over to our CEO Bill Miller.
Thank you Anthony.
Veeco delivered strong financial performance exceeding the high end of our guidance.
Revenue totaled $166 million non-GAAP operating income of $23 million and non-GAAP EPS of <unk> 36.
Greetings, and welcome to the Q2 2025 earnings call for Veeco Instruments Inc.
At this time, all participants are in a listen-only mode.
Our semiconductor business posted another robust quarter highlighted by record revenue for our advanced packaging systems.
A brief question and answer session will follow the formal presentation.
This revenue was driven by growing demand from AI by a broad base of customers, including leading foundries and <unk>.
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As a reminder, this conference is being recorded.
Additionally, we had increased revenue for our ion beam deposition systems for <unk> mask blanks and continued demand for our laser spike anneal systems with shipments to leading customer supporting gate, all around and high bandwidth memory applications.
It is now my pleasure to introduce your host Anthony papone head of investor relations. Thank you. You may begin.
I'll now provide an overview of our role in the semiconductor manufacturing process and an update on key technologies.
Thank you and good afternoon everyone. Joining me on the call today are Bill Miller because Chief Executive Officer and John Kieran. Our Chief Financial Officer, today's earnings release, and slide presentation to accompany today's webcast is available on the vo website.
Veeco technologies remain critical for several leading edge semi manufacturing process steps.
Veeco is a market leader in laser annealing with our laser Spike anneal system qualified as production tool of record for leading logic customers and one tier one DRAM customer.
Our next generation nanosecond annealing system expands our capabilities to enable new applications and we're pleased to report our evaluations at advanced logic customers are progressing well.
Equally as important interest from additional logic and memory customers to evaluate our NSA system remains high.
Veeco is also the market leader for deposition of defect free films for <unk> mask blank production with our IBD <unk> system, our ion beam deposition technology is critical to the industry's roadmap and we're in a strong position to support demand for <unk> lithography we.
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, and our 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, 10K, annual report and other SEC filings vehicle, 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 management will address 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 turn the call over to our CEO Bill Miller.
Thank you, Anthony.
We also see opportunities to expand our business into adjacent mask blank steps.
Pico delivered strong financial performance exceeding, the high end of our guidance
Growth in AI is accelerating the adoption of new technologies and materials that enable continued device scaling and address the increasing demand for energy efficient compute performance.
Revenue total 166 million non-gaap operating, income of 23 million and non-gaap, EPS of 36 Cents.
As device geometries shrink traditional approaches are falling short of meeting resistivity requirements, prompting customers to evaluate new solutions to tackle these high value challenges.
Our semiconductor business, posted another robust quarter highlighted by record revenue for our Advanced Packaging Systems.
By a broad base of including leading Founders and OSAP.
Non-GAAP operating income of $23 million and non-GAAP EPS of $0.36.
It goes IBD 300 system, which is currently being evaluated by two DRAM customers differentiates itself from traditional technologies through its ability to achieve improved thin film properties with critical metals in memory and logic, which can directly impact device performance speed and battery life.
Our semiconductor business, posted another robust quarter highlighted by record revenue for our Advanced Packaging Systems.
Additionally, we had increased revenue for our imbe. Deposition systems for euv, mask blanks and continued demand for our laser Spike and kneeling systems with shipments to Leading customer supporting gate all-around and high bandwidth memory applications.
This Revenue was driven by growing demand from AI by a broad base of customers, including leading Founders and Oates.
I'll now provide an overview of our role in the semiconductor manufacturing process and an update on key Technologies.
Looking ahead, we remain highly focused on working with our customers to integrate our technology into their manufacturing processes and evaluate new applications.
Bico Technologies. Remain critical for several Leading Edge. Semi-manufactured steps.
Additionally, we had increased revenue for our IM beam deposition systems for euv, mask blanks, and continued demand for our laser Spike and kneeling systems with shipments to Leading customer supporting gate all around and high bandwidth memory applications.
And advanced packaging are wet processing systems, our production tool of record at a number of leading customers and we continue to expand with new application wins.
I'll now provide an overview of our role in the semiconductor manufacturing process and an update on key Technologies.
Vico is a market leader in laser and healing with our laser Spike and kneeling system qualified as a Production Tool of record for leading logic customers and 1, Tier 1 D Ram. Customer
Our system's unique capabilities have enabled our strong position in three D packaging for AI, providing continued growth.
Vico Technologies remain critical for several Leading Edge. Semi manufacturing process steps.
Our next Generation nanosecond and elink system expands our capabilities to enable new applications and we're pleased to report our evaluations at Advanced logic customers are progressing. Well,
And in advanced packaging lithography, where experience a recovery fueled by IBM and <unk> customers for several applications. This is expected to drive meaningful revenue growth in 2025.
Vico is a market leader in laser and healing, with our laser spike in kneeling system qualified as the production tool of record for leading logic customers and Tier 1 DRAM customers.
equally as important interest from additional logic and memory customers to evaluate our NSA system remains High
Demand for Veeco technologies is being accelerated by leading edge inflections, such as gate all around high bandwidth memory, <unk> lithography and <unk> packaging.
Vo is also the market leader for deposition of defect-free films for euv, mask blank production, with our IBD euv system.
Our next Generation nanosecond and elink system expands our capabilities to enable new applications and we're pleased to report our evaluations at Advanced logic customers are progressing. Well,
equally as important interest from additional logic and memory customers to evaluate our NSA system remains High
Our iron beam deposition technology is critical to the industry's roadmap and we're in a strong position to support demand for euv lithography.
Our exposure to each of these high growth areas offers the opportunity to expand our served available market.
We also see opportunities to expand our business into adjacent mask blank steps.
Kneeling, we project, our Sam to grow to approximately $1 3 billion in 2029 as device geometries continue to shrink and new architectures emerge customer roadmaps increasingly require precise and healing solutions with tighter thermal budgets. This is expanding the number of process steps we're laser anneal.
Vico is also the market leader for deposition of defect-free films for euv, mask blank production, with our IBD euv system.
Growth in AI is accelerating the adoption of new technologies and materials that enable continued device scaling and address the increasing demand for energy efficient performance.
Our IM beam deposition technology is critical to the industry's roadmap and we're in a strong position to support demand for euv lithography.
We also see opportunities to expand our business into adjacent Mass blank steps.
<unk> is being adopted.
as device geometry, shrink traditional approaches are falling short of meeting, resistivity requirements, prompting customers to evaluate new solutions, to tackle these high-value challenges
In logic gate, all around architectures and innovations like backside power delivery are driving higher laser annealing intensity.
Growth in AI is accelerating the adoption of new technologies and materials that enable continued device scaling and address the increasing demand for energy efficient compute performance.
In memory the <unk>.
<unk> towards the high bandwidth memory, and <unk> devices is prompting customers to adopt laser annealing to address new performance and integration challenges.
Because IBD 300 system, which is currently being evaluated, by 2D Ram customers differentiates itself from traditional Technologies, through its ability to achieve improved thin film properties, with critical Metals in memory and logic.
This device geometry shrink traditional approaches are falling short of meeting, resistivity requirements, prompting customers to evaluate new solutions, to tackle these high-value challenges
Which can directly impact the device performance speed and battery life.
And iron beam deposition for front end semi applications, we forecast growth in our Sam to approximately $350 million for high value steps required critical film performance.
Looking at we remain highly focused on working with our customers, to integrate our technology, into their manufacturing processes, and evaluate new applications.
And ion beam deposition for easy mask blanks, we see our Sam growing to over $120 million as the market expands adoption of EV and high in a lithography.
Rico's IBD 300 system, which is currently being evaluated by 2D Ram customers differentiates itself from traditional Technologies. Through, its ability to achieve an improved thin film properties with critical Metals in memory and logic, which can directly impact device, performance, speed and battery life.
An advanced packaging, our wet processing systems. Are Production Tool of record at a number of leading customers. And we continue to expand with new application.
And customers continue evaluating our technologies for adjacent mask blank steps.
Our systems unique capabilities have enabled, our strong position in 3D packaging for AI.
Looking ahead. We remain highly focused on working with our customers to integrate our technology, into their manufacturing processes, and evaluate new applications.
Providing continued growth.
And in advanced packaging, we see potential Sam growth for our enabling wet processing solutions for a growing number of applications supporting AI and high performance computing.
And in advanced packaging, lithography, we're experiencing a recovery fueled by IDM and osac customers for several applications.
In advanced packaging, our wet processing systems, are Production Tool of record at a number of leading customers. And we continue to expand with new application lens.
This is expected to drive meaningful Revenue. Growth in 2025,
As we look ahead, we believe our portfolio of enabling technologies for key inflections positions, our semi business to outperform <unk> growth over the long term.
Our systems unique capabilities have enabled, our strong position in 3D packaging for AI.
Providing continued growth.
Demand for Vico Technologies is being accelerated by Leading Edge inflections. That
I will now provide additional details on our evaluation program, which is core to our investment strategy and are essential to capturing our largest opportunities.
And in advanced packaging lithography, we're experiencing a recovery fueled by IDM and oat customers for several applications. This is expected to drive meaningful Revenue growth in 2025,
We're seeing strong customer engagement across multiple evaluations, which are targeting a range of high value applications. Each application win has the potential to generate $30 million to $60 million and follow on business, assuming 100000 wafer starts per month.
Demand for Vico Technologies is being accelerated by Leading Edge, inflections, such as gate, all around, high bandwidth, memory euv, lithography, and 3D packaging, our exposure to each of these high growth areas offers opportunity to expand our served available Market.
While adoption timing will vary by system customer and market customers are clearly excited about the value of our technologies bring and we remained sharply focused on execution.
Our evaluations in the field are progressing well and we're continuing to invest in additional systems to drive new business in both logic and memory we.
In annealing, we project our Sam to grow to approximately 1.3 billion in 2029. As the device geometries continue to shrink and new architectures emerge, customer roadmaps increasingly require precise and healing Solutions with tighter thermal budgets. This is expanding the number of process steps where laser annealing is being adopted.
We expect to ship in LSA evaluation system to a second tier one DRAM customer later this year, along with an NSA evaluation system to a third largest customer.
In logic gate, all-around architectures and Innovations. Like backside, power delivery are driving higher laser annealing intensity.
We also see potential for additional NSA in IBD 300 evaluation systems in 2026.
In memory, the shift toward high bandwidth, memory and 3D devices is prompting customers to adopt laser annealing to address new performance and integration challenges.
Given our continued momentum in our semiconductor business, we remain confident in our ability to capitalize on our long term growth trajectory.
With that I'll turn it over to Jon for a financial update.
In IM beam deposition for front-end semiconductor applications, we forecast growth in our SAM to approximately $350 million for high-value steps, requiring critical film performance.
Thank you Bill.
Starting with revenue for the quarter revenue came in at $166 million above the high end of our guidance slightly down sequentially and down 6% from the prior year.
An imbe deposition for Ev Mass blanks. We see our Sam growing to over 120 million dollars as the market expands adoption of euv and high na lithography.
And our guidance for the quarter, we took into consideration, but then impose substantial import tariffs.
In customers, continue evaluating our Technologies for adjacent Mass blank steps.
In China for goods manufactured in the United States, We reported certain China customers were delaying shipments due to the tariffs and the midpoint of our guidance range assumed $15 million of shipments would be delayed outside the quarter.
See potential Sam growth for our enabling wet processing solutions for growing number of applications supporting Ai and high performance computing.
During the second quarter as the tariff rate was significantly reduce customers' accepted the majority of shipments that were previously believed.
As we look ahead, we believe our portfolio of enabling Technologies for key inflections. Positions are semi- business to outperform wfe growth over the long term.
Our semiconductor business had another strong quarter flat sequentially and growing 13% year over year, representing 75% of total revenue year.
I'll now provide additional details on our evaluation program which is core to our investment strategy and essential to capturing our largest opportunities.
Year over year growth was led by strong performance of our ion beam systems for <unk> and wet processing and lithography systems for advanced packaging applications.
We're seeing strong customer engagement, across multiple evaluations, which are targeting a range of high-value applications.
And the compound semiconductor market revenue was flat from the prior quarter at $14 million totaling 9% of revenue.
Each application has the potential to generate 30 to 60 million dollars in follow-on business, assuming 100,000 wafer starts per month.
Data storage revenue increased to $12 million totaling 7% of revenue in line with our expectation.
Also in line with our expectations scientific and other revenue decreased to $16 million totaling 9% of revenue.
While adoption timing will vary by System. Customer and Market, customers are clearly excited about the value. Our Technologies bring and we remain, sharply focused on execution.
Turning to quarterly revenue by region.
Our evaluations in the field are progressing. Well and we're continuing to invest in additional systems to drive new business, in both logic and memory.
Revenue from the Asia Pacific region, Excluding China was 59% an increase from 36% in the prior quarter.
This increase was led by sales in Taiwan, and Southeast Asia for advanced packaging as well as ion beam deposition for <unk> mask blanks.
We expect to ship an LSA evaluation system to a second, tier 1 dram customer later this year, along with an NSA evaluation system to a third logic customer.
Revenue from China customers decrease in Q2 from Q1 with the percentage of revenue decreased to 17% from 42%.
We also see potential for additional NSA and IBD 300 evaluation systems in 2026.
China was 30% of first half of the year revenue in line with our initial expectations coming into the year.
Given our continued momentum in the semiconductor business. We remain confident in our ability to capitalize on our long-term growth trajectory
With that, I'll turn it over to John for a financial update.
The United States came in at 13%.
Thank you, Bill.
In EMEA was 11%.
Switching gears to our non-GAAP quarterly results.
Gross margin totaled approximately 43%.
Starting with revenue, for the quarter Revenue came in at 166 million of the high-end of our guidance, slightly down sequentially, and down 6% from the prior year.
Above the high end of guidance.
Gross margin was favorably impacted by higher volume and improved product mix operating expenses totaled approximately $48 million in line with our guidance.
in our guidance for the quarter, we took into consideration but then impose substantial import tariffs,
Income tax expense was approximately $3 million, resulting in an effective tax rate of approximately 11%.
In China for goods manufactured in the United States, we reported certain China customers were delaying shipments due to the tariffs. The midpoint of our guidance range assumed $15 million of shipments would be delayed outside the quarter.
Net income came in at approximately 22 million and diluted EPS was <unk> 36.
On 60 million shares.
During the second quarter as the Tariff rate was significantly reduced customers accepted the majority of shipments that were previously delayed.
Now moving to the balance sheet and cash flow highlights.
We ended the quarter with cash and short term investments of $355 million, a sequential increase from $353 million.
Our semiconductor business had another strong quarter, flat sequentially and growing 13% year-over-year. Representing 75% of total revenue.
From a working capital perspective, our accounts receivable decreased by $7 million to $107 million.
Year-over-year growth was led by strong performance to our iron beam systems for euv, mass blanes and wet processing and lithography systems for advanced packaging applications.
Inventory increased by $5 million to $259 million and accounts payable decreased by 8 million to $50 million.
In The Compound Semiconductor Market Revenue was flat from the prior quarter at 14 million totaling 9% of Revenue.
Customer deposits included within contract liabilities on the balance sheet decreased by $3 million to $37 million.
data storage Revenue, increased to 12 million totaling 7% of Revenue in line with our expectations
Cash flow from operations totaled $9 million and Capex totaled $3 million during the quarter.
Also in line with our expectation scientific and other Revenue decreased to 16 million dollars, totaling 9% of Revenue.
Further strengthening our balance sheet, we retired all $25 million of our convertible senior notes due in 2027 and the transaction. We issued one 6 million shares of common stock and $5 million of cash.
turning to quarterly Revenue by region,
Revenue from the asia-pacific region. Excluding China was 59%. An increase from 36% in the prior quarter?
Also during the quarter, we entered into an amendment to our revolving credit facility, increasing the size to $250 million from $225 million and.
This increase was led by sales in Taiwan and Southeast Asia for advanced packaging, as well as in beam deposition for euv. Max lines.
Ended the maturity to June 2030.
Both of these actions provide greater financial flexibility and liquidity as we focus on our key growth drivers for the business.
Revenue from China, customers decrease in Q2 from q1 with the percentage of Revenue decreasing to 17% from 42%.
China was 30% of first half of the Year Revenue in line with our initial expectations coming into the year.
Before turning to Q3 guidance I'll address global trade dynamics, which continue to evolve we remain closely engaged with regulatory developments and tariff policies across key region.
the United States came in at 13%,
And Amia was 11%.
Switching gears to our non-gaap quarterly results.
While the broader economic impacts of global trade tensions remain difficult to predict we've seen increased costs from tariffs on imported materials.
Gross margin total approximately 43%.
Of the high end of guidance.
That said, we are actively working with our global supply chain partners to mitigate these impacts our teams are focused on cost containment sourcing flexibility and operational efficiency to help offset potential headwinds.
Gross margin was favorably impacted by higher volume and improved product mix.
Operating expenses total approximately 48 million in line with our guidance.
Income tax expense was approximately 3 million dollars resulting in an effective tax rate of approximately 11%.
Now turning to our Q3 outlook.
Q3 revenue is expected between 150 and $170 million.
Net income came in at approximately 22 million and diluted EPS was 36 Cents on 60 million shares.
Gross margin is expected to between 40% to 42%.
Now, moving to the balance sheet and cash flow highlights.
Which assumes a 100 basis point impact from tariffs, we expect opex between 48% and $49 million.
We ended the quarter with cash and short-term Investments of 355 million, a sequential increase from 353 million.
Net income between 12 and $21 million.
And diluted EPS between 20, and 35 on approximately 60 million shares.
I will now provide additional commentary for each of our markets.
Inventory increased by million dollars, to 259 million, and accounts, payable decreased by 8 million to 50 million.
In the semiconductor market, we continue to see growth potential in 2025, particularly in leading edge investments driven by AI and high performance computing. These trends are expected to support significant demand with growth and gate, all around and advanced packaging technologies.
Customer deposits included within contract, liabilities on the balance sheet decreased by $3 million to 37 million.
Cash flow from operations, total 9 million and capex total $3 million during the quarter.
Beyond 2025, our outlook remains strong supported by our differentiated product portfolio across laser annealing ion beam deposition wet processing and lithography.
While we expect revenue in the compound semi conductor market to decline in 2025 compared to 2024, we are seeing encouraging signs of growth for application and Gan power solar in photonics. These.
Further strengthening our balance sheet. We retired all 25 million of our convertible senior notes. Due in 2027 in the transaction we issued 1.6 million shares of common stock and $5 million of cash.
Also, during the quarter, we entered into an amendment to our revolving credit facility increasing the size to 250 million from 225 million and extended the maturity to June 2030.
These emerging opportunities are expected to begin contributing to revenue growth in 2026.
Both of these actions provide greater financial flexibility and liquidity as we focus on our key growth drivers for the business.
And the data storage market system revenues declining year over year. However, our service revenue has increased reflecting higher customer utilization.
While it is too early to predict customer capacity additions for 2026, we are encouraged by increased engagement and commercial discussions around future requirements.
Before turning to Q3 guidance, I'll address global trade dynamics, which continued to evolve. We remain closely engaged with regulatory developments and tariff policies across key regions.
We continue to see strong demand in the scientific market for our research driven applications, particularly in quantum computing. This segment is expected to deliver growth in 2025 supported by ongoing investment in advanced scientific innovation.
While the broader economic impact of global trade tensions remains difficult to predict, we've seen increased costs from tariffs on imported materials.
With that I'll now turn the call over to the operator to open up Q&A.
That said we're actively working with our Global Supply Chain Partners to mitigate these impacts. Our teams are focused on Cost Containment source and flexibility and operational efficiency to help offset potential, headwinds.
Now, turning to our Q3 Outlook.
Thank you we will now be conducting a question and answer session.
Q3 revenue is expected between 150 and 170 million.
If you'd like to ask a question. Please press star and then one on the telephone keypad.
Gross margin is expected to be between 40 to 42%.
The Gulf of measured tone will indicate your line is in the question queue.
Which assumes a 100 basis point impact from tariffs, we expect Opex to be between $48 million and $49 million.
You May press Star and then T. J good luck to remove your question from the queue.
Net income between 12 and 21 million.
For participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.
And diluted EPS between 20 and 35 cents on approximately 60 million shares.
Once again, if you would like to ask a question.
Press Star and then one.
I'll now provide additional commentary for each of our markets.
The first question we have is from Thomas O'malley of Barclays. Please go ahead.
Hey, guys. Thanks for taking my questions. My first is just around the quarter. So you you took out some impact from China, but it looks like you've got that back in the numbers.
In the semiconductor Market, we continue to see growth potential in 2025 particularly in Leading Edge, Investments driven by Ai and high performance Computing. These Trends are expected to support significant Demand with growth in Gate all around and advanced packaging Technologies.
And I look at the geographic exposure, China does come down in the rest of World goes up pretty significantly I think quarter over quarter was up 64%. So are you shipping these products to other locations and they are making their way to China or are these different customers that are filling in the gap here. If you could just help put those together I'd appreciate it.
Beyond 2025, our Outlook remains strong supported by our differentiated product portfolio across laser kneeling, iron beam deposition wet processing and lithography.
Sure. So Tom this is John Thanks for the thanks for the question no. This is the delayed shipments that we expected at the beginning of the quarter that were being delayed because of the higher tariffs in China customers.
While we expect Revenue to Compound Semiconductor Market, to decline in 2025, compared to 2024, we are seeing encouraging signs of growth for applications in Gan, power solar and photonics.
These emerging opportunities are expected to begin contributing to revenue growth in 2026.
Then when the tariffs got significantly reduced rescheduled shipment during the quarter and accepted those shipments.
In the data storage market, system revenue is declining year-over-year. However, our service Revenue has increased reflecting higher customer utilization.
So China was expected even with those shipments in it to be down in the second quarter compared to the.
Compared to the first quarter and has come in rarely right, where we expected coming into the year. So for the first half of the year revenue the China customers was about 30% of revenue.
While it is too early to predict customer capacity additions for 2026. We are encouraged by increased engagement, and Commercial discussions around future requirements.
Okay. So the two are unrelated so I guess when you look at the back half of the year.
We continue to see strong demand in the scientific market for our research-driven applications particularly in Quantum Computing. This segment is expected to deliver growth in 2025, supported by ongoing investment in advanced scientific innovation.
You had previously kind of taken out $10 million to $15 million or so of <unk>.
With that, I'll now turn the call over to the operator to open up Q&A.
Impact from.
Products that you were unable to ship or is your view now that you're able to ship those in that customers are going to take those or are you still remaining cautious just youre, obviously getting it back in June do you put it back in for the rest of the year as well.
Thank you. We will now be conducting a question and answer session.
if you'd like to ask a question please press star and then 1 on a telephone keypad,
The confirmation tone will indicate your line is in the question queue.
So I think Tom for our view coming into the year irrespective of tariffs that China revenue is going to be about 30% in the first half of the year and sort of lesser in the second half of the year and generally in the semiconductor piece of the business because less invest.
you may press star and then 2, if you would like to remove your question from the queue,
for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Once again, if you would like to ask a question, you may press star and then 1.
And new 28, and 40 nanometer Fabs, where that was really the sweet spot for where our equipment was going I think the year is playing out as we expected it to play out there and now we expect somewhere in the range of about 20% of revenue for the second half of the year.
The first question we have is from Thomas Ali of Barclays. Please go ahead.
Coming from from China, So no change in expectations. The delay in tariffs shipments was a onetime thing in Q2 that for right now it's been totally resolved.
The next question, we have is from Rick Schafer of Oppenheimer. Please go ahead.
Thank you.
Yes, My first question, if I could you guys.
One of your largest U S customers.
Customers has become.
Pretty publicly more cautious around spending on advanced nodes.
So it's sort of like no more I guess more.
If you build it they will come attitude there so.
Does that affect or how does that affect your tam outlook for NSA and ion beam for metal right receptivity both of those kind of come to mind and anything else you might highlight that might be impacted by that.
Sure. Uh, so Tom, this is, uh, John. Thanks for the, uh, thanks for the question. No, this is, uh, the delayed shipment that we expected at the beginning of the quarter, that would be delayed because of the higher, uh, tariffs in China customers, um, uh than uh, when the tariffs got significantly reduced uh, rescheduled shipment during the quarter and accepted, uh, those shipments. Um, so China was expected even with those shipments in it to be uh, down in the second quarter compared to the um compared to the first quarter. And has come in rarely right where we expected coming into the year. So, for the first half of the year, uh, Revenue to China customers was about 30% of Revenue.
Yes, Rick I mean.
Yes.
That's a great question I would say you know obviously this IDM is trying to transition to a foundry and using your baseball analogy.
If you build it they will come it doesn't really work in a foundry model and I think.
Okay, so the 2 are unrelated. So I guess when you look at the back half of the year, um, you had previously kind of taken out 10 to 15 million or so, um, of continued impact from, you know, products that you were unable to ship are, is your view now that you are able to ship those and that customers are going to take those or are you still remaining cautious? Just you're, you're obviously getting it back in, June, do you put it back in for the rest of the year as well?
That makes a lot of sense for them.
That being said we are working with all the leading logic players on their next nodes and we're continuing to partner with.
With that IBM.
On helping them develop their core building blocks and key technologies that they need to enable in R&D to enable.
Their next nodes so it.
It's not really impacting our business in the short or mid term, we're continuing to work with them and.
In HBM for that is still a few years out and of course is subject to risk as is all R&D investments are.
Yeah.
Thanks for that Bill.
And if I could maybe just a follow up.
You mentioned, John maybe mentioned Gan power kind of briefly in a list of drivers for the business. So you have had that in our CBD eval I think more for a few quarters. Now I was just curious if you can give any more color on the on that eval.
So, I think Tom, you know, for our view coming into the year, irrespective of tariffs that China Revenue was going to be about 30%, in the first half of the year and, you know, sort of lesser in the second, you know, half of the year and generally in the semiconductor piece of the business because less investments in new 28, and 40 nanometer, Fabs where that was really The Sweet Spot for where our equipment uh, was going. I think, uh, the year is playing out as we expected it to play out there and now we, you know, expect you know, somewhere in the range of about 20% of the revenue for the second half of the year. Um you know coming from uh from China. So no change in expectations, the delay in tariffs. You know shipments was a 1 time thing in in Q2 that for right now has been totally resolved.
Mostly around timing like a sense of timing like are you.
The next question we have is from Richard Schaefer of oppenheim and Co please go ahead.
<unk> revenues there because they hit this year or is it really more of a 'twenty six driver I'm sorry, if I missed what you said, John but I just.
Kind of curious about where we are there.
Yes.
The 300 millimeter Gan on Silicon evaluation system, we have in the field.
Uh, thank you. Uh, I guess my first question. If I could, you guys, um, you know, one of your largest U.S. IDMs, uh, customers has become, you know, pretty publicly more cautious around spending on advanced nodes and...
Is progressing well.
We've received very positive.
Feedback from our customer.
Yes, we're pretty excited about it because this customer has kind of a long term view of.
300 millimeter Gan on silicon.
You know, so it's sort of like, no more, I guess more build it, if you build it, they will come attitude there. So, you know, does that affect? Or how does that affect your Tam outlook for NSA and, and ion being for metal resistivity? I mean, both of those kind of come to mind and, and anything else you might highlight that, that might be impacted by that, by that pivot.
And assuming success.
The plan is would be to have this drive pilot line business for us starting in 2006, so kind of a bit of a step up and then ramping to high volume in 2007 and beyond so.
Yeah, Rick. I mean
Pretty pretty exciting stuff for us.
it's a great question. I would say, you know, obviously this, uh, IDM is trying to transition to a Foundry and, you know, using your, uh, baseball analogy, you know.
Great. Thanks Bill.
Thank you Rick.
The next question, we have is from Charles <unk> of Needham <unk> Company. Please go ahead.
Thanks.
Jeff two questions here.
I'll continue on that cannot silicon.
Take a little bit more into the competitive dynamics here because we do recognize you have a European.
Equipment competitor.
<unk> has also historically being very strong in a compound semi especially when it comes to power and how do you characterize why you are able to weighing in.
You know, if you build it, they will come, doesn't really work in in a Foundry model and I think, uh, that makes a lot of sense for them. Uh, that being said we are working with all the leading logic players on their next nodes. And, uh, we're continuing to partner with uh, with that IDM uh, on helping them develop their core building blocks and key technologies that they need to enable in R&D to enable, you know, their next node. So um, it's not really impacting our business in the short or mid-term. We're
Continuing to work with them, and HVM for that is still a few years out, and, of course, is subject to risk as all R&D investments are.
With a potential to win here and what differentiates you from your competitor.
That's my first question. Thank you.
Charles I would say over the last few years in most CBD in particular, we've had a concerted effort to.
Upgrade our product lines specifically.
Specifically in 300 millimeter Gan on silicon and in the batch arsenide phosphide tools and what we're seeing is that as we're putting them out there that we are gaining some traction in the marketplace relative to competition. So specifically in Gan on silicon at 300.
Thanks for that little. Um if I could maybe just a follow up, um you mentioned like John, maybe mentioned Gan power, kind of briefly in a list of drivers for the business so you've had that msbd uh eval I think going on for a few quarters now I was just curious to give any more color on the on that eval.
You know mostly around timing like a sense of of timing like are you targeting revenues there? Could they hit this year? Is it really more of a 26 driver? Um I'm sorry if I missed that in in what you said, John. But uh, I just was kind of little kind of curious about where we are there.
Millimeters.
See that we're competitive from a productivity and cost of ownership standpoint.
While maintaining excellent process performance meeting the customer's specification.
And.
Arsenide phosphide tool set.
We're working with a number of customers for example in.
Low or low Earth orbit solar.
Activity.
Opportunities there micro OLED and indium phosphide applications in the data center. So we're working with a number of customers and some of the feedback we're receiving is that well.
Feedback from our customer. Um, you know, and we're pretty excited about it because this customer has kind of a long-term view of of 300, mm, gain on silicon and, you know, assuming success, uh, the plan, it would be to have this drive, uh, pilot line business for us starting in 26. So kind of a, a bit of a step up and then ramping to high volume in 27, and Beyond. So, um, it's pretty pretty exciting stuff for us.
We're really differentiated on our performance.
Great. Thanks Bill.
Thank you, Rick.
With a lower cost of ownership.
For our customers so.
Yes, it seems that it's been a bit of a long road and we still have a ways to go but early returns on the products.
The next question we have is from Charles she of nimman Company. Please go ahead.
Seem to be going in the right direction.
Thank you.
So the second question, maybe this is for John.
Wanted to ask you a little bit more China commentary.
It sounds like you're.
Sure.
Youre kind of guiding to like 20% ish of the revenue in the second half of the year will be coming from China, but that would imply a pretty big.
<unk>.
Versus the first half, but but on the other hand, we've been hearing from your peers, creating meaningful China upsides. So.
Uh, thanks uh, thanks Bill. Uh, John 2 questions here. Uh, maybe I'll continue on that. Uh, again, no silicon. Um, what, what a dig a little bit more into the competitive Dynamics here because we, we do recognize, you have a European, uh, equipment, uh, competitor who's, uh, has also historically been very strong in compound semi especially as when it comes to power. And how do you characterize why you are able to wing and uh with the potential of the wing here and what differentiates you from the good competitor? Uh that that's my first question. Thank you.
China there'll be upside over the last two or three weeks and so once they are.
You have embedded some of the upside in that second half guidance already or if you will.
Our expectation for China.
Bob over the last 90 ish days and.
Wanted to know if.
If you think there is more to the numbers I just it's a set of contracts that thank you.
Sure sure Charles.
So again a lot of the business that we drove the last couple of years in China was four laser annealing equipment and principally in new Greenfield Fabs at 28 40 nanometer.
We see continued investment in in that 20% revenue for the second half of the year, we're continuing to get <unk>.
Business for LSA with existing customers and we are seeing.
Charles I would say, over the last few years, in CBD, in particular, we've had a concerted effort to, uh, upgrade our product lines, uh, specifically in 300, mm, Gan on silicon and in the back, arsenide phosphide tools. And uh, what we're seeing is that as we're putting them out there uh that we are uh gaining subtraction in the marketplace relative to competition. So specifically in Gan on Silicon at 300. Mm, uh we see that we're competitive from a productivity and cost of ownership standpoint, uh while maintaining excellent process performance meeting the customers uh specification and uh in the arsenite, phosphide Tool Set. Uh we're working with a number of customers for example in uh low or low earth, orbit solar uh activity. Uh, there's some opportunities there.
New customers.
Come in here.
I would say, we really see that this playing out fairly the way we expected it to play out for the year. So we are having ongoing business just not at the pace of the last two.
Two years.
Okay.
Thanks.
Charles Thank you Charles.
There, uh, microled and uh, indium phosphide applications in the data center. So we're working with a, a number of customers. And some of the feedback we're receiving is that, uh, we're really differentiated on a a performance uh, with a lower cost of ownership, uh, for our customers. So at, um, yeah, it seems that it's been a bit of a long road and we still have a ways to go. But uh, early Returns on the products.
Okay.
The next question we have is from Mark Miller of benchmark. Please go ahead.
Uh, seem to be going in the right direction.
I'm just wondering if youre seeing any impact from the tariffs in terms of from your component suppliers, increasing costs or do you expect any.
Yes.
Yeah, So mark.
Have seen.
In terms of tariffs that we we import ourselves from from Europe, and Southeast Asia as the principal areas that we import directly ourselves.
China commentary um sounds like your your your your your kind of uh guiding to like 20% ish of the revenue infection.
Half of the year will be coming from China, but that would imply pretty big there.
For our supply chain and we are seeing tariffs tariffs there.
And it's about 100 basis point impact and our actual results for Q2, and we're forecasting a similar result in Q3, we are seeing potential for increases in price from domestic suppliers that also have international.
<unk>.
Supply chain there.
I'd say, we continue to work with those suppliers to try to mitigate the.
Uh, versus the first half. But but on the other hand, we we've been hearing from your peers pretty meaningful, uh, China upside. So, uh, China wfb upside over the last 2 or 3 weeks and so, on their, uh, you have embedded. Some of the upside in that the second half guidance already or, uh, did your expectation for China. Uh, come up over the last 90 days and, uh, well want to know if, um, if you think there there's more to to the numbers. You just uh you just said, 20%, thank you.
The impact from those tariffs.
Tariff increases or potential increases from our domestic suppliers.
You mentioned an opportunity in quantum computing for what equipment is that for.
IPD.
No markets for our mostly our molecular beam epitaxy equipment or <unk> equipment as well as some.
<unk> equipment for <unk>.
Sure, uh, sure Charles. Uh, so. So again, a lot of the business that we drove, uh, the last couple of years in in China was for uh laser kneeling equipment and principally in, you know, new Greenfield, Fabs at 28 and you know 40 nanometer. Um you know we see continued investment and in that you know, 20% you know, revenue for the second half of the Year. We're continuing to get
Researchers in the quantum computing space so.
Really MBE.
Thank you.
Thank you Mike Thank you Mark.
The next question, we have is from Gus Richard of Northland Capital markets. Please go ahead.
Yes. Thanks for taking the question you guys have a sort of a unique visibility across the industry.
Business for uh LSA with existing customers. And we are seeing uh you know, new customers. Uh you know, um come in here. I I would say we really see that this playing out fairly the way we expected it to, you know, play out um, for the year. So we're having ongoing, you know, business just not at the pace of the last uh, you know, 2 years.
Involved with litho.
Thanks.
We're involved with backside power Youre involved with advanced packaging and even transistor structures like gate, all around and <unk>.
Hey Charles, thank you. Charles
So my question is.
The next question we have is from Mark Miller of Benchmark. Please go ahead.
Which which technology or people.
Hot to trot, where are you seeing the most activity where are things getting pushed the hardest.
I'm just wondering if you're seeing any impact from the tariffs in terms of from your cam component, suppliers, increasing costs, or do you expect any
Thus I would say, it's really driven by AI high performance computing.
High bandwidth memory, and so our advanced packaging business is doubling in 'twenty five.
Really seeing a lot of strength in a lot of pull in wet processing, there, we're really engaged with.
Leading foundry H.
<unk> manufacturer as well as <unk> there.
And we're really.
Really expanding that business.
Yeah, so so Mark. Uh, we we have seen um uh in terms of uh tariffs that we we import ourselves from from Europe and Southeast Asia, the principal areas that we import directly ourselves, you know, for our supply chain and we are seeing you know, tariffs uh tariffs there. Um and um and it's about a 100 basis point impact in, in our actual results for Q2 and we're forecasting, a similar result in Q3, you know, we are seeing potential for increases in price from domestic suppliers. That also have a international um,
<unk> solidly in and likewise in litho, our business is improving over 24 will be a driver of growth for us.
In applications like.
Not only are AI and high performance computing, but also mobile and litho.
Supply chain there. Um, and I would say we continue to work with those suppliers to try to, you know, mitigate the, uh, the impacts, uh, from those tariff. And, uh, tariff increases or potential increases from our domestic suppliers.
And then besides advanced packaging I would say the second major area for growth for us kind of at the leading edge is in <unk>.
You mentioned an opportunity in Quantum Computing. For what, what equipment is that for?
Ipd.
In gate, all around where we're seeing a fair amount of a lot of growth there.
Year over year in 25, so I would say, it's really kind of transistor Vance transistor on the logic side and then wet processing.
Uh, no Mark, it's for our, um, mostly our molecular beam epitaxy equipment or MBE equipment as well as, uh, some ald equipment for, uh, researchers in in the quantum Computing space. So,
Really MBE.
Thank you.
Thank you, Mark.
Excuse me in advanced packaging.
Type applications for AI high bandwidth memory et cetera.
The next question we have is from Gus. Richard of Northland Capital markets, please go ahead.
Got it got it.
That's helpful and then my second one is.
There's not a lot of hard disk drive Geisel say, the customer's name <unk> doubled our capex.
Already seeing an increase in <unk>.
Spares and service.
Is there more upside in spares and service and if you are sorry in commercial.
Yes. Uh thanks for taking the question. You guys have a sort of a unique visibility across the industry. You're involved with, litho you're involved with backside power. You're involved with Advanced packaging and even transistor structures like data all around and CED.
so, my
Question is.
You know.
<unk> seen as I recall the lead time is three quarters do you see potential of systems shipping for the HDD market in the second half.
Which which technology are people, you know, hot to trot. Where are you seeing the most activity? Where are are things getting pushed the hardest?
Of 20.
Yes, I would say customers have continued to bring capacity online clearly their utilizations are increasing and we've seen that readout in our service numbers here throughout the first half of 'twenty five I would say.
To your to your point there, we actually are quite encouraged by.
Increased engagement with not only one but.
The other as well in terms of commercial discussions with our customers about their future requirements.
And you're right about the lead time.
So these are all very positive.
Positive signs that are.
That they could be bordering some more more equipment here so.
It's positive we don't have purchase orders in hand, but these are these are the the signs of.
Positive signs I would say for the data storage industry, and obviously you kind of quoted there.
Increasing capex percentage on increasing revenues, that's obviously a good a good sign.
Gosh, I would say it's it's really driven by AI high performance Computing and and high bandwidth memory. And so our Advanced packaging business is, is doubling in 25, uh, really think a lot of strength and a lot of pull in uh, wet processing. Their we're really engaged with uh, leading Foundry. Uh, hbm manufacturer as well as oats there and uh, and we're really uh, really expanding that business. Uh, very solidly and and likewise in litho, our business is improving, uh, over 24 and will be a driver of growth for us. Uh, uh, in applications like, uh, not only, uh, Ai and high performance Computing but also mobile, uh, in litho. And then the, uh, besides Advanced packaging, I would say the second major area for growth for us, kind of at the Leading Edge.
Great. Thanks, so much.
Thanks, guys. Thanks, Scott.
At this time, we have no further questions and I would like to turn the call back over to Bill Miller for closing remarks.
Yes, I'd like to thank our customers and shareholders along with.
The veeco team for their continued support and have a great evening. Thank you.
Edge is in, uh, in Gate all around where, uh, we're seeing a fair amount of a lot of growth there, um, year over year in 2561, uh, excuse me, in advanced packaging, uh, type applications for AI, high bandwidth memory, etc.
Got it, got it, that that's helpful. And then my second 1 is, um,
Ladies and gentlemen that concludes today's conference. Thank you for joining US you may now disconnect your lines.
You know, there's not a lot of hard to describe guy sold say the customer's name Seagate, I believe doubled or capex. You're already seeing an increase in um, spares and service.
Um, you know is there more upside and Spares and service? And if um you're starting commercial negotiations, as I recall the lead time is 3/4, do you see potential of systems shipping for the hcd market in the second half?
of 26, because I
To your to your point. There, we actually are quite encouraged by uh increased engagement with not only 1 but uh the other as well, in terms of uh commercial discussions with our customers about their future requirements, and you write about the lead time and so these are all very positive uh,
Positive signs that, uh, that they could be bordering some more more equipment here. So it's, uh, it's positive. We don't have purchase orders in hands. But these are, these are the, the signs of, uh,
Positive signs. I would say for the data storage industry and and obviously you kind of quoted there uh increasing capex percentage on increasing Revenue so that's obviously a good, a good sign.
Great. Thanks so much.
Thanks guys.
Thanks guys.
At this time, we have no further questions and I would like to turn the call back over to Bill Miller for closing remarks.
Yeah, I'd like to thank our customers and shareholders along with, uh, the Vico team for, uh, their continued support and, uh, have a great evening. Thank you.
Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.