Veeco Instruments Inc.

Good day and welcome to the VCO Instruments Incorporated corporate hosted Q3 2020 earnings call. At this time, I would like to turn the conference over to Anthony Bencivenga, Investor Relations. Please go ahead, sir.

Thank you, and good afternoon, everyone. Joining me on the call today are Bill Miller, VECO's Chief Executive Officer, and John Kiernan, our Chief Financial Officer. Today's earnings release is available on the VECO website. Please note that we have prepared a slide presentation to accompany today's webcast. We encourage you to follow along with the slides on VECO.com. This call is being recorded by Veco Instruments and is copyrighted material. It cannot be recorded or rebroadcast without Veco's express permission. Your participation implies consent to our recording. To the extent that this call discusses expectations about market conditions, market acceptance, and future sales of the company's products, future disclosures, future earnings expectations, or otherwise make statements about the future. Such statements are forward-looking and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made, including as a result of the COVID-19 pandemic. These factors are discussed in the business description, management's discussion and analysis, and risk factors sections of the company's report on Form 10-K, an annual report to shareholders, and in our subsequent quarterly reports on Form 10-Q, current reports on Form 8-K, and press releases. Vigo does not undertake any obligation to update any forward-looking statements, including those made on this call, to reflect future events or circumstances after the date of such statements. During this call, management may address non-GAAP financial measures. Information regarding such non-GAAP financial measures, including reconciliation to GAAP measures of performance, is available on our website. With that, I will turn the call over to Bill for his opening remarks.

Thank you, Anthony. Good afternoon, everyone, and thank you for joining the call. I hope you and your families are well. I'm excited to talk to you today about the current status of a United VICO. We are making great progress becoming a more cohesive organization as we implement our two-phase strategy. As a result of our teamwork, determination, and accountability, we have been operating remarkably well through this global pandemic. I am very proud of our VECO employees worldwide. As you know, we are investing in our core technologies to drive organic growth. It is this investment which will drive the next phase of Veco's growth by helping our customers enable a new experience age for consumers with game-changing applications like artificial intelligence, virtual and augmented reality, and autonomous driving. These applications require new device architectures, new materials, and higher performance. Vico has a history of solving difficult materials challenges, which gives us a unique advantage in delivering scalable technology solutions. In short, Vico is well-positioned to play a meaningful role in driving this new age with our customers. Today, I will take you through our Q3 highlights, John will provide a financial update and guidance, and then I will discuss our markets and technologies before taking your questions. Q3 marked another quarter of solid execution, with results driven by strength in our data storage business, and revenue came in at $112 million, which was above the midpoint of our guidance. Our gross margin was again healthy at 44%, and along with well-managed expenses, we achieved non-GAAP operating income of $14 million and non-GAAP earnings per diluted share of 22 cents. Our sustained profitability is a result of the work we completed over several quarters to improve our operating model, such as expanding gross margins and restructuring to reduce costs. And we increased our cash balance by generating $10 million in cash flow from operations. There has been significant activity in our data storage market related to data center and cloud storage demand. We are also seeing significant customer engagement in advanced-node semiconductor manufacturing, 5GRF, and power electronics. Entering the fourth quarter, we are in a strong backlog position. Our success in Q3 would not have been possible without putting employee health and wellness first. We maintain all health measures at our sites and have been working closely with our supply chain partners, enabling us to operate at normal capacity. As an added precaution and consistent with our commitment to safety, we communicated that all employees who can work from home should continue to do so into Q3 of 2021. Overall, we are confident looking forward. We have strong customer engagements and have a healthy backlog. The market drivers linked to the experience age, such as data center, 5G, semiconductor, power electronics, and photonics, are all trending positively and are aligned with FICO's growth initiatives. We believe we will have a strong finish to 2020 and are optimistic about 2021. And with that, I will turn the call over to John for a review of the financials.

Thanks, Bill, and good afternoon, everyone. Today I will be discussing non-GAAP financial data and would encourage you to refer to our reconciliation between GAAP and non-GAAP results, which you can find in our press release or at the end of the quarterly earnings presentation. Covering revenue for the quarter. Revenue totaled $112 million for the quarter, which was a sequential increase of 14%. We had strong performance in our scientific and industrial market, which made up 47% of our revenue. This was led by IonBeam system shipments to our data storage customers. The front-end semiconductor market contributed 18% of our revenue and was driven by an IonBeam deposition system sold for EUV mask blanks. We were encouraged by our laser annealing customer activity in the quarter and expect laser annealing to become a bigger revenue contributor in the upcoming quarters. LED lighting, display, and compound semi was 18% of revenue, driven by a broad number of applications, including RF and power devices, as well as advanced applications in the photonics segment. And the advanced packaging MEMS and RF filter market made up 17% of our revenue, with systems shipped into 5G RF filter and advanced packaging applications. And looking at our revenue by region, the rest of the world, which includes Japan, Taiwan, Korea, and Southeast Asia, was 42% of revenue, driven by sales of ion beam deposition systems to EUV mask blanks and data storage customers in Southeast Asia. The U.S. was 36% of revenue and included sales of systems for data storage as well as advanced packaging and GaN power electronics. EMEA was 13% of revenue and was driven by sales to compound semiconductor customers. And finally, China was 9% of overall revenue as expected. Now turning to non-GAAP operating results, we achieved gross margin of 44% in the third quarter at the high end of our guidance range. OpEx for the quarter was $36 million. This is in line with our stated operating expense target. On a non-GAAP basis, tax expense for the quarter was approximately $400,000, with net income coming in at $11 million. EPS was $0.22 on a diluted share count of 49 million shares. Now moving to the balance sheet and cash flow highlights. We ended the quarter with cash and short-term investments of $310 million, a sequential increase of $9 million. From a working capital perspective, our accounts receivable increased to $80 million as we increased shipments. DSOs for the quarter came in at 64 days, a slight increase from the prior quarter. Accounts payable increased $8 million to $34 million, driving days of payables up to 49, partially offsetting the increase in accounts receivable. Inventory increased $6 million to $143 million, resulting from investments we are making to increase shipments and provide evaluation systems to our customers in support of our growth strategy in semiconductor and compound semiconductor markets. Long-term debt on our balance sheet was recorded at $321 million, representing the carrying value of $382 million in convertible notes. And lastly, our capex during the quarter was $1.4 million. Now turning to Q4 guidance. Q4 revenue is expected to be between $120 and $135 million with non-GAAP gross margin between 42 and 44%. Reflected in our gross margin estimate are additional service expenses to support customer evaluation arrangements. We expect non-GAAP OPEX to be between $36 and $38 million. On a go-forward basis, we expect to keep SG&A close to current levels but are making strategic investments in R&D to support our growth initiatives. Gap EPS is expected between $0.02 and $0.17 per diluted share. Non-gap EPS is expected between $0.22 and $0.37 per diluted share. Diluted EPS is based upon a $50 million share count. And now for some additional color beyond Q4. At this time, based on our current visibility and forecasted backlog, we expect revenue growth in full year 2021 in the 10% range when compared to full year 2020. And with that, I'll turn it back over to Bill for a market update.

Turning to the markets we serve and our technologies. With the first phase of our transformation behind us, we will continue to focus solidly on the second phase of our transformation, growing the company organically in the semiconductor and compound semiconductor markets. We are confident in our execution in the near term based upon multiple customer engagements where the pull for production solutions is strong. This near-term growth stems from multiple product lines and comes from the data storage market, renewed demand in RF filters related to 5G, and continued activity in the front-end semiconductor market. Consistent with our longer-term strategy for growing in semiconductor and compound semiconductor markets, we are making investments to solve our customers' most difficult challenges with our core technologies. These investments include increased R&D and service spending, as well as inventory supporting evaluation tools at customer sites. Evaluation agreements are in process for our laser annealing systems for logic and memory applications. and our MOCVD systems for early-stage micro-LED applications. We have confidence this activity in high-value markets will be the catalyst for our growth in 2022 and beyond, and we will keep you updated on important milestones over the coming quarters. Now, looking more specifically at each of our four markets. In our front-end semiconductor market, our opportunities today are with our laser annealing technology sold to foundries and integrated device manufacturers, and our ion beam deposition technology sold to EUV mask buying providers. Both of these technologies are performing well. We are becoming incrementally more optimistic with our laser annealing opportunities. You may recall we are the process tool of record for one application step with two customers at advanced nodes. We are seeing continued order activity at the current node as our customers add capacity. In addition, there are multiple growth vectors we believe will drive market share gains in laser annealing. we are making solid progress with the second application step at an existing customer. We continue to make progress with our customers on their next nodes. In fact, we expect to ship evaluation systems to multiple customers in the coming quarters. And lastly, while our LSA product line has historically been applied to logic applications, we have shipped systems to a top-tier memory customer who is evaluating Vico's laser annealing solution. If successful, we expect the evaluations will result in new market opportunity, which would produce revenue growth in 2022 and beyond. In summary, our laser annealing technology, with its unique process capabilities at advanced nodes, is providing near-term strength and is also a key component in our long-term growth strategy. In the EUV mass blank market, we shift the system in the quarter, and we continue to work closely with our customers on future plans for capacity expansion as the industry progresses. In fact, one of our customers issued a press release in July announcing their plans to expand facilities in response to market demand for EUV lithography mass blanks. As previously stated, we see this market as a two-to-four system opportunity per year. In compound semiconductor markets, our MOCVD product is well-positioned to address applications like power electronics, 5G RF, Vixels, and edge-emitting lasers, and micro-LED. We are experiencing an uptick in demand for our MOCVD systems. We received multiple orders for a high-volume Propel system for power electronics, RF devices, and early-stage micro-LED applications, and there are noteworthy examples reflected in recent press releases. Aledia, a developer of next-generation advanced displays, has selected VECO's Propel 300-millimeter MOCVD system to manufacture its 3D nanowire micro-LED displays. The system features a semi-compliant equipment front-end module with full automation and was chosen due to its excellent productivity and film quality. APRO Semicon, based in Korea, has selected Beco's Propel HVM MOCVD system for GAN-based power and 5G RF semiconductor device manufacturing. As you can see, our single wafer gallium nitride propelled system has been well received by leading customers for its proven high performance capability. I am proud to announce recent successes with our Lumina Arsenide Phosphide System as well. Osram Opto Semiconductors qualified our Lumina MOCBD Beta System to drive their next generation of advanced photonic devices. The performance Osram demonstrated reinforces our confidence in Lumina's capability. Also, we have an evaluation agreement in place with another leading customer, which will further advance our ability to drive long-term growth. Within our scientific and industrial market, data storage continues to be strong, driven by cloud and data center demand. Our IonBeam technology enables our customers to increase the aerial density of their read-write heads, This improves performance in their high-capacity drives using cloud and data center applications. Based on our visibility in this market, we expect strong performance to continue through 2021. In our advanced packaging, MEMS, and RF filter market, RF filter demand is driven by 5G RF adoption and increasing RF content in 5G mobile devices. We expect this market to contribute to our near-term growth as we continue to deliver on wet processing solutions to our RF filter customers. The advanced packaging lithography market is driven by mobile devices, artificial intelligence, and high-performance computing. Our advanced packaging systems are optimized for methods such as fan-out wafer-level packaging, and we continue to engage with our customers to solve their lithography challenges. Lastly, before turning to our 2020 progress to date, I would like to inform our stakeholders that we will be modifying the way we report revenue to align with the company's evolving strategy. On a go-forward basis, beginning the fourth quarter of 2020, we will provide revenue in a new market segmentation. We will provide historical data reclassified to the new market segments for comparative purposes. As you know, Today's market segments are front-end semiconductor, LED lighting display and compound semiconductor, advanced packaging, MEMS and RF filter, and scientific and industrial. Given the size of our data storage business, we will be breaking out a data storage segment separately. We will also designate segments for semiconductor and compound semiconductor separately, given our strategic focus in these areas. and other important customers, such as universities or those that manufacture optical coatings, will be reported in a fourth segment. Our new segments will be semiconductor, compound semiconductor, data storage, and scientific and other. Now turning to our 2020 progress to date. We implemented appropriate actions and maintained the health and well-being of our employees during the global pandemic. During this time, we improved profitability by restructuring and reducing our expenses and improving gross margin. And as a result, our quarterly non-GAAP operating income improved year on year by $10 million on similar revenue. We also aligned R&D projects with our long-term growth strategy. Our current markets are performing well, giving us confidence we will continue to perform well through 2021. And we are pleased by our high level of customer engagement as we invest in evaluation systems for semiconductor and compound semiconductor customers, which we believe will drive our growth in 2022 and beyond. We are committed to making a material difference and building a stronger VECO that serves all our stakeholders. And with that, John and I will be happy to take your questions. Operator, please open the line.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. And if you're using speakerphone, please make sure your function is turned off to allow your signal to reach your equipment. Again, press star 1 to ask a question. We'll pause the remote so everyone has an opportunity to signal for questions. And we will go to our first question from Tom O'Malley of Barclays.

Hey, guys. Thanks for taking my questions, and congrats on the solid results. My first one is really around the MSCBD business. You saw during the quarter a bunch of press releases about some additional traction there. Can you talk about why you're seeing that initial traction right now, and is that becoming an increasing portion of what you guys – you know recognizes the growth story i know i know you can still be very excited about edb and and laser striking healing but um can you can you kind of talk about how the opportunity and compounds that you had to fall particularly at late yeah thanks for the question tom

You know, MOCBD is at historically low revenue levels right now. Really that's driven by the fact that we decided to exit the commoditized China blue LED business. So over the last year and a half or so, you know, we did a lot of work restructuring the business. and really focusing on new markets and new opportunities. And what you're seeing is just some early success. We're starting to gain some traction with Propel and Propower and 5G RF with APRO, and that's a pretty exciting opportunity. Also, we had an announcement with Aledia in propelled micro-LED. They have a very disruptive way of manufacturing micro-LEDs on 200- and 300-millimeter silicon. We also have another customer beta agreement in place for micro-LED with our Lumina system. Osram has signed off their luminous system. So I think we're just seeing the fruits of a lot of work kind of starting kind of from a very low level. So I think on a go forward basis, certainly coming off these very low levels in 2020, I would expect to see an uptick in 2021.

Great. That's really helpful. And then my second is really a question on the EUV market. You saw, you know, ASML report a couple of weeks ago and it was a little more cautious on their outlook there. I understand it's not a one-for-one for you guys, but you're part of that supply chain. Can you talk about if you've seen anything different from your expectations there? Or you mentioned in your prepared remarks that some of your customers are actually talking about new facilities. But can you talk about the variance there between what ASML is seeing and what some of your customers are seeing?

yeah we we obviously follow uh asml very closely and we're uh in very close discussions uh with our two japanese uh customers who do provide those math blanks i think all in all there's many puts it takes uh between asml and what customers plans are our view is is unchanged um overall you know we plan to ship about two to four systems per year on average and i think Even with some of these changes, we're not seeing a material impact to our forecasts.

Great. That's helpful. Thanks, guys. Thanks, Tom.

And we'll go to our next question from Rick Schaefer of Von Heimer.

Yeah, thanks. I love you. My congratulations, guys. Nice quarter. Bill, maybe my first question is kind of a follow-up on the MSCBD question. I think it's specific probably to APRO, but I'm curious, with that win, it just seems like that customer certainly is focused on EV fast-charging stations, and I was wondering if you could describe that market opportunity and how you look at the growth potential there as EV really starts to take off and certainly GAN power, as you mentioned a couple times on your call, continues to grow.

Yeah, we have seen an uptick in business certainly in the third quarter from an order activity. And I think what we're seeing now is the introduction of power devices in consumer electronic products. And so for applications like fast charging and wireless charging is driving demand. There's also other customers trying to qualify GAN in the automotive market, not in the high-power silicon carbide, high-voltage areas, but for power management throughout automotive. So it looks like it's going to be a good market for us, and it looks like our product, the Propel single wafer tool, is pretty well positioned there.

Thanks. And another question, and thanks for all the color on next year and the look on top line, and obviously you guys sound pretty bullish. I think you said for a while that you've got great visibility on your HDD business into the first half. Now it sounds like you've got pretty strong visibility in the second half. I didn't know if you could give, not to get too fine a point on it, but just give a little color on how that second half shapes up. I mean, at this point, I know it's next year, but, you know, just – Does second half look like it could be up over the first half next year in that business?

You know, I would say, you know, obviously we just announced that we're expecting 10% growth next year over 2020. And really, let me just break down, I guess, what the key growth drivers for us. And the first is data storage. You know, we've been booking a lot of business, and we see that really pretty clearly through all of 2021. The second growth driver for us next year is really in laser annealing. And, you know, we continue to ship at the current nodes and qualify at the next nodes. And our outlook there is very positive for 2021. And we're seeing a lot of activity in our wet processing equipment really for RF filters, 5G RF filters, and power amplifiers. So I think we really have a very good handle on 21. But as I looked at 22 and beyond, you know, we are making investments now in R&T and inventory for evals and improving our service capabilities to really support long-term growth in the semiconductor and compound semi-market. So big push right now is – is in placing evals and laser annealing for memory, advanced logic nodes, new logic customers. And in MOCVD, one focus for us is becoming qualified in micro-LED when that takes off in two to three years from now. And then finally, we are exploring other VECO core technologies in front-end SEMI, but it's a bit early for us to elaborate on that yet. Kind of a long-winded answer, but we see a clear path for 21, and we're really doing a lot of work to make sure we continue that growth trajectory in 22.

That's great, Tyler. Thanks. Thanks, Ray.

And moving on, we'll go to a question from David Dooley of Steelhead Securities. Oh, yeah, thanks for taking my question.

Real quick, as far as the upcoming quarter, could you just talk about the segments in Q4 and which directionally what you expect there?

I would expect to see strength in our scientific and industrial really on the back of continued activity in data storage. Do you want to take that, John?

Sure. So, Dave, just to add to what Bill said, and, you know, we do expect a good quarter coming out of the front-end semiconductor market as well. We see some opportunities for our laser annealing product there as well. So I think, you know, across the board, we're seeing, you know, activity across all four markets. Okay.

And I guess China is fairly de-risked out of our numbers.

Okay. And I noticed customer deposits were up fairly significantly sequentially. I think it was $20 million, if I'm not mistaken. Could you just talk about what's going on there?

Yes, sure, David. So we have been increasing engagements with customers where we've been fortunate to receive customer deposits. So we've expanded the base of customers that we're receiving deposits from. So, yeah, it was a very strong quarter for us in obtaining new deposits from customers for orders we took during the quarter.

Okay, final question from me. There wasn't a lot of information on the advanced packaging front. I was just wondering if you might address if you see anything coming in 2021 or when you would expect your advanced packaging business to take off, either from the big initial customer that you've had in the past or one or two of those customers, I guess, or any new customer engagements.

Yeah, Dave, I would say, you know, the part of the market where we participate, you know, has been steady and healthy and has had modest growth. And that's for applications like fan-out wafer-level packaging, copper pillars and bumping. This quarter we did revenue several tools to OSATs and IDMs. And I think, as you know, you know, we do have short lead times and limited visibility. But the business is a steady performer for us. We have not yet seen a significant uptick in this business yet. So that's kind of where we stand.

And would you expect there to be more activity in 2021?

You know, there obviously could be. We are not seeing visibility to it yet. So, I think I wouldn't want to speculate. Certainly, our growth, our 10% growth plan does not have that factored in.

Thank you very much.

Thanks, Dave.

And go to our next question from Patrick Ho of Stiefel.

Thank you very much, and congrats on the nice quarter. Bill, maybe first off, as a follow-up to some of your LSA comments, particularly the work you're now doing with the memory side of things, can you give a little bit of color on the type of applications? Whether it's because of the advanced memory moving to a lot more logic type of processes, is that helping to drive, I guess, the work you're doing with memory manufacturers or even their future adoptions?

Yeah, I mean, I think what we're seeing, and we've been working with a number of memory customers from a demo standpoint for a pretty long time. And we are seeing as a general statement that customers run a few nodes behind front and semi, a number of nodes behind front and semi. So they're looking at similar class of problems that the front-end logic guys have been working on for the previous number of nodes. So they're seeing, certainly in the demo activity, some significant benefits and benefits enough for them to take evaluation tools. So, obviously, it's very early, and the evaluation period is a year or more. But, you know, in two years, if we're successful, this could be a significant driver of longer-term growth. It's probably a market that's similar, if not maybe larger, than the logic business we have today. Great.

That's helpful. Maybe as my follow-up question, you know, going on to the data storage side of things, you know, one of the leading disk drive makers has, you know, noted that they are in the process of rolling out dry based on its hammer technology before year end. Can you just remind investors about some of the opportunities ahead for VECO, especially as this technology finally gets rolled out?

Yeah, thanks for the question, Patrick. As our investors may know, we've been a partner to the data storage industry for decades, and our IonBeam technology is used by all the hard disk drive manufacturers. And we're currently seeing explosion of data in the cloud and data centers requiring data higher capacity near-line drives. And so VECO is benefiting from additional head capacity on an absolute value, but also this hammer or mammer heat-assisted magnetic recording. So this technology transition is really driving a lot more steps and passes through VECO equipment as the drives become much more complex. So what we're seeing are some companies actually making brick-and-mortar expansion for their – to produce their capital – to place their capital, excuse me. So it's a good long-term trend, and VECO benefits from not only capacity but this technology transition. Great. Thank you.

Thank you, Patrick.

Our next question is from Mark Miller of the Benchmark Company.

Well, congrats on your quarter. I'm just wondering, following up on InnoVac yesterday, which came out and they said that their factory utilization of their tools, which are used to deposit the magnetic coating, When the hard disk is near historic highs, are you seeing similar high utilization on your data storage tools?

Yes. Yes, we are.

And they were talking about a, you said, I know you said it was going to remain, be strong. Is it going to be linear throughout the year or stronger in the first half of the year, or will it be strong throughout?

We have visibility pretty much through the entire year.

Okay. And typically you get nice margins on these tools. Will this help give you margin improvements next year?

You know, John, why don't you answer that question?

Sure. So, Mark, you know, we're currently operating in, you know, margin range in 42 to 44, you know, percent range this last quarter. We achieved 44%. you know, gross margin at the company level, you know, that's what we're guiding on, you know, going, you know, forward as well. That's what, you know, our current visibility, you know, gives us. In some respect, as volumes go up, as we've indicated, the volume increase, top line increase in Q4 and 10% year on year, we will get some benefit from volume. But as we indicated, we are making investments, you know, in service and some other spending for supporting these, you know, evaluations that will start to drive revenue in 2022. So overall, you know, we expect to, you know, operate in this 42% to 44%, you know, gross margin.

Okay. Finally, thank you. Finally, in terms of – give us an update on what's going on with the VIXL opportunity as well as the AP. Is that going to be choppy next year as it typically is?

Yeah, right now we're seeing – the market is really satisfied with the capacity that's there. We have – a product that's capable of producing edge-emitting lasers and Vixels, as well as silicon photonics, as well as micro LEDs, red micro LEDs. And so we are placing an evaluation tool at a key customer for micro LED applications, a beta evaluation. So I would think it's probably going to be, you know, slow to build. But I think over the longer term, I think it could be pretty good.

I could just make one on one. What are you looking for in terms of tax rate for next year?

So... So, Mark, I think, you know, the way we look at it is more of a tax, you know, expense given our NOL position in the U.S. than looking at it as a rate. So we are looking at, you know, taxes on a cash basis in the, you know, $1 million to $2 million, you know, range as we've been – on that trajectory because we expect that, you know, the U.S. profits that we have will be shielded by NOLs. That's per year, right? One to two million percent? Yes, per year.

Thank you.

Thank you, Mark. And as a reminder, you may press star one on your telephone keypad if you have a question at this time. That is star one for questions. And we'll go to our next question from Gus Richard of Northland.

Thanks for taking the question. Just real quick on the LSA system, you mentioned you're getting into memory. Is that slash or DRAM or both?

The opportunity is DRAM.

Okay. That makes sense. And then on the OSRAM tool, the press announcement getting qualified, congratulations. Did you recognize the revenue for that in the third quarter, or will that be recognized in the fourth?

That will be recognized, John. Actually, I think that was in the third. In the third quarter.

Got it. And then the GAN opportunity seems to be taking off a bit. I think it's shift one. or at least your second 300-millimeter tool or took an order for it. And I'm just wondering, on the GAN side, how much is power, how much is RF, how much is, you know, 300-millimeter versus smaller diameter?

Yeah, I would say most of – I'd say all of the power is at 200-millimeter, and really that's driven – you know, they're thicker – Films and 300 millimeter, the bow is very substantial bow. So I think the power applications will probably stay at 200 millimeter. And the 300 millimeter tool that we shipped and we announced to Aledia is for a unique GAN nanowire method where they actually deposit the LEDs directly on a 300 millimeter silicon wafer.

Okay.

So it's kind of a disruptive view of micro-LED.

I got it. And then, so they would do the green and the blue? Or can they do the red as well?

You know, I know the answer, but I'm not going to say. Maybe we should ask Elidia. Okay.

I'll move on.

I'll throw in that one.

Um, yeah, fair enough. And then, um, you know, you had a record from what I can tell quarter in science and industrial and I am being deaf. Um, and you're shipping the V systems as well. Are there any capacity complaints in that, um, for that tool?

Uh, no, no, we're, uh, We're performing well. We are still at a point where we can socially distance our assemblers and test technicians and work on staggered shifts. So no, we don't see any problem delivering our capacity in 21. OK.

And then last one for me. Sorry to take so many. On the advanced packaging, can you hold in at this, mid-60s level, we're seeing opportunity to start to see growth as demand for RF increase next year.

As I said, we are seeing the business growing modestly, but not explosively. And I think You know, certainly, you know, 5G has a really broad indirect effect, I think, on all the markets, whether it's LSA or advanced packaging. So I think we're seeing it, starting to see bits of it, but not in large chunks at this time. Got it. We don't need that growth. Yep. Thank you, Gus.

Yeah, yeah, I can tell. Thanks. Mm-hmm.

And at this time, there are no other questions. I would now like to turn the call back to our speakers for any additional reports and comments.

Yes, thank you, Operator, and I hope everyone is staying well during this challenging time. We do expect a strong finish to 2020, and I want to thank the VECO team for their continued dedication executing our growth strategy. I look forward to updating you at upcoming conferences. Have a great evening.

And this concludes today's call. Thank you for your participation you may now disconnect.