Veeco Instruments Inc.

Welcome to the Vico Instruments Incorporated corporate hosted Q1 2021 earnings call. Today's call is being recorded. At this time, I would like to turn the conference over to Anthony Benzvenga, Head of 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 VCO Instruments and is copyrighted material. It cannot be recorded or rebroadcast without VCO'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. VECO 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 Miller.

Thanks, Anthony. Good afternoon and thank you for joining the call. I hope everyone's doing well. VECO delivered strong first quarter results, which is a testament to our team's resilience, dedication, and hard work. We're excited about the prospects of returning to more normal operations as more people are vaccinated. However, we're entering this phase cautiously and with the health and safety of our employees in mind. Before we get started, I'd like to express my confidence in 2021 by letting you know we'll be increasing our full-year guidance for revenue and earnings as a result of our backlog position. John will have more detail on this in just a few minutes. I'll begin by discussing our Q1 highlights, a review of our markets, and then turn it over to John for financial update and guidance. Q1 marked another quarter of solid execution with results above the midpoint of our guidance. Revenue of $134 million was driven by semiconductor and data storage sales. Our gross margin came in above 41%, and we achieved non-GAAP operating income of $16 million, leading to diluted non-GAAP EPS of 25 cents. In addition, we generated $10 million in cash flow from operations and increased our cash in short-term investments by $8 million. We're seeing strong order momentum broadly across our semiconductor products. This is consistent with a healthy macro environment in the semiconductor equipment space. Several analysts are forecasting this improvement. For example, Goldman Sachs recently revised their 2021 wafer fab equipment forecast up for the third time. It's now forecasted to grow more than 20% in 2021 and another 10% in 2022. A survey of the large semiconductor companies in the U.S., Korea, and Taiwan clearly demonstrates the commitment to investing in additional logic, memory, and advanced packaging capacity. And when we look further at the sources of demand for this capacity, we find the continued proliferation of mobile devices with 5G wireless, high-performance computing for graphics, AI and data center applications, and applications such as automotive and cloud storage. These market drivers and capacity investments made by our customers align well with our near-term growth initiatives in laser annealing, 5GRF, and data storage, and our long-term growth initiatives in semiconductor and compound semiconductor markets. In addition to healthy market dynamics, we made more progress during the quarter engaging with our customers and shipping evaluation systems. I'll explain how this positions VECO for longer-term growth. Now, let's turn to our specific market opportunities. Beginning with our semiconductor market, we serve this market with three major product lines, our laser annealing products for advanced logic, our ion beam deposition systems for EUV mask blank production, and our lithography products for advanced packaging. Our laser annealing products enable high-performance computing. They're used by leading-edge device manufacturers at the most advanced logic nodes. And a memory customer is evaluating our laser annealing system for their manufacturing processes as well. For logic applications, we're currently production tool of record at multiple leading-edge customers for their most advanced nodes, including a recent third application win at one of these customers. And recently, we shipped multiple evaluation systems to both an existing customer and a new leading-edge logic customer at their next nodes. As these evaluations close over the course of the next year, we hope to receive multiple tool orders. So, in summary, current product demand coupled with ongoing evaluations for future nodes make laser annealing an important part of our 2021 and longer-term growth plan. And in support of the semiconductor growth plan, I'm pleased to report construction is well underway at our new San Jose manufacturing facility. EUV lithography is also an enabler for high-performance computing as it allows manufacturers to further shrink their device geometries. VECO's ion beam deposition systems are used to make mass blanks for EUV lithography. Leading-edge fabs are accelerating their adoption of EUV lithography at their advanced nodes, which is driving mass consumption, and this is forecasted to continue. We're experiencing this trend with continued customer engagement, and in fact, I'm excited to announce that during the quarter, we received an order for two ion beam deposition chambers for EUV mass blank production. Moving on to advanced packaging. In order for electronic device performance to continue to improve, our customers have incorporated advanced packaging techniques such as fan-out wafer-level packaging in addition to shrinking nodes along Moore's Law. High-performance computing such as CPUs and graphics processors are driving advanced packaging demand. VECO's lithography products are recognized by our customers for flexibility, superior process control, and high productivity. In fact, we're seeing promising signs of improved demand. During the quarter, we received a multi-tool order from a large OSAT for our lithography products, and we continue to see advanced packaging as a healthy and steady business for the company. We serve the compound semiconductor market primarily with two product lines, our wet processing equipment for RF filters and power amplifiers, and MOCBD equipment for power, RF, and photonics applications. Our wet processing equipment offers excellent process performance for our customers in the RF market. The frequency and power demands of 5G RF drives more content per mobile device. Accordingly, we continue to see strong demand as customers add filter and power amplifier capacity. We are encouraged by customer feedback and demo results from our gallium nitride and arsenide phosphide MOCVD platforms. These products enable fast charging and other power management solutions, 5G RF devices, and micro LEDs. Recent early stage wins and an evaluation shipment position VECO to grow with these emerging markets as they gain traction. Our third major end market is data storage. This market has been growing for multiple years, consistent with cloud and data center demand. Our customers who make thin film magnetic heads require additional capacity to keep up with increasing head demand driven by larger drives. After multiple years of customers accelerating their capacity additions, including in 2021, our visibility into 2022 is limited at this time. However, with data proliferation showing no signs of slowing, we feel confident about the long-term prospects of our data storage business. And lastly, we're beginning to see signs of a potential recovery in our scientific and other market. This market is largely driven by sales to universities and research institutes. Now, for an update on our 2021 priorities. First, we strive to maintain resiliency across all aspects of our operations. Overall, I've seen remarkable teamwork and dedication throughout the organization. It's our people that put Vico in a position to succeed and meet our short and long-term growth objectives. Second, we'll continue to focus on profitability, and we're off to a great start with our Q1 results. Third, we expect to deliver near-term growth with our laser annealing, 5G RF, and data storage solutions. And fourth, we continue to make investments in evaluation systems and our service infrastructure. Our goal is to win additional application steps leading to multi-tool orders that will position VECO for long-term growth. And with these four priorities, the VECO team is committed to making a material difference and building a stronger VECO. Now I'll hand it over to John.