Veeco Instruments Inc (VECO) 2008 Q1 法說會逐字稿

Good day, everyone, and welcome to Veeco Instruments first quarter 2008 results conference call.

Today's call is being recorded.

For opening remarks and introductions, I would like to turn the conference over to Senior Vice President of Corporate Communications and Investor Relations, Ms.

Debra Wasser.

Ms.

Wasser, please go ahead.

Thank you, operator, and thank you all for joining today's call.

Joining me today are John Peeler, our Chief Executive Officer; and Jack Rein our Chief Financial Officer.

Today's earnings release was distributed at 4:00 p.m.

this afternoon.

If you haven't seen the press release please visit the veeco.com Website or call 516-677-0200 extension 1305 to get a copy.

We have also prepared an overview of our results, including historical segment information, for 2007.

This presentation can be found on the Veeco Website.

This call is being recorded by Veeco instruments and is copyrighted material.

It cannot be recorded or rebroadcast without Veeco's express permission.

You participation implies consent to our taping.

To the extent this that call discusses expectations about market conditions, market acceptance, and future sales of the Company's products, future disclosures, future earnings expectations or otherwise makes 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.

These factors are discussed in the business description and management's discussion and analysis section of the Company's report on Form 10-K and annual report to shareholders and in our subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and press releases.

Veeco does not undertake any obligation to update any forward-looking statements, including those made on this call, to reflect future events or circumstances after the date of such statements.

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 also available on our Website.

I would now like to turn the call over to John for our opening remarks.

Thanks, Deb, and thank you all for joining us today.

I'm pleased to be able to report on Veeco's solid progress for the first quarter of 2008.

This afternoon, we reported in line revenues and better than expected earnings due to our restructuring and cost containment efforts and good progress on gross margin improvements.

I'm confident that we are on track to improve Veeco's performance on both the top and bottom line in 2008.

As stated in our press press release, Veeco reported first quarter revenue of $102 million, which is in line with our guidance of $98 to $105 million.

Revenues were up 3% over the first quarter of 2007.

First quarter 2008 bookings were $109.3 million, at the mid-point of our guidance of $105 to $112 million and also up about 3% from the prior year.

We experienced strong revenue growth versus the prior year in our LED and solar process equipment business, which is the combination of our MOCVD and MBE product lines.

First quarter LED and solar revenues were $42.1 million, up nearly 90% from $22.4 million last year.

This business now represents our largest segment at 41% of revenue.

We're also quite pleased with the profitability of this business, which reported Q1 EBITDA of $8.6 million and gross margin of 41%.

During the first quarter, we received acceptance on all of our newest generation K465 MOCVD gallium nitride systems, which were shipped to customers in APAC, Japan and Europe during 2007.

LED and solar process equipment orders were $38.7 million, up 6% compared to $36.4 million booked in last year's first quarter.

First quarter orders included several multi-unit orders in some key strategic penetrations of tier 1 LED customers.

Data storage process equipment, the combination of our ion, beam and slider product lines reported revenues of $24.1 million, a decline from last year's $35.7 million.

As per our prior guidance, we had anticipated weak data storage revenues and profitability in the first half of 2008.

This business reported an EBITDA loss of $1.4 million in the first quarter and gross margins of 35.3%.

While our first half data storage revenue starts out slowly, we owned significant backlog to fuel revenue and profit recovery in this business in the second half of 2008.

And in fact, we currently anticipate that data storage will return to at least break-even level in the second quarter due to improved revenue and the benefit of our right sizing activities.

Data storage orders were $40.6 million in the first quarter, an increase of 27% compared to the $32.2 million reported last year and up 13% sequentially.

I think our solid bookings this past quarter in data storage is evidence that we made the right choices in streamlining our product lines and we remain well aligned to the current customer technology requirements.

Our key data storage customers have shown commitment to their wafer size and technology-related programs and lower cost of ownership requirements.

For example, we experienced strength in orders for PVDi, IBD, IBE, as well as our back-end slider products.

In metrology, revenues were $36.1 million, down 12% from the $41.1 million in the first quarter of last year, primarily due to the weak semiconductor environment.

However, the profitability of this segment improved significantly on a sequential basis, with gross margins increasing from 39.3% to 46.6% and EBITDA recovering to $1.8 million from a loss in the fourth quarter.

Metrology bookings were $30 million, the result of seasonally slow scientific research and industrial spending and continued semiconductor industry softness.

We believe that the normally weak first quarter in our research and industrial products was exacerbated by the difficult economic environment because earnings per share, excluding exclude amortization and restructuring charges, was $0.09.

This was ahead of our guidance range due to better than forecasted operating spending levels, which has been a significant focus area for us.

In addition, our gross margins were 41.7%, ahead of our guidance of 39% and up compared to the fourth quarter gross margin of 37.9%, even with the lower revenue base.

Jack will provide a bit more detail about this better than forecasted earnings result and we're certainly pleased that profitability and gross margins are heading in the right direction.

In addition to the improved financial metrics, I;d like to take a few moments to highlight some of our key accomplishments for the quarter.

First, we received see field sign offs of our new K465 MOCVD system and are receiving positive customer feedback on the high margin this tool delivers for high brightness LED manufacturers due to its automation, higher throughput and excellent yield.

Our competitor's tools are producing either 138 or 90 wafers per day depending on the system, while the TurboDisc K465 produces over 200 wafers per day.

Second, we began shipping our first thermal deposition sources for the CIGS solar market this quarter.

While we're not permitted to name these customers, our sources are currently being sold to several leading thin film CIGS manufacturers.

Third, we shipped our first PVD high right alumina deposition tool to an important hard disk drive customer.

Fourth, Mark Munch joined Veeco in February as our new leader for Veeco metrology.

Fifth, we received customer acceptance of our beta InSight 3D Auto AFM at a leading semiconductor device manufacturer.

InSight is the only metrology system on the market with the accuracy and precision required for nondestructive, high resolution, three-dimensional measurements for 45 and 32-nanometer semiconductor features.

Six, we completed the move of our corporate headquarters from Woodbury into our Plainview, New York, ion beam facility, which will save the Company nearly $2 million on an annual basis.

Seventh, in our optical metrology products during the first quarter we made our first commercial shipments of two important new products.

These are the HD 9800 production optical profiler for the data storage industry and the new NT9100, which is a bench-top interference microscope that's experiencing strong early adoption at key industrial customers, including those in solar and LED.

Eighth, in our Nano-Bio AFM business we launched six new advanced electrical and mechanical characterization modes and features for our highly successful Innova AFM.

We also announced an exciting new imaging mode for our Nano-Bio products called Harmonics.

Harmonics rapidly provides quantitative nanoscale material property maps and will be incorporated into several of our scanning probe microscope products.

And lastly, we completed our SAP implementation in Japan and now all of Veeco's global sites are up live on SAP.

So in summary, we made excellent progress in each of our businesses during the first quarter and reported solid results for the Company overall.

I'll now turn to our guidance for the second quarter.

As stated in our press release, we currently anticipate that revenue will increase to $102 to $110 million.

Veeco's earnings per share is forecasted to be between $0.05 and $0.11 on a non-GAAP basis.

We expect second quarter 2008 bookings to improve from the first quarter with a range of $110 to $118 million, driven by sequential bookings increases in LED and solar process equipment and metrology segments.

End markets in high brightness LED remain strong with customers continuing to invest in capacity.

In solar, our E475 MOCVD system, with 50% more throughput than the competitor, is helping to manufacture some of the world's most efficient, low cost, 3,5 solar cells.

Q1 bookings also included both MBE systems and CIGS sources.

We think the thin film CIGS market offers a promising growth opportunity for Veeco, given the potential for increased efficiency and lower cost panels than silicon.

As stated, we're increasing our R&D and engineering investments in our LED and solar businesses in 2008.

In our data storage segment, while we anticipate further lumpiness in order flows as customers manage CapEx on a quarterly basis, we're confident that there remains a healthy unit demand for hard drivers and thin film magnetic heads that should enable Veeco to continue to have a growing and profitable equipment business.

In metrology, we currently forecast a sequential improvement in bookings due to an anticipated anticipated pickup in our nano, bio and optical instrument product lines due to strong customer interest in some of our newest products.

In optical, we're also seeing positive bookings patterns for our HD line from key data storage customers.

However, overall semiconductor market conditions remain extremely weak and while we've seen a recent increase in the number of semiconductor customers sending in their wafers for testing, we are experiencing very challenging head winds for gaining traction in our new InSight 3D Auto AFM system.

We are not anticipating a meaningful improvement in this business at least through the first half of the year.

For metrology overall, I'm glad to have Mark Munch on board as the new leader for this business.

I think he's making good progress in increasing the group's customer focus and identifying a growth and profit improvement path for the business.

Some initial focus areas for Mark are on improving our marketing, product definition, and customer satisfaction and implementing continued gross margin improvement programs.

So in summary, we expect to make good progress in the second quarter for Veeco on both the revenue and bookings front and are on track for a better 2008 with a plan to deliver steady revenue increases and profitability improvement.

I'd now like to turn the call over to Jack to review some details on our P&L and balance sheet.

Jack.

Thank you, John.

First quarter 2008 orders improved to $109.3 million, up 3.2% from the first quarter of 2007.

LED solar process equipment represented 35.4% of orders at $38.7 million.

Data storage process equipment represented 37.2% of orders at $40.6 million.

And metrology represented 27.4% of orders at $30 million.

Compared to the first quarter of '07, we experienced a 6.3% increase in LED solar process equipment orders, a 25.7% increase in data storage process equipment orders and a 19.4% decrease in metrology orders.

Veeco's book-to-bill ratio was 1.07-to-1 for the quarter.

Sales were $102.3 million, up $3.1 million or 3.2% for the three months ended March 31, 2008, versus the first quarter of 2007.

We experienced a $19.7 million or 88% increase in LED and solar process equipment sales due to positive market acceptance of our latest generation of gallium nitride and arsenic phosphide tools and this is partially offset by an $11.6 million or 32.5% decrease in data storage process equipment sales from a timing delay in customer demand in the data storage industry.

In addition, metrology sales declined $5 million at 12.1% due to weak revenues from instruments sold to semiconductor and research markets.

Backlog at March 31, 2008, was approximately $179.3 million, up $5.8 million from the December 31, 2007, level.

First quarter 2008 backlog adjustments totaled $1.2 million.

Gross profit was $42.6 million or 41.7% of sales for the quarter, up sequentially from 37.9% in the fourth quarter of '07 but down compared to the 44.1% in the first quarter of 2007.

The aggregate decrease in gross profit principally resulted from a lower proportion of metrology and nonsystem sales, both of which have higher average gross margins.

LED and solar process equipment gross margins were 41%, up compared to 39.8% in the fourth quarter '07 and 38.2% in the first quarter of '07, mainly due to significant increases in sales volume.

Data storage process equipment gross margins were 35.3%, up sequentially from 34.9% in the fourth quarter of '07 but down from 41.6% in the first quarter of '07.

The 6.3 margin point decrease compared to the first quarter of '07 was due to lower sales volume and unfavorable product mix and manufacturing costs.

Metrology had a 46.6% gross margin, up from 39.3% in the fourth quarter of '07, mainly due increased automated AFM sales volume, more favorable product mix and reduced spending.

Metrology gross margin was down from 49.4% in the first quarter of '07 principally due to the $5 million of lower sales volume.

SG&A was $22.6 million or 22.2% of sales, compared to $22.8 million or 23% of sales in the first quarter of '07 and $21.6 million or 20.2% of sales in the fourth quarter of '07.

R&D expense totaled $14.7 million, a decrease of $700,000 from the first quarter of 2007, mainly due to a more focused approach to data storage product development.

R&D remained flat with the fourth quarter of '07.

Overall operating expenses, excluding the restructuring and asset impairment charges and amortization, totaled $37.4 million or 36.5% of sales, compared to $38 million or 38.4% of sales in the first quarter of 2007.

This decline was mainly attributable to the reduction in compensation-related expenses, lower travel and entertainment and depreciation resulting from our overall course reduction initiatives.

On a sequential basis operating expenses increased due to higher bonus, profit sharing and FICA accruals.

Amortization expense totaled $2 million in the first quarter of 2008 versus $3.9 million in the first quarter of 2007.

The decrease is mainly due to certain technology-based intangibles becoming fully amortized during the second quarter of 2007.

During the first quarter of 2008, there was a $2.9 million restructuring and asset impairment charge related to the consolidation and relocation of our four-month corporate headquarters into our Plainview, New York facility and a $300,000 charge for personnel severance costs.

First quarter 2008 GAAP net loss was $1.6 million or $0.05 per share, compared to net income of $300,000 or $0.01 per share in the first quarter of 2007.

EPS, excluding amortization expense, restructuring items, and utilizing a 35% tax rate for the quarter; was $0.09, compared to guidance of $0.00 to $0.06 and $0.10 in the first quarter of '07.

Regarding outlook, our guidance for the second quarter of 2008 is for revenues to be in the range of $102 to $110 million, with earnings per share of a loss of $0.02 to a profit of $0.07 on a GAAP basis and earnings per share of between $0.05 and $0.11, excluding amortization of $2 million.

For non-GAAP EPS use the 35% tax rate.

We expect gross margins to stay in the 41.5% range and operating expenses to stay at the 36.5% range at the high-end of our revenue guidance and at 38% at the low end of our revenue guidance.

The forecast for the second quarter '08 operating expense dollar increases is related to annual salary raises effective at the beginning of April and bonus accruals as well as critical new hires.

For the full year 2008, we are anticipating revenue growth at a minimum of 10% to $440 million.

Regarding our balance sheet, cash and equivalents totaled $114.4 million at March 31.

We used $2.7 million in cash during the first quarter of 2008, mainly as a result of the timing of cash receipts at quarter end, as we received $11 million of cash on the first day of the second quarter.

Accounts receivable DSO's for the first quarter were 68 days, an increase from December 31 but well below industry averages of 78 days.

During the quarter, inventory increased by $6.6 million to $105.2 million, with a turnover of 2.3 times.

This increase was primarily due to an increase in the buildup of WIP inventory and data storage process equipment to support the increase in customer orders for second and third quarter scheduled shipments.

Capital expenditures were $3.1 million for the first quarter of 2008.

And depreciation expense totaled $3.3 million in the quarter.

I will now turn the call back over to John.

Thank you for your patience during our prepared remarks.

Operator, we'd like to now start the question and answer session.

Thank you, Mr.

Peel.

(OPERATOR INSTRUCTIONS) And we will take our first question from Brett Hodess with Merrill Lynch.

Good afternoon and congratulations on the strong operating performance in the quarter.

A couple of questions.

Can you talk a little bit about where you think margins are going to move from here since you're a little bit -- you're obviously stronger based on your restructuring?

As you move into the second half and we start to see the volume pickup on the dry side as well, where do you think you might go to in margins in the second half of the year?

And second question is, in the LED side of the business orders have continued to be pretty strong and all.

Do you see any digestion period in the LED side of the business or do you think it's going to continue to move up?

This quarter obviously was up a little bit on order basis but still quite strong.

Jack, why don't you take the gross margin, and then I'll talk about LED.

Sure.

Brett, on the gross margin, in our prior guidance we had indicated about 1 point per quarter, and we got a bit ahead of that in the first quarter, so we guided to sort of a flat second quarter.

We sort of stand by that guidance that we exit the year about 2 points above where we currently are.

Great.

Thanks.

Brett, on the LED side we have a strong funnel, a lot of good opportunities in the pipeline.

We haven't seen any signs of a slowdown and we've been -- we've seen strong LED bookings now for about two years.

We do anticipate that at some point, it will become more cyclical in nature but we have not yet seen that.

We did enter the year with a very solid backlog, so our plan will allow for a certain level of slowdown.

And just one last one, Jack, on the inventory, just to get that clear, the increase is specifically due to the build of the data storage items that you're booking now for second half shipment, is that right?

That's correct, Brett.

Yes, we expect inventorying to be down several million dollars in the next quarter, second quarter, so it was a temporary build for the order ramp that we see in data storage.

Got it.

Very good.

Thank you.

We will now go to our next question from Timothy Arcuri with Citi.

Hi.

A couple things.

John, as I look at the revenue guidance for the year, and I kind of consider two factors, one that this is the fifth quarter in a row where your bookings are greater than your revenue.

And that if I also consider in LED you're basically booking, and you're revenuing a rate that would -- if you'd just flat line that, that would equate to an annual number that's something in the 160 range and you're kind of guiding closer to 140.

So I am wondering, is there some conservatism built in in one particular part of the business?

Because certainly, at least in LED, it looks like you're well ahead of your guidance.

I am wondering, maybe you're worried about that business falling off later on this year or in data storage or something?

So, Tim, on the LED and solar side, I do think we have reasonably conservative plan.

We did allow for the fact that revenues or orders might flatten or even take a dip during the year, but overall if you look at our last three or four quarters of bookings and you average it out, it's a pretty reasonable number with respect to the projections for the year.

Okay.

All right.

Then, John, as you look at the LED margins, do you think that you kind of guided the full -- the corporate margin to be about 200 basis points higher exiting the year than where it is today.

But specifically in LED at like-for-like revenues, so if you exited the year at this same revenue level, do you think that the margins in that business would be appreciably different than they are today?

I think there we've achieved a 41% margin for the first quarter and I think that we could see some progress but we're not at this point projecting that.

All right.

So, Jack, you would say that there is not a whole lot more upside from the -- ?

There may be upside but at this point, we're kind of guiding conservatively here.

Yes, okay, I would agree.

Thanks.

Thanks, Tim.

And we'll now take our next question from Bill Ong with American Technology Research.

Yes, hi.

On the MOCVD tools what's your percentage booking mix between gallium nitride based tools and gallium arsenide phosphorous based tools?

And also, have you been able to raise prices on some of the news that tools that you've announced, just given the new improved productivity and performance?

Bill, we have not raised prices recently and I don't know if we have that split.

I don't think we're prepared to give you that at this time but clearly the blue/green is by far the highest percentage.

Okay.

So you probably expect at least selling more gallium nitride based, just based on that qualitative comment?

Yes.

And then what portion of the revenues is geared towards the solar applications?

It's a relatively small percent on the MOCVD systems.

They are predominantly going into the LED marketplace with a smaller number headed into the 3,5 multijunction solar cells, along with our thermal sources in the MBE side of the business.

Can you give me a dollar number or you're not comfortable with sharing that?

We're not splitting things out to that level.

Okay.

Well, thanks very much.

Thanks, Bill.

We will now take our next question from Mark Moskowitz with JPMorgan.

Good afternoon.

Two questions.

John, can you give us a sense of what percentage of the overall solar market is CIGS and where do you see that percentage going over the next couple of years?

And then kind of as a follow-up to that question, as it relates to Veeco, can you talk more about new products to address other thin film solar technologies outside or is it mostly going to be focused within CIGS?

So, CIGS is really in the early stages of the technology lifecycle.

It's certainly a relatively small percentage of the overall total at this point, as is thin film.

But thin film and CIGS are projected to grow faster than the market.

The advantage of CIGS is potentially higher efficiencies and good costs per watt figures.

So early stage technology expecting to grow rapidly, and our area of -- that's our area of focus for thermal sources.

Whereas, our MOCVD systems are focused on the 3,5 multijunction solar cells.

So early but we think it offers very good growth opportunities and it's where a lot of investment is going at this time.

Okay.

And then the second question, related to data storage, can you give us a sense in terms of the mix of technology buys versus production related for the quarter and how that compared to last quarter?

The buys in data storage predominantly focus on either new technologies or move to larger wafer size, so ultimately enable greater efficiency in building data storage devices or thin film magnetic heads.

So they're all related to technology or wafer size, as opposed to kind of general capacity improvement.

And can that help your margins out over time as you scale that?

It should help our margins over time.

This quarter was a particularly low revenue quarter for us in data storage.

We predicted that.

And we have been quite clear that we expected the second half of 2008 to be much stronger than the first half.

We have the backlog to deliver that and we're seeing the ongoing improvement here as we go from Q1 into Q2.

So I think you will see the margin uptick as the volume goes up there.

Okay.

Thank you.

Thanks, Mark.

We will now go to our next question from Matt Petkun with D.A.

Davidson & Co.

Good afternoon.

John, could you comment a little bit more specifically on the semiconductor portion of the metrology business?

That's obviously a market where we're hoping to see the new Auto AFM tool capture some new customers.

What's the progress look like there?

And when I look at the combined number for the new, what you're calling, metrology segment, it looks like either that semiconductor piece was even weaker than it was last quarter or the rest of the business is even weaker, the core metrology business.

So, can you help us see what's going on there?

Sure.

So on the semiconductor side of metrology, really predominantly served by our Auto AFM, which we launched our new InSight platform in December.

We're getting very good feedback from the market on that platform.

We received our acceptance at a large semiconductor company on our first beta unit there this quarter.

The customers are -- like the product.

On the other hand, as you probably know, the semiconductor market is down pretty seriously and expected to be a significantly down year.

So we're in a situation with a new product, with some exciting capabilities but not a lot of money going into the market.

And it is going to take some time for this to take off.

So I think we're making progress but the market is tough, so it's going to take some time here.

Okay.

And when you look at that semiconductor segment in particular, in the '04/'05/'06 you had run orders and revenues in the kind of $60ish million range.

Is that a reasonable target for this business going forward?

And within that number how much of the orders actually came from the memory market?

Because when I look at the semiconductor market overall and the spending, the real weakness that we're seeing at least is primarily on the memory side.

I don't know if we -- I don't believe we ever got to $60's million in that business but -- and clearly we wouldn't be predicting anything in that range any time soon here based on the conditions.

The application is split between memory and non-memory, so we can play on both sides.

But I think it is going to take some time to get back into solid growth on that side of the business, so on the Auto AFM side of the business.

Now, our other metrology products have a much broader market into the general purpose research and scientific data storage and really a lot of different industrial markets.

So a much better diversification on that side and some good new products that we think will catch on and drive our growth ultimately.

Okay.

Then really quickly, I'm sure the number is here somewhere but I'm missing it, the backlog at the end of the quarter?

Yes, the backlog was, stay with me for a second $170 --.

matt, while Jack is looking for that, just to clarify, the metrology number, there was no change in the segmentation that we've been giving.

We've always given metrology as a separate segment of Veeco.

Right.

The backlog was $179.3 million.

Okay.

Thanks, guys.

And we will now take our next question from Nick Tishchenko with Global Crown Capital.

My question is related to the tools going into the LED markets.

What is the major differentiator between your tools and your competitors?

What is current competitive environment?

You did a great job in 2007 gaining such an incremental market share.

What is happening right now, and where are you seeing yourselves versus your German competitor?

Well, I think it's been a good quarter for us in many ways because our new system that was launched in 2007, the K465 saw acceptances from all of its early customers.

So, I think that's a really good accomplishment for us.

The advantage of our system is really throughput in productivity.

It enables a more rapid production of LED's in terms of units per hour.

So we think it's a very -- a really excellent product.

And now that we've gotten through this acceptance phase, we have really solid expectations that we're going to continue to grow and do well in this market.

It's certainly a competitive market out there and we battle for every order.

And we think we've got a really good future here with this new product.

Can you describe the competitive environment?

Let's say there was a number one big guy, the second big guy is Veeco, what else is in the market?

Well, there -- first of all, I think we know our German competitor was there earlier and is ahead of us in terms of number of installed systems and is the market share leader.

We're the clear leader beyond that and a very strong number two and I think doing very well.

We hear rumors about other companies attempting to enter the market.

And we have a Japanese competitor, Nippon Sanso, who has some share in certain Japanese customers predominantly but we don't really see them in other places.

So, I think you've got Extron and then Veeco and then Nippon Sanso.

And beyond that, all we've really seen is rumors in terms of who might be working to get into this market.

So basically, you're optimistic in terms of further gain of market share?

Yes.

Thank you.

(OPERATOR INSTRUCTIONS) And we will take our next question from Mark Miller with Brean Murray.

You mentioned you had confidence from your backlog that data storage sales would improve but we've seen recently data storage companies seem to be getting more conservative.

Actually, Western Digital cut their CapEx spending.

Just wondering, what do you feel about orders?

Do you feel orders will continue to grow there?

Well, I think on a data storage market -- first of all a couple of things.

We hit the year with a very solid backlog.

We had a very strong book-to-bill ratio in Q1.

We had a $40 million quarter in orders.

And I know there has been some mixed statements by our some of the top players in the market but overall, with the programs that we've been providing that are either technology-based or productivity improvement that have quick paybacks, we have seen strong demand for those products.

We've also seen, from some of the top customers who are putting a lot of money in the facilities last year, planning to spend more on actual equipment this year.

And so, even with the same amount of CapEx doing some shifts.

So, we think we're on track.

We had a conservative plan for the year, less than 5% growth.

We do think we're on track to make our plan.

Where are the head manufacturers in terms of the transition to the larger wafer sides?

We're seeing key players following through on their programs to transition to larger wafer sizes.

So we're seeing them stick to their plans and move ahead.

This is a multi-year transition.

It's not a whole scale replacement of the existing product but it's add-to existing product to get better efficiencies and to support future capacity.

So everything we've seen is positive on that front.

Thank you.

(OPERATOR INSTRUCTIONS) As we have no further questions, I'll turn the conference back over to you, Mr.

Peeler.

Okay.

Thank you very much.

I want to thank you all for joining us today.

Operator, that will conclude our call.

This concludes today's conference.

Thank you for participating, and have a great day.