Veeco Instruments Inc (VECO) 2013 Q1 法說會逐字稿

Good day, everyone, and welcome to the Veeco first-quarter 2013 conference call.

Today's call is being recorded.

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

Ms. Wasser, please go ahead.

Thanks, Operator, and thanks to all of you for joining John Peeler, Dave Glass and me.

Today's call will be a bit different from our normal quarterly calls.

Given our ongoing accounting review, we are unable to provide detailed revenue, earnings, or other financials.

Dave will start the call with some top-level first-quarter highlights.

He will also give a brief overview of where we are with the accounting review.

Please keep in mind, when we get to the Q&A session, that we are limited in scope to what we can say about the matter, other than what Dave is revealing.

While the accounting review is a challenge for the Company, we wanted to take this opportunity to give you some insight into what is going on at Veeco.

So John's presentation will review technology opportunities we are excited about; how we see the latest trends in our end markets; and, most importantly, our vision for how we are going to get Veeco growing again.

If you haven't done so already, please visit our website so you can follow along with the slides.

Let me just briefly remind you that this call is being recorded by Veeco Instruments and is copyrighted material.

It cannot be recorded or rebroadcast without our express permission.

Your participation implies consent to our taping.

To the extent that this call discusses expectations about market conditions, market acceptance, and future sales of the Company's products, future disclosures, 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 the actual results to differ materially from the statements made.

These factors are discussed in our public filings 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.

Given our accounting review and limited financial metrics, we are planning to hold only a very brief Q&A session.

With that, here is Dave.

Thanks, Deb.

My plan today is to share some of our key financial metrics.

But as Deb mentioned, I'm going to ask for everybody's understanding in recognizing that with the ongoing accounting review still underway, we'll have to limit all our comments and financial disclosures to those that are unrelated to revenue.

Having said that, I think the information we can share today around bookings, cash, and shipments may be helpful to at least give you some line of sight on how the business is doing.

Q1 was another challenging quarter for Veeco.

Bookings came in at just $70 million, remaining at trough levels for MOCVD and MBE.

Data storage was up versus Q4, but not enough to counter the very weak MOCVD trend.

Bookings were at the lowest level we've seen since 2009.

As John will explain in a moment, we do expect to see a recovery in bookings during Q2.

There are positive signs, such as some of our top MOCVD customers operating close to full utilization; and, in some case, they are even talking about fab expansions.

In data storage, we see customers starting to make selective technology buy decisions.

These are all positive signs.

System shipments declined sharply in MOCVD and data storage, reflecting the weak overall environment we are still operating under.

There are a few sizable MOCVD deals that were not shippable in Q1.

Shipments continue to be lumpy because of issues such as fab readiness in China.

We didn't have to make any significant backlog adjustments this quarter.

Cash continues to be a bright spot for us.

We continue to maintain a very strong financial base from which to weather this storm.

In Q1, our cash balance grew to $588 million.

That's up from $579 million at the end of December.

We had a tax refund that came in during the first quarter; but even excluding that, we maintained our cash balance at about Q4 2012 levels, which we are quite pleased with in this environment.

The Company has done a good job continuing to manage costs and working capital during this downturn environment, and to leverage our variable cost model in a very positive way.

No doubt we're experiencing the most challenging business conditions since 2009, and this downturn has persisted longer than anyone predicted.

Business conditions have been weak across all our end markets for well over a year now.

And pricing pressure in MOCVD has been intense in this downturn, since there are so few deals available.

While I can't provide specific gross margin numbers or guidance, it's fair to say that selling prices have been under considerable pressure.

Fortunately, our teams working together across the Company had done a good job navigating through this difficult time.

Our advanced planning in areas like inventory and supply chain management, cost containment, and flexible manufacturing have all paid off for us.

We've also completed a 10% reduction in workforce and significantly cut our operating expenses since peak levels in 2011.

We continue to focus on carefully managing our operating expenses.

And we have installed strong inventory and working capital disciplines that have helped us to continue to fund our R&D at high levels.

We're quite confident that Veeco is ready with the right products, people, and manufacturing strategy to ramp quickly as business conditions improve.

If there's one thing we are very proud of, it's our flexible and nimble operating model.

So, now let me say just a few words about the accounting review.

Obviously, a top priority in the Company is to get the review completed; to do it well; and to get back to being a timely filer again as soon as practicable.

We can't go into a lot of detail here about the review itself, but let me just highlight a few of the key points.

The accounting review concerns technical accounting issues related to multiple element arrangements for MOCVD transactions originating in 2009 and 2010.

That's an accounting term for some of our deals that include systems as well as upgrades, parts, credits, and other add-ins we might sell as part of our deals with customers.

These systems were delivered, accepted, and paid for in full.

The review is not related to any product quality or customer satisfaction issues.

It's about the timing of revenue recognition and related expenses.

We are undergoing a comprehensive review of similar multiple element arrangements since 2009.

We realize it's taking a long time.

We understand this.

But keep in mind that there are a lot of transactions, and the rules require significant interpretation and judgments.

In some cases, we're going into past records up to four years old to assess whether we properly identified all of the elements in the arrangement; determined the proper units of accounting; and properly allocated consideration to each of the units of accounting.

At this time, we still haven't concluded that a restatement is required.

And that's the extent of what we can say today.

With that, I'll turn it over to John.

Thanks, Dave.

No one wants to get through this accounting review any faster than me, but we really have to get it right.

I'm going to focus my comments today on our growth opportunities and show you how we can get Veeco growing again.

You can think of Veeco's growth story as a journey.

We started out by developing or acquiring technology in our core markets.

And then we built that technology into the global leadership positions in MOCVD for LED lighting; MBE for compound semiconductor production; and ion beam etch and deposition for hard disk drives.

We're now in a new phase, and we want to accomplish three things -- first, to fortify and build our leadership position in our core markets, especially in LED lighting, which has a huge market opportunity, and which also allows us to grow our services business.

Second, we want to leverage our core technologies into adjacent markets like power electronics, OLED, MEMS, and EUV.

And, third, we want to acquire other businesses that have synergy with our business.

Today, I'm going to focus on the organic growth portions of the journey, and provide an update on our core markets and where we are heading into adjacent markets.

LEDs represent a new growth opportunity and a greener paradigm for the $70 billion lighting industry.

And according to the US Department of Energy, adoption of LED lighting in the US alone will reduce lighting electricity demands by 62%.

LED lighting will eliminate 258 million metric tons of carbon emissions.

And LED lighting will enable us to avoid building 133 new power plants.

The New York Times recently ran a piece on LED lights.

They said they last for decades; save electricity; don't shatter; don't burn you; don't contain anything harmful; and they will save you hundreds of dollars.

It was a great endorsement for LED lighting, and not just for the commercial and industrial applications, but for the residential market, too.

It's now clear that LED lighting is accelerating.

LED lighting demand is projected to grow at a 35% CAGR from 2010 to 2020.

And that's going to drive a large, multiyear MOCVD opportunity.

Along the way in our journey, we've introduced a sequence of new MOCVD solutions where each new system substantially reduced the cost of making high-quality LEDs.

This has helped us to achieve the number-one market position, and it helped us to win key deals in a tough market.

One example is the large order we received last year from KaiStar.

KaiStar is one of Epistar's China joint ventures.

And KaiStar chose Veeco for their Xiamen expansion because our systems' lowest cost of ownership, its easy process transfer from other sites, and our great local support.

We're working on our next-generation systems; and, although I can't tell you when it's coming, I can assure you that the market will not be disappointed.

Outside of our MOCVD business, services accounts for more than 30% of revenue.

In MOCVD, services accounts for less than half of that percentage at this point, but it's growing rapidly.

Our customers are coming back to us for upgrades, consumables, parts, that improve the performance of their systems and increase their profitability.

And you can think of it as -- it's like using a personal trainer to get more out of your gym membership; spending a little more on our services has big payoffs.

This is a really large opportunity for us.

And if we achieve our internal goals, 2013 MOCVD services revenue will be 70% higher than it was two years ago.

Moving beyond LEDs and services, GaN-based power devices offer an emerging growth opportunity for our MOCVD technology.

They offer the potential to increase the energy efficiency and reduce the size of power sources for consumer electronics, alternative energy sources, and electric cars.

We're working with key customers around the globe, as they work to develop new products and bring this technology to production over the next few years.

It'll take time, but GaN electronics will be substantial in our future.

In the MBE production market, we are far ahead of the competition, with systems that are fully automated and much larger than anything else available.

We also do well in the MBE R&D market, as you can see from our customer list, but our share is well below the 75% share that we have in the production market.

But that can change.

We're launching a new R&D tool in the coming months, and we expect to substantially increase our R&D market share.

Another growth opportunity for our MBE business comes from our world-class thermal source technology.

This is the technology that's actually one of the reasons our MBE systems are the world's best.

And we're now shipping thermal sources into the OLED market.

It's a way for us to participate in an exciting new technology segment and to accelerate our growth.

Turning to the hard drive market, storage requirements are growing dramatically.

And according to Western Digital, information stored will grow at a 25% CAGR between 2012 and 2020, and over 85% of the information storage in 2020 will be on hard drives.

Hard drives are obviously here to stay.

And while the short-term overcapacity has slowed our business, we'll continue to be a key equipment supplier to the industry and help move the technology forward.

But aside from keeping up with the ever-growing and ever-increasing storage requirements, our data storage business contains our IBE and our IBD technologies, which have exciting applications in other markets.

I'll start with MEMS.

MEMS growth is accelerating due to smartphones, automotive, and other applications.

And based on the years of work in the hard disk drive industry, we're the world's largest supplier of thin-film magnetics process occurred.

It turns out that magnetics technology is key to making MEMS for electronic compasses and other applications.

So we've taken our technology to the MEMS market.

We've already sold systems to 12 different MEMS manufacturers.

And we recently announced an order for an ion beam etch system to EPFL.

This is one of Europe's top technical universities, who is developing new MEMS devices.

Another bright spot for our data storage business is our IBD system for photomask applications.

We've been selling these for years.

We think we have 100% market share.

And recently, Sematech selected Veeco to work with them on next-generation ion beam deposition systems for EUV photomasks.

And with the potential to be the industry's tool of record for making EUV mask blanks, this could be a $50 million to $100 million opportunity for Veeco.

So, all in all, in addition to our huge opportunity in lighting, we have a number of other exciting opportunities -- MOCVD services, power electronics, MBE R&D systems, OLEDs, MEMS, and EUV.

And in each of these areas, we already have products and compelling technology, and we expect meaningful revenue contributions in the future.

I want to switch to the current market conditions and the outlook.

Our first-quarter bookings levels were the worst we've seen since early 2009.

But late in March, we started to experience what looks like a meaningful inflection in MOCVD business conditions.

It included reports that some customers are operating at close to full utilization rates.

We had the first rush orders we've had in a long time.

And we're negotiating orders at several Chinese customers who have committed fab expansion plans.

In data storage, customers are back making technology buys.

And in MBE, our quotes are way up.

As I travel the world and talk to customers, what I hear is that they all see lighting ramping.

Some are optimistic in moving to increase their capacity, while others are holding out and waiting before committing more capital.

It's a tough market to predict at this point.

But we do anticipate meaningfully higher bookings in Q2.

We'll now take a few questions.

And, since we are limited in what we can say, our session will be shorter than usual.

It would be best if your questions centered on technology and market trends, since we are unable to provide further details on our financials or the accounting review.

So, Operator, we'll take questions now.

(Operator Instructions).

Krish Sankar, Bank of America Merrill Lynch.

Yes, hi.

Thanks for taking my question.

First, John, in your prepared comments, you spoke about the pricing pressure.

Can you elaborate a little bit on it?

Is it coming from your primary competitor, Aixtron?

Or are you seeing new guys come up in China?

And then I had a follow-up.

Okay.

Well, we've been gaining market share for the last three years.

And I think what we've been seeing more and more recently is Aixtron using price as a strategy to try to win more deals in a tough environment.

So, it's really -- the pressures are Veeco and Aixtron.

We're not seeing Chinese competitors.

We haven't seen any competition with Chinese competitors at this point.

We've seen them trying to get people to take a look at their systems and things, but they are not driving the pricing pressure.

Got it; got it.

That's very helpful.

And then just a quick follow-up.

The meaningfully higher bookings in Q2, is that -- is that -- are you talking about all MOCVD bookings, basically the total bookings?

And when you mean meaningfully higher, is it back to Q3, Q4 levels of last year?

Or is it going to be higher than that?

Well, it is -- we are expecting higher bookings in both MOCVD and for Veeco as a whole.

Q1 orders were very weak, at $70 million.

So we can get meaningfully higher without setting any new records or anything like that.

But it is broad-based.

And I can tell you that it's coming from more than one region.

This is not a single customer, single region.

At least that's where we think things are going now.

Got it.

Thank you very much.

Satya Kumar, Credit Suisse.

Yes, hi, thanks for taking my question.

I was wondering if you could provide a little bit of color on the level of profitability.

If your shipments, hypothetically in Q2, were in line with the anticipated a higher level of bookings that you are thinking about in Q2, would you still be able to sustain cash at current levels?

Yes, Satya -- unfortunately, due to the accounting review, we really can't comment on anything in the income statement that starts with revenue.

As we said in the past, though, we are pretty proud of the job we've done in managing cash.

But we just can't really comment on the details of the income statement.

Okay.

And the cash itself, can view you give perhaps the breakdown of the cash that you have onshore versus offshore?

And is any portion of that cash in China?

No significant change from in the past, Satya.

So it's mostly onshore.

Mostly onshore.

Got it.

Thanks a lot.

(Multiple speakers).

Vishal Shah, Deutsche Bank.

You guys had mentioned previously that you are trying to reduce the breakeven level down to $85 million, $90 million.

I was curious to see if you could provide some color on where the cash and overall revenue breakeven levels would be in this environment.

Yes, Vishal, again, I'll have to say anything related to breakeven would have a relationship to revenue.

And because the accounting review is revenue-related, we can't comment.

Okay.

And then, the rush orders that you mentioned, are they coming from China only, or from other regions as well?

And is it fair to say it's general lighting-related orders?

Historically, we've seen this pickup and utilization rate due to seasonality.

What do you think -- this is different this time around?

Thank you.

Well, it's been a long time since we had customers calling up saying, hey, can you get me that system two months earlier than we planned, and can you pull in my shipment?

That's why we thought it was meaningful for us; and, in this case, it certainly was China.

But we've just noticed a change in the tone of the customers over the last month or so, and a bigger sense of urgency.

I do believe it's lighting.

Lighting is what's driving all the growth now.

There are enough systems out there to handle backlighting, and any kind of expansion is ultimately lighting-driven, because the customers can move capacity between backlighting and lighting.

Thanks, Vishal.

Jed Dorsheimer, Canaccord.

Hi, thanks.

John, just a follow-up on that last one.

I think you guys consider Taiwanese joint ventures, in China -- if the tool is going to China, as a Chinese sale, I believe.

So, if the activity you are seeing in China, is that mostly around the joint ventures?

Or is it Chinese-specific companies?

And then I have a follow-up.

Well, you're right, we do consider the end shipment destination of the equipment.

So if it's a Taiwanese joint venture in China, it's a China deal.

We are seeing pickup and increased quoting activity -- really, in all regions, though; it's not just a China thing.

Okay.

And then just with respect to the MaxBright, I forget the number of tools, but have those whole gone through final acceptance?

And then, just on your quoting activity, can you give any breakdown between the level of activity for MaxBrights versus single chamber reactors?

Okay.

Well, if we look at acceptance, it's pretty much everything that shipped before the first half -- before the second half 2012 -- has been accepted.

There are probably a couple of exceptions, but not much in the way of tools.

And I think, as far as the second half of 2012 to now, acceptances are running fairly normally.

Q1 acceptances were about in line with where we expected them to be, so no major changes there.

And then, we don't really report the mix of MaxBrights versus single chambers.

But what we have done over the last year -- last couple of years -- is we've been very careful to keep the single wafer reactors moving forward technically, just like the cluster tool reactors.

So we offer the same type of upgrades and capabilities on both products.

And what we find is, some customers prefer a cluster tool.

And it may be because they have tightness on fabs or fab space, or other reasons.

And some customers prefer single wafer reactors.

So both products are doing very well.

Both are -- there's not one that's falling by the wayside.

They're both doing well.

Okay.

Thank you.

Edwin Mok, Needham & Company.

Hi.

Thanks for taking my questions.

I remember back in the days when business was doing really well, you guys had quite a lot of large orders from customers.

But as things slow down, the order sizes also come down quite a bit.

With these recent rush orders, have you started to see order size start to increase as well?

No, I don't think so.

In Q1 -- well, there weren't a lot of orders, period.

And there were a limited number of larger orders plus smaller orders.

So we haven't noticed any real change in that.

Of course, in 2010, there were some pretty huge orders that we haven't seen after 2010 or 2011.

So I don't think I have anything to report there on a big uptick in that or anything.

Maybe I'll ask it differently.

Is the customer interest in getting quotes for more number of tools?

Or is it still ordering two, three tools here and there?

It is mixed.

It depends on the customer size and where they are.

Some larger customers are quoting relatively large numbers of tools, versus what we have been seeing in recent quarters.

And others are mixed, all the way down to single tools.

Okay.

Actually, that's helpful.

And, John, on your comments regarding the new opportunities to various end markets -- or various new opportunities you talked about, which one should we look out for as the one market that you feel is the most immediate and most likely to be a near-term revenue driver?

And which ones do you think is going to be the greatest option for you longer-term?

I'm not sure I've got a good answer for you on that.

But what I can tell you is for each of these markets, we have products now, and technology now, and have already won revenue.

I think, longer-term, MOCVD services is going to become a much bigger component of our overall revenue.

And it will get up to ratios that are more in line with our other businesses than where it is now.

So I think that's a big opportunity.

And then I think each of these others has some good opportunities for us.

And it's really going to depend on how much energy we put in there, what products we deliver, and our success rate.

But these aren't visions.

They are not fuzzy concepts where we don't have anything.

They are all areas where we've got products and revenue already.

Great.

That's very helpful.

Thank you.

Stephen Chin, UBS.

Yes, hi, thanks for taking my question.

John, can you give us your updated thoughts on how many tools will be needed by the industry for lighting?

And then, in that same light, can you also give us some color on your visibility for 2013, relative to 2012, in terms of bookings or shipments?

Okay.

Let me take that in kind of reverse order.

If we go back and look at 2012, there were probably 200 to 250 reactors shipped between Veeco and Aixtron.

2013 is pretty hard to call at this point.

It could be less, because we came into the year with a lower backlog.

But, then again, it could pick up fast and be different.

So I'm not really prepared to call a 2013 number of reactors.

But I would say that it could be bigger or smaller than last year.

It's not definitely on either side.

For the longer term, we're looking at another 3000 hours of reactors to really satisfy this lighting wave.

That's a guess.

It's an estimate.

And it's probably not real different than the midpoint of the estimates in the market.

Could be could significantly higher, and it could be lower.

It depends on the rate that lighting takes off, as well as how much we are able to drive improved yield and improve performance, and how much our customers are able to do certain things.

But you are looking at 3000 or so additional reactors.

Great.

And then just a quick follow-up for Dave.

Dave, last time when you gave us your thoughts on 4Q, you had given us some color on the OpEx.

I'm wondering if you could give us some color on the OpEx for 1Q 2013?

And can you maybe quantify the OpEx related to the accounting review?

Let me start with the first part.

We can't comment on OpEx, because it's income statement-related.

What I will say is that the cost drives, given the environment that we're in, we are continuing to manage costs very, very closely, and doing a good job of keeping costs in check; can't give a specific number, though.

And in terms of what the accounting review is costing, that's not really our focus.

Our focus is, put the resources on as necessary to get it done; get it done right; and get it done in the most timely way we can.

All right.

Thank you.

Andrew Huang, Sterne, Agee.

Thanks very much, guys.

On the pricing pressure you alluded to, are you seeing it more in multichamber tools or on the standalone tools?

We don't really think about it as split between the two.

So I would say we see just more pricing pressure everywhere, which is pretty common in a small market without a lot of deals that -- we're fighting over less food, so prices tend to go down.

They are down, really, on both.

Okay.

And can you comment on the tools that are idle or sitting in crates?

Will they be usable if they get a tune-up from your services group?

Or how do you think about those tools that are sitting there doing nothing right now?

Well, we do know a couple of customers that have some tools in crates that aren't fully installed.

And I know, in one case, they are installing them at a pretty rapid rate.

So they are certainly usable, and can be made to work.

So I don't think there's any issue there.

But most of what we've shipped is -- has been installed.

It's been accepted.

It's been paid for.

And the customers are using them.

Or if they are maybe a second- or third-tier China supplier, where they have got excess capacity, they are working hard to get improvements in their LED yield and their LED quality so they can use everything they've got.

The larger suppliers in China are running at high utilization rates.

And they are using what they have.

So it's just a matter of time before that capacity gets used up.

Is it okay if I squeeze in one follow-up?

Sure.

Thank you.

Can you say how much working capital management on the balance sheet contributed to the sequential cash increase?

No, can't comment on that.

But as we have, through the past quarters during the downturn, we're keeping a very, very close and active management of working capital.

(Multiple speakers).

We're pretty darn proud of the way we've managed our inventory.

And we've been able to manage our inventory in our supply chain to not tie up an excessive amount of cash in working capital; and to not have big write-offs; and to not have a lot of inventory of older tools.

Because one of the things in this business is, you are always improving your tool and you are always changing it.

And when you buy too much, you really get put at a disadvantage because you've got too much of last year's model.

So, anyway, I at least have to put in my pitch there.

Operator, we will take the next question.

Brian Lee, Goldman Sachs.

Hey, guys.

Thanks for taking the question.

I was wondering, are you seeing any impact on market share on the limited amount of MOCVD deals that are out there, given the aggressive pricing actions from your main competitor?

And then, as a follow-up to that, are the rush orders that you are alluding to in Q2 -- are they seeing the same amount of pricing pressure that seemed to be percolating throughout the market?

Thank you.

We've done really well in market share, from over 50% in 2011 to over -- to 62% in 2012.

And one of the other changes that we've seen is, IMS now has us reported to have over 50% market share in every region.

So in regions where, maybe, a couple years ago, we were a little bit behind in share, we pulled those up.

And we do believe we are the leader again in every region of the world.

So I think we've done well in market share, and we expect to continue to do well.

The overall pricing pressure is kind of all around.

It's been there, and we're all competing for that.

So it is in Q2, and pretty much of what we've booked.

Thanks, Brian.

Paul Coster, JPMorgan.

Yes, thanks for taking my question.

You talked of this pricing pressure.

Is it the kind of pricing pressure that's reversible when the market recovers?

Do you think that margins can also recover?

I think margins will improve as the market covers.

One of the things that -- there's a pretty fast pace of technology development in this market.

And we're certainly working on next-generation systems that have real advantages for our customers.

And I suspect Aixtron is doing the same.

So I think there will be some improved pricing in the future.

One of the things that we've also been very focused on is driving our costs down.

And we really started that quite a few years ago, to drive out manufacturing costs, to improve our designs, to improve the way we manufacture the product; and, basically, continue to drive the cost down.

So that helps also.

You talked of going after some new market opportunities, whether it's in the power segment, R&D, OLED, et cetera.

Can you talk a little bit about the go-to-market strategy, whether you need an additional resource, what impact that may have on SG&A?

Thank you.

Well, in most of these segments, we are already selling to that segment.

So the move in -- and I'll pick a couple of examples.

The move into MEMS, we started well over a year ago -- 1.5 years ago.

And we've been basically getting to know the customers, understanding the technologies, and refining our strategy.

So we've already done that there.

Another example would be either power electronics or MBE R&D.

We are selling into both of those segments already, so we're already there.

It's more hitting the market at the right time with the right products.

And some could happen very quickly, and some may just take a while for market adoption.

Thanks, Paul.

Colin Rusch, Northland Capital Markets.

Thanks so much.

Can you talk in reference to your 3000 tool estimate on the impact of geometry changes?

As we go forward, as you see some of your customers move to smaller geometries, is that included in your 3000 tool estimate?

And can you talk about whether you are seeing that in the marketplace just yet?

Yes, our estimate includes a lot of different factors.

It includes changes in customer yield on the front end It includes changes in wafer size, because there are ongoing sizes -- changes in wafer size.

It includes changes in the size of the actual die, whether it's somebody trying to switch from -- to overdrive LEDs; changes between vertical and lateral LEDs.

We try to take every last piece of this, and project where it's going to go.

It also makes some assumptions on what happens with GaN-on-silicon, and who wins there and what happens there.

So, we've tried to bake all of that in, to the best we can.

So that's where we are with that.

We'll take one more question, Operator.

I'm sorry, can I just get my follow-up in real quick?

Are you seeing any orders out of Japan just yet?

We do have orders from Japan, yes.

And the magnitude of those -- are they sizable?

Or are they still (multiple speakers)?

We've had sizable orders from Japan in the past.

And I think we consider that we are doing well in certain areas of Japan.

We could always do better, but we have penetrated some key customers.

Thank you so much.

Thanks, Colin.

Operator, we'll take one more question.

Patrick Ho, Stifel.

Thanks a lot.

In terms of the (technical difficulty) that you talked about picking up in the month of March, can you give a little bit of a big-picture view -- whether it's coming on single crackers, or from the (technical difficulty) cluster tools?

Because that could imply that we are seeing some capacity add-ons or some next-generation fab buildout.

Can you just give a little color on that?

Yes.

I wouldn't read too much into whether it's single or cluster.

Because, frankly, we have some really important customers that just prefer single tools.

And that's pretty much what they are going to buy, no matter what they are doing.

And then we have customers that prefer the cluster.

So, don't really see a big shift change or anything there.

But it's driven by utilization rates.

We've got customers that are basically close to 100%.

They need more capacity if they want to get the business that they either are winning, or can win.

And that, plus some customers with funding and customers basically trying to pull in their program; so it's a mix.

And it is more than one region, so it's not a single region thing.

Great.

And my final question and follow-up to that is, on the supply chain, given that you're starting to see some quote (technical difficulty) orders, how ready is your supply chain, given that they've been pretty quiet for the same time period you've been?

How quickly can they ramp up and make up your needs?

Our supply chain is in really good shape.

We work with it carefully.

We have multiple vendors supplying us.

There are some sole sources.

But for the most part, and for the final assembly side, we have multi sites, multiple suppliers, and multiple groups of our own people.

So we are really prepared to ramp.

And I wouldn't anticipate anything where we would be manufacturing-limited for any significant period of time.

And I think we've proven that in the past, as we ramped before, that we were able to do that, both from a manufacturing basis and from an install and services basis.

And we're actually more prepared now than ever for that.

Great, thank you very much.

Thanks, Patrick.

All right, well, this will conclude our call.

Thank you for joining us, and we'll talk to you later.

That does conclude today's conference.

We thank you for your participation.