Veeco Instruments Inc (VECO) 2013 Q4 法說會逐字稿

Good day, everyone, and welcome to the Veeco Instruments Q4 Full Year 2013 Earnings Conference Call.

Today's conference is being recorded.

At this time, I'd like to turn the conference over to the Senior Vice President of Corporate Communications and Investor Relations, Miss Debra Wasser.

Please go ahead ma'am.

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

With me today are our CEO, John Peeler, and our CFO, Dave Glass.

Today's earnings release is available on the Veeco website.

Please note that we have prepared a slide presentation to accompany the webcast, and we encourage you to follow along with the slides on Veeco.com.

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, 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 the actual results to differ materially from the statements made.

These factors are discussed in the business description and management discussion and analysis sections 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 reconciliations to GAAP measures or performance is available on our website.

I'll now turn the call over to John.

Thanks, Deb.

Veeco's 2013 revenue was $332 million, it was down 36% from 2012, with all of our businesses experiencing down cycles.

Fourth quarter revenue was $73 million, and within our guidance range.

Very weak gross margins and high operating expenses contributed to our poor bottom line performance.

Bookings remained at trough levels, down 7% sequentially to $85 million, but we had a positive book-to-bill ratio.

A bright spot for Veeco continues to be our solid cash performance.

We have nearly $500 million of cash in the bank, even after investing $76 million for our new ALD business.

Q4 was a tough finish to a challenging year, but we expect Q1 to be better.

I'll turn the call over to Dave for some details on the financials.

Thanks, John.

We reported a significantly wider loss in Q4 than in Q3, due to the convergence of lower revenue, weaker margins, and a spike in our OpEx spending.

Our margins in Q4 were unusually low due to the depressed volumes, continuing weak selling prices, and higher cost of goods sold, which included items such as higher than normal supply chain costs.

Operating expenses spiked higher in Q4.

There are two primary reasons for the spike.

First, we're now carrying about $4 million of additional R&D and administrative costs related to the new ALD business, which was acquired in early October.

In addition to ALD, our fourth quarter OpEx included a few nonrecurring items such as the reserve for bad debt expense in Asia, acquisition related legal and accounting fees, and special performance and retention bonuses.

OpEx is expected to come back down in Q1, as I'll explain shortly.

To recap, for the full year 2013, selling, administrative, and research was $149 million, excluding the accounting review costs, as well as the Q4 nonrecurring items I just mentioned.

This represents a 12% year-over-year decline in spending.

Revenue at $73 million was down 26% from the prior quarter, but still at the high end of our guidance range.

System shipments in MOCVD and Data Storage were very low this quarter, resulting in total revenue for those businesses down 27% and 31% respectively on a sequential basis.

At these low revenue levels, both segments operated below their breakeven points.

Reporting adjusted EBITDA losses for the quarter of $16.5 million for LED and Solar, and $3.1 million for Data Storage.

It's important to note that our ALD business is now included in the LED and Solar segment.

And, since it's still pre-revenue, represents a drag on adjusted EBITDA for that segment.

In terms of orders, we booked $85 million in the quarter, which fell about 7% short of last quarter.

LED and Solar booked $63 million, which was down 14%.

The weakness in MOCVD bookings continued in Q4 at what we're considering trough levels.

While MBE did see some positive traction with multiple GENxplor orders, as well as one production system order.

Data Storage bookings were up from a very weak third quarter, but at $22 million still quite weak by historical standards.

We finished the year with a total backlog of $143 million.

It's worth noting that in Q4, we received a PO for a prototype ALD system.

This was not included in our reported bookings for the quarter, since the revenue recognition timing on the prototype is still uncertain.

Veeco finished the year with cash and short-term investments of $495 million, which is down only slightly from the start of the year after adjusting for cash used for acquisitions.

The total Q4 payout for Synos was $76 million, including the adjusted purchase price and the earn-out tied to the prototype system order.

Although 2013 was a year of declining revenue and losses, we're proud of our ability to respond by reigning in costs and keeping a sharp focus on working capital.

With positive operating cash generation in the first half and negative cash in the second, we finished a very challenging year at about breakeven on an operating cash flow basis.

Both DSO and inventory turns have improved through 2013, finishing up in Q4 at 29 days sales outstanding and 3.9 inventory turns respectively.

Looking now at our guidance for the first quarter, orders are likely to increase.

Revenue is currently forecasted to be in the range of $85 million to $95 million.

In terms of our gross margins, we do see the likelihood of improvement as certain MOCVD deals with better ASPs roll out of backlog, and the impact of various cost improvement efforts gain traction.

For example, a new cost-down version of MaxBright will positively benefit our margin starting this quarter.

First quarter gross margins are therefore forecast to be about 33% to 35%.

Absent some of the one-time expenses that impacted us negatively in the fourth quarter, we expect OpEx spending to be back to more normal levels, in the $42 million to $43 million range.

As we move forward into 2014, with the accounting review now behind us, we expect significantly lower outside advisor and accounting costs.

But this lower spend will be largely replaced by new ALD business OpEx, which we have taken on.

It should be noted that R&D is front end loaded in the first half of 2014, and this is likely to trend down in the second half of the year.

As a result, we do expect OpEx to tick down in the second half.

This along with the expectation of better margins, should be effective in driving our quarterly breakeven revenue back down to below $100 million later in 2014.

Although we've given you the major elements of earnings, we're not giving earnings guidance this quarter.

The complexity of purchase accounting for the Synos acquisition, specifically, how we'll account for the likelihood of burn-out payments related to potential orders for Veeco ALD make it challenging to be able to give meaningful GAAP earnings guidance for the quarter.

And of course, since we cannot give you GAAP guidance, we can't give non-GAAP guidance either.

Let's spend a few minutes now talking about our plan for gross margin recovery.

Looking back on 2013, our margins averaged about 31% over the course of the year.

As I just mentioned, in Q1, we do expect to see some improvement.

But frankly, we're likely you to be range bound in the low to mid 30%s until we see higher volumes again and per chamber ASPs back to more normal levels.

Beyond the ongoing incremental cost reduction improvements that we're continually driving, for MOCVD, achieving better margins will require new products that drive growth in lighting and power electronics.

Some wins in OLED and adjacent markets for the newly acquired ALD businesses will also solidify our path back to 40% plus margins.

Except for the cost reduction improvements, which are ongoing, we see most of these factors starting to take shape in the second half of this year, but unlikely to be a strong force for margin recovery until 2015.

With that, let me turn the call back over to John.

Thanks, Dave.

The last couple of years have been tough for Veeco, yet I'm confident that we'll emerge from this down cycle in a position of strength.

Let's look at our growth opportunities in two key markets, LED lighting and flexible OLEDs.

Nearly every day, we hear or read evidence that LED lighting adoption is accelerating.

Incandescent bulb phase-outs have begun in the US and China.

Utilities are broadening subsidies for energy efficient lighting, including LEDs, and LED bulb prices keep dropping.

The price of a 60-watt bulb has declined over 50% in the last two years.

McKenzie forecasts that by 2016, just two years from now, LEDs will represent nearly half of the world's spending on lighting.

It's starting to feel like the tipping point for LED lighting adoption is imminent.

Over the last few years, our MOCVD customers substantially improved their [epi] yields, and this allowed them to get more capacity out of their installed base.

Now that yields are higher, yield and productivity gains are slowing, and this means that capacity increases have to come from MOCVD tool upgrades and new tool purchases, and this is a good thing for us.

With demand picking up, we're seeing some very positive signs.

Top customers in China and Taiwan have over 90% fab utilization, and they did not shut down for the Chinese New Year.

Some Korean customers are adding capacity by upgrading older systems and buying new tools to keep up with demand, and many of our customers are doing better financially.

It's good to see supply and demand come back into alignment, and I'm encouraged that key customers are talking to us about adding capacity.

IHS reported that Veeco market share exceeded 60% in 2013.

And if you look at the last four years in total, we have better than 50% or better in all regions except Japan.

We're proud to be the number one supplier to the majority of LED makers with the biggest installed base of tools, and the number one supplier to the majority of LED technology leaders.

We've achieved this by providing systems that are technically differentiated, provide higher productivity, are well-suited for mass production, and provide the lowest cost of making LEDs.

We're in a great position to capture the next wave of MOCVD growth.

Switching to ALD, things are heating up.

In their recent analyst conference, Samsung predicted that 40% of their smartphones will be flexible by 2018.

And at the Consumer Electronics Show, there were reports that some vendors secretly showed flexible and thin OLED phones.

While we can't predict the timing of production ramps, we are really excited to receive a purchase order for a prototype of a larger scale ALD system in Q4.

The order was for a fast ALD system for next generation flexible OLED phones.

Aside from OLED phones, we continue to work on application of our fast ALD technology into other new markets, and we're very excited about the potential.

Our priority for 2014 is to take the steps to transition the Company back to profitable growth.

We're focused on four areas to improve our performance: first, developing and launching game-changing new products that enable cost effective LED lighting, flexible OLED encapsulation, and other emerging technologies, second, executing manufacturing cost reduction initiatives and lowering expenses wherever possible, third, driving process improvement initiatives to make us more efficient, and finally, improving product differentiation, customer value and pricing to stem margin erosion.

We expect our performance to improve in Q1, but we're prepared to run at a loss for a couple of quarters, and continue to believe that we have a very bright future.

So at this point, we'll take questions.

Operator, please start the Q&A session.

Thank you.

(Operator Instructions)

And we'll go first to Patrick Ho with Stifel Nicolaus.

Thank you very much.

John, in terms of the pricing pressures that you're still seeing today, have you seen any of that kind of migrate into your leading edge products, particularly for the MaxBright?

So the pricing pressures basically started as we went through a period of very low order volume where Aixtron had a lot of written off inventory, and they've been pretty tough for the last year.

We think that as the market recovers, that as our lead times move out, and we introduce new products that the pricing will get better.

But they have -- pricing pressures have been pretty much across the board.

Great.

Maybe as a follow-up question on the manufacturing cost reductions that you talked about, what have you done or what are you doing with your supply chain to get some of those cost reductions out?

So one, I guess you could combat some of the pricing, but also in terms of your next generation products.

We started working -- we've worked on cost reductions for MaxBright and 465-I since we introduced them.

And what Dave mentioned here that's going to occur this quarter, is actually just another round of cost reductions actually hitting in the products that shipped.

So it's not a new announcement, but these are things that we worked on for the last I'd say nine months that are finally coming out the door in shipped units.

We'll continue to do that.

We've got a very efficient manufacturing organization, and we'll continue to work to source our materials from the best cost suppliers and run a very efficient operation.

Thanks, Patrick.

Great.

Thank you very much.

We'll hear next from Krish Sankar with Bank of America-Merrill Lynch.

Good afternoon, guys.

This is Andrew Hughes on for Krish.

Seems to be a lot of optimism on recovering in the MOCVD purchases this year.

You mentioned a few key geographies, China, Korea, and Taiwan driving that.

Curious if you have insight into where utilization levels might vary on a geographic basis now, and where you might see that headed.

Sure.

Well, first of all, in China the utilization rates are 80% to 95%, some of the customers are virtually at full out production.

But beyond just the tier 1s, what we're now seeing is the tier 2s are actually at high utilization, and even a good number of tier 3s.

So overall, the units in China are at a pretty high utilization.

Taiwan is probably 80% to 85%, and Epistar was recently quoted saying that they'll be full soon.

And Korea is 80% to 90%, depending on which customer you're talking to.

So it's really utilization is up across the full major geographies.

And I don't have information on Japan, so I can't provide that.

But it's up rather across the board.

Great.

And then as a follow-up, are you starting to see any activity from competitors in China, or is it still primarily Aixtron that you're running into in the marketplace?

It's really Veeco and Aixtron competing for all the deals.

We have seen Chinese competitors, and we've seen them basically make some progress with the tools.

But they're far behind in terms of performance, and they're not really actively being considered in deals from what we've seen.

Great.

Thanks a lot, guys.

Okay.

Thanks, Andrew.

We'll move on to Brandon Heiken with Credit Suisse.

Hello.

Thank you for taking the question.

I was wondering if you could talk about the cost reductions that you mentioned that are starting to benefit the March quarter, and how that may benefit future quarters?

And I think in the past, you've talked about new tools helping gross margins.

Is there anything we should think about in the way that that could help later this year or next year?

Well, we haven't announced any new tools, so there's not a lot I can say there.

But the cost reductions are something that we've been working on for quite a while, and they're a natural thing to focus on as products get older.

So I can't give you a lot of details, but they're certainly a move in the right direction.

Our objective is to get margin back into the 40% plus range.

I think that needs to happen for the industry to be healthy, and I think that's more typical of capital equipment, process equipment.

So that's where we're targeted at.

And congratulations on the purchase order for the fast ALD prototype.

How should we think about progress there, and your discussions with the customer?

Well, it's a larger system for a next generation pilot line that has higher volume production than what's been delivered before.

We've been working on it for I'd say three months or more now.

So we're making good progress.

It's hard to read, though, how quickly our customer is going to go into volume production and when they'll order more.

So timing for production orders is unclear, and we, as Dave mentioned, we left this order out of our bookings.

And we've also made the comment that bookings would increase in Q1, and that's really regardless of what happens in ALD.

Thank you.

Thanks, Brandon.

And JPMorgan's Paul Coster has our next question.

Thanks.

Mostly my questions have been answered.

So a little bit boring, but can you just explain on the OpEx from $42 million to $43 million in the first quarter, does that include the amortization expense associated with the acquisition or is that just purely the same period expenses?

No, that does not include the amortization.

It's basically SG&A and research.

Okay.

Got it.

And then how quickly did bookings turn into revenues generally?

Maybe if you could just be a bit more specific across each of the segments, to the extent that it's relevant.

Well for MOCVD, the lead times have been fairly short, probably in the three month range.

There are certainly times when we can turn a product around faster if we happen to have one.

But I would say -- so that's kind of typical at the trough.

It's likely to move out if the order rate picks up.

And more full-on market rates are probably about five months.

Data Storage, I would say is four to six months also, and MBE is a little slower at actually probably six to nine months, depending on what product gets ordered.

Thank you very much.

Thanks, Paul.

We'll hear next from Steven Chin with UBS.

Thanks.

Hello, John.

Just a couple of follow-up questions.

Maybe the first one on the order guidance.

So it sounds like the utilization rates are still very high out in the industry.

So is the order recovery scenario that you're thinking one that potentially has rush orders come in one quarter, and then maybe have this digestion quarter?

Or is it more of a scenario where maybe you see more of a steady quarterly increase as customers add capacity gradually?

Thanks.

Yes, there's probably a mix.

There's probably some that -- the customers have basically waited a lot longer to purchase additional systems than they usually do.

And if you look back at the customers over the last couple of -- or last year, a lot of them lost money.

And so they're running very cautiously, and they've really held off I think as long as they can.

And usually you would have seen them buying more already.

So I think there will be some rush, and I think there will also be some more rational gradual ramp.

So hopefully both.

Okay.

And then maybe a follow-up question on the ALD order in the quarter.

Do you have an early sense yet if the potential ALD adoption will be at the generation three equipment basis, or maybe it waits until the later generation six equipment is ready?

Yes, it's not clear to us right now which way that will go.

The new order was for a larger tool, though.

Thanks, John.

Thanks, Steven.

We'll hear next from Mark Heller with Credit Line of Securities Asia.

It's actually CLSA.

But thanks.

A quick question just to clarify, for Q1 revenue growth, is that mostly coming from the MOCVD business, it's not Data Storage or MBE, correct?

Yes, that's primarily MOCVD.

Okay.

And then on the ALD business, I think you guys were talking about when you acquired it.

I guess for the earn-out to be executed you were targeting about $75 million in shipments in 2014.

Is that still a possibility?

It is.

And it depends on when we get orders, and what exactly is ordered as far as how that will play out.

There are some --

Okay.

There are some threshold for getting orders this quarter, and then there are shipment-based payments.

Okay.

And one more question, if I can.

I'm not sure, there's a company, GT Advanced Technologies, they've been I guess doing some work on HVPE process to target the LED market.

I'm just wondering if you're familiar with that technology, and what your thoughts are on that.

Yes, we are familiar with it.

We think their models are not accurate, and that it doesn't work.

The growth rates that we've seen in their models and the material prices are far off from what our customers are actually experiencing.

So the economics are far worse than what's in the model that we've seen published.

There's also a lot of production worthiness issues.

And you might think back to what happened to the last company that tried to enter this market with HVPE.

Applied materials, and they were not successful.

Thank you.

Thanks, Mark.

And Canaccord's Jed Dorsheimer has our next question.

Hello, thanks.

It's actually Josh for Jed.

Could you just talk about the moving pieces between the underutilization, which is probably pretty small, obviously pricing effects, and then the effects of Synos on gross margin?

Dave?

We'll start with the Synos effects.

Actually there is no Synos effect on margin currently, because we haven't booked any revenue.

So in the revenue guidance that I gave for Q1, that really doesn't include any Synos.

And I'm sorry, what was the second -- the first second question?

Well, the effects of underutilization, which is probably low, and then just pricing pressure.

Okay.

Yes, both of those are key drivers in our weak margins, certainly the margin performance in the fourth quarter, those were by far the two biggest drivers.

Okay.

And then could you talk a little bit or can you just help me quantify the amount of let's call it services, spares, et cetera in the LED business and the data business this quarter?

Well, while Dave's actually looking for a number, over the last year as overall revenues dropped substantially and systems revenues dropped about 45%, services actually dropped a much smaller amount.

So services has become a larger piece of the business over the last year.

And in MOCVD, I don't know if we have a --

We don't really usually report services by business.

What I can give you is for the total Company, which for the fourth quarter was $28.5 million.

That's helpful.

I'll pass it on.

Thanks.

We'll go next to Brian Lee with Goldman Sachs.

Hello, guys.

Thanks for taking the questions.

First off, can you elaborate a bit on the ALD prototype you're shipping to Samsung, will it be used for commercial production or do you need to see a follow-on order for a production tool?

And also on that same topic, is the bump up in referred profit is that related to the ALD tool?

So the ALD tool that we have, the order is for a first generation product.

It is a larger scaled up version of a previous product, so we don't expect any kind of major technical barriers.

I can't say whether the customer will ultimately use it in production or in a production pilot line or not.

That's really not up to us, but I think that may determine how the testing and evaluation goes over the next few months.

So that's really more up to them.

I think when they go into production at this size of system, we would certainly expect additional orders and that they not -- that this really doesn't foot the bill.

Okay.

That's helpful.

And Dave, on the deferred profit line, is that related to ALD?

Yes, no, I'm sorry, and that's -- I'm glad you asked that, because it's something to point out.

A reporting change that we've made, which we think probably increases transparency here.

What we've done is actually what you see now, you see the nomenclature of that line has changed a bit.

It's customer deposits and deferred revenue.

So we're now including the $27 million customer deposits on that same line along with deferred revenue, if you're comparing that to the last quarter.

Got it.

That's helpful.

So that $34.7 million includes $27 million of deposits.

Okay.

Fair enough.

And if I could just squeeze in a second one real quick.

It seems the pricing pressure maybe has subsided a bit, and cost reductions are starting to hit here if we look at your Q1 outlook for MOCVD.

So, just wondering if you can walk through some of the incremental drivers you think you need to get the MOCVD margins back into the 40%s.

I think margins will improve.

First of all, as we get our own factory utilization ramped up to higher levels.

Secondly, as there's an order volume that doesn't cause people to discount so much that there isn't any margin and Aixtron gets past its written off inventory.

I think those are all key things.

And then I certainly think product enhancements and new products will play a key role in getting the business back to more normal margins.

Okay.

Thanks, guys.

Thanks.

We'll move on to Edwin Mok with Needham & Company.

Hello, thanks for taking my questions.

So if I look at the business beyond MOCVD and your Data Storage and MBE, typically you have a longer lead time.

Do you have visibility on the order trend beyond the current quarter, and how you think about that you would play out for those markets?

Well for Data Storage, we don't have a lot of visibility past the current quarter.

We did have a little better order quarter in Q4, but it was still pretty weak.

So visibility is tough there.

We're not expecting to have a great year in Data Storage.

We are expecting to make money, and to do at least a little better than last year.

So that's where that would stand.

For MBE, we've introduced a new tool called the GENxplor to the market.

We introduced that a couple of quarters ago.

It's received a really excellent reception by the market, and it's focused on the research lab, and the university, and more focused on the R&D, and the laboratory market.

It is -- it does take time to turn those around.

But business has ticked up there in overall orders also.

So we're not planning on great things from those businesses, but we are planning to make money.

Great.

Actually that's good color.

And then on the ALD, I want to get a little bit better understanding in terms of your competitive position.

And I want to understand what is the customer using right now, and is there other competitor that have similar technology that the customer is evaluating, or are they pretty much set on working with you guys specifically?

I was just trying to understand the competitive position and what other competitor is out there.

I can tell you a little bit of that.

The customer is using an older technology solution with a different deposition approach.

We believe ours is a superior film quality, and will have a lower cost, and will ultimately provide for much more flexible displays and thinner things.

So they can stay with their older approach, or they can adopt the newer approach, which they've been testing for well over a year, and qualified in many respects.

So we believe they will switch.

We don't know if they'll switch right away, or if there will be some delay in that process.

But the ALD film is a better approach.

Great.

Thank you.

Thanks, Edwin.

(Operator Instructions)

We'll move on to Vishal Shah with Deutsche Bank.

Hello, this is Suzie Min for Vishal Shah.

Thanks for taking my question.

Wanted to get a little bit more color on your Q1 guidance.

If I think about traditionally what services has added in the past as well as where Data Storage is, it would still imply flat levels from Q4.

Just wanted to get a little bit more color where you're seeing I guess a turn, whether it be on the Data Storage side, services, or on the tools.

Services, we're expecting for 2014 should be about in the same range as we've seen -- we're seeing this quarter.

The growth that we're seeing is primarily coming from systems, not necessarily from services.

And it's mostly MOCVD as far as growth goes.

Right.

MOCVD systems.

Okay.

Great.

That's really helpful.

And then I know you've mentioned in your prepared remarks that you're hoping to achieve the $100 million breakeven level by the second half of 2014.

I just wanted to get a little bit more color on how you can get there.

I know you said that you should see some margin improvement.

Is that just volumes?

I know you're talking about OpEx ticking down.

Any additional details would be helpful.

Well, the margin improvement is going to be largely a factor of better volumes or function of better volumes and better ASPs than we've seen in the latter half of 2013 here.

And then of course, as I said before, or as I said in my comments, R&D spend in 2014 is pretty much front end loaded.

So what that translates to is probably lower overall OpEx in the second half.

That, plus the better margins is what brings the breakeven cost down.

Okay.

And I know that the revenue recognition on the ALD side is a little bit uncertain, but my understanding is those gross margins are higher as well.

So would any of that factor into the second half of the 2014 outlook?

Not necessarily.

I think we made those comments independent of ALD, because it's hard to predict when we'd actually recognize the revenue, and whether we would get that in the year or not.

So I think those comments were independent of ALD.

Okay.

Great.

Thanks very much.

Thank you, Suzie.

We'll move on to David Dooley with Steelhead Securities.

Thanks very much for taking my question.

You have a great chart in your presentation about how you plan to improve gross margins from 31% to 40%.

But one of the key things here is your competitor not discounting their systems as much as they have in the past.

Are you still seeing the significant discounts?

Do they still have excess inventory?

Can you talk about what you're seeing on that front, please?

I think you'd have to ask them if they have excess inventory or not.

But I guess it's our theory that it eventually will go away, and that there will get back to a more rational pricing that supports the investments that both companies have to make in terms of R&D and service and support for the customer.

So there has been a lot of price pressure, but we'll have to wait and see what happens.

And can you maybe just give us an idea on a percentage basis what sort of reactor ASP declines you saw last year, and do you think ASPs actually increase per reactor in 2014 or 2015?

I don't think we -- we have historically not provided ASPs to the market, and I do think ASPs per reactor will increase.

Thank you.

Thanks, David.

And we'll hear you now from JoAnne Feeney with ABR Investment Strategy.

Hello, John.

I have a question about the pricing issue that was just raised.

I'm wondering if it's possible for you to raise prices on the existing tools, or is that just a matter of reducing discounts?

And do those possible price increases have to wait until Aixtron's inventory is cleared, and is that why you think the second half is more likely for you to reach that breakeven point than the first half?

First of all, I think it's more reducing discounts than raising prices.

So I think that's the mechanism there.

And I think there's potential for both.

Remember, we've dealt with a lot of excess inventory on the other side.

So I would expect that as that gets depleted, that we'll see some more rational pricing.

So I think it can happen earlier.

Okay.

And then you've mentioned a couple times over the course of the call the prospects of new tools.

Would you care to be more specific or talk about the longer term plans and possible timing of some new MOCVD tools coming to market?

Yes, our practice is to talk about new products after we've released them, so that's what we'll stay with here.

Okay.

Thanks.

Thanks, Joanne.

And, everyone, I'll turn the conference back to you all for closing remarks.

All right.

Well, thank you for joining us, and we'll look forward to speaking to you in the coming months.

Thanks.

And that will conclude today's conference.

Again, thank you all for joining us.