Good day, and welcome to the Veeco Instruments Inc. Corporate Hosted Q1 2020 Earnings Call. At this time, I'd like to turn the conference over to Mr. Anthony Bencivenga, Head of Investor Relations. Please go ahead, sir.

Thank you, and good afternoon, everyone. Joining me on the call today are Bill Miller, Veeco's Chief Executive Officer; and John Kiernan, our Chief Financial Officer. Today's earnings release is available on the Veeco website. Please note that we have prepared a slide presentation to accompany today's webcast. We encourage you to follow along with the slides on veeco.com. This call is being recorded by Veeco Instruments and is copyrighted material. It cannot be recorded or rebroadcast without Veeco's expressed permission. Your participation implies consent to our recording. To the extent that this call discusses expectations about market conditions, market acceptance and future sales of the company's products, future disclosures, future earnings expectations or otherwise 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, including as a result of the COVID-19 pandemic. These factors are discussed in the business description, management's discussion and analysis, and Risk Factors sections of the company's report on Form 10-K 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 available on our website. And with that, I will turn the call over to Bill for his opening remarks.

Thank you, Anthony. Good afternoon, everyone, and thank you for joining the call. To echo some of our industry peers, these are unprecedented times. The effects of the COVID-19 pandemic are ongoing, fluid, and difficult to predict. I would like to take a few minutes to discuss the impact of COVID-19 has had on Veeco and the steps we have taken to successfully maintain business operations and manage the business through this crisis as it continues to unfold. I will provide some color on our Q1 performance, update you on our markets, and then hand it over to John for a financial update. I would like to begin by recognizing the Veeco team for their dedication. It's safe to say that all Veeco employees have been impacted in some way, but have adapted to enable us to perform well in the first quarter. And they continue to deliver, overcoming unforeseen disruptions while working from home, in Veeco facilities, or at customer sites. This is a team I am both impressed with and proud to be a part of. Due to disruptions related to various governmental measures implemented to contain the virus in mid-March, we withdrew our financial guidance for the first quarter. Shortly thereafter, as an essential business supporting critical infrastructure, we maintained operations at all our manufacturing facilities with minimal disruptions. Over the course of the pandemic, we have taken steps to keep our employees safe and minimize the spread of the virus, while continuing to serve our customers. Our COVID-19 pledge, developed to keep our employees healthy, is posted in all Veeco facilities and outlines behaviors we expect from everyone on site. These behaviors include social distancing, good hygiene practices, the use of personal protective equipment, and a directive that employees who can work from home are required to do so. In our manufacturing environment, we have included further measures like temperature screening, additional disinfecting, and separating shifts to minimize employee overlap in gowning areas. We also implemented innovative workarounds, such as virtual customer demos and factory acceptances, where customers can review data and performance of their system in our factory via live video. In our customer service organization, working in our customers' fabs is frequently required. So our service engineers do so with proper precautions. However, when possible, they perform service remotely to resolve customer issues. In our supply chain, we maintain continuity of supply by frequent and ongoing interactions with all our suppliers. We proactively identified supply gaps and resourced a number of components, maintaining our customer commitments, and we continue to monitor the financial health of our supply chain. While these steps have been effective so far, there could be additional challenges ahead that may impact either our operations or those of our customers as a result of the ongoing pandemic. While no one can predict the future, our team is experienced at managing through industry cycles. In addition, when we look at our cash balance, both the level and quality of our backlog, and the recent expense reductions we implemented, we are confident in our ability to successfully manage through the pandemic. Switching gears away from our COVID-19 response and onto Q1 results. Q1 results were driven by strength in our data storage business, and revenue came in at $105 million. While we withdrew our guidance for the quarter due to potential COVID-19 disruptions, we were fortunate to keep those disruptions to a minimum. With improved product mix driving gross margins to 45% and reducing operating expenses, we were able to drive solid profitability of $13 million in non-GAAP operating income, resulting in $0.22 of non-GAAP earnings per diluted share. This marks our third consecutive quarter of non-GAAP profitability and our most profitable quarter in several years. The first phase of our transformation, which includes shifting away from low gross margin products and reducing expenses, is reading out in our P&L as higher operating leverage. From a balance sheet perspective, we managed cash well during the quarter and ended with $242 million in cash and short-term investments. I mentioned our team's ability to manage tactically through the pandemic, but I also want to spend a minute providing an update on the markets we serve and our technology in the context of the coronavirus. We believe in the long-term health of the technology industry and remain excited about what the future holds for Veeco. We do, however, have concerns about the economic effects of COVID-19 on the broader electronics industry. While we do have exposure to certain customers that may be impacted, we have diverse product lines serving markets that are expected to perform well, such as data storage, 5G RF, and leading-edge front-end semiconductor. We are hopeful this diversity will insulate us to some extent from the adverse effects of the pandemic. Looking at some of the markets we serve, within our scientific and industrial market, data storage is strong, bolstered by the increasing importance of cloud storage and the work-from-home environment. Our customers rely on our ion beam technology to improve their read/write heads and increase aerial density. This drives performance in our high-capacity drives used in cloud and data-center applications. We expect this market to continue to stay strong for us, at least through 2020, but we continue to monitor the impact of COVID-19 on demand. Recent sales activity in front-end semiconductor was driven by customers ramping their current nodes like seven and five nanometers. Looking ahead, we continue to work with our customers on their next nodes with our laser annealing technology. In the EUV market, according to ASML's shipment plans, customers appear to be moving forward with their leading-edge EUV lithography plans, which drives the requirements for mask blank capacity. In compound semiconductor markets, we are not seeing significant traction of 3D sensing or laser diodes, but we are encouraged by recent GaN MOCVD order activity for power electronics applications. Our advanced packaging, MEMS, and RF filter market was weak in Q1, and the timing of recovery is uncertain given recent smartphone softness. Nevertheless, we are encouraged by interactions with our advanced packaging and RF customers. Applications such as high-performance computing and 5G are driving this activity, which we believe will eventually lead to orders. We are confident our advanced packaging lithography and wet etch and clean systems are an ideal fit for our customers' current and future requirements. These are uncertain times, but we are continuing along our transformation path to strengthen the company, despite the challenges facing the global economy, electronics industry, and our customers. Veeco's two-phase transformation is well underway. You will recall, Phase One is about returning to profitability and rationalizing our product lines, and Phase Two is driving growth. Phase One is largely complete and has proven to be effective. We exited low gross margin commodity businesses, which improved our product mix and overall gross margin. We flattened the organization, creating better accountability and reducing expenses, and we recently made a step toward rationalizing our product lines. Last quarter, we indicated our intention to divest a non-core product. After the end of the quarter, we closed the transaction moving the associated assets and employees to a third party. This is a win-win for all involved and demonstrates our commitment to streamlining the company. Phase Two of our transformation consists of growing in our current markets such as front-end semiconductor, advanced packaging, and data storage. It also includes penetrating markets with new applications of our technology in front-end semiconductor and compound semiconductor. We are committed to this growth plan. A symbol of this commitment is our new logo and tagline, which you may have noticed in the earnings presentation. Although this may not seem like the best time to launch our new Veeco identity, we felt that it was important to continue to move forward and ensure our customers, investors, and employees that we are a united, resilient, and focused company that believes in the great opportunities ahead of us. The change in our logo signifies our commitment to our transformation on the foundation of our success in helping customers achieve profitable scale. Our new tagline, making a material difference, stands for improving performance, ensuring quality, and delivering value to our customers, and our commitment to building a stronger Veeco that serves all of our stakeholders. Looking ahead to our 2020 priorities, in the near term, we are effectively dealing with the uncertainties of a global pandemic by keeping our employees safe and building resiliency into our operations. At the same time, we continue to look to our future. Our strategy is still intact. We are focused on prioritizing our R&D spend on the projects that are strategically and financially most impactful to the company and strengthening our foundational businesses. We are working to extend our core technologies into the front-end semiconductor and compound semiconductor markets, and we are starting to see the operating leverage benefits of actions taken to improve gross margin and reduce our expenses. With that, I'll turn the call over to John for a review of the financials, and then we'll take your questions.

Thanks, Bill, and good afternoon, everyone. Today, I will summarize our revenue by market and geography, cover our P&L, balance sheet, and cash flow, and then take you through our outlook. I will discuss non-GAAP financial data and would encourage you to refer to our reconciliation between GAAP and non-GAAP results, which you can find in our press release or at the end of the quarterly earnings presentation. Revenue for the quarter was $105 million, which came in at the high end of our revised revenue estimate. While we experienced COVID-19-related disruptions, such as shipment delays, temporary facility closures, and supply chain and logistic challenges, we were able to manage through with only modest top line impact. As Bill mentioned earlier, we had strong performance in our scientific and industrial market, which made up 47% of our revenue. This was led by ion beam system shipments to our data storage customers. The front-end semiconductor market contributed 30% of our revenue, resulting from EUV mask blank and laser annealing system shipments. LED lighting, display and compound semiconductors made up 15% of revenue. We sold additional slow-moving LED-related inventory and shipped multiple wet etch and clean systems to RF device customers for 5G-related power amplifiers. The advanced packaging, MEMS, and RF filter market made up 8% of our overall revenue, reflecting softness in advanced packaging system shipments. By region, the U.S. accounted for 38% of revenue, driven by sales to data storage customers. The rest of the world, which includes Japan, Taiwan, Korea, and Southeast Asia, was 37% of overall revenue, driven by our EUV mask blank and laser annealing systems. EMEA was 15% of overall revenue and was also driven by sales to data storage customers. Finally, China was 10% of overall revenue, mainly from legacy MOCVD system and service revenue. Now turning to non-GAAP operating results. The first quarter gross margin was 45%, which was favorable to our guidance and up almost five points from Q4. This improvement in margin was primarily a result of favorable product mix and reduced reserves, along with reduced manufacturing costs and service-related expenses, some of which were due to COVID-19 related restrictions. We expect our gross margins to fluctuate on a quarter-to-quarter basis due to product mix and other factors, and we do not expect gross margins to remain as high as 45% for near-term quarters going forward. Operating expenses for the quarter were $34 million, which was also favorable to our guidance and sequentially better by almost $4 million. As we mentioned last quarter, we are ahead of schedule on our expense target reduction, and additionally, Q1 operating expenses benefited from less travel and other variable expenses due to COVID-19-related restrictions. On a non-GAAP basis, tax expense for the quarter was $300,000, with net income coming in at $10.9 million. EPS was $0.22 on a diluted share count of 48 million shares. Now moving to the balance sheet and cash flow highlights. We ended the quarter with cash and short-term investments of $242 million, a use of $3 million during the quarter. We experienced a working capital increase in Q1, as accounts receivable increased to $84 million from a historically low level in Q4 2019, resulting in days sales outstanding for the quarter of 73. This was principally due to the timing of when payments were due, with some falling just outside of the quarter. Accounts payable increased to $36 million, driving days of payables to 57, partially offsetting the increase in accounts receivable. Inventory declined $3 million to $130 million, resulting from progress selling slow-moving inventory during the quarter. Long-term debt on the balance sheet was recorded at $303 million, representing the carrying value of our $345 million in convertible notes, which mature in January 2023. In April, we closed on the sale of a non-core product line that was designated as held for sale in our March balance sheet. The sales price was $11.4 million, of which $9.7 million was paid at the closing, with the balance to be paid in 18 months. Lastly, our capex during the quarter was $1.1 million. We are closely monitoring the coronavirus situation, and in efforts to provide transparency to our investors and analysts, we are providing a qualitative outlook, but will not provide Q2 guidance. We should caution that the conditions caused by the coronavirus could adversely affect our customers' ability to purchase our products, delay purchasing decisions, or adversely impact our supply chain, manufacturing, or logistic capability to deliver products, all of which could affect our future financial performance. That said, at this time, we are seeing a small number of system delivery dates pushed out of Q2 due to COVID-19 impacts in China. But otherwise, the rollout of our backlog and timing of bookings appear to be on track. Gross margins have been trending positively over the last number of quarters as a result of transformational actions taken to improve profitability. However, given the size of individual transactions and product mix, our gross margin will likely fluctuate from quarter to quarter. As I mentioned, we do not expect gross margin to remain as high as 45% we achieved in Q1. From an operating expenses perspective, we expect to incur lower spending related to travel and other variable costs due to COVID-19-related restrictions in the near term, but we continue to maintain our longer-term $36 million or less quarterly operating expense target at current revenue levels when business activity returns to normal. It's worth reiterating that although there is uncertainty related to the anticipated impact of the COVID-19 outbreak, we believe our business model, our current cash and short-term investments, and the recent steps we've taken to rationalize expenses leave us well positioned to manage our business through the crisis as it continues to unfold. Thanks, Bill, and good afternoon, everyone. Today, I will summarize our revenue by market and geography, cover our P&L, balance sheet, and cash flow, and then take you through our outlook. I will discuss non-GAAP financial data and would encourage you to refer to our reconciliation between GAAP and non-GAAP results, which you can find in our press release or at the end of the quarterly earnings presentation. Revenue for the quarter was $105 million, which came in at the high end of our revised revenue estimate. While we experienced COVID-19-related disruptions, such as shipment delays, temporary facility closures, and supply chain and logistic challenges, we were able to manage through with only modest top line impact. As Bill mentioned earlier, we had strong performance in our scientific and industrial market, which made up 47% of our revenue. This was led by ion beam system shipments to our data storage customers. Front-end semiconductor market contributed 30% of our revenue resulting from EUV mask blank and laser annealing system shipments. LED lighting, display and compound semi was 15% of revenue. We sold additional slow-moving LED-related inventory and shipped multiple wet etch and clean systems to RF device customers for 5G-related power amplifiers. The advanced packaging, MEMS and RF filter market made up 8% of our overall revenue, reflecting softness in advanced packaging system shipments. By region, the U.S. was 38% of revenue and was driven by sales to data storage customers. Rest of world, which includes Japan, Taiwan, Korea, and Southeast Asia was 37% of overall revenue, driven by our EUV mask blank and LSA systems. EMEA was 15% of overall revenue and was also driven by sales to data storage customers. Finally, China was 10% of overall revenue, mainly from legacy MOCVD system and service revenue. Now turning to non-GAAP operating results. First quarter gross margin was 45%, which was favorable to our guidance and up almost five points from Q4. This improvement in margin was primarily a result of favorable product mix and reduced reserves, along with reduced manufacturing costs and service-related expenses, some of which were a result of COVID-19 related restrictions. We expect our gross margins to fluctuate on a quarter-to-quarter basis due to product mix and other factors, and we do not expect gross margins to remain as high as 45% for near-term quarters going forward. OpEx for the quarter was $34 million, which was also favorable to our guidance and sequentially better by almost $4 million. As we mentioned last quarter, we are ahead of schedule on our expense target reduction, and in addition, Q1 OpEx benefited from less travel and other variable expenses as a result of COVID-19-related restrictions. On a non-GAAP basis, tax expense for the quarter was $300,000, with net income coming in at $10.9 million. EPS was $0.22 on a diluted share count of 48 million shares. Now moving to the balance sheet and cash flow highlights. We ended the quarter with cash and short-term investments of $242 million, a use of $3 million during the quarter. We experienced a working capital increase in Q1, as accounts receivable increased to $84 million from a historically low level in Q4 2019, resulting in DSOs for the quarter of 73. This was principally due to the timing of when payments were due, with some falling just outside of the quarter. Accounts payable increased to $36 million driving days of payables to 57, partially offsetting the increase in accounts receivable. Inventory declined $3 million to $130 million, resulting from progress selling slow-moving inventory during the quarter. Long-term debt on the balance sheet was recorded at $303 million, representing the carrying value of our $345 million in convertible notes, which mature in January 2023. In April, we closed on the sale of a non-core product line that was designated as held for sale in our March balance sheet. The sales price was $11.4 million, of which $9.7 million was paid at the closing with the balance to be paid in 18 months. Lastly, our capex during the quarter was $1.1 million. We are closely monitoring the coronavirus situation, and in efforts to provide transparency to our investors and analysts, we are providing a qualitative outlook but will not provide Q2 guidance. We should caution that the conditions caused by the coronavirus could adversely affect our customers' ability to purchase our products, delay purchasing decisions or adversely impact our supply chain, manufacturing or logistic capability to deliver products, all of which could affect our future financial performance. That said, at this time, we are seeing a small number of system delivery dates pushed out of Q2 from COVID-19 impacts in China. But otherwise, the rollout of our backlog and timing of bookings appear to be on track. Gross margins have been trending positive over the last number of quarters as a result of transformational actions taken to improve profitability. But given the size of individual transactions and product mix, our gross margin will likely fluctuate from quarter-to-quarter. As I mentioned, we do not expect gross margin to remain as high as 45% we achieved in Q1. From an OpEx perspective, we expect to incur lower spending related to travel and other variable costs due to COVID-19 related restrictions in the near term, but we continue to maintain our longer-term $36 million or less quarterly OpEx target at current revenue levels when business activity returns to normal. It's worth reiterating that although there is uncertainty related to the anticipated impact of the COVID-19 outbreak, we believe our business model, our current cash and short-term investments, and the recent steps we've taken to rationalize expenses leave us well positioned to manage our business through the crisis as it continues to unfold.

Bill, I understand the difficulties for providing guidance given the many different businesses and the many different markets you participate in. So I'm just going to ask in one segment, just to kind of get your qualitative thoughts on the advanced packaging and there's probably some mixed data points out there. You're right, smartphone demand could be down, but there are opportunities that seem to be going on, notably in Taiwan where they're moving forward with their advanced packaging processes and capacity build. Can you just give qualitatively how you look at the marketplace, at least for the June quarter? And what are some of the swing variables that are out there?

Thanks for the question, Patrick. I would say Q1 was a soft quarter for us in advanced packaging. It's actually, I think, it will come back here pretty quickly. I think that's more a matter of timing than anything else. And so I would expect those numbers to recover here, independent of COVID-19. I mean, we are seeing a lot of the megatrends for artificial intelligence, high-performance computing, 5G still intact and still driving long-term the advanced packaging market. As a matter of fact, we just recently won some business from IDM as well. So I think the market is still viable and still going in a general sense, our evaluation tool for a new product with better resolution and depth of focus in a larger field size specifically for the advanced packaging market. So I think long term, our market share is holding. It's just that we are waiting for a smartphone recovery here to drive the business in a meaningfully positive way.

Sure. So we are working closely with our suppliers. We've seen some minor disruptions in supply chain to this point, Patrick, but nothing significant. We are monitoring the health of our suppliers. Right now, they are able to meet their commitments to us, and we've been able to meet our commitment dates to our customers. So far, we don't see any change in that pattern. Of course, there could be things that happen in this environment in the future that we don't see today. But as we stand now, we're able to manage through any of the disruptions.

Yes. I'd just add, our supply chain group has done a really good job. They're talking with our suppliers almost every week. We've resourced about 50 parts over the last few months due to COVID-19. We might be seeing some hits in terms of on-time delivery, but we're not seeing any delays of days or a week, but nothing yet that would really cause the whole machine to grind to a halt.

Yes, thanks for taking my question. A couple of them. Sorry, I missed just a couple of moments of the call I don't think you gave revenue guidance for the June quarter. But as far as the number goes, but did you mention if you thought it would be up or down from the March quarter?

We didn't do that. Out of an abundance of caution, David, we decided not to provide guidance because we're really worried about the unknowns out there. We could have a number of employees, our employees or our customers' employees test positive for the coronavirus, we may have to shut down a plant for a week or two, or there could be further government orders requiring us to close a facility. So really just out of abundance of caution, we've not given guidance. When I look to Q2 specifically, John mentioned in our prepared remarks that we did have a few tools pushed out of the quarter. This was specifically with one Chinese LED customer who happens to be close to Wuhan. The other area that we're experiencing some delays is really an acceptance of new products, driven by travel restrictions that our engineers from our factories are unable to visit customer sites. Overall, we are seeing our gross margin improving. As John said, our ion beam products were a higher than normal percentage of revenue in Q1. We wouldn't expect that to last going forward. But I would say that we are expecting to have our gross margins over 40% at these current revenue levels.

I was going to say, maybe let me ask the revenue question a different way. If there was no COVID going on right now, would you be guiding revenues up, down, or flat?

Yes. We really can't, I can't really give you that color, David. I apologize for that. I did say though that we did have a few tools from one Chinese customer push out of the quarter. But I will say to you that currently, all our facilities are running at or near-normal capacity. We've had no supply chain disruptions. We're not seeing significantly reduced or changed customer demand. The quality of our funnel is strong. We had a strong order flow in April. Our cash collections in April are so far strong. So I would assume we're moving along.

Okay. And then maybe just elaborate a little bit more. You mentioned that your disk drive business was quite strong. I guess, you mentioned maybe just to elaborate as to why it's strong? And is it all cloud, or is it enterprise? Or are there some other things going on? And then if it is the cloud, are they moving more toward using hard drives versus SSD drives as far as storage capabilities go?

Yes. What we're seeing is all of our data storage customers are pretty bullish in adding capacity now. Our 2020 is mostly in backlog right now, and we are quoting for slots in 2021. What we're seeing is their demand is driven by the cloud, very large-format drives, 20-terabyte size drives. They're also going through a technology transition now to energy-assisted magnetic recording. What this means is the heads are more complex. So there are more passes through our tool, and there are more heads per drive, and the absolute value of heads is growing. Right now, we're seeing added tailwinds due to the customers needing more capacity and tailwinds due to the complexity of the heads driving more equipment. Thank you, operator, and thank you all for joining us on today's call. I appreciate the thoughtful questions in these truly unprecedented times. Going forward, we will continue to keep our employees safe as we continue to focus on our customers. I look forward to updating you at our next conference call. Have a great evening.

Thank you. And that does conclude today’s conference. Thank you all for your participation. You may now disconnect.