Good day and welcome to the Veeco Instruments Incorporated Corporate Hosted Q3 2020 Earnings Call. At this time, I would like to turn the conference over to Anthony Bencivenga, 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 make statements about the future, such statements are forward-looking and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made including as a result of the COVID-19 pandemic.

These factors are discussed in the business description, management's discussion and analysis, and risk factors sections of the company's report on Form 10-K and annual report to shareholders and in our subsequent quarterly report 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. 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. I hope you and your families are well. I'm excited to talk to you today about the current status of a United Veeco. We're making great progress becoming a more cohesive organization as we implement our two phased strategy.

As a result of our team work, determination and accountability, we have been operating remarkably well through this global pandemic. I'm very proud of our Veeco employees worldwide. As you know, we’re investing in our core technologies to drive organic growth.

It is this investment which will drive the next phase of Veeco’s growth by helping our customers enable a new experience age for consumers with game changing applications like Artificial Intelligence, virtual and augmented reality and Autonomous Driving. These applications require new device architectures, new materials and higher performance.

Veeco has a history of solving difficult materials challenges, which gives us a unique advantage in delivering scalable technology solutions. In short, Veeco is well positioned to play a meaningful role in driving this new age with our customers.

Today, I’ll take you through our Q3 highlights, John will provide a financial update and guidance, and then I’ll discuss our markets and technologies before taking your questions.

Q3 marked another quarter of solid execution, with results driven by strength in our data storage business, and revenue came in at $112 million, which is above the midpoint of our guidance. Our gross margin was again healthy at 44%.

And along with well managed expenses, we achieved non-GAAP operating income of $14 million and non-GAAP earnings per diluted share of $0.22. Our sustained profitability is a result of the work we completed over several quarters to improve our operating model, such as expanding gross margins, and restructuring to reduce costs.

And we increased our cash balance by generating $10 million in cash flow from operations. There has been significant activity in our data storage market related to data center and Cloud storage demand. We’re also seeing significant customer engagement in advanced node semiconductor manufacturing, 5G RF and power electronics.

Entering the fourth quarter, we’re in a strong backlog position. Our success in Q3 would not have been possible without putting employee health and wellness first, we maintain all health measures at our sites and have been working closely with our supply chain partners, enabling us to operate at normal capacity.

As an added precaution and consistent with our commitment to safety, we communicated that all employees who can work from home should continue to do so into Q3 of 2021. Overall, we’re confident looking forward, we have strong customer engagements and have a healthy backlog.

The market drivers linked to the experience age such as data center, 5G, semiconductor, power electronics, and photonics are all turning positively and are aligned with Veeco’s growth initiatives. We believe we will have a strong finish to 2020 and are optimistic about 2021. And with that, I’ll turn the call over to John for review of the financials..

Thanks, Bill and good afternoon everyone. Today, I’ll be discussing 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.

Covering revenue for the quarter, revenue totaled $112 million for the quarter, which was a sequential increase of 14%. 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 18% of our revenue and was driven by an ion beam deposition system sold for EUV mask blanks. We were encouraged by our laser annealing customer activity in the quarter and expect laser annealing to become a bigger revenue contributor in the upcoming quarters.

LED lighting, display and compound semi was 18% of revenue driven by a broad number of applications including RF and power devices, as well as advanced applications in the Photonics segment. In the advanced packaging, MEMS and RF filter market made up 17% of our revenue with system shift into 5G RF filter and advanced packaging applications.

And looking at our revenue by region, rest of world which includes Japan, Taiwan, Korea and Southeast Asia was 42% of revenue driven by sales of Ion Beam Deposition systems to EUV mask blanks, and data storage customers in Southeast Asia. The U.S.

was 36% of revenue and included sales of systems for data storage, as well as advanced packaging and again power electronics. EMEA was 13% of revenue and was driven by sales to compound semiconductor customers. And finally, China was 9% of overall revenue as expected.

Now turning to non-GAAP operating results, we achieved gross margin of 44% in the third quarter at the high end of our guidance range. OpEx for the quarter was $36 million. This is in line with our stated operating expense target. On a non-GAAP basis, tax expense for the quarter was approximately $400,000 with net income coming in at $11 million.

EPS was $0.22 on a diluted share count of 49 million shares. Now moving to the balance sheet and cash flow highlights, we ended the quarter with cash and short-term investments of $310 million, a sequential increase of $9 million. From a working capital perspective, our accounts receivable increased to $80 million as we increased shipments.

DSOs for the quarter came in at 64 days, a slight increase from the prior quarter. Accounts payable increased $8 million to $34 million driving days payables up to 49 partially offsetting the increase in accounts receivables.

Inventory increased $6 million to $143 million resulting from investments we’re making to increase shipments and provide evaluation systems to our customers in support of our growth strategy in semiconductor and compound semiconductor markets.

Long-term debt on our balance sheet was recorded at $321 million representing the carrying value of $382 million in convertible notes. And lastly, our CapEx during the quarter was $1.4 million.

Now turning to Q4 guidance, Q4 revenue is expected to be between $120 million and $135 million with non-GAAP gross margin between 42% and 44%, reflected in our gross margin estimate are additional service expenses to support customer evaluation arrangements, we expect non-GAAP OpEx to be between $36 million and $38 million.

On a go forward basis, we expect to keep SG&A close to current levels, but are making strategic investments in R&D to support our growth initiatives. GAAP EPS is expected to between $0.02 and $0.17 per diluted share. Non-GAAP EPS is expected to be between $0.22 and $0.37 per diluted share. Diluted EPS is based upon a 15 million share count.

And now for some additional color beyond Q4. At this time, based on our current visibility and forecasted backlog, we expect revenue growth in full-year 2021 in the 10% range when compared to full-year 2020. And with that, I'll turn it back over to Bill for a market update..

Turning to the markets we serve in our technologies. With the first phase of our transformation behind us, we’ll continue to focus solidly on the second phase of our transformation, growing the company organically in the semiconductor and compound semiconductor markets.

We’re confident in our execution in the near-term based upon multiple customer engagements where the pull for production solutions is strong. This near-term growth stems from multiple product lines, and comes from the data storage market, renewed demand in RF filters related to 5G and continued activity in the front end semiconductor market.

Consistent with our longer term strategy for growing in semiconductor, in compound semiconductor markets, we’re making investments to solve our customers most difficult challenges with our core technologies. These investments include increased R&D and server spending, as well as inventory supporting evaluation tools at customer sites.

The evaluation agreements are in process for laser annealing systems for logic and memory applications. And our MOCVD systems for early stage Micro LED applications. We have confidence this activity in high value markets will be the catalyst for our growth in 2022 and beyond. And we’ll keep you updated on important milestones over the coming quarters.

Now looking more specifically at each of our four markets, in our front end semiconductor market, our opportunities today are with our laser annealing technology sold to foundries and integrated device manufacturers. And our Ion Beam Deposition technology sold to EUV mask blank providers. Both of these technologies are performing well.

We’re becoming incrementally more optimistic with our laser annealing opportunities. You may recall we’re the process tool of record for one application step with two customers at Advanced nodes. We’re seeing continued order activity at the current node as our customers add capacity.

In addition, there are multiple growth vectors we believe will drive market share gains in laser annealing. We’re making solid progress with the second application step at an existing customer. We continue to make progress with our customers on their next nodes. In fact, we expect to ship evaluation systems to multiple customers in the coming quarters.

And lastly, while our LSA product line has historically been applied to logic applications, we have shipped systems to a top tier memory customer who is evaluating Veeco’s laser annealing solution. If successful, we expect the evaluations will result in new market opportunity, which would produce revenue growth in 2022 and beyond.

In summary, our laser annealing technology with its unique process capabilities and advanced nodes is providing near-term strength and is also a key component in our long-term growth strategy.

In the EUV mask blank market, we ship the system in the quarter, and we continue to work closely with our customers on future plans for capacity expansion as the industry progresses. In fact, one of our customers issued a press release in July announcing their plans to expand facilities in response to market demand for EUV lithography mask blanks.

As previously stated, we see this market as a two to four system opportunity per year. In compound semiconductor markets, our MOCVD product is well positioned to address applications like power electronics, 5G RF, VCSELs and edge emitting lasers and Micro LED. We’re experiencing an uptick in demand for MOCVD systems.

We received multiple orders for a high volume Propel system for power electronics, RF devices and early stage Micro LED applications, and there are noteworthy examples reflected in recent press releases.

Aledia, a developer of next-generation advanced displays has selected Veeco’s Propel 300 millimeter MOCVD system to manufacturer 3D nano wire Micro LED displays. The system features a semi compliant equipment front end module with full automation and was chosen due to its excellent productivity and film quality.

A-Pro Semicon based in Korea has selected Veeco’s Propel HVM MOCVD system for GaN based Power and 5G RF semiconductor device manufacturing. As you can see, our single wafer gallium nitride Propel system has been well received by leading customers for its proven high performance capability.

I'm proud to announce recent successes with our Lumina arsenide phosphide system as well. OSRAM Opto Semiconductors qualified our Lumina MOCVD beta system to drive their next generation of advanced photonic devices. The performance OSRAM demonstrated reinforces our confidence in Lumina’s capability.

Also, we have an evaluation agreement in place with another leading customer which will further advance our ability to drive long-term growth. Within our Scientific and Industrial market, data storage continues to be strong, driven by cloud and data center demand.

Our Ion Beam Technology enables our customers to increase the areal density of their read to write heads. This improves performance in our high capacity drives using cloud and data center applications. Based on our visibility in this market, we expect strong performance to continue through 2021.

In our advanced packaging, MEMS and RF filter market, RF filter demand is driven by 5G RF adoption and increasing RF content in 5G mobile devices. We expect this market to contribute to our near-term growth as we continue to deliver on what processing solutions to our RF filter customers.

The advanced packaging lithography market is driven by mobile devices, artificial intelligence and high performance computing. Our advanced packaging systems are optimized for methods such as Fan-out Wafer Level Packaging, and we continue to engage with our customers to solve their lithography challenges.

Lastly, before turning to our 2020 progress to date, I would like to inform our stakeholders that we’ll be modifying the way we report revenue to align with the company's evolving strategy. On a go-forward basis, beginning the fourth quarter 2020, we will provide revenue in a new market segmentation.

We’ll provide historical data reclassified to the new market segments for comparative purposes. As you know, today's market segments are front semiconductor, LED lighting, display and compound semiconductor, advanced packaging MEMS and RF filter and Scientific and Industrial.

Given the size of our data storage business, we’ll be breaking out a data storage segment separately.

We’ll also designate segments for semiconductor and compound semiconductor separately, given our strategic focus in these areas, and other important customers such as universities, for those that manufacture optical coatings will be reported in the fourth segment.

Our new segments will be Semiconductor, Compound Semiconductor, data storage, and scientific and other. Now turning to our 2020 progress to date, we implemented appropriate actions and maintain the health and well being of our employees during the global pandemic.

During this time, we improved profitability by restructuring and reducing our expenses and improving gross margin. And as a result, our quarterly non-GAAP operating income improved year-on-year by $10 million on similar revenue. We also aligned R&D projects with our long-term growth strategy.

Our current markets are performing well giving us confidence we will continue to perform well through 2021. And we’re pleased by our high level of customer engagement as we invest in evaluation systems for semiconductor and compound semiconductor customers, which we believe will drive our growth in 2022 and beyond.

We’re committed to making material difference and building a stronger Veeco that serves all our stakeholders. And with that, John and I will be happy to take your questions. Operator, please open the line..

Thank you. [Operator Instructions] And we will go to our first question from Tom O'Malley of Barclays..

Hey, guys, thanks for taking my questions and congrats on the solid results. My first one is really on the MOCVD business, you saw during the quarter a bunch of press releases about some additional traction there.

Can you talk about why you're seeing the initial traction right now? And is that becoming an increasing portion of what you guys recognize as the growth story and then you historically been very excited about EUV and laser really, but can you kind of talk about how an opportunity in compound semi has evolved particularly?.

Yes, thanks for the question, Tom. MOCVD is at historically low revenue levels right now, really, that's driven by the fact that we decided to exit the commoditized China Blue LED business. So over the last year and a half or so, we did a lot of work, restructuring the business, and really focusing on new markets and new opportunities.

And what you're seeing is just some early successes, we're starting to gain some traction with Propel and for power and 5G RF with A-Pro and that's pretty exciting opportunity. Also, we had an announcement with Aledia in Propel Micro LED they have a very disruptive way of manufacturing Micro LEDs on 200 and 300 millimeter silicon.

We also have another customer beta agreement in place for Micro LED with our Lumina system. OSRAM has signed off their Lumina system. So I think we're just seeing the fruits of a lot of work, kind of starting kind of from a very low level.

So I think on a go forward basis, certainly coming off these very low levels in 2020, I would expect to see an uptick in 2021..

Great, that's really helpful. Then my second is really a question on the EUV market. You saw ASML report a couple of weeks ago, and it was a little more cautious on their outlook there. I understand it's not a one to one for you guys. But you're part of that supply chain.

Can you talk about if you've seen anything different from your expectations there? Or you mentioned in your prepared remarks that some of your customers are actually talking about new facilities? But can you talk about the variance there between what ASML seeing and then what some of your customers are seeing?.

Yes, we obviously follow ASML very closely, and we're in very close discussions with our two Japanese customers who do provide those mask blanks. I think all in all, there's many puts and takes between ASML and what customers plans are, our view is unchanged. Overall, we plan to ship about two to four systems per year on average.

And I think even with some of these changes, we're not seeing any material impact to our forecasts..

Great, that’s helpful. Thanks, guys..

Thanks, Tom..

And we'll go to our next question from Rick Schafer of Oppenheimer..

Yes, thanks. And I love to add my congratulations, guys. Nice quarter. Bill may be my first question is kind of a follow-up on the MOCVD question. I think it's specific probably to A-Pro. But I'm curious with that when it just seems like that the customer certainly is focused on EV fast charging stations.

And I was wondering if you could describe that market opportunity and how you look at the growth potential there.

As EV really starts to take a take off and certainly GaN Power as you mentioned a couple of times on your call, continues to grow?.

Yes, we have seen an uptick in business, certainly in the third quarter from an order activity. And I think what we're seeing now is the introduction of GaN Power devices in consumer electronic products. And so for applications like fast charging and wireless charging is driving demand.

There's also other customers trying to qualify GaN in the automotive market, not in the high power, silicon carbide high voltage areas, but for power management throughout automotive. So it looks like it's going to be a good market for us. And it looks like our product, the Propel single wafer tool is pretty well positioned there..

Thanks and another question and thanks for all the color on next year and the look on top line. And obviously, you guys sound pretty bullish, I think you said for a while that you got great visibility on your HDD business into the first half. Now it sounds like you've got pretty strong visibility in the second half.

I didn't know if you could give not to get too fine a point on it, but just give a little color on how that second half shapes up.

I mean, at this point, I know it's next year, but does the second half look like it could be up over the first half next year in that business?.

I would say, obviously, we just announced that we're expecting 10% growth next year over 2020. And really, let me just break down I guess what the key growth drivers for us and the first is data storage. We've been booking a lot of business. And we see that really pretty clearly through all of 2021.

The second growth driver for us next year is really in laser annealing. And, we continue to ship at the current nodes and qualify at the next nodes. And our outlook there is very positive for 2021. And we're seeing a lot of activity in our wet processing equipment, really for RF filters, 5G RF filters, and power amplifiers.

So I think we really have a very good handle on 2021. But as I looked at 2022 and beyond, we’re making investments now in R&T and inventory for e-valves, improving our service capabilities to really support long-term growth in the semiconductor and compound semi market.

So big push right now is in placing e-valves and laser annealing for memory, advanced logic nodes, new logic customers and in MOCVD, our one focus for us is becoming qualified in Micro LED when that takes off in two to three years from now. So and then finally, we're exploring other Veeco core technologies in front-end semi.

But it's a bit early for us to elaborate on that yet. So kind of a long winded answer, but we see a clear path for 2021. And we're really doing a lot of work to make sure we continue that growth trajectory in 2022..

That's great color. Thanks..

Thanks, Rick..

And moving on, we’ll go to a question from David Duley of Steelhead Securities..

Yes, thanks for taking my question.

Real quick, as far as the upcoming quarter, could you just talk about the segments in Q4, which directionally what to expect there?.

I would expect to see strength in our Scientific and Industrial really on the back of continued activity in data storage.

Do you want to take that, John?.

Sure, so Dave just to add to what Bill said and we do expect a good quarter coming out of compound, excuse me out of the semiconductor, the front-end semiconductor market as well, we see some opportunities for our laser annealing product there as well. So I think across the board, we're seeing activity across all four markets..

And I guess China's fairly de-risked that of our numbers..

Okay. And I noticed customer deposits were up very significantly, sequentially. I think it was $20 million if I'm not mistaken.

Could you just talk about what's going on there?.

Yes, sure David. So we have been increasing engagements with customers where we've been fortunate to receive customer deposits. So we've expanded the base of customers that were receiving deposits from. So yes, it was a very strong quarter for us in obtaining new deposits from customers for orders we took during the quarter..

Okay, final question for me, there wasn't a lot of information was on the advanced packaging front, I was just wondering if you might address if you see anything coming in 2021, or when you would expect your advanced packaging business to take off, either from the big initial customer that you've had in the past, or one or two of those customers, I guess or any new customer engagements?.

Yes, Dave, I would say the part of the market where we participate has been steady and healthy and has had modest growth. And that's for applications like Fan-Out Wafer-Level Packaging, copper pillars and bumping. This quarter, we did revenue several tools to OSATs and IDM's. And I think as you know, we do have short lead times and limited visibility.

But the business is a steady, steady performer for us. We have not yet seen a significant uptick in this business yet. So we are that's kind of where we stand..

And would you expect there to be more activity in 2021?.

There obviously could be, we’re not seeing visibility to it yet. So I think, I wouldn't want to speculate. Certainly, our growth, our 10% growth plan does not have that factored in..

Thank you very much..

Thanks, Dave..

We will go to our next question from Patrick Ho of Stifel..

Thank you very much, and congrats on the nice quarter. Bill, maybe first-off as a follow-up to some of your LSA comments, particularly the work you're now doing with the memory side of things.

Can you give a little bit of color on the type of applications whether it's because of the advanced memory moving to a lot more logic type of processes? Is that helping to drive? I guess the work you're doing with memory manufacturers, or even their future adoption?.

Yes, I mean, I think what we're seeing, and we've been working with a number of memory customers, from a demo standpoint for pretty long time. And we’re seeing as a general statement that customers run a few nodes behind front-end semi, a number of nodes behind front-end semi.

So they're looking at similar class of problems that the front-end logic guys have been working on for the previous number of nodes. And so they're seeing in certainly in the demo activity, some significant benefits and benefits enough for them to take evaluation tools. So obviously, that's it's very early and the evaluation period a year or more.

But in two years, if we're successful, this could be a significant driver of longer-term growth, because it's probably a market that's similar, if not maybe larger than the logic business, we have today..

Great, that's helpful. And maybe as my follow-up question. Going on to the data storage side of things one of the leading disk drive makers has noted that they’re in the process of rolling out dry based on its HAMR technology before year-end.

Can you just remind investors about some of the opportunities ahead for Veeco especially as this technology finally gets rolled out?.

Yes, thanks for the question, Patrick. As our investors may know, we've been a partner to the data storage industry for decades.

And our Ion Beam Technology is used by all the hard disk drive manufacturers and we're certainly seeing explosion of data in the cloud and data centers requiring higher capacity nearline drives and so, Veeco is benefiting from additional head capacity on an absolute value, but also this HAMR or MAMR heat assisted magnetic recording.

So this technology transition is really driving a lot more steps and passes through Veeco equipment as the drives become much more complex. And so what we're seeing are some companies actually making brick and mortar expansion for there to produce [Audio Gap] only capacity but this technology transition..

Great, thank you..

Thank you, Patrick..

We will take our next question from Mark Miller of the Benchmark Company..

Congrats on your quarter..

Thanks, Mark..

Just was wondering, following-up on -- you're welcome.

Following-up on (inaudible) yesterday, which came out and they said that their factory utilization of their tools which are used to make the deposit the magnetic coating on hard disk is near historic highs, so you’re seeing similar high utilization on your data storage tools?.

Yes, yes we’re..

And they were talking about.

You said, I know you said it was going to remain strong, you're going to be linear throughout the year, strong in the first half of the year, or it will be strong throughout?.

We have visibility pretty much through the entire year..

Okay. And typically, you get nice margins on these tools.

Will this help give you a margin improvements next year?.

John, why don’t you answer that question?.

So Mark, we're currently operating in margin range in 42% to 44% range this last quarter, we achieved 44% gross margin at the company level, that's what we're guiding on going forward as well, that's what our current visibility gives us in some respect as volumes go up, as we've indicated, the volume increase, top line increase in Q4 and 10% year-on-year, we’ll get some benefit from volume, but as we indicated, we’re making investments in service and some other spending for supporting these evaluations that will start to drive revenue in 2022.

So, overall, we expect to operate in this 42% to 44% gross margin..

Okay, finally, thank you.

Finally, in terms of give us an update on what's going on with the VCSEL opportunities, as well as was that going to be choppy next year as it typically is?.

Yes, right now we're seeing the market is really satisfied with the capacity that's, that's there, we have a product that's capable of producing edge emitting lasers and VCSELs as well as silicon photonics as well as Micro LED’s, Red Micro LEDs. And so we’re placing an evaluation tool at a key customer for Micro LED applications, beta evaluation.

So I would think it's probably going to be slow to build. But I think over the longer term, I think it could be pretty good..

I could just sneak one on, what are you looking for in terms of tax rate for next year?.

So Mark, I think the way we look at it as more of a tax expense given our NOL position in the U.S. than looking at it as a rate. So, we’re looking at taxes on a cash basis in the $1 million to $2 million range as we've been on that trajectory, because we expect that the U.S. profits that we have will be shielded by NOLs..

That's per year right, $1 million to $2 million?.

Yes, per year..

Thank you..

Thank you, Mark..

[Operator Instructions] And we'll go to our next question from Gus Richard of Northland..

Yes, thanks for taking the questions.

Just real quick on the LSA system you mentioned in the memory, is that Flash or DRAM or both?.

The opportunity is DRAM..

Okay, that makes sense. And then on the OSRAM tool with the press announcements getting qualified, congratulations.

Did you recognize the revenue for that in the third quarter? Or will that be recognized in the fourth?.

That will be recognized, John? Actually, I think that was in the third quarter..

In the third quarter..

Got it. And then the GaN opportunities seems to be taking off a bit. This is ship or at least your second 300 millimeter tool or took an order for it.

And I'm just wondering, on the GaN side, how much is Power? How much is order, how much is 300 millimeter versus smaller diameter?.

Yes, I would say most of, I say all of the Power is at 200 millimeter. And really, that's driven they're thicker films and 300 millimeter, the bode is very, substantial. So I think the power applications will probably stay at 200 millimeter.

And the 300 millimeter tool that we ship, we announced to Aledia is for unique GaN nanowire method where they actually deposit the LEDs directly on a 300 millimeter silicon wafer..

Okay..

That's kind of a disruptive view of Micro LED..

I got it.

And then so they would do the green and the blue? Or can they do the red as well?.

I know the answer, but I'm not going to say maybe we should ask Aledia..

Okay..

I’ll move from that one..

Yes, fair enough. And then, you had a record from what I can tell quarter in Science and Industrial, and Ion Beam Dep. And you’re shipping the EUV systems as well.

Are there any capacity complaints for that tool?.

No, we're performing well. We’re still at a point where we can socially distance our assemblers and test technicians and work on staggered shifts. So no we don't see any problem delivering our capacity in 2021..

Okay, and then last one for me, sorry to take so many. On the Advanced packaging.

Can you hold in at this mid 16th level of we're assuming opportunity to start to see growth as demand per RF increase next year?.

Yes, as I said, we're seeing the business growing modestly, but not explosively. And I think, certainly, 5G has a really a broad indirect effect, I think on all the markets, whether it's LSA or advanced packaging. So I think we're seeing, starting to see bits of it, but not in large chunks at this time..

Got it. All right, thanks..

I think that we don't need that growth. Yes, thank you, Gus..

Yes, thanks..

And at this time, there are no questions in queue. I would now like to turn the call back to our speakers for any additional or closing comments..

Thank you, operator, and I hope everyone is doing well during this challenging time. We do expect a strong finish to 2020. And I want to thank the Veeco team for their continued dedication, executing our growth strategy. I look forward to updating you at upcoming conferences. Have a great evening..

And this concludes today’s call. Thank you for your participation. You may now disconnect..