Debra Wasser - Senior Vice President of Investor Relations & Corporate Communications John R. Peeler - Chairman, Chief Executive Officer and Member of Strategic Planning Committee David D. Glass - Chief Financial Officer and Executive Vice President

William Ong - B. Riley & Co., LLC, Research Division Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division Noah Kaye - ThinkEquity LLC, Research Division Brian K. Lee - Goldman Sachs Group Inc., Research Division Olga Levinzon - Barclays Capital, Research Division Krish Sankar - BofA Merrill Lynch, Research Division Carter B. Shoop - KeyBanc Capital Markets Inc., Research Division Edwin Mok - Needham & Company, LLC, Research Division Farhan Ahmad William C. Peterson - JP Morgan Chase & Co, Research Division Vishal Shah - Deutsche Bank AG, Research Division John Shen Stephen Chin - UBS Investment Bank, Research Division Aaron Chew - Maxim Group LLC, Research Division David Duley Ahmar M. Zaman - Piper Jaffray Companies, Research Division

Good day, everyone, and welcome to the Veeco Second Quarter 2012 Earnings Conference Call. Today's call is being recorded. For opening remarks, and introductions, I would like to turn the conference over to Senior Vice President of Corporate Communications and Investor Relations Ms. Debra Wasser. Please go ahead.

Thank you, operator, and thank you, all, for joining us today. Our earnings release was distributed at 4:00 this afternoon and is available on our website. Also posted on our site is the PowerPoint version of today's results. This call is being recorded by Veeco and is copyrighted material. It cannot be recorded or rebroadcast without Veeco's expressed 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 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. These factors are discussed in the Business Description and Management's Discussion and Analysis section of the company's report on Form 10-K and annual report to shareholders, as well as in our subsequent quarterly reports on Form 10-Q, quarterly 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 made. During this call, we may address non-GAAP financial measures. Information regarding such non-GAAP financial measures, including reconciliation to GAAP measures and performance, is available on our website. I'll now turn over the call to John for opening remarks.

Thanks, Deb. We did well in Q2. Revenue was $137 million. EBITA was 20 million, gross margin at 45%, and EPS was $0.37. And all of these were right in the middle of our guidance range. Additionally, cash grew to $540 million. And we're on track to deliver full year revenue of $520 million to $560 million, and that implies an EBITA of 13% to 16%. We continue to perform well, but as we all know, we're living through a downcycle. And what Veeco has done really well was to plan for that downcycle. Over 4 years ago, we started building our operations strategy around a variable cost structure. It took a lot of planning and hard work, but it's really paid off. The fact that we can go from $300 million of revenue in an upcycle quarter to a $137 million of revenue in a downcycle quarter and still make 15% EBITA shows that we did a great job managing our cost. Let's look at some macroeconomic trends. When people go home and turn on the TV at night, they are likely to see a story about an insolvent country in Europe or the growth slowdown in China or the delay in economic recovery in the U.S. And all of this has driven consumer confidence down, and consumers aren't spending. Our customers see that, and they're pulling back the throttle. Our Q2 orders were weak at $103 million, and MOCVD orders bumped along the bottom at $70 million, and Data Storage and MBE both trended down. On the other hand, current quoting activity and capacity levels at our customers’ leads us to believe that orders will improve gradually as we go to the second half of the year. But right now, it feels like customers have no real drive…

Thank you, John. Veeco's second quarter 2012 revenues were $137 million. That's down 2% sequentially and ending up at about the midpoint of our $120 million to $145 million guidance. Non-GAAP net income for Q2 was $15 million or $0.37 per share compared to $19 million or $0.49 per share in Q1. Second quarter GAAP net income was $11 million or $0.28 per share compared to $16 million, $0.42 per share in Q1 2012. As forecasted, second quarter gross margins were 45% or about 200 basis points below last quarter's unusually strong 47%. Last quarter's margins were helped by a favorable mix in larger revenue from final acceptances. In addition, this quarter we've seen increased pressure on selling prices as one could expect given the weaker business environment. Excluding amortization, Veeco's operating expenses were $45 million, up from $43 million last quarter and right in line with our guidance. This reflects the impact of salary increases, which became effective earlier in the quarter, as well as equity compensation expense. A little bit later, I'm going to talk about our plans to dial back our rate of SG&A spending during the second half of the year. R&D was roughly flat sequentially at about $24 million. Despite the business slowdown, we're keeping the R&D spending rate at about the same pace as 2011 levels, maintaining our accelerated product development programs. Our Q2 adjusted EBITA was $20 million or 15% of sales, in line with the financial model that John showed earlier. Adjusted EBITA trended down sequentially due to the lower sales volume in gross profit margins, as well as the increased OpEx. Turning to Slide 11. You can see that our reported $137 million in revenue -- LED & Solar was $87 million or 64% of sales, and Data Storage was $50…

Thanks, Dave. Let's move on to the outlook. The LED lighting market is going to be huge. LED has offered tremendous energy savings and provide great payback in many applications right now. LED lighting chips are projected to grow at an average annual growth rate of over 40% as the market moves from less than 5% penetration to more than 70% penetration by the end of the decade. Our business will take off as LED lighting demand accelerates. There will be billions of LEDs made over the next 5 years, and we want to make sure that the majority of them are made on Veeco equipment. If you think about Veeco in 2012 versus a few years ago, the thing that really stands out is how much we've accelerated the pace of new product introductions. We did it again this quarter. We launched a more compact MaxBright M and the higher-performance versions of both of the MaxBright and the K465i. These products reduce the cost of making high-quality LEDs, and they help to enable the massive adoption of LED lighting. We plan to maintain our high level of R&D spending, and you can expect our fast-paced product introductions to continue in the future. The flow of exceptional new products as well as a great job with customer support and customer service have translated into exceptional market share gains. We've gained market share in every region of the world over the last 5 years. And in addition to the top market share in 2011 and the first half of 2012, we're the #1 supplier to 6 out of 10 of the LED manufacturers that have the largest installed base of merchant tools. I'm really proud that the leaders choose Veeco. Let me summarize our business outlook. We don't see any clear signs that the economy is improving, but we do anticipate a gradual order recovery in the second half of 2012. We expect that to be led by 3 factors: China and Taiwan MOCVD investments, Data Storage technology buys and capacity additions, and growth in Services. Our Services business has been doing really well. We achieved record revenue in Q2, and we expect continued growth here. It's a tough market right now, but let me tell you why I'm really confident about our future. We've delivered solid results and in a tough year, and a lot of companies can't say that. In each of our markets, we are the market leader with exceptional technology and great customer relationships. The LED lighting market is going to be huge. LEDs are going to become the dominant form of lighting everywhere. And finally, our business model is well-developed and it's proven. And I'm confident that we'll be able to scale up when the market is ready. Our future is really bright. Thank you. Operator, we'll now take questions.

[Operator Instructions] Our first question comes from Bill Ong from B. Riley. William Ong - B. Riley & Co., LLC, Research Division: Of the $70 million in MOCVD Q2 orders, any of these orders came from the newly launched MaxBright M and the K465 HP? And also, about what percentage of the $70 million orders is scheduled for 6 months or less delivery?

Both of our new products, the MaxBright M and the MaxBright MHP and the 465i, we've had orders for all of those. And so they are doing really well. The $70 million, I don't think I can tell you in 6 months, but it's pretty close. So it's not -- there's no reason for customers to buy and spread backlog out. So I would have to say the delivery is fairly tight, but I don't have the facts. William Ong - B. Riley & Co., LLC, Research Division: Okay. Sounds like a large amount will be delivered within 6 months. Is that a fair statement?

I think it is.

Yes, 6 to 9, for sure, yes.

And we'll now go to Patrick Ho from Stifel, Nicolaus. Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division: I think, Dave, you mentioned gross margins felt some pressures on ASPs this past quarter. Could you just give a little bit of, I guess, color in terms of whether there was -- some or all of your products experienced these pressures, where was it coming from in terms of the product mix for you guys?

Yes, I mean, you can see that our margins, actually, they held up pretty well. So it's not having a huge impact on our margins, but it's normal as you'd expect in this environment. Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division: Okay. But did it come in both MOCVD, as well as Data Storage? Or was it primarily 1 of the 2 businesses?

MOCVD is what we're referring to. Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division: Okay. Fair enough. Looking forward, John, in terms of the industry outlook, you're projecting orders to gradually pick up in the second half of the year. I know it's obviously very early, but there is, I guess, improving signs about 2013 being a potential recovery scenario for the industry. What are some of the variables that need to happen in the second half of the year to, I guess, be the catalyst for a recovery in 2013?

Well, fab utilizations had been going up in China and Taiwan and Korea. So if that continues, that's certainly a key factor. Any kind of help we could get from the global economy would be a great thing as far as either TV sales or lighting adoption. We base our gradual upward trend based on what we're hearing from our customers, what we're seeing in terms of quoting activity and their capacity and that sort of thing. So I think it's been a little slower than we expected overall here, but we do think it will start to move up.

We'll now go to Colin Rusch from ThinkEquity.

This is Noah Kaye in for Colin. Even with this very low order levels, you're taking share now with MOCVD. Can you talk a little bit more on your earlier comments about what the drivers are that are helping you to take share?

Well, it's really being able to provide products that have great throughput and a lower cost of ownership for making really good LEDs. And what it comes down to more than anything else, helping our customers improve their economics with solutions that do a better job. And the products we just announced this quarter improved uniformity significantly in the 20% range and dropped cost of ownership by an additional 5% in addition to some of the other benefits from these products. So it's really having the best product and then doing a great job of supporting them.

That's helpful. And just a follow-up on that. I was wondering if you can talk about GaN-on-Silicon specifically, what changes may be required and what are the associated throughput differences in relation to current sapphire-based processing?

Well, we see all of our customers, all our larger LED customers, with programs to investigate GaN-on-Silicon. Some of them claim to be very close to full-scale introductions of those products, and some of them seem a bit farther away and maybe they're covering their bets to have a both the silicon and sapphire approach. Our tools work on either one, and they work quite well. So I think we'll do very well whichever way the market goes.

And we'll now move to Brian Lee from Goldman Sachs.

First, I wanted to ask about the backlog adjustments, if you could provide a bit more detail. Just wondering, how many customers were involved there? What are some of the maybe specific qualifiers that drove you to make the adjustments? And how much of the remaining $158 million and MOCVD is backlog is tied to Chinese customers?

Sure. There was -- it was 5 customers. And I mean, without going into specifics of each one, as we've mentioned on prior calls. Every quarter, we go through a review of our total -- of our backlog. And we look at all the conditions around the orders status and the customer and when they're expected to take the tools. So we do an assessment. And if it doesn't meet our booking criteria, we make an adjustment. That's what we get. For the rest of the backlog, I believe around 80% still is China customers.

I'll just add to that, Brian, that over the last 2.5 years, we've had about $70 million overall of backlog adjustments. It's less than 4% of what we've booked over that period. So we have maintained very tight booking standards, and our backlog adjustments have been relatively low. And in these cases, these orders didn't necessarily go away. But they didn't meet the criteria. Maybe they pushed out too far in the future, too, for us to keep them in backlog. But hope is not lost for all of this.

Okay. Great. I appreciate the color guys. And maybe if I can just dig into it a little bit more. Is it a funding issue? Is it technology readiness? I know in the past you guys have also talked about fab readiness. Maybe if you can just qualify it a bit more.

Yes, we don't want to go into specific customer situations, but it's the normal things that cause order delays. And at some point, we just say it's time to take it out of the backlog under our guidelines that we look at every quarter.

Our next question comes from Olga Levinzon from Barclays.

Just touching based on the market share side, David, you indicated that you're the #1 player at the top 6 LED makers out there. How do you to look towards this gradual LED order recovery in the second half of the year and potentially into 2013? Where do you -- which regions do you see the biggest potential for market share gains? And would that be primarily coming from getting a larger share of those 6 customers or adding the other 4 to the mix as the #1 supplier?

Well, let me take it in pieces. We've gained share in all regions. Our market share is very solid in all regions. And in particular, over the last, let's say, 1.5 years, our share grew faster in Taiwan than anywhere else. And that's because that's where our share was the lowest. So that region has balanced out a good bit versus the others, and I think we're very well positioned in all of the Asian countries to do very well on any kind of business. So I don't think it's going to be one region that will drive it. I believe it will be a broad front and because it's driven largely by the products. And when we say 6 of the top 10, there certainly is the potential for us to increase our penetration in some of those others. And I do expect that will happen. It's been happening. If we went back a couple of years ago, I couldn't tell you 6 out of the top 10. It's been moving up. And I think we have a decent position in just about every major player in the world. There are some that we're still the #2, but we're going to work real hard to get to #1.

Got it. And then on the high productivity upgrades that you recently introduced, just wondering, are you seeing a lot of traction there in the back half of the year from a perspective of upgrading existing capacity? Or is the vision to some level of LED order recovery based on customers seeing higher productivity tools and ordering whole new tools as a result?

It's really -- there will be elements of both because we will sell these products, at least the HP upgrades for the MaxBright and the 465i. We will sell those as upgrades to existing systems, and we've already have orders for those. I think the bulk of the economics for us is going to be in new tools, and the strategy is to have the best tool that gives the customer the ability to make really good LEDs at a lower cost. So to the extent we keep putting out tools that are better and better at doing that, those are what helps us get a bigger share of the overall market spending. So that's really our drive. And we've committed to our customers to deliver a continued stream of both upgrades and new platforms, and we're following through on that.

[Operator Instructions] We will now go to Krish Sankar from Bank of America Merrill Lynch.

John, if I look at the guidance for Q2 and the full year, it looks like the second half is going to be down almost 5% from the first half. How will the Data Storage and LED & Solar revenues trend?

Well, I think if you remember back on the -- when we came into this year with a huge backlog and we've shipped, that's gone down as we shipped more than we booked each month. So that's probably why we had a bigger quarter at the beginning. And for the last couple of quarters in the MOCVD business, the bookings have been fairly flat. And so that's what tells us, hey, you haven't seen the recovery yet, but it's still done fairly well. Dave, do you want to add to this?

No. Yes, I think that covers it.

If I can just squeeze in one more. The $70 million in MOCVD bookings, how many customers does that include?

It's fairly broad based. It's not 1 or 2, 2 deals. It's not...

And it's across the regions, too.

Yes.

We'll now move to Carter Shoop from KeyBanc.

First question is, I didn't notice a slide showing your outlook for 2013. I think you guys had introduced that slide last quarter, talking about 460 tools in industry for '13 , 540 for '14 and in best-case scenario. Any kind of updated thoughts on that and where you kind of -- industry trending would be helpful.

Well, we haven't -- what we were showing last quarter was a longer-term projection of the MOCVD market. We haven't changed that projection. I would say -- and we still think it's valid. I think that the thing that I would add is we might be sliding out a little bit. We had hoped that Q2 orders might have been a little stronger than they were and that maybe Q3 would be yet stronger. So we haven't -- we'll know that when Q3 is done. But we think the forecast is still valid, and we'll do well in that market.

One more quick one if I may, and this might be a little bit of a stretch. But I think a lot of investors are trying to better understand where are the utilization rates are in China, and I think there are several customers where utilization rates are quite high. But have you had a chance to maybe go back and look at your backlog, which you've said is 80% from Chinese customers, and get a kind of weighted utilization rate based on your backlog from those customers? Do you have any sense on what that kind of weighted utilization rate would be?

We have not done that. It's an interesting idea. But what I can tell you though is that when we look at the top customers in China, top 5 or 6 or 7, the utilization rates are surprisingly high. A lot of them are above 80%. And then there are some other customers that may be running at 80% of what they have installed, and they were going through pretty very rapid installs for them of equipment they bought and just moving it into their fabs. So at the leaders, the utilization rates are high. And then there's a mixed bag as you get down into the Tier 2 and Tier 3. Some of the Tier 2s are doing quite well. Some are doing pretty poorly. And the same thing on the Tier 3. So it is mixed, which is why we wanted to not just talk about overall China utilization, because I think it doesn't give you a good picture of what's really going on.

Hey, operator, before we go to the next question, I just want to answer something that we left open. We had orders in Q2 from over -- system orders from over a dozen customers in the quarter, MOCVD.

We'll now go to Edwin Mok from Needham & Company. Edwin Mok - Needham & Company, LLC, Research Division: A quick question on Data Storage sites. I understand you think orders was actually improved but are you saying that Data Storage revenue will come down as customers finish from flood-related installation?

I think most of the revenue for this year is in backlog at this point for Data Storage. So we're not counting on a lot more. And there's a number of contrary contradicting trends here. On one case, some of the customers spent a lot of money on flood recovery, and they got through that. And they may try to hold off on CapEx spending until they get to a real high utilization rate. On the other hand, it's still a healthy business. It's not growing really fast. But one of the good trends is that the number of heads per disk is rolling faster than the overall disk drive rate. So disks, hard disks, are getting larger, and the heads per disk is increasing. And that's what we really make the equipment to make the heads. So the growth prospects per head is a little better than the overall growth prospects for hard disk drives. Edwin Mok - Needham & Company, LLC, Research Division: That's helpful. And just a quick follow-up. Your competitors reported this morning, sounded a little more positive about back half. But they said that it was just not taking orders for one particular -- or a few particular customers. How are you seeing the order trends in your customers, too? Is it mostly concentrated on a few big customers with high utilization? Or is it more broad based?

It's more broad based. But there are some larger customers that we expect to place larger orders as they wrap up their funding and move to the next level.

We'll now go to Satya Kumar from Crédit Suisse.

This is Farhan on behalf of Satya. I wanted to ask you about the mix between the MOCVD. Can you talk about like what kinds are you seeing on the Power Electronics side and what portion of the MOCVD works towards that market?

Yes. We sell MOCVD systems into, of course, scan LEDs on sapphire, GaN-on-Silicon for LEDs and GaN-on-Silicon for Power Electronics. We don't provide splits between the markets, but we continue to do well in all 3 markets. And I think all 3 markets have a great future. So it's pretty broad based there.

Okay. And in terms of your Service revenue, compared to the last quarter, were they up or down? And considering that utilizations are up this quarter, is it fair to say that you should have gotten higher Service revenues on the MOCVD side?

The question was, do we expect Service revenues to go up again in Q3? And with utilization rates, shouldn't they go up more? Well, first of all, our overall Service revenues are a combination of our MOCVD Services and our Data Storage. And we had a bit of kind of upward pressure on Data Storage Services in Q1 and Q2 due to flood recovery. So although MOCVD Services continue to grow quarter-over-quarter and we expect that going forward, there is -- we'll be a little bit taken away from that as the kind of onetime events in Data Storage don't proceed.

Yes, just to add. I don't think we've put it in the press release or where you've seen so far, but the number for Services this quarter is about $33.5 million. And if you remember, at the beginning of the year, we said we do expect it to grow over the course of the year by 50% compared to last year. So it should be ticking up.

We'll now go to Chris Blansett from JPMorgan. William C. Peterson - JP Morgan Chase & Co, Research Division: This is Bill Peterson calling on behalf of Chris. Wondering about if there's any product that's already been shipped. Are there still products that remain to be signed off, I guess, particularly in China? How does that look?

Sure. I mean, we normally ship standard products with a 10% remaining that gets signed off that gets paid on sign-off. And in China, we can probably average a couple of months before getting that. So there's always a lagging component of revenue that relates to what you've shipped previously, and that will continue to happen. If you remember, in the last quarter, we had kind of an unusual numbers. And last quarter, meaning not Q2 but Q1, we had an unusual number of acceptances, and it pushed our gross margin up by 1 to 2 points. And Q2 was more normal in that respect, and the target predicts when you might get a little bubble of those. But there always are some and there always will be.

We'll now go to Vishal Shah from Deutsche Bank.

John, I wanted to just get attention from you on your cash and the use of cash over the year. Are you looking at any kind of dividend or announcing any buyback?

Well, we did well on cash. We grew it to $540 million this quarter. So that was a good result. And we haven't announced any buybacks. We'll announce them if the board moves forward to do that. We are certainly continuing to prioritize keeping a large chunk of cash there just as a safety net for the company and then would also certainly look for acquisitions that fit with our products and our expertise and our strategy. But no real news to report there other than that we did a good job growing our cash.

Okay. Great. And just one other question. The MOCVD orders for this quarter, what percentage of the orders came from customers that may be looking at this segment from a strategic standpoint out of Korea or Taiwan? Are you seeing some of the big guys coming back and placing orders or they're still evaluating?

Yes, I mean, there's certainly -- orders are coming from big and important customers. And right now, you have to be pretty solid to be buying and getting funding and moving forward. So absolutely.

We'll now go to Andrew Huang from Sterne Agee.

This is John Shen in for Andrew. I was wondering what the revenue and order exposure is from China?

It has -- what do you mean by exposure though? Content?

Order exposure, sorry.

The percentage?

That's right.

The percentage is about 80% of MOCVD, yes. And that's remained kind of constant for us.

Got it. And how about MOCVD backlog?

It's about the same.

Our next question comes from Stephen Chin from UBS.

So I just wanted to follow up with you on what you think gets China to order significantly more tools. We agree with you that utilization rates in China are higher. We think they're around 70% by just analyzing sapphire demand. But do you think utilization rate is all that's needed to drive China orders? Or do you think they need like the LED lighting subsidy or even more funding before releasing the larger orders that they've planned over the past few years?

I think they need all of those. I mean, hopefully, if there are to be subsidies that helps spur demand, then that obviously drives utilization and drives the business, that there are a number of customers that do need funding. And of course, that can delay things or whatever. But things seem to be moving along in a positive way, and the utilizations keep going up. The customers keep getting better at making LEDs. And I think it's hard to say exactly how it's going to play out and will it play out as a nice linear adoption rate or will it swing up quickly. And historically, we've seen both. We've seen things flip in this market very quickly. So we have to be prepared for that in any case it happens.

And just a follow-up question on the possibility of orders improving slightly. Could you share any color on which regions you expect to positively show that improvement in the second half? Is it still just China? Or would you expect Korea, Taiwan to show modest improvement?

Well, we mentioned both China and Taiwan. And Korea, it might take a little longer in Korea. Utilization rates are coming up. There could be some orders later this year out of Korea. There have been some orders already. But I think that the big movers will be China and Taiwan from our perspective.

And we'll now go to Aaron Chew from Maxim Group.

It's very encouraging to see the pickup in sell-through among your customers in utilization for that matter, primarily with the big ones in Taiwan. But just have been hearing a lot of chatter among some of your customers that their own demand, just their own sell-through for LED, not necessarily MOCVD equipment, but their LED has actually been ebbing a bit and looking up ahead deeper into 3Q. Some of the explanations attributed to this has been maybe the coming into the Taiwan TV subsidy and maybe just a second slowdown in the backlighting market. Just wondering if you could comment on that, if you're -- I know I'm asking about your own customers, but if you can just contest or maybe corroborate anything you're hearing would be appreciated?

Yes, we haven't really heard that. I think what you can see though is that as utilization rates are moving up, the customers are very cautious. And they're not springing in to a buying pattern as quickly as they would have 1 year or 2 years ago. I think they know that lead times on equipment are relatively short and that they can get equipment fairly quickly. And there have been some kind of peaks and valleys locally within years over the last year or 2, and so I think they're waiting to make sure where they're going. So that's what we think is happening.

That's helpful. If I can have a quick follow-up. Are you able to maybe just highlight -- I know you've generated $19 million in operating cash in the quarter. Just what was CapEx, free cash and maybe what were the big components moving operating cash would be helpful.

Yes, free cash flow is about $10 million.

And the big movers driving the $19 million, is it some more inventory drawdown, receivables or just any of the big components would be helpful.

Yes, I mean, it's mostly operating and then working capital changes. You saw that inventory did go down, offset a little bit by accounts receivable. But nothing unusual given where we're at in the cycles. It's mostly driven by operating.

Nothing you can't see on the balance sheet.

And then our CapEx was finishing up the Korea, the Korea operation, the Korea building we're in the process of.

We'll now go to David Duley from Steelhead.

Yes. Just a couple of quick ones from me. When orders do return in the second half of the year, do you think, in the MOCVD space? Do you think it will be driven by backlighting or general lighting? And then as far as your total cost structure goes now, what percentage is variable? And what percentage is fixed? And what are your targets there?

I think -- I'll take the first part of that question. I think both backlighting and lighting are both driving the overall utilization. And I don't think it will be one or the other. Ultimately, the general purpose or general illumination will be the bigger driver of growth with a little bit of help from the economy and TV sales would sure help backlighting and push things along. Dave, do you want to take the...

Yes. On the variable fixed, we said in the past that our breakeven point is about $100 million of revenue per quarter, and that pretty much holds. We have a very flexible -- it's one of the reasons we've been able to deliver the results we have in this environment. We have a very flexible fixed asset or fixed cost structure. About 90% of our cost to goods sold is variable. So that's certainly helping us now in the margins.

We'll now go to Ahmar Zaman from Piper Jaffray.

I guess the first question I have is, David, on your commentary earlier about SG&A potentially trending back down in the fourth quarter to $43 million run rate. How should we think about that in 2013? You mentioned you're taking some fixed costs out. So any color on 2013 on the SG&A would be helpful.

Yes, I mean, right now we're looking at the order pattern and we're rightsizing ourselves for what we see. We mentioned -- if you go back to the fall of last year, when we dialed down at the first pullback we saw in orders, we said we've got a lot of -- we do have a lot of dials that we can turn to, to manage that. So we kind of managed it based on what we see coming up in the next few quarters.

You wouldn't be too far to take the Q4 savings and annualize them into next year.

That's very helpful. And then, John, can I ask you a little bit about the OLED market and the OLED opportunity there? Your competitor has mentioned this morning as that one of their -- that's one of their focus areas going forward. What is Veeco doing on that front?

We have a couple of initiatives in OLED. We don't have an OLED systems at this time. We do have an investment in another company. And we have some OLED work going on with some top customers. But it's nothing we've announced. And it's nothing that anyone should count on for significant revenue this year. We are working on it. When we have a product to announce, we'll talk about it.

And it appears that there are no further questions. I'll turn the conference back over to our presenters for any additional or closing remarks.

All right. Well, thank you for joining us today, and we look forward to delivering another great quarter in Q3. Thanks.

This concludes today's presentation. Thank you for your participation.