Good day and welcome to the Veeco Instruments Q4 Year End 2014 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Debra Wasser. Please go ahead, ma'am. Debra A. Wasser - Senior Vice President, Investor Relations & Corporate Communications: Thank you operator, and thank you all for joining today's call. With me are Veeco's CEO, John Peeler and CFO, Sam Maheshwari. Today's earnings call 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 express permission. Your participation implies consent to our taping. To the extent that this call discusses expectations about market conditions, market acceptance and future sales of the company's products, future disclosures, future earnings expectations, or otherwise makes statements about the future, such statements are forward-looking and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These factors are discussed in the Business Description and Management's Discussion and Analysis sections of the company's report on Form 10-K and Annual Report to shareholders and in our subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and press releases. Veeco does not undertake any obligation to update any forward-looking statements, including those made on this call to reflect future events or circumstances after the date of such statements. During this call, management may address non-GAAP financial measures. Information regarding such non-GAAP financial measures, including reconciliation to GAAP measures of performance, is available on Veeco's website. I'd now like to turn the call over to…

Thank you. And we'll now take our first question from Mehdi Hosseini from SIG.

Yes. Thanks for taking my question. Just as a follow-up to the EPIK700 and the revenue recognition. Given how the backlog has turned out more than $280 million exiting 2014 and there is also revenue recognition, how should we think about the shipment and the revenue beyond Q2? And I'm not asking for a specific guide looking forward beyond Q1, but just for purpose of modeling and how the units are going to come out of backlog and shipment and revenue are going to be followed. Any kind of qualitative comment will be really helpful. And I have a follow-up. Shubham Maheshwari - Chief Financial Officer & Executive VP-Finance: Sure. Thanks, Mehdi. This is Sam. The way we are looking at our business right now is that the revenues over the quarter should be sustainably up beyond Q1. Obviously Q1 is down, as I said in my prepared remarks, because of deferred revenue. But as this revenue gets recognized in Q2, Q3 timeframe, they should be up. And with almost about $300 million of backlog that you just said that we are starting the year with, it gives us great confidence that we'd have a very good 2015. And since we're beginning 2015 with a low Q1, so to say, on the revenue line, Q2, Q3, Q4 should be expected to be pretty strong.

Great. And then one follow-up. I think John was talking about the PSP revenue contribution as much as $65 million. Would this be accretive on the operating margin, the PSP revenue contribution? Shubham Maheshwari - Chief Financial Officer & Executive VP-Finance: Yes Mehdi, it should be – we are looking at PSP that it would be accretive on the gross margin and/or operating margin, both of them.

Okay, thank you.

And we'll now take our next question from Krish Sankar from Bank of America.

Yeah. I have two questions. First one, a housekeeping one for Sam. What is the tax rate you're assuming for the March quarter? And you also said, if you'd baked in the EPIK revenue, it would have been about $120 million to $130 million in Q1. What are the gross margins sort of been at that run rate level? Shubham Maheshwari - Chief Financial Officer & Executive VP-Finance: Krish, I will answer the first question on the tax rate. The tax rate is expected around 20% to 25%. We have previously guided you in the low 20%s. However the way we are looking at taxes for the full year, the taxes would probably not change with the addition of revenue for Q1. And then in terms of gross margins, I would say that it would be roughly still in the same range even if we had added those revenues in Q1.

Got it. Got it. Okay, that's very helpful. And then as a follow-up, I wanted to find out – when you look at the order guidance given that it's coming back after a one-time uptick from Sanan. If you look at the landscape of your customers, it seems like Sanan and Epistar are probably the two big customers out there. The rest of them are probably not going to be adding like 50 to 100 tools, probably more, more like 10 to 30 tools. A, is that a right characterization and B., if that is the case, how does the landscape for MOCVD look like over the next few years if the customer size has really become smaller except for two for them? Thank you. John R. Peeler - Chairman & Chief Executive Officer: Well, I think – it's John here. First of all, there are more customers or more important customers than just Sanan and Epistar. And in fact we've seen positive reception and actually orders from four regions for the EPIK700. So, we think there is substantial purchases in other regions other than China and Taiwan. And that's going to add on to the two large customers you mentioned. So I think there's good potential for orders. I think the trend will remain intact. We've seen good growth over the last eight quarters, when you average it out for the ups and downs. We expect good growth in the future. And we think 2015 is going to grow and 2016 also. So I think there is a good market out there.

Gotcha. Thanks, John.

We'll now take our next question from Mike Ritzenthaler from Piper Jaffray. Mike Ritzenthaler - Piper Jaffray & Co (Broker): Yes. Good afternoon. In terms of utilization rates across the key geographies, are we seeing more tightness in MOCVD capacity? And how do you see that kind of seasonally as we head into the March quarter? John R. Peeler - Chairman & Chief Executive Officer: Yes, well, we've seen – we saw the rates take a dip in Q4 and we've seen them pick back up since then and getting back in the high 80%s or even the 90% in some regions. So I think utilization rates are tightening up and people will – are getting near their capacity which is why we expect orders to continue. Mike Ritzenthaler - Piper Jaffray & Co (Broker): Sure. Okay. Thanks. And then on the FAST-ALD strategy going forward, any renewed expectations on timing for revenues as you kind of refocus that. Are we looking kind of two years out. And then any go forward expectations for the cost reductions that we could embed in our model from the OpEx line? John R. Peeler - Chairman & Chief Executive Officer: So, on the first part of that, I think we're not going to see revenues of substance in 2015. I think it's going to be 2016 and beyond, whatever we sell is going to be a new product and it will have an extended revenue recognition cycle on the front end. So, it is going to push out and that's one of the things that drove us to take the impairment. And I'll let Sam answer the cost reduction. Shubham Maheshwari - Chief Financial Officer & Executive VP-Finance: So Mike, Sam here. Looking at possibilities of reducing expense run rates here, we think about $4 million or in that range on an annual basis that we would be able to reduce. And that would be across people, tools, depreciation, et cetera, all those types of expense reduction, and probably about $1 million or thereabout in terms of restructuring charge that we may take in Q1. Mike Ritzenthaler - Piper Jaffray & Co (Broker): Okay. Perfect. Thanks, John. Thanks, Sam. Shubham Maheshwari - Chief Financial Officer & Executive VP-Finance: Thank you.

We'll now take our next question from Edwin Mok from Needham & Company. Edwin Mok - Needham & Co. LLC: Hi, thanks for taking my questions. So first question regarding the order trend beyond this large order that you got on EPIK. How fast are customer converting to EPIK here? Maybe a better way to ask this, what do you expect the order mix to be as you go into first – let's say first half of this year between EPIK and probably the older MaxBright or even K465i, how do you kind of think of all that? John R. Peeler - Chairman & Chief Executive Officer: Well, first of all, we are still selling K465i's more into niche applications. We're also selling MaxBright's and expect to continue to sell those. I think as we get into the second half of the year, we'll be more than 50% EPIK products, and it could reach that in the first half too, but it's going to be mixed. But I think eventually as we get later in the year, we'll certainly be more than 50% EPIKs. And we'd expect EPIK to help us improve our gross margin and get to the targets that we're looking for. Edwin Mok - Needham & Co. LLC: Okay. Guys, that's helpful. I'm going to squeeze two questions into one. So question on Propel, is that a product that will allow you to address the silicon-carbide market or is it still only GaN-based power device? And then on PSP, I notice that the revenue target of $65 million is kind of flat to last year. (31:22) we've seen some growth in end market, why the difference there? John R. Peeler - Chairman & Chief Executive Officer: So, on the Propel, we won't be addressing silicon carbide initially. That's not where we focus. That's not to say that it can't do bad. But at least initially, we're really focused on GaN Power Electronics. So we'll stay with that for the beginning. And Sam, you want to take the other? Shubham Maheshwari - Chief Financial Officer & Executive VP-Finance: Yeah so – and Edwin on PSP, the business in 2015 is expected to grow. If you remember, when we had done the PSP acquisition, we had highlighted growth rate of about low single-digits for that business, and this is in line with that. So what John said $65 million is essentially a growth over what they did in their business last year. Of course they were not with Veeco, so that those numbers are not provided. Also the revenue recognition for them was different when they were standalone company. So revenue recognition changes here and we are still looking at about the same number, $65 million or so for PSP in this calendar year. Edwin Mok - Needham & Co. LLC: Great. Thanks so much. Edwin Mok - Needham & Co. LLC: Thanks Edwin. Shubham Maheshwari - Chief Financial Officer & Executive VP-Finance: Thank you.

We'll now take our next question from Paul Coster of JPMorgan.

Yeah, thanks. Sam, can I just make sure I understand that with respect to deferred revenue, we're going through a sort of one-time event here and that the revenue recognition rules will sort of normalize by the end of this year. Is that a correct statement? Shubham Maheshwari - Chief Financial Officer & Executive VP-Finance: Hopefully much sooner than that, Paul. In Q1, we are shipping $25 million or more of product and we are spending money on manufacturing those tools and testing them and everything else that comes along with shipment. But we really are not able to get benefit from that revenue in Q1. But we expect that we would be able to meet the thresholds for revenue recognition on shipment sometime in Q2. And beyond that Q3, Q4 it should normalize. So, Q1 and Q2, they are going to go a little bit through a dip and then come up, but at the same time, and in the meantime, we are expecting we'll also be shipping all the product that we've been booking so far.

Right, got it. And then John, you talked a figure of 30% growth this year. If I strip out the ESP business, then we're talking about somewhere in the region of 10% to 15% growth, which doesn't seem that much of a stretch given your bookings recently. Can you just comment on that please? John R. Peeler - Chairman & Chief Executive Officer: Yeah. Well, first of all, we said more than 30%. So, we are at least working to do quite a bit more than that, but Sam, why don't you take the rest of this? Shubham Maheshwari - Chief Financial Officer & Executive VP-Finance: Yeah, even if you strip out PSP, the non-PSP business, even if we go with the lower bar that John put of 30%, the ex-PSP business is growing about 20% plus. So, 20% plus growth on ex-PSP business, then we add PSP and then all this is with the idea that we are saying 30% or more.

Okay. Thank you. That's helpful.

We'll now take our next question from Patrick Ho from Stifel, Nicolaus. Please go ahead. Sir Ho, your line is open. Patrick J. Ho - Stifel, Nicolaus & Co., Inc.: Thank you very much. John, given how well your gross margins have held over the past few quarters and in your outlook, are you seeing any pricing pressures on the new EPIK product? John R. Peeler - Chairman & Chief Executive Officer: Well, there is – there's certainly pricing pressure, but I do think we will be improving our margin (35:26) our gross margins. So I think the environment is getting better, the tools – an excellent tool produces great results. So that certainly helps a lot and our goal is to get our gross margins back above 40% by the end of this year. So I think the new tool will help us do that. Patrick J. Ho - Stifel, Nicolaus & Co., Inc.: Great. And my follow-up in terms of some of the applications that you talked about for PSP. Some of them obviously are targeted on TSV type of applications or stuff that hasn't really gained mass adoption as of yet. How do you look at the adoption for TSV as well as some of the more complex advanced packaging techniques and how that can impact or potentially provide some upside for your business this year? John R. Peeler - Chairman & Chief Executive Officer: Yeah. I think with TSV, it's been a – this has been a moving target for the last few years and it's been shifting out. So it's a little hard to predict when it is, but – and I think it does give us tremendous upside because there is not a lot of TSV baked into our case plan. On the other hand, we are sampling wafers with multiple IDMs for TSV. They've told us the process works. And we think we have better economics on this process than the older approach of a dry etch. So we think it really gives us some good upside and we're able to address the other applications that we've been selling into. So, good feedback from customers. And I think when it takes off, there'll be some really good business for us. Patrick J. Ho - Stifel, Nicolaus & Co., Inc.: Great. Thank you.

We'll now take our next question from Brian Lee from Goldman Sachs. Brian K. Lee - Goldman Sachs & Co.: Hey, guys. Thanks for taking the questions. Apology if some of these have been asked already, I had to jump on a little bit late. First off, what percent of your MOCVD bookings this quarter were for the EPIK700? And then separately, what percent of the orders in MOCVD this quarter were from China? Shubham Maheshwari - Chief Financial Officer & Executive VP-Finance: Brian, we do not disclose bookings by product type. We just disclose bookings for MOCVD. But I would say that a large percentage of booking was for EPIK. And then coming back to your second question, I think we do disclose overall company's booking by region, not particular product line or particular business and its bookings by the country. But I would say that a large percentage of bookings in this quarter were from China. Brian K. Lee - Goldman Sachs & Co.: Okay. Fair enough. And then as a follow-up, I guess just wanted to dig into what type of environment you're seeing amongst your U.S. and EU customers on capacity expansion particularly as it relates to the MOCVD business and whether or not that's more of an upgrade or new system activity that you're seeing in the region. And then lastly, if there is any impact you guys are seeing from gain on silicon transitions? Thank you. John R. Peeler - Chairman & Chief Executive Officer: So, first of all by – utilization rates have picked up from earlier – let's say earlier in the fourth quarter, there was a depression there in the early fall. They picked back up. They're in the high 80%s, some are in the 90%s. We've seen interest and purchases in multiple regions of the world. So, not just China, but China, Korea, U.S. and Europe. And so, we do have new order activity in all regions. And, what was the third question? Brian K. Lee - Goldman Sachs & Co.: Any impact from GaN-on-silicon transition that you're seeing whether in that region or more broadly? John R. Peeler - Chairman & Chief Executive Officer: Well. We're selling products in the GaN-on-silicon for LEDs and have done quite well. Some of our customers have achieved excellent performance for GaN-on-silicon. And so, our approach is, we can sell you a product to do sapphire-based LEDs or GaN-on-silicon, it doesn't really matter to us. So, we don't look at that transition in any negative way. Brian K. Lee - Goldman Sachs & Co.: Okay, thanks guys. John R. Peeler - Chairman & Chief Executive Officer: Okay, thank you. Thanks, Brian.

And we'll take our next question from Vishal Shah from Deutsche Bank.

Yeah, hi, thanks for taking my question. And I apologize if some of these have already been asked. I jumped a little late in the call. But, maybe, John, can you talk about the outlook for the OLED business? I know you guys took some charges. How do you see the evolution of that product at your customer this year? I mean when do you expect bookings, if at all for this year? And then, bookings in the fourth quarter are very strong, but even despite the deferred revenue in Q1 – Q1 revenue outlook – looks a little light, so can you maybe talk about what's going on there? John R. Peeler - Chairman & Chief Executive Officer: Sure. Well, first of all, on OLED. So, with our large customer, we did demonstrate the ALD approach to OLED encapsulation. We got good film quality, it worked. But that technology's bigger benefits come from very highly flexible displays and more foldable displays. So for the current generation, what's happened is that – is the incumbent competitive technology has progressed and the customer made decisions that that was a better approach in the near term. And that's what basically told us we weren't going to get any orders from that customer in the near future. We're still talking to customers in multiple other regions. So it's not to say that the opportunity is dead, but there, things are not as clear. So we're back kind of evaluating how we'll do there. Q4 bookings were great. They were the best since 2011 when the market was doing spectacular and Q1 shipments are really strong, I think that's the message and Sam can explain why there's not more revenue, but Q1 shipments are excellent. Shubham Maheshwari - Chief Financial Officer & Executive VP-Finance: Yeah. Vishal, Q1 shipments, as John has said, are pretty strong and we expect shipments to remain strong through the summer for sure that we can see. We have certainly started this year with a very strong backlog of about $300 million. And we will be working our way down on the backlog and at the same time expect to see some strong bookings also here during the spring and the summer timeframe.

Okay. That's helpful. Just one last question. Can you maybe talk about what percentage of your Q4 bookings were service? Shubham Maheshwari - Chief Financial Officer & Executive VP-Finance: Typically overall, our service business runs about 30% of our revenue.

Okay. Great. Thank you. John R. Peeler - Chairman & Chief Executive Officer: Thanks, Vishal.

. And we'll take our next question from Mark Heller from CLSA.

Thanks for taking my question. And I again also apologize if this has been asked by those (0:43:48) bumped-off the call. But the Sanan orders, are they all occurring in Q4 of 2014 or is there some orders that are also rolling into 2015 as well? Shubham Maheshwari - Chief Financial Officer & Executive VP-Finance: A large majority of that is in Q4 and then some of that is going to be in 2015, depending upon the service requirements.

Okay. And can you also just talk about the general environment in China? I guess there's been some talk about reduction in subsidies over there. Are you seeing that and what's the potential implications? Thanks. John R. Peeler - Chairman & Chief Executive Officer: Well, I think there has been talk of reduction in subsidies. What we've seen so far is that our customers, the large companies in China are still getting subsidies and expect to get those in the near term. I think there is some thinking that that may go away, but it's not really clear exactly what's going to happen. At the same time, we see it for the longer term that when the subsidies go away, it will be better for the market, that we'll have a more leveled global playing field across the world. And we'll see less kind of artificial influence in the market due to subsidies. Because in the end, what's going to drive LED tools or MOCVD tools to make LEDs is lighting. We know that end market is growing, it's got a better than 30% CAGR, capacity utilization rates are high. So, as subsidies change, there may be some short-term aberrations in bookings and things. But we think that overall, it's going to settle out and will be healthy for the market. But not clear exactly how that's going to work yet.

Thank you.

We'll now take our next question from Mehdi Hosseini from SIG.

Yes. Thanks for letting me ask a follow-up. Just on the MOCVD pricing trend, there was a comment on the prepared remark that your gross margin is somewhat dependent on ASP. I'm just wondering if you could elaborate on the current ASP trend. Should we assume a flattish environment or is it just pretty much a fluid dynamic? John R. Peeler - Chairman & Chief Executive Officer: When we develop a new tool and we launch a new tool, we build in new technologies, advanced technologies. We improve performance. And as we sell that to our customers, they get a benefit. So, their newer tool gives them a better cost of ownership or a better yield or uniformity than their old tool. But they have to pay some more for that too. So, the net expectation – and it's really hard to talk about ASPs because reactor sizes have changed and many things have changed. I think the net expectation is that we expect our gross margins to improve and that as we get later in the year and up the learning curve a little bit for this new product, as well as sell to more and more customers that we're going to get our gross margins back over 40%. So I think the pricing environment from that perspective will improve – is improving.

Got it. Thank you.

And with no further questions, I'll now turn the conference back over to John Peeler for any closing comments. John R. Peeler - Chairman & Chief Executive Officer: Thank you. Thank you for joining us tonight and we'll look forward to seeing you again next quarter with some great results. Thanks. Shubham Maheshwari - Chief Financial Officer & Executive VP-Finance: Thank you.

This does conclude today's conference. Thank you for your participation.