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Coherent (COHR)

Participants
Bret DiMarco Executive Vice President & General Counsel
John Ambroseo President & Chief Executive Officer
Kevin Palatnik Executive Vice President & Chief Financial Officer
Jim Ricchiuti Needham & Company
Tom O'Malley Barclays
Mehdi Hosseini SIG
Pete Lucas CJS Securities
Mark Miller The Benchmark Company
Nik Todorov Longbow Research
Andrew DeGasperi Berenberg
Mark Miller The Benchmark Company
Call transcript
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Operator

Good day and welcome to the Coherent First Quarter Fiscal Year 2020 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to introduce Mr. Bret DiMarco, Executive Vice President and General Counsel. ahead. go Please

Bret DiMarco

and call Sean fiscal everyone. to Welcome ended Thank discuss good Coherent's conference to XXth, first results today's December you, XXXX. afternoon from quarter its

with Palatnik our Vice President call On Ambroseo, Officer. Chief Executive are Officer; Kevin Executive President our the and and me Financial Chief and John

trends, forward-looking timing everyone events, limitation, without statements benefit, Coherent's future I remind information of during including, that would such like expected this statements, provided financial and results, if any, business anticipated some and to call the may include trends. about

no contain forward-looking statements referred forward-looking such words These forward-looking and Coherent future, outlook, obligation expects, guidance. statements. assumes of as anticipates, may statements or to such intends, update as as beliefs, estimates, and predictions project, any believes, reflect These will, today, to expressly

forward-looking those or or predictions are and actual that are are substantial may to to to achievement these only materially results, assumptions subject expressed cause risks, predict implied from and by uncertainties, difficult forward-looking statements. performance, statements These and differ

successfully, could our our forecast successful to implementation conditions, exposure end and customer our and to long-term sufficient mobile generate that our and timely the States our worldwide customers our not customers' products customers' shipments; Eurozone; our ability our such economic expanded United global of differences accurately our our our with other to periods; spending government products integrate synergies; acquisitions and associated filings. adoption SEC commercial economic business with cash and ability contribute cause achieve or OLED Rofin ability on of to orders; for panel and manage from accept other worldwide successfully materials coronavirus-related of relations associated achieve site anticipated acceptance, risks trade to demand ability such and to and the to actions cancel world our pricing in use in savings operations are and own worldwide of applications; impact programs future risks planned our ability to including and ability efficiency; identified to, flat our fund displays for projects our products demand, and products; other operational wins; in limited ability our demand and company's China of of consolidation ability displays; of China; purchase qualify repayment; include, ability the anticipated improved the our government; risks displays; forecast global to customers manage to products; availability the ship cost-reduction our related our suppliers; debt adoption the for and markets; their design but our the the and have to arising the particular, trade or policies, the and between availability continued Factors OLED of timely by to customers' our from in to capital

Form, statements, today's identified XX-Q, Coherent's X-K, description detailed the release. should filings including XX-K most recent periodic these which financial a its SEC uncertainties and you forward-looking risks impact of For and press review in Form could risks Forms including

will Chief and over President Ambroseo, turn call Officer. John I now to Executive our the

John Ambroseo

mostly outlook from first multiple X due welcome year are encouraging above certain strong well call. aggressive, unchanged. The in and The applications. to several takeaways of competitive and in is China, full our Bret everyone while the are XXXX. key Thanks was markets improving There from quarter still book-to-bill to dynamics fiscal demand

II prior This XXXXs consecutive system investments. microelectronics the system well destined orders with which across positive the orders new were LineBeam for up was industry to third have that our aligns for market. received news Display is commentary China. we were orders on Phase systems The and quarter significantly LineBeam The service.

reflects in smartphones XXXX. the demand calendar increase fourth OLED-equipped service The higher of orders in quarter for

from were the bookings pulse in orders, OLED low In addition lasers displays projected XXXX. and ramp, XXXX COX suppliers as using short OLED is specs penetration lock in but the in for There the cutting to sets. small and a up XX% is two years industry to also units likely ramp for down manufacturers ELA material flexible to prepares the and foldable contribution as the three for remain

but at to will CES covered Following one's CES, questions Micro-LEDs up. XXX achieve The potential, The regarding inches while predictions take impressive. technology gone likes market others It and costs mass of tiles for and could clearly Samsung, prohibitive. running. to wall Samsung's viability. has years Sony, were of be no and likely from the has has was the remain number display added Micro-LED the surprise demos

The capacity full CapEx Semicap the for spending year and changed X-nanometers XG last TSMC higher X-nanometers reportedly XX adding at in with TSMC announcing is and Samsung for AI days outlook servers chips. dramatically spending. both and

from renewed seeing demand reportedly is memory. Samsung

for partners plans Our variety metrology tools. integrated a and build raising their inspection by responded OEM of

Consequently, were our on Semi a basis. up orders laser sharply for applications sequential

and service of benefited contracts. from sustained annual high service timing Our the bookings utilization

microelectronics arising sequential from which in semiconductor demand service out is growth API, the increased orders and for marking chips. Rounding picture also double-digit subsystems enjoyed

programs to seeing uptick adoption. due also are Chinese for We drive XG-related an to technology government

towards are during These increase that in double-digit circuit should micron board support currently XX tool XG XXXX. circuit requirements HDIs calendar density. XX a to drive Printed higher XX-plus designs HDI percent for micron trending demand

uptick to upcoming for We manufacture also a antennas. XG in see lasers corresponding quarters demand used expect to

exports autos domestic to and still Europe global PMI Germany's a strength in signal for market be below demand The on partially materials eurozone depressed modest the America well although appears market expansion. is North headwinds due into lagging. to moved faces stabilizing. China's still PMI the processing territory are average. PMIs of positive

seasonally few bookings reflects the The was first a The data on our fiscal quarter year our period. from business for and adjusted a market. book-to-bill one worth percent for prior stabilizing

cutting the various strong market submarkets and a quarter. outperformed medical COX the prior high-power up lasers very held broader systems cutting Within device used orders manufacturing well following for in

applications of internal from overall for due sequentially, the combustion weak but electric the engines remain challenging to automotive to mix Our shifting were automobile portfolio conditions up vehicles. and demand market orders sands

Competition laser diodes rising to become or is due pump and to from domestically are suppliers. for a lasers. components direct in pricing them the Western Chinese manufacturers independent desire and market to sourcing Chinese more

have We that heard fiber at laser manufacturers from end users X X share to domestic taking power are kilowatt level. Chinese the kilowatt

suppliers. demand in market shift or setting neither indicative of bookings This wavelength As surprising powers a OLED increase, currently is performance pumps, manufacturers prior component of the optic diode were and quarter. Western lower will record share. nor favors following the which Instrumentation in long-term a change along

like adoption. are clinical greater Bioinstrumentation cytometry flow experiencing applications

One functionality. of of to are trend study UV-activated that small is to cell is the this capabilities that critical driving the particles ability reagents

is leading reagents exciting Our multiyear the ultraviolet OBIS product we laser for expect and growth from solution platform platform. this

Our shape. medical business solid in also is

aesthetic integrators making for demand procedures therapy, for is China in and on defense growth saw the the business OEM is American new our to from North strong conjunction and double-digit legacy annual track business cataract mostly inroads of One good and finally aerospace primes. with

the Chief I'll Financial over Officer. call now Kevin Palatnik, to our turn

Kevin Palatnik

summarize and to release well non-GAAP between financial detailed results you XXXX fiscal QX press primarily move first as a first results. for the today's I'll results I'll Today, non-GAAP quarter for refer and John. of as XXXX. description GAAP a financial discuss results outlook reconciliation financial ask our Thanks, fiscal and to that GAAP

of expense, to restructuring adjustments and The adjustments tax compensation. for stock-based non-GAAP the compensation and adjustments assets related relate amortization intangible tax costs stock-based

XX A today's website. on of non-GAAP of replay text the Relations will be following GAAP days supplemental full webcast trended will be The call. and Coherent prepared made also Investor for posted the remarks approximately and financial available information this

first margin EBITDA of XXXX EPS XX.X% million, of company's X.X%, XX%, adjusted key Fiscal of for and total non-GAAP were; non-GAAP operating financial $XXX.X margin $X.XX. metrics gross quarter non-GAAP of the of results operating revenue

guided the Total $XXX.X revenue in our first end rather for to range market. came materials of stability weakness above moderate in fiscal than quarter due significant and primarily the the processing midpoint million previously was

fiscal processing Our for scientific first microelectronics XX%. revenue the materials and XX%, XX%, was Asia revenues OEM in of XX% the instrumentation quarter, and XX% market accounted components the government for X%. and by Geographically, Europe rest XX%, world of U.S. mix XX%, QX

greater to Asia related XX% of territories than contributed quarter our display South that manufacturing first in includes more had customer of revenues one fiscal panel than with flat revenues. Korea XX% We large two sales.

XX% revenues their service product service and fiscal service sales. related sequentially increased parts, end revenues Other million approximately stuff. Other spare Revenue revenue of of service XX% integrators for was products by of X% agreements of sales. from product $X approximately the as consists was other or and and $XXX consumable were replenish first approximately and sales. million users Total our services quarter approximately and accessories

gross and in midpoint XX% margin previously stock-based compensation and quarter first guided approximately profit Fiscal QX excluding $XXX our Non-GAAP costs, restructuring at amortization was non-GAAP million. for came intangibles of the range. gross was

to factors and year approximately the non-GAAP expenses increased came resulted the fiscal operating Non-GAAP relating miscellaneous XX.X% QX. first a fringe of operating range. and our to slightly Adjusted EBITDA $X new quarter guided in our primarily by fiscal X.X% above fiscal This margin of midpoint including for and million, expenses. other increases in was merit of due previously

balance term the our investments term fiscal the fiscal of make of sheet, outstanding approximately an end non-restricted the QX $XXX million payments QX, at We compared were million of of cash equivalents short-term against the $XXX not and the to cash, of loan was end million. at approximately quarter. last amount Turning $XX did the any to increase voluntary loan end and approximately

XX quarter. was of foreign inventory primarily XX quarter the from days the was quarter to DSO receivable prior million Accounts due compared at $XXX prior million, balance the The exchange. fiscal in an net end increase first of $X approximately days to

of turn Now fiscal second outlook our for I'll XXXX. the quarter to

and The the businesses outset impacted monitor base quarantining the actions hubs related on impact our operations Mainland to such of major with rapidly Let like continue opening China, from say installed ability and our the products service multinational and government's and an will sell around in the we Chinese to individuals have to service me our as other in Wuhan coronavirus. areas. likely restricting in corporations evolving particularly at sales, situation

well We continue in China as discussed world governments. situation actions and as being by to out other the rolled monitor

range. fiscal be quarter fiscal the at outlook $XX $XXX second reduction and for uncertainties wider of revenue QX million. $XXX said Our million these normal range than that, approximate expected to reflect revenue revenue $XX in and to million in includes million to midpoint is the attempts a Having to an

QX and million approximately stock total $XX.X X%. in compensation intangibles estimated amortization million. of of of for $X.X expected range total QX a is to to excludes $X.X $XX.X the XX%. excludes Non-GAAP margin the XX% in We at range compensation be non-GAAP approximately and estimated Non-GAAP of million. gross stock operating margin intangibles amortization expect cost of margin to fiscal gross expense X% of This million to be fiscal a at

you'll sequential As you models, growth. expenses increase versus operating fiscal the QX is This a quarter XX-week and in quarter. primarily less work through as show your March our healthy that note quarter typical well holiday XX-week as being to the vacation our due

is We do Other $X future expense in foreign income the OI&E range not estimated in related and include be million million. in and outlook. changes losses an to of $X our exchange gains to to rates expense transaction

the repurchase We in of average company's shares fiscal to for in be next the approximately XX.X expect Board our assuming outstanding weighted We're have to And stock also authorization QX common quarter. over year. to of million to second the finally XX% XX%. the we $XXX rate million non-GAAP tax up received range

for call the turn operator session. a I'll back over Q&A to the now

Operator

Thank you.

We [Operator with Please begin Needham first from session. will & question-and-answer ahead. Ricchiuti will go come Jim now Company. today Instructions] Our question the

Jim Ricchiuti

the Thank seeing from that if the you. Kevin, John a $XX wondering impact can little million us give or $XX in particular Good more I'm bit one the million more other? than coronavirus. you impacting you're that any Is on vertical color you afternoon. to

John Ambroseo

business everything what current assess going well the holiday of markets, as people as scientific be customers quarter to to to and think microelectronics. is The following won't back the in those across situation the suppliers, I is And an New aware until us impacting on Year. as our offices, employees It's the we the you're able we the extended look country like. Lunar is fully from have

Jim Ricchiuti

the the in similar John your out you orders you're or recovery market, a what anticipate looking larger Or mix seeing the the potentially shifting some toward -- seeing over anticipating? you're cycle year? of the changing do calling where I LineBeam do that Is at what more you believe of you're terms machines what the in of and see to you're some FPD XXXX. LineBeam course

John Ambroseo

all of well; going Jim. I of think good it's first be question first to it's all -- a --

to competency secure part and availability other be systems to chain. on going it's the of largely situational based their own I with think on supply as based individual the customers also

the systems not part lead of terms be long pole are right the X,XXX in to other we're delivery While some that And procure difficult those in are now these seem tent factories. to exceptionally times very there long. of

the That would of smartphones, thinking customers these are position year. be on in impact a we're customers' I an next have XXXX themselves say should especially year's probably some for record trying this as supplier to for to of later or

Jim Ricchiuti

Got it. on to clearly business, over business help And the one course different think from me, the cycle. seeing years? about cutting that's question us for the in the the just -- little queue. in something a of for the mean you're that's last guys way jump back any strength next two there market. I'll that to again potential you the display the in the flat I last panel But Is

John Ambroseo

Well, the annealing are size. cutting going be an cutting market. different is still between annealing, different you're much of order is in while the market substantially obviously to than volume probably the it for and magnitude unit the market ASPs for And higher

Jim Ricchiuti

about. in stance in that feel you you're holding little award like a competitive. bit share? market more Do like competitive your gaining own your and that's you're like it's sounds It feel -- you But that market, an

John Ambroseo

look early as we're favored market in we that certainly think I us. a And gain at going this share. year XXXX have to opportunities the

Jim Ricchiuti

Thank Okay. you.

Operator

Please Blayne Curtis question Barclays. go next will Our come ahead. from with

Tom O'Malley

a the on in had guidance on for Curtis. quarter. Hey, I guys. Blayne O'Malley XX-week the question Tom is This

are what Normally, the Can you just you of think forecast in for ahead, you there. kind runs and a a the you OpEx little XX-week all week you about Or of when conservative thinking get additional may I you get bit the differently benefit including on little your that revenue? that being talk always bit revenue companies don't quarter. side expectations there were are not forecasting? benefit? Are the

Kevin Palatnik

Yeah.

is the Tom. compared in is quarter a revenue included that's There's guidance. XX-weeks a or ability the This right, bring to expenses. in standpoint, definite You're bit the are And of definitive. From planning little the the related do on in We on back-end a certainly forecasting expense expenses definite. Kevin. side mismatch The that's a that to that. to can

Tom O'Malley

side. one next really is the the then on And Semicap Okay.

over as forecast and in Can portion about year remarks of spent obviously a you talk a This is Do thinking where a guys Semicap the lot You that how this bucket? that though can And initially prepared talking your X-nanometer time turning for see of seems think drive of that becomes guys some becoming X-nanometer. it both bucket. larger year? the upside you course about help you of microelectronics that were of you kind versus additional portion that year? the greater

John Ambroseo

to do CapEx. both it year, I talked upping going two largely the and this than earlier, appears is to fiscal the guess beginning try TSMC better that it's of which Samsung I had to I'll frame to their way. we forecasted at that the Semi factors

or larger we to becomes microelectronics to percentage As whether answer, pick as start expect display business go a see a simply it the the the of little that's bit to bucket, to not up because we through year. tougher

plan the is I within better answer is do little short too an one. think than we far to as probably that had absolute mix as the originally. is revenue Semicap the basis, going a early in what to call So, on microelectronics, But

Tom O'Malley

guys. Fair enough. Thanks

Operator

go Our ahead. from Hosseini will come SIG. next Mehdi Please question with

Mehdi Hosseini

adversely have by of million, would now I the impact Yes, have million $XX add were operating coronavirus? revenue follow-up. and $XX to on a that impacted two questions. you the And is Kevin, back the been if being absorption what margin

Kevin Palatnik

could we the $XX in. or suspect Mehdi, XX% to I with against in Yeah. that improve the that even quarter. did we achieve million million that maybe back $XX

Mehdi Hosseini

margin? Okay. to more average a than I or corporate I trying million higher That's that to million, out lower part figure was was figure is out. is trying guess margin? in $XX corporate growth what average I that what the of $XX Or like

Kevin Palatnik

across the end John all Yeah right Mehdi, markets. is across board decrease the said as earlier,

the same now. it. probably do I That's of terms impact, in impact, So, the would the Without been what that's about or best little a I we it's the And without the higher. bit said across board. have mix can

Mehdi Hosseini

Sure. for And Thank you. question John. then one

I constructive in panel point lagging display latter on impact should even XXXX. How specifically turn panel and and in part in flat booking is seems real on your the for think more You the of inflection year about mid pickup flat sometime -- now or last And the the way it of revenue display? inflection of communicating like earlier. the point more

John Ambroseo

question. a of the XXXX, we understand it, orders. but shot completely I a and dearth with started nonetheless. year backlog it I'm sure give display not let Interesting me in In

as our So, surpass to were orders have XXXX means continuing place. burn have through moved in we the we those year, to backlog, to which XXXX, all in equal you or

revenues So inflection refer you an mean assume I year. when correct surpass display prior a as part? my you on that Is assumption the to what

Mehdi Hosseini

yes. Yes,

John Ambroseo

Well, then the simple. is answer

could developing build that get talking were perhaps You past the about backlog think clearly you year to don't momentum constantly have building and the prior have we I I communicate the we into period. and as fact as that before were can I but XXXX. it XXXX orders didn't I the and XXXX move

Kevin Palatnik

And And right lead Mehdi, Kevin systems. remember, six-month on time we have these again a here.

plus month of potentially six-month to So or neighborhood see five seven the order from when it's delivery. an revenue months a or in around booking we the to minus

Mehdi Hosseini

just inject I may quick If follow-up. one

with basis. wondering if or booking I even help confusion reinstate when of clarity for you chance can it? that backlog stopped on more few on a I'm just change been I any mind? your but there think some going that's would that quarterly think a providing Is you you the started would years

John Ambroseo

No.

Mehdi Hosseini

want you just... elaborate? we to Or And should

John Ambroseo

I think not? answer. Is that's it a clear pretty

Mehdi Hosseini

Yes you. sir. Thank

Kevin Palatnik

Mehdi. Thanks,

Operator

with Our Please next question CJS ahead. Solow go will come from Securities. Larry

Pete Lucas

Pete for Larry. it's hi, Lucas Yes,

most of the stuff. covered You

Just a hard macro open plans is XX predict. or XXXX. while question. to to Appears to fabs so be And visibility timing by on

thoughts what's what's to your other either your not further occurring the Just issues? getting cycle elongated wondered yields on or lower of the on confidence due and this risk in them opening

John Ambroseo

we're It's taken yields predict of in has improve certainly The than are how companies always far. suppliers suggest people question. feedback to they're their great terms going A would OLED do that they're the in hard certainly yield a publicly Samsung and that of It improvement. ship for going year to getting comments any thus this of higher longer year. they prior that to displays making from did number much other levels to than

encouraging. that's So

I I things long much very this at right that And impact. it impact be. at severe have explicit think could And to could how and how the It's predict think say difficult may little the that's could point. juncture on an that this bit. coronavirus push a depending lasts as I what to as

Pete Lucas

were you predicted conversion market's enough. demand that these would fair assume for enough think open, to OLED? Yes ones And fabs the so satisfy to the handset do if we that to be far did

John Ambroseo

The say accounts fabs. additional that we we But still would have and need about yields you know what no.

But you If that a a you could you the Samsung-like gets result. then do yields explicit mixture start to it gives of a calculation. math everyone yields do to you very different do if more

Pete Lucas

in very queue. I’ll the helpful. jump back Thanks. That’s

John Ambroseo

Sure.

Operator

go Goldman Brian Lee Our with will ahead. from Sachs. come next Please question

Unidentified Analyst

how it on for This is Hey, going? Brian. is Alex

And we're I what on if costs used here. see or main prepared know your what I I remarks get? you device going how to away wondering economic you expect a on was the few opportunity more you So you clarity from bit opportunity just cases guess that from little large do that provide is? to the being But a mentioned the could are a microLED. side? years back

John Ambroseo

technology think as displays lot play and microLED AR stands it years that on where clearly VR they're to walls would these format has as things first we be this large And could So microLED-based TVs viable a a small so imagine example proximity then in few a eye. today, has you go a in one spoke like also close but are the since changed I forward. very inserts don't you very about ago. displays

play. have In phase the are meaningful a two there where processes we R&D

a take ones that laser-induced annealing forward excimer The you identical or first lasers which is being the used is that in transfer work displaced substrate, and substrate similar growth transfer. off them to the called to the with the of when done are is A emitters being of lot process.

the VR, like AR ones backplane used For those anneal management. for likely and very it's small use power in will heat are displays that and

For use we handset of a are where far pixels early again just are. the We're in are this finding you and LTPS-enabled very large in we're about traditional said pretty in the the be displays is still apart the the development the more what things. community devices – very in now the let's can backplane. the displays backplane. out capabilities these or But puts probably we're more these not Coherent frontplane right meaning broad as us displays what it, But we for limitations and

where if devices Is of both in have you sort doubles helpful? used play. that So our it it's

Unidentified Analyst

here. color have Super Appreciate you on guess including that. Samsung maybe of you product I heard heard that? in Do new an AX. Yeah. unrelated question any What have kind We've -- things helpful. market? some about the another And rollouts

John Ambroseo

I raging We fall have or few AX. our starts on the plans. are There two in years. don't rumors around currently think three AX over last The been it have

opportunity plant, be each, we to judge size to to opportunity, may difficult well what regardless. the to TV is much be we know we're upside have. in it have to of the So know or needs capacity be an address view to place we but the and they going we the the to and whether mobile going that able address would as until going be in it's any and to how positioned mix it's allocated is mobile But

Unidentified Analyst

the Appreciate insight. you. Got Okay.

John Ambroseo

Sure.

Operator

Please Miller next come question will Our Company. The with Benchmark ahead. Mark go from

Mark Miller

taking for question. Thank my you

I'm more coming revenues? half, would be drivers serving first upside upside second that such to what potential you could fabs? just into XG going up. Especially, as the the any are be to in driver to in these equipment -- memory the think second fabs compared some what the the you driver. China, might an wondering do are fabs domestic be half a will be in of be area another interested greatest half Just

John Ambroseo

I'd say would year. biggest where when where expect we plan and single Well, frame June been year, in change which compared outperform market. the been of to somewhat started be we were it doing has down the the probably sort soft Semi of have the We Semi last the was have market. to time projections still The early to going

think either the we or prior call in one that. the I that before communicated

change meaningful to a is spending very will big industry timing from increases the some conversation. the the this What in is be explicit players two meaningful. is subject CapEx obviously So because

an China there's to previously. There even our capability. As from us. as seems is opportunity get players on a integrated front to and become the inspection the in is to for were somewhat of the they China they're urgency that we goes than say far view provided extent folks a be still also circuit by that inside I'd non-Chinese gap relying equipment that that that on independent metrology of greater sense

delay in timing, delay a the all mentioned programs. But not And with. curve a course fourth it's it's that a of then coronavirus, I've time deal have ball third to we it's this that's that -- if is in or anything

Mark Miller

ramp Are applications seeing You antennas. of revenues that on you picked because circuit second board What year? the really up supposed for is some and the about half accelerating to come the XG in XG?

John Ambroseo

who fair talking the opportunities. Chinese the or answer to hostilities reconciled while. a equipment between another where won remains been We've The us. be and them early have the are for things probably in a suppliers way XG. is, who seen vendors going the is but encouraging have and XG will U.S. So It that our We've have bit as we been or optimistic place, capacity more in network to of certainly available for for to be that to are about been share one be about them. the certain put

Mark Miller

in in well-known mentioned Are space would what And any competition non-fiber the China laser diodes. finally, And area? be laser seeing you fiber increasing competition in you the China?

John Ambroseo

been long lasers glass-based suppliers UV of COX low-power There's like things really lasers, local that hasn't No. changed.

Mark Miller

Thank you.

Operator

will from Research. Nik with question come ahead. Todorov next Our go Longbow Please

Nik Todorov

Hello guys. Thanks.

Going mix to is relative sensing maybe mix your is of back the mix, X,XXX customers question because are that cycle different of to mix so -- be X,XXXs. could systems here the factors guess But ELA what different. to of X,XXX lead the much could of of life higher the question I'm that I versus

not Given X,XXXs terms much that of ROI. throughput assuming funding is and an issue are so superior in in

John Ambroseo

think deploy Nik yes. have come capped availability tools the the The the then manufacturers equipment think is X, two they again of answer So of it continue the I customer are If other outside of is that will I experience currently XXXX competency. And to from they at things terms capacity. into format are XXX? annealing that in more likely to

of a can I XX market that the think window deploy to miss months that have wait to am you going really to. going wait more quickly market. to and say, my months I it jump that's go -- format for well piece If I'm hardware what I a down -- to and into XX get comes or much is That's the you

Nik Todorov

larger this again of above more processing? see about a if diverse last more book-to-bill a order I is bookings. processing Can set having quarter materials a extended? a Or again that quarter, you maybe maybe driving order talked bookings talk large you better bit on little in X, semiannual materials short-term about And think that Okay. you was

John Ambroseo

general bucket. processing are probably largest that terribly It the fiber those were was have the a components were within are then I'd areas neither used And and most surprising. in of say areas mix two the materials of probably products. our products consumer activity production lasers that

Nik Todorov

Can seems you quarter. And Okay. turnaround. talked the quarter in to it's think It talk the or Samsung you display maybe happening also taking some factors? the about for lower much last about in of having about quarter talked lastly I me potentially expected. quicker like utilization recovery March a two the side than industry, from services

So those? of drivers had Or so they was it are the just low inventories have some there? what some gotten start and replenished

Kevin Palatnik

Yes. Nick, in it's Kevin. good This got a where row. is point another case one data we've

beyond by wouldn't and improve the extend end $X current was services revenues their integrators in quarter. our that the primarily out some replenishing I quarter did customers We So million stock. of that

talked But that inventory were and let's single constantly XXXX it's see cash extrapolate the a not data their again, take lowering manage throughout to just we finally As that late off a an we yet. uptick. of they levels point bit

Nik Todorov

Got Good guys. it. luck Thanks.

Operator

question Please Andrew next Berenberg. ahead. go from Our DeGasperi come with will

Andrew DeGasperi

Thanks. wanted to your from a that that? elaborate certain the needs? potentially of comments their laser Like question you you a use integrators maybe will or to competition X this those kilowatts laser a lot do they've on Can the of think the on I makers. just achieved Chinese reliability potentially now replace X Chinese regarding stage degree for makers ask at

John Ambroseo

master made. the done probably assume performance know levels. aggressive. this time X And not being -- basis is higher It's competitive this power the X a are basis. a This a they at that, we those have manufacturers lower This past range the to they're I comments power to don't reliability levels they have year -- more this so. would than they is think previously have what were on that heard in kilowatt discussion any on is in because is unreasonable that we So look the becoming go-forward pricing and is pricing done at or Chinese

market. levels that Chinese in range So the they're that's power about. share comment appears what they're in higher the gaining It and is that mastering

Andrew DeGasperi

maybe can secondly the defense that you trending us end? on Got side maybe on anything it. that's then And update

John Ambroseo

is had You of projects, larger becoming opportunities involved of early-stage been programs know A ready done deployment, but these than the that, the are number lot we've in, that well. for we than, are have anticipated. things rather

things checking to these boxes primes the to need The keep forward. check take they all

that years, a into I would of piece becomes there. That's business our some news. And the good field them position think don't over going our And that view now change this deployment. anything the next are meaningful generally of there's few

Andrew DeGasperi

Great, thank you.

Operator

Mehdi question ahead. next SIG. go Our Please a is Hosseini follow-up with from

Mehdi Hosseini

about changes questions. think Yes. to year, taking about the the half a how leverage I operating two to that I second half? my first mix from second And figure and out margin? calendar the ask follow-up the way Thanks you for Kevin, half how when of follow-up, as should think

Kevin Palatnik

Yeah. Mehdi.

about talked as we've we've as or So, stated in are right, the accretive. Linebeam our past machines our publicly ELA

we in leverage have as and very will so against that orders the deliver P&L. continue the good And orders the to to future then take

we September to the in took I'm we timing. not more But we've December quarter, past, about quarter. the talked get June specific more and into took order in the in orders the orders and as quarter going now in

model can minimum or map lead machines these the And given for have roughly out the time at of nature accretive you least they at will But revenue on a P&L X-month some scenarios. sure. leverage

Mehdi Hosseini

Great. And a is CEO second the any on and there update transition? follow-up John for you

John Ambroseo

be an made. The process is to one And ongoing. ready when they're will announcement make

Mehdi Hosseini

in we process? the are Where

John Ambroseo

search. as confidential to periodic we a updates where not We're is going to are. Mehdi, this give

Mehdi Hosseini

Thank it. Got you.

John Ambroseo

Mehdi. Thanks,

Operator

next a The go follow-up Mark Miller question ahead. Company. Our Benchmark Please with from is

Mark Miller

OpEx week? selling will up, the approximate it SG&A, not up much in you're of will quarter they Or because by because both the of you be won't -- Just extra the indicated percentage OpEx next extra up the as week. rises as much? roughly scale for modeling the Will

Kevin Palatnik

It's XX Mark. all from functions will that up XX weeks across the scale It the if you functions to impacts will. latter Yeah.

XX-week scale back quarter. will following And quarters the quarter. in then it a So, the to

efficiency some see there. should we So,

Mark Miller

will both scale, SG&A R&D Okay. approximately and same? But the

Kevin Palatnik

week. absolute yeah Well, But they will of they're additional different that because amounts. scale

Mark Miller

thank Okay, you.

Operator

will question-and-answer conference any the to like to back for John Ambroseo remarks. closing now turn conclude Mr. session. over I This would today's

John Ambroseo

participating. doing look a like in again, we for this everybody months. to forward thank Thanks, I'd Sean. And And few to

Operator

conference The now concluded. has presentation. may attending Thank now you you today's disconnect. for And