Greetings, and welcome to the Veeco Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] It is now my pleasure to introduce your host, Alex Delacroix, Head of Investor Relations. Thank you. You may begin.

Thank you, and good afternoon, everyone. Joining me on the call today are Bill Miller, Veeco's Chief Executive Officer; and John Kiernan, our Chief Financial Officer. Today's earnings release and slide presentation to accompany today's webcast is available on the Veeco website. To the extent that this call discusses expectations for future revenues, future earnings, the timing and expected benefits of the proposed transaction with Axcelis, market conditions or otherwise make statements about the future. These forward-looking statements are based on management's current expectations and are subject to the risks and uncertainties that could cause actual results to differ materially from the statements made. These risks are discussed in detail in our Form 10-K annual report and other SEC filings. 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. Unless otherwise noted, management will address non-GAAP financial results. We encourage you to refer to our reconciliation between GAAP and non-GAAP results, which you can find in our press release and at the end of the earnings presentation. We will not be addressing questions related to our pending merger with Axcelis. Please note that on February 6, 2026, our stockholders voted to approve all proposals related to our pending merger with Axcelis. We urge you to read the joint proxy statement relating to the transactions with Axcelis. With that, I would now like to hand the call over to our CEO, Bill Miller.

Thank you, Alex, and thank you, everyone, for joining us on our call today. Veeco executed well in 2025 and accomplished important milestones, setting the stage for future value creation. We grew our semiconductor business, experienced rapid expansion in our order activity for compound semiconductor and data storage customers, supporting strong growth in 2026, and continued to invest strategically in next-generation technologies. Additionally, on October 1, 2025, we announced an all-stock merger agreement with Axcelis Technologies to create a leading semiconductor equipment company. Our new products are gaining powerful traction, fueled by accelerating demand from AI and high-performance computing. As hyperscalers ramp their next-generation infrastructure, we're seeing clear acceleration in order activity. This momentum drove a meaningful build in backlog at year-end, supporting an increase in revenue for 2026. Later in the call, John will provide additional detail on our backlog. Revenue for our semiconductor business reached another record in 2025, which was primarily driven by laser annealing and wet processing and ion beam EUV technology. We shipped an LSA evaluation system to our second Tier 1 DRAM customer, showing exciting progress for penetration with our memory customers. A key driver for the semiconductor market came from our advanced packaging business, which we doubled year-over-year. This was driven by wet processing and lithography tool shipments for 3D packaging. New products for the compound semiconductor market are gaining significant traction and driving market share gains. We received orders for our new Propel 300-millimeter GaN-on-silicon system for GaN power and microLEDs and Lumina plus arsenide phosphide for photonics and solar end markets, which support revenue growth primarily in the second half of 2026. Additionally, in the data storage market, we see customers expanding capacity, increasing CapEx spend and adopting Heat-Assisted Magnetic Recording, resulting in increased orders in the third and fourth quarter…

Thank you, Bill. To begin with revenue for the year, revenue came in at $664 million, declining 7% from the prior year. Our semiconductor business delivered $477 million in revenue, up 2% year-over-year and comprising 72% of revenue. Revenue in the semiconductor market was driven largely by laser annealing, ion beam technology and our advanced packaging wet processing and lithography products. As disclosed in January, 2 LSA tool shipments to customers in China were under customs review. These matters have since been resolved, and we recognized $15 million of revenue related to these systems in the fourth quarter of 2025. Compound semiconductor revenue totaled $60 million, a decline from the prior year, representing 9% of revenue. Data storage revenue totaled $39 million, declining from the prior year and comprising 6% of revenue. Lastly, scientific and other revenue was $89 million, increasing from the prior year, making up 13% of revenue. Turning to revenue by region. The Asia Pacific region was 50% of revenue, led by shipments to leading Taiwanese semiconductor customers for multiple vehicle products. Our China portion was 27% of revenue with a decrease from the prior year in laser annealing systems. The U.S. accounted for 15% of revenue. And lastly, EMEA was 8% of revenue. Our order backlog ended the year at $555 million, a significant increase of $145 million from the prior year. This 35% growth in backlog reflects the strong acceleration in orders in the second half of 2025. This positions us well for revenue growth in 2026, principally in the second half. I will provide additional market segment commentary in the guidance section. Moving to our full year 2025 non-GAAP operating results. Gross margin came in at 41%. Operating expenses totaled $188 million. Operating income was $84 million and net income was $80 million, with…

[Operator Instructions] As a reminder, given the pending merger with Axcelis, Veeco management will not be addressing questions related to the merger. [Operator Instructions] And the first question comes from the line of Dave Duley with Steelhead Securities.

I was wondering for the outlook for 2026, if you could give us an idea of what you expect your semi business to grow and your hard disk drive business to grow. Actually, just all 3 segments, to your best of your abilities, would be awesome.

Yes, I'll take that, Dave, and thanks for the question. So yes, so we've given a guide of $740 million to $780 million of revenue for next year.

$800 million.

$800 million, excuse me. Thank you, Bill. $740 million to $800 million next year. So if you pick the midpoint of the guide at $770 million, that's up 16%. And we do expect growth in the semiconductor piece of the business, the compound semiconductor and the data storage piece. The one area of the market that we expect to be down would be the scientific and other after a strong year in 2025, and we had some large quantum computing orders that we don't see at this point continuing into 2026. So we're going to see that business, call it, about $60 million at the midpoint of our guide, down by about 33%. But let me come back to the semiconductor market first. It is our largest market. We expect growth around 15% at the midpoint of our guide, so about $550 million revenue year in 2026 for the semiconductor piece of the business and fairly in line with the range of estimates for WFE growth between 10% and 20% for next year. On the compound semiconductor side, as Bill mentioned in the prepared remarks, we're really making traction with some of our new products and particularly for the GaN-on-silicon 300-millimeter for both GaN power and microLED and our new large batch size arsenide phosphide tool for solar and other applications. And we expect that business to be up about 1/3 next year to about $80 million. And then the data storage, we started signaling the data storage that customers were increasing the order activity in Q3. We expected that activity to continue in Q4. It has. And we're expecting that business to double to about $80 million in 2026. And we mentioned in our prepared remarks as well that we're fully booked for system orders for 2026 at this point in time and even started booking orders into the beginning of 2027.

And along that last point in the hard disk drive business, if you're fully booked this year and it's spilling over into next year, I would imagine your customers' CapEx is obviously going up. I would think this would be a multiyear increase in business in that sector. Maybe you could just help us understand what you think.

Yes. We're definitely seeing with the adoption of HAMR, the capital intensity is going up. Certainly, their CapEx is increasing. And we're seeing the first round of orders that we'll be shipping in '26 are really for the front-end fabs. And now we're starting to see some orders not only continuing in the front end, but also the back-end fabs that we call the slider fabs for shipment in '27. So it does seem that the amount of heads that are being shipped is increasing because the slider fab is really just a function of the number of heads shipping. So that's a very positive sign actually. So I think it's -- there's clearly legs into '27 and potentially beyond.

Great. Final question for me is on the Propel. I was just wondering, that's the GaN-on-silicon tool, I believe. What do you think the opportunity for revenue production is in '26 and '27? And I would imagine the outlook there might be increasing just given that there seems to be a lot of momentum to adopt GaN in the data centers.

Yes. What we -- as you know, Dave, we've had an evaluation system at a leading power IDM for some time. And that's going very well. We're in a very solid position there. And we -- I think on our last call announced that we actually received a pilot line order -- received a pilot line order for a -- excuse me, a pilot line order for shipment in 2026. And so that's going to drive incremental business in probably approaching $15 million range. And I would expect there's a possibility if they stick with their plans of continuing to ramp in '27, we might receive orders in the second half of '26 to be shipped in '27 for that. So that's the power opportunity. We also have a tool in backlog for 300-millimeter Propel GaN-on-silicon for a microLED application. And we're actually doing demos with a few different customers for microLEDs as well as other GaN power opportunities.

The next question comes from the line of Denis Pyatchanin with Needham.

I have a question about the gross margins. So it seems like we've taken a little bit of a dip here in Q4 and then in Q1, I think in Q4 was because of some evaluation systems. And I think you're still guiding a little bit below where you were trending before that. Maybe can you tell us about gross margins in Q1 and how you see them progressing through the rest of the year, given that you guided, I think, 41% to -- was it 43% for 2026?

Sure, Denis. Thanks for the question, and I'll be happy to. So yes, we're guiding Q1 at a similar level to Q4. And we had highlighted coming into Q4 that we saw a change in our product mix. And that product mix moved a little bit more to advanced packaging as a bigger percentage of the overall business with a lower gross margin profile and also some impact from anticipated signoffs from evaluation systems. And I would say that for Q1, we're seeing a similar revenue profile and similar margin drivers there for Q1. As we look into the year, we do see gross margin accelerating and accelerating, particularly in the second half of the year next year. And that's driven by a couple of factors. One, that we're seeing business from our new products and the gross margins on those new products are higher than the most recent averages. Increase in the data storage business will help towards gross margin improvement and significantly higher volumes in the second half of the year next year will also benefit the gross margin profile. And I would say, as we exit the second half of the year or we're in the second half of the year in 2026, we would expect to see gross margins at our 45% gross margin target.

That's some great detail. So just following up on that, is there currently any sort of tariff headwind that's factored into the guide? And could you quantify it if possible?

Yes. So we started to see the impact principally in the second half of last year, and it was running about 100 basis points of gross margin headwind to pre-tariff regime. And we are baking in slightly higher tariff regime in our forecast in 2026 compared to 2025.

Thank you. We -- at this time, we have no further questions. I'd like to turn the call back over to Bill Miller for closing remarks.

Thank you. As we look ahead to 2026 and beyond, we remain confident in our ability to build momentum. We continue to be excited about the pending merger with Axcelis, which we believe together will enhance our ability to bring needed solutions to the rapidly evolving semiconductor industry and better serve our customers and shareholders. We look forward to keeping you updated on our progress. I would like to take a moment to thank our customers and shareholders for the continued support as well as recognizing our employees for their dedication. Have a great evening.

Thank you. This concludes today's conference. You may disconnect your lines at this time, and we thank you for participating.