Veeco Instruments Inc. (VECO) Earnings Call Transcript & Summary

Greetings, and welcome to the Axcelis and Veeco Merger Announcement Conference Call. [Operator Instructions]. Please note that this conference is being recorded. A copy of the investor presentation accompanying this call is available on the Investor Relations pages of both companies' websites as well as the company's joint transaction website, www.www.AxcelisVeeco.com. I would now like to hand the conference over to David Ryzhik, Axcelis Senior Vice President of Investor Relations and Corporate Strategy. Please go ahead.

Thank you, operator, and welcome, everyone. Statements made during this call may include forward-looking statements within the meaning of the federal securities laws, which are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Such risks and uncertainties include, but are not limited to, those associated with the proposed transaction between Axcelis and Veeco including the risk that the transaction may not be completed on the anticipated terms or at all, the failure to obtain necessary regulatory or shareholder approvals, integration risk risks associated with post-closing capital allocation by the combined company and other factors that are detailed in the company's respective filings with the SEC. We will also discuss certain forward-looking non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. Please refer to the safe harbor disclaimer and non-GAAP financial measures discussion in the accompanying investor presentation. The investor presentation, the press release and the recording of this call will be available on both companies' websites as well as the company's joint transaction website, www.AxcelisVeeco.com. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Now turning to Slide 4. Participating on today's call are Axcelis' President and Chief Executive Officer, Dr. Russell Low; and EVP and Chief Financial Officer, Jamie Coogan; and Veeco's President and Chief Executive Officer, Dr. Bill Miller; and SVP and Chief Financial Officer, John Kiernan. With that, I'll turn the call over to Russell.

Thank you, David. Good morning, and thank you for joining us today on short notice. Jamie and I are thrilled to be joined by Bill and John to speak to you about the transformational combination with Axcelis and Veeco. As industry peers, we know each other well, those of us on the Axcelis team have long admired betas track record of innovation and ability to deliver breakthrough products for customers. I bring that to companies together, we are building a leading semiconductor equipment company with the capabilities, resources and financial foundation to drive sustainable value creation for shareholders and deliver meaningful benefits to all our stakeholders. This is a uniquely compelling combination of a few important ways. First, Axcelis and Veeco together will offer a broader and more diverse product portfolio serving the global supply chain with solutions that span a wide range of semiconductor manufacturing needs. For example, our implant solutions and because annealing solutions are in patent steps in the semiconductor manufacturing process. Optimizing the synergies between these two steps provide significant opportunities to enhance semiconductor device performance and yield. Second, will expand our total addressable market opportunity with greater exposure to secular tailwinds. Third, we'll be able to leverage technical capabilities and expertise to increase R&D scale and accelerate innovation for customers. And lastly, but importantly, the transaction is expected to be accretive to non-GAAP earnings per share within the first year post closing, and the combined company will have an even stronger financial profile and cash position giving us the financial flexibility to capitalize on value to enhance the organic growth opportunities as well as return capital to shareholders. I want to take a bit of time to talk about the compelling fit between the two companies from a strategic perspective on what we look like together. We believe this combination will establish a new leader with even brighter prospects for growth and value creation that either company on a stand-alone basis could achieve. Many of you are familiar with the Axcelis story and our industry-leading position through the design, manufacture and complete life cycle support of Ion Implantation systems. I also know firsthand the powerful capabilities and talented team that Veeco brings having spent almost 5 years there prior to joining Axcelis. Their Laser Annealing, Ion Beam, Wet Processing, Lithography and MOCVD technologies are highly complementary to ours. As I mentioned, our products used in adjacent process steps in semiconductor production with Veeco's annealing products, which almost always follow Ion Implantation to repair crystal damage and activate the implied dopants. These two steps are implantation and anneal a fundamental and essential within the semiconductor manufacturing process. In advanced packaging, Veeco also specializes in Wet Processing and Lithography critical technologies, which continue to grow to meet evolving customer needs for AI applications. We believe this is truly a great fit that the combination of our two companies doesn't just work on paper. We're also confident about the upside value potential this combination because of the people. Both companies have talented specialized teams focused on innovation and customer service. Together, this team will be fueled by more than $230 million in combined pro forma R&D investment to develop next-generation products and capabilities to meet evolving customer high-value needs. By joining together, we established the fourth largest U.S. Wafer Fabrication Equipment Supplier by revenue, delivering meaningful scale and resources to better compete throughout the global semiconductor equipment value chain. Our highly complementary and diversified technologies, solutions and geographic footprint will allow us to capitalize on expanded addressable market. Combined company also have a resilient operating profile and balance sheet, which is a deliberate result of the all-stock transaction structure. Jamie will touch more on the combined company financial profile later in the call. We also expect to deliver significant benefits for employees, customers and partners as a stronger organization with additional opportunities and capabilities. We'll now dive into each of these areas in more detail, and I'll turn it over to Bill to begin with the combined market opportunities we see.

Thank you, Russell, and thank you to our investors and analysts for joining us today. I've known Russell and the Axcelis team for many years. As we've discussed, bringing the companies together, the opportunity to drive innovation and excellence for our customers has only become more compelling. Before I go further, I want to acknowledge the Veeco team for their hard work, which has allowed us to take this next transformative step. Solving complex challenges for our customers is what we do, as Russell outlined, and this merger better enables us all to deliver for our combined customer base with next-gen innovative solutions. One of the most attractive components of this transaction is how we'll unlock new product technology and market opportunities for the combined company. By bringing our companies together, we expect to benefit from an expansion of our addressable markets to more than $5 billion. Leveraging Axcelis and Veeco's core competencies in respective technology portfolios, we're positioned to capitalize on sizable and growing end markets with significant secular tailwinds, including growth in artificial intelligence and the corresponding demand for Power Solutions. Turning now to Slide 9. Similarly, the combined company will have an expanded product portfolio supported by robust aftermarket services to serve global customers. We will combine Axcelis strength across the full spectrum of Ion Implantation applications with our leadership positions spanning Laser Annealing, Ion Beam Deposition, Wet Processing and MOCVD solutions. Together, we will be able to leverage both companies' technical competencies to accelerate next-generation innovation for our customers and unlock new market opportunities. From a geographical perspective, this transaction will diversify our respective regional exposure across key geographies. For example, Axcelis can leverage the strong combined sales channels in semi and compound semi to pull each product into respective markets and drive increased penetration with Tier 1 foundry logic memory and IDM customers. The diversified geographic presence and expanded operational footprint allows us to leverage Axcelis' strength in China and Korea, Veeco strength in Taiwan, and Axcelis and Veeco's complementary presence in Japan. On the next 2 slides, you'll see how our complementary portfolio of solutions fit together in the semiconductor and compound semiconductor equipment markets. In the front-end semi manufacturing process, the adjacency of Axcelis' Ion Implantation products with our Deposition and Annealing products in our customer Semiconductor manufacturing process invites innovation and unlocks new opportunities, particularly as we work on future road maps with customers. Starting with deposition, Veeco brings differentiated technologies that broaden our portfolio and strengthen the way we support customers through increasingly complex manufacturing steps. Because Ion Beam Deposition technology has enabled the adoption of low defect density EUV mask blanks and has helped enable advanced node semiconductor manufacturing. More recently, Veeco has developed an application for of our IBD EUV system for high transparency pellicles. The IBD EUV system delivers an EUV transmission rate better than previous pellicle deposition technology and improves yield through low defect density, making it a critical enabler for high-volume manufacturing of EUV pellicles at the 2-nanometer node and beyond. Additionally, Veeco has an Ion Beam Deposition product, which is an evaluation phase for low resistivity materials. Innovation in material properties is increased requirement and advanced nodes where there is a premium for a higher performance compute and lower power loss, which these films enable. At the next step, Axcelis' Ion Implanters deliver ions of high purity at the right dose, energy and angle to modify the electrical or physical characteristics of material. Enabling the precise formation of transistors. Axcelis' products cover the industry's widest energy range from 200 eV to 15 MeV for all device applications. Next, in Annealing, Veeco has capabilities that deliver the performance and precision customers need to advance their most demanding technology road map to keep pace with next-generation device requirements. Veeco's low thermal budget Laser Annealing technology enables our customers to precisely anneal the dopants while not impacting other thermally sensitive regions of the device. Our LSA is well established and our complementary NSA 500 is in evaluation to further extend our leadership in this segment. Finally, in Advanced Packaging, Veeco has developed solutions for both Wet Processing and Lithography playing an important role in flux cleaning for both high-bandwidth memory and Chip-on-Wafer-on-Substrate type architectures. Our solutions are optimized for performance at the required cost of ownership, and we're further extending this technology to Panel-level Packaging. Our Lithography solutions have been optimized for steps like bumping and copper pillar with features like warped wafer handling. For compound semiconductor customers, the combination provides Power Solutions across epitaxial and implant products. Together, Axcelis and Veeco bring complementary strengths in compound semiconductors, Axcelis' leadership in power device applications, combined with Veeco's expertise and depth in epitaxy and deposition creates a stronger platform to serve high-growth markets like silicon carbide and gallium nitride. Veeco is focused on 300-millimeter GaN on silicon which we expect to be an important inflection point in the near future. Our Propel 300 as a leadership position in this developing opportunity. Our silicon carbide Epi complements Axcelis' industry-leading implant products potentially enabling high-quality Epi to end customers. As you can see, this combination creates a new leader, supported by highly complementary businesses and an expanded portfolio of products and solutions to better address our customers' needs. At closing, the combined company will have strengthened its global footprint, allowing us to better meet our customers' needs in the places where they operate, providing a competitive advantage. We'll have a more robust supply chain, supporting differentiated next-generation technologies for customers with accelerated lead times. We expect to leverage the proximity of our East Coast Ion Beam centers of excellence to develop new products and technology, accelerating customer road maps. I'll now turn it back over to Russell.

Thanks, Bill. Turning now to the breakdown of the value creation opportunities we see given our respective core competencies. We believe each company can open new doors to the other and unlock cross-selling synergies. Our combined technical depth will enable us to optimize technology advancements. So the cross-selling opportunity is something I'm really excited to pursue because we are able to serve our customers even better and grow our business at the same time. For example, from a technology perspective, we have deep ion sourcing component expertise which can be harnessed to enhance Veeco's Ion Beam Deposition capabilities and vice versa. From a market perspective, we are strong in certain carbide, while Veeco is an exciting opportunity in MOCVD for GaN-on-Silicon. This combined presence allows us to be a comprehensive solution provider for key wide-band gap materials which are becoming more and more relevant given today's increased demand for power efficiency. In addition, Veeco's MOCVD business also has an opportunity in micro LED as well as Indium Phosphide for optical communication products, which is emerging in the data center. Moreover, our strengths in memory and mature foundry logic are complemented very well by Veeco's strength in Advanced Logic and Advanced Packaging, which stretches across Annealing, Ion Beam Deposition and Wet Processing solutions. Finally, the combined company will be supported by market services to better serve our customers through access to expanded installed base. This transaction is truly about growth, which we believe will enable us to deliver benefits to all stakeholders. For customers will expand our product offerings, increase R&D scale and capitalize on the core competencies of both companies to drive customer road maps while providing end-to-end support across the full manufacturing process. Veeco and Axcelis has shared cultures of routine respect, collaboration and a common desire to make a difference, which we will continue to uphold as a combined company. Our next chapter will build on a strong foundation our employees are created, and we are deeply grateful to each of them for helping to make this transaction possible. As we work to bring our two organizations together, we look forward to creating exciting new opportunities for our employees. With that, I'll now turn the call to Jamie to walk us through the transaction terms and financials.

Thanks, Russell. Before I discuss some of the financial benefits, let's review some of the key transaction terms on Slide 16. Our agreement is structured as an all-stock transaction with Veeco shareholders receiving 0.3575 shares of Axcelis common stock for each share of Veeco common stock they own. At close, Axcelis shareholders will own approximately 58% and Veeco shareholders will own approximately 42% of the combined company on a fully diluted basis. We will also have a governance and leadership structure that leverages the experience of both companies. Russell will serve as CEO, and I will serve as CFO of the combined company. The Board will comprise 11 directors, six from Axcelis and four from Veeco and be chaired by Tom St. Dennis, who currently sits on the Board of both companies. Jorge Titinger, current Chairperson of Axcelis will remain on the board of the combined company. Bill will join the Board of the combined company and serve as Chair of its Technology Committee. At close, the combined company will be headquartered in Beverly, Massachusetts and to reflect the transformational nature of this transaction, we will assume a new name, ticker symbol and brand. As for timing, we expect to close the transaction in the second half of 2026 and subject to approval by Axcelis and Veeco shareholders, receipt of required regulatory approvals and the satisfaction of other customary closing conditions. Turning to Slide 17. Let's dive into how this merger will create a combined company with a robust financial profile that will enable us to drive enhanced shareholder value. As Russell touched on earlier, the combined company will have greater scale and financial flexibility to enable further investment in the business, generating more opportunities for growth. Looking at our companies on a 2024 pro forma basis, we generated $1.7 billion in revenue, a strong gross margin profile of 44% and on the bottom line, adjusted EBITDA of $387 million with a 22% adjusted EBITDA margin. These pro forma figures do not reflect the anticipated synergies. As in any combination like this, we will realize cost savings. We are estimating $35 million of run rate cost synergies within 24 months post closing, primarily from standard public company costs as well as cost of goods sold and operating expense efficiencies. Moreover, this estimate does not include additional savings from our share-based compensation expense. As we noted in the press release, we expect the combination will be accretive to non-GAAP EPS within the first year post close. With over $900 million in combined cash and the expected synergies we will benefit from a strong operating profile and the financial foundation to drive returns. As we touched on earlier, the all-stock transaction structure will result in a strong combined cash position that enables value creative capital allocation centered around three priorities. First, and most importantly, we will focus on reinvesting in the business to drive organic growth. Second, we will evaluate opportunities to return capital to shareholders. To that end, we expect to execute a share repurchase program following the closing of the transaction. And finally, we will prudently consider inorganic growth in M&A in the longer term. Together, these priorities give us the flexibility to invest through cycles, deliver returns to our shareholders and pursue growth opportunities in a disciplined way. With that, we'll open the line for questions.

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Craig Ellis with B. Riley Securities.

Yes. Thank you to on the deal, which seems quite transformative. Russell, I wanted to direct my first question to you, and it's related to the points that you made on Slide 14, which really focused, I think, on the crux of the issues that you all presented, which is the -- really the growth synergies and the revenue synergies and what I was hoping you could do is across the parameters you identify technology, markets and services. Give us some sense of which the bigger top line beneficiaries would be? And to the extent that you could provide any magnitude similar to the way Jamie scoped the cost benefits 2 years out, that would be helpful.

Craig, thanks for the question. So yes, so what really excites us is how complementary Veeco is with Axcelis from a product, technology and market perspective. And you're right, Slide 14 has a pretty good rundown of those combination benefits. So I think the start them in sort of maybe order. It's hard to know what the magnitude is going to be. We haven't able to be able to tell that yet, but or implantation annealing are adjacent to each other in the fab and both are sold into the same diffusion module in the fab. I mean, together, we have the cross-selling opportunity and the deep technical expertise in both steps which we believe provides an opportunity to drive technology optimization to deliver better solutions for customers. These two technologies are really aligned. We also have deep Ion Source and Component Expertise. We're talking about plasma physics here. And this can enhance Veeco's Ion Beam Deposition capabilities and vice versa. And we have a lot of overlap in Ion Beam physics. We also have overlap in particle control, which is absolutely critical for advanced logic and electrostatic chucks as well. So there's a lot of overlap here in the technology. But I'd say we're actually really excited about having lots of really smart people working together. From a market perspective, as you know, Craig, we're strong in silicon carbide. While Vega has an exciting opportunity in MOCVD for GaN. This will be power GaN, and that's where we've had limited exposure to date. I mean we have sold some implant calls for gallium nitride, but it's more of a periphery application rather than the core growing the entire Epi stack. So the combined presence allows us to have a comprehensive solution provided for wide-band gap materials. These are becoming more and more relevant today as the demand for power efficiency increases and the general electrification. So I think this is a really good secular tailwind. In addition, we mentioned that Veeco MOCVD business also has an opportunity in micro LED, so displays, display technology, as well as indium phosphide. So indium phosphide is used for optical communication products. And as you know, that's finding an opportunity in data centers for a very rapid data transfer rates. But going a little bit further into markets, we have strengths, as you know, in memory and mature foundry logic and these are really well complemented with Veeco's strength in Advanced Logic and Advanced Packaging, which actually stretches across their annealing, the Ion Beam Deposition, the wet processing solutions and lithography. So as you know, Advanced Logic as well as Advanced Packaging has been an area where Axcelis has been underrepresented. We believe each company can open new doors for the other and unlock potential cross-selling synergies in the combined company. So in the end, Craig, you need great technology and great relationships. And by combining the company, we really have strengthened our portfolio that we can offer to customers and our intimate knowledge of those customers.

That's great. And then the follow-up is for Jamie. Jamie, when I look at the $35 million in run rate forward to your cost savings, it looks like it equates to about 5% of what would be Veeco COGS and OpEx. And so the question, given that the company will benefit from reduced D&O and public company costs, what are you baking into that cost saving, expense estimate? And what are some of the key dependencies that we need to think about, whether it be nuances like ERP system coordination or other things on the way to capturing that $35 million.

Yes. No, great question, Craig. And John and I have actually had a couple of conversations already as we've gone through this process to sort of start to think about how we attack the cost synergy piece here. I think it's important to remember, right, that this is -- this transaction is not necessarily about the cost cutting. It is about the potential synergistic opportunity between our markets, our technologies, our customers, right, the complementary nature of this transaction is what really excites us. But to that end, we do see opportunities here in both COGS. I think that's really material spend, right, is the kind of best way to think about that is maybe the largest component potential opportunity on the operating efficiencies. We're going to continue to invest in R&D. We talked about the combined R&D power of the business, $230 million of combined R&D spend on a pro forma basis. So we want to make sure that the technologies are well positioned. The business has the resources it needs to go after the revenue opportunities that Russell and Bill highlighted on the call. As it relates to some of the longer poles. IT is always going to be one as we think about the systems integration that just takes time to look at processes, do some process reengineering system selection and others. And I think importantly, the collaborative nature in which we're going to work together with the Veeco team as we go through this, is going to help to inform the necessary steps to achieve those synergy numbers. I would say, again, we're going to put our heads together. We put out an achievable number. We believe we can get the majority of that within the 12-month period with the full right after 24 months. And as John and I worked together, I don't know if John, there's anything you want to add relative to the process we're going to undertake.

Yes. So thank you, Jamie. And I agree with everything that Jamie just laid out here. I think there is opportunity clearly for this type of transaction for the type of synergies that Jamie described. But what we're more excited about is really the opportunity for revenue synergies and to improve our capabilities for our customers. That's really much more exciting about this transaction here. Russell really laid out nicely the opportunities for collaboration between the two companies and the complementary strengths and technology amongst the company, and that's what we're really excited about today.

[Operator Instructions]. Our next question comes from the line of Auguste Richard with Northland Capital Markets.

Congratulations on the transaction. I just had one question. The combination of two companies have always made sense to me why now? And how did you calculate the percentage of ownership in NewCo?

Yes, Gus, great question. I would say we've been talking -- the two companies have been talking to each other for over a long time, actually Russell work at Veeco, so we've known each other for over a decade. So I think the why now is we've always had the same complementary technology and the strategic rationale always made sense. But clearly, with the dawn of artificial intelligence and the drive for high-performance computing and high-bandwidth memory, as well as now the electrification and the adoption of silicon carbide and GaN, it just -- the why now, the real driver for it is really kind of AI and electrification and the opportunity to grow scale for both companies. And we're really excited about the opportunities it's made a strategic sense for a long time.

Totally agree, Bill. The secular tailwinds are really exciting. So in obviously electrification, we're putting together GaN and silicon carbide and wide-band gap. That's very exciting, having a full portfolio of products we can offer our customers. And then when you think about AI, it's kind of really -- it's high performance compute. It's high bandwidth memory, and it's also Advanced Packaging, and we check a lot of boxes on the combined company. So we actually feel like we can offer our customers full solutions to some of their really demanding problems as a combined company.

Our next question comes from the line of Mark Miller with the Benchmark Company.

Congratulations on the deal. And I'm just wondering, you indicated there's several areas that could really be of interest to investors in terms of more exposure data center, Advanced Packaging, power electronics, which one do you think will be most important?

Yes, that's a tough one to handicap. I would say, we have significant opportunities to cross-sell, for example, Axcelis has very strong relationships in silicon carbide and compound semi. Veeco has a strong position just developing in 300-millimeter GaN-on-silicon. Clearly, we can leverage their relationships and their strong customer support to roll out that on a larger scale with GaN as that happens. And likewise, I think Veeco's strong position in Laser Annealing in the leading edge will provide, hopefully, a positive conduit for Axcelis' Ion Implant in advanced semi. And so the relative magnitude of those. And I think Russell mentioned it a few minutes ago, the opportunity to take some of the core technologies from Axcelis, whether that's particle knowledge, Electrostatic Chuck Ion Beam physics to the Veeco's Ion Beam Deposition could be a significant game changer in the next 3 to 5 years and really help us accelerate the joint company's road map and really meet the customers' needs for their future requirements.

You just mentioned two technologies that are similar. Your Ion Beam Deposition, Ion Beam Matching, Axcelis' Ion Implant. Do you see any ability to leverage the technology of either of these products into the other?

I would say when you look at the cadre of technical people here in Beverly, [ Massachusetts ] and on Long Island, there's a lot of technical overlap in decades and probably centuries of experience between the two teams. So I think there's a lot of -- I think Russell mentioned a little earlier, you put a lot of break people in the room on a big problem. They're going to figure something out.

Yes. I think that's absolutely right. And I am being felid like to think it was actually a science. A lot of it is an art and having smart people with lots of different experience, bring all of that experience to bear on difficult problems, I think that's going to be a really great opportunity to collaborate.

Congratulations on the deal.

Our next question comes from the line of Jed Dorsheimer with William Blair.

Congrats both of you for the combined transaction. I guess first question is while -- if I look at the technology overlap as you've outlined, it makes a lot of sense. But there is -- and maybe I've got this wrong. But if I look at -- I'm just wondering how you might address the cultural difference between tools that are lower volume, maybe higher precision versus more of a batch approach and kind of marrying those two and whether or not this signals a shift in technological strategic shift that would be more Veeco or more Axcelis or down the middle of the fairway there? And then I have a follow-up.

Jed, Bill Miller here. I haven't talked to you -- it's been a while. So as you remember, at that time, Veeco's MOCVD was largely batch tools, kind of high-volume batch systems. And over the last decade or so, our MOCVD equipment has really morphed from back size to single wafer a 200-millimeter now single wafer 300-millimeter GaN-on-silicon. So we're actually similarly in our MOCVD business, specifically moving towards moving substantially towards single wafer our Laser Annealing tools are single wafer and our in beam deposition tools are single wafer. So I would say it marries very nicely with the automation and common technical bits that clearly, I would say both companies are on a single wafer.

Right. And I think your way for processing is your wafer processing is also similar. So this is very much a single wafer culture, if you like, Jed, to use your word coming together.

Got it. Well, that makes a ton of sense. And then last question. In terms of focus area, particularly around compound semis, I'm just wondering how you're thinking about there's so much activity around reshoring. Most of the reshoring is going to be leading edge, not trailing edge power. But it seems to me that the combination of the two businesses might have a larger impact of -- or be able to capture greater opportunity in some of that reshoring for AI. I'm curious your thoughts there or if a lot of the foundry and compound will be focused on the Asian markets?

Well, so I think as you know, Jed, we are equipment suppliers. So we will be supplying to our customers and in all the various geographies One of the things I think you're going to see is as we become more -- each company is becoming more aware of security and went to recur, you're going to kind of build in some kind of inefficiency into the system. So in some respects, this is actually an additional tailwind where you're going to have multiple companies in each country that are deemed to be secure. And as a consequence, we will absolutely want to work with all of those people.

Yes. We're being a U.S. provider right into the U.S. market really does position us well for the potential expansion, both in the trailing as well as the leading-edge nodes. And I'd imagine, Jed, there will be some expansion on the trailing edge as well as to ensure that we've got the full complementary suite of semiconductors necessary for call it, national security reasons. And that trend is likely going to continue, not just in the U.S. but also probably in other regions of the [ geography ].

I talked about bifurcation were the kind of a Western world is heading towards more advanced devices like trench or super junction. They're going from smaller wafers, 6-inch to 8-inch, and now you've been talking about 12-inch. I think you're going to see a bifurcation where there's going to be the more advanced customers will be working to do the smallest possible device and the largest possible wafer and then you're going to get a little -- a large amount of trailing edge technology, which is probably going to be planar type device. I'm talking about silicon carbon specifically on the smaller wafers and they'd be kind of like in volume.

[Operator Instructions]. Our next question comes from the line of David Duley with Steelhead Securities. Mr. Duley, your line is live. I'm sorry. It seems that we have a technical error there. I'll pause a moment to allow for any other questions. [Operator Instructions]. Our next question comes from the line of Duksan Jang with Bank of America.

I just had a quick question on what you see on the regulatory approval plan just given both companies have a sizable China exposure. And from Axcelis' point of view, you're also entering more of the leading-edge space as opposed to your prior more mature node exposure. So any color on that would be helpful.

I'll leave that one off and then let other people chime in. But yes, this transaction is expected to close in the second half of '26, so obviously subject to approval by shareholders of both companies. Received the required recency approvals, which you are talking about and the satisfaction of other customary closing conditions. We are well advised, and we would not have agreed to a transaction we did not think we could compete -- complete. There really is no overlap between the two companies, and we're both U.S. based. As a result, we see no reason this deal get held up in the regulatory process. And this merger allows the combined company to be more efficient compared to the larger players in that market while also providing our customers, which is really important, the enhanced technologies and capabilities, which can accelerate their road maps.

Yes. We think that's a really important point, Duksan this actually allows us to compete significantly more effectively as a combined business against the larger players in the space provides our customers alternatives, a stronger alternative and enhances the technology development stack through the combined research development and technical know-how of our teams. So we think that on a regulatory basis, that those are all really positive indicators for us as we move forward.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Dr. Low for any final comments.

Thank you all. We hope you appreciate this transformational moment for Axcelis and Veeco as we set out to create an industry-leading semiconductor equipment company, we look forward to bringing together our highly complementary technologies, portfolios, end markets and teams to deliver diversified solutions to support customers through semiconductor production process while delivering returns to our shareholders. I want to thank the team that both Axcelis and Veeco for their hard work and dedication to serving customers with excellence. I can't wait to see what we can accomplish together. Operator, you can now conclude the call. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.