Slide 1: Veeco Q3 2007 Results; Q4 Outlook and Performance Improvement Plan
Veeco Q3 2007 Results; Q4 Outlook and Performance Improvement Plan October 22, 2007
Slide 2: Introduction and Safe Harbor Statement
Introduction and Safe Harbor Statement To the extent that this conference call and presentation discuss expectations or otherwise make statements about the future, such statements are forward-looking and are subject to a number of risks and uncertainties that could cause actual results to differ mat
Slide 3: Introduction – John Peeler, CEO
Introduction John Peeler, CEO
Slide 4: Agenda for Today's Call
Agenda for Today’s Call Review Q3 ‘07 Results Provide Outlook and Guidance for Q4 ‘07 Review our Plan to Improve Veeco’s Performance Discuss Overall Market Trends Impacting Veeco Provide some thoughts on Next Steps
Slide 5: Q3 '07 Financial Highlights
Q3 ‘07 Financial Highlights Revenue $98M, in line with guidance of $92-97M Flat sequentially Down 13% versus Q3 ‘06 revenue of $112M Bookings: $118M, above guidance of $100-115M Up 3% versus Q3 ‘06 Up 5% sequentially Bookings ahead of guidance primarily due to strength in HB-LED/Wireless, Scientific
Slide 6: Q3 '07 Financial Review – Jack Rein, CFO
Q3 ‘07 Financial Review Jack Rein, CFO
Slide 7: Q3 '07 Revenue Overview
Q3 ‘07 Revenue Overview Revenue by Product Q3 ‘07 vs. Q3 ‘06 Process Equip. Rev – down 12% Metrology Rev – down 15% Revenue by Market Q3 ‘07 vs. Q3 ‘06 Data Storage Rev – down 35% Semi Rev – down 26% HB-LED/Wireless – up 14% Scientific Research - up 8% Revenue by Region $97.7M vs. $112.4M Q3 ‘06 (do
Slide 8: Q3 '07 Order Overview
Orders by Product Q3 ‘07 vs. Q3 ‘06 PE - up 8% Metrology - down 7% Q3 ‘07 vs. Q2 ‘07 PE – up 4% Metrology – up 8% Q3 ‘07 Order Overview – B-B 1.21 to 1.0 $118.3M vs. $114.8M Q3 ‘06 (up 3%) Metrology $37.4M 32% Process Equipment $80.9M 68% HB-LED/Wireless 37% Scientific Research 28% Data Storage 30%
Slide 9: Q3 '07 Profitability Analysis
Q3 ‘07 Profitability Analysis Gross profit was $35.9M, or 36.7% of sales, compared to $47.9M, or 42.6% of sales in Q3 ‘06 We forecasted difficult GMs in Q3 ‘07 due to delivery of beta versions of new products Combination of unfavorable mix, higher spending resulted in lower sequential GMs in both PE
Slide 10: Q3 '07 Profitability Analysis cont'd
Q3 ‘07 Profitability Analysis cont’d Amortization expense totaling $2.0M vs. $4.0M last year Restructuring expense of approximately $0.5 million consisting of severance costs Net interest expense was $0.7M compared to $1.1M in the comparable 2006 quarter primarily due to convertible note repayment N
Slide 11: First Nine Months '07 Revenue Overview
First 9 Months ‘07 Revenue Overview Metrology $114.7M 39% Process Equipment $181.0M 61% HB-LED/Wireless 26% Scientific Research 30% Data Storage 33% Semi-conductor 11% NA 32% APAC 35% Europe 18% Japan 15% $295.7M vs. $317.9M 9 Month ‘06 (down 7%) Revenue by Product 9Mo ‘07 vs. 9Mo ‘06 P.E. – down 6%
Slide 12: First Nine Months '07 Orders Overview
First 9 Months ‘07 Orders Overview Metrology $109.4M 32% Process Equipment $227.3M 68% HB-LED/Wireless 35% Scientific Research 26% Data Storage 31% Semi-conductor 8% NA 36% APAC 32% Europe 19% Japan 13% $336.7M vs. $384.8M 9 Month ‘06 (down 12%) Orders by Product 9Mo ‘07 vs. 9Mo ‘06 P.E.– down 10% M
Slide 13: Nine Month Profitability Analysis
9 Month Profitability Analysis Gross profit was $121.8M, or 41.2% of sales, compared to $139.3M, or 43.8% of sales in the first nine months of 2006 SG&A was $69.3M vs $68.6M last year R&D was $46.3M compared to $45.6M last year Operating expenses totaled $115.1M, or 38.9% of sales, compared to $113.
Slide 14: Veeco Balance Sheet
Veeco Balance Sheet December 31, 2006 September 30, 2007 (in millions) $281.8 $280.4 Shareholder’s Equity 209.2 151.9 Long-Term Debt 589.6 527.4 Total Asset 73.5 69.5 Fixed Assets 248.1 201.4 Working Capital $147.0 $108.4 Cash and Investments During 2007, Veeco repurchased $56.0M of its 4.125% conve
Slide 15: Q4 '07 Outlook/Guidance
Q4 ‘07 Outlook/Guidance Q4 ‘07 Revenues $104-$112 million Q4 ‘07 EPS ($0.26)-($0.14) per share Non-GAAP EPS $0.00 - $0.06, excluding amortization of $1.9M and restructuring charges of $5.0 million, using a 35% tax rate Additional restructuring charges in the range of $8-13 million could potentially
Slide 16: Q4 '07 Outlook/Guidance
Q4 ‘07 Outlook/Guidance Q4 ‘07 Orders currently expected to be between $105-$115M Cautious outlook based upon lack of visibility in Data Storage and very strong Q3 in HB-LED/wireless Q4 ‘07 Operating Expenses will increase in absolute dollars (but decrease as a % of sales) to approximately $40-$41M
Slide 17: Initial Thoughts on 2008 – Recovery Year
Initial Thoughts on 2008 – Recovery Year Based upon recent bookings improvement, we will enter 2008 with significant backlog – end of year backlog is currently estimated to be $180 million based upon Q4 guidance ‘08 should be a growth year for Veeco But will start slowly Expect modestly improved rev
Slide 18: Insight into My First Days – John Peeler, CEO
Insight into My First 100 Days John Peeler, CEO
Slide 19: Veeco Plan Initial Timeline
Veeco Plan Initial Timeline Strategy & Planning Sept. – Nov. Adjust strategies, processes and plans Planning for 2008 Discuss strategy and initial plans with Veeco Board and Investors Initial Learning July – Aug. Develop Business Unit and Functional Understanding Visit key factories, global regions
Slide 20: First Days – Completed Initial Business Assessment
First 100 Days – Completed Initial Business Assessment Impressive products and technology Leading market positions in key areas #2 MOCVD for HB-LED; gaining share #1 PE and Metrology for TFMHs #1 AFM and strong position in optical profilers/interferometers Strong relationships with key customers Sol
Slide 21: Initial Assessment – Key Challenges
Initial Assessment – Key Challenges We Need: Increased and more consistent growth Increased profitability Better predictability Short-term goal: to help Veeco Process Equipment and Veeco Metrology grow and become more profitable control spending at every level
Slide 22: Initiated Performance Improvement Plan
Initiated Performance Improvement Plan Direct our resources to the best growth opportunities Strengthen our global sales and services organization Competitive advantage Engine for growth Short-term actions to improve profitability Expense reduction Gross margin improvement Cost containment Ensure th
Slide 23: 1. Direct our Resources to the Best Growth Opportunities
1. Direct our Resources to the Best Growth Opportunities 100 Day Assessment to define best Veeco growth opportunities for 2008 and beyond Align 2008 R&D Spending to the following key areas: HB-LED – long-term growth with deep end-market applications... increase investment to advance technology, impr
Slide 24: 2. Strengthen our Global Sales and Service Organization
2. Strengthen our Global Sales and Service Organization Have completed in-depth analysis of worldwide sales organization Focusing our selling efforts around four key product lines: Data Storage; Auto AFM; Metrology Instrumentation; MOCVD and MBE Recruited new Head of Global Sales and Service – Willi
Slide 25: 3. Short Term Actions to Improve Profitability
3. Short term Actions to Improve Profitability 100 person reduction in force – employees, consultants and temporary workers Reduction of discretionary expenses Realignment of our sales organization to more closely match current market/regional opportunities Consolidation of certain engineering & mar
Slide 26: 4. Ensure that Each of our Product Businesses is Executing Well
4. Ensure that Each of our Product Businesses is Executing Well Effective conceptualization, development and commercialization of leadership products More discipline around Product Life Cycle (PLC) process Within Process Equipment Data storage: streamline the number of products and customer commitme
Slide 27: 5. Improve Business Processes
5. Improve Business Processes Do not allow businesses to spend ahead of revenue Drive for better linearity of order/revenue rates New discipline surrounding: PLC process and decisions Headcount additions Quarterly forecasting process Customer commitments Completing SAP in APAC this quarter... Japan
Slide 28: HB-LED/Wireless Trends & Outlook
HB-LED currently Veeco’s highest growth end market Orders up 45% through the first nine months of 2007 New K-Series™ GaN MOCVD penetrating key accounts worldwide Multi-unit orders from 4 customers — Broad base of global customers investing in LEDs for backlighting, architectural, automotive E475 AsP
Slide 29: Data Storage Trends & Outlook
Data Storage Trends & Outlook HDD orders in line with expectations... down sequentially but stabilized HDD unit CAGR high single digit growth forecasted versus historical double digit PMR investment continues Larger (8") wafers require retooling in >50% of the process steps to achieve comparable yie
Slide 30: Semiconductor Trends & Outlook
Semiconductor Trends & Outlook Veeco Q3 semiconductor order rate at historically low level Q4 Introduction of New Semiconductor Auto AFM Platform 45nm & 32nm Capable Improved Throughput (3x) Improved Accuracy & Repeatability (2x) Reduced CoO 2 beta tools shipped... additional orders received... mult
Slide 31: Scientific Research/Industrial Trends & Outlook
Scientific Research/Industrial Trends & Outlook Q3 Scientific Research orders up 17% sequentially and 9 months orders up 20% versus last year Successful new product launch Veeco Innova SPM For universities/industrial customers... lower cost option to MultiMode or Dimension Dektak 150 – shipped 150th
Slide 32: Next Steps
Next Steps First 100 Days – Learned a lot and have started executing our Plan Veeco turnaround will take multiple quarters... we will continue to refine our revenue growth and profit improvement program Review of domestic & international organizations and cost structures Evaluation of sites and infr
Slide 33: Question & Answer Session
Question & Answer Session
Slide 34: Q3 '07 GAAP Reconciliation Table
Q3 ‘07 GAAP Reconciliation Table 2007 2006 2007 2006 Operating (loss) income ($4,187) $4,969 ($3,459) $12,215 Adjustments: Write-off of purchased in-process technology - 1,160 (1) - 1,160 Amortization expense 1,959 4,025 8,236 12,029 Restructuring expense 529 (2) - 1,974 (2) - Earnings (loss) before
Slide 35: Q4 '07 Guidance Reconciliation Table
Q4 ‘07 Guidance Reconciliation Table High End Low End 1,900 5,000 1,900 5,000 Amortization expense Restructuring expense 4,000 750 Earnings before interest, income taxes and amortization, excluding certain items (“EBITA”) 900 900 Interest expense, net 3,100 (150) (Loss) earnings excluding certain it