Veeco Instruments Inc. · NASDAQ:VECO
Veeco Instruments — Investor Presentation (October 2006)
55 slides from Veeco Instruments's investor presentation, Oct 24, 2006
Slide 1: Investor Presentation October 23, 2006
Investor Presentation October 23, 2006
Slide 2: Veeco Provides Enabling Technology for Multiple Growth Markets
Data Semiconductor HB-LED Scientific Storage Wireless Research Embedded Storage for CE Microdrives / Femto TFHS Perpendicular recording 90 and 65nm 300mm HB-LED / Wireless, Automotive, Camera Cell Phones, Backlit LCD TV Nanotech, Material & Life Science Veeco Provides Enabling Technology in Process
Slide 3: Veeco's Strategy For Growth
Veeco’s Strategy For Growth Develop a broad product line of enabling Process Equipment and Metrology technologies. Develop strategic relationships with technology leaders worldwide. Capture leading market share in all product lines. Leverage our exposure to high-growth end markets. Fuel our growth t
Slide 4: Solid Q3 Results
SOLID Q3 RESULTS… Revenue, Orders, EBITA All Improve Vs Prior Year REVENUE $112.4M … +12% FROM Q305. ORDERS $114.8M … UP 36% FROM Q305. EBITA $10.2M ... UP 28% FROM Q305. EPS (NON GAAP) $0.19 PER SHARE VS. $0.14 IN Q305. CASH $126.6M… up $10.5M from 2Q06 . BOOK/BILL 1.02 TO 1. Q306 results short of
Slide 5: Solid Nine Month Results
SOLID 9 Month Results… Revenue, Orders, EBITA All Improve Vs Prior Year REVENUE $317.9M … UP 7% VS 9 MONTHS 2005. ORDERS $384.8M … UP 27% VS 9 MONTHS 2005. EBITA $25.4M ... UP 50% VS 9 MONTHS 2005. EPS (NON GAAP) $0.46… UP 91% VS 9 MONTHS 2005.
Slide 6: Veeco 2006 Benefits From Multi-Market Growth
Veeco 2006 Benefits From… Multi-Market Growth Perpendicular Recording technology & consumer electronics require new Veeco Equipment & Metrology Brightness Roadmap for new LCD-TV backlighting requires new MOCVD tools 3D Metrology required as dimensions shrink below 90 nm Nanoscale Research requires a
Slide 7: Q3 Top Customers by Orders
Q3 – Top 15 Customers by Orders… Across All Major Veeco Markets $26M $29M $14M $45M TOTAL $ ORDERS BY MARKET X Kopti 13. X Fujitsu 11. X Seoul Opto 12. IBM SMIC Wuxi Blue Star Nanya Printed Circuit Arima Opto OSRAM Nanjing Guosheng Electronics Bandwidth Seagate Western Digital Headway/TDK/SAE Hitach
Slide 8: Strategic Relationships With Global Technology Leaders & Strong Market Share
We Have Strategic Relationships With Global Technology Leaders & Strong Market Share STRONG MARKET SHARE SERVING GLOBAL INDUSTRY LEADERS Semiconductor #1 AFM, Leader Optical HB-LED / Wireless A Leader in MOCVD and MBE Scientific Research #1 Research AFM Data Storage #1 TFMH Equipment THOUSANDS OF CU
Slide 9: Veeco's Financial Model
Veeco’s Financial Model
Slide 10: Q306 Revenue Up 12%, Orders Up 36%
Q306 … Revenue Up 12% Year over Year… Orders Up 36% Year Over Year Revenue ($M) 9 Months Up 7% Orders 9 Months Up 27% Q306 Orders Up 36%. 9 Month Orders up 27% Q306 Revenue Up 12%. 9 Month Revenue up 7% 9 Months ORDERS Up 27% 9 Months REVENUE Up 7% $99 $119 $85 $103 $127 $143 $115 $0 $20 $40 $60 $80
Slide 11: Diverse Revenue Base: Q3 Revenue by Product, Market, Geography
Veeco Has a Diverse Revenue Base… Growth in Semiconductor and HB-LED/Wireless Revenue by Product Equipment up 45% Revenue by Market Semiconductor up 31% HB-LED / Wireless up 193% Revenue by Geography APAC growth +41% Veeco benefits from product, market and geographic diversity. Q306 REVENUE $112.4M…
Slide 12: Q3 Orders by Product, Market, Geography
Q3 Data Storage and HB-LED APAC Growth Orders by Product Equipment Orders Up 59% Metrology Up 7% Orders by Market Data Storage Orders Up 35% HB-LED Orders Up 100% Semiconductor Orders Up 26% Orders by Geography APAC Up 125% U.S. Up 42% Q306 ORDERS $115M …up 36% Year Over Year Equipment 65% Orders $7
Slide 13: Diverse Revenue Base: Nine Month Revenue
Veeco Has a Diverse Revenue Base… Multi-Product…Multi-Market…Worldwide Exposure Revenue by Product (Equipment up 19%) Revenue by Market (Data Storage up 13% HB-LED/Wireless up 34%) Revenue by Geography (APAC growth 43%) Veeco benefits from product, market and geographic diversity 9 Months YTD REVENU
Slide 14: Nine Month Orders by Product, Market, Geography
Orders by Product Equipment Orders Up 48% Orders by Market Data Storage Orders Up 34% HB-LEB Orders Up 93% Orders by Geography APAC Up 69% 9 Months YTD ORDERS $385M Up 27% Equipment 66% Orders $252.6M Metrology 34% Orders $132.1M HB-LED/ Wireless 21% Scientific Research 18% Data Storage 49% Semicond
Slide 15: 2006 Growth Opportunity: Increased Revenues and Gross Margins
Veeco’s 2006 Growth Opportunity… Increased Revenues and Gross Margins $163M +9% $182M +12% $170M -6% $227M +75% $228M FLAT $270M +18% 2004 2005 2006F Metrology Process Equipment Revenue $390M Revenue $410M Revenue $440M 30% GM 52% GM 39% GM 35% GM 51% GM 42% GM 39% GM 52% GM 44% GM Growth +7% Growth
Slide 16: 2006 Continued Growth in Revenue, Margins and EBITA
2006 Continued Growth in… Revenue, Margins and EBITA *EBITA calculation = earnings before interest, taxes and amortization… see reconciliation table Gross Margin EBITA* Revenue 2006 Revenue Growth +9% Gross Margin Improvement +200 Basis Points Per Year EBITA Growth Greater than 30% for Year 39% 42%
Slide 17: Improved Financial Performance in Trough and Peak Quarters
Improved Financial Performance in Trough and Peak Quarters $49M 3.5% 38% 100% Equipment Trough Quarter $45M 16% 51% 100% Metrology Revenue EBITA Oper Expense Gross Margin Sales 100% 45% 39% $94M 6% Total Veeco ~$135 to $145M 14-17% 32% 46-48% 100% Target $80M 14% 40% 100% Equipment Peak Quarter $46M
Slide 18: Continued Initiatives to Improve Margins and Operational Excellence
Continued Initiatives… Improve Margins, Operational Excellence, Reduced Cycle Times Simplify Veeco operational organization around a single Process Equipment and a single Metrology senior management structure with emphasis on: Development of common hardware/software platforms Increased outsourcing c
Slide 19: Opportunity to Strengthen Balance Sheet Through Cash Generation
2005-2006 Opportunity to Strengthen Balance Sheet Through Cash Generation ($M) CASH GENERATED BY OPERATIONS IN 2005 TOTALED $44.9M February 18, 2006: Veeco repurchased $20M of convertible notes December 31, 2005 Sep 30, 2006 $248.6 $273.1 Shareholder’s Equity 229.2 208.9 Long Term Debt ($200M conver
Slide 20: Q4 2006 Guidance
Q4 2006 GUIDANCE Q4 revenues to be in the range of $120 - $124 million. Q4 orders to be in the range of $115 million +/- 5% . Q4 2006 GAAP in the range of $0.11 to $0.17 per share. Q4 2006 non-GAAP (excluding amortization) earnings per diluted share are expected to be between $0.18 and $0.22 using a
Slide 21: Data Storage Opportunity
Data Storage Opportunity
Slide 22: Consumer Applications Enable Dramatic Hard Drive Growth
0 2004006008001000120014001600 1956 1966 1976 1986 1996 2006 M Units – Annual HDD Shipments PC 3.5” 2.5” 3 rd ERA 2016 Mainframe 24”, 14” 1 st ERA Mini-computer 8”, 5.25” 2 nd ERA 2004 Consumer era 2.5” 1.8” 1” 3.5” DVD/HDD recorder since 2002 MP3 HDD since 2001 4 th ERA Source : Hitachi GST Estimat
Slide 23: Consumer Electronics Segment Will Approach Size of Computer Market
Data Storage… Hard Disk Drive Unit >20% CG… Consumer Electronics Segment Will Approach Size of Computer Market Segment 1980 1985 1990 1995 2000 2005 2010 2015 Unit Drive Shipments (M) 800 700 600 500 400 300 200 100 0 Consumer Electronics Laptop PC Desktop PC Enterprise Servers Desktop Laptop TiVo i
Slide 24: Consumer Electronics and Mobile Will Drive Unit Growth
Consumer Electronics and Mobile Segment Will Drive Unit Growth 1980 1985 1990 1995 2000 2005 2010 2015 Unit Drive Shipments (M) 800 700 600 500 400 300 200 100 0 Consumer Electronics Laptop PC Desktop PC Enterprise 14% 505M 435M Total 15% 113M 94M Mobile 26% 125M 98M Consumer Electronics 5% 225M 208
Slide 25: Data Storage Market Continues to Be a Growth Opportunity
Data Storage Market Continues to be a growth opportunity for Veeco Consumer applications are fastest growing segments Small Form Factor (SFF) drives are beneficiaries of this growth and are driving areal density requirements DVR iPod Personal Storage Mobile Phones Xbox GPS HDD Camcorder Portable Uni
Slide 26: Record Breaking Years Lie Ahead
Record Breaking Years Lie Ahead 0 100 200 300 400 500 600 700 800 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003< /font> 2004 2005 2006 2007 2008 2009 2010 $0B $5B $10B $15B $20B $25B $30B $35B $40B $45B Units Revenue (M) Source: IDC, Storage Mechanisms - Disk IDC current forecast is ov
Slide 27: HDD Opportunity: Unprecedented Technology and Form Factor Changes
HDD Opportunity… Unprecedented Technology and Form Factor Changes Occurring Simultaneously Areal Density (Gbit/in 2 ) Perpendicular Recording 1000 100 10 1 00 01 02 03 04 05 06 07 Perpendicular Recording Longitudinal Recording CPP GMR TMR Pico Slider Femto Slider Slider Shrinks (FEMTO) and Wafer Siz
Slide 28: Rapid Adoption of PMR and TMR and Transition to Femto Sliders
Rapid adoption of PMR and TMR Technology and Transition to Femto Sliders Areal Density Growth 125 to 500 Gbits/in 2 è Femto , PMR and TMR technologies have stringent requirements for Process Equipment and Metrology Technology Advances to Meet Market Requirements… Requires Continued Investment 0% 10%
Slide 29: Data Storage Capital Intensity Increases
Data Storage Capital Intensity Increases… 10% of HDD Revenue Source: Tom Coughlin, Coughlin Associates 10.6% $5.68 B $53.6 B 2010 10.1% (avg.) $21.45 $211.9 B Total (2006-2010) 8.9% $2.87 B $32.4 B 2006 9.9% $3.62 B $36.6 B 2007 10.3% $4.29 B $41.5 B 2008 10.4% $4.96 B $47.7 B 2009 7.9% $2.23 B $28.
Slide 30: Multi-Year Growth in New Technology and Capacity
Data Storage Multi-Year Growth in New Technology and Capacity… Provides Veeco with Continued Growth 30% 90% 2076 2009 10% Larger Wafer 150mm/200mm ~30% $190M $167M $123M Veeco Revenue CAGR 2007F 2005 2006 60% 30% 14% 3% PMR Content 100% 80% 30% 10% Femto Content Perpendicular recording / Areal densi
Slide 31: Veeco HDD Strong Y/Y Growth Trends
Veeco HDD Strong Y/Y Growth Trends… Quarters Remain Volatile Veeco to Continue our Commitment to HDD Well Positioned to Remain the TFMH Equipment Industry Leader Veeco HDD Revenues ($M) 30% CAGR $91 $124 $167 $190 $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 2003 2004 2005 2006F
Slide 32: A Strategic Partner in Every Step of the Manufacturing Process
Veeco… A Strategic Partner in Every Step of the Manufacturing Process Our strategy has been to provide tool and process technology, improved productivity, and a broad range of products to be the world-wide strategic supplier to the TFMH industry.
Slide 33: HB-LED/Wireless Opportunity
HB-LED/Wireless Opportunity
Slide 34: Early Stage, High-Growth Opportunity
Early Stage, High-Growth Opportunity LED market opportunity in its infancy – traffic lights, key pads, LCD monitors We have key enabling technology, MOCVD Each LED generation requires new MOCVD equipment Our focus on process technology development, support and strategic customer relationships
Slide 35: Brightness Defines Next Generation Veeco MOCVD
HB-LED/Wireless Opportunity… “Brightness” Defines Next Generation Veeco MOCVD Color Binning (wavelength in nanometers) Brightness (mW per std LED area) 8mW 7mW 6mW 5mW 4mW 3mW 2mW 1mW Large LCD Backlighting Mobile Phones Traffic Lights Outdoor Signage General Lighting GaNzilla II MOCVD Next Gen MOCV
Slide 36: Solid State Lighting Growth Opportunity
1960 1970 1980 1990 2000 2010 2020 Relative LED Unit Shipments Enterprise Red Indicator Lights Red HB-LEDs Blue & Green HB-LED (GaN) White Backlighting General Illumination Red LED Blue & Green HB-LED Red HB-LED Tail Light HB-LED Headlights Small LCD Backlighting Cell Phone PDA Large LCD Backlightin
Slide 37: Multi-Year HB-LED/Wireless Growth Driven by White LED
Multi Year HB-LED/Wireless Growth … Driven By “White LED” Penetration of LCD TV, Automotive & Architectural Lighting 138M 10B 2004 27% +23% +20% CAGR $175M +15% 13.0% 395M 25B 2009 Mobile phones Outdoor signs Traffic lights Camera flash Backlit laptops Auto lighting Specialty interior lighting Gener
Slide 38: Multi-Year Growth Opportunity: HB-LED Units Forecast
0 10,000 20,000 30,000 40,000 50,000 60,000 2005 2006 2007 2008 2009 # Devices (Millions) Multi-Year Growth Opportunity… HB-LED Units Forecast: 23% CAGR Red/Orange/Yellow Blue/Green/UV 23% CAGR Source: Strategies Unlimited and Veeco Estimates
Slide 39: HB-LED Opportunity: Multi-Year Equipment Growth From Increased Adoption
HB-LED Opportunity… Multi-Year Equipment Growth From Increased Adoption Automotive Lighting General Illumination Outdoor Signage Mobile Appliances Headlamps Dashboard Heads up displays 60 million light vehicles produced per year; only 40% use LEDs Headlamps and DRL will be introduced as brightness c
Slide 40: Emerging Applications: First Wave Small Panel Displays
Emerging Applications… First Wave Small Panel Displays (’06/’07 MOCVD) HB-LEDs are capturing small panel display backlighting Cost and brightness now meet requirements Replaces CCFL backlight, no mercury Provide weight, power and panel thickness advantage “Every small LCD panel maker in Taiwan is qu
Slide 41: Emerging Applications: Second Wave TV Backlighting
Emerging Applications… Second Wave TV Backlighting (’08/’09 MOCVD) Adoption driver: color quality, depth, contrast Cost competitive LED backlighting expected for 32” LCD TV in 2007 – sooner than expected CCFL covers 85% of NTSC color gamut…LEDs cover 105% *Source: Insight Media, DigiTimes.com, Press
Slide 42: GaNzilla II: Improved Uniformity Driving Share Gains
GaNzilla II: Improved Uniformity Driving Share Gains in 2006 LEDs are binned based on wavelength Wavelength uniformity key measure of Yield Tighter distribution is better Customer reaction has been very positive – “more good die per wafer” Binning cost equals GaN EPI cost GaNzilla II GaNzilla I >30%
Slide 43: Veeco Metrology
Veeco Metrology
Slide 44: Veeco's Leading Metrology Solutions
Veeco’s Leading Metrology Solutions DMEMS Optical Dimension V AFM Dektak Stylus Multimode V AFM Dimension AFP $170M+ Revenues 2006, GM growth 51->52% in 2006 Leadership positions in: Semiconductor, Data Storage, General Industrial, MEMS Metrology Nano/Bio Research – university & nano-center focused
Slide 45: Success in Auto-AFM: Multi-Market Expansion
Success in Auto-AFM… Multi-Market Expansion Veeco created the Semi AFM Market opportunity and remains the clear market leader… more than 350 Automated AFM systems shipped Automated Pole Tip Recession Metrology Markets Data Storage Non destructive, accurate Metrology Markets Semiconductor CCD Advance
Slide 46: Auto-AFM Market Drivers
Auto-AFM Market Drivers Accurate Metrology Reference Systems are required to benchmark Optical-CD and CD-SEM systems X3D defined by Sematech as reference system 70nm Resist Lines, X3D Image Metrology Systems that do not alter materials while measuring them New materials (Low-k + resist) unaffected b
Slide 47: Growing Application Space for Automated AFMs
Growing Application Space for Automated AFMs Auto-AFMs used for in-line metrology in CMP, Etch, Litho and Mask modules Auto-AFM continues penetration at 65 & 45nm with new Veeco solutions Fab-based Reference Metrology for TEM replacement Advanced Mask Metrology for 45nm and below Advanced Lithograph
Slide 48: Auto-AFM New Applications in Data Storage
Auto-AFM New Applications in Data Storage Rapid adoption of PMR and TMR Technology Areal Density Growth 125 to 500 Gbits/in 2 è Advanced Perpendicular recording requires new 3D metrology not satisfied by current techniques 3D Auto-AFM provides non-destructive complete 3-D imaging capability displaci
Slide 49: Nano Ruler: World Leader in Surface Science and Metrology
Nano Ruler World Leader in Surface Science and Metrology Magnetic Bits (HDD) 160nmx40nm (100Gb/in2). MEMS 10um – 1mm Transistor 0.5um – 90nm Quantum Dots 20nm wide ea. Silicon Atom 0.2nm dia Human Hair 70um wide Red Blood Cells 3um dia DNA Strand 2nm wide Nanotech 1,000,000nm 100,000nm 10,000nm 1,00
Slide 50: Life Science and Nanotechnology Will Drive New Growth Areas
Life Science and Nanotechnology Will… Drive New Growth Areas Cancer Research - AFM Bone Studies - AFM Heart Stent Development - Optical DS Metrology – AFM & Optical Source: Veeco, SDI, Dataquest, IDE DLP & MEMS Metrology - Optical Windows on the World – R&D Market Veeco scientific tools have a rich
Slide 51: BioAFM Microscopy Market in Its Infancy
BioAFM Microscopy Market in its Infancy The potential of the SPM in biology remains largely untapped. Quantitative research, followed by clinical applications, will drive adoption. Rate of Adoption for Biological Imaging Technologies vs. Time Innovators Early Majority Late Majority Early Adopters La
Slide 52: Safe Harbor Statement
Safe Harbor Statement To the extent that this presentation discusses expectations about market conditions, market acceptance and future sales of Veeco’s products, Veeco’s future financial performance, future disclosures, or otherwise makes statements about the future, such statements are forward-loo
Slide 53: Appendix
APPENDIX
Slide 54: Q306 Reconciliation Table
Q306 Reconciliation Table 2006 2005 2006 2005 Operating income $4,969 $4,213 $12,215 $4,390 Adjustments: Write-off of purchased in-process technology 1,160 (1) - 1,160 (1) - Amortization expense 4,025 4,038 12,029 12,554 Earnings before interest, income taxes and amortization, excluding certain item
Slide 55: Q406 Guidance Reconciliation Table
Q406 Guidance Reconciliation Table High End Low End 4,000 4,000 Amortization expense 12,500 10,300 Earnings before interest, income taxes and amortization, excluding certain items (“EBITA”) 1,400 1,500 Interest expense, net 11,100 8,800 Earnings excluding certain items before income taxes 3,885 3,08
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