Veeco Instruments Inc. · NASDAQ:VECO
Veeco Instruments — Investor Presentation (July 2006)
60 slides from Veeco Instruments's investor presentation, Jul 27, 2006
Slide 1: Investor Presentation July 24, 2006
Investor Presentation July 24, 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 end markets with high-growth potential. Fu
Slide 4: Veeco Enters a Multi-Year, Multi-Market Growth Opportunity
Veeco Enters a Multi-Year, Multi-Market Growth Opportunity Consumer Electronics technology & capacity investments require new Veeco Equipment & Metrology Brightness Roadmap for solid state lighting requires continued MOCVD technology advances More 3D Metrology required as dimensions shrink below 90
Slide 5: Broad Product Line of Process Equipment and Metrology Technologies
ADD MATERIAL (DEPOSITION) REMOVE MATERIAL IMAGE, MEASURE & MONITOR Broad Product Line of Process Equipment and Metrology Technologies WHAT WE DO ’06 NEW PRODUCTS at HIGHER GROSS MARGINS PROCESS EQUIPMENT METROLOGY NEW PRODUCT REVENUE TO EXCEED $175 MILLION Ion Beam Deposition (IBD) x Physical Vapor
Slide 6: 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 7: Q2 – Top Customers by Orders
Q2 – Top 15 Customers by Orders… Across All Major Veeco Markets $25M $27M $20M $71M TOTAL $ ORDERS BY MARKET X Huahong Semi 13. X DT Fineelectronics 11. X IPG Photonics 12. IM Flash Technology Korae Photonics Hynix Semi Tekcore Samsung Dalian Meiming Epitaxy Huga Opto Tech Western Digital LG Innotek
Slide 8: Solid Q2 Results
SOLID Q2 RESULTS Revenue in line…growth in Orders, Gross Margin and EBITA REVENUE $111.6M …ABOVE GUIDANCE, +8% vs. Q205 ORDERS $143.2M …UP 21% FROM Q205; 13% over Q106 (5 YEAR HIGH) …ABOVE GUIDANCE EBITA $9.6M ...UP 57% FROM Q205 EPS (NON GAAP) $0.18 PER SHARE VS. $.09 IN Q205, ABOVE GUIDANCE GROSS
Slide 9: Management Highlights Continued
Management Highlights CONTINUED Gross Margin 44.5% Up 250 basis points from prior year (40% GM for Equipment, 51% GM Metrology) EBITA $9.6M vs $6.1M in prior year (up 58%) 6 month YTD Revenue & Orders are up 1.08 to 1 1.47 to 1 1.31 to 1 Book/Bill $92M down 2% $178M up 44% $270M up 24% Orders $85M d
Slide 10: Veeco's Financial Model
Veeco’s Financial Model
Slide 11: Veeco Has a Diverse Revenue Base
Veeco Has a Diverse Revenue Base… Growth in Data Storage and LED Revenue by Product Equipment up 10% Revenue by Market Data Storage up 12% HB-LED / Wireless up 32% Scientific Research up 9% Revenue by Geography APAC growth +75% Veeco benefits from product, market and geographic diversity. Q206 REVEN
Slide 12: Q2 Orders Reflect Strong Data Storage and HB-LED APAC Growth
Q2 Orders Reflect Strong Data Storage and HB-LED APAC Growth Orders by Product Equipment Orders Up 38% Metrology Down 3% Orders by Market Data Storage Orders Up 18% HB-LED Orders Up 106% Semiconductor Orders Up 6% Orders by Geography APAC Up 37% U.S. Up 65% Q206 Orders $143M (5 year high)…up 21% Equ
Slide 13: Veeco's 2006 Growth Opportunity
Veeco’s 2006 Growth Opportunity… Increased Revenues and Gross Margins ($M) $163 +9% $182 +12% $190 +4% $227 +75% $228 FLAT $275 +20% 2004 2005 2006F Metrology Process Equipment Revenue $390M Revenue $410M Revenue $465M* 30% GM 52% GM 39% GM 35% GM 51% GM 42% GM 40% GM 53% GM 45% GM Growth +13% Growt
Slide 14: Gross Margins and EBITA Trend Upward
2006… Gross Margins and EBITA Trend Upward *EBITA calculation = earnings before interest, taxes and amortization… see reconciliation table Gross Margin TRENDING UP EBITA ($M) TRENDING UP Gross Margin Growth to 46-48% in Q406 Expect Y/Y EBITA Growth in Each Quarter of 2006. Q2 EBITA Up 58% 40% 42% 44
Slide 15: 21% Order Growth, Increased Backlog Supports Strong 2H Revenue
Q2… 21% Order Growth… Increased Backlog… Supports Strong 2H Revenue Revenue ($M) TRENDING UP Orders ($M) TRENDING UP Q2 Orders Up 13% Sequentially. Up 21% Year Over Year. Revenue to Trend Upward. Expect Year Over Year Revenue Growth In Each Quarter *$122M midpoint of Q3 Order Guidance $99 $119 $85 $
Slide 16: 2006-07 Continued Growth in Revenue, Margins and EBITA
2006-07 Continued Growth in… Revenue, Margins and EBITA ($M) *EBITA calculation = earnings before interest, taxes and amortization… see reconciliation table Gross Margin EBITA* Revenue 2006 Revenue Growth +15 to +17% Gross Margin Improvement +300 Basis Points Per Year EBITA Nearly Doubles Again For
Slide 17: Improved Financial Performance in Trough and Peak Quarters
Improved Financial Performance in Trough and Peak Quarters* $49M 3.5% 35% 38% 100% Equipment Trough Quarter $45M 16% 35% 51% 100% Metrology Revenue EBITA Oper Expense Gross Margin Sales 100% 45% 39% $94M 6% Total Veeco ~$135 to $140M 20% 30% 50% E 46% M 56% 100% 2007 Target for Peak Quarter $75M 17%
Slide 18: Improve Profitability: Cost Reduction and Operational Excellence
Improve Profitability… Cost Reduction … Operational Excellence Initiatives Achieve target quarterly business model $135 – 140M 48 – 50% 30% 18 – 20% Sales Gross Margin Operating Expense EBITA Operational excellence to include inventory reduction, capex reduction, DSO management and cash generation …
Slide 19: Q3 2006 Guidance
Q3 2006 GUIDANCE Q3 revenues to be in the range of $125 - $130 million. Q3 orders to be in the range of $115 - $130 million. Q3 2006 GAAP in the range of $0.23 to $0.29 per share. Q3 2006 non-GAAP (excluding amortization) earnings per diluted share are expected to be between $0.25 and $0.30 using a
Slide 20: Data Storage Opportunity
Data Storage Opportunity
Slide 21: Consumer Applications Enable Exponential 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 22: Hard Disk Drive Unit Growth; Consumer Electronics Segment
Data Storage… Hard Disk Drive Unit >20% Compound Growth …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
Slide 23: Consumer Electronics and Mobile Segment Will Drive Unit Growth
Consumer Electronics and Mobile Segment Will Drive Unit Growth 1980 1985 1990 1995 2000 2005 2010 2015 Unit Drive Shipments (millions) 800 700 600 500 400 300 200 100 0 Consumer Electronics Laptop PC Desktop PC Enterprise 20% 20% 33% 4% 6.8% CAGR ’05-09 453M 379M Total 97M 76M Mobile 119M 79M Consum
Slide 24: HDD Opportunity: Unprecedented Technology and Form Factor Changes
HDD Opportunity: Unprecedented Technology and Form Factor Changes Occurring Simultaneously Areal Density (Gbit/in 2 ) 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
Slide 25: Rapid Adoption of PMR and TMR Technology and 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 26: Data Storage Capital Intensity Increases
Data Storage Capital Intensity Increases… 10% of HDD Revenue 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 $28.1 B 2005 Percentage Capital Equipment Spen
Slide 27: Data Storage Multi-Year Investment Provides Continued Growth
Data Storage Multi-Year Investment in New Technology & Capacity… Provides Veeco with Continued Growth 10% Larger Wafer 150mm/200mm $90M 2003 ~35% $220M $167M $123M Veeco Revenue CAGR 2006F 2004 2005 30% 14% 2.3% 0% PMR Content 80% 31% 3.1% 0% Femto Content Perpendicular recording / Areal density gro
Slide 28: Veeco HDD Strong Y/Y Growth Trends
Veeco HDD Strong Y/Y Growth Trends… Quarters Remain Volatile Veeco to Continue our Commitment to HDD. Well Positioned to Remain the TFMH Equipment Industry Leader Veeco HDD Revenues ($M) 34% CAGR $91M $124M $167M $220M $0 $50 $100 $150 $200 $250 2003 2004 2005 2006F
Slide 29: We Are Early in Move to Perpendicular Recording
We are Early in Move to Perpendicular Recording Perpendicular recording will be multi-generational Source: Tom Coughlin, Coughlin Associates Gen 1 Perp . Gen 2 Perp . Gen 3 Perp . Gen 4 Perp . Longitudinal Recording HDD Product 10.00 100.00 1,000.00 10,000.00 Q1 2000 Q2 2000 Q3 2000 Q4 2000 Q1 2001
Slide 30: A Strategic Partner to Every Step of the Manufacturing Process
Veeco…A Strategic Partner to 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 31: New Veeco Process Tools Are Clusterable to Standard Platform
New Veeco Process Tools Are Clusterable to Standard Platform Asymmetry control for narrow TW CD control for PMR Sub 100nm shallow step for low HMS Sub 20 Å overcoat for low HMS Deep Cavity Etch (RIE replacement) TMR/CPP & HMM Isolation, and seed for TMR & PMR Alumina and metal layers WAFER SLIDER
Slide 32: HB-LED / Wireless Opportunity
HB-LED / Wireless Opportunity
Slide 33: 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 34: Brightness Defines Next Generation 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 MO
Slide 35: 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 36: 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 37: Multi-Year Growth Opportunity: HB-LED Units Forecast
Multi-Year Growth Opportunity: HB-LED Units Forecast: 23% CAGR Red/Orange/Yellow Blue/Green/UV 23% CAGR Source: Strategies Unlimited and Veeco Estimates 0 10,000 20,000 30,000 40,000 50,000 60,000 2005 2006 2007 2008 2009 # Devices (Millions)
Slide 38: HB-LED 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
Slide 39: 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 q
Slide 40: 2008/09 Growth Driven By Large Panel TV Backlighting
2008/09 Growth Driven By Large Panel TV Backlighting LED cost competitive 32” LCD TV by 2007 RGB chipsets Color spectrum coverage is adoption driver CCFL = 85% LED = 105% Backlighting Unit Shipment Forecast 40-44 inch LCD TV Segment 0 5 10 15 20 2007F 2008F 2009F 2010F Million Units CCFL LED penetra
Slide 41: Double-Digit Growth Opportunity in MOCVD
Veeco’s Double-Digit Growth Opportunity in MOCVD Small Display Backlighting Driven Source: Veeco Estimates Auto / Architectural General Lighting TAM FORECAST: 20% CAGR Large Display Backlighting Driven 0 50 100 150 200 250 300 350 2005 2006F 2007F 2008F 2009F $Millions AsP MOCVD R/O/Y TAM Revenue Ga
Slide 42: Veeco Well Positioned Across Global Leaders
Veeco Well Positioned Across Global Leaders China Japan Europe Korea Taiwan US Recent Capacity Investment in Korea & Taiwan…some customers becoming “key accounts” -partnership, process development, multi-unit orders… China Emerging… Japan Opportunity for Veeco
Slide 43: 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 44: Veeco Advantage: Process Support and Technology Development
Veeco Advantage: Process Support and Technology Development University of California Santa Barbara Member of SSLDC- World’s top in SSL researchers Joint development project on new LED materials Veeco to place GaN research system Korea Optoelectronics Technology Institute MOU signed June 2006 Access
Slide 45: Veeco Metrology
Veeco Veeco Metrology
Slide 46: Veeco's Leading Metrology Solutions
Veeco’s Leading Metrology Solutions DMEMS Optical Dimension V AFM Dektak Stylus Multimode V AFM Dimension AFP $190M+ Revenues 2006, GM expansion 51->53% in 2006 Leadership positions in: Semiconductor, Data Storage, General Industrial, MEMS Metrology Nano/Bio Research – university & nano-center focus
Slide 47: Success in Auto-AFM: Lab-to-Fab
Success in Auto-AFM: Lab-to-Fab Veeco created the Semi AFM Market Opportunity and remains the clear market leader >350 Automated AFM systems shipped Automated Pole Tip Recession Metrology Markets Data Storage Non destructive, accurate metrology Markets Semiconductor CCD Advanced 3D AFM Metrology Mar
Slide 48: 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 49: 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 50: New Applications in Image Sensor Technology
New Applications in Image Sensor Technology 2003 2004 2005 2006 2010 CMOS imagers CCDs Source: IC Insights CMOS and CCD imager markets, $ billions CMOS Image Sensor (CIS) Technology is replacing CCD $1.29 $1.94 $2.56 $3.12 $3.28 $3.03 $4.30 $2.75 $10.84 $1.91 $9B $8B $7B $6B $5B $4B $3B $2B $1B $0 A
Slide 51: Increasing Application Space Improving Auto-AFM Entitlement
Increasing Application Space is Improving Veeco’s Auto-AFM Entitlement 2-5 1-2 1-2 4-7 1 CMP & Etch Photomask Reference CMOS Sensor Data Storage # Systems per fab Continued Application Penetration in Semi market Reference, TEM/SEM Replacement, Low-k, Gate CD Market Expansion into CMOS Image Sensor a
Slide 52: Nano Ruler: World Leader in Surface Science and Metrology
Nano Ruler World Leader in Surface Science and Metrology Magnetic Bits (HDD) 160nmx40nm (100Gb/in2). MEMS 10um – 1mm Transistor 0.5um – 90nm Quantum Dots 20nm wide ea. Silicon Atom 0.2nm dia Human Hair 70um wide Red Blood Cells 3um dia DNA Strand 2nm wide Nanotech 1,000,000nm 100,000nm 10,000nm 1,00
Slide 53: Our Scientific Heritage Will Drive New Growth Areas
Our Scientific Heritage Will Drive New Growth Areas 8-15% End Market Growth in Nano/Bio Research, Consumer Electronics & MEMS will Drive Veeco’s Instrumentation Growth in 2007 and Beyond Cancer Research - AFM Bone Studies - AFM Heart Stent Development - Optical Data Storage Metrology – AFM & Optical
Slide 54: 2006 New Product Launch Timeline
New Market Areas 2006 New Product Launch Timeline Q1 Q2 Q3 Q4 BioScope II SP3250 V Series AFM DMEMS Optical Caliber AFM D150 Stylus Profiler HD/NT Optical Profiler Dimension AFP New Product Extensions
Slide 55: Opportunity to Strengthen Balance Sheet Through Cash Generation
2005-2006 OPPORTUNITY TO STRENGTHEN BALANCE SHEET THROUGH CASH GENERATION ($M) CASH GENERATED BY OPERATIONS IN 2005 TOTALED $44.9M February 18, 2006: Veeco repurchased $20M of convertible notes December 31, 2005 June 30, 2006 $248.6 $261.8 Shareholder’s Equity 229.2 209.0 Long Term Debt ($200M conve
Slide 56: 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 57: Appendix
APPENDIX 0724/06 tnveter Presentation Veeco Seace hla Reventon 2
Slide 58: Q206 Reconciliation Table
Q206 RECONCILIATION TABLE 2006 2005 2006 2005 Operating income $5,607 $2,032 $7,246 $177 Adjustments: Amortization expense 3,989 4,026 8,004 8,516 Earnings before interest, income taxes and amortization, excluding certain items ("EBITA") 9,596 6,058 15,250 8,693 Interest expense, net 1,149 1,959 2,5
Slide 59: Q306 Guidance Reconciliation Table
Q306 GUIDANCE RECONCILIATION TABLE High End Low End 3,900 3,900 Amortization expense 16,100 13,900 Earnings before interest, income taxes and amortization, excluding certain items (“EBITA”) 1,500 1,500 Interest expense, net 14,600 12,400 Earnings excluding certain items before income taxes 5,111 4,3
Slide 60: Reconciliation of Operating Income (Loss) GAAP Basis to EBITA
RECONCILIATION OF OPERATING INCOME (LOSS) "GAAP BASIS" to EBITA ADJUSTMENTS Operating income (loss) "GAAP basis" Amortization expense Asset impairment charges Inventory write- offs Merger and restructuring expenses Write-off of deferred charges Purchase accounting adjustments Write-off of purchased
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