Veeco Instruments Inc. · NASDAQ:VECO
Veeco Instruments — Investor Day (September 2021)
51 slides from Veeco Instruments's investor day presentation, Sep 9, 2021
Slide 1: Welcome to Veeco's Analyst Event
Welcome to Veeco’s Analyst Event September 9, 2021
Slide 2: Safe Harbor
Safe Harbor This presentation contains “forward-looking statements”, within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, as amended, that are based on management’s expectations, estimates, projections and assumptions. Words such as “expects,
Slide 3: Agenda
Agenda Introduction Anthony Bencivenga, Head of Investor Relations Background and Strategy Bill Miller, Ph.D., CEO Markets and Technologies Adrian Devasahayam, Ph.D., Sr. VP, Product Organization Go-to-Market Strategy Susan Wilkerson, Sr. VP, Global Customer Operations Financial Insights & Model Joh
Slide 4: Bill Miller, Ph.D.
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Slide 5: Keys to Success
Keys to Success Commitment Culture Building a Customers Employees Winning Team Stakeholders ©2021 All Rights Reserved. 5
Slide 6: Commitment
Commitment Customers Employees Stakeholders ©2021 All Rights Reserved. 6
Slide 7: Culture Survey 2021 vs. 2019
Culture Survey 2021 vs. 2019 Meaningful Improvement in the Following Areas: Clarity of Vision Clarity of Strategic Direction Ability to Innovate and Learn Culture Accountability ©2021 All Rights Reserved. 7
Slide 8: Building a Winning Team
Susan Wilkerson Adrian Devasahayam Peter Porshnev Ajit Paranjpe Global Customer Operations Product Organization Engineering CTO Bill Miller CEO John Kiernan Robert Bradshaw Mark Harris Monica DeMarco CFO CAO Global Operations Quality & Customer Satisfaction Committed to Making a Material Difference
Slide 9: Core Values
Core Values We will always put our CUSTOMERS first We will never compromise on SAFETY We will always demonstrate RESPECT We will never stop IMPROVING We will always be ACCOUNTABLE We will never forget that DIVERSITY & INCLUSION make us stronger ©2021 All Rights Reserved. 9
Slide 10: Veeco Background
Veeco Background Patents ~500 Global provider of Differentiated portfolio of semiconductor capital high-value technology that has equipment that addresses Employees evolved with market trends complex materials challenges >1000 Technology leadership across four key end markets, with 2021 Revenue* opp
Slide 11: Veeco Evolution
Veeco Evolution 1990s & 2000s 2010-2011 2017 2018 2019/2020 and Beyond Exited Commodity LED Business Ion Beam GaN MOCVD for LED Leader in Laser Necessitated a Deposition & Etch of backlighting LCD displays & Annealing and Transformation and a magnetic material for general lighting Advanced Packaging
Slide 12: Multi-Year Transformation & Strategy
Multi-Year Transformation & Strategy 2018 2019 2020 2021 Today and Beyond Phase I Phase II Stabilize Functional structure, de-layer, return to profitability, divest non-core product line We are here Pivot Prioritize R&D in core technologies for the semiconductor and compound semiconductor markets In
Slide 13: Industry Megatrends Driving Veeco Growth
Industry Megatrends Driving Veeco Growth # Evaluations Laser Annealing 5 Mobility and Semiconductor Immersive User Experience Ion Beam 1 High Performance Computing/AI Compound Semiconductor AP Lithography 1 Transformation of the Automotive Industry Wet Processing 1 Data Storage The Cloud MOCVD 2 AI
Slide 14: Compelling Investment Opportunity
Compelling Investment Opportunity Growing Markets Winning team in place with $1.1B to culture of execution $2.2B* Aligned resources and investments with growth markets and technologies: service, Compelling evals and R&D in semi and compound semi Investment Opportunity Engaging with customers to solv
Slide 15: We are well positioned to Make a Material Difference
We are well positioned to Make a Material Difference
Slide 16: Adrian Devasahayam, Ph.D.
Adrian Devasahayam, Ph.D. Sr. VP, Product Organization
Slide 17: Veeco's Addressable Market
Veeco’s Addressable Market VEECO SAM: CAGR* ~16% Veeco SAM projected to grow ~2.5x TAM: CAGR* ~ 6%* faster than total market* 2,500 Semi opportunity expected to grow to 2,000 ~$1B driven by laser annealing and new products* 1,500 Compound Semi opportunity expected to grow 1,000 to ~$800M driven by g
Slide 18: Semiconductor Market Opportunities
Semiconductor Semiconductor Market Opportunities Advanced Packaging ▪ Lithography Graphic courtesy of ▪ Wet Processing Intel Corporation Metal Wiring Layers ▪ Low Resistivity/ High Density Solutions EUV Segment ▪ Mask Blank Deposition Transistor ▪ Laser Annealing © Intel/IEDM 2017 EUV – Extreme Ultr
Slide 19: Semiconductor Market Opportunity
Semiconductor Semiconductor Market Opportunity 1000 Laser Annealing SAM Expansion CAGR ~26%* 800 ~$250M EUV Mask Blank 600 New Ion Beam CAGR ~12%* CAGR ~30%* Product ($M) 400 AP Litho CAGR ~18%* Expanding CAGR ~10%* Existing Product 200 Lines New Ion Beam Product 0 ~$250M* 2020 2025 Projected *Proje
Slide 20: Laser Annealing Opportunity
Semiconductor Laser Annealing Opportunity Annealing technology becoming more Expected ~26% CAGR laser annealing growth driven by: critical as industry moves to Gate all 1. Migration of applications projected from long thermal anneal to millisecond anneal around architecture in logic and 2. Expansion
Slide 21: Laser Annealing Advantage for Advanced Nodes
Semiconductor Laser Annealing Advantage for Advanced Nodes Competitor Veeco Laser Key Characteristics Laser Flash Annealing Annealing Lowest Thermal Budget x x Local area exposure Full wafer exposure Pattern sensitivity to anneal x x Temperature (°C) Veeco laser Competitor Flash anneal laser anneal
Slide 22: Gate Transistor Evolution
Semiconductor Gate Transistor Evolution Gate Architecture* Material* Dwell Time 5nm FinFET SiGe 0.2ms (25% Ge) 3nm FinFET/ SiGe 0.15ms Gate All Around (50% Ge) 2nm Gate All Around SiGe <0.1ms (50% Ge) *Gate architecture and material changes predicted by International Roadmap for Devices and Systems
Slide 23: EUV Mask Blank Opportunity
Semiconductor EUV Mask Blank Opportunity Absorber Substrate Multi-Layer Capping Absorber Absorber Capping Substrate Mask Preparation Deposition Deposition Deposition Etch Multi Layer Substrate Backside Material Veeco Steps Blank ▪ Veeco’s ion beam deposition system optimized for defectivity and unif
Slide 24: Advanced Packaging Opportunity
Semiconductor Advanced Packaging Opportunity Industry Trends Processing Trends Veeco Solutions ▪ Higher I/O density ▪ Shrinking dimensions AP 200/300 Platform ▪ Heterogeneous ▪ Wide range of Photo PTOR at leading IDM, Packaging Resist Thickness Foundries, and OSATs. ▪ Thinner packaging ▪ Higher Wafe
Slide 25: Solving Challenges With Ion Beam Technology
Semiconductor Solving Challenges With Ion Beam Technology Industry Challenge Veeco Solution ▪ Device shrink drives continuous need for materials improvement ▪ Current deposition technologies are at their fundamental limits ▪ New techniques are required to drive the Semi roadmap Specific Resistivity
Slide 26: Compound Semiconductor Opportunity
Compound Semi Compound Semiconductor Opportunity 1,000 Adv. Display (MicroLED) 800 CAGR ~57%* ($M) 600 CAGR ~23%* 400 Power GaN CAGR ~26%* 200 0 5G & Base Business 2020 2025 Projected Base Business** 5G Power GaN Advanced Display (MicroLED) CAGR ~8%* ** Base Business includes epi deposition applicat
Slide 27: Power Market Opportunity
Compound Semi Power Market Opportunity Application Device & Processs Trends Veeco Solution Uniformity ▪ Faster switching speeds Veeco’s Propel® MOCVD ▪ Higher power density Platform for GaN based ▪ Small footprint power devices, RF devices ▪ Low thermal load (consumer device, data center) Compositio
Slide 28: Advanced Display (MicroLED) Opportunity
Compound Semi Advanced Display (MicroLED) Opportunity Application Barrier to Adoption Veeco Solutions ▪ Yield Large Display ▪ Cost Solution for GaAs Red MicroLED Lumina® MOCVD Platform: Industry leading film uniformity for Red mLED on Sapphire (6 inch) Processing Challenges Small Display ▪ Defectivi
Slide 29: Data Storage Opportunity
Data Storage Data Storage Opportunity Magnetic Head Forecast for Hard Disk Drives (millions) (normalized) 3000 3.0 ▪ End market storage growth ~35% CAGR 2500 ▪ Manufacturers expected to balance supply Magnetic Heads and demand for magnetic heads driving 2000 2.0 incremental tool purchases in near te
Slide 30: The future looks bright for Veeco
The future looks bright for Veeco
Slide 31: Susan Wilkerson
Susan Wilkerson Sr. VP, Global Customer Operations
Slide 32: Operating Philosophy – Plan to Win
Operating Philosophy – Plan to Win ▪ Customer trust is #1 ▪ Organizational strength: global, diverse workforce ▪ 35% overall bookings growth; Semi bookings growing more than 100%* ▪ Execution is everything *First half 2021 compared to first half 2020 ©2021 All Rights Reserved. 32
Slide 33: Veeco's Transformational Journey
Veeco’s Transformational Journey Driving growth in semiconductor and compound semiconductor Navigating Challenges: Investments in customer-facing infrastructure COVID-19 Evaluation systems leading to high-volume manufacturing Global Supply Chain End-market diversification & go-to- International Trad
Slide 34: Global Service Solutions (GSS)
Global Service Solutions (GSS) GSS Vision Step 1: Deliver to ‘Semiconductor Standard’ Be our customer’s most trusted supplier Invest for success Spares inventory and people where/when needed GSS Team Install Base Customers Skilled professionals 300 4,000 600 Step 2: Collaborate Closely with Customer
Slide 35: Customer Experience
Customer Experience “…we have been tremendously successful up to this point. We have gotten very strong support from Veeco. I think we are in a really good position to enable LSA technology for several applications.” Engineering Director, Major DRAM Manufacturer “ Veeco's continued commitment to exc
Slide 36: Customer Leadership - Driving Veeco's Strategic Goals
Customer Leadership - Driving Veeco’s Strategic Goals Growth Profitability Culture Relentless focus on GROWTH Outcome driven metrics to Embrace CULTURE living with a plan to achieve deliver PROFITABLE growth Veeco United core values ©2021 All Rights Reserved. 36
Slide 37: We are a united team dedicated to winning our customer's trust
We are a united team dedicated to winning our customer's trust
Slide 38: John Kiernan
CC ee reece eee. MAKING A MATERIAL DIFFFRFENCE
Slide 39: Improving Financial Trends (2019 – 2021) (Non-GAAP)
Improving Financial Trends (2019 – 2021) (Non-GAAP) Revenue^ ($m) Gross Margin (%) ~570 454 43% ~42% 419 39% 2019 2020 2021* 2019 2020 2021* OPEX ($m, %) Diluted EPS($) 37% Toward 1.30 32% 0.86 ~28% 156 144 (0.03) 2019 2020 2021* 2019 2020 2021* Transformation strategy drives improving financial per
Slide 40: Target Revenue Growth (3 - Year)
Target Revenue Growth (3 - 5 Year) Revenue Growth by Market Target Market Breakout (3 - 5 Year) ~$800 ~25 50 - 100 10% 75 - 125 Revenue ($m) 150 - 200 40% 25% $454 2020 Semiconductor Compound Semi Data Storage Scientific & Other 3 - 5 Year Target 25% Semiconductor Compound Semi $m 2020 Data Storage
Slide 41: Non-GAAP Gross Margin Target (3 - Year)
Non-GAAP Gross Margin Target (3 - 5 Year) Gross Margin Drivers Gross Profit ($m) 197 GM% 45% Manufacturing efficiency 43% ~42% Leverage from investments in service infrastructure 2020 2021 3 - 5 Year Target Today’s investments drive future gross margin improvement to 45% • FY 2021 is based on outloo
Slide 42: Non-GAAP Operating Expense Target (3 - Year)
Non-GAAP Operating Expense Target (3 - 5 Year) 32% Operating Expense Initiatives OPEX ($m) OPEX % 144 ~28% 25% Investing in R&D for growth Maintain SG&A controls 2020 2021 3 - 5 Year Target Investments in R&D to drive growth while improving operating expenses as a percent of revenue • FY 2021 is bas
Slide 43: 3 - 5 Year Non-GAAP Target Model
3 - 5 Year Non-GAAP Target Model 2020 3 - 5 Year $ millions Target Revenue 454 800 Gross Margin 43% 45% Operating Expense 32% 25% Operating Income 12% 20% Cash Flow from Operations 43 140 Target model delivers top line growth, improved bottom line and strong cash flow generation • A 2020 reconciliat
Slide 44: Capital Allocation Priorities
Capital Allocation Priorities Priorities Fund organic growth initiatives Growth & Completion of facility expansion Operating De-lever balance sheet Leverage Potential synergistic M&A Return capital to shareholders Improved profitability and cash flow from operations to provide multiple options for c
Slide 45: Team, technology and focus to drive strong long-term financial performance
Team, technology and focus to drive strong long-term financial performance
Slide 46: In Summary…
In Summary… SAM doubling driven by technology Introduced new service programs and megatrend alignment to build & maintain customer trust Evals performing well & laser San Jose expansion annealing wins PTOR at next node project ahead of schedule Extending ion beam technology $800M in revenue & 20% op
Slide 47: Thank you. Please stand by for the Q&A session.
Thank you. Please stand by for the Q&A session.
Slide 48: Reconciliation Tables & Backup
Reconciliation Tables & Backup
Slide 49: Note on Reconciliation Tables
Note on Reconciliation Tables These tables include financial measures adjusted for the impact of certain items; these financial measures are therefore not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). These Non-GAAP financial measures exclude items such as: sh
Slide 50: Supplemental Information—GAAP to Non-GAAP Reconciliation
Supplemental Information—GAAP to Non-GAAP Reconciliation In millions Q1 21 Q2 21 2020 2019 In millions, except per share amounts Q1 21 Q2 21 2020 2019 Net sales $133.7 $146.3 $454.2 $419.3 GAAP Basic weighted average shares 48.6 48.7 48.4 47.5 GAAP gross profit 54.9 60.2 194.3 158.2 GAAP Diluted wei
Slide 51: Acronyms
Acronyms 5G – 5th Generation Wireless Technology LED – Light Emitting Diode AI – Artificial Intelligence mLED – MicroLED AP – Advanced Packaging MOCVD – Metal Organic Chemical Vapor Deposition B/G – Blue/Green ms – millisecond CoO – Cost of Ownership NA – Numerical Aperture Epi – Epitaxial depositio