master investor slides october 29 2014 -...

Master Investor Slides

October 29 2014

Copyright ©2014 Veeco Instruments Inc. 2

Third Quarter 2014 Highlights

Orders improve 3% to

$107M

Cash and Short Term Investments

$487M

Revenue at $93M

Fourth sequential quarter with a positive book-to-bill ratio

Track record of solid cash management continues

Increase in MOCVD offset by

declines in MBE and Data Storage


P&L Highlights

($M) Q3 13 Q4 13 Q1 14 Q2 14 Q3 14

Revenue 99 73 91 95 93

Gross Profit 30 16 34 31 33

% 31% 21% 37% 32% 35%

SG&A 19 26 21 22 22

R&D 19 21 20 21 20

OPEX* 38 46 41 43 42

% 38% 63% 45% 45% 45%

Adjusted EBITDA (2) (23) 0 (4) (2)

% -2% -32% 0% -4% -2%

GAAP EPS ($0.16) ($0.57) $0.48** (0.39) ($0.35)

Non-GAAP EPS ($0.08) ($0.42) ($0.06) (0.16) ($0.02)

*Excludes amortization, restructuring and asset impairment.

**Q1 2014 GAAP results include $29M gain resulting from reversal of Synos acquisition related contingency accruals

See financial tables for further details.

Synos Purchase 10/1/13


Q3 2014 Bookings and Revenue Highlights and Trends

Q3 13 Q4 13 Q1 14 Q2 14 Q3 14

LED & Solar 75 57 71 77 77

MOCVD 68 50 64 67 71

MBE 7 6 7 10 6

ALD NA 1 0 0 0

Data Storage 24 16 20 18 16

Total 99 73 91 95 93

87%

13% Total

Bookings:

$107M

Revenue

Data Storage

~$14M

LED & Solar

~$93M

82%

18% Total Revenue:

$93M

Bookings

Data Storage

~$16M

LED & Solar

~$77M

Q3 13 Q4 13 Q1 14 Q2 14 Q314

LED & Solar 73 63 88 81 93

MOCVD 66 52 83 75 81

MBE 7 11 5 6 9

ALD NA 0 0 0 3

Data Storage 18 22 15 23 14

Total 91 85 103 104 107


Balance Sheet Highlights

Track Record

of Solid Cash

Management

Continues

($M) Q3 13 Q4 13 Q1 14 Q2 14 Q3 14

Cash & Short-

term

Investments

573 495 483 485 487

Accounts

Receivable 38 24 51 58 62

Inventory 58 60 52 48 47

Accounts

Payable 28 36 28 28 26

($M) Q3 13 Q4 13 Q1 14 Q2 14 Q3 14

DSO 34 29 50 55 59

DOI 76 95 83 69 70

DPO 37 57 45 39 39

Synos Purchase 10/1/13


Q4 2014 Guidance

Q4 2014

Orders Higher than Q3 2014

Revenue $107.5M +/- $7.5M

Gross Margins 35% +/- 1%

OPEX* $41M +/- $1M

GAAP EPS $(0.19) +/- $0.06

Adjusted EBITDA $4.2M +/- $2.5M

Non-GAAP EPS $0.03 +/- $0.06

Orders on Track to Grow in 2H 2014

Compared with 1H 2014 *Excludes Amortization, Restructuring and Asset Impairment

Copyright ©2013 Veeco Instruments Inc.

CONFIDENTIAL

7

On-Track for Profitable Growth in 2015

Goal to be EBITDA Profitable in Every Quarter of 2015

Develop and launch game changing new products

EPIK700 and FAST-ALD to drive growth in 2015

GM Goal >40%

Streamlining initiatives to improve profitability…OPEX below $40M by Q1’15

Improve customers’ CoO and our gross margins

Drive process improvement initiatives and lower expenses


LED Backlighting Demand Remains Strong

Trends favoring LED:

Sources: DisplaySearch, IHS Research, Digitimes Forecast Reports

iPhone

shipments

200M by 2015

UHD TV sales

expected to double

to 32M in 2015 from 13.5M in

2014…14% of TV

market by 2015

Apple iPhone 6 and 6+

Larger screens =

more LEDs

Wearables gain traction

• Unit shipments to grow

from 54M in 2014 to

800M in 2023

• LED backlighting

currently featured in

certain devices

Utilization rates remain high overall, adjusting for seasonality


2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

LED TV 1500 MOCVD

LED Lighting Adoption is Accelerating

LED Lighting projected to grow at 35% CAGR from 2010 to 2020

LE

D D

em

and b

y A

rea (

B m

m2)

Cellphone 250 MOCVD

LED Lighting Thousands of MOCVD

LED Lighting

CAGR 35%

LED TV

Wall Street and Veeco Estimates


Veeco Innovation Helped Accelerate LED Bulb to the “Teens Price”

Veeco Epi Cost reduction is 2X faster than U.S. DOE Forecast (‘10-’12)

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

No

rma

lize

d E

pi C

ost ($

/m

.cm

2)

2010 2012 2015 2020

$50 LED bulb Price

$13

$23

$6 $5

Throughput

Yield (HP)

Automation

Cluster Yield

Next Gen

Next Gen

U.S. Dept of Energy projected bulb cost

Actual bulb cost Reduction of Epi cost from Veeco innovations


Lighting Market Demand Will End LED Oversupply

LE

D d

em

and

Supply

Chinese subsidy

Cellphone Backlight Lighting

Phase 1:

Outdoor

(government

subsidy)

Phase 2:

Industrial

Commercial

(ROI)

Phase 3:

Residential

(bulb cost)

Now

Over capacity cross-over

Residential demand

pulled-in

Global Number of Sockets as of 2013


LED Lighting Demand Accelerating

Source: IHS Research

0

500

1000

1500

2000

2500

3000

3500

4000

2012 2013 2014 2015 2016 2017 2018 2019 2020

Japan

NorthAmerica

WesternEurope

China

Rest ofEMEA

Rest ofAPAC

LatinAmerica

India

LE

D L

am

p S

hip

me

nts

(in

M u

nits)

Nearly

40% CAGR

LED Lighting Market Value up 25% to $5B in 2014

8%

8%

6%

12%

16%

36%

13%

1%

Architectural

Homes

Industry

Office

Retail & Hospitality

Retrofit

Outdoor

Other


Early Innings of Big Secular LED Lighting Trend

Some Underutilized

Equipment Still

Coming On-line

LED Customer

Consolidation

Customers Remain

Cautious

Install Base Yield

Improvements Maxing

Out

Tier 1 Operating Close to

Maximum Capacity…

Starting to Invest

LED Adoption

Accelerating

Incandescent Phase-Outs

Occurring Globally

Better LED Customer

Profitability

LED Demand Strong

for TV and Lighting


Asian LED Customers Benefitting from Growth in Mid-Power Chips

0

20

40

60

80

100

120

140

160

180

2013 2014 2015 2016 2017 2018

High power LED

Mid-power LED

Standard LED

LE

D S

hip

me

nts

(in

B U

nits)

Price vs. Performance

Advantage for Taiwan

& China LED Chip Makers

Source LEDInside

Mid-Power Forecasted to be

50% of LED Lighting by 2018


MOCVD Industry Leader

24 % 29 %

44 %

62% 51%

2007 2008 2009 2010 2011 2012

Competitive Advantage: Lowest CoO and Superior Customer Connectivity

Note: Estimated comparative market share Veeco and Aixtron only

K465i and MaxBright are

#1 Selling MOCVD Systems with

the Industry’s Highest Productivity

Veeco

Market Share

2013 2014

63%


EPIK700: Highest Productivity and Lowest Cost of Ownership MOCVD System

• Highest productivity platform

with up to 20% improved CoO

compared to previous

generations

• Designed for best-in-class

uniformity which provides

greater wafer yield

• Fastest to production with easy

process transfer

• Most efficient capital

investment for maximum

profitability

EPIK700 Surpasses Competition: More Good LEDs for Less Money


Key innovations:

MaxBright

EPIK700 31x4”

12x6”

EPIK700 Maximizes Productivity

Larger Capacity

Advanced Automation

Improved Serviceability

AcuRampTM Advanced Temperature Control


Key innovations:

MaxBright

EPIK700

Best-in-Class Uniformity with Key Innovations

IsoFlangeTM Technology Improved flow uniformity

TruHeatTM Technology Improved temperature uniformity


EPIK700 Roll-Out Status

In Production

at Beta

Customers

Demo Lab

Active

Currently Plan to

Ship Multiple

EPIK700s before

end of 2014

In Commercial

Discussions with

many Customers

“EPIK’s performance, reliability and production readiness, as well as the support we received… fully met our high manufacturing standards. The EPIK700’s cost of ownership advantage will help reduce our cost per wafer…a highly attractive platform for our future capacity expansions.”

- Dr. MJ Jou, President


Power Electronics: New Growth Opportunity for MOCVD

Notes: 1) Yole Nov 2011, 2) IMS Research Feb 2012

Ga

N P

ow

er

De

vic

e M

ark

et2

2011 2012 2013 2015 2018 2021

Power Electronics device market continues to grow

GaN-based power devices offer higher efficiency,

switching speed and lower power consumption

Veeco MOCVD is positioned at key customer sites

around the globe to support this high growth

segment

1


Veeco ALD: 10x Faster Than Traditional ALD and Scaled With Virtually No Limits

A new generation of ALD:

Fast deposition

Low temperature

Large area format

Inflection Point for Flexible OLED

Production Manufacturing Ramp


Mobile OLED Display Technology Transition

Rigid Unbreakable Curved Bendable Foldable

Flexible Product Introductions Have Begun


1

Aligning FAST-ALD Technology for Near and Longer-Term Market Growth Opportunities

Engaged with Key

Customer on 6G-H

Process

Development;

2015 Ramp

Opportunity

OLED Mobile Encapsulation

$300-500M TAM

Sell 3.5G FAST-

ALD System to

OLED Panel

Makers

Lab Tool On-Line

by Q1’15

2

OLED Display Encapsulation

>$200M TAM

3

Market

Validation

for New

Applications

Semiconductor & Other

>$200M TAM


Diversifying our MBE Business from Production to Research

Capitalizing on our

Leadership MBE Position

To Increase Our Market

Share in R&D

Veeco GEN2000

on Cover


GENxplor MBE Driving Increased R&D Market Share

System Generating

Worldwide Interest for

Cutting Edge Research

Customer engagements span multiple

research fields including:

IR detectors, laser diodes, novel HEMTs,

graphene, solar, high- temp superconductors, UV

LEDs, and thermo electrics

Data Storage


Data Storage Business: More than Just Hard Drives

End Market Blended

CAGR ~20%

High Performance Optical Coatings

MEMS & Magnetic Sensors

*Seagate Technology

End Market

CAGR ~ 5-10%

PVD CVD DLC IBD IBE Lap

& Dice

From 1960- 2010

approximately 1 billion

terabytes of data was stored.

In 2012, 1 billion terabytes

will be stored.*

EUV Masks


Hard Disk Drives Will Continue to Dominate Storage

2012

3,500

0 2020

It took Seagate 29

years to reach their

first billion hard

drives… and only

four years to

reach their

second billion

Source: Western Digital

Exa

byte

Sh

ipm

en

ts

Over 85% of

exabytes in 2020 will

be stored on HDDs

2016

Client PC

Personal Consumer Electronics

Cloud

Smart Phones/ Tablets

Cloud SSD

Client SSD


Veeco IBD Required for EUV Mask Roadmap

• $300B semiconductor

market investing heavily

in EUV to solve

lithography challenges

• Defect-free photomasks

are a technical

roadblock

• We have 100% market

share in Ion Beam

Deposition for this

application

Currently engaged with key

industry players on next-gen

equipment solutions


Global Trends Driving Veeco’s MEMS Opportunity

• We are the largest

supplier of thin film

magnetics process

equipment

• Over 800 etch and

deposition systems

installed worldwide

• Strong technical team

and dedicated

applications lab

Source: Semico Research Corp. Dec 2012

$B

illi

on

s o

f d

oll

ars

$20

2005 2015

MEMS Revenue by Application

Automotive

Smartphones

Displays

$0

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