verigy … a premier semiconductor test companyfiles.shareholder.com/downloads/vrgy... · verigy: a...

Verigy … a Premier Semiconductor Test Company

Keith BarnesChairman, CEO, and President

Needham 2008 Growth Stock ConferenceJanuary 9, 2008

Verigy Restricted

Investor Relations Presentation / January 2008

Safe Harbor Statement

This webcast or presentation contains certain forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current information and expectations, and involve a number of risks and uncertainties. Actual results may differ materially from those projected in such statements due to various factors, including but not limited to: unforeseen changes in demand for semiconductors and thus for our semiconductor test solutions; our dependence on independent contract manufacturers and sole source suppliers; changes in key customer relationships; and new product introductions by our competitors and/or technological changes that may render our test solutions less competitive. These and other factors that may cause actual results to differ from those projected are discussed in our Quarterly Report on Form 10-Q for the quarter ended October 31, 2007.

We may discuss non-GAAP financial measures including non-GAAP net income and earnings per share. To the extent we discuss any non-GAAP financial measures, you will find the required reconciliation to the most directly comparable GAAP financial measure on our website at www.verigy.com.

Verigy assumes no obligation to update the information in this presentation.

http://www.verigy.com/

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Verigy: A Premier Semiconductor Test Company

A Leader of Advanced Test Systems and Solutions for the SoC and Memory Markets

Cupertino, California• 260 employees• V5000 Series

DevelopmentJapan

• 90 employeesTaiwan• 115 employees

ROW• 335 employees

GermanyGermany Shanghai, China• 180 employees• Manufacturing

(Final System Integration)

CaliforniaCalifornia

ChinaChina

Singapore• Business Center• 160 employees

SingaporeSingapore

Böblingen, Germany• 400 employees• V93000 Series

Development

January 2006 June June 2007October October November

Registered in Singapore

Spun-Off fromAgilent & Completed

IPO

Completed FinalAgilent Share Distribution

Celebrated One Yearas a Public Company

Completed First FullFiscal Year as a

Standalone Company

AnnouncedBoard Approval of Share Buy-Back

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Verigy: Best-in-Class ATE Company

Focused Operating Model

– Generated $1.79 of non-GAAP earnings per share in fiscal 2007– Increased cash and marketable securities by $124 million in fiscal 2007– Low effective tax rate of ~15.5% for fiscal 2007

Improved Profitability

– Improved EPS consistently throughout fiscal 2007– Exceeded earnings guidance every quarter– Attained OpEx target goals earlier than planned

Scalable Platform Strategy

– Protects customer investments– Leverages R&D and support requirements– Enables faster introduction of new capabilities

Diversified Product Portfolio

– Introduced three new solutions on the 93K platform– Announced expansion of V5000 series– Countercyclical markets provided stability

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Memory: Flash

MultiChip Package

System on Chip: System in Package High Speed Memory

Our Business is Semiconductor Test

V5000 Platform

V93000 Platform

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Why Verigy? Delivering Value Through a Single Scalable Architecture

Verigy SupportCustomer focused applications teams

Centers of expertise

Application development centers

Uptime support

Supply chain business development services

Training (Verigy Academy)

Web-based application support

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Pioneering the Single Scalable Platform Concept V93000 - Visionary and Enduring Architecture

Flexible and future-ready to address key technology waves

Highest-Performance Digital Technology

(HP 83000)

V93000

Lowest-Noise Mixed-Signal Technology

(HP 94000)

Highest-Performance RF

(Agilent 84000)

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Port Scale RFConsumer

Mixed-SignalNanoelectronics

Digital

FY’07 New Product Announcements Extending Product Leadership in SOC

Port Scale RF

MB AV8

Pin Scale 400

DC Scale VI32

DC Scale DPS32

Pin Scale HX

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Integra Flex

New

UltraFLEXNew

J750

SapphireNew

NewSZ Automotive

ASL-1/2000

Diamond 10/40New

ASL-3000/RF

Gemini MS Engr Validation

Architecture Consolidation or Just New Platforms Where to Invest R&D?

Fusion CX NewFusion MX

Fusion EXNewFusion HFi

NewFusion LXNew

T2000

6373New

5761New

J750ExNew

6500New

7722New

8571New

6500 6371

RFICDFT 667X

668X

A5X

CAT J973

Tiger

RFx (TMT)

Quartet-OneOctet

ASL-1000SCSeries

Synchro

Fusion HF

NewT6535A

Nextest Magnum

Nextest Maverick

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Inovys: Provide innovative solutions for design debug, failure analysis and yield acceleration. Established in 1999, privately held and venture capital backed.

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Completed Acquisition of Inovys Announced on January 7, 2008

Verigy V93000Engineering and Production Test Platform

Compliments Verigy’s Digital Nanoelectronics Solution for new SoCdevices at advanced technology nodes, 65nm and below.

Installed base synergies at complementary customers representing IDM’s, fabless, outsource assembly and test and foundry companies

Verigy’s and Inovys’ design-for-manufacturing tools have already demonstrated significant time-to-yield value for customers

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SOC Test Market Environment

Key Growth Drivers:• PCs/Laptops• RF “everywhere” at consumer

prices• Consumer Electronics in

emerging economies

SOC ATE TAM CAGR: (3.0)%Verigy SOC ATE SAM CAGR: 4.9%

Source: VLSI Research, Nov., 2007; Verigy Corp. Mktg.

SOC ATE TAM & Verigy SoC SAM2006-2010

(US$B)

0.00

0.50

1.00

1.50

2.00

2.50

3.00

2006 2007 2008 2009 2010

SOC ATE TAM Verigy SOC ATE SAM

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Memory Test Market Environment

Key Growth Drivers:• Memory bit growth• Memory unit growth• Process node shrinks

Memory ATE TAM CAGR: 1.1%Verigy Memory SAM CAGR: 11.5%

Memory ATE TAM & Verigy Memory SAM2006-2010

(US$B)

Source: VLSI Research, Nov., 2007; Verigy Corp. Mktg.

0.00

0.50

1.00

1.50

2.00

2006 2007 2008 2009 2010Memory ATE TAM Verigy Memory ATE SAM

http://images.google.com/imgres?imgurl=http://www.losbignames.com/graphics/marga-movie.png&imgrefurl=http://www.losbignames.com/video/&h=199&w=200&sz=17&hl=en&start=23&sig2=l6Y1oB4OaR0g3F9a1zSm8w&um=1&tbnid=KwT3kMsPnq2INM:&tbnh=103&tbnw=104&ei=jwRKR5KtH6L-gQO1srnWDg&prev=/images?q=mp4+video+filetype:png&start=18&as_st=y&ndsp=18&svnum=10&um=1&hl=en&rls=RNWA,RNWA:2003-35,RNWA:en&sa=N

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Memory Device Market As a Percentage of Overall Market

Source: WSTS, IC Insights, 12/07

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Cellular Handset & Memory Content

176 224128 120

288 240 240

416

580

400

586

1,120

720788

1,560

1,180 1,184

2,270

1,6801,788

3,200

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2011F2010F2009F2008F2007E200620052004

DRAM NOR Flash NAND Flash

Increasing Memory Content in Cellular Phones(Average Mb Content per Phone)

Source: IC Insights, 12/07

Mb

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Focus for FY 2008

Technology Leadership

– Maintain leadership in core strength areas– Expand market share in RF, consumer mixed-signal, and NAND Flash

Supply Chain Management

– Continue transition of SOC manufacturing to Flextronics China– Continue the localization of our supply chain in Asia

Customer Satisfaction

– Improve service & support initiatives– Align R&D programs with customer roadmaps

Shareholder Value

– Improve profitability from cycle-to-cycle– Optimize revised targeted financial model

Financial Highlights

Bob NiklChief Financial Officer

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Fourth Quarter Financial Highlights

Consecutive Quarters of Improved Profitability

– Revenue of $209 million, up 2.5% sequentially– Orders $183 million, down 12% sequentially– Book-to-Bill was 0.88– Gross margin improved by 90 bps to 46.8%– Operating margin improved by 150 bps to 17.4%– Non-GAAP net income of $35 million and EPS of $0.58– GAAP net income of $32 million and EPS of $0.52

– DSO at 46 Days

– Ended fiscal 2007 with $424 million in cash and marketable securities, and no debt

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P&L Highlights

NOTE: Non-GAAP excludes the impact of separation and restructuring costs related to the Company’s spin-off from Agilent, and the change in German tax rate.

Q4’07 Q3’07 Q4’06 FY’07 FY’06

Orders $183M $208M $164M $726M $852M

Revenue $209M $204M $202M $761M $778M

Book-to-Bill 0.88 1.02 0.81 0.95 1.10

Gross Margin % 46.8% 45.9% 45.8% 45.2% 46.6%

Operating Margin % 17.4% 15.9% 16.4% 14.2% 14.6%

EPS (non-GAAP) $0.58 $0.52 $0.52 $1.79 $1.81

EPS (GAAP) $0.52 $0.50 $0.25 $1.61 $0.00

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Q4’07 Q3’07 Q4’06

Cash & Marketable Securities $424M $391M $300M

Accounts Receivable $107M $78M $108M

DSO 46 Days 34 Days 48 days

Inventory $68M $73M $87M

Inventory Days 57 days 62 days 72 days

Total Assets $772M $714M $674M

Cap Ex $1M $2M $6M

Depreciation $4M $3M $3M

Balance Sheet Highlights

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Customer Snapshot Q4 Orders Breakdown

North America 12%

North America12% Asia-

Pacific 86%

Asia- Pacific86%

OSAT/Fabless

69%OSAT/Fabless

69%IDM

31%IDM

31%

Europe2%

Europe2%

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Strength in a Diversified Portfolio

24

12

43

24

14

62

25

19

74

28

43

88

27

29

114

34

40

118

33

63

118

38

72

92

37

79

49

36

78

69

36

76

92

37

49

123

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

SOC

Memory

Service & Support

FY’05 FY’06 FY’07

$79

$100

$118

$159$170

$192

$214$202

$165

$183

$204 $209

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Peer Group Verigy Verigy

Original Target ModelRange Average Recent QTR TTM

Gross Margin % 48% - 56% 51% 47% 45% 45% - 50%

R&D % 14% - 39% 22% 11% 12% 15% - 19%

SG&A % 19% - 22% 21% 18% 19% 20% - 26%

Operating Margin % (13%) - 22% 9% 17% 14% 0% - 15%+

Tax Rate % NM NM 15.5% 15% 12% - 15%

Differentiated Operating Model Peer Comparison (Comparable Quarter)

NOTE: Non-GAAP excludes the impact of separation and restructuring costs related to the Company’s spin-off from Agilent, and the change in German tax rate.

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Validation of our Financial Model GAAP EPS for TTM

$0.22

$0.36

$0.50 $0.52

$1.61

($0.40)

($0.20)

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

$1.60

$1.80

YearQ4Q3Q2Q1

VerigyTeradyneCredenceLTXNextest

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-2.38

1.61

-$2.50

-$2.00

-$1.50

-$1.00

-$0.50

$0.00

$0.50

$1.00

$1.50

$2.00

FY'05 FY'06 FY'07

Improving Profitability from Cycle to Cycle

GAAP EPS $ Per Share

0.00

-2.16

1.79

-$2.50

-$2.00

-$1.50

-$1.00

-$0.50

$0.00

$0.50

$1.00

$1.50

$2.00

FY'05 FY'06 FY'07

1.81

Non-GAAP EPS $ Per Share

NOTE: Non-GAAP excludes the impact of separation and restructuring costs related to the Company’s spin-off from Agilent.

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Verigy A B C D

Revenue Per Employee ($K) Trailing Twelve Months

$489

$289$329

$308$330

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0%

5%

10%

15%

20%

25%

30%

35%

40%

Q3 Q4 Q1 Q2 Q3 Q4 Q1

Verigy Tax Model

FY’06 FY’0736 26 16 12 10 21Tax Rate %

(GAAP)

*FY’08 guidance provided on November 27, 2007

Effective Tax Rate

• Low marginal tax rate

– Singapore domicile– Maintain this tax structure

until 2016 with opportunities for extension

– Not based on the use of NOLS

9-12

FY’08

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Share Repurchase Program Announced November 27, 2007

Requires Board and Shareholder Approval

– Received Board Approval – Use of up to $150M – Repurchase up to 10 percent of Verigy’s outstanding shares– Seek shareholder approval at our Annual Meeting in April 2008

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Market Recognition of Verigy Business Model Stock Price Increases 53%, Market Cap Grows 58%

$1.041B market cap

$1.643B market cap

Verigy’s stock price increased by 53% from December 31, 2006 – December 31, 2007S&P 500 increased approx. 4% over same timeframe

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