VECO - Earnings call transcript Q2 2018

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Operator

Good day, and welcome to the Veeco Instruments Second Quarter 2018 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Anthony Bencivenga, Head of Investor Relations. Please go ahead, sir.

Anthony Bencivenga

morning good and you everyone. Thank

accompany the the Joining a Veeco's earnings slide are note on Peeler, presentation to today today's be is and permission. and follow Veeco's me release we copyrighted It cannot CEO; you prepared available encourage or along on rebroadcast slides expressed Instruments Today's the webcast. on by Chairman CFO. call This and Veeco John We recorded our without veeco.com. is to Please call with Sam have being recorded material. website. Veeco is that Maheshwari,

are reports statements. any does any our not such Your Management's makes participation and implies To future results press this disclosures, that to consent and factors Veeco Description quarterly and XX-K Form releases. materially about made. the products, are market risks are the of company's such and report discussed company's including obligation shareholders to of this Business expectations Analysis call XX-Q, number statements about subject differ sections acceptance, actual Discussion Form forward-looking the uncertainties market future report the to conditions, a future, those recording. discusses Form that cause earnings otherwise extent to or current of future in undertake the events These on in and of sales statements forward-looking X-K, from after the could to future date update reflect statements, call the our expectations, on on statements to made reports and or subsequent annual and circumstances on and

call such measures And financial measures, is non-GAAP on his of non-GAAP the I financial over GAAP website. reconciliation During this including to John call, for management address opening that, turn Peeler our measures. remarks. available will performance to with Information may regarding

John R. Peeler

operational performance had We in Thank you, QX. Anthony. good

towards $X.XX and of the $XX came in Non-GAAP operating of income of million. revenue EPS our Our guidance. $XXX were million high at a end

at gross was and in our communicated also half previously the which XX%, margin first expectations. the We above quarter half exceeded guidance closed out first

ratio of projections Ultratech in asset an to as book-to-bill million. period. the in beginning confident manufacturers Blue Between we shipped absorption intangible Also, in Our caused detail. to which that Order market, prospects see delay reiterate we're a X.X MOCVD Sam and was bookings first Even a absorb hundred will by in at XXXX LED for $XXX the recently where were were long-term reactors added explain non-cash half the company. orders revision combined softness XXXX, impairment Ultratech coming a $XXX the charge the business, into they LED and of we for LEDs between market fit remain expect capacity. several our Veeco growth was and let and to we million, record of due required strategic me so, the more with

we rationalize Additionally, continue recently closed activities to synergies generating to We towards capacity initiated steps Singapore-based make for Ultratech manufacturing and integrate as our we Ultratech. manufacturing progress products.

some by We highlighted the of but few Power as receiving we of XXXX and $X in result to call annual and announcements now I'll in a let for Sam Packaging the million turn minutes, for initiative these our our Electronics. financial had markets Memory a in end Advanced over this complete of update. growth a of exciting traction are savings. for Display, opportunities wins growth me quarter to the expect We innovation. Photonics, into the highlighted get throughout They QX that several anticipate customer

Shubham Maheshwari

performance. discussing non-GAAP everyone. financial morning good I Thanks, be Today, our John, will and

detailed and and release press our on results a find non-GAAP between GAAP the can You website. reconciliation in

followed bookings and like then the color address by the to would charge impairment asset provide details. I revenue First, on I'll some

lower QX, from unit reduced projections time of the Fan-out caused products Packaging During than the made well delay as volume by the lower were of Level Wafer Packaging of a incorporate at were acquisition. The electronics revised expected our vendors' which in as by than smartphones Wafer adoption Fan-out projections manufacturers. Ultratech Level those certain other

addition, XX a to delay has in our who LSA In systems. were buy there fabs the been China in of build-out nanometer expected

projections value carrying assess on required books. Taken the together, these the intangible the assets to of company

GAAP charge of made this we of are does Advanced projections in the not we growth rates, non-cash the is of non-GAAP from recorded financial. in excluded of this confident analysis, is nature of comparing to million the financial. run Semi result the charge time the company, impact the day-to-day a acquisition. this this the an $XXX a of as is or outcome it the future at both in as current business As Packaging current the the about Again, Front-End projection liquidity well markets. for Relative and to Since operations

a second Bookings Blank pillar $XXX quarter copper Packaging, In application. Front-End STT-MRAM Packaging multiple MEMS Deposition booked received In Advanced markets systems RF and multiple the supporting booked to tools relating (XX:XX:XX) turning for EUV application. to were application lithography Now booking. for DRAM we & and million. Semi, we Filter Mask Advanced orders we multiple, wafer

our was bookings markets Scientific & MEMS & balanced, Advanced of storage LED Packaging, increase and growth and a were our sharp from both bookings for QX We Display industrial as Veeco. Industrial. and Semi tools. from Blue XX%; Display & backlighting more & Compound Deposition general very particularly & of for purposes Ion XX%; RF XX% declined Industrial drivers scientific these Lighting, orders Filters China orders markets bookings. of was quarter-over-quarter. bookings markets, Semi In was were the in about Semi data lighting strong soft. Beam customers, distribution we Lighting, In XX%; notwithstanding the Compound LED MOCVD for orders total market, are was for summary, experienced Front-End In across Scientific overall optimistic

first sequentially at over was revenue and million; half first XX% Display Lighting, grew over XXXX half million half impressive QX dollars. to roughly $XX XX% second moving to relatively was flat Now revenue, an unchanged & at Semi XXXX. XXXX Compound revenue QX of $XXX our

volume was shipment XX% QX, customers tools nearly revenue. total of of Our in Veeco healthy in which made up China MOCVD to

However, the bookings due to softness in going we decline volume forward, described to China expect earlier. I this

also We tools shipped variety applications of photonics a number of this device for RF and market. a in

million Packaging, RF PSP lithography & us. We devices and and expect systems included at was & MEMS and $XX Semi applications. as photonics for and for shipments revenue quarter-over-quarter included to million which applications. RF Advanced continue quarter STT-MRAM Annealing Industrial growth and was Filter potential down provide to to included RF $XX $XX data dollars Front-End storage revenue Packaging coding optical Advanced this revenue doubled as from Laser for and million, System. nearly Filter Scientific well

world We XX%, up was pick the rest of China million, of to was this was XX%, total at Geographically, scheduled and which expect momentum backlog XX% market, in given XXXX. is ship solid to levels. Ending two-thirds of QX U.S. roughly strength EMEA booking the QX XX%, $XXX in revenue. in

Ion the of other to The Beam includes time one-third ship longer in systems which XXXX. first half scheduled are lead

count EPS guidance $X.XX of were gross XX.X And finally, product highlights was dollars. P&L mix higher warranty areas. XX.X% Non-GAAP on than guidance turning Non-GAAP Now better guidance million for expenses. share was million was taxes to non-GAAP and in due million than better lower to structure favorable and driven gross primarily and OpEx manufacturing margin cost sequentially as Non-GAAP dollars. $X.X of diluted by $XX.X upside margin midpoint, well a as better at shares than QX. well-managed

a recorded Now decrease to the and reduction moving increased backend loaded new value $XXX of to we the at working Long-term from the invest decreased the due with in balance balance lastly, capital QX sheet. short-term in from on to by notes. quarter; driven China-based as million $XXX launch sheet shipments MOCVD the receivable investments. due ready Accounts products; and We $XXX million, representing ended investments, get convertible in the deposits debt rose quarter in cash inventory to carrying million orders customers. customer to was

is in the $XXX previously between million. expenses comes and China in $XX color are the sales are softness Blue XX%, million. operating additional we GAAP half. some and Quarter-over-quarter with and million QX. $XX grow segments Beam is LED China expected revenue per partially diluted expected between million. for operating decline in to million Non-GAAP $X.XX beyond strength and all Non-GAAP $XXX diluted system to of non-GAAP $X between market turning per now decline. between Ion is in is expect per share expected between expected expected Non-GAAP QX to MOCVD expectations guidance. expected to $X.XX improving from million XX% second continue loss by in Overall, XXXX. $X Now, diluted margin Low four is QX and revenue in offset share. EPS $X.XX Systems. diluted and and expected shipments, $X.XX between per margins share margin share in MOCVD line And gross stated in income

the business, pick gross to overall a the up. we from expect for sales businesses our our rest and As of grow increase proportion of company as margin

As tracking at target committed the gross to margin. remain to of revenue of but a exiting We now flat XX% we margin. year see gross QX QX, higher with

with is update. mix back Beyond sustainable John higher a that, of call cost margin and as to a product to XXXX business the QX, turn expected completion for XX% be And better initiatives. of result gross for calendar than I'll reduction

John R. Peeler

to performance up On the and common improvement, path being being weeks alternative be theme materials techniques an Intelligence Law the growth in is well-positioned pace the XXXX. per applications the demand per Sam. Advanced Artificial longer will According where we throughout Wafer Fan-Out foundry performance structures keep Packaging Wet to copper term. year attended is Though help and to TechSearch, from Packaging better The calls, with products. industry Packaging logic memory Packaging for DRAM designs. than opportunity clearly. has requirements an will X is products our this like a achieve Advanced customer and orders Level customers, million this as customers, X multi-tool improve primarily lithography and overcapacity and qualified and in recently fan-out being We topic the situation but order package Autonomous in pillars new prior the million of incorporated their to and our wafers and semiconductor with In with Vehicles. Lithography lithography in mentioned currently interconnects customers a grow are into order ago, and Advanced us for follow received markets. in electrical momentum efficiency. developed, application Veeco wafers alone A adjacent the of we this earnings believe now DRAM increase in by are of are in event chip thermal to a build wafers on for in for year importance Thanks, other its Etch for was Logic working the are from are West performance more SEMICON innovation the currently the to customers and slowing incorporating copper we today market pillars incorporating quite using undertaking. performance systems been market Moore's memory to resonated new enabler Few on

ownership many there Turning over this their market TurboDisc systems market, as mobile our to customers and sold to the uniformity. this LED a where of backlighting from very has LEDs. We lower well market, Lighting, technology. backlighting enabled their to inherent were to Display TV cost improve our Veeco market evolved MOCVD did advantages & make Semiconductor and Compound are in years

XXXX Veeco than well further successfully time. the this ownership. market generation did by Overall, more of of we've more there installed developing dynamics at MOCVD As at transitioned happening are market, cost a same general again reactors a to next lighting reduce XXX Currently, a customers. of market tools over to very two

backlighting commoditized Chinese for began this of becoming with general the pricing We declined. margins. and towards and orders with the First, has addition MOCVD, XXXX gross end the competition to at lighting very see of is market low

RF XG displays. sensing, of and there XD GaN GaN devices Micro photonics devices vehicles, such new as an applications for for Second, emergence electronics and RF power electric LED for is

MOCVD strategy see technology facial differentiated recognition our broad through strategy In this were this pleased their Our to devices. for we phone these on has R&D product XD value applications. has with to delivering a in address pixel-based manufacturers to market portfolio in time, focus some additional sensing, adopt been resulting been emerging and aligned in

address We the this will systems year of be to half in second shipping this demand.

are epi several getting VCSEL process with manufacturers (XX:XX:XX) for volume We to and ready are engaged for production. invest their

Sensing for single-wafer are Lift Photoresist We and is with pixel growth markets, Propel several platform. manufacturing Strip believe GaN also products IDMs with RF GaN large Wet and engaged and and had we with we recent our Power Etch XD Clean for In just traction Metal Off beginning.

is production Etch base happen. as of interrelated Propel products shipped to well Taiwanese we multiple driving and positioned to Our production Power Compound and Compound And beginning we're Wet for mass such The installed when megatrends recently, expanding ramps. applications. capitalize foundries other and RF RF Clean Amplifiers GaN GaN and to and are Semi markets Semi

in have regard (XX:XX:XX). For Front-End in Ultraviolet a at nodes advanced along Lithography emerge below nanometers. competing manufacture at to Data We're transition growth evolves profile been margin an enabler markets for been the and on Semiconductor nodes. gaining EUV as some Semiconductor example, Analytics technology IDMs Semiconductor foundries requires Compound or Intelligence has latest as foundries which the business, these by transition emerging traction will IDMs advanced this enabled time. company all for single better as has in Big are and smartphones and we autonomous a as nodes Compound less region EUV to emerged Extreme beginning computing to megatrends any with finer Artificial vehicles etch. with our have this to technology. These are With XX our excited about reliance stronger utilize and

and Density in is and Lithography. in in mask seems An term. XXXX. guidance France. producing blanks for presenting QX Mask XXXX deposition system Ion EUV XX orders was the European ASML now has near advances Lithography leadership to California Deposition Beam of the Berkeley, deposition reiterated recent LDD happening Beam ordered as the in technology its EUV we between at Ion Our for Low Conference The our Lithography workshop multi-layer expect point tipping in best the defect-free to be Defect shipment EUV We Grenoble, blanks our tools enable demonstrated mask recently by or more and and LDD additional

we XX-nanometer XX-nanometer Melt tools, Regarding shipped an China. for development our LSA system LSA and in production and

However, we a delay China of fab in seeing XX-nanometer are overall the pace build-out.

evaluation leading its is in Our companies annealing we're for X-nanometer at Melt adoption. and about and X-nanometer product two applications optimistic for

of Beam In and optical market drive for revisit industrial we QX, Industrial success. & business. class examples support number let's in by require to driving forecasted maintained Sputtering Turning & their drive and consistently thin additional orders also Ion Storage, our where Ion magnetic sharp applications. increase business manufacturers to density Scientific Industrial saw objectives. film in momentum few to heads; market. systems looking QX. Data a technology are foundational laser Beam for In products: closing, factors our are a our are heads these for disk we continually to second, enabling Scientific Ion our in demand There first; In Beam factors of areal has additional The Veeco. just steps the overall magnetic provided improve the shipping for of our is of overall process our increase. our customers' best Both our is XXXX two These coating

to this all in markets year. growth continue anticipate we four First,

committed we're of second development be are our efforts force, innovation; the and in announcing will Second, new we full to the year. products half in

the take compared and with in half And we stay to questions. Based Third, will the first unifying our operations half to eliminating last, solid Ultratech with Singapore. second of I to first ERP XXXX. on continue we track integration. And margin we're we systems, well. our results, have happy Sam continue improved redundant your on quarter operating to our of manufacturing be After XXXX execute that in now

Operator

go from Sachs. you, take from We Please question can sir. ahead. Thank Goldman Lee first Brian our

Your is open. line

Brian Lee

like quarterly or And here the tracking annual off, whether bit little just of you been respect seems a write-down, guess below if had assessment? assessed to for Thanks taking several for deal. can Sam, with had expectations that's post then and an a the us on guys. give I color first questions. business timing, it the little Ultratech bit more on the here. Hey I that's time

if to point? further So, anything even decision the downticked impairment here had at drive this wondering

Shubham Maheshwari

thanks, So Brian.

acquisition So, would assessed had new in at accounting business, as late of projections made you acquisition June at reasons, acquisition. these for of and projections May, early we anniversary lower what last we – we have the – we time than the the remember around done look the year to we if the – the the and at towards particularly are of

And so, impairment. that what is triggered the

than experienced that However, far the current current we here I the for out-quarters want rates is to higher have say so Ultratech. with that run projections

You Level projections know business delays the adoption of with last smartphones of as kind And because we time various soft the been in that the one year new develop to before Wafer results consideration Ultratech take the of it is have into news; or of shared Packaging. acquisition, are and since not has you at that we off either those experience, based experience. required Fan-Out look of of we

And with to stress an growth done. far. these the business confident projections confident made what are to of the this add that's question? are that so forward about importantly, compared Maybe do we've we But also, Brian's so we about I want annual the what Veeco. have experienced you to we And John, fit more basis, want something going and are business on of very strategic to

John R. Peeler

business I'd Semi Compound just reiterate fits We customers. sell well products Well, that with the are we – Ultratech to ours.

it of us really The do. made the sales a Veeco. the We think are in is be accountants long-term, business, to lot and addition will we seeing synergy a impairment the good over that something

Shubham Maheshwari

Yeah.

the on of way. other is is company or want non-cash thing which completely liquidity any a stress, impact this no that It in So, Brian, the mean the has to I charge. I operations

Brian Lee

Okay.

to Storage – the Ion sounds that of the mentioned you state little like bit a second in of quarterly I And and business your context. results on John, question some the sort in the Beam Data strength related of two here. first Industrial questions that's segment & It of it's Now, the the strength seeing you're related. I one appreciate or color. we've and guess off, bookings. bigger helpful think the time. for seen Scientific I of

you of are for not CapEx is, you this we think moderate that something how I'm Data or should to expect think Storage if here? speak we can some momentum the to of you sure terms where the So in is sustainable cycle players.

John R. Peeler

there Well, the be in various cloud applications. to of the due tremendous there's and is enterprise – amount to stored information growth

So, Storage drives areal density, our working and customers work to more and designs they equipment are in the are heads improve disk need that more store their Data and advanced more their better. changing market more to advanced make they

year. think it'll was So, continue business strong we both in of see and this do particularly healthy a but services. this ahead the more terms be next business products and over It will us for quarter, we

Shubham Maheshwari

add of finding market business, this other I'll Brian, inside this of we've residing the EUV Optical Coatings and same number that business. certain also in had solid Ion good technologies a lot and in technologies, traditionally Beam traction we the are And very of a type market.

are So also in this from it's of generating other kind beginning not us us, we And also. these but areas Storage for type business out from is of to other strength for good pan some just revenues and seeing applications. Data

Brian Lee

Okay, I'll last pass it one on. great. me Maybe from and

how a about might how then there side, utilization – seeing comments given specifically the time thinking across of what maybe in you that LED back require how just in in us customers digestion, your Just you're are on you your you supply/demand Thanks. see for Blue of out terms update pickup to trends know around and capacity think China, can China. much you us on the some balance

John R. Peeler

slightly, come a have down utilizations Well, lot. Okay. not

the certain Tier-Xs heard utilizations in the are high We've in dropped dropped. XXs. And Tier then they Tier-X added there X it's going it's at were some bit I the inventory players. we XXXX, substantially in too. over little over of China, surprising; And market think still in China XXX has a of outside that. have to to reactors And XXXX, or reactors. believe KXXXi-equivalent grow buildup not

product think some going we've into what's pace, market. it's I the So but there. time at continues very out a of Lighting adoption a put lot take to fast to just absorb

Brian Lee

on KXXXi-equivalents to XXX you in your added? be so, to that were Just and John, XXX incremental XXXX XXXX estimate comments; than going units in clarify, more are added

John R. Peeler

Yes, yes.

Brian Lee

guys. Okay. right, All lot thanks a

John R. Peeler

Brian. Thanks,

Operator

from Thank Mok next now take We Edwin Please ahead. go can our from question you. Needham.

Y. Edwin Mok

Hey guys. question. for Thanks taking my

question, capacity? John, LED. on some Micro in expect that So you those first so or the customer do growth that use existing can One, driver be XXXX on it you Micro to Micro you the talked think to GaN specifically do buy and about, LEDs, those LED, to applications of need also base new replace tools new and

John R. Peeler

XXXX important and (XX:XX:XX) be I we and RF, to think will first Photonics announced Power, us. this year We've on growth of all GaN think Alidia GaN on and in Photonics for Power deals Semi Lumentum a GaN do that quarter.

So that we are I and the new we certain make winning will think stronger products applications. have on way us deals in even

growth will So, a lot this our of future from. is come where

I Micro are it's say take going announcements to clearly tools LED, haven't here when really we've ramp think product a off. yet seen shipped LED, that's Micro ready we to that into early but to (XX:XX:XX). But little in

another take may year two. it So or

are requirements this market. tool there think for new I

for tool tools, well. existing really with handled be can LEDs applications requirements but work new there Micro are Some to

think be opportunity. So that growth I will a

Y. Edwin Mok

follow-up just maybe on that. so Yeah, John, a quick

working you've Power think new you or also that platform about that? improvement new for talked it a in Are also LED, tool tool and – for I Photonics on market. it developing you guys a are Micro GaN just of before; on is then

John R. Peeler

product a Micro that basically time right are ready key Yeah, at needs around go. with the in working market as world that roll deliver out the really quite pipeline LEDs a Micro and we'll there to what the and we LEDs and players of been were when few them the will we've have –

Y. Edwin Mok

be and orders LDD the shipped? the a On Is (XX:XX:XX) you Ion you when can expect multi-tool to do products clarify that it?

John R. Peeler

unit quarter. this we one Well, booked additional

ship and the more in tools we expect will in more coming interest XXXX. in quarter. strong bookings Those a have We

growth in so us a of good think they'll I And source give XXXX. there

Shubham Maheshwari

very as you So, imagine that we Edwin, tools are blank only these times. tools, the capability are provider can lead the in pretty These deposition much pretty have blank long complex market. – and mask for

this. pretty activity quite tools And said, long that are John for customer just about excited as have strong these so, But in times. there we lead market And us. do is,

Y. Edwin Mok

very, term That's can Is rate? think Sam, guidance Is guidance then If very to And or a about helpful. rate OpEx lastly, you. long your revenue (XX:XX:XX) implied that be on see, sequentially. new you I run think run should just should give down OpEx about there (XX:XX:XX) for way this some is the that. we

Shubham Maheshwari

sure. Yes. Yeah,

So and you (XX:XX:XX) you (XX:XX:XX) and Difficulty] the continued down performance [Technical working the this for [Technical the been quarter, been look if over of know Difficulty] on our what's on it's last guidance Difficulty] the (XX:XX:XX) the efforts synergies with OpEx steadily happening at acquisition. into is coming [Technical

down. initiatives we completed, the able So bring cost structure to as are these gets

(XX:XX:XX) that trend it continuously but further think be (XX:XX:XX) – but just to and been magnitude this expected completed but you a is it's down here. I already don't definitely a we'll getting I [Technical it's going further them dependent largely underway, upon so little lower. Difficulty] bit, time, coming trended [Technical lower are at have And and so guide to to so Difficulty]

Y. Edwin Mok

all That's trend. great a That's Great. have. you. Thank I Okay.

John R. Peeler

Thanks Edwin.

Shubham Maheshwari

Edwin. Thanks

Operator

you. Thank

from take the from will next We Mark now Please Benchmark Miller go our question Company. ahead.

Mark Miller

NAND. Ultratech front-end that push-outs their other your to related XXXX some reporting on into or your and equipment impacting equipment smartphone businesses? the semiconductor suppliers Is (XX:XX:XX) the are

John R. Peeler

We seen haven't impact. that

was overcapacity weakness a Difficulty] (XX:XX:XX). front-end you Blue performed say So, seen OSATs from we've a would LED well that memory and think we've I I large Packaging But penetrated we the market. situation at orders [Technical know more new and We've received Advanced the other customer. in trend. is in markets. an our haven't

Mark Miller

Ion You in Ion Data I assume? related reported Beam business and its thin that and increase for Is from Etch head film Beam Deposition Storage. sharp

John R. Peeler

[Technical earlier tools and Etch and the Yes. they Yes. And period, developed the drives. think you more Storage the [Technical technology, Beam to (XX:XX:XX) to those areal Difficulty] to use time, to same get Difficulty] blanks. applied to we've we in make hard it disk Beam [Technical do need for customers Data they on same our Ion applications. for (XX:XX:XX) as SST-MRAM steps Deposition the Difficulty] is tools. At And improve market, best technology are EUV deposition other heads used We density, saw our for (XX:XX:XX) their more what more and Ion need mask Ion Beam work

Our Ion doing Optical well. Beam Coatings for actually very Deposition is

I for solid quarter future. think new [Technical well (XX:XX:XX) those the of Difficulty] So a more in expect applications, playing Storage and in we Data

Mark Miller

film these more designs Ion So thin it's Beam for heads, new (XX:XX:XX)? for rather

John R. Peeler

Difficulty] Yeah. They – Lot capability. [Technical so it's more of they'll areal take more density additional (XX:XX:XX), and customers better to enable new designs passes that basically the need enable times have tools.

Mark Miller

Thank you.

John R. Peeler

Mark. Thanks, Yeah.

Operator

are There no this further questions on at time. phones the

to any additional for back or hand to remarks. our closing like would I hosts So,

John R. Peeler

and in (XX:XX:XX) out today on you forward to the [Technical we us Thanks. road. Difficulty] the joining for seeing months you look Thank

Shubham Maheshwari

Thank you.

Operator

call participation. you our ladies for your concludes Thank today This and gentlemen.

You may now disconnect.

Veeco Instruments (VECO) 2 Aug 182018 Q2 Earnings call transcript