VECO - Earnings call transcript Q1 2019

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Operator

Good day, everyone, and welcome to the Veeco Instruments Inc. corporate hosted Q1 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Anthony Bencivenga. Please go ahead, sir.

Anthony Bencivenga

afternoon, good and you, everyone. Thank

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

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

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

William Miller

$XXX to afternoon, million. range. in the million, executed and were results thank our QX Thank midpoint of guided call. and and Good you, QX, EUV our storage data for $XXX above joining and well has the bookings Anthony. products, you grown led our by everyone, Veeco were backlog

LED quarter $XX the portion Data a behind overall largely our us, at was storage stabilized large for revenue the With revenue. million. commodity of business revenues our have

multiple and both packaging lithography also advanced shipped customers. annealing laser to systems We

margin operating loss $X.X quarter the $XXX million, Non-GAAP income came gross in of investments. ended was EPS non-GAAP We our million at Our non-GAAP XX.X%. a a short-term of cash was and in and $X.XX. loss with

We is on I'll returning and our and are gross focused our restoring by update will the margins managing tech to equipment, improving softness on there at look impacting provide Smartphone growth automotive and provide downturns and an sales prices markets growth details carefully time, across more this growth have on At top When memory sector. few declined capital influencing and macro our the Sam a environment markets. opportunities, cyclical slowed, are line profitability we has expenses. then the financials. also

sales, belief by slowdowns XG fab In the in brought forecasted cyclical the temporary fact, in the equipment on effect to between to spending wafer GPUs as equipment while industry. cloud XX%. down run, cycle anywhere these such refresh a this our computing, It is have year and trends provide capital longer mega the about improvements is tailwinds that mid-teens

these to investments technology our aligned have We mega trends.

industry engaged to upturn. expect solve have in challenges to benefit We our and with materials tough the customers next the

lithography. You laser Deposition; Beam using EUV with mask will for semiconductor using advanced MOCVD; and Ion growth advanced blanks our are: packaging X VCSEL front-end manufacturing areas recall anneal; focus

driver which has been as in X-nanometer to they've are in proof in backlog TSMC next lithography. opportunity, These ASML XXXX EUV mask have system-on-chips turn And development production Accordingly, trends, ship low addition Ion such they they indicated announced computing samples. EUV. lithography has customer now. customers Likewise, prior which XX cloud to And as high-performance on the are blank is The are for Law, DRAM systems and that to which existing mentioned drivers Deposition happening EUV enables artificial extremely and are of systems. for a EUV track on in EUV generation, calls recently XX X-nanometer EUV interest Moore's mask also utilizes completed are of intelligence, and at XXXX. computing We manufacture computing blanks points mask Beam seeing all process, high-performance building blank released well. design which earnings EUV Looking they we X-nanometer designs risk of in lithography. for for systems, are EUV logic EUV their defect Samsung infrastructure, announced their customers, applications. EUV their has required ready have in another are express

market received million opportunity $XX and I'm the During shipped is million of we to Xth $XX QX, order we our the first believe production between per capacity, We systems for that and announce in April, planned. happy year. as these

we with working are closely In as make map to We this our laser and conducting to evolve. good customers continue annealing, continues with progress world technology discussions very our customers.

experiencing shipped we dual-laser million. trends. trends low architecture step driving same that and laser EUV nodes. We systems for consistent control to unique additional leading advanced a at foundry our a are These or exceptional with stress. to The spike very industry demand we node. are process is leverages anneal driving quarter, the market thermal temperature believe offer this potential laser is LSA The are are important Veeco's increasingly becoming lithography $XXX today's advanced about at process annealing. During LSA advantages

our We requirements update to on continue potential an the VCSEL market. for as now And customers our MOCVD future as well applications. work applied technology current production with to

smartphone was been market application. facilities. have the enhancing TurboDisc is stacks. superior product's their that In performance, and new our multiple beta are our over VCSEL facial environment, advantage customers know, the our produce absorbing to believe we with recognition our an we This we you today have currently capacity epitaxial the has product As high-performance tool platform validated our for added We working place in to recently competition.

demand sensors automotive of is per LIDAR million $XXX applications million and will believe market additional time. $XXX to opportunity as potential we such However, generate for a year. that XD some world-facing This sensing

growth source advanced Another for Veeco of is packaging.

As of consumer techniques by utilizing integrate advanced components and device responding proximity. are power in performance, manufacturers for in packaging logic higher demand one integration packaging device. been that memory example close approach, to system performance is the years has improves this in well-publicized wafer-level consumption. packaged This An mobile In Apple advanced devices. application assembled processor are together and in using their very

many lithography as wafer-level such flip-chip play and packaging advanced advanced role fan-out packaging, copper fan-in applications wafer-level systems Our an packaging interconnects packaging in pillar in important packages.

GPU We our variety both traction at with system manufacturing. have had for a applications, lithography including of recent sets

order time million between is come and investments continue scrutinized. application market $XX when on copper recent with capacity at had In throughout we pillar priorities also summary, This manufacturer. high-bandwidth X shipment for the million memory memory have in a a annually. be leading activity being We repeat and focused technology These $XXX XXXX. has to memory carefully somewhere to potential remain

The first is innovation.

toughest applications products in customers invest to their solve new our to engineering materials help and challenges. continue We

anneal, in to profitability. growth with on continue packaging to And advanced we accelerating penetrating VCSEL laser lastly, lithography. The new mask manufacturing our to returning second EUV front-end blanks, and work are and markets is semiconductor focused

our for over doing With expenses. We this and margins by Sam to turn details financials. on gross our are managing I'll that, it further improving the

Shubham Maheshwari

Bill, will our financial discussing everyone. non-GAAP good afternoon, Thanks, and I performance. be

equipment update the administrative and website. on then providing also and find I'll an the In practice, GAAP industry can XXXX, in to discontinue our You the detailed in bookings reconciliation start results. non-GAAP line financials. we our with broader quarterly and beginning results semiconductor between press with release will move

as may most business volatile reliable bookings performance. indicator We of can serve have years found the not the over that be and near-term

We million, data said, continue XXXX. rest bookings by of to Scientific for orders, information backlog and customers. were saw & million. our end strength the will, storage provide however, the We QX quarter at $XXX driven that the $XXX Industrial in bookings of was a With quarterly

of and the systems LED sold semi mentioned. our market strength GPUs multiple mask lighting, sold revenue now was to by multiple advanced order, and multiple for system Front-end region, for from and semi our of midpoint, And details. $XX.X We by overall revenue services advanced LED EUV million. world, above guidance an to business. Rest with was China turning in Revenue the also lithography received display for no was another revenue, system as packaging XX% of of quarter of was LSA Industrial U.S. XX% blank Scientific Bill a driven driven revenue, driven XX%. was revenue. contribution as high-bandwidth other storage Korea as leading as the This orders our was XX% as beam By total ion customers. memory lithography foundry EMEA overall overall customers several applications. sputtering and commodity up up XX% and node. market Advanced by packaging, revenue, compound includes AP which driven MEMS data sales by was as well and equipment Japan, of systems filter market systems RF overall Taiwan optical XX% XX% our shipments was revenue, to made well expected. of made & to the for us, shipped almost XX%

highlighted have of forward. small expect going a overall remain China we before, we As our revenue to portion

for guidance, was towards tighter was quarter the driven QX. of $XX of Now results OpEx XX.X% to operating end non-GAAP for turning Gross controls. margin our higher by million. spending the

efforts diluted cost $X.X Our shares. loss expense communicated. million, the count income quarter earlier a previously was of quarter share and a for of a $X.X EPS million. was achieved $X.XX XX on a Net million were reduction of loss than Tax was

Now balance the net Cash working a in million. with million, due short-term biannual investments, held $XX highlights. million negative $XX investments, from were quarter was and operations debt sheet and offshore. interest $X.X million We non-GAAP payment which primarily to flow of moving and ended capital to of loss flow $XXX cash the cash

in receivable during expect positive QX, cash million the to incoming QX. payables generate the month of to cash Accounts quarter, balance third and decelerated. we received accounts increased profile stronger Although declined dropped $XX inventory to shipment million due as $XX the to in

lastly, As $XXX quarter carrying on debt declined to was sheet representing notes. $X.X the the a during value million. And the was $XXX Long-term balance $XXX CapEx our million. at million, result, in million recorded convertible of inventory

$XX sales million share. EPS loss is is income million is and Gross around GAAP At expected tracking of QX. QX above $XXX of beyond expected between revenue And $X to this of loss guidance, QX $XX EPS between expected a and expected $X.XX million. non-GAAP, Non-GAAP per specifically OpEx is $X now backlog our XX%. margin loss is QX GAAP turning diluted XX% income diluted million. income expected additional expected which based per is between and time of and mentioned. and unless between Now Operating is color visibility, and QX. is share. $X.XX $X.XX between some $X.XX a we for current see on million.

product improving We also further favorable gross our due see mix. margins to

For line half half XX%. of see over we top improve the by the XXXX, roughly second first

of will be this with continue margin target lines. the We XX% the happy to please questions. to end I that, Operator, year. open gross And and your of Bill by take

Operator

[Operator Sachs. Instructions]. with from our Goldman Lee take We'll first question Brian

Brian Lee

field. like that record? field you TAM on as the here, is areas, four of the of beta tool still that and Can how turning related to have Maybe come? to looks the It that, focus close I into Bill, have guess, how $XXX the evals on the tools update totals -- much And an that in to in already tool outlined you is much you play you million. agreements are with POs? in ultimately some those then talk on as How of it much and you that

William Miller

Brian. Sure,

at top to Let me million start with the to $XX that of kind the market. We kind be million of see in $XX EUV.

the that We in today. are leader space

QX. we hitting so to start that And financials our expect

in would in the some that really player and we position. we share in anneal that there, today. end, player are that's So we are Laser currently are and a good be market. front gaining incremental, a But

that's do $XXX million kind of we kind size VCSEL, where not to play Moving of today. the opportunity

we've that We're tool results a lab. have for getting this we application. in our mentioned, developed I as so, And great

near a to working We're the are customer in landing beta right to term. close done now and multiple expect We with of here. that them be here

do that opportunity, in we of the developing would are opportunity. to kind market -- maintain a we and And leading product be strong position. a advanced that lithography in incremental in So that share, packaging have then

incremental compete and advanced be So I would characterize packaging and is it EUV be would as incremental, LSA VCSEL in markets would existing that strong, today. and we

Brian Lee

Okay. That's helpful. then... And

Shubham Maheshwari

that very the here to is I'd market in data Brian, are strong also player opportunities, storage. least growing. a we like and And at that also add beyond strong, it's growth very

Brian Lee

color, any of number and specifying if then provide you the of throw of the any EUV, And guess is in Maybe on just the I opportunity you just here. Okay. talked the with on think granularity there set? but time engagements know have on Great. guys had TAM housekeeping. the updates it -- to there you're Sam. security you this and that. thoughts across scale terms is that of and last quarter, based additional I can How customer QX I don't VCSEL what in on. that actually appreciate additional it, breach I pass missed around of about you related any cost line, I'll kind applicable sort

William Miller

jump Okay. VCSEL on I'll your in question.

and is tool fast months as long those probably revenue beta to the as that typically, tool XX So a placing from first X having as -- maybe as time months. of

somewhere middle And the frame to meaningful maybe time have a about revenue have probably meaningful be tool. in would first revenue that months the as similar -- revenue X to it's So well. have on

Shubham Maheshwari

And question the security the I'll Okay. on breach. take Brian,

So that public frame. in February something a -- filing or had in like that we time And we completed that. investigation largely X-K

we time. but any in with largely or is that. to interested cost authorities That the behind cooperating this it the is further, of government us. at completed cost be investigate investigative are time at this behind we have time, largely this So might at us that just And

Operator

with We'll move Steelhead next Duley to Investments. David

David Duley

had a couple. I

be the half from first up talked you revenue as mentioned XX% would -- goes. as far second half the You

about from talk a XX% areas that you which Just contribute to perspective, could expect you macro to growth?

William Miller

Sure. storage our transitions Sam with nanometers. seeing as anneal HAMR exposure cloud, and X the in at in we I in we some strengths previously MAMR. the exposure then, With spike have with mask have blank third as some laser spoke well We're technology particularly logic, data technology tool, transitions. about, our just do EUV, And tool mentioned, as in with

And progressing seems it's so like well. that really

know, So growth a well, you we in don't the big so. I those think are as memory And market have of exposure as areas. the lot

David Duley

opportunities mentioned been And you've tools foundry some It's logic since customer there, customers beyond could business, customer. that you why the you're into at about the do what Perhaps -- expect I you've far nodes? and advanced reinserted talk shipping a and it LSA advanced you that Okay. is as add other or potential done as first that time, major nodes. you think, here been the

William Miller

Sure, David.

customers. to current our in more at was, be at we able system, engaged and these win applications as I as And XX been with think the is to got last this And are our nanometers, as now win And the our foot that customer Ultratech new have liked seems well. X-nanometer we've the well penetrate working our at very is customers dual-laser temperature working we to say, seeing time. to stability by we're at since advanced than ability I'd beyond. what we control door, -- fine to had well are nodes really and and more one with --

we it's of position So kind a have. beachhead

Shubham Maheshwari

to as would of add won David, node the X-nanometer the I then also also going record at major that to and customer like we well. tool following the be we're node, development on for this

David Duley

Okay. That's good hear. to

others. investments this a there's talking just in and as and just maps do the size goes, product see as like and and overall and far their wondering such that market. acceleration I'm as lot advanced this Intel it you Now making of seems IDMs And area TSMC packaging OSATs in road are of incremental an Samsung about

I which time. is been what some was think mentioned market it's like, I to recollect for roughly, $XXX the seem million, you

help to as maybe what seeing So out. happen the expect far to what this customer as market frame just you and understand broadening us you're base

William Miller

Sure.

high-bandwidth is smartphone say, would But you're driven applications strongly time. right graphic new period I headwinds units come certainly, seeing with demand on the memory. some applications OSATs, applications big at we're different DRAM really we as demand, So that as with wins been last in from are us. in by which with seeing it's well though of historically, And smartphone definitely processor

also then schemes. other integration that own you many and of their -- these various customers So have mentioned

So demand, are it a smartphone big applications of their see being developed piece the that does we the current is new to position. growing, of a current but kind the seem would continue business there but this that in certainly, for show even long-term,

David Duley

past, just customers at multiple in X large nanometers customer given there purchased foundry than has the rather an the rekindling X X And expected tools and X? that customers of that from or X there's demand is that

William Miller

Good into this here. too their here -- much question. business I at of a demand, is -- driven specifics maybe which or by specific soft by lot to But driven time. get don't smartphone want too is

business And as so soft them their our is with -- well.

Operator

next [Operator Northland. Instructions]. And move to with we'll Gus Richard

Auguste Richard

is or business MOCVD mostly gallium the On are applications? other remains there what nitride still

William Miller

Yes. They're as opportunities. well as gallium phosphide arsenic both nitride

market developing in so the today. strong arsenic we is a the have compete $XXX an don't really we're tool market tool And photonics to that position for phosphide million that

of that GaN would And RFID would as LEDs power be like; be edge-emitting power will then red, for greater well gigahertz yellow for the the RF applications. millimeter VCSELs; GaN-on-Silicon road, electronics. type down microLED. opportunities as It -- include electronics So GaN. orange, in in lasers; than us the and opportunity And really XX for specialty kind wave

Auguste Richard

still all? before development folks opportunity microLED, going And some some you it. Is revenue Got at on. about for other that away a talking being I've recently least heard ways

William Miller

Yes.

We challenges. the and space, with through in display technical are players are they many the of engaged working

et growth, like new system-level also for LEDs, MOCVD driving integration us. good But cetera. are transferring performance which challenges epitaxial in Some are is challenges requirement of those there the technical our

first see think, of say but of, displays, amount are mini of I think, going still, a some adoption area. a ongoing larger to But so, fair you're true microLED activity years size there's still LEDs. few that LEDs, out kind in I And

Auguste Richard

then And anybody MRAM, noticed think has on this right. don't at point. reached seeing development level of I All I activity. increased production

it in you're your the prepared activity I You mention just sort MRAM and didn't of was seeing in market. comments, what wondering

William Miller

Yes.

we partner orders all a how MRAM. tools to kind those are that number position once the players working are in develop their working a the a have And applications. we're in and we here, at of of materialize with So see seeded customers

Auguste Richard

it. Got

that Okay. to do might when revenue? But you still contribute think

William Miller

-- So a opposed actually we're we're supplying multimillion-dollar as component, the a in key MRAM, -- in an selling component a complete this expensive but to system, the -- system. to component key

So is will not tool. business, as a about growth. it's it revenue But entire big but top a selling be I line the I be to significant not want think really just clear as the that. good

Shubham Maheshwari

like equipment a I'd along like all along Bill to the with we Gus, a our provide and position capital MRAM Between side. just partner, partner, partner, add Bill is with we they tool said. critical on full said are the and us provide a that, what subassembly, in pull the

we together way and our But very for market. the time in position participating we tick here go wait production. in is the this into we So over are strong, industry up things as to that's

Operator

Miller Benchmark Mark to with next move Company. We'll The

Mark Miller

your about talk to wanted just guidance. I

be at gross least You're -- indicating margins. is that Is believe -- correct? non-GAAP for your goal you fourth the quarter or XX% you'll

Shubham Maheshwari

Yes. Mark. true, That's

Mark Miller

-- also I excuse data me? about talk to want

Shubham Maheshwari

Mark. ahead, Go No.

Mark Miller

out last indicated and you sales assume Data storage, spindles be laptop that's that which -- growing. quarter, lower. considerably last came their assume it's desktop, because their said Nidec motor week strong will lower. I was I

drives, actually compensate nearline growth. do up? picking that have cloud and So you're the the more When see anticipating to provide platters, you which or

William Miller

business been up very the drive. quarters question, from our make actually some order of to the of to the is We've And an number good equipment Yes, picking for we've saying. used standpoint of as our all making -- Mark. seen steps head of meet

So number not drive increasing, of total is heads heads only increasing. as also actually drives are are per decreasing, in

to to well that make I closely is our very mentioned, a our we're with customers and transitions business technology doing MAMR, with and So and exposed, we're success. also there, HAMR as working

Mark Miller

in used specifically I And for hard leads deposition. bias your the know reader tools are

For the structures there is HAMR-MAMR, what the those for the application for writer?

William Miller

are steps, of There similar types different actually just requirements.

Mark Miller

correct? tool. Those -- are a that Is deposition it's than rather edge deposition

William Miller

Yes.

Operator

to [Operator next Instructions]. We'll with Patrick move Ho Stifel.

Patrick Ho

broadened is comments to could this Or customer additional this maybe the to The Are regarding pushing with Bill, of shipments? the your shipments color as drove applications same nanometers. this part of little these aggressively your increased these LSA more shipments a you X that application? additional if add aggressive past push additional some reach and you on for quarter. industry have

William Miller

are we're very But said, gain Yes, Yes, but unfortunately, shipping, one at if are at to really, application, will. at that's our a applications, next question. nodes as with more still point. we our working it's this great that we certainly, beachhead to I broaden particular you customers the closely

Patrick Ho

That's follow-up LSA Maybe that as helpful. a question. Great. onto

this advanced do but eventually potential Given to nodes? additional valuations X how industry wins the are have at these foundry X nanometers, that for into win push wins towards customers X, had on made continues foundry, other logic Is you've you given this you the entry one -- key given back you and feel -- itself also customer? are going this your the there opportunities there with

William Miller

Yes.

we're and -- product is demo a for as we're significant next-generation very And proof us, on programs also our for point customers. tool, our certainly and there programs well. I strong working demo think generally doing it's interest other with

I here. think pretty position So we're in a strong

Shubham Maheshwari

for Yes. also were or edge trailing activity the time see beginning application pick beginning see some buying up like tool. are I'd to now that that we see foundries add to And activity for that China we to to this start. Patrick, expected

China, time, good this trailing investors thing the at just But particularly this and a activity. same tool. the the next-gen about to the -- of tool of about terms So from seeing feeling on said want remind also bit advanced Bill nodes, good we edge, in leading edge, about are we where then, are

Patrick Ho

trends specifically going gross margin from forward. for Final Sam, Great. maybe you on the question me,

of as of some MOCVD way, the traditional at variable, has I mix out always and But forward? me, on you is decline look a the your the, product absorption excuse and I the type influence. basis, revenue know margins business going gross going-forward With conventional of biggest guess,

Shubham Maheshwari

good question, Yes, Patrick.

Of here. forward, of X play are that into things a coming X But or always course, here. number factors going are there play

the also shipping we ship and products begin which have to tool data EUV with storage, for backlog. we obviously, First,

So those all are beneficial product mix.

So forward. is beneficial the mix going

the we with Secondly, deemphasizing but the of some out. LED, extra have that time, that through a at declined of commodity worked this revenue the cost, all created lot of that cost

beneficial So mix. a we cost then, in playing also although, reduction product margin, smaller is a the than here. gross way are growth impact thirdly, at the And to looking

the So X absorption it as better look quarters. begins revenue than been in grows, what X to doing has or overall last

all the meeting margin about and next look goals many X gross So for feel good our we playing, factors we are quarters here. very as forward these

Operator

additional does comments. I'll to final question-and-answer over session. or our our That conclude for At turn speakers this call time, any back the

William Miller

as Thank forward for Okay. giving Look all, Thank well. next today. quarter attending you you, you. to update an

Shubham Maheshwari

Thanks.

Operator

does our do we conclude participation. for today. your Everyone, This thank you conference call for

You may disconnect. now

Veeco Instruments (VECO) 6 May 192019 Q1 Earnings call transcript