VECO - Earnings call transcript Q2 2019

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Operator

Good day, everyone, and welcome to the Veeco Instruments Inc. corporate hosted Q2 2019 Earnings Conference Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Anthony Bencivenga, Investor Relations. Please go ahead, sir.

Anthony Bencivenga

afternoon, good and you everyone. Thank

Today's the Joining presentation follow Please Veeco's Officer note slides are available to Officer. Miller, the that to we a today's today Executive me and the Officer; slide website. Financial Operating accompany on you Chief Chief and Bill our webcast. along is encourage prepared call with Sam Veeco release veeco.com. earnings have on Chief on Maheshwari, We

copyrighted recorded This cannot Veeco by material. call is without permission. It recorded and expressed being rebroadcast or is be Instruments Veeco's

consent implies participation to Your our recording.

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

is our call, such of Information reconciliation GAAP regarding non-GAAP on management financial financial website. performance, including this may to measures. During measures, measures non-GAAP address available

remarks. to I Bill that, will call with turn for his over opening And the

William Miller

executed the the and for joining well quarter. afternoon, thank Thank you, call. Good everyone, in Anthony. second you Veeco

improved near was to percentage points margin X and Our at gross of million the XX.X%. guidance non-GAAP $XX.X revenue midpoint

bottom operating loss EPS of results per million of share. $X.XX also an within with loss non-GAAP guidance and Our were line $X.X an

orders But soft capacity-related growth This in for purchases about strength the our long-term optimistic bookings $XX.X see remained in to were continue the macroenvironment. soft, quarter we technology-driven but given We million. expected prospects. our of resulting was

toward improve company. to profitability, infrastructure further structure of We and the of are to in goal we'll reducing cost coming the quarters the still working be returning our

smartphone I on growth provide headwinds experiencing multiple Sam financials. more our will markets. sales update is provide is growth and supply inventory is memory the industry has slowed, The slowed. end an smartphones then volume unit high as state has a market and and on capital opportunities, markets in cyclical chain with Automotive the details in growth equipment will semiconductor a overcapacity the from downturn of levels

expected As wafer fab be a spending is vary result XXXX the timing these headwinds, and of in recovery. to equipment estimates of down regarding

proud history this spending. high-volume production while is Veeco short technology the is we industry to driving softness benefit from of semi in slowdown. impacted inflection customers' But intact. and our and we industry term, leverage technology Veeco a enabling long long-term-trends the by are facilitating their see

an you customers and progress give laser semi making on adoption, packaging. front-end on for remained update will focused We advanced exciting are and growth market I with photonics EUV winning products MOCVD our business. supporting the our initiatives new annealing, now with

and is is very low-defect Beam customers strong Deposition Beam are choose aligned for system many defect-free. adoption. density technology. mask the lithography our customers blank in begin why supporting our masks This opportunities, important mask There mask are that use tool of a critically deposit Ion EUV this. EUV proof with Looking is demand blank and at their All it our to layers blank. Customer several they Deposition points Ion process essential with Veeco's

all a is Barenberg for processes. DRAM their TSMC and Samsung ready committed This EUV that ago, and XX-nanometer according they XX-nanometer for Hynix Samsung Intel months readiness more In recently manufacturing report, are announced to SK and consistent also EUV announcing addition to they to most EUV introduction the are track earnings they their using and indicating points are Underpinning to ASML on and ship proof EUV to in from seeing in XX with indicated these recent EUV interest systems in call, XXXX. DRAM ASML customers their systems XXXX are customers. more logic than for on XX addition

before adoption drive adoption critical take many There the number produced a are of well our Regardless will of EUV number a positioned system. layers in number evolve, variables tool, of EUV with be mask EUV, for scanner yield, such replaced, Ion throughput, are variables, Beam to mask colorful which lithography exposures the and as the Deposition mask demand the of role these play we must ups. with of our blank blank how

our laser front anneal are to both traction existing by in us. spike the excited product, and opportunity customer Moving we of the

production have status and of node. As annealing achieved tool records a previously advanced announced, we for major customer's one application

with applications excited next their node, another also well. in customer and be with this are we We multiple working customer leading on next to are on as node for additional applications working their

are activity leading-edge LSA this from activity, in China order to we also products. addition seeing our customers In for

has and key and been run-to-run you for LEDs. in TurboDisc Initial as cavity our red, suggests such MOCVD orange, platform requirements, As our have vertical growth customer particle includes enhancing over the lasers, competition VCSELs, surface-emitting This market advantages rates, new or our edge-emitting defectivity, feedback yellow consistency. we photonics product know, market. lasers specialty uniformity

and and with beta have systems systems. place shipped excellent receiving to to first We continued MOCVD additional look of that to customers we forward We continue now are feedback. with to our the pleased other customer to announce we work are these them, we success

vision when for machine to LIDAR. customers automotive sensors we market working will are capacity returns. Future with industrial and be And growth them and market applications, help build drivers this world-facing the

packaging, the of of is source industry. is for Another which exciting an growth advanced semiconductor Veeco segment

will of advanced techniques electronic packaging adapt confident, devices. improve are manufacturers We continue to to performance

lower memory, scheme packaging artificial Advanced latency characteristics AI and reduced shortened are One advanced devices require. and which intelligence. the power of consumption, performance, between packaging of distant logic drivers higher the in big is resulting

size depth improved We demos new to and expect product and our of that focus first packaging lithography next-generation in several facility overlay, in ship coming are investing the We quarters. the a beta to completed field requirements. our advanced for meet successfully resolution, in market delivers

this on for hard computing. to to I how data market storage our a continue spend would Ion the and been have foundational strong drive several company. growth like we of minute in the Builds to manufacturers due the is to Beam providing systems quarters cloud expect to support disk

As drive a the to is grow as access favoring disk continues hard over storage customers real-time their is cloud memory and has and density, data as forecasted of manufacturers reduce cost solid driving to drives as This helping to state growth software a well. per in declined, Veeco significant required down computing an service importance, aerial still our this must gigabyte. exponentially. cost becomes state pervasive long memory. disk their cost the improve by history amount cost continued advantage grow our of a The solid trend enabling

is Moreover, increase. tailwind total to heads drives enable from number is for if hard to is disk of the devices mix the Veeco. shift another of shifting high-capacity cloud, that personal forecasted the This drives computer

look let's Now at that through XXXX, are halfway to our we date. progress

for time, system have system system products. and as packaging At mentioned, previously first progress photonics manufacturing. most nanometer our new for laser development this annealing on sub-X for mask our lithography we the advanced EUV market. of are we shipped system completed applications, activity our We making we designed the with next-generation good And our blank MOCVD production

profitability. remain focused on lastly, And we

optimize we our as Our further are performance. improved to see cost improving gross and margins we expect structure,

details on With that, I'll further turn the for Sam financials. it over to

Shubham Maheshwari

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

find $XX a million $XXX website. on in results million. and non-GAAP bookings were can press detailed and release ending GAAP backlog You and QX reconciliation between our the was

As beginning results. and will in providing discontinue a XXXX, reminder, bookings backlog we

midpoint and Revenue slightly industrial data million. for recent made our due revenue, restrictions was was by and XX% million customers. impacted the Scientific $X which driven to Beam the shipments for storage Huawei, up revenue of Ion $XX system us. trading This our optical market to with total guidance of the by quarter approximately below

market lithography sold Advanced of & laser XX% for of revenue, was AP high-bandwidth revenue, are softness semi in overall overall of market. of GPU was shipments compound was and EUV multiple driven display system memory the by systems MEMS lighting, mask our worldwide made driven blank and and RF stages semi the systems. XX% in Filter market penetrating application. Front-end and photonics multiple revenue, reflecting we by as LED, first sales as the early market LED up XX% annealing packaging, of of well

China And and the EUV revenue, XX% driven was shipment. by the By overall Korea, driven Taiwan mask LSA data and world, the which product Japan, services XX%, includes driven market. revenue of our revenue, our of by storage systems by U.S. blank of sales. was region, Rest overall XX% was

XX% Lastly, EMEA of was overall revenue.

results. X as as XX.X% R&D million Gross of Now product was improvement on to sequential cost-reduction turning mix to margin non-GAAP the OpEx was a improved reduced $XX.X percentage efforts. QX the well from the due quarter for spending. point operating

these OpEx remainder in expect XXXX. the year for expect We at to levels this and to remain it of reduce

million income expense loss count Tax of of diluted on $X.XX $X.X was was a million. quarter XX a and Net a was of million $X loss shares. the for share EPS

offset million cash, million. of which as cash the customer and was decrease sequential an deposit, quarter receivable and payable. million, balance sheet held of $XX offshore. driven with cash $XX were $XXX increase $XX flow a and by million, a in We in of well Out the operations in as flow accounts million from was moving to highlights. accounts increase Now ended investments inventory the short-term in reduction by $XXX Cash

are by due inventory made LED high is converting the however, We inventory ongoing experiencing to reducing softness the still quarter, in slow-moving good business there. tools inventory because evaluation this we progress in

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

is Now gross million between unless turning XX%. non-GAAP, QX which million guidance, GAAP revenue $XXX is mentioned. is XX% QX with between $XX to and and margin expected specifically

is to is $X.XX OpEx an of expected between and Non-GAAP income a GAAP per expect diluted share. EPS per EPS $XX $X.XX $X.XX million. We and be loss loss between around diluted share. of expected $X.XX

this current visibility, we the top first are And beyond color on over At our based XX% half. roughly second QX. reiterating now of growth line for time, some half additional

the of the to by XX% of margin product And reductions. end gross EPS target in this to cost expect favorable positive due year mix we continue and We QX.

will the and open Bill I be that, your happy Operator, questions. take with to lines. please And

Operator

[Operator but Instructions] line today us have We'll your And muted Patrick, you may Ho is Patrick to first go Stifel. open. with

Patrick Ho

Sorry better? about that. Is it

William Miller

Yes.

Operator

can We hear Yes. you.

Patrick Ho

packaging lipo side the packaging on driven first market. lot your of on the buys that. about advanced Traditionally, have market. a smartphone advanced Sorry Maybe the been focusing past by

continue? to turn trends You are any that'll you those smartphone your Or mentioned quarters? some you memory drive market buys. Do the soon next may few over that you new saw buys and of seeing expect indication the some

William Miller

Sure, Patrick.

acquisition, the supply So advanced to starting we some are Ultratech have breadth and increase. packaging that since seen the is chain push applications the in into smartphone a headwinds we But big market. of the seeing

are And we're applications seeing pillars so applications in for memory buying seeing packaging. OSATs GPU high-bandwidth applications we also for some in and advanced some DRAM copper

that's applications big And So that the But a packaging today a and as well. driving we broaden is certainly, a of market positive lot driver are is thing. a much the market. seeing very obviously, of the AI number smartphone of of advanced certainly

packaging will it takeoff the fast how advanced AI see be to applications So here. interesting for

Patrick Ho

of to a follow-up, simply going quarter, or get the I are? Is as this you quarter as What's well look cost-savings some tell getting into are putting the the you're margins Sam, gross maybe, your that going XXXX? margin to us biggest, December mix? target for what Or the XX% you by on get be biggest that the December do at we start influence into gross recognized on variables line? guess, place, influence initiatives for And gross they you can the margins product should Great. as

Shubham Maheshwari

a Thanks, Patrick. good question. That's

in already but contributor quarter, The mix strongest to is contributor. in and definitely helping it reduction certainly product is So for gross the XXXX the margin. QX definitely improvement small cost is a QX us QX

begin XXXX go second its of also Now margin overall our should into with play expansion. as into the to as the we carry gross revenue in that we half growth guide part growth and XXXX, volume

positive be the and as would and cost reduction largest mix the the So third overall term, is driver product for is margin. say then playing volume summarize I would longer contributor second, for and out the that gross

Operator

next from Brian We'll Goldman Lee with hear Sachs.

Brian Lee

versus metric trying had I not be longer to us though seemed half. XQ? know here. couple into anymore. you're XQ for just bookings XQ they relatively visibility I that a XXXX, moving the on second half focus reiterating good versus soft Maybe up But like this revenue are -- going view and into the and reported XX% have to sounds quarter guide no It you first

something So just the wondering, is mix unique term. there near about

business relative of to some GAAP turns you more could there the bookings of give more color the maybe guide in Just or sort there? us terms revenue

Shubham Maheshwari

Sure.

So we've do in agree in bookings definitely, soft July QX. actually, already. we were bookings seen good But

So it in got to were June, to some July. planning close over of the business X we in pushed the that first weeks just

So QX, for us. are so bookings looking our overall, in we over at improving encouraging that's certainly QX

then a backlog terms first lot is the we confidence of carrying. of being the the XX% strong that guide overall the half, half for from And second are in there coming over

backlog. So have at this time, in $XXX million we about

to the ship the revenue in half us and us confidence gives enables enable growth. that So second to

other other question then question or of of in And terms your mix. part your the

heavy are quite storage right we into So industry. the data now, shipping

a are lead have there, helpful. that's position and with We very strong blessed certainly there, time market share so very we long

that couple lead the be soft time the or of X say, other the has to in are is many A our talked in markets, seeing piece continuing particularly it has months, packaging The from sense for to about EUV advanced are place business generally quarters Bill as X months is in the low be to but soft. where visibility of some in business. generally times, there last X the good we activity, business, us running been and we has can X

revenue looking now, So backlog also plenty us gives And for our we of to are in QX. bookings the give the visibility us growth. overall confidence hopefully, right for growth

Brian Lee

Okay.

here, market? this MOCV the customer congrats you know Now technology there, that's tool, can helpful But give there use? off sort running expectations? a is guys this more have the the VCSEL color for been on some VCSEL then source a the a quarters see is customer to they line including can that the do to about Or I of of terms color. Appreciate new you good beta? that, provide your as whether of in revenue looking couple then converting that to Sam. And Are us speaking this you current second us data vendor just part of so progress. is you on And time half

William Miller

out -- Sure, on Veeco's shout for for of the arsenide it's a there. long-standing Brian. VCSEL. our it's Yes, Yes, out really and customer thanks photonics the getting including phosphide tool applications,

that characterize that. but would is enter I today, So space them as not being in their to desire

your we're So to to X XX months. second of beta answer the half -- a say, go, typically, question, would

more from in early second thinking not tool XXXX the revenue we're so the So is and this half guidance. like

Operator

hear Northland, And Richard. from we'll from Gus

Gus Richard

logic? you how give guys On a tools for need bit side, it or DRAM coming Dep matter the and EUV got memory if in. you little mix Could help stepper you've us of on of it's Ion a does Beam many

William Miller

a of number EUV number that. significantly. and the into going matters of are mask pretty applications are pellicles EUV the is that variables whether There blanks, difference. Certainly, The steps -- of that introduced number to big products lot of yield a are and willing make Sure. go the just go absolute EUV the that

is low well. a item yield masks the mask the wear is off key variable blanks of themselves fairly mechanisms of obviously the and are today Another the as

give XX that. mask per lot neighborhood for you given X that. scanners, something So a I'd XX it's in those rule caveats I variability of there's you, a to probably told blank ASML like all like But thumb of tool and just EUV XX, to of the

Gus Richard

Okay...

William Miller

how pretty have to I this we'd a shakes kind market see of apologize, but range out. -- wide It's

Gus Richard

machine. Right. blanks how long don't will a last mask the we know And in

So phos VCSELs okay, And the yellow using laser, orange, then that's helpful. initial LEDs. red, arsenide the MOCVD that customer on for for tool, edge-emitting is or an

William Miller

for to So say, they full-service all I use they're player are probably photonics above the and they planning would in applications. a -- the of world it are

Gus Richard

the before another year-end? any do -- you Okay. the color expect And then to there? on ship beta timing Or

William Miller

tool Yes. that's certainly, to the a one X like issues of with second in -- number we're We're shipped of get just the the ours. And certainly closely for Still working work here in the we'd strong and sure. a another certainly working ship another in through -- customers certainly of very half progress. goal to year

Gus Richard

Okay.

On customers spike the decided of, going the have, spike see fourth imagine would additional my color start from the using? Have for they're anneal, what layers indication understanding, X be to risk nanometer the to at I we X should quarter. or through anneal? gotten on reduction any kind you in

William Miller

clearly for with are node. application X are the next working are the X applications node. their working at particular X but are Obviously, of we next qualify we we particular with actually tool to So incumbent at to that on them and them application, record at X we other the

our understand, So far as at exposure was really X, only application. the I X as

Gus Richard

mean X? You

William Miller

Yes.

Gus Richard

at and layers X, So indication at X X layer but in additional you you're working on X, X no more of have Xs?

William Miller

No, at one -- multiple for won we've The user X now and it their steps. with let just me -- multiple clear. application, the nodes we're them steps on actually next working be

Gus Richard

Got it. it. Got

then... And Sorry, my misunderstanding.

William Miller

so. applications And X to one-step and have And application, working fill more qualified Similarly, a another them just node. we're working color. -- their next with in with a say, X at customer to to at we're X X-nanometer little additional or qualify

the to customers, then X So more nodes moving next X steps steps. and

Gus Richard

last me. one for And it. then Got

color a picking which in which were noted or up? end bookings pick give up July, end market markets You've that can on you little

William Miller

we was and really some it over. orders I'll but would actually just would slipped for timing. to it say, just Sam pass color, QX these mean I forecasting say, were I I in more

etch some anneal order. laser was I think clean, in there wet, particular, tools maybe and a

the mind. come are X those think to that I my

Shubham Maheshwari

Yes.

Operator

[Operator from hear Instructions] Steelhead. with David We'll Duley next

David Duley

I revenue half? drive the half? over above going tool, first maybe was half mask first tool, that the second to to with wondering up half EUV is, growth is Or question XX% going mask blank what's blank second drive what's the the

Shubham Maheshwari

EUV Sure, question. Yes, David. blank I'll to part your definitely a mask answer try it. tool in plays

other of part, industry. in there our is side. half is in also related other shipments the the few stronger is data the MOCVD areas which to business storage second The improving to a And

David Duley

second a qualified Okay. you're And tool, you -- LSA on that mentioned the with customer. you've

needs some be these Just curious, type what driving a annealing technical those nanometers, is there they or nodes from or is different switching X of whatever are, might X advanced at or this? technology adopting

William Miller

Yes. We're laser annealing which for strong, also particularly control. our we the clearly seeing We're a with desire but only can technology. with ramp, temperature the very fine not speed

And the as so nodes, more maintaining with these effective really controlling the well. And is temperature that finer aren't temperature at techniques important. peak as peak standard

does that tailwind be for seem So to a us. positive

Operator

We'll The Company. Miller, hear Mark next from Benchmark

Mark Miller

hard for Intevac, indicated supplies utilization systems. in deposition tools equipment terms using which disk, your I'm wondering, just were of manufacturing and head they increased the in are seeing things their similar

William Miller

a for demand HAMR overall talking one Mark. would I technology discussed size on with certainly upgrading MAMR a But say, certainly, of added variety for side capacity. larger previously, customer we're wafer we've seeing and be as seems potentially to Yes. We're buyers to about the up. head

mix a it's pretty right and environment So with technology I now. of buys think strong capacity a

Mark Miller

the by are Or You been some still changed in the headwinds sales Huawei picture revision $X quarter. restrictions? Huawei recent this the for last the you mentioned with administration? Has from about million expecting

Shubham Maheshwari

Yes.

$X obtaining at terms taking so been else licenses the I the is have exposure Mark just Huawei. that we minimal. as successful ship we We or do everybody But product all our it's Mark, remind the need are we and to have year. to not amount very as you Huawei less take what of are steps far, quite million in and small for to a needed. backlog entire we Overall, carrying. of it -- want well But to is that to that

complex might Huawei it of more single that ship, not entities, because than bit okay. okay might are every entity some entities, some little be a to not is it's be there it restricted, Now

it, of not more are shipped. lot question. a detailed a becomes we but have But so to we ship it far So trying

Mark Miller

any the Will see you Do increased on coming that of possibility impact additional September? impact your the business? on have tariffs by any

Shubham Maheshwari

would in of of down terms a break it in tariff, areas. I So couple

tariff, is one, we that China for going might minimal which that one can The ignore be that. answer so is from simpler impact any us, is to first procurement supply a to chain which include

to of piece basis, sort new is, China our the we is believe, an our annual on around China. shipments second the exposure Then XX%. into Overall, say, in revenue Veeco,

to terms the the we with happens So have are and so and have to we in products Chinese actions continuing related we to tariffs are China, of product those takes or do ship non-LED in that government see terms ship what what whatever you. of

is to rather really macroeconomy unknown we that is may the down But from the impact. down a levels of And impact insulated very revenue that it how quantify impact to or slows these I third which say of that and not of way tariffs all it rather us us. us, must the impact, the unknown we and customers have trade indirect the immune slows not softness. macro to is are accurately do or our

I way this think the that's are looking situation. we at So

Mark Miller

devalue risk terms you see? that exchange exchange in currency, any risk Any of its challenges

Shubham Maheshwari

so brought our are most And China in fairly of lot -- So cash our sales of Mark, cash in onshore, U.S.-dollar has denominated. China small. a been already are our we balances

but rate again is expense So us, have direct it such, can impact small not And does as to side a us. the help us. exchange very impact on

is our customers So just for it's don't The that there. that overall, minimal. may yuan out, in more little it impact become you over and know, place too have answer for soon only may I shakes a bit on on dollar-denominated would we an one terms, us, How expensive rate front. the exchange where that not our I say, sales since are is

Operator

to time, Bill this at like for to things And back closing turn I'd Miller remarks.

William Miller

and starting of a want more just really on on Veeco. focusing the that Thank to differentiate challenging working as talked really nodes. everyone. thank with that you. this leading-edge not of -- end-customer applications. point, we think in as you, where much cost time appropriate in industry LSA traction, and now transformation do at about And some structure in have working legacy thought our close at to down businesses we We're it's midst significant. some we are an I to are EUV And start business points And see our proof there we're challenges the we

an So of general LED that example be would lighting. for

doing by company. and So invest into us solving this we allows profitability materials as this, our challenges improving tough to the continue to transform

So talking towards I our look you I -- update and to forward in Sam progress quarter with forward next longer-term you, look to again. Thank our meeting -- goals.

Operator

And Again, joining that all for thank does conclude today's us. you conference.

Veeco Instruments (VECO) 6 Aug 192019 Q2 Earnings call transcript