VECO - Earnings call transcript Q4 2019

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Operator

Good day, everyone. Welcome to the Veeco Instruments Inc. Corporate Hosted Q4 and Fiscal Year 2019 Earnings Call. Today’s conference is being recorded.

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

Anthony Bencivenga

good and afternoon, you everyone. Thank

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

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

Your consent our recording. participation to implies

the discusses that to future, To the sales expectations market number a cause conditions, or future extent could company’s disclosures, expectations and to results actual subject about the statements such from future of risks and statements differ about otherwise that this makes materially earnings future are call market forward-looking the made. uncertainties of products, are acceptance statements and

and description of XX-K discussion Report quarterly factors circumstances Form the of statements. including management’s in this our Form press and those are reports to on Veeco Form events on undertake any and does report subsequent on sections business XX-Q, analysis and shareholders, company’s and current in discussed X-K date to obligation forward-looking These Annual to made on reports call future reflect statements, after not the update or any releases. such the

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

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

William Miller

first, company transformation We you and previously discussing results through update to call. Good joining be phases. Anthony. our I talking in transformation. the announced provide like and everyone, our afternoon, an for financial our you would on you, characterized X Thank markets. But thank our I’ll

is profitability includes The costs the underway to and phase, returning the reducing and company delevering well company. first

eliminated company process, when December. the of COO from the Sam part last his announced we resignation the role delevering As Maheshwari

about year. Kiernan John for Senior years, that Financial at I of President, to Chief as excited to has promoted Officer Vice the through of Veeco leading the XX the I’m announce company growth. function and continue John of to been years. John position beginning we XX our the we together for just work the be transformation every partnering I’m as for prepare last finance with happy and

Now, progress high-level to I’ll Then over detailed turn call John financial you take review. for through more our and XXXX financials. the I’ll

For XXXX, penetrate to were our priorities and innovate, improve markets profitability.

our systems we executed multiple applications our and EUV Regarding photonics a We very MOCVD platform premier deposition system beam beta mask ion objective, our We shipped first production. innovation for semi shipped for optimized well. blank customer. compound to

made XXX-millimeter our we and at developed the a next single-wafer enhancements MOCVD and to semiconductor to shipped, a We improve updated to product our laser with its nodes. major fully-automated performance our cluster product annealing advanced tool front-end lithography packaging We acceptance, to improve fab. major competitiveness

our Regarding had mixed beam We ion we blank the with in systems. deposition our success mask results. EUV enjoyed great market market, penetration objective,

promising with advanced semiconductor product leaders. annealing X nodes have laser We at very industry at our traction

disappointed conditions non-GAAP we to returning objective market market And throughout lithography soft experiencing market, for in we profitability, still are we packaging, improved XXXX the our margin. of with VCSELs. advanced for photonics are regarding lastly, In our products. And condition weak gross

was XX.X%. Our exited XXXX QX margin at we XXXX and gross XX%

at the OpEx at $XX now and expenses million at operating million end in quarter. declining. are $XX quarterly Entering have of fourth the non-GAAP Our been we’re XXXX,

QX in We QX quarters of non-GAAP also and positive profitability EPS X to posting XXXX. by of consecutive returned

of by inventory for and the to reduced results. our XXXX million QX now, On improved million our balance well. XXXX. sheet, figure $XXX And throughout the with QX $XXX end year opened inventory as We that in

the above quarter. mask blank off Revenue execution revenue EUV by which solid midpoint of our achieved in of systems. We our and We with fourth annealing driven semiconductor the in front-end shipments $XXX guidance. market, XXXX our laser capped was was strong million,

Additionally, was XX.X%, sales was ion of data guidance. which line in storage solid. with margin our gross beam the market Non-GAAP remains products to

income to We of per $X.X million, happy share report over are non-GAAP resulting earnings operating in $X.XX.

Importantly, we million with $XX XXXX cash and we generated entered positive in momentum.

the non-GAAP full Looking at $XXX results, year our was revenue XXXX million.

During where were operating million LED to over lost $X year, generate commodity this transformational million income. $XXX we able we in of revenue,

forecasted, year revenue return to over XX% half first gross growth with margin QX outlook. with we second and exceeded as QX. profitability positive XX% the XX% half our EPS Our in And and exited non-GAAP

Vice-President-level delayering, we of to intentional our Throughout ability positions. of reduction positions, individual This contributor as the while X% infrastructure approach of execute. XX% our above eliminated our to our over year, and and part approximately preserves trimming was

efficiency. We better along central our focus highest This also across product R&D reorganized organization, which the us allocate enables lines to us with project operational spend company. R&D priority to improve customer to our and our allows

and to on importance to company. financial with projects spend strategic In R&D addition highest prioritizing the

We product are onto set criteria. similar evaluating of a existing our

our You divest which our is in a indication to will notice of an non-core sale, certain asset held for financials intent and product line.

would I to outbreak. address like recent the coronavirus time, this At

that In monitoring appropriate carefully And and situation Our priority and being employees and health interim, it of resolved is stakeholders. travel we are the hope our situation implemented quickly. the well is the all restrictions. we

will to the John that, financials. a for provide the turn Then, I call update. review over market With I’ll

John Kiernan

non-GAAP I between take everyone. cash cover market balance press refer the end find or in for geography, Bill, Thanks, at and discuss to QX. our financial P&L, reconciliation GAAP encourage earnings Today, of can I presentation. the quarterly you and sheet by non-GAAP through release our then and will and our data and good you our outlook to and will results, flow, you which summarize would revenue afternoon, our

semiconductor mask customers. revenue scientific led our quarter and due revenue EUV annealing and made was Revenue The multiple data by market for up ion XX% our shipments storage with the $XXX system and laser of market systems. was to XX% was front-end to million. blank our The industrial beam

display or amplifiers. power XX% was sale and LED-related revenue. lighting, Revenue system market slow RF wet in multiple of this etch related the compound clean had & XG of We semi also device inventory. moving included shipments to LED customers

advanced market. filter in overall XX% and Southeast experiencing was The of made region, MEMS storage LSA wet was of revenue. which softness continued XX% overall finally, By EUV was X% by from this was blank sales revenue etch our EMEA and which market systems. XX%, we Taiwan, XX% U.S. driven our of data overall China reflecting And the are sales to up revenue, of rest multiple Korea mass mainly clean packaging, included and market. and RF Japan, the of includes world, Asia overall systems.

Now turning results. from margin gross flat to Fourth QX. non-GAAP operating quarter was of XX.X%

please to that We slow of gross margin. margin XXXX, slow continue inventory We note, at selling we to portion provide the of as our moving forecasted, then XX% year are inventory expect happy but off negative moving headwinds. do there was sell-off a are gross in a impact exiting may slightly the which

we However, are better forward. XX% still margin going targeting gross are

OpEx and our favorable for $XX million was quarter the to forecast.

for $X.XX, was at XX Net impact of reductions plan. count We are Tax $X.X the expense $XXX,XXX. came on quarter the our shares. million of million EPS ahead beginning in to approximately see of infrastructure with cost diluted target the a income share of

with Our charge [ph]. principally, in a our loss in widened [Cativa] QX GAAP because included investments it $XX net associated million, non-cash

us conclude determine we our fully was were there certain to impairment December which of indicators, XX, that As investment XXXX, led impaired.

provide I’ll full year a financial now, few And numbers.

rate million. depreciation million, the Dilution expenditures Capital For year was XXXX, was comp X% million, $XX.X for equity $XX.X was fiscal was were our equity of approximately expense from shares. $XX.X amortization and $XX.X outstanding million. employee

$X.X debt ended the federal the reserved. cash million were had $XXX which backlog of year our end the on million. $X.X Cash are interest $XXX NOLs taxes million with year, QX We expense of and was million, and million. $XXX of we fully of bookings At

be As will next we’ve quarterly and year we results. throughout booking longer starting quarter backlog providing communicated the no

historical to sheet million the due payables days customer sales the accounts timing payable payments, in receivable with cash in operations decreased $XX our to and of our Cash flow flow balance resulting highlights. Accounts the resulting which cash outstanding. moving XX and while lowered from investments capital. $XXX was outstanding, quarter quarter working $X due than We short-term in average, in million the of of is reduction days lower ended million. to of and XX earnings we Now

Inventory was And lastly, the declined at recorded has our which on to slow-moving QX, convertible of inventory made in some time, selling this in representing the of carrying expect $XXX $X million. notes. in a for to million, million. order XXXX. $XXX Long-term throughout $X.X quarter was balance monetize given CapEx this area, been the activity inventory focus million during sheet debt ours value We progress and continue we

have China. to this of million level significant factory Now QX related widened between turning end and still restriction in our coronavirus to non-GAAP million XX% and a $XX accommodate of QX guidance. we XX%. with travel, expected the shutdowns range guidance gross and $XXX is There be is low between revenue from to margin uncertainty uncertainty. Accordingly,

be OpEx non-GAAP expect around million. to $XX We

share. of and $X.XX expected per a is GAAP breakeven between loss is a $X.XX Non-GAAP diluted and $X.XX between diluted per be EPS expected to be income to loss of share. EPS

unknown any And QX slightly that not some time. this at Please QX our impact, see on beyond higher based or trending which QX. now visibility, this similar coronavirus than this potential time, does for is current color to additional we incorporate At revenue QX. note outlook

we OpEx and are revenue reduction plan with Additionally, that reiterate current ahead of level. at

per to expect of our We million OpEx quarter target toward $XX QX. decline non-GAAP by

that, to over with I’ll back turn Bill. And it

William Miller

Thanks, a John. And business for update. now

forecasted such semiconductor in increase intelligence big XXXX by XG in indicators infrastructure leading areas, wireless deployment, is around driven positive and high cloud as packaging. and seeing advanced computing fabrication This are markets. data autonomous We increase driving. billion. Wafer equipment node to artificial and to In is and fab spending somewhere semiconductor computing, capacity performance $XX

is with lithography scanner in XX ion ASML, demand from ship our in underway to trends bode shipped XX blank we to plan capacity shift XX our technologies XXXX. and in market Generally these This laser EUV lithography mask reflected our and the beam capacity customers. in beam, messaging systems annealing, improvements well MOCVD. deposition from and like specifically, consistent strong XXXX our semi systems recent EUV XXXX, XX market, speaking, for and are which ion required systems between for More experiencing front-end customers

laser edge our In market. in continue annealing node. to fourth on revenue with We systems well at the do recognized laser the annealing semiconductor front-end quarter, multiple product we’ve also leading

invest As these customers we annealing to and hope to nodes, ability and given share, advanced continue meet our edge their next node requirements. gain laser ramp leading our advantages customers these begin to for to

packaging, wafer-level packaging fan-out of tool our we Filter and In product. our market, a record OSAT application advanced achieved major at co-production MEMS with RF status lithography

in compete to accomplishment We are this our lithography as technology ability market. by validates this encouraged it and

packaging a The lithography advanced year. for soft portion the well of over has market been

we in-time as will However, the performance of drivers result such persist resume and believe softness market this a computing and and growth. as AI will high the overcapacity

largely evaluation expect to semiconductor are improve to coming our lithography uniformity customers targeted with the complete manufacturers And and focus. depth we in We quarters. We at system of size, field product packaging. new the in advanced leading ship systems

In of a breadth technology the address compound market, a history MOCVD, applications. semiconductor leadership long of offers many has products in to Veeco and

automated have We platform, we can power is wafer would photonics for announced which manufacturing. arsenide to are device which wafer nitride up ideally cluster an This suited sizes applications. And accommodate single and for phosphide be XXX RF Lumina recently gallium used millimeter. tool,

in currently is achieving system leader we photonics, The being feedback. evaluated excellent and by a Lumina are

customer system. Additionally, the received we during another order for the from in quarter, Lumina

RF, confident ready our micro-LED address the to display MOCVD technology entire are markets. with best-in-class the and portfolio needs are XG we power performance of photonics, solutions of in We the and

storage And big Veeco. finally, market, driven our data computing through and strong quarter, in to data the remain customers we the and continue again be scientific at expect the cloud Sales positive fourth in XXXX. sales to data storage were and strong of dynamics to least the industrial by for end

in XXXX. Looking ahead our to priorities

foundational our the on that projects most R&D and on focused are strategically the financially prioritizing company to and spend impactful businesses. are strengthening We our

our and technologies front-end and RF starting benefits And markets. core of also expenses. we gross the operating taken see margins to seek into our actions leverage reduce We photonics to to operating semiconductor are and extend improve the

throughout to expenses gross We expect margins to strong and continue reduce operating delivered XXXX.

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

Operator

hear first Instructions] with Richard [Operator We’ll you. Northland. from Thank Gus

Gus Richard

a give for on on thanks Lasers? question. taking little good you that Yes, order? Lumina Congratulations for application the the Is VCSEL Could or the color more Edge-Emitting quarter. second

William Miller

Yeah. Thanks for the question, Gus.

placed the back have in We beta field in the XXXX.

feedback also getting other VCSEL very excellent results that from but stacks, good not photonics We’re getting applications for customer. and only

Also, And we’re with it’s And sharing from did we up results impressed as data VCSEL they’ve yes, the to your customer. a second is receive our straight understanding and important VCSEL their our and with several question, well. of micro order application. been LED a for purchase that end-customers

positive. very that’s So

So yeah, – although XXXX go was ahead.

Gus Richard

And a of EUV, kind faster? X EUV shipping I’m side, going a quarter. go of little should then, rate given should run on it we bit sorry. or, roughly the that that like proliferation you’re the looks expect the Is forward

William Miller

The is we a shipment bit or could X XXXX. X up in any given profile X, be to tools ended lumpy. X. going in We be quarter, shipping shipping But

our think into XXXX going the is we in for backlog have here tools backlog year. I X

Gus Richard

XX and nanometers us of and the much customer on you and is then, how let’s [ph] [China] leading much And it. Got how related? can X out split is nanometer of X for edge, say, more LSA, below, nanometers, kind

William Miller

I here. But is would my say, and tip would leading-edge just at have approximately XX XXXX, nanometer exact at the back at that right say, XX% nodes, through fingers XX/XX. number is of the about nodes I looking don’t the I XX% maybe

Gus Richard

[lith] Got how of give the bit is it in LSA a this Can obviously, then, is a sense as of it coronavirus customers is wildcard. to me, many us What that selling you the it. are I you little one China, for near-Wuhan is to And, the your revenue? last in And guess, or are advanced packaging? systems, a what province? [ph]

William Miller

customers. our to talking been we’ve Yeah,

actually Our customers’ understanding facilities today. of our open is are that all

exposure to of XX% XX% China our XXXX, was over back revenue. look you If

Specifically, quarter about XX% here the in it’s revenue. first of

of products. are mix a We selling

products Some as well quarter. and etch MOCVD some first in clean mix our equipment, as the wet here. That’s

Gus Richard

much. Got it. so That’s it for you me. Thank

William Miller

Gus. Thanks,

Operator

Steelhead from David with hear Securities. We’ll next Duley

David Duley

saw or you thanks questions. detail, the some Could mentioned Yes, the selling classify have selling provide quarter might you inventory I much that slow-moving you however couple. roughly that? you were do my the quarter impact and over-inventory give slow-moving December in could dollar-wise, how the March in had more inventory? taking had potential some you you little that on I a a first you older – to And or what’s or from just that for that us headwinds. – guess,

William Miller

focus and of We it’s of XXXX. We did had had prior sell we recently million to sure. of been We did was in we make We’ve began us. in about current what order monetize about had an – made make had and inventory that slow-moving been $X $XX XXXX. QX inventory. off Sure, progress And mentioned expectation of in million also calls as progress progress inventory. our categorized this we that to for in activity ongoing terms throughout

David Duley

margins? the gross And impacts on rough

John Kiernan

Yes.

to provides – the to off it mention inventory we range. headwinds We margin. gross So, yes, selling did the this see that X in slow percentage some point X

David Duley

you business a won with an as far that line? repeat mention there? for confused, little on then, you your you just I piece fan-out advanced you a lithography Could as said what And OSAT did business, Great. was you did – packaging of

William Miller

Yeah.

have a You application. co-PTOR wafer-level said we were Dave. a We at fan-out for that packaging an correct, OSAT

David Duley

Okay. And who the competitor other is there? viable

William Miller

will I Canon. believe it be

David Duley

for lithography. see improving for And sure back-end orders as that how kind invented Okay. But am or things been at the pieces increase applications. customer fan-out sometime this indication to they’re that of on a would directed call, fan-out of big from any big there customer big much talking your, has or in your is you not types equipment? as year initial that there guy conference the expect package. the far CapEx the about who Certainly was I of

William Miller

Yeah.

as that with expect. customer contact might you close very in are We

in this not very lead-time equipment. for long visibility is Our

that wouldn’t So the just and far lead-times. we certainly our of that, picking in the we to out. expectations have actually hear up But lithography market visibility year. see have visibility short of don’t half given We second

David Duley

of you significant way is initially be a quantify Will around quarterly this basis multiple it Okay. couple to on And there will a is us OSAT any appreciated? tools be could back much tools to how that for sort you? a just flavor is win, that or shipping give of the or you

William Miller

is would Dave. throughout Thanks. small Obviously, same a not into what just Yeah. probably it’s see or given with longer-term No, cycles. the year. probably, a it’s Thanks, we’re I demand tools handful given say, we our of can issue lot visibility of lead-times. their

David Duley

movement how guys. you is And far needle, be? that I ramp lines. Okay. But make for for me as important thing – areas would then the final the which where help me it you understand you think significant as most multiple touches could what And of know it XG is, will if the product

William Miller

we’re from broad XG. actually demand seeing Yeah, a pretty

seeing than The XG. fairly the first implementations are are X really of gigahertz, XG to sets we’re equipment similar less where

kind And seeing that in some see we’re us. for would than MOCVD We’re also XX positive for And the also early millimeter some signs opportunities greater starting of to interest opportunities. wave, gigahertz really there. opportunities those be

we from But mentioned seeing by are I products, I customers, say amplifiers. XG. for power of broad driven demand our would many really many

an MOCVD there. player have We

having also lithography on beam We’re and order selling, ion tools. and itch processing activity discussions equipment, wet

ALD space, And in filter seeing and wet in the processing RF equipment. our opportunities we’re

So very future this the as longer be driving term, early. to would but it’s I I there look would I – really could business the were say,

David Duley

Thank you.

William Miller

Dave. Thanks,

Operator

Instructions] [Operator to Benchmark the Company’s next We’ll go Mark Miller.

Mark Miller

to expect in customers, of you in the, data Is remain storage throughout later that customers orders strong pickup NAND predicated a from that indicated terms memory business year? XXXX. the You on the

William Miller

predicated actually good that. on question. not Hi, Mark, It’s

is data the from opening we’ll of order a standpoint, data have as we year confident unfolds, remain we activity backlog so Business and position in storage – kind an going the if see as remains strong to we’ll order very strong is pretty storage good but from – in business, view it our still in We XXXX. our are now.

Mark Miller

about of you orders year. Do we were go of expect are XG who equipment people a terms talking later towards acceleration in for opportunities? their Number XG acceleration as XXXX talking about similar

William Miller

Yeah.

just the seeing really sets the going does pickup certainly quotations early if our be equipment And work, second quite is question, in not from broad increasing. I some of surprised some half similar are we ready a customers. starting answered out. XG some demo discussions, activity of be it number opportunity As there really But call a big to just to I lot a pickup, I’m of in a And but wouldn’t the year yet. in

Mark Miller

Thank you.

William Miller

Mark. you, Thank

Operator

go with We’ll now Patrick Ho to Stifel.

Patrick Ho

just very you But maybe packaging that on some a up valuation. mentioned advanced new see, marketplace Right remains do low, now you much. business you Bill, Thank a side, the great do to when the in buying lithography I follow-up is actually this as for to a again? the time guess, wins you there. how picks

they’ll What go buy is, system I when market that guys just back when volume more Do buying, And by mean the that guess, for versus to systems? start they buys are your used this I capacity. these things old typically to. see new then, turns, you

William Miller

Yeah. Yeah.

with leaders focus. so, and in And depth advanced as said, in new the significant and litho better well coming the quarters. like, we tools As at months the application of here made better we did place packaging lithography win XXXX right with and eval the I a are in in some an field industry platform to size also OSAT. in resolution, we investments as And working

market when a well be positioned I with share. does leading think market-leading market comeback our to we hold product this should

Patrick Ho

you in intensity for basically, from see generation nodes. with of that as do are to my obviously, what as their increases, top-tier migrate the nodes? of for also application and node leading in on very starting you And work the to LSA? some They’re your do go you edge design customers evaluation terms is our next as of of I’m kind in maybe front. getting question How And terms you LSA, Okay. node the LSA down their capital follow-up now

William Miller

for we are opportunity think to laser our at leaders actually finer, with steps the spike to the technology their the we have X node. working as today excited that, next go step become on nodes. maybe and We’re the the see need an to We And anneal in X increases. very nodes even industry from next X

customers working those very So closely on evals we’re with now. right those

Patrick Ho

you Thank very Great. much.

William Miller

you, Thank Patrick.

Operator

questions Instructions] this And at I’ll no back all to other [Operator things time, for remarks. turn you with closing

William Miller

and thank all operator, call today. you joining you, for Thank the

be and streamlined to entering in positive momentum more a excited with a are success. company Have We evening. focused positioned great XXXX for

Operator

all Again, that for does conclude you today’s us. Thank conference. joining

Veeco Instruments (VECO) 13 Feb 202019 Q4 Earnings call transcript