VECO - Earnings call transcript Q1 2020

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Operator

Good day, and welcome to the Veeco Instruments Inc. Corporate Hosted Q1 2020 Earnings Call.

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

Anthony Bencivenga

afternoon, good and you, everyone. Thank

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

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

participation implies consent Your to our recording.

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

These press business sections factors description, on current and Form and of Form quarterly the on our and are Factors subsequent and annual reports analysis and XX-K in XX-Q report discussed X-K reports Risk to management's releases. shareholders company's discussion Form in report on the

statements. to Veeco reflect on such this statements the future after update does call, events any not including undertake obligation of date to forward-looking any those made or circumstances

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

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

William Miller

the joining everyone, Anthony. Good afternoon, call. for you, you Thank thank and

QX had are I fluid of Veeco are performance, operations to and some steps to we these a update. a to would the update hand financial few continues the COVID-XX over and industry the difficult then for through To COVID-XX our the echo markets our of our predict. will color unfold. has crisis provide I unprecedented have on maintain to of times. impact business some The manage discuss minutes on and successfully as on taken it take like to and effects John ongoing business pandemic this it peers, to you

and their would recognizing customer to to from first have I continue have some us all quarter. way, governmental an safe of. sites. team the that with say to Veeco our been related all overcoming our Due for to a by we while with for begin adopted to withdrew Shortly employees This It's essential critical quarter. working to guidance Veeco at they we part virus supporting business thereafter, impacted contain the maintained in dedication. in disruptions unforeseen as disruptions facilities Veeco team perform like operations in to impressed infrastructure, And or to am be a facilities minimal mid-March, I financial to deliver first but proud disruptions. various well both manufacturing measures home, is the implemented enable the

our Over and the have customers. while continuing keep the of minimize pandemic, the taken serve to the spread of steps safe to our course virus, we employees

required can protective facilities pledge, good distancing, our include behaviors practices, keep home all in COVID-XX who expect do use Our hygiene we employees healthy, from developed the everyone work behaviors social site. to Veeco directive and to of posted These so. is and on employees from personal a that are outlines equipment

additional separating have screening, minimize we manufacturing like environment, included gowning areas. shifts measures overlap in further disinfecting our to temperature employee In and

service fab video. In customer our our acceptances, virtual via and demos implemented required. working workarounds, factory is and factory in customers in our review such as can organization, where of customers' their innovative data customer performance We also system frequently live

do engineers proper service precautions. so with our So

of of continuity issues. health our of components, possible, In remotely all number gaps we service supply supply by a interactions our resourced commitments, to perform suppliers. maintaining ongoing they customer customer the supply proactively resolve to We and chain. supply and identified financial when frequent our However, maintain and our monitor with continue chain, we

been challenges either ahead additional a so ongoing While result have may far, or there as these operations of could effective our of customers steps pandemic. be impact our the those that

While no managing experienced future, predict one industry the is can our cycles. through at team

confident cash the level we the our recent when and balance, expense addition, we In ability look reductions successfully backlog implemented, manage to quality at are of both in and our we data by through our million. the and in business, from on QX results in $XXX and Switching our storage revenue COVID-XX response came pandemic. strength driven gears to at QX were away our results.

guidance quarter profitability our million fortunate mix to $X.XX XX% our reducing potential able product the disruptions in quarter due of to improved a and expenses, profitable keep most share. profitability withdrew disruptions, driving we quarter income, were we earnings those to resulting With years. and margins of diluted minimum. to non-GAAP gross COVID-XX to drive in operating solid operating consecutive While were This marks of $XX non-GAAP for several in our per third non-GAAP we

which million during $XXX first and reading our short-term investments. P&L, in is low leverage. ended shifting The perspective, a out balance-sheet higher cash From as transformation, from managed cash in the expenses our includes away reducing with and of phase quarter we operating well products gross and margin

economic COVID-XX concerns We remain electronics industry. what technology broader effects believe about We the the health the manage I minute mentioned future Veeco. the context a long-term the about of coronavirus. the of want pandemic, ability excited however, serve holds tactically in the through for we spend technology, our markets on our in also industry I and the of to update the but and to an providing do, team's on have

have be end we impacted, RF markets to and data do serving leading-edge as to we storage, customers may are Such exposure front that diverse lines well. perform certain product have While semiconductor. expected that XG

hopeful will extent and us We the effects the diversity this of are insulate some to adverse pandemic.

importance our Within strong, we of scientific storage serve. environment. markets data cloud and work-from-home the and the increasing of industrial by some storage is the market, at Looking bolstered

rely drives and in capacity used our and their This technology applications. customers cloud beam on Our to high density. drives heads our in aerial read/write ion improve increase performance data-center

expect continue to for the like front-end Recent monitor stay to of in was and to at by but customers seven on XXXX, sales We impact continue activity driven we strong their five nodes semiconductor demand. through market COVID-XX us, least nanometer. current ramping this

to with annealing appear plans, our Looking market, ahead, with our on to shipment XD the significant work customers for lithography edge for with be ASML's EUV with In we capacity. requirements or blank applications. their moving technology. the semiconductor are traction to markets, diodes, we continue but next their nodes encouraged laser sensing according GaN laser EUV MOCVD customers forward electronics power In drives of which order compound we recent are mask not plans, leading seeing activity

are Our smartphone and uncertain MEMS we softness. driving is and Nevertheless, we such market with given packaging high-performance recovery which by this advanced RF lead Applications our was orders. filter weak eventually activity, believe as packaging, of customers. are advanced and recent XG QX, interaction timing in the encouraged computing to and RF will

are our ideal requirements. systems our and future clean wet current for customers' etch We lithography and advanced and fit are an confident packaging

facing transformation path These but industry our electronics continuing along way. Veeco's challenges and the X-phase well transformation under strengthen to global despite times, the are customers. uncertain are economy, our is company, the we

is rationalizing product our recall, growth. to is profitability proven lines, returning two has Phase Phase and and effective. largely is one will driving Phase to You and about be one complete

Last and reduced which We better expenses gross the indicated flattened businesses, product our a accountability toward the gross and product. creating exited we and low overall commodity mix margin lines. step rationalizing intention made we product divest quarter, noncore organization, improved to our We our margin. recently

assets a current This is of involved After third quarter, of transformation and and a the such end closed to data our two the the and semiconductor, to employees win-win company. we for party. of growing in our advanced storage. as our moving consists demonstrates front-end the markets commitment packaging the Phase streamlining transaction associated all

our It semiconductor. includes compound markets and with applications semiconductor in also front-end of technology penetrating new

you our the have growth presentation. and symbol this are may committed this in is noticed We to commitment logo earnings A tag plan. new line, of

Although this employees united, ensure our and we to us. that and that best move resilient in that forward to was company launch like identity, continue we time new felt a the focused may customers, the ahead great investors to believes and Veeco not of are seem it our important opportunities

signifies our commitment profitable scale. our in the our change success our logo on of customers to helping The foundation transformation achieve in

customers Our our and performance, stakeholders. and of new building our a to stands serves tag commitment for difference, material value all line, making stronger that delivery to Veeco ensuring our improving a quality

time, same to into our continue and our uncertainties of keeping our term, future. ahead our the dealing are the with safe we near In by global resiliency look building to pandemic At a operations. effectively the employees priorities. Looking to XXXX we

still intact. Our strategy is

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

We working are extend to taken to compound gross front-end the and and into to our core reduce our the we semiconductor of starting actions technologies markets, leverage and expenses. operating improve semiconductor benefits are see margin

to a your and turn questions. take then I'll that, With we'll of John the call for over review financials, the

John Kiernan

good afternoon, everyone. and Thanks, Bill,

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

came end revised quarter $XXX Revenue was for the million, estimate. high revenue the of at our in which

closures experienced with to top were we line facility and modest While and manage logistic disruptions, delays, chain COVID-XX-related we impact. shipment temporary only supply as such challenges, through able

of and we of was made system in revenue blank LED data mask ion annealing our Front-end customers. beam This and and shipments laser to our lighting, earlier, our had resulting performance up from XX% semiconductor compound XX% scientific XX% display shipments. market semi industrial contributed system EUV market, mentioned Bill of our revenue. which storage by revenue. was strong led As

LED-related and multiple RF advanced shipments. market made reflecting MEMS slow-moving to X% advanced sold wet our softness device And clean XG-related packaging filter systems customers etch and overall of RF in We shipped for up amplifiers. additional power system revenue, the packaging, and inventory

revenue, By storage driven was legacy Rest systems. XX% was Japan, finally, of of customers. customers. by data service mask revenue and EMEA revenue, was China LSA sales region, from of and to data Asia blank overall mainly the revenue. XX% Southeast also overall EUV XX% which of world, driven Taiwan, and and by Korea to of was overall sales our was driven U.S. was by includes and system storage MOCVD And revenue XX%

results. non-GAAP Now turning to operating

with our was First reduced up manufacturing favorable guidance QX. which service-related of primarily XX%, along product a from of margin and restrictions. and result This improvement in were COVID-XX quarter and points margin which gross of some five costs favorable reduced was was result expenses, to almost mix reserves, a related

to expect was expect margins for our and $XX favorable on factors, other and forward. million, our do the near-term almost to guidance to as margins which gross We for gross remain and was sequentially basis fluctuate as product $X million. XX% OpEx going quarter-to-quarter due high better quarters we mix quarter to not a also by

expense the of in million. $X.XX share restrictions. last we quarter, shares. in tax we for net a of our was was On income a quarter result coming travel diluted XX basis, expenses variable OpEx and target reduction, EPS QX mentioned with count addition, million $XXX,XXX, a ahead expense on COVID-XX-related $XX.X As are of from and less other schedule at benefited as on non-GAAP

when increase ended accounts cash of experienced Now the of quarter and quarter. as and $XXX We QX increased sheet due the a in short-term with QX, million, low moving million the due level quarter. some just to to for quarter We a million historically payments receivable flow the in cash of This to was use investments highlights. timing outside $X $XX capital of the during the a of from working DSOs falling XX. balance in XXXX, were resulting with principally

million, driving Long-term on partially resulting $XXX $X in from quarter. the of million, in sheet increase $XX offsetting debt XXXX. slow-moving accounts days was progress January representing to declined to our selling to receivable. which payables during $XXX the XX, convertible Inventory notes, million $XXX inventory the balance million payable mature recorded the carrying in at Accounts million of increased value

was which a line the we in sale price sale, sheet. for was as noncore paid sales that months. with $XX.X balance in $X.X April, on during closing the was balance was March quarter held million. the The our of In million million And the product of $X.X to paid lastly, be capex closed our designated XX at

or in caused and will we affect outlook, the situation, purchase guidance. to closely but a not to the conditions investors We delay of of the providing impact are QX caution logistic performance. provide deliver said, That QX chain, monitoring which our seeing are manufacturing adversely analysts, our that this affect our purchasing ability capability could small dates efforts supply our or could at from to in coronavirus system a products, China. and provide decisions coronavirus adversely We out number should financial of we impacts transparency qualitative push time, our future to customers' by COVID-XX delivery are products, all

bookings number taken margin But I gross the do achieved our in been as gross of as quarters likely to as improve Gross mentioned, appear margin of But remain size otherwise, as of trending rollout to track. individual we from be last given And and transactions margins of the QX. the we profitability. a on actions our product mix, transformational have expect over quarter-to-quarter. backlog fluctuate to timing positive high not XX% will of and result

but the perspective, quarterly OpEx continue From due longer-term million related related of near well our cash there taken leave in to worth our it OpEx at expect although and anticipated our as current the COVID-XX variable we've less term, through recent manage related unfold. the business business to when the rationalize we impact restrictions normal. the returns to revenue steps investments, current is an our and outbreak, believe continues target to other crisis incur that to activity maintain travel to It's we we or reiterating costs short-term business and us $XX to to expenses positioned levels uncertainty lower to COVID-XX spending model,

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

Revenue our revenue which end of at for estimate. million, the the quarter $XXX revised in came high was

disruptions, and to and we logistic with facility able chain temporary such we While delays, as top closures impact. through shipment supply challenges, only experienced manage line COVID-XX-related modest were

of lighting, market, market led our we made contributed our our As laser beam earlier, scientific annealing customers. which performance and system Bill ion mentioned storage and system up This strong had semi compound revenue. XX% revenue. industrial to data in our from semiconductor was revenue of XX% was XX% shipments. EUV by and display Front-end LED shipments resulting mask blank of

X% We to device and and softness shipped for packaging, system wet overall XG-related amplifiers. filter multiple clean made revenue, advanced RF MEMS power And and etch additional LED-related packaging RF slow-moving inventory advanced market our customers systems up of sold in the shipments. reflecting

EMEA Korea XX% EUV and of overall and was Taiwan, Japan, world, driven and of of customers. our region, includes mainly China By to customers. Asia was And overall was by and U.S. Southeast legacy was by sales service LSA by revenue. MOCVD revenue, to revenue, finally, data XX% of revenue overall XX% and driven systems. Rest storage mask system sales also storage from which data revenue the XX% was blank driven was of

Now turning to operating results. non-GAAP

result product improvement This favorable a and a margin from some related and along which with was of and mix of manufacturing almost restrictions. gross expenses, were COVID-XX was up result five reserves, service-related in quarter QX. points First of primarily was to reduced our which XX%, guidance reduced margin costs favorable

better factors, as basis as and high our $X gross margins our for product was quarter-to-quarter quarters fluctuate XX% the near-term favorable guidance was other quarter expect almost OpEx to million, due do forward. going remain gross on sequentially we to $XX million. and to to for not mix margins We expect a also which by and

coming travel benefited As last reduction, ahead XX share non-GAAP diluted On and a we of from the QX schedule for basis, $XX.X we in of tax with expenses our EPS $X.XX target of COVID-XX-related quarter, OpEx mentioned was on on count as are $XXX,XXX, million. a a addition, variable was restrictions. other in net expense quarter less shares. result expense million at and income

balance of Now of the to the was increased just highlights. quarter timing experienced We This with use to million, moving some $XX and principally historically falling quarter sheet cash cash flow million a during in short-term a of from of in We DSOs investments when XXXX, $XXX quarter. accounts increase the ended for and due $X quarter. to outside were the payments working capital with as a resulting the QX, million receivable level in the of XX. low QX due

to selling XX, Accounts driving recorded declined million in partially mature carrying offsetting progress Inventory was increased $XXX the resulting million representing to of our during million, $XX Long-term accounts from sheet payables on the million convertible $XXX January which days inventory $XXX at in the to increase slow-moving quarter. XXXX. receivable. payable in value of notes, million, $X the debt balance

closing $X.X we the our paid months. In held product $X.X And designated capex closed in March on our April, of million. line was be million to as which sale, of during sales XX $XX.X in was million that lastly, the a the price paid sale with was balance the at balance sheet. quarter for was noncore The

supply of our and customers' provide QX that coronavirus providing We affect purchase our not caution which future we closely in logistic QX of are or are products, track. performance. purchasing We otherwise, our from and the situation, of seeing caused a in manufacturing backlog we transparency financial should this or adversely are number could will delay out be the on the to qualitative affect said, impacts of That coronavirus appear delivery at to dates China. But monitoring COVID-XX provide all efforts adversely conditions time, investors our capability ability but the bookings a and products, our push small chain, timing our rollout system analysts, to to of outlook, to impact could guidance. by decisions deliver

remain and trending XX% from the individual gross margins last as But a to as quarters mentioned, size our I actions have not gross high positive likely over been to given as Gross will mix, profitability. taken number fluctuate of transactions And QX. transformational the of improve quarter-to-quarter. expect as in achieved of margin result do we margin we product

From lower COVID-XX levels to to in due target when and travel to restrictions costs our OpEx incur spending term, other at revenue million current perspective, near expect to returns an we $XX variable the related quarterly maintain longer-term we normal. activity OpEx or less to business related continue but

leave that to unfold. cash It's crisis as the uncertainty of short-term worth outbreak, we our steps related investments, reiterating us well and impact anticipated the our although taken positioned rationalize we've through continues believe the it expenses there business our manage business model, to current is to COVID-XX the and recent to

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

Operator

question go Please take Stifel. ahead. [Operator our We'll from Instructions] with Patrick Ho first

Patrick Ho

for I providing given difficulties the Bill, guidance participated. markets the businesses many understand the you different many different and

qualitative mixed one probably of just and in I'm get ask there. your kind on segment, advanced the some going thoughts packaging to out points So data to just there's

are how the their they're And packaging could be opportunities just the marketplace, going demand capacity variables and moving give of smartphone some out at the to build. least in right, there look processes you at on, Can Taiwan that quarter? where what but advanced with notably seem swing down, You're are that there? forward June qualitatively for are be you

William Miller

come the quarter a I actually it quickly. It's I back QX would us question, in AP. think say here for pretty Patrick. was soft will Thanks for

timing anything think more I matter of than a else. that's

driving those so intelligence, artificial of computing, I lot market. recover would And the AP to XG mean, megatrends of COVID-XX. we expect the still still here, a and I numbers are seeing independent for high-performance intact long-term

business we from of IDM well. as matter just won recently a some As fact,

resolution we the for size and depth think new and with are viable the of just in eval for for the better So our our AP is general still product tool market putting in specifically a field still focus sense, larger I going together market. a

here think, I way. long I in just meaningfully It's drive a share So the positive market term, think waiting business is smartphone for our we holding. to that recovery are a

Patrick Ho

the follow-up there inventory That's entire and question, you've talking around building. well. your same COVID-XX And Great. from is the my customers, of time, really margin going just maybe, situation level to probably obviously, a OpEx industry, there's your of John, inventory the At by the gross customers helpful. as that's your their a management, ecosystem building through handled

again, given longer is qualitative about you have supply, you businesses. maybe lot making the and particularly a lead still on how different markets talk you chain are you stuff, have parts basis, sure the open, time that Can the necessary a of that

John Kiernan

Sure.

are We've working in with nothing disruptions this to we significant. Patrick, some So closely supply but point, chain minor seen suppliers. our

to our us, suppliers. they now, We our able are to meet to dates monitoring And are the to of able they their commitment right commitments health are we customers. able and are we've able and our meet been

far, pattern. so that change don't see we in And any

Now of in any we that happen now, in environment of today. we're be see manage disruptions. stand able things there we the future But to through this as the could don't that course,

William Miller

They're might almost the a We've add, few hits every yet to has week XX resourced week, the good machine our really to talking just of any but COVID-XX. seeing supply or suppliers, not the whole done would some parts talking days on-time halt. terms we're job. group And a a really over our seeing due about I'd in every that months with supplier. by we last Yes. to chain be but delivery, nothing grind cause to

Operator

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

David Duley

of couple them. thanks my taking Yes, A for question.

just be quarter? far goes, call the as thought quarter. number don't did March if missed you would think from guidance to revenue June you the moments the Sorry, as you a I for of gave mention it of or I couple up but But down

William Miller

there. guidance customers' unknowns or be David, employees the could for of worried didn't employees, a our about our have plant have two, could a to What positive a us provide we're to do government down that. shut orders We caution, not We because or we to close number for facility. abundance out test of an unknown the further of decided out employees a there really we coronavirus, may requiring we week

guidance. caution, So of not given we've really just out of abundance

specifically, And to our When few the some in have And I we Wuhan. mentioned happens customer that customer our with Chinese I quarter. engineers really LED to that was delays prepared experiencing we're remarks, tools John other new our to of are QX look area be did travel is the to a which specifically out the products, that visit restrictions from really by close one push factories an of is acceptance unable sites. who driven

are Overall, margin we our improving. seeing gross

John going said, is these ahead sorry, in that revenue XX% products that higher expecting forward. that beam our levels. at OpEx But over expect a our said margins go say current last of wouldn't schedule. QX. of percentage gross normal have We As ahead. were I would revenue ion to than We are we to

David Duley

I to on revenue now, the you revenues was If flat? up, was different me down way. going COVID ask or right would going no question there a be say, guiding maybe let

William Miller

really apologize for I Yes. can't We give color, you that I David. really that. can't

David Duley

No worries.

Okay.

William Miller

say that... did I though

David Duley

Go ahead.

William Miller

We quarter. we out though, all customer currently, tools have Chinese did supply April. from strong. reduced will disruptions. I the say of that a our no to is changed just had quality said, We're chain strong that had of The at you I order push few our or demand. not one are funnel or significantly facilities But flow running customer a near-normal in seeing We've capacity.

collections cash Our April are so strong. in far

along. we're And so I assume would moving

David Duley

elaborate Okay. bit just a more. maybe little And then

cloud, you some business on? to cloud more to it drive mentioned it there And that quite toward it other far it's your You as drives hard elaborate mentioned as is moving as just drives capabilities going I SSD is the things then guess, using are they if go? storage is was disc are why all Or versus And maybe strong? strong. or enterprise?

William Miller

of pretty our is capacity seeing all are customers data adding now. we're in What Yes. storage bullish

Our XXXX. demand XX-terabyte And XXXX backlog their magnetic drives, now transition And for by we're driven in to and drives. large-format we cloud, size the is in through quoting is a right energy-assisted seeing are really mostly is going what technology recording. now, also they're very slots

means And heads so this is what the more are complex.

are And of our heads so and per is and passes more an heads there tool, drive, through growing. absolute value there's more there are

due now, to right to customers equipment. the needing heads due more capacity we're tailwinds added of seeing So the tailwinds complexity more and the driving

Operator

With Instructions] Miller closing the the conference we'll to Mr. [Operator or questions further queue, no remarks. in additional hand back for Bill over

William Miller

Thank call. you, today's in thoughtful us truly on I thank the you joining and for questions all operator, times. appreciate these unprecedented

next Going forward, we our safe our call. you will employees Have continue to we great conference forward on focus to as continue updating at look to keep our a I customers. evening.

Operator

your And Thank you. for participation. you that does conclude Thank all today’s conference.

You may now disconnect.

Veeco Instruments (VECO) 9 May 202020 Q1 Earnings call transcript