VECO - Earnings call transcript Q2 2020

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Operator

Good day and welcome to the Veeco Instruments Incorporated Second Quarter 2020 Earnings Conference Call. At this time, I like to turn the conference over to Anthony Bencivenga, Head of Investor Relations. Please go ahead, sir.

Anthony Bencivenga

Thank you and good afternoon everyone.

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

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

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

Bill Miller

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

significantly you Scientific technologies our to well QX before and and I questions. storage business will markets our QX XX% per drove well-managed $XX of million for organization been earnings improved through share in operating over a our to year achieved provide due over and to and update $X.XX. in at The and delayering strength taking within it along margin brief a $X then data non-GAAP a despite the were financials Today. revenue quarters a non-core million. and driven reduce Comparing line. as John Then, came results healthy I cost, the a to accountability pandemic. several income by we will guidance. operating the manufacturing the taken we diluted improve non-GAAP steps rightsizing ongoing executing your Industrial update, of ago, from gross COVID-XX and discuss such expenses, and our financial divesting product and of have with our turn highlights, footprint, We past take business results market

strength with flow applications wet seeing XG will from more and $XX quarter position million. cash line cash divestiture, product increased with $XX explain by a our well strong debt our products. our during million. detail. across refinancing the From sheet balance activity broad a Along clean We John RF in with and product this we operations with are notable in filter we related lines perspective, etch cash managed of

throughout capacity normal team COVID-XX throughout our the the or the Our been resilient sites near operated has crisis. stages at our health quarter. All of

so we of midst far, continue recognize global the are with operating a our pleased trajectory to we in While operate we that do pandemic.

in been we of measures all our up employees and initially set in the have mind Our with introduced place. still are safety operating guidelines health

are at but to begun doing number into a limited pace. facilities, measured employees have our a so introduce We of

The are until further market are RF, as notice. significant participate are computing XG positively. high the a positioned fact, we do majority of employees where home and we cloud, that well. performance our to drivers continuing such can In work from Overall, all so trending

have backlog. and again spending engagements Wafer in customer forecasted fab and increase healthy a is in XXXX. We equipment have XXXX to built strong

From about revenue turn And core that, continue of to our advance second indications, the all the of we R&D to QX the optimistic for the are will in appears with to half low financials. call I to invest John year. a We technologies. over point be and review a

John Kiernan

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

earlier, Japan, OSAT mentioned RF which This our strong revenue. our $XX mainly made was Taiwan, device sales. XX% of Rest in was LSA, of Southeast overall of contributed million XX% market of and made we and finally, and of etch up customers. annealing sales EMEA revenue overall and overall and revenue of of Bill up XX% of was wet to technologies China revenue our resulting front-end XX% the beam display, region, shipments sales The was of of MOCVD and market, by The XX% sold XX% total overall wet and includes, and our and and filter revenue service XX% by was advanced performance customers. led Scientific ion data and by Korea, system clean system data from revenue MEMS several a etch revenue had from and of clean driven in customers. As By MOCVD to products. XX% And products laser advanced to manufacturers. Asia semi included storage to lithography, which packaging, sales to system of storage world and Industrial variety driven from U.S. compound lithography shipments was packaging was with shipments lighting, semiconductor our LED a revenue overall of market customers. variety

to were that current due in new are trade China restriction lost orders have orders and the We anticipating. experiencing we environment closing several challenges

expect the we China of in overall result, as near-term, revenue. percentage to customers our revenue a from a As decrease

the Now achieved results. quarter. operating XX% turning of second in margin to non-GAAP We gross

a better Our improvements improved product OpEx was for efficiency margins, along the manufacturing contributing quarter are gross to $XX mix million. with

quarter, of ahead mentioned complete. activities are expense are target restructuring schedule we our now our on As reduction and last

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

$XXX proceeds million. was decreased The payments Inventory cash on partially increase sequential cash million increased cash capital from $X payables flow of made just average higher outside DSOs a $XX $XX cash we COVID-XX timing related with the Now like the recent Accounts ended $XX chain million shipments convertible And flow investments $XX the the operations, convertible quarter. We XX of in moving million our and of resulting up payable preparation our and sheet million the increase in to quarter $XXX,XXX. for which due stock actions in decrease million from line. a CapEx when highlights. down decreased more minute and detail investments supply balance to days $XX of second working describe net in lastly, would made From offering, a of short-term in the minute, the QX in XXXX in approximately the million, non-core spend driving due, flowing I previously to to million our million were accounts to debt in reduction accounts and quarter to in a receivable. offsetting than sale from a for adding of to from XXXX some receivable XX half. to was product will our offering. to $XXX were $XX DSOs $XX higher from quarter. QX debt in in million safety XX announced perspective, the a resulting during I

original X.XX% We XXXX. we is $XX the convertible cost notes of debt, coupon of value was new a in Our May in million, due thus of sheet, January million we retired and a which January issued liquidity. face for In XXXX After approximately the with the to our transaction. a the million XXXX. issued call, XXXX, of balance of in cash XXXX, due had of June which of convertible improving coupon X.X% $XXX notes, transaction rationale the and the $XX cap added million was $XXX fees

sheet long-term of now and $XXX is $XXX of balance with tranches of value Our coupon notes of debt million two million. average a made our on carrying a up X% weighted

expense on this $XX.X annual cash debt million. Our is

Now turning guidance. QX to

between XX% potential million to million pandemic, the are of XX%. are current be guidance. $XXX QX there our impact uncertainties $XXX QX still gross visibility, surrounding given non-GAAP with margin Although and we revenue is expected the providing between and COVID-XX

a basis, expect a On gain we to million of and that, non-GAAP back share. certain is Non-GAAP strength support R&D based revenue and backlog At be additional EPS this RF SG&A our OpEx strategically we turn slightly and storage to areas to market to plan EPS in QX. with $XX our go-forward QX experiencing is but expected expect trending $X.XX color $X.XX GAAP a over expected diluted on keep $XX to and XXXX. per now be low time, than beyond loss to between as diluted it million. update. will higher XG for We Bill we of and $X.XX increase initiatives. between $X.XX share. And growth per are QX as filters, possible, And data in some see between for a I

Bill Miller

a minute has cloud Within technologies. serve our and bolstered At want strong we this data an and by the market, to strong I demand. update our center been markets on data time, and spend scientific providing storage industrial

worked read high with drives drives aerial data in and of performance ion write in density center applications. partnership in capacity increases used to enable and in technology we our have beam years, cloud many their For and close our heads. customers invested This

our advanced nodes. Veeco's advantages market customers by were is as of seek our capacity, better to advantage products this our unique for technological advantage them and and continue their architecture thermal results add semiconductor expect current for offer Front-end at to laser allows process XXXX. This dual advanced our stay today's to LSA us we to critical temperature technology nodes. continue their control ramped customers. stay budgets, to leverages LSA driven into which sales customers strong within As

we we opportunity nodes as combination blank to customers nodes. with by a logic next customers. semiconductor, process our next and at of with with customers new in we encouraged can they are additional expand our our the front-end EUV mask engagements continue laser work we existing EUV In We steps within market customers ahead, with closely well. as their believe are begin Looking developing annealing having market

and system still portfolio. did we not this system a did Deposition we four an another Beam continue MOCVD year. market for semiconductor ship as While see quarter, to per in Ion our we make second opportunity the In receive to a product two compound in markets, order investments system

product, datacom latest such system yield, lasers and system, we The is performing indium telecom, LEDs arsenides providing is and vehicles, world-facing recognition based phosphides customer. Lumina facial is feedback red Tier top sensors and for LED long excellent Lumina applications designed on for for for for the well uniformity, and LiDAR our and received autonomous over This low and XD Micro have from system defectivity film deposits and TurboDisc excellent our campaigns. X applications, displays. Our phosphide technology as

in LED. and visibility be regulatory charging, is where providing compound film opportunity electronic Our near-term remains quality reactor the volume headwinds. are system We especially an China Despite between such options or deposits The nitride alternative from also available. equipment on in our Lumina power capable, U.S. wafer ideal like would single with and GaN our buying Propel the millimeter systems Propel suppliers semiconductor when as XXX weighing a Micro for Propel power RF can best-in-class Veeco technology and fit. see Customers suppliers our this, limited where be fully environment markets TurboDisc non-U.S. is based XG used multiple gallium devices it wireless chambers amplifiers, applications for high manufacturing. automated, in for clustered platform

RF by high-performance market improved this such multiple and device packaging advanced Filter manufacturers. Our by lithography and portion to driven advanced sold of MEMS, advanced posted is The artificial and market packaging, intelligence applications driven packaging upgrades as computing. OSATs second systems quarter and lithography an

mobile per in the to the is where could packaging of RF size see filter market market market XG roughly great driven year. our technology RF the of continue of be and in growth has this million applicable $XXX The portion content RF We potential devices. is adoption and increasing lithography and advanced by portion

RF to of per XX In as the estimate XG from XX mobile filters some XG. industry device reports number fact, transition increase to we to from

clean we wet along recently market's we profitability company. an global indication etch the of multiple application. significant the RF are challenges improve order Despite for economy, to for this transformation an filter facing and and grow received a the path As strength, continuing our systems

actions included Looking our margin, at company the gross R&D spending, We during reducing we our put our for X in our opportunities our of date, XXXX place executed and resiliency and appropriate transformation which which progress to optimizing Phase our strengthening global maintained improving expenses, foundational growth. fund businesses pandemic.

We continuing of which our company the the work phase to are on growing transformation. second is

products, extending photonics, core enabling share market us RF have are We markets, into we which semi, and in are front-end also grow new and existing to applications. our our technologies

to stands performance, value our from a our tag quality, reminder, delivering line, As customers. Difference, a Material and ensuring proven new Making

building to that, committed I John serves stakeholders. please line. to And of that stronger happy all Operator, a are a open and will and the difference take Veeco your questions. We with material our be making

Operator

our And very with much. Instructions] question Thank comes [Operator ahead. from Please first you go Patrick Stifel. Ho

Patrick Ho

much well and the to Bill, Maybe, you start guys been margin profile that. very and quite the first and outlook. you your congrats nice have clearly executing Thank quarter off, reflects on

traction your that had have products for are margin before profile model you you time had and purchased to contributing you the those starting business that to earnings on can a for it, they the where been efforts Now in of of some and the see under Ultratech you markets are leverage the overall now the discuss of improvements? and operating businesses under pressure some fold side bit the

Bill Miller

Yes, great Patrick. question, great,

reduction that done. then I John. did ahead, talk me John expense Let talk have we pass to things to we some other the it will and some of about about of Go the

John Kiernan

thanks and question, Bill thanks, Sure, the Patrick. for

analysis as benefits to Jose Singapore mainly Ultratech, the we for area. acquisition and on post moved SG&A operations facilities last in-sourcing we gross quickly outsourcing we product we is Ultratech able we year those us have that and that then those And quarter, capacity have And done manufacturing sub-assemblies that the were eliminated eliminated last for that margins, some of acquisition do we has margin post synergies in having that where get been and have Jose. fairly and sense saw terms to acquisition. started for of both were business indicated it a as a and what and And to to non-core So part acquired as Ultratech we of and initially to line. improving was expected able the we what we model where versus and excess there working well. San dividends and San Singapore line existed in more in we bring done with divested a stacking pay we in that recently the number That we product made house

activities prove in all Ultratech. and starting are So out business improved model the dividends for those to pay

over turn he to me about a some more it Bill talk little as and let will well. activities bit Patrick, other So,

Bill Miller

functional What to have Yes, structure. John. the we business moving done across have thanks, moved structure we from also is a company, unit a

process I we So we the moved, moved Ultratech marketing And Veeco's think one well. products thing are product more all Ultratech into we lifecycle for example, engineering organization. for leader able to the into of and same new have develop in as have under technology accountability and drive and how we

at nanometers last we about Ultratech So recover talking able also we is XX fundamental And originally lost. then some spent year had that LSA to over I then so, were and business how there. or that lost a the think change time

to been and at leading with And have so come the most we advanced back nodes business win able two customers.

-- some We say, importantly some well. then beyond with and leadership maybe guess finally, some well two people another those think done also we gelling customer job excellent good And even we to beyond at really done are on starting progress execute time, is application and and working I rebuilding grading I on step we have our and nodes. would increasing top really customers most are are leading at by the this that making the team edge promoting we Ultratech, I team have a but we working people, and Veeco base are those

So, positive. pretty

Patrick Ho

Great, see advanced packaging that on the is in a as really starting pickup are my you on to helpful, bit particularly Bill side a John. gave of and Maybe you color follow-up of question, your activity litho business. the some

in As mobility that is very of been you buys. terms know a marketplace Bill, packaging advanced driven historically,

you like are buys may color advanced how much that bit how AI, processes. qualitatively about computing, at much guess these a high-performance and give stuff of I related you be are little the complex new can mobility more of talk seeing of devices are of As least some still packaging

Bill Miller

step-up Yes, that now encouraging. big recent not Smartphone the is it certainly weakness did from really you say is a we driven as you to has mobility and OSATs computing but for offset those activity see that said. and drivers and largely I IDMs enough you kind It of just as would pickup in Patrick. from a or great pretty of high-performance and artificial it spoke question, is intelligence is certainly about, said, by, kind QX been is that QX

are as have we said our short. So before, lead times

limited. So into our growth visibility fairly is

packaging, micron the resolution maintaining leading X applications and the are level fan-out pillars. at like share bumping copper wafer kind of We our greater than

are we ship continuing new line planning that quarters. We a are product coming the to in product to invest and in

progresses. stay tuned will we QX in to and uptake see some seeing summary, positive are our it how we numbers So in

Operator

We next with Schafer from will take Rick question our Oppenheimer. now

Rick Schafer

at is question, is I the on I'm but are the of pretty lithographies Intel for leading decides Veeco curious and low-interest you, what great point, and it margin. as just of high puts Intel kind results advanced takes affecting Yes, some guess are to this guess that the more and my solid Bill, struggles at you in hi, edge? level, if probably I they outsource is congrats first how for

Bill Miller

don't Intel, make blank I you, anything EUV strong. front-end mask products the deposit mask Yes, about in to tell really comment our an standpoint, semi will we equipment to remains the but I From specific metallization. blank want

aren't really We an impact. seeing

we market a so and to facility our expand we Expecting of matter per we an announced other two customers those be about to are seeing with fact, that four customers a systems to As customers. and opportunities with engagements one having perspective, expansion great LSA two have from of that the today. year beyond are

we does. would whether on think Intel it independent are say semi still of I So front-end what -- I bullish is almost

Rick Schafer

are Is don't I the and thanks Great, point you. could hit rate looking XQ maybe for at talk target? and for that a drag direction have about of target. toward I great and longer-term still to for expansion wanted if John, maybe, of guide fourth further this or what and know be quarter just LED needs XQ, your a of run what to the sense - some question puts much of gross kind given the but year takes revenue a of you all at mid-XX next could to there maybe the at maybe margin you and Thanks. give you

John Kiernan

this we Rick, what what QX. that up target we we recently on half first are in in year question, I done with creeping good and have of the done have Yes, think

So footprint. actions mentioned as we manufacturing our rightsizing I have the earlier around taken

future. margins will higher extra help really volume gross So the in drive

the is business no and part from get should margin quarter-to-quarter upon and longer levels, if the China helping commoditized over benefit product LED as mix and gross variations of the product is to business LED the that significant our on margins So certainly higher mix a based improvement in we particularly revenue that time. with

Operator

Thank you.

from Brian We Goldman Sachs. hear will next now with Lee

Alex Meisel

This it Brian. on is how Alex Hey, going? for is

and follow-up follow-up just on - a that gross So a quick just [indiscernible] margin question question.

of you possible toward the year. for of to any inventory year? discussed closer to now, expect into I the visibility have limited as XQ end know driving sell as Towards but do inventory down the XX% some down sell you beginning of the weigh you potentially year, margins on margins the

John Kiernan

we mention some and is given We on is year XX% as earlier XX% margin where our the Alex, in to off the potential So, range. quarter-to-quarter, operating. sold did are saw having slower-moving we would expected have we in given variations expect QX That impact now, right a gross profile some for but we current inventory. guided lesser our headwinds visibility we from that the we than margin profile,

Alex Meisel

know bit, of that a And commentary. said that trajectory That discussed recent from kind you is impact you if quantify potentially in of XXXX can EUV could I you. I helpful. market but on guess in light the into tool expand large how Got was positive what is I wondering or sizing you revenue you And and XXXX? size that of is kind a a perspective ASML's

Bill Miller

for these Yes, of I the excess think million and have $XX machines is XX of our to we XX ASML in every about industry run needs what machines said each. scanners, one

two year $XX we million per puts it like That the systems looking what to kind targeting So of range, - right for that. are million of $XX in of kind something to at the kind is now. four

Operator

Thank you.

David Duley from question next our take with Securities. Steelhead will We

David Duley

and taking for results. nice questions thanks of my Yes, A questions. couple

think nodes, had you understand front, but business us guys - I business of just think at could what going for LSA bit, advanced winning the size market you idea give about little you maybe an the talked nodes what is in and about actually. just edge if you of that that trailing you is is On us that with a most could on differentiate doesn't Maybe well. some as China help the

you commentary great. some further stuff, be us would could around give that that if just So

Bill Miller

be your sizing we We the Yes, million at year. per part that been answer a question, have that $XXX first to David, expanding. for market I would do see say of to opportunities

applications but significant. with the could we XX%? the leading trailing talking think know we steps, expanding how edge XX get would like time of and I I kind size do would sizing opportunities nodes So XX that right as now I more edge a I John, China be have nanometer. and you about is winning lot kind various the into that customers, we sell and of probably that that And low-end of spent tools application of call

John Kiernan

is the Yes, in been of XX% LSA. somewhere, sales XX% annual to that Bill, system range the for

David Duley

and Okay, are or restrictions segment activity impacting increased of there is the there also Chinese that business?

Bill Miller

continuing we buy direct don't but have seeing, where we when a to although a customer to would an don't if non-U.S., business seeing example, has say they had opportunity are good are Chinese and buy the that know What David, are they really is direct it doesn't them but seems exercise I U.S. that, alternatives, non-U.S. really competitor. a I I LSA have

there, much pieces business. but have seen of really we in haven't So, other change the

David Duley

pretty your that on then market strength is advanced us seeing And the share what XX%. it I you would like could and remind in into to you to packaging, year? next Okay current marketplace? is expect that high are continue you believe

you micron If share have could or like point. at much Is implication you. at just smaller as you having market does X below gave that. matter And about that. do geometries -- some that or stat something geometries you that don't share market an Thank high this update

Bill Miller

compete advanced market, Canon where packaging compete about is than and that. X really say and don't I we think is X our Yes, really micron XX% ASML then there. greater this in micron XX% share so That the less to market would in than I

XX% So there. is greater that. it of market share been to been position to X have XX% million bit $XXX but over that That than we our XX% is is recently about about a but XX% of micron, depressed,

David Duley

the And going the have of micron packages, are more, ASML-type and chiplets that X other the sift microns, multiple into we one to or buzzwords sorry, still those and the to below like things so micron? the packages, marketplace of range not of heterogeneous kind fan-out those are

Bill Miller

I micron are there steps of but is above are big below There stay it piece X at packaging so, and five beyond, lot definitely and than but XX of there mean X lot that yes, some a micron. X microns, a advanced is greater there will of micron, a

Operator

Northland. Richard you Thank from next Gus question will with take our

Gus Richard

Yes, questions. thanks taking the for

You coverage this Are quarter. booked feel backlog color pretty confident QX. you basically QX, pretty give point. Can much over about any around and execution the you fourth at

Bill Miller

strong in in I we John, I two a a significant follow-up. the said we our at sold RF in business position to our say equipment really XG and of pretty customer have quarters. would as wet shot here backlog piece which prepared I remarks, will have take pushing it processing do have delivered the is a it, can you next for filters,

think So, yes, I be an think I is backlog for issue, given an this is that It issue us largely our order, it execution what coverage is is and other but not significant now. left to executed.

Gus Richard

Okay, got it. And then -.

John Kiernan

well. that I say covered Bill would Yes,

Gus Richard

the the in was does back in to to LSA for and little of in in front-end come and quarter or the the half? back half. look product increase the the It how you EUV then a Okay some circling lines, weak just back an expecting

John Kiernan

this would say I we Yes, - tool didn't EUV an have shipment are quarter. we expecting

in shipment have second half. will the we EUV So

So from are to we expecting pick LSA and quarter this also up be up that well. will as

Gus Richard

and yes, I it. - got then And got Okay, that. on

think I it that is from me.

Operator

you. Thank

next hear Mark will from with We Miller Company. Benchmark The

Mark Miller

traditionally Congratulations and large the starting Are back bunches. orders quarters on in you your orders OSATs expect see upside these you earnings. bought have in come to ahead?

Bill Miller

so are short our very in in and with sharing they lead are said forecast really us. OSATs, visibility demanding the times to remarks, they I advanced AP, not long-term the prepared of litho packaging As

visibility not strong. So our is that

where hasn't is significant it So order. kind it RF been with a of XG like the mentioned what I filters

We lithography. haven't advanced anything that seen like yet packaging in

Mark Miller

better slightly third margin than quarter the for June guided You the quarter.

what think or backlog mix? the in at is has it you Just do similar somewhat a mix looking or softer the is richer backlog,

John Kiernan

Gus. Sure,

is quarter. this XX%. would So be XX% we just achieved That to midpoint so what are guiding XX%, we from

are light quarter. we the our little is now Bill bit stronger a a We be mix, bit quarter. similar Mark, seeing that visibility had semi. a for So indicate right for did mix little should the

a lighter and of mix there, feel So XX% margin visibility to have comfortable overall, good range. that QX into a got little backlog we bit with we had for XX% gross the but

Mark Miller

In products, mix margin above AP terms it still of or storage and litho be data would the highest be would highest IBD. average?

John Kiernan

I would probably our data ones. as the say our are as EUV higher well storage

Mark Miller

you. thank Okay,

Bill Miller

you, Thank Mark.

John Kiernan

Thank you, Mark.

Operator

does our management session. to that closing to I for like And you. turn or would conclude over any answer the question back and conference remarks. additional Thank

Bill Miller

Thank revenue I are at in you, we everyone. second you we trough you, the to conferences it forward upcoming you quarter. looks It looking growth to our and updating Thank look and half. us for operator today. forward through profitability joining made virtual and thank quarter this like continued

Operator

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

You disconnect. my now

Veeco Instruments (VECO) 3 Aug 202020 Q2 Earnings call transcript