KULICKE & SOFFA INDUSTRIES NASDAQ: KLIC DECEMBER QUARTER 2018 INVESTOR PRESENTATION

Transcription

1 KULICKE & SOFFA INDUSTRIES DECEMBER QUARTER 2018 INVESTOR PRESENTATION

2 SAFE HARBOR STATEMENT In addition to historical statements, this press release contains statements relating to future events and our future results. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and include, but are not limited to, statements that relate to our future revenue, sustained, increasing, continuing or strengthening demand for our products, replacement demand, our research and development efforts, our ability to control costs, and our ability to identify and realize new growth opportunities within segments, such as automotive and industrial as well as surrounding technology adoption such as system in package and advanced packaging techniques. While these forward-looking statements represent our judgments and future expectations concerning our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to: the risk that customer orders already received may be postponed or canceled, generally without charges; the risk that anticipated customer orders may not materialize; the risk that our suppliers may not be able to meet our demands on a timely basis; the volatility in the demand for semiconductors and our products and services; the risk that identified market opportunities may not grow or developed as we anticipated; volatile global economic conditions, which could result in, among other things, sharply lower demand for products containing semiconductors and for the Company s products, and disruption of capital and credit markets; the risk of failure to successfully manage our operations; the possibility that we may need to impair the carrying value of goodwill and/or intangibles established in connection with one or more of our prior acquisitions; acts of terrorism and violence; risks, such as changes in trade regulations, currency fluctuations, political instability and war, which may be associated with a substantial non-u.s. customer and supplier base and substantial non-u.s. manufacturing operations; the impact of changes in tax law; and the factors listed or discussed in Kulicke and Soffa Industries, Inc Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission. Kulicke and Soffa Industries, Inc. is under no obligation to (and expressly disclaims any obligation to) update or alter its forwardlooking statements whether as a result of new information, future events or otherwise. 2

3 PRESENTATION AGENDA CATALYSTS FOR OUTPERFORMANCE Leadership Corporate Strategy MARKET TRENDS & OPPORTUNITIES Overview of Opportunities Growth Drivers Revenue Potential FINANCIAL PERFORMANCE & CAPITAL ALLOCATION December Quarter Financial Results Operating Leverage & Cash Generation Capital Allocation 3

4 CATALYSTS FOR OUTPERFORMANCE PROVEN LEADERSHIP History of innovation Management Industry position POSITIONED FOR GROWTH Fundamental shifts in value chain Strong served market growth Operational leverage GOOD STEWARDS OF CAPITAL Prudent M&A Share repurchase execution Openness to partnerships 4

5 REVENUE POTENTIAL K&S DRIVES SHAREHOLDER VALUE Served Available Market $1.9B K&S Market Opportunity & Revenue Potential $2.2B $2.7B Value Enhancement Historic Positioning & Leadership $627M $809M Expanding Portfolio & Competencies R&D Investments Business Optimization F 2017 Revenue Growth (+29%) Exceeded SAM (+16%) Growth by ~1.8x Prudent Capital Deployment K&S IS WELL POSITIONED TO CONTINUE OUTPERFORMING SOURCE(S): VLSI RESEARCH, OCT. 2017; INTERNAL K&S FORECAST 5

6 LEADERSHIP & CORPORATE STRATEGY

7 REVENUE LEADERSHIP & STRATEGY OVERVIEW FUSEN E. CHEN, PRESIDENT & CHIEF EXECUTIVE OFFICER Appointed President & CEO on October 31, 2016, prior to joining K&S: Proven Industry veteran with history in large front-end peers Delivered strong financial results through focused leadership Consistent track record of business execution and shareholder value creation OUR STRATEGY FOR SHAREHOLDER VALUE CREATION $627 $809 $1.75 (1) Business Optimization Generate greater cash flow from existing business (2) Strategic Positioning $0.67 EPS 1 Build durable, long-term competitive positions FY16 FY17 (3) Capital Allocation Deploy capital to amplify shareholder returns 1 PRO-FORMA, EXCLUDING NON-RECURRING GOODWILL IMPAIRMENT OF $35.2M, AND FAVORABLE TAX CREDIT OF $20.9M 7

8 FY 17 BUSINESS OPTIMIZATION ORGANIZATIONAL Capital Equipment and Aftermarket Products & Services (APS) segmentation introduced Further enhances ownership and accountability of projects and results R&D decentralized and largely reports through business unit general management TACTICAL Enhancing recurring revenue from 20% to 30% over the next 3 years Reprioritizing recurring income stream of sizeable install base Sales Organization is P&L responsible for APS segment performance Pursuing Adjacent Market Opportunities Sizeable adjacent opportunities in back-end packaging Fully leveraging potential of R&D team LED sales increased 3X in 2017 DRIVING OPERATING LEVERAGE BY MAXIMIZING CURRENT OPPORTUNITIES & ENHANCING NEW MARKET EXECUTION 8

9 STRATEGIC POSITIONING: VALUE DRIVERS RESEARCH & DEVELOPMENT FY2017 R&D Investments surpassed $100M Global R&D headcount exceeds 450 More than 300 Patents issued worldwide SUPPLY CHAIN & OPERATIONS >30,000 Cumulative Wire Bonders Sold Since FY13 High Volume, Low Mix Platform Drives Operational Leverage Large scale operations in Singapore and Suzhou, CN SALES & DISTRIBUTION >80% of Sales through Direct Channels since FY13 Global team of more than 350 Sales & Customer Support personnel strategically located 9

10 STRATEGIC POSITIONING: INDUSTRY LANDSCAPE $47B $9B $1B SEMICONDUCTOR FABRICATION SEMICONDUCTOR ASSEMBLY & TEST ELECTRONICS ASSEMBLY ( EA ) Chip design & wafer fab Chip assembly & test Electronic device assembly Back-End Assembly $5B $4B Lithography Metrology & Inspection Dicing Bonding Packaging EA Back-End Lithography 2017 TAM 2017 TAM K&S Solutions Adjacencies Wafer Inspection Die Inspection Package Inspection Back-End Metrology Blade Dicing Laser Dicing Plasma Dicing Backside Grinding Mounting Package Singulation Die Attach Wire Bond Flip Chip / Mass Reflow Advanced Packaging Molding & Sealing Finishing & Marking Package Inspection Screen Printing Component Placement Reflow & Inspection LEVERAGING SIZEABLE MARKET POSITIONS TO CAPTURE SECULAR GROWTH OPPORTUNITIES & INCREMENTAL SHARE GAINS SOURCE(S): VLSI RESEARCH, JAN. 2018; INTERNAL K&S FORECAST 10

11 MARKET TRENDS & OPPORTUNITIES

12 General Semiconductor MARKET OVERVIEW: EXPOSED TO MEGA-TRENDS FY 2017 REVENUE MIX (APPROXIMATION) TECHNOLOGY MEGA-TRENDS DRIVING OUR BUSINESS Advanced Packaging AP INTERNET OF THINGS SENSORS DUAL CAMERA / 3D SENSING HIGH PERFORMANCE COMPUTING ARTIFICIAL INTELLIGENCE AR / VR HYBRID / ELECTRIC VEHICLES AUTONOMOUS VEHICLES 5G LED SOLID-STATE DRIVES INFOTAINMENT SYSTEMS ENABLING TOMORROW'S TECHNOLOGY INNOVATIONS (SELECT CUSTOMERS) 12

13 GENERAL SEMI: BROAD-BASED DEMAND 1, Years of Insatiable Semiconductor Demand (Billions of Semiconductor Units) Apple Watch Released 1,200 1, IBM Releases Acorn PC, Commodore 64 Released MS Windows Introduced HTML Developed Google Purchases Android First IPhone Released Smartphones Surpass PC Sales Google Home Released Amazon Echo Released 200 Google Incorporated CONNECTED 0 Amazon Formed PERSONAL COMPUTING & INTERNET SMARTPHONE SOURCE(S): VLSI RESEARCH, DECEMBER 2017 Forecast SEMICONDUCTORS FORECAST TO GROW AT A 7% UNIT CAGR FROM 2017 THROUGH

14 AP: VALUE CHAIN SHIFTING TO BACK-END Physical challenges of Node Shrink are driving new industry solutions $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 $USD per 100M Gates 90nm 65nm 45/40nm 28nm 20nm 16/14nm 10/7nm WHILE NODE SHRINK IS STILL BEING DRIVEN INDUSTRY IS PURSUING NEW WAYS TO DRIVE DENSITY PER FUNCTION MORE THAN MOORE Cost benefits have largely disappeared Leading Node adoption limited to performance applications Lithography Higher resolution and new packaging formats driving higher capacity and throughput requirements Dicing Ultra-thin wafers and higher specifications Bonding Higher accuracy & density, new bonding technologies and multi-die packages Electronics Assembly Smaller components with closer placement requirements SOURCE(S): INTERNATIONAL BUSINESS STRATEGIES, INC. 14

15 AP: GROWING MEMORY DEMAND Cost & Performance Driving Solid State Memory Adoption 2016 NAND Flash Unit Demand 2021 NAND Flash Unit Demand > 128 GB 128 GB x 2016 Solid State Drives displacing Hard Disk Drives NAND cost/bit reducing at 20-30% per year Recent K&S NAND demand ~2X historic average DOMINANT SHARE LEADER IN NAND WIRE BONDING EQUIPMENT SOURCE(S): EETIMES, SEP 2016; GARTNER, MAY

16 AUTOMOTIVE: EVOLVING OPPORTUNITIES Electric Vehicles EVs In Use (Millions of Units) 22% CAGR Annual Automotive Sensor/Camera Demand (Millions of Units) 21% CAGR Estimate 2021 Forecast EV to outpace traditional Auto Driving new power management applications EV growth to trigger infrastructure build-outs Increasing High Reliability Increasing Infotainment Higher-bandwidth processing required MEANINGFUL POSITIONS WITH AUTOMOTIVE MANUFACTURES AND OEMS SOURCE(S): GARTNER, MAY 2017; YOLE DÉVELOPPEMENT,

17 POTENTIAL SUMMARY OF MARKET OPPORTUNITIES WELL POSITIONED TO CAPTURE GROWTH K&S Illustrative Organic Revenue Potential (Values in Millions of USD) Advanced Packaging $809 General Semiconductor Automotive Sizeable net cash position also provides inorganic growth opportunities FY 2017 FY 2021 REVENUE GROWTH EXPECTED TO DELIVER MEANINGFUL NET INCOME & EPS FALL-THROUGH & FCF GENERATION 17

18 FINANCIALS & CAPITAL ALLOCATION

19 DECEMBER QUARTER FISCAL YEAR 2018 RESULTS Quarterly Results U.S. GAAP Fiscal Q Change vs. Fiscal Q Change vs. Fiscal Q Net Revenue $213.7 million up 42.8% down 1.0% Gross Profit $99.0 million up 44.9% down 5.4% Gross Margin 46.3% up 60 bps down 220 bps Income from Operations $38.6 million up 123.1% up 4.6% Operating Margin 18.1% up 650 bps up 100 bps Net Income $(69.3) million down 544.2% down 289.3% Net Margin (32.4)% down 4280 bps down 4940 bps EPS Diluted $(0.98) down 545.5% down 292.2% Quarterly Results Non-GAAP 1 Fiscal Q Change vs. Fiscal Q Change vs. Fiscal Q Income from Operations $41.8 million up 122.3% up 3.5% Operating Margin 19.6% up 700 bps up 90 bps Net Income $38.8 million up 126.9% down 3.2% Net Margin 18.2% up 680 bps down 40 bps EPS - Diluted $0.54 up 125.0% down 3.6% MARCH QUARTER REVENUE GUIDANCE BETWEEN $205M $215M FOR THE FIRST HALF OF FISCAL 2018, THIS GUIDANCE REPRESENTS A 21% REVENUE INCREASE OVER THE SAME PERIOD IN THE PRIOR FISCAL YEAR 1 SEE APPENDIX FOR A RECONCILIATION OF THE GAAP AND NON-GAAP ADJUSTED RESULTS 19

20 CONTINUED THROUGH-CYCLE PERFORMANCE Revenue ($M) Operating Margin % 16.3% 19.1% 17.1% 18.10% % 6.7% 9.8% 7.5% 11.5% 1.4% 2.7% -1.6% Dec '14 Mar '15 Jun '15 Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17 Dec '14 Mar '15 Jun '15 Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17 R&D ($M) $213.7M of Revenue and Gross Margin of 46.3% drove Non-GAAP Net Income of $38.8M and Non-GAAP EPS of $0.54 in the December Quarter Strong Gross Margin s and an efficient operating model enhance profitability Consistent R&D investments continue to support robust Dec '14 Mar '15 Jun '15 Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17 financial performance 20

21 HIGHLY SCALABLE OPERATING MODEL ILLUSTRATIVE PRO-FORMA FINANCIAL MODEL (Annualized) Revenue Incremental Revenue $809M 1 $900M $1B +$91M (+11%) +$191M (+24%) Gross Margin Target 45% 45% 45% Total Operating Expense 2 (Non-GAAP) Non-GAAP: $204M Fixed + 5-7% Variable $253M $258M $264M Effective Tax Rate Target 15% 15% 15% Illustrative Net-Income ( NI ) Fall-Through (Non-GAAP) >$30M ~33% Fall-Through >$63M +11% Revenue growth drives NI growth of +32% MEANINGFUL GROWTH OPPORTUNITIES & STRONG FALL-THROUGH DRIVE SHAREHOLDER VALUE 1 REPRESENTS FISCAL 2017 REVENUE FOR ILLUSTRATIVE PURPOSES 2 PRO-FORMA OPERATING EXPENSE EXCLUDES ESTIMATED AMORTIZATION CHARGES OF $7M ANNUALLY 21

22 Net Cash Millions of USD (bar) TTM Free Cash Flow Millions of USD (line) STRONG CASH FLOW & BALANCE SHEET Net Cash Position & TTM Free-Cash-Flow 1 Generation (Values in Millions of USD) Q K&S Fiscal Year -60 ENDED THE DECEMBER QUARTER WITH A NET CASH & INVESTMENTS POSITION OF $650M, OR $9.20 ON A PER DILUTED SHARE BASIS 1 FREE CASH FLOW DEFINED AS: OPERATING CASH FLOW LESS CAPITAL EXPENDITURES 22

23 CAPITAL ALLOCATION STRATEGY #1 REINVEST IN THE #2 ACQUISITIONS & #3 RETURN CASH TO BUSINESS PARTNERSHIPS SHAREHOLDERS DRIVE R&D INNOVATIONS ENHANCE OPERATIONAL EFFICIENCY SUPPORT EXTENDIBILITY WITH EXISTING PLATFORMS STRONG PIPELINE OF OPPORTUNITIES PARTNERSHIPS & JOINT VENTURES M&A ROUGHLY $115M OF SHARES REPURCHASED THROUGH DECEMBER 2017 REPURCHASING SHARES BELOW INTRINSIC VALUE EVALUATING SUPPLEMENTAL CAPITAL RETURN OPTIONS 23

24 SUMMARY: FOCUSED ON LONG-TERM VALUE CREATION MARKET LEADERS HIGH GROWTH TRENDS SUSTAINABLE LONG-TERM VALUE STRONG OPERATIONAL LEVERAGE GOOD STEWARDS OF CAPITAL 24

25 SUPPLEMENTAL INFORMATION

26 APPENDIX: GAAP TO NON-GAAP RECONCILIATION In addition to U.S. GAAP results, this presentation also contains non-gaap financial results. The Company's non-gaap results exclude amortization related to intangible assets acquired through business combinations, goodwill impairment, costs associated with restructuring, income tax expense related to the Tax Cuts and Jobs Act of 2017 as well as tax benefits or expense associated with the foregoing non-gaap items. These non-gaap measures are consistent with the way management analyzes and assesses the Company s operating results. The Company believes these non-gaap measures enhance investors understanding of the Company s underlying operational performance, as well as their ability to compare the Company s period-to-period financial results and the Company s overall performance to that of its competitors. Management uses both U.S. GAAP metrics as well as non-gaap operating income, operating margin, net income, net margin and net income per diluted share to evaluate the Company's operating and financial results. Non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in the Company s industry, as other companies in the industry may calculate non-gaap financial results differently. In addition, there are limitations in using non-gaap financial measures because the non-gaap financial measures are not prepared in accordance with GAAP, may be different from non-gaap financial measures used by other companies and exclude expenses that may have a material impact on the Company s reported financial results. The presentation of non-gaap items is meant to supplement, but not substitute for, GAAP financial measures or information. The Company believes the presentation of non-gaap results in combination with GAAP results provides better transparency to the investment community when analyzing business trends, providing meaningful comparisons with prior period performance and enhancing investors' ability to view the Company's results from management's perspective. 26

27 APPENDIX: GAAP TO NON-GAAP RECONCILIATION 27

28 APPENDIX: GAAP TO NON-GAAP RECONCILIATION 28