KULICKE & SOFFA INDUSTRIES, INC. NASDAQ: KLIC JUNE QUARTER 2017 INVESTOR PRESENTATION

Transcription

1 JUNE QUARTER 2017 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; 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 forward-looking statements whether as a result of new information, future events or otherwise. 2

3 PRESENTATION AGENDA TRENDS & OPPORTUNITIES Served Available Market Expansion Fundamental Industry Evolution Specific Highlights & Opportunities SERVED AVAILABLE MARKET Core Market Electronics Assembly Advanced Packaging FINANCIALS & USES OF CASH Through-Cycle Performance Cash Flow Generation & Uses of Cash Summary 3

4 ONGOING VALUE CREATION DOMINANT LONG-TERM LEADERSHIP POSITIONED FOR NEW GROWTH GOOD STEWARDS OF CAPITAL LARGE INSTALL BASE SIGNIFICANT INDUSTRY RELATIONSHIPS HISTORY OF INNOVATION FUNDAMENTAL SHIFTS IN VALUE CHAIN SERVED MARKET TO GROW BY OVER $800M THROUGH 2021 PRUDENT M&A SHARE REPURCHASE EXECUTION 4

5 TRENDS & OPPORTUNITIES

6 GROWING OPPORTUNITIES CALENDAR SERVED MARKET EXPANSION $2.1B to $2.9B CORE BACK-END 2016 SAM: $980M 2021 SAM: $1.05B ADVANCED PACKAGING (AP) 2016 SAM: $545M 2021 SAM: $930M ELECTRONIC ASSEMBLY (EA) 2016 SAM: $560M 2021 SAM: $910M 6 Source(s): K&S Internal Forecast

7 VALUE CHAIN SHIFTING TO ADVANCED PACKAGING (AP) $4.50 $4.00 $USD per 100M Gates $3.50 Moore s Law - the number of transistors per square inch on integrated circuits doubles every months. $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $ nm 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 Advanced Packaging (AP) System-in-Package (SiP) Wafer-Level-Package (WLP) Embedded Die Package-on-Package (PoP) Fan-Out-WLP (FOWLP) Thermo-Compression-Bond (TCB) Electronics Assembly Shift towards higher-accuracy applications 7 Source(s): International Business Strategies, Inc.

8 SEMICONDUCTOR UNIT GROWTH Packaging Technology GLOBAL SEMICONDUCTOR INTERCONNECTIONS BY BONDING PROCESS Advanced 11% Traditional 7% Interconnect CAGR Expanding New Opportunities Advanced Packaging (AP) SiP, PoP, WLP, FOWLP, Embedded Die, TCB Flip Chip (Mass Reflow) Advanced Electronics Assembly (EA) Downstream Electronics Assembly Trillion T T Expanding Core Opportunities Wire Bonding Ball Bonding Wedge Bonding Consumable Tools Ongoing semiconductor unit demand 9% CAGR through 2021 supports future interconnect growth Greater complexity & chip integration requires comprehensive Advanced Packaging solutions Customer alignment & leadership positions within sizeable core markets strengthens competitive advantage 8 Source(s): VLSI Research, Jul 2017; Gartner, 2Q17 Update

9 ENGAGED IN FAST-GROWING END MARKETS UNIT CAGR WEARABLES UTILITY SMARTPHONES INTERNET OF THINGS (IOT) SOLID-STATE- LIGHTING 14% Semi Units 7% Semi Units 15% IOT Units 33% LED Units SERVERS CLOUD COMPUTING AUTONOMOUS VEHICLE FEATURES HYBRID/EV SOLID-STATE DRIVES 9% Semi Units 22% Semi Units 15% Semi Units 15% Semi Units 9% Overall Semi Unit CAGR through 2021 Technology Replacement Enabling Additional Advanced Packaging Opportunities 9 Source(s): Gartner, 2Q17 Update; IHS, Mar 2016

10 FLASH MEMORY COST & PERFORMANCE DRIVING 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 K&S Technologies: Core 10 Source(s): EEtimes, Sep 2016; Gartner, May 2017

11 AUTOMOTIVE ANNUAL ELECTRIC VEHICLES (EV) DEMAND (UNIT FORECAST) ANNUAL AUTOMOTIVE SENSORS/CAMERA DEMAND (UNIT FORECAST) 362M Electric vehicles on the road in 2016 Electric vehicles forecast on the road in % CAGR 145M % CAGR 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 K&S Technologies: Core, Electronics Assembly, Advanced Packaging 11 Source(s): Gartner, May 2017; Yole Développement, 2016

12 SERVED AVAILABLE MARKETS

13 CORE MARKET: WIRE BOND EQUIPMENT & CONSUMABLE TOOLS TECHNOLOGY & MARKET ALIGNMENT ~80% of Semiconductor Packages are Wire Bonded 155,000+ Global Industry Installed Base Consistent Leadership - 60% Market Share Lowest cost & most flexible interconnect solution Front-loading of traditional replacement cycle in FY2011 required a few years of capacity digestion HOW WE WIN Long established history, deep institutional knowledge, leading technology Flexible manufacturing, supply chain strength Relentless focus on new development BUSINESS FOCUS Dominating new growth in complex applications Copper, Memory, Power Storage, SIP Increased focus on cost-sensitive applications such as discrete and LED devices Leverage our 90,000+ installed base to drive recurring revenues from 20% to 30% of sales 13 Source(s): K&S Internal Forecast

14 ELECTRONICS ASSEMBLY (EA) TECHNOLOGY & MARKET ALIGNMENT New Opportunity from 2015 Acquisition Changing Market Dynamics Increasing Complexity is Driving New Opportunities High throughput, high accuracy pick and place Strong loyalty base of European automotive and industrial customers HOW WE WIN Unique architecture and ability to handle active and passive components Complementary customer overlap with Core and Adv. Packaging solutions Strong and close post sales engagement BUSINESS FOCUS Prioritizing feature development over cost down initiatives Increasing engagement with Asia-centric targets Leveraging sales synergies through cross-selling opportunities 14

15 ADVANCED PACKAGING (AP) TECHNOLOGY & MARKET ALIGNMENT Shifts in technology are presenting meaningful entry points in sizeable high growth areas HOW WE WIN ~20% of Semiconductor Unit s use an AP Process Tech Inflection Drives High-Growth Opportunity AP Enables Significant SAM Expansion Five platforms addressing several Flip-Chip, TCB, WLP, SiP, FOWLP, PoP and Embedded Die processes Complementary customer overlap with Core and Adv. Packaging solutions Aggressive development and customer engagement BUSINESS FOCUS Aggressive roadmap focused on capturing and expanding market opportunities Aggressive engagement with global sales team through evaluation programs as well as sampling labs in Singapore, Korea, China, Taiwan and US Fundamental architecture differences provide comprehensive set of advanced packaging solutions 15 Source(s): K&S Internal Forecast

16 NEW K&S DEDICATED AP LITHOGRAPHY SOLUTION Investment Highlights Highly competitive tool, ready for customer evaluation Kulicke & Soffa s 6 th Advanced Packaging platform Proximity to existing Netherlands facility Partnership with industry leader Unique AP Lithograph Solution Dedicated i-line step-and-repeat tool focused on RDL for traditional and AP applications Innovative laser light source enhances competitiveness Modular solution serving wide range of packaging and customer processes Market Expectations Served Available Market anticipated to grow from $186M to $296M, Calendar

17 APAMA Assembléon LITEQ KULICKE & SOFFA INDUSTRIES, INC. NASDAQ: KLIC WELL POSITIONED TO CAPTURE AP GROWTH $1,000 $900 K&S AP SOLUTION PORTFOLIO SERVED AVAILABLE MARKET ($M USD) $800 $700 $600 $500 $400 $300 $200 $100 $0 Initiates Development of APAMA C2S & C2W Acquires Assembléon Acquires Liteq Forecast AP-Lithography High-Accuracy Flip Chip, Active & Passive Die Placement Thermo- Compression- Bonding C2W, C2S 17 Source(s): VLSI Research, Jan. 2017; K&S Internal Estimates

18 Market Sizes in Billions of USD KULICKE & SOFFA INDUSTRIES, INC. NASDAQ: KLIC POSITIONED TO EXCEED TAM GROWTH EXCLUDES FUTURE M&A OPPORTUNITIES $4.0 $3.5 $3.0 K&S Served Available Market $2.1B to $2.9B in 2021 AP TAM $2.5 $2.0 EA TAM $1.5 $1.0 $0.5 $0.0 Core TAM Source(s): K&S Internal Forecast

19 FINANCIALS & USES OF CASH

20 JUNE QUARTER FISCAL YEAR 2017 RESULTS Quarterly GAAP Results Fiscal Q Change vs. Fiscal Q Change vs. Fiscal Q Net Revenue $243.9 million up 12.7% up 22.2% Gross Profit $111.7 million up 11.7% up 23.7% Gross Margin 45.8% down 40 bps up 60 bps Income from Operations $11.5 million down 70.3% down 64.8% Operating Margin 4.7% down 1310 bps down 1160 bps Net Income $30.8 million down 3.1% up 6.1% Net Margin 12.6% down 210 bps down 190 bps EPS Diluted $0.43 down 4.4% up 7.5% Fiscal Year 2017 Revenue to Fall Between $793 Million and $805 Million, an approximately 28% Improvement Over the Prior Fiscal Year 20

21 CONTINUED THROUGH-CYCLE PERFORMANCE Revenue ($M) Operating Margin % 19.3% 9.0% 6.7% 9.8% 1.4% 17.8% 7.5% 2.7% 16.3% 11.5% 4.7% * Jun '14 Sep '14 Dec '14 Mar '15 Jun '15 Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Jun '14 Sep '14 Dec '14 Mar '15 Jun '15 Sep '15-1.6% Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun ' R&D ($M) $243.9M of Revenue & $30.8M of Net Income drove $0.43 of EPS in the June Quarter Strong Gross Margin s and an efficient operating model enhance profitability Consistent R&D investments continue to Jun '14 Sep '14 Dec '14 Mar '15 Jun '15 Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 support robust financial performance 21 * Includes impairment & restructuring charges of $35.2M and $2.2M, respectively; excluding these charges, Operating Margin would have been 20.0% for Jun 2017

22 Net Cash Millions of USD (bar) TTM Free Cash Flow Millions of USD (line) KULICKE & SOFFA INDUSTRIES, INC. NASDAQ: KLIC STRONG CASH FLOW & BALANCE SHEET Q 2Q 3Q K&S Fiscal Year 0-60 Macro softness related to global recession drove challenging 2008 & 2009 Pent-up demand & the copper conversion cycle front-loaded the traditional replacement cycle Copper capacity digestion combined with below normal industry growth drove softer FCF generation 22 * Free Cash Flow defined as: Operating Cash Flow less Capital Expenditures

23 KEY USES OF CASH 2012 ORGANIC DEVELOPMENT INITIATIVE Re-allocated & expanded development capacity Targeted new & high growth areas Adv Pack 2014 SHAREHOLDER RETURNS Initiated first repurchase program in Company s history Reduced shares outstanding by 10% through open market transactions 2015 ACQUISITION OF ASSEMBLÉON B.V. Strategic acquisition expands AP portfolio solutions Expanded K&S SAM by more than $700M 2017 ACQUISITION OF LITEQ B.V. Broadens and diversifies K&S AP solution portfolio into higher-growth lithography market segment Highly competitive solution dedicated for AP market GUIDING PRINCIPLES OF CASH DEPLOYMENT 1. Long-Term 2. Sustainable 3. Value-Creative 23

24 SUMMARY: FOCUSED ON LONG-TERM VALUE CREATION MARKET LEADERS IN SIZEABLE MARKETS ALIGNED WITH HIGH GROWTH TECH TRENDS SUSTAINABLE LONG-TERM VALUE STRONG CASH FLOW GOOD STEWARDS OF CAPITAL 24