NASDAQ: KLIC QUARTERLY UPDATE. A WORLD OF OPPORTUNITY December 2018

Transcription

1 NASDAQ: KLIC QUARTERLY UPDATE A WORLD OF OPPORTUNITY December 2018

2 SAFE HARBOR In addition to historical statements, this presentation 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 expected dividend payouts and growth opportunities. 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 the Company fails to meet its operational and financial targets in order to adhere to its dividend policy; the risk that customer orders already received may be postponed or canceled; 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; the risk that the Company will not identify suitable acquisition opportunities or that any acquisitions will not be successful; the risk that the Company fails to timely remediate the material weaknesses identified in the Company s internal controls over financial reporting or that new material weaknesses or significant deficiencies emerge; 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 COMPANY & INDUSTRY EVOLUTION CURRENT LANDSCAPE

4 WHO WE ARE NASDAQ: KLIC DOMINANT POSITIONS SOLID FUNDAMENTALS VALUE DELIVERY Share Leadership Long-term History Broad End-Market Diversification Proven Management Core Business Optimization Parallel Growth Initiatives Aggressive Share Repurchases Regular Dividend Operating Leverage 4

5 $47B $9B $1B SEMICONDUCTOR FABRICATION Chip design & wafer fab SEMICONDUCTOR ASSEMBLY & TEST Chip assembly & test ELECTRONICS ASSEMBLY ( EA ) Electronic device assembly Back-End Assembly $4B Lithography Metrology & Inspection Dicing Bonding Packaging EA Back-End Lithography 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 Dominant positions, R&D investments and market reach provide several adjacent growth opportunities 2017 TAM Served Market Adjacent Opportunity 5

6 A WORLD OF OPPORTUNITY Internet of Things, Artificial Intelligence Autonomous MAJOR MARKET DRIVERS & ANNUAL IC UNIT PRODUCTION Mobility 4X EQUIPMENT PORTFOLIO GROWTH SINCE 2008 Internet Data Center Personal & Corporate Computing IC PACKAGES PRODUCED 260B 560B 1T IC ASSEMBLY EQUIP REVENUE $2.2B $2.9B $5.2B IC BONDING EQUIP REVENUE $0.9B $1.3B $2.7B 6 Source: VLSI Research

7 POSITIONED TO EXECUTE CONTINUAL BUSINESS ENHANCEMENT Fiscal Year 2017 Reorganization Facilitates Competiveness, Incremental Market Access & Operating Leverage Research & Development Accountability & Ownership Business Unit Dedicated Teams Better Enables Value Creation Aftermarket Product & Services (APS) Accountability & Ownership Centralized Strategy Improved External Reporting 7

8 SOCIALLY RESPONSIBLE OUR COMMITMENT Kulicke & Soffa and its employees around the world are committed to sustainability. We are focused on continually improving our social, environmental, and economic impact to make a difference for a better tomorrow. Local Community Engagement Recycling > 40% Annual Energy Reduction of 2% Over 35% of Women in Global Workforce Annual Paper Reduction of 3% As a responsible global organization, K&S is committed to ethical and responsible business practices, environmental stewardship, and the well-being of our communities in which we operate. Fusen Chen President & CEO 8

9 Revenue ($M) ORGANIC GROWTH TARGETS BY END MARKET, FISCAL 2017 VS 2021 GENERAL SEMI & LED AUTOMOTIVE & INDUSTRIAL ADVANCED PACKAGING TARGET MIX 1,250 1, IoT & Connected Smartphone/PC Consumer Electronics LED Sensing Power Control Power Storage Infotainment Electrification Autonomous Artificial Intelligence Cloud Computing Augmented, Mixed Reality Blockchain, Crypto Micro & Mini-LED NAND Flash ' General Semi LED Automotive Industrial Advanced Packaging 9

10 KEY GROWTH OPPORTUNITIES

11 ALIGNED AT OUR CORE GENERAL SEMI & LED AUTOMOTIVE & INDUSTRIAL ADVANCED PACKAGING 11 Capacity Expansion Significant installed-base and legacy positions Increasing diversity in end-products Both Capacity & Capability Traditional, Hybrid and Electric Vehicles Over 150 dedicated Auto customers New Capability More than Moore Growing Portfolio

12 1. INTERNET OF THINGS NEXT PHASE OF IC UNIT GROWTH IOT End-point to Outnumber Smartphone Production by >4X BILLIONS PRODUCED ANNUALLY 10 Connected Devices Smartphones *SOURCE: GARTNER & COMPANY ESTIMATES 12

13 2. NEXT-GENERATION LED SIZEABLE DISPLAY MARKET NEW ACCESS DRAMATIC INCREASE IN PLACEMENT NEEDS FOR DISPLAY TRENDS & POSITIONING New alternative for premium display Potential general lighting disruptor Significant process capability required to place up to 10k LED die per display Rohinni Partnership - May 2018 Leverages existing competencies Innovative process Distribution channels Targeted end-customer 13

14 3. AUTOMOTIVE SEVERAL INFLECTIONS AVERAGE SEMI INDUSTRY SALES AS A % OF TOTAL* K&S AUTO SALES AS % OF TOTAL INCREMENTAL OPPORTUNITY Multiple Products Serving Multiple Applications 9 % 15 % Global Customer Base Customer Centric Engagement 2018 FY Q18 *SOURCE: GARTNER 14

15 4. ADVANCED PACKAGING PROVIDING NEW VALUE-ADD Scaling has historically enabled the industry s progress on: Performance & capability Changing economics & increasing opportunities through advanced packaging adoption Form-factor reductions Power efficiency enhancements Historic cost benefits have driven scale migration even when performance, form-factor or power efficiency were not required 15 Moore s Law is alive and well, but it is no longer the only approach. And depending on the market or slice of a market, it may no longer be the best approach. Ed Sperling, Editor in Chief, Semiconductor Engineering

16 COMPREHENSIVE SOLUTIONS POSITION DOMINANT POSITIONS SOLUTIONS GENERAL SEMI & LED AUTOMOTIVE & INDUSTRIAL ADVANCED PACKAGING DIVERSIFIED END MARKETS HIGH PERFORMANCE ENGAGED SALES TEAM Aftermarket Products and Services (APS) Ball Bonding MARKET DRIVERS GENERAL SEMI & LED AUTOMOTIVE & INDUSTRIAL INCREASING CUSTOMER ENGAGEMENT Wedge Bonding Electronics Assembly APAMA Liteq, Hybrid, ATP, Katalyst 16

17 FINANCIALS TARGETS

18 DECEMBER QUARTER FISCAL Q RESULTS Quarterly Results - U.S. GAAP Non-GAAP Results & Target Fiscal Q Change vs Fiscal Q Change vs. Fiscal Q Net Revenue $157.2 million down 26.4% down 14.9% Gross Profit $74.8 million down 23.0% down 12.8% Gross Margin 47.6% up 210 bps up 120 bps Income from Operations $14.6 million down 62.8% down 40.7% Operating Margin 9.3% down 900 bps down 400 bps Net Income $7.5 million down 110.8% down 74.7% Net Margin 4.8% up 3730 bps down 1120 bps EPS - Diluted 0.11 down 111.1% down 74.4% Quarterly Results - Non-GAAP* Non-GAAP Results & Target Fiscal Q Change vs Fiscal Q Change vs. Fiscal Q Income from Operations $16.5 million down 61.1% down 39.3% Operating Margin 10.5% down 930 bps down 420 bps Net Income $17.0 million down 56.9% down 45.5% Net Margin 10.8% down 760 bps down 610 bps EPS - Diluted $0.25 down 54.5% down 44.4% 18

19 CONTINUED THROUGH-CYCLE PERFORMANCE Revenue ($M) % 9.8% 7.5% 17.8% Operating Margin 19.1% 18.1% 16.3% 17.1% 17.7% 11.5% 24.0% 13.3% 9.3% 1.4% 2.7% -1.6% Mar '15 Jun '15 Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17 Mar '18 Jun '18 Sep '18 Dec '18 Mar '15 Jun '15 Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17 Mar '18 Jun '18 Sep '18 Dec ' R&D ($M) Q19 Highlights: Revenue of $157M 47.6% Gross Margins $0.25 of Non-Gaap EPS $25.5M of Shares Repurchased R&D Investments > Market Expansion > Operating Leverage Mar '15 Jun '15 Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17 Mar '18 Jun '18 Sep '18 Dec '18 19

20 Net Cash - $USD (bar) TTM Free Cash Flow - $USD (line) STRONG CASH FLOW & BALANCE SHEET Net Cash Position & TTM Free-Cash-Flow 1 Generation (Values in Millions of USD) K&S Fiscal Periods 1Q 2Q 3Q 4Q 1Q FREE CASH FLOW DEFINED AS: OPERATING CASH FLOW LESS CAPITAL EXPENDITURES DECEMBER QTR NET CASH & INVESTMENTS OF $633M, $9.33 PER SHARE TOTAL 1Q19 SHAREHOLDER RETURNS OF $33.55M 20

21 PEER BENCHMARK Comparison to Semi Capital Equipment Peers with $ B Market Cap KLIC Average Peer Range 21

22 Revenue ($M) ORGANIC GROWTH TARGETS BY END MARKET, FISCAL 2017 VS 2021 GENERAL SEMI & LED AUTOMOTIVE & INDUSTRIAL ADVANCED PACKAGING TARGET MIX 1,250 1, IoT & Connected Smartphone/PC Sensing Power Control Power Storage Infotainment Artificial Intelligence Cloud Computing Augmented, Mixed Reality Blockchain, Crypto Consumer Electronics Electrification Micro & Mini-LED 250 LED Autonomous NAND Flash ' General Semi LED Automotive Industrial Advanced Packaging 22

23 LONG-TERM TARGET Anticipate Multiple Expansion with Execution Non-GAAP Results & Target Fiscal 2017 Results Fiscal 2021 Target Model Revenue $ % TOP-LINE GROWTH $1,150M - $1,225M Gross Margin 47% BASIS POINT IMPROVEMENT 49% - 51% Operating Income $159M $280M - $330M Operating Margin 20% BASIS POINT IMPROVEMENT 24% - 27% Operating Income Per Share $ % 115% IMPROVEMENT $ $4.75 Assumptions: GDP Growth: 3% Semi Unit growth of 6-8% 1 EPS assumes 69 million shares outstanding in Non-GAAP adjustments exclude goodwill impairment of $35.2M, restructuring of $3.8M and amortization of intangibles of $6.6M 2021 Non-GAAP target model excludes $8M of amortization of intangibles

24 DELIVERING VALUE Distribution & Growth of Average Operational Cash Flow Fiscal Q Target Executing Organic & Inorganic Initiatives Enhancing Operating Leverage Returning Capital: +125%* 31% 50% $228M Repurchased, end of December FY19 $172M Remaining on Current Repurchase Authorization 2.2% Div Yield as of Jan 30, 2019 Long Term Target of 50% Operating Cash Flow, Returned to Shareholders Organic Inorganic Capital Returns 2 High range of 2021 Target Model 24

25 SUMMARY Organizational Dominant & New Growth Operational Shareholder Alignment Highly Initiatives at Focus, Advocacy & Relevant Technology Leverage & Returns Positions Inception Earnings Potential 25

26 Q&A FOR FURTHER QUESTIONS & DISCUSSION:

27 INTERCONNECT EXAMPLES Ball Bond Wedge Bond (heavy wire) Wafer Level Packaging (WLP) WLP Fan-Out Wafer Level Packaging (FOWLP) Thermo-Compression Bond (TCB) Ball Bond Ball Bond Wedge Bond (ribbon) Mass Reflow Flip Chip 27

28 NON-GAAP RECONCILIATION Reconciliation of U.S. GAAP Income from Operating to Non-GAAP Income from Operation and Operating Margin (in thousands, except percentages) (unaudited) Three months ended December 29, 2018 December 30, 2017 September 29, 2018 Net revenue $ 157,208 $ 213,691 $ 184,824 U.S. GAAP Income from operations 14,555 39,159 24,574 U.S. GAAP operating margin 9.3 % 18.3% 13.3 % Pre-tax non-gaap items: Amortization related to intangible assets acquired through business combinationselling, general and administrative 1,877 1,943 1,899 Restructuring 31 1, Non-GAAP Income from operations $ 16,463 $ 42,416 $ 27,229 Non-GAAP operating margin 10.5 % 19.8% 14.7 % (a) GAAP diluted net earnings per share reflects any dilutive effect of outstanding restricted stock units and stock options, but that effect is excluded when calculating GAAP diluted net (loss) per share because it would be anti-dilutive. For the three months ended December 30, 2017, 1.2 million shares of restricted stock units and stock options were excluded due to the Company's net loss. (b) Non-GAAP adjustments per share includes amortization related to intangible assets acquired through business combinations, 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. (c) Non-GAAP diluted net earnings per share reflects any dilutive effect of outstanding restricted stock units and stock options. Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income and U.S. GAAP net income per share to Non-GAAP net income per share (in thousands, except per share data) (unaudited) Three months ended December 29, 2018 December 30, 2017 September 29, 2018 Net revenue $ 157,208 $ 213,691 $ 184,824 U.S. GAAP net income/(loss) 7,517 (69,528 ) 29,635 U.S. GAAP net margin 4.8% (32.5%) 16.0% Non-GAAP adjustments: Amortization related to intangible assets acquired through business combinationselling, general and administrative 1,877 1,943 1,899 Restructuring 31 1, Income tax expense- Tax Reform 7, ,688 (1,137 ) Net income tax (benefit)/expense on non- GAAP items (141 ) (36 ) 44 Total non-gaap adjustments 9, ,909 1,562 Non-GAAP net income 16,996 39,381 31,197 Non-GAAP net margin 10.8% 18.4 % 16.9% U.S. GAAP net income/(loss) per share: Basic 0.11 (0.99 ) 0.44 Diluted (a) 0.11 (0.99 ) 0.43 Non-GAAP adjustments per share: (b) Basic Diluted Non-GAAP net income per share: Basic $ 0.25 $ 0.56 $ 0.46 Diluted (c) $ 0.25 $ 0.55 $