Veeco Investor Presentation. John Peeler, CEO. January 8, 2008

Transcription

1 Veeco Investor Presentation John Peeler, CEO January 8, 2008

2 Veeco Investment Themes We possess leading positions in our Process Equipment and Metrology market segments #1 or #2 in every technology we make We have several high-growth market opportunities will commit additional resources to capitalize on them in 2008 HB-LED Solar Nanotechnology - tools provider for material science, life science and 3D in-fab metrology We are focused on executing a financial turnaround that will take multiple quarters 07 revenue and earnings performance disappointing due to dramatic slowdown in HDD and semiconductor end market Focus on improving efficiencies and operational excellence across our diverse business model 2008 Veeco Instruments Inc. 2

3 Veeco Snapshot 2008 Veeco Instruments Inc. 3

4 Veeco Snapshot 9 Month 2007 Orders $336.7M LED Now Largest % Metrology $109M 32% Process Equipment $227M 68% Data Storage 31% HB-LED/ Wireless/Solar 35% Scientific Research Semiconductor 26% 8% NA 36% Europe 19% APAC 32% Japan 13% Orders by Product Orders by Market Orders by Region Veeco Has Unique Diversification of Product & Markets and Global Opportunities 2008 Veeco Instruments Inc. 4

5 Two Pronged Strategy To Improve Performance Increase Top-Line Growth Profit Improvement Activities Align R&D to best growth opportunities New product launches to support 08 growth Strengthen management team Improve global field sales and service organization 100 person reduction in force Consolidation of certain HDD engineering & marketing groups Real estate initiatives Travel & Expense control Restructuring of global finance and IT organization 2008 Veeco Instruments Inc. 5

6 Process Equipment Growth Drivers

7 Veeco s LED Market Opportunity LED Industry Overview LEDs being adopted for energy savings, quality of light and lifetime benefits Broad applications laptops, automotive, displays, architectural Industry 17% CAGR through 2011 signs and displays 42% CAGR Penetration into SSL is happening through architectural and retail lighting Veeco Market Position A leading supplier of critical MOCVD technology (GaN and AsP deposition) 35-40% share of new orders MOCVD is >50% of LED fab capex MOCVD technology critical to LED manufacturers lm/w success Currently Veeco s fastest growth market: orders up 45% through 9 months 07 Strategies Unlimited LED Growth Forecast $M Mobile/Signals/Auto/Other Signs/Displays General Illumination Selected Veeco LED customers TEKCORE Co Veeco Instruments Inc. 7

8 HB-LED Adoption Occurring in Broad- Based Applications Laptop Backlighting by Apple and HP Mobile devices Sony Ericsson, Samsung Camera flash in cell phones Automotive Head lamps Audi R8 and Lexus 600h Cadillac Escalade 1 st SUV with a full LED headlamp Daytime running lights, Stop lights Emerging Markets: China Beijing Olympics $269B spent on lighting China s national highways (DigiTimes) Big Screen TVs Samsung Electronics recently launched a 40-inch, 52 inch, & 70 inch LED TV 2008 Veeco Instruments Inc. 8

9 TurboDisc K465 GaN Advantage TurboDisc K465 GaN modular platform produces highest margin for HB-LED manufacturers Only automated, high capacity system delivers highest throughput Next generation TurboDisc technology produces excellent yield Extendable platform for long capital life TurboDisc K465 GaN 2 Wafer Capacity 45 Wafers/ Day % More Throughput with TurboDisc K465 GaN Competitor A Competitor B Veeco Instruments Inc. 9

10 TurboDisc E475 AsP Advantage Production proven E475 produces the highest margin for ROY HB-LED manufacturers Temperature control assures accurate process reproducibility Flow Flange enables excellent uniformity and repeatability Vacuum loadlock minimizes idle time Low maintenance TurboDisc technology enables highest uptime 15% More throughput than our E % More Throughput than the Competition Upgradeable on Production Proven E450 2 Wafer 4 wafer Veeco Wafers/month 11,038 2,905 Competitor Wafers/month 8,010 2, Veeco Instruments Inc. 10

11 Veeco s Emerging Solar Market Opportunity - $15-20M 2008 Crystalline Si Thin Film Mono-Si Poly-Si a-si CuInGaSe 2 (CIGS) CdTe (Cad-Tel) III-Vs (Multi-Jct.) Deposition Sources MOCVD Strong Q3 Solar Orders >$5M MOCVD, CIGS deposition sources, Metrology 2008 Veeco Instruments Inc. 11

12 III-V Solar Cells Provide Lowest Cost for Satellite Solar Cells & Terrestrial PV E475 As/P TurboDisc platform capable of providing high volume, low cost III-V solar cells with the highest solar cell efficiency Highest production throughput using robotic transfers In-situ process controls for excellent repeatability and yields Excellent uniformity Superior crystal quality to provide the required high efficiency Flexible control of nucleation techniques and high purity epi layer films assures maximum solar cell performance World s Highest Efficiency III-V solar cells produced using Veeco MOCVD systems 40.7% > 50% more throughput than the competition 2008 Veeco Instruments Inc. 12

13 Providing Reliable, Proven CIGS Deposition Sources Veeco provides thermal deposition sources for 2-30MW glass and flexible substrates Demonstrated supplier experience Reliable, proven thermal deposition sources Repeatable, consistent results Fastest time to market Lowest capital costs For R&D and Production-Scale CIGS Only supplier of production-scale CIGS sources, reducing total components by >60% and total capital costs by >25% 2008 Veeco Instruments Inc. 13

14 Veeco s Data Storage Market Opportunity HDD Industry Overview Industry consolidation: TDK/Alps; HGST site consolidation Maturing customer base greater efficiency Flash memory makes in-roads into low-capacity storage market but, does drive HDD technology investment Veeco Market Position Leading supplier of equipment & metrology to create TFMHs Broad-based portfolio of products across wafer and slider (front and back-end) steps #1 or #2 in every technology Key customer relationships and partnerships HDD & Platter Unit Growth (IDC) 2,500 M 2,000 M 1,500 M 1,000 M 500 M M 8% CAGR Heads Platters Veeco HDD Customers 2008 Veeco Instruments Inc. 14

15 CAPEX Drivers in a Maturing Industry Adoption [%] 200% 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% Areal Density Trend Year 2nd and 3rd Generation PMR PMR TMR GBSI Capacity 8 wafer format allows a 50% increase in sliders/wafer without investment in facility expansion Larger wafer format requires retooling in >50% of the process steps to achieve comparable yields Technology Areal density growth continues at 30-40% per year drives tech spending New materials, new processes PVD and ALD Cost of Ownership HDD manufacturing cost reduction is driving lower cost-of-ownership tool sets and processes PVD for Alumina and Metals 2008 Veeco Instruments Inc. 15

16 Metrology Growth Drivers

17 Veeco s Nanoscience Opportunity Industry Overview Universities and institutes, engaged in materials science and life science research Worldwide government and private spending continues Nanotech centers adding equipment Research institutes demand leading-edge tools Veeco Market Position World leader in AFM and SPM technology; optical interferometry and stylus profilers Nano-scale and micro-scale technologies New products to fuel future growth 2006 Global Nanotechnology Spend $5.8B N.A 32% ROW 4% APAC/ Japan 29% Europe 36% +9% Y/Y Selected Veeco Research Customers 2008 Veeco Instruments Inc. Thousands 17 of Customers Worldwide

18 New Products Driving Growth Innova Scanning Probe Microscope Lower cost SPM option for university researchers Dektak 150: High-performance research/ industrial metrology stylus profiler High repeatability, low noise, large scanning range Innova SPM Wyko NT9100: More affordable table-top optical profiler Broad applications optics, solar, biomedical, automotive Wyko NT 9100 Q3 Scientific Research Orders up 17% sequentially and 9 month orders up 20% versus last year 2008 Veeco Instruments Inc. 18

19 Veeco s Semiconductor Market Opportunity SEMI Market Overview 3D Metrology Challenges at 65nm and below Key Issues: Accuracy Optical CD model development Tool to Tool matching Not adequately addressed by CDSEM & OCD Thousand Wafer Starts Per Week Wafer Starts Below 75nm Veeco Market Position World s leading supplier of automated AFMs 350 tools ww Q4 07: New InSight 3D AFM Addresses industry critical CD metrology challenges: Accuracy Applications not being adequately addressed with CD-SEM and OCD Tool to Tool matching Selected Veeco Auto AFM Customers 2008 Veeco Instruments Inc. 19

20 New InSight 3DAFM: Improved Performance Expands our TAM 45nm node measurement capability with 32nm roadmap Industry highest AFM depth & CD throughput with 30 wph, 9 sites <1nm Measurement uncertainty Production based metrology Significant ease of use enhancements Improved reliability for production worthy Improved ease of use 10x improvement in probe lifetimes better CoO 2008 Veeco Instruments Inc. 20

21 Financial Highlights and Summary

22 2007 A Disappointing Year Business Has Stabilized $390.4 $410.2 $441.0 $400.0 Disappointing 2007; Driven By Downturn in Data Storage & Semiconductor End Markets $28.8 $39.7 EBITA Impacted by Weak Volume & GM Declines in PE and M&I $13.9 $ F SALES ($M) *Earnings before interest, taxes, amortization, and certain items ($M) 2008 Veeco Instruments Inc F EBITA* ($M) 2008 Goal to Get Back on Track to Revenue Growth and Improved Profitability

23 Q4 07 Outlook/Guidance (10/22/07) Q4 07 Revenues $104-$112 million Q4 07 EPS ($0.26)-($0.14) per share; Non-GAAP EPS $ $0.06, excluding amortization of $1.9M and restructuring charges of $5.0 million, using a 35% tax rate Q4 07 Orders expected to be between $105-$115M Q4 07 Operating Expenses will decrease as a % of sales to approximately $40-$41M Gross margins should improve to a 40% level (high 30% in PE and mid 40% in Metrology) First half 2008 revenues start out slow (similar to 2H 07) impact of Q3 HDD orders having 9 month lead times 2008 Veeco Instruments Inc. 23

24 Performance Improvement Goal to Get Back on Track to Trough and Peak Models Trough Quarter Peak Quarter Q4F 39-40% Gross Margin Equipment 38-40% Metrology 45% Total Veeco 40-42% Equipment 42% Metrology 52% Total Veeco 45-46% 36-38% Operating Expense 38% 32-34% 2-4% EBITA 2-4% 11-14% $ M Revenue $65M+ $35M+ $ M $82- $90M $43-45M $ M Note: GMs are very sensitive to Process Equipment vs. Metrology Mix 2008 Veeco Instruments Inc. 24

25 Veeco Improved Balance Sheet (in millions) Cash and Investments Working Capital Fixed Assets Total Asset Long-Term Debt Shareholder s Equity September 30, 2007 $ $280.4 December 31, 2006 $ $281.8 Convertible debt reduced $56M to $144M in 2007 Term of $118M of convertible debt extended through April 2012 Approximately $25.2M of Old Notes remain outstanding due end 2008 The 2007 transactions have significantly improved Veeco s capital structure Veeco Instruments Inc. 25

26 Veeco Investment Themes We possess leading positions in our Process Equipment and Metrology market segments #1 or #2 in every technology we make We have several high-growth market opportunities will commit additional resources to capitalize on them in 2008 HB-LED Solar Nanotechnology - tools provider for material science, life science and 3D in-fab metrology We are focused on executing a financial turnaround that will take multiple quarters 07 revenue and earnings performance disappointing due to dramatic slowdown in HDD and semiconductor end market Focus on improving efficiencies and operational excellence across our diverse business model 2008 Veeco Instruments Inc. 26

27 Safe Harbor Statement To the extent that this presentation discusses expectations or otherwise make statements about the future, such statements are forward-looking and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These factors include the risk factors discussed in the Business Description and Management's Discussion and Analysis sections of Veeco's Annual Report on Form 10-K for the year ended December 31, 2006 and subsequent Quarterly Reports on Form 10-Q and current reports on Form 8-K. Veeco does not undertake any obligation to update any forwardlooking statements to reflect future events or circumstances after the date of such statements. In addition, this presentation includes non-gaap financial measures. For GAAP reconciliation, please refer to the reconciliation section in this presentation as well as Veeco s financial press releases and 10-K and 10-Q filings available on Veeco Instruments Inc. 27

28 Q3 07 GAAP Reconciliation Table Veeco Instruments Inc. and Subsidiaries Reconciliation of operating (loss) income to earnings (loss) excluding certain items (In thousands, except per share data) (Unaudited) Three months ended Nine months ended September 30, September 30, Operating (loss) income ($4,187) $4,969 ($3,459) $12,215 Adjustments: Write-off of purchased in-process technology - 1,160 (1) - 1,160 Amortization expense 1,959 4,025 8,236 12,029 Restructuring expense 529 (2) - 1,974 (2) - Earnings (loss) before interest, income taxes and amortization excluding certain items ("EBITA") (1,699) 10,154 6,751 25,404 Interest expense, net 665 1,056 2,256 3,583 Gain on extinguishment of debt - - (738) (3) (330) (4) Adjustment to exclude gain on extinguishment of debt Earnings (loss) excluding certain items before income taxes (2,364) 9,098 4,495 21,821 Income tax (benefit) provision at 35% (827) 3,184 1,573 7,637 Noncontrolling interest, net of income tax provision at 35% (80) (785) (313) (785) Earnings (loss) excluding certain items ($1,457) $6,699 $3,235 $14,969 Earnings excluding certain items per diluted share ($0.05) $0.21 $0.10 $0.48 Diluted weighted average shares outstanding 31,100 31,393 31,319 31,100 (1) During 2006, the Company purchased a 19.9% interest in Fluens Corporation. During the third quarter of 2006, the Company finalized its purchase accounting for Fluens determining that Fluens is a variable interest entity and the Company is its primary beneficiary as defined by FIN46(R). As such, the Company has consolidated the results of Fluens' operations from the acquisition date. As part of that acquisition, the Company acquired $1.2 million of in-process technology, which was written off as of the acquisition date. (2) During the second quarter of 2007, the Company incurred $1.5 million in expenses for personnel severance costs associated with its restructuring plan. During the third quarter of fiscal 2007, the Company incurred an additional $0.5 million of these costs. (3) During the first quarter of 2007, the Company repurchased $56.0 million aggregate principal amount of its 4.125% convertible subordinated notes. As a result of these repurchases, the amount of convertible subordinated notes outstanding was reduced to $144.0 million, and the Company recorded a gain from the extinguishment of debt in the amount of $0.7 million. (4) During the first quarter of 2006, the Company repurchased $20.0 million aggregate principal amount of its 4.125% convertible subordinated notes. As a result of this repurchase, the amount of convertible subordinated notes outstanding was reduced to $200.0 million, and the Company recorded a gain from the extinguishment of debt in the amount of $0.3 million. NOTE - The above reconciliation is intended to present Veeco's operating results, excluding certain items and providing income taxes at a 35% statutory rate. This reconciliation is not in accordance with, or an alternative method for, generally accepted accounting principles in the United States, and may be different from similar measures presented by other companies. Management of the Company evaluates performance of its business units based on EBITA, which is the primary indicator used to plan and forecast future periods. The presentation of this financial measure facilitates meaningful comparison with prior periods, as management of the Company believes EBITA reports baseline performance and thus provides useful information Veeco Instruments Inc. 28

29 Q4 07 Guidance Reconciliation Table Guidance for three months ended December 31, 2007 (in thousands) Operating loss Amortization expense Restructuring expense Earnings before interest, income taxes and amortization, excluding certain items ( EBITA ) Interest expense, net (Loss) earnings excluding certain items before income taxes Low End $(6,150) 1,900 5, (150) High End $(2,900) 1,900 5,000 4, ,100 Income tax benefit (expense) at 35% Non-controlling interest, net of income tax provision at 35% Earnings excluding certain items Earnings excluding certain items per diluted share Diluted weighted average shares outstanding $23 $ ,000 (1,085) 120 $2,135 $ ,000 Note: The forecasted income tax expenses for the three months ending December 31, 2007 high end and low end guidance is $1.1 million and $1.2 million, respectively. NOTE: The above reconciliation is intended to present Veeco s operating results, excluding certain items and providing income taxes at a 35% statutory rate. This reconciliation is not in accordance with, or an alternative method for, generally accepted accounting principles in the United States, and may be different from similar measures presented by other companies. Management of the Company evaluates performance of its business units based on EBITA, which is the primary indicator used to plan and forecast future periods. The presentation of this financial measure facilitates meaningful comparison with prior periods, as management of the Company believes EBITA 2008 reports Veeco baseline Instruments performance Inc. and thus provides useful information. 29