Investor Presentation...2020/11/13 · Semiconductor Compound Semiconductor Data Storage Ion Beam Deposition & Etch of magnetic material for HDD heads 1990s Profitability has significantly

November 13, 2020

Investor

Presentation

Investor Presentation | © 2020 Veeco Instruments Inc.

Safe Harbor

2

This presentation contains “forward-looking statements”, within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, as amended, that are based on management’s expectations, estimates, projections andassumptions. Words such as “expects,” “anticipates,” “plans,” “believes,” “scheduled,” “estimates” and variations of these wordsand similar expressions are intended to identify forward-looking statements. Forward-looking statements include, but are not limited to, those regarding anticipated growth and trends in our businesses and markets, industry outlooks and demand drivers, our investment and growth strategies, our development of new products and technologies, our business outlook for current and future periods, the impact of the COVID-19 pandemic and the affects thereof on our operations and financial results; and other statements that are not historical facts. These statements and their underlying assumptions are subject to risks and uncertainties and are not guarantees of future performance. Factors that could cause actual results to differ materially from those expressed or implied by such statements include, without limitation: the level of demand for our products; global economic and industry conditions; the effects of regional or global health epidemics, including the effects of the COVID-19 pandemic on the Company’s operations and on those of our customers and suppliers; global trade issues, including the ongoing trade disputes between the U.S. and China, and changes in trade and export license policies; our dependency on third-party outsourcing partners; the timing of customer orders; our ability to develop, deliver and support new products and technologies; our ability to expand our currentmarkets, increase market share and develop new markets; the concentrated nature of our customer base; our ability to obtain and protect intellectual property rights in key technologies; our ability to achieve the objectives of operational and strategic initiatives and attract, motivate and retain key employees; the variability of results among products and segments, and our ability to accurately forecast future results, market conditions, and customer requirements; the impact of our indebtedness, including our convertible senior notes and our capped call transactions; and other risks and uncertainties described in our SEC filings on Forms 10-K, 10-Q and 8-K. All forward-looking statements speak only to management’s expectations, estimates, projections and assumptions as of the date of this presentation or, in the case of any document referenced herein or incorporated by reference, the date of that document. The Company does not undertake any obligation to update or publicly revise any forward-looking statements to reflect events, circumstances or changes in expectations after the date of this presentation.

Investor Presentation | © 2020 Veeco Instruments Inc.3

Global Presence, World-Class Customer Experience

Veeco at a Glance

St.Paul MNTokyo

Horsham PASan Jose CA

Waltham MA

Plainview NY

Veeco System for

Semiconductor Manufacturing

Munich

Seoul

Shanghai

Bangkok

Hsinchu

Laguna

Penang

Singapore

950+ ~600 $443M

Employees Patents

Forecasted

2020 Revenue*

Global semiconductor capital equipment provider with specialized technology

Somerset NJ

* Based off Q1 to Q3 actuals and Q4 midpoint of guidance


Investment Summary

4

▪ Managing well through global pandemic

▪ Well positioned to capitalize on global technology megatrends

▪ Improving and sustained profitability as we execute on company transformation

▪ 10% growth expected in 2021 over 2020

▪ Near-term growth in the Data Storage market, 5G RF Filters and the Semiconductor market with Laser Annealing

▪ Longer-term growth in 2022 and beyond in Semiconductor and Compound Semiconductor markets


COVID-19 Update

Health & Safety

▪ Robust communication protocols in place to monitor situation

▪ Employee temperature screening

▪ Veeco COVID-19 Pledge

o Social distancing

o Personal Protective Equipment

o Working from home mandated into Q3 2021

▪ Travel restrictions

▪ Factory shift separation

▪ Additional disinfecting

Business Resiliency

▪ “Essential Status” – all facilities are operational

▪ Maintaining customer service levels and providing remote support where possible

▪ Proactively identifying supply gaps and alternate sourcing where required

▪ Virtual factory acceptances

▪ Maintaining flexibility

▪ Monitoring government actions

Well Positioned

▪ Sufficient liquidity

▪ Recent expense reductions

▪ Healthy Backlog

▪ Veeco team is experienced managing through cycles

We are successfully managing through COVID-19


Our Customers Drive the Trends

6

IDMs and Foundries

OSATs, MEMS and RF Filters

Compound Semiconductor

Scientific & Industrial


LEDGaN MOCVD for LCD

backlighting & general lighting

applications

Ultratech AcquisitionLeader in Laser Annealing and

Advanced Packaging

Lithography

Two-Phase

TransformationTargeting improved profitability

and growth in:

▪ Semiconductor

▪ Compound Semiconductor

Data StorageIon Beam Deposition & Etch of

magnetic material for HDD heads

1990s

Profitability has significantly improved and we are driving growth

7

Historical Perspective

Positioned to Drive Growth

2000s 2010s Today

Proven History of Enabling Technologies

Transformation

HDD – Hard Disk Drive

LED – Light Emitting Diode

MOCVD – Metal Organic Chemical Vapor Deposition

GaN – Gallium Nitride


Phase 1: Returning to Profitability

▪ Shift MOCVD market focus from commodity LED to higher value Compound Semiconductor

▪ Execute general infrastructure reductions

▪ Rationalize product line investments

Phase 1: executed

8

Transformation - Update

Phase 2: Driving Growth

▪ Front-End Semi with Laser Annealing

▪ Data Storage with Ion Beam

▪ RF with Wet Processing

▪ Semiconductor


Grow in current markets Penetrate with new applications

Phase 2: early stages

RF – Radio Frequency


Markets/Technologies

High Performance Computing

AI / High Performance

Computing / 5G

Power / 5G / Photonics /

MicroLED

Cloud / Data Storage

* Compound Semi includes LED, Lighting & Display

AI – Artificial Intelligence

5G – Fifth Generation Wireless

MOCVD – Metal Organic Chemical Vapor Deposition

AP – Advanced Packaging

MEMS – Micro-Electromechanical Systems

Front End Semi

Advanced Packaging,

MEMS & RF Filters

Compound

Semi*

Scientific &

Industrial Ion Beam

Laser Annealing

Ion Beam

MOCVD

Wet Processing

AP Lithography

Wet Processing

Market Served Drivers Veeco Technologies

Veeco is well positioned to drive both near-term and longer-term growth


Front-End Semiconductor Solutions with Laser Annealing

PTOR – Process Tool of Record

Market Drivers The Veeco Difference

▪ Artificial Intelligence

▪ High Performance Computing

▪ Graphical Processing Units

Veeco’s Laser Annealing systems allow customers to perform their annealing steps with great accuracy

▪ Very high temperatures over

precise geometries

▪ Extremely short durations

▪ Minimal wafer defects

Current status:

▪ PTOR for single application step

at ≤7nm with 2 customers

▪ Making progress with:o additional application with existing

customer

o next nodes at existing customers

o an additional logic customer

o early stage engagement with

memory customer

Enabling Advanced Nodes


EUV Mask Blank for Front-End Semiconductor

*Source: Semiconductor Engineering

EUV – Extreme Ultraviolet



▪ High Performance Computing

▪ Autonomous Driving

▪ Primarily logic and early interest

from memory end customers

Veeco supplies best in class Ion Beam Deposition systems to the EUV Lithography mask blank suppliers for the semiconductor industry

28nm 14nm 10nm 7nm 5nm

Multi Patterning

Single Patterning

EUV Lithography

EUV Adopters*

Incre

asin

g T

ran

sis

tor

De

nsit

y

Enabling Advanced Nodes


Compound Semi Solutions with MOCVD

Veeco’s New Lumina™ Platform for

VCSELs, EELs and mini / microLEDs

LiDAR – Light Detection and Ranging AsP – Arsenide Phosphide

GaN – Gallium Nitride GaAs – Gallium Arsenide

InP – Indium Phosphide RF – Radio Frequency

EEL – Edge Emitting Laser VCSEL – Vertical Cavity Surface Emitting Laser


PhotonicsAsP based devices with consumer, automotive and industrial

applications such as world facing sensors in mobile devices,

LiDAR for autonomous vehicles and Data / Telecom.

GaN RF Devices (5G)GaN based RF devices are more efficient than silicon based

power amplifiers. Potential in mm-wave base station and

mobile device applications.

MicroLEDSunlight readability, power efficiency & high brightness are the

advantages of this next generation display technology.

▪ Multi-Wafer or Single Wafer

GaN – GaAs – InP – AsP

Proprietary TurboDisc® advantages:

▪ Excellent uniformity

▪ Maximum up-time

▪ Highest productivity

▪ Lowest cost of ownership

GaN Power DevicesGaN based power devices are more efficient than silicon

based power devices. This enables higher power density and

lower system cost in consumer applications such as wired and

wireless charging.

Veeco’s Propel™ Platform for GaN based

power devices, RF devices and MicroLED


Data Storage Solutions with Ion Beam Technology

▪ Data Center / Cloud

▪ Edge Computing

o Artificial Intelligence

o Internet of Things

o 5G RF

Digital/ Information Revolution

Market Drivers

Decades of investment have driven deep customer partnerships

The Veeco Difference

▪ HDDs have a 10X cost advantage

over flash memory1

▪ Data stored on HDDs is expected to

grow 14% annually for the next

decade1

▪ Average number of heads per drive is

increasing, leading to a forecasted

increase in magnetic heads shipped

▪ Heads are increasing in complexity to

enable improvements in areal

density driving increased capacity

requirements for our customers

Source: Coughlin Associates

HDD – Hard Disk Drive

(1) Source: Bernstein

Heads Projected to Increase

Source: Seagate

Increase in Heads per Drive


Advanced Packaging Solutions with Lithography



▪ Automotive

▪ Mobility

▪ Graphical Processing Units

Veeco’s advanced packaging lithography is the process of choice:

▪ Fan-out wafer level packaging at

top foundries and OSATs

▪ Copper Pillar applications in high

bandwidth memory

Updated Product Platform:

▪ Highly automated

▪ Improved performance

▪ Cost effective

Enabling Better System Performance


Growth in Semi and Compound Semi (2022 and Beyond)

PTOR – Process Tool of Record

1 TrendForce estimate

Traditional MicroLED approach – Red, green and blue MicroLEDs are produced to make up a single display pixel

Disruptive MicroLED approach – MicroLEDs are grown in place on silicon wafers similar to a semiconductor process

Investments for Growth Semiconductor Markets

▪ Research and Developmento Annealing

o GaN & AsP MicroLED

o Other core Veeco technologies

▪ Evaluation Agreementso Laser Annealing for Logic and

Memory

o MOCVD Systems for early stage

MicroLED

▪ Service Capabilityo Enhancements to support multiple

product evaluations

Veeco’s Laser Annealing solutions are ideally suited for our customers’ challenges at advanced nodes.

We seek to expand our market opportunity and increase share by:

▪ Achieving PTOR status at next

nodes with our existing customers

▪ Achieving PTOR status at an

additional logic customer

▪ Expanding annealing into memory

applications

Compound Semiconductor Markets

MOCVD for MicroLED display has the potential to be a significant growth driver in 2022 and beyond.

Veeco is active in traditional and disruptive MicroLED approaches

Investments delivering early traction toward longer term growth in 2022 and beyond

MicroLED wafer production is

expected to increase from

74,000 wafers in 2021 to

over 5 million wafers in 20241


Recent Financial Trends (Non-GAAP)

40 38

34 34 36 37

37%

34%33%

35%

32%

29%

Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20*

OPEX ($m, %)

109 113

105

99

112

128

Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20*

Revenue ($m)

40% 40%

45%

43%44%

43%

Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20*

Gross Margin (%)

0.05

0.11

0.22

0.11

0.220.30

Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20*

EPS($)

Improved

profitability

Sustained

healthy gross

margin

Improving financials as we seek to grow top line

* Based on the midpoint of Q4 20 Guidance

A reconciliation of GAAP to Non-GAAP financial measures can be found in the backup section of this presentation.

OPEX improving as

a percentage of

revenue

FY ’21 expected to

grow over FY ’20 by

10%


Balance Sheet and Cash Flow Highlights

17Amounts may not calculate precisely due to rounding. A reconciliation of GAAP to Non-GAAP financial measures can be found in the backup section of this presentation.

$ millions Q2 20 Q3 20

Cash & Short-Term Investments 301 310

Accounts Receivable 67 80

Inventories 137 143

Accounts Payable 26 34

Long-Term Debt 317 321

Cash Flow from Operations 20 10

DSO (days) 61 64

DOI 211 200

DPO 42 49


2020 Capital Restructuring

18

Convertible DebtPrincipal

AmountCoupon

Annual

Cash

Interest

Initial

Conversion

Price

As of December 31, 2019 Convertible Notes Due 2023 $345M 2.7% $9.3M $40.03

Total Convertible Debt $345M 2.7% $9.3M

Pro-Forma3

As of Sept. 30, 2020

Convertible Notes Due 2023 $132M 2.7% $3.6M $40.03



Total Convertible Debt $389M 3.3%2 $12.9M

(1) Conversion price for 2027 Convertible Notes includes the effect of the Capped Call transaction

(2) Weighted average

(3) Reflects November 2020 exchange as of September 30, 2020

Amounts may not calculate precisely due to rounding.

May 2020

• Veeco issued $125M convertible notes due 2027

• Retired $88M 2023 convertible notes

• Added ~$30M cash to balance sheet

November 2020

• Veeco entered a privately negotiated exchange agreement extending the maturity of a portion of the January 2023 notes by 2 years to January 2025

• Debt maturities are now staggered more evenly over 7 years

• Cash balance improved from $245M ending 2019 to $310M as of September 30, 2020


Focus

product lines

Extend

core technologies

Strengthen

leverage & profitability

Resilient

essential business

▪ Optimize R&D spending

▪ Strengthen foundational businesses

▪ Employees

▪ Service

▪ Supply Chain

▪ Manufacturing

▪ Semiconductor


▪ Reduce operating expenses

▪ Deliver strong gross margin

Improved company performance today while investing for longer-term growth

19

2020 Priorities UpdatePhase I of Company Transformation Phase II of Company Transformation

Backup &

Financial Tables


Q3 2020 Revenue by Market & Region

Revenue by Market Revenue by Region

Revenue Trend ($m) Q3 19 Q4 19 Q1 20 Q2 20 Q3 20

Front-End Semiconductor 34 39 31 18 21

LED Lighting, Display & Compound Semi 24 26 15 16 20

Scientific & Industrial 40 32 49 43 52

Advanced Packaging, MEMS & RF Filters 11 16 9 22 19

Total 109 113 105 99 112


ROW includes Japan, Taiwan, Korea and South East Asia.

18%

18%

17%

47%

Scientific & Industrial

Front-End Semiconductor

LED Lighting, Display & Compound Semiconductor

Advanced Packaging, MEMS & RF Filters

42%

36%

9%

13%

EMEA

China

United States

ROW

$112M


Q4 2020 Guidance

22

GAAP Non-GAAP

Revenue $120M - $135M $120M - $135M

Gross Margin 42% - 44% 42% - 44%

Operating Expenses $43M - $45M $36M - $38M

Net Income / (Loss) $1M - $9M $11M - $19M

Earnings/(Loss) Per Share $0.02 - $0.17 $0.22 - $0.37

A reconciliation of GAAP to Non-GAAP financial measures can be found in the backup section of this presentation.


Market Segmentation Update

Front-End Semiconductor

Scientific & Industrial (includes Data Storage)

LED Lighting, Display &

Compound Semiconductor

Advanced Packaging,

MEMS & RF Filters

Semiconductor (includes Advanced Packaging)

Scientific & Other (includes MEMS)

Compound Semiconductor (includes RF Filters)

Data Storage

Future Market SegmentsCurrent Market Segments

New market segmentation aligns with Veeco’s strategic focus


Historical Revenue by Market and Geography

24

Revenue by Market ($M) FY 2017 FY 2018 FY 2019

Front-End Semi 40 63 120

Advanced Packaging, MEMS

& RF Filters67 91 67


Compound Semi249 250 73

Scientific & Industrial 119 139 160

Total 476 542 419

Revenue by Market (%) FY 2017 FY 2018 FY 2019

Front-End Semi 8% 12% 29%

Advanced Packaging, MEMS

& RF Filters15% 17% 16%


Compound Semi52% 46% 17%

Scientific & Industrial 25% 25% 38%

Total 100% 100% 100%

Revenue by Geography ($M) FY 2017 FY 2018 FY 2019

USA 93 126 126

EMEA 73 89 57

China 107 194 71

ROW 203 133 165

Total 476 542 419

Revenue by Geography (%) FY 2017 FY 2018 FY 2019

USA 20% 23% 30%

EMEA 15% 16% 14%

China 22% 36% 17%

ROW 43% 25% 39%

Total 100% 100% 100%

Amounts may not calculate precisely due to rounding. A reconciliation of GAAP to Non-GAAP financial measures can be found in the backup section of this presentation.


Note on Reconciliation Tables

25

These tables include financial measures adjusted for the impact of certain items; these financial measures are therefore not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). These Non-GAAP financial measures exclude items such as: share-based compensation expense; charges relating to restructuring initiatives; non-cash asset impairments; certain other non-operating gains and losses; and acquisition-related items such as transaction costs, non-cash amortization of acquired intangible assets, incremental transaction-related compensation, and certain integration costs.

These Non-GAAP financial measures may be different from Non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. By excluding these items, Non-GAAP financial measures are intended to facilitate meaningful comparisons to historical operating results, competitors' operating results, and estimates made by securities analysts. Management is evaluated on key performance metrics including Non-GAAP Operating Income, which is used to determine management incentive compensation as well as to forecast future periods.

These Non-GAAP financial measures may be useful to investors in allowing for greater transparency of supplemental information used by management in its financial and operational decision-making. In addition, similar Non-GAAP financial measures have historically been reported to investors; the inclusion of comparable numbers provides consistency in financial reporting. Investors are encouraged to review the reconciliation of the Non-GAAP financial measures used in this news release to their most directly comparable GAAP financial measures.


Supplemental Information—GAAP to Non-GAAP Reconciliation

US$ millions Q3 19 Q4 19 Q1 20 Q2 20 Q3 20

Net Sales $109.0 $113.2 104.5 98.6 112.1

GAAP Gross Profit 42.2 45.0 46.4 41.9 49.1

GAAP Gross Margin 38.8% 39.7% 44.4% 42.5% 43.8%

Add: Release of inventory fair value step-up for purchase

accounting

1.3 - - - 0.3

Add: Share-Based Comp 0.4 0.5 0.5 0.5 0.4

Non-GAAP Gross Profit $43.9 $45.5 $47.0 $42.4 $49.8

Non-GAAP Gross Margin 40.3% 40.2% 44.9% 43.0% 44.5%


GAAP Net Income (Loss) $(11.8) $(32.9) $(0.6) $(8.3) $0.6


Add: Amortization 4.3 4.3 3.8 3.8 3.8

Add: Restructuring 1.8 2.1 0.6 0.5 -

Add: Release of inventory fair value step-up for purchase

accounting1.3 - - - 0.3

Add: Depreciation of PP&E fair value step-up for purchase

accounting

0.1 0.1 0.1 0.1 -

Add: Loss on extinguishment of debt - - - 3.0 -

Add: Asset Impairment - 4.0 - 0.3 -

Add: Interest Expense 4.3 4.7 4.9 5.6 6.2

Add: Impairment of equity investment - 21.0 - - -

Add: Tax expense (benefit) 0.1 0.4 0.3 0.1 0.2

Non-GAAP Operating Income (Loss) $4.0 $7.4 $12.7 $8.0 $14.1

US$ millions, except per share amounts Q3 19 Q4 19 Q1 20 Q2 20 Q3 20

GAAP Basic EPS (0.25) (0.69) (0.01) (0.17) 0.01

GAAP Diluted EPS (0.25) (0.69) (0.01) (0.17) 0.01

GAAP Net Income (Loss) (11.8) (32.9) (0.6) (8.3) 0.6


Add: Amortization 4.3 4.3 3.8 3.8 3.8

Add: Restructuring 1.8 2.1 0.6 0.5 -

Add: Release of inventory fair value step-up for purchase accounting 1.3 - - - 0.3

Add: Depreciation of PP&E fair value step-up for purchase accounting 0.1 0.1 0.1 0.1 -

Add: Loss on extinguishment of debt - - - 3.0 -

Add: Asset Impairment - 4.0 - 0.3 -

Add: Non-Cash Interest Expense 3.2 3.3 3.3 3.5 3.5

Add: Impairment of equity investment - 21.0 - - -

Add: Tax Adjustment from GAAP to Non-GAAP (0.1) (0.2) (0.1) (0.3) (0.2)

Non-GAAP Net Income (Loss) 2.6 5.4 10.9 5.5 11.0

Non-GAAP Basic EPS 0.05 0.11 0.23 0.11 0.23

Non-GAAP Diluted EPS 0.05 0.11 0.23 0.11 0.22


GAAP Operating Expenses $49.6 $51.8 $41.9 $41.5 $42.2

Share-Based Compensation (3.4) (3.3) (3.1) (2.5) (2.6)

Amortization (4.3) (4.3) (3.8) (3.8) (3.8)

Asset Impairment - (4.0) - (0.3) -

Other (1.9) (2.2) (0.7) (0.5) -

Non-GAAP Operating Expenses $40.0 38.0 34.2 34.4 35.7



Q3 2020 Actual: GAAP to Non-GAAP Reconciliation


Non-GAAP Adjustments

In millions, except per share amounts GAAP

Share-Based

Compensation Amortization Other Non-GAAP

Net Sales $112.1 $112.1

Gross Profit 49.1 0.4 0.3 49.8

Gross Margin 43.8% 44.5%

Operating Expenses 42.2 (2.6) (3.8) 35.8

Operating Income (Loss) 7.0 2.9 3.8 0.3 14.1

Net Income (Loss) $0.6 2.9 3.8 3.7 $11.0

Income (Loss) Per Common Share:

Basic $0.01 $0.23

Diluted 0.01 0.22

Weighted Average Number of Shares:

Basic 48.3 48.3

Diluted 49.2 49.2

Other Non-GAAP Adjustments

Release of inventory fair value step-up associated with

the Ultratech purchase accounting 0.3

Subtotal 0.3

Non-Cash Interest Expense 3.5

Non-GAAP Tax Adjustment (0.2)

Total Other 3.7


Q4 2020 Guidance: GAAP to Non-GAAP Reconciliation


Non-GAAP Adjustments

In millions, except per share amounts GAAP

Share-Based

Compensation Amortization Other Non-GAAP

Net Sales $120–$135 $120–$136

Gross Profit 50–60 — — — 50–60

Gross Margin 42%–44% 42%–44%

Operating Expenses $43–$45 (3) (4) — $36–$38

Operating Income (Loss) $7–$15 3 4 — $14–$22

Net Income (Loss) $1–$9 3 4 3 $11–$19

Income (Loss) per Diluted Share $0.02–$0.17 $0.22–$0.37

GAAP Net Income (Loss) $1–$9

Share-Based Compensation 3

Amortization 4

Interest Expense, Net 6

Non-GAAP Operating Income (Loss) $14–$22

Thank you

Documents

Investor Presentation...2020/11/13 · Semiconductor Compound Semiconductor Data Storage Ion Beam Deposition & Etch of magnetic material for HDD heads 1990s Profitability has significantly