KULICKE & SOFFA INDUSTRIES, INC. NASDAQ: KLIC DECEMBER QUARTER 2016 INVESTOR PRESENTATION

Transcription

1 DECEMBER QUARTER 2016 INVESTOR PRESENTATION

2 SAFE HARBOR STATEMENT 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 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; 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 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 "More than Moore Semiconductor Unit Growth Served Available Market Expansion SERVED AVAILABLE MARKET Core Market Electronics Assembly Advanced Packaging FINANCIALS & USES OF CASH Through-Cycle Performance Financial Model Cash Flow Generation & Uses of Cash Summary 3

4 POSITIONED FOR ONGOING VALUE CREATION LONG-TERM LEADERSHIP IN GROWING MARKETS POSITIONED FOR NEW GROWTH GOOD STEWARDS OF CAPITAL LARGE INSTALL BASE STRONG SALES & DISTRIBUTION NETWORK SIGNIFICANT INDUSTRY RELATIONSHIPS ELECTRONICS ASSEMBLY, AUTOMOTIVE, IOT, SSD, ADVANCED PACKAGING SERVED MARKET TO GROW BY OVER $1B THROUGH 2020 PRUDENT M&A RETURNS TO SHAREHOLDERS 4

5 TRENDS & OPPORTUNITIES

6 VALUE CHAIN SHIFTING TO PACKAGING $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 Physical limitations are more pronounced Cost benefits have largely disappeared INDUSTRY IS PURSUING NEW WAYS TO DRIVE DENSITY PER FUNCTION MORE THAN MOORE Advanced Packaging 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 6 Source(s): International Business Strategies, Inc.

7 SEMICONDUCTOR UNIT GROWTH Bonding Process GLOBAL SEMICONDUCTOR INTERCONNECTIONS BY BONDING PROCESS Advanced Packaging 12% Wire Bond 6% Interconnect CAGR Expanding Served Market Advanced Packaging (AP) SiP, PoP, WLP, FOWLP, Embedded Die, TCB Flip Chip (Mass Reflow) Advanced Electronics Assembly (EA) Downstream Electronics Assembly Trillion T T Sizable Core Market Wire Bonding Ball Bonding Wedge Bonding Consumable Tools Ongoing semiconductor unit demand 9% CAGR through 2020 supports future interconnect growth Greater complexity & chip integration requires comprehensive Advanced Packaging solutions Customer alignment & leadership positions within sizeable core markets strengthens competitive advantage 7 Source(s): VLSI Research, Oct 2016; Gartner, 4Q16 Update

8 WE COVER ALL MAJOR INTERCONNECT OPPORTUNITIES CORE EA AP WEARABLES UTILITY SMARTPHONES INTERNET-OF- THINGS (IOT) SOLID-STATE- LIGHTING 20% Device Unit CAGR 13% Semi Unit CAGR 30B IoT Units by % LED Unit CAGR SERVERS CLOUD COMPUTING AUTONOMOUS VEHICLE FEATURES HYBRID/EV SOLID-STATE DRIVES 14% Semi Unit CAGR 19% Semi Unit CAGR 14% Semi Unit CAGR 24% Semi Unit CAGR 9% Overall Semi Unit CAGR through 2020 Technology Replacement Enabling Additional Advanced Packaging Opportunities 8 Source(s): Gartner, 4Q16 Update; IDC, Jun 2016

9 GROWING OPPORTUNITIES CALENDAR SERVED MARKET EXPANSION $1.53B to $2.45B CORE BACK-END 2016 SAM: $780M 2020 SAM: $850M ADVANCED PACKAGING (AP) 2016 SAM: $450M 2020 SAM: $900M ELECTRONIC ASSEMBLY (EA) 2016 SAM: $300M 2020 SAM: $700M 9 Source(s): K&S Internal Forecast

10 SERVED AVAILABLE MARKETS

11 CORE MARKET: WIRE BOND EQUIPMENT & CONSUMABLE TOOLS TECHNOLOGY & MARKET ALIGNMENT >80% of Semiconductor Packages are Wire Bonded 145,000 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 11 Source(s): K&S Internal Forecast

12 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 12

13 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 Variant 41% K&S AP Equipment SAM CAGR Through 2020 Tech Inflection Drives High Growth Opportunity Two platforms addressing Flip-Chip, TCB, WLP, SiP, FOWLP, PoP and Embedded Die 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 13 Source(s): K&S Internal Forecast

14 Market Sizes in Billions of USD KULICKE & SOFFA INDUSTRIES, INC. NASDAQ: KLIC POSITIONED TO EXCEED TAM GROWTH EXCLUDES M&A OPPORTUNITIES $2.5 K&S Served Available Market $1.53 to $2.45B $2.0 Core TAM $1.5 $1.0 EA TAM $0.5 $0.0 AP TAM Source(s): K&S Internal Forecast

15 FINANCIALS & USES OF CASH

16 DECEMBER QUARTER FY 2017 RESULTS Quarterly GAAP Results Fiscal Q Change vs. Fiscal Q Change vs. Fiscal Q Net Revenue $149.6 million up 37.9% up 2.6% Gross Profit $68.3 million up 35.5% up 2.5% Gross Margin 45.7% down 80 bps - Income from Operations $17.3 million up % up 341.6% Operating Margin 11.5% up 1310 bps up 880 bps Net Income $15.6 million up % up 50.9% Net Margin 10.4% up 1050 bps up 330 bps EPS Diluted $0.22 up 100.0% up 46.7% Strongest ember Quarter EPS Generation in 8 years 16

17 CONTINUED THROUGH-CYCLE PERFORMANCE Revenue ($M) Operating Margin % 19.3% 8.9% 9.0% 9.8% 6.7% 1.4% 17.8% 11.5% 7.5% 2.7% '13 Mar Jun Sep Mar Jun Sep Mar Jun Sep -2.8% Mar '13 Jun Sep Mar Jun Sep -1.6% Mar Jun Sep R&D ($M) $149.6M of Revenue & $15.6M of Net Income drove $0.22 of EPS in the ember Quarter Strong Gross Margin s and an efficient operating model enhance profitability Consistent R&D investments continue to '13 Mar Jun Sep Mar Jun Sep Mar Jun Sep support robust financial performance 17

18 AN EFFICIENT OPERATING MODEL PREVIOUS CURRENT FUTURE Served Accessible Market Size $1B $1.5B $2.5B Variable Operating Expense (% of Revenue) 6-8% 4-6% 4-6% Fixed Quarterly Operating Expense* $50M $48M < $48M Effective Tax Rate Target 15% 20% 18-20% Implied Breakeven Level $135M $125M < $125M SAM Growth + Relatively Fixed OpEx to Drive Meaningful Cash-Flow Generation 18 * Fixed Quarterly Operating Expense includes SG&A, R&D, Depreciation & Amortization; excludes prototyping expenses

19 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 K&S Fiscal Year 1Q 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 19 * Free Cash Flow defined as: Operating Cash Flow less Capital Expenditures

20 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. Extremely strategic acquisition Major market opportunities in both AP and EA Increased revenue by ~40% in fiscal 2016, over 2015 GUIDING PRINCIPLES OF CASH DEPLOYMENT 1. Long-Term 2. Sustainable 3. Value-Creative 20

21 SUMMARY: FOCUSED ON LONG-TERM VALUE CREATION MARKET LEADERS IN SIZEABLE MARKETS GOOD STEWARDS OF CAPITAL SUSTAINABLE LONG-TERM VALUE STRONG CASH FLOW ALIGNED WITH HIGH GROWTH TECH TRENDS 21