canaccord genuity 33rd annual growth ......33rd annual growth conference august 2013 august 2013 2...
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CANACCORD GENUITY
33RD ANNUAL GROWTH CONFERENCE
AUGUST 2013
2 August 2013
SAFE HARBOR STATEMENT
This presentation contains statements about management's future expectations, plans and prospects of our business that
constitute forward-looking statements, which are found in various places throughout the press release, including , but not
limited to, statements relating to expectations of orders, net sales, product shipments, backlog, expenses, timing of
purchases of assembly equipment by customers, gross margins, operating results and capital expenditures. The use of
words such as “anticipate”, “estimate”, “expect”, “can”, “intend”, “believes”, “may”, “plan”, “predict”, “project”, “forecast”,
“will”, “would”, and similar expressions are intended to identify forward looking statements, although not all forward looking
statements contain these identifying words. The financial guidance set forth under the heading “Outlook” constitutes forward
looking statements. While these forward looking statements represent our judgments and expectations concerning the
development of our business, a number of risks, uncertainties and other important factors could cause actual developments
and results to differ materially from those contained in forward looking statements, including the discovery of weaknesses in
our internal controls and procedures, our inability to maintain continued demand for our products; the impact on our
business of potential disruptions to European economies from euro zone sovereign credit issues; failure of anticipated
orders to materialize or postponement or cancellation of orders, generally without charges; the volatility in the demand for
semiconductors and our products and services; failure to adequately decrease costs and expenses as revenues decline,
loss of significant customers, lengthening of the sales cycle, incurring additional restructuring charges in the future, acts of
terrorism and violence; inability to forecast demand and inventory levels for our products, the integrity of product pricing and
protect our intellectual property in foreign jurisdictions; risks, such as changes in trade regulations, currency fluctuations,
political instability and war, associated with substantial foreign customers, suppliers and foreign manufacturing operations;
potential instability in foreign capital markets; the risk of failure to successfully manage our diverse operations; those
additional risk factors set forth in Besi's annual report for the year ended December 31, 2012 and other key factors that
could adversely affect our businesses and financial performance contained in our filings and reports, including our statutory
consolidated statements. We are under no obligation to (and expressly disclaim any such obligation to) update or alter our
forward-looking statements whether as a result of new information, future events or otherwise.
3 August 2013
AGENDA
I. Company Overview
II. Market
III. Strategy
IV. Financial Review
V. Outlook & Summary
4 August 2013
I. COMPANY OVERVIEW
5 August 2013
COMPANY OVERVIEW
• Leading assembly equipment supplier with #1 and #2 positions in key products. 27% addressable market share
• Broad portfolio: die attach, packaging, plating, wire bond
• Strategic positioning in wafer level and substrate packaging
• Global mfg. operations in 7 countries; 1,520 employees worldwide. HQ in Duiven, the Netherlands
Corporate Profile
• 2012 revenue and net income of € 273.7 and € 15.8 million
• Cash at 6/30/13: € 81.1 million
• Total debt at 6/30/13: € 24.9 million
Financial Highlights
• Advanced packaging, smart phone/tablet growth and Asian production transfer offer significant upside potential
• Restructuring and production transfer have transformed company and earnings potential
• Stock market valuation at discount to peers
Investment Considerations
6 August 2013
• Market cap € 303.2 million: 37.2 million shares x € 8.15 price (July 31)
• Shares listed on NYSE Euronext Amsterdam (BESI) and NASDAQ OTCQX
International (BESIY). 2013 average daily volume of 105,000 shares
• Trading at significant discount to industry multiples:
Besi (a) Peers (b, c) Industry (c, d)
TTM P/S 1.1x 1.5x 2.1x
TTM EV/EBITDA 8.6x 8.4x 11.5x
2013E P/S 1.1x 1.6x 2.1x
2013E EV/EBITDA 8.5x 9.3x 11.8x
STOCK PRICE INFORMATION
Source: a) Besi: Canaccord Genuity, SNS Securities research & ABN AMRO b) Peers: ASMPT, Disco Corp, Mühlbauer, Tokyo Seimitsu, Shinkawa, Süss MicroTec and K&S c) Reuters & MS estimates d) Industry: Reuters semi equipment universe
7 August 2013
BESI EQUIPMENT PORTFOLIO
Die Attach
• Die Bonding
- 2100 xP
- 2009 series
- 2100 HS
- 2100 sD
- 2100PPP
• Multi Module Die
Attach
- 2200 evo
• Flip Chip - 8800 Quantum
- 8800 Chameo
- "Smart Line"
- 2100FC
Packaging & Plating Wire Bonding
• Die Sorting
- DS 9000E
- CS 1250
- DS 11000
• 3100
• 3100
Smart Card
• 3200 Smart
Card
• Molding
- AMS series
- AMS Foil
- AMS LM 95
• Trim & Form
- Compact series
- Power series
- Compact Line
XHD
• Singulation
- FSL
• Plating
- Leadframe
- Solar
- Film & foil
New
New
In Development
• TCB flip chip system
• Common die attach platform
• Common packaging platform
New
New
New
8 August 2013
II. MARKET
9 August 2013
ASSEMBLY EQUIPMENT MARKET FORECAST
• Since 2010 rebound, assembly market has been trending lower
• However, 25%+ growth from 2013 levels anticipated by 2015
2.3
4.9
4.6
4.13.9
4.5
4.9
-20.6%
-6.4%-10.2%
-4.7%
15.3%8.6%
114.9%
0
1
2
3
4
5
6
2009 2010 2011 2012 2013E 2014E 2015E
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
140%
160%
Assembly Equipment Market Size YoY Growth Rate
Source: VLSI July 2013
10 August 2013
ASSEMBLY EQUIPMENT MARKET COMPOSITION
• 51% assembly market 2012 represented by die attach and wire bonding equipment
• Die attach increasing market share relative to wire bonding
• Besi focus: fastest growing die attach and packaging segments serving advanced
applications
Die Attach
61%
Packaging
38%
Plating
1%
Flip Chip
14%
Die Sorting
3%
Singulation
8%
Presses
10%
Molds
14%
Lead Trim &
Form
6% Die Bonding
44%
Assembly Equipment Market *
(2012: $4.1 billion) Besi Addressable Market *
(2012: $1.7 billion)
Wire Bonding
22%
Die Attach
29%
Packaging
20%
Plating
1%
Other Assembly
(Inspection, Dicing)
28%
* Source: VLSI July 2013
Plating
2%
11 August 2013
Customers OEMs End Products
CUSTOMER ECOSYSTEM
• Blue chip customer base, top 10 customers represented 48% of 2012 revenue
• Leading Asian Subcontractors and IDMs. 57/43% split in 2012
• Equipment utilized to produce chips for leading fabless companies: Qualcomm,
Broadcom, MediaTek
• Long term relationships, some exceeding 45 years
IDMs
Subcontractors
12 August 2013
• Customers are largest producers.
• Most advanced packaging
applications
• Strong customer market shares:
• 50 – 100% of die attach
requirements
• 35 – 50% of packaging
requirements
• Customer market shares/annum
vary depending on capacity
requirements and purchasing
cycles
• Primary competition:
• Die Attach: ASMPT, Shinkawa,
Hitachi
• Packaging: Towa, Yamada,
ASMPT
ESTIMATED SHARE OF WALLET
LEADING CUSTOMERS
* YTD through May 31
** No customer purchases indicated
*** Fabless semiconductor companies such as Qualcomm, Broadcom and Mediatek have assembly
production done by subcontractors
**** In general, Samsung satisfies approximately 50% of its equipment needs internally
Die Attach Packaging
In USD FY2011 FY2012 YTD2013* FY2011 FY2012 YTD2013*
Subcontractors
ASE 76% 67% 72% 34% 36% 49%
Amkor 36% 75% 90% 63% 45% 28%
STATSChippac 100% 95% 100% 61% 28% - **
SPIL 63% 47% 100% 35% 37% 86%
Unisem 100% 92% - ** 68% - ** - **
Cowell/Foxconn
(Camera Modules) 0% 100% - **
IDMs ***
Skyworks 78% 100% 100% 0% 13% 0%
ST Micro 92% 91% 87% 51% 44% 100%
Infineon 93% 81% 100% 37% - ** - **
Samsung**** 17% 5% - ** 37% - ** 100%
% of Besi Die Attach
and Packaging
systems revenue 30%
47%
66%
67%
53%
78%
13 August 2013
ADVANCED PACKAGING GROWTH FAVORS BESI
Greater Miniaturization
Greater Complexity
Increased Density
Higher Performance
Lower Power Consumption
Higher Accuracy
• High growth applications require ever smaller, denser and more complex chips with increased performance, all at lower power usage
• <40 nanometer geometry will be the standard chip design over the next 3-5 years
• System on Chip or System in Package via substrate and wafer level packaging process is the only answer
• Besi has full range of AP systems. 2012E revenue: 70% substrate/wafer level vs. 30% leadframe
Die Attach
• Die Sorting: DS 9000
• Die Bonding: ES 2009, 2100
• Flip Chip: DC 8800 FC
• Multi Module: DC evo 2200
Packaging
• Molding: AMS-LM 95
• Singulation: FSL
High Growth End
User Areas:
Mobile internet
devices, Digital set
top boxes, Autos,
MEMS
14 August 2013
SMART PHONE ILLUSTRATION
Main Components Manufacturer Country Besi Systems Utilized
Processor Samsung South Korea 8800FCQ, AMS-W, Singulation
DRAM Memory Samsung South Korea 2100sD, AMS-W, Singulation
Flash Memory Chip Samsung South Korea 2100sD, AMS-W, Singulation
Battery Samsung South Korea N/A
Power Management Dialog Germany 2100sD, 2009
Compass AKM Japan N/A
Accelerator/Gyroscope ST Micro Italy/France 2100sD
Communications
Radio Frequency Memory Intel USA 8800FCQ, Singulation
Wi-Fi/Bluetooth/GPS Broadcom USA 2200 evo, AMS-W, Singulation
Receiver/Transceiver Infineon Germany 8800FCQ, AMS-I, Singulation
PA Module Skyworks, Triquint USA
2200 evo, AMS-W, Singulation, 8800 Chameo
Video/Audio
Touch Screen Control TI USA 2100sD, AMS-W, Singulation
Audio Codec Cirrus Logic USA 2100sD, AMS-W, Singulation
LCD Display LG South Korea N/A
Touch Screen Wintek USA N/A
Camera – 5/8 megapixel/VGA LG, Foxconn, Cowell
South Korea, China 2200 evo
Besi systems can assemble components representing up to 50% of smart phone content.
15 August 2013
Computer,
PCs50%
Mobile
Internet Devices
22%
Auto13%
Industrial
10%
LED3%
Service
2%
2008
BESI’S PRODUCT SHIFT TO ADVANCED
PACKAGING END USER APPLICATIONS
Computer,
PCs21%
Mobile
Internet Devices
35%
Auto17%
Industrial10%
LED5%
Service
12%
2012
Source: 2012 Company Estimates
• Mobile internet
devices now equal
35% of Besi’s end
user revenue
• Automotive has also
increased significantly
in recent years
• Service/spare parts
have grown to 12%.
Less cyclical revenue
stream
16 August 2013
Wire
Bonding
$1,016 75%
Flip Chip
$335
25%
2017E
FLIP CHIP/WIRE BOND OPPORTUNITY
Wire
Bonding
$923 80%
Flip Chip
$228
20%
2012 Wire Bonding Flip Chip Bonding
Reduces board area by up to 95%.
Requires far less height
Offers higher speed electrical
performance
Greater I/O connection flexibility
More durable interconnection
method
Lower cost for high volume production,
with costs below $0.01 per connection
Flip Chip Advantages
* Source: VLSI July 2013
• Move to <40 nanometer can only be accomplished by use of flip chip die bonding vs. wire bonding process
• Flip chip revenue represents only 20% currently of total potential market of $1.2 billion
• Expected to gain share rapidly over next 5 years vs. wire bonding (5.5% CAGR delta) as per VLSI
• Growth rates could accelerate depending on adoption rates of key IDMs/subcons
CAGR 2012 – 17
Flip Chip 8.0%
Wire Bond 1.6%
17 August 2013
III. STRATEGY
18 August 2013
15%
20%
25%
30%
35%
40%
45%
50%
55%
60%
0
50
100
150
200
250
300
350
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Gro
ss M
arg
in
Re
ve
nu
e (
€ m
illio
n)
Revenue Gross Margin
CORPORATE TRANSFORMATION
Restructuring
Asian Production Transfer
Dragon I
complete:
€ 6 million
cost savings
Dragon II
complete:
€ 15 million
cost savings
Die Attach Acquisitions
Standard packaging and certain die
bonding systems transferred to
Malaysia
Dutch tooling &
Hungarian die bonding
transferred to Asia
Epoxy DB transferred
to Malaysia
Asia capacity expansion
Cost
savings
plan
initiated
13%
Headcount
reduction;
Plating unit
rationalized
Soft solder
DB
transfer to
Malaysia
initiated
Asian headcount increased from 34% in ‘06 to 54% in ‘12
Malaysian system and Chinese tooling capacity expansion
19 August 2013
KEY STRATEGIC OBJECTIVES
2012 2013 2014
Operational Objectives
Soft Solder DB production transfer to Malaysia
50% Malaysia/100% China capacity expansion
European Die attach integration activities
Expansion of Asian supply chain. System module outsourcing
Development Objectives
TCB flip chip die bonding development
300-450 mm wafer handling
Common platform/parts activities
20 August 2013
396
487
658
170
331
553
42.9%
68.0%
84.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
-
100
200
300
400
500
600
700
2010 2011 2012
% D
irect
Sh
ipm
en
ts
Sh
ipm
en
ts
Total Asian Shipments Direct Asian Shipments % Direct
SUCCESSFUL ASIAN PRODUCTION TRANSFER
21 August 2013
HAS LED TO LOWER EUROPEAN AND
AGGREGATE HEADCOUNT
• Headcount trends continue to favorably influence
break even revenue levels
• Fixed European headcount gradually reducing
as shift to Asia manufacturing progresses:
• Down by 1.7% sequentially in Q2-13
• Down by 12.7% year over year
• Declined from 56% of total in 2009 to 43% at
end of Q2-13
• Aggregate of 1,520 headcount at Q2-13 quarter
end (including temps):
• Flat vs. Q1-13
• Down 9.2% vs. Q2-12
770 56%
738 49%
741 48%
680 46%
644 44%
633 43%
614 44%
772 51%
802 52% 799
54% 820 56%
825 57%
1,384
1,510 1,543
1,479 1,464 1,458
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2009 2010 2011 2012 Q12013
Q22013
He
ad
co
un
t
Europe/NA Fixed HC Asia Fixed HC
22 August 2013
IV. FINANCIAL REVIEW
23 August 2013
SUMMARY FINANCIAL HIGHLIGHTS
• Financial transformation since 2008
• Scale and market presence have changed:
• Esec acquisition expanded mainstream presence
and leveraged revenue potential
• Strategic positioning in advanced packaging has
yielded benefits:
• Enhanced top line growth
• Increased gross margins
• Restructuring has aided gross margins and profits
despite 2011/2012 cyclical volatility due to:
• Advanced packaging positioning
• Ongoing Asian production transfer
• Reduction of European based costs
• Die attach integration
• Product line restructurings
• Scalability of business model increased in
response to increased order volatility
• Solid liquidity base. Expanding net cash
Year Ended December 31,
(€ millions, except share data) 2010 2011 2012
Revenue
351.1 326.9 273.7
Orders 376.5 301.1 276.1
Gross margin 39% 40% 40%
EBITDA 60.5 45.6 32.4
Pretax income 47.4 34.4 19.5
Net income 47.3 26.4 15.8
EPS (diluted) 1.25 0.73 0.42
Net margin 13% 8% 6%
Adj. net income (loss) 41.6 27.1 18.2
Adj. EPS (diluted) 1.11 0.74 0.49
Net Cash 22.9 62.7 79.5
24 August 2013
REVENUE/GROSS MARGIN TRENDS
• Quarterly revenue/order patterns show
cyclicality of semiconductor business:
• Three cycles past 3 years
• Global macro uncertainty = customer
caution + short term purchasing
• Q4-12 was recent trough
• Product mix shift to higher margin
advanced packaging systems:
• Multi module and flip chip die attach
• Ultra thin molding systems
• Drivers: mobile internet devices and
intelligent automotive components
• Exit from lower margin plating, wire
bonding and packaging systems
• Gross margins have held up despite
cyclicality:
• Increased scalability of production model
• Product mix shift to higher margin
advanced packaging systems
• Lower unit costs due to:
• Asian production transfer
• Reduction in European personnel
91 90
76
70
56
87
75
56
64
72
88
83
75
55
84
91
49 52
64
83
40.0%
40.0%41.2%
40.0%
38.5%
39.4%
41.5%
40.3%
37.7%
39.6%
40.4%
30.0%
32.0%
34.0%
36.0%
38.0%
40.0%
42.0%
44.0%
46.0%
48.0%
50.0%
0
20
40
60
80
100
Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13
(eu
ro in
mill
ion
s)
Revenue OrdersGross Margin Gross Margin ex Restructuring
25 August 2013
BREAK EVEN REVENUE LEVELS
270
235
200 212
-
50
100
150
200
250
300
2011 2012 2013E
(€ m
illi
on
s)
(13.0%)
(10.0% - 15.0%)
26 August 2013
NET INCOME TRENDS
• Cyclical peak earnings of € 47.3 million
reached in 2010
• 2012 earnings declined to € 15.8 million.
Adversely affected by:
• 16.3% YOY revenue decrease due to
ongoing customer caution
• € 2.4 million restructuring charges
• € 1.2 million increased forex losses
• Partial offset from restructuring:
• -11% European headcount
• -7% cost/production employee
• -12% opex
• € 3.0 million tax loss benefit
• H1-13 rebound from Q4-12 trough due
to order upturn and reduction in break
even revenue levels
• Significant leverage in operating model
• Quarterly opex have ranged between
€ 20-24 million over past 8 quarters
• € 20.3 million in Q2-13 ex restructuring
9.6
8.8
4.9
3.2
0.2
10.0
4.3
1.2
3.8
6.5
3.9
4.6
3.3
4.0
7.0
0
2
4
6
8
10
12
Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13
(eu
ro in
mill
ion
s)
Net Income Adjusted Net Income
27 August 2013
LIQUIDITY TRENDS
• Solid liquidity position
• € 81.1 million cash at 6/30/13
• € 2.16 per share vs. price of
€ 7.93 at quarter end
• Net cash has grown to € 56.2 million
from € 19.6 million at year end 2009
• Significant increase in profitability
• Redemption and share conversion of
5.5% convertible notes in Q2-2011
• Improved working capital management
• Shareholder value enhanced
• € 38 million spent on share repurchases
and cash dividends 2011-2013
• 1.5 million share buyback initiated in
October 2012. 600k shares purchased
• Strong balance sheet supports future
organic growth and acquisition strategy
65.5
61.8
76.6
87.5
93.5
77.3
89.8
106.4
91.9
81.1
45.9
16.1
27.0 24.8
23.1
27.9 30.6
26.9 27.7 24.9
0
20
40
60
80
100
120
Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13
(euro
in m
illio
ns)
Cash Debt
Net Cash 19.6 45.7 49.6 62.7 70.4 49.4 59.2 79.5 64.2 56.2
28 August 2013
V. OUTLOOK & SUMMARY
29 August 2013
IC PRICING AND ASSEMBLY MARKET TRENDS
Assembly Capacity Utilization & IC Pricing
Book to Bill Ratio
Source: VLSI Jul 2013 Source: Semi Jul 2013
1.23
1.12
1.08
1.51
1.40
1.23
0.50
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
Jan 1
0
Mar
10
May
10
Jul 1
0
Sep
t 10
Nov
10
Ja
n 1
1
Ma
r 1
1
Ma
y 1
1
Jul 1
1
Sep
t 11
Nov
11
Jan 1
2
Mar
12
May
12
Jul 1
2
Sep
t 12
Nov
12
Jan 1
3
Mar
12
May
12
Semiconductor Equipment Book to Bill Trends(3 month moving average)
Assembly Equipment
Total Semi Equipment
1.14
1.16
1.18
1.20
1.22
1.24
1.26
1.28
1.30
1.32
1.34
1.36
1.38
1.40
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
2010 JAN
MAY SEP 2011 JAN
MAY SEP 2012 JAN
MAY SEP 2013 JAN
MAY
3 M
on
th A
vg
Pri
cin
g (
$)
% C
ap
acit
y U
tili
zati
on
Assembly Utilization IC ASP
• Relatively short seasonal cycles over past three years driven by:
• smart phone and tablet purchasing patterns
• macro economic conditions
• Assembly book/bill and capacity utilization have increased since Q4-12 industry trough
30 August 2013
Q3-2013 GUIDANCE AS PER JULY 31, 2013
• Q3-13 revenue approximately flat to down 10%
• Gross margins between 39% - 41%
• Opex approximately equal to € 20.3 million (ex restructuring)
• Capex of € 1.4 million
Revenue Gross Margin Operating Expenses* Capex
Q2 Q3 Q2 Q3 Q2 Q3 Q2 Q3
€ 72.4 40.4% € 20.3 € 1.1
41%
-
39%
Flat
-
down
10%
€ 0.3
MM
* Excluding restructuring
Approx.
equal
31 August 2013
SUMMARY
Leading semi assembly equipment supplier with #1
or #2 positions in fastest growing advanced
packaging segments
Scalability and profitability of business model greatly
enhanced for cyclical industry
Favorable industry outlook 2014/2015
Solid liquidity position. Committed to enhancing
shareholder value
Significant upside potential.
Advanced packaging, mobile internet devices,
ongoing cost reduction and Asian production transfer
Attractive stock market valuation and dividend yield relative to peers