Veeco Reports Third Quarter 2019 Financial Results - Veeco Instruments (NASDAQ:VECO)

Third Quarter 2019 Highlights:

Revenues of $109.0 million, compared with $126.8 million in the same period last year
GAAP net loss of $11.8 million, or $0.25 loss per diluted share
Non-GAAP net income of $2.6 million, or $0.05 per diluted share

PLAINVIEW, N.Y., Nov. 04, 2019 (GLOBE NEWSWIRE) -- Veeco Instruments Inc. VECO today announced financial results for its third quarter ended September 30, 2019. Results are reported in accordance with U.S. generally accepted accounting principles ("GAAP") and are also reported adjusting for certain items ("Non-GAAP"). A reconciliation between GAAP and Non-GAAP operating results is provided at the end of this press release.

U.S. Dollars in millions, except per share data

GAAP Results	Q3 '19			Q3 '18
Revenue	$	109.0		$	126.8
Net income (loss)	$	(11.8	)	$	(9.0	)
Diluted earnings (loss) per share	$	(0.25	)	$	(0.19	)

Non-GAAP Results	Q3 '19		Q3 '18
Net income (loss)	$	2.6	$	5.3
Operating income (loss)	$	4.0	$	8.0
Diluted earnings (loss) per share	$	0.05	$	0.11

"Veeco executed well in Q3 with revenue and EPS above the midpoint of our guided range. Our gross margin exceeded our guidance and the company returned to profitability on a non-GAAP basis," commented William J. Miller, Ph.D., Chief Executive Officer. "We continue to experience demand for our EUV mask blank products and have shipped our second production system. This shipment, combined with revenue from multiple LSA systems, drove strong Front End Semiconductor sales. Additionally, shipments to our data storage customers remained solid as they continued to invest in technology and capacity."

Guidance and Outlook

The following guidance is provided for Veeco's fourth quarter 2019:

Revenue is expected in the range of $100 million to $120 million
GAAP loss per share is expected in the range of ($0.32) to ($0.10)
Non-GAAP earnings (loss) per share are expected in the range of $(0.03) to $0.18

Please refer to the tables at the end of this press release for further details.

Conference Call Information

A conference call reviewing these results has been scheduled for today, November 4, 2019 starting at 5:00pm ET. To join the call, dial 1-888-394-8218 (toll free) or 1-646-828-8193 and use passcode 9227350. Participants may also access a live webcast of the call by visiting the investor relations section of Veeco's website at ir.veeco.com. A replay of the webcast will be made available on the Veeco website beginning at 8:00pm ET this evening. We will post an accompanying slide presentation to our website prior to the beginning of the call.

About Veeco

Veeco VECO is an innovative manufacturer of semiconductor process equipment. Our proven ion beam, laser annealing, lithography, MOCVD, and single wafer etch & clean technologies play an integral role in the fabrication and packaging of advanced semiconductor devices. With equipment designed to optimize performance, yield and cost of ownership, Veeco holds leading technology positions in the markets we serve. To learn more about Veeco's systems and service offerings, visit www.veeco.com.

Forward-looking Statements

To the extent that this news release discusses expectations or otherwise makes 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 risks 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, 2018 and in our subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and press releases. Veeco does not undertake any obligation to update any forward-looking statements to reflect future events or circumstances after the date of such statements.

Veeco Contacts:

Investors:	Media:
Anthony Bencivenga (516) 252-1438	Kevin Long (516) 714-3978
abencivenga@veeco.com	klong@veeco.com


Veeco Instruments Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Net sales	$	108,954		$	126,757		$	306,147		$	443,110
Cost of sales		66,731			80,372			192,924			284,651
Gross profit		42,223			46,385			113,223			158,459
Operating expenses, net:
Research and development		22,639			23,544			68,901			72,793
Selling, general, and administrative		20,962			20,186			60,620			70,842
Amortization of intangible assets		4,312			4,183			12,773			28,102
Restructuring		1,828			2,057			3,874			7,669
Acquisition costs		—			249			—			2,906
Asset impairment		—			—			—			252,343
Other, net		(153	)		39			(232	)		325
Total operating expenses, net		49,588			50,258			145,936			434,980
Operating income (loss)		(7,365	)		(3,873	)		(32,713	)		(276,521	)
Interest expense, net		(4,330	)		(4,779	)		(12,742	)		(13,847	)
Income (loss) before income taxes		(11,695	)		(8,652	)		(45,455	)		(290,368	)
Income tax expense (benefit)		72			301			407			(27,954	)
Net income (loss)	$	(11,767	)	$	(8,953	)	$	(45,862	)	$	(262,414	)

Income (loss) per common share:
Basic	$	(0.25	)	$	(0.19	)	$	(0.97	)	$	(5.55	)
Diluted	$	(0.25	)	$	(0.19	)	$	(0.97	)	$	(5.55	)

Weighted average number of shares:
Basic		47,489			46,982			47,361			47,283
Diluted		47,489			46,982			47,361			47,283


Veeco Instruments Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)

	September 30,		December 31,
	2019		2018
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	135,259	$	212,273
Restricted cash		687		809
Short-term investments		95,672		48,189
Accounts receivable, net		72,731		66,808
Contract assets		20,782		10,397
Inventories		135,190		156,311
Deferred cost of sales		2,198		3,072
Prepaid expenses and other current assets		23,762		22,221
Total current assets		486,281		520,080
Property, plant and equipment, net		77,801		80,284
Operating lease right-of-use assets		10,472		—
Intangible assets, net		72,376		85,149
Goodwill		184,302		184,302
Deferred income taxes		1,872		1,869
Other assets		29,172		29,132
Total assets	$	862,276	$	900,816

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	34,702	$	39,611
Accrued expenses and other current liabilities		40,641		46,450
Customer deposits and deferred revenue		66,031		72,736
Income taxes payable		663		1,256
Total current liabilities		142,037		160,053
Deferred income taxes		5,713		5,690
Long-term debt		296,810		287,392
Operating lease long-term liabilities		6,066		—
Other liabilities		9,180		9,906
Total liabilities		459,806		463,041

Total stockholders' equity		402,470		437,775

Total liabilities and stockholders' equity	$	862,276	$	900,816


Veeco Instruments Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Data
(in thousands, except per share amounts)
(unaudited)

					Non-GAAP Adjustments
					Share-Based
Three months ended September 30, 2019	GAAP				Compensation		Amortization		Other			Non-GAAP
Net sales	$	108,954										$	108,954
Gross profit		42,223			383				1,316				43,922
Gross margin		38.8		%									40.3	%
Operating expenses		49,588			(3,400	)	(4,312	)	(1,920	)			39,956
Operating income (loss)		(7,365	)		3,783		4,312		3,236		^		3,966
Net income (loss)		(11,767	)		3,783		4,312		6,302		^		2,630

Income (loss) per common share:
Basic	$	(0.25	)									$	0.06
Diluted		(0.25	)										0.05
Weighted average number of shares:
Basic		47,489											47,495
Diluted		47,489											47,898
____________________________ ^ - See table below for additional details.


Veeco Instruments Inc. and Subsidiaries
Other Non-GAAP Adjustments
(in thousands)
(unaudited)

Three months ended September 30, 2019
Restructuring	1,828
Release of inventory fair value step-up associated with the Ultratech purchase accounting	1,270
Depreciation of PP&E fair value step-up associated with the Ultratech purchase accounting	138
Subtotal	3,236
Non-cash interest expense	3,199
Non-GAAP tax adjustment *	(133	)
Total Other	6,302
____________________________ * - The ‘with or without' method is utilized to determine the income tax effect of all Non-GAAP adjustments.

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, 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 (loss), 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.


Veeco Instruments Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Data
(in thousands, except per share amounts)
(unaudited)

					Non-GAAP Adjustments
					Share-based
Three months ended September 30, 2018		GAAP			Compensation		Amortization		Other			Non-GAAP
Net sales	$	126,757										$	126,757
Gross profit		46,385			513				1,489				48,387
Gross margin		36.6		%									38.2	%
Operating expenses		50,258			(2,766	)	(4,183	)	(2,892	)			40,417
Operating income (loss)		(3,873	)		3,279		4,183		4,381		^		7,970
Net income (loss)		(8,953	)		3,279		4,183		6,813		^		5,322

Income (loss) per common share:
Basic	$	(0.19	)									$	0.11
Diluted		(0.19	)										0.11
Weighted average number of shares:
Basic		46,982											46,984
Diluted		46,982											47,000
____________________________ ^ - See table below for additional details.


Veeco Instruments Inc. and Subsidiaries
Other Non-GAAP Adjustments
(in thousands)
(unaudited)

Three months ended September 30, 2018
Restructuring	1,890
Acquisition related	249
Release of inventory fair value step-up associated with the Ultratech purchase accounting	1,411
Depreciation of PP&E fair value step-up associated with the Ultratech purchase accounting	236
Accelerated depreciation	595
Subtotal	4,381
Non-cash interest expense	2,968
Non-GAAP tax adjustment *	(536	)
Total Other	6,813
____________________________ * - The ‘with or without' method is utilized to determine the income tax effect of all Non-GAAP adjustments.


Veeco Instruments Inc. and Subsidiaries
Reconciliation of GAAP Net Income (loss) to Non-GAAP Operating Income (loss)
(in thousands)
(unaudited)

	Three months ended			Three months ended
	September 30, 2019			September 30, 2018
GAAP Net income (loss)	$	(11,767	)	$	(8,953	)
Share-based compensation		3,783			3,279
Amortization		4,312			4,183
Restructuring		1,828			1,890
Acquisition related		—			249
Release of inventory fair value step-up associated with the Ultratech purchase accounting		1,270			1,411
Depreciation of PP&E fair value step-up associated with the Ultratech purchase accounting		138			236
Accelerated depreciation		—			595
Interest (income) expense, net		4,330			4,779
Income tax expense (benefit)		72			301
Non-GAAP Operating income (loss)	$	3,966		$	7,970

This table includes 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, and certain integration costs.


Veeco Instruments Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Data
(in millions, except per share amounts)
(unaudited)

									Non-GAAP Adjustments
Guidance for the three months ending									Share-based
December 31, 2019	GAAP								Compensation	Amortization	Other	Non-GAAP
Net sales	$	100			-	$	120					$	100			-	$	120
Gross profit		38			-		48		1	—	—		39			-		49
Gross margin		39	%		-		41	%					39	%		-		41	%
Operating expenses				~$48					3	4	2				~$39
Operating income (loss)		(10	)		-		—		4	4	2		—			-		10
Net income (loss)	$	(15	)		-	$	(5	)	4	4	5	$	(2	)		-	$	8

Income (loss) per diluted common share	$	(0.32	)		-	$	(0.10	)				$	(0.03	)		-	$	0.18
Weighted average number of shares		48					48						48					48


Veeco Instruments Inc. and Subsidiaries
Reconciliation of GAAP Net Income (loss) to Non-GAAP Operating Income (Loss)
(in millions)
(unaudited)

Guidance for the three months ending December 31, 2019
GAAP Net income (loss)	$	(15	)	-	$	(5	)
Share-based compensation		4		-		4
Amortization		4		-		4
Restructuring		2		-		2
Interest expense, net		4		-		4
Other		1		-		1
Non-GAAP Operating income (loss)	$	—		-	$	10

Note: Amounts may not calculate precisely due to rounding.

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