Veeco Reports Second Quarter 2017 Financial Results

PLAINVIEW, NY--(Marketwired - August 03, 2017) -

Second Quarter 2017 Highlights:

Revenues of $115.1 million, compared with $75.3 million in the same period last year
GAAP net loss of $18.4 million, or $0.43 per share
Non-GAAP net income of $6.4 million, or $0.15 per share
Non-GAAP adjusted EBITDA of $12.8 million
Completed acquisition of Ultratech, Inc., a leading supplier of lithography, laser-processing and inspection systems addressing the advanced packaging, front-end semiconductor and LED markets

Veeco Instruments Inc. (NASDAQ: VECO) today announced financial results for its second fiscal quarter ended June 30, 2017. 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	Q2 '17	Q2 '16
Revenue	$115.1	$75.3
Net income (loss)	($18.4)	($32.1)
Diluted earnings (loss) per share	($0.43)	($0.82)

Non-GAAP Results	Q2 '17	Q2 '16
Net income (loss)	$6.4	($7.6)
Operating income (loss)	$9.6	($6.2)
Adjusted EBITDA	$12.8	($2.8)
Diluted earnings (loss) per share	$0.15	($0.19)

"Veeco delivered another quarter of solid results with revenue of $115 million and non-GAAP EPS of $0.15," commented John R. Peeler, Chairman and Chief Executive Officer. "We achieved a key milestone in the quarter having closed the acquisition of Ultratech on May 26, 2017. As such, our Q2 results include approximately one month of Ultratech's business. Excluding Ultratech, our Q2 results were in line with our guidance. Importantly, backlog continued to grow and bookings increased sequentially from the first quarter.

"The integration of Ultratech is proceeding well and we are very optimistic about the potential synergies in both revenue and costs. In addition, LED industry conditions continue to improve, and we believe we can achieve a stronger second half of 2017," concluded Mr. Peeler.

Guidance and Outlook

The following guidance is provided for Veeco's third quarter 2017:

Revenue is expected to be in the range of $125 million to $145 million
Non-GAAP operating income is expected to be in the range of $0 million to $9 million
GAAP earnings (loss) per share are expected to be in the range of ($0.53) to ($0.34)
Non-GAAP earnings (loss) per share are expected to be in the range of ($0.09) to $0.09

Note: The revenue guidance range above does not include approximately $20-$25 million of deferred revenue relating to orders for Veeco's new high-productivity MOCVD systems that are expected to ship in the third quarter. We will recognize this revenue once the tools are installed and our customers place them into production, which we expect to occur in early 2018.

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, August 3, 2017 starting at 5:00pm ET. To join the call, dial 877-857-6151 (toll free) or 719-325-4934 and use passcode 7191473. The call will also be webcast live on the Veeco 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 (NASDAQ: VECO) is a leading manufacturer of innovative semiconductor process equipment. Our proven MOCVD, lithography, laser annealing, ion beam and single wafer etch & clean technologies play an integral role in producing LEDs for solid-state lighting and displays, and in the fabrication of advanced semiconductor devices. With equipment designed to maximize performance, yield and cost of ownership, Veeco holds technology leadership positions in all these served markets. To learn more about Veeco's innovative equipment and services, 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, 2016 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 Instruments Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

		Three months ended June 30,						Six months ended June 30,
		2017			2016			2017			2016
Net sales		$	115,066		$	75,348		$	209,452		$	153,359
Cost of sales			76,346			43,909			136,533			89,964
Gross profit			38,720			31,439			72,919			63,395
Operating expenses, net:
	Research and development		18,619			21,543			33,608			43,653
	Selling, general, and administrative		22,698			19,995			41,801			39,834
	Amortization of intangible assets		6,354			5,273			9,221			10,524
	Restructuring		3,257			2,095			4,595			2,195
	Acquisition costs		14,133			—			15,494			—
	Asset impairment		675			13,627			1,138			13,627
	Other, net		(10	)		159			(87	)		88
Total operating expenses, net			65,726			62,692			105,770			109,921
Operating income (loss)			(27,006	)		(31,253	)		(32,851	)		(46,526	)
	Interest income (expense), net		(4,279	)		185			(7,621	)		453
Income (loss) before income taxes			(31,285	)		(31,068	)		(40,472	)		(46,073	)
	Income tax expense (benefit)		(12,897	)		1,014			(23,179	)		1,542
Net income (loss)		$	(18,388	)	$	(32,082	)	$	(17,293	)	$	(47,615	)

Income (loss) per common share:
	Basic	$	(0.43	)	$	(0.82	)	$	(0.42	)	$	(1.22	)
	Diluted	$	(0.43	)	$	(0.82	)	$	(0.42	)	$	(1.22	)

Weighted average number of shares:
	Basic		42,656			38,965			41,160			39,035
	Diluted		42,656			38,965			41,160			39,035

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

				June 30,		December 31,
				2017		2016
				(unaudited)
Assets
Current assets:
	Cash and cash equivalents			$	205,564	$	277,444
	Short-term investments				97,086		66,787
	Accounts receivable, net				108,349		58,020
	Inventories				119,935		77,063
	Deferred cost of sales				4,439		6,160
	Prepaid expenses and other current assets				24,909		16,034
		Total current assets			560,282		501,508
Property, plant and equipment, net					82,546		60,646
Intangible assets, net					396,097		58,378
Goodwill					303,160		114,908
Deferred income taxes					2,528		2,045
Other assets					25,056		21,047
		Total assets		$	1,369,669	$	758,532

Liabilities and stockholders' equity
Current liabilities:
	Accounts payable			$	46,040	$	22,607
	Accrued expenses and other current liabilities				44,305		33,201
	Customer deposits and deferred revenue				76,985		85,022
	Income taxes payable				4,316		2,311
	Current portion of long-term debt				1,013		368
		Total current liabilities			172,659		143,509
Deferred income taxes					46,291		13,199
Long-term debt					270,071		826
Other liabilities					11,163		6,403
		Total liabilities			500,184		163,937

		Total stockholders' equity			869,485		594,595

			Total liabilities and stockholders' equity	$	1,369,669	$	758,532

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

						Non-GAAP Adjustments
Three months ended June 30, 2017				GAAP		Share-Based Compensation		Amortization	Other			Non-GAAP
Net sales			$	115,066							$	115,066
Gross profit				38,720		500			7,495			46,715
Gross margin				33.6%								40.6	%
Research and development				18,619		(708	)					17,911
Selling, general, and administrative and Other				22,688		(3,368	)		(73	)		19,247
Net income (loss)				(18,388	)	9,620		6,354	8,830			6,416

Income (loss) per common share:
	Basic		$	(0.43	)						$	0.15
	Diluted			(0.43	)							0.15
Weighted average number of shares:
	Basic			42,656								42,884
	Diluted			42,656								43,214


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

Three months ended June 30, 2017
	Restructuring											2,416
	Acquisition related											9,930
	Release of inventory fair value step-up associated with the Ultratech purchase accounting											7,368
	Depreciation of PP&E fair value step-up associated with the Ultratech purchase accounting											109
	Accelerated depreciation											91
	Asset impairment											675
	Non-cash interest expense											2,702
	Non-GAAP tax adjustment *											(14,461	)
		Total Other										8,830

* - The 'with or without' method is utilized to determine the income tax effect of all non-GAAP adjustments.

These 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 incremental transaction-related compensation.

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 Adjusted EBITDA and 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
Three months ended June 30, 2016			GAAP			Share-based Compensation		Amortization	Other		Non-GAAP
Net sales			$	75,348							$	75,348
Gross profit				31,439		486						31,925
Gross margin				41.7	%							42.4	%
Research and development				21,543		(940	)					20,603
Selling, general, and administrative and Other				20,154		(2,576	)		(62	)		17,516
Net income (loss)				(32,082	)	4,002		5,273	15,222			(7,585	)

Income (loss) per common share:
	Basic		$	(0.82	)						$	(0.19	)
	Diluted			(0.82	)							(0.19	)
Weighted average number of shares:
	Basic			38,965								38,965
	Diluted			38,965								38,965


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

Three months ended June 30, 2016
	Asset impairment											13,627
	Restructuring											2,095
	Acquisition related											62
	Non-GAAP tax adjustment											(562	)
		Total Other										15,222

* - 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
	June 30, 2017			June 30, 2016
GAAP Net income (loss)	$	(18,388	)	$	(32,082	)
Share-based compensation		9,620			4,002
Amortization		6,354			5,273
Restructuring		2,416			2,095
Acquisition related		9,930			62
Release of inventory fair value step-up associated with the Ultratech purchase accounting		7,368			-
Depreciation of PP&E fair value step-up associated with the Ultratech purchase accounting		109			-
Accelerated depreciation		91			-
Asset impairment		675			13,627
Interest (income) expense		4,279			(185	)
Income tax expense (benefit)		(12,897	)		1,014
Non-GAAP Operating Income (loss)	$	9,557		$	(6,194	)

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 incremental transaction-related compensation.



Veeco Instruments Inc. and Subsidiaries
Reconciliation of GAAP Net Income (loss) to Adjusted EBITDA
(in thousands)
(unaudited)

	Three months ended			Three months ended
	June 30, 2017			June 30, 2016
GAAP Net income (loss)	$	(18,388	)	$	(32,082	)
Share-based compensation		9,620			4,002
Amortization		6,354			5,273
Restructuring		2,416			2,095
Acquisition related		9,930			62
Release of inventory fair value step-up associated with the Ultratech purchase accounting		7,368			-
Depreciation of PP&E fair value step-up associated with the Ultratech purchase accounting		109			-
Accelerated depreciation		91			-
Asset impairment		675			13,627
Interest (income) expense		4,279			(185	)
Depreciation		3,267			3,424
Income tax expense (benefit)		(12,897	)		1,014
Adjusted EBITDA	$	12,824		$	(2,770	)



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 ended September 30, 2017				GAAP						Share-based Compensation	Amortization	Other	Non-GAAP
Net sales			$	125		-	$	145						125		-		145

Gross profit				46		-		56		1	-	3		50		-		60
	Gross margin			37%		-		39%						39	%	-		41	%

Net income (loss)			$	(25	)	-	$	(16	)	5	13	3		(4	)	-		5

Income (loss) per diluted common share			$	(0.53	)	-	$	(0.34	)				$	(0.09	)	-	$	0.09
		Weighted average number of shares		47				47						47				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 ended September 30, 2017
GAAP Net income (loss)													$	(25	)	-	$	(16	)
Share-based compensation														5		-		5
Amortization														13		-		13
Restructuring														2		-		2
Acquisition related														1		-		1
Release of inventory fair value step-up associated with the Ultratech purchase accounting														3		-		3
Interest expense, net														5		-		5
Income tax expense (benefit)														(4	)	-		(4	)
Non-GAAP Operating Income													$	-		-	$	9

Note: Amounts may not calculate precisely due to rounding.