Veeco Reports Third Quarter 2017 Financial Results

PLAINVIEW, NY--(Marketwired - November 02, 2017) -

Third Quarter 2017 Highlights:

Revenues of $131.9 million, compared with $85.5 million in the same period last year
GAAP net loss of $21.9 million, or $0.47 per share
Non-GAAP net income of $4.3 million, or $0.09 per diluted share

Veeco Instruments Inc. (NASDAQ: VECO) today announced financial results for its third fiscal quarter ended September 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	Q3 '17	Q3 '16
Revenue	$131.9	$85.5
Net income (loss)	($21.9)	($69.6)
Diluted earnings (loss) per share	($0.47)	($1.78)

Non-GAAP Results	Q3 '17	Q3 '16
Net income (loss)	$4.3	($1.8)
Operating income (loss)	$6.8	($0.2)
Diluted earnings (loss) per share	$0.09	($0.05)

"The third quarter of 2017 marked the first full quarter of Veeco and Ultratech on a combined basis. Sales in the quarter were driven by increased shipments of our MOCVD tools and backlog has continued to build. Also during the quarter, we formally released our new MOCVD system, the EPIK^® 868, which provides a lower-cost and higher-productivity solution for our customers," commented John R. Peeler, Chairman and Chief Executive Officer. "The integration of Ultratech into Veeco is proceeding extremely well with many key milestones now behind us, including the complete integration of our sales and support organizations. As a result, we are even stronger than before, with the right staff in each region, focused on driving improved results for our business and customers."

Guidance and Outlook

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

Revenue is expected to be in the range of $135 million to $155 million
GAAP net loss is expected to be in the range of ($15) million to ($8) million
Non-GAAP operating income is expected to be in the range of $5 million to $12 million
GAAP earnings (loss) per share are expected to be in the range of ($0.33) to ($0.17)
Non-GAAP earnings (loss) per share are expected to be in the range of $0.00 to $0.16

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 2, 2017 starting at 5:00pm ET. To join the call, dial 800-263-0877 (toll free) or 323-701-0225 and use passcode 7119567. 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.

-financial tables attached-


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,
		Three months ended September 30,						Nine months ended September 30,
		2017			2016			2017			2016
Net sales		$	131,872		$	85,482		$	341,324		$	238,842
Cost of sales			78,811			52,027			215,344			141,991
Gross profit			53,061			33,455			125,980			96,851
Operating expenses, net:			40.24	%
	Research and development		24,061			19,892			57,669			63,545
	Selling, general, and administrative		29,771			18,396			71,574			58,230
	Amortization of intangible assets		12,500			5,261			21,722			15,785
	Restructuring		5,010			1,798			9,605			3,993
	Acquisition costs		783			-			16,277			-
	Asset impairment		2			56,035			1,139			69,662
	Other, net		(140	)		795			(228	)		884
Total operating expenses, net			71,987			102,177			177,758			212,099
Operating income (loss)			(18,926	)		(68,722	)		(51,778	)		(115,248	)
	Interest income (expense), net		(4,748	)		260			(12,368	)		713
Income (loss) before income taxes			(23,674	)		(68,462	)		(64,146	)		(114,535	)
	Income tax expense (benefit)		(1,790	)		1,136			(24,969	)		2,677
Net income (loss)		$	(21,884	)	$	(69,598	)	$	(39,177	)	$	(117,212	)

Income (loss) per common share:
	Basic	$	(0.47	)	$	(1.78	)	$	(0.91	)	$	(2.99	)
	Diluted	$	(0.47	)	$	(1.78	)	$	(0.91	)	$	(2.99	)

Weighted average number of shares:
	Basic		46,941			39,131			43,100			39,193
	Diluted		46,941			39,131			43,100			39,193


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

				September 30,			December 31,
				2017			2016
					(unaudited	)
Assets
Current assets:
	Cash and cash equivalents			$	235,268		$	277,444
	Short-term investments				85,853			66,787
	Accounts receivable, net				113,795			58,020
	Inventories				113,681			77,063
	Deferred cost of sales				17,594			6,160
	Prepaid expenses and other current assets				36,396			16,034
		Total current assets			602,587			501,508
Property, plant and equipment, net					84,403			60,646
Intangible assets, net					383,596			58,378
Goodwill					308,529			114,908
Deferred income taxes					2,528			2,045
Other assets					25,263			21,047
		Total assets		$	1,406,906		$	758,532

Liabilities and stockholders' equity
Current liabilities:
	Accounts payable			$	53,716		$	22,607
	Accrued expenses and other current liabilities				65,728			33,201
	Customer deposits and deferred revenue				107,636			85,022
	Income taxes payable				4,171			2,311
	Current portion of long-term debt				-			368
		Total current liabilities			231,251			143,509
Deferred income taxes					46,268			13,199
Long-term debt					272,825			826
Other liabilities					11,033			6,403
		Total liabilities			561,377			163,937

		Total stockholders' equity			845,529			594,595

			Total liabilities and stockholders' equity	$	1,406,906		$	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 September 30, 2017		GAAP	Share-Based Compensation	Amortization	Other	Non-GAAP
Net sales		$ 131,872				$ 131,872
Gross profit		53,061	740		1,954	55,755
Gross margin		40.2%				42.3%
Research and development		24,061	(849)			23,212
Selling, general, and administrative and Other		29,631	(3,714)		(195)	25,722
Net income (loss)		(21,884)	6,170	12,500	7,504	4,290

Income (loss) per common share:
	Basic	$ (0.47)				$ 0.09
	Diluted	(0.47)				0.09
Weighted average number of shares:
	Basic	46,941				47,107
	Diluted	46,941				47,327


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

Three months ended September 30, 2017
	Restructuring		4,143
	Acquisition related		783
	Release of inventory fair value step-up associated with the Ultratech purchase accounting		1,856
	Depreciation of PP&E fair value step-up associated with the Ultratech purchase accounting		293
	Asset impairment		2
	Non-cash interest expense		2,754
	Non-GAAP tax adjustment *		(2,327)
		Total Other	7,504

* - 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 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 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 September 30, 2016		GAAP			Share-based Compensation		Amortization	Other		Non-GAAP
Net sales		$	85,482							$	85,482
Gross profit			33,455		607			355			34,417
Gross margin			39.1	%							40.3	%
Research and development			19,892		(993	)					18,899
Selling, general, and administrative and Other			19,191		(2,143	)		(1,368	)		15,680
Net income (loss)			(69,598	)	3,743		5,261	58,831			(1,763	)

Income (loss) per common share:
	Basic	$	(1.78	)						$	(0.05	)
	Diluted		(1.78	)							(0.05	)
Weighted average number of shares:
	Basic		39,131								39,131
	Diluted		39,131								39,131


Veeco Instruments Inc. and Subsidiaries
Other Non-GAAP Adjustments
(in thousands)
(unaudited)
Three months ended September 30, 2016
	Asset impairment		56,035
	Restructuring		1,798
	Acquisition related		63
	Accelerated depreciation		355
	Pension termination		1,305
	Non-GAAP tax adjustment *		(725	)
		Total Other	58,831

* - 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, 2017			September 30, 2016
GAAP Net income (loss)	$	(21,884	)	$	(69,598	)
Share-based compensation		6,170			3,743
Amortization		12,500			5,261
Restructuring		4,143			1,798
Acquisition related		783			63
Release of inventory fair value step-up associated with the Ultratech purchase accounting		1,856			-
Depreciation of PP&E fair value step-up associated with the Ultratech purchase accounting		293			-
Accelerated depreciation		-			355
Asset impairment		2			56,035
Pension termination		-			1,305
Interest (income) expense		4,748			(260	)
Income tax expense (benefit)		(1,790	)		1,136
Non-GAAP Operating Income (loss)	$	6,821		$	(162	)

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 to Non-GAAP Financial Data
(in millions, except per share amounts)
(unaudited)

									Non-GAAP Adjustments
Guidance for the three months ended December 31, 2017		GAAP							Share-based Compensation	Amortization	Other		Non-GAAP
Net sales		$	135		-	$	155							135		-		155

Gross profit			52		-		63		1	-	-			53		-		64
	Gross margin		39	%	-		41	%						39	%	-		41	%

Net income (loss)		$	(15	)	-	$	(8	)	5	12	(2	)		-		-		7

Income (loss) per diluted common share		$	(0.33	)	-	$	(0.17	)					$	-		-	$	0.16
	Weighted average number of shares		47				47							47				47


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 December 31, 2017
GAAP Net income (loss)	$	(15	)	-	$	(8	)
Share-based compensation		5		-		5
Amortization		12		-		12
Restructuring		1		-		1
Acquisition related		1		-		1
Interest expense, net		5		-		5
Income tax expense (benefit)		(4	)	-		(4	)
Non-GAAP Operating Income	$	5		-	$	12

Note: Amounts may not calculate precisely due to rounding.

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.