VECO Veeco Instruments Inc DE

Third Quarter 2018 Highlights:

Veeco Instruments Inc. (Nasdaq: VECO) today announced financial results for its third quarter ended September 30, 2018.  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 ‘18				Q3 ‘17
Revenue		$126.8				$129.3
Net income (loss)		($9.0)				($23.7)
Diluted earnings (loss) per share		($0.19)				($0.51)
Non-GAAP Results		Q3 ‘18				Q3 ‘17
Net income (loss)		$5.3				$2.4
Operating income (loss)		$8.0				$4.3
Diluted earnings (loss) per share		$0.11				$0.05

“Third quarter results were mixed with revenue coming in below our guided range due to broader market softness in China across all of our businesses, as well as a US foundry putting its 7nm FinFET program on hold.  However, Non-GAAP gross margin was better than guidance and led to Non-GAAP operating income, net income and EPS all coming in at the high end of our guided ranges,” commented William J. Miller, Ph.D., Chief Executive Officer.

“We are pleased with our bookings in the Front-End Semiconductor market which included EUV mask blank deposition systems, and a laser spike anneal system order from a market leader in a leading-edge application.  We remain encouraged by our growth prospects in compound semiconductor, advanced packaging and front-end semiconductor,” Dr. Miller concluded.

Guidance and Outlook

The following guidance is provided for Veeco’s fourth quarter 2018:

• Revenue is expected in the range of $85 million to $105 million
• GAAP net income (loss) is expected in the range of ($26) million to ($19) million
• GAAP earnings (loss) per diluted share are expected in the range of ($0.56) to ($0.40)
• Non-GAAP operating income (loss) is expected in the range of ($10) million to ($3) million

• Non-GAAP earnings (loss) per diluted share are expected in the range of ($0.25) to ($0.09)

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 1, 2018, starting at 8:30am ET. To join the call, dial 1-866-288-0540 (toll free) or 1-323-794-2094 and use passcode 8093884. 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 5:00pm ET this evening. We will post an accompanying slide presentation to our website prior to the beginning of the call.

New Accounting Standard

The Company adopted the new accounting standard, ASC 606, related to revenue recognition, effective January 1, 2018. The prior periods presented here have been recast to reflect the adoption of this new standard.

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, 2017 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 Contacts:Investors:Anthony Bencivenga 516-677-0200 x1308 abencivenga@veeco.com 

Media:David Pinto 408-325-6157 dpinto@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,
		2018				2017				2018				2017
Net sales	$	126,757			$	129,308			$	443,110			$	336,025
Cost of sales		80,372				78,779				284,651				215,150
Gross profit		46,385				50,529				158,459				120,875
Operating expenses, net:
Research and development		23,544				24,061				72,793				57,669
Selling, general, and administrative		20,186				29,771				70,842				71,574
Amortization of intangible assets		4,183				12,500				28,102				21,722
Restructuring		2,057				5,010				7,669				9,605
Acquisition costs		249				783				2,906				16,277
Asset impairment		—				2				252,343				1,139
Other, net		39				(140	)			325				(228	)
Total operating expenses, net		50,258				71,987				434,980				177,758
Operating income (loss)		(3,873	)			(21,458	)			(276,521	)			(56,883	)
Interest expense, net		(4,779	)			(4,748	)			(13,847	)			(12,369	)
Income (loss) before income taxes		(8,652	)			(26,206	)			(290,368	)			(69,252	)
Income tax expense (benefit)		301				(2,466	)			(27,954	)			(26,334	)
Net income (loss)	$	(8,953	)		$	(23,740	)		$	(262,414	)		$	(42,918	)
Income (loss) per common share:
Basic	$	(0.19	)		$	(0.51	)		$	(5.55	)		$	(1.00	)
Diluted	$	(0.19	)		$	(0.51	)		$	(5.55	)		$	(1.00	)
Weighted average number of shares:
Basic		46,982				46,941				47,283				43,100
Diluted		46,982				46,941				47,283				43,100

Veeco Instruments Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
	September 30,			December 31,
	2018			2017
Assets
Current assets:
Cash and cash equivalents	$	213,506		$	279,736
Restricted cash		828			847
Short-term investments		52,063			47,780
Accounts receivable, net		90,816			98,866
Contract assets		7,441			160
Inventories		149,832			120,266
Deferred cost of sales		2,986			15,994
Prepaid expenses and other current assets		23,400			33,437
Total current assets		540,872			597,086
Property, plant and equipment, net		80,626			85,058
Intangible assets, net		89,398			369,843
Goodwill		307,131			307,131
Deferred income taxes		2,183			3,047
Other assets		30,356			25,310
Total assets	$	1,050,566		$	1,387,475
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	65,042		$	50,318
Accrued expenses and other current liabilities		40,430			58,068
Customer deposits and deferred revenue		64,443			112,032
Income taxes payable		1,819			3,846
Total current liabilities		171,734			224,264
Deferred income taxes		7,170			36,845
Long-term debt		284,369			275,630
Other liabilities		9,206			10,643
Total liabilities		472,479			547,382
Total stockholders' equity		578,087			840,093
Total liabilities and stockholders' equity	$	1,050,566		$	1,387,475



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, 2018		GAAP			Share-Based 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%
Research and development			23,544		(709)								22,835
Selling, general, and administrative and Other, net			20,225		(1,890)					(753)			17,582
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
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
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.
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, incremental transaction-related compensation, 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
Three months ended September 30, 2017	GAAP			Share-based Compensation		Amortization		Other		Non-GAAP
Net sales	$	129,308								$	129,308
Gross profit		50,529		740				1,954			53,223
Gross margin		39.1%									41.2%
Research and development		24,061		(849)							23,212
Selling, general, and administrative and Other, net		29,631		(3,714)				(195)			25,722
Net income (loss)		(23,740)		6,170		12,500		7,504			2,434
Income (loss) per common share:
Basic	$	(0.51)								$	0.05
Diluted		(0.51)									0.05
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, incremental transaction-related compensation, 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 Net Income (loss) to Non-GAAP Operating Income (loss)
(in thousands)
(unaudited)
				Three months ended				Three months ended
				September 30, 2018				September 30, 2017
GAAP Net income (loss)				$	(8,953	)		$	(23,740	)
Share-based compensation					3,279				6,170
Amortization					4,183				12,500
Restructuring					1,890				4,143
Acquisition related					249				783
Release of inventory fair value step-up associated with the Ultratech purchase accounting					1,411				1,856
Depreciation of PP&E fair value step-up associated with the Ultratech purchase accounting					236				293
Accelerated depreciation					595				-
Asset impairment					-				2
Interest (income) expense					4,779				4,748
Income tax expense (benefit)					301				(2,466	)
Non-GAAP Operating Income (loss)				$	7,970			$	4,289
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, incremental transaction-related compensation, 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 millions, except per share amounts)
(unaudited)
										Non-GAAP Adjustments
Guidance for the three months ending December 31, 2018		GAAP								Share-based Compensation		Amortization		Other				Non-GAAP
Net sales		$	85		-	$	105											$	85		-	$	105
Gross profit			30		-		39			1		-		-					31		-		40
Gross margin			35	%	-		37	%											36	%	-		38	%
Net income (loss)		$	(26	)	-	$	(19	)		4		4		7				$	(11	)	-	$	(4	)
Income (loss) per diluted common share		$	(0.56	)	-	$	(0.40	)										$	(0.25	)	-	$	(0.09	)
	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 ending December 31, 2018
GAAP Net income (loss)																		$	(26	)	-	$	(19	)
Share-based compensation																			4		-		4
Amortization																			4		-		4
Restructuring																			2		-		2
Accelerated depreciation																			1		-		1
Interest expense, net																			4		-		4
Income tax expense (benefit)																			1		-		1
Non-GAAP Operating Income																		$	(10	)	-	$	(3	)
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, incremental transaction-related compensation, 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.