Veeco Reports Fourth Quarter and Fiscal Year 2022 Financial

Fourth Quarter 2022 Highlights:

Revenues of $153.8 million, compared with $153.0 million in the same period last year
GAAP net income of $128.9 million, or $2.00 per diluted share, compared with $8.2 million, or $0.15 per diluted share in the same period last year
Non-GAAP net income of $21.9 million, or $0.38 per diluted share, compared with $22.6 million, or $0.43 per diluted share in the same period last year

Fiscal Year 2022 Highlights:

Revenues of $646.1 million, compared with $583.3 million in the same period last year
GAAP net income of $166.9 million, or $2.71 per diluted share, compared with $26.0 million, or $0.49 per diluted share in the same period last year
Non-GAAP net income of $89.6 million, or $1.57 per diluted share, compared with $73.6 million, or $1.43 per diluted share in the same period last year

PLAINVIEW, N.Y., Feb. 15, 2023 (GLOBE NEWSWIRE) -- Veeco Instruments Inc. (Nasdaq: VECO) today announced financial results for its fourth quarter and fiscal year ended December 31, 2022. 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

	4th Quarter				Full Year
GAAP Results	Q4 '22		Q4 '21		2022		2021
Revenue	$	153.8	$	153.0	$	646.1	$	583.3
Net income	$	128.9	$	8.2	$	166.9	$	26.0
Diluted earnings per share	$	2.00	$	0.15	$	2.71	$	0.49

	4th Quarter				Full Year
Non-GAAP Results	Q4 '22		Q4 '21		2022		2021
Operating income	$	23.8	$	24.9	$	99.8	$	86.6
Net income	$	21.9	$	22.6	$	89.6	$	73.6
Diluted earnings per share	$	0.38	$	0.43	$	1.57	$	1.43

“2022 was another year of growth for Veeco,” commented Bill Miller, Ph.D., Veeco’s Chief Executive Officer. “We achieved record revenue with our semiconductor products led by increased traction in laser annealing for both advanced and trailing nodes. We grew our backlog with strong order activity while also strengthening our balance sheet with robust cashflow from operations.”

“We enter 2023 cautiously optimistic,” continued Dr. Mr. Miller. “We’re focused on investing R&D in our product roadmaps and integrating our recently acquired silicon carbide epitaxy business. We expect to outperform the wafer fab equipment market with our semiconductor products, grow in the data storage market and maintain profitability during the current macroeconomic challenges.”

Guidance and Outlook

The following guidance is provided for Veeco’s first quarter 2023:

Revenue is expected in the range of $130 million to $150 million
GAAP diluted earnings (loss) per share are expected in the range of $(0.03) to $0.16
Non-GAAP diluted earnings per share are expected in the range of $0.12 to $0.28

Conference Call Information

A conference call reviewing these results has been scheduled for today, February 15, 2023 starting at 5:00pm ET. To join the call, dial 1-877-407-8029 (toll free) or 1-201-689-8029. 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 that evening. We will post an accompanying slide presentation to our website prior to the beginning of the call.

About Veeco

Veeco (NASDAQ: 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

This press release contains “forward-looking statements”, within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, as amended, that are based on management’s expectations, estimates, projections and assumptions. Words such as “expects,” “anticipates,” “plans,” “believes,” “scheduled,” “estimates” and variations of these words and similar expressions are intended to identify forward-looking statements. Forward-looking statements include, but are not limited to, those regarding anticipated growth and trends in our businesses and markets, industry outlooks and demand drivers, our investment and growth strategies, our development of new products and technologies, our business outlook for current and future periods, the impact of the COVID-19 pandemic, our ongoing transformation initiative and the effects thereof on our operations and financial results; and other statements that are not historical facts. These statements and their underlying assumptions are subject to risks and uncertainties and are not guarantees of future performance. Factors that could cause actual results to differ materially from those expressed or implied by such statements include, without limitation: the level of demand for our products; global economic and industry conditions; the effects of regional or global health epidemics, including the effects of the COVID-19 pandemic on the Company’s operations and on those of our customers and suppliers; global trade issues, including the ongoing trade disputes between the U.S. and China, and changes in trade and export license policies; our dependency on third-party suppliers and outsourcing partners; the timing of customer orders; our ability to develop, deliver and support new products and technologies; our ability to expand our current markets, increase market share and develop new markets; the concentrated nature of our customer base; our ability to obtain and protect intellectual property rights in key technologies; our ability to achieve the objectives of operational and strategic initiatives and attract, motivate and retain key employees; the variability of results among products and end-markets, and our ability to accurately forecast future results, market conditions, and customer requirements; the impact of our indebtedness, including our convertible senior notes and our capped call transactions; and other risks and uncertainties described in our SEC filings on Forms 10-K, 10-Q and 8-K, and from time-to-time in our other SEC reports. All forward-looking statements speak only to management’s expectations, estimates, projections and assumptions as of the date of this press release or, in the case of any document referenced herein or incorporated by reference, the date of that document. The Company does not undertake any obligation to update or publicly revise any forward-looking statements to reflect events, circumstances or changes in expectations after the date of this press release.

-financial tables attached-

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

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

	Three months ended December 31,						Year ended December 31,
	2022			2021			2022			2021
Net sales	$	153,799		$	152,972		$	646,137		$	583,277
Cost of sales		90,881			88,949			382,989			341,003
Gross profit		62,918			64,023			263,148			242,274
Operating expenses, net:
Research and development		26,327			22,283			103,565			88,680
Selling, general, and administrative		20,965			21,211			88,952			84,536
Amortization of intangible assets		2,505			2,974			10,018			12,280
Other operating expense (income), net		(271	)		(71	)		317			68
Total operating expenses, net		49,526			46,397			202,852			185,564
Operating income		13,392			17,626			60,296			56,710
Interest expense, net		(1,558	)		(5,799	)		(9,311	)		(26,020	)
Other income (expense), net		—			(5,010	)		—			(5,010	)
Income before income taxes		11,834			6,817			50,985			25,680
Income tax expense (benefit)		(117,081	)		(1,387	)		(115,957	)		(358	)
Net income	$	128,915		$	8,204		$	166,942		$	26,038

Income per common share:
Basic	$	2.58		$	0.17		$	3.35		$	0.53
Diluted	$	2.00		$	0.15		$	2.71		$	0.49

Weighted average number of shares:
Basic		49,912			49,187			49,906			49,073
Diluted		65,684			54,931			65,607			53,643

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


	December 31,		December 31,
	2022		2021
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	154,925	$	119,747
Restricted cash		547		725
Short-term investments		147,488		104,181
Accounts receivable, net		124,221		109,609
Contract assets		16,507		18,293
Inventories		206,908		170,858
Prepaid expenses and other current assets		18,305		25,974
Total current assets		668,901		549,387
Property, plant and equipment, net		107,281		99,743
Operating lease right-of-use assets		26,467		28,813
Intangible assets, net		23,887		33,905
Goodwill		181,943		181,943
Deferred income taxes		116,349		1,639
Other assets		3,355		3,546
Total assets	$	1,128,183	$	898,976

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	52,049	$	44,456
Accrued expenses and other current liabilities		56,031		79,752
Customer deposits and deferred revenue		127,223		63,136
Income taxes payable		2,432		1,860
Current portion of long-term debt		20,169		—
Total current liabilities		257,904		189,204
Deferred income taxes		1,285		4,792
Long-term debt		254,491		229,438
Long-term operating lease liabilities		33,581		32,834
Other liabilities		3,098		5,080
Total liabilities		550,359		461,348

Total stockholders’ equity		577,824		437,628
Total liabilities and stockholders’ equity	$	1,128,183	$	898,976

Note on Reconciliation Tables

The below 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.

Reconciliation of GAAP to Non-GAAP Financial Data (Q4 2022)
(in thousands)
(unaudited)

				Non-GAAP Adjustments
				Share-Based
Three months ended December 31, 2022	GAAP			Compensation		Amortization		Other			Non-GAAP
Net sales	$	153,799									$	153,799
Gross profit		62,918		1,167				1,011				65,096
Gross margin		40.9	%									42.3	%
Operating expenses		49,526		(4,858	)	(2,505	)	(821	)			41,342
Operating income		13,392		6,025		2,505		1,832		^		23,754
Net income		128,915		6,025		2,505		(115,554	)	^		21,891

^ - See table below for additional details.

Other Non-GAAP Adjustments (Q4 2022)
(in thousands)
(unaudited)

Three months ended December 31, 2022
Transition expenses related to San Jose expansion project	$	1,788
Depreciation of PP&E fair value step-up associated with the Ultratech purchase accounting		44
Subtotal		1,832
Non-cash interest expense		244
Release of valuation allowance on deferred tax assets		(104,971	)
Non-GAAP tax adjustment *		(12,659	)
Total Other	$	(115,554	)

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

Net Income per Common Share (Q4 2022)
(in thousands, except per share amounts)
(unaudited)


	Three months ended December 31, 2022
	GAAP		Non-GAAP
Numerator:
Net income	$	128,915	$	21,891
Interest expense associated with convertible notes		2,712		2,467
Net income available to common shareholders	$	131,627	$	24,358

Denominator:
Basic weighted average shares outstanding		49,912		49,912
Effect of potentially dilutive share-based awards		805		805
Dilutive effect of 2023 Convertible Senior Notes		504		504
Dilutive effect of 2025 Convertible Senior Notes		5,521		5,521
Dilutive effect of 2027 Convertible Senior Notes ⁽¹⁾		8,942		6,771
Diluted weighted average shares outstanding		65,684		63,513

Net income per common share:
Basic	$	2.58	$	0.44
Diluted	$	2.00	$	0.38

⁽¹⁾ The non-GAAP incremental dilutive shares includes the impact of the Company’s capped call transaction issued concurrently with our 2027 Notes, and as such, an effective conversion price of $18.46 is used when determining incremental shares to add to the dilutive share count. The GAAP incremental dilutive shares does not include the impact of the Company’s capped call transaction, and as such, an effective conversion price of $13.98 is used when determining incremental shares to add to the dilutive share count.

Reconciliation of GAAP to Non-GAAP Financial Data (Q4 2021)
(in thousands, except per share amounts)
(unaudited)

				Non-GAAP Adjustments
				Share-based
Three months ended December 31, 2021		GAAP		Compensation		Amortization		Other			Non-GAAP
Net sales	$	152,972									$	152,972
Gross profit		64,023		608				235				64,866
Gross margin		41.9	%									42.4	%
Operating expenses		46,397		(2,906	)	(2,974	)	(537	)			39,980
Operating income		17,626		3,514		2,974		772		^		24,886
Net income		8,204		3,514		2,974		7,950		^		22,642

Income per common share:
Basic	$	0.17									$	0.46
Diluted		0.15										0.43
Weighted average number of shares:
Basic		49,187										49,187
Diluted ⁽¹⁾		54,931										52,761

^ - See table below for additional details.

⁽¹⁾ The non-GAAP incremental dilutive shares includes the impact of the Company’s capped call transaction issued concurrently with our 2027 Notes, and as such, no incremental shares are added to the dilutive share count in periods in which the average stock price per share is below $18.46. The GAAP incremental dilutive shares does not include the impact of the Company’s capped call transaction, and as such, incremental shares are added to the dilutive share count in periods in which the average stock price per share is above $13.98, and the Company is in a net income position. The average stock price for the three months ended December 31, 2021 was $25.53, and therefore 1.9 million shares were included in the non-GAAP diluted share count, and 4.0 million shares were included in the GAAP diluted share count related to the 2027 Notes.

Other Non-GAAP Adjustments (Q4 2021)
(in thousands)
(unaudited)


Three months ended December 31, 2021
Transition expenses related to San Jose expansion project	$	698
Depreciation of PP&E fair value step-up associated with the Ultratech purchase accounting		74
Subtotal		772
Non-cash interest expense		3,057
Other (income) expense, net		5,010
Non-GAAP tax adjustment *		(889	)
Total Other	$	7,950

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

Reconciliation of GAAP Net Income to Non-GAAP Operating Income (Q4 2022 and 2021)
(in thousands)
(unaudited)


	Three months ended			Three months ended
	December 31, 2022			December 31, 2021
GAAP Net income	$	128,915		$	8,204
Share-based compensation		6,025			3,514
Amortization		2,505			2,974
Transition expenses related to San Jose expansion project		1,788			698
Depreciation of PP&E fair value step-up associated with the Ultratech purchase accounting		44			74
Interest (income) expense, net		1,558			5,799
Other (income) expense, net		—			5,010
Income tax expense (benefit)		(117,081	)		(1,387	)
Non-GAAP Operating income	$	23,754		$	24,886

Reconciliation of GAAP to Non-GAAP Financial Data (FY 2022)
(in thousands)
(unaudited)


				Non-GAAP Adjustments
				Share-based
For the year ended December 31, 2022		GAAP		Compensation		Amortization		Other			Non-GAAP
Net sales	$	646,137									$	646,137
Gross profit		263,148		4,551				3,300				270,999
Gross margin		40.7	%									41.9	%
Operating expenses		202,852		(18,443	)	(10,018	)	(3,212	)			171,179
Operating income (loss)		60,296		22,994		10,018		6,512		^		99,820
Net income (loss)		166,942		22,994		10,018		(110,379	)	^		89,575

^ - See table below for additional details.

Other Non-GAAP Adjustments (FY 2022)
(in thousands)
(unaudited)


For the year ended December 31, 2022
Transition expenses related to San Jose expansion project	$	6,202
Depreciation of PP&E fair value step-up associated with the Ultratech purchase accounting		310
Subtotal		6,512
Non-cash interest expense		962
Release of valuation allowance on deferred tax assets		(104,971	)
Non-GAAP tax adjustment *		(12,882	)
Total Other	$	(110,379	)

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

Net Income per Common Share (FY 2022)
(in thousands, except per share amounts)
(unaudited)


	Year ended December 31, 2022
	GAAP		Non-GAAP
Numerator:
Net income	$	166,942	$	89,575
Interest expense associated with convertible notes		10,832		9,870
Net income available to common shareholders	$	177,774	$	99,445

Denominator:
Basic weighted average shares outstanding		49,906		49,906
Effect of potentially dilutive share-based awards		734		734
Dilutive effect of 2023 Convertible Senior Notes		504		504
Dilutive effect of 2025 Convertible Senior Notes		5,521		5,521
Dilutive effect of 2027 Convertible Senior Notes (1)		8,942		6,771
Diluted weighted average shares outstanding		65,607		63,436

Net income per common share:
Basic	$	3.35	$	1.79
Diluted	$	2.71	$	1.57

Reconciliation of GAAP to Non-GAAP Financial Data (FY 2021)
(in thousands, except per share amounts)
(unaudited)


				Non-GAAP Adjustments
				Share-based
For the year ended December 31, 2021		GAAP		Compensation		Amortization		Other			Non-GAAP
Net sales	$	583,277									$	583,277
Gross profit		242,274		2,373				448				245,095
Gross margin		41.5	%									42.0	%
Operating expenses		185,564		(12,876	)	(12,280	)	(1,918	)			158,490
Operating income (loss)		56,710		15,249		12,280		2,366		^		86,605
Net income (loss)		26,038		15,249		12,280		20,082		^		73,649

Income (loss) per common share:
Basic	$	0.53									$	1.50
Diluted		0.49										1.43
Weighted average number of shares:
Basic		49,073										49,073
Diluted		53,643										51,472

^ - See table below for additional details.

Other Non-GAAP Adjustments (FY 2021)
(in thousands)
(unaudited)


For the year ended December 31, 2021
Transition expenses related to San Jose expansion project	$	2,021
Depreciation of PP&E fair value step-up associated with the Ultratech purchase accounting		345
Subtotal		2,366
Non-cash interest expense		13,819
Other (income) expense, net		5,010
Non-GAAP tax adjustment *		(1,113	)
Total Other	$	20,082

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

Reconciliation of GAAP Net Income to Non-GAAP Operating Income (FY 2022 and 2021)
(in thousands)
(unaudited)


	Year ended			Year ended
	December 31, 2022			December 31, 2021
GAAP Net income (loss)	$	166,942		$	26,038
Share-based compensation		22,994			15,249
Amortization		10,018			12,280
Transition expenses related to San Jose expansion project		6,202			2,021
Depreciation of PP&E fair value step-up associated with the Ultratech purchase accounting		310			345
Interest (income) expense, net		9,311			26,020
Other (income) expense, net		—			5,010
Income tax expense (benefit)		(115,957	)		(358	)
Non-GAAP Operating income (loss)	$	99,820		$	86,605

Reconciliation of GAAP to Non-GAAP Financial Data (Q1 2023)
(in millions, except per share amounts)
(unaudited)


								Non-GAAP Adjustments
Guidance for the three months ending								Share-based
March 31, 2023	GAAP							Compensation		Amortization		Other		Non-GAAP
Net sales	$	130		-	$	150								$	130		-	$	150
Gross profit		48		-		61		1		—		—			49		-		62
Gross margin		37	%	-		40	%								39	%	-		41	%
Operating expenses		49		-		51		(5	)	(2	)	(1	)		42		-		44
Operating income (loss)		(1	)	-		10		6		2		1			8		-		19
Net income (loss)	$	(1	)	-	$	8		6		2		(1	)	$	6		-	$	15

Income (loss) per diluted common share	$	(0.03	)	-	$	0.16								$	0.12		-	$	0.28

Income per Diluted Common Share (Q1 2023)
(in millions, except per share amounts)
(unaudited)


Guidance for the three months ending March 31, 2023	GAAP						Non-GAAP
Numerator:
Net income (loss)	$	(1	)	-	$	8	$	6	-	$	15
Interest expense associated with convertible notes		—				1		—			2
Net income (loss) available to common shareholders	$	(1	)	-	$	9	$	6	-	$	17

Denominator:
Basic weighted average shares outstanding		50				50		50			50
Effect of potentially dilutive share-based awards		1				1		1			1
Dilutive effect of 2023 Convertible Senior Notes		—				—		—			—
Dilutive effect of 2025 Convertible Senior Notes		—				—		—			6
Dilutive effect of 2027 Convertible Senior Notes ⁽¹⁾		—				9		—			7
Diluted weighted average shares outstanding		51				60		51			64

Net income (loss) per common share:
Income (loss) per diluted common share	$	(0.03	)	-	$	0.16	$	0.12	-	$	0.28

Reconciliation of GAAP Net Income to Non-GAAP Operating Income (Q1 2023)
(in millions)
(unaudited)


Guidance for the three months ending March 31, 2023
GAAP Net income (loss)	$	(1	)	-	$	8
Share-based compensation		6		-		6
Amortization		2		-		2
Interest expense, net		1		-		1
Income tax expense (benefit)		—		-		1
Other		—		-		1
Non-GAAP Operating income	$	8		-	$	19

Note: Amounts may not calculate precisely due to rounding.

Veeco Reports Fourth Quarter and Fiscal Year 2022 Financial Results