Veeco Reports Third Quarter 2015 Financial Results; Authorizes $100 Million Share Repurchase Program

  • Recorded revenue of $140.7 million, an increase of 51% compared with the same period last year
  • Delivered GAAP earnings per share of $0.13 and Non-GAAP earnings per share of $0.33
  • Increased Non-GAAP adjusted EBITDA to $21.8 million
  • Generated $9.9 million in cash from operations
  • Authorizes $100 million share repurchase program
  • Lowered 2015 revenue outlook based on weaker LED industry conditions

PLAINVIEW, N.Y.--()--Veeco Instruments Inc. (Nasdaq: VECO) announced financial results for its third fiscal quarter ended September 30, 2015. 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.

In addition to the third quarter financial results, the Company announced that its Board of Directors has authorized the repurchase of up to $100 million of the Company's outstanding common stock.

U.S. Dollars in millions, except per share data
       
GAAP Results     Q3 ‘15     Q3 ‘14
Revenue     $140.7     $93.3
Net income (loss)     $5.3     ($14.0)
Diluted earnings (loss) per share     $0.13     ($0.35)
             
Non-GAAP Results     Q3 ‘15     Q3 ‘14
Adjusted EBITDA     $21.8     ($1.8)
Net income (loss)     $13.6     ($0.8)
Diluted earnings (loss) per share     $0.33     ($0.02)

“Veeco’s third quarter results demonstrate solid operational execution with gross margin, adjusted EBITDA and earnings per share all above the mid-point of our guided ranges,” commented John R. Peeler, Chairman and Chief Executive Officer.

“Business conditions deteriorated in the final weeks of the quarter and had a severe impact on our bookings performance. We recorded $52 million in bookings, which were well below our expectations. Customers delayed their MOCVD investments amid ongoing economic uncertainty in China and weak LED demand for TV display backlighting. We cannot accurately predict the duration of this MOCVD investment pause. However, demand for LED lighting remains healthy, which gives us confidence that investments will resume once industry conditions improve. We will continue to actively manage those things within our control through this period of uncertainty.

“We announced a $100 million share repurchase program, which underscores our confidence in longer term growth prospects and our commitment to enhance shareholder value. We believe our strong balance sheet provides us with the flexibility to execute share repurchases while continuing to invest in R&D and other opportunities to profitably grow our business.” Mr. Peeler concluded.

Guidance and Outlook

The following guidance is provided for Veeco’s fourth fiscal quarter 2015:

  • Revenue is expected to be in the range of $90 million to $110 million
  • Adjusted EBITDA is expected to be in the range of ($3) million to $5 million
  • GAAP earnings (loss) per share are expected to be in the range of ($0.38) to ($0.19)
  • Non-GAAP earnings (loss) per share are expected to be in the range of ($0.12) to $0.07

Based on above guidance, we expect fiscal year 2015 revenue to be in a range of $460 million to $480 million, reflecting annual growth of between 17% and 22%.

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

Share Repurchase Authorization

Veeco announced that its Board of Directors has authorized the repurchase of up to $100 million of the Company's outstanding common stock to be completed over the next two years. Repurchases are expected to be made from time to time on the open market or in privately negotiated transactions in accordance with applicable federal securities laws. The timing of repurchases and the exact number of shares of common stock to be purchased will depend upon market conditions, SEC regulations, and other factors. The repurchases will be funded using the Company's available cash balances and cash generated from operations. The program does not obligate the Company to acquire any particular amount of common stock and may be modified or suspended at any time at the Company's discretion.

Conference Call Information

A conference call reviewing these results has been scheduled for today, October 28, 2015 starting at 5:00pm ET. To join the call, dial 1-888-219-1217 (toll free) or 1-913-312-0961 and use passcode 3687897. 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’s process equipment solutions enable the manufacture of LEDs, displays, power electronics, compound semiconductors, hard disk drives, semiconductors, MEMS and wireless chips. We are the leader in MOCVD, MBE, Ion Beam, Wet Etch single wafer processing and other advanced thin film process technologies. Our high performance systems drive innovation in energy efficiency, consumer electronics and network storage and allow our customers to maximize productivity and achieve lower cost of ownership. For information on our company, products and worldwide service and support, please visit www.veeco.com.

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, 2014 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 September 30,     Nine months ended September 30,
  2015       2014         2015         2014  
Net sales $ 140,744 $ 93,341 $ 370,494 $ 279,304
Cost of sales   86,494   60,783     232,038     182,296  
Gross profit   54,250   32,558     138,456     97,008  
Operating expenses, net:
Selling, general, and administrative 21,905 21,712 69,153 65,270
Research and development 19,200 19,968 57,904 60,747
Amortization 5,891 3,149 21,832 8,951
Restructuring 469 2,317 3,509 3,510
Asset impairment - 2,864 126 2,864
Changes in contingent consideration - - - (29,368 )
Other, net   207   36     (795 )   (334 )
Total operating expenses, net   47,672   50,046     151,729     111,640  
Operating income (loss) 6,578 (17,488 ) (13,273 ) (14,632 )
Interest income, net   161   305     442     541  
Income (loss) before income taxes 6,739 (17,183 ) (12,831 ) (14,091 )
Income tax expense (benefit)   1,433   (3,206 )   9,360     (4,063 )
Net income (loss) $ 5,306 $ (13,977 ) $ (22,191 ) $ (10,028 )
 
Income (loss) per common share:
Basic $ 0.13 $ (0.35 ) $ (0.56 ) $ (0.26 )
Diluted $ 0.13 $ (0.35 ) $ (0.56 ) $ (0.26 )
 
Weighted average number of shares:
Basic 40,846 39,401 39,729 39,317
Diluted 40,979 39,401 39,729 39,317
Veeco Instruments Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
       
 
September 30, 2015 December 31, 2014
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 334,114 $ 270,811
Short-term investments 68,877 120,572
Restricted cash - 539
Accounts receivable, net 46,798 60,085
Inventory 69,973 61,471
Deferred cost of sales 9,665 5,076
Prepaid expenses and other current assets 22,589 23,132
Assets held for sale 5,000 6,000
Deferred income taxes   6,497   7,976
Total current assets 563,513 555,662
Property, plant and equipment, net 80,521 78,752
Intangible assets, net 137,476 159,308
Goodwill 114,908 114,959
Deferred income taxes 1,180 1,180
Other assets   21,091   19,594
Total assets $ 918,689 $ 929,455
 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 25,122 $ 18,111
Accrued expenses and other current liabilities 41,728 48,418
Customer deposits and deferred revenue 89,025 96,004
Income taxes payable 7,764 5,441
Deferred income taxes 120 120
Current portion of long-term debt   333   314
Total current liabilities 164,092 168,408
Deferred income taxes 16,538 16,397
Long-term debt 1,281 1,533
Other liabilities   6,873   4,185
Total liabilities 188,784 190,523
 
Total stockholders' equity   729,905   738,932
 
Total liabilities and stockholders' equity $ 918,689 $ 929,455
Veeco Instruments Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Data
(In thousands, except per share data)
(Unaudited)
 
        Non-GAAP Adjustments      
Three months ended September 30, 2015 GAAP

Share-based

Compensation

   

Acquisition

Related

    Other Non-GAAP
Net sales $ 140,744 $ - $ - $ - $ 140,744
Cost of sales   86,494     (787 )   -     -     85,707  
Gross profit 54,250 787 - - 55,037
Gross margin 38.5 % 39.1 %
Operating expenses, net:
Selling, general, and administrative 21,905 (3,288 ) (188 ) - 18,429
Research and development 19,200 (1,044 ) - - 18,156
Amortization 5,891 - (5,891 ) - -
Restructuring 469 - - (469 ) -
Other, net   207     -     -     (395 )   (188 ) *
Total operating expenses, net   47,672     (4,332 )   (6,079 )   (864 )   36,397  
Operating income (loss) 6,578 5,119 6,079 864 18,640
Interest income, net   161     -     -     -     161  
Income (loss) before income taxes 6,739 5,119 6,079 864 18,801
Income tax expense (benefit)   1,433     -     -     3,727     5,160   **
Net income (loss) $ 5,306   $ 5,119   $ 6,079   $ (2,863 ) $ 13,641  
 
Income (loss) per common share:
Basic earnings per share $ 0.13 $ 0.33
Diluted earnings per share $ 0.13 $ 0.33
 
Weighted average number of shares:
Basic shares 40,846 40,846
Diluted shares 40,979 40,979
 
Non-GAAP operating income $ 18,640
Depreciation   3,151  
Adjusted EBITDA $ 21,791  
Note: Amounts may not calculate precisely due to rounding.
 
* The non-GAAP adjustment relates to a one-time legal settlement.
** The 'with or without' method is utilized to determine the income tax effect of the non-GAAP adjustments.
 
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; nonrecurring charges relating to restructuring initiatives, non-cash asset impairments, certain other non-operating gains and losses, and acquisition-related items such as one-time transaction costs, non-cash amortization of acquired intangible assets, incremental nonrecurring compensation, and the stepped-up cost of sales associated with the purchase accounting of acquired inventory.

 

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 as 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, which is used to determine management incentive compensation as well as 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 data)
(Unaudited)
 
   
    Non-GAAP Adjustments    
Three months ended September 30, 2014 GAAP

Share-based

Compensation

   

Acquisition

Related

    Other Non-GAAP

 

Net sales $ 93,341 $ - $ - $ - $ 93,341
Cost of sales   60,783     (619 )   -     -     60,164  
Gross profit 32,558 619 - - 33,177
Gross margin 34.9 % 35.5 %
Operating expenses:
Selling, general, and administrative 21,712 (2,766 ) - - 18,946
Research and development 19,968 (1,105 ) - - 18,863
Amortization 3,149 - (3,149 ) - -
Restructuring 2,317 - - (2,317 ) -
Asset impairment 2,864 - - (2,864 ) -
Other, net   36     -     -     -     36  
Total operating expenses, net   50,046     (3,871 )   (3,149 )   (5,181 )   37,845  
Operating income (loss) (17,488 ) 4,490 3,149 5,181 (4,668 )
Interest income, net   305     -     -     -     305  
Income (loss) before income taxes (17,183 ) 4,490 3,149 5,181 (4,363 )
Income tax provision (benefit)   (3,206 )   (140 )   -     (261 )   (3,607 ) *
Net income (loss) $ (13,977 ) $ 4,630   $ 3,149   $ 5,442   $ (756 )
 
Income (loss) per common share:
Basic earnings per share $ (0.35 ) $ (0.02 )
Diluted earnings per share $ (0.35 ) $ (0.02 )
 
Weighted average number of shares:
Basic shares 39,401 39,401
Diluted shares 39,401 39,401
 
Non-GAAP operating income $ (4,668 )
Depreciation   2,900  
Adjusted EBITDA $ (1,768 )
Note: Amounts may not calculate precisely due to rounding.
 
* The 'with or without' method is utilized to determine the income tax effect of the non-GAAP adjustments.
 
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; nonrecurring charges relating to restructuring initiatives, non-cash asset impairments, certain other non-operating gains and losses, and acquisition-related items such as one-time transaction costs, non-cash amortization of acquired intangible assets, incremental nonrecurring compensation, and the stepped-up cost of sales associated with the purchase accounting of acquired inventory.

 

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 as 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, which is used to determine management incentive compensation as well as 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 data)
(Unaudited)
                                   
Non-GAAP Adjustments
Guidance for the three months ended December 31, 2015 GAAP

Share-based

Compensation

Acquisition

Related

Other Non-GAAP
Net sales $ 90 - $ 110 $ - $ - $ - $ 90 - $ 110
 
Gross profit 28 - 38 1 - - 29 - 39
Gross margin 31 % - 34 % 32 % - 35 %
 
 
Operating income (18 ) - (10 ) 6 6 - (6 ) - 2
Depreciation   3     3  
Adjusted EBITDA $ (3 ) - $ 5  
 
 
Net income (loss) (15 ) - (7 ) 6 6 (2 ) * (5 ) - 3
 
Income (loss) per diluted common share $ (0.38 ) - $ (0.19 ) $ (0.12 ) - $ 0.07  
Weighted average number of shares 40 40 40 41
Note: Amounts may not calculate precisely due to rounding.
 
* Primarily relates to the income tax effect of the non-GAAP adjustments utilizing the 'with or without' method.
 
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; nonrecurring charges relating to restructuring initiatives, non-cash asset impairments, certain other non-operating gains and losses, and acquisition-related items such as one-time transaction costs, non-cash amortization of acquired intangible assets, incremental nonrecurring compensation, and the stepped-up cost of sales associated with the purchase accounting of acquired inventory.

 

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 as 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, which is used to determine management incentive compensation as well as 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.

Contacts

Veeco
Investors:
Shanye Hudson, 516-677-0200 x1272
shudson@veeco.com
or
Media:
Jeffrey Pina, 516-677-0200 x1222
jpina@veeco.com

Contacts

Veeco
Investors:
Shanye Hudson, 516-677-0200 x1272
shudson@veeco.com
or
Media:
Jeffrey Pina, 516-677-0200 x1222
jpina@veeco.com