Veeco Reports Second Quarter 2016 Financial Results

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News Desk 2018

Aug 1, 2016 at 4:15 PM

PLAINVIEW, NY --(Marketwired - August 01, 2016) -

Second Quarter 2016 Results Summary:

Revenues of $75.3 million
GAAP net loss per share of $0.82, includes a pre-tax charge of ~$16 million associated with the restructuring plans
Non-GAAP net loss per share of $0.19
Non-GAAP adjusted EBITDA of negative $2.8 million

Veeco Instruments Inc. ( NASDAQ : VECO ) today announced financial results for its second fiscal quarter ended June 30, 2016. 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.


Veeco Instruments Inc. and Subsidiaries
Press Release Summary - Financial Results
U.S. dollars in millions, except per share data

GAAP Results		Q2 '16		Q2 '15
Revenue	$	75.3	$	131.4
Net income (loss)	$	(32.1)	$	(8.4)
Diluted earnings (loss) per share	$	(0.82)	$	(0.21)

Non-GAAP Results		Q2 '16		Q2 '15
Net income (loss)	$	(7.6)	$	8.4
Adjusted EBITDA	$	(2.8)	$	12.8
Diluted earnings (loss) per share	$	(0.19)	$	0.20

"Veeco closed out a difficult first half of 2016 delivering second quarter results which were in line with our expectations and underscore our focus on operational execution," commented John R. Peeler, Chairman and Chief Executive Officer.

"As previously communicated, we have taken decisive steps aimed at improving our through-cycle profitability by reducing fixed costs and streamlining our operations. This plan will enable us to lower our quarterly adjusted EBITDA breakeven level to between $75 and $80 million in revenue, without compromising our ability to capitalize on growth opportunities. Looking ahead, we see positive indications that should lead to a pick-up in demand for our Metal Organic Chemical Vapor Deposition ("MOCVD") equipment over the near term," Mr. Peeler concluded.

The restructuring plan involves the consolidation of three manufacturing operations and streamlining of field and administrative functions. The plan is expected to be substantially completed by the end of 2016 and to result in annualized savings of approximately $20 million starting in the first quarter of 2017. As a result of these actions, the company recorded a pre-tax charge of approximately $16 million in the second quarter.

Guidance and Outlook

The following guidance is provided for Veeco's third quarter 2016:

Revenue is expected to be in the range of $70 million to $85 million
GAAP Net Income (loss) is expected to be in the range of ($24) million to ($18) million and earnings (loss) per share is expected to be in the range of ($0.62) to ($0.46)
Non-GAAP Net Income (loss) is expected to be in the range of ($10) million to ($4) million and earnings (loss) per share is expected to be in the range of ($0.26) to ($0.10)
Adjusted EBITDA (loss) is expected to be in the range of ($6) million to breakeven

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 1, 2016 starting at 5:00pm ET. To join the call, dial 1-888-455-2296 (toll free) or 1-719-325-2454 and use passcode 7244577. 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, 2015 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,
		Three months ended June 30,						Six months ended June 30,
		2016			2015			2016			2015
Net sales		$	75,348		$	131,410		$	153,359		$	229,751
Cost of sales			43,909			82,341			89,964			145,545
Gross profit			31,439			49,069			63,395			84,206
Operating expenses, net:
	Selling, general, and administrative		19,995			24,365			39,834			47,247
	Research and development		21,543			20,119			43,653			38,704
	Amortization		5,273			7,979			10,524			15,941
	Restructuring		2,095			683			2,195			3,040
	Asset impairment		13,627			-			13,627			126
	Other, net		159			(51	)		88			(1,002	)
Total operating expenses, net			62,692			53,095			109,921			104,056
Operating income (loss)			(31,253	)		(4,026	)		(46,526	)		(19,850	)
	Interest income, net		185			119			453			280
Income (loss) before income taxes			(31,068	)		(3,907	)		(46,073	)		(19,570	)
	Income tax expense (benefit)		1,014			4,479			1,542			7,926
Net income (loss)		$	(32,082	)	$	(8,386	)	$	(47,615	)	$	(27,496	)

Income (loss) per common share:
	Basic	$	(0.82	)	$	(0.21	)	$	(1.22	)	$	(0.69	)
	Diluted	$	(0.82	)	$	(0.21	)	$	(1.22	)	$	(0.69	)

Weighted average number of shares:
	Basic		38,965			39,693			39,035			39,666
	Diluted		38,965			39,693			39,035			39,666


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

				June 30, 2016		December 31, 2015
				(unaudited)
Assets
Current assets:
	Cash and cash equivalents			$	257,641	$	269,232
	Short-term investments				73,211		116,050
	Accounts receivable, net				41,695		49,524
	Inventories				90,771		77,469
	Deferred cost of sales				2,590		2,100
	Prepaid expenses and other current assets				20,356		22,760
	Assets held for sale				11,177		5,000
		Total current assets			497,441		542,135
Property, plant and equipment, net					62,981		79,590
Intangible assets, net					121,380		131,674
Goodwill					114,908		114,908
Deferred income taxes					1,384		1,384
Other assets					21,056		21,098
		Total assets		$	819,150	$	890,789

Liabilities and stockholders' equity
Current liabilities:
	Accounts payable			$	34,883	$	30,074
	Accrued expenses and other current liabilities				35,113		49,393
	Customer deposits and deferred revenue				65,753		76,216
	Income taxes payable				654		6,208
	Current portion of long-term debt				354		340
		Total current liabilities			136,757		162,231
Deferred income taxes					13,014		11,211
Long-term debt					1,013		1,193
Other liabilities					6,141		1,539
		Total liabilities			156,925		176,174

		Total stockholders' equity			662,225		714,615

			Total liabilities and stockholders' equity	$	819,150	$	890,789


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	%
Selling, general, and administrative and Other					20,154			(2,576	)			(62	)		17,516
Research and development					21,543			(940	)						20,603
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.

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, 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, 2015				GAAP			Share-based Compensation			Amortization		Other		Non-GAAP
Net sales				$	131,410									$	131,410
Gross profit					49,069			713							49,782
Gross margin					37.3	%									37.9	%
Selling, general, and administrative and Other					24,314			(3,112	)			(188	)		21,014
Research and development					20,119			(1,096	)						19,023
Net income (loss)					(8,386	)		4,921			7,979	3,867			8,381

Income (loss) per common share:
	Basic			$	(0.21	)								$	0.21
	Diluted				(0.21	)									0.20
Weighted average number of shares:
	Basic				39,693										40,790
	Diluted				39,693										40,960

Veeco Instruments Inc. and Subsidiaries
Other Non-GAAP Adjustments
(in thousands)
(unaudited)
Three months ended June 30, 2015
		Restructuring													683
		Acquisition related													188
		Non-GAAP tax adjustment *													2,996
			Total Other												3,867

* - 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, 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 Adjusted EBITDA
(in thousands)
(unaudited)

	Three months ended			Three months ended
	June 30, 2016			June 30, 2015
GAAP Net income (loss)	$	(32,082	)	$	(8,386	)
Share-based compensation		4,002			4,921
Amortization		5,273			7,979
Asset impairment		13,627			-
Restructuring		2,095			683
Acquisition related		62			188
Interest (income) expense		(185	)		(119	)
Depreciation		3,424			3,022
Income tax expense (benefit)		1,014			4,479
Adjusted EBITDA	$	(2,770	)	$	12,767

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.

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, 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 ended September 30, 2016			GAAP							Share-based Compensation		Amortization		Other	Non-GAAP
Net sales			$	70		-	$	85							$	70		-	$	85

Gross profit				27		-		34			1		-	-		28		-		35
	Gross margin			38	%	-		40	%							39	%	-		41	%

Net income (loss)			$	(24	)	-	$	(18	)		5		6	3		(10	)	-		(4	)

Income (loss) per diluted common share			$	(0.62	)	-	$	(0.46	)						$	(0.26	)	-	$	(0.10	)
		Weighted average number of shares		39				39								39				39

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

Guidance for the three months ended September 30, 2016
GAAP Net income (loss)															$	(24	)	-	$	(18	)
Share-based compensation																5		-		5
Amortization																6		-		6
Other *																3		-		3
Interest (income) expense																0		-		0
Depreciation																3		-		3
Income tax expense (benefit) **																1		-		1
Adjusted EBITDA															$	(6	)	-	$	-

Note: Amounts may not calculate precisely due to rounding.


* - Other includes expenses associated with the termination of a defined benefit plan and the restructuring plan.

** - 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, 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.