Veeco Reports Third Quarter 2016 Financial Results

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News Desk 2018

Nov 1, 2016 at 5:45 PM

PLAINVIEW, NY --(Marketwired - November 01, 2016) - Veeco Instruments Inc. ( NASDAQ : VECO )

Third Quarter 2016 Results Summary:

Recognized revenue of $85.5 million
GAAP net loss per share of $1.78, includes pre-tax restructuring and asset impairment charges of $57.8 million
Narrowed non-GAAP net loss per share to $0.05
Achieved positive non-GAAP adjusted EBITDA of $2.9 million
Generated $7 million in cash from operations

Veeco Instruments Inc. ( NASDAQ : VECO ) today announced financial results for its third fiscal quarter ended September 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.


U.S. dollars in millions, except per share data

GAAP Results	Q3 '16	Q3 '15
Revenue	$85.5	$140.7
Net income (loss)	($69.6)	$5.3
Diluted earnings (loss) per share	($1.78)	$0.13

Non-GAAP Results	Q3 '16	Q3 '15
Adjusted net income (loss)	($1.8)	$13.6
Adjusted EBITDA	$2.9	$21.8
Adjusted diluted earnings (loss) per share	($0.05)	$0.33

"Veeco executed well in the third quarter, delivering revenue above the top end of our guidance range and generating positive adjusted EBITDA and cash flows from operations," commented John R. Peeler, Chairman and Chief Executive Officer. "We are seeing a clear improvement in LED industry conditions and solid demand for our MOCVD products. We continue to win LED lighting and display opportunities with our TurboDisc® EPIK™700 Metal Organic Chemical Vapor Deposition ("MOCVD") system and expand our positions in red, orange and yellow LEDs with our TurboDisc® K475i™ Arsenic Phosphide ("As/P") system.

"We remain focused on improving the Company's through-cycle profitability. We are executing against our cost reduction initiatives, including our recently announced plans to significantly reduce investments in Atomic Layer Deposition ("ALD") technology development. These actions are expected to lower our quarterly adjusted EBITDA breakeven level to approximately $75 million in revenue, starting in the first quarter of 2017. Overall, I'm pleased with our ongoing execution and the positive momentum of our business looking ahead," Mr. Peeler concluded.

In the third quarter, the company recorded total asset impairment and restructuring charges of $57.8 million. Of these charges, the vast majority were non-cash relating to an intangible ALD asset impairment and $1.8 million were restructuring charges requiring cash. Page 2/Q3 2016 Earnings Results Press Release

Guidance and Outlook

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

Revenue is expected to be in the range of $85 million to $100 million
GAAP Gross Margin is expected to be in the range of 37% to 39% and non-GAAP Gross Margin is expected to be in the range of 38% to 40%
GAAP Net Income (loss) is expected to be in the range of ($13) million to ($7) million and non-GAAP Net Income (loss) is expected to be in the range of ($3) million to $3 million
GAAP earnings (loss) per share is expected to be in the range of ($0.34) to ($0.19) and non-GAAP earnings (loss) per share is expected to be in the range of ($0.07) to $0.07
Adjusted EBITDA is expected to be between $0 and $6 million

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, 2016 starting at 5:00pm ET. To join the call, dial 1-888-430-8709 (toll free) or 1-719-325-2448 and use passcode 6493222. 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.




Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

		Three months ended September 30,					Nine months ended September 30,
		2016			2015		2016			2015
Net sales		$	85,482		$	140,744	$	238,842		$	370,494
Cost of sales			52,027			86,494		141,991			232,038
Gross profit			33,455			54,250		96,851			138,456
Operating expenses, net:
	Research and development		19,892			19,200		63,545			57,904
	Selling, general, and administrative		18,396			21,905		58,230			69,153
	Amortization of intangible assets		5,261			5,891		15,785			21,832
	Restructuring		1,798			469		3,993			3,509
	Asset impairment		56,035			-		69,662			126
	Other, net		795			207		884			(795	)
Total operating expenses, net			102,177			47,672		212,099			151,729
Operating income (loss)			(68,722	)		6,578		(115,248	)		(13,273	)
	Interest income, net		260			161		713			442
Income (loss) before income taxes			(68,462	)		6,739		(114,535	)		(12,831	)
	Income tax expense		1,136			1,433		2,677			9,360
Net income (loss)		$	(69,598	)	$	5,306	$	(117,212	)	$	(22,191	)

Income (loss) per common share:
	Basic	$	(1.78	)	$	0.13	$	(2.99	)	$	(0.56	)
	Diluted	$	(1.78	)	$	0.13	$	(2.99	)	$	(0.56	)

Weighted average number of shares:
	Basic		39,131			40,846		39,193			39,729
	Diluted		39,131			40,979		39,193			39,729


Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

			September 30, 2016		December 31, 2015

Assets
Current assets:
	Cash and cash equivalents		$	274,018	$	269,232
	Short-term investments			62,835		116,050
	Accounts receivable, net			50,463		49,524
	Inventories			86,651		77,469
	Deferred cost of sales			3,165		2,100
	Prepaid expenses and other current assets			19,099		22,760
	Assets held for sale			12,129		5,000
		Total current assets		508,360		542,135
Property, plant and equipment, net				57,557		79,590
Intangible assets, net				61,812		131,674
Goodwill				114,908		114,908
Deferred income taxes				1,384		1,384
Other assets				21,047		21,098
		Total assets	$	765,068	$	890,789

Liabilities and stockholders' equity
Current liabilities:
	Accounts payable		$	27,455	$	30,074
	Accrued expenses and other current liabilities			38,421		49,393
	Customer deposits and deferred revenue			79,699		76,216
	Income taxes payable			1,825		6,208
	Current portion of long-term debt			361		340
		Total current liabilities		147,761		162,231
Deferred income taxes				13,146		11,211
Long-term debt				920		1,193
Other liabilities				6,503		1,539
	Total liabilities			168,330		176,174

	Total stockholders' equity			596,738		714,615

		Total liabilities and stockholders' equity	$	765,068	$	890,789


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.

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 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.

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

				Non-GAAP Adjustments
Three months September 30, 2015		GAAP		Share-based Compensation		Amortization	Other		Non-GAAP
Net sales		$	140,744						$	140,744
Gross profit			54,250	787						55,037
Gross margin			38.5%							39.1%
Research and development			19,200	(1,044	)					18,156
Selling, general, and administrative and Other			22,112	(3,288	)		(188	)		18,636
Net income (loss)			5,306	5,119		5,891	(2,675	)		13,641

Income (loss) per common share:
	Basic	$	0.13						$	0.33
	Diluted		0.13							0.33
Weighted average number of shares:
	Basic		40,846							40,846
	Diluted		40,979							40,979

Veeco Instruments Inc. and Subsidiaries
Other Non-GAAP Adjustments
(in thousands)
(unaudited)
Three months September 30, 2015
	Restructuring		469
	Acquisition related		188
	One-time legal settlement		395
	Non-GAAP tax adjustment *		(3,727	)
		Total Other	(2,675	)

* - 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 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.

Reconciliation of GAAP Net Income (loss) to Adjusted EBITDA
(in thousands)
(unaudited)

	Three months ended September 30,
	2016			2015
GAAP Net income (loss)	$	(69,598	)	$	5,306
Share-based compensation		3,743			5,119
Amortization		5,261			5,891
Asset impairment		56,035			-
Restructuring		1,798			469
Acquisition related		63			188
One-time legal settlement		-			395
Accelerated depreciation		355			-
Pension termination		1,305			-
Interest income		(260	)		(161	)
Depreciation		3,104			3,151
Income tax expense (benefit)		1,136			1,433
Adjusted EBITDA	$	2,942		$	21,791

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 December 31, 2016		GAAP			Share-based Compensation	Amortization	Other	Non-GAAP
Net sales		$ 85	-	$ 100				$ 85	-	$ 100

Gross profit		31	-	39	1	-	-	32	-	40
	Gross margin	37%	-	39%				38%	-	40%

Net income (loss)		$(13)	-	$(7)	5	4	1	(3)	-	3

Income (loss) per diluted common share		$(0.34)	-	$(0.19)				$(0.07)	-	$0.07
	Weighted average number of shares	39		39				39		40

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

Guidance for the three months ended December 31, 2016
GAAP Net income (loss)	$	(13	)	-	$	(7	)
Share-based compensation		5		-		5
Amortization		4		-		4
Restructuring		1		-		1
Interest (income) expense		0		-		0
Depreciation		3		-		3
Income tax expense (benefit) *		0		-		0
Adjusted EBITDA	$	0		-	$	6

Note: Amounts may not calculate precisely due to rounding.

* - 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 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.