Veeco Reports First Quarter 2016 Financial Results

May 4, 2016

PLAINVIEW, NY–(Marketwired – May 04, 2016) –

First Quarter 2016 Results Summary:

Revenues of $78 million, down 21% compared with the same period last year
GAAP net loss per share of $0.40 and Non-GAAP net loss per share of $0.15
Non-GAAP adjusted EBITDA of negative $2.1 million

Veeco Instruments Inc. (NASDAQ: VECO) today announced financial results for its first fiscal quarter ended March 31, 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	Q1 ’16	Q1 ’15
Revenue	$78.0	$98.3
Net income (loss)	($15.5)	($19.1)
Diluted earnings (loss) per share	($0.40)	($0.48)

Non-GAAP Results	Q1 ’16	Q1 ’15
Adjusted EBITDA	($2.1)	$2.7
Net income (loss)	($5.7)	($0.5)
Diluted earnings (loss) per share	($0.15)	($0.01)

“Although business conditions remain challenging, Veeco executed well in the first quarter. We achieved revenue at the high end of our guided range; expanded non-GAAP gross margin to nearly 42%, as well as exceeded expectations for adjusted EBITDA and earnings per share,” commented John R. Peeler, Chairman and Chief Executive Officer.

“LED industry conditions remain weak. As we navigate this challenging environment, we are assessing our cost structure to align with the current business outlook while positioning the company for future growth.

“We are prioritizing investments in areas that offer meaningful growth. We’re focused on qualifying our Precision Surface Processing (“PSP”) systems for additional Advanced Packaging applications and have made progress in our customer engagements for Through Silicon Via (“TSV”) applications. We are also leveraging our expertise in Metal Organic Chemical Vapor Deposition (“MOCVD”) to capture emerging opportunities for Gallium-Nitride (“GaN”) based power devices and to strengthen our position for Arsenic Phosphide applications including automotive lighting. These efforts support our strategy to enhance growth and improve the stability of our revenue stream,” Mr. Peeler concluded.

Guidance and Outlook

The following guidance is provided for Veeco’s second quarter 2016:

Revenue is expected to be in the range of $70 million to $83 million
Adjusted EBITDA (loss) is expected to be in the range of ($6) million to breakeven
GAAP earnings (loss) per share are expected to be in the range of ($0.59) to ($0.44)
Non-GAAP earnings (loss) per share are expected to be in the range of ($0.29) to ($0.14)

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, May 4, 2016 starting at 5:00pm ET. To join the call, dial 1-888-438-5448 (toll free) or 1-719-325-2458 and use passcode 858047. 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 March 31,
		2016			2015
Net sales		$	78,011		$	98,341
Cost of sales			46,055			63,205
Gross profit			31,956			35,136
Operating expenses, net:
	Selling, general, and administrative		19,839			22,882
	Research and development		22,110			18,585
	Amortization		5,251			7,962
	Restructuring		100			2,357
	Asset impairment		–			126
	Other, net		(71	)		(951	)
Total operating expenses, net			47,229			50,961
Operating income (loss)			(15,273	)		(15,825	)
	Interest income, net		268			161
Income (loss) before income taxes			(15,005	)		(15,664	)
	Income tax expense (benefit)		528			3,446
Net income (loss)		$	(15,533	)	$	(19,110	)

Income (loss) per common share:
	Basic	$	(0.40	)	$	(0.48	)
	Diluted	$	(0.40	)	$	(0.48	)

Weighted average number of shares:
	Basic		39,113			39,639
	Diluted		39,113			39,639


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

				March 31, 2016		December 31, 2015
				(unaudited)
Assets
Current assets:
	Cash and cash equivalents			$	243,722	$	269,232
	Short-term investments				104,979		116,050
	Accounts receivable, net				56,089		49,524
	Inventories				77,205		77,469
	Deferred cost of sales				1,090		2,100
	Prepaid expenses and other current assets				29,420		22,760
	Assets held for sale				4,983		5,000
		Total current assets			517,488		542,135
Property, plant and equipment, net					80,225		79,590
Intangible assets, net					126,653		131,674
Goodwill					114,908		114,908
Deferred income taxes					1,384		1,384
Other assets					21,098		21,098
		Total assets		$	861,756	$	890,789

Liabilities and stockholders’ equity
Current liabilities:
	Accounts payable			$	30,624	$	30,074
	Accrued expenses and other current liabilities				46,318		49,393
	Customer deposits and deferred revenue				74,473		76,216
	Income taxes payable				5,315		6,208
	Current portion of long-term debt				347		340
		Total current liabilities			157,077		162,231
Deferred income taxes					11,658		11,211
Long-term debt					1,104		1,193
Other liabilities					1,447		1,539
		Total liabilities			171,286		176,174

		Total stockholders’ equity			690,470		714,615

			Total liabilities and stockholders’ equity	$	861,756	$	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 March 31, 2016			GAAP			Share-based Compensation			Acquisition Related			Other			Non-GAAP
Net sales			$	78,011		$	–		$	–		$	–		$	78,011
Cost of sales				46,055			(546	)		–			–			45,509
Gross profit				31,956			546			–			–			32,502
	Gross margin			41.0	%											41.7	%
Operating expenses, net:
	Selling, general, and administrative			19,839			(2,743	)		(63	)		–			17,033
	Research and development			22,110			(1,099	)		–			–			21,011
	Amortization			5,251			–			(5,251	)		–			–
	Restructuring			100			–			–			(100	)		–
	Other, net			(71	)		–			–			–			(71	)
Total operating expenses, net				47,229			(3,842	)		(5,314	)		(100	)		37,973
Operating income (loss)				(15,273	)		4,388			5,314			100			(5,471	)
	Interest income, net			268			–			–			–			268
Income (loss) before income taxes				(15,005	)		4,388			5,314			100			(5,203	)
	Income tax expense (benefit)			528			–			–			–			528		*
Net income (loss)			$	(15,533	)	$	4,388		$	5,314		$	100		$	(5,731	)

Income (loss) per common share:
	Basic		$	(0.40	)										$	(0.15	)
	Diluted		$	(0.40	)										$	(0.15	)

Weighted average number of shares:
	Basic			39,113												39,113
	Diluted			39,113												39,113

Non-GAAP operating income															$	(5,471	)
	Depreciation															3,341
		Adjusted EBITDA													$	(2,130	)

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; 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 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 amounts)
(unaudited)

						Non-GAAP Adjustments
Three months ended March 31, 2015			GAAP			Share-based Compensation			Acquisition Related				Other				Non-GAAP
Net sales			$	98,341		$	–		$	–			$	–			$	98,341
Cost of sales				63,205			(601	)		(1,311	)	(a)		–				61,293
Gross profit				35,136			601			1,311				–				37,048
	Gross margin			35.7	%													37.7	%
Operating expenses, net:
	Selling, general, and administrative			22,882			(2,798	)		–				–				20,084
	Research and development			18,585			(599	)		–				–				17,985
	Amortization			7,962			–			(7,962	)			–				–
	Restructuring			2,357			–			–				(2,357	)			–
	Asset impairment			126			–			–				(126	)			–
	Other, net			(951	)		–			–				–				(951	)
Total operating expenses, net				50,961			(3,397	)		(7,962	)			(2,484	)			37,118
Operating income (loss)				(15,825	)		3,998			9,273				2,484				(70	)
	Interest income, net			161			–			–				–				161
Income (loss) before income taxes				(15,664	)		3,998			9,273				2,484				90
	Income tax expense (benefit)			3,446			–			–				(2,825	)	(b)		621
Net income (loss)			$	(19,110	)	$	3,998		$	9,273			$	5,309			$	(531	)

Income (loss) per common share:
	Basic		$	(0.48	)												$	(0.01	)
	Diluted		$	(0.48	)												$	(0.01	)

Weighted average number of shares:
	Basic			39,639														39,639
	Diluted			39,639														39,639

Non-GAAP operating income																	$	(70	)
	Depreciation																	2,762
		Adjusted EBITDA															$	2,692

Note: Amounts may not calculate precisely due to rounding.

(a) The inventory fair value step-up associated with the PSP acquisition’s purchase accounting.

(b) The ‘with or without method’ is utilized to determine the income tax effect of the non-GAAP adjustments.


Veeco Instruments Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Data
(In thousands, except per share amounts)
(unaudited)

										Non-GAAP Adjustments
Guidance for the three months ended June 30, 2016			GAAP							Share-based Compensation		Acquisition Related		Other			Non-GAAP
Net sales			$	70		–	$	83		$	–	$	–	$	–		$	70		–	$	83

Gross profit				26		–		34			1		–		–			27		–		35
	Gross margin			38	%	–		40	%									39	%	–		41	%


Operating income (loss)				(22	)	–		(16	)		5		6		1	(a)		(10	)	–		(4	)
	Depreciation																	4				4
		Adjusted EBITDA															$	(6	)	–	$	0


Net income (loss)				(23	)	–		(17	)		5		6		1	(b)		(11	)	–		(5	)

Income (loss) per diluted common share			$	(0.59	)	–	$	(0.44	)								$	(0.29	)	–	$	(0.14	)
		Weighted average number of shares		39				39										39				39

Note: Amounts may not calculate precisely due to rounding.

(a) In connection with a defined benefit plan termination, the minimum pension liability included in Accumulated Other Comprehensive Income will be charged to
earnings.

(b) In addition to the defined benefit plan termination, the ‘with or without method’ is utilized to determine the income tax effect of the non-GAAP adjustments.

Veeco Contacts:
Investors:
Shanye Hudson
516-677-0200 x1272
[email protected]

Media:
Jeffrey Pina
516-677-0200 x1222
[email protected]

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