SOURCE: Veeco Instruments Inc.

Veeco

November 01, 2016 16:05 ET

Veeco Reports Third Quarter 2016 Financial Results

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. 

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