Press Release Details

Veeco Reports Third Quarter 2016 Financial Results

11/01/2016

PLAINVIEW, NY -- (Marketwired) -- 11/01/16 -- 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    Nine months ended
                                     September 30,         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,  December 31,
                                                      2016          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              Share-based
 September 30, 2016    GAAP    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                    Share-based
 September 30, 2015     GAAP   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                    Share-based
 31, 2016        GAAP       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.
   Veeco Contacts:Investors: Shanye Hudson 516-677-0200 x1272 shudson@veeco.comMedia: Jeffrey Pina 516-677-0200 x1222 jpina@veeco.com

Source: Veeco Instruments Inc.

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