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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Veeco Instruments Inc DE | NASDAQ:VECO | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
1.37 | 3.41% | 41.53 | 41.00 | 42.32 | 41.75 | 40.435 | 40.69 | 456,979 | 22:16:11 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number
(Exact Name of Registrant as Specified in Its Charter)
| ||
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code:
(
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
| Accelerated filer ☐ | ||
Non-accelerated filer ☐ | Smaller reporting company | |||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 1, 2024, there were
VEECO INSTRUMENTS INC.
INDEX
Safe Harbor Statement
This quarterly report on Form 10-Q (the “Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Discussions containing such forward-looking statements may be found in Part I - Items 1, 2, and 3 hereof, as well as within this Report generally. In addition, when used in this Report, the words “believes,” “anticipates,” “expects,” “estimates,” “targets,” “plans,” “intends,” “will,” and similar expressions related to the future are intended to identify forward-looking statements. All forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from projected results.
In addition, the preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates and assumptions are based on knowledge of current events and planned actions to be undertaken in the future, they may ultimately differ from actual results. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. All estimates and assumptions are subject to a number of risks and uncertainties that could cause actual results to differ materially from these estimates and assumptions.
The risks and uncertainties of Veeco Instruments Inc. (together with its consolidated subsidiaries, “Veeco,” the “Company,” “we,” “us,” and “our,” unless the context indicates otherwise) include, without limitation, those set forth under the heading “Risk Factors” in Part 1, Item 1A of our 2023 Form 10-K, and the following:
Risks Related to Our Business and Industry
● | Unfavorable market conditions have adversely affected, and may continue to adversely affect, our operating results; |
● | We face significant competition; |
● | We operate in industries characterized by rapid technological change; |
● | Certain of our sales are dependent on the demand for consumer electronic products and automobiles, which can experience significant volatility; |
● | We have a concentrated customer base, located primarily in a limited number of regions, which operates in highly concentrated industries; |
● | The cyclicality of the industries we serve directly affects our business; |
● | Our failure to estimate customer demand accurately could result in inventory obsolescence, liabilities to our suppliers for products no longer needed, and manufacturing interruptions or delays which could affect our ability to meet customer demand; |
1
● | We rely on a limited number of suppliers, some of whom are our sole source for particular components; |
● | Our failure to successfully manage our outsourcing activities or failure of our outsourcing partners to perform as anticipated could adversely affect our results of operations; |
● | The timing of our orders, shipments, and revenue recognition may cause our quarterly operating results to fluctuate significantly; |
● | Our sales cycle is long and unpredictable; |
● | Our backlog is subject to customer cancellation or modification which could result in decreased sales, increased inventory obsolescence, and liabilities to our suppliers for products no longer needed; |
● | We are exposed to risks associated with business combinations, acquisitions, strategic investments and divestitures; |
Risks Associated with Operating a Global Business
● | We are exposed to risks of operating businesses outside the United States; |
● | Changes in U.S. trade policy and export controls and ongoing trade disputes between the U.S. and China have adversely affected, and may continue to adversely affect, our business, results of operations, and financial conditions; |
● | We may be unable to obtain required export licenses for the sale of our products; |
● | We are exposed to various risks associated with global regulatory requirements; |
Risks Related to Intellectual Property and Cybersecurity
● | Disruptions in our information technology systems or data security incidents could result in significant financial, legal, regulatory, business, and reputational harm to us; |
● | We may be unable to effectively enforce and protect our intellectual property rights; |
● | We may be subject to claims of intellectual property infringement by others; |
Financial, Accounting, and Capital Markets Risks
● | Our operating results may be adversely affected by tightening credit markets; |
● | We are subject to foreign currency exchange risks; |
● | We may be required to take impairment charges on assets; |
● | Changes in accounting pronouncements or taxation rules, practices, or rates may adversely affect our financial results; |
● | Our current debt facilities contain certain restrictions, covenants and repurchase provisions that may limit our ability to raise the funds necessary to meet our working capital needs, which may include the cash conversion of the Notes or repurchase of the Notes for cash upon a fundamental change; |
2
● | Issuance of our common stock, if any, upon conversion of the Notes, as well as the capped call transactions and the hedging activities of the option counterparties, may impair or reduce our ability to utilize our research and development credits carryforwards in the future; |
● | The capped call transactions may affect the value of the 2027 Notes and our common stock; |
General Risk Factors
● | The price of our common shares is volatile and could decrease; |
● | Our inability to attract, retain, and motivate employees could have a material adverse effect on our business; |
● | We are subject to risks of non-compliance with environmental, health, and safety regulations; |
● | We are exposed to risks associated with the increased attention by our stakeholders to environmental, social and governance (“ESG”) matters; and |
● | We have adopted certain measures that may have anti-takeover effects, which may make an acquisition of our Company by another company more difficult. |
Consequently, such forward looking statements and estimates should be regarded solely as the current plans and beliefs of Veeco. We do not undertake any obligation to update any forward-looking statements to reflect future events or circumstances after the date of such statements.
3
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
Veeco Instruments Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share amounts)
March 31, | December 31, | |||||
| 2024 |
| 2023 | |||
Assets | (unaudited) | |||||
Current assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Restricted cash | | | ||||
Short-term investments |
| |
| | ||
Accounts receivable, net |
| |
| | ||
Contract assets | | | ||||
Inventories |
| |
| | ||
Prepaid expenses and other current assets | | | ||||
Total current assets |
| |
| | ||
Property, plant, and equipment, net |
| |
| | ||
Operating lease right-of-use assets | | | ||||
Intangible assets, net | | | ||||
Goodwill |
| |
| | ||
Deferred income taxes | | | ||||
Other assets |
| |
| | ||
Total assets | $ | | $ | | ||
Liabilities and stockholders' equity | ||||||
Current liabilities: | ||||||
Accounts payable | $ | | $ | | ||
Accrued expenses and other current liabilities |
| |
| | ||
Contract liabilities |
| |
| | ||
Income taxes payable |
| |
| — | ||
Current portion of long-term debt |
| |
| — | ||
Total current liabilities |
| |
| | ||
Deferred income taxes |
| |
| | ||
Long-term debt |
| |
| | ||
Long-term operating lease liabilities | | | ||||
Other liabilities |
| |
| | ||
Total liabilities |
| |
| | ||
Stockholders' equity: | ||||||
Preferred stock, $ |
| |||||
Common stock, $ |
| |
| | ||
Additional paid-in capital |
| |
| | ||
Accumulated deficit |
| ( |
| ( | ||
Accumulated other comprehensive income |
| |
| | ||
Total stockholders' equity |
| |
| | ||
Total liabilities and stockholders' equity | $ | | $ | |
See accompanying Notes to the Consolidated Financial Statements.
4
Veeco Instruments Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three months ended March 31, | |||||||
| 2024 |
| 2023 |
| |||
Net sales | $ | | $ | | |||
Cost of sales |
| |
| | |||
Gross profit |
| | | ||||
Operating expenses, net: | |||||||
Research and development |
| |
| | |||
Selling, general, and administrative |
| |
| | |||
Amortization of intangible assets |
| |
| | |||
Other operating expense (income), net | ( | ( | |||||
Total operating expenses, net | | | |||||
Operating income |
| |
| | |||
Interest income |
| |
| | |||
Interest expense |
| ( |
| ( | |||
Income before income taxes |
| | | ||||
Income tax expense |
| |
| | |||
Net income | $ | | $ | | |||
Income per common share: | |||||||
Basic | $ | | $ | | |||
Diluted | $ | | $ | | |||
Weighted average number of shares: | |||||||
Basic |
| |
| | |||
Diluted |
| |
| |
See accompanying Notes to the Consolidated Financial Statements.
5
Veeco Instruments Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
Three months ended March 31, | ||||||||
| 2024 |
| 2023 |
|
| |||
Net income | $ | | $ | | ||||
Other comprehensive income (loss), net of tax: | ||||||||
Unrealized gain (loss) on available-for-sale securities |
| ( |
| | ||||
Change in currency translation adjustments |
| ( |
| | ||||
Total other comprehensive income (loss), net of tax |
| ( |
| | ||||
Total comprehensive income | $ | | $ | |
See accompanying Notes to the Consolidated Financial Statements.
6
Veeco Instruments Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three months ended March 31, | |||||||
| 2024 |
| 2023 |
| |||
Cash Flows from Operating Activities | |||||||
Net income | $ | | $ | | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization |
| |
| | |||
Non-cash interest expense | | | |||||
Deferred income taxes |
| ( |
| | |||
Share-based compensation expense |
| |
| | |||
Change in contingent consideration | ( | — | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable and contract assets |
| ( |
| | |||
Inventories |
| ( |
| ( | |||
Prepaid expenses and other current assets |
| |
| ( | |||
Accounts payable and accrued expenses |
| |
| | |||
Contract liabilities |
| ( |
| | |||
Income taxes receivable and payable, net |
| |
| | |||
Other, net |
| ( |
| ( | |||
Net cash provided by (used in) operating activities |
| |
| | |||
Cash Flows from Investing Activities | |||||||
Capital expenditures |
| ( |
| ( | |||
Acquisition of businesses, net of cash acquired | — | ( | |||||
Proceeds from the sale of investments |
| |
| | |||
Payments for purchases of investments |
| ( |
| ( | |||
Proceeds from sale of productive assets |
| |
| — | |||
Net cash provided by (used in) investing activities | | ( | |||||
Cash Flows from Financing Activities | |||||||
Restricted stock tax withholdings | ( | ( | |||||
Contingent consideration payment | ( | — | |||||
Proceeds (net of tax withholdings) from option exercises and employee stock purchase plan |
| |
| | |||
Extinguishment of Convertible Notes |
| — |
| ( | |||
Net cash provided by (used in) financing activities |
| ( |
| ( | |||
Effect of exchange rate changes on cash and cash equivalents |
| ( |
| | |||
Net increase (decrease) in cash, cash equivalents, and restricted cash |
| |
| ( | |||
Cash, cash equivalents, and restricted cash - beginning of period |
| |
| | |||
Cash, cash equivalents, and restricted cash - end of period | $ | | $ | | |||
Supplemental Disclosure of Cash Flow Information | |||||||
Interest paid | $ | | $ | | |||
Income taxes paid, net of refunds received | | | |||||
Non-cash activities | |||||||
Capital expenditures included in accounts payable and accrued expenses | | | |||||
Net transfer of inventory to property, plant and equipment | — | | |||||
Right-of-use assets obtained in exchange for lease obligations | — | |
See accompanying Notes to the Consolidated Financial Statements.
7
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
(unaudited)
Note 1 — Basis of Presentation
The accompanying unaudited Consolidated Financial Statements of Veeco have been prepared in accordance with U.S. GAAP as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 270 for interim financial information and with the instructions to Rule 10-01 of Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements as the interim information is an update of the information that was presented in Veeco’s most recent annual financial statements. For further information, refer to Veeco’s Consolidated Financial Statements and Notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal, recurring nature.
Veeco reports interim quarters on a
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, actual results may differ from these estimates.
Revenue Recognition
Revenue is recognized upon the transfer of control of the promised product or service to the customer in an amount that reflects the consideration the Company expects to receive in exchange for such product or service. The Company’s contracts with customers generally do not contain variable consideration. In the rare instances where variable consideration is included, the Company estimates the amount of variable consideration and determines what portion of that, if any, has a high probability of significant subsequent revenue reversal, and if so, that amount is excluded from the transaction price. The Company’s contracts with customers frequently contain multiple deliverables, such as systems, upgrades, components, spare parts, installation, maintenance, and service plans. Judgment is required to properly identify the performance obligations within a contract and to determine how the revenue should be allocated among the performance obligations. The Company also evaluates whether multiple transactions with the same customer or related parties should be considered part of a single contract based on an assessment of whether the contracts or agreements are negotiated or executed within a short time frame of each other or if there are indicators that the contracts are negotiated in contemplation of one another.
When there are separate units of accounting, the Company allocates revenue to each performance obligation on a relative stand-alone selling price basis. The stand-alone selling prices are determined based on the prices at which the Company separately sells the systems, upgrades, components, spare parts, installation, maintenance, and service plans. For items that are not sold separately, the Company estimates stand-alone selling prices generally using an expected cost plus margin approach.
Most of the Company’s revenue is recognized at a point in time when the performance obligation is satisfied. The Company considers many facts when evaluating each of its sales arrangements to determine the timing of revenue recognition, including its contractual obligations and the nature of the customer’s post-delivery acceptance provisions. The Company’s system sales arrangements, including certain upgrades, generally include field acceptance provisions that may include functional or mechanical test procedures. For many of these arrangements, a customer source inspection of the system is performed in the Company’s facility, test data is sent to the customer documenting that the system is functioning to the agreed upon specifications prior to delivery, or other quality assurance testing is performed
8
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
internally to ensure system functionality prior to shipment. Historically, such source inspection or test data replicates the field acceptance provisions that are performed at the customer’s site prior to final acceptance of the system. When the Company objectively demonstrates that the criteria specified in the contractual acceptance provisions are achieved prior to delivery either through customer testing or the Company’s historical experience of its tools meeting specifications, transfer of control of the product to the customer is considered to have occurred and revenue is recognized upon system delivery since there is no substantive contingency remaining related to the acceptance provisions at that date. For new products, new applications of existing products, or for products with substantive customer acceptance provisions where the Company cannot objectively demonstrate that the criteria specified in the contractual acceptance provisions have been achieved prior to delivery, revenue and the associated costs are deferred. The Company recognizes such revenue and costs upon obtaining objective evidence that the acceptance provisions can be achieved, assuming all other revenue recognition criteria have been met.
In certain cases the Company’s contracts with customers contain a billing retention, which is billed by the Company and payable by the customer when field acceptance provisions are completed. Revenue recognized in advance of the amount that has been billed is recorded as a contract asset on the Consolidated Balance Sheets.
The Company recognizes revenue related to maintenance and service contracts over time based upon the respective contract term. Installation revenue is recognized over time as the installation services are performed. The Company recognizes revenue from the sales of components, spare parts, and specified service engagements at a point in time, which is typically consistent with the time of delivery in accordance with the terms of the applicable sales arrangement.
The Company may receive advanced payments on system transactions. The timing of the transfer of goods or services related to the advanced payments is either at the discretion of the customer or generally expected to be within one year from the advanced receipt. As such, the Company does not adjust transaction prices for the time value of money. Incremental direct costs incurred related to the acquisition of a customer contract, such as sales commissions, are expensed as incurred since the expected amortization period is
The Company has elected to treat shipping and handling costs as a fulfillment activity, and the Company includes such costs in cost of sales when the Company recognizes revenue for the related goods. Taxes assessed by governmental authorities that are collected by the Company from a customer are excluded from revenue.
Inventories
Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Each quarter the Company assesses the valuation and recoverability of all inventories: materials (raw materials, spare parts, and service inventory); work-in-process; and finished goods; and evaluation inventory at customer facilities. Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated net realizable value if less than cost. The Company evaluates usage requirements by analyzing historical usage, anticipated demand, alternative uses of materials, and other qualitative factors. Unanticipated changes in demand for the Company’s products may require a write down of inventory, which would be reflected in cost of sales in the period the revision is made. Inventory acquired as part of a business combination is recorded at fair value on the date of acquisition.
Recent Accounting Standards Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07: Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures. This standard primarily enhances disclosures about significant segment expenses. The standard requires interim and annual disclosure of significant segment expenses that are regularly provided to the chief operating decision-maker (“CODM”) and included within the reported measure of a segment’s profit or loss, requires interim disclosures about a reportable segment’s profit and loss and assets that are currently required annually, requires disclosure of the position and title of the CODM, clarifies circumstances in which an entity can disclose multiple
9
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
segment measures of profit or loss and contains other disclosure requirements. This authoritative guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the effect of this new guidance on its consolidated financial statements.
Note 2 — Income Per Common Share
Basic income per share is calculated by dividing net income by the weighted average number of shares outstanding during the period. Diluted income per share is calculated by dividing net income available to common shareholders by the weighted average number of shares used to calculate basic income per share plus the weighted average number of common share equivalents outstanding during the period. The dilutive effect of outstanding options to purchase common stock and share-based awards is considered in diluted income per share by application of the treasury stock method. The dilutive effect of performance share units is included in diluted income per common share if the performance targets have been achieved, or would have been achieved if the reporting date was the end of the contingency period. Finally, the Company includes the dilutive effect of shares issuable upon conversion of its Notes in the calculation of diluted income per share using the if-converted method. The Company has the option for the 2025 and 2027 Notes to settle the conversion value in any combination of cash or shares, and as such, the maximum number of shares issuable are included in the dilutive share count if the effect would be dilutive. The Company must settle the principal amount of the 2029 Notes in cash, and has the option to settle any excess of the conversion value over the principal amount in any combination of cash or shares. As such, the Company only includes the excess shares that may be issuable above the principal amount of the 2029 Notes in the dilutive share count, if the effect would be dilutive.
The computations of basic and diluted income per share for the three months ended March 31, 2024 and 2023 are as follows:
Three months ended March 31, | ||||||||
| 2024 |
| 2023 |
|
| |||
(in thousands, except per share amounts) | ||||||||
Numerator: | ||||||||
Net income | $ | | $ | | ||||
Interest expense associated with convertible notes | | | ||||||
Net income available to common shareholders | $ | | $ | | ||||
Denominator: | ||||||||
Basic weighted average shares outstanding |
| |
| | ||||
Effect of potentially dilutive share-based awards | | | ||||||
Dilutive effect of convertible notes |
| |
| | ||||
Diluted weighted average shares outstanding |
| |
| | ||||
Net income per common share: | ||||||||
Basic | $ | | $ | | ||||
Diluted | $ | | $ | | ||||
Potentially dilutive shares excluded from the diluted calculation as their effect would be antidilutive | | | ||||||
Potential shares to be issued for settlement of the convertible notes excluded from the diluted calculation as their effect would be antidilutive | — | |
10
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
Note 3 — Business Combination
Epiluvac
On January 31, 2023, the Company acquired Epiluvac AB, a privately held manufacturer of chemical vapor deposition (CVD) epitaxy systems that enable silicon carbide (SiC) applications in the electric vehicle market. This acquisition is expected to accelerate penetration into the emerging, high-growth SiC equipment market. The results of Epiluvac’s operations have been included in the consolidated financial statements since the date of acquisition. Acquisition date fair value totaled $
The purchase agreement included performance milestones that, if achieved, could trigger additional payments to the original selling shareholders. The contingent arrangements include payments up to $
The Company estimated the fair value of the contingent consideration by assigning probabilities and discount factors to each of the various defined performance milestones, while using a Monte-Carlo simulation model to determine the most likely outcome for payments to be based on value of orders received. These fair value measurements are based on significant inputs not observable in the market and thus represent a Level 3 measurement as defined in ASC 820. The
The Company updates its estimate of fair value of the contingent consideration each reporting period, utilizing the same methodologies described above. The
Note 4 — Assets
Investments
Short-term investments are generally classified as available-for-sale and reported at fair value, with unrealized gains and losses, net of tax, presented as a separate component of stockholders’ equity under the caption “Accumulated other comprehensive income” in the Consolidated Balance Sheets. These securities may include U.S. treasuries, government agency securities, corporate debt, and commercial paper, all with maturities of greater than three months when purchased. All realized gains and losses and unrealized losses resulting from declines in fair value that are other than temporary are included in “Other operating expense (income), net” in the Consolidated Statements of Operations.
11
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
Fair value is the price that would be received for an asset or the amount paid to transfer a liability in an orderly transaction between market participants. Veeco classifies certain assets based on the following fair value hierarchy:
Level 1: Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and
Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Veeco has evaluated the estimated fair value of financial instruments using available market information and valuations as provided by third-party sources. The use of different market assumptions or estimation methodologies could have a significant effect on the estimated fair value amounts.
The following table presents the portion of Veeco’s assets that were measured at fair value on a recurring basis at March 31, 2024 and December 31, 2023:
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |||||
(in thousands) | ||||||||||||
March 31, 2024 | ||||||||||||
Cash equivalents | ||||||||||||
Certificate of deposits and time deposits | $ | | $ | — | $ | — | $ | | ||||
Corporate debt | — | | — | | ||||||||
U.S. treasuries | | — | — | | ||||||||
Money market cash | | — | — | | ||||||||
Total | $ | | $ | | $ | — | $ | | ||||
Short-term investments | ||||||||||||
U.S. treasuries | $ | | $ | — | $ | — | $ | | ||||
Government agency securities | — | | — | | ||||||||
Corporate debt | — | | — | | ||||||||
Total | $ | | $ | | $ | — | $ | | ||||
December 31, 2023 | ||||||||||||
Cash equivalents | ||||||||||||
Certificate of deposits and time deposits | $ | | $ | — | $ | — | $ | | ||||
Corporate debt | — | | — | | ||||||||
Money market cash | | — | — | | ||||||||
Total | $ | | $ | | $ | — | $ | | ||||
Short-term investments | ||||||||||||
U.S. treasuries | $ | | $ | — | $ | — | $ | | ||||
Government agency securities | — | | — | | ||||||||
Corporate debt | — | | — | | ||||||||
Commercial paper | — | | — | | ||||||||
Total | $ | | $ | | $ | — | $ | |
There were
12
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
At March 31, 2024 and December 31, 2023, the amortized cost and fair value of available-for-sale securities consist of:
|
| Gross |
| Gross |
| |||||||
Amortized | Unrealized | Unrealized | Estimated | |||||||||
Cost | Gains | Losses | Fair Value | |||||||||
(in thousands) | ||||||||||||
March 31, 2024 | ||||||||||||
U.S. treasuries | $ | | $ | — | $ | ( | $ | | ||||
Government agency securities | | — | ( | | ||||||||
Corporate debt | | — | ( | | ||||||||
Total | $ | | $ | — | $ | ( | $ | | ||||
December 31, 2023 | ||||||||||||
U.S. treasuries | $ | | $ | | $ | ( | $ | | ||||
Government agency securities | | | ( | | ||||||||
Corporate debt |
| | | ( |
| | ||||||
Commercial paper | | — | — | | ||||||||
Total | $ | | $ | | $ | ( | $ | |
Available-for-sale securities in a loss position at March 31, 2024 and December 31, 2023 consist of:
Continuous Loss Position | Continuous Loss Position | |||||||||||
for Less than 12 Months | for 12 Months or More | |||||||||||
|
| Gross |
|
| Gross | |||||||
Estimated | Unrealized | Estimated | Unrealized | |||||||||
Fair Value | Losses | Fair Value | Losses | |||||||||
(in thousands) | ||||||||||||
March 31, 2024 | ||||||||||||
U.S. treasuries | $ | | $ | ( | $ | — | $ | — | ||||
Government agency securities | | ( | — | — | ||||||||
Corporate debt |
| |
| ( |
| |
| ( | ||||
Total | $ | | $ | ( | $ | | $ | ( | ||||
December 31, 2023 | ||||||||||||
U.S. treasuries | $ | | $ | ( | $ | — | $ | — | ||||
Government agency securities | | ( | — | — | ||||||||
Corporate debt |
| |
| ( |
| |
| ( | ||||
Total | $ | | $ | ( | $ | | $ | ( |
The contractual maturities of securities classified as available-for-sale at March 31, 2024 were as follows:
March 31, 2024 | ||||||
Amortized | Estimated | |||||
Cost | Fair Value | |||||
(in thousands) | ||||||
Due in one year or less | $ | | $ | | ||
Due after one year through two years | |
| | |||
Total | $ | | $ | |
13
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. There were
Accounts Receivable
Accounts receivable is presented net of an allowance for doubtful accounts of $
Inventories
Inventories at March 31, 2024 and December 31, 2023 consist of the following:
March 31, | December 31, | |||||
| 2024 |
| 2023 | |||
(in thousands) | ||||||
Materials | $ | | $ | | ||
Work-in-process |
| |
| | ||
Finished goods |
| |
| | ||
Evaluation inventory | | | ||||
Total | $ | | $ | |
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets primarily consist of supplier deposits, prepaid value-added tax, lease deposits, prepaid insurance, prepaid software and maintenance, and other receivables. The Company had deposits with its suppliers of $
Property, Plant, and Equipment
Property, plant, and equipment at March 31, 2024 and December 31, 2023 consist of the following:
March 31, | December 31, | |||||
| 2024 |
| 2023 | |||
(in thousands) | ||||||
Land | $ | | $ | | ||
Building and improvements |
| |
| | ||
Machinery and equipment (1) |
| |
| | ||
Leasehold improvements |
| |
| | ||
Gross property, plant, and equipment |
| |
| | ||
Less: accumulated depreciation and amortization |
| |
| | ||
Net property, plant, and equipment | $ | | $ | |
(1) | Machinery and equipment also includes software, furniture and fixtures |
For the three months ended March 31, 2024 and 2023, depreciation expense was $
14
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
Goodwill
Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognized. There were
Intangible Assets
Intangible assets consist of purchased technology, customer relationships, patents, trademarks and tradenames, licenses, and backlog, and are initially recorded at fair value. Long-lived intangible assets are amortized over their estimated useful lives in a method reflecting the pattern in which the economic benefits are consumed or amortized on a straight-line basis if such pattern cannot be reliably determined.
The components of purchased intangible assets were as follows:
March 31, 2024 | December 31, 2023 | |||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||
| Gross |
| Amortization |
|
| Gross |
| Amortization |
| |||||||||
Carrying | and | Net | Carrying | and | Net | |||||||||||||
Amount | Impairment | Amount | Amount | Impairment | Amount | |||||||||||||
(in thousands) | ||||||||||||||||||
Technology | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Customer relationships | | | | | | | ||||||||||||
Trademarks and tradenames | | | | | | | ||||||||||||
Other |
| |
| |
| |
| |
| |
| | ||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | |
Other intangible assets primarily consist of patents, licenses, and backlog.
Note 5 — Liabilities
Accrued Expenses and Other Current Liabilities
The components of accrued expenses and other current liabilities at March 31, 2024 and December 31, 2023 consist of:
March 31, | December 31, | |||||
| 2024 |
| 2023 | |||
(in thousands) | ||||||
Payroll and related benefits | $ | | $ | | ||
Warranty | | | ||||
Operating lease liabilities | | | ||||
Interest | | | ||||
Professional fees | | | ||||
Sales, use, and other taxes |
| |
| | ||
Contingent consideration | — | | ||||
Other |
| |
| | ||
Total | $ | | $ | |
Warranty
Warranties are typically valid for
15
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
statistics and regional warranty support costs and are affected by product failure rates, material usage, and labor costs incurred in correcting product failures during the warranty period. Unforeseen component failures or exceptional component performance can also result in changes to warranty costs. Changes in product warranty reserves for the three months ended March 31, 2024 include:
(in thousands) | |||
Balance - December 31, 2023 | $ | | |
Warranties issued |
| | |
Consumption of reserves |
| ( | |
Changes in estimate |
| ( | |
Balance - March 31, 2024 | $ | |
Contract Liabilities and Performance Obligations
Contract liabilities consist of unsatisfied performance obligations related to advanced payments received and billing in excess of revenue recognized. The contract liability balance as of December 31, 2023 was approximately $
This reduction in contract liabilities was offset in part by new billings for products and services which were unsatisfied performance obligations to customers and revenue had not yet been recognized as of March 31, 2024.
As of March 31, 2024, the Company has approximately $
Convertible Senior Notes
2023 Notes
On January 10, 2017, the Company issued $
The 2023 notes that remained outstanding matured on January 15, 2023 and were paid in cash and settled by the Company at that time.
2025 Notes
On November 17, 2020, as part of the privately negotiated exchange agreement, the Company issued $
On May 19, 2023, in connection with the completion of a private offering of $
16
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
$
2027 Notes
On May 18, 2020, the Company completed a private offering of $
On May 19, 2023, in connection with the completion of a private offering of $
2029 Notes
On May 19, 2023, the Company completed a private offering of $
The 2025 Notes, 2027 Notes, and 2029 Notes (collectively, the “Notes”) are unsecured senior obligations of Veeco and rank senior in right of payment to any of Veeco’s subordinated indebtedness; equal in right of payment to all of Veeco’s unsecured indebtedness that is not subordinated; effectively subordinated in right of payment to any of Veeco’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally subordinated to all indebtedness and other liabilities (including trade payables) of Veeco’s subsidiaries.
The Company may redeem for cash, at its option, all or any portion of (i) the outstanding 2025 Notes at any time on or after January 15, 2023, (ii) the outstanding 2027 Notes at any time on or after June 6, 2024 and/or (iii) the outstanding 2029 Notes at any time on or after June 8, 2026, in each case, at a redemption price equal to
17
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
on which the Company provides the redemption notice. Upon the Company’s notice of redemption, holders may elect to convert their Notes based on the conversion rates and criteria outlined below.
The Notes are convertible at the option of the holders upon the satisfaction of specified conditions and during certain periods as described below. The initial conversion rates are
Holders may convert all or any portion of their Notes, in multiples of
(i) | During any calendar quarter (and only during such calendar quarter), if the last reported sale price of the common stock for at least |
(ii) | During the |
(iii) | If the Company calls any or all of applicable series of the Notes for redemption at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or |
(iv) | Upon the occurrence of specified corporate events. |
For the calendar quarter ended March 31, 2024, the last reported sales price of the common stock during the
Holders may convert their Notes at any time, regardless of the foregoing circumstances, on October 15, 2024 with respect to the 2025 Notes, October 1, 2026 with respect to the 2027 Notes, and February 1, 2029 with respect to the 2029 Notes, until the close of business on the business day immediately preceding the respective maturity date.
The Notes are recorded as a single unit within liabilities in the consolidated balance sheets as the conversion features within the Notes are not derivatives that require bifurcation and the Notes do not involve a substantial premium. Transaction costs of $
18
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
The carrying value of the 2025 Notes, 2027 Notes, and 2029 Notes are as follows:
March 31, 2024 | December 31, 2023 | |||||||||||||||||
| Principal Amount |
| Unamortized |
| Net carrying value |
| Principal Amount |
| Unamortized |
| Net carrying value | |||||||
(in thousands) | ||||||||||||||||||
2025 Notes | $ | | $ | ( | $ | | $ | | $ | ( | $ | | ||||||
2027 Notes | | ( | | | ( | | ||||||||||||
2029 Notes | | ( | | | ( | | ||||||||||||
Net carrying value | $ | | $ | ( | $ | | $ | | $ | ( | $ | |
Total interest expense related to the 2023 Notes, 2025 Notes, 2027 Notes, and 2029 Notes is as follows:
Three months ended March 31, | ||||||||
| 2024 |
| 2023 |
| ||||
| (in thousands) | |||||||
Cash Interest Expense |
|
|
| |||||
Coupon interest expense - 2023 Notes | $ | — | $ | | ||||
Coupon interest expense - 2025 Notes | | | ||||||
Coupon interest expense - 2027 Notes | | | ||||||
Coupon interest expense - 2029 Notes | | — | ||||||
Non-cash Interest Expense |
|
|
| |||||
Amortization of debt discount/transaction costs- 2023 Notes |
| — |
| | ||||
Amortization of debt discount/transaction costs- 2025 Notes | | | ||||||
Amortization of debt discount/transaction costs- 2027 Notes | | | ||||||
Amortization of debt discount/transaction costs- 2029 Notes | | — | ||||||
Total Interest Expense | $ | | $ | |
The Company determined the 2025 Notes, 2027 Notes, and
Capped Call Transactions
In connection with the offering of the 2027 Notes, on May 13, 2020, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”), pursuant to capped call confirmations, covering the total principal amount of the 2027 Notes for an aggregate premium of $
The Capped Call Transactions are separate transactions entered into by the Company with the capped call counterparties, are not part of the terms of the 2027 Notes and do not change the holders’ rights under the 2027 Notes. Holders of the 2027 Notes do not have any rights with respect to the Capped Call Transactions. The cost of the Capped Call Transactions is not expected to be tax-deductible as the Company did not elect to integrate the Capped Call Transactions into the 2027 Notes for tax purposes. The Company used a portion of the net proceeds from the offering of the 2027 Notes to pay for the Capped Call Transactions, and the cost of the Capped Call Transactions was recorded as a reduction of the Company’s additional paid-in capital in the accompanying consolidated financial statements.
19
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
Revolving Credit Facility
On December 16, 2021, the Company entered into a loan and security agreement providing for a senior secured revolving credit facility in an aggregate principal amount of $
Borrowings will bear interest at a floating rate which can be, at the Company’s option, either (a) an alternate base rate plus an applicable rate ranging from
The Loan and Security Agreement contains customary affirmative covenants for transactions of this type, including, among others, the provision of financial and other information to the administrative agent, notice to the administrative agent upon the occurrence of certain material events, preservation of existence, maintenance of properties and insurance, compliance with laws, including environmental laws, the provision of additional guarantees, and an affiliate transactions covenant, subject to certain exceptions. The Loan and Security Agreement contains customary negative covenants, including, among others, restrictions on the ability to merge and consolidate with other companies, incur indebtedness, refinance our existing convertible notes, grant liens or security interests on assets, make investments, acquisitions, loans, or advances, pay dividends, and sell or otherwise transfer assets.
The Loan and Security Agreement contains financial maintenance covenants that require the Borrower to maintain an Interest Coverage Ratio (as defined in the Loan and Security Agreement) of not less than
Other Liabilities
Other liabilities at March 31, 2024 and December 31, 2023 were approximately $
20
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
Note 6 — Commitments and Contingencies
Leases
The Company’s operating leases primarily include real estate leases for properties used for manufacturing, R&D activities, sales and service, and administration, as well as certain equipment leases. Some leases may include options to renew for a period of up to
The following table provides the maturities of lease liabilities at March 31, 2024:
Operating | |||
| Leases | ||
(in thousands) | |||
Payments due by period: | |||
2024 | $ | | |
2025 | | ||
2026 | | ||
2027 | | ||
2028 | | ||
Thereafter | | ||
Total future minimum lease payments | | ||
Less: Imputed interest | ( | ||
Total | $ | | |
Reported as of March 31, 2024 | |||
$ | | ||
Long-term operating lease liabilities | | ||
$ | |
Operating lease costs for the three months ended March 31, 2024 and 2023 were $
Receivable Purchase Agreement
The Company entered into a receivable purchase agreement with a financial institution to sell certain of its trade receivables from customers without recourse, up to $
21
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
Purchase Commitments
Veeco has purchase commitments of $
Bank Guarantees
Veeco has bank guarantees and letters of credit issued by a financial institution on its behalf as needed. At March 31, 2024, outstanding bank guarantees and standby letters of credit totaled $
Legal Proceedings
The Company is involved in various legal proceedings arising in the normal course of business. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows.
Note 7 — Equity
Statement of Stockholders’ Equity
The following tables present the changes in Stockholders’ Equity:
|
|
|
|
| Accumulated |
| |||||||||||
Additional | Other | ||||||||||||||||
Common Stock | Paid-in | Accumulated | Comprehensive | ||||||||||||||
Shares | Amount | Capital | Deficit | Income | Total | ||||||||||||
(in thousands) | |||||||||||||||||
Balance at December 31, 2023 |
| | $ | | $ | | $ | ( | $ | | $ | | |||||
Net income |
| — |
| — |
| — |
| |
| — |
| | |||||
Other comprehensive income (loss), net of tax |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Share-based compensation expense |
| — |
| — |
| |
| — |
| — |
| | |||||
Net issuance under employee stock plans | | | ( | — | — | ( | |||||||||||
Balance at March 31, 2024 |
| | $ | | $ | | $ | ( | $ | | $ | |
|
|
|
|
| Accumulated |
| |||||||||||
Additional | Other | ||||||||||||||||
Common Stock | Paid-in | Accumulated | Comprehensive | ||||||||||||||
Shares | Amount | Capital | Deficit | Income | Total | ||||||||||||
(in thousands) | |||||||||||||||||
Balance at December 31, 2022 |
| | $ | | $ | | $ | ( | $ | | $ | | |||||
Net income |
| — |
| — |
| — |
| |
| — |
| | |||||
Other comprehensive income (loss), net of tax |
| — |
| — |
| — |
| — |
| |
| | |||||
Share-based compensation expense |
| — |
| — |
| |
| — |
| — |
| | |||||
Net issuance under employee stock plans | | — | ( | — |
| — | ( | ||||||||||
Balance at March 31, 2023 |
| | $ | | $ | | $ | ( | $ | | $ | |
22
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
Accumulated Other Comprehensive Income (“AOCI”)
The following table presents the changes in the balances of each component of AOCI, net of tax:
Unrealized | |||||||||
Gains (Losses) | |||||||||
Foreign | on Available | ||||||||
Currency | for Sale | ||||||||
| Translation |
| Securities |
| Total | ||||
(in thousands) | |||||||||
Balance - December 31, 2023 | $ | | $ | ( | $ | | |||
Other comprehensive income (loss) |
| ( |
| ( |
| ( | |||
Balance - March 31, 2024 | $ | | $ | ( | $ | |
There were minimal reclassifications from AOCI into net income for the three months ended March 31, 2024 and 2023.
Note 8 — Share-based Compensation
Restricted share awards are issued to employees and to members of our board of directors that are subject to specified restrictions and a risk of forfeiture. The restrictions typically lapse over
Share-based compensation expense was recognized in the following line items in the Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023:
Three months ended March 31, | ||||||||
| 2024 |
| 2023 |
|
| |||
(in thousands) | ||||||||
Cost of sales |
| $ | |
| $ | |
|
|
Research and development | | | ||||||
Selling, general, and administrative | | | ||||||
Total | $ | | $ | |
For the three months ended March 31, 2024, equity activity related to non-vested restricted shares and performance shares was as follows:
|
| Weighted | |||
Average | |||||
Number of | Grant Date | ||||
Shares | Fair Value | ||||
(in thousands) | |||||
Balance - December 31, 2023 | | $ | | ||
Granted | | | |||
Performance award adjustments | | | |||
Vested | ( | | |||
Forfeited | ( | | |||
Balance - March 31, 2024 | | $ | |
23
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
Note 9 — Income Taxes
Income taxes are estimated for each of the jurisdictions in which the Company operates. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. Realization of net deferred tax assets is dependent on future taxable income.
At the end of each interim reporting period, the effective tax rate is aligned with expectations for the full year. This estimate is used to determine the income tax provision on a year-to-date basis and may change in subsequent interim periods.
Income before income taxes and income tax expense for the three months ended March 31, 2024 and 2023 were as follows:
Three months ended March 31, |
| ||||||
| 2024 |
| 2023 |
| |||
(in thousands, except percentages) |
| ||||||
Income before income taxes | $ | | $ | | |||
Income tax expense |
| $ | |
| $ | | |
Effective tax rate |
|
|
The Company’s income tax expense for the three months ended March 31, 2024 was $
Note 10 — Segment Reporting and Geographic Information
Veeco operates and measures its results in
Veeco serves the following
Semiconductor
The Semiconductor market refers to early process steps in logic and memory applications where silicon wafers are processed. There are many different process steps in forming patterned wafers, such as deposition, etching, masking, and doping, where the microchips are created but remain on the silicon wafer. This market includes mask blank production for extreme ultraviolet (“EUV”) lithography, as well as Advanced Packaging, which refers to a portfolio of wafer-level assembly technologies that enable improved performance of electronic products, such as smartphones, high-end servers, and graphical processors.
Compound Semiconductor
The Compound Semiconductor market includes Photonics, Power Electronics, RF Filters and Amplifiers, and Solar applications. Photonics refers to light source technologies and laser-based solutions for 3D sensing, datacom and telecom applications. This includes micro-LED, laser diodes, edge emitting lasers and vertical cavity surface emitting lasers (“VCSELs”). Power Electronics refers to semiconductor devices such as rectifiers, inverters and converters for the
24
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
control and conversion of electric power in applications such as fast or wireless charging of consumer electronics and automotive applications. RF power amplifiers and filters (including surface acoustic wave (“SAW”) and bulk acoustic wave (“BAW”) filters) are used in 5G communications infrastructure, smartphones, tablets, and mobile devices. They make use of radio waves for wireless broadcasting and/or communications. Solar refers to power obtained by harnessing the energy of the sun through the use of compound semiconductor devices such as photovoltaics.
Data Storage
Data Storage refers to the Hard Disk Drive (“HDD”) market, for which our systems enable customers to manufacture thin film magnetic heads for hard disk drives as part of large capacity storage applications.
Scientific & Other
Scientific & Other refers to advanced materials research and a range of manufacturing applications including optical coatings (laser mirrors, optical filters, and anti-reflective coatings).
Sales by end-market and geographic region for the three months ended March 31, 2024 and 2023 were as follows:
Three months ended March 31, | |||||||
| 2024 | 2023 |
| ||||
(in thousands) | |||||||
Sales by end-market | |||||||
Semiconductor | $ | | $ | | |||
Compound Semiconductor | | | |||||
Data Storage |
| |
| | |||
Scientific & Other |
| |
| | |||
Total | $ | | $ | | |||
Sales by geographic region | |||||||
United States | $ | | $ | | |||
EMEA(1) | | | |||||
China | | | |||||
Rest of APAC | | | |||||
Rest of World |
| |
| | |||
Total | $ | | $ | |
(1) | EMEA consists of Europe, the Middle East, and Africa |
For geographic reporting, sales are attributed to the location in which the customer facility is located.
25
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement Regarding Forward Looking Statements
Our discussion below constitutes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in this Report, the words “believes,” “anticipates,” “expects,” “estimates,” “targets,” “plans,” “intends,” “will,” and similar expressions related to the future are intended to identify forward-looking statements. All forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from projected results. You should not place undue reliance on any forward-looking statements, which speak only as of the dates they are made.
Executive Summary
We are an innovative manufacturer of semiconductor process equipment. Our proven ion beam, laser annealing, lithography, MOCVD, CVD, and single wafer wet processing technologies play an integral role in the fabrication and packaging of advanced semiconductor devices. With equipment designed to optimize performance, yield and cost of ownership, Veeco holds leading technology positions in the markets we serve. To learn more about Veeco’s systems and service offerings, visit www.veeco.com.
Business Update
The Semiconductor industry has been historically cyclical based on fluctuations in global chip production capacity and demand. Semiconductor industry sales declined in 2023 to approximately $550 billion dollars after several years of growth following the pandemic. Looking ahead, industry analysts are forecasting long-term growth of the Semiconductor industry, driven by secular growth trends such as artificial intelligence, high-performance computing, mobile connectivity, and the transformation of the automotive industry, as well as government programs globally to accelerate strategic investment in next-generation technologies.
Growth in the Semiconductor industry, coupled with increasing technological complexity of Semiconductor chips, are expected to drive long-term growth in Wafer Fab Equipment (“WFE”) spending. In an effort to improve chip performance and reduce costs, today’s most advanced Semiconductor manufacturers are shrinking device geometries and investing in more complex technologies, including 3D devices, Gate-All-Around architectures, as well as backside power delivery. As a result, growth of the WFE market is expected to keep pace with growth of the Semiconductor industry, which we believe should benefit semiconductor capital equipment providers, including Veeco.
Our strategy of investing in advanced logic and memory has enabled our Semiconductor business to outperform WFE growth for 3 consecutive years. Veeco technologies are at the forefront of new technological innovations in the Semiconductor industry, including manufacturing of higher performance AI chips, and we continue to invest in new technologies to expand our Served Available Market (“SAM”) to a broad range of new applications.
Semiconductor revenue increased by 29% in first quarter 2024 from the comparable year period, comprising 69% of total revenue. This increase was led by strong demand for our Laser Annealing systems. Our laser annealing solutions continue to gain share in advanced node logic, highlighted by recent wins at both new and existing customers. In 2023, we won business with a new Tier 1 logic customer for advanced anneal applications and shipped multiple systems to this customer. In first quarter 2024, we received a multi-tool laser annealing order from a leading edge logic foundry for their 2nm gate-all-around process. In the memory market, a Tier 1 memory customer placed several Laser Spike Annealing (“LSA”) orders for high volume production of High Bandwidth Memory (“HBM”) and advanced DRAM devices following a successful evaluation program, and we’ve shipped multiple systems to this customer. While our growth strategy is predominately focused on advanced node logic and memory, we continue to see strong growth for mature node applications predominantly in China driven by new greenfield fabs and capacity additions. In our continued efforts to grow our Laser Annealing business by driving product roadmap to address customer device challenges, we achieved a key milestone in fourth quarter 2023 upon shipping two next-generation annealing systems for nano second annealing applications to two Tier 1 logic customers. Nanosecond annealing provides Veeco with an opportunity to expand our
26
laser annealing SAM to new advanced node logic and memory applications, including 3D devices, Gate-All-Around architecture, and backside power delivery.
The ongoing adoption of EUV Lithography for advanced node semiconductor manufacturing continues to drive demand for our Ion Beam mask blank deposition systems, and we’re well-positioned for adoption of next-generation High-NA lithography. We achieved another significant milestone in fourth quarter 2023 upon shipment of our first two Ion Beam Deposition “IBD300” evaluation systems to Tier 1 memory customers for front end semiconductor applications. Our IBD300 system provides Veeco with another opportunity to expand our SAM to advanced node applications where low resistance films are critical, and our initial systems are being evaluated for advanced memory applications such as DRAM bitline. Additionally, our Wet Processing systems are used for Advanced Packaging applications, including 3D packaging technologies, and we continue to see strong demand for HBM. Our Advanced Packaging lithography systems are used for packaging approaches such as fan out wafer level packaging and other advanced packaging applications. Given our current backlog and visibility, we expect Semiconductor revenue to grow in 2024.
Veeco also serves customers in the Compound Semiconductor, Data Storage, and Scientific & Other markets.
We address the Compound Semiconductor market with a broad portfolio of technologies, including Wet Processing, MOCVD, MBE and Ion Beam, for a range of Power Electronics, Photonics, and 5G RF applications. Sales in the Compound Semiconductor market increased sequentially in first quarter 2024. Looking ahead, we’re focused on several long-term growth opportunities within Power Electronics and Photonics. We expect revenue in the Compound Semiconductor market to grow in 2024. We address the Data Storage market with sales of our Ion Beam Deposition technology. Demand for our Ion Beam products is driven by cloud-based storage, and sales declined sequentially in first quarter 2024. We expect revenue in the Data Storage market to be flat to up in 2024. Sales in the Scientific & Other market are largely driven by sales to governments, universities, and research institutions. We address the Scientific & Other market with several technologies, including MBE, ALD, MOCVD, Wet Processing, & IBD/IBE, which support scientific, optical coating and other applications, and sales in this market declined as compared to the prior quarter. We expect revenue in the Scientific and Other market to remain flat in 2024.
27
Results of Operations
For the three months ended March 30, 2024 and 2023
The following table presents revenue and expense line items reported in our Consolidated Statements of Operations for the indicated periods in 2024 and 2023 and the period-over-period dollar and percentage changes for those line items. Our results of operations are reported as one business segment, represented by our single operating segment.
Three Months Ended March 31, | Change | ||||||||||||||||||
2024 | 2023 | Period to Period | |||||||||||||||||
(dollars in thousands) | |||||||||||||||||||
Net sales |
| $ | 174,484 |
| 100% | $ | 153,504 |
| 100% | $ | 20,980 |
| 14% |
| |||||
Cost of sales |
| 99,065 |
| 57% |
| 91,487 |
| 60% |
| 7,578 |
| 8% | |||||||
Gross profit |
| 75,419 |
| 43% |
| 62,017 |
| 40% |
| 13,402 |
| 22% | |||||||
Operating expenses, net: |
|
|
|
|
|
|
|
|
|
| |||||||||
Research and development |
| 29,642 |
| 17% |
| 27,562 |
| 18% |
| 2,080 |
| 8% | |||||||
Selling, general, and administrative |
| 24,700 |
| 14% |
| 22,627 |
| 15% |
| 2,073 |
| 9% | |||||||
Amortization of intangible assets |
| 1,891 |
| 1% |
| 2,111 |
| 1% |
| (220) |
| (10)% | |||||||
Other operating expense (income), net |
| (2,859) |
| - |
| (89) |
| - |
| (2,770) |
| * | |||||||
Total operating expenses, net |
| 53,374 |
| 31% |
| 52,211 |
| 34% |
| 1,163 |
| 2% | |||||||
Operating income |
| 22,045 |
| 13% |
| 9,806 |
| 6% |
| 12,239 |
| 125% | |||||||
Interest income (expense), net |
| 705 |
| 0% |
| (802) |
| (1)% |
| 1,507 |
| (188)% | |||||||
Income before income taxes |
| 22,750 |
| 13% |
| 9,004 |
| 6% |
| 13,746 |
| 153% | |||||||
Income tax expense (benefit) |
| 896 |
| - |
| 263 |
| - |
| 633 |
| * | |||||||
Net income | $ | 21,854 |
| 13% | $ | 8,741 |
| 6% | $ | 13,113 |
| 150% |
* | Not meaningful |
Net Sales
The following is an analysis of sales by market and by region:
Three Months Ended March 31, | Change |
| |||||||||||||||||
2024 | 2023 | Period to Period |
| ||||||||||||||||
(dollars in thousands) |
| ||||||||||||||||||
Sales by end-market |
|
|
|
|
|
|
|
|
|
|
| ||||||||
Semiconductor | $ | 120,384 |
| 69% | $ | 93,107 |
| 60% | $ | 27,277 |
| 29% | |||||||
Compound Semiconductor |
| 21,002 |
| 12% |
| 21,159 |
| 14% |
| (157) |
| (1)% | |||||||
Data Storage |
| 18,017 |
| 10% |
| 21,514 |
| 14% |
| (3,497) |
| (16)% | |||||||
Scientific & Other |
| 15,081 |
| 9% |
| 17,724 |
| 12% |
| (2,643) |
| (15)% | |||||||
Total | $ | 174,484 |
| 100% | $ | 153,504 |
| 100% | $ | 20,980 |
| 14% | |||||||
Sales by geographic region |
|
|
|
|
|
|
|
|
|
|
| ||||||||
United States | $ | 27,868 |
| 16% | $ | 31,011 |
| 20% | $ | (3,143) |
| (10)% | |||||||
EMEA |
| 8,488 |
| 5% |
| 22,947 |
| 15% |
| (14,459) |
| (63)% | |||||||
China | 64,308 | 37% | 60,747 | 40% | 3,561 |
| 6% | ||||||||||||
Rest of APAC |
| 73,220 |
| 42% |
| 38,744 |
| 25% |
| 34,476 |
| 89% | |||||||
Rest of World |
| 600 |
| - |
| 54 |
| - |
| 546 |
| * | |||||||
Total | $ | 174,484 |
| 100% | $ | 153,504 |
| 100% | $ | 20,981 |
| 14% |
* | Not meaningful |
28
Sales increased for the three months ended March 31, 2024 against the comparable prior year period driven by sales in the Semiconductor market, partially offset by decreases in sales in the Data Storage, and Scientific & Other markets. By geography, sales increased in the Rest of APAC, and China regions, partially offset by decreases in the EMEA and United States regions. Sales in the Rest of APAC region for the three months ended March 31, 2024 included sales in Japan and Taiwan of $32.9 million, and $19.3 million respectively. Sales in the Rest of APAC region for the three months ended March 31, 2023 included sales in Taiwan and Thailand of $18.0 million and $8.4 million respectively. We expect there will continue to be year-to-year variations in our future sales distribution across markets and geographies. In light of the global nature of our business, we are impacted by conditions in the various countries in which we and our customers operate.
Gross Profit
For the three months ended March 31, 2024, gross profit increased against the comparable prior period primarily due to an increase in sales volume and increased gross margins. Gross margin increased principally due to higher volume and favorable product mix of sales in the periods. We expect our gross margins to fluctuate each period due to product mix and other factors.
Research and Development
The markets we serve are characterized by continuous technological development and product innovation, and we invest in various research and development initiatives to maintain our competitive advantage and achieve our growth objectives. Research and development expenses increased for the three months ended March 31, 2024 against the comparable prior period primarily due to an increase in project materials and personnel-related expenses as we invest in new research and development and additional applications for our technology in order to be well-positioned to capitalize on emerging global megatrends and support longer term growth in Semiconductor and Compound Semiconductor markets. However, expenses as a percentage of revenue are slightly down when compared to the prior period.
Selling, General, and Administrative
Selling, general, and administrative expenses increased for the three months ended March 31, 2024 against the comparable prior period primarily due to higher variable expenses associated with the increase in revenue and profitability. However, expenses as a percentage of revenue are slightly down when compared to the comparable prior year period.
Amortization Expense
Amortization expense decreased compared to the comparable prior year period primarily due to changes in amortization expense to reflect expected cash flows of certain intangible assets.
Interest Income (Expense)
We recorded net interest income of $0.7 million for the three months ended March 31, 2024, compared to net interest expense of $0.8 million for the comparable prior year period. The increase in net interest income of $1.5 million was primarily due to higher interest rates for the three months ended March 31, 2024, against the comparable prior year period.
Income Taxes
At the end of each interim reporting period, we estimate the effective income tax rate expected to be applicable for the full year. This estimate is used to determine the income tax provision or benefit on a year-to-date basis and may change in subsequent interim periods.
Our income tax expense for the three months ended March 31, 2024 was $0.9 million, compared to $0.3 million for the comparable prior period. For the three months ended March 31, 2024 and March 31, 2023, the effective tax rate was
29
lower than the U.S. statutory tax rate primarily relating to discrete income tax benefit for share-based compensation windfall. Additionally, the effective tax rate was also favorably impacted by the tax benefits related to Foreign-Derived Intangible Income and research and development tax credits.
Liquidity and Capital Resources
Our cash and cash equivalents, restricted cash, and short-term investments are as follows:
March 31, | December 31, | |||||
| 2024 |
| 2023 | |||
(in thousands) | ||||||
Cash and cash equivalents | $ | 173,998 | $ | 158,781 | ||
Restricted cash |
| 326 |
| 339 | ||
Short-term investments |
| 122,886 |
| 146,664 | ||
Total | $ | 297,210 | $ | 305,784 |
At March 31, 2024 and December 31, 2023, cash and cash equivalents of $52.7 million and $46.8 million, respectively, were held outside the United States. As of March 31, 2024, we had $23.4 million of accumulated undistributed earnings generated by our non-U.S. subsidiaries for which the U.S. tax has previously been provided. Approximately $8.1 million of undistributed earnings will be subject to foreign withholding taxes if distributed back to the United States and we accrued $0.8 million for foreign withholding taxes for the undistributed earnings.
We believe that our projected cash flow from operations, combined with our cash and short-term investments, will be sufficient to meet our projected working capital requirements, contractual obligations, and other cash flow needs for the next twelve months, including scheduled interest payments on our convertible senior notes, purchase commitments, and payments in respect of operating leases.
A summary of the cash flow activity for the three months ended March 31, 2024 and 2023 is as follows:
Cash Flows from Operating Activities
Three Months Ended March 31, |
| ||||||
| 2024 |
| 2023 |
| |||
(in thousands) | |||||||
Net income | $ | 21,854 | $ | 8,741 | |||
Non-cash items: | |||||||
Depreciation and amortization |
| 6,405 |
| 6,276 | |||
Non-cash interest expense |
| 296 |
| 226 | |||
Deferred income taxes |
| (842) |
| 191 | |||
Share-based compensation expense |
| 8,082 |
| 7,027 | |||
Change in contingent consideration |
| (625) |
| — | |||
Changes in operating assets and liabilities |
| (25,809) |
| (8,543) | |||
Net cash provided by (used in) operating activities | $ | 9,361 | $ | 13,918 |
Net cash provided by operating activities was $9.4 million for the three months ended March 31, 2024 and was due to net income of $21.9 million and adjustments for non-cash items of $13.3 million, partially offset by a decrease in cash flow from changes in operating assets and liabilities of $25.8 million. The changes in operating assets and liabilities were largely attributable to increases in inventories and; contract assets, and a decrease in contract liabilities; partially offset by increases in accounts payable and accrued expenses.
30
Cash Flows from Investing Activities
Three Months Ended March 31, | |||||||
| 2024 |
| 2023 |
| |||
(in thousands) | |||||||
Capital expenditures | $ | (5,990) | $ | (6,946) | |||
Changes in investments, net |
| 24,682 |
| 36,557 | |||
Acquisitions of businesses, net of cash acquired | — | (30,373) | |||||
Proceeds from the sale of productive assets | 2,033 | — | |||||
Net cash provided by (used in) investing activities | $ | 20,725 | $ | (762) |
The cash provided by investing activities during the three months ended March 31, 2024 was primarily attributable to net cash provided by net investment activity and proceeds from the sale of productive assets, partially offset by capital expenditures. The cash used in investing activities during the three months ended March 31, 2023 was primarily attributable to net cash used in the acquisition of Epiluvac, and capital expenditures, partially offset by net investment activity.
Cash Flows from Financing Activities
Three Months Ended March 31, | |||||||
| 2024 |
| 2023 |
| |||
(in thousands) | |||||||
Settlement of equity awards, net of withholding taxes | $ | (13,022) | $ | (7,268) | |||
Contingent consideration payment | (1,818) | — | |||||
Extinguishment of Convertible Notes | — | (20,173) | |||||
Net cash provided by (used in) financing activities | $ | (14,840) | $ | (27,441) |
The cash used in financing activities for the three months ended March 31, 2024 was related to cash used to settle taxes related to employee equity programs and contingent consideration payment related to Epiluvac acquisition, partially offset by cash received under the Employee Stock Purchase Plan. The cash used in financing activities for the three months ended March 31, 2023 was related to the repayment of the 2023 Notes, as well as cash used to settle taxes related to employee equity programs, partially offset by cash received under the Employee Stock Purchase Plan.
Convertible Senior Notes
We have $26.5 million outstanding principal balance of 3.50% convertible senior notes that bear interest at a rate of 3.50% per year, payable semiannually in arrears on January 15 and July 15 of each year, and mature on January 15, 2025, unless earlier purchased by the Company, redeemed, or converted. In addition, we have $25.0 million outstanding principal balance of 3.75% convertible senior notes that bear interest at a rate of 3.75% per year, payable semiannually in arrears on June 1 and December 1 of each year, and mature on June 1, 2027, unless earlier purchased by the Company, redeemed, or converted. The 2027 Notes are currently convertible by shareholders until June 30, 2024. In addition, we have $230.0 million outstanding principal balance of 2.875% convertible senior notes that bear interest at a rate of 2.875% per year, payable semiannually in arrears on June 1 and December 1 of each year, and mature on June 1, 2029, unless earlier purchased by the Company, redeemed, or converted.
We believe that we have sufficient capital resources and cash flows from operations to support scheduled interest payments on these debts and the scheduled January 2025 principal payment due on the 2025 Notes. In addition, we have access to a $150.0 million revolving credit facility (including an ability to request an additional $75.0 million, for a total commitment of no more than $225.0 million) to provide for our working capital needs and reimburse drawings under letters of credit and for other general corporate purposes. The Company has no immediate plans to draw down on the facility, which expires in December of 2026. Interest under the facility is variable based on the Company’s secured net leverage ratio and is expected to bear interest based on SOFR plus a range of 150 to 225 basis points, if drawn. There is a yearly commitment fee of 25 to 35 basis points, based on the Company’s secured net leverage ratio, charged on the unused portion of the Facility.
31
Contractual Obligations and Commitments
We have commitments under certain contractual arrangements to make future payments for goods and services. These contractual arrangements secure the rights to various assets and services to be used in the future in the normal course of business. We expect to fund these contractual arrangements with cash generated from operations in the normal course of business.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
Our exposure to market rate risk for changes in interest rates primarily relates to our investment portfolio. We centrally manage our investment portfolios considering investment opportunities and risks, tax consequences, and overall financing strategies. Our investment portfolio includes fixed-income securities with a fair value of approximately $122.9 million at March 31, 2024. These securities are subject to interest rate risk and, based on our investment portfolio at March 31, 2024, a 100 basis point increase in interest rates would result in a decrease in the fair value of the portfolio of $0.7 million. While an increase in interest rates may reduce the fair value of the investment portfolio, we will not realize the losses in the Consolidated Statements of Operations unless the individual fixed-income securities are sold prior to recovery or the loss is determined to be other-than-temporary.
Currency Exchange Risk
We conduct business on a worldwide basis and, as such, a portion of our revenues, earnings, and net investments in foreign affiliates is exposed to changes in currency exchange rates. The economic impact of currency exchange rate movements is complex because such changes are often linked to variability in real growth, inflation, interest rates, governmental actions, and other factors. These changes, if material, could cause us to adjust our financing and operating strategies. Consequently, isolating the effect of changes in currency does not incorporate these other important economic factors.
Changes in currency exchange rates could affect our foreign currency denominated monetary assets and liabilities and forecasted cash flows. We may enter into monthly forward derivative contracts from time to time with the intent of mitigating a portion of this risk. We only use derivative financial instruments in the context of hedging and not for speculative purposes and have not historically designated our foreign exchange derivatives as hedges. Accordingly, changes in fair value from these contracts are recorded as “Other, net” in our Consolidated Statements of Operations. We execute derivative transactions with highly rated financial institutions to mitigate counterparty risk.
Our net sales to customers located outside of the United States represented approximately 84% and 80% of our total net sales for the three months ended March 31, 2024 and 2023 respectively. We expect that net sales to customers outside the United States will continue to represent a large percentage of our total net sales. Our sales denominated in currencies other than the U.S. dollar represented approximately 3% of total net sales for both the three months ended March 31, 2024 and 2023.
A 10% change in foreign exchange rates would have an immaterial impact on the consolidated results of operations since most of our sales outside the United States are denominated in U.S. dollars.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our principal executive and financial officers have evaluated and concluded that our disclosure controls and procedures are effective as of March 31, 2024. The disclosure controls and procedures are designed to ensure that the information required to be disclosed in this report filed under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and
32
forms and is accumulated and communicated to our principal executive and financial officers as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
During the quarter ended March 31, 2024, there were no changes in internal control that have materially affected or are reasonably likely to materially affect internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various legal proceedings arising in the normal course of business. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows.
Item 1A. Risk Factors
Information regarding risk factors appears in the Safe Harbor Statement at the beginning of this quarterly report on Form 10-Q, and in Part I — Item 1A of our 2023 Form 10-K. There have been no material changes from the risk factors previously disclosed.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
During the fiscal quarter ended March 31, 2024, the following directors and Section 16 officers, as applicable, adopted, modified or terminated “Rule 10b5-1 trading arrangements” (as defined in Item 408 of Regulation S-K):
● On
There were no “non-Rule 10b5-1 trading arrangements” (as defined in Item 408 of Regulation S-K)
33
Item 6. Exhibits
Unless otherwise indicated, each of the following exhibits has been filed with the Securities and Exchange Commission by Veeco under File No. 0-16244.
Exhibit | Incorporated by Reference | Filed or | ||||||||
Number |
| Exhibit Description |
| Form |
| Exhibit |
| Filing Date |
| Herewith |
10.1 | * | |||||||||
10.2 | * | |||||||||
31.1 | * | |||||||||
31.2 | * | |||||||||
32.1 | * | |||||||||
32.2 | * | |||||||||
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ** | ||||||||
101.XSD | XBRL Schema. | ** | ||||||||
101.PRE | XBRL Presentation. | ** | ||||||||
101.CAL | XBRL Calculation. | ** | ||||||||
101.DEF | XBRL Definition. | ** | ||||||||
101.LAB | XBRL Label. | ** | ||||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | ** |
* Filed herewith
** Filed herewith electronically
34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 7, 2024.
Veeco Instruments Inc. | |||
By: | /s/ WILLIAM J. MILLER, Ph.D. | ||
William J. Miller, Ph.D. | |||
Chief Executive Officer | |||
By: | /s/ JOHN P. KIERNAN | ||
John P. Kiernan | |||
Senior Vice President and Chief Financial Officer |
35
Exhibit 10.1
VEECO INSTRUMENTS INC. 2019 STOCK INCENTIVE PLAN
NOTICE OF PERFORMANCE RESTRICTED STOCK UNIT AWARD (2024)
Veeco Instruments Inc. (the “Company”) is pleased to confirm the award to the employee named below (the “Grantee”) of Restricted Stock Units (the “Award”), subject to the terms and conditions of this Notice of Performance Restricted Stock Unit Award (2024) (the “Notice”), the Veeco Instruments Inc. 2019 Stock Incentive Plan, as amended from time to time (the “Plan”) and the Veeco Instruments Inc. Terms and Conditions of Restricted Stock Unit Award (2024) (the “Terms and Conditions”) attached hereto, as follows. Unless otherwise provided herein, the terms in this Notice shall have the same meaning as those defined in the Plan.
Grantee: | |
Date of Award: | March 14, 2024 |
Target Number of Restricted Stock Units Awarded (the “Units”): | |
Performance Period: | March 14, 2024 to March 13, 2027 |
| |
The Units shall be earned based on the Company’s Three Year Total Shareholder Return (“TSR”) versus the Three Year TSR of the Russell 2000 Index (the “Index”) measured at the end of the Performance Period. Subject to the Grantee’s Continuous Service and other limitations set forth in this Notice, the Terms and Conditions and the Plan, the Units shall be earned and will “vest” in accordance with the schedules set forth in Exhibit A. For purposes of this Notice and the Terms and Conditions, the term “vest” shall mean, with respect to any Units, that such Units are no longer subject to forfeiture to the Company. If the Grantee would become vested in a fraction of a Unit, such Unit shall not vest until the Grantee becomes vested in the entire Unit.
Except as may otherwise be specifically provided for under the terms of any other agreement or policy between the Company and the Grantee, vesting shall cease upon the date the Grantee terminates Continuous Service for any reason, including death or Disability, and in the event the Grantee terminates Continuous Service for any reason, including death or Disability, any unvested Units held by the Grantee at the time of such termination of the Grantee’s Continuous Service shall be forfeited.
Additional Provisions:
This Award shall be subject to the terms and conditions set forth in the Plan and the Terms and Conditions, including, without limitation, the Forfeiture for Restricted Activity, Clawback, Governing Law, and Venue and Jurisdiction provisions of Sections 2.2, 2.3, 4.1 through 4.5, 6.5, and 6.6 of the Terms and Conditions.
IMPORTANT NOTICE
Grantee must sign this Notice and return it to the Company’s Sr. VP, Chief Administrative Officer on or before April 29, 2024. Return your executed Notice to: Robert Bradshaw by mail at 1 Terminal Drive, Plainview, New York 11803, or email at RBradshaw@Veeco.com. If Grantee has received this Notice by way of email from the Company, and if Grantee is unable to sign and return the Notice on or before the aforementioned date, Grantee may accept the Award by reply email to the Company, stating “I accept” (or words to this effect) on or before the aforementioned date.
PLEASE NOTE THAT YOUR ACCEPTANCE OF THE AWARD WILL ALSO CONSTITUTE ACCEPTANCE OF, AND AGREEMENT TO BE BOUND BY THE TERMS AND CONDITIONS
GOVERNING THE PERFORMANCE RESTRICTED STOCK UNIT AWARD, INCLUDING WITHOUT LIMITATION, THE RESTRICTED ACTIVITY, CLAWBACK, GOVERNING LAW, AND VENUE AND JURISDICTION PROVISIONS OF SECTIONS 2.2, 2.3, 4.1 through 4.5, 6.5, AND 6.6 OF THE TERMS AND CONDITIONS.
VEECO INSTRUMENTS INC.
Name: Robert Bradshaw
Title: Sr. VP, Chief Administrative Officer
______________________________
VEECO INSTRUMENTS INC. 2019 STOCK INCENTIVE PLAN
TERMS AND CONDITIONS OF
RESTRICTED STOCK UNIT AWARD (2024)
These TERMS AND CONDITIONS OF RESTRICTED STOCK UNIT AWARD (2024) (these “Terms and Conditions”) apply to any award by Veeco Instruments Inc., a Delaware corporation (the “Company”), of Restricted Stock Units, subject to certain restrictions pursuant to the Veeco Instruments Inc. 2019 Stock Incentive Plan (as it may be amended from time to time, the “Plan”), which specifically references these Terms and Conditions.
The Company hereby issues to the Grantee (the “Grantee”) named in the Notice of Performance Restricted Stock Unit Award (2024) (the “Notice”) an award (the “Award”) of Restricted Stock Units, as set forth in the Notice (the “Units”), subject to the Notice, these Terms and Conditions, and the terms and provisions of the Plan, which is incorporated herein by reference. Unless otherwise provided herein, the terms in these Terms and Conditions shall have the same meaning as those defined in the Plan.
Except as set forth herein, the Grantee shall not have any right in, to or with respect to any of the Shares (including any voting rights) issuable under the Award until the Award is settled by the issuance of such Shares to the Grantee. Notwithstanding the foregoing, while one or more Shares remain subject to this Award, the Grantee shall have the right to accrue Cash Dividend Equivalents. For purposes herein, a “Cash Dividend Equivalent” means, for each Share subject to the Award, a cash payment equal to the cash dividend, if any, that would become payable to the Grantee with respect to such Share had the Grantee been the holder of such Share on the record date for such cash dividend. Cash Dividend Equivalents will be subject to all of the terms and conditions of the Award, including that the Cash Dividend Equivalents will vest, become payable, and be subject to forfeiture and clawback upon the same terms and at the same time as the Units to which they relate.
Notwithstanding the foregoing, the Company or a Related Entity also may satisfy any Tax Withholding Obligation by offsetting any amounts (including, but not limited to, salary, bonus and severance payments) payable to the Grantee by the Company and/or a Related Entity. Furthermore, in the event of any determination that the Company has failed to withhold a sum sufficient to pay all withholding taxes due in connection with the Award, the Grantee agrees to pay the Company the amount of such deficiency in cash within five (5) calendar days after receiving a written demand from the Company to do so, whether or not the Grantee is an employee of the Company at that time.
* * * * *
EXHIBIT A
Three Year Relative Total Shareholder Return
The number of Units earned shall be determined pursuant to the Company’s Three Year Total Shareholder Return (“TSR”) versus the Three Year TSR of the Russell 2000 Index, as comprised on the first day of the Performance Period (the “Index”), measured at the end of the Performance Period.
Performance Range | Percentile Rank of Russell 2000 Index | Percentage of Units Earned |
Maximum | 75th Percentile or greater | 200% |
Target | 55th Percentile | 100% |
Threshold | 25th Percentile | 50% |
Below Threshold | Less than 25th Percentile | 0% |
● | The number of Units earned shall be equal to the Target number of Units multiplied by the percentage of Units earned in the above table. |
● | If the Company’s percentile rank for the Performance Period is equal to or greater than the Threshold, the percentage of Units earned will be determined through linear interpolation between the relevant data points (Threshold, Target, Maximum). |
● | If the Company’s percentile rank is equal to or greater than the Maximum, 200% of the Target number of Units will be earned. |
● | If the Company’s percentile rank is less than the Threshold, the Units will be forfeited. |
● | Notwithstanding the above, if the Company’s TSR is less than zero, the Maximum number of Units that may be earned shall be the Target number of Units, even if the Company’s percentile rank for the Performance Period exceeds the 55th percentile. |
● | Any Units that are not earned will be forfeited. |
● | TSR for the Company and for each of the companies in the Index is calculated by (x) raising the quotient of the ending stock price divided by the beginning stock price to the 1/3 power and (y) subtracting one, as follows: |
● | For purposes of computing TSR: (i) any dividends paid by the Company or the companies in the Index shall be treated as having been reinvested at the closing stock price on the ex-dividend date; (ii) the beginning stock price will be the average closing stock price over the 20 trading days preceding the beginning of the Performance Period; and (iii) the ending stock price will be the average closing stock price over the 20 trading days ending on the last day of the Performance Period, or in the case of a Corporate Transaction, ending on the date of such Change in Control or some earlier date, as determined by the Administrator. |
● | The Company’s percentile rank versus the Index will be expressed as a percentage, with rounding to the nearest tenth of a percent, with all hundredths of a percent equal to or greater than 5 rounded up to the nearest tenth of a percent. |
● | Companies in the Index that are acquired, are taken private, or are no longer publicly traded in the U.S. during the Performance Period will be removed from the Index and not included in the determination of the number of Units earned. |
● | Companies in the Index that go bankrupt, are liquated or dissolved, or otherwise cease conducting operations during the Performance Period will be deemed to have a TSR equal to -100% for the Performance Period. |
● | Upon the occurrence of a Corporate Transaction during the Performance Period, (i) if the Award (or a portion thereof) is neither Assumed or Replaced, the Award (or the portion thereof that is not Assumed or Replaced) shall automatically become fully vested immediately prior to the specified |
effective date of such Corporate Transaction, provided the Grantee’s Continuous Service has not terminated prior to such date, and (ii) if the Award (or a portion thereof) is Assumed or Replaced, the service-based vesting conditions applicable to the Award (or the portion thereof that is Assumed or Replaced) shall remain in effect through the last day of the Performance Period, but the performance-based vesting condition shall be deemed achieved based on the greater of (A) assumed achievement of Target performance and (B) actual performance as determined by the Administrator through the date of the Corporate Transaction. For purposes of clause (i) above, the portion of such Award that shall become fully vested shall be based on the greater of (A) assumed achievement of Target performance and (B) actual performance as determined by the Administrator through the date of the Corporate Transaction. |
● | The date that the Company determines the number of Units earned is the date such Units will be deemed to have become fully vested. |
● | The Compensation Committee shall make all determinations and interpretations regarding the number of Units earned. |
VEECO INSTRUMENTS INC. 2019 STOCK INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK UNIT AWARD (2024)
Veeco Instruments Inc. (the “Company”) is pleased to confirm the award to the individual named below (the “Grantee”) of Restricted Stock Units (the “Award”), subject to the terms and conditions of this Notice of Restricted Stock Unit Award (2024) (the “Notice”), the Veeco Instruments Inc. 2019 Stock Incentive Plan, as amended from time to time (the “Plan”) and the Veeco Instruments Inc. Terms and Conditions of Restricted Stock Unit Award (2024) (the “Terms and Conditions”) attached hereto, as follows. Unless otherwise defined herein, the terms in this Notice shall have the same meaning as those defined in the Plan.
Total Number of Restricted Stock
Units Awarded (the “Units”):
Subject to the Grantee’s Continuous Service and other limitations set forth in this Notice, the Terms and Conditions and the Plan, the Units will “vest” in accordance with the following schedule (the “Vesting Schedule”): 1/3 of the Units comprising the Award will vest, and the restrictions with respect to such shares shall lapse, on each of the first (1st), second (2nd) and third (3rd) anniversaries of the Award Date (or, if later, the date on which the issuance of shares will not cause a violation of United States federal securities laws) (the later of each such dates, a “Vesting Date”). If the Grantee would become vested in a fraction of a share on a Vesting Date, such share shall not vest until the Grantee becomes vested in the entire share on the following Vesting Date.
For purposes of this Notice and the Terms and Conditions, the term “vest” shall mean, with respect to any Units, that such Units are no longer subject to forfeiture to the Company. If the Grantee would become vested in a fraction of a Unit, such Unit shall not vest until the Grantee becomes vested in the entire Unit.
Except as otherwise provided in an agreement with the Grantee or a plan or policy covering the Grantee, including, if applicable to the Grantee, the Company’s Amended and Restated Senior Executive Change in Control Policy (as may be amended or superseded, the “CIC Policy”), vesting shall cease upon the date the Grantee’s Continuous Service terminates for any reason other than a termination (i) due to the Grantee’s death or (ii) by the Company or a Related Entity due to the Grantee’s Disability (any such termination described in (i) or (ii) or, if the Grantee is a participant in the CIC Policy, any termination that results in vesting of equity awards under the CIC Policy, a “Qualifying Termination”), and any unvested Units held by the Grantee immediately upon such termination of the Grantee’s Continuous Service (other than a Qualifying Termination) shall be forfeited and deemed reconveyed to the Company and the Company shall thereafter be the legal and beneficial owner of such reconveyed Units and shall have all rights and interest in or related thereto without further action by the Grantee. In the event of a Qualifying Termination, the Units shall vest immediately as of the date of the Qualifying Termination.
IMPORTANT NOTICE
Grantee must sign this Notice and return it to the Company’s Sr. VP, Chief Administrative Officer on or before April 29, 2024. Return your executed Notice to: Robert Bradshaw by mail at 1 Terminal Drive, Plainview, New York 11803, or email at RBradshaw@Veeco.com. If Grantee has received this Notice by way of email from the Company, and if Grantee is unable to sign and return the Notice on or before the aforementioned date, Grantee may accept the Award by reply email to the Company, stating “I accept” (or words to this effect) on or before the aforementioned date.
PLEASE NOTE THAT YOUR acceptance of the Award will also constitute acceptance of, and agreement to be bound by, the Terms and Conditions governing the Award, including without limitation, the Forfeiture for Restricted Activity, Clawback, Governing Law and
Venue and Waiver of Jury Trial provisions of Sections 5.5, 5.10, 6.1 and 6.5 of the Terms and Conditions.
VEECO INSTRUMENTS INC.
Name: Robert Bradshaw
Title: Sr. VP, Chief Administrative Officer
Grantee
______________________________________________________________
Print Name Signature Date
VEECO INSTRUMENTS INC. 2019 STOCK INCENTIVE PLAN
TERMS AND CONDITIONS OF RESTRICTED STOCK UNIT AWARD
(2024)
These TERMS AND CONDITIONS OF RESTRICTED STOCK UNIT AWARD (2024) (these “Terms and Conditions”) apply to any award by Veeco Instruments Inc., a Delaware corporation (the “Company”), of Restricted Stock Units, subject to certain restrictions pursuant to the Veeco Instruments Inc. 2019 Stock Incentive Plan (as it may be amended from time to time, the “Plan”), which specifically references these Terms and Conditions.
The Company hereby issues to the Grantee (the “Grantee”) named in the Notice of Restricted Stock Unit Award (2024) (the “Notice”) an award (the “Award”) of the Total Number of Restricted Stock Units Awarded set forth in the Notice (the “Units”), subject to the Notice, these Terms and Conditions, and the terms and provisions of the Plan, which is incorporated herein by reference. Unless otherwise provided herein, capitalized terms in these Terms and Conditions shall have the same meaning as those defined in the Plan.
RIGHT TO SHARES
Except as set forth herein, the Grantee shall not have any right in, to or with respect to any of the Shares (including any voting rights) issuable under the Award until the Award is settled by the issuance of such Shares to the Grantee. Notwithstanding the foregoing, while one or more Shares remain subject to this Award, the Grantee shall have the right to accrue Cash Dividend Equivalents (as defined in this Article 3). For purposes of this Agreement, a “Cash Dividend Equivalent” means, for each Share subject to the Award, a cash payment equal to the cash dividend, if any, that would have become payable to the Grantee with respect to such Share had the Grantee been the holder of such Share. Cash Dividend Equivalents that have accrued will vest and become payable upon the same terms and at the same time as the Units to which they relate, except as otherwise provided herein.
Notwithstanding the foregoing, the Company or a Related Entity also may satisfy any Tax Withholding Obligation by offsetting any amounts (including, but not limited to, vested Cash Dividend Equivalents, salary, bonus and severance payments) payable to the Grantee by the Company and/or a Related Entity. Furthermore, in the event of any determination that the Company has failed to withhold a sum sufficient to pay all withholding taxes due in connection with the Award, the Grantee agrees to pay the Company the amount of such deficiency in cash within five (5) days after receiving a written demand from the Company to do so, whether or not the Grantee is an employee of the Company at that time.
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS SET FORTH IN THE PLAN AND IN THE TERMS AND CONDITIONS APPLICABLE TO THE RESTRICTED STOCK AWARD, COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION.”
(a)the Grantee will not own, manage, work for or otherwise participate in any business whose products, services or activities compete with the current or currently contemplated products, services or activities of the Company in any state or country in which the Company sells products or conducts business and (x) in which the Grantee was involved or (y) with respect to which the Grantee had access to Confidential Information, in each case, during the 5 years prior to termination, provided, however, that Grantee may own up to 1% of the securities of any such public company (but without otherwise participating in the activities of such enterprise); and
(b) the Grantee will not, for himself or any other person: (i) induce or try to induce any customer, supplier, licensor or business relation to stop doing business with the Company or otherwise interfere with the relationship between the Company and any of its customers, suppliers, licensors or business relations; or (ii) solicit the business of any person known by the Grantee to be a customer of the Company, whether or not the Grantee had personal contact with such person, with respect to products or activities that compete with the products or activities of the Company in existence or contemplated at the time of termination of the Grantee’s Continuous Service. The Grantee agrees that this covenant is reasonable with respect to its scope, geographical area, and duration.
(a)induce or try to induce any employee to leave the Company or otherwise interfere with the relationship between the Company and any of its employees; or
(b) employ or engage as an independent contractor, any current or former employee of the Company, other than former employees who have not worked for the Company within the past year. The Grantee agrees that this covenant is reasonable with respect to its scope and duration.
ARTICLE 6
OTHER PROVISIONS
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULE 13a — 14(a) or RULE 15d — 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
I, William J. Miller, Ph.D., certify that:
1. | I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 2024 of Veeco Instruments Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| By: | /s/ WILLIAM J. MILLER, Ph.D. |
| | William J. Miller, Ph.D. |
| | Chief Executive Officer |
| | Veeco Instruments Inc. |
| | May 7, 2024 |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULE 13a — 14(a) or RULE 15d — 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
I, John P. Kiernan, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 2024 of Veeco Instruments Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| By: | /s/ JOHN P. KIERNAN |
| | John P. Kiernan |
| | Senior Vice President and Chief Financial Officer |
| | Veeco Instruments Inc. |
| | May 7, 2024 |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Veeco Instruments Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William J. Miller, Ph.D., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| By: | /s/ WILLIAM J. MILLER Ph.D. |
| | William J. Miller, Ph.D. |
| | Chief Executive Officer |
| | Veeco Instruments Inc. |
| | May 7, 2024 |
A signed original of this written statement required by Section 906 has been provided to Veeco Instruments Inc. and will be retained by Veeco Instruments Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Veeco Instruments Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John P. Kiernan, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| By: | /s/ JOHN P. KIERNAN |
| | John P. Kiernan |
| | Senior Vice President and Chief Financial Officer |
| | Veeco Instruments Inc. |
| | May 7, 2024 |
A signed original of this written statement required by Section 906 has been provided to Veeco Instruments Inc. and will be retained by Veeco Instruments Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Consolidated Balance Sheets | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 500,000 | 500,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized shares | 120,000,000 | 120,000,000 |
Common stock, shares issued | 56,637,473 | 56,364,131 |
Common stock, shares outstanding | 56,637,473 | 56,364,131 |
Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Consolidated Statements of Operations | ||
Net sales | $ 174,484 | $ 153,504 |
Cost of sales | 99,065 | 91,487 |
Gross profit | 75,419 | 62,017 |
Operating expenses, net: | ||
Research and development | 29,642 | 27,562 |
Selling, general, and administrative | 24,700 | 22,627 |
Amortization of intangible assets | 1,891 | 2,111 |
Other operating expense (income), net | (2,859) | (89) |
Total operating expenses, net | 53,374 | 52,211 |
Operating income | 22,045 | 9,806 |
Interest income | 3,324 | 2,073 |
Interest expense | (2,619) | (2,875) |
Income before income taxes | 22,750 | 9,004 |
Income tax expense | 896 | 263 |
Net income | $ 21,854 | $ 8,741 |
Income per common share: | ||
Basic (in dollars per share) | $ 0.39 | $ 0.17 |
Diluted (in dollars per share) | $ 0.37 | $ 0.17 |
Weighted average number of shares: | ||
Basic (in shares) | 55,968 | 50,559 |
Diluted (in shares) | 60,764 | 59,856 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Consolidated Statements of Comprehensive Income | ||
Net Income (Loss) | $ 21,854 | $ 8,741 |
Other comprehensive income (loss), net of tax: | ||
Unrealized gain (loss) on available-for-sale securities | (95) | 470 |
Change in currency translation adjustments | (33) | 6 |
Total other comprehensive income (loss), net of tax | (128) | 476 |
Total comprehensive income | $ 21,726 | $ 9,217 |
Basis of Presentation |
3 Months Ended |
---|---|
Mar. 31, 2024 | |
Significant Accounting Policies | |
Basis of Presentation | Note 1 — Basis of Presentation The accompanying unaudited Consolidated Financial Statements of Veeco have been prepared in accordance with U.S. GAAP as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 270 for interim financial information and with the instructions to Rule 10-01 of Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements as the interim information is an update of the information that was presented in Veeco’s most recent annual financial statements. For further information, refer to Veeco’s Consolidated Financial Statements and Notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal, recurring nature. Veeco reports interim quarters on a 13-week basis ending on the last Sunday of each quarter. The fourth quarter always ends on the last day of the calendar year, December 31. The 2024 interim quarters end on March 31, June 30, and September 29, and the 2023 interim quarters ended on April 2, July 2, and October 1. These interim quarters are reported as March 31, June 30, and September 30 in Veeco’s interim consolidated financial statements. The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, actual results may differ from these estimates. Revenue Recognition Revenue is recognized upon the transfer of control of the promised product or service to the customer in an amount that reflects the consideration the Company expects to receive in exchange for such product or service. The Company’s contracts with customers generally do not contain variable consideration. In the rare instances where variable consideration is included, the Company estimates the amount of variable consideration and determines what portion of that, if any, has a high probability of significant subsequent revenue reversal, and if so, that amount is excluded from the transaction price. The Company’s contracts with customers frequently contain multiple deliverables, such as systems, upgrades, components, spare parts, installation, maintenance, and service plans. Judgment is required to properly identify the performance obligations within a contract and to determine how the revenue should be allocated among the performance obligations. The Company also evaluates whether multiple transactions with the same customer or related parties should be considered part of a single contract based on an assessment of whether the contracts or agreements are negotiated or executed within a short time frame of each other or if there are indicators that the contracts are negotiated in contemplation of one another.
When there are separate units of accounting, the Company allocates revenue to each performance obligation on a relative stand-alone selling price basis. The stand-alone selling prices are determined based on the prices at which the Company separately sells the systems, upgrades, components, spare parts, installation, maintenance, and service plans. For items that are not sold separately, the Company estimates stand-alone selling prices generally using an expected cost plus margin approach.
Most of the Company’s revenue is recognized at a point in time when the performance obligation is satisfied. The Company considers many facts when evaluating each of its sales arrangements to determine the timing of revenue recognition, including its contractual obligations and the nature of the customer’s post-delivery acceptance provisions. The Company’s system sales arrangements, including certain upgrades, generally include field acceptance provisions that may include functional or mechanical test procedures. For many of these arrangements, a customer source inspection of the system is performed in the Company’s facility, test data is sent to the customer documenting that the system is functioning to the agreed upon specifications prior to delivery, or other quality assurance testing is performed internally to ensure system functionality prior to shipment. Historically, such source inspection or test data replicates the field acceptance provisions that are performed at the customer’s site prior to final acceptance of the system. When the Company objectively demonstrates that the criteria specified in the contractual acceptance provisions are achieved prior to delivery either through customer testing or the Company’s historical experience of its tools meeting specifications, transfer of control of the product to the customer is considered to have occurred and revenue is recognized upon system delivery since there is no substantive contingency remaining related to the acceptance provisions at that date. For new products, new applications of existing products, or for products with substantive customer acceptance provisions where the Company cannot objectively demonstrate that the criteria specified in the contractual acceptance provisions have been achieved prior to delivery, revenue and the associated costs are deferred. The Company recognizes such revenue and costs upon obtaining objective evidence that the acceptance provisions can be achieved, assuming all other revenue recognition criteria have been met.
In certain cases the Company’s contracts with customers contain a billing retention, which is billed by the Company and payable by the customer when field acceptance provisions are completed. Revenue recognized in advance of the amount that has been billed is recorded as a contract asset on the Consolidated Balance Sheets.
The Company recognizes revenue related to maintenance and service contracts over time based upon the respective contract term. Installation revenue is recognized over time as the installation services are performed. The Company recognizes revenue from the sales of components, spare parts, and specified service engagements at a point in time, which is typically consistent with the time of delivery in accordance with the terms of the applicable sales arrangement.
The Company may receive advanced payments on system transactions. The timing of the transfer of goods or services related to the advanced payments is either at the discretion of the customer or generally expected to be within one year from the advanced receipt. As such, the Company does not adjust transaction prices for the time value of money. Incremental direct costs incurred related to the acquisition of a customer contract, such as sales commissions, are expensed as incurred since the expected amortization period is one year or less. The Company has elected to treat shipping and handling costs as a fulfillment activity, and the Company includes such costs in cost of sales when the Company recognizes revenue for the related goods. Taxes assessed by governmental authorities that are collected by the Company from a customer are excluded from revenue. Inventories Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Each quarter the Company assesses the valuation and recoverability of all inventories: materials (raw materials, spare parts, and service inventory); work-in-process; and finished goods; and evaluation inventory at customer facilities. Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated net realizable value if less than cost. The Company evaluates usage requirements by analyzing historical usage, anticipated demand, alternative uses of materials, and other qualitative factors. Unanticipated changes in demand for the Company’s products may require a write down of inventory, which would be reflected in cost of sales in the period the revision is made. Inventory acquired as part of a business combination is recorded at fair value on the date of acquisition. Recent Accounting Standards Not Yet Adopted In November 2023, the FASB issued ASU 2023-07: Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures. This standard primarily enhances disclosures about significant segment expenses. The standard requires interim and annual disclosure of significant segment expenses that are regularly provided to the chief operating decision-maker (“CODM”) and included within the reported measure of a segment’s profit or loss, requires interim disclosures about a reportable segment’s profit and loss and assets that are currently required annually, requires disclosure of the position and title of the CODM, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss and contains other disclosure requirements. This authoritative guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the effect of this new guidance on its consolidated financial statements.
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Income Per Common Share |
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Income Per Common Share | Note 2 — Income Per Common Share Basic income per share is calculated by dividing net income by the weighted average number of shares outstanding during the period. Diluted income per share is calculated by dividing net income available to common shareholders by the weighted average number of shares used to calculate basic income per share plus the weighted average number of common share equivalents outstanding during the period. The dilutive effect of outstanding options to purchase common stock and share-based awards is considered in diluted income per share by application of the treasury stock method. The dilutive effect of performance share units is included in diluted income per common share if the performance targets have been achieved, or would have been achieved if the reporting date was the end of the contingency period. Finally, the Company includes the dilutive effect of shares issuable upon conversion of its Notes in the calculation of diluted income per share using the if-converted method. The Company has the option for the 2025 and 2027 Notes to settle the conversion value in any combination of cash or shares, and as such, the maximum number of shares issuable are included in the dilutive share count if the effect would be dilutive. The Company must settle the principal amount of the 2029 Notes in cash, and has the option to settle any excess of the conversion value over the principal amount in any combination of cash or shares. As such, the Company only includes the excess shares that may be issuable above the principal amount of the 2029 Notes in the dilutive share count, if the effect would be dilutive. The computations of basic and diluted income per share for the three months ended March 31, 2024 and 2023 are as follows:
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Business Combination |
3 Months Ended |
---|---|
Mar. 31, 2024 | |
Business Combination | |
Business Combination | Note 3 — Business Combination Epiluvac On January 31, 2023, the Company acquired Epiluvac AB, a privately held manufacturer of chemical vapor deposition (CVD) epitaxy systems that enable silicon carbide (SiC) applications in the electric vehicle market. This acquisition is expected to accelerate penetration into the emerging, high-growth SiC equipment market. The results of Epiluvac’s operations have been included in the consolidated financial statements since the date of acquisition. Acquisition date fair value totaled $56.4 million, which included $30.4 million of cash and $26.1 million of contingent consideration.
The purchase agreement included performance milestones that, if achieved, could trigger additional payments to the original selling shareholders. The contingent arrangements include payments up to $15.0 million based on the timely completion of certain defined milestones tied to strategic targets, and up to $20.0 million based on the percentage of orders received during the defined Earn-out period. The Earn-out period is four years after the closing date of the acquisition, or earlier if certain conditions are met. The Company estimated the fair value of the contingent consideration by assigning probabilities and discount factors to each of the various defined performance milestones, while using a Monte-Carlo simulation model to determine the most likely outcome for payments to be based on value of orders received. These fair value measurements are based on significant inputs not observable in the market and thus represent a Level 3 measurement as defined in ASC 820. The used was 5.54% for the strategic target and order value related contingent payments. The rate was determined based on the nature of the milestone, the risks and uncertainties involved and the time period until the milestone was measured. The determination of the various probabilities and discount factors is highly subjective, requires significant judgment and is influenced by a number of factors, including the adoption of SiC technology. The aggregate fair value of the contingent consideration arrangement at the acquisition date was $26.1 million. While the use of SiC is expected to grow in the near future, it is difficult to predict the rate at which SiC will be adopted by the market and thus would impact the sales of our equipment.The Company updates its estimate of fair value of the contingent consideration each reporting period, utilizing the same methodologies described above. The used was 5.6% for the strategic target and order value related contingent payments. During the three months ended March 31, 2024, the Company recognized approximately $0.6 million of a reduction to contingent consideration, included within “Other operating expense (income) net” in the Consolidated Statement of Operations. Additionally, during the three months ended March 31, 2024, the Company paid $1.8 million to the original selling shareholders in recognition of a performance milestone having been successfully completed. Total contingent consideration liability as of March 31, 2024 was $21.8 million included within “Other liabilities” on the Consolidated Balance Sheet. |
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Assets | Note 4 — Assets Investments Short-term investments are generally classified as available-for-sale and reported at fair value, with unrealized gains and losses, net of tax, presented as a separate component of stockholders’ equity under the caption “Accumulated other comprehensive income” in the Consolidated Balance Sheets. These securities may include U.S. treasuries, government agency securities, corporate debt, and commercial paper, all with maturities of greater than three months when purchased. All realized gains and losses and unrealized losses resulting from declines in fair value that are other than temporary are included in “Other operating expense (income), net” in the Consolidated Statements of Operations. Fair value is the price that would be received for an asset or the amount paid to transfer a liability in an orderly transaction between market participants. Veeco classifies certain assets based on the following fair value hierarchy: Level 1: Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Veeco has evaluated the estimated fair value of financial instruments using available market information and valuations as provided by third-party sources. The use of different market assumptions or estimation methodologies could have a significant effect on the estimated fair value amounts. The following table presents the portion of Veeco’s assets that were measured at fair value on a recurring basis at March 31, 2024 and December 31, 2023:
There were no transfers between fair value measurement levels during the three months ended March 31, 2024. At March 31, 2024 and December 31, 2023, the amortized cost and fair value of available-for-sale securities consist of:
Available-for-sale securities in a loss position at March 31, 2024 and December 31, 2023 consist of:
The contractual maturities of securities classified as available-for-sale at March 31, 2024 were as follows:
Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. There were no realized gains or losses, or unrealized losses from declines in fair value that are other than temporary, for the three months ended March 31, 2024 and 2023. Accounts Receivable Accounts receivable is presented net of an allowance for doubtful accounts of $1.0 million at March 31, 2024 and December 31, 2023. The Company considered its current expectations of future economic conditions when estimating its allowance for doubtful accounts. Inventories Inventories at March 31, 2024 and December 31, 2023 consist of the following:
Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets primarily consist of supplier deposits, prepaid value-added tax, lease deposits, prepaid insurance, prepaid software and maintenance, and other receivables. The Company had deposits with its suppliers of $17.0 million and $19.4 million at March 31, 2024 and December 31, 2023, respectively. Property, Plant, and Equipment Property, plant, and equipment at March 31, 2024 and December 31, 2023 consist of the following:
For the three months ended March 31, 2024 and 2023, depreciation expense was $4.5 million and $4.2 million, respectively. Goodwill Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognized. There were no changes to goodwill during the three months ended March 31, 2024. Intangible Assets Intangible assets consist of purchased technology, customer relationships, patents, trademarks and tradenames, licenses, and backlog, and are initially recorded at fair value. Long-lived intangible assets are amortized over their estimated useful lives in a method reflecting the pattern in which the economic benefits are consumed or amortized on a straight-line basis if such pattern cannot be reliably determined. The components of purchased intangible assets were as follows:
Other intangible assets primarily consist of patents, licenses, and backlog. |
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Liabilities | Note 5 — Liabilities Accrued Expenses and Other Current Liabilities The components of accrued expenses and other current liabilities at March 31, 2024 and December 31, 2023 consist of:
Warranty Warranties are typically valid for one year from the date of system final acceptance. The Company estimates the costs that may be incurred under the warranty which are determined by analyzing specific product and historical configuration statistics and regional warranty support costs and are affected by product failure rates, material usage, and labor costs incurred in correcting product failures during the warranty period. Unforeseen component failures or exceptional component performance can also result in changes to warranty costs. Changes in product warranty reserves for the three months ended March 31, 2024 include:
Contract Liabilities and Performance Obligations Contract liabilities consist of unsatisfied performance obligations related to advanced payments received and billing in excess of revenue recognized. The contract liability balance as of December 31, 2023 was approximately $118.0 million, of which the Company recognized approximately $35.6 million in revenue during the three months ended March 31, 2024. This reduction in contract liabilities was offset in part by new billings for products and services which were unsatisfied performance obligations to customers and revenue had not yet been recognized as of March 31, 2024. As of March 31, 2024, the Company has approximately $139.8 million of remaining performance obligations on contracts with an original estimated duration of one year or more, of which approximately 82% is expected to be recognized within one year, with the remaining amounts expected to be recognized between to three years. The Company has elected to exclude disclosures regarding remaining performance obligations that have an original expected duration of one year or less.Convertible Senior Notes 2023 Notes On January 10, 2017, the Company issued $345.0 million of 2.70% convertible senior unsecured notes due 2023 (the “2023 Notes”). The 2023 Notes had a maturity date of January 15, 2023, unless earlier purchased by the Company, redeemed, or converted. The Company repurchased and retired approximately $111.5 million and $213.3 million of aggregate principal amount of its outstanding 2023 Notes during the years ended December 31, 2021 and December 31, 2020, respectively. The 2023 notes that remained outstanding matured on January 15, 2023 and were paid in cash and settled by the Company at that time. 2025 Notes On November 17, 2020, as part of the privately negotiated exchange agreement, the Company issued $132.5 million of 3.50% convertible senior notes due 2025 (the “2025 Notes”). The 2025 Notes bear interest at a rate of 3.50% per year, payable semiannually in arrears on January 15 and July 15 of each year, commencing on July 15, 2021. The 2025 Notes mature on January 15, 2025, unless earlier purchased by the Company, redeemed, or converted. On May 19, 2023, in connection with the completion of a private offering of $230.0 million aggregate principal amount of 2.875% convertible senior notes due 2029 described below, the Company repurchased and retired approximately $106.0 million in aggregate principal amount of its outstanding 2025 Notes, with a carrying amount of $105.4 million, for approximately $106.0 million of cash and 0.7 million shares of the Company’s common stock. The Company accounted for the partial settlement of the 2025 Notes as an extinguishment, and as such, recorded a loss on extinguishment of approximately $16.5 million for the year ended December 31, 2023. 2027 Notes On May 18, 2020, the Company completed a private offering of $125.0 million of 3.75% convertible senior notes due 2027 (the “2027 Notes”). The Company received net proceeds of approximately $121.9 million, after deducting underwriting discounts and fees and expenses payable by the Company. Additionally, the Company used approximately $10.3 million of cash to purchase capped calls, discussed below. The 2027 Notes bear interest at a rate of 3.75% per year, payable semiannually in arrears on June 1 and December 1 of each year, commencing on December 1, 2020. The 2027 Notes mature on June 1, 2027, unless earlier purchased by the Company, redeemed, or converted. On May 19, 2023, in connection with the completion of a private offering of $230.0 million aggregate principal amount of 2.875% convertible senior notes due 2029 described below, the Company repurchased and retired approximately $100.0 million in aggregate principal amount of its outstanding 2027 Notes, with a carrying amount of $98.5 million, for approximately $92.8 million of cash and 3.8 million shares of the Company’s common stock. The Company accounted for the partial settlement of the 2027 Notes as an extinguishment, and as such, recorded a loss on extinguishment of approximately $80.6 million for the year ended December 31, 2023. 2029 Notes On May 19, 2023, the Company completed a private offering of $230.0 million of 2.875% convertible senior notes due 2029 (the “2029 Notes”). The Company received net proceeds of approximately $223.2 million, after deducting underwriting discounts and fees and expenses payable by the Company. Additionally, the Company used approximately $198.8 million of net proceeds from the offering to fund the cash portion of the 2025 Notes and 2027 Notes extinguishments described above and the remainder for general corporate purposes. The 2029 Notes bear interest at a rate of 2.875% per year, payable semiannually in arrears on June 1 and December 1 of each year, commencing on December 1, 2023. The 2029 Notes mature on June 1, 2029, unless earlier purchased by the Company, redeemed, or converted. The Company will settle any conversions of the 2029 Notes by paying cash up to the aggregate principal amount of the 2029 Notes to be converted, and paying or delivering either cash, shares of Company’s common stock, or a combination of cash and shares of common stock at the Company’s election, in respect of the remainder, if any, of the conversion obligation in excess of the aggregate principal amount of the 2029 Notes being converted. The 2025 Notes, 2027 Notes, and 2029 Notes (collectively, the “Notes”) are unsecured senior obligations of Veeco and rank senior in right of payment to any of Veeco’s subordinated indebtedness; equal in right of payment to all of Veeco’s unsecured indebtedness that is not subordinated; effectively subordinated in right of payment to any of Veeco’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally subordinated to all indebtedness and other liabilities (including trade payables) of Veeco’s subsidiaries. The Company may redeem for cash, at its option, all or any portion of (i) the outstanding 2025 Notes at any time on or after January 15, 2023, (ii) the outstanding 2027 Notes at any time on or after June 6, 2024 and/or (iii) the outstanding 2029 Notes at any time on or after June 8, 2026, in each case, at a redemption price equal to 100% of the principal amount of such Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date, if the last reported sale price of the common stock has been at least 130% of the conversion price for the applicable series of Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides the redemption notice. Upon the Company’s notice of redemption, holders may elect to convert their Notes based on the conversion rates and criteria outlined below. The Notes are convertible at the option of the holders upon the satisfaction of specified conditions and during certain periods as described below. The initial conversion rates are 41.6667, 71.5372, and 34.21852 shares of the Company’s common stock per $1,000 principal amount of the 2025 Notes, 2027 Notes, and 2029 Notes, respectively, representing initial effective conversion prices of $24.00, $13.98, and $29.22 per share of common stock, respectively. The conversion rates may be subject to adjustment upon the occurrence of certain specified events. Holders may convert all or any portion of their Notes, in multiples of one thousand dollar principal amount, at their option at any time prior to the close of business on the business day immediately preceding October 15, 2024, with respect to the 2025 Notes, October 1, 2026, with respect to the 2027 Notes, and February 1, 2029 with respect to the 2029 Notes, only under the following circumstances:
For the calendar quarter ended March 31, 2024, the last reported sales price of the common stock during the 30 consecutive trading days, based on the criteria outlined in (i) above, was greater than 130% of the conversion price of the 2025 Notes and 2027 Notes, and as such are convertible by the holders until June 30, 2024. Holders may convert their Notes at any time, regardless of the foregoing circumstances, on October 15, 2024 with respect to the 2025 Notes, October 1, 2026 with respect to the 2027 Notes, and February 1, 2029 with respect to the 2029 Notes, until the close of business on the business day immediately preceding the respective maturity date. The Notes are recorded as a single unit within liabilities in the consolidated balance sheets as the conversion features within the Notes are not derivatives that require bifurcation and the Notes do not involve a substantial premium. Transaction costs of $1.9 million, $3.1 million, and $6.8 million incurred in connection with the issuance of the 2025 Notes, 2027 Notes, and 2029 Notes, respectively, were recorded as direct deductions from the related debt liabilities and recognized as non-cash interest expense using the effective interest method over the expected terms of the Notes. The carrying value of the 2025 Notes, 2027 Notes, and 2029 Notes are as follows:
Total interest expense related to the 2023 Notes, 2025 Notes, 2027 Notes, and 2029 Notes is as follows:
The Company determined the 2025 Notes, 2027 Notes, and Notes are Level in the fair value hierarchy and had an estimated fair value at March 31, 2024 of $36.8 million, $62.1 million, and $342.5 million, respectively.Capped Call Transactions In connection with the offering of the 2027 Notes, on May 13, 2020, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”), pursuant to capped call confirmations, covering the total principal amount of the 2027 Notes for an aggregate premium of $10.3 million. The Capped Call Transactions are expected generally to reduce the potential dilution to the Company’s common stock upon any conversion of the 2027 Notes and/or offset any cash payments the Company is required to make in excess of the aggregate principal amount of converted 2027 Notes, as the case may be, with such reduction and/or offset subject to a cap based on the capped price of the Capped Call Transactions. The Capped Call Transactions exercise price is equal to the initial conversion price of the 2027 Notes, and the capped price of the Capped Call Transactions is approximately $18.46 per share and is subject to certain adjustments under the terms of the capped call confirmations. The Capped Call Transactions are separate transactions entered into by the Company with the capped call counterparties, are not part of the terms of the 2027 Notes and do not change the holders’ rights under the 2027 Notes. Holders of the 2027 Notes do not have any rights with respect to the Capped Call Transactions. The cost of the Capped Call Transactions is not expected to be tax-deductible as the Company did not elect to integrate the Capped Call Transactions into the 2027 Notes for tax purposes. The Company used a portion of the net proceeds from the offering of the 2027 Notes to pay for the Capped Call Transactions, and the cost of the Capped Call Transactions was recorded as a reduction of the Company’s additional paid-in capital in the accompanying consolidated financial statements. Revolving Credit Facility On December 16, 2021, the Company entered into a loan and security agreement providing for a senior secured revolving credit facility in an aggregate principal amount of $150 million (the “Credit Facility”), including a $15 million letter of credit sublimit. The Credit Facility is guaranteed by the Company’s direct material U.S. subsidiaries, subject to customary exceptions. Borrowings under the Credit Facility are secured by a first-priority lien on substantially all of the assets of the Company, subject to customary exceptions. The Credit Facility has a term of five years, maturing on December 16, 2026, or earlier if certain liquidity measures are not met prior to the 2025 Notes maturing. Subject to certain conditions and the receipt of commitments from the lenders, the Loan and Security Agreement allows for revolving commitments under the Credit Facility to be increased by up to $75 million. The existing lenders under the Credit Facility are entitled, but not obligated, to provide such incremental commitments. Borrowings will bear interest at a floating rate which can be, at the Company’s option, either (a) an alternate base rate plus an applicable rate ranging from 0.50% to 1.25% or (b) a Secured Overnight Financing Rate (“SOFR”) (with a floor of 0.00%) for the specified interest period plus an applicable rate ranging from 1.50% to 2.25%, in each case, depending on the Company’s Secured Net Leverage Ratio (as defined in the Loan and Security Agreement). The Company will pay an unused commitment fee ranging from 0.25% to 0.35% based on unused capacity under the Credit Facility and the Company’s Secured Net Leverage Ratio. The Company may use the proceeds of borrowings under the Credit Facility to pay transaction fees and expenses, provide for its working capital needs and reimburse drawings under letters of credit and for other general corporate purposes. The Loan and Security Agreement contains customary affirmative covenants for transactions of this type, including, among others, the provision of financial and other information to the administrative agent, notice to the administrative agent upon the occurrence of certain material events, preservation of existence, maintenance of properties and insurance, compliance with laws, including environmental laws, the provision of additional guarantees, and an affiliate transactions covenant, subject to certain exceptions. The Loan and Security Agreement contains customary negative covenants, including, among others, restrictions on the ability to merge and consolidate with other companies, incur indebtedness, refinance our existing convertible notes, grant liens or security interests on assets, make investments, acquisitions, loans, or advances, pay dividends, and sell or otherwise transfer assets. The Loan and Security Agreement contains financial maintenance covenants that require the Borrower to maintain an Interest Coverage Ratio (as defined in the Loan and Security Agreement) of not less than 3.00 to 1.00, a Total Net Leverage Ratio (as defined in the Loan and Security Agreement) of not more than 4.50 to 1.00, and a Secured Net Leverage Ratio (as defined in the Loan and Security Agreement) of not more than 2.50 to 1.00, in each case, tested at the end of each fiscal quarter commencing with the fiscal quarter ending September 30, 2022. The Loan and Security Agreement also provides for a number of customary events of default, including, among others: payment defaults to the lenders; voluntary and involuntary bankruptcy proceedings; covenant defaults; material inaccuracies of representations and warranties; certain change of control events; material money judgments; and other customary events of default. The occurrence of an event of default could result in the acceleration of obligations and the termination of lending commitments under the Loan and Security Agreement. No amounts were outstanding under the Credit Facility as of March 31, 2024 or December 31, 2023. Other Liabilities Other liabilities at March 31, 2024 and December 31, 2023 were approximately $25.2 million and $25.5 million, respectively; which primarily included contingent consideration of $21.8 million and $22.4 million, respectively; medical and dental benefits from former executives of $1.9 million; and asset retirement obligations of $0.9 million. |
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Commitments and Contingencies | Note 6 — Commitments and Contingencies Leases The Company’s operating leases primarily include real estate leases for properties used for manufacturing, R&D activities, sales and service, and administration, as well as certain equipment leases. Some leases may include options to renew for a period of up to 5 years, while others may include options to terminate the lease. The weighted average remaining lease term of the Company’s operating leases as of March 31, 2024 was 11 years, and the weighted average discount rate used in determining the present value of future lease payments was 5.6%. The following table provides the maturities of lease liabilities at March 31, 2024:
Operating lease costs for the three months ended March 31, 2024 and 2023 were $1.2 million and $1.4 million, respectively. Variable lease costs for the three months ended March 31, 2024 and 2023 were $0.4 million and $0.3 million, respectively. Additionally, the Company has an immaterial amount of short-term leases. Operating cash outflows from operating leases for the three months ended March 31, 2024 and 2023 were $1.6 million and $1.4 million, respectively. Receivable Purchase Agreement The Company entered into a receivable purchase agreement with a financial institution to sell certain of its trade receivables from customers without recourse, up to $30.0 million at any point in time. Pursuant to this agreement, the Company did not sell any receivables during the three months ended March 31, 2024, and $18.9 million was available under the agreement for additional sales of receivables as of March 31, 2024. The Company sold $8.3 million of receivables under this agreement for the three months ended March 31, 2023. The net sale of accounts receivable under the agreement is reflected as a reduction of accounts receivable in the Company’s Consolidated Balance Sheet at the time of sale and any fees for the sale of trade receivables were not material for the periods presented. Purchase Commitments Veeco has purchase commitments of $200.8 million at March 31, 2024, substantially all of which become due within one year. Bank Guarantees Veeco has bank guarantees and letters of credit issued by a financial institution on its behalf as needed. At March 31, 2024, outstanding bank guarantees and standby letters of credit totaled $23.7 million, and unused bank guarantees and letters of credit of $17.0 million were available to be drawn upon. Legal Proceedings The Company is involved in various legal proceedings arising in the normal course of business. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows. |
Equity |
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Equity | Note 7 — Equity Statement of Stockholders’ Equity The following tables present the changes in Stockholders’ Equity:
Accumulated Other Comprehensive Income (“AOCI”) The following table presents the changes in the balances of each component of AOCI, net of tax:
There were minimal reclassifications from AOCI into net income for the three months ended March 31, 2024 and 2023. |
Share-based Compensation |
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Share-based compensation | Note 8 — Share-based Compensation Restricted share awards are issued to employees and to members of our board of directors that are subject to specified restrictions and a risk of forfeiture. The restrictions typically lapse over to four years and may entitle holders to dividends and voting rights. Other types of share-based compensation include performance share awards, performance share units, and restricted share units (collectively with restricted share awards, “restricted shares”), as well as options to purchase common stock.Share-based compensation expense was recognized in the following line items in the Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023:
For the three months ended March 31, 2024, equity activity related to non-vested restricted shares and performance shares was as follows:
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Income Taxes |
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Income Taxes | Note 9 — Income Taxes Income taxes are estimated for each of the jurisdictions in which the Company operates. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. Realization of net deferred tax assets is dependent on future taxable income. At the end of each interim reporting period, the effective tax rate is aligned with expectations for the full year. This estimate is used to determine the income tax provision on a year-to-date basis and may change in subsequent interim periods. Income before income taxes and income tax expense for the three months ended March 31, 2024 and 2023 were as follows:
The Company’s income tax expense for the three months ended March 31, 2024 was $0.9 million, compared to $0.3 million for the comparable prior period. For the three months ended March 31, 2024 and March 31, 2023, the effective tax rate was lower than the U.S. statutory tax rate primarily relating to a discrete income tax benefit for share-based compensation windfall. Additionally, the effective tax rate was also favorably impacted by the tax benefits related to Foreign-Derived Intangible Income and research and development tax credits. |
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Segment Reporting and Geographic Information | Note 10 — Segment Reporting and Geographic Information Veeco operates and measures its results in one operating segment and therefore has one reportable segment: the development, manufacture, sales, and support of semiconductor and thin film process equipment primarily sold to make electronic devices. Veeco serves the following four end-markets: Semiconductor The Semiconductor market refers to early process steps in logic and memory applications where silicon wafers are processed. There are many different process steps in forming patterned wafers, such as deposition, etching, masking, and doping, where the microchips are created but remain on the silicon wafer. This market includes mask blank production for extreme ultraviolet (“EUV”) lithography, as well as Advanced Packaging, which refers to a portfolio of wafer-level assembly technologies that enable improved performance of electronic products, such as smartphones, high-end servers, and graphical processors. Compound Semiconductor The Compound Semiconductor market includes Photonics, Power Electronics, RF Filters and Amplifiers, and Solar applications. Photonics refers to light source technologies and laser-based solutions for 3D sensing, datacom and telecom applications. This includes micro-LED, laser diodes, edge emitting lasers and vertical cavity surface emitting lasers (“VCSELs”). Power Electronics refers to semiconductor devices such as rectifiers, inverters and converters for the control and conversion of electric power in applications such as fast or wireless charging of consumer electronics and automotive applications. RF power amplifiers and filters (including surface acoustic wave (“SAW”) and bulk acoustic wave (“BAW”) filters) are used in 5G communications infrastructure, smartphones, tablets, and mobile devices. They make use of radio waves for wireless broadcasting and/or communications. Solar refers to power obtained by harnessing the energy of the sun through the use of compound semiconductor devices such as photovoltaics. Data Storage Data Storage refers to the Hard Disk Drive (“HDD”) market, for which our systems enable customers to manufacture thin film magnetic heads for hard disk drives as part of large capacity storage applications. Scientific & Other Scientific & Other refers to advanced materials research and a range of manufacturing applications including optical coatings (laser mirrors, optical filters, and anti-reflective coatings). Sales by end-market and geographic region for the three months ended March 31, 2024 and 2023 were as follows:
For geographic reporting, sales are attributed to the location in which the customer facility is located. |
Basis of Presentation (Policies) |
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Significant Accounting Policies | |
Basis of Presentation | The accompanying unaudited Consolidated Financial Statements of Veeco have been prepared in accordance with U.S. GAAP as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 270 for interim financial information and with the instructions to Rule 10-01 of Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements as the interim information is an update of the information that was presented in Veeco’s most recent annual financial statements. For further information, refer to Veeco’s Consolidated Financial Statements and Notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal, recurring nature. |
Fiscal Period | Veeco reports interim quarters on a 13-week basis ending on the last Sunday of each quarter. The fourth quarter always ends on the last day of the calendar year, December 31. The 2024 interim quarters end on March 31, June 30, and September 29, and the 2023 interim quarters ended on April 2, July 2, and October 1. These interim quarters are reported as March 31, June 30, and September 30 in Veeco’s interim consolidated financial statements.
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Use of Estimates | The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, actual results may differ from these estimates. |
Revenue Recognition | Revenue Recognition Revenue is recognized upon the transfer of control of the promised product or service to the customer in an amount that reflects the consideration the Company expects to receive in exchange for such product or service. The Company’s contracts with customers generally do not contain variable consideration. In the rare instances where variable consideration is included, the Company estimates the amount of variable consideration and determines what portion of that, if any, has a high probability of significant subsequent revenue reversal, and if so, that amount is excluded from the transaction price. The Company’s contracts with customers frequently contain multiple deliverables, such as systems, upgrades, components, spare parts, installation, maintenance, and service plans. Judgment is required to properly identify the performance obligations within a contract and to determine how the revenue should be allocated among the performance obligations. The Company also evaluates whether multiple transactions with the same customer or related parties should be considered part of a single contract based on an assessment of whether the contracts or agreements are negotiated or executed within a short time frame of each other or if there are indicators that the contracts are negotiated in contemplation of one another.
When there are separate units of accounting, the Company allocates revenue to each performance obligation on a relative stand-alone selling price basis. The stand-alone selling prices are determined based on the prices at which the Company separately sells the systems, upgrades, components, spare parts, installation, maintenance, and service plans. For items that are not sold separately, the Company estimates stand-alone selling prices generally using an expected cost plus margin approach.
Most of the Company’s revenue is recognized at a point in time when the performance obligation is satisfied. The Company considers many facts when evaluating each of its sales arrangements to determine the timing of revenue recognition, including its contractual obligations and the nature of the customer’s post-delivery acceptance provisions. The Company’s system sales arrangements, including certain upgrades, generally include field acceptance provisions that may include functional or mechanical test procedures. For many of these arrangements, a customer source inspection of the system is performed in the Company’s facility, test data is sent to the customer documenting that the system is functioning to the agreed upon specifications prior to delivery, or other quality assurance testing is performed internally to ensure system functionality prior to shipment. Historically, such source inspection or test data replicates the field acceptance provisions that are performed at the customer’s site prior to final acceptance of the system. When the Company objectively demonstrates that the criteria specified in the contractual acceptance provisions are achieved prior to delivery either through customer testing or the Company’s historical experience of its tools meeting specifications, transfer of control of the product to the customer is considered to have occurred and revenue is recognized upon system delivery since there is no substantive contingency remaining related to the acceptance provisions at that date. For new products, new applications of existing products, or for products with substantive customer acceptance provisions where the Company cannot objectively demonstrate that the criteria specified in the contractual acceptance provisions have been achieved prior to delivery, revenue and the associated costs are deferred. The Company recognizes such revenue and costs upon obtaining objective evidence that the acceptance provisions can be achieved, assuming all other revenue recognition criteria have been met.
In certain cases the Company’s contracts with customers contain a billing retention, which is billed by the Company and payable by the customer when field acceptance provisions are completed. Revenue recognized in advance of the amount that has been billed is recorded as a contract asset on the Consolidated Balance Sheets.
The Company recognizes revenue related to maintenance and service contracts over time based upon the respective contract term. Installation revenue is recognized over time as the installation services are performed. The Company recognizes revenue from the sales of components, spare parts, and specified service engagements at a point in time, which is typically consistent with the time of delivery in accordance with the terms of the applicable sales arrangement.
The Company may receive advanced payments on system transactions. The timing of the transfer of goods or services related to the advanced payments is either at the discretion of the customer or generally expected to be within one year from the advanced receipt. As such, the Company does not adjust transaction prices for the time value of money. Incremental direct costs incurred related to the acquisition of a customer contract, such as sales commissions, are expensed as incurred since the expected amortization period is one year or less. The Company has elected to treat shipping and handling costs as a fulfillment activity, and the Company includes such costs in cost of sales when the Company recognizes revenue for the related goods. Taxes assessed by governmental authorities that are collected by the Company from a customer are excluded from revenue. |
Inventories | Inventories Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Each quarter the Company assesses the valuation and recoverability of all inventories: materials (raw materials, spare parts, and service inventory); work-in-process; and finished goods; and evaluation inventory at customer facilities. Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated net realizable value if less than cost. The Company evaluates usage requirements by analyzing historical usage, anticipated demand, alternative uses of materials, and other qualitative factors. Unanticipated changes in demand for the Company’s products may require a write down of inventory, which would be reflected in cost of sales in the period the revision is made. Inventory acquired as part of a business combination is recorded at fair value on the date of acquisition.
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Recent Accounting Standards Not Yet Adopted | Recent Accounting Standards Not Yet Adopted In November 2023, the FASB issued ASU 2023-07: Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures. This standard primarily enhances disclosures about significant segment expenses. The standard requires interim and annual disclosure of significant segment expenses that are regularly provided to the chief operating decision-maker (“CODM”) and included within the reported measure of a segment’s profit or loss, requires interim disclosures about a reportable segment’s profit and loss and assets that are currently required annually, requires disclosure of the position and title of the CODM, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss and contains other disclosure requirements. This authoritative guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the effect of this new guidance on its consolidated financial statements.
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Assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of portion of Veeco's assets (excluding cash balances) that are measured at fair value on a recurring basis |
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Schedule of amortized cost and fair value of available-for-sale securities |
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Schedule of fair value and unrealized losses of available-for-sale securities in a loss position |
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Schedule of contractual maturities of securities classified as available-for-sale |
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Schedule of inventories |
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Schedule of property, plant, and equipment |
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Schedule of intangible assets excluding goodwill |
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Liabilities (Tables) |
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Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accrued expenses and other current liabilities |
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Schedule of changes in product warranty reserves |
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Schedule of carrying value of Convertible Senior Notes |
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Schedule of interest expense related to Convertible Senior Notes |
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Commitments and Contingencies (Tables) |
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Commitments and Contingencies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of maturities of lease liabilities 2020 | The following table provides the maturities of lease liabilities at March 31, 2024:
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Equity (Tables) |
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Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stockholders' Equity |
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Schedule of the changes in the balances of each component of AOCI, net of tax |
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Share-based Compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of share-based compensation expense |
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Summary of non-vested restricted and performance shares activity |
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Income Taxes (Tables) |
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of income before income taxes and income tax expense |
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Segment Reporting and Geographic Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Schedule of sales by end-market |
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Schedule of sales by geographic region |
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Basis of Presentation - Fiscal Period (Details) |
3 Months Ended |
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Mar. 31, 2024 | |
Significant Accounting Policies | |
Fiscal period duration (in days) | 91 days |
Basis of Presentation - Revenue Recognition (Details) |
3 Months Ended |
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Mar. 31, 2024 | |
Significant Accounting Policies | |
Revenue, practical expedient, incremental cost of obtaining contract | true |
Income Per Common Share - Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
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Numerator: | ||
Net income | $ 21,854 | $ 8,741 |
Interest expense associated with convertible notes | 514 | 1,277 |
Net income available to common shareholders | $ 22,368 | $ 10,018 |
Denominator: | ||
Basic weighted average shares outstanding | 55,968 | 50,559 |
Effect of potentially dilutive share-based awards | 939 | 355 |
Dilutive effect of convertible notes | 3,857 | 8,942 |
Diluted weighted average shares outstanding | 60,764 | 59,856 |
Net income (loss) per common share: | ||
Basic (in dollars per share) | $ 0.39 | $ 0.17 |
Diluted (in dollars per share) | $ 0.37 | $ 0.17 |
Income Per Common Share - Shares Excluded from EPS (Details) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Potentially dilutive shares | ||
Antidilutive securities | ||
Securities excluded from the diluted calculation as their effect would be antidilutive | 213 | 1,140 |
Convertible Notes | ||
Antidilutive securities | ||
Securities excluded from the diluted calculation as their effect would be antidilutive | 5,603 |
Assets - Accounts Receivable (Details) - USD ($) $ in Millions |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Assets | ||
Allowance for doubtful accounts receivable | $ 1.0 | $ 1.0 |
Assets - Inventories (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Inventories | ||
Materials | $ 144,793 | $ 139,884 |
Work-in-process | 75,344 | 71,278 |
Finished goods | 3,670 | 6,183 |
Evaluation inventory | 19,459 | 20,290 |
Total | $ 243,266 | $ 237,635 |
Assets - Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Millions |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Prepaid expenses and other current assets | ||
Deposits with suppliers | $ 17.0 | $ 19.4 |
Assets - Property, Plant, and Equipment (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
Property, plant, and equipment | |||
Gross property, plant and equipment | $ 302,173 | $ 300,833 | |
Less: accumulated depreciation and amortization | 186,876 | 182,374 | |
Net property, plant, and equipment | 115,297 | 118,459 | |
Depreciation expense | 4,500 | $ 4,200 | |
Land | |||
Property, plant, and equipment | |||
Gross property, plant and equipment | 5,061 | 5,061 | |
Building and improvements | |||
Property, plant, and equipment | |||
Gross property, plant and equipment | 61,292 | 61,679 | |
Machinery and equipment | |||
Property, plant, and equipment | |||
Gross property, plant and equipment | 182,811 | 181,180 | |
Leaseholds improvements | |||
Property, plant, and equipment | |||
Gross property, plant and equipment | $ 53,009 | $ 52,913 |
Assets - Goodwill (Details) $ in Millions |
3 Months Ended |
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Mar. 31, 2024
USD ($)
| |
Changes in goodwill balances | |
Increase (decrease) in goodwill | $ 0.0 |
Liabilities - Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Accrued expenses and other current liabilities | ||
Payroll and related benefits | $ 35,059 | $ 28,321 |
Warranty | 8,667 | 8,864 |
Operating lease liabilities | 3,955 | 4,025 |
Interest | 2,804 | 1,149 |
Professional fees | 2,237 | 1,834 |
Sales, use, and other taxes | 3,217 | 1,825 |
Contingent consideration | 1,814 | |
Other | 3,320 | 9,792 |
Total accrued expenses and other current liabilities | $ 59,259 | $ 57,624 |
Liabilities - Warranty (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2024
USD ($)
| |
Warranty | |
Warranty period | 1 year |
Balance, beginning of the period | $ 8,864 |
Warranties issued | 1,545 |
Consumption of reserves | (1,542) |
Changes in estimate | (200) |
Balance, end of the period | $ 8,667 |
Liabilities - Contract Liabilities (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Dec. 31, 2023 |
|
Changes in deferred revenue | ||
Contract liability | $ 118.0 | |
Amount of contract liability recognized into revenue | $ 35.6 |
Liabilities - Convertible Senior Notes Carrying Value (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
May 19, 2023 |
Nov. 17, 2020 |
May 18, 2020 |
---|---|---|---|---|---|
Debt | |||||
Principal amount | $ 281,500 | $ 281,500 | |||
Unamortized transaction costs | (6,264) | (6,559) | |||
Net carrying value | 275,236 | 274,941 | |||
2025 Notes | |||||
Debt | |||||
Principal amount | 26,500 | 26,500 | $ 132,500 | ||
Unamortized transaction costs | (75) | (102) | |||
Net carrying value | 26,425 | 26,398 | |||
2027 Notes | |||||
Debt | |||||
Principal amount | 25,000 | 25,000 | $ 125,000 | ||
Unamortized transaction costs | (293) | (313) | |||
Net carrying value | 24,707 | 24,687 | |||
2029 Notes | |||||
Debt | |||||
Principal amount | 230,000 | 230,000 | $ 230,000 | ||
Unamortized transaction costs | (5,896) | (6,144) | |||
Net carrying value | $ 224,104 | $ 223,856 |
Liabilities - Capped Call Transactions (Details) - Capped Call Transactions $ / shares in Units, $ in Millions |
May 13, 2020
USD ($)
$ / shares
|
---|---|
Debt | |
Aggregate price of capped call transaction | $ | $ 10.3 |
Cap price of the capped call transactions (in dollars per share) | $ / shares | $ 18.46 |
Liabilities - Other Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Other liabilities | ||
Other liabilities | $ 25,168 | $ 25,544 |
Contingent consideration | 21,800 | 22,400 |
Medical and dental benefits | 1,900 | 1,900 |
Asset retirement obligations | $ 900 | $ 900 |
Commitments and Contingencies - Lease terms (Details) |
Mar. 31, 2024 |
---|---|
Leases | |
Lease renewal term | 5 years |
Remaining lease term | 11 years |
Weighted average discount rate (as a percent) | 5.60% |
Commitments and Contingencies - Minimum lease commitments (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Minimum lease commitments, Payments due by period: | ||
2024 | $ 2,557 | |
2025 | 4,138 | |
2026 | 4,097 | |
2027 | 3,640 | |
2028 | 3,422 | |
Thereafter | 30,824 | |
Total future minimum lease payments | 48,678 | |
Less: Imputed interest | (13,774) | |
Total operating lease liabilities | 34,904 | |
Operating lease liability, current | $ 3,955 | $ 4,025 |
Operating Lease, Liability, Current, Statement of Financial Position | Accrued expenses and other current liabilities | |
Long-term operating lease liabilities | $ 30,949 | $ 31,529 |
Total operating lease liabilities | $ 34,904 | |
Operating Lease, Liability, Statement of Financial Position | Long-term operating lease liabilities, Accrued expenses and other current liabilities |
Commitments and Contingencies - Lease costs (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Lease cost | ||
Operating lease costs | $ 1.2 | $ 1.4 |
Variable lease costs | 0.4 | 0.3 |
Operating cash flows from operating leases | $ 1.6 | $ 1.4 |
Commitments and Contingencies - Receivable Purchase Agreement (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Commitments and Contingencies | ||
Maximum amount of trade receivables to be sold under agreement | $ 30.0 | |
Receivables sold | 0.0 | $ 8.3 |
Amount of trade receivables available to be sold under agreement | $ 18.9 |
Commitments and Contingencies - Purchase Commitments and Bank Guarantees (Details) $ in Millions |
Mar. 31, 2024
USD ($)
|
---|---|
Purchase commitments | |
Purchase commitments due within one year | $ 200.8 |
Bank guarantees | |
Bank guarantees and letters of credit outstanding | 23.7 |
Unused bank guarantees and letters of credit | $ 17.0 |
Equity - AOCI Rollforward (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Changes in the balances of each component of AOCI | ||
Balance at the beginning of the period | $ 672,442 | $ 577,824 |
Other comprehensive income (loss) | (128) | 476 |
Balance at the end of the period | 687,910 | 585,559 |
Accumulated Other Comprehensive Income | ||
Changes in the balances of each component of AOCI | ||
Balance at the beginning of the period | 1,607 | 928 |
Other comprehensive income (loss) | (128) | |
Balance at the end of the period | 1,479 | $ 1,404 |
Foreign Currency Translation | ||
Changes in the balances of each component of AOCI | ||
Balance at the beginning of the period | 1,761 | |
Other comprehensive income (loss) | (33) | |
Balance at the end of the period | 1,728 | |
Unrealized Gains (Losses) on Available for Sale Securities | ||
Changes in the balances of each component of AOCI | ||
Balance at the beginning of the period | (154) | |
Other comprehensive income (loss) | (95) | |
Balance at the end of the period | $ (249) |
Share-based Compensation - Recognized Share-based Compensation (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Recognized share-based compensation | ||
Total share-based compensation expense | $ 8,082 | $ 7,027 |
Restricted stock | Minimum | ||
Share-based compensation | ||
Expiration term | 1 year | |
Restricted stock | Maximum | ||
Share-based compensation | ||
Expiration term | 4 years | |
Cost of Sales | ||
Recognized share-based compensation | ||
Total share-based compensation expense | $ 1,730 | 1,451 |
Research and development | ||
Recognized share-based compensation | ||
Total share-based compensation expense | 2,318 | 2,089 |
Selling, general and administrative | ||
Recognized share-based compensation | ||
Total share-based compensation expense | $ 4,034 | $ 3,487 |
Share-based Compensation - Restricted shares and performance shares (Details) - Non-vested restricted shares and performance shares shares in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2024
$ / shares
shares
| |
Number of Shares | |
Outstanding at the beginning of the period (in shares) | shares | 2,464 |
Granted (in shares) | shares | 1,019 |
Performance award adjustments (in shares) | shares | 200 |
Vested (in shares) | shares | (1,040) |
Forfeited (in shares) | shares | (13) |
Outstanding at the end of the period (in shares) | shares | 2,630 |
Weighted Average Grant Date Fair Value | |
Outstanding at the beginning of the period (in dollars per share) | $ / shares | $ 26.19 |
Granted (in dollars per share) | $ / shares | 37.72 |
Performance award adjustments (in dollars per share) | $ / shares | 27.81 |
Vested (in dollars per share) | $ / shares | 25.93 |
Forfeited (in dollars per share) | $ / shares | 23.06 |
Outstanding at the end of the period (in dollars per share) | $ / shares | $ 31.13 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Tax reconciliation disclosures | ||
Income before income taxes | $ 22,750 | $ 9,004 |
Income tax expense | $ 896 | $ 263 |
Effective tax rate (as a percent) | 3.94% | 2.93% |
Pay vs Performance Disclosure - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Pay vs Performance Disclosure | ||
Net Income (Loss) | $ 21,854 | $ 8,741 |
Insider Trading Arrangements |
3 Months Ended |
---|---|
Mar. 31, 2024
shares
| |
Trading Arrangements, by Individual | |
Material Terms of Trading Arrangement | Item 5. Other Information During the fiscal quarter ended March 31, 2024, the following directors and Section 16 officers, as applicable, adopted, modified or terminated “Rule 10b5-1 trading arrangements” (as defined in Item 408 of Regulation S-K): ● On February 29, 2024, John Kiernan, our Chief Financial Officer, entered into a trading plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). Mr. Kiernan’s plan covers the sale of 30,000 shares of our common stock, between June 10, 2024 and May 30, 2025. Transactions under the plan are based upon pre-established dates. There were no “non-Rule 10b5-1 trading arrangements” (as defined in Item 408 of Regulation S-K) adopted, modified or terminated during the fiscal quarter ended March 31, 2024 by our directors and Section 16 officers. Each of the Rule 10b5-1 trading arrangements are in accordance with our Securities Trading Policy and actual sale transactions made pursuant to such trading arrangements will be disclosed publicly in Section 16 filings with the SEC in accordance with applicable securities laws, rules and regulations. |
Non-Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
John Kiernan | |
Trading Arrangements, by Individual | |
Name | John Kiernan |
Title | Chief Financial Officer |
Rule 10b5-1 Arrangement Adopted | true |
Adoption Date | February 29, 2024 |
Aggregate Available | 30,000 |
1 Year Veeco Instruments Inc DE Chart |
1 Month Veeco Instruments Inc DE Chart |
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