Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-16244 VEECO INSTRUMENTS INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 11-2989601 (State or Other Jurisdiction of Incorporati ...

Financial Data and Key Metrics Changes - Revenue for Q1 2021 was $134 million, driven by semiconductor and data storage sales, with a gross margin above 41% and non-GAAP operating income of $16 million, leading to diluted non-GAAP EPS of $0.25 [9][28] - Cash flow from operations was $10 million, and cash and short-term investments increased by $8 million to $328 million [10][32] - The company increased its full-year revenue guidance to a range of $540 million to $560 million, reflecting a 21% year-on-year growth, up from a previous guidance of 17% [37] Business Line Data and Key Metrics Changes - Semiconductor revenue was $52 million, representing 39% of total revenue, driven by laser annealing and lithography products [29] - Compound semiconductor revenue was $25 million, making up 18% of total revenue, driven by wet processing systems for RF applications [29] - Data storage revenue was $41 million, accounting for 31% of total revenue, with expectations for continued growth [29] Market Data and Key Metrics Changes - The Asia Pacific region (excluding China) contributed 41% of total revenue, the United States accounted for 34%, China made up 15%, and EMEA contributed 10% [30] - Analysts forecasted a growth of more than 20% in wafer fab equipment for 2021 and another 10% in 2022, indicating a healthy macro environment in the semiconductor equipment space [11] Company Strategy and Development Direction - The company is focusing on maintaining resiliency across operations, profitability, and near-term growth with laser annealing, 5G RF, and data storage solutions [25][26] - Investments are being made in evaluation systems and service infrastructure to support growth and win additional application steps [26] - The company is engaging with customers and shipping evaluation systems to position itself for long-term growth [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's performance and the positive macro trends in the semiconductor space, noting increased demand for laser annealing and advanced packaging [41][44] - The company is cautiously optimistic about returning to normal operations as vaccination rates increase, while prioritizing employee health and safety [7][8] Other Important Information - The company reported a backlog of $366 million at the beginning of the year, with data storage being the largest contributor [102] - The company is experiencing strong demand in the compound semiconductor market, particularly for RF filters and power amplifiers driven by 5G adoption [22][78] Q&A Session Summary Question: Demand pull-ins in semiconductor supply chain - Management noted an uptick in demand aligned with macro trends, particularly in laser annealing opportunities, and increased engagement in the semiconductor space [41] Question: Number of evaluation tools delivered - Six evaluation systems are currently in the field, with plans to ship four more by the end of the year, focusing on laser annealing and advanced packaging [45] Question: Advanced packaging market demand - Demand is broadening to include foundries and IDMs, not just OSATs, indicating a positive trend in the advanced packaging market [50] Question: Supply chain tightness - The supply chain is currently stable, with no significant constraints reported, and the company is actively managing supply chain issues [59] Question: Data storage business visibility - Management indicated that Q1 revenue was within expectations, and they anticipate a strong data storage year based on backlog [67][68] Question: Transition to HAMR and EMR heads - The transition to more complex heads is expected to increase the number of passes through Veeco's equipment, positively impacting demand [91] Question: Backlog size and growth - The backlog was reported at $366 million, with a positive trend in backlog execution, particularly in data storage and semiconductor segments [102]

MAKING A MATERIAL DIFFERENCE Q1 2021 Financial Results Conference Call Veeco (Nasdaq: VECO) May 4, 2021 Safe Harbor This presentation contains "forward-looking statements", within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, as amended, that are based on management's expectations, estimates, projections and assumptions. Words such as "expects," "anticipates," "plans," "believes," "scheduled," "estimates" and variations of these words and similar exp ...

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) This section details Veeco Instruments Inc.'s Form 10-Q filing information, including the reporting period, stock exchange, and outstanding common stock - The document is a Quarterly Report on Form 10-Q for Veeco Instruments Inc. for the period ended **March 31, 2021**[3](index=3&type=chunk) - Veeco Instruments Inc. (VECO) common stock is registered on The NASDAQ Global Select Market[4](index=4&type=chunk) - The registrant is classified as a **large accelerated filer**[5](index=5&type=chunk) - As of April 28, 2021, there were **50,182,609 shares of common stock outstanding**[5](index=5&type=chunk) [Safe Harbor Statement and Risk Factors](index=4&type=section&id=Safe%20Harbor%20Statement) This section outlines the company's forward-looking statements and details various risks related to its business, global operations, intellectual property, industry, and general factors [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section outlines the forward-looking nature of statements within the report, emphasizing that they are subject to risks and uncertainties that could cause actual results to differ materially from projections - The report contains forward-looking statements, identified by words like 'believes,' 'anticipates,' 'expects,' 'estimates,' 'targets,' 'plans,' 'intends,' and 'will,' which are subject to risks and uncertainties[9](index=9&type=chunk) - Preparation of financial statements requires management to make estimates and assumptions that may ultimately differ from actual results, including the potential impact of the COVID-19 pandemic[10](index=10&type=chunk) [Risks Related to Business, Finance and Operations](index=4&type=section&id=Risks%20Related%20to%20Our%20Business%2C%20Finance%20and%20Operations) This section details specific risks impacting the company's business, financial health, and operations, including the effects of the COVID-19 pandemic, market conditions, sales cycle volatility, and financial instrument risks - The COVID-19 pandemic has strained and may continue to negatively impact business and operations, with uncertain duration and extent of impact on future results[11](index=11&type=chunk) - Unfavorable market conditions have adversely affected, and may continue to affect, operating results[11](index=11&type=chunk) - The timing of orders, shipments, and revenue recognition can cause significant quarterly operating result fluctuations[11](index=11&type=chunk) - The company may not have the ability to raise funds necessary to settle cash conversions or repurchase its 2023, 2025, and 2027 Convertible Senior Notes[11](index=11&type=chunk) [Risks Associated with Global Business](index=6&type=section&id=Risks%20Associated%20with%20Operating%20a%20Global%20Business) This section highlights risks inherent in operating internationally, such as exposure to foreign currency fluctuations, trade policy changes, export controls, and global regulatory requirements - The company is exposed to risks of operating businesses outside the United States, including foreign currency exchange risks[16](index=16&type=chunk) - Changes in U.S. trade policy, export controls, and ongoing trade disputes (e.g., U.S. and China) have adversely affected, and may continue to affect, business[16](index=16&type=chunk) - The company is exposed to various risks associated with global regulatory requirements and may be subject to liabilities under the Foreign Corrupt Practices Act[16](index=16&type=chunk) [Risks Related to Intellectual Property and Cybersecurity](index=6&type=section&id=Risks%20Related%20to%20Intellectual%20Property%20and%20Cybersecurity) This section addresses risks concerning the company's intellectual property rights and the potential for cybersecurity breaches, which could lead to significant harm - Disruptions in information technology systems or data security incidents could result in significant financial, legal, regulatory, business, and reputational harm[16](index=16&type=chunk) - The company may be unable to effectively enforce and protect its intellectual property rights and may be subject to claims of intellectual property infringement by others[16](index=16&type=chunk) [Risks Associated with Industry](index=6&type=section&id=Risks%20Associated%20with%20Our%20Industry) This section outlines industry-specific challenges, including intense competition, rapid technological change, and the cyclical nature of the markets served, particularly the demand for consumer electronics - The company faces significant competition and operates in industries characterized by rapid technological change[16](index=16&type=chunk) - Certain sales are dependent on the demand for consumer electronics, which can experience significant volatility[16](index=16&type=chunk) - The company has a concentrated customer base in highly concentrated industries, and the cyclicality of these industries directly affects its business[16](index=16&type=chunk) [General Risk Factors](index=8&type=section&id=General%20Risk%20Factors) This section covers broader operational and financial risks, such as inventory management, reliance on suppliers, stock price volatility, regulatory compliance, and the ability to attract and retain employees - Failure to estimate customer demand accurately could result in inventory obsolescence, liabilities to suppliers, and manufacturing interruptions[20](index=20&type=chunk) - Reliance on a limited number of suppliers, some of whom are sole sources, poses a risk[20](index=20&type=chunk) - The price of common shares is volatile and could decrease[20](index=20&type=chunk) - Inability to attract, retain, and motivate employees could have a material adverse effect on the business[20](index=20&type=chunk) [PART I—FINANCIAL INFORMATION](index=9&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This part presents the company's unaudited consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements](index=9&type=section&id=Item%201.%20Financial%20Statements) This section provides the unaudited consolidated financial statements, including the balance sheets, statements of operations, comprehensive income (loss), and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items [Consolidated Balance Sheets](index=9&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's consolidated balance sheets, detailing assets, liabilities, and stockholders' equity at specific reporting dates Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2021 | December 31, 2020 | | :------------------------- | :------------- | :---------------- | | Total Assets | $945,242 | $898,064 | | Total Liabilities | $532,781 | $489,690 | | Total Stockholders' Equity | $412,461 | $408,374 | [Consolidated Statements of Operations](index=11&type=section&id=Consolidated%20Statements%20of%20Operations) This section presents the company's consolidated statements of operations, detailing net sales, expenses, and net income (loss) for the periods presented Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Net sales | $133,714 | $104,502 | +28.0% | | Cost of sales | $78,800 | $58,083 | +35.7% | | Gross profit | $54,914 | $46,419 | +18.3% | | Operating income (loss) | $9,415 | $4,567 | +106.1% | | Income (loss) before income taxes | $2,792 | $(299) | N/A | | Net income (loss) | $2,494 | $(567) | N/A | | Basic EPS | $0.05 | $(0.01) | N/A | | Diluted EPS | $0.05 | $(0.01) | N/A | [Consolidated Statements of Comprehensive Income (Loss)](index=12&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) This section presents the company's consolidated statements of comprehensive income (loss), including net income and other comprehensive income (loss) Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $2,494 | $(567) | | Total other comprehensive income (loss), net of tax | $(19) | $153 | | Total comprehensive income (loss) | $2,475 | $(414) | [Consolidated Statements of Cash Flows](index=13&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's consolidated statements of cash flows, detailing cash movements from operating, investing, and financing activities Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $10,485 | $(2,396) | | Net cash provided by (used in) investing activities | $1,395 | $35,194 | | Net cash provided by (used in) financing activities | $(747) | $276 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $11,103 | $33,026 | | Cash, cash equivalents, and restricted cash - end of period | $141,386 | $162,977 | [Notes to the Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the consolidated financial statements, including accounting policies and specific line item breakdowns [Note 1 — Basis of Presentation](index=14&type=section&id=Note%201%20%E2%80%94%20Basis%20of%20Presentation) This note describes the basis of preparing the unaudited interim financial statements, including accounting policies and the impact of estimates - The unaudited Consolidated Financial Statements are prepared in accordance with U.S. GAAP for interim financial information and SEC Regulation S-X[32](index=32&type=chunk) - Management's estimates and assumptions are significantly affected by current events, including the COVID-19 pandemic, which may impact sales, expenses, and asset valuations[34](index=34&type=chunk) - Revenue is recognized upon the transfer of control of products or services to the customer, with judgment required for identifying performance obligations and allocating revenue for multiple deliverables[35](index=35&type=chunk)[36](index=36&type=chunk) - The adoption of ASU 2020-06 in Q1 2022 is expected to decrease non-cash interest expense and increase diluted earnings per share due to changes in accounting for convertible debt instruments[47](index=47&type=chunk) [Note 2 — Income (Loss) Per Common Share](index=19&type=section&id=Note%202%20%E2%80%94%20Income%20%28Loss%29%20Per%20Common%20Share) This note details the calculation of basic and diluted income (loss) per common share, including the treatment of convertible senior notes Income (Loss) Per Common Share (in thousands, except per share amounts) | Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $2,494 | $(567) | | Basic weighted average shares outstanding | 48,624 | 47,811 | | Diluted weighted average shares outstanding | 53,050 | 47,811 | - The company accounts for the conversion spread of its convertible senior notes using the treasury stock method, as it intends to settle the principal in cash[49](index=49&type=chunk) [Note 3 — Assets](index=19&type=section&id=Note%203%20%E2%80%94%20Assets) This note provides detailed information on the company's assets, including fair value of investments, inventories, and intangible assets - Short-term investments are generally classified as available-for-sale and reported at fair value, with unrealized gains and losses presented in accumulated other comprehensive income[50](index=50&type=chunk) Fair Value of Cash Equivalents and Short-term Investments (March 31, 2021, in thousands) | Category | Level 1 | Level 2 | Total | | :----------------------- | :------ | :------ | :------ | | Cash equivalents | $81,047 | $2,952 | $83,999 | | Short-term investments | $120,096 | $66,046 | $186,142 | Inventories (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :--------------- | :------------- | :---------------- | | Materials | $90,115 | $82,679 | | Work-in-process | $55,995 | $53,979 | | Finished goods | $10,106 | $9,248 | | **Total** | **$156,216** | **$145,906** | Net Intangible Assets (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :---------------------- | :------------- | :---------------- | | Technology | $23,247 | $25,550 | | Customer relationships | $15,623 | $16,334 | | Trademarks and tradenames | $3,957 | $4,296 | | Other | $4 | $5 | | **Total** | **$42,831** | **$46,185** | [Note 4 — Liabilities](index=26&type=section&id=Note%204%20%E2%80%94%20Liabilities) This note details the company's liabilities, including accrued expenses, warranty reserves, customer deposits, and convertible senior notes Accrued Expenses and Other Current Liabilities (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :-------------------------- | :------------- | :---------------- | | Payroll and related benefits | $29,238 | $26,630 | | Warranty | $5,363 | $5,058 | | Operating lease liabilities | $4,375 | $4,148 | | Interest | $4,017 | $2,574 | | Professional fees | $1,335 | $1,112 | | Sales, use, and other taxes | $3,221 | $2,658 | | Other | $3,515 | $2,696 | | **Total** | **$51,064** | **$44,876** | Changes in Product Warranty Reserves (in thousands) | Metric | Amount | | :-------------------------- | :----- | | Balance - December 31, 2020 | $5,058 | | Warranties issued | $1,561 | | Consumption of reserves | $(1,310) | | Changes in estimate | $54 | | Balance - March 31, 2021 | $5,363 | - Customer deposits totaled **$52.2 million** at March 31, 2021, and deferred revenue was **$16.7 million**[66](index=66&type=chunk) - The company has outstanding **2.70% Convertible Senior Notes due 2023 ($131.7M principal)**, **3.50% Convertible Senior Notes due 2025 ($132.5M principal)**, and **3.75% Convertible Senior Notes due 2027 ($125.0M principal)**[142](index=142&type=chunk)[143](index=143&type=chunk) Total Interest Expense Related to Convertible Senior Notes (in thousands) | Category | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :----------------------------------------- | :-------------------------------- | :-------------------------------- | | Cash Interest Expense | $3,220 | $2,329 | | Non-cash Interest Expense | $3,514 | $3,320 | | **Total Interest Expense** | **$6,734** | **$5,649** | [Note 5 — Commitments and Contingencies](index=33&type=section&id=Note%205%20%E2%80%94%20Commitments%20and%20Contingencies) This note outlines the company's operating lease liabilities, purchase commitments, bank guarantees, and ongoing legal proceedings - The weighted average remaining lease term for operating leases was **12 years** as of March 31, 2021, with a weighted average discount rate of **5.7%**[85](index=85&type=chunk) Maturities of Operating Lease Liabilities (March 31, 2021, in thousands) | Period | Payments Due | | :-------------------------- | :------------- | | 2021 | $3,559 | | 2022 | $4,335 | | 2023 | $3,170 | | 2024 | $2,896 | | 2025 | $2,506 | | Thereafter | $38,367 | | **Total future minimum lease payments** | **$54,833** | - Purchase commitments totaled **$158.8 million** at March 31, 2021, with substantially all due within one year[87](index=87&type=chunk) - Outstanding bank guarantees and standby letters of credit totaled **$7.2 million** at March 31, 2021[88](index=88&type=chunk) - The company is vigorously defending two purported class action lawsuits and a derivative action related to the Ultratech acquisition, but does not believe their ultimate resolution will have a material adverse effect[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) [Note 6 — Derivative Financial Instruments](index=34&type=section&id=Note%206%20%E2%80%94%20Derivative%20Financial%20Instruments) This note describes the company's use of derivative financial instruments to manage foreign currency exchange risk and their accounting treatment - The company uses monthly forward derivative contracts to mitigate foreign currency exchange rate risks, but these are not designated as hedges[92](index=92&type=chunk) - There were no outstanding derivative contracts at March 31, 2021, or December 31, 2020, and no gains or losses from currency exchange derivatives during the three months ended March 31, 2021 and 2020[93](index=93&type=chunk) [Note 7 — Equity](index=35&type=section&id=Note%207%20%E2%80%94%20Equity) This note details changes in stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit Changes in Stockholders' Equity (in thousands) | Metric | Balance at Dec 31, 2020 | Net Income (Loss) | Other Comprehensive Income (Loss) | Share-based Compensation | Net Issuance under Employee Stock Plans | Balance at Mar 31, 2021 | | :-------------------------- | :---------------------- | :---------------- | :-------------------------------- | :----------------------- | :-------------------------------------- | :---------------------- | | Common Stock (Amount) | $497 | — | — | — | $5 | $502 | | Additional Paid-in Capital | $1,113,352 | — | — | $3,237 | $(1,630) | $1,114,959 | | Accumulated Deficit | $(707,321) | $2,494 | — | — | — | $(704,827) | | Accumulated Other Comprehensive Income | $1,846 | — | $(19) | — | — | $1,827 | | **Total Stockholders' Equity** | **$408,374** | **$2,494** | **$(19)** | **$3,237** | **$(1,625)** | **$412,461** | [Note 8 — Share-based Compensation](index=35&type=section&id=Note%208%20%E2%80%94%20Share-based%20Compensation) This note provides details on share-based compensation expense and the balance of non-vested restricted and performance shares Share-based Compensation Expense (in thousands) | Line Item | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Cost of sales | $495 | $521 | | Research and development | $817 | $874 | | Selling, general, and administrative | $1,925 | $2,251 | | **Total** | **$3,237** | **$3,646** | - The balance of non-vested restricted shares and performance shares increased from **2,040 thousand shares** at December 31, 2020, to **2,610 thousand shares** at March 31, 2021, with **813 thousand shares granted** during the period[97](index=97&type=chunk) [Note 9 — Income Taxes](index=36&type=section&id=Note%209%20%E2%80%94%20Income%20Taxes) This note details income tax expense (benefit), including domestic and foreign components, and the valuation allowance against U.S. deferred tax assets Income (Loss) Before Income Taxes and Income Tax Expense (Benefit) (in thousands) | Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Income (loss) before income taxes | $2,792 | $(299) | | Income tax expense (benefit) | $298 | $268 | - The company's U.S. deferred tax assets are fully offset by a valuation allowance, as realization of future benefits is not more likely than not[98](index=98&type=chunk)[100](index=100&type=chunk) - Domestic tax expense is primarily attributable to the tax amortization of indefinite-lived intangible assets, while foreign tax expense is due to non-U.S. operations profits and foreign withholding taxes[100](index=100&type=chunk) [Note 10 — Segment Reporting and Geographic Information](index=37&type=section&id=Note%2010%20%E2%80%94%20Segment%20Reporting%20and%20Geographic%20Information) This note provides information on the company's single operating segment and disaggregated sales data by end-market and geographic region - Veeco operates and measures its results in one operating segment: the development, manufacture, sales, and support of semiconductor and thin film process equipment[101](index=101&type=chunk) Sales by End-Market (in thousands) | End-Market | Three months ended March 31, 2021 | Three months ended March 31, 2020 | Change (YoY) | | :----------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Semiconductor | $51,631 | $37,423 | +38% | | Compound Semiconductor | $24,751 | $18,430 | +34% | | Data Storage | $40,980 | $38,883 | +5% | | Scientific & Other | $16,352 | $9,766 | +67% | | **Total** | **$133,714** | **$104,502** | **+28%** | Sales by Geographic Region (in thousands) | Geographic Region | Three months ended March 31, 2021 | Three months ended March 31, 2020 | Change (YoY) | | :------------------------ | :-------------------------------- | :-------------------------------- | :----------- | | United States | $45,162 | $39,635 | +14% | | EMEA | $13,625 | $16,150 | -16% | | China | $20,007 | $10,472 | +91% | | Rest of APAC | $54,877 | $37,943 | +45% | | Rest of World | $43 | $302 | -86% | | **Total** | **$133,714** | **$104,502** | **+28%** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition, discussing key factors influencing results, including the impact of COVID-19, business segment updates, and detailed analysis of revenue and expense line items [Cautionary Statement Regarding Forward Looking Statements](index=39&type=section&id=Cautionary%20Statement%20Regarding%20Forward%20Looking%20Statements) This section reiterates the cautionary statement regarding forward-looking statements, emphasizing potential material differences from actual results - The discussion contains forward-looking statements, and readers should not place undue reliance on them as actual results may differ materially due to risks and uncertainties[106](index=106&type=chunk) [Executive Summary](index=39&type=section&id=Executive%20Summary) This section provides an overview of Veeco's business as an innovative manufacturer of semiconductor process equipment and its core technologies - Veeco is an innovative manufacturer of semiconductor process equipment, utilizing ion beam, laser annealing, lithography, MOCVD, and single wafer etch & clean technologies[107](index=107&type=chunk) [COVID-19 Update](index=39&type=section&id=COVID-19%20Update) This section details the impact of the COVID-19 pandemic on Veeco's operations, supply chain, and global sales, along with mitigation efforts - Veeco's operations are considered part of critical and essential infrastructure, allowing manufacturing facilities to remain open despite governmental measures to contain the COVID-19 pandemic[109](index=109&type=chunk) - Net sales to customers outside the United States represented approximately **68% of total net sales in 2020**, indicating significant global exposure to economic conditions[110](index=110&type=chunk) - The company has not experienced significant supply chain interruptions to date but continues to monitor risks and has implemented business continuity activities, including health and safety protocols, remote work, and supply chain re-sourcing[111](index=111&type=chunk)[112](index=112&type=chunk)[114](index=114&type=chunk) [Business Update](index=41&type=section&id=Business%20Update) This section provides updates on sales drivers and growth expectations across the Semiconductor, Compound Semiconductor, and Data Storage markets - Sales in the Semiconductor market are driven by laser annealing and lithography systems for Advanced Packaging, with momentum in advanced node logic and memory applications[116](index=116&type=chunk) - The Compound Semiconductor market is supported by a broad portfolio of technologies for emerging applications like 5G RF device manufacturing, photonics (micro-LEDs), and GaN-based power electronics[117](index=117&type=chunk) - Data Storage market sales are growing due to demand for Ion Beam systems, driven by big data, cloud-based storage, and innovations in hard disk drive manufacturing[118](index=118&type=chunk) - Near-term revenue growth through 2021 is expected from laser annealing, 5G RF, and data storage products, with long-term growth (2022 and beyond) anticipated from Semiconductor and Compound Semiconductor markets[120](index=120&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including detailed discussions of net sales, gross profit, and operating expenses [Net Sales](index=44&type=section&id=Net%20Sales) This section analyzes net sales performance by end-market and geographic region, highlighting key drivers of change Net Sales by End-Market (in thousands) | End-Market | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :----------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Semiconductor | $51,631 | $37,423 | +38% | | Compound Semiconductor | $24,751 | $18,430 | +34% | | Data Storage | $40,980 | $38,883 | +5% | | Scientific & Other | $16,352 | $9,766 | +67% | | **Total** | **$133,714** | **$104,502** | **+28%** | Net Sales by Geographic Region (in thousands) | Geographic Region | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :------------------------ | :-------------------------------- | :-------------------------------- | :----------- | | United States | $45,162 | $39,635 | +14% | | EMEA | $13,625 | $16,150 | -16% | | China | $20,007 | $10,472 | +91% | | Rest of APAC | $54,877 | $37,943 | +45% | | Rest of World | $43 | $302 | -86% | | **Total** | **$133,714** | **$104,502** | **+28%** | - The increase in sales in the Rest of APAC region was primarily driven by shipments to data storage customers[125](index=125&type=chunk) [Gross Profit](index=46&type=section&id=Gross%20Profit) This section analyzes gross profit and gross margin trends, explaining factors influencing changes in profitability Gross Profit (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :----------- | :-------------------------------- | :-------------------------------- | :----------- | | Gross profit | $54,914 | $46,419 | +18% | | Gross margin | 41% | 44% | -3 percentage points | - Gross margins decreased primarily due to product and region mix of sales and an increase in spending to support higher business activity[127](index=127&type=chunk) [Research and Development](index=46&type=section&id=Research%20and%20Development) This section discusses research and development expenses, detailing investments in new technologies and applications Research and Development Expenses (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | R&D expenses | $21,844 | $19,195 | +14% | | R&D as % of revenue | 16% | 18% | -2 percentage points | - The increase in R&D expenses was primarily due to personnel-related expenses as the company invests in new research and applications for Semiconductor and Compound Semiconductor markets[128](index=128&type=chunk) [Selling, General, and Administrative](index=46&type=section&id=Selling%2C%20General%2C%20and%20Administrative) This section analyzes selling, general, and administrative expenses, including factors contributing to changes and future expectations Selling, General, and Administrative Expenses (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | SG&A expenses | $20,255 | $18,304 | +11% | | SG&A as % of revenue | 15% | 18% | -3 percentage points | - The increase in SG&A expenses was primarily due to higher variable expenses associated with increased revenue and order intake[129](index=129&type=chunk) - The company expects a period of duplicate operating expenses during the one-to-two-year transition to its new leased facility in San Jose, California[129](index=129&type=chunk) [Amortization Expense](index=46&type=section&id=Amortization%20Expense) This section details amortization expense for intangible assets and the reasons for its change over the periods presented Amortization of Intangible Assets (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Amortization expense | $3,354 | $3,837 | -13% | - Amortization expense decreased primarily due to changes in amortization schedules reflecting expected cash flows of certain intangible assets[130](index=130&type=chunk) [Interest Income (Expense)](index=46&type=section&id=Interest%20Income%20%28Expense%29) This section analyzes net interest income (expense), including cash and non-cash components, and the impact of convertible notes Net Interest Income (Expense) (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Net interest expense | $(6,623) | $(4,866) | +36% | | Non-cash charges (amortization of debt discount/transaction costs) | $3,514 | $3,320 | +6% | | Interest income decrease | ~$0.7 million | N/A | N/A | - The increase in net interest expense was primarily related to the issuance of the 2027 Notes (May 2020) and 2025 Notes (November 2020), partially offset by the partial repurchase and exchange of the 2023 Notes[131](index=131&type=chunk) [Income Taxes](index=48&type=section&id=Income%20Taxes) This section discusses income tax expense (benefit), including domestic and foreign components, and the treatment of deferred tax assets Income Tax Expense (Benefit) (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Income tax expense (benefit) | $298 | $268 | | Domestic tax expense | $100 | $100 | | Non-U.S. operations tax expense | $200 | $200 | - The company's U.S. deferred tax assets are fully offset by a valuation allowance, as it cannot conclude that these future benefits will be realized[135](index=135&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's liquidity position, capital resources, cash flow activities, and management of convertible senior notes [Cash Flow Activity](index=49&type=section&id=Cash%20Flow%20Activity) This section details cash flow from operating, investing, and financing activities, and the overall change in cash and equivalents Cash, Cash Equivalents, and Short-term Investments (in thousands) | Metric | March 31, 2021 | December 31, 2020 | | :-------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $140,733 | $129,625 | | Restricted cash | $653 | $658 | | Short-term investments | $186,142 | $189,771 | | **Total** | **$327,528** | **$320,054** | Net Cash Flow by Activity (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Operating Activities | $10,485 | $(2,396) | | Investing Activities | $1,395 | $35,194 | | Financing Activities | $(747) | $276 | - Net cash provided by operating activities improved to **$10.5 million** in Q1 2021, driven by net income and non-cash adjustments, partially offset by increases in accounts receivable and inventories[139](index=139&type=chunk) - Capital expenditures are expected to total **$30 million to $40 million** over the next one-to-two years for the new San Jose facility, leading to duplicate operating expenses during the transition[140](index=140&type=chunk) [Convertible Senior Notes](index=49&type=section&id=Convertible%20Senior%20Notes%20%28Liquidity%29) This section provides details on the company's outstanding convertible senior notes, their terms, and management's liquidity assessment - The company has **$131.7 million principal of 2.70% convertible senior notes due 2023**, **$132.5 million principal of 3.50% convertible senior notes due 2025**, and **$125.0 million principal of 3.75% convertible senior notes due 2027**[142](index=142&type=chunk)[143](index=143&type=chunk) - The 2027 Notes are currently convertible by shareholders until **June 30, 2021**[143](index=143&type=chunk) - Management believes it has sufficient capital resources and cash flows from operations to support scheduled interest payments and cash payment of principal amounts for any converted notes[144](index=144&type=chunk) [Contractual Obligations and Commitments](index=51&type=section&id=Contractual%20Obligations%20and%20Commitments) This section outlines the company's significant contractual obligations and purchase commitments, and their expected funding sources - The company has purchase commitments of **$158.8 million** at March 31, 2021, with substantially all due within one year, expected to be funded by cash generated from operations[87](index=87&type=chunk)[145](index=145&type=chunk) [Off-Balance Sheet Arrangements](index=51&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of material off-balance sheet arrangements beyond disclosed guarantees and commitments - The company does not have any material off-balance sheet arrangements other than disclosed bank guarantees and purchase commitments[146](index=146&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section details the company's exposure to market risks, specifically interest rate risk related to its investment portfolio and currency exchange risk from global operations, and the strategies employed to mitigate these risks [Interest Rate Risk](index=51&type=section&id=Interest%20Rate%20Risk) This section quantifies the company's exposure to interest rate risk on its investment portfolio and the potential impact of rate changes - The company's investment portfolio includes fixed-income securities with a fair value of approximately **$186.1 million** at March 31, 2021[147](index=147&type=chunk) - A **100 basis point increase** in interest rates would result in a **$0.9 million decrease** in the fair value of the investment portfolio[147](index=147&type=chunk) [Currency Exchange Risk](index=51&type=section&id=Currency%20Exchange%20Risk) This section details the company's exposure to foreign currency exchange risk from global operations and its mitigation strategies - Net sales to customers outside the United States represented approximately **66% of total net sales** for the three months ended March 31, 2021[150](index=150&type=chunk) - Most of the company's sales outside the United States are denominated in U.S. dollars, leading to an immaterial impact on consolidated results from a **10% change in foreign exchange rates**[152](index=152&type=chunk) - The company uses monthly forward derivative contracts to mitigate foreign currency exchange rate risk, but these are not designated as hedges[149](index=149&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as of March 31, 2021, and states that there were no material changes in internal control over financial reporting during the quarter [Evaluation of Disclosure Controls and Procedures](index=53&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as evaluated by executive officers - The principal executive and financial officers evaluated and concluded that the company's disclosure controls and procedures were **effective** as of March 31, 2021[153](index=153&type=chunk) [Changes in Internal Control Over Financial Reporting](index=53&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports on any material changes in internal control over financial reporting during the quarter - There were no changes in internal control over financial reporting during the quarter ended March 31, 2021, that have materially affected or are reasonably likely to materially affect it[154](index=154&type=chunk) [PART II—OTHER INFORMATION](index=53&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in two purported class action lawsuits related to the Ultratech acquisition, alleging false/misleading statements, and a derivative action alleging breach of fiduciary duty. Veeco is vigorously defending these matters and does not believe their ultimate resolution will materially affect its financial position - Two purported class action complaints (Wolther v. Maheshwari et al.) were filed alleging false/misleading statements in the registration statement for the Ultratech acquisition[156](index=156&type=chunk) - A derivative action (Vladimir Gusinsky Revocable Trust v. Peeler, et al.) was filed alleging breach of fiduciary duty and waste of corporate assets related to the Ultratech acquisition[157](index=157&type=chunk) - The company does not believe that the ultimate resolution of these legal proceedings will have a material adverse effect on its consolidated financial position, results of operations, or cash flows[158](index=158&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) This item refers to the risk factors previously disclosed in the Safe Harbor Statement of this 10-Q and the 2020 Form 10-K, stating that there have been no material changes - There have been no material changes from the risk factors previously disclosed in the Safe Harbor Statement at the beginning of this report and in Part I — Item 1A of the 2020 Form 10-K[159](index=159&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=54&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities and use of proceeds were reported[160](index=160&type=chunk) [Item 3. Defaults Upon Senior Securities](index=54&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[161](index=161&type=chunk) [Item 4. Mine Safety Disclosures](index=54&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[161](index=161&type=chunk) [Item 5. Other Information](index=54&type=section&id=Item%205.%20Other%20Information) The company reported no other information required to be disclosed under this item - No other information was reported under this item[162](index=162&type=chunk) [Item 6. Exhibits](index=55&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the SEC, including forms of stock awards, certifications of officers, and XBRL documents - Exhibits include forms of Notice of Performance Restricted Stock Unit Award and Restricted Stock Award, certifications of the Chief Executive Officer and Chief Financial Officer, and XBRL documents[165](index=165&type=chunk) [SIGNATURES](index=56&type=section&id=SIGNATURES) This section contains the official signatures of the Chief Executive Officer and Chief Financial Officer, certifying the report on behalf of Veeco Instruments Inc - The report was signed on **May 4, 2021**, by William J. Miller, Ph.D., Chief Executive Officer, and John P. Kiernan, Senior Vice President and Chief Financial Officer[167](index=167&type=chunk)[168](index=168&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 Terminal Drive Plainview, New York 11803 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (516) 677-0200 Securities registered pursuant to Section 12(b) of the Act: OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 1 ...

MAKING A MATERIAL DIFFERENCE | --- | --- | --- | --- | |-------|----------------------|-------|-------| | | | | | | | | | | | | Q4 2020 | | | | | Financial Results | | | | | Conference Call | | | | | Veeco (Nasdaq: VECO) | | | | | February 11, 2021 | | | Safe Harbor This presentation contains "forward-looking statements", within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, as amended, that are based on management's expectations, estimates, projectio ...

Financial Data and Key Metrics Changes - Revenue for the full year 2020 was $454 million, compared to $419 million in 2019, representing an increase of 8.3% [14] - Gross margin improved by nearly 5 percentage points to 43% in 2020 [14] - Non-GAAP operating income increased from $5 million in 2019 to $52 million in 2020 [32] - Diluted non-GAAP EPS reversed from a loss of $0.03 in 2019 to a profit of $0.86 in 2020 [15] - Q4 2020 revenue was $130 million, above the high end of guidance, with diluted non-GAAP EPS at $0.30 [16] Business Line Data and Key Metrics Changes - Semiconductor revenue for 2020 was $166 million, a decline of about 6% from the prior year, making up 36% of total revenue [26] - Compound Semiconductor revenue was $108 million, a 26% increase from 2019, contributing 24% to total revenue [26] - Data Storage revenue was $123 million, a 47% increase over the prior year, accounting for 27% of total revenue [27] - Scientific & Other revenue was $57 million, a decline of 23% from 2019, making up 13% of total revenue [27] Market Data and Key Metrics Changes - In Q4 2020, Semiconductor market revenue contributed 41% of total revenue, driven by laser annealing systems [29] - Compound Semiconductor market accounted for 33% of revenue, driven by 5G RF applications [30] - Data Storage market contributed 14% of total revenue, with expectations for growth in 2021 based on order backlog [30] - Asia-Pacific region including China made up 48% of total revenue in Q4 2020 [31] Company Strategy and Development Direction - The company is focusing on growth in Semiconductor and Compound Semiconductor markets, with investments in R&D and service [13][50] - Plans to expand production capacity for laser annealing systems through a new facility [19] - The company aims to maintain resiliency and flexibility across operations while executing on near-term transformation objectives [66] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth opportunities in 2021, driven by semiconductor, 5G, and data center demand [18] - The company expects revenue for 2021 to be in the range of $520 million to $540 million, with non-GAAP EPS targeted between $1 and $1.20 [46] - Management noted that while gross margins may vary, Q1 2021 is expected to be the low point for the year [90] Other Important Information - The company ended 2020 with a backlog of $366 million, with significant contributions from Data Storage and Semiconductor markets [34] - Cash and short-term investments at the end of Q4 2020 were $320 million, a sequential increase of $10 million [39] - The company is increasing R&D investments while expecting operating expenses as a percentage of revenue to decrease over the year [134] Q&A Session Summary Question: Insights on laser spike anneal business and future applications - Management highlighted that laser annealing is driving business growth in 2021, with opportunities for additional applications as technology advances [72] Question: Working capital management and supply chain status - Management confirmed effective management of working capital despite increased demand, with no significant supply chain impacts noted [76] Question: Impact of legacy MOCVD on revenue and margins - Legacy MOCVD contributed about $10 million in Q4 at very low gross margin, with expectations for a mix impact on Q1 gross margins [84] Question: Data Storage segment performance and outlook - Management indicated that fluctuations in Data Storage revenue are typical due to the high ASP of tools, with expectations for increased shipments in Q2 and Q3 [100] Question: Backlog characteristics and revenue growth potential - Management characterized the backlog as front-end loaded, with significant contributions expected from laser annealing and 5G RF segments [128]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR Commission file number 0-16244 VEECO INSTRUMENTS INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 11-2989601 (State or Other Jurisdiction of Incorp ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-16244 VEECO INSTRUMENTS INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 11-2989601 (State or Other Jurisdiction of Incorporati ...

```markdown [Safe Harbor Statement](index=4&type=section&id=Safe%20Harbor%20Statement) This statement outlines risks and uncertainties in forward-looking projections, including the COVID-19 pandemic's impact - This report contains forward-looking statements, identified by words like "believes," "anticipates," and "expects," which are subject to risks and uncertainties that could cause actual results to differ materially from projections[9](index=9&type=chunk) - The preparation of financial statements requires management to make estimates and assumptions, including the potential impact of the COVID-19 pandemic, which may ultimately differ from actual results[10](index=10&type=chunk) - Key risks and uncertainties include the unknown duration and economic, operational, and financial impacts of the COVID-19 pandemic, unfavorable market conditions, global business risks, changes in U.S. trade policy, IT system disruptions, intellectual property issues, significant competition, rapid technological change, and dependence on consumer electronics demand[11](index=11&type=chunk)[13](index=13&type=chunk)[17](index=17&type=chunk) [PART I—FINANCIAL INFORMATION](index=9&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=9&type=section&id=Item%201.%20Financial%20Statements) This section presents Veeco Instruments Inc.'s unaudited consolidated financial statements for the quarter ended March 31, 2020, including balance sheets, statements of operations, comprehensive income, and cash flows, along with detailed notes explaining accounting policies, significant assets, liabilities, equity, and segment information [Consolidated Balance Sheets](index=9&type=section&id=Consolidated%20Balance%20Sheets) This section compares the company's consolidated balance sheets for Q1 2020 and year-end 2019 **Consolidated Balance Sheet Highlights (March 31, 2020 vs. December 31, 2019):** | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Total Current Assets | **$500,490** | **$475,878** | | Total Assets | **$832,886** | **$818,088** | | Total Current Liabilities | **$128,509** | **$118,224** | | Total Liabilities | **$455,822** | **$443,576** | | Total Stockholders' Equity | **$377,064** | **$374,512** | [Consolidated Statements of Operations](index=11&type=section&id=Consolidated%20Statements%20of%20Operations) This section details the company's consolidated operational performance for the three months ended March 31, 2020 and 2019 **Consolidated Statements of Operations Highlights (Three months ended March 31, 2020 vs. 2019):** | Metric | 3 Months Ended March 31, 2020 (in thousands) | 3 Months Ended March 31, 2019 (in thousands) | Change (YoY) | | :-------------------------- | :----------------------------------- | :----------------------------------- | :------------ | | Net sales | **$104,502** | **$99,371** | **+$5,131** (**+5%**) | | Gross profit | **$46,419** | **$34,716** | **+$11,703** (**+34%**) | | Operating income (loss) | **$4,567** | **$(14,140)** | **+$18,707** | | Net income (loss) | **$(567)** | **$(18,530)** | **+$17,963** | | Basic EPS | **$(0.01)** | **$(0.40)** | **+$0.39** | | Diluted EPS | **$(0.01)** | **$(0.40)** | **+$0.39** | [Consolidated Statements of Comprehensive Income (Loss)](index=12&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) This section presents the company's comprehensive income and loss for the three months ended March 31, 2020 and 2019 **Consolidated Statements of Comprehensive Income (Loss) Highlights (Three months ended March 31, 2020 vs. 2019):** | Metric | 3 Months Ended March 31, 2020 (in thousands) | 3 Months Ended March 31, 2019 (in thousands) | Change (YoY) | | :------------------------------------------ | :----------------------------------- | :----------------------------------- | :------------ | | Net income (loss) | **$(567)** | **$(18,530)** | **+$17,963** | | Total other comprehensive income (loss), net of tax | **$153** | **$38** | **+$115** | | Total comprehensive income (loss) | **$(414)** | **$(18,492)** | **+$18,078** | [Consolidated Statements of Cash Flows](index=13&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the company's cash flow activities from operations, investing, and financing for Q1 2020 and 2019 **Consolidated Statements of Cash Flows Highlights (Three months ended March 31, 2020 vs. 2019):** | Metric | 3 Months Ended March 31, 2020 (in thousands) | 3 Months Ended March 31, 2019 (in thousands) | Change (YoY) | | :-------------------------------------------------- | :----------------------------------- | :----------------------------------- | :------------ | | Net cash provided by (used in) operating activities | **$(2,396)** | **$(22,291)** | **+$19,895** | | Net cash provided by (used in) investing activities | **$35,194** | **$(20,938)** | **+$56,132** | | Net cash provided by (used in) financing activities | **$276** | **$379** | **-$103** | | Net increase (decrease) in cash, cash equivalents, and restricted cash | **$33,026** | **$(42,839)** | **+$75,865** | | Cash, cash equivalents, and restricted cash - end of period | **$162,977** | **$170,243** | **-$7,266** | [Notes to the Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) [Note 1 — Basis of Presentation](index=14&type=section&id=Note%201%20%E2%80%94%20Basis%20of%20Presentation) This note details the basis of financial statement presentation, revenue recognition, and inventory valuation policies - The unaudited Consolidated Financial Statements are prepared in accordance with U.S. GAAP for interim financial information, with all adjustments considered necessary for fair presentation included[29](index=29&type=chunk) - The COVID-19 pandemic has adversely impacted and is likely to further impact the Company's business and markets, including its workforce, operations, customers, suppliers, and business partners, with the full extent depending on future developments[31](index=31&type=chunk) - Revenue is recognized upon the transfer of control of the promised product or service to the customer, with judgment required to identify performance obligations and allocate revenue in contracts with multiple deliverables[32](index=32&type=chunk)[33](index=33&type=chunk) - Most revenue is recognized at a point in time, typically upon system delivery, when the Company can objectively demonstrate that contractual acceptance provisions are achieved prior to delivery[35](index=35&type=chunk) - Inventories are stated at the lower of cost or net realizable value, with quarterly assessments for valuation and recoverability, including write-downs for obsolete or excess inventory based on usage requirements and anticipated demand[40](index=40&type=chunk)[42](index=42&type=chunk) [Note 2 — Income (Loss) Per Common Share](index=18&type=section&id=Note%202%20%E2%80%94%20Income%20%28Loss%29%20Per%20Common%20Share) This note provides details on the calculation of basic and diluted income (loss) per common share **Income (Loss) Per Common Share (Three months ended March 31, 2020 vs. 2019):** | Metric | 3 Months Ended March 31, 2020 (in thousands, except per share) | 3 Months Ended March 31, 2019 (in thousands, except per share) | | :-------------------------------- | :------------------------------------------------- | :------------------------------------------------- | | Net income (loss) | **$(567)** | **$(18,530)** | | Basic EPS | **$(0.01)** | **$(0.40)** | | Diluted EPS | **$(0.01)** | **$(0.40)** | | Basic weighted average shares outstanding | **47,811** | **46,848** | | Diluted weighted average shares outstanding | **47,811** | **46,848** | - Common share equivalents and potentially dilutive shares were excluded from the diluted weighted average shares outstanding for both periods because the Company incurred a net loss, making their effect antidilutive[43](index=43&type=chunk) [Note 3 — Assets](index=18&type=section&id=Note%203%20%E2%80%94%20Assets) This note details the company's assets, including investments, receivables, inventories, and intangible assets - 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[44](index=44&type=chunk) **Fair Value Measurement of Assets (March 31, 2020 vs. December 31, 2019):** | Asset Category | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--------------------- | :---------------------------- | :---------------------------- | | Cash equivalents | **$138,794** | **$78,493** | | Short-term investments | **$79,429** | **$115,252** | - Accounts receivable is presented net of an allowance for doubtful accounts of **$0.6 million** at both March 31, 2020, and December 31, 2019, with no increase deemed necessary due to the current estimated impact of COVID-19 on collectability[51](index=51&type=chunk) **Inventories (March 31, 2020 vs. December 31, 2019):** | Category | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :-------------- | :---------------------------- | :---------------------------- | | Materials | **$81,684** | **$82,155** | | Work-in-process | **$41,706** | **$42,575** | | Finished goods | **$6,221** | **$8,337** | | Total | **$129,611** | **$133,067** | - A non-core product line was classified as held for sale in Q4 2019, resulting in a **$4.0 million** non-cash impairment charge, and was subsequently sold for approximately **$11.4 million** after March 31, 2020[53](index=53&type=chunk)[54](index=54&type=chunk) **Net Property, Plant, and Equipment (March 31, 2020 vs. December 31, 2019):** | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--------------------------------- | :---------------------------- | :---------------------------- | | Net property, plant, and equipment | **$72,291** | **$75,711** | - The Company assessed the COVID-19 pandemic as a potential triggering event for goodwill and intangible asset impairment but concluded there were no indicators of impairment during the three months ended March 31, 2020[56](index=56&type=chunk)[57](index=57&type=chunk) **Net Intangible Assets (March 31, 2020 vs. December 31, 2019):** | Category | March 31, 2020 (Net, in thousands) | December 31, 2019 (Net, in thousands) | | :-------------------- | :--------------------------------- | :--------------------------------- | | Technology | **$33,494** | **$36,142** | | Customer relationships | **$18,859** | **$19,701** | | Trademarks and tradenames | **$5,314** | **$5,654** | | Other | **$13** | **$21** | | Total | **$57,680** | **$61,518** | [Note 4 — Liabilities](index=24&type=section&id=Note%204%20%E2%80%94%20Liabilities) This note outlines the company's liabilities, including accrued expenses, warranty, restructuring, and convertible notes **Accrued Expenses and Other Current Liabilities (March 31, 2020 vs. December 31, 2019):** | Category | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :------------------------ | :---------------------------- | :---------------------------- | | Payroll and related benefits | **$18,909** | **$15,174** | | Warranty | **$5,968** | **$7,067** | | Operating lease liabilities | **$4,286** | **$4,196** | | Interest | **$1,992** | **$4,321** | | Professional fees | **$1,936** | **$2,443** | | Sales, use, and other taxes | **$2,644** | **$811** | | Restructuring liability | **$2,074** | **$2,841** | | Other | **$3,759** | **$4,390** | | Total | **$41,568** | **$41,243** | - Warranty reserves decreased from **$7.067 million** at December 31, 2019, to **$5.968 million** at March 31, 2020, reflecting **$0.645 million** in new warranties issued and **$1.708 million** in consumption of reserves[60](index=60&type=chunk) - Restructuring charges continued in Q1 2020, with additional accruals and payments made related to initiatives from H2 2019 to streamline operations and reduce costs, impacting approximately **60 employees**[61](index=61&type=chunk)[63](index=63&type=chunk) - Customer deposits totaled **$24.9 million** and deferred revenue was **$24.731 million** at March 31, 2020, with approximately **$32.2 million** of remaining performance obligations expected to be recognized within one to three **years**[64](index=64&type=chunk) **Convertible Senior Notes Carrying Value (March 31, 2020 vs. December 31, 2019):** | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--------------- | :---------------------------- | :---------------------------- | | Principal amount | **$345,000** | **$345,000** | | Net carrying value | **$303,388** | **$300,068** | - Total interest expense related to the Convertible Senior Notes was **$5.649 million** for the three months ended March 31, 2020, including **$3.320 million** in non-cash interest expense[67](index=67&type=chunk) [Note 5 — Commitments and Contingencies](index=27&type=section&id=Note%205%20%E2%80%94%20Commitments%20and%20Contingencies) This note details the company's lease, purchase commitments, and ongoing legal proceedings - The weighted average remaining lease term for operating leases was **3 years** as of March 31, 2020, with total future minimum lease payments of **$14.918 million**[70](index=70&type=chunk)[71](index=71&type=chunk) - Purchase commitments totaled **$76.2 million** at March 31, 2020, with substantially all due within one year[72](index=72&type=chunk) - Outstanding bank guarantees and letters of credit totaled **$5.8 million**, with **$25.8 million** unused, as of March 31, 2020[73](index=73&type=chunk) - The Company is vigorously defending two purported class action lawsuits related to the Ultratech acquisition, alleging false/misleading statements and breach of fiduciary duty, but does not believe their ultimate resolution will have a material adverse effect on its financial position, results of operations, or cash flows[74](index=74&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk) [Note 6 — Derivative Financial Instruments](index=30&type=section&id=Note%206%20%E2%80%94%20Derivative%20Financial%20Instruments) This note describes the company's use of derivative financial instruments to mitigate foreign currency risk - Veeco uses monthly forward derivative contracts to mitigate foreign currency exchange rate risks but does not designate them as hedges, recording fair value changes in "Other operating expense (income), net."[78](index=78&type=chunk) - There were no outstanding derivative contracts or gains/losses from currency exchange derivatives for the three months ended March 31, 2020, or 2019[79](index=79&type=chunk) [Note 7 — Equity](index=31&type=section&id=Note%207%20%E2%80%94%20Equity) This note details changes in the company's stockholders' equity, including common stock and accumulated comprehensive income **Changes in Stockholders' Equity (Three months ended March 31, 2020):** | Metric | Balance at Dec 31, 2019 (in thousands) | Net Loss (in thousands) | Other Comprehensive Income (in thousands) | Share-based Compensation (in thousands) | Net Issuance under Employee Stock Plans (in thousands) | Balance at Mar 31, 2020 (in thousands) | | :------------------------------------ | :------------------------------------- | :---------------------- | :---------------------------------------- | :-------------------------------------- | :----------------------------------------------------- | :------------------------------------- | | Common Stock Amount | **$490** | — | — | — | **$4** | **$494** | | Additional Paid-in Capital | **$1,071,058** | — | — | **$3,646** | **$(684)** | **$1,074,020** | | Accumulated Deficit | **$(698,930)** | **$(567)** | — | — | — | **$(699,497)** | | Accumulated Other Comprehensive Income | **$1,894** | — | **$153** | — | — | **$2,047** | | Total | **$374,512** | **$(567)** | **$153** | **$3,646** | **$(680)** | **$377,064** | - Accumulated Other Comprehensive Income (AOCI) increased from **$1.894 million** at December 31, 2019, to **$2.047 million** at March 31, 2020, primarily due to unrealized gains on available-for-sale securities[81](index=81&type=chunk) [Note 8 — Share-Based Compensation](index=31&type=section&id=Note%208%20%E2%80%94%20Share-Based%20Compensation) This note outlines the company's share-based compensation expense and non-vested share activity **Share-Based Compensation Expense (Three months ended March 31, 2020 vs. 2019):** | Category | 3 Months Ended March 31, 2020 (in thousands) | 3 Months Ended March 31, 2019 (in thousands) | | :--------------------------------- | :------------------------------------------- | :------------------------------------------- | | Cost of sales | **$521** | **$470** | | Research and development | **$874** | **$792** | | Selling, general, and administrative | **$2,251** | **$1,895** | | Total | **$3,646** | **$3,157** | - Total share-based compensation expense increased by **$0.489 million** (**15.5%**) from **$3.157 million** in Q1 2019 to **$3.646 million** in Q1 2020[83](index=83&type=chunk) - The number of non-vested restricted shares and performance shares increased from **2,257 thousand** at December 31, 2019, to **2,629 thousand** at March 31, 2020, with **840 thousand** granted during the period[83](index=83&type=chunk) [Note 9 — Income Taxes](index=33&type=section&id=Note%209%20%E2%80%94%20Income%20Taxes) This note details the company's income tax expense and the valuation allowance against U.S. deferred tax assets **Loss Before Income Taxes and Income Tax Expense (Benefit) (Three months ended March 31, 2020 vs. 2019):** | Metric | 3 Months Ended March 31, 2020 (in thousands) | 3 Months Ended March 31, 2019 (in thousands) | | :------------------------- | :------------------------------------------- | :------------------------------------------- | | Loss before income taxes | **$(299)** | **$(18,340)** | | Income tax expense (benefit) | **$268** | **$190** | - The Company's U.S. deferred tax assets are fully offset by a valuation allowance because it cannot conclude that it is more likely than not that these future benefits will be realized[84](index=84&type=chunk) - Domestic tax expense for the current period is primarily attributable to the tax amortization of indefinite-lived intangible assets that is not available to offset U.S. deferred tax assets, despite a domestic pre-tax loss[86](index=86&type=chunk) [Note 10 — Segment Reporting and Geographic Information](index=34&type=section&id=Note%2010%20%E2%80%94%20Segment%20Reporting%20and%20Geographic%20Information) This note provides sales breakdown by end-market and geographic region for the reporting period - Veeco operates and measures its results in one operating segment: the design, development, manufacture, and support of thin film process equipment primarily sold to make electronic devices[87](index=87&type=chunk) **Sales by End-Market (Three months ended March 31, 2020 vs. 2019):** | End-Market | 3 Months Ended March 31, 2020 (in thousands) | 3 Months Ended March 31, 2019 (in thousands) | Change (YoY) | | :----------------------------------------- | :------------------------------------------- | :------------------------------------------- | :------------ | | Front-End Semiconductor | **$31,366** | **$22,617** | **+$8,749** (**+39%**) | | Advanced Packaging, MEMS & RF Filters | **$8,588** | **$23,127** | **-$14,539** (**-63%**) | | LED Lighting, Display & Compound Semiconductor | **$15,402** | **$13,550** | **+$1,852** (**+14%**) | | Scientific & Industrial | **$49,146** | **$40,077** | **+$9,069** (**+23%**) | | Total | **$104,502** | **$99,371** | **+$5,131** (**+5%**) | **Sales by Geographic Region (Three months ended March 31, 2020 vs. 2019):** | Geographic Region | 3 Months Ended March 31, 2020 (in thousands) | 3 Months Ended March 31, 2019 (in thousands) | Change (YoY) | | :---------------- | :------------------------------------------- | :------------------------------------------- | :------------ | | United States | **$39,635** | **$32,315** | **+$7,320** (**+23%**) | | China | **$10,472** | **$10,159** | **+$313** (**+3%**) | | EMEA | **$16,150** | **$17,827** | **-$1,677** (**-9%**) | | Rest of World | **$38,245** | **$39,070** | **-$825** (**-2%**) | | Total | **$104,502** | **$99,371** | **+$5,131** (**+5%**) | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Veeco's financial condition and operational results for the three months ended March 31, 2020, highlighting the impact of the COVID-19 pandemic, market segment performance, and key financial changes, including revenue, gross profit, operating expenses, and liquidity [Cautionary Statement Regarding Forward Looking Statements](index=37&type=section&id=Cautionary%20Statement%20Regarding%20Forward%20Looking%20Statements) This statement reiterates the risks and uncertainties associated with forward-looking information - This discussion contains forward-looking statements, identified by words like "believes," "anticipates," "expects," and "estimates," which are subject to risks and uncertainties that could cause actual results to differ materially[94](index=94&type=chunk) [Executive Summary](index=37&type=section&id=Executive%20Summary) This section provides an overview of Veeco's innovative semiconductor process equipment manufacturing business - Veeco is an innovative manufacturer of semiconductor process equipment, utilizing ion beam, laser annealing, lithography, MOCVD, and single wafer etch & clean technologies for advanced semiconductor device fabrication and packaging[95](index=95&type=chunk) [COVID-19 Update](index=37&type=section&id=COVID-19%20Update) This section details the impact of the COVID-19 pandemic on Veeco's operations, workforce, and supply chain - Veeco's operations are considered part of the **critical and essential infrastructure**, allowing manufacturing facilities to remain open and operating **largely at or near full capacity** despite governmental measures to contain the COVID-19 pandemic[97](index=97&type=chunk) - The Company serves a global customer base, with approximately **70%** of net sales to customers outside the United States in 2019, making its business **vulnerable to further deterioration** in global economic conditions, particularly in Asia and Europe[98](index=98&type=chunk) - Proactive measures taken in response to the pandemic include rigorous health and safety protocols, mandated remote working arrangements for **52%** of the global workforce, virtual customer interactions, supply chain gap identification, and monitoring IT systems[101](index=101&type=chunk) - While **no significant supply chain interruptions** have occurred to date, **future disruptions are possible** due to financial challenges confronting suppliers or restrictions/disruptions of transportation[99](index=99&type=chunk) [Business Update](index=39&type=section&id=Business%20Update) This section provides an update on sales performance across key end-markets and emerging applications - Sales in the Front-End Semiconductor market were **driven by shipments** of laser annealing systems and Low-Defect-Density Ion Beam Deposition (LDD-IBD) systems for Extreme Ultraviolet (EUV) Mask Blank production, with customers **ramping production** at **7nm** and **5nm nodes**[103](index=103&type=chunk) - Sales in the Advanced Packaging, MEMS, and RF Filter market **remained weak in Q1**, with **recovery timing uncertain** due to **smartphone industry softness**, though interactions for High-Performance Computing and 5G applications are encouraging[104](index=104&type=chunk)[106](index=106&type=chunk) - Sales in the LED Lighting, Display & Compound Semiconductor market also **remained soft**, but the Company's MOCVD and PSP technologies **support emerging applications** like 5G driven RF device manufacturing, 3D sensing VCSELs, and GaN-based power electronics[107](index=107&type=chunk) - Sales in the Scientific & Industrial market were **primarily driven by Ion Beam systems** for data storage applications, **benefiting from big data, cloud-based storage growth**, and **innovations like heat assisted magnetic recording (HAMR) and microwave assisted magnetic recording (MAMR)**[108](index=108&type=chunk) [Results of Operations](index=41&type=section&id=Results%20of%20Operations) This section analyzes Veeco's financial performance, including net sales, gross profit, and operating expenses **Key Financial Performance (Three Months Ended March 31, 2020 vs. 2019):** | Metric | 2020 (in thousands) | 2019 (in thousands) | Change (YoY) | | :------------------------ | :------------------ | :------------------ | :------------ | | Net sales | **$104,502** | **$99,371** | **+$5,131** (**+5%**) | | Gross profit | **$46,419** | **$34,716** | **+$11,703** (**+34%**) | | Operating expenses, net | **$41,852** | **$48,856** | **-$7,004** (**-14%**) | | Operating income (loss) | **$4,567** | **$(14,140)** | **+$18,707** | | Net income (loss) | **$(567)** | **$(18,530)** | **+$17,963** (**-97%**) | [Net Sales](index=43&type=section&id=Net%20Sales) This section analyzes the year-over-year changes in net sales by market and geographic region - Total net sales **increased by 5%** year-over-year to **$104.5 million** for the three months ended March 31, 2020, **primarily driven by growth** in the Scientific & Industrial (**+23%**) and Front-End Semiconductor (**+39%**) markets[112](index=112&type=chunk) - Sales in the Advanced Packaging, MEMS & RF Filters market **significantly decreased by 63%** year-over-year[112](index=112&type=chunk) - Geographically, sales increased in the United States by **23%**, while EMEA and Rest of World regions experienced decreases of **9%** and **2%** respectively[112](index=112&type=chunk) [Gross Profit](index=43&type=section&id=Gross%20Profit) This section details the factors contributing to changes in gross profit and future margin expectations - Gross profit **increased by 34%** year-over-year, driven by an increase in sales volume, improved product and region mix, and reductions in inventory reserves and manufacturing expenses[113](index=113&type=chunk) - Future gross margins are **expected to fluctuate each period** due to product mix and other factors, and are **not expected to be as high as the current period**[113](index=113&type=chunk) [Research and Development](index=43&type=section&id=Research%20and%20Development) This section explains the changes in research and development expenses due to operational streamlining - Research and development expenses **decreased by 18%** year-over-year, primarily due to reduced personnel-related expenses and professional fees resulting from ongoing operational streamlining and cost reduction initiatives[114](index=114&type=chunk)[115](index=115&type=chunk) [Selling, General, and Administrative](index=44&type=section&id=Selling%20General%20and%20Administrative) This section details the changes in SG&A expenses and proactive management due to COVID-19 - Selling, general, and administrative expenses **decreased by 8%** year-over-year, mainly due to lower personnel-related expenses from continued efforts to streamline operations and reduce costs[116](index=116&type=chunk)[117](index=117&type=chunk) - The Company is **proactively managing expenses** due to COVID-19 uncertainty and may incur additional SG&A expenses in future periods to support pandemic responses[117](index=117&type=chunk) [Amortization Expense](index=45&type=section&id=Amortization%20Expense) This section notes the consistency of amortization expense with the prior year period - Amortization expense **remained consistent with the comparable prior year period**[118](index=118&type=chunk) [Restructuring Expense](index=45&type=section&id=Restructuring%20Expense) This section details ongoing restructuring charges related to operational streamlining and cost reduction efforts - Restructuring charges continued in Q1 2020, with additional accruals and payments made, as part of ongoing efforts to streamline operations and reduce costs, following a reorganization in H2 2019 that impacted approximately **60 employees**[119](index=119&type=chunk) [Interest Income (Expense)](index=45&type=section&id=Interest%20Income%20%28Expense%29) This section analyzes the changes in net interest expense and income, including non-cash charges - Net interest expense **increased by 16%** year-over-year to **$4.9 million** for Q1 2020, including **$3.3 million** in non-cash charges related to the amortization of debt discount and transaction costs of Convertible Senior Notes[120](index=120&type=chunk) - Interest income **decreased by approximately $0.4 million** due to lower interest rates, a **trend expected to continue**[120](index=120&type=chunk) [Income Taxes](index=45&type=section&id=Income%20Taxes) This section details the income tax expense and the treatment of domestic pre-tax losses - Income tax expense for Q1 2020 was **$0.3 million**, up from **$0.2 million** in Q1 2019, with domestic operations contributing **$0.1 million** and non-U.S. operations **$0.2 million**[122](index=122&type=chunk) - No current tax benefit was provided on domestic pre-tax losses as the amounts are **not realizable**, with domestic tax expense primarily from the tax amortization of indefinite-lived intangible assets[122](index=122&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses Veeco's financial liquidity, capital resources, and ability to meet obligations **Cash, Cash Equivalents, Restricted Cash, and Short-term Investments (March 31, 2020 vs. December 31, 2019):** | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :------------------------ | :---------------------------- | :---------------------------- | | Cash and cash equivalents | **$162,325** | **$129,294** | | Restricted cash | **$652** | **$657** | | Short-term investments | **$79,429** | **$115,252** | | Total | **$242,406** | **$245,203** | - The Company believes its projected cash flow from operations, combined with its cash and short-term investments, will be **sufficient to meet its projected working capital requirements**, contractual obligations, and other cash flow needs for the next **twelve months**[126](index=126&type=chunk) - Despite uncertainty related to the COVID-19 outbreak, the Company believes its business model, current cash and short-term investments, and recent expense rationalization efforts **position it well to manage through the crisis**[127](index=127&type=chunk) [Cash Flows from Operating Activities](index=47&type=section&id=Cash%20Flows%20from%20Operating%20Activities) This section details net cash used in operating activities and changes in operating assets and liabilities - Net cash used in operating activities was **$2.4 million** for Q1 2020, primarily due to a net loss and a decrease in cash flow from changes in operating assets and liabilities, partially offset by non-cash adjustments[130](index=130&type=chunk) - Changes in operating assets and liabilities were largely attributable to an increase in accounts receivable and a decrease in deferred revenue, partially offset by an increase in accounts payable and a decrease in contract assets[130](index=130&type=chunk) [Cash Flows from Investing Activities](index=47&type=section&id=Cash%20Flows%20from%20Investing%20Activities) This section outlines net cash provided by investing activities, primarily from investments and capital expenditures - Net cash provided by investing activities was **$35.2 million** for Q1 2020, primarily from net changes in investments, partially offset by capital expenditures[131](index=131&type=chunk) [Cash Flows from Financing Activities](index=49&type=section&id=Cash%20Flows%20from%20Financing%20Activities) This section details net cash provided by financing activities, including employee stock plans - Net cash provided by financing activities was **$0.276 million** for Q1 2020, related to cash received under the Employee Stock Purchase Plan, partially offset by cash used to settle taxes related to employee equity programs[132](index=132&type=chunk) [Convertible Senior Notes](index=49&type=section&id=Convertible%20Senior%20Notes) This section describes the company's convertible senior unsecured notes and ability to meet interest payments - The Company has **$345.0 million** of **2.70%** convertible senior unsecured notes, maturing on January 15, 2023, and believes it has **sufficient capital resources and cash flows from operations to support scheduled interest payments**[133](index=133&type=chunk) [Contractual Obligations and Commitments](index=49&type=section&id=Contractual%20Obligations%20and%20Commitments) This section outlines the company's commitments under contractual arrangements for future payments - The Company has commitments under contractual arrangements for future payments for goods and services, which it expects to fund with cash generated from operations in the normal course of business[134](index=134&type=chunk) [Off-Balance Sheet Arrangements](index=49&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of material off-balance sheet arrangements beyond disclosed items - The Company **does not have any off-balance sheet arrangements** that have, or are reasonably likely to have, a current or future material effect on its financial condition, results of operations, liquidity, capital expenditures, or capital resources, other than disclosed bank guarantees and purchase commitments[135](index=135&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section details Veeco's exposure to market risks, specifically interest rate risk on its investment portfolio and currency exchange risk from global operations, and the strategies employed to mitigate these risks [Interest Rate Risk](index=49&type=section&id=Interest%20Rate%20Risk) This section describes the interest rate risk associated with Veeco's fixed-income investment portfolio - Veeco's investment portfolio, with a fair value of approximately **$79.4 million** in fixed-income securities at March 31, 2020, is **exposed to interest rate risk**[136](index=136&type=chunk) - A **100 basis point** increase in interest rates would result in a **$0.3 million** decrease in the fair value of the investment portfolio[136](index=136&type=chunk) [Currency Exchange Risk](index=49&type=section&id=Currency%20Exchange%20Risk) This section details the currency exchange risk from global operations and mitigation strategies - Veeco conducts business worldwide, exposing a portion of its revenues, earnings, and net investments in foreign affiliates to changes in currency exchange rates[137](index=137&type=chunk) - The Company enters into monthly forward derivative contracts to **mitigate foreign currency exchange risk**, but **does not designate them as hedges**, recording fair value changes in "Other operating expense (income), net."[139](index=139&type=chunk) - Net sales to non-U.S. customers represented **62%** of total net sales for Q1 2020, but only **3%** of total net sales were denominated in currencies other than the U.S. dollar, making a **10%** change in foreign exchange rates **immaterial to consolidated results**[140](index=140&type=chunk)[141](index=141&type=chunk) [Item 4. Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of Veeco's disclosure controls and procedures as of March 31, 2020, and notes that remote working arrangements due to COVID-19 did not materially affect internal control over financial reporting [Management's Report on Internal Control Over Financial Reporting](index=51&type=section&id=Management%27s%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) This section confirms the effectiveness of Veeco's disclosure controls and procedures as of March 31, 2020 - Management evaluated and concluded that Veeco's disclosure controls and procedures were **effective** as of March 31, 2020, ensuring timely and accurate reporting of required information[142](index=142&type=chunk) [Changes in Internal Control Over Financial Reporting](index=51&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section states that remote work due to COVID-19 did not materially affect internal control over financial reporting - Remote working arrangements implemented in March 2020 due to the COVID-19 pandemic **did not have a material effect on the Company's internal control over financial reporting**[143](index=143&type=chunk) - There were **no changes in internal control over financial reporting** during the quarter ended March 31, 2020, that have materially affected or are reasonably likely to materially affect it[143](index=143&type=chunk) [PART II—OTHER INFORMATION](index=51&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=51&type=section&id=Item%201.%20Legal%20Proceedings) This section details ongoing legal proceedings against Veeco, including class action lawsuits - Two purported class action complaints, consolidated as Wolther v. Maheshwari et al., were filed alleging false/misleading statements in the registration statement for the Ultratech acquisition, primarily concerning delays in advanced packaging, increased MOCVD competition in China, and an intellectual property dispute[145](index=145&type=chunk) - A derivative action, Vladimir Gusinsky Revocable Trust v. Peeler, et al., was filed on behalf of Veeco, asserting claims for breach of fiduciary duty, waste of corporate assets, and unjust enrichment against current and former directors related to the Ultratech acquisition[146](index=146&type=chunk)[148](index=148&type=chunk) - The Company is **vigorously defending** these matters and does not believe that their ultimate resolution will have a **material adverse effect** on its consolidated financial position, results of operations, or cash flows[149](index=149&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, adding a new risk related to the COVID-19 pandemic's uncertain impact - A new risk factor highlights the **significant and uncertain negative impact** of the COVID-19 pandemic on global business activities, economic conditions, and Veeco's operations, customers, suppliers, and partners[151](index=151&type=chunk) - Despite being deemed critical infrastructure, COVID-19 could adversely affect customer purchasing, product delivery, service provision, payment terms, and creditworthiness, impacting future sales and financial performance[152](index=152&type=chunk) - Remote working arrangements due to COVID-19 may increase the risk of information or cyber-security incidents, fraud, or a failure to maintain the uninterrupted operation of information systems[155](index=155&type=chunk) - The full extent of the pandemic's impact is **unpredictable**, depending on factors like duration, severity, containment measures, economic effects, and the speed of recovery to normal operating conditions[156](index=156&type=chunk)[157](index=157&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=55&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report - **No unregistered sales** of equity securities or use of proceeds occurred during the period[158](index=158&type=chunk) [Item 3. Defaults Upon Senior Securities](index=55&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section indicates that there were no defaults upon senior securities during the reporting period - **No defaults** upon senior securities occurred during the period[159](index=159&type=chunk) [Item 4. Mine Safety Disclosures](index=55&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the Company - Mine Safety Disclosures are **not applicable** to Veeco Instruments Inc[160](index=160&type=chunk) [Item 5. Other Information](index=55&type=section&id=Item%205.%20Other%20Information) This section reports that there is no other information to disclose for the period - **No other information** is required to be disclosed for the period[161](index=161&type=chunk) [Item 6. Exhibits](index=56&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the SEC, including an agreement, certifications from the CEO and CFO, and XBRL-related documents - Exhibits filed include an Agreement and General Release, CEO and CFO certifications (pursuant to Rule 13a-14(a) or Rule 15d-14(a) and 18 U.S.C. Section 1350), and various XBRL documents[164](index=164&type=chunk) [SIGNATURES](index=56&type=section&id=SIGNATURES) This section contains the required signatures for the report, affirming its compliance with regulations - The report was signed on May 7, 2020, by William J. Miller, Ph.D., Chief Executive Officer, and John P. Kiernan, Senior Vice President and Chief Financial Officer, pursuant to the requirements of the Securities Exchange Act of 1934[166](index=166&type=chunk)[167](index=167&type=chunk) ```