Veeco(VECO) - 2024 Q2 - Quarterly Report

Safe Harbor Statement The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from projections - The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from projections. Management's estimates and assumptions in financial statements may also differ from actual results[4][5] - Key risks include those associated with global business operations (e.g., U.S. trade policy, export controls, global regulatory requirements), business and industry factors (e.g., unfavorable market conditions, intense competition, rapid technological change, concentrated customer base, supply chain reliance, long sales cycles, backlog cancellations), intellectual property and cybersecurity, financial and capital markets (e.g., tightening credit, foreign currency risk, impairment charges, debt covenants), and general factors (e.g., stock price volatility, employee retention, ESG matters, anti-takeover measures)[6][7][8][9] PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents Veeco Instruments Inc.'s unaudited consolidated financial statements for the periods ended June 30, 2024, including the balance sheets, statements of operations, comprehensive income, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial accounts Consolidated Balance Sheets This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time | (in thousands) | June 30, 2024 (unaudited) | December 31, 2023 | | :--------------- | :-------------------------- | :------------------ | | Assets | | | | Total current assets | $718,195 | $706,278 | | Total assets | $1,235,115 | $1,229,041 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $203,973 | $218,033 | | Total liabilities | $520,102 | $556,599 | | Total stockholders' equity | $715,013 | $672,442 | | Total liabilities and stockholders' equity | $1,235,115 | $1,229,041 | - Total assets increased by $6.074 million from December 31, 2023, to June 30, 2024, primarily driven by an increase in cash and cash equivalents and contract assets, partially offset by decreases in short-term investments and accounts receivable[12] - Total liabilities decreased by $36.497 million, mainly due to a significant reduction in contract liabilities and long-term debt, while stockholders' equity increased by $42.571 million[12] Consolidated Statements of Operations This statement presents the company's financial performance over a period, including net sales, gross profit, operating income, and net income or loss | (in thousands, except per share amounts) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $175,879 | $161,641 | $350,363 | $315,145 | | Gross profit | $75,390 | $67,510 | $150,809 | $129,527 | | Operating income | $16,722 | $13,688 | $38,767 | $23,494 | | Income (loss) before income taxes | $17,071 | $(84,035) | $39,821 | $(75,031) | | Net income (loss) | $14,944 | $(85,320) | $36,798 | $(76,579) | | Basic income (loss) per common share | $0.27 | $(1.61) | $0.66 | $(1.48) | | Diluted income (loss) per common share | $0.25 | $(1.61) | $0.61 | $(1.48) | - Net sales increased by 8.8% for the three months ended June 30, 2024, and by 11.2% for the six months ended June 30, 2024, compared to the prior year periods[13] - The company reported a significant turnaround from a net loss in the prior year to net income of $14.944 million for the three months and $36.798 million for the six months ended June 30, 2024, largely due to the absence of the prior year's loss on extinguishment of debt[13] Consolidated Statements of Comprehensive Income This statement details the company's net income or loss and other comprehensive income or loss, reflecting all changes in equity during a period except those from owner transactions | (in thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $14,944 | $(85,320) | $36,798 | $(76,579) | | Other comprehensive income (loss), net of tax: | | | | | | Unrealized gain (loss) on available-for-sale securities | (10) | — | (105) | 470 | | Change in currency translation adjustments | (2) | (39) | (35) | (33) | | Total other comprehensive income (loss), net of tax | (12) | (39) | (140) | 437 | | Total comprehensive income (loss) | $14,932 | $(85,359) | $36,658 | $(76,142) | - Total comprehensive income for the three and six months ended June 30, 2024, was $14.932 million and $36.658 million, respectively, a significant improvement from losses in the comparable prior year periods[15] - Other comprehensive income (loss) was negative for both periods in 2024, primarily due to unrealized losses on available-for-sale securities and currency translation adjustments[15] Consolidated Statements of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities over a period, providing insights into liquidity | (in thousands) | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :--------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $17,816 | $25,135 | | Net cash provided by (used in) investing activities | $10,781 | $2,366 | | Net cash provided by (used in) financing activities | $(13,220) | $(1,971) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $15,333 | $25,489 | | Cash, cash equivalents, and restricted cash - end of period | $174,453 | $180,961 | - Net cash provided by operating activities decreased to $17.816 million for the six months ended June 30, 2024, from $25.135 million in the prior year, mainly due to changes in operating assets and liabilities, particularly a decrease in contract liabilities and increases in inventories[18][135] - Net cash provided by investing activities significantly increased to $10.781 million in 2024 from $2.366 million in 2023, driven by net investment activity and proceeds from asset sales, with no business acquisitions in 2024[18][136] - Net cash used in financing activities increased to $13.220 million in 2024, primarily due to equity award settlements and contingent consideration payments, contrasting with the prior year's activity related to convertible notes issuance and extinguishment[18][137] Notes to the Consolidated Financial Statements This section provides detailed explanations of the accounting policies, significant estimates, and specific financial accounts presented in the consolidated financial statements Note 1 — Basis of Presentation This note outlines the accounting principles, reporting periods, revenue recognition policies, and inventory valuation methods used in preparing the financial statements - The unaudited Consolidated Financial Statements are prepared in accordance with U.S. GAAP for interim financial information, with all necessary adjustments being normal and recurring[19] - Veeco reports interim quarters on a 13-week basis, with the fourth quarter ending on December 31. Management makes estimates and assumptions that may differ from actual results[20] - Revenue is recognized upon transfer of control of products or services, with judgment required for identifying performance obligations and allocating revenue. Most revenue is recognized at a point in time, typically upon system delivery after acceptance criteria are met or objectively demonstrated[21][22][23][24][25] - Inventories are stated at the lower of cost or net realizable value (first-in, first-out basis) and are assessed quarterly for obsolescence or excess, with write-downs reflected in cost of sales[27] - The company is evaluating new accounting standards ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Tax Disclosures), effective for fiscal years beginning after December 15, 2023, and December 15, 2024, respectively[28][29] Note 2 — Income Per Common Share This note details the calculation of basic and diluted earnings per common share, including the treatment of share-based awards and convertible notes - Basic EPS is calculated by dividing net income by weighted average shares outstanding. Diluted EPS includes the dilutive effect of share-based awards and convertible notes, using the treasury stock method and if-converted method, respectively[30] | (in thousands, except per share amounts) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) available to common shareholders | $15,456 | $(85,320) | $37,824 | $(76,579) | | Basic weighted average shares outstanding | 56,277 | 52,861 | 56,160 | 51,764 | | Diluted weighted average shares outstanding | 62,535 | 52,861 | 61,733 | 51,764 | | Basic net income per common share | $0.27 | $(1.61) | $0.66 | $(1.48) | | Diluted net income per common share | $0.25 | $(1.61) | $0.61 | $(1.48) | - For periods with a net loss (e.g., June 30, 2023), common share equivalents are excluded from diluted EPS calculation as their effect would be antidilutive[32][33] Note 3 — Business Combination This note describes the acquisition of Epiluvac AB, including the purchase price allocation and the fair value measurement of contingent consideration - On January 31, 2023, Veeco acquired Epiluvac AB for $56.4 million (including $30.4 million cash and $26.1 million contingent consideration) to accelerate penetration into the SiC equipment market[34] - Contingent consideration includes up to $15.0 million for strategic milestones and up to $20.0 million based on order percentage during a four-year earn-out period[35] - The fair value of contingent consideration is updated each reporting period using a discount rate (5.9% at June 30, 2024). During the six months ended June 30, 2024, the company recognized a $0.1 million reduction in contingent consideration and paid $1.8 million for a strategic target milestone, resulting in a total contingent consideration liability of $22.3 million[36][37] Note 4 — Assets This note provides a detailed breakdown of the company's assets, including cash, investments, accounts receivable, inventories, property, plant, equipment, goodwill, and intangible assets - Short-term investments are classified as available-for-sale and reported at fair value, with unrealized gains/losses in AOCI. Fair value measurements are categorized into Level 1, 2, or 3 based on input observability[38][39] Cash and Short-term Investments | (in thousands) | June 30, 2024 | December 31, 2023 | | :--------------- | :------------ | :---------------- | | Cash equivalents | $118,246 | $97,837 | | Short-term investments | $130,696 | $146,664 | | Total | $248,942 | $244,501 | Short-term Investments by Type | (in thousands) | Amortized Cost (June 30, 2024) | Estimated Fair Value (June 30, 2024) | | :--------------- | :----------------------------- | :----------------------------------- | | U.S. treasuries | $58,541 | $58,438 | | Government agency securities | $18,095 | $18,068 | | Corporate debt | $54,307 | $54,190 | | Total | $130,943 | $130,696 | - Accounts receivable are presented net of a $1.0 million allowance for doubtful accounts at both June 30, 2024, and December 31, 2023[46] Inventories | (in thousands) | June 30, 2024 | December 31, 2023 | | :--------------- | :------------ | :---------------- | | Materials | $140,977 | $139,884 | | Work-in-process | $76,481 | $71,278 | | Finished goods | $4,844 | $6,183 | | Evaluation inventory | $22,806 | $20,290 | | Total Inventories | $245,108 | $237,635 | - Net property, plant, and equipment decreased to $113.461 million at June 30, 2024, from $118.459 million at December 31, 2023. Depreciation expense for the three and six months ended June 30, 2024, was $4.8 million and $9.3 million, respectively[48] - Goodwill remained unchanged at $214.964 million during the six months ended June 30, 2024. Intangible assets, net, decreased to $40.229 million from $43.945 million, primarily due to amortization of technology and customer relationships[12][49][51] Note 5 — Liabilities This note details the company's liabilities, including accrued expenses, contract liabilities, and convertible senior notes, along with their terms and conditions Accrued Expenses and Other Current Liabilities | (in thousands) | June 30, 2024 | December 31, 2023 | | :--------------- | :------------ | :---------------- | | Payroll and related benefits | $23,810 | $28,321 | | Warranty | $8,954 | $8,864 | | Operating lease liabilities | $3,656 | $4,025 | | Income, sales, use, and other taxes | $4,872 | $1,825 | | Total Accrued expenses and other current liabilities | $50,119 | $57,624 | - Warranty reserves increased slightly to $8.954 million at June 30, 2024, with $3.127 million in new warranties issued and $3.065 million consumed during the six months[55] - Contract liabilities decreased from $118.0 million at December 31, 2023, to $80.556 million at June 30, 2024, with $66.2 million recognized as revenue during the six months[12][55] - Remaining performance obligations on contracts with an original estimated duration of one year or more totaled $98.2 million as of June 30, 2024, with 77% expected to be recognized within one year[56] Convertible Senior Notes | (in thousands) | Principal Amount (June 30, 2024) | Net carrying value (June 30, 2024) | Principal Amount (December 31, 2023) | Net carrying value (December 31, 2023) | | :--------------- | :------------------------------- | :--------------------------------- | :----------------------------------- | :------------------------------------- | | 2025 Notes | $26,500 | $26,448 | $26,500 | $26,398 | | 2027 Notes | $25,000 | $24,730 | $25,000 | $24,687 | | 2029 Notes | $230,000 | $224,375 | $230,000 | $223,856 | | Total | $281,500 | $275,553 | $281,500 | $274,941 | - Total interest expense for convertible notes was $2.435 million for the three months and $4.850 million for the six months ended June 30, 2024. The 2025, 2027, and 2029 Notes are unsecured senior obligations, convertible under specified conditions, and have initial conversion prices of $24.00, $13.98, and $29.22 per share, respectively[65][66][67][70] - The company entered into capped call transactions for the 2027 Notes to reduce potential dilution and/or offset cash payments upon conversion, with an aggregate premium of $10.3 million recorded as a reduction of additional paid-in capital[71][72] - The revolving credit facility was increased from $150 million to $225 million on August 2, 2024, providing additional liquidity, particularly for potential cash settlement of 2029 Notes conversions. No amounts were outstanding under the facility as of June 30, 2024[73][77][139] - Other liabilities primarily included contingent consideration of $22.3 million at June 30, 2024, and $22.4 million at December 31, 2023[78] Note 6 — Commitments and Contingencies This note outlines the company's operating lease obligations, purchase commitments, bank guarantees, and potential impacts from legal proceedings - Operating lease liabilities totaled $38.594 million at June 30, 2024, with a weighted average remaining lease term of 11 years and a discount rate of 5.7%[79] Operating Lease Payments | (in thousands) | Operating Leases | | :--------------- | :--------------- | | Payments due by period: | | | 2024 | $1,374 | | 2025 | $4,236 | | 2026 | $4,524 | | 2027 | $4,370 | | 2028 | $4,170 | | Thereafter | $34,911 | | Total future minimum lease payments | $53,585 | | Less: Imputed interest | $(14,991) | | Total | $38,594 | - The company sold $8.0 million of trade receivables under a non-recourse agreement for the three and six months ended June 30, 2024, with $22.0 million available for additional sales[80] - Purchase commitments amounted to $175.3 million at June 30, 2024, mostly due within one year. Outstanding bank guarantees and standby letters of credit totaled $22.7 million, with $17.8 million unused[81] - The company is involved in various legal proceedings but does not expect them to have a material adverse effect on its financial position, results of operations, or cash flows[82] Note 7 — Equity This note presents the changes in stockholders' equity, including common shares, additional paid-in capital, accumulated deficit, and accumulated other comprehensive income Changes in Stockholders' Equity | (in thousands) | Common Shares | Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total | | :--------------- | :------------ | :----------- | :------------------------- | :------------------ | :------------------------------------- | :---- | | Balance at December 31, 2023 | 56,364 | $564 | $1,202,440 | $(532,169) | $1,607 | $672,442 | | Net income | — | — | — | 36,798 | — | 36,798 | | Other comprehensive income (loss), net of tax | — | — | — | — | (140) | (140) | | Share-based compensation expense | — | — | 17,315 | — | — | 17,315 | | Net issuance under employee stock plans | 409 | 5 | (11,407) | — | — | (11,402) | | Balance at June 30, 2024 | 56,773 | $569 | $1,208,348 | $(495,371) | $1,467 | $715,013 | - Total stockholders' equity increased by $42.571 million from December 31, 2023, to June 30, 2024, primarily due to net income and share-based compensation expense, partially offset by net issuance under employee stock plans and other comprehensive loss[84] Accumulated Other Comprehensive Income (Loss) | (in thousands) | Foreign Currency Translation | Unrealized Gains (Losses) on Available-for-Sale Securities | Total | | :--------------- | :--------------------------- | :--------------------------------------------------------- | :---- | | Balance - December 31, 2023 | $1,761 | $(154) | $1,607 | | Other comprehensive income (loss) | (35) | (105) | (140) | | Balance - June 30, 2024 | $1,726 | $(259) | $1,467 | - Accumulated Other Comprehensive Income (AOCI) decreased from $1.607 million to $1.467 million, primarily due to unrealized losses on available-for-sale securities and foreign currency translation adjustments[86] Note 8 — Share-based Compensation This note details the share-based compensation expense recognized and the outstanding performance shares under employee stock plans - Share-based compensation expense increased to $9.233 million for the three months and $17.315 million for the six months ended June 30, 2024, compared to $7.932 million and $14.959 million in the prior year periods, respectively[89] Share-based Compensation Expense | (in thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of sales | $1,445 | $1,572 | $3,175 | $3,023 | | Research and development | $2,993 | $2,568 | $5,311 | $4,657 | | Selling, general, and administrative | $4,795 | $3,792 | $8,829 | $7,279 | | Total | $9,233 | $7,932 | $17,315 | $14,959 | - The balance of performance shares outstanding increased to 2,664 thousand shares at June 30, 2024, from 2,464 thousand at December 31, 2023, with a weighted average grant date fair value of $31.92[90] Note 9 — Income Taxes This note provides an analysis of the company's income tax expense and effective tax rates, highlighting factors influencing tax benefits and liabilities Income Tax Information | (in thousands, except percentages) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income (loss) before income taxes | $17,071 | $(84,035) | $39,821 | $(75,031) | | Income tax expense | $2,127 | $1,285 | $3,023 | $1,548 | | Effective tax rate | 12.46% | (1.53)% | 7.59% | (2.06)% | - The effective tax rate for the three and six months ended June 30, 2024, was favorably impacted by tax benefits from Foreign-Derived Intangible Income, R&D tax credits, and a discrete income tax benefit for share-based compensation windfall[92] - In the prior year (June 30, 2023), income tax expense was primarily related to pre-tax income excluding the loss on extinguishment of convertible notes, with a $0.9 million benefit recognized for this loss[92] Note 10 — Segment Reporting and Geographic Information This note describes the company's single reportable segment, its end-markets, and the breakdown of sales by geographic region - Veeco operates as one reportable segment, focusing on the development, manufacture, sales, and support of semiconductor and thin film process equipment[93] - The company serves four end-markets: Semiconductor (logic, memory, EUV lithography, Advanced Packaging), Compound Semiconductor (Photonics, Power Electronics, RF Filters and Amplifiers, Solar), Data Storage (Hard Disk Drive), and Scientific & Other (advanced materials research, optical coatings)[93][94][95][96][97] Sales by End-Market and Geographic Region | (in thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales by end-market | | | | | | Semiconductor | $109,936 | $106,275 | $230,320 | $199,382 | | Compound Semiconductor | $18,223 | $24,066 | $39,225 | $45,225 | | Data Storage | $33,960 | $13,945 | $51,977 | $35,459 | | Scientific & Other | $13,760 | $17,355 | $28,841 | $35,079 | | Total | $175,879 | $161,641 | $350,363 | $315,145 | | Sales by geographic region | | | | | | United States | $42,744 | $35,739 | $70,612 | $66,750 | | EMEA | $23,802 | $17,511 | $32,290 | $40,458 | | China | $65,376 | $49,986 | $129,684 | $110,733 | | Rest of APAC | $43,935 | $58,320 | $117,155 | $97,065 | | Rest of World | $22 | $85 | $622 | $139 | | Total | $175,879 | $161,641 | $350,363 | $315,145 | - Semiconductor sales increased by 3% (QoQ) and 16% (YoY), while Data Storage sales saw a significant increase of 144% (QoQ) and 47% (YoY). Compound Semiconductor and Scientific & Other markets experienced declines[97][110][123] - Geographically, China (31% QoQ, 17% YoY), United States (20% QoQ, 6% YoY), and EMEA (36% QoQ) showed sales increases, while Rest of APAC declined by 25% QoQ but increased by 21% YoY[97][110][123] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Veeco's financial performance and condition, discussing key business updates, detailed results of operations for the three and six months ended June 30, 2024, and an analysis of liquidity and capital resources Executive Summary 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, CVD, and single wafer wet processing technologies for advanced semiconductor device fabrication and packaging[99] Business Update This section discusses industry trends, Veeco's performance in the semiconductor market, key product developments, and revenue expectations for various end-markets - The Semiconductor industry, though cyclical, is forecasted for long-term growth driven by secular trends like AI, high-performance computing, mobile connectivity, and automotive electrification, supported by government investments[100] - Veeco's Semiconductor business has outperformed Wafer Fab Equipment (WFE) growth for three consecutive years, driven by investments in advanced logic and memory, particularly for high-performance AI chips and High-Bandwidth Memory (HBM)[102] - Semiconductor revenue increased by 3% in Q2 2024, led by record Laser Annealing revenue and new wins in advanced nodes (e.g., 2nm gate-all-around process, HBM production). Strong demand for mature node applications in China also contributed[103] - Key product developments include the NSA500 next-generation nanosecond annealing system for advanced node logic and memory, the IBD-LDD for EUV Lithography mask blanks, and the IBD300 system for advanced memory applications like DRAM bitline[104][105] - The company expects Semiconductor revenue to grow in 2024, while Compound Semiconductor revenue is expected to be flat to down, Data Storage flat to up, and Scientific & Other flat[106][107] Results of Operations - Three Months Ended June 30, 2024 and 2023 This section analyzes the company's financial performance for the three-month period, detailing changes in net sales, gross profit, operating expenses, and net income | (dollars in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Change Period to Period | Percentage Change | | :--------------------- | :------------------------------- | :------------------------------- | :---------------------- | :---------------- | | Net sales | $175,879 | $161,641 | $14,238 | 9% | | Gross profit | $75,390 | $67,510 | $7,880 | 12% | | Operating income | $16,722 | $13,688 | $3,034 | 22% | | Income (loss) before income taxes | $17,071 | $(84,035) | $101,106 | (120)% | | Net income (loss) | $14,944 | $(85,320) | $100,264 | (118)% | - Net sales increased by 9% year-over-year, driven by strong performance in Data Storage (+144%) and Semiconductor (+3%) markets, partially offset by declines in Compound Semiconductor (-24%) and Scientific & Other (-21%)[110][111] - Gross profit increased by 12% due to higher sales volume and improved gross margins, despite higher service costs[112] - Operating expenses increased by 9%, primarily due to higher R&D expenses (+16%) for new projects and personnel, and increased SG&A (+3%) associated with higher revenue and profitability[109][113][114] - The company reported net interest income of $0.3 million, a significant improvement from a net interest expense of $0.6 million in the prior year, due to higher interest rates[114] - Net income dramatically improved from a loss of $85.320 million to a gain of $14.944 million, primarily due to the absence of the $97.091 million loss on extinguishment of convertible notes recorded in the prior year[109][117] - Income tax expense increased to $2.1 million from $1.3 million, with the effective tax rate favorably impacted by Foreign-Derived Intangible Income, R&D tax credits, and share-based compensation windfall[119] Results of Operations - Six Months Ended June 30, 2024 and 2023 This section analyzes the company's financial performance for the six-month period, detailing changes in net sales, gross profit, operating expenses, and net income | (dollars in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Change Period to Period | Percentage Change | | :--------------------- | :----------------------------- | :----------------------------- | :---------------------- | :---------------- | | Net sales | $350,363 | $315,145 | $35,218 | 11% | | Gross profit | $150,809 | $129,527 | $21,282 | 16% | | Operating income | $38,767 | $23,494 | $15,273 | 65% | | Income (loss) before income taxes | $39,821 | $(75,031) | $114,852 | * | | Net income (loss) | $36,798 | $(76,579) | $113,377 | * | - Net sales increased by 11% year-over-year, driven by Semiconductor (+16%) and Data Storage (+47%) markets, partially offset by declines in Compound Semiconductor (-13%) and Scientific & Other (-18%)[123][124] - Gross profit increased by 16% due to higher sales volume and a favorable product mix, partially offset by higher service costs[125] - Operating expenses increased by 6%, primarily due to higher R&D expenses (+12%) for personnel and new applications, and increased SG&A (+6%) associated with higher revenue and profitability[121][126][128] - The company recorded net interest income of $1.1 million, a significant improvement from a net interest expense of $1.4 million in the prior year, primarily due to higher interest rates[129] - Net income dramatically improved from a loss of $76.579 million to a gain of $36.798 million, primarily due to the absence of the $97.091 million loss on extinguishment of convertible notes recorded in the prior year[121][130] - Income tax expense increased to $3.0 million from $1.5 million, with the effective tax rate favorably impacted by Foreign-Derived Intangible Income, R&D tax credits, and share-based compensation windfall[131] Liquidity and Capital Resources This section assesses the company's cash position, cash flow from operating, investing, and financing activities, and its ability to meet future financial obligations Cash, Cash Equivalents, Restricted Cash, and Short-term Investments | (in thousands) | June 30, 2024 | December 31, 2023 | | :--------------- | :------------ | :---------------- | | Cash and cash equivalents | $174,164 | $158,781 | | Restricted cash | $289 | $339 | | Short-term investments | $130,696 | $146,664 | | Total | $305,149 | $305,784 | - The company believes its projected cash flow from operations, combined with cash and short-term investments, will be sufficient to meet working capital, contractual obligations, and other cash flow needs for the next twelve months[134] - Net cash provided by operating activities was $17.8 million for the six months ended June 30, 2024, primarily from net income and non-cash adjustments, partially offset by a decrease in contract liabilities and increases in inventories[135] - Net cash provided by investing activities was $10.8 million, mainly from net investment activity and proceeds from asset sales, with no business acquisitions in 2024[136] - Net cash used in financing activities was $13.2 million, primarily for settling equity awards and contingent consideration payments related to the Epiluvac acquisition[137] - The company has outstanding convertible senior notes totaling $281.5 million principal balance (2025, 2027, and 2029 Notes), all convertible by noteholders until September 30, 2024. The revolving credit facility was increased to $225 million to provide liquidity for potential 2029 Notes conversions[138][139] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section details Veeco's exposure to market risks, specifically interest rate risk and currency exchange risk, and outlines the strategies employed to manage these risks - The company's investment portfolio, with a fair value of approximately $130.7 million in fixed-income securities at June 30, 2024, is exposed to interest rate risk. A 100 basis point increase in interest rates would result in a $0.7 million decrease in the portfolio's fair value[141] - Veeco is exposed to currency exchange rate changes due to global operations. While derivative contracts may be used for hedging, most sales outside the U.S. are denominated in U.S. dollars, making a 10% change in foreign exchange rates have an immaterial impact on consolidated results[142][143][144] - Net sales to customers outside the United States represented approximately 76% and 80% of total net sales for the three and six months ended June 30, 2024, respectively[144] Item 4. Controls and Procedures This section confirms the effectiveness of Veeco's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter - The principal executive and financial officers concluded that the company's disclosure controls and procedures were effective as of June 30, 2024[145] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2024, that have materially affected or are reasonably likely to materially affect internal control[145] PART II—OTHER INFORMATION Item 1. Legal Proceedings This section states that Veeco is involved in routine legal proceedings but does not anticipate any material adverse effects on its financial standing - The company is involved in various legal proceedings in the normal course of business but does not believe their ultimate resolution will have a material adverse effect on its consolidated financial position, results of operations, or cash flows[146] Item 1A. Risk Factors This section refers to the comprehensive risk factors detailed in the Safe Harbor Statement and the company's 2023 Form 10-K, confirming no material changes since the previous disclosure - Information regarding risk factors is provided in the Safe Harbor Statement at the beginning of this report and in Part I — Item 1A of the 2023 Form 10-K[147] - There have been no material changes from the risk factors previously disclosed[147] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports that there were no unregistered sales of equity securities or related use of proceeds during the reporting period - None[147] Item 3. Defaults Upon Senior Securities This section confirms that the company did not experience any defaults upon senior securities during the reporting period - None[147] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company's operations - Not Applicable[147] Item 5. Other Information This section indicates that there is no other material information to report under this item - None[147] Item 6. Exhibits This section lists all exhibits filed with the Securities and Exchange Commission, including certifications and XBRL interactive data files - The exhibits include certifications from the Chief Executive Officer and Chief Financial Officer (31.1, 31.2, 32.1, 32.2) and various XBRL interactive data files (101.INS, 101.XSD, 101.PRE, 101.CAL, 101.DEF, 101.LAB, 104)[150] SIGNATURES This section formally attests to the accuracy and completeness of the report by the company's principal executive and financial officers - The report was signed on behalf of Veeco Instruments Inc. by William J. Miller, Ph.D., Chief Executive Officer, and John P. Kiernan, Senior Vice President and Chief Financial Officer, on August 6, 2024[151][152]