Veeco(VECO) - 2024 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for Veeco Instruments Inc as of September 30, 2024, and for the three and nine-month periods then ended Consolidated Balance Sheets Total assets increased to $1.27 billion as of September 30, 2024, from $1.23 billion at year-end 2023, while total liabilities decreased, resulting in higher stockholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2024 (unaudited) | Dec 31, 2023 | | :--- | :--- | :--- | | Total current assets | $760,977 | $706,278 | | Total assets | $1,272,872 | $1,229,041 | | Total current liabilities | $215,167 | $218,033 | | Total liabilities | $526,353 | $556,599 | | Total stockholders' equity | $746,519 | $672,442 | Consolidated Statements of Operations The company reported higher net sales for Q3 and the nine-month period of 2024, with a significant turnaround to net income for the nine-month period compared to a net loss in 2023 Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $184,807 | $177,366 | $535,170 | $492,511 | | Gross profit | $79,211 | $76,877 | $230,020 | $206,404 | | Operating income | $24,335 | $22,263 | $63,102 | $45,757 | | Net income (loss) | $21,951 | $24,574 | $58,749 | $(52,005) | | Diluted EPS | $0.36 | $0.42 | $0.97 | $(0.98) | Consolidated Statements of Cash Flows For the first nine months of 2024, net cash from operations was $35.4 million, contributing to a $4.4 million increase in total cash, cash equivalents, and restricted cash Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $35,430 | $32,189 | | Net cash used in investing activities | $(18,830) | $(27,180) | | Net cash used in financing activities | $(12,325) | $(3,630) | | Net increase in cash | $4,366 | $1,325 | | Cash, cash equivalents, and restricted cash - end of period | $163,486 | $156,797 | Notes to the Consolidated Financial Statements The notes detail accounting policies, the Epiluvac acquisition, convertible debt structure, and segment information - On January 31, 2023, the Company acquired Epiluvac AB for $30.4 million in cash and $26.1 million in contingent consideration to accelerate its entry into the SiC equipment market[40] - The company operates as a single reportable segment, developing and manufacturing semiconductor and thin film process equipment[108] - As of September 30, 2024, the company had three series of convertible senior notes outstanding: 2025 Notes ($26.5M principal), 2027 Notes ($25.0M principal), and 2029 Notes ($230.0M principal)[81][82] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strong Semiconductor market growth driven by AI, financial results, liquidity, and the business outlook Executive Summary and Business Update Veeco highlights its strong semiconductor market position driven by AI and automotive trends but anticipates a significant reduction in Data Storage revenue in 2025 - Strategy focuses on investing in advanced logic and memory, which has enabled the Semiconductor business to outperform Wafer Fab Equipment (WFE) growth for 3 consecutive years[117] - Shipped two next-generation laser annealing systems (NSA500) to Tier 1 customers for evaluation in Q4 2023, targeting advanced node logic and memory applications like Gate-All-Around transistors[119] - Announced over $50 million in orders for Wet Processing systems from a leading foundry, HBM manufacturer, and OSATs, driven by AI-related packaging demand[122] - Expects an approximate $70 million reduction in Data Storage business revenue in 2025 due to customers not investing in capacity expansion[125] Results of Operations Net sales grew 4% in Q3 and 9% in the nine-month period year-over-year, led by strong performance in the Semiconductor market, particularly in China and the Rest of APAC Q3 2024 vs Q3 2023 Net Sales by End-Market (in thousands) | End-Market | Q3 2024 | Q3 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Semiconductor | $124,143 | $98,155 | $25,988 | 26% | | Compound Semiconductor | $15,556 | $25,666 | $(10,110) | (39)% | | Data Storage | $32,750 | $33,957 | $(1,207) | (4)% | | Scientific & Other | $12,358 | $19,588 | $(7,230) | (37)% | | Total | $184,807 | $177,366 | $7,441 | 4% | Nine Months 2024 vs 2023 Net Sales by End-Market (in thousands) | End-Market | Nine Months 2024 | Nine Months 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Semiconductor | $354,463 | $297,537 | $56,926 | 19% | | Compound Semiconductor | $54,781 | $70,891 | $(16,110) | (23)% | | Data Storage | $84,727 | $69,416 | $15,311 | 22% | | Scientific & Other | $41,199 | $54,667 | $(13,468) | (25)% | | Total | $535,170 | $492,511 | $42,659 | 9% | - R&D expenses increased 12% in Q3 2024 YoY due to investments in new projects and applications for long-term growth in Semiconductor and Compound Semiconductor markets[132] Liquidity and Capital Resources The company's liquidity position remains strong with $321.0 million in cash and investments, supported by positive operating cash flow and an expanded credit facility Liquidity Position (in thousands) | Item | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $163,228 | $158,781 | | Short-term investments | $157,534 | $146,664 | | Total Liquidity | $321,020 | $305,784 | - On August 2, 2024, the company increased its senior secured revolving credit facility from $150 million to $225 million, with no amounts outstanding as of September 30, 2024[86][155] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risks are interest rate fluctuations on its investment portfolio and foreign currency exchange, with both currently considered immaterial - The investment portfolio, valued at $157.5 million, is subject to interest rate risk; a 100 basis point rate increase would decrease its fair value by $0.8 million[157] - Sales denominated in currencies other than the U.S. dollar represented only 4% of total net sales for the first nine months of 2024, making foreign exchange risk immaterial[160][161] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The principal executive and financial officers concluded that disclosure controls and procedures are effective as of September 30, 2024[162] - No changes in internal control over financial reporting occurred during the quarter ended September 30, 2024, that have materially affected or are reasonably likely to materially affect internal control[163] PART II—OTHER INFORMATION Item 1. Legal Proceedings The company is involved in routine legal proceedings that are not expected to have a material adverse effect on its financial condition - The company states that ongoing legal proceedings are not expected to have a material adverse effect on its financial condition or results[164] Item 1A. Risk Factors There have been no material changes from the risk factors previously disclosed in the company's 2023 Form 10-K - There have been no material changes from the risk factors previously disclosed in the 2023 Form 10-K[165] Other Part II Items This section confirms no unregistered sales of equity, no defaults on senior securities, and no other material information to disclose - The company reports 'None' for Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), and Item 5 (Other Information)[165] - Item 4 (Mine Safety Disclosures) is reported as 'Not Applicable'[165]