Veeco(VECO) - 2023 Q3 - Quarterly Report

Safe Harbor Statement This section addresses forward-looking statements and outlines various business, financial, and operational risks Forward-Looking Statements This section defines forward-looking statements, highlights inherent risks and uncertainties, and notes that financial estimates are based on management assumptions - Forward-looking statements are identified by words such as 'believes,' 'anticipates,' 'expects,' 'estimates,' 'targets,' 'plans,' 'intends,' 'will,' and similar expressions related to the future[9] - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts, which are subject to risks and uncertainties and may ultimately differ from actual results[10] Risks and Uncertainties This section outlines various business, market, financial, and operational risks, including those related to trade policy, competition, and supply chain - Key business risks include changes in U.S. trade policy and export controls, unfavorable market conditions, significant competition, and operating in industries characterized by rapid technological change[12] - The company faces risks from a concentrated customer base, cyclical industries, reliance on a limited number of suppliers, and long/unpredictable sales cycles[12][15] - Financial and capital markets risks include tightening credit markets, foreign currency exchange risks, potential impairment charges, and restrictions imposed by debt facilities[15] - Other general risks encompass the volatility of common stock price, inability to attract and retain employees, non-compliance with environmental, health, and safety regulations, and increased attention to ESG matters[20] PART I—FINANCIAL INFORMATION This part presents unaudited consolidated financial statements, notes, and management's discussion and analysis of financial condition Item 1. Financial Statements This section presents the company's unaudited consolidated financial statements, including balance sheets, income statements, and cash flows, along with detailed explanatory notes Consolidated Balance Sheets (September 30, 2023 vs. December 31, 2022) | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Total Assets | $1,246,233 | $1,128,183 | $118,050 | 10.46% | | Total Liabilities | $601,753 | $550,359 | $51,394 | 9.34% | | Total Stockholders' Equity | $644,480 | $577,824 | $66,656 | 11.54% | Consolidated Statements of Operations (Three Months Ended September 30, 2023 vs. 2022) | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :-------------------- | :--------- | | Net Sales | $177,366 | $171,913 | $5,453 | 3.17% | | Gross Profit | $76,877 | $69,951 | $6,926 | 9.90% | | Operating Income | $22,263 | $17,564 | $4,699 | 26.75% | | Net Income | $24,574 | $15,041 | $9,533 | 63.38% | | Basic EPS | $0.44 | $0.30 | $0.14 | 46.67% | | Diluted EPS | $0.42 | $0.27 | $0.15 | 55.56% | Consolidated Statements of Operations (Nine Months Ended September 30, 2023 vs. 2022) | Metric | 9M 2023 (in thousands) | 9M 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :-------------------- | :--------- | | Net Sales | $492,511 | $492,338 | $173 | 0.04% | | Gross Profit | $206,404 | $200,229 | $6,175 | 3.08% | | Operating Income | $45,757 | $46,904 | $(1,147) | -2.45% | | Net Income (Loss) | $(52,005) | $38,026 | $(90,031) | * | | Basic EPS | $(0.98) | $0.76 | $(1.74) | -228.95% | | Diluted EPS | $(0.98) | $0.70 | $(1.68) | -240.00% | Consolidated Statements of Cash Flows (Nine Months Ended September 30, 2023 vs. 2022) | Metric | 9M 2023 (in thousands) | 9M 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :-------------------- | :--------- | | Net cash provided by (used in) operating activities | $32,189 | $75,374 | $(43,185) | -57.29% | | Net cash provided by (used in) investing activities | $(27,180) | $(21,161) | $(6,019) | 28.44% | | Net cash provided by (used in) financing activities | $(3,630) | $(4,909) | $1,279 | -26.05% | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $1,325 | $49,196 | $(47,871) | -97.31% | Note 1 — Basis of Presentation This note outlines the basis for preparing interim financial statements, revenue recognition policies, and inventory valuation methods - Interim financial statements are prepared in accordance with U.S. GAAP and SEC Regulation S-X, serving as an update to the information presented in Veeco's 2022 Annual Report on Form 10-K[33] - Revenue is recognized upon the transfer of control of promised products or services to the customer, with most revenue recognized at a point in time, typically upon system delivery after contractual acceptance provisions are met[36][38] - Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis, and are assessed quarterly for obsolescence[44] Note 2 — Income Per Common Share This note details the calculation of basic and diluted income per common share, including the impact of outstanding options and convertible notes - Basic income per share is calculated by dividing net income by the weighted average number of shares outstanding, while diluted income per share includes the dilutive effect of outstanding options, share-based awards, and convertible notes[45] Income (Loss) Per Common Share (Three Months Ended September 30, 2023 vs. 2022) | Metric | Q3 2023 | Q3 2022 | | :-------------------------------- | :------ | :------ | | Basic EPS | $0.44 | $0.30 | | Diluted EPS | $0.42 | $0.27 | | Basic Weighted Average Shares Outstanding (in thousands) | 55,352 | 49,887 | | Diluted Weighted Average Shares Outstanding (in thousands) | 59,636 | 65,151 | Income (Loss) Per Common Share (Nine Months Ended September 30, 2023 vs. 2022) | Metric | 9M 2023 | 9M 2022 | | :-------------------------------- | :------ | :------ | | Basic EPS | $(0.98) | $0.76 | | Diluted EPS | $(0.98) | $0.70 | | Basic Weighted Average Shares Outstanding (in thousands) | 52,978 | 49,831 | | Diluted Weighted Average Shares Outstanding (in thousands) | 52,978 | 65,090 | Note 3 — Business Combination (Epiluvac) This note details the acquisition of Epiluvac AB, including the consideration paid, goodwill generated, and intangible assets acquired - On January 31, 2023, Veeco acquired Epiluvac AB, a manufacturer of chemical vapor deposition (CVD) epitaxy systems for silicon carbide (SiC) applications, to accelerate penetration into the emerging, high-growth SiC equipment market[47] Epiluvac Acquisition Consideration (January 31, 2023) | Metric | Amount (in thousands) | | :---------------------- | :-------------------- | | Cash paid, net of cash acquired | $30,373 | | Contingent consideration | $26,055 | | Acquisition date fair value | $56,428 | - Goodwill of $33.0 million was generated from the acquisition, primarily attributed to expected synergies from future growth and strategic advantages[51] Intangible Assets Acquired (January 31, 2023) | Category | Amount (in thousands) | Useful life | | :---------------------- | :-------------------- | :---------- | | Technology | $28,020 | 15 years | | Customer relationships | $460 | 5 years | | Backlog | $60 | 1.5 years | | Intangible assets acquired | $28,540 | | Note 4 — Assets This note provides details on the company's assets, including short-term investments, fair value measurements, inventories, goodwill, and other 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[54] Fair Value Measurement of Assets (September 30, 2023) | Asset Type | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Total (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :------------------- | | Cash equivalents | $99,506 | $4,718 | $0 | $104,224 | | Short-term investments | $23,886 | $106,231 | $0 | $130,117 | Inventories (September 30, 2023 vs. December 31, 2022) | Category | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :---------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Materials | $156,485 | $134,940 | $21,545 | 15.97% | | Work-in-process | $86,349 | $68,765 | $17,584 | 25.57% | | Finished goods | $9,286 | $3,203 | $6,083 | 189.91% | | Total Inventories | $252,120 | $206,908 | $45,212 | 21.85% | Goodwill (Nine Months Ended September 30, 2023) | Metric | Amount (in thousands) | | :-------------------------- | :-------------------- | | Balance at December 31, 2022 | $181,943 | | Acquisition | $33,021 | | Balance at September 30, 2023 | $214,964 | Intangible Assets (September 30, 2023 vs. December 31, 2022) | Category | Sep 30, 2023 Net (in thousands) | Dec 31, 2022 Net (in thousands) | Change (in thousands) | Change (%) | | :---------------------- | :------------------------------ | :------------------------------ | :-------------------- | :--------- | | Technology | $35,257 | $10,990 | $24,267 | 220.81% | | Customer relationships | $9,837 | $11,050 | $(1,213) | -10.98% | | Trademarks and tradenames | $942 | $1,847 | $(905) | -49.00% | | Other | $33 | $0 | $33 | N/A | | Total Intangible Assets | $46,069 | $23,887 | $22,182 | 92.86% | Note 5 — Liabilities This note details the company's liabilities, including accrued expenses, customer deposits, performance obligations, convertible senior notes, and credit facilities Accrued Expenses and Other Current Liabilities (September 30, 2023 vs. December 31, 2022) | Category | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Payroll and related benefits | $27,809 | $30,044 | $(2,235) | -7.44% | | Contingent consideration | $7,279 | $0 | $7,279 | N/A | | Warranty | $8,552 | $8,601 | $(49) | -0.57% | | Operating lease liabilities | $3,825 | $3,333 | $492 | 14.76% | | Interest | $3,007 | $2,853 | $154 | 5.40% | | Professional fees | $2,047 | $2,102 | $(55) | -2.62% | | Sales, use, and other taxes | $5,995 | $2,027 | $3,968 | 195.76% | | Other | $7,085 | $7,071 | $14 | 0.20% | | Total | $65,599 | $56,031 | $9,568 | 17.08% | - Customer deposits increased to $118.7 million at September 30, 2023, from $110.2 million at December 31, 2022[70] - The company has approximately $244.5 million of remaining performance obligations on contracts with an original estimated duration of one year or more, with approximately 83% expected to be recognized within one year[71] - The company issued $230.0 million of 2.875% convertible senior notes due 2029 and repurchased and retired $106.0 million of 2025 Notes and $100.0 million of 2027 Notes, resulting in a total loss on extinguishment of approximately $97.1 million for the nine months ended September 30, 2023[78][79][81][82][165] Convertible Senior Notes Carrying Value (September 30, 2023 vs. December 31, 2022) | Note Type | Sep 30, 2023 Net Carrying Value (in thousands) | Dec 31, 2022 Net Carrying Value (in thousands) | Change (in thousands) | Change (%) | | :---------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------- | | 2023 Notes | $0 | $20,169 | $(20,169) | -100.00% | | 2025 Notes | $26,376 | $131,510 | $(105,134) | -79.94% | | 2027 Notes | $24,664 | $122,981 | $(98,317) | -79.95% | | 2029 Notes | $223,606 | $0 | $223,606 | N/A | | Total | $274,646 | $274,660 | $(14) | -0.01% | - The company has a $150 million senior secured revolving credit facility, which was undrawn as of September 30, 2023, and December 31, 2022[94][100] Note 6 — Commitments and Contingencies This note outlines the company's operating lease liabilities, purchase commitments, and outstanding bank guarantees and letters of credit - The weighted average remaining lease term for the company's operating leases as of September 30, 2023, was 12 years, with a weighted average discount rate of 5.6%[104] Operating Lease Liabilities Maturities (September 30, 2023) | Period | Operating Leases (in thousands) | | :-------------------------- | :------------------------------ | | Payments due by period: | | | 2023 | $65 | | 2024 | $4,604 | | 2025 | $4,095 | | 2026 | $4,071 | | 2027 | $3,633 | | Thereafter | $34,245 | | Total future minimum lease payments | $50,713 | | Less: Imputed interest | $(14,734) | | Total | $35,979 | - Veeco has purchase commitments of $216.2 million at September 30, 2023, with substantially all becoming due within one year[107] - Outstanding bank guarantees and standby letters of credit totaled $18.7 million at September 30, 2023, with $13.0 million of unused capacity available[108] Note 7 — Equity This note details the changes in the company's stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit Changes in Stockholders' Equity (Nine Months Ended September 30, 2023) | Metric | Dec 31, 2022 (in thousands) | Sep 30, 2023 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Common Stock | $517 | $564 | $47 | | Additional Paid-in Capital | $1,078,180 | $1,196,224 | $118,044 | | Accumulated Deficit | $(501,801) | $(553,806) | $(52,005) | | Accumulated Other Comprehensive Income | $928 | $1,498 | $570 | | Total Stockholders' Equity | $577,824 | $644,480 | $66,656 | Note 8 — Share-based Compensation This note provides details on the company's share-based compensation expense, including its allocation across cost of sales, R&D, and SG&A - Share-based compensation expense for the nine months ended September 30, 2023, was $22.4 million, an increase from $17.0 million in the comparable prior period[114] Share-based Compensation Expense (Nine Months Ended September 30, 2023 vs. 2022) | Category | 9M 2023 (in thousands) | 9M 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :-------------------- | :--------- | | Cost of sales | $4,579 | $3,384 | $1,195 | 35.31% | | Research and development | $6,815 | $4,939 | $1,876 | 37.98% | | Selling, general, and administrative | $10,985 | $8,646 | $2,339 | 27.05% | | Total | $22,379 | $16,969 | $5,410 | 31.89% | Note 9 — Income Taxes This note details the company's income tax expense or benefit and effective tax rates, highlighting the impact of R&D tax credits and debt extinguishment - The company reported an income tax benefit of $2.1 million for the three months ended September 30, 2023, and $0.5 million for the nine months ended September 30, 2023, primarily due to previously unrecognized R&D tax credits and tax benefits from the loss on extinguishment of convertible notes[117][118][119] Income Tax Expense (Benefit) and Effective Tax Rate (Three Months Ended September 30, 2023 vs. 2022) | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | | Income (loss) before income taxes | $22,510 | $15,249 | | Income tax expense (benefit) | $(2,064) | $208 | | Effective tax rate | (9.17)% | 1.36% | Income Tax Expense (Benefit) and Effective Tax Rate (Nine Months Ended September 30, 2023 vs. 2022) | Metric | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | | Income (loss) before income taxes | $(52,521) | $39,151 | | Income tax expense (benefit) | $(516) | $1,125 | | Effective tax rate | 0.98% | 2.87% | Note 10 — Segment Reporting and Geographic Information This note provides details on the company's single operating segment, its four end-markets, and sales performance 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 primarily sold to make electronic devices[121] - The company serves four end-markets: Semiconductor, Compound Semiconductor, Data Storage, and Scientific & Other[122][123][124][125] Sales by End-Market (Three Months Ended September 30, 2023 vs. 2022) | End-Market | Q3 2023 (in thousands) | Q3 2022 (in thousands) | Change (in thousands) | Change (%) | | :--------------------- | :--------------------- | :--------------------- | :-------------------- | :--------- | | Semiconductor | $98,155 | $100,387 | $(2,232) | -2.22% | | Compound Semiconductor | $25,666 | $28,094 | $(2,428) | -8.64% | | Data Storage | $33,957 | $27,702 | $6,255 | 22.58% | | Scientific & Other | $19,588 | $15,730 | $3,858 | 24.53% | | Total | $177,366 | $171,913 | $5,453 | 3.17% | Sales by Geographic Region (Three Months Ended September 30, 2023 vs. 2022) | Geographic Region | Q3 2023 (in thousands) | Q3 2022 (in thousands) | Change (in thousands) | Change (%) | | :---------------- | :--------------------- | :--------------------- | :-------------------- | :--------- | | United States | $58,337 | $53,747 | $4,590 | 8.54% | | EMEA | $25,874 | $17,562 | $8,312 | 47.33% | | China | $40,823 | $36,193 | $4,630 | 12.79% | | Rest of APAC | $52,223 | $64,259 | $(12,036) | -18.73% | | Rest of World | $109 | $152 | $(43) | -28.29% | | Total | $177,366 | $171,913 | $5,453 | 3.17% | Sales by End-Market (Nine Months Ended September 30, 2023 vs. 2022) | End-Market | 9M 2023 (in thousands) | 9M 2022 (in thousands) | Change (in thousands) | Change (%) | | :--------------------- | :--------------------- | :--------------------- | :-------------------- | :--------- | | Semiconductor | $297,537 | $275,528 | $22,009 | 7.99% | | Compound Semiconductor | $70,891 | $96,325 | $(25,434) | -26.40% | | Data Storage | $69,416 | $70,845 | $(1,429) | -2.02% | | Scientific & Other | $54,667 | $49,640 | $5,027 | 10.13% | | Total | $492,511 | $492,338 | $173 | 0.04% | Sales by Geographic Region (Nine Months Ended September 30, 2023 vs. 2022) | Geographic Region | 9M 2023 (in thousands) | 9M 2022 (in thousands) | Change (in thousands) | Change (%) | | :---------------- | :--------------------- | :--------------------- | :-------------------- | :--------- | | United States | $125,087 | $159,157 | $(34,070) | -21.41% | | EMEA | $66,332 | $66,221 | $111 | 0.17% | | China | $151,556 | $95,071 | $56,485 | 59.41% | | Rest of APAC | $149,288 | $170,526 | $(21,238) | -12.45% | | Rest of World | $248 | $1,363 | $(1,115) | -81.80% | | Total | $492,511 | $492,338 | $173 | 0.04% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of financial condition and results of operations, covering macroeconomic factors, business updates, and detailed financial performance - Macroeconomic challenges include supply chain constraints, an inflationary and high-interest rate environment, heightened China export regulations, and a forecasted decline in semiconductor and related markets[130] - The supply chain is improving with a significant decline in lead times, though some material lead times remain higher than pre-pandemic levels[131] - Reduced demand for certain products like advanced packaging lithography, spare parts, and upgrades is observed due to low customer utilization rates, leading to order cancellations or delayed shipments/payments[132] - The Semiconductor business is expected to be up about 10% in 2023, outpacing wafer fab equipment spending growth, driven by laser annealing solutions in advanced node logic and High Bandwidth Memory (HBM) DRAM devices[136] - Veeco acquired SiC technology on January 31, 2023, to accelerate its entry into the high-growth SiC power epitaxy equipment market, with initial revenue expected in 2024[137] - Total 2023 revenue is expected to be in the range of $648 million to $668 million[140] 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 etch & clean technologies for advanced semiconductor devices[129] Business Update This section discusses macroeconomic challenges, supply chain improvements, demand trends, regulatory impacts, and market performance across key end-markets - Macroeconomic challenges include supply chain constraints, an inflationary and high-interest rate environment, heightened China export regulations, and a forecasted decline in semiconductor markets[130] - Supply chain conditions are improving with declining lead times, though some material lead times remain above pre-pandemic levels[131] - Demand for advanced packaging lithography, spare parts, and upgrades has decreased due to low customer utilization rates, leading to order cancellations or delays[132] - New US export regulations (October 17, 2023) are not expected to materially impact the business, but the regulatory landscape is dynamic[133] - Semiconductor market sales declined 8% sequentially in Q3 but are expected to be up 10% for 2023, driven by advanced node logic and memory applications (HBM DRAM, EUV lithography)[135][136] - Compound Semiconductor market sales increased quarter-over-quarter but declined year-over-year, with continued investment in power electronics (GaN, SiC) and Micro-LED[137] - Data Storage market sales increased significantly quarter-over-quarter and year-over-year, driven by cloud-based storage and increased capital intensity in HDD manufacturing[138] - Total 2023 revenue is projected to be between $648 million and $668 million[140] Results of Operations (Three Months Ended September 30, 2023 and 2022) This section analyzes the company's financial performance for the three months ended September 30, 2023, focusing on net sales, gross profit, operating expenses, and net income Key Financials (Three Months Ended September 30, 2023 vs. 2022) | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :-------------------- | :--------- | | Net sales | $177,366 | $171,913 | $5,453 | 3% | | Cost of sales | $100,489 | $101,962 | $(1,473) | -1% | | Gross profit | $76,877 | $69,951 | $6,926 | 10% | | Operating expenses, net | $54,614 | $52,387 | $2,227 | 4% | | Operating income | $22,263 | $17,564 | $4,699 | 27% | | Net income | $24,574 | $15,041 | $9,533 | 63% | - Gross profit increased by 10% due to an increase in sales volume and improved gross margins, primarily driven by product mix and favorable spending[146] - Research and development expenses increased by 6% due to personnel-related expenses as the company invests in new R&D and additional applications for its technology[147] - Net interest income improved by $2.5 million, shifting from a net expense of $2.3 million in Q3 2022 to a net income of $0.2 million in Q3 2023, primarily due to higher interest rates[150] - Income tax benefit for Q3 2023 was $2.1 million, compared to a $0.2 million tax expense in Q3 2022, mainly due to a $2.0 million tax benefit from previously unrecognized research and development tax credits[153] Results of Operations (Nine Months Ended September 30, 2023 and 2022) This section analyzes the company's financial performance for the nine months ended September 30, 2023, focusing on net sales, gross profit, operating expenses, and net income Key Financials (Nine Months Ended September 30, 2023 vs. 2022) | Metric | 9M 2023 (in thousands) | 9M 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :-------------------- | :--------- | | Net sales | $492,511 | $492,338 | $173 | 0% | | Cost of sales | $286,107 | $292,109 | $(6,002) | -2% | | Gross profit | $206,404 | $200,229 | $6,175 | 3% | | Operating expenses, net | $160,647 | $153,325 | $7,322 | 5% | | Operating income | $45,757 | $46,904 | $(1,147) | -2% | | Net income (loss) | $(52,005) | $38,026 | $(90,031) | * | - Net sales remained flat year-over-year, with increases in the Semiconductor and Scientific & Other markets offset by decreases in the Compound Semiconductor and Data Storage markets[157] - Gross profit increased by 3% due to higher gross margins, driven by product mix of sales and favorable spending[158] - Research and development expenses increased by 8% due to personnel-related investments in new R&D and additional applications for technology[159][160] - Net interest expense decreased by $6.6 million, primarily due to an increase in interest income from higher interest rates[164] - A significant 'Other income (expense), net' of $(97.1) million was recorded, primarily due to a $97.1 million loss on extinguishment of the 2025 and 2027 Convertible Senior Notes[165] - Income tax benefit for 9M 2023 was $0.5 million, compared to a $1.1 million tax expense in 9M 2022, driven by R&D tax credits and tax benefits from the debt extinguishment loss[167] Liquidity and Capital Resources This section discusses the company's cash position, changes in cash flows from operating, investing, and financing activities, and its ability to meet future obligations Cash, Cash Equivalents, and Short-term Investments (September 30, 2023 vs. December 31, 2022) | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Cash and cash equivalents | $156,419 | $154,925 | $1,494 | 0.96% | | Restricted cash | $378 | $547 | $(169) | -30.90% | | Short-term investments | $130,117 | $147,488 | $(17,371) | -11.78% | | Total | $286,914 | $302,960 | $(16,046) | -5.30% | - Net cash provided by operating activities decreased to $32.2 million for 9M 2023 from $75.4 million for 9M 2022, primarily due to a net loss and changes in operating assets and liabilities[169] - Net cash used in investing activities increased to $27.2 million for 9M 2023 from $21.2 million for 9M 2022, mainly due to the acquisition of Epiluvac and capital expenditures[170] - Net cash used in financing activities decreased to $3.6 million for 9M 2023 from $4.9 million for 9M 2022, reflecting the issuance of 2029 Notes partially offsetting repurchases of 2025/2027 Notes and other payments[171] - The company believes its projected cash flow from operations, combined with cash and short-term investments, will be sufficient to meet working capital and contractual obligations for the next twelve months[169] - Veeco has access to a $150.0 million revolving credit facility (undrawn) with an option to increase by $75.0 million, maturing in December 2026[173] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section discusses the company's exposure to interest rate risk on its investment portfolio and currency exchange risk from global operations, noting that most foreign sales are USD-denominated - A 100 basis point increase in interest rates would result in a decrease of $0.6 million in the fair value of the investment portfolio as of September 30, 2023[176] - Net sales to customers outside the United States represented approximately 67% and 75% of total net sales for the three and nine months ended September 30, 2023, respectively[179] - Most of the company's sales outside the United States are denominated in U.S. dollars, resulting in an immaterial impact on consolidated results from a 10% change in foreign exchange rates[180] Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures and notes the ongoing integration of the acquired Epiluvac business into internal control over financial reporting - The company's principal executive and financial officers evaluated and concluded that disclosure controls and procedures were effective as of September 30, 2023[181] - The acquired Epiluvac AB business is being integrated into the overall internal control over financial reporting process, with management assessing and implementing necessary controls[184] PART II—OTHER INFORMATION This part covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings The company is involved in various legal proceedings in the normal course of business, not expecting a material adverse effect on its financial position or results - 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[109][186] Item 1A. Risk Factors This section refers to previously disclosed risk factors, confirming no material changes since the Safe Harbor Statement and 2022 Form 10-K - There have been no material changes from the risk factors previously disclosed in the Safe Harbor Statement and the 2022 Form 10-K[187] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms no unregistered sales of equity securities or use of proceeds occurred during the reported fiscal quarter - There were no unregistered sales of equity securities and use of proceeds during the fiscal quarter ended September 30, 2023[188] Item 3. Defaults Upon Senior Securities This section reports no defaults upon senior securities occurred during the fiscal quarter - There were no defaults upon senior securities during the fiscal quarter ended September 30, 2023[189] Item 4. Mine Safety Disclosures This section states that Mine Safety Disclosures are not applicable to the company - Mine Safety Disclosures are not applicable to the company[190] Item 5. Other Information This section discloses the adoption of Rule 10b5-1 trading arrangements by the CEO and CFO during the quarter, detailing shares and trading periods - On August 23, 2023, CEO William J. Miller adopted a Rule 10b5-1 trading plan covering the sale of 84,201 shares of common stock between November 27, 2023, and November 29, 2024[191] - On August 22, 2023, CFO John Kiernan adopted a Rule 10b5-1 trading plan covering the sale of 30,000 shares of common stock between November 27, 2023, and November 29, 2024[192] Item 6. Exhibits This section lists the exhibits filed with the SEC, including certifications from the CEO and CFO, and XBRL-related documents - Exhibits include certifications from the Chief Executive Officer (31.1, 32.1) and Chief Financial Officer (31.2, 32.2) as well as XBRL instance, schema, presentation, calculation, and label documents[196] SIGNATURES This section provides the official signatures of the Chief Executive Officer and Chief Financial Officer, confirming the report's submission - The report was signed on November 6, 2023, by William J. Miller, Ph.D., Chief Executive Officer, and John P. Kiernan, Senior Vice President and Chief Financial Officer[199][200]