UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 3 , 2018
VEECO INSTRUMENTS INC.(Exact name of registrant as specified in its charter)
Delaware
0-16244
11-2989601(State or other jurisdiction
(Commission
(IRS Employerof incorporation)
File Number)
Identification No.)
Terminal Drive, Plainview, New York 11803 (Address of principal executive offices)
(516) 677-0200
(Registrant’s telephone number, including area code)
Not applicable(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below): o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) orRule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company o If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02 Results of Operations and Financial Condition. On May 7, 2018, Veeco Instruments Inc. issued a press release announcing its financial results for the quarter ended March 31, 2018. In connection with therelease and the related conference call, Veeco posted a presentation relating to its first quarter 2018 financial results on its website (www.veeco.com). Copies ofthe press release and presentation are furnished as Exhibit 99.1 and Exhibit 99.2 to this report. Item 5.07 Submission of Matters to a Vote of Security Holders. On May 3, 2018, Veeco held its 2018 Annual Meeting. The matters voted on at the meeting are described in detail in the Company’s proxy statement for themeeting, which was filed with the SEC on March 19, 2018. As of the record date for the meeting, there were 48,125,907 shares of common stock outstanding, each of which was entitled to one vote with respect to each of thematters voted on at the meeting. Each of the directors up for election was elected and each of the other matters was approved by the required number of votes oneach such matter. The terms of each of the following directors continued after the meeting: Kathleen A. Bayless, Gordon Hunter, John R. Peeler, Peter J. Simoneand Thomas St. Dennis. The final voting results were:
Matter
For
Withheld
Broker Non- votes
1. Election of Directors
(a) Richard A. D’Amore
39,064,432
1,026,970
3,074,908
(b) Keith D. Jackson
39,322,795
768,607
3,074,908
Matter
For
Against
Abstained
Broker Non-votes
2. Approval of the advisory vote onexecutive compensation
33,077,477
6,400,399
613,526
3,074,908
3. Ratification of the appointment of KPMGLLP
42,917,414
104,598
144,298
0
Item 9.01 Financial Statements and Exhibits. (d) Exhibits . Exhibit
Description 99.1
Press release issued by Veeco dated May 7, 2018 99.2
Veeco Q1 2018 Conference Call, May 7, 2018 The information in this report, including the exhibits, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended(the “Exchange Act”), or otherwise subject to the liabilities under that Section, nor shall this information or these exhibits be deemed to be incorporated byreference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersignedhereunto duly authorized. May 7, 2018 VEECO INSTRUMENTS INC.
By: /s/ Gregory A. RobbinsName: Gregory A. RobbinsTitle: Senior Vice President and General Counsel
EXHIBIT INDEX
Exhibit
Description 99.1
Press release issued by Veeco dated May 7, 2018 99.2
Veeco Q1 2018 Conference Call, May 7, 2018
3
Exhibit 99.1
NEWS
VEECO REPORTS FIRST QUARTER 2018 FINANCIAL RESULTS
First Quarter 2018 Highlights:
· Revenues of $158.6 million, compared with $94.5 million in the same period last year· GAAP net loss of $15.8 million, or $0.34 loss per share· Non-GAAP net income of $9.2 million, or $0.20 per diluted share
Plainview, N.Y., May 7, 2018 — Veeco Instruments Inc. (Nasdaq: VECO) today announced financial results for its first quarter ended March 31, 2018. Results arereported in accordance with U.S. generally accepted accounting principles (“GAAP”) and are also reported adjusting for certain items (“Non-GAAP”). Areconciliation between GAAP and Non-GAAP operating results is provided at the end of this press release.
U.S. Dollars in millions, except per share data
GAAP Results
Q1 ‘18
Q1 ‘17
Revenue
$ 158.6
$ 94.5
Net income (loss)
$ (15.8) $ 1.6
Diluted earnings (loss) per share
$ (0.34) $ 0.04
Non-GAAP Results
Q1 ‘18
Q1 ‘17
Net income (loss)
$ 9.2
$ 4.2
Operating income (loss)
$ 11.3
$ 4.8
Diluted earnings (loss) per share
$ 0.20
$ 0.11
“2018 is off to a great start with strong sequential and year-over-year revenue growth. Our Non-GAAP gross margin, operating income, net income and EPS allexceeded our guided ranges,” commented John R. Peeler, Chairman and Chief Executive Officer. “Sales growth in the first quarter was driven primarily byshipments of our lithography systems into the advanced packaging market, and shipments of MOCVD systems for LED applications. “As we work towards our goal of being a more diversified company, we are pleased to see orders grow in the Front-End Semi and Advanced Packaging, MEMS &RF Filter markets,” continued Mr. Peeler. “Our Ultratech integration is also proceeding well and we remain encouraged with Veeco’s growth prospects ahead.”
Guidance and Outlook The following guidance is provided for Veeco’s second quarter 2018:
· Revenue is expected in the range of $145 million to $170 million· Non-GAAP operating income is expected in the range of $2 million to $11 million· GAAP earnings (loss) per share are expected in the range of ($0.45) to ($0.26)· Non-GAAP earnings (loss) per share are expected in the range of $0.01 to $0.20
Please refer to the tables at the end of this press release for further details. Conference Call Information A conference call reviewing these results has been scheduled for today, May 7, 2018, starting at 5:00pm ET. To join the call, dial 1-800-281-7973 (toll free) or 1-323-794-2093 and use passcode 1840311. Participants may also access a live webcast of the call by visiting the investor relations section of Veeco’s website atir.veeco.com. A replay of the webcast will be made available on the Veeco website beginning at 8:00pm ET this evening. We will post an accompanying slidepresentation to our website prior to the beginning of the call. New Accounting Standard The Company adopted the new accounting standard, ASC 606, related to revenue recognition, effective January 1, 2018. The prior periods presented here havebeen recast to reflect the adoption of this new standard. About Veeco Veeco (NASDAQ: VECO) is a leading manufacturer of innovative semiconductor process equipment. Our proven MOCVD, lithography, laser annealing, ion beamand single wafer etch & clean technologies play an integral role in producing LEDs for solid-state lighting and displays, and in the fabrication of advancedsemiconductor devices. With equipment designed to maximize performance, yield and cost of ownership, Veeco holds technology leadership positions in all theseserved markets. To learn more about Veeco’s innovative equipment and services, visit www.veeco.com. Forward-looking Statements To the extent that this news release discusses expectations or otherwise makes statements about the future, such statements are forward-looking and are subject to anumber of risks and uncertainties that could cause actual results to differ materially from the statements made. These factors include the risks discussed in theBusiness Description and Management’s Discussion and Analysis sections of Veeco’s Annual Report on Form 10-K for the year ended December 31, 2017 and inour subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and press releases. Veeco does not undertake any obligation to update any forward-looking statements to reflect future events or circumstances after the date of such statements.
- financial tables attached- Veeco Contacts: Investors: Media:Anthony Bencivenga 516-677-0200 x1308 David Pinto [email protected] [email protected]
2
Veeco Instruments Inc. and Subsidiaries
Condensed Consolidated Statements of Operations(in thousands, except per share amounts)
(unaudited)
Three months ended March 31,
2018
2017
Net sales
$ 158,574
$ 94,499
Cost of sales
101,894
59,999
Gross profit
56,680
34,500
Operating expenses, net:
Research and development
24,320
14,989
Selling, general, and administrative
26,383
19,105
Amortization of intangible assets
13,532
2,867
Restructuring
2,695
1,338
Acquisition costs
1,342
1,361
Asset impairment
—
463
Other, net
(157) (78)Total operating expenses, net
68,115
40,045
Operating income (loss)
(11,435) (5,545)Interest income (expense), net
(4,622) (3,342)Income (loss) before income taxes
(16,057) (8,887)Income tax expense (benefit)
(230) (10,527)Net income (loss)
$ (15,827) $ 1,640
Income (loss) per common share:
Basic
$ (0.34) $ 0.04
Diluted
$ (0.34) $ 0.04
Weighted average number of shares:
Basic
46,963
39,619
Diluted
46,963
40,140
3
Veeco Instruments Inc. and SubsidiariesCondensed Consolidated Balance Sheets
(in thousands)(unaudited)
March 31,
December 31,
2018
2017
Assets
Current assets:
Cash and cash equivalents
$ 245,525
$ 279,736
Restricted cash
841
847
Short-term investments
65,130
47,780
Accounts receivable, net
108,219
98,866
Contract assets
1,984
160
Inventories
130,964
120,266
Deferred cost of sales
1,080
15,994
Prepaid expenses and other current assets
29,615
33,437
Total current assets
583,358
597,086
Property, plant and equipment, net
83,100
85,058
Intangible assets, net
356,311
369,843
Goodwill
307,131
307,131
Deferred income taxes
3,281
3,047
Other assets
28,847
25,310
Total assets
$ 1,362,028
$ 1,387,475
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$ 58,273
$ 50,318
Accrued expenses and other current liabilities
54,297
58,068
Customer deposits and deferred revenue
94,473
112,032
Income taxes payable
1,581
3,846
Total current liabilities
208,624
224,264
Deferred income taxes
36,794
36,845
Long-term debt
278,489
275,630
Other liabilities
10,164
10,643
Total liabilities
534,071
547,382
Total stockholders’ equity
827,957
840,093
Total liabilities and stockholders’ equity
$ 1,362,028
$ 1,387,475
4
Veeco Instruments Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Data(in thousands, except per share amounts)
(unaudited)
Non-GAAP Adjustments
Three months ended March 31, 2018
GAAP
Share-Based Compensation
Amortization
Other
Non-GAAP
Net sales
$ 158,574
$ 158,574
Gross profit
56,680
554
611
57,845
Gross margin
35.7%
36.5%Research and development
24,320
(954)
23,366
Selling, general, and administrative and Other, net
26,226
(2,857)
(188) 23,181
Net income (loss)
(15,827) 4,537
13,532
6,985
9,227
Income (loss) per common share:
Basic
$ (0.34)
$ 0.20
Diluted
(0.34)
0.20
Weighted average number of shares:
Basic
46,963
47,022
Diluted
46,963
47,191
Veeco Instruments Inc. and Subsidiaries
Other Non-GAAP Adjustments(in thousands)(unaudited)
Three months ended March 31, 2018
Restructuring
2,523
Acquisition related
1,342
Release of inventory fair value step-up associated with the Ultratech purchase accounting
514
Depreciation of PP&E fair value step-up associated with the Ultratech purchase accounting
293
Non-cash interest expense
2,859
Other
(8)Non-GAAP tax adjustment *
(538)Total Other
6,985
* - The ‘with or without’ method is utilized to determine the income tax effect of all Non-GAAP adjustments. These tables include financial measures adjusted for the impact of certain items; these financial measures are therefore not calculated in accordance with U.S.generally accepted accounting principles (“GAAP”). These Non-GAAP financial measures exclude items such as: share-based compensation expense; chargesrelating to restructuring initiatives; non-cash asset impairments; certain other non-operating gains and losses; and acquisition-related items such as transactioncosts, non-cash amortization of acquired intangible assets, incremental transaction-related compensation, and certain integration costs. These Non-GAAP financial measures may be different from Non-GAAP financial measures used by other companies. Non-GAAP financial measures should notbe considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. By excluding these items, Non-GAAPfinancial measures are intended to facilitate meaningful comparisons to historical operating results, competitors’ operating results, and estimates made bysecurities analysts. Management is evaluated on key performance metrics including Non-GAAP Operating Income (loss), which is used to determine managementincentive compensation as well as to forecast future periods. These Non-GAAP financial measures may be useful to investors in allowing for greater transparencyof supplemental information used by management in its financial and operational decision-making. In addition, similar Non-GAAP financial measures havehistorically been reported to investors; the inclusion of comparable numbers provides consistency in financial reporting. Investors are encouraged to review thereconciliation of the Non-GAAP financial measures used in this news release to their most directly comparable GAAP financial measures.
5
Veeco Instruments Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Data(in thousands, except per share amounts)
(unaudited)
Non-GAAP Adjustments
Three months ended March 31, 2017
GAAP
Share-based Compensation
Amortization
Other
Non-GAAP
Net sales
$ 94,499
$ 94,499
Gross profit
34,500
657
89
35,246
Gross margin
36.5%
37.3%Research and development
14,989
(429)
14,560
Selling, general, and administrative and Other, net
19,027
(3,100)
(1,361) 14,566
Net income (loss)
1,640
4,186
2,867
(4,504) 4,189
Income (loss) per common share:
Basic
$ 0.04
$ 0.11
Diluted
0.04
0.10
Weighted average number of shares:
Basic
39,619
39,619
Diluted
40,140
40,140
Veeco Instruments Inc. and Subsidiaries
Other Non-GAAP Adjustments(in thousands)(unaudited)
Three months ended March 31, 2017
Restructuring
1,338
Acquisition related
1,361
Asset impairment
463
Accelerated depreciation
89
Non-cash interest expense
2,185
Non-GAAP tax adjustment *
(9,940)Total Other
(4,504)
* - The ‘with or without’ method is utilized to determine the income tax effect of all Non-GAAP adjustments. Also included in the Non-GAAP tax adjustment isthe exclusion of a $4.9 million tax benefit associated with the Convertible Senior Notes, as well as a $4.9 million tax benefit associated with the reversal of areserve for an uncertain tax position. These tables include financial measures adjusted for the impact of certain items; these financial measures are therefore not calculated in accordance with U.S.generally accepted accounting principles (“GAAP”). These Non-GAAP financial measures exclude items such as: share-based compensation expense; chargesrelating to restructuring initiatives; non-cash asset impairments; certain other non-operating gains and losses; and acquisition-related items such as transactioncosts, non-cash amortization of acquired intangible assets, incremental transaction-related compensation, and certain integration costs. These Non-GAAP financial measures may be different from Non-GAAP financial measures used by other companies. Non-GAAP financial measures should notbe considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. By excluding these items, Non-GAAPfinancial measures are intended to facilitate meaningful comparisons to historical operating results, competitors’ operating results, and estimates made by securitiesanalysts. Management is evaluated on key performance metrics including Non-GAAP Operating Income (loss), which is used to determine management incentivecompensation as well as to forecast future periods. These Non-GAAP financial measures may be useful to investors in allowing for greater transparency ofsupplemental information used by management in its financial and operational decision-making. In addition, similar Non-GAAP financial measures havehistorically been reported to investors; the inclusion of comparable numbers provides consistency in financial reporting. Investors are encouraged to review thereconciliation of the Non-GAAP financial measures used in this news release to their most directly comparable GAAP financial measures.
6
Veeco Instruments Inc. and Subsidiaries
Reconciliation of GAAP Net Income (loss) to Non-GAAP Operating Income (loss)(in thousands)(unaudited)
Three months ended
Three months ended
March 31, 2018
March 31, 2017
GAAP Net income (loss)
$ (15,827) $ 1,640
Share-based compensation
4,537
4,186
Amortization
13,532
2,867
Restructuring
2,523
1,338
Acquisition related
1,342
1,361
Release of inventory fair value step-up associated with the Ultratech purchase accounting
514
—
Depreciation of PP&E fair value step-up associated with the Ultratech purchase accounting
293
—
Asset impairment
—
463
Accelerated depreciation
—
89
Interest (income) expense
4,622
3,342
Other
(8) —
Income tax expense (benefit)
(230) (10,527)Non-GAAP Operating Income (loss)
$ 11,298
$ 4,759
This table includes financial measures adjusted for the impact of certain items; these financial measures are therefore not calculated in accordance with U.S.generally accepted accounting principles (“GAAP”). These Non-GAAP financial measures exclude items such as: share-based compensation expense; chargesrelating to restructuring initiatives; non-cash asset impairments; certain other non-operating gains and losses; and acquisition-related items such as transactioncosts, non-cash amortization of acquired intangible assets, incremental transaction-related compensation, and certain integration costs. These Non-GAAP financial measures may be different from Non-GAAP financial measures used by other companies. Non-GAAP financial measures should notbe considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. By excluding these items, Non-GAAPfinancial measures are intended to facilitate meaningful comparisons to historical operating results, competitors’ operating results, and estimates made by securitiesanalysts. Management is evaluated on key performance metrics including Non-GAAP Operating Income (loss), which is used to determine management incentivecompensation as well as to forecast future periods. These Non-GAAP financial measures may be useful to investors in allowing for greater transparency ofsupplemental information used by management in its financial and operational decision-making. In addition, similar Non-GAAP financial measures havehistorically been reported to investors; the inclusion of comparable numbers provides consistency in financial reporting. Investors are encouraged to review thereconciliation of the Non-GAAP financial measures used in this news release to their most directly comparable GAAP financial measures.
7
Veeco Instruments Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Data(in millions, except per share amounts)
(unaudited)
Non-GAAP Adjustments
Guidance for the three months ending June 30, 2018
GAAP
Share-based Compensation
Amortization
Other
Non-GAAP
Net sales
$ 145 - $ 170
$ 145 - $ 170
Gross profit
47 - 58
1
—
—
48 - 59
Gross margin
33% - 35%
33% - 35%
Net income (loss)
$ (21) - $ (12)
4
14
4
$ 1 - $ 10
Income (loss) per diluted common share
$ (0.45) - $ (0.26)
$ 0.01 - $ 0.20
Weighted average number of shares
47
47
47
47
Veeco Instruments Inc. and Subsidiaries
Reconciliation of GAAP Net Income (loss) to Non-GAAP Operating Income (Loss)(in millions)(unaudited)
Guidance for the three months ending June 30, 2018
GAAP Net income (loss)
$ (21) -
$ (12)Share-based compensation
4
-
4
Amortization
14
-
14
Restructuring
1
-
1
Acquisition related
1
-
1
Interest expense, net
5
-
5
Income tax expense (benefit)
(2) -
(2)Non-GAAP Operating Income
$ 2
-
$ 11
Note: Amounts may not calculate precisely due to rounding. These table includes financial measures adjusted for the impact of certain items; these financial measures are therefore not calculated in accordance with U.S.generally accepted accounting principles (“GAAP”). These Non-GAAP financial measures exclude items such as: share-based compensation expense; chargesrelating to restructuring initiatives; non-cash asset impairments; certain other non-operating gains and losses; and acquisition-related items such as transactioncosts, non-cash amortization of acquired intangible assets, incremental transaction-related compensation, and certain integration costs. These Non-GAAP financial measures may be different from Non-GAAP financial measures used by other companies. Non-GAAP financial measures should notbe considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. By excluding these items, Non-GAAPfinancial measures are intended to facilitate meaningful comparisons to historical operating results, competitors’ operating results, and estimates made by securitiesanalysts. Management is evaluated on key performance metrics including Non-GAAP Operating Income (loss), which is used to determine management incentivecompensation as well as to forecast future periods. These Non-GAAP financial measures may be useful to investors in allowing for greater transparency ofsupplemental information used by management in its financial and operational decision-making. In addition, similar Non-GAAP financial measures havehistorically been reported to investors; the inclusion of comparable numbers provides consistency in financial reporting. Investors are encouraged to review thereconciliation of the Non-GAAP financial measures used in this news release to their most directly comparable GAAP financial measures.
8
Exhibit 99.2Q1 2018 Conference Call Veeco Instruments Inc. May 7, 2018
Safe Harbor To the extent that this presentation discusses expectations or otherwise makes statements about the future, such statements are forward-looking and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These items include the risk factors discussed in the Business Description and Management's Discussion and Analysis sections of Veeco's Annual Report on Form 10-K for the year ended December 31, 2017 and subsequent Quarterly Reports on Form 10-Q and current reports on Form 8-K. Veeco does not undertake any obligation to update any forward-looking statements to reflect future events or circumstances after the date of such statements.
CEO Introduction John Peeler
20¢ Non-GAAP EPS $159M Revenue Q1 2018 Highlights Profit better than consensus and exceeded guided range Maintained solid backlog of $331M Strong revenue growth Ultratech integration – On Track $155M Bookings Q1 Results Note: A reconciliation of GAAP to Non-GAAP financial measures may be found in Back-up & Reconciliation Tables $11M Non-GAAP Op Income 2018 is off to a great start
CFO Financial Review Sam Maheshwari
Q1 2018 Revenue by End Market and Geography Strong shipments to China Revenue concentration in LED Lighting, Display & Compound Semi reflects strong 2018 opening MOCVD backlog Mix by End Market Mix by Geography 17% Advanced Packaging, MEMS & RF Filters 20% Scientific & Industrial 57% LED Lighting, Display & Compound Semi $159M 28% Rest of World 47% China 10% EMEA 15% United States 6% Front-End Semi ROW includes Photonics, RF Device and Advanced Packaging revenue in Taiwan, Korea and Japan Note: Amounts may not calculate precisely due to rounding
Non-GAAP GAAP P&L Highlights Note: Amounts may not calculate precisely due to rounding. Prior period results have been recast to reflect the retrospective adoption of ASC 606. A reconciliation of GAAP to Non-GAAP financial measures is contained in the Back Up & Reconciliation Tables $ millions (except per share amounts) Q4 17 Q1 18 Q4 17 Q1 18 Revenue $139.7 $158.6 $139.7 $158.6 Gross Profit 55.4 56.7 56.5 57.8 Gross Margin 39.6% 35.7% 40.5% 36.5% R&D 24.3 24.3 23.3 23.4 SG&A & Other 28.5 26.2 25.6 23.2 Operating Income/(Loss) (15.0) (11.4) 7.5 11.3 Net Income/(Loss) (8.5) (15.8) 6.2 9.2 Earnings/(Loss) Per Share ($0.18) ($0.34) $0.13 $0.20 Solid revenue growth Sequential gross margin decline due to product mix. Expect improvement in 2nd half.
DSO (days) 62 61 DOI 130 118 DPO 54 52 $ millions Q4 17 Q1 18 Cash & Short-Term Investments 328 311 Accounts Receivable 99 108 Inventories 120 131 Accounts Payable 50 58 Long-Term Debt 276 278 Cash Flow from Operations 19 (12) Balance Sheet Highlights Note: Amounts may not calculate precisely due to rounding Working capital investment as we prepare for higher volume in Q2
Q2 2018 Guidance Revenue $145M–$170M $145M–$170M Gross Margin 33%–35% 33%–35% Net Income (Loss) ($21M)–($12M) $1M–$10M Earnings Per Share ($0.45)–($0.26) $0.01–$0.20 Non-GAAP Operating Income $2M–$11M Non-GAAP GAAP Note: A reconciliation of GAAP to Non-GAAP financial measures is contained in the Back Up & Reconciliation Tables
Business Update & Outlook
Advanced Packaging, MEMS & RF Filters Reflects new customers or application penetrations 2016 FOWLP – Fan Out Wafer Level Packaging ADAS – Advanced Driver Assisted Systems GPU – Graphical Processing Unit Applicable Technologies: MOCVD Lithography Wet Etch/Clean Laser Anneal Ion Beam MBE 3D Inspection ALD Ample Growth Drivers Big data analytics Autonomous vehicles (ADAS) 5G RF Cryptocurrency mining (GPUs) Capacity is Being Added Etching for MEMS applications Lithography – FOWLP & Cu Pillar
Recent Wins in Photonics and Power Photonics market: 25% CAGR to $1.5B by 2022 EXALOS – Superluminescent LEDs for medical imaging, optical sensing and other applications Power market: 80% CAGR to $500M by 2022 ON Semiconductor – High voltage power management for automotive and other applications LED Lighting, Display & Compound Semi VCSEL – Vertical Cavity Surface-Emitting Laser Applicable Technologies: MOCVD Lithography Wet Etch/Clean Laser Anneal Ion Beam MBE 3D Inspection ALD Continue to Win Business in China Booked additional EPIK® 868 business R&D Focused on Growth Markets Photonics (VCSEL) GaN power devices
Front-End Semi 3D Wafer Inspection Repeat order for multiple SuperfastTM systems for 3D NAND application Continuing high level of interest and engagement across customers STT-MRAM Partnership with leading semiconductor capital equipment manufacturer DTOR at leading memory manufacturer Applicable Technologies: MOCVD Lithography Wet Etch/Clean Laser Anneal Ion Beam MBE 3D Inspection ALD STT-MRAM – Spin-Transfer Torque Magnetic Random Access Memory DTOR – Development Tool of Record
Scientific & Industrial Applicable Technologies: MOCVD Lithography Wet Etch/Clean Laser Anneal Ion Beam MBE 3D Inspection ALD Continued Momentum in Optical Coatings Robust Q1 bookings Broad-based market demand including industrial lasers, medical imaging & material processing Compound Semiconductor Innovation Award GENxcelTM R&D MBE system Enabling leading edge research in compound semiconductor/photonics
2018 Priorities Update On track to achieve our 2018 priorities Ultratech Integration ERP Go-Live New Product Innovation Underway in MOCVD, Lithography, Wet Etch, Optical, EUV Delivering Growth – Diversifying Company Significant revenue growth and solid bookings Operating Leverage Solid Q1 results
Q&A
Back Up & Reconciliation Tables
Note on Reconciliation Tables These tables include financial measures adjusted for the impact of certain items; these financial measures are therefore not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). These Non-GAAP financial measures exclude items such as: share-based compensation expense; charges relating to restructuring initiatives; non-cash asset impairments; certain other non-operating gains and losses; and acquisition-related items such as transaction costs, non-cash amortization of acquired intangible assets, incremental transaction-related compensation, and certain integration costs. These Non-GAAP financial measures may be different from Non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. By excluding these items, Non-GAAP financial measures are intended to facilitate meaningful comparisons to historical operating results, competitors' operating results, and estimates made by securities analysts. Management is evaluated on key performance metrics including Non-GAAP Operating Income, which is used to determine management incentive compensation as well as to forecast future periods. These Non-GAAP financial measures may be useful to investors in allowing for greater transparency of supplemental information used by management in its financial and operational decision-making. In addition, similar Non-GAAP financial measures have historically been reported to investors; the inclusion of comparable numbers provides consistency in financial reporting. Investors are encouraged to review the reconciliation of the Non-GAAP financial measures used in this news release to their most directly comparable GAAP financial measures.
Supplemental Information—GAAP to Non-GAAP Reconciliation Note: Amounts may not calculate precisely due to rounding. Prior period results have been recast to reflect the retrospective adoption of ASC 606. In millions Q4 17 Q1 18 Net Sales $139.7 $158.6 GAAP Gross Profit 55.4 56.7 GAAP Gross Margin 39.6% 35.7% Add: Release of inventory fair value step-up for purchase accounting 0.4 0.5 Add: Share-Based Comp 0.6 0.6 Add: Accelerated Depreciation 0.1 0.1 Non-GAAP Gross Profit $56.5 $57.8 Non-GAAP Gross Margin 40.5% 36.5% In millions (except per share amounts) Q4 17 Q1 18 GAAP Basic EPS (0.18) (0.34) GAAP Diluted EPS (0.18) (0.34) GAAP Net Income (Loss) (8.5) (15.8) Add: Share-Based Comp 4.4 4.5 Add: Amortization 13.8 13.5 Add: Restructuring 2.1 2.5 Add: Acquisition Related 1.5 1.3 Add: Release of inventory fair value step-up for purchase accounting 0.4 0.5 Add: Depreciation of PP&E fair value step-up for purchase accounting 0.3 0.3 Add: Non-Cash Interest Expense 2.8 2.9 Add: Tax Adjustment from GAAP to Non-GAAP (10.6) (0.5) Non-GAAP Net Income (Loss) 6.2 9.2 Non-GAAP Basic EPS 0.13 0.20 Non-GAAP Diluted EPS 0.13 0.20 In millions Q4 17 Q1 18 GAAP Net Income (Loss) $(8.5) $(15.8) Add: Share-Based Comp 4.4 4.5 Add: Amortization 13.8 13.5 Add: Restructuring 2.1 2.5 Add: Acquisition Related 1.5 1.3 Add: Release of inventory fair value step-up for purchase accounting 0.4 0.5 Add: Depreciation of PP&E fair value step-up for purchase accounting 0.3 0.3 Add: Interest Expense 4.7 4.6 Subtract: Tax Benefit (11.3) (0.2) Non-GAAP Operating Income $7.5 $11.3
Q1 2018 GAAP to Non-GAAP Reconciliation Non-GAAP Adjustments In millions (except per share amounts) GAAP Share-Based Compensation Amortization Other Non-GAAP Net Sales $158.6 $158.6 Gross Profit 56.7 0.6 0.6 57.8 Gross Margin 35.7% 36.5% Research and Development 24.3 (1.0) 23.4 Selling, General, and Administrative and Other 26.2 (2.9) (0.2) 23.2 Net Income (Loss) $(15.8) 4.5 13.5 (7.0) $9.2 Income (Loss) Per Common Share: Basic $(0.34) $0.20 Diluted (0.34) 0.20 Weighted Average Number of Shares: Basic 47.0 47.0 Diluted 47.0 47.2 Other Non-GAAP Adjustments Restructuring 2.5 Acquisition Related 1.3 Release of inventory fair value step-up associated with the Ultratech purchase accounting 0.5 Depreciation of PP&E fair value step-up associated with the Ultratech purchase accounting 0.3 Non-Cash Interest Expense 2.9 Non-GAAP Tax Adjustment (0.5) Total Other (7.0) Note: Amounts may not calculate precisely due to rounding
Q2 2018 Guidance GAAP to Non-GAAP Reconciliation Non-GAAP Adjustments In millions (except per share amounts) GAAP Share-Based Compensation Amortization Other Non-GAAP Net Sales $145–$170 $145–$170 Gross Profit 47–58 1 — — 48–59 Gross Margin 33%–35% 33%–35% Net Income (Loss) $(21)–$(12) 4 14 4 $1–$10 Income (Loss) per Diluted Share $(0.45)–$(0.26) $0.01–$0.20 GAAP Net Income (Loss) $(21)–$(12) Share-Based Compensation 4 Amortization 14 Restructuring 1 Acquisition Related Expense 1 Interest Expense 5 Income Tax Expense (Benefit) (2) Non-GAAP Operating Income $2–$11 Non-GAAP Adjustments Note: Amounts may not calculate precisely due to rounding
2017 Recast Historical Financials Under ASC 606 Note: Amounts may not calculate precisely due to rounding. Prior period results have been recast to reflect the retrospective adoption of ASC 606. Q1 2017 In millions (except per share amounts) As reported Adjustments As adjusted Net Sales $94.4 $0.1 $94.5 Cost of sales 60.2 (0.2) 60.0 Income tax expense (benefit) (10.3) (0.2) (10.5) Net Income (loss) 1.1 0.5 1.6 Diluted earnings (loss) per share $0.03 $0.01 $0.04 Q2 2017 In millions (except per share amounts) As reported Adjustments As adjusted Net Sales $115.1 $(2.8) $112.2 Cost of sales 76.3 - 76.4 Income tax expense (benefit) (12.9) (0.4) (13.3) Net Income (loss) (18.4) (2.4) (20.8) Diluted earnings (loss) per share $(0.43) $(0.06) $(0.49) Q3 2017 In millions (except per share amounts) As reported Adjustments As adjusted Net Sales $131.9 $(2.6) $129.3 Cost of sales 78.8 - 78.8 Income tax expense (benefit) (1.8) (0.7) (2.5) Net Income (loss) (21.9) (1.9) (23.7) Diluted earnings (loss) per share $(0.47) $(0.04) $(0.51) Q4 2017 In millions (except per share amounts) As reported Adjustments As adjusted Net Sales $143.4 $(3.8) $139.7 Cost of sales 85.1 (0.8) 84.3 Income tax expense (benefit) (11.1) (0.1) (11.3) Net Income (loss) (5.6) (2.9) (8.5) Diluted earnings (loss) per share $(0.12) $(0.06) $(0.18) Sales by Market In millions Q1 ‘17 Q2 ‘17 Q3 ‘17 Q4 ‘17 CY 2017 Advanced Packaging, MEMS & RF Filters $10.9 $21.8 $21.5 $13.2 $67.4 LED Lighting, Display & Compound Semi 55.2 54.3 57.6 81.5 248.6 Front-End Semiconductor 1.2 10.3 16.3 12.6 40.3 Scientific & Industrial 27.3 25.8 33.9 32.4 119.3 Total Sales $94.5 $112.2 $129.3 $139.7 $475.7