VEECO INSTRUMENTS INC

Report of Independent Registered Public Accounting F****irm

To the Stockholders and Board of Directors

Veeco Instruments Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Veeco Instruments Inc. and subsidiaries (the Company) as of December 31, 2023 and December 31, 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes and financial statement schedule II - valuation and qualifying accounts (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 16, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for the convertible senior notes as of January 1, 2022 due to the adoption of Accounting Standards Update No. 2020-06: Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, using the modified retrospective method.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Assessment of the value of excess and obsolete inventory

As discussed in Note 1 of the consolidated financial statements, the Company assesses the valuation of its inventories, including materials, work-in-process, and finished goods, each reporting period. Obsolete inventory or inventory in excess of the Company’s estimated usage requirement is written down to its estimated net realizable value if less than cost. Estimates of usage include the Company’s analysis of anticipated demand, possible alternative uses of its inventory, as well as other qualitative factors. As of December 31, 2023, the Company’s inventories totaled $237.6 million.

We identified the assessment of the value of excess and obsolete inventory as a critical audit matter. Subjective auditor judgement was required to evaluate the Company’s estimates of anticipated demand, which can be affected by market and economic conditions outside the Company’s control.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s inventory valuation process. This included controls related to the development of estimates of anticipated demand of inventory. We evaluated current year estimates of anticipated demand used to assess the value of excess and obsolete inventory when they differed significantly from historical sales volumes. For certain inventory items, we compared the prior year estimate of anticipated demand to actual results to assess the Company’s ability to accurately forecast.

Acquisition-date fair value of a developed technology intangible asset and contingent consideration in the acquisition of Epiluvac AB

As discussed in Note 5 to the consolidated financial statements, on January 31, 2023, the Company acquired Epiluvac AB (Epiluvac) in a business combination for total purchase consideration of $56.4 million, including contingent consideration. In connection with the transaction, the purchase price was allocated to the assets and liabilities assumed by the Company based on their fair values as of the acquisition date, primarily comprised of developed technology with the estimated fair value of $28.0 million. The acquisition date fair value of the contingent consideration was approximately $26.1 million, which includes payments up to $15.0 million based on the timely completion of certain defined milestones tied to strategic targets, and up to $20.0 million based on the percentage of orders received during the defined earn-out period. The Company estimated the fair value of the developed technology based on a discounted cash flow model. The Company estimated the fair value of the contingent consideration by assigning probabilities and discount factors to each of the various defined performance milestones, while using a Monte-Carlo simulation model to determine the most likely outcome for payments to be based on value of orders received.

We identified the evaluation of the acquisition-date fair value of developed technology and the acquisition-date fair value of the contingent consideration related to the orders received during the defined earn-out period as a critical audit matter. A higher degree of auditor judgment was required to evaluate the Company’s determination of certain projected revenues used in the fair value of the developed technology and the fair value of the contingent consideration because there was limited observable market information. Additionally, specialized skills and knowledge were required to evaluate the discount rates used to determine in the fair value of the developed technology and the fair value of the contingent consideration. Changes in certain projected revenues and discount rates could have a significant impact on the fair value of the acquired developed technology and the contingent consideration liability.

The following are the primary procedures we performed to address the critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls over the determination of certain projected revenues and discount rates. We evaluated the Company’s determination of certain projected revenues by (1) inquiring of individuals outside of the accounting function about the underlying assumptions used to determine certain projected revenues and the process used to develop them, (2) comparing the underlying assumptions to relevant industry reports, (3) and comparing the underlying assumptions to relevant competitor investor presentation materials. In addition, we involved valuation professionals with specialized skills and knowledge who assisted in:

/s/KPMG LLP

We have served as the Company’s auditor since 2015.

Santa Clara, California

February 16, 2024