VEECO INSTRUMENTS INC

Previous wording

While the long-term outlook of the Semiconductor industry remains favorable, recently enacted tariffs, foreign and domestic, have resulted in uncertainty across Veeco’s business. Recently enacted tariffs are currently causing some customers in China to delay shipments. The tariffs have also resulted in an increase in certain of our costs and those of our customers, and could impact future end market demand. Given the dynamic nature of the situation, we continue to evaluate the potential impacts to our business, and our team is working diligently with our suppliers and customers to assess, manage and mitigate the related impacts.

Current wording

While the long-term outlook of the Semiconductor industry remains favorable, recently enacted tariffs, foreign and domestic, have resulted in uncertainty across Veeco’s business. The tariffs have resulted in an increase in certain of our costs and those of our customers and could impact future end market demand. Given the dynamic nature of the situation, we continue to evaluate the potential impacts to our business, and our team is working diligently with our suppliers and customers to assess, manage and mitigate the related impacts.

Previous wording

Semiconductor revenue increased by 3% in the first quarter from the comparable prior year period, comprising 74% of total revenue. Growth was primarily driven by an increase in system shipments in Advanced Packaging, including wet processing systems to a leading foundry and HBM manufacturer, as well as lithography systems to IDM and OSAT customers.

Current wording

Semiconductor revenue increased by 13% in the second quarter from the comparable prior year period, comprising 75% of total revenue. Growth was primarily driven by an increase in system shipments of our Ion Beam Deposition LDD system for mask blanks and our Advanced Packaging wet processing systems.

Previous wording

Our laser annealing solutions continue to gain traction at advanced logic nodes, highlighted by recent order activity and new application wins. In 2024 and the first quarter of 2025, we received laser annealing orders from and shipped systems to leading-edge logic customers Gate-All-Around nodes. We also shipped and recognized revenue on our first NSA system to a leading logic customer in the fourth quarter of 2024. Recently, we announced our Laser Spike Annealing LSA system was named production tool of record for new applications at two leading-edge logic customers most advanced gate-all-around nodes. In the memory market, we continue to ship LSA systems to a Tier 1 customer for high volume production of HBM and advanced DRAM devices. While our growth strategy is predominately focused on advanced node logic and memory, LSA shipments to mature node customers increased in 2023 and 2024, predominantly driven by new greenfield fabs and capacity additions in China.

Current wording

Our laser annealing solutions continue to gain traction at advanced logic nodes, highlighted by recent order activity and shipments to leading-edge logic customers Gate-All-Around nodes. In the memory market, we continue to ship LSA systems to a Tier 1 customer for high volume production of HBM and advanced DRAM devices. While our growth strategy is predominately focused on advanced node logic and memory, LSA shipments to mature node customers increased in 2023 and 2024, predominantly driven by new greenfield fabs and capacity additions in China.

Previous wording

We have two next generation laser annealing systems under evaluation at Tier 1 foundry and logic customers. This next generation system, the NSA500, covers the nano-second annealing regime and complements our LSA product. This new system is part of our continued effort to enable our customers’ product roadmap by providing innovative annealing solutions. Nanosecond annealing provides Veeco with an opportunity to expand our laser annealing SAM for new advanced node logic and memory applications, including low thermal budget anneals for Gate-All-Around transistors and advanced 3D devices.

Current wording

We have two next generation laser annealing systems under evaluation at Tier 1 foundry and logic customers. This next generation system, the NSA500, covers the nano-second annealing regime and complements our LSA product. This new system is part of our continued effort to enable our customers’ product roadmap by providing annealing solutions and driving higher device performance. Nanosecond annealing provides Veeco with an opportunity to expand our laser annealing SAM for new advanced node logic and memory applications, including low thermal budget anneals for Gate-All-Around transistors and advanced 3D devices.

Previous wording

We also have two Ion Beam Deposition “IBD300” systems under evaluation at leading memory customers. Our IBD300 system provides Veeco with another opportunity to expand our SAM to advanced node applications where low resistance films are critical. These initial systems are being evaluated for advanced memory applications, such as DRAM bitline.

Current wording

We also have two Ion Beam Deposition “IBD300” systems under evaluation at leading DRAM memory customers. Our IBD300 system provides Veeco with another opportunity to expand our SAM to advanced node applications where low resistance films are critical. These initial systems are being evaluated for advanced memory applications, such as DRAM bitline.

Previous wording

In Advanced Packaging, our Wet Processing systems are used for several applications, and we continue to see strong demand driven by Heterogenous Integration and 3D Packaging for AI. In the fourth quarter of 2024, we announced over $50 million in orders for our Wet Processing systems from a leading foundry, a HBM manufacturer, and OSATs driven by AI and high-performance computing. We also recently announced our wet processing systems were qualified by an IDM for two new applications, and the customer also placed initial orders for these applications. Both applications represent key Served Available Market expansion opportunities for our Wet Processing systems at separate Tier 1 customers.

Current wording

In Advanced Packaging, our Wet Processing systems are used for several applications, and we continue to see strong demand driven by Heterogenous Integration and 3D Packaging for AI. In the fourth quarter of 2024, we announced over $50 million in orders for our Wet Processing systems from a leading foundry, a HBM manufacturer, and OSATs driven by AI and high-performance computing. In the first quarter of 2025, we announced that our wet processing systems were qualified by an IDM for two new applications, and the customer also placed initial orders for these applications. Both applications represent key Served Available Market expansion opportunities for our Wet Processing systems at separate Tier 1 customers.

Previous wording

Our Advanced Packaging lithography systems are used for packaging applications such as fan out wafer level packaging and other advanced packaging solutions. After two years of slow order activity driven by consumer markets, we’re seeing an increase in order activity from several customers. We also just announced over $35 million in orders for our lithography systems from an IDM and OSATs driven by AI and high-performance computing, and mobile.

Current wording

Our Advanced Packaging lithography systems are used for packaging applications such as fan out wafer level packaging and other advanced packaging solutions. After two years of slow order activity driven by consumer markets, we’re seeing an increase in order activity from several customers.

Previous wording

Looking ahead, we anticipate seeing growth in leading-edge investment driven by new nodes and AI-related demand, including investment in Gate-All-Around nodes, High-Bandwidth Memory, and 3D packaging for AI. At the same time, engagement with customers in China has moderated, and we expect a decline in China revenue in 2025.

Current wording

Looking ahead, we anticipate seeing growth in leading-edge investment driven by new nodes and AI-related demand, including investment in Gate-All-Around nodes, High-Bandwidth Memory, and 3D packaging for AI. At the same time, engagement with customers in China has decreased quarter over quarter, and we expect a continued decline in China revenue for the second half of 2025.

Previous wording

Veeco also serves customers in the Compound Semiconductor, Data Storage, and Scientific & Other markets. We address the Compound Semiconductor market with a broad portfolio of technologies, including Wet Processing, MOCVD, MBE and Ion Beam, for Power Electronics, Photonics, and 5G RF applications. Sales in the Compound Semiconductor market declined in the first quarter from the comparable prior year period. In GaN Power, emerging use

Current wording

Veeco also serves customers in the Compound Semiconductor, Data Storage, and Scientific & Other markets. We address the Compound Semiconductor market with a broad portfolio of technologies, including Wet Processing, MOCVD, MBE and Ion Beam, for Power Electronics, Photonics, and 5G RF applications. Sales in the Compound Semiconductor market declined in the second quarter from the comparable prior year period. In GaN Power, emerging use cases have driven some traditional silicon power electronics manufacturers to consider adoption of GaN at 300mm, and we have an evaluation system outstanding at a Tier 1 power device customer. We are also seeing photonics opportunities in areas such as solar driven by demand for low orbit satellites and MicroLEDs for applications such as luxury TVs, AR/VR, and automotive.

Previous wording

We address the Data Storage market with sales of our Ion Beam technology. Demand for our Ion Beam products is driven by demand for cloud-based storage. Revenue from our Data Storage declined in the first quarter from the comparable prior year period. Looking ahead, while customer utilizations are improving, they remain well below peak levels from a few years ago and customers are not investing to expand new system capacity in 2025 as they bring idle capacity back on line. As a result, we expect an approximate $60 to $70 million reduction in revenue in our Data Storage business in 2025.

Current wording

We address the Data Storage market with sales of our Ion Beam technology. Demand for our Ion Beam products is driven by demand for cloud-based storage. Revenue from our Data Storage declined in the second quarter from the comparable prior year period. Looking ahead, while customer utilizations are improving, they are not investing to

Previous wording

Sales in the Scientific & Other market are largely driven by sales to governments, universities, and research institutions. We address the Scientific & Other market with several technologies, including MBE, ALD, MOCVD, Wet Processing, and IBD/IBE, which support scientific, optical coating and other applications, and sales in this market increased in the first quarter from the comparable prior year period.

Current wording

Sales in the Scientific & Other market are largely driven by sales to government-funded laboratories, universities, and research institutions. We address the Scientific & Other market with several technologies, including MBE, ALD, MOCVD, Wet Processing, and IBD/IBE, which support scientific, optical coating and other applications, and sales in this market increased in the second quarter from the comparable prior year period.

Previous wording

Sales decreased for the three months ended March 31, 2025 against the comparable prior year period driven by a decrease in sales in the Data Storage and Compound Semiconductor markets, partially offset by an increase in sales in the Semiconductor and Scientific & Other markets. By geography, sales decreased in the Rest of APAC and United States, partially offset by increased sales in the China and the EMEA regions. Sales in the Rest of APAC region for the three months ended March 31, 2025 included sales in Taiwan and Japan of $32.5 million, and $14.0 million respectively. Sales in the Rest of APAC region for the three months ended March 31, 2024 included sales in Japan and Taiwan of $32.9 million, and $19.3 million respectively. In light of the global nature of our business, we are impacted by conditions in the various countries in which we and our customers operate, including the recent tariff and trade dynamics which has caused some customers in China to delay shipments. We expect there will continue to be year-to-year variations in our future sales distribution across markets and geographies.

Current wording

Sales decreased for the three months ended June 30, 2025 against the comparable prior year period driven by a decrease in sales in the Data Storage and Compound Semiconductor markets, partially offset by an increase in sales in the Semiconductor and Scientific & Other markets. By geography, sales decreased in the China, United States, and EMEA, partially offset by increased sales in the Rest of APAC region. Sales in the Rest of APAC region for the three months ended June 30, 2025 included sales in Taiwan, Singapore and Japan of $45.5 million, $23.4 million and $14.8 million respectively. Sales in the Rest of APAC region for the three months ended June 30, 2024 included sales in Taiwan and Japan of $21.0 million, and $8.8 million respectively. In light of the global nature of our business, we are impacted by conditions in the various countries in which we and our customers operate, including the recent tariff and trade dynamics. We expect there will continue to be year-to-year variations in our future sales distribution across markets and geographies.

Previous wording

The markets we serve are characterized by continuous technological development and product innovation, and we invest in various research and development initiatives to maintain our competitive advantage and achieve our growth objectives. Research and development expenses decreased for the three months ended March 31, 2025 against the comparable prior period primarily due to a decrease in personnel-related expenses as part of our continued initiative to manage costs.

Current wording

The markets we serve are characterized by continuous technological development and product innovation, and we invest in various research and development initiatives to maintain our competitive advantage and achieve our growth objectives. Research and development expenses remained consistent for the three months ended June 30, 2025 against the comparable prior period.

Previous wording

Amortization expense decreased compared to the comparable prior year period primarily due to the full impairment of the Epiluvac related intangibles in 2024, as well as changes in amortization expense to reflect expected cash flows of certain intangible assets, and certain other intangible assets becoming fully amortized.

Current wording

Amortization expense decreased compared to the comparable prior year period primarily due to changes in amortization expense to reflect expected cash flows of certain intangible assets, and certain other intangible assets becoming fully amortized, as well as the full impairment of the Epiluvac related intangibles in 2024.

Previous wording

We recorded net interest income of $0.8 million for the three months ended March 31, 2025, compared to net interest income of $0.7 million for the comparable prior year period. The increase in net interest income was primarily due to reduced interest expense on the 2025 Notes as they matured on January 15, 2025.

Current wording

We recorded net interest income of $0.9 million for the three months ended June 30, 2025, compared to net interest income of $0.3 million for the comparable prior year period. The increase in net interest income was primarily due to reduced interest expense on the 2025 Notes as they matured on January 15, 2025 and the 2027 Notes that were settled on May 15, 2025.

Previous wording

Our tax expense for the three months ended March 31, 2025, was $3.0 million, compared to $0.9 million of tax expense for the comparable prior period. For the three months ended March 31, 2025, the effective tax rate was in line with the U.S. statutory tax rate, which included a $1.5 million tax expense related to share-based compensation shortfalls, partially offset by tax benefits related to Foreign-Derived Intangible Income and research and development tax credits. For the three months ended March 31, 2024, the effective tax rate was lower than the U.S. statutory tax rate primarily relating to discrete income tax benefit for share-based compensation windfall. Additionally, the effective tax rate was also favorably impacted by the tax benefits related to Foreign-Derived Intangible Income and research and development tax credits.

Current wording

Our tax expense for the three months ended June 30, 2025, was $0.9 million, compared to $2.1 million of tax expense for the comparable prior period. For the three months ended June 30, 2025, the effective tax rate was lower than the U.S. statutory tax rate primarily relating to tax benefits related to Foreign-Derived Intangible Income and research and development tax credits. For the three months ended June 30, 2024, the effective tax rate was favorably impacted by the tax benefits related to Foreign-Derived Intangible Income and research and development tax credits. Additionally, the effective tax rate was also lower than the U.S. statutory tax rate primarily relating to a discrete income tax benefit for share-based compensation windfall.

Previous wording

For the three months ended March 31, 2025, gross profit decreased against the comparable prior period primarily due to a decrease in sales volume, as well as a decrease in gross margins. Gross margins decreased principally due to unfavorable product mix of sales. In addition to product mix and other factors that will cause our gross margins to fluctuate each period, we expect higher costs in future periods as we incur tariffs on imported materials from overseas suppliers, as well as higher costs from domestic suppliers incurring tariffs on their imports.

Current wording

For the six months ended June 30, 2025, gross profit decreased against the comparable prior period primarily due to a decrease in sales volume, as well as a decrease in gross margins. Gross margins decreased principally due to lower volume, unfavorable product mix and higher manufacturing costs. Additionally other factors will cause our gross margins to fluctuate each period. We expect higher costs in future periods as we incur tariffs on imported materials from overseas suppliers, as well as higher costs from domestic suppliers incurring tariffs on their imports.

Previous wording

At March 31, 2025 and December 31, 2024, cash and cash equivalents of $44.0 million and $45.1 million, respectively, were held outside the United States. As of March 31, 2025, we had $23.0 million of accumulated undistributed earnings generated by our non-U.S. subsidiaries for which the U.S. tax has previously been provided. Approximately $10.6 million of undistributed earnings will be subject to foreign withholding taxes if distributed back to the United States and we accrued $1.1 million for foreign withholding taxes for the undistributed earnings.

Current wording

At June 30, 2025 and December 31, 2024, cash and cash equivalents of $36.4 million and $45.1 million, respectively, were held outside the United States. As of June 30, 2025, we had $22.2 million of accumulated undistributed earnings generated by our non-U.S. subsidiaries for which the U.S. tax has previously been provided. Approximately $8.8 million of undistributed earnings will be subject to foreign withholding taxes if distributed back to the United States and we accrued $0.9 million for foreign withholding taxes for the undistributed earnings.

Previous wording

A summary of the cash flow activity for the three months ended March 31, 2025 and 2024 is as follows:

Current wording

A summary of the cash flow activity for the six months ended June 30, 2025 and 2024 is as follows:

Previous wording

Net cash provided by operating activities was $20.0 million for the three months ended March 31, 2025 and was due to net income of $11.9 million and adjustments for non-cash items of $16.1 million, partially offset by a decrease in cash flow from changes in operating assets and liabilities of $8.0 million. The changes in operating assets and liabilities were largely attributable to a decrease in contract liabilities and increases in accounts receivables, inventories, and contract assets, partially offset by a increase in accounts payable and accrued expenses.

Current wording

Net cash provided by operating activities was $29.0 million for the six months ended June 30, 2025 and was due to net income of $23.7 million and adjustments for non-cash items of $30.2 million, partially offset by a decrease in cash flow from changes in operating assets and liabilities of $24.9 million. The changes in operating assets and liabilities were largely attributable to a decrease in contract liabilities and increases in accounts receivables, and inventories, partially offset by a decrease in prepaid expenses and accrued expenses.

Previous wording

The cash used in investing activities during the three months ended March 31, 2025 was primarily attributable to net cash used for investment activity, partially offset by capital expenditures. The cash used in investing activities during the three months ended March 31, 2024 was primarily attributable to net cash provided by net investment activity and proceeds from the sale of productive assets, partially offset by capital expenditures.

Current wording

The cash provided by investing activities during the six months ended June 30, 2025 was primarily attributable to net cash provided for investment activity, partially offset by capital expenditures. The cash provided by investing activities during the six months ended June 30, 2024 was primarily attributable to net cash provided by net investment activity and proceeds from the sale of productive assets, partially offset by capital expenditures.

Previous wording

The cash used in financing activities for the three months ended March 31, 2025 was related to cash used to settle taxes related to employee equity programs, partially offset by cash received under the Employee Stock Purchase Plan. The cash used in financing activities for the three months ended March 31, 2024 was related to cash used to settle taxes related to employee equity programs and contingent consideration payment related to Epiluvac acquisition, partially offset by cash received under the Employee Stock Purchase Plan.

Current wording

The cash used in financing activities for the six months ended June 30, 2025 was related to cash used to settle taxes related to employee equity programs, settlement of the 2027 Notes, and debt issuance costs associated with the execution of the Fourth Amendment of the Loan and Security Agreement, partially offset by cash received under the Employee Stock Purchase Plan. The cash used in financing activities for the six months ended June 30, 2024 was related to cash used to settle taxes related to employee equity programs and contingent consideration payment related to Epiluvac acquisition, partially offset by cash received under the Employee Stock Purchase Plan.

Previous wording

We have $25.0 million outstanding principal balance of 3.75% convertible senior notes that bear interest at a rate of 3.75% per year, payable semiannually in arrears on June 1 and December 1 of each year, and mature on June 1, 2027, unless earlier purchased by the Company, redeemed, or converted. In addition, we have $230.0 million outstanding principal balance of 2.875% convertible senior notes that bear interest at a rate of 2.875% per year, payable semiannually in arrears on June 1 and December 1 of each year, and mature on June 1, 2029, unless earlier purchased by the Company, redeemed, or converted. The 2027 Notes are currently convertible by noteholders and callable by the Company until June 30, 2025.

Current wording

We have $230.0 million outstanding principal balance of 2.875% convertible senior notes that bear interest at a rate of 2.875% per year, payable semiannually in arrears on June 1 and December 1 of each year, and mature on June 1, 2029, unless earlier purchased by the Company, redeemed, or converted.

Previous wording

We believe that we have sufficient capital resources and cash flows from operations to support scheduled interest payments on this debt. In addition, on August 2, 2024, we increased the total funds available to us through our revolving credit facility from $150 million to $225 million. The Company has no immediate plans to draw down on the facility, which expires in December of 2026. Interest under the facility is variable based on the Company’s secured net leverage ratio and is expected to bear interest based on SOFR plus a range of 150 to 225 basis points, if drawn. There is a yearly commitment fee of 25 to 35 basis points, based on the Company’s secured net leverage ratio, charged on the unused portion of the Facility.

Current wording

We believe that we have sufficient capital resources and cash flows from operations to support scheduled interest payments on this debt. In addition, in June 2025, we increased the total funds available to us through our revolving credit facility from $225 million to $250 million and extended the maturity until June 16, 2030, subject to a springing maturity date of March 2, 2029. The Company has no immediate plans to draw down on the facility. Interest under the facility is variable based on the Company’s secured net leverage ratio and is expected to bear interest based on SOFR plus a range of 125 to 200 basis points, if drawn. There is a yearly commitment fee of 20 to 30 basis points, based on the Company’s secured net leverage ratio, charged on the unused portion of the Facility.