Veeco Instruments Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the supplied text does not provide standalone Q4 financial results. Veeco makes semiconductor and thin-film process equipment, serving Semiconductor, Compound Semiconductor, Data Storage, and Scientific & Other markets.
Financial results and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net sales | $646.1 million | $583.3 million |
| Gross profit / margin | $263.1 million / 40.7% | $242.3 million / 41.5% |
| Operating income / margin | $60.3 million / 9.3% | $56.7 million / 9.7% |
| Net income | $166.9 million | $26.0 million |
| Diluted EPS | $2.71 | $0.49 |
| Cash from operations | $108.5 million | $67.7 million |
| Capital expenditures | $24.6 million | $40.6 million |
- Revenue grew 11%. By market: Semiconductor $369.4 million (+50%); Compound Semiconductor $121.2 million (+13%); Data Storage $87.5 million (-48%); Scientific & Other $68.0 million (+12%).
- Gross margin declined about 0.8 percentage points, with higher logistics costs and investment in service infrastructure and capacity expansion among the stated factors. Operating expenses increased 9%, including higher R&D spending.
- Net income included a $116.0 million income tax benefit, principally reflecting release of domestic deferred-tax valuation allowances after three years of cumulative domestic pretax income. Accordingly, reported earnings growth substantially reflects a non-cash tax accounting benefit, not just operating performance.
- At year-end, cash and cash equivalents were $154.9 million, short-term investments $147.5 million, and restricted cash $0.5 million. Current assets were $668.9 million against current liabilities of $257.9 million.
- Debt principal outstanding at year-end was $277.7 million: $20.2 million of 2.70% notes due January 2023, $132.5 million of 3.50% notes due 2025, and $125.0 million of 3.75% notes due 2027. The 2023 notes were paid in cash at maturity on January 15, 2023. The $150 million revolving facility was undrawn at year-end.
- Backlog rose to $499.9 million from $440.2 million. Inventory increased to $206.9 million from $170.9 million; customer deposits and deferred revenue increased to $127.2 million from $63.1 million.
Material changes and outlook
- Semiconductor revenue became 57% of total sales, up from 43% in 2021; Data Storage fell to 13% from 29%. U.S. sales declined 9%, while EMEA, China, and Rest of APAC sales increased.
- Management forecast FY2023 revenue of $630 million to $670 million, citing strong Semiconductor, Data Storage, and Scientific markets offset by near-term Compound Semiconductor weakness. It expected Veeco Semiconductor revenue to outpace forecast WFE spending decline of 20% or more.
- Veeco acquired Epiluvac AB on January 31, 2023, after year-end, for $30 million cash, with up to $35 million in performance-based earn-outs. Management expects revenue from the SiC equipment opportunity in 2024.
- Veeco adopted ASU 2020-06 in 2022, changing convertible-note accounting and diluted EPS treatment. The adoption reduced reported non-cash interest expense and affected EPS comparability; the company showed 2022 diluted EPS of $2.71 under the new method versus $2.91 under legacy accounting.
Risks, contingencies, and other notable items
- Management reported continuing supply shortages, longer lead times, and rising labor, logistics, and material costs, which constrained timely fulfillment and pressured gross margins. It expected these challenges to persist into 2023.
- Customers requested some cancellations, shipment delays, or payment delays. Backlog is subject to modification or cancellation and includes China orders that may be affected by U.S. export controls. Management believed most China backlog would not be negatively affected, but regulations remained fluid.
- Key risks include cyclical semiconductor and capital-equipment demand, customer concentration, reliance on limited or sole-source suppliers, competition, product qualification and acceptance delays, export restrictions and geopolitical tensions, and cybersecurity incidents. No customer exceeded 10% of FY2022 sales; the ten largest customers represented 63% of year-end receivables.
- Purchase commitments totaled $289.2 million, mostly due within one year, partly offset by $9.4 million of supplier deposits. Outstanding bank guarantees and letters of credit were $8.2 million.
- A $15.0 million securities class-action settlement received final court approval in 2022 and was funded by insurance. A related derivative action settlement included governance changes and an insurer-funded $0.3 million payment. The company said other ordinary-course legal matters were not expected to have a material adverse effect.
- KPMG issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded disclosure controls and internal control were effective at December 31, 2022.
Important facts for investors to verify
- Separate operating trends from the large, non-cash deferred-tax benefit when assessing FY2022 earnings and future tax rates.
- Check conversion, repayment, and liquidity implications of the 2025 and 2027 notes, including the 2027 notes’ capped-call terms and conversion status.
- Track realization of the $499.9 million backlog, especially cancellation risk, China export-license exposure, and the company’s ability to deliver amid supply constraints.
- Assess whether the 2023 revenue outlook and anticipated Semiconductor strength offset weakness in Compound Semiconductor and Data Storage demand.
- Monitor inventory growth, purchase commitments, customer deposits, and receivable concentration for working-capital or obsolescence risks.
- Review the Epiluvac acquisition’s integration, earn-out conditions, cash use, and progress toward expected 2024 revenue.