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Veeco Instruments reports wider loss on noncash charge; revenue surges

Veeco Instruments Inc, maker of the tools used

Veeco Instruments Inc, maker of the tools used to create light-emitting diodes. Picture shows a machine that is sold to global LED manufacturers to make high-brightness Light Emitting Diodes (LEDs).  Credit: None/HANDOUT

Veeco Instruments Inc., which makes equipment used to manufacture light-emitting diodes and semiconductors, on Thursday reported higher second-quarter revenue and a widening loss due to a $252 million noncash charge.

The Plainview company reported a 40.6 percent surge in revenue for the quarter ended June 30, to $157.8 million.

Shares of the company dropped by 19.5 percent Thursday to close at $11.88. A year earlier, the company’s stock closed at $29.75.

Veeco posted a loss of $237.6 million in its results reported in accordance with U.S. generally accepted accounting principles, or GAAP. The company attributed the loss to the performance of San Jose, California-based Ultratech Inc., which Veeco acquired in February 2017 for $815 million.

“Based on Ultratech’s performance relative to our prior projections, we were required to record an intangible asset impairment charge of $252 million for GAAP results,” John R. Peeler, Veeco’s chairman and chief executive, said in a statement. “This is a noncash charge and does not affect our liquidity, day-to-day operations” or the company’s non-GAAP results after adjusting for certain items, Peeler said.

By non-GAAP measures, Peeler said in the statement, the company “had solid Q2 performance” in gross margin, operating income, net income and earnings per share. In its non-GAAP results, the company reported net income of $7.2 million for the quarter.

Veeco is “optimistic about the longer term growth prospects of the combined company as we now have a stronger presence in attractive, growing markets and the right technology to succeed,” Peeler said.

The company plans to close a Singapore manufacturing site by the end of the first quarter of fiscal 2019, which will save about $2 million a year, Peeler said.  

In its GAAP results, the company reported a loss of $5.02 in earnings per diluted share for the quarter, compared with a loss of 49 cents a year earlier.

In its guidance for the third quarter, the company said it expects a loss of $7 million to $12 million, or 15 cents to 25 cents a share, by GAAP measures.

Veeco’s second-quarter results were “a little bit disappointing but not a complete surprise,” given Ultratech’s “bloated” costs, said Patrick Ho, a senior analyst with Stifel Nicolaus & Co. in Dallas.

“I don’t want to say they overpaid, I think there’s value there – it’s [a question of] when that value can be extracted,” he said of the acquisition. “One of Veeco’s strengths is on the operations side of things,” and they should be able to cut those costs, Ho said.

Over the next quarter or two, Veeco’s stock price should “reset,” Ho said.

“All the negative news is out there,” he said. “I don’t think it’s going to get worse.”

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