0001558370-25-010544
SEC filingSemiconductor revenue grew 13% YoY, but overall sales declined 6% due to Data Storage and Compound Semiconductor weakness; gross margin contracted to 41%.
For the three months ended June 30, 2025, Veeco reported total net sales of $166.1 million, a 6% decrease from $175.9 million in the prior year period. The decline was primarily driven by a 64% drop in Data Storage revenue to $12.4 million and a 22% decline in Compound Semiconductor revenue to $14.2 million, partially offset by a 13% increase in Semiconductor revenue to $123.9 million and a 14% rise in Scientific & Other revenue to $15.7 million. Gross profit decreased 9% to $68.7 million, with gross margin contracting to 41% from 43% due to lower sales volume, higher manufacturing costs, and unfavorable product mix. Operating income fell 26% to $12.4 million, and net income decreased 21% to $11.7 million. Earnings per share were not explicitly disclosed in the MD&A.
Semiconductor remains the dominant segment, accounting for 75% of total revenue. Growth was fueled by shipments of the Ion Beam Deposition LDD system for EUV mask blanks and Advanced Packaging wet processing systems for AI and HBM applications. The company also noted traction with laser annealing solutions for Gate-All-Around nodes and evaluation systems at leading foundries. Data Storage revenue collapsed as customers refrained from capacity expansion, and management guided to a $60-70 million full-year reduction. Compound Semiconductor declined across GaN Power and Photonics, though evaluation systems are in place. Scientific & Other grew on government and university demand. Geographically, Rest of APAC surged 123% to $98.2 million (driven by Taiwan, Singapore, and Japan), while China plunged 58% to $27.5 million, with further declines expected in H2 2025.
Management expressed cautious optimism for leading-edge investments in AI, Gate-All-Around, HBM, and 3D packaging, but highlighted near-term headwinds from tariffs and declining China engagement. The company expects continued weakness in Data Storage and a reduction in China revenue for the remainder of 2025. Gross margins are anticipated to face further pressure from tariff-related cost increases. The company increased its revolving credit facility to $250 million and extended maturity to 2030, providing liquidity flexibility. No specific numerical guidance was provided for revenue or earnings.
Veeco's balance sheet remains strong with cash and cash equivalents of $188.9 million and short-term investments of $165.9 million, totaling $354.8 million in liquid assets. Total debt stands at $225.4 million (net carrying value of 2029 Notes), down from $276.2 million at year-end 2024 following the settlement of the 2025 and 2027 convertible notes. Shareholders' equity increased to $856.2 million from $770.8 million, driven by net income and share issuances. Inventory rose to $259.0 million, reflecting higher materials and work-in-process.
Purchase commitments total $140.4 million, substantially all due within one year, to secure rights to assets and services. Operating lease liabilities have a total future minimum payment of $51.2 million, with $37.3 million recognized on balance sheet. Remaining performance obligations on contracts with original duration over one year amount to $39.8 million, with 71% expected to be recognized within one year. The company also has $8.7 million in outstanding bank guarantees and letters of credit, with $34.0 million available.
No share buybacks or dividends were declared. Capital expenditures totaled $10.4 million for the first half of 2025, representing 3.1% of sales. Debt activity included repayment of $5.2 million of the 2025 Notes at maturity and settlement of the remaining $25.0 million 2027 Notes through a combination of shares and cash, resulting in an inducement expense of $0.7 million. The company has a $250 million revolving credit facility, with no borrowings outstanding.
Veeco operates as a single reportable segment: semiconductor and thin film process equipment. For the six months ended June 30, 2025, net sales were $333.4 million, down 4.8% year-over-year. End-market breakdown: Semiconductor $247.7M (74%), Compound Semiconductor $28.6M (9%), Data Storage $19.1M (6%), Scientific & Other $38.0M (11%). Geographically, Rest of APAC led with $158.2M (47%), followed by China $98.4M (30%), United States $45.9M (14%), EMEA $30.9M (9%), and Rest of World $0.1M.
Net income of $23.7M translated to $29.0M in operating cash flow (CFO), a healthy 1.22x coverage. Key non-cash add-backs included depreciation/amortization ($10.1M) and share-based compensation ($18.9M). Working capital consumed cash: accounts receivable rose $9.1M, inventories increased $12.2M, and contract liabilities fell $7.3M, partially offset by higher payables. Capex of $10.4M consumed 36% of CFO, leaving ample FCF for debt repayment and investments. No dividends or share buybacks were reported. Investing activities showed net cash generation of $24.1M, driven by $104.5M in proceeds from investment sales partially offset by $70.1M in purchases, indicating active portfolio management. Financing outflows of $10.0M mainly reflect restricted stock tax withholdings ($6.7M) and convertible debt repayment ($5.2M). The company ended the period with $189.0M in cash, up from $145.8M, after net taxes paid of -$0.4M (refund). Overall, cash generation remains strong and supports ongoing capital allocation flexibility.