0001558370-25-010544
SEC filingVeeco's Q2 2025 revenue fell 6% YoY to $166.1M, with Semiconductor growth offset by steep declines in Data Storage and China sales.
Veeco's Q2 2025 revenue declined 6% year-over-year to $166.1 million, primarily driven by sharp reductions in Data Storage (-64%) and Compound Semiconductor (-22%) markets, partially offset by 13% growth in Semiconductor. Gross profit fell 9% to $68.7 million, with gross margin contracting to 41.4% from 42.9% a year ago due to lower volume, unfavorable product mix, and higher manufacturing costs, including initial tariff impacts. Operating income dropped 26% to $12.4 million, reflecting the revenue decline and margin compression, while selling, general, and administrative expenses remained flat. Net income decreased 21% to $11.7 million, with a lower effective tax rate providing some relief. Interest income rose significantly to $0.9 million due to reduced interest expense from debt maturities.
Semiconductor revenue grew 13% to $123.9 million, now representing 75% of total sales, driven by shipments of Ion Beam Deposition LDD systems for EUV mask blanks and wet processing systems for advanced packaging. Compound Semi fell 22% to $14.2 million, while Data Storage plunged 64% to $12.4 million, with management forecasting a $60-70 million revenue decline for the full year 2025 as customers defer capacity investments. Scientific & Other increased 14% to $15.7 million. Geographically, China revenue dropped 58% to $27.5 million, while Rest of APAC surged 123% to $98.2 million, led by Taiwan ($45.5M), Singapore ($23.4M), and Japan ($14.8M), reflecting customer diversification away from China.
Management expects continued headwinds from tariffs and trade uncertainty, with higher costs anticipated in future periods. China revenue is expected to decline further in the second half of 2025. Growth in semiconductor is expected to be driven by AI-related demand, Gate-All-Around nodes, High-Bandwidth Memory, and 3D packaging. The company is seeing traction with next-generation laser annealing (NSA500) and IBD300 systems under evaluation at leading customers. However, Data Storage and Compound Semi will likely remain weak. No specific quantitative guidance was provided for Q3 2025.
As of June 30, 2025, Veeco held $188.9 million in cash and cash equivalents and $165.9 million in short-term investments (mostly U.S. treasuries and corporate debt), totaling $354.8 million in cash and investments. Total debt stood at $225.4 million (net of unamortized transaction costs), consisting solely of the 2029 Notes ($230M principal). The company had no borrowings under its $250 million revolving credit facility. Shareholders' equity increased to $856.2 million from $770.8 million at year-end 2024, driven by net income and settlement of convertible notes. Inventory rose to $259.0 million, with materials and work-in-process increasing.
Veeco disclosed $140.4 million in purchase commitments as of June 30, 2025, substantially all due within one year, primarily to secure rights to various assets and services. Remaining performance obligations on contracts with original duration of one year or more were $39.8 million, of which 71% is expected within one year. Operating lease obligations total $51.2 million in future minimum payments, with $1.9 million due in the remainder of 2025. The company also had $8.7 million in outstanding bank guarantees and standby letters of credit, with an additional $34.0 million available.
During the first half of 2025, Veeco focused on deleveraging. The 2025 Notes ($26.5M principal) matured in January and were settled with 1.1 million shares. In May 2025, the remaining 2027 Notes ($25.0M principal) were settled for 1.6 million shares and $5.4 million cash, resulting in a $0.7 million inducement expense. Total debt decreased by $50.8 million net from year-end 2024. Capital expenditures were $10.4 million (3.1% of sales), aligned with maintenance and growth needs. No share repurchases or dividends were reported; the credit facility was undrawn.
Veeco operates as a single reportable segment. For the six months ended June 30, 2025, net sales were $333.4 million, down 4.8% from $350.4 million in the prior year. By end-market, Semiconductor sales grew 7.5% to $247.7 million, while Compound Semiconductor declined 27.1% to $28.6 million, Data Storage dropped 63.3% to $19.1 million, and Scientific & Other increased 31.9% to $38.0 million. Geographically, sales to China fell 24.1% to $98.4 million, while Rest of APAC rose 35.0% to $158.2 million. The U.S. segment declined 35.0% to $45.9 million. The shift reflects changing demand patterns and customer concentration.
Veeco's operating cash flow of $29.0M exceeded net income of $23.7M, signaling good cash conversion. The improvement from $17.8M in the prior year was driven by reduced working capital outflows, particularly contract liabilities (which decreased but less than prior year's large drop). Capex increased to $10.4M, representing a 36% CFO payout ratio. The company generated substantial investing cash inflows of $24.1M from sale of investments, offsetting the capex. Financing activities used $10.0M, primarily for tax withholdings and debt repayment. Free cash flow (implicitly $18.7M) provides ample coverage of capital returns, but no share repurchases or dividends were reported. Overall, cash generation is strong with manageable capex intensity.