0001104659-26-055672
SEC filingRevenue down 5% YoY to $158.3M, gross margin fell to 35%, net loss of $0.3M vs prior year profit, dragged by Semicon weakness but offset by Compound Semi and Data Storage growth.
For the three months ended March 31, 2026, Veeco reported net sales of $158.3 million, a 5% decrease from $167.3 million in the same period last year. Gross profit fell 18% to $55.8 million, resulting in a gross margin of 35.3% compared to 40.9% in the prior year. The margin compression was primarily due to unfavorable product mix and higher logistics costs. Operating income swung to a loss of $2.7 million from a profit of $14.1 million, impacted by lower gross profit and a $2.0 million increase in merger costs. Net loss was $0.3 million versus net income of $11.9 million in Q1 2025.
Management remains optimistic about long-term growth driven by AI, high-performance computing, and advanced packaging. The pending merger with Axcelis Technologies is subject to Chinese regulatory approval. For 2026, the company expects semiconductor market growth in leading-edge investment, while compound semiconductor momentum is expected to continue as AI infrastructure expands. Data Storage business is fully booked for 2026 and extending into 2027. No specific numerical guidance was provided, but gross margins will continue to be influenced by product mix and tariff dynamics.
As of March 31, 2026, Veeco held $179.5 million in cash and cash equivalents and $203.8 million in short-term investments (U.S. treasuries, agency securities, corporate debt). Total debt stood at $226.3 million, primarily the 2.875% convertible senior notes due 2029 (net carrying value). Shareholders' equity was $883.7 million. Inventory rose to $282.2 million ($275.3 million at year-end 2025), driven by materials and work-in-process.
Veeco disclosed $205.8 million in purchase commitments, substantially all due within one year, to secure rights to assets and services. Additionally, remaining performance obligations on contracts with an original duration of one year or more totaled $142.8 million, with ~51% expected to be recognized within one year and the remainder over one to three years. Operating lease commitments amount to $47.6 million in future minimum payments, with $35.2 million recognized as lease liabilities.
Capital expenditures were $5.1 million in Q1 2026, representing 3.2% of net sales. No share repurchases or dividends were reported. The company has no borrowings under its $250 million revolving credit facility (amended June 2025). Merger costs of $2.0 million were incurred in connection with the pending Axcelis Technologies merger.
Veeco operates as a single reportable segment: development, manufacture, sales, and support of semiconductor and thin film process equipment. The CODM uses net income to assess performance. Net sales declined 5.4% year-over-year to $158.3 million, with Semiconductor end-market down 12% to $109.0 million, partially offset by gains in Compound Semiconductor and Data Storage. Geographically, Rest of APAC led at $90.4 million (57% of sales), followed by United States ($32.2 million) and China ($20.0 million). China sales dropped significantly from $70.9 million in Q1 2025.
Net income was -$0.3M in Q1 2026 vs $11.9M in Q1 2025, yet operating cash flow was positive $7.9M due to non-cash add-backs (depreciation $5.0M, share-based comp $8.5M) and working capital changes. Working capital was a net use of cash: accounts receivable grew $26.7M, partially offset by a $18.6M increase in contract liabilities. Capex of $5.1M was lower than prior year's $6.8M, representing a moderate capital intensity relative to CFO. The company did not return cash to shareholders via dividends or buybacks; financing cash flow was negative due to restricted stock tax withholdings. Investing activities provided $17.7M from net sales of investments. Overall, CFO declined significantly year-over-year, impacted by working capital outflows and lower net income, but remains sufficient to cover capex.
Large swings in accounts receivable and contract liabilities warrant further investigation. The sale of investments provided a significant cash inflow, masking weak operating cash generation.