Veeco's History of Innovation Veeco's roots can be traced back to 1945 when the company was founded in Plainview, New York. Initially focused on manufacturing precision measurement equipment, including a line of vacuum measurement instruments, Veeco expanded its product offerings and entered the semiconductor equipment market in the 1980s. Throughout the 1990s, the company made several strategic acquisitions to broaden its technology portfolio and customer base, including the acquisition of Ion Tech, a leader in ion beam deposition and etch technologies, and CVC Products, a provider of chemical vapor deposition and physical vapor deposition systems. These acquisitions allowed Veeco to establish a strong presence in the data storage and semiconductor markets.
In the early 2000s, Veeco faced challenges as the semiconductor industry experienced a downturn. The company responded by streamlining its operations and focusing on improving profitability. Veeco also began to diversify beyond its traditional semiconductor markets, expanding into emerging areas like LED and solar cell manufacturing. Despite these industry headwinds, Veeco maintained its position as a leading provider of advanced semiconductor process equipment by continuing to invest in research and development to enhance its technology portfolio and deliver innovative solutions to its customers.
Financial Strength and Operational Efficiency Veeco's financial performance has been robust, with the company reporting impressive results in recent years. As of the fiscal year 2023, Veeco generated revenue of $666.43 million and a net income of -$30.37 million. The company's operating cash flow (OCF) was $61.67 million, and free cash flow (FCF) was $33.74 million. Veeco's balance sheet remains strong, with $305.44 million in cash, cash equivalents, and short-term investments as of the end of 2023.
For the most recent quarter (Q3 2024), Veeco reported revenue of $184.81 million, up 4% year-over-year, with net income of $21.95 million. The company's OCF for the quarter was $18.00 million, and FCF was $13.62 million. The increase in quarterly revenue was primarily driven by strength in the Semiconductor market, which grew 26% year-over-year and comprised 67% of total revenue. This growth was partially offset by declines in the Compound Semiconductor, Data Storage, and Scientific Other markets.
Veeco's financial position remains solid, with a debt-to-equity ratio of 0.369 and $321.02 million in cash and short-term investments. The company's current ratio stands at 3.54, and its quick ratio is 2.41, indicating a strong ability to meet short-term obligations. Additionally, Veeco has access to a $225 million revolving credit facility, which was increased from $150 million in August 2024 and expires in December 2026.
Diversified Product Portfolio and Expanding Served Available Market Veeco's product portfolio spans a diverse range of applications, including semiconductor, compound semiconductor, data storage, and scientific markets. The company operates and reports its results in one operating segment, which represents its single reportable segment. Veeco serves four end-markets:
1. Semiconductor: Veeco's systems are used in the early process steps in logic and memory applications where silicon wafers are processed, including deposition, etching, masking, and doping to create microchips. This market also includes mask blank production for extreme ultraviolet (EUV) lithography and advanced packaging technologies.
2. Compound Semiconductor: This market includes Photonics (light source technologies and laser-based solutions for 3D sensing, datacom, and telecom), Power Electronics (semiconductor devices for control and conversion of electric power), RF Filters and Amplifiers (for 5G communications), and Solar (compound semiconductor photovoltaic devices).
3. Data Storage: Veeco's Ion Beam Deposition systems are used to manufacture thin film magnetic heads for hard disk drives.
4. Scientific & Other: Veeco's technologies, including MBE, ALD, MOCVD, Wet Processing, and IBD/IBE, are used in advanced materials research and a range of manufacturing applications such as optical coatings, laser mirrors, and anti-reflective coatings.
The company's focus on enabling industry inflections has allowed it to expand its Served Available Market (SAM) across these segments. Industry analysts project Veeco's SAM to grow faster than overall wafer fab equipment spending, positioning the company for continued growth.
Capturing Growth Opportunities in Semiconductor and Compound Semiconductor The semiconductor industry has experienced cyclical fluctuations, but long-term growth trends driven by emerging technologies, such as artificial intelligence, high-performance computing, and the electrification of the automotive industry, continue to drive demand for Veeco's products. The company's strategy of investing in advanced logic and memory has enabled its semiconductor business to outperform the overall wafer fab equipment (WFE) market for three consecutive years.
In the compound semiconductor market, Veeco serves customers in power electronics, photonics, and 5G RF applications. While the company has faced headwinds in the silicon carbide (SiC) market due to a slowdown in electric vehicle adoption, it sees exciting opportunities in GaN power and photonics applications.
Navigating the Data Storage Market Challenges Veeco's data storage business has faced challenges in recent years, as customer utilizations remain below peak levels, and customers have indicated they are not planning to invest in new systems to expand capacity in 2025. The company expects an approximately $60 million to $70 million reduction in data storage revenue in 2025 due to these market conditions.
Investing in Innovative Technologies to Drive Future Growth Veeco's strategy of investing in core technologies to enable industry inflections has been a key driver of its success. The company's next-generation laser annealing and ion beam deposition technologies are crucial for addressing the evolving needs of semiconductor manufacturers. Veeco's recent introduction of the NSA500 system, which covers the nanosecond annealing regime, and the IBD300 system, designed for advanced memory applications, exemplify the company's commitment to innovation.
Expanding Footprint in the Growing EUV Mask Blank Market The ongoing adoption of Extreme Ultraviolet (EUV) lithography for advanced semiconductor manufacturing has created a significant opportunity for Veeco's ion beam deposition technology. The company's IBD-EUV system is a critical enabler for the production of defect-free EUV mask blanks, and Veeco expects its SAM in this area to more than double to over $100 million as the industry expands EUV and high-NA EUV capacity.
Focusing on Advanced Packaging to Capitalize on AI and High-Performance Computing Veeco's wet processing systems have gained traction in the advanced packaging market, supporting applications such as heterogeneous integration and 3D packaging for artificial intelligence and high-performance computing. The company's recent announcement of over $50 million in orders for its wet processing systems from leading foundries, HBM manufacturers, and OSATs underscores the growing demand in this segment.
Strengthening Partnerships and Expanding Global Reach Veeco's strong relationships with its customers, which include leading semiconductor manufacturers and foundries, have been instrumental in the company's success. The company continues to work closely with its Tier-1 customers to address their evolving needs, leveraging its expertise in materials science and process integration.
Geographically, Veeco has a global presence, with significant revenue contributions from various regions. In Q3 2024, the United States accounted for 32% of revenue, EMEA for 5%, China for 30%, and the Rest of APAC for 33%. The company expects China revenue to decline in 2025 as customers digest recent capacity additions, while opportunities in other regions like the United States and Rest of APAC remain strong.
Navigating Challenges and Maintaining Resilience Veeco has demonstrated its resilience in the face of industry challenges, such as the COVID-19 pandemic and global supply chain disruptions. The company has implemented measures to mitigate the impact of these external factors, underscoring its operational agility and commitment to serving its customers effectively.
Looking Ahead: Poised for Continued Growth As the semiconductor industry continues to evolve, driven by the rising demand for advanced computing power, energy-efficient devices, and emerging technologies, Veeco is well-positioned to capitalize on these opportunities. The semiconductor industry is forecasted to grow to over $1 trillion in revenue by 2030, driving long-term growth in wafer fab equipment spending.
Veeco's guidance for Q4 2024 projects revenue between $165 million and $185 million. For the full year 2024, the company has narrowed its revenue guidance to $700 million to $720 million, up from the prior range of $690 million to $730 million. Veeco now expects non-GAAP diluted EPS between $1.68 and $1.78 per share for 2024, up from the prior range of $1.65 to $1.85 per share. The company expects its semiconductor business to grow approximately 10% in 2024, outperforming WFE growth for the fourth consecutive year.
Looking beyond 2024, Veeco anticipates a decline in revenue from China in 2025 but sees increased investment opportunities in AI and high-performance computing outside of China. In the compound semiconductor market, the company continues to see long-term opportunities in power electronics and photonics. For Q1 2025, Veeco currently expects revenue to be in a similar range to Q4 2024.
Veeco's focus on enabling industry inflections, its track record of outperforming the WFE market, and its commitment to developing cutting-edge technologies suggest a promising future for the company. As the semiconductor revolution marches on, Veeco stands ready to power the industry's progress with its innovative solutions.