10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-16244

VEECO INSTRUMENTS INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	11-2989601
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
Terminal Drive Plainview, New York	11803
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code:

(516) 677-0200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	VECO	The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).Yes ☒  No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No ☒

As of May 1, 2020, there were 49,428,391 shares of the registrant’s common stock outstanding.

VEECO INSTRUMENTS INC.

INDEX

Safe Harbor Statement	1
PART I—FINANCIAL INFORMATION	4
Item 1. Financial Statements	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosures about Market Risk	30
Item 4. Controls and Procedures	31
PART II—OTHER INFORMATION	31
Item 1. Legal Proceedings	31
Item 1A. Risk Factors	32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3. Defaults Upon Senior Securities	33
Item 4. Mine Safety Disclosures	33
Item 5. Other Information	33
Item 6. Exhibits	34
SIGNATURES	34

Safe Harbor Statement

This quarterly report on Form 10-Q (the “Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Discussions containing such forward-looking statements may be found in Part I - Items 1, 2, and 3 hereof, as well as within this Report generally. In addition, when used in this Report, the words “believes,” “anticipates,” “expects,” “estimates,” “targets,” “plans,” “intends,” “will,” and similar expressions related to the future are intended to identify forward-looking statements. All forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from projected results.

In addition, the preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates and assumptions are based on knowledge of current events, including the potential impact of the COVID-19 pandemic on our business, and planned actions to be undertaken in the future, they may ultimately differ from actual results. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. All estimates and assumptions are subject to a number of risks and uncertainties that could cause actual results to differ materially from these estimates and assumptions.

The risks and uncertainties of Veeco Instruments Inc. (together with its consolidated subsidiaries, “Veeco,” the “Company,” “we,” “us,” and “our,” unless the context indicates otherwise) include, without limitation, those set forth under the heading “Risk Factors” Part 1, Item 1A in our 2019 Form 10-K and Part 2, Item 1A in this quarterly report, and the following:

● The unknown duration and economic, operational, and financial impacts of the COVID-19 pandemic and the actions taken or contemplated by governmental authorities or others in response to the pandemic on our business, employees, customers and suppliers, including, among others, (a) changes in customer demand for our products, (b) disruptions in our supply chain, particularly to the extent we rely on a single supplier for certain components, (c) financial challenges confronting major customers in light of reduced end-user demand for their products, (d) operational changes implemented by us, including remote working arrangements, which may put increased strain on our IT systems and create increased vulnerability to cybersecurity incidents, (e) increases in shipping, raw material or other costs, (f) competitive pricing pressures, and (g) prolonged measures to contain the spread of COVID-19 or the premature easing of government-imposed restrictions implemented to contain the spread of COVID-19;

● Unfavorable market conditions have adversely affected, and may continue to adversely affect, our operating results;

● We are exposed to the risks of operating a global business;

● Changes in U.S. trade policy and export controls and ongoing trade disputes between the U.S. and China have adversely affected, and may continue to adversely affect, our business, results of operations, and financial condition;

● Disruptions in our information technology systems or data security incidents could result in significant financial, legal, regulatory, business, and reputational harm to us;

● We may be unable to effectively enforce and protect our intellectual property rights;

● We may be subject to claims of intellectual property infringement by others;

● We face significant competition;

● We operate in industries characterized by rapid technological change;

1

● Certain of our sales are dependent on the demand for consumer electronics, which can experience significant volatility due to seasonal and other factors;

● We have a concentrated customer base, located primarily in a limited number of regions, which operates in highly concentrated industries;

● The cyclicality of the industries we serve directly affects our business;

● The timing of our orders, shipments, and revenue recognition may cause our quarterly operating results to fluctuate significantly;

● Our sales cycle is long and unpredictable;

● Our backlog is subject to customer cancellation or modification which could result in decreased sales, increased inventory obsolescence, and liabilities to our suppliers for products no longer needed;

● We may be unable to obtain required export licenses for the sale of our products;

● Our operating results may be adversely affected by tightening credit markets;

● Our failure to estimate customer demand accurately could result in inventory obsolescence, liabilities to our suppliers for products no longer needed, and manufacturing interruptions or delays which could affect our ability to meet customer demand;

● Our failure to successfully manage our outsourcing activities or failure of our outsourcing partners to perform as anticipated could adversely affect our results of operations;

● We rely on a limited number of suppliers, some of whom are our sole source for particular components;

● The price of our common shares is volatile and could decrease;

● We may be required to take impairment charges on assets;

● Our inability to attract, retain, and motivate employees could have a material adverse effect on our business;

● We are exposed to risks associated with business combinations, acquisitions, strategic investments and divestitures;

● We are subject to internal control evaluations and attestation requirements of Section 404 of the Sarbanes-Oxley Act and any delays or difficulties in satisfying these requirements or negative reports concerning our internal controls could adversely affect our future results of operations and our stock price;

● Changes in accounting pronouncements or taxation rules or practices may adversely affect our financial results;

● Our income taxes may change;

● We have indebtedness in the form of convertible senior notes which could adversely affect our financial position, prevent us from implementing our strategy, and dilute the ownership interest of our existing shareholders;

● The accounting method for convertible debt securities that may be settled in cash, such as the Convertible Senior Notes, could have a material effect on our reported financial results;

2

● We are subject to foreign currency exchange risks;

● We have adopted certain measures that may have anti-takeover effects which may make an acquisition of our Company by another company more difficult;

● We are exposed to various risks associated with global regulatory requirements;

● We may be exposed to liabilities under the Foreign Corrupt Practices Act and other similar laws;

● We are subject to risks of non-compliance with environmental, health, and safety regulations; and

● We have significant operations in locations which could be materially and adversely impacted in the event of a natural disaster, an act of terrorism, or other significant disruption.

Consequently, such forward looking statements and estimates should be regarded solely as the current plans and beliefs of Veeco. We do not undertake any obligation to update any forward looking statements to reflect future events or circumstances after the date of such statements.

3

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Veeco Instruments Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share amounts)

	March 31,		December 31,
	2020		2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	162,325	$	129,294
Restricted cash		652		657
Short-term investments		79,429		115,252
Accounts receivable, net		84,251		45,666
Contract assets		14,612		25,351
Inventories		129,611		133,067
Deferred cost of sales		1,981		445
Prepaid expenses and other current assets		16,446		14,966
Assets held for sale		11,183		11,180
Total current assets		500,490		475,878
Property, plant, and equipment, net		72,291		75,711
Operating lease right-of-use assets		13,159		14,453
Intangible assets, net		57,680		61,518
Goodwill		181,943		181,943
Deferred income taxes		1,549		1,549
Other assets		5,774		7,036
Total assets	$	832,886	$	818,088
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	36,359	$	21,281
Accrued expenses and other current liabilities		41,568		41,243
Customer deposits and deferred revenue		49,628		54,870
Income taxes payable		954		830
Total current liabilities		128,509		118,224
Deferred income taxes		5,763		5,648
Long-term debt		303,388		300,068
Operating lease long-term liabilities		9,294		10,300
Other liabilities		8,868		9,336
Total liabilities		455,822		443,576
Stockholders' equity:
Preferred stock, $0.01 par value; 500,000 shares authorized; no shares issued and outstanding.		—		—
Common stock, $0.01 par value; 120,000,000 shares authorized; 49,428,391 shares issued and outstanding at March 31, 2020 and 48,994,346 shares issued and outstanding at December 31, 2019		494		490
Additional paid-in capital		1,074,020		1,071,058
Accumulated deficit		(699,497)		(698,930)
Accumulated other comprehensive income		2,047		1,894
Total stockholders' equity		377,064		374,512
Total liabilities and stockholders' equity	$	832,886	$	818,088

See accompanying Notes to the Consolidated Financial Statements.

4

Veeco Instruments Inc. and Subsidiaries

Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

	Three months ended March 31,
	2020		2019
Net sales	$	104,502	$	99,371
Cost of sales		58,083		64,655
Gross profit		46,419		34,716
Operating expenses, net:
Research and development		19,195		23,340
Selling, general, and administrative		18,304		19,902
Amortization of intangible assets		3,837		4,218
Restructuring		625		1,430
Other operating expense (income), net		(109)		(34)
Total operating expenses, net		41,852		48,856
Operating income (loss)		4,567		(14,140)
Interest income		800		1,245
Interest expense		(5,666)		(5,445)
Income (loss) before income taxes		(299)		(18,340)
Income tax expense (benefit)		268		190
Net income (loss)	$	(567)	$	(18,530)
Income (loss) per common share:
Basic	$	(0.01)	$	(0.40)
Diluted	$	(0.01)	$	(0.40)
Weighted average number of shares:
Basic		47,811		46,848
Diluted		47,811		46,848

See accompanying Notes to the Consolidated Financial Statements.

5

Veeco Instruments Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

	Three months ended March 31,
	2020		2019
Net income (loss)	$	(567)	$	(18,530)
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on available-for-sale securities		201		27
Foreign currency translation		(48)		11
Total other comprehensive income (loss), net of tax		153		38
Total comprehensive income (loss)	$	(414)	$	(18,492)

See accompanying Notes to the Consolidated Financial Statements.

6

Veeco Instruments Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Three months ended March 31,
	2020		2019
Cash Flows from Operating Activities
Net income (loss)	$	(567)	$	(18,530)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		7,724		8,796
Non-cash interest expense		3,320		3,081
Deferred income taxes		115		(15)
Share-based compensation expense		3,646		3,157
Changes in operating assets and liabilities:
Accounts receivable and contract assets		(27,846)		(8,134)
Inventories and deferred cost of sales		2,446		8,489
Prepaid expenses and other current assets		(1,480)		(2,457)
Accounts payable and accrued expenses		14,459		(12,260)
Customer deposits and deferred revenue		(5,242)		(3,855)
Income taxes receivable and payable, net		124		(463)
Other, net		905		(100)
Net cash provided by (used in) operating activities		(2,396)		(22,291)
Cash Flows from Investing Activities
Capital expenditures		(1,070)		(2,180)
Proceeds from the sale of investments		71,130		22,500
Payments for purchases of investments		(34,866)		(41,258)
Net cash provided by (used in) investing activities		35,194		(20,938)
Cash Flows from Financing Activities
Proceeds (net of tax withholdings) from option exercises and employee stock purchase plan		956		1,021
Restricted stock tax withholdings		(680)		(642)
Net cash provided by (used in) financing activities		276		379
Effect of exchange rate changes on cash and cash equivalents		(48)		11
Net increase (decrease) in cash, cash equivalents, and restricted cash		33,026		(42,839)
Cash, cash equivalents, and restricted cash - beginning of period		129,951		213,082
Cash, cash equivalents, and restricted cash - end of period	$	162,977	$	170,243
Supplemental Disclosure of Cash Flow Information
Interest paid	$	4,681	$	4,693
Income taxes paid		293		2,341
Non-cash operating and financing activities
Net transfer of property, plant and equipment to inventory		526		130
Right-of-use assets obtained in exchange for lease obligations		—		238

See accompanying Notes to the Consolidated Financial Statements.

7

Veeco Instruments Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

(unaudited)

Note 1 — Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of Veeco have been prepared in accordance with U.S. GAAP as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 270 for interim financial information and with the instructions to Rule 10-01 of Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements as the interim information is an update of the information that was presented in Veeco’s most recent annual financial statements. For further information, refer to Veeco’s Consolidated Financial Statements and Notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal, recurring nature.

Veeco reports interim quarters on a 13-week basis ending on the last Sunday of each quarter. The fourth quarter always ends on the last day of the calendar year, December 31. The 2020 interim quarters end on March 29, June 28, and September 27, and the 2019 interim quarters ended on March 31, June 30, and September 29. These interim quarters are reported as March 31, June 30, and September 30 in Veeco’s interim consolidated financial statements.

The preparation of financial statements in conformity with U.S GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, actual results may differ from these estimates. In particular, the COVID-19 pandemic has adversely impacted and is likely to further adversely impact the Company’s business and markets, including the Company’s workforce and operations and the operations of the Company’s customers, suppliers, and business partners. The full extent to which the pandemic will directly or indirectly impact the Company's business, results of operations and financial condition, including sales, expenses, manufacturing, research and development costs, reserves and allowances, fair value measurements, and asset impairment charges, will depend on future developments that are highly uncertain and difficult to predict. These developments include, but are not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or address its impact, governmental actions to contain the spread of the pandemic and respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume.

Revenue Recognition

Revenue is recognized upon the transfer of control of the promised product or service to the customer in an amount that reflects the consideration the Company expects to receive in exchange for such product or service. The Company’s contracts with customers generally do not contain variable consideration. In the rare instances where variable consideration is included, the Company estimates the amount of variable consideration and determines what portion of that, if any, has a high probability of significant subsequent revenue reversal, and if so, that amount is excluded from the transaction price. The Company’s contracts with customers frequently contain multiple deliverables, such as systems, upgrades, components, spare parts, installation, maintenance, and service plans. Judgment is required to properly identify the performance obligations within a contract and to determine how the revenue should be allocated among the performance obligations. The Company also evaluates whether multiple transactions with the same customer or related parties should be considered part of a single contract based on an assessment of whether the contracts or agreements are negotiated or executed within a short time frame of each other or if there are indicators that the contracts are negotiated in contemplation of one another.

When there are separate units of accounting, the Company allocates revenue to each performance obligation on a relative stand-alone selling price basis. The stand-alone selling prices are determined based on the prices at which the Company separately sells the systems, upgrades, components, spare parts, installation, maintenance, and service plans. For items

8

Veeco Instruments Inc. and Subsidiaries

Notes to the Consolidated Financial Statements - continued

(unaudited)

that are not sold separately, the Company estimates stand-alone selling prices generally using an expected cost plus margin approach.

Most of the Company’s revenue is recognized at a point in time when the performance obligation is satisfied. The Company considers many facts when evaluating each of its sales arrangements to determine the timing of revenue recognition, including its contractual obligations and the nature of the customer’s post-delivery acceptance provisions. The Company’s system sales arrangements, including certain upgrades, generally include field acceptance provisions that may include functional or mechanical test procedures. For many of these arrangements, a customer source inspection of the system is performed in the Company’s facility, test data is sent to the customer documenting that the system is functioning to the agreed upon specifications prior to delivery, or other quality assurance testing is performed internally to ensure system functionality prior to shipment. Historically, such source inspection or test data replicates the field acceptance provisions that are performed at the customer’s site prior to final acceptance of the system. When the Company objectively demonstrates that the criteria specified in the contractual acceptance provisions are achieved prior to delivery either through customer testing or the Company’s historical experience of its tools meeting specifications, transfer of control of the product to the customer is considered to have occurred and revenue is recognized upon system delivery since there is no substantive contingency remaining related to the acceptance provisions at that date. For new products, new applications of existing products, or for products with substantive customer acceptance provisions where the Company cannot objectively demonstrate that the criteria specified in the contractual acceptance provisions have been achieved prior to delivery, revenue and the associated costs are deferred. The Company recognizes such revenue and costs upon obtaining objective evidence that the acceptance provisions can be achieved, assuming all other revenue recognition criteria have been met.

In certain cases the Company’s contracts with customers contain a billing retention, typically 10% of the sales price, which is billed by the Company and payable by the customer when field acceptance provisions are completed. Revenue recognized in advance of the amount that has been billed is recorded as a contract asset on the Consolidated Balance Sheets.

The Company recognizes revenue related to maintenance and service contracts over time based upon the respective contract term. Installation revenue is recognized over time as the installation services are performed. The Company recognizes revenue from the sales of components, spare parts, and specified service engagements at a point in time, which is typically consistent with the time of delivery in accordance with the terms of the applicable sales arrangement.

The Company may receive customer deposits on system transactions. The timing of the transfer of goods or services related to the deposits is either at the discretion of the customer or expected to be within one year from the deposit receipt. As such, the Company does not adjust transaction prices for the time value of money. Incremental direct costs incurred related to the acquisition of a customer contract, such as sales commissions, are expensed as incurred since the expected amortization period is one year or less.

The Company has elected to treat shipping and handling costs as a fulfillment activity, and the Company includes such costs in cost of services when the Company recognizes revenue for the related goods. Taxes assessed by governmental authorities that are collected by the Company from a customer are excluded from revenue.

Inventories

Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Each quarter the Company assesses the valuation and recoverability of all inventories: materials (raw materials, spare parts, and service inventory); work-in-process; and finished goods. Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated net realizable value if less than cost. The Company evaluates usage requirements by analyzing historical usage, anticipated demand, alternative uses of materials, and other qualitative factors. Unanticipated changes in demand for the Company’s products may require a write down of

9

Veeco Instruments Inc. and Subsidiaries

Notes to the Consolidated Financial Statements - continued

(unaudited)

inventory, which would be reflected in cost of sales in the period the revision is made. Inventory acquired as part of a business combination is recorded at fair value on the date of acquisition.

Note 2 — Income (Loss) Per Common Share

Basic income (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares outstanding during the period. Diluted income per share is calculated by dividing net income by the weighted average number of shares used to calculate basic income (loss) per share plus the weighted average number of common share equivalents outstanding during the period. The dilutive effect of outstanding options to purchase common stock and share-based awards is considered in diluted income per share by application of the treasury stock method. The dilutive effect of performance share units is included in diluted income per common share if the performance targets have been achieved, or would have been achieved if the reporting date was the end of the contingency period. The computations of basic and diluted income (loss) per share for the three months ended March 31, 2020 and 2019 are as follows:

	Three months ended March 31,
	2020		2019
	(in thousands, except per share amounts)
Net income (loss)	$	(567)	$	(18,530)
Net income (loss) per common share:
Basic	$	(0.01)	$	(0.40)
Diluted	$	(0.01)	$	(0.40)
Basic weighted average shares outstanding		47,811		46,848
Effect of potentially dilutive share-based awards		—		—
Diluted weighted average shares outstanding		47,811		46,848
Common share equivalents excluded from the diluted weighted average shares outstanding since the Company incurred a net loss and their effect would be antidilutive		627		320
Potentially dilutive shares excluded from the diluted calculation as their effect would be antidilutive		1,485		2,426
Maximum potential shares to be issued for settlement of the Convertible Senior Notes excluded from the diluted calculation as their effect would be antidilutive		8,618		8,618

Note 3 — Assets

Investments

Short-term investments are generally classified as available-for-sale and reported at fair value, with unrealized gains and losses, net of tax, presented as a separate component of stockholders’ equity under the caption “Accumulated other comprehensive income” in the Consolidated Balance Sheets. These securities may include U.S. treasuries, government agency securities, corporate debt, and commercial paper, all with maturities of greater than three months when purchased. All realized gains and losses and unrealized losses resulting from declines in fair value that are other than temporary are included in “Other, net” in the Consolidated Statements of Operations.

Fair value is the price that would be received for an asset or the amount paid to transfer a liability in an orderly transaction between market participants. Veeco classifies certain assets based on the following fair value hierarchy:

Level 1: Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

10

Veeco Instruments Inc. and Subsidiaries

Notes to the Consolidated Financial Statements - continued

(unaudited)

Level 2: Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and

Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Veeco has evaluated the estimated fair value of financial instruments using available market information and valuations as provided by third-party sources. The use of different market assumptions or estimation methodologies could have a significant effect on the estimated fair value amounts.

The following table presents the portion of Veeco’s assets that were measured at fair value on a recurring basis at March 31, 2020 and December 31, 2019:

	Level 1		Level 2		Level 3		Total
	(in thousands)
March 31, 2020
Cash equivalents
Certificate of deposits and time deposits	$	81,796	$	—	$	—	$	81,796
Government money market fund		47,500		—		—		47,500
Commercial paper		—		9,498		—		9,498
Total	$	129,296	$	9,498	$	—	$	138,794
Short-term investments
U.S. treasuries	$	52,507	$	—	$	—	$	52,507
Government agency securities		—		5,976		—		5,976
Corporate debt		—		7,015		—		7,015
Commercial paper		—		13,931		—		13,931
Total	$	52,507	$	26,922	$	—	$	79,429
December 31, 2019
Cash equivalents
Certificate of deposits and time deposits	$	67,009	$	—	$	—	$	67,009
Commercial paper		—		10,484		—		10,484
Corporate debt		—		1,000		—		1,000
Total	$	67,009	$	11,484	$	—	$	78,493
Short-term investments
U.S. treasuries	$	105,130	$	—	$	—	$	105,130
Government agency securities		—		1,139		—		1,139
Corporate debt		—		6,002		—		6,002
Commercial paper		—		2,981		—		2,981
Total	$	105,130	$	10,122	$	—	$	115,252

There were no transfers between fair value measurement levels during the three months ended March 31, 2020.

11

Veeco Instruments Inc. and Subsidiaries

Notes to the Consolidated Financial Statements - continued

(unaudited)

At March 31, 2020 and December 31, 2019, the amortized cost and fair value of available-for-sale securities consist of:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
	(in thousands)
March 31, 2020
U.S. treasuries	$	52,285	$	222	$	—	$	52,507
Government agency securities		5,947		29		—		5,976
Corporate debt		7,032		—		(17)		7,015
Commercial paper		13,930		1		—		13,931
Total	$	79,194	$	252	$	(17)	$	79,429
December 31, 2019
U.S. treasuries	$	105,096	$	38	$	(4)	$	105,130
Government agency securities		1,139		—		—		1,139
Corporate debt		6,003		—		(1)		6,002
Commercial paper		2,981		—		—		2,981
Total	$	115,219	$	38	$	(5)	$	115,252

Available-for-sale securities in a loss position at March 31, 2020 and December 31, 2019 consist of:

	March 31, 2020				December 31, 2019
			Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses
		(in thousands)
U.S. treasuries	$	—	$	—	$	22,943	$	(4)
Corporate debt		7,015		(17)		6,002		(1)
Total	$	7,015	$	(17)	$	28,945	$	(5)

At March 31, 2020 and December 31, 2019, there were no short-term investments that had been in a continuous loss position for more than 12 months.

The maturities of securities classified as available-for-sale at March 31, 2020 were all due in one year or less, and an allowance for credit loss is considered unnecessary. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. There were no realized gains or losses for the three months ended March 31, 2020 and 2019.

Accounts Receivable

Accounts receivable is presented net of an allowance for doubtful accounts of $0.6 million at March 31, 2020 and December 31, 2019. The Company considered its current expectations of future economic conditions, including the impact of COVID-19, when estimating its allowance for doubtful accounts. As a result of this assessment, no increase to the Company’s allowance for doubtful accounts was deemed necessary as a result of the Company’s current estimate of the impact COVID-19 will have on the collectability of the Company’s accounts receivable.

12

Veeco Instruments Inc. and Subsidiaries

Notes to the Consolidated Financial Statements - continued

(unaudited)

Inventories

Inventories at March 31, 2020 and December 31, 2019 consist of the following:

	March 31,		December 31,
	2020		2019
	(in thousands)
Materials	$	81,684	$	82,155
Work-in-process		41,706		42,575
Finished goods		6,221		8,337
Total	$	129,611	$	133,067

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets primarily consist of supplier deposits, prepaid value-added tax, lease deposits, prepaid insurance, and prepaid licenses. Veeco had deposits with its suppliers of $5.4 million and $5.9 million at March 31, 2020 and December 31, 2019, respectively.

Assets Held for Sale (including subsequent event)

In the fourth quarter of 2019, the Company determined that one of its non-core product lines (the “disposal group”) met the held for sale criteria, and as such, the related assets are presented as “Assets held for sale” on the Consolidated Balance Sheets. Subsequent to March 31, 2020, the Company completed the sale of this product line for approximately $11.4 million, with approximately 85% of the transaction price due upon closing, and 15% held in escrow for a period of 18 months. Long-lived assets and definite-lived intangible assets were not depreciated or amortized while classified as held for sale. The sale of this disposal group does not represent a strategic shift that will have a material effect on the Company’s operations and financial results, nor is it considered a component of the Company, and as such it did not meet the criteria to be reported as discontinued operations.

For the year ended December 31, 2019, the Company recorded a non-cash impairment charge on these assets held for sale of $4.0 million in order to measure the disposal group at the lower of its carrying value or fair value less costs to sell, which resulted in a corresponding held for sale valuation allowance on its assets held for sale in the Consolidated Balance Sheet. The major classes of assets that were classified as held for sale as of March 31, 2020 are as follows:

	March 31, 2020
	(in thousands)
Assets held for sale:
Inventories	$	5,988
Property, plant, and equipment, net		310
Intangible assets, net		6,546
Goodwill		2,359
Impairment		(4,020)
Total Assets held for sale	$	11,183

13

Veeco Instruments Inc. and Subsidiaries

Notes to the Consolidated Financial Statements - continued

(unaudited)

Property, Plant, and Equipment

Property, plant, and equipment at March 31, 2020 and December 31, 2019 consist of the following:

	March 31,		December 31,
	2020		2019
	(in thousands)
Land	$	5,061	$	5,061
Building and improvements		62,631		61,884
Machinery and equipment (1)		136,625		137,692
Leasehold improvements		6,770		6,703
Gross property, plant, and equipment		211,087		211,340
Less: accumulated depreciation and amortization		138,796		135,629
Net property, plant, and equipment	$	72,291	$	75,711

(1) Machinery and equipment also includes software, furniture and fixtures

For the three months ended March 31, 2020 and 2019, depreciation expense was $3.9 million and $4.6 million, respectively.

Goodwill

Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognized. The Company continues to assess the COVID-19 pandemic as a potential triggering event related to the value of its goodwill and concluded that there were no indicators of impairment during the three months ended March 31, 2020.

Intangible Assets

Intangible assets consist of purchased technology, customer relationships, patents, trademarks and tradenames, and backlog, and are initially recorded at fair value. Long-lived intangible assets are amortized over their estimated useful lives in a method reflecting the pattern in which the economic benefits are consumed or amortized on a straight-line basis if such pattern cannot be reliably determined. The Company continues to assess the COVID-19 pandemic as a potential triggering event related to the value of its intangible assets and concluded that there were no indicators of impairment during the three months ended March 31, 2020.

The components of purchased intangible assets were as follows:

	March 31, 2020						December 31, 2019
			Accumulated						Accumulated
	Gross		Amortization				Gross		Amortization
	Carrying		and		Net		Carrying		and		Net
	Amount		Impairment		Amount		Amount		Impairment		Amount
	(in thousands)
Technology	$	327,908	$	294,414	$	33,494	$	327,908	$	291,766	$	36,142
Customer relationships		146,465		127,606		18,859		146,465		126,764		19,701
Trademarks and tradenames		30,910		25,596		5,314		30,910		25,256		5,654
Other		3,686		3,673		13		3,686		3,665		21
Total	$	508,969	$	451,289	$	57,680	$	508,969	$	447,451	$	61,518

Other intangible assets primarily consist of patents, licenses, and backlog.

14

Veeco Instruments Inc. and Subsidiaries

Notes to the Consolidated Financial Statements - continued

(unaudited)

Note 4 — Liabilities

Accrued Expenses and Other Current Liabilities

The components of accrued expenses and other current liabilities at March 31, 2020 and December 31, 2019 consist of:

	March 31,		December 31,
	2020		2019
	(in thousands)
Payroll and related benefits	$	18,909	$	15,174
Warranty		5,968		7,067
Operating lease liabilities		4,286		4,196
Interest		1,992		4,321
Professional fees		1,936		2,443
Sales, use, and other taxes		2,644		811
Restructuring liability		2,074		2,841
Other		3,759		4,390
Total	$	41,568	$	41,243

Warranty

Warranties are typically valid for one year from the date of system final acceptance, and Veeco estimates the costs that may be incurred under the warranty. Estimated warranty costs are determined by analyzing specific product and historical configuration statistics and regional warranty support costs and are affected by product failure rates, material usage, and labor costs incurred in correcting product failures during the warranty period. Unforeseen component failures or exceptional component performance can also result in changes to warranty costs. Changes in product warranty reserves for the three months ended March 31, 2020 include:

		(in thousands)
Balance - December 31, 2019	$	7,067
Warranties issued		645
Consumption of reserves		(1,708)
Changes in estimate		(36)
Balance - March 31, 2020	$	5,968

Restructuring Accruals

The Company continued to record restructuring charges during the year ended December 31, 2019 as a result of its efforts to further streamline operations, enhance efficiencies, and reduce costs. In the second half of 2019, the Company executed an initiative to reorganize various functions along product lines and created a central research and development organization to better allocate its resources to the Company’s highest priority projects. In addition, the Company delayered the organization. Collectively, these actions impacted approximately 60 employees. During the three months ended March 31, 2020, additional accruals were recognized and payments were made related to these restructuring initiatives.

The following table shows the amounts incurred and paid for restructuring activities during the three months ended March 31, 2020, and the remaining accrued balance of restructuring costs at March 31, 2020, which is included in

15

Veeco Instruments Inc. and Subsidiaries

Notes to the Consolidated Financial Statements - continued

(unaudited)

“Accrued expenses and other current liabilities” in the Consolidated Balance Sheets, and principally consists of personnel severance and related costs:

	(in thousands)
Balance - December 31, 2019	$	2,841
Provision		625
Payments		(1,392)
Balance - March 31, 2020	$	2,074

Customer Deposits and Deferred Revenue

Customer deposits totaled $24.9 million and $26.6 million at March 31, 2020 and December 31, 2019, respectively. Deferred revenue represents amounts billed, other than deposits, in excess of the revenue that can be recognized on a particular contract at the balance sheet date. Changes in deferred revenue were as follows:

	(in thousands)
Balance - December 31, 2019	$	28,249
Deferral of revenue		5,089
Recognition of previously deferred revenue		(8,607)
Balance - March 31, 2020	$	24,731

As of March 31, 2020, the Company has approximately $32.2 million of remaining performance obligations on contracts with an original estimated duration of one year or more, of which approximately 88% is expected to be recognized within one year, with the remaining amounts expected to be recognized between one to three years. The Company has elected to exclude disclosures regarding remaining performance obligations that have an original expected duration of one year or less.

Convertible Senior Notes

On January 10, 2017, the Company issued $345.0 million of 2.70% convertible senior unsecured notes (the “Convertible Senior Notes”). The Company received net proceeds, after deducting underwriting discounts and fees and expenses payable by the Company, of approximately $335.8 million. The Convertible Senior Notes bear interest at a rate of 2.70% per year, payable semiannually in arrears on January 15 and July 15 of each year, commencing on July 15, 2017. The Convertible Senior Notes mature on January 15, 2023 (the “Maturity Date”), unless earlier purchased by the Company, redeemed, or converted.

The carrying value of the Convertible Senior Notes is as follows:

	March 31,		December 31,
	2020		2019
	(in thousands)
Principal amount	$	345,000	$	345,000
Unamortized debt discount		(37,804)		(40,820)
Unamortized transaction costs		(3,808)		(4,112)
Net carrying value	$	303,388	$	300,068

16

Veeco Instruments Inc. and Subsidiaries

Notes to the Consolidated Financial Statements - continued

(unaudited)

Total interest expense related to the Convertible Senior Notes is as follows:

	Three months ended March 31,
	2020		2019
	(in thousands)
Cash Interest Expense
Coupon interest expense	$	2,329	$	2,329
Non-Cash Interest Expense
Amortization of debt discount		3,016		2,799
Amortization of transaction costs		304		282
Total Interest Expense	$	5,649	$	5,410

The Company determined the Convertible Senior Notes is a Level 2 liability in the fair value hierarchy and estimated its fair value as $283.8 million at March 31, 2020.

Other Liabilities

As part of the acquisition of Ultratech, the Company assumed an executive non-qualified deferred compensation plan that allowed qualifying executives to defer cash compensation. The plan was frozen at the time of acquisition and no further contributions have been made. At March 31, 2020 and December 31, 2019, plan assets approximated $1.9 million and $2.7 million, respectively, representing the cash surrender value of life insurance policies and is included within “Other assets” in the Consolidated Balance Sheets, while plan liabilities approximated $2.3 million and $3.1 million, respectively, and is included within “Other liabilities” in the Consolidated Balance Sheets. Other liabilities at both March 31, 2020 and December 31, 2019 also included medical and dental benefits for former executives of $2.0 million, asset retirement obligations of $3.2 million, and income tax payables of $1.0 million.

Note 5 — Commitments and Contingencies

Leases

The Company’s operating leases primarily include real estate leases for properties used for manufacturing, R&D activities, sales and service, and administration, as well as certain equipment leases. Some leases may include options to renew for a period of up to 5 years, while others may include options to terminate the lease. The weighted average

17

Veeco Instruments Inc. and Subsidiaries

Notes to the Consolidated Financial Statements - continued

(unaudited)

remaining lease term of the Company’s operating leases as of March 31, 2020 was 3 years, and the weighted average discount rate used in determining the present value of future lease payments was 6.0%.

The following table provides the maturities of lease liabilities at March 31, 2020:

	Operating
	Leases
	(in thousands)
Payments due by period:
2020	$	3,898
2021		4,970
2022		4,387
2023		1,112
2024		551
Thereafter		—
Total future minimum lease payments		14,918
Less: Imputed interest		(1,338)
Total	$	13,580
Reported as of March 31, 2020
Accrued expenses and other current liabilities	$	4,286
Operating lease long-term liabilities		9,294
Total	$	13,580

Operating lease cost for both the three months ended March 31, 2020 and 2019 was $1.4 million. Variable lease cost for the three months ended March 31, 2020 and 2019 was $0.5 million and $0.6 million, respectively. Additionally, the Company has an immaterial amount of short term leases. Operating cash outflows from operating leases for the three months ended March 31, 2020 and 2019 were $1.3 million and $1.5 million, respectively.

Purchase Commitments

Veeco has purchase commitments of $76.2 million at March 31, 2020, substantially all of which become due within one year.

Bank Guarantees

Veeco has bank guarantees and letters of credit issued by a financial institution on its behalf as needed. At March 31, 2020, outstanding bank guarantees and letters of credit totaled $5.8 million, and unused bank guarantees and letters of credit of $25.8 million were available to be drawn upon.

Legal Proceedings

On June 8, 2018, an Ultratech shareholder who received Veeco stock as part of the consideration for the Ultratech acquisition filed a purported class action complaint in the Superior Court of the State of California, County of Santa Clara, captioned Wolther v. Maheshwari et al., Case No. 18CV329690, on behalf of himself and others who purchased or acquired shares of Veeco pursuant to the registration statement and prospectus which Veeco filed with the SEC in connection with the Ultratech acquisition (the “Wolther Action”). On August 2 and August 8, 2018, two purported class action complaints substantially similar to the Wolther Action were filed on behalf of different plaintiffs in the same court as the Wolther Action. These cases have been consolidated with the Wolther Action, and a consolidated complaint was filed on December 11, 2018. The consolidated complaint seeks to recover damages and fees under Sections 11, 12, and

18

Veeco Instruments Inc. and Subsidiaries

Notes to the Consolidated Financial Statements - continued

(unaudited)

15 of the Securities Act of 1933 for, among other things, alleged false/misleading statements in the registration statement and prospectus relating to the Ultratech acquisition, relating primarily to the alleged failure to disclose delays in the advanced packaging business, increased MOCVD competition in China, and an intellectual property dispute. Veeco is defending this matter vigorously.

On December 21, 2018, a purported Veeco stockholder filed a derivative action in the Superior Court of the State of California, County of Santa Clara, captioned Vladimir Gusinsky Revocable Trust v. Peeler, et al., Case No. 18CV339925, on behalf of nominal defendant Veeco. The complaint seeks to assert claims for breach of fiduciary duty, waste of corporate assets, and unjust enrichment against current and former Veeco directors premised on purported misstatements and omissions in the registration statement relating to the Ultratech acquisition. Veeco is defending this matter vigorously.

The Company is involved in various other legal proceedings arising in the normal course of business. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows.

Note 6 — Derivative Financial Instruments

The Company is exposed to financial market risks arising from changes in currency exchange rates. Changes in currency exchange rates could affect the Company’s foreign currency denominated monetary assets and liabilities and forecasted cash flows. The Company enters into monthly forward derivative contracts with the intent of mitigating a portion of this risk. The Company only uses derivative financial instruments in the context of hedging and not for speculative purposes and had not designated its foreign exchange derivatives as hedges. Accordingly, changes in fair value from these contracts are recorded as “Other operating expense (income), net” in the Company’s Consolidated Statements of Operations. The Company executes derivative transactions with highly rated financial institutions to mitigate counterparty risk.

The Company did not have any outstanding derivative contracts at March 31, 2020 or December 31, 2019. Additionally, the Company did not have any gains or losses from currency exchange derivatives during the three months ended March 31, 2020 and 2019.

19

Veeco Instruments Inc. and Subsidiaries

Notes to the Consolidated Financial Statements - continued

(unaudited)

Note 7 — Equity

Statement of Stockholders’ Equity

The following tables present the changes in Stockholders’ Equity:

								Accumulated
				Additional				Other
	Common Stock			Paid-in		Accumulated		Comprehensive
	Shares	Amount		Capital		Deficit		Income		Total
	(in thousands)
Balance at December 31, 2019	48,994	$	490	$	1,071,058	$	(698,930)	$	1,894	$	374,512
Net loss	—		—		—		(567)		—		(567)
Other comprehensive income, net of tax	—		—		—		—		153		153
Share-based compensation expense	—		—		3,646		—		—		3,646
Net issuance under employee stock plans	434		4		(684)		—		—		(680)
Balance at March 31, 2020	49,428	$	494	$	1,074,020	$	(699,497)	$	2,047	$	377,064

												Accumulated
								Additional				Other
	Common Stock			Treasury Stock				Paid-in		Accumulated		Comprehensive
	Shares	Amount		Shares		Amount		Capital		Deficit		Income		Total
	(in thousands)
Balance at December 31, 2018	48,547	$	485		523	$	(5,872)	$	1,061,325	$	(619,983)	$	1,820	$	437,775
Net loss	—		—		—		—		—		(18,530)		—		(18,530)
Other comprehensive income, net of tax	—		—		—		—		—		—		38		38
Share-based compensation expense	—		—		—		—		3,157		—		—		3,157
Net issuance under employee stock plans	128		2		(523)		5,872		(6,303)		(213)		—		(642)
Balance at March 31, 2019	48,675	$	487		—	$	—	$	1,058,179	$	(638,726)	$	1,858	$	421,798

Accumulated Other Comprehensive Income (“AOCI”)

The following table presents the changes in the balances of each component of AOCI, net of tax:

			Unrealized
			Gains (Losses)
	Foreign		on Available
	Currency		for Sale
	Translation		Securities		Total
	(in thousands)
Balance - December 31, 2019	$	1,861	$	33	$	1,894
Other comprehensive income (loss)		(48)		201		153
Balance - March 31, 2020	$	1,813	$	234	$	2,047

There were minimal reclassifications from AOCI into net income for the three months ended March 31, 2020 and 2019.

Note 8 — Share-Based Compensation

Restricted share awards are issued to employees that are subject to specified restrictions and a risk of forfeiture. The restrictions typically lapse over one to five years and may entitle holders to dividends and voting rights. Other types of share-based compensation include performance share awards, performance share units, and restricted share units (collectively with restricted share awards, “restricted shares”), as well as options to purchase common stock.

20

Veeco Instruments Inc. and Subsidiaries

Notes to the Consolidated Financial Statements - continued

(unaudited)

Share-based compensation expense was recognized in the following line items in the Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019:

		Three months ended March 31,
		2020		2019
	(in thousands)
Cost of sales		$	521	$	470
Research and development			874		792
Selling, general, and administrative			2,251		1,895
Total		$	3,646	$	3,157

For the three months ended March 31, 2020, equity activity related to stock options was as follows:

		Weighted
	Number of	Average
	Shares	Exercise Price
	(in thousands)
Balance - December 31, 2019	1,119		34.88
Expired or forfeited	(40)		34.19
Balance - March 31, 2020	1,079		34.90

For the three months ended March 31, 2020, equity activity related to non-vested restricted shares and performance shares was as follows:

		Weighted
		Average
	Number of	Grant Date
	Shares	Fair Value
	(in thousands)
Balance - December 31, 2019	2,257		16.20
Granted	840		8.99
Performance award adjustments	(45)		31.34
Vested	(190)		12.68
Forfeited	(233)		16.35
Balance - March 31, 2020	2,629		13.88

Note 9 — Income Taxes

Income taxes are estimated for each of the jurisdictions in which the Company operates. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. Realization of net deferred tax assets is dependent on future taxable income. At March 31, 2020, the Company’s U.S. deferred tax assets are fully offset by a valuation allowance since the Company cannot conclude that it is more likely than not that these future benefits will be realized.

At the end of each interim reporting period, the effective tax rate is aligned with expectations for the full year. This estimate is used to determine the income tax provision on a year-to-date basis and may change in subsequent interim periods. If necessary, the year-to-date tax benefit for interim period losses is limited to the amount that could be recognizable at the end of the fiscal year.

21

Veeco Instruments Inc. and Subsidiaries

Notes to the Consolidated Financial Statements - continued

(unaudited)

Loss before income taxes and income tax expense (benefit) for the three months ended March 31, 2020 and 2019 were as follows:

	Three months ended March 31,
	2020		2019
	(in thousands)
Loss before income taxes	$	(299)	$	(18,340)
Income tax expense (benefit)	$	268	$	190

The Company’s tax expense for the three months ended March 31, 2020 was $0.3 million, compared to $0.2 million for the comparable prior period. The 2020 tax expense included a $0.1 million expense related to the Company’s domestic operations and $0.2 million related to the Company’s non-U.S. operations, compared to 2019 when the expense included a $0.1 million expense related to the Company’s domestic operations and $0.1 million related to the Company’s non-U.S. operations. Although there was a domestic pre-tax loss for the three months ended March 31, 2020 and 2019, the Company did not provide a current tax benefit on domestic pre-tax losses, as the amounts are not realizable on a more-likely-than-not basis. The domestic tax expense for the current period is primarily attributable to the tax amortization of indefinite-lived intangible assets that is not available to offset U.S. deferred tax assets.

Note 10 — Segment Reporting and Geographic Information

Veeco operates and measures its results in one operating segment and therefore has one reportable segment: the design, development, manufacture, and support of thin film process equipment primarily sold to make electronic devices.

Veeco categorizes its sales into the following four end-markets:

Front-End Semiconductor

Front-End Semiconductor refers to the early steps in the process of integrated circuit fabrication where the microchips are created but still remain on the silicon wafer. This category includes Laser Spike Anneal, Ion Beam etch for front-end semiconductor applications, and Ion Beam deposition for EUV mask blanks.

Advanced Packaging, MEMS & RF Filters

Advanced Packaging includes a portfolio of wafer-level assembly technologies that enable improved performance of electronic products, such as smartphones, high-end servers, and graphical processors. Micro-Electro Mechanical Systems (“MEMS”) includes tiny mechanical devices such as sensors, switches, mirrors, and actuators embedded in semiconductor chips used in vehicles, smartphones, tablets, and games. RF Filters refers to RF filters used in smartphones, tablets, and mobile devices.

LED Lighting, Display & Compound Semiconductor

LED Lighting refers to Light Emitting Diode (“LED”) and semiconductor illumination sources used in various applications including, but not limited to, displays such as backlights, general lighting, automotive running lights, and headlamps. Display refers to LEDs used for displays and Organic Light Emitting Diode (“OLED”) displays found in outdoor display/signage applications, TVs, smartphones, wearable devices, and tablets. Compound Semiconductor includes Photonics, Power Electronics, and Radio Frequency (“RF”) Devices. Photonics refers to laser diodes, Vertical Cavity Surface Emitting Lasers (“VCSEL”) in 3D sensing and communications, and various other optical devices. Power Electronics refers to semiconductor devices such as rectifiers, inverters, and converters for the control and conversion of electric power. RF devices refers to radio frequency emitting and receiving devices that enable wireless communications. Such devices include power amplifiers, switches, and transceivers for applications such as mobile (including handsets and base stations), defense, automobile, and the Internet of Things.

22

Veeco Instruments Inc. and Subsidiaries

Notes to the Consolidated Financial Statements - continued

(unaudited)

Scientific & Industrial

Scientific refers to advanced materials research at university research institutions, industry research institutions, industry consortiums, and government research agencies. Industrial refers to large-scale product manufacturing applications including data storage and optical coatings: thin layers of material deposited on a lens or mirror that alters how light reflects and transmits.

Sales by end-market and geographic region for the three months ended March 31, 2020 and 2019 were as follows:

	Three months ended March 31,
	2020		2019
	(in thousands)
Sales by end-market
Front-End Semiconductor	$	31,366	$	22,617
Advanced Packaging, MEMS & RF Filters		8,588		23,127
LED Lighting, Display & Compound Semiconductor		15,402		13,550
Scientific & Industrial		49,146		40,077
Total	$	104,502	$	99,371
Sales by geographic region
United States	$	39,635	$	32,315
China		10,472		10,159
EMEA(1)		16,150		17,827
Rest of World		38,245		39,070
Total	$	104,502	$	99,371

(1) EMEA consists of Europe, the Middle East, and Africa

For geographic reporting, sales are attributed to the location in which the customer facility is located.

23

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward Looking Statements

Our discussion below constitutes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in this Report, the words “believes,” “anticipates,” “expects,” “estimates,” “targets,” “plans,” “intends,” “will,” and similar expressions related to the future are intended to identify forward-looking statements. All forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from projected results. You should not place undue reliance on any forward-looking statements, which speak only as of the dates they are made.

Executive Summary

We are an innovative manufacturer of semiconductor process equipment. Our proven ion beam, laser annealing, lithography, MOCVD and single wafer etch & clean technologies play an integral role in the fabrication and packaging of advanced semiconductor devices. With equipment designed to optimize performance, yield and cost of ownership, Veeco holds leading technology positions in the markets we serve. To learn more about Veeco’s systems and service offerings, visit www.veeco.com.

COVID-19 Update

As a result of the COVID-19 pandemic, governmental authorities have implemented and are continuing to implement numerous and constantly evolving measures to try to contain the virus, such as travel bans and restrictions, limits on gatherings, quarantines, shelter-in-place orders, and business shutdowns. We have important manufacturing operations in the U.S. and sales and support operations in China, Germany, Japan, Malaysia, Philippines, Singapore, South Korea, Thailand, Taiwan and the United Kingdom, all of which have been affected by the COVID-19 pandemic.

Measures providing for business shutdowns generally exclude certain essential services, and those essential services include critical infrastructure and the businesses that support that critical infrastructure. Our operations are considered part of the critical and essential infrastructure defined by applicable government authorities, and, although governmental measures to contain the pandemic may be modified or extended, our manufacturing facilities remain open and operating largely at or near full capacity. We believe our diverse product offerings and the critical nature of certain of our products for infrastructure insulate us, to some extent, from the adverse effects of the pandemic; however, a prolonged economic downturn will adversely affect our customers, which could have a material adverse effect on our revenues, particularly if customers from whom we derive a significant amount of revenue reduce or delay purchases to mitigate the impacts of the pandemic or fail to make payments to us on time or at all.

We serve a global and highly interconnected customer base across the Asia-Pacific region, Europe, and North America. Our net sales to customers located outside of the United States represented approximately 70%, 77%, and 80% of our total net sales in 2019, 2018, and 2017, respectively, and we expect that net sales to customers outside the United States will continue to represent a significant percentage of our total net sales. As a result, our business will be adversely impacted by further detoriation in global economic conditions, particularly in markets in Asia and Europe. Markets in China have recently begun to indicate signs of recovery, but European and North American markets continue to remain challenged given ongoing restrictions on business and travel.

To date, we have not yet experienced any significant interruptions to our supply chain as a result of the COVID-19 pandemic. We continue to monitor our global supply chain and may experience disruptions in future periods, primarily as a result of financial challenges confronting companies in our supply chain and restrictions or disruptions of transportation, such as reduced availability of air transport, port closures and increased border controls or closures, any of which could cause a disruption in our ability to obtain raw materials or components required to manufacture our products.

Like many in our industry, we are managing through the effects of the COVID-19 pandemic. Although the full extent of the COVID-19 pandemic’s impact on our business, results of operations, supply chains and growth can not be predicted

24

or quantified, we proactively identified potential challenges to our business and have been executing business continuity activities to manage disruptions in our business and continue to provide critical infrastructure to our customers. In response to the pandemic, we have taken, or intend to take, the following steps, among others, to keep our employees safe and minimize the spread of the virus, while continuing to serve our customers:

● implemented rigorous health and safety protocols at our manufacturing facilities, including extensively and frequently disinfecting our facilities, limiting access to our facilities, checking temperatures of individuals entering our facilities, staggering shifts to minimize employee overlap in gowning areas, and providing protective equipment;

● mandated remote working arrangements for employees that do not need to be physically present on the manufacturing floor or at customer facilities, which has impacted approximately 52% of our global workforce;

● implemented virtual meetings, customer demos, and factory acceptances to enable customers to review data and performance of their system in our factory remotely via live video;

● performing service and support activities remotely to resolve customer issues and enable our customers to maintain their operations;

● proactively identified gaps in our supply chain and re-sourced a number of components in order to maintain our customer shipment commitments and mitigate single points of failure;

● monitoring our IT sytems and implementing contingency and disaster recovery plans to support our IT infrastructure to ensure that our systems remain continuously operative; and

● continuing to monitor and, if necessary, reduce our operating expenses and capital expenditures to maintain financial flexibility and profit margins.

While these steps have been effective so far, there could be additional challenges ahead that may impact either our operations or those of our customers, which could have a negative effect on our financial performance, including productivity and capacity impacts as a result of the ongoing pandemic. We expect to continue to implement these measures until we determine that the COVID-19 pandemic is adequately contained for purposes of our business, and we may take further actions as government authorities require or recommend or as we determine to be in the best interests of our employees, customers and suppliers. As a result, we may incur additional expenses in future periods in response to the pandemic, which could adversely affect our financial position, results of operations, or cash flows. In addition, we may revise our approach to these initiatives or take additional actions to meet the needs of our employees and customers, and mitigate the impact of the pandemic on our business.

Business Update

We categorize our revenue by the key market segments into which we sell. Our four key markets are: Front-End Semiconductor; Advanced Packaging, MEMS & RF Filters; LED Lighting, Display & Compound Semiconductor; and Scientific & Industrial.

Sales in the Front-End Semiconductor market were driven by shipments of our laser annealing systems, as well as our Low-Defect-Density Ion Beam Deposition (“LDD-IBD”) system for Extreme Ultraviolet (“EUV”) Mask Blank production. Customers appear to be ramping production at their current nodes, such as 7nm and 5nm. Looking ahead, we continue to work with our customers with our laser annealing technology, as they develop their “next nodes”. In the EUV market, customers appear to be moving ahead with their leading node EUV lithography plans, continuing to drive requirements for our mask blank systems. We believe demand for these two product lines, driven by the development and release of advanced node semiconductors, will continue to provide future growth opportunities for us.

Sales in the Advanced Packaging, MEMS and RF Filter market remained weak in the first quarter, and the timing of a recovery is uncertain given recent softness in the smartphone industry. Nevertheless, we are encouraged by interaction

25

with our advanced packaging and RF customers for applications such as High-Performance Computing and 5G. We believe the performance of our advanced packaging lithography systems and our wet etch and clean systems is an ideal fit for our customers’ current and future requirements.

Sales in the LED Lighting, Display & Compound Semiconductor market also remained soft in the first quarter. Our broad portfolio of MOCVD and PSP technologies have been developed to support emerging applications such as 5G driven RF device manufacturing, 3D sensing VCSELs and laser diodes, and GaN-based power electronics.

Sales in the Scientific & Industrial market were primarily driven by shipments of Ion Beam systems for data storage applications. Demand for our Ion Beam products for Data Storage is being driven by big data and cloud-based storage growth. In order to be successful, hard disk drive manufacturers are required to improve areal density of magnetic heads for hard disk drives and are manufacturing drives with an increasing number of thin film magnetic heads. These two factors taken together along, with new innovations by HDD manufacturers such as heat assisted magnetic recording (“HAMR”) and microwave assisted magnetic recording (“MAMR”), are driving additional capacity and equipment upgrades. Given recent trends, the importance of cloud computing and work from home environment are also providing tailwinds to this market.

Results of Operations

For the three months ended March 31, 2020 and 2019

The following table presents revenue and expense line items reported in our Consolidated Statements of Operations for 2020 and 2019 and the period-over-period dollar and percentage changes for those line items. Our results of operations are reported as one business segment, represented by our single operating segment.

	Three Months Ended March 31,						Change
	2020			2019			Period to Period
	(dollars in thousands)
Net sales	$	104,502	100%	$	99,371	100%	$	5,131	5%
Cost of sales		58,083	56%		64,655	65%		(6,572)	(10)%
Gross profit		46,419	44%		34,716	35%		11,703	34%
Operating expenses, net:
Research and development		19,195	18%		23,340	23%		(4,145)	(18)%
Selling, general, and administrative		18,304	18%		19,902	20%		(1,598)	(8)%
Amortization of intangible assets		3,837	4%		4,218	4%		(381)	(9)%
Restructuring		625	1%		1,430	1%		(805)	(56)%
Other operating expense (income), net		(109)	-		(34)	-		(75)	*
Total operating expenses, net		41,852	40%		48,856	49%		(7,004)	(14)%
Operating income (loss)		4,567	4%		(14,140)	(14)%		18,707	*
Interest income (expense), net		(4,866)	(5)%		(4,200)	(4)%		(666)	16%
Income (loss) before income taxes		(299)	-		(18,340)	(18)%		18,041	(98)%
Income tax expense (benefit)		268	-		190	-		78	41%
Net income (loss)	$	(567)	-	$	(18,530)	(19)%	$	17,963	(97)%

* Not meaningful

26

Net Sales

The following is an analysis of sales by market and by region:

	Three Months Ended March 31,						Change
	2020			2019			Period to Period
	(dollars in thousands)
Sales by market
Front-End Semiconductor	$	31,366	30%	$	22,617	23%	$	8,749	39%
Advanced Packaging, MEMS & RF Filters		8,588	8%		23,127	23%		(14,539)	(63)%
LED Lighting, Display & Compound Semiconductor		15,402	15%		13,550	14%		1,852	14%
Scientific & Industrial		49,146	47%		40,077	40%		9,069	23%
Total	$	104,502	100%	$	99,371	100%	$	5,131	5%
Sales by geographic region
United States	$	39,635	38%	$	32,315	33%	$	7,320	23%
China		10,472	10%		10,159	10%		313	3%
EMEA		16,150	15%		17,827	18%		(1,677)	(9)%
Rest of World		38,245	37%		39,070	39%		(825)	(2)%
Total	$	104,502	100%	$	99,371	100%	$	5,131	5%

Sales increased for the three months ended March 31, 2020 against the comparable prior year period principally in the Scientific & Industrial and Front-End Semiconductor markets, partially offset by a decrease in the Advanced Packaging, MEMS & RF Filters market. Sales in the Scientific & Industrial market were primarily driven by shipments of Ion Beam systems for data storage applications, while sales in the Front-End Semiconductor market were driven by shipments of our laser annealing systems, as well as our LDD-IBD system for EUV Mask Blank production. Pricing was not a significant driver of the change in total sales. By geography, sales increased in the United States principally for data storage applications, partially offset by a decrease in the EMEA and Rest of World regions. We expect there will continue to be year-to-year variations in our future sales distribution across markets and geographies. In light of the global nature of our business, we are impacted by conditions in the various countries in which we and our customers operate. Several markets continue to remain challenged in light of ongoing restrictions on business and travel, and decreased business and consumer spending generally, resulting from the COVID-19 pandemic.

Gross Profit

In the first quarter of 2020, gross profit increased compared to the first quarter of 2019 due to an increase in sales volume and increased gross margins. Gross margins increased principally due to product and region mix of sales in the periods, as well as reductions in inventory reserves and manufacturing expenses. We expect our gross margins to fluctuate each period due to product mix and other factors, and we do not expect future margins in the coming quarters to be as high as the current period.

Research and Development

The markets we serve are characterized by continuous technological development and product innovation, and we invest in various research and development initiatives to maintain our competitive advantage and achieve our growth objectives. Research and development expenses decreased for the three months ended March 31, 2020 against the comparable prior period primarily related to personnel-related expenses and professional fees as a result of our continued initiative to streamline operations, enhance efficiency, and reduce costs. In the second half of 2019, we executed an initiative to reorganize various functions along product lines and created a central research and development organization to better allocate our resources to our highest priority projects.

Selling, General, and Administrative

Selling, general, and administrative expenses decreased for the three months ended March 31, 2020 against the comparable prior period primarily related to personnel-related expenses as a result of our continued initiative to

27

streamline operations, enhance efficiency, and reduce costs. Given the the uncertainty regarding the impacts on our business resulting from the COVID-19 pandemic, we are focused on the proactive management of expenses. In future periods, we may incur additional selling, general and administrative expenses to support our responses to the COVID-19 pandemic.

Amortization Expense

Amortization expense remained consistent with the comparable prior year period.

Restructuring Expense

We continued to record restructuring charges during the year ended December 31, 2019 as a result of our efforts to further streamline operations, enhance efficiencies, and reduce costs. In the second half of 2019, we executed an initiative to reorganize various functions along product lines and created a central research and development organization to better allocate our resources to our highest priority projects. In addition, we delayered the organization. Collectively, these actions impacted approximately 60 employees. During the three months ended March 31, 2020, additional accruals were recognized and payments were made related to these restructuring initiatives.

Interest Income (Expense)

We recorded net interest expense of $4.9 million for the three months ended March 31, 2020, compared to $4.2 million for the comparable prior year period. Included in interest expense for the three months ended March 31, 2020 and 2019 were non-cash charges of $3.3 million and $3.1 million, respectively, related to the amortization of debt discount and transaction costs of the Convertible Senior Notes. Additionally, interest income decreased approximately $0.4 million for the three months ended March 31, 2020 compared to the prior period, primarily as a result of lower interest rates, and we expect interest income to remain depressed as a result.

Income Taxes

At the end of each interim reporting period, we estimate the effective income tax rate expected to be applicable for the full year. This estimate is used to determine the income tax provision or benefit on a year-to-date basis and may change in subsequent interim periods.

Our tax expense for the three months ended March 31, 2020 was $0.3 million compared to $0.2 million for the comparable prior period. The 2020 tax expense included an expense of $0.1 million related to our domestic operations and $0.2 million related to our non-U.S. operations, compared to 2019 when the expense included a $0.1 million expense related to our domestic operations and $0.1 million related to our non-U.S. operations. Although there was a domestic pre-tax loss for the three months ended March 31, 2020 and 2019, we did not provide a current tax benefit on domestic pre-tax losses as the amounts are not realizable on a more-likely-than-not basis. The domestic tax expense for the current period is primarily attributable to the tax amortization of indefinite-lived intangible assets that is not available to offset U.S. deferred tax assets.

Liquidity and Capital Resources

Our cash and cash equivalents, restricted cash, and short-term investments are as follows:

	March 31,		December 31,
	2020		2019
	(in thousands)
Cash and cash equivalents	$	162,325	$	129,294
Restricted cash		652		657
Short-term investments		79,429		115,252
Total	$	242,406	$	245,203

28

At March 31, 2020 and December 31, 2019, cash and cash equivalents of $52.8 million and $73.0 million, respectively, were held outside the United States. As of March 31, 2020, we had $10.4 million of accumulated undistributed earnings generated by our non-U.S. subsidiaries for which the U.S. repatriation tax has been provided and did not require the use of cash due to the use of net operating loss carryforwards. Approximately $5.3 million of undistributed earnings will be subject to foreign withholding taxes if distributed back to the United States.

We believe that our projected cash flow from operations, combined with our cash and short-term investments, will be sufficient to meet our projected working capital requirements, contractual obligations, and other cash flow needs for the next twelve months, including scheduled interest payments on our Convertible Senior Notes due 2023, purchase commitments and payments in respect of operating leases. However, the COVID-19 pandemic, together with other dynamics in the marketplace, has resulted in wider credit spreads and significantly increased borrowing costs and, in certain cases, limited the ability of companies to access the capital markets and other sources of financing on attractive terms or at all.

Although there is uncertainty related to the anticipated impact of the recent COVID-19 outbreak on our future results, we believe our business model, our current cash and short-term investments and the recent steps we have taken to rationalize expenses, leave us well-positioned to manage our business through this crisis as it continues to unfold.

A summary of the cash flow activity for the three months ended March 31, 2020 and 2019 is as follows:

Cash Flows from Operating Activities

	Three Months Ended March 31,
	2020		2019
	(in thousands)
Net income (loss)	$	(567)	$	(18,530)
Non-cash items:
Depreciation and amortization		7,724		8,796
Non-cash interest expense		3,320		3,081
Deferred income taxes		115		(15)
Share-based compensation expense		3,646		3,157
Other		—		(100)
Changes in operating assets and liabilities		(16,634)		(18,680)
Net cash provided by (used in) operating activities	$	(2,396)	$	(22,291)

Net cash used in operating activities was $2.4 million for the three months ended March 31, 2020 and was due to the net loss of $0.6 million plus a decrease in cash flow from changes in operating assets and liabilities of $16.6 million, offset by adjustments for non-cash items of $14.8 million. The changes in operating assets and liabilities were largely attributable to an increase in accounts receivable and a decrease in deferred revenue, partially offset by an increase in accounts payable and a decrease in contract assets.

Cash Flows from Investing Activities

	Three Months Ended March 31,
	2020		2019
	(in thousands)
Capital expenditures	$	(1,070)	$	(2,180)
Changes in investments, net		36,264		(18,758)
Net cash provided by (used in) investing activities	$	35,194	$	(20,938)

The cash provided by investing activities during the three months ended March 31, 2020 was primarily attributable to net changes in investments, partially offset by capital expenditures.

29

Cash Flows from Financing Activities

	Three Months Ended March 31,
	2020		2019
	(in thousands)
Settlement of equity awards, net of withholding taxes	$	276	$	379
Net cash provided by (used in) financing activities	$	276	$	379

The cash provided by financing activities for the three months ended March 31, 2020 was related to cash received under the Employee Stock Purchase Plan, partially offset by cash used to settle taxes related to employee equity programs.

Convertible Senior Notes

On January 10, 2017, we issued $345.0 million of 2.70% convertible senior unsecured notes (the “Convertible Senior Notes”). We received net proceeds, after deducting underwriting discounts and fees and expenses payable by us, of approximately $335.8 million. The Convertible Senior Notes bear interest at a rate of 2.70% per year, payable semiannually in arrears on January 15 and July 15 of each year, commencing on July 15, 2017. The Convertible Senior Notes mature on January 15, 2023, unless earlier purchased by the Company, redeemed, or converted. We believe that we have sufficient capital resources and cash flows from operations to support scheduled interest payments on this debt.

Contractual Obligations and Commitments

We have commitments under certain contractual arrangements to make future payments for goods and services. These contractual arrangements secure the rights to various assets and services to be used in the future in the normal course of business. We expect to fund these contractual arrangements with cash generated from operations in the normal course of business.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, expenses, and results of operations, liquidity, capital expenditures or capital resources other than bank guarantees and purchase commitments disclosed in the preceding footnotes.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

Our exposure to market rate risk for changes in interest rates primarily relates to our investment portfolio. We centrally manage our investment portfolios considering investment opportunities and risks, tax consequences, and overall financing strategies. Our investment portfolio includes fixed-income securities with a fair value of approximately $79.4 million at March 31, 2020. These securities are subject to interest rate risk and, based on our investment portfolio at March 31, 2020, a 100 basis point increase in interest rates would result in a decrease in the fair value of the portfolio of $0.3 million. While an increase in interest rates may reduce the fair value of the investment portfolio, we will not realize the losses in the Consolidated Statements of Operations unless the individual fixed-income securities are sold prior to recovery or the loss is determined to be other-than-temporary.

Currency Exchange Risk

We conduct business on a worldwide basis and, as such, a portion of our revenues, earnings, and net investments in foreign affiliates is exposed to changes in currency exchange rates. The economic impact of currency exchange rate movements is complex because such changes are often linked to variability in real growth, inflation, interest rates, governmental actions, and other factors. These changes, if material, could cause us to adjust our financing and operating strategies. Consequently, isolating the effect of changes in currency does not incorporate these other important economic factors.

30

Changes in currency exchange rates could affect our foreign currency denominated monetary assets and liabilities and forecasted cash flows. We enter into monthly forward derivative contracts with the intent of mitigating a portion of this risk. We only use derivative financial instruments in the context of hedging and not for speculative purposes and had not designated our foreign exchange derivatives as hedges. Accordingly, changes in fair value from these contracts are recorded as “Other, net” in our Consolidated Statements of Operations. We execute derivative transactions with highly rated financial institutions to mitigate counterparty risk.

Our net sales to customers located outside of the United States represented approximately 62% of our total net sales for the three months ended March 31, 2020, and 67% for the comparable 2019 period. We expect that net sales to customers outside the United States will continue to represent a large percentage of our total net sales. Our sales denominated in currencies other than the U.S. dollar represented 3% of total net sales in the three months ended March 31, 2020, and 6% for the comparable 2019 period.

A 10% change in foreign exchange rates would have an immaterial impact on the consolidated results of operations since most of our sales outside the United States are denominated in U.S. dollars.

Item 4. Controls and Procedures

Management’s Report on Internal Control Over Financial Reporting

Our principal executive and financial officers have evaluated and concluded that our disclosure controls and procedures are effective as of March 31, 2020. The disclosure controls and procedures are designed to ensure that the information required to be disclosed in this report filed under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to our principal executive and financial officers as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

As a result of the COVID-19 pandemic, certain of our employees began working remotely in March 2020 but these remote working arrangements did not have a material effect on our internal control over financial reporting. During the quarter ended March 31, 2020, there were no changes in internal control that have materially affected or are reasonably likely to materially affect internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

On June 8, 2018, an Ultratech shareholder who received Veeco stock as part of the consideration for the Ultratech acquisition filed a purported class action complaint in the Superior Court of the State of California, County of Santa Clara, captioned Wolther v. Maheshwari et al., Case No. 18CV329690, on behalf of himself and others who purchased or acquired shares of Veeco pursuant to the registration statement and prospectus which Veeco filed with the SEC in connection with the Ultratech acquisition (the “Wolther Action”). On August 2 and August 8, 2018, two purported class action complaints substantially similar to the Wolther Action were filed on behalf of different plaintiffs in the same court as the Wolther Action. These cases have been consolidated with the Wolther Action, and a consolidated complaint was filed on December 11, 2018. The consolidated complaint seeks to recover damages and fees under Sections 11, 12, and 15 of the Securities Act of 1933 for, among other things, alleged false/misleading statements in the registration statement and prospectus relating to the Ultratech acquisition, relating primarily to the alleged failure to disclose delays in the advanced packaging business, increased MOCVD competition in China, and an intellectual property dispute. Veeco is defending this matter vigorously.

On December 21, 2018, a purported Veeco stockholder filed a derivative action in the Superior Court of the State of California, County of Santa Clara, captioned Vladimir Gusinsky Revocable Trust v. Peeler, et al., Case No.

31

18CV339925, on behalf of nominal defendant Veeco. The complaint seeks to assert claims for breach of fiduciary duty, waste of corporate assets, and unjust enrichment against current and former Veeco directors premised on purported misstatements and omissions in the registration statement relating to the Ultratech acquisition. Veeco is defending this matter vigorously.

The Company is involved in various other legal proceedings arising in the normal course of business. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows.

Item 1A. Risk Factors

Information regarding risk factors appears in the Safe Harbor Statement at the beginning of this quarterly report on Form 10-Q, in Part I — Item 1A of our 2019 Form 10-K. There have been no material changes from the risk factors previously disclosed in our 2019 Form 10-K, except for the following.

The following risk factor is added:

The effects of the COVID-19 pandemic have strained and have threatened to negatively impact our businesses and operations, and the duration and extent to which COVID-19 may impact our future results of operations and overall financial performance remains uncertain.

The outbreak and continuing spread of a novel strain of the coronavirus (COVID-19) has resulted in a substantial curtailment of business activities worldwide and is causing weakened economic conditions, both in the United States and many countries abroad, including in markets in Asia and Europe from which we derive the majority of our revenue. The COVID-19 pandemic has caused changes to, and significant and rapid reductions in, household and business activity and consumer and business spending, as well as economic contraction and a record rise in unemployment in many markets around the world. In addition, as part of intensifying efforts to contain the spread of COVID-19, a growing number of state, local and foreign governments have imposed various restrictions on the conduct of business and travel. Government restrictions (such as stay-at-home orders), quarantines and worker absenteeism as a result of COVID-19 have led to a significant number of business closures and other slowdowns. These slowdowns have adversely impacted and will likely continue to adversely impact Veeco directly, as well as our customers, suppliers and other partners.

We have determined that our operations are considered part of the critical and essential infrastructure defined by applicable government agencies. Consequently, as of the date of filing this report, we are currently permitted and are endeavoring to maintain manufacturing and supply chain operations. However, the conditions caused by COVID-19 could adversely affect our customers’ ability or willingness to purchase our products or services, delay prospective customers’ purchasing decisions, adversely impact our ability to deliver products and provide on-site services to our customers, delay the provisioning of our offerings, or lengthen payment terms, all of which could adversely affect our future sales, operating results and overall financial performance. In addition, adverse impacts on the creditworthiness of our customers and other counterparties and their ability to pay amounts owed to us and our ability to collect such amounts may be adversely affect, which could materially and adversely affect our results of operations, financial condition and cash flows.

Our operations have also been negatively affected by a range of external factors related to COVID-19 that are not within our control. For example, many state, local and foreign governments have imposed, or may impose, a wide range of restrictions on the physical movement of individuals, designed to limit the spread of COVID-19. These restrictions have presented significant challenges for us and have had, and may continue to have, a negative impact on the productivity or our employees, suppliers and partners, which may significantly harm our results of operations and overall financial performance. Furthermore, increased spending on our business continuity efforts in future periods and our readiness efforts to enable an eventual return to on-site work in all of our offices, may cause us to incur additional expenses that may outpace revenues or require that we cut costs and investments in other areas.

32

In addition, as a result of remote working arrangements we implemented in response to the COVID-19 pandemic, we may be subject to increased risk of an information or cyber-security incident, fraud, or a failure to maintain the uninterrupted operation of our information systems.

While the potential economic impact associated with COVID-19 may be difficult to assess or predict, the pandemic has resulted in significant disruption of global financial markets, and a recession or long-term market correction resulting from the spread of COVID-19 could materially impact the value of our common stock, impact our access to capital, and affect our business in the near and long-term. The extent to which the pandemic will affect our business and results of operations will depend on numerous factors that we are not able to predict, including the duration, spread and severity of the outbreak; the nature, extent and effectiveness of containment measures; the extent and duration of the effect on the economy, unemployment, consumer confidence and consumer and business spending; and how quickly and to what extent normal economic and operating conditions can resume.

The extent to which the COVID-19 pandemic will affect our business and results of operations will depend on future developments that cannot be accurately predicted at this time, such as the duration, severity and transmission rate of the virus, the extent and effectiveness of containment actions, the extent and duration of the effect on the global economy, including: unemployment levels; consumer confidence; consumer and business spending; and the impact of these and other factors on our employees, customers, suppliers and other partners. If we are not able to respond to and manage the impact of such events effectively, our business will be harmed.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

33

Item 6. Exhibits

Unless otherwise indicated, each of the following exhibits has been filed with the Securities and Exchange Commission by Veeco under File No. 0-16244.

Exhibit		Incorporated by Reference			Filed or Furnished
Number	Exhibit Description	Form	Exhibit	Filing Date	Herewith
10.1	Agreement and General Release dated March 18, 2020 between Veeco and Shubham Maheshwari				*
31.1	Certification of Chief Executive Officer pursuant to Rule 13a—14(a) or Rule 15d—14(a) of the Securities and Exchange Act of 1934.				*
31.2	Certification of Chief Financial Officer pursuant to Rule 13a—14(a) or Rule 15d—14(a) of the Securities and Exchange Act of 1934.				*
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.				*
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.				*
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.				**
101.XSD	XBRL Schema.				**
101.PRE	XBRL Presentation.				**
101.CAL	XBRL Calculation.				**
101.DEF	XBRL Definition.				**
101.LAB	XBRL Label.				**
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*     Filed herewith

**   Filed herewith electronically

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 7, 2020.

Veeco Instruments Inc.
By:	/S/ WILLIAM J. MILLER, Ph.D.
	William J. Miller, Ph.D.
	Chief Executive Officer
By:	/s/ JOHN P. KIERNAN
	John P. Kiernan
	Senior Vice President and Chief Financial Officer

34

EX-10.1

Exhibit 10.1

AGREEMENT AND GENERAL RELEASE

Veeco Instruments Inc., having offices at Terminal Drive,  Plainview,  NY 11803 on behalf of itself and its subsidiaries (collectively, "Employer" or “Company”), and Shubham Maheshwari ("Employee"), agree that:

1.Last Day of Employment.   Employee's last day of employment (the “Separation Date”) with Employer will be on March 16, 2020.    

2.Consideration.  In consideration for Employee (i) signing this Agreement during the period beginning on the Separation Date and ending on the date which is 21 days following the Separation Date (it being understood that this Agreement shall expire if not executed on or prior to the 21st day following the Separation Date), and (ii) complying with the promises made herein and not revoking execution pursuant to Section 3 below, Employer agrees:

(a)to pay to Employee a salary continuation benefit in an amount equivalent to fifty-two  (52) weeks of Employee’s final salary, less applicable deductions, in equal installments on Employer’s regular pay days commencing on the first pay day following the expiration of the revocation period specified in Section 3 below, and

(b)if Employee is currently enrolled in Employer’s medical and dental plans and elects to continue coverage thereunder in accordance with the continuation of benefits requirements of COBRA, Employee's contribution amount therefor for the equivalent number of weeks during which Employee is receiving salary continuation benefits hereunder will be the normal employee contribution rate. Thereafter, the Employee's contribution amount will be the full COBRA rate. Employee shall notify Employer if Employee becomes eligible for coverage under another group health insurance plan, whereupon Employer's obligation to pay for a portion of such coverage shall cease. 

Employee agrees to return all Company property (for example, laptop, peripherals, cellular phone/PDA, credit cards, etc.) to Human Resources no later than the Separation Date.  In addition, by such date, Employee shall have returned all documents, computer files and/or other materials containing any Employer confidential information in Employee’s possession or control.  Employee understands and agrees that Employee would not receive the monies and/or benefits specified herein in the absence of Employee’s execution of this Agreement and Employee’s fulfillment of the promises contained herein. 

3.Revocation.  Employee may revoke this Agreement for a period of seven (7) days following the day Employee executes this Agreement.  Any such revocation must be in writing and must be delivered either personally or by email or fax (in each case, with telephonic confirmation and original to follow by first class mail) within this period to:

Veeco Instruments Inc.

Attention:  Robert Bradshaw

Terminal Drive 

Plainview,  NY 11803

If the last day of the revocation period is a Saturday, Sunday, or legal holiday in the state in which Employee’s place of employment is located, then the revocation period shall not expire until the next day which is not a Saturday, Sunday, or legal holiday.

4.General Release of Claims.  In exchange for the consideration set forth in Section 2 above, Employee knowingly and voluntarily releases and forever discharges Employer, and its parent corporation, affiliates, subsidiaries, divisions, predecessors, insurers, successors and assigns and its and their employees, officers, directors, attorneys and agents, both individually and in their business capacities, and their employee benefit plans and programs and their administrators and fiduciaries (referred to collectively throughout the remainder of this Agreement as "Employer"), of and from any and all claims, known and unknown, which Employee, Employee’s heirs, executors, administrators, successors, and assigns (referred to collectively throughout the remainder of this Agreement as "Employee") have or may have against Employer as of the date of execution of this Agreement, including, but not limited to, any alleged violation of:

•The National Labor Relations Act;

•Title VII of the Civil Rights Act of 1964;

•The Civil Rights Act of 1991;

•Sections 1981 through 1988 of Title 42 of the United States Code;

•The Employee Retirement Income Security Act of 1974;

•The Immigration Reform and Control Act;

•The Americans with Disabilities Act of 1990;

•The Worker Adjustment and Retraining Notification Act;

•The Occupational Safety and Health Act;

•The Fair Credit Reporting Act;

•The Family and Medical Leave Act of 1993;

•The Age Discrimination in Employment Act of 1967;

•The Older Workers Benefit Protection Act of 1990;

•New York Human Rights Law, N.Y. Exec. Law § 296, et. seq.;

•New York City Human Rights Law, NYC Code § 8-101;

•New York Equal Pay Law, N.Y. Lab. Law §194, 

•New York Equal Rights Law, N.Y. Civ. Rights §40e,

•New York Off-duty Conduct Lawful Activities Discrimination Law, N.Y. Lab. Law. §201-d;

•New York Minimum Wage Act, N.Y. Lab. Law §§ 650 to 665;

•New York Wage and Hour Law, N.Y. Lab. Law § 190 et seq.;

•New York Whistleblower Statute, N.Y. Lab Law. § 740;

•The New York Labor Law;

•any amendments to the foregoing statutes;

•any other federal, state or local civil, human rights, bias, whistleblower, discrimination, retaliation, compensation, employment, labor or other law regulation or ordinance;

•any benefit, payroll or other plan, policy or program;

•any public policy, contract, third-party beneficiary, tort or common law claim; or

•any claim for costs, fees, or other expenses including attorneys’ fees.

5.Exclusions From General Release.    Excluded from the general release above are any rights or claims which cannot be waived by law, including (i) claims that may arise after the date you sign this Agreement; (ii) your rights under this Agreement; and (iii) any vested rights you may have under any of the Company's employee benefit plans, in accordance with the terms of the applicable plan documents.  Also excluded from the general release is your right to file a charge with an administrative agency or participate in any agency investigation.  You are, however, waiving your right to recover money in connection with any such charge or investigation.  You are also waiving your right to recover money in connection with a charge filed by any other entity or individual, or by any federal, state or local agency. 

Covenant Not to Sue.  A "covenant not to sue" is a legal term which means you promise not to file a lawsuit in court.  It is different from the general release of claims covered above.  In addition to waiving and releasing the claims set forth above in Section 4, you further agree never to sue the Company in any forum for any reason covered by the claims addressed in Section 4.  If you sue the Company, you shall be liable to the Company for its reasonable attorneys' fees and other litigation costs incurred in defending against such a suit.  Notwithstanding this covenant not to sue, you may bring a claim against the Company to enforce this Agreement.

6.Affirmations.  (a)  Employee affirms that he has been paid and has received all compensation, wages, bonuses, commissions, leave (paid or unpaid) and benefits to which he may be entitled and that no other compensation, wages, bonuses, commissions, leave (paid or unpaid) or benefits are due him, except as provided in this Agreement. 

(b)Employee also affirms that Employee is in possession of all of Employee’s property that Employee had at Employer's premises and that Employer is not in possession of any of Employee’s property.

(c)Employee further affirms that he has no known workplace injuries or occupational diseases and has been provided any leave to which Employee was entitled under the Family and Medical Leave Act.

(d)Employee further affirms that he has not been retaliated against for reporting any allegations of wrongdoing by Employer or its officers, including any allegations of corporate fraud.  Both Employer and Employee acknowledge that this Agreement does not limit either party’s right, where applicable, to file or participate in an investigative proceeding of any federal, state or local governmental agency.  To the extent permitted by law, Employee agrees that if such an administrative claim is made, Employee shall not be entitled to recover any individual monetary relief or other individual remedies.

7.Confidentiality; Non-Disparagement.  During the five years following the Separation Date, Employee will not use or disclose to any individual or entity any Confidential Information (as defined below) except (i) as authorized in writing by Company, or (ii) as required by law or legal process, provided, that, prior written notice of such required disclosure is provided to Company and, provided, further, that, all reasonable efforts to preserve the confidentiality of such information shall be made.  As used herein, “Confidential Information” shall mean information that (i) is used or potentially useful in Company’s business, (ii) Company treats as proprietary, private or confidential, and (iii) is not generally known to the public.  “Confidential Information” includes, without limitation to, information relating to Company’s products or services, processing, manufacturing, selling, customer lists, call lists, customer data, memoranda, notes, records, technical data, sketches, plans, drawings, chemical formulae, trade secrets, composition of products, research and development data, sources of supply and material, operating and cost data, financial information, and information contained in manuals or memoranda.  “Confidential Information” also includes proprietary and/or confidential information of Company’s customers, suppliers and trading partners who may share such information with Company pursuant to a confidentiality agreement or otherwise.  Employee agrees to treat all such customer, supplier or trading partner information as “Confidential Information” hereunder.  Employee agrees not to defame, disparage or demean Company in any manner whatsoever.

8. Non-Competition.  For twelve (12) months following the Separation Date (the “Noncompete Period”), Employee will not, without the prior written consent of the Company, directly or indirectly, engage or invest in, own, manage, operate, finance, control or participate in the ownership, management, operation, financing or control of, be employed by, associated with, or in any manner connected with, lend Employee’s name to, lend Employee’s credit to or render services or advice to, any business whose products or activities compete in whole or in part with the former, current or currently contemplated products or activities of the Company or any of its subsidiaries, in any state or the United States or in any country in which the Company or any of its subsidiaries sells products or conducts business; provided, however, that Employee may purchase or otherwise acquire up to (but not more than) one percent of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934, as amended.  Employee agrees that this covenant is reasonable with respect to its duration, geographical area, and scope. During the Noncompete Period, Employee will, within ten (10) days after accepting any employment, advise the Company of the identity of any employer of the Employee.  Receipt of the benefits provided under Section 2 is conditioned upon compliance by

Employee with this Section.

9.Non-Solicitation; Non-Hire.  For the Noncompete Period, Employee hereby agrees that he will not, directly or indirectly, either for himself or any other person: (a) induce or attempt to induce any employee of the Company or any of its subsidiaries to leave the employ of the Company or such subsidiary, (b) in any way interfere with the relationship between the Company and its subsidiaries and any employee of the Company or any of its subsidiaries, (c) employ, or otherwise engage as an employee, independent contractor or otherwise, any current or former employee of the Company or any of its subsidiaries, other than such former employees who have not worked for the Company or any of its subsidiaries in the prior 12 months; (d) induce or attempt to induce any customer, supplier, licensee or business relation of the Company or any of its subsidiaries to cease doing business with the Company or such subsidiary, or in any way interfere with the relationship between the Company and its subsidiaries and any customer, supplier, licensee or business relation of the Company or any of its subsidiaries; or (e) solicit the business of any person known to Employee to be a customer of the Company or any of its subsidiaries, whether or not Employee had personal contact with such person, with respect to products or activities which compete in whole or in part with the former, current or currently contemplated products or activities of the Company and its subsidiaries or the products or activities of the Company and its subsidiaries in existence or contemplated at the time of termination of Employee’s service.  Receipt of the benefits provided under Section 2 is conditioned upon compliance by Employee with this Section.

10.Governing Law; Severability.  This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York without regard to its choice or conflict of laws provisions.  If any provision of this Agreement is declared illegal or unenforceable by any court of competent jurisdiction, the parties agree the court shall have the authority to modify, alter or change the provision(s) in question to make the Agreement legal and enforceable.  If this Agreement cannot be modified to be enforceable, excluding the general release language, such provision shall immediately become null and void, leaving the remainder of this Agreement in full force and effect.  If the general release language is found to be illegal or unenforceable, Employee agrees to execute a binding replacement release or, if requested by the Employer, return the monies paid pursuant to this Agreement.

11.Specific Performance.  Each party acknowledges that irreparable damage may occur to the other party in the event any of the provisions of this Agreement were not performed in accordance with their specific terms.  Accordingly, each party shall be entitled, without the requirement of posting a bond or other security, to seek an injunction to prevent breach of this Agreement and to enforce specifically the terms and provisions hereof in any court of competent jurisdiction in the United States of America or any state thereof, in addition to any other remedy to which such party may otherwise be entitled.

12.Nonadmission of Wrongdoing.  The parties agree that neither this Agreement nor the furnishing of the consideration for this Agreement shall be deemed or construed at any time for any purpose as an admission by either party of any liability or unlawful conduct of any kind.

13.Tax Advice.  Employee acknowledges and agrees that (a) he is responsible for any taxes owing with respect to the payments and benefits to be provided hereunder, (b) he has not relied on any tax advice provided by the Company in connection with the payments and benefits to be provided hereunder, and (c) he has been advised to consult with an independent tax advisor regarding any questions concerning tax matters relating to such payments and benefits.

14.Miscellaneous.  The terms and conditions herein constitute the entire understanding of the parties and supersede all communications, negotiations, arrangements and agreements, either oral or written, with respect to the subject matter hereof; it being understood that the provisions of the Employee Confidentiality and Inventions Agreement (attached hereto) shall continue according to their terms for the period specified therein.  No amendments to or modifications of this Agreement shall be effective unless reduced to writing and executed by the parties hereto.  This Agreement shall be binding upon, inure to the benefit of and be enforceable by, the respective successors and assigns of the parties hereto.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument.  A facsimile copy of a signed counterpart shall be treated the same as a signed original.  Section headings are used herein for convenience of reference only and shall not affect the meaning of any provision of this Agreement.

EMPLOYEE HAS BEEN ADVISED THAT EMPLOYEE HAS TWENTY-ONE  (21) DAYS TO CONSIDER THIS AGREEMENT AND GENERAL RELEASE AND HAS BEEN ADVISED IN WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTION OF THIS AGREEMENT AND GENERAL RELEASE.  EMPLOYEE AGREES THAT ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO THIS AGREEMENT DO NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL TWENTY-ONE  (21) DAY CONSIDERATION PERIOD.

HAVING ELECTED TO EXECUTE THIS AGREEMENT AND GENERAL RELEASE, TO FULFILL THE PROMISES SET FORTH HEREIN, AND TO RECEIVE THE CONSIDERATION SET FORTH IN SECTION 2 ABOVE, EMPLOYEE FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTERS INTO THIS AGREEMENT AND GENERAL RELEASE INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS EMPLOYEE HAS OR MIGHT HAVE AGAINST EMPLOYER.

The parties knowingly and voluntarily execute this Agreement as of the dates set forth below:

Veeco Instruments Inc. By: /s/ Robert Bradshaw Name:  Robert Bradshaw Title:  Chief Administrative Officer Date:  March 18, 2020 Employee /s/ Shubham Maheshwari Shubham Maheshwari Date:  March 16, 2020

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULE 13a — 14(a) or RULE 15d — 14(a)

 OF THE SECURITIES EXCHANGE ACT OF 1934

I, William J. Miller, Ph.D.,  certify that:

1.I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 2020 of Veeco Instruments Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ WILLIAM J. MILLER, Ph.D.
	William J. Miller, Ph.D.
	Chief Executive Officer
	Veeco Instruments Inc.
	May 7, 2020

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULE 13a — 14(a) or RULE 15d — 14(a)

 OF THE SECURITIES EXCHANGE ACT OF 1934

I,  John P. Kiernan, certify that:

1.    I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 2020 of Veeco Instruments Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)  designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)  designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)  evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)  disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)  all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ JOHN P. KIERNAN
	John P. Kiernan
	Senior Vice President and Chief Financial Officer
	Veeco Instruments Inc.
	May 7, 2020

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Veeco Instruments Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William J. Miller, Ph.D., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ WILLIAM J. MILLER Ph.D.
	William J. Miller, Ph.D.
	Chief Executive Officer
	Veeco Instruments Inc.
	May 7, 2020

A signed original of this written statement required by Section 906 has been provided to Veeco Instruments Inc. and will be retained by Veeco Instruments Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Veeco Instruments Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John P. Kiernan,  Senior Vice President and Chief Financial Officer  of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ JOHN P. KIERNAN
	John P. Kiernan
	Senior Vice President and Chief Financial Officer
	Veeco Instruments Inc.
	May 7, 2020

A signed original of this written statement required by Section 906 has been provided to Veeco Instruments Inc. and will be retained by Veeco Instruments Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Income (Loss) Per Common Share

3 Months Ended

Mar. 31, 2020

Income (Loss) Per Common Share

Income (Loss) Per Share

Note 2 — Income (Loss) Per Common Share

Basic income (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares outstanding during the period. Diluted income per share is calculated by dividing net income by the weighted average number of shares used to calculate basic income (loss) per share plus the weighted average number of common share equivalents outstanding during the period. The dilutive effect of outstanding options to purchase common stock and share-based awards is considered in diluted income per share by application of the treasury stock method. The dilutive effect of performance share units is included in diluted income per common share if the performance targets have been achieved, or would have been achieved if the reporting date was the end of the contingency period. The computations of basic and diluted income (loss) per share for the three months ended March 31, 2020 and 2019 are as follows:

	Three months ended March 31,
	2020		2019
	(in thousands, except per share amounts)
Net income (loss)	$	(567)	$	(18,530)
Net income (loss) per common share:
Basic	$	(0.01)	$	(0.40)
Diluted	$	(0.01)	$	(0.40)
Basic weighted average shares outstanding		47,811		46,848
Effect of potentially dilutive share-based awards		—		—
Diluted weighted average shares outstanding		47,811		46,848
Common share equivalents excluded from the diluted weighted average shares outstanding since the Company incurred a net loss and their effect would be antidilutive		627		320
Potentially dilutive shares excluded from the diluted calculation as their effect would be antidilutive		1,485		2,426
Maximum potential shares to be issued for settlement of the Convertible Senior Notes excluded from the diluted calculation as their effect would be antidilutive		8,618		8,618

XML

Commitments and Contingencies - Legal Proceedings (Detail)	Aug. 08, 2018 case
Ultratech acquisition litigation
Legal Proceedings
Number of purported class action complaints filed	2

XML

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Consolidated Statements of Operations
Net sales	$ 104,502	$ 99,371
Cost of sales	58,083	64,655
Gross profit	46,419	34,716
Operating expenses, net:
Research and development	19,195	23,340
Selling, general, and administrative	18,304	19,902
Amortization of intangible assets	3,837	4,218
Restructuring	625	1,430
Other operating expense (income), net	(109)	(34)
Total operating expenses, net	41,852	48,856
Operating income (loss)	4,567	(14,140)
Interest income	800	1,245
Interest expense	(5,666)	(5,445)
Income (loss) before income taxes	(299)	(18,340)
Income tax expense (benefit)	268	190
Net income (loss)	$ (567)	$ (18,530)
Income (loss) per common share:
Basic (in dollars per share)	$ (0.01)	$ (0.40)
Diluted (in dollars per share)	$ (0.01)	$ (0.40)
Weighted average number of shares:
Basic (in shares)	47,811	46,848
Diluted (in shares)	47,811	46,848

XML

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Tax reconciliation disclosures
Loss before income taxes	$ (299)	$ (18,340)
Income tax expense (benefit)	268	190
Domestic
Tax reconciliation disclosures
Income tax expense (benefit)	100	100
Foreign tax
Tax reconciliation disclosures
Income tax expense (benefit)	$ 200	$ 100

XML

Assets - Assets held for sale (Details) - Asset held for sale - USD ($) $ in Thousands	1 Months Ended	12 Months Ended
	Apr. 30, 2020	Dec. 31, 2019	Mar. 31, 2020
Assets Held for Sale
Impairment		$ 4,000
Major classes of assets classified as held for sale
Inventories			$ 5,988
Property, plant, and equipment, net			310
Intangible assets, net			6,546
Goodwill			2,359
Impairment			(4,020)
Total Assets held for sale			$ 11,183
Subsequent event
Assets Held for Sale
Consideration	$ 11,400
Transaction price due upon closing (as a percent)	85.00%
Amount held in escrow (as a percent)	15.00%
Period over which portion of transaction price is held in escrow	18 months

XML

Assets - Available-For-Sale Securities (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Total available-for-sale securities
Amortized Cost	$ 79,194		$ 115,219
Gross Unrealized Gains	252		38
Gross Unrealized Losses	(17)		(5)
Estimated Fair Value	79,429		115,252
Available-for-sale securities in a loss position
Estimated Fair Value	7,015		28,945
Gross Unrealized Losses	(17)		(5)
Investments that had been in a continuous loss position for more than 12 months	0		0
Realized gains or losses
Realized gains	0	$ 0
Realized losses	0	0
U.S. treasuries
Total available-for-sale securities
Amortized Cost	52,285		105,096
Gross Unrealized Gains	222		38
Gross Unrealized Losses			(4)
Estimated Fair Value	52,507		105,130
Available-for-sale securities in a loss position
Estimated Fair Value			22,943
Gross Unrealized Losses			(4)
Government agency securities
Total available-for-sale securities
Amortized Cost	5,947	1,139
Gross Unrealized Gains	29
Estimated Fair Value	5,976	$ 1,139
Corporate debt
Total available-for-sale securities
Amortized Cost	7,032		6,003
Gross Unrealized Losses	(17)		(1)
Estimated Fair Value	7,015		6,002
Available-for-sale securities in a loss position
Estimated Fair Value	7,015		6,002
Gross Unrealized Losses	(17)		(1)
Commercial paper
Total available-for-sale securities
Amortized Cost	13,930		2,981
Gross Unrealized Gains	1
Estimated Fair Value	$ 13,931		$ 2,981

XML

Liabilities - Warranty (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($)
Warranty
Warranty period	1 year
Balance, beginning of the year	$ 7,067
Warranties issued	645
Consumption of reserves	(1,708)
Changes in estimate	(36)
Balance, end of the year	$ 5,968

XML

Derivative Financial Instruments

3 Months Ended

Mar. 31, 2020

Derivative Financial Instruments

Derivative Financial Instruments

Note 6 — Derivative Financial Instruments

The Company is exposed to financial market risks arising from changes in currency exchange rates. Changes in currency exchange rates could affect the Company’s foreign currency denominated monetary assets and liabilities and forecasted cash flows. The Company enters into monthly forward derivative contracts with the intent of mitigating a portion of this risk. The Company only uses derivative financial instruments in the context of hedging and not for speculative purposes and had not designated its foreign exchange derivatives as hedges. Accordingly, changes in fair value from these contracts are recorded as “Other operating expense (income), net” in the Company’s Consolidated Statements of Operations. The Company executes derivative transactions with highly rated financial institutions to mitigate counterparty risk.

The Company did not have any outstanding derivative contracts at March 31, 2020 or December 31, 2019. Additionally, the Company did not have any gains or losses from currency exchange derivatives during the three months ended March 31, 2020 and 2019.

XML

Segment Reporting and Geographic Information

3 Months Ended

Mar. 31, 2020

Segment Reporting and Geographic Information

Segment Reporting and Geographic Information

Note 10 — Segment Reporting and Geographic Information

Veeco operates and measures its results in one operating segment and therefore has one reportable segment: the design, development, manufacture, and support of thin film process equipment primarily sold to make electronic devices.

Veeco categorizes its sales into the following four end-markets:

Front-End Semiconductor

Front-End Semiconductor refers to the early steps in the process of integrated circuit fabrication where the microchips are created but still remain on the silicon wafer. This category includes Laser Spike Anneal, Ion Beam etch for front-end semiconductor applications, and Ion Beam deposition for EUV mask blanks.

Advanced Packaging, MEMS & RF Filters

Advanced Packaging includes a portfolio of wafer-level assembly technologies that enable improved performance of electronic products, such as smartphones, high-end servers, and graphical processors. Micro-Electro Mechanical Systems (“MEMS”) includes tiny mechanical devices such as sensors, switches, mirrors, and actuators embedded in semiconductor chips used in vehicles, smartphones, tablets, and games. RF Filters refers to RF filters used in smartphones, tablets, and mobile devices.

LED Lighting, Display & Compound Semiconductor

LED Lighting refers to Light Emitting Diode (“LED”) and semiconductor illumination sources used in various applications including, but not limited to, displays such as backlights, general lighting, automotive running lights, and headlamps. Display refers to LEDs used for displays and Organic Light Emitting Diode (“OLED”) displays found in outdoor display/signage applications, TVs, smartphones, wearable devices, and tablets. Compound Semiconductor includes Photonics, Power Electronics, and Radio Frequency (“RF”) Devices. Photonics refers to laser diodes, Vertical Cavity Surface Emitting Lasers (“VCSEL”) in 3D sensing and communications, and various other optical devices. Power Electronics refers to semiconductor devices such as rectifiers, inverters, and converters for the control and conversion of electric power. RF devices refers to radio frequency emitting and receiving devices that enable wireless communications. Such devices include power amplifiers, switches, and transceivers for applications such as mobile (including handsets and base stations), defense, automobile, and the Internet of Things.

Scientific & Industrial

Scientific refers to advanced materials research at university research institutions, industry research institutions, industry consortiums, and government research agencies. Industrial refers to large-scale product manufacturing applications including data storage and optical coatings: thin layers of material deposited on a lens or mirror that alters how light reflects and transmits.

Sales by end-market and geographic region for the three months ended March 31, 2020 and 2019 were as follows:

	Three months ended March 31,
	2020		2019
	(in thousands)
Sales by end-market
Front-End Semiconductor	$	31,366	$	22,617
Advanced Packaging, MEMS & RF Filters		8,588		23,127
LED Lighting, Display & Compound Semiconductor		15,402		13,550
Scientific & Industrial		49,146		40,077
Total	$	104,502	$	99,371
Sales by geographic region
United States	$	39,635	$	32,315
China		10,472		10,159
EMEA(1)		16,150		17,827
Rest of World		38,245		39,070
Total	$	104,502	$	99,371

(1) EMEA consists of Europe, the Middle East, and Africa

For geographic reporting, sales are attributed to the location in which the customer facility is located.

XML

Income (Loss) Per Share - Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income (Loss) Per Common Share
Net income (loss)	$ (567)	$ (18,530)
Net income (loss) per common share:
Basic (in dollars per share)	$ (0.01)	$ (0.40)
Diluted (in dollars per share)	$ (0.01)	$ (0.40)
Weighted average shares reconciliation
Basic weighted average shares outstanding	47,811	46,848
Diluted weighted average shares outstanding	47,811	46,848

XML

Liabilities (Tables)

3 Months Ended

Mar. 31, 2020

Liabilities

Schedule of accrued expenses and other current liabilities

	March 31,		December 31,
	2020		2019
	(in thousands)
Payroll and related benefits	$	18,909	$	15,174
Warranty		5,968		7,067
Operating lease liabilities		4,286		4,196
Interest		1,992		4,321
Professional fees		1,936		2,443
Sales, use, and other taxes		2,644		811
Restructuring liability		2,074		2,841
Other		3,759		4,390
Total	$	41,568	$	41,243

Schedule of changes in product warranty reserves

		(in thousands)
Balance - December 31, 2019	$	7,067
Warranties issued		645
Consumption of reserves		(1,708)
Changes in estimate		(36)
Balance - March 31, 2020	$	5,968

Schedule of restructuring accrual activities

	(in thousands)
Balance - December 31, 2019	$	2,841
Provision		625
Payments		(1,392)
Balance - March 31, 2020	$	2,074

Schedule of changes in deferred revenue

	(in thousands)
Balance - December 31, 2019	$	28,249
Deferral of revenue		5,089
Recognition of previously deferred revenue		(8,607)
Balance - March 31, 2020	$	24,731

Schedule of carrying value of Convertible Senior Notes

	March 31,		December 31,
	2020		2019
	(in thousands)
Principal amount	$	345,000	$	345,000
Unamortized debt discount		(37,804)		(40,820)
Unamortized transaction costs		(3,808)		(4,112)
Net carrying value	$	303,388	$	300,068

Schedule of interest expense related to Convertible Senior Notes

	Three months ended March 31,
	2020		2019
	(in thousands)
Cash Interest Expense
Coupon interest expense	$	2,329	$	2,329
Non-Cash Interest Expense
Amortization of debt discount		3,016		2,799
Amortization of transaction costs		304		282
Total Interest Expense	$	5,649	$	5,410

XML

Income Taxes (Tables)

3 Months Ended

Mar. 31, 2020

Income Taxes

Schedule of loss before income taxes and income tax benefit

	Three months ended March 31,
	2020		2019
	(in thousands)
Loss before income taxes	$	(299)	$	(18,340)
Income tax expense (benefit)	$	268	$	190

XML

Liabilities - Other Liabilities (Details) - USD ($) $ in Millions	36 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Other liabilities
Contributions to deferred compensation plan	$ 0.0
Other Assets
Other liabilities
Deferred compensation plan assets	1.9	$ 2.7
Other Liabilities
Other liabilities
Deferred compensation plan liabilities	2.3	3.1
Medical and dental benefits	2.0
Asset retirement obligations	3.2	3.2
Income taxes payable	$ 1.0	$ 1.0

XML

Liabilities - Customer Deposits and Deferred Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Liabilities
Customer deposits and deferred revenue	$ 24,900	$ 26,600
Changes in deferred revenue
Beginning balance	28,249
Deferral of revenue	5,089
Recognition of previously deferred revenue	(8,607)
Ending balance	$ 24,731

XML

Commitments and Contingencies - Purchase Commitments and Bank Guarantees (Details) $ in Millions	Mar. 31, 2020 USD ($)
Purchase commitments
Purchase commitments due within one year	$ 76.2
Bank guarantees
Bank guarantees and letters of credit outstanding	5.8
Unused bank guarantees and letters of credit	$ 25.8

XML

Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2020

Commitments and Contingencies

Schedule of maturities of lease liabilities 2019

The following table provides the maturities of lease liabilities at March 31, 2020:

	Operating
	Leases
	(in thousands)
Payments due by period:
2020	$	3,898
2021		4,970
2022		4,387
2023		1,112
2024		551
Thereafter		—
Total future minimum lease payments		14,918
Less: Imputed interest		(1,338)
Total	$	13,580
Reported as of March 31, 2020
Accrued expenses and other current liabilities	$	4,286
Operating lease long-term liabilities		9,294
Total	$	13,580

XML

Segment Reporting and Geographic Information (Tables)

3 Months Ended

Mar. 31, 2020

Segment Reporting and Geographic Information

Schedule of sales by end-market

	Three months ended March 31,
	2020		2019
	(in thousands)
Sales by end-market
Front-End Semiconductor	$	31,366	$	22,617
Advanced Packaging, MEMS & RF Filters		8,588		23,127
LED Lighting, Display & Compound Semiconductor		15,402		13,550
Scientific & Industrial		49,146		40,077
Total	$	104,502	$	99,371
Sales by geographic region
United States	$	39,635	$	32,315
China		10,472		10,159
EMEA(1)		16,150		17,827
Rest of World		38,245		39,070
Total	$	104,502	$	99,371

(1) EMEA consists of Europe, the Middle East, and Africa

Schedule of sales by geographic region

	Three months ended March 31,
	2020		2019
	(in thousands)
Sales by end-market
Front-End Semiconductor	$	31,366	$	22,617
Advanced Packaging, MEMS & RF Filters		8,588		23,127
LED Lighting, Display & Compound Semiconductor		15,402		13,550
Scientific & Industrial		49,146		40,077
Total	$	104,502	$	99,371
Sales by geographic region
United States	$	39,635	$	32,315
China		10,472		10,159
EMEA(1)		16,150		17,827
Rest of World		38,245		39,070
Total	$	104,502	$	99,371

(1) EMEA consists of Europe, the Middle East, and Africa

XML

Income (Loss) Per Share - Shares Excluded from EPS (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Common share equivalents
Diluted income (loss) per share
Securities excluded from the diluted calculation as their effect would be antidilutive	627	320
Potentially dilutive shares
Diluted income (loss) per share
Securities excluded from the diluted calculation as their effect would be antidilutive	1,485	2,426
Convertible Notes
Diluted income (loss) per share
Securities excluded from the diluted calculation as their effect would be antidilutive	8,618	8,618

XML

Commitments and Contingencies - Lease costs (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Lease cost
Operating lease cost	$ 1.4	$ 1.4
Variable lease cost	0.5	0.6
Operating cash flows from operating leases	$ 1.3	$ 1.5

XML

Liabilities - Convertible Senior Notes (Details) - Convertible Notes - USD ($) $ in Thousands		3 Months Ended
	Jan. 10, 2017	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Debt
Principal amount	$ 345,000	$ 345,000		$ 345,000
Interest rate (as a percent)	2.70%	2.70%
Proceeds received, net of transaction fees	$ 335,800
Unamortized debt discount		$ (37,804)		(40,820)
Unamortized transaction costs		(3,808)		(4,112)
Net carrying value		303,388		$ 300,068
Cash Interest Expense
Coupon interest expense		2,329	$ 2,329
Non-Cash Interest Expense
Amortization of debt discount		3,016	2,799
Amortization of transaction costs		304	282
Total Interest Expense		$ 5,649	$ 5,410
Convertible Debt, Fair Value by Fair Value Hierarchy Level		us-gaap:FairValueInputsLevel2Member
Estimated fair value		$ 283,800

XML

Liabilities - Restructuring Accruals (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($)	Dec. 31, 2019 employee
Liabilities
Number of employees impacted | employee		60
Changes in restructuring accrual
Balance at the beginning of the period	$ 2,841
Provision	625
Payments	(1,392)
Balance at the end of the period	$ 2,074

XML

Equity - Statement of Stockholders' Equity (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Increase (Decrease) in Stockholders' Equity
Balance at the beginning of the period	$ 374,512	$ 437,775
Net loss	(567)	(18,530)
Other comprehensive income, net of tax	153	38
Share-based compensation expense	3,646	3,157
Net issuance under employee stock plans	(680)	(642)
Balance at the end of the period	377,064	421,798
Common Stock
Increase (Decrease) in Stockholders' Equity
Balance at the beginning of the period	$ 490	$ 485
Balance (in shares)	48,994	48,547
Net issuance under employee stock plans	$ 4	$ 2
Net issuance under employee stock plans (in shares)	434	128
Balance at the end of the period	$ 494	$ 487
Balance (in shares)	49,428	48,675
Treasury Stock
Increase (Decrease) in Stockholders' Equity
Balance at the beginning of the period		$ (5,872)
Balance (in shares)		523
Net issuance under employee stock plans		$ 5,872
Net issuance under employee stock plans (in shares)		(523)
Additional Paid-in Capital
Increase (Decrease) in Stockholders' Equity
Balance at the beginning of the period	$ 1,071,058	$ 1,061,325
Share-based compensation expense	3,646	3,157
Net issuance under employee stock plans	(684)	(6,303)
Balance at the end of the period	1,074,020	1,058,179
Accumulated Deficit
Increase (Decrease) in Stockholders' Equity
Balance at the beginning of the period	(698,930)	(619,983)
Net loss	(567)	(18,530)
Net issuance under employee stock plans		(213)
Balance at the end of the period	(699,497)	(638,726)
Accumulated Other Comprehensive Income
Increase (Decrease) in Stockholders' Equity
Balance at the beginning of the period	1,894	1,820
Other comprehensive income, net of tax	153	38
Balance at the end of the period	$ 2,047	$ 1,858

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2020	May 01, 2020
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2020
Document Transition Report	false
Entity File Number	0-16244
Entity Registrant Name	VEECO INSTRUMENTS INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	11-2989601
Entity Address, Address Line One	Terminal Drive
Entity Address, City or Town	Plainview
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	11803
City Area Code	516
Local Phone Number	677-0200
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	VECO
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		49,428,391
Entity Central Index Key	0000103145
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Consolidated Statements of Comprehensive Income (Loss)
Net income (loss)	$ (567)	$ (18,530)
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on available-for-sale securities	201	27
Foreign currency translation	(48)	11
Total other comprehensive income (loss), net of tax	153	38
Total comprehensive income (loss)	$ (414)	$ (18,492)

XML

Segment Reporting and Geographic Information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($) item segment	Mar. 31, 2019 USD ($)
Revenue reporting by end-market and geographic region
Number of operating segments | segment	1
Number of reportable segments | segment	1
Number of key markets | item	4
Sale by end-market	$ 104,502	$ 99,371
United States
Revenue reporting by end-market and geographic region
Sale by end-market	39,635	32,315
China
Revenue reporting by end-market and geographic region
Sale by end-market	10,472	10,159
EMEA
Revenue reporting by end-market and geographic region
Sale by end-market	16,150	17,827
Rest Of World
Revenue reporting by end-market and geographic region
Sale by end-market	38,245	39,070
Front-End Semiconductor
Revenue reporting by end-market and geographic region
Sale by end-market	31,366	22,617
Advanced Packaging, MEMS & RF Filters
Revenue reporting by end-market and geographic region
Sale by end-market	8,588	23,127
LED Lighting, Display & Compound Semiconductor
Revenue reporting by end-market and geographic region
Sale by end-market	15,402	13,550
Scientific & Industrial
Revenue reporting by end-market and geographic region
Sale by end-market	$ 49,146	$ 40,077

XML

Assets

3 Months Ended

Mar. 31, 2020

Assets

Assets

Note 3 — Assets

Investments

Short-term investments are generally classified as available-for-sale and reported at fair value, with unrealized gains and losses, net of tax, presented as a separate component of stockholders’ equity under the caption “Accumulated other comprehensive income” in the Consolidated Balance Sheets. These securities may include U.S. treasuries, government agency securities, corporate debt, and commercial paper, all with maturities of greater than three months when purchased. All realized gains and losses and unrealized losses resulting from declines in fair value that are other than temporary are included in “Other, net” in the Consolidated Statements of Operations.

Fair value is the price that would be received for an asset or the amount paid to transfer a liability in an orderly transaction between market participants. Veeco classifies certain assets based on the following fair value hierarchy:

Level 1: Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and

Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Veeco has evaluated the estimated fair value of financial instruments using available market information and valuations as provided by third-party sources. The use of different market assumptions or estimation methodologies could have a significant effect on the estimated fair value amounts.

The following table presents the portion of Veeco’s assets that were measured at fair value on a recurring basis at March 31, 2020 and December 31, 2019:

	Level 1		Level 2		Level 3		Total
	(in thousands)
March 31, 2020
Cash equivalents
Certificate of deposits and time deposits	$	81,796	$	—	$	—	$	81,796
Government money market fund		47,500		—		—		47,500
Commercial paper		—		9,498		—		9,498
Total	$	129,296	$	9,498	$	—	$	138,794
Short-term investments
U.S. treasuries	$	52,507	$	—	$	—	$	52,507
Government agency securities		—		5,976		—		5,976
Corporate debt		—		7,015		—		7,015
Commercial paper		—		13,931		—		13,931
Total	$	52,507	$	26,922	$	—	$	79,429
December 31, 2019
Cash equivalents
Certificate of deposits and time deposits	$	67,009	$	—	$	—	$	67,009
Commercial paper		—		10,484		—		10,484
Corporate debt		—		1,000		—		1,000
Total	$	67,009	$	11,484	$	—	$	78,493
Short-term investments
U.S. treasuries	$	105,130	$	—	$	—	$	105,130
Government agency securities		—		1,139		—		1,139
Corporate debt		—		6,002		—		6,002
Commercial paper		—		2,981		—		2,981
Total	$	105,130	$	10,122	$	—	$	115,252

There were no transfers between fair value measurement levels during the three months ended March 31, 2020.

At March 31, 2020 and December 31, 2019, the amortized cost and fair value of available-for-sale securities consist of:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
	(in thousands)
March 31, 2020
U.S. treasuries	$	52,285	$	222	$	—	$	52,507
Government agency securities		5,947		29		—		5,976
Corporate debt		7,032		—		(17)		7,015
Commercial paper		13,930		1		—		13,931
Total	$	79,194	$	252	$	(17)	$	79,429
December 31, 2019
U.S. treasuries	$	105,096	$	38	$	(4)	$	105,130
Government agency securities		1,139		—		—		1,139
Corporate debt		6,003		—		(1)		6,002
Commercial paper		2,981		—		—		2,981
Total	$	115,219	$	38	$	(5)	$	115,252

Available-for-sale securities in a loss position at March 31, 2020 and December 31, 2019 consist of:

	March 31, 2020				December 31, 2019
			Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses
		(in thousands)
U.S. treasuries	$	—	$	—	$	22,943	$	(4)
Corporate debt		7,015		(17)		6,002		(1)
Total	$	7,015	$	(17)	$	28,945	$	(5)

At March 31, 2020 and December 31, 2019, there were no short-term investments that had been in a continuous loss position for more than 12 months.

The maturities of securities classified as available-for-sale at March 31, 2020 were all due in one year or less, and an allowance for credit loss is considered unnecessary. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. There were no realized gains or losses for the three months ended March 31, 2020 and 2019.

Accounts Receivable

Accounts receivable is presented net of an allowance for doubtful accounts of $0.6 million at March 31, 2020 and December 31, 2019. The Company considered its current expectations of future economic conditions, including the impact of COVID-19, when estimating its allowance for doubtful accounts. As a result of this assessment, no increase to the Company’s allowance for doubtful accounts was deemed necessary as a result of the Company’s current estimate of the impact COVID-19 will have on the collectability of the Company’s accounts receivable.

Inventories

Inventories at March 31, 2020 and December 31, 2019 consist of the following:

	March 31,		December 31,
	2020		2019
	(in thousands)
Materials	$	81,684	$	82,155
Work-in-process		41,706		42,575
Finished goods		6,221		8,337
Total	$	129,611	$	133,067

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets primarily consist of supplier deposits, prepaid value-added tax, lease deposits, prepaid insurance, and prepaid licenses. Veeco had deposits with its suppliers of $5.4 million and $5.9 million at March 31, 2020 and December 31, 2019, respectively.

Assets Held for Sale (including subsequent event)

In the fourth quarter of 2019, the Company determined that one of its non-core product lines (the “disposal group”) met the held for sale criteria, and as such, the related assets are presented as “Assets held for sale” on the Consolidated Balance Sheets. Subsequent to March 31, 2020, the Company completed the sale of this product line for approximately $11.4 million, with approximately 85% of the transaction price due upon closing, and 15% held in escrow for a period of 18 months. Long-lived assets and definite-lived intangible assets were not depreciated or amortized while classified as held for sale. The sale of this disposal group does not represent a strategic shift that will have a material effect on the Company’s operations and financial results, nor is it considered a component of the Company, and as such it did not meet the criteria to be reported as discontinued operations.

For the year ended December 31, 2019, the Company recorded a non-cash impairment charge on these assets held for sale of $4.0 million in order to measure the disposal group at the lower of its carrying value or fair value less costs to sell, which resulted in a corresponding held for sale valuation allowance on its assets held for sale in the Consolidated Balance Sheet. The major classes of assets that were classified as held for sale as of March 31, 2020 are as follows:

	March 31, 2020
	(in thousands)
Assets held for sale:
Inventories	$	5,988
Property, plant, and equipment, net		310
Intangible assets, net		6,546
Goodwill		2,359
Impairment		(4,020)
Total Assets held for sale	$	11,183

Property, Plant, and Equipment

Property, plant, and equipment at March 31, 2020 and December 31, 2019 consist of the following:

	March 31,		December 31,
	2020		2019
	(in thousands)
Land	$	5,061	$	5,061
Building and improvements		62,631		61,884
Machinery and equipment (1)		136,625		137,692
Leasehold improvements		6,770		6,703
Gross property, plant, and equipment		211,087		211,340
Less: accumulated depreciation and amortization		138,796		135,629
Net property, plant, and equipment	$	72,291	$	75,711

(1) Machinery and equipment also includes software, furniture and fixtures

For the three months ended March 31, 2020 and 2019, depreciation expense was $3.9 million and $4.6 million, respectively.

Goodwill

Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognized. The Company continues to assess the COVID-19 pandemic as a potential triggering event related to the value of its goodwill and concluded that there were no indicators of impairment during the three months ended March 31, 2020.

Intangible Assets

Intangible assets consist of purchased technology, customer relationships, patents, trademarks and tradenames, and backlog, and are initially recorded at fair value. Long-lived intangible assets are amortized over their estimated useful lives in a method reflecting the pattern in which the economic benefits are consumed or amortized on a straight-line basis if such pattern cannot be reliably determined. The Company continues to assess the COVID-19 pandemic as a potential triggering event related to the value of its intangible assets and concluded that there were no indicators of impairment during the three months ended March 31, 2020.

The components of purchased intangible assets were as follows:

	March 31, 2020						December 31, 2019
			Accumulated						Accumulated
	Gross		Amortization				Gross		Amortization
	Carrying		and		Net		Carrying		and		Net
	Amount		Impairment		Amount		Amount		Impairment		Amount
	(in thousands)
Technology	$	327,908	$	294,414	$	33,494	$	327,908	$	291,766	$	36,142
Customer relationships		146,465		127,606		18,859		146,465		126,764		19,701
Trademarks and tradenames		30,910		25,596		5,314		30,910		25,256		5,654
Other		3,686		3,673		13		3,686		3,665		21
Total	$	508,969	$	451,289	$	57,680	$	508,969	$	447,451	$	61,518

Other intangible assets primarily consist of patents, licenses, and backlog.

XML

Liabilities - Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Accrued expenses and other current liabilities
Payroll and related benefits	$ 18,909	$ 15,174
Warranty	5,968	7,067
Operating lease liabilities	4,286	4,196
Interest	1,992	4,321
Professional fees	1,936	2,443
Sales, use, and other taxes	2,644	811
Restructuring liability	2,074	2,841
Other	3,759	4,390
Total	$ 41,568	$ 41,243

XML

Assets - Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Prepaid expenses and other current assets
Deposits with suppliers	$ 5.4	$ 5.9

XML

Assets - Fair Value (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Short-term investments
Transfer of assets from Level 1 to Level 2	$ 0
Transfer of assets from Level 2 to Level 1	0
Transfer of Liabilities from Level 1 to Level 2	0
Transfer of Liabilities from Level 2 to Level 1	0
Measured at fair value on a recurring basis
Cash equivalents
Total Cash equivalents	138,794	$ 78,493
Short-term investments
Total Short-term investments	79,429	115,252
Measured at fair value on a recurring basis | U.S. treasuries
Short-term investments
Total Short-term investments	52,507	105,130
Measured at fair value on a recurring basis | Government agency securities
Short-term investments
Total Short-term investments	5,976	1,139
Measured at fair value on a recurring basis | Corporate debt
Short-term investments
Total Short-term investments	7,015	6,002
Measured at fair value on a recurring basis | Commercial paper
Short-term investments
Total Short-term investments	13,931	2,981
Measured at fair value on a recurring basis | Certificate of deposits and time deposits
Cash equivalents
Total Cash equivalents	81,796	67,009
Measured at fair value on a recurring basis | Government money market fund
Cash equivalents
Total Cash equivalents	47,500
Measured at fair value on a recurring basis | Commercial paper
Cash equivalents
Total Cash equivalents	9,498	10,484
Measured at fair value on a recurring basis | Corporate debt
Cash equivalents
Total Cash equivalents		1,000
Measured at fair value on a recurring basis | Level 1
Cash equivalents
Total Cash equivalents	129,296	67,009
Short-term investments
Total Short-term investments	52,507	105,130
Measured at fair value on a recurring basis | Level 1 | U.S. treasuries
Short-term investments
Total Short-term investments	52,507	105,130
Measured at fair value on a recurring basis | Level 1 | Certificate of deposits and time deposits
Cash equivalents
Total Cash equivalents	81,796	67,009
Measured at fair value on a recurring basis | Level 1 | Government money market fund
Cash equivalents
Total Cash equivalents	47,500
Measured at fair value on a recurring basis | Level 2
Cash equivalents
Total Cash equivalents	9,498	11,484
Short-term investments
Total Short-term investments	26,922	10,122
Measured at fair value on a recurring basis | Level 2 | Government agency securities
Short-term investments
Total Short-term investments	5,976	1,139
Measured at fair value on a recurring basis | Level 2 | Corporate debt
Short-term investments
Total Short-term investments	7,015	6,002
Measured at fair value on a recurring basis | Level 2 | Commercial paper
Short-term investments
Total Short-term investments	13,931	2,981
Measured at fair value on a recurring basis | Level 2 | Commercial paper
Cash equivalents
Total Cash equivalents	$ 9,498	10,484
Measured at fair value on a recurring basis | Level 2 | Corporate debt
Cash equivalents
Total Cash equivalents		$ 1,000

XML

Equity

3 Months Ended

Mar. 31, 2020

Stockholders' Equity

Stockholders' Equity

Note 7 — Equity

Statement of Stockholders’ Equity

The following tables present the changes in Stockholders’ Equity:

								Accumulated
				Additional				Other
	Common Stock			Paid-in		Accumulated		Comprehensive
	Shares	Amount		Capital		Deficit		Income		Total
	(in thousands)
Balance at December 31, 2019	48,994	$	490	$	1,071,058	$	(698,930)	$	1,894	$	374,512
Net loss	—		—		—		(567)		—		(567)
Other comprehensive income, net of tax	—		—		—		—		153		153
Share-based compensation expense	—		—		3,646		—		—		3,646
Net issuance under employee stock plans	434		4		(684)		—		—		(680)
Balance at March 31, 2020	49,428	$	494	$	1,074,020	$	(699,497)	$	2,047	$	377,064

												Accumulated
								Additional				Other
	Common Stock			Treasury Stock				Paid-in		Accumulated		Comprehensive
	Shares	Amount		Shares		Amount		Capital		Deficit		Income		Total
	(in thousands)
Balance at December 31, 2018	48,547	$	485		523	$	(5,872)	$	1,061,325	$	(619,983)	$	1,820	$	437,775
Net loss	—		—		—		—		—		(18,530)		—		(18,530)
Other comprehensive income, net of tax	—		—		—		—		—		—		38		38
Share-based compensation expense	—		—		—		—		3,157		—		—		3,157
Net issuance under employee stock plans	128		2		(523)		5,872		(6,303)		(213)		—		(642)
Balance at March 31, 2019	48,675	$	487		—	$	—	$	1,058,179	$	(638,726)	$	1,858	$	421,798

Accumulated Other Comprehensive Income (“AOCI”)

The following table presents the changes in the balances of each component of AOCI, net of tax:

			Unrealized
			Gains (Losses)
	Foreign		on Available
	Currency		for Sale
	Translation		Securities		Total
	(in thousands)
Balance - December 31, 2019	$	1,861	$	33	$	1,894
Other comprehensive income (loss)		(48)		201		153
Balance - March 31, 2020	$	1,813	$	234	$	2,047

There were minimal reclassifications from AOCI into net income for the three months ended March 31, 2020 and 2019.

XML

Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2020

Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of Veeco have been prepared in accordance with U.S. GAAP as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 270 for interim financial information and with the instructions to Rule 10-01 of Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements as the interim information is an update of the information that was presented in Veeco’s most recent annual financial statements. For further information, refer to Veeco’s Consolidated Financial Statements and Notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal, recurring nature.

Fiscal Period

Veeco reports interim quarters on a 13-week basis ending on the last Sunday of each quarter. The fourth quarter always ends on the last day of the calendar year, December 31. The 2020 interim quarters end on March 29, June 28, and September 27, and the 2019 interim quarters ended on March 31, June 30, and September 29. These interim quarters are reported as March 31, June 30, and September 30 in Veeco’s interim consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with U.S GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, actual results may differ from these estimates. In particular, the COVID-19 pandemic has adversely impacted and is likely to further adversely impact the Company’s business and markets, including the Company’s workforce and operations and the operations of the Company’s customers, suppliers, and business partners. The full extent to which the pandemic will directly or indirectly impact the Company's business, results of operations and financial condition, including sales, expenses, manufacturing, research and development costs, reserves and allowances, fair value measurements, and asset impairment charges, will depend on future developments that are highly uncertain and difficult to predict. These developments include, but are not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or address its impact, governmental actions to contain the spread of the pandemic and respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume.

Revenue Recognition

Revenue Recognition

Revenue is recognized upon the transfer of control of the promised product or service to the customer in an amount that reflects the consideration the Company expects to receive in exchange for such product or service. The Company’s contracts with customers generally do not contain variable consideration. In the rare instances where variable consideration is included, the Company estimates the amount of variable consideration and determines what portion of that, if any, has a high probability of significant subsequent revenue reversal, and if so, that amount is excluded from the transaction price. The Company’s contracts with customers frequently contain multiple deliverables, such as systems, upgrades, components, spare parts, installation, maintenance, and service plans. Judgment is required to properly identify the performance obligations within a contract and to determine how the revenue should be allocated among the performance obligations. The Company also evaluates whether multiple transactions with the same customer or related parties should be considered part of a single contract based on an assessment of whether the contracts or agreements are negotiated or executed within a short time frame of each other or if there are indicators that the contracts are negotiated in contemplation of one another.

When there are separate units of accounting, the Company allocates revenue to each performance obligation on a relative stand-alone selling price basis. The stand-alone selling prices are determined based on the prices at which the Company separately sells the systems, upgrades, components, spare parts, installation, maintenance, and service plans. For items

that are not sold separately, the Company estimates stand-alone selling prices generally using an expected cost plus margin approach.

Most of the Company’s revenue is recognized at a point in time when the performance obligation is satisfied. The Company considers many facts when evaluating each of its sales arrangements to determine the timing of revenue recognition, including its contractual obligations and the nature of the customer’s post-delivery acceptance provisions. The Company’s system sales arrangements, including certain upgrades, generally include field acceptance provisions that may include functional or mechanical test procedures. For many of these arrangements, a customer source inspection of the system is performed in the Company’s facility, test data is sent to the customer documenting that the system is functioning to the agreed upon specifications prior to delivery, or other quality assurance testing is performed internally to ensure system functionality prior to shipment. Historically, such source inspection or test data replicates the field acceptance provisions that are performed at the customer’s site prior to final acceptance of the system. When the Company objectively demonstrates that the criteria specified in the contractual acceptance provisions are achieved prior to delivery either through customer testing or the Company’s historical experience of its tools meeting specifications, transfer of control of the product to the customer is considered to have occurred and revenue is recognized upon system delivery since there is no substantive contingency remaining related to the acceptance provisions at that date. For new products, new applications of existing products, or for products with substantive customer acceptance provisions where the Company cannot objectively demonstrate that the criteria specified in the contractual acceptance provisions have been achieved prior to delivery, revenue and the associated costs are deferred. The Company recognizes such revenue and costs upon obtaining objective evidence that the acceptance provisions can be achieved, assuming all other revenue recognition criteria have been met.

In certain cases the Company’s contracts with customers contain a billing retention, typically 10% of the sales price, which is billed by the Company and payable by the customer when field acceptance provisions are completed. Revenue recognized in advance of the amount that has been billed is recorded as a contract asset on the Consolidated Balance Sheets.

The Company recognizes revenue related to maintenance and service contracts over time based upon the respective contract term. Installation revenue is recognized over time as the installation services are performed. The Company recognizes revenue from the sales of components, spare parts, and specified service engagements at a point in time, which is typically consistent with the time of delivery in accordance with the terms of the applicable sales arrangement.

The Company may receive customer deposits on system transactions. The timing of the transfer of goods or services related to the deposits is either at the discretion of the customer or expected to be within one year from the deposit receipt. As such, the Company does not adjust transaction prices for the time value of money. Incremental direct costs incurred related to the acquisition of a customer contract, such as sales commissions, are expensed as incurred since the expected amortization period is one year or less.

The Company has elected to treat shipping and handling costs as a fulfillment activity, and the Company includes such costs in cost of services when the Company recognizes revenue for the related goods. Taxes assessed by governmental authorities that are collected by the Company from a customer are excluded from revenue.

Inventories

Inventories

Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Each quarter the Company assesses the valuation and recoverability of all inventories: materials (raw materials, spare parts, and service inventory); work-in-process; and finished goods. Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated net realizable value if less than cost. The Company evaluates usage requirements by analyzing historical usage, anticipated demand, alternative uses of materials, and other qualitative factors. Unanticipated changes in demand for the Company’s products may require a write down of

inventory, which would be reflected in cost of sales in the period the revision is made. Inventory acquired as part of a business combination is recorded at fair value on the date of acquisition.

XML

Share-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2020

Share-Based Compensation

Schedule of share-based compensation expense

		Three months ended March 31,
		2020		2019
	(in thousands)
Cost of sales		$	521	$	470
Research and development			874		792
Selling, general, and administrative			2,251		1,895
Total		$	3,646	$	3,157

Summary of stock option activity

		Weighted
	Number of	Average
	Shares	Exercise Price
	(in thousands)
Balance - December 31, 2019	1,119		34.88
Expired or forfeited	(40)		34.19
Balance - March 31, 2020	1,079		34.90

Summary of non-vested restricted and performance shares activity

		Weighted
		Average
	Number of	Grant Date
	Shares	Fair Value
	(in thousands)
Balance - December 31, 2019	2,257		16.20
Granted	840		8.99
Performance award adjustments	(45)		31.34
Vested	(190)		12.68
Forfeited	(233)		16.35
Balance - March 31, 2020	2,629		13.88

XML

Basis of Presentation - Revenue Recognition (Details)	3 Months Ended
	Mar. 31, 2020
Significant Accounting Policies
Billing retention recognized at time of transfer of control (as a percent)	10.00%
Revenue, Practical Expedient, Incremental Cost of Obtaining Contract	true

XML

Commitments and Contingencies - Lease terms (Details)	Mar. 31, 2020
Leases
Lease Renewal Term	5 years
Remaining lease term	3 years
Weighted average discount rate (as a percent)	6.00%

XML

Liabilities - Performance Obligations Amount (Details) $ in Millions	Mar. 31, 2020 USD ($)
Liabilities
Remaining performance obligations	$ 32.2
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-04-01
Performance obligations
Percentage of remaining performance obligation expected to be recognized	88.00%

XML

Share-Based Compensation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Share-based compensation
Non-cash share based compensation	$ 3,646	$ 3,157
Cost of sales
Share-based compensation
Non-cash share based compensation	521	470
Research and development
Share-based compensation
Non-cash share based compensation	874	792
Selling, general and administrative
Share-based compensation
Non-cash share based compensation	$ 2,251	$ 1,895
Restricted stock awards | Minimum
Share-based compensation
Expiration term	1 year
Restricted stock awards | Maximum
Share-based compensation
Expiration term	5 years
Stock options
Number of Shares
Outstanding at the beginning of the period (in shares)	1,119
Expired or forfeited (in shares)	(40)
Outstanding at the end of the period (in shares)	1,079
Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 34.88
Expired or forfeited (in dollars per share)	34.19
Outstanding at the end of the period (in dollars per share)	$ 34.90
Non-vested restricted shares and performance shares
Number of Shares
Outstanding at the beginning of the period (in shares)	2,257
Granted (in shares)	840
Performance award adjustments (in shares)	(45)
Vested (in shares)	(190)
Forfeited (in shares)	(233)
Outstanding at the end of the period (in shares)	2,629
Weighted Average Grant Date Fair Value
Outstanding at the beginning of the period (in dollars per share)	$ 16.20
Granted (in dollars per share)	8.99
Performance award adjustments (in dollars per share)	31.34
Vested (in dollars per share)	12.68
Forfeited (in dollars per share)	16.35
Outstanding at the end of the period (in dollars per share)	$ 13.88

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2020	Dec. 31, 2019
Consolidated Balance Sheets
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	500,000	500,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized shares	120,000,000	120,000,000
Common stock, shares issued	49,428,391	48,994,346
Common stock, shares outstanding	49,428,391	48,994,346

XML

Basis of Presentation

3 Months Ended

Mar. 31, 2020

Significant Accounting Policies

Basis of Presentation

Note 1 — Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of Veeco have been prepared in accordance with U.S. GAAP as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 270 for interim financial information and with the instructions to Rule 10-01 of Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements as the interim information is an update of the information that was presented in Veeco’s most recent annual financial statements. For further information, refer to Veeco’s Consolidated Financial Statements and Notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal, recurring nature.

Veeco reports interim quarters on a 13-week basis ending on the last Sunday of each quarter. The fourth quarter always ends on the last day of the calendar year, December 31. The 2020 interim quarters end on March 29, June 28, and September 27, and the 2019 interim quarters ended on March 31, June 30, and September 29. These interim quarters are reported as March 31, June 30, and September 30 in Veeco’s interim consolidated financial statements.

The preparation of financial statements in conformity with U.S GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, actual results may differ from these estimates. In particular, the COVID-19 pandemic has adversely impacted and is likely to further adversely impact the Company’s business and markets, including the Company’s workforce and operations and the operations of the Company’s customers, suppliers, and business partners. The full extent to which the pandemic will directly or indirectly impact the Company's business, results of operations and financial condition, including sales, expenses, manufacturing, research and development costs, reserves and allowances, fair value measurements, and asset impairment charges, will depend on future developments that are highly uncertain and difficult to predict. These developments include, but are not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or address its impact, governmental actions to contain the spread of the pandemic and respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume.

Revenue Recognition

Revenue is recognized upon the transfer of control of the promised product or service to the customer in an amount that reflects the consideration the Company expects to receive in exchange for such product or service. The Company’s contracts with customers generally do not contain variable consideration. In the rare instances where variable consideration is included, the Company estimates the amount of variable consideration and determines what portion of that, if any, has a high probability of significant subsequent revenue reversal, and if so, that amount is excluded from the transaction price. The Company’s contracts with customers frequently contain multiple deliverables, such as systems, upgrades, components, spare parts, installation, maintenance, and service plans. Judgment is required to properly identify the performance obligations within a contract and to determine how the revenue should be allocated among the performance obligations. The Company also evaluates whether multiple transactions with the same customer or related parties should be considered part of a single contract based on an assessment of whether the contracts or agreements are negotiated or executed within a short time frame of each other or if there are indicators that the contracts are negotiated in contemplation of one another.

When there are separate units of accounting, the Company allocates revenue to each performance obligation on a relative stand-alone selling price basis. The stand-alone selling prices are determined based on the prices at which the Company separately sells the systems, upgrades, components, spare parts, installation, maintenance, and service plans. For items

that are not sold separately, the Company estimates stand-alone selling prices generally using an expected cost plus margin approach.

Most of the Company’s revenue is recognized at a point in time when the performance obligation is satisfied. The Company considers many facts when evaluating each of its sales arrangements to determine the timing of revenue recognition, including its contractual obligations and the nature of the customer’s post-delivery acceptance provisions. The Company’s system sales arrangements, including certain upgrades, generally include field acceptance provisions that may include functional or mechanical test procedures. For many of these arrangements, a customer source inspection of the system is performed in the Company’s facility, test data is sent to the customer documenting that the system is functioning to the agreed upon specifications prior to delivery, or other quality assurance testing is performed internally to ensure system functionality prior to shipment. Historically, such source inspection or test data replicates the field acceptance provisions that are performed at the customer’s site prior to final acceptance of the system. When the Company objectively demonstrates that the criteria specified in the contractual acceptance provisions are achieved prior to delivery either through customer testing or the Company’s historical experience of its tools meeting specifications, transfer of control of the product to the customer is considered to have occurred and revenue is recognized upon system delivery since there is no substantive contingency remaining related to the acceptance provisions at that date. For new products, new applications of existing products, or for products with substantive customer acceptance provisions where the Company cannot objectively demonstrate that the criteria specified in the contractual acceptance provisions have been achieved prior to delivery, revenue and the associated costs are deferred. The Company recognizes such revenue and costs upon obtaining objective evidence that the acceptance provisions can be achieved, assuming all other revenue recognition criteria have been met.

In certain cases the Company’s contracts with customers contain a billing retention, typically 10% of the sales price, which is billed by the Company and payable by the customer when field acceptance provisions are completed. Revenue recognized in advance of the amount that has been billed is recorded as a contract asset on the Consolidated Balance Sheets.

The Company recognizes revenue related to maintenance and service contracts over time based upon the respective contract term. Installation revenue is recognized over time as the installation services are performed. The Company recognizes revenue from the sales of components, spare parts, and specified service engagements at a point in time, which is typically consistent with the time of delivery in accordance with the terms of the applicable sales arrangement.

The Company may receive customer deposits on system transactions. The timing of the transfer of goods or services related to the deposits is either at the discretion of the customer or expected to be within one year from the deposit receipt. As such, the Company does not adjust transaction prices for the time value of money. Incremental direct costs incurred related to the acquisition of a customer contract, such as sales commissions, are expensed as incurred since the expected amortization period is one year or less.

The Company has elected to treat shipping and handling costs as a fulfillment activity, and the Company includes such costs in cost of services when the Company recognizes revenue for the related goods. Taxes assessed by governmental authorities that are collected by the Company from a customer are excluded from revenue.

Inventories

Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Each quarter the Company assesses the valuation and recoverability of all inventories: materials (raw materials, spare parts, and service inventory); work-in-process; and finished goods. Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated net realizable value if less than cost. The Company evaluates usage requirements by analyzing historical usage, anticipated demand, alternative uses of materials, and other qualitative factors. Unanticipated changes in demand for the Company’s products may require a write down of

inventory, which would be reflected in cost of sales in the period the revision is made. Inventory acquired as part of a business combination is recorded at fair value on the date of acquisition.

XML

Assets (Tables)

3 Months Ended

Mar. 31, 2020

Assets

Schedule of portion of Veeco's assets (excluding cash balances) that are measured at fair value on a recurring basis

	Level 1		Level 2		Level 3		Total
	(in thousands)
March 31, 2020
Cash equivalents
Certificate of deposits and time deposits	$	81,796	$	—	$	—	$	81,796
Government money market fund		47,500		—		—		47,500
Commercial paper		—		9,498		—		9,498
Total	$	129,296	$	9,498	$	—	$	138,794
Short-term investments
U.S. treasuries	$	52,507	$	—	$	—	$	52,507
Government agency securities		—		5,976		—		5,976
Corporate debt		—		7,015		—		7,015
Commercial paper		—		13,931		—		13,931
Total	$	52,507	$	26,922	$	—	$	79,429
December 31, 2019
Cash equivalents
Certificate of deposits and time deposits	$	67,009	$	—	$	—	$	67,009
Commercial paper		—		10,484		—		10,484
Corporate debt		—		1,000		—		1,000
Total	$	67,009	$	11,484	$	—	$	78,493
Short-term investments
U.S. treasuries	$	105,130	$	—	$	—	$	105,130
Government agency securities		—		1,139		—		1,139
Corporate debt		—		6,002		—		6,002
Commercial paper		—		2,981		—		2,981
Total	$	105,130	$	10,122	$	—	$	115,252

Schedule of amortized cost and fair value of available-for-sale securities

			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
	(in thousands)
March 31, 2020
U.S. treasuries	$	52,285	$	222	$	—	$	52,507
Government agency securities		5,947		29		—		5,976
Corporate debt		7,032		—		(17)		7,015
Commercial paper		13,930		1		—		13,931
Total	$	79,194	$	252	$	(17)	$	79,429
December 31, 2019
U.S. treasuries	$	105,096	$	38	$	(4)	$	105,130
Government agency securities		1,139		—		—		1,139
Corporate debt		6,003		—		(1)		6,002
Commercial paper		2,981		—		—		2,981
Total	$	115,219	$	38	$	(5)	$	115,252

Schedule of fair value and unrealized losses of available-for-sale securities in a loss position

	March 31, 2020				December 31, 2019
			Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses
		(in thousands)
U.S. treasuries	$	—	$	—	$	22,943	$	(4)
Corporate debt		7,015		(17)		6,002		(1)
Total	$	7,015	$	(17)	$	28,945	$	(5)

Schedule of inventories

	March 31,		December 31,
	2020		2019
	(in thousands)
Materials	$	81,684	$	82,155
Work-in-process		41,706		42,575
Finished goods		6,221		8,337
Total	$	129,611	$	133,067

Schedule of classes of assets classified as held for sale

	March 31, 2020
	(in thousands)
Assets held for sale:
Inventories	$	5,988
Property, plant, and equipment, net		310
Intangible assets, net		6,546
Goodwill		2,359
Impairment		(4,020)
Total Assets held for sale	$	11,183

Schedule of property, plant, and equipment

	March 31,		December 31,
	2020		2019
	(in thousands)
Land	$	5,061	$	5,061
Building and improvements		62,631		61,884
Machinery and equipment (1)		136,625		137,692
Leasehold improvements		6,770		6,703
Gross property, plant, and equipment		211,087		211,340
Less: accumulated depreciation and amortization		138,796		135,629
Net property, plant, and equipment	$	72,291	$	75,711

(1) Machinery and equipment also includes software, furniture and fixtures

Schedule of intangible assets excluding goodwill

	March 31, 2020						December 31, 2019
			Accumulated						Accumulated
	Gross		Amortization				Gross		Amortization
	Carrying		and		Net		Carrying		and		Net
	Amount		Impairment		Amount		Amount		Impairment		Amount
	(in thousands)
Technology	$	327,908	$	294,414	$	33,494	$	327,908	$	291,766	$	36,142
Customer relationships		146,465		127,606		18,859		146,465		126,764		19,701
Trademarks and tradenames		30,910		25,596		5,314		30,910		25,256		5,654
Other		3,686		3,673		13		3,686		3,665		21
Total	$	508,969	$	451,289	$	57,680	$	508,969	$	447,451	$	61,518

XML

Commitments and Contingencies

3 Months Ended

Mar. 31, 2020

Commitments and Contingencies

Commitments and Contingencies

Note 5 — Commitments and Contingencies

Leases

The Company’s operating leases primarily include real estate leases for properties used for manufacturing, R&D activities, sales and service, and administration, as well as certain equipment leases. Some leases may include options to renew for a period of up to 5 years, while others may include options to terminate the lease. The weighted average

remaining lease term of the Company’s operating leases as of March 31, 2020 was 3 years, and the weighted average discount rate used in determining the present value of future lease payments was 6.0%.

The following table provides the maturities of lease liabilities at March 31, 2020:

	Operating
	Leases
	(in thousands)
Payments due by period:
2020	$	3,898
2021		4,970
2022		4,387
2023		1,112
2024		551
Thereafter		—
Total future minimum lease payments		14,918
Less: Imputed interest		(1,338)
Total	$	13,580
Reported as of March 31, 2020
Accrued expenses and other current liabilities	$	4,286
Operating lease long-term liabilities		9,294
Total	$	13,580

Operating lease cost for both the three months ended March 31, 2020 and 2019 was $1.4 million. Variable lease cost for the three months ended March 31, 2020 and 2019 was $0.5 million and $0.6 million, respectively. Additionally, the Company has an immaterial amount of short term leases. Operating cash outflows from operating leases for the three months ended March 31, 2020 and 2019 were $1.3 million and $1.5 million, respectively.

Purchase Commitments

Veeco has purchase commitments of $76.2 million at March 31, 2020, substantially all of which become due within one year.

Bank Guarantees

Veeco has bank guarantees and letters of credit issued by a financial institution on its behalf as needed. At March 31, 2020, outstanding bank guarantees and letters of credit totaled $5.8 million, and unused bank guarantees and letters of credit of $25.8 million were available to be drawn upon.

Legal Proceedings

On June 8, 2018, an Ultratech shareholder who received Veeco stock as part of the consideration for the Ultratech acquisition filed a purported class action complaint in the Superior Court of the State of California, County of Santa Clara, captioned Wolther v. Maheshwari et al., Case No. 18CV329690, on behalf of himself and others who purchased or acquired shares of Veeco pursuant to the registration statement and prospectus which Veeco filed with the SEC in connection with the Ultratech acquisition (the “Wolther Action”). On August 2 and August 8, 2018, two purported class action complaints substantially similar to the Wolther Action were filed on behalf of different plaintiffs in the same court as the Wolther Action. These cases have been consolidated with the Wolther Action, and a consolidated complaint was filed on December 11, 2018. The consolidated complaint seeks to recover damages and fees under Sections 11, 12, and

15 of the Securities Act of 1933 for, among other things, alleged false/misleading statements in the registration statement and prospectus relating to the Ultratech acquisition, relating primarily to the alleged failure to disclose delays in the advanced packaging business, increased MOCVD competition in China, and an intellectual property dispute. Veeco is defending this matter vigorously.

On December 21, 2018, a purported Veeco stockholder filed a derivative action in the Superior Court of the State of California, County of Santa Clara, captioned Vladimir Gusinsky Revocable Trust v. Peeler, et al., Case No. 18CV339925, on behalf of nominal defendant Veeco. The complaint seeks to assert claims for breach of fiduciary duty, waste of corporate assets, and unjust enrichment against current and former Veeco directors premised on purported misstatements and omissions in the registration statement relating to the Ultratech acquisition. Veeco is defending this matter vigorously.

The Company is involved in various other legal proceedings arising in the normal course of business. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows.

XML

Income Taxes

3 Months Ended

Mar. 31, 2020

Income Taxes

Income Taxes

Note 9 — Income Taxes

Income taxes are estimated for each of the jurisdictions in which the Company operates. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. Realization of net deferred tax assets is dependent on future taxable income. At March 31, 2020, the Company’s U.S. deferred tax assets are fully offset by a valuation allowance since the Company cannot conclude that it is more likely than not that these future benefits will be realized.

At the end of each interim reporting period, the effective tax rate is aligned with expectations for the full year. This estimate is used to determine the income tax provision on a year-to-date basis and may change in subsequent interim periods. If necessary, the year-to-date tax benefit for interim period losses is limited to the amount that could be recognizable at the end of the fiscal year.

Loss before income taxes and income tax expense (benefit) for the three months ended March 31, 2020 and 2019 were as follows:

	Three months ended March 31,
	2020		2019
	(in thousands)
Loss before income taxes	$	(299)	$	(18,340)
Income tax expense (benefit)	$	268	$	190

The Company’s tax expense for the three months ended March 31, 2020 was $0.3 million, compared to $0.2 million for the comparable prior period. The 2020 tax expense included a $0.1 million expense related to the Company’s domestic operations and $0.2 million related to the Company’s non-U.S. operations, compared to 2019 when the expense included a $0.1 million expense related to the Company’s domestic operations and $0.1 million related to the Company’s non-U.S. operations. Although there was a domestic pre-tax loss for the three months ended March 31, 2020 and 2019, the Company did not provide a current tax benefit on domestic pre-tax losses, as the amounts are not realizable on a more-likely-than-not basis. The domestic tax expense for the current period is primarily attributable to the tax amortization of indefinite-lived intangible assets that is not available to offset U.S. deferred tax assets.

XML

Assets - Property, Plant, and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Property, plant, and equipment
Gross property, plant and equipment	$ 211,087		$ 211,340
Less: accumulated depreciation and amortization	138,796		135,629
Net property, plant, and equipment	72,291		75,711
Depreciation expense	3,900	$ 4,600
Land
Property, plant, and equipment
Gross property, plant and equipment	5,061		5,061
Building and improvements
Property, plant, and equipment
Gross property, plant and equipment	62,631		61,884
Machinery and equipment
Property, plant, and equipment
Gross property, plant and equipment	136,625		137,692
Leaseholds improvements
Property, plant, and equipment
Gross property, plant and equipment	$ 6,770		$ 6,703

XML

Assets - Accounts Receivable (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Accounts Receivable
Allowance for doubtful accounts receivable	$ 0.6	$ 0.6
Impact of COVID-19
Accounts Receivable
Change in allowance for doubtful accounts	$ 0.0

XML

Equity - AOCI Rollforward (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Changes in the balances of each component of AOCI
Balance at the beginning of the period	$ 374,512	$ 437,775
Total other comprehensive income (loss), net of tax	153	38
Balance at the end of the period	377,064	421,798
Accumulated Other Comprehensive Income
Changes in the balances of each component of AOCI
Balance at the beginning of the period	1,894	1,820
Total other comprehensive income (loss), net of tax	153
Balance at the end of the period	2,047	$ 1,858
Foreign Currency Translation
Changes in the balances of each component of AOCI
Balance at the beginning of the period	1,861
Total other comprehensive income (loss), net of tax	(48)
Balance at the end of the period	1,813
Unrealized Gains (Losses) on Available for Sale Securities
Changes in the balances of each component of AOCI
Balance at the beginning of the period	33
Total other comprehensive income (loss), net of tax	201
Balance at the end of the period	$ 234

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 162,325	$ 129,294
Restricted cash	652	657
Short-term investments	79,429	115,252
Accounts receivable, net	84,251	45,666
Contract assets	14,612	25,351
Inventories	129,611	133,067
Deferred cost of sales	1,981	445
Prepaid expenses and other current assets	16,446	14,966
Assets held for sale	11,183	11,180
Total current assets	500,490	475,878
Property, plant, and equipment, net	72,291	75,711
Operating lease right-of-use assets	13,159	14,453
Intangible assets, net	57,680	61,518
Goodwill	181,943	181,943
Deferred income taxes	1,549	1,549
Other assets	5,774	7,036
Total assets	832,886	818,088
Current liabilities:
Accounts payable	36,359	21,281
Accrued expenses and other current liabilities	41,568	41,243
Customer deposits and deferred revenue	49,628	54,870
Income taxes payable	954	830
Total current liabilities	128,509	118,224
Deferred income taxes	5,763	5,648
Long-term debt	303,388	300,068
Operating lease long-term liabilities	9,294	10,300
Other liabilities	8,868	9,336
Total liabilities	455,822	443,576
Stockholders' equity:
Preferred stock, $0.01 par value; 500,000 shares authorized; no shares issued and outstanding.
Common stock, $0.01 par value; 120,000,000 shares authorized; 49,428,391 shares issued and outstanding at March 31, 2020 and 48,994,346 shares issued and outstanding at December 31, 2019	494	490
Additional paid-in capital	1,074,020	1,071,058
Accumulated deficit	(699,497)	(698,930)
Accumulated other comprehensive income	2,047	1,894
Total stockholders' equity	377,064	374,512
Total liabilities and stockholders' equity	$ 832,886	$ 818,088

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash Flows from Operating Activities
Net income (loss)	$ (567)	$ (18,530)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	7,724	8,796
Non-cash interest expense	3,320	3,081
Deferred income taxes	115	(15)
Share-based compensation expense	3,646	3,157
Changes in operating assets and liabilities:
Accounts receivable and contract assets	(27,846)	(8,134)
Inventories and deferred cost of sales	2,446	8,489
Prepaid expenses and other current assets	(1,480)	(2,457)
Accounts payable and accrued expenses	14,459	(12,260)
Customer deposits and deferred revenue	(5,242)	(3,855)
Income taxes receivable and payable, net	124	(463)
Other, net	905	(100)
Net cash provided by (used in) operating activities	(2,396)	(22,291)
Cash Flows from Investing Activities
Capital expenditures	(1,070)	(2,180)
Proceeds from the sale of investments	71,130	22,500
Payments for purchases of investments	(34,866)	(41,258)
Net cash provided by (used in) investing activities	35,194	(20,938)
Cash Flows from Financing Activities
Proceeds (net of tax withholdings) from option exercises and employee stock purchase plan	956	1,021
Restricted stock tax withholdings	(680)	(642)
Net cash provided by (used in) financing activities	276	379
Effect of exchange rate changes on cash and cash equivalents	(48)	11
Net increase (decrease) in cash, cash equivalents, and restricted cash	33,026	(42,839)
Cash, cash equivalents, and restricted cash - beginning of period	129,951	213,082
Cash, cash equivalents, and restricted cash - end of period	162,977	170,243
Supplemental Disclosure of Cash Flow Information
Interest paid	4,681	4,693
Income taxes paid	293	2,341
Non-cash operating and financing activities
Net transfer of property, plant and equipment to inventory	$ 526	130
Right-of-use assets obtained in exchange for lease obligations		$ 238

XML

Liabilities

3 Months Ended

Mar. 31, 2020

Liabilities

Liabilities

Note 4 — Liabilities

Accrued Expenses and Other Current Liabilities

The components of accrued expenses and other current liabilities at March 31, 2020 and December 31, 2019 consist of:

	March 31,		December 31,
	2020		2019
	(in thousands)
Payroll and related benefits	$	18,909	$	15,174
Warranty		5,968		7,067
Operating lease liabilities		4,286		4,196
Interest		1,992		4,321
Professional fees		1,936		2,443
Sales, use, and other taxes		2,644		811
Restructuring liability		2,074		2,841
Other		3,759		4,390
Total	$	41,568	$	41,243

Warranty

Warranties are typically valid for one year from the date of system final acceptance, and Veeco estimates the costs that may be incurred under the warranty. Estimated warranty costs are determined by analyzing specific product and historical configuration statistics and regional warranty support costs and are affected by product failure rates, material usage, and labor costs incurred in correcting product failures during the warranty period. Unforeseen component failures or exceptional component performance can also result in changes to warranty costs. Changes in product warranty reserves for the three months ended March 31, 2020 include:

		(in thousands)
Balance - December 31, 2019	$	7,067
Warranties issued		645
Consumption of reserves		(1,708)
Changes in estimate		(36)
Balance - March 31, 2020	$	5,968

Restructuring Accruals

The Company continued to record restructuring charges during the year ended December 31, 2019 as a result of its efforts to further streamline operations, enhance efficiencies, and reduce costs. In the second half of 2019, the Company executed an initiative to reorganize various functions along product lines and created a central research and development organization to better allocate its resources to the Company’s highest priority projects. In addition, the Company delayered the organization. Collectively, these actions impacted approximately 60 employees. During the three months ended March 31, 2020, additional accruals were recognized and payments were made related to these restructuring initiatives.

The following table shows the amounts incurred and paid for restructuring activities during the three months ended March 31, 2020, and the remaining accrued balance of restructuring costs at March 31, 2020, which is included in

“Accrued expenses and other current liabilities” in the Consolidated Balance Sheets, and principally consists of personnel severance and related costs:

	(in thousands)
Balance - December 31, 2019	$	2,841
Provision		625
Payments		(1,392)
Balance - March 31, 2020	$	2,074

Customer Deposits and Deferred Revenue

Customer deposits totaled $24.9 million and $26.6 million at March 31, 2020 and December 31, 2019, respectively. Deferred revenue represents amounts billed, other than deposits, in excess of the revenue that can be recognized on a particular contract at the balance sheet date. Changes in deferred revenue were as follows:

	(in thousands)
Balance - December 31, 2019	$	28,249
Deferral of revenue		5,089
Recognition of previously deferred revenue		(8,607)
Balance - March 31, 2020	$	24,731

As of March 31, 2020, the Company has approximately $32.2 million of remaining performance obligations on contracts with an original estimated duration of one year or more, of which approximately 88% is expected to be recognized within one year, with the remaining amounts expected to be recognized between one to three years. The Company has elected to exclude disclosures regarding remaining performance obligations that have an original expected duration of one year or less.

Convertible Senior Notes

On January 10, 2017, the Company issued $345.0 million of 2.70% convertible senior unsecured notes (the “Convertible Senior Notes”). The Company received net proceeds, after deducting underwriting discounts and fees and expenses payable by the Company, of approximately $335.8 million. The Convertible Senior Notes bear interest at a rate of 2.70% per year, payable semiannually in arrears on January 15 and July 15 of each year, commencing on July 15, 2017. The Convertible Senior Notes mature on January 15, 2023 (the “Maturity Date”), unless earlier purchased by the Company, redeemed, or converted.

The carrying value of the Convertible Senior Notes is as follows:

	March 31,		December 31,
	2020		2019
	(in thousands)
Principal amount	$	345,000	$	345,000
Unamortized debt discount		(37,804)		(40,820)
Unamortized transaction costs		(3,808)		(4,112)
Net carrying value	$	303,388	$	300,068

Total interest expense related to the Convertible Senior Notes is as follows:

	Three months ended March 31,
	2020		2019
	(in thousands)
Cash Interest Expense
Coupon interest expense	$	2,329	$	2,329
Non-Cash Interest Expense
Amortization of debt discount		3,016		2,799
Amortization of transaction costs		304		282
Total Interest Expense	$	5,649	$	5,410

The Company determined the Convertible Senior Notes is a Level 2 liability in the fair value hierarchy and estimated its fair value as $283.8 million at March 31, 2020.

Other Liabilities

As part of the acquisition of Ultratech, the Company assumed an executive non-qualified deferred compensation plan that allowed qualifying executives to defer cash compensation. The plan was frozen at the time of acquisition and no further contributions have been made. At March 31, 2020 and December 31, 2019, plan assets approximated $1.9 million and $2.7 million, respectively, representing the cash surrender value of life insurance policies and is included within “Other assets” in the Consolidated Balance Sheets, while plan liabilities approximated $2.3 million and $3.1 million, respectively, and is included within “Other liabilities” in the Consolidated Balance Sheets. Other liabilities at both March 31, 2020 and December 31, 2019 also included medical and dental benefits for former executives of $2.0 million, asset retirement obligations of $3.2 million, and income tax payables of $1.0 million.

XML

Share-Based Compensation

3 Months Ended

Mar. 31, 2020

Share-Based Compensation

Share-based compensation

Note 8 — Share-Based Compensation

Restricted share awards are issued to employees that are subject to specified restrictions and a risk of forfeiture. The restrictions typically lapse over one to five years and may entitle holders to dividends and voting rights. Other types of share-based compensation include performance share awards, performance share units, and restricted share units (collectively with restricted share awards, “restricted shares”), as well as options to purchase common stock.

Share-based compensation expense was recognized in the following line items in the Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019:

		Three months ended March 31,
		2020		2019
	(in thousands)
Cost of sales		$	521	$	470
Research and development			874		792
Selling, general, and administrative			2,251		1,895
Total		$	3,646	$	3,157

For the three months ended March 31, 2020, equity activity related to stock options was as follows:

		Weighted
	Number of	Average
	Shares	Exercise Price
	(in thousands)
Balance - December 31, 2019	1,119		34.88
Expired or forfeited	(40)		34.19
Balance - March 31, 2020	1,079		34.90

For the three months ended March 31, 2020, equity activity related to non-vested restricted shares and performance shares was as follows:

		Weighted
		Average
	Number of	Grant Date
	Shares	Fair Value
	(in thousands)
Balance - December 31, 2019	2,257		16.20
Granted	840		8.99
Performance award adjustments	(45)		31.34
Vested	(190)		12.68
Forfeited	(233)		16.35
Balance - March 31, 2020	2,629		13.88

XML

Income (Loss) Per Share (Tables)

3 Months Ended

Mar. 31, 2020

Income (Loss) Per Common Share

Schedule of basic and diluted income (loss) per share and weighted average shares

	Three months ended March 31,
	2020		2019
	(in thousands, except per share amounts)
Net income (loss)	$	(567)	$	(18,530)
Net income (loss) per common share:
Basic	$	(0.01)	$	(0.40)
Diluted	$	(0.01)	$	(0.40)
Basic weighted average shares outstanding		47,811		46,848
Effect of potentially dilutive share-based awards		—		—
Diluted weighted average shares outstanding		47,811		46,848
Common share equivalents excluded from the diluted weighted average shares outstanding since the Company incurred a net loss and their effect would be antidilutive		627		320
Potentially dilutive shares excluded from the diluted calculation as their effect would be antidilutive		1,485		2,426
Maximum potential shares to be issued for settlement of the Convertible Senior Notes excluded from the diluted calculation as their effect would be antidilutive		8,618		8,618

XML

Assets - Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Intangible assets
Total Gross Intangible Assets	$ 508,969	$ 508,969
Accumulated Amortization and Impairment	451,289	447,451
Total Net Intangible Assets	57,680	61,518
Technology
Intangible assets
Gross Carrying Amount, Definite-lived intangible assets	327,908	327,908
Accumulated Amortization and Impairment, Definite-lived intangible assets	294,414	291,766
Net Amount, Definite-lived intangible assets	33,494	36,142
Customer relationships
Intangible assets
Gross Carrying Amount, Definite-lived intangible assets	146,465	146,465
Accumulated Amortization and Impairment, Definite-lived intangible assets	127,606	126,764
Net Amount, Definite-lived intangible assets	18,859	19,701
Trademarks and tradenames
Intangible assets
Gross Carrying Amount, Definite-lived intangible assets	30,910	30,910
Accumulated Amortization and Impairment, Definite-lived intangible assets	25,596	25,256
Net Amount, Definite-lived intangible assets	5,314	5,654
Other Intangible Assets
Intangible assets
Gross Carrying Amount, Definite-lived intangible assets	3,686	3,686
Accumulated Amortization and Impairment, Definite-lived intangible assets	3,673	3,665
Net Amount, Definite-lived intangible assets	$ 13	$ 21

XML

Assets - Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Inventories
Materials	$ 81,684	$ 82,155
Work-in-process	41,706	42,575
Finished goods	6,221	8,337
Total	$ 129,611	$ 133,067

XML

Equity (Tables)

3 Months Ended

Mar. 31, 2020

Stockholders' Equity

Schedule of Stockholders' Equity

								Accumulated
				Additional				Other
	Common Stock			Paid-in		Accumulated		Comprehensive
	Shares	Amount		Capital		Deficit		Income		Total
	(in thousands)
Balance at December 31, 2019	48,994	$	490	$	1,071,058	$	(698,930)	$	1,894	$	374,512
Net loss	—		—		—		(567)		—		(567)
Other comprehensive income, net of tax	—		—		—		—		153		153
Share-based compensation expense	—		—		3,646		—		—		3,646
Net issuance under employee stock plans	434		4		(684)		—		—		(680)
Balance at March 31, 2020	49,428	$	494	$	1,074,020	$	(699,497)	$	2,047	$	377,064

												Accumulated
								Additional				Other
	Common Stock			Treasury Stock				Paid-in		Accumulated		Comprehensive
	Shares	Amount		Shares		Amount		Capital		Deficit		Income		Total
	(in thousands)
Balance at December 31, 2018	48,547	$	485		523	$	(5,872)	$	1,061,325	$	(619,983)	$	1,820	$	437,775
Net loss	—		—		—		—		—		(18,530)		—		(18,530)
Other comprehensive income, net of tax	—		—		—		—		—		—		38		38
Share-based compensation expense	—		—		—		—		3,157		—		—		3,157
Net issuance under employee stock plans	128		2		(523)		5,872		(6,303)		(213)		—		(642)
Balance at March 31, 2019	48,675	$	487		—	$	—	$	1,058,179	$	(638,726)	$	1,858	$	421,798

Schedule of the changes in the balances of each component of AOCI, net of tax

			Unrealized
			Gains (Losses)
	Foreign		on Available
	Currency		for Sale
	Translation		Securities		Total
	(in thousands)
Balance - December 31, 2019	$	1,861	$	33	$	1,894
Other comprehensive income (loss)		(48)		201		153
Balance - March 31, 2020	$	1,813	$	234	$	2,047

XML

Basis of Presentation - Fiscal Period (Details)	3 Months Ended
	Mar. 31, 2020
Significant Accounting Policies
Fiscal period duration (in days)	91 days

XML

Commitments and Contingencies - Minimum lease commitments (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Minimum lease commitments, Payments due by period:
2020	$ 3,898
2021	4,970
2022	4,387
2023	1,112
2024	551
Total future minimum lease payments	14,918
Less: Imputed interest	(1,338)
Total operating lease liabilities	13,580
Operating lease liability, current	$ 4,286	$ 4,196
Operating Lease, Liability, Current, Statement of Financial Position	veco:AccruedAndOtherLiabilitiesCurrent
Operating lease liability, noncurrent	$ 9,294	$ 10,300
Operating Lease, Liability, Noncurrent, Statement of Financial Position	us-gaap:OperatingLeaseLiabilityNoncurrent
Total operating lease liabilities	$ 13,580

XML

Liabilities - Performance Obligations Timing (Details)	3 Months Ended
	Mar. 31, 2020
Liabilities
Revenue, Practical Expedient, Remaining Performance Obligation	true
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-04-01
Performance obligations
Remaining performance obligations, expected timing of satisfaction	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-04-01
Performance obligations
Remaining performance obligations, expected timing of satisfaction	2 years