1 August 2011

Veeco’s Q2 yields record orders as MaxBright comprises 40% of MOCVD orders

For second-quarter 2011, epitaxial deposition and process equipment maker Veeco Instruments Inc of Plainview, NY, USA has reported revenue of $264.8m, up 4% on Q1’s $254.7m and up 20% on $221.4m a year ago for continuing operations (excluding the Metrology business, sold to Bruker Corp of Billerica, MA, USA on 7 October).

In particular, Data Storage revenue was $45.7m (the highest quarterly level in five years), up 15% on Q1’s $40m and 28% on $35.7m a year ago. LED & Solar revenue was $219.1m (up 2% on Q1’s $214.7m and 18% on $185.6m a year ago). This included metal-organic chemical vapor deposition (MOCVD) revenue of $206m, up slightly on Q1’s $204m and up 18% on $175m a year ago. 

Veeco met its quarterly guidance of $255–285m. However, the timing of revenue continues to be impacted by the longer order-to-revenue cycle times associated with the high percentage of MOCVD business currently coming from China, due mainly to customer facility readiness and credit tightening.

Non-GAAP net income was $57.6m ($1.34 per share), up from $56.6m ($1.33 per share) last quarter and $40.7m ($0.94 per share) a year ago.

Order bookings were a record $311m, up slightly from $310.5m a year ago but up 35% on Q1’s $230.9m (boosting order backlog from $530m to $558.2m). In particular, Data Storage orders were $37.5m, down 25% on $50m a year ago but up 15% on Q1’s $32.6m. LED & Solar orders were a record $273.3m (up 38% on Q1’s $198.3m and 5% on $260.4m a year ago). Of this, MBE (molecular beam epitaxy) bookings were a strong $24m. MOCVD orders were $250m, down slightly on $251m a year ago but up 34% on Q1’s $186m. While China was again the main region for new systems purchases, Korea showed signs of improvement, including a multi-system MaxBright MOCVD order from an “important LED industry leader”. 

“We have seen spectacular customer reaction to our new MaxBright MOCVD system [launched in February] — in the second quarter we booked over $100m of MaxBright systems — 40% of our total MOCVD bookings,” says CEO John R. Peeler. “We believe customers are clearly recognizing that MaxBright is simply the best tool on the market to drive down LED manufacturing costs,” he adds.

CIGS Solar Systems business discontinued

“Veeco has decided to exit the CIGS Solar Systems business for various reasons, including the improved performance of mainstream solar technologies and the lower-than-expected end-market acceptance for CIGS technology to date,” says Peeler. “While CIGS remains an important thin-film solar technology, we have determined that the timeframe and cost to successful commercialization are not acceptable to Veeco,” he adds.

“Veeco intends to transfer our R&D facility, pilot line, technology and key personnel in Clifton Park, New York to the College of Nanoscale Science and Engineering (CNSE) in order to support their planned CNSE/SEMATECH Photovoltaic Manufacturing Consortium (PVMC),” Peeler continues. “PVMC is much-needed to drive CIGS industry roadmaps, collaboration, market acceptance and commercialization,” he believes.

Veeco’s second-quarter GAAP results were negatively impacted by about $51m in asset impairment and restructuring charges related to the CIGS Solar Systems business. In addition, about $20m in CIGS deposition systems has been removed from Veeco’s backlog. Effective third-quarter 2011, Veeco will treat its CIGS Solar Systems business, which operated at a loss, as a discontinued operation. “The closure of our CIGS Systems business is expected to have an immediate and positive impact to Veeco’s profitability,” says Peeler. “Veeco will continue to sell CIGS deposition components and remains the top supplier of MOCVD and MBE tools to the concentrator photovoltaic (CPV) market,” he adds.

Veeco repurchases shares, eliminates convertible debt, and invests in technology

During Q2/2011, under its board-authorized share buy-back program, Veeco purchased $7.8m in stock at an average price of $46.91 per share. It also completed the redemption of its outstanding convertible subordinated notes for $98.1m aggregate principal amount and completed the purchase of a privately held company that supplies certain critical components to its MOCVD business for $28.3m. “In addition to paying off our convertible debt and making a small technology purchase, Veeco recently utilized cash to buy-back our shares, reflecting our continued confidence in the long-term outlook for the company,” comments Peeler.

Subsequently, so far during July (as of 26 July), Veeco has purchased an additional $71.9m of stock, at an average price of $42.21 per share. Since the $200m buy-back program was authorized last August, Veeco has repurchased a total of 3 million shares for $117.8m.

Q3/2011 guidance

“Quoting activity in MOCVD remains robust and we are experiencing extremely positive customer reaction to MaxBright,” Peeler says. “MOCVD order patterns will continue to fluctuate from quarter to quarter, depending upon the timing of customer deposits,” he adds. “In the short term, orders will likely be impacted by several headwinds that have been widely reported, including weak near-term LED industry end-market demand and global macro-economic concerns. We therefore currently forecast that Veeco’s third-quarter 2011 bookings will be lower than our record second quarter.”

For third-quarter 2011, Veeco expects revenue of $235–285m, and non-GAAP net income of $41.3–57.7m ($1.00–1.40 per share). “We expect to have a great 2011 and are on track to deliver on our guidance of over $1bn in revenue and over $5.25 in non-GAAP earnings per share,” notes Peeler. “We are confident that the company can perform well during any short-term fluctuations in business thanks to our variable cost model and strong cash position.” Despite spending $134.2m on repurchasing shares, eliminating convertible debt, and investing in technology, Veeco's cash and short-term investments at the end of the quarter still totaled $632.7m.

“While short-term business conditions are uncertain, there is a fantastic growth opportunity ahead of us as LED lighting market adoption is expected to increase in 2012 and 2013,” comments Peeler. “We believe lighting market penetration will accelerate due to a variety of factors including ban the bulb legislation in Europe and the US, Japan’s move to stimulate LED adoption, significant investment by Korean and Taiwanese leaders who have already introduced lighting products in the sub-$15 range, China’s emergence as a major LED industry player, and rapidly declining LED prices... In fact, we estimate that over 50% of our first-half 2011 MOCVD shipments were for lighting, up from 28% in 2010,” he adds. “While accurately predicting industry investment cycles is difficult, our forecast of an MOCVD market opportunity of 5000 reactors from 2011 to 2015 appears conservative, given the industry’s growth potential.”

See related items:

Veeco’s revenue drops 15% in Q1 due to ‘lumpy’ order patterns

Veeco reports record quarterly revenue of $300m in Q4

Veeco grows a further 25% in Q3; on track for $1bn in 2010

Veeco’s record Q2 driven by LED & Solar revenues growing 66% from Q1

Veeco’s LED & Solar orders up seven-fold year-on-year as backlog reaches $0.5bn

See: Veeco Company Profile

Tags: Veeco MOCVD MBE

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