Q3 2025 Veeco Instruments Inc Earnings Call
Greetings and welcome to Vivi code Q3 2025 earnings call.
At this time, all participants are in a listen-only mode.
A brief question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Alex Della Cry.
Head of investor relations. Thank you. You may begin.
Thank you and good afternoon everyone. Joining me on the call today are Bill Miller, Voz chief executive officer and John Kieran, our Chief Financial Officer.
today's earnings release and slide presentation to accompany, today's webcast is available on Voz website,
To the extent that this call discusses expectations for future revenues.
Future earnings.
The timing and expected benefits of the proposed transaction with excellus.
Or otherwise make statements about the future.
These forward-looking statements are based on Management's, current expectations, and our subject, to the risks and uncertainties, that could cause actual results to differ, materially from the statements made
These arrests are discussed in detail in our form, 10K annual report and other FEC filings.
Pho does not undertake any obligation to update any forward-looking statements, including those made on this call to reflect future events or circumstances after the date of such statements.
Unless otherwise, noted management will address non-gaap Financial results.
We encourage you to refer to our reconciliation between gaap and non-gaap results, which you can find in our press release. And at the end of the earnings presentation,
given the pending merger with excellus, we will not be addressing questions related to the transaction.
Please note that today's call is neither an offering of Securities nor solicitation of a proxy vote in connection with our previously, announced transaction with excellus.
We urge you to read The Joint proxy statement relating to the transaction with excellus, once it becomes available.
With that, I would now like to hand a call over to our CEO Bill Miller.
Thank you, Alex.
Good afternoon and thanks for joining us. We entered the quarter focused on execution and I'm pleased to report that vo continues to perform well.
Third quarter Revenue was 166 million exceeding, the midpoint of our prior guidance of 160 million and non-gaap operating income was 23 million.
Non-gaap diluted earnings per. Share was 36 Cents above the prior guidance, midpoint of 28 cents.
Reflecting continued, operational discipline and strong execution across the business.
This performance, underscores the sustained investment in Leading Edge, semiconductor Technologies, particularly in Ai and high-performance computing.
These Trends are driving healthy demand, especially in Gate all around high bandwidth memory and advanced packaging where veikos differentiated equipment enables customers to advance their most complex technology roadmaps.
On October 1st, we announced that we entered into a definitive agreement to combine with excellus Technologies and in all stock transaction to create a leading semiconductor equipment company serving, complimentary Diversified and expanding and markets.
The completion of the merger is subject to among other things, the approval of our stockholders and various regulatory approvals, which we are focusing on securing
we are hopeful that we will successfully bring this transaction to completion and strongly believe these 2 companies are optimal together and will drive sustainable value, creation for all our stakeholders
We expect to see many growth synergies from the transaction. That will be integral and driving success for the combined company.
First expansion of our served available Market which combined was over 5 billion dollars on a pro-forma 2024 basis.
second we believe the transaction will enable a broader and complementary product portfolio and provide better Solutions and services for the combined companies customers
A few items include.
adjacent technology steps with excellus, ion, implantation, and our laser, and kneeling likely, providing significant opportunities to enhance device performance and yield
Accelerated development of IM beam deposition Technologies, likely enabling greater market share gain from traditional deposition Technologies.
Third.
We believe the transaction will provide expansion of the combined companies Channel, reach and Regional Leverage.
Together, this will allow us to penetrate Tier 1 Foundry, logic memory and IDM customers more effectively.
Forth. The combination will increase R&D scale and enhance capabilities, which we believe will accelerate benefits to the combined companies Collective customers.
And lastly with over 900 million dollars in Combined cache, we expect the combined company to benefit from a strong operating profile and the financial Foundation to drive returns to shareholders.
Now, I'll turn to our critical role in the semi manufacturing process and provide updates on our evaluation programs for the quarter.
Tool of record for laser Spike and kneeling for all leading logic customers and 1 Tier 1 dram customer. We expect to grow our penetration in leading dram by shipping an LSA evaluation system, to a second, tier 1 D Ram customer in the fourth quarter of this year.
Additionally, our next Generation nanosecond and kneeling system expands our capabilities to the Nano second regime.
and our systems are being evaluated at 2 Advanced logic customers for advanced low thermal budget applications
These evaluations are progressing well and we plan to ship additional NSA evaluation systems during 2026 to Tier 1, customers.
We're also the market leader for IBD euv systems for the deposition of defect-free films.
Our product roadmap is well aligned as the industry adopts Next Generation, High na euv lithography. And we're expanding our euv related business. The euv Pelicans which are increasingly being used to improve the productivity of euv steps.
Activity in our lithography system.
Last month, we announced multiple orders for our Advanced packaging. Wet processing and lithography systems from a leading Foundry supporting critical and markets through AI Automotive Aerospace defense and Communications.
Across our portfolio. We continued to focus on performance and yield advantages that matter most to our customers in advanced nodes.
As we look at, we believe our portfolio and enables Technologies for key inflections, supporting Innovation, and gate all around high bandwidth, memory, euv, lithography and advanced Packaging.
These growth areas, create significant opportunities in our served available markets.
In annealing, we project our Sam to be approximately 1.3 billion dollars by 2029 as devices. Continue to shrink and shallower Niels are required to improve performance and adapt to changing structures.
For our iron beam, deposition technology in semi we project, our Sam to be approximately 500 million dollars in 2029 as the market expands to adopt euv and high in a lithography.
This growth is also driven by the need for lower resistance. Metals deposition in a uniform manner required for improved, device performance and power consumption.
Lastly, in advanced packaging, we project Sam Groth to be approximately 650 Million by 2029.
With growth, mainly driven by wet processing systems supporting Ai and high-performance computing.
As we look at the business, we continue to invest in programs that position us for the next leg of growth and focus our R&D to advance the industry.
I'll now turn the call over to John to walk through the financials for the quarter and provide our outlook for Q4 2025.
Thank you, Bill.
Revenue came in at 166 million above the midpoint of our guidance.
In line with the previous quarter.
Our semiconductor business reported 118 million of decline of 5%, quarter of a quarter, and 71% of total revenue.
Our performance was driven by LSA IBD euv, for Mass blanks and our Advanced packaging web processing systems.
In The Compound Semiconductor Market revenue is 1 million.
Down from the prior quarter totaling 7% of Revenue.
Data storage Revenue was $10 million totaling 6% of Revenue.
In scientific and other Revenue increased to 27 million, totaling 16% of Revenue, driven by an increase in Optical deposition systems.
Turning to the quarterly Revenue by region.
Revenue from the asia-pacific region, excluding China was 49%.
A decrease from 59% in the prior quarter.
Sales were driven by customers in Taiwan for LSA.
IBD euv, masks and advanced Packaging.
Revenue from China, customers was 28% and increase from 17% in Q2.
sales with driven, primarily by LSA and Optical deposition systems,
The United States came in at 16% and a meal with 7%.
Switching gears to our non-gaap quarterly results.
Gross margin.
Total approximately 42% at the top end of our guidance.
Gross margin was favorably impacted by higher volume and improved product mix.
Operating expenses totaled, approximately 46 million, which came in favorably below our previously guided range.
Income tax expense was approximately $3 million resulting. In an effective tax rate of approximately 12%.
Net income came in at approximately 22 million.
And diluted EPS was 36 Cents on 61 million shares.
Now, moving to the balance sheet and cash flow highlights.
we ended the quarter with cash and short-term Investments of 369 million, the sequential increase of 14 million,
From a working capital perspective, our accounts receivable increase by 10 million to 116 million.
Inventory increased by $4 million, to 263 million and accounts, payable decreased by 6 million to 44 million.
Customer deposits included within contract, liabilities on the balance sheet remained, relatively flat at 36 million.
now, turning to our Q4 Outlook,
Q4 revenue is expected to be between 155 and 175 million.
Gross margin for Q4, is expected in to range between 37 and 39% representing a decline from prior periods.
This anticipated reduction is primarily driven by a shift in product mix with several discounted evaluation tool acceptances and a greater proportion of revenue from Advanced Packaging Systems.
We expect Opex of approximately 48 million.
Net income between 10 and 19 million.
And diluted EPS between 16 and 32 cents on approximately 62 million shares.
I'll now provide additional commentary for each of our markets.
In the semiconductor Market, we see growth for 2025 compared to 2024 driven by demand in Gate all around and advanced Packaging.
Additionally, we see continued momentum for our products into 2026 driven by Leading Edge Investments for AI and high performance computing.
In The Compound Semiconductor Market, we have Revenue growth opportunities in Gan power, photonics and solar for 2026.
After experiencing a down year in 2025,
We are excited about the recent order activity and the acceptance of our new propelled. 300 mm. Gan and lumina plus arson phosphide platforms.
Which are Tailwinds for next year.
After an extensive successful evaluation period. Today, we announced that we received an order for our Propel 300. Mm, Gan on Silicon M ocbd system from a leading power IDM for AI data centers. This order, cements our position as a leader in 300, mm, Gan technology, which is at an important inflection point. Transitioning from 200 mm wafer sizes.
Additional recent announcements in this market include an order for multiple Lumina Indian phosphide, mocvd. Tools for data center. Optical communication Solutions.
we also received the first multi-tool order for our recently released new
Lumina plus platform for low earth. Orbit space grade solar cells.
These orders support the revenue growth projected for the compound semi.
Conductor Market in 2026, which shipments principally in the second half.
In the data storage market system Revenue. Declined in 2025 compared to 2024, as customers did not add new system capacity. However, our service Revenue has increased reflecting higher customer utilization.
And we are excited to announce we recently received orders for our IMB and what processing equipment.
We expect these orders to drive data storage, Revenue growth in 2026.
Principally in the second half.
We continue to see strong demand in the scientific and other market for our research-driven applications.
The segment is expected to deliver growth in 2025 supported by ongoing investment in advanced scientific innovation.
With that, I'll now turn the call over to the operator to open up Q&A.
Thank you. We will now be conducting a question and answer session.
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As a reminder, given the pending merger with excellus, we can management will not be addressing questions related to the transaction.
1 moment, please while we pull for questions.
We have a question from David Ali. Of steelhead Securities. Please go ahead.
Why Gan is being adopted in these particular segments at this point.
Yeah, we've had an evaluation with his leading power IDM for over a year, and we've found it to be successful. We just received a follow-on multi-chamber order for a pilot line tool.
Likely for data center applications and they're going to Pilot production in 26.
And their plan is to ramp to uh, hvm in 27.
At 300, mm. Sorry.
And and is there a specific reason? Now again as being adopted in the data centers?
I think, uh, the efficiency of power conversion in the data center is a real, uh, limiting issue in the data center. And so, any material that can be adopted to, uh, convert electricity more efficiently. Uh, is pretty desirous,
Okay. And then John, if you could just address the gross margin guidance, I think you mentioned in increased, uh, evaluation activity as to why, the gross margins would be down but maybe just elaborate on that a little bit for me.
Sure Dave uh be happy uh happy to. So yeah we just ended, you know, this quarter with gross margin in Q3 uh around uh you know 402% on the high end of our you know, guided guided range. Uh but we have guided for Q3 a less favorable, uh, excuse me for Q4 or less favorable, um, gross gross margin in 37 to 39% range, which is lower than we have been, uh, experiencing and we did indicate in our prepared remarks, uh, uh, driver being uh, product mixed there.
And, uh, within the product mix, uh, two items, uh, to highlight. One is, uh, as you mentioned here, Dave, we're expecting some eval sign-offs this quarter at favorable, uh, pricing. Now, for clarity, uh, those are not, uh, evals related to our NSA at Leading Logic or evals for our IBD, uh, 300 for the low resistance metal. This is more, uh, recurring sort of LSA, uh, type of uh, eval, and as well as, uh, an eval that we have out, uh, for um,
For, um, in compound semiconductor for micro, uh, LEDs. So, that's the one area. The second area is that we have in our semiconductor business, in our Q4, um, revenue guide, an increased amount of, uh, business in advanced, uh, you know, packaging for applications where the gross margins for those tools aren't as high as the company's, uh, average.
Okay. Um and then just final question from me, is he went through the segments um uh in pretty good detail but I was just wondering if you could elaborate a little bit more on what you would expect, the trajectory of your Advanced packaging business to be in 2026.
Um I think it I think it doubled this year. I don't imagine it's going to do that again. But um, what early indications do you have of of growth there?
Yeah, the business has doubled Dave and it, it was not easy and I have to give kudos to our operations team. And uh, in the business for ramping, the doubling the business in uh, in pretty short order there. Uh, we are actually running the business uh to a roadmap. And so we're working with as you might imagine industry industry leaders and helping them with their uh, wet processing challenges, whether they're moving to under bump metal Edge. Uh trying to solve some problems. There photo resist removal and hybrid bonding so
We feel that we've got a number of projects and programs and demo activity uh to to sustain uh our position. Uh, I think it's a bit early for us to comment on the direction of uh Advanced packaging for 26 specifically, really because uh the business runs on a shorter shorter, backlog, and shorter lead time, so that full year visibility, we just just don't have it for that that segment.
Thank you.
Thanks Dave.
The next question we have is from Dennis P.A. Chanin of NIDM and Co. Please go ahead.
Great. Thanks for taking our questions. I think you've previously mentioned an uptick in HDD customer utilizations. Uh, how are the ordering patterns needed? Um, the only visible Demand right now? For the second half of 26.
Dennis our, uh, lead time we, you know, this is a build to order business and our lead times are, you know, approaching a year maybe a little bit less, but in in that range. And so, uh, our first orders we received in, uh, in Q3
For ION beam and wet processing equipment and, uh, we're negotiating orders in the fourth quarter. Uh, so just based on the timing of the receipt of the orders, uh, kind of dictates that those would be shipped in the second half of next year.
Great. Uh, thank you for the detail.
And um on the strength and scientific uh, could you tell us more about that, was that driven predominantly by Chinese customers this quarter?
There was some content for Chinese customers, this quarter. Um, some of the um the strength in the um in that segment. This quarter also were for optical uh deposition tools, where General industrial, you know applications um there and there was China content uh with that.
All right, and my last 1 is about NSA. Um, maybe a little bit more high level. So I think you'd mentioned that it's being tested with logic customers. Um, do you see NSA adoption as being possible for memory customers as well?
Yes. They're actually uh interested in adopting it. Uh particularly, you know, because of the, our NSA can uh Anil of only very thin layer. So it's very conducive to uh, material modification and 3D stacking, which is uh, which is happening in, in memory applications. Uh, but yeah, the evals are, are going quite well, um, moving along with the, the 2 that we have, we have strong pull from the third, uh, logic customers. And as I just said, uh, memory customers are interested. Our plan would be to ship multiple nanosecond and kneeling Tools in 2026.
Uh, to a mix of logic and memory or memory.
Great. That's it from us. Thank you very much.
Thank you, Dennis.
The next question we have is from Mark Miller of Benchmark. Please go ahead.
Thank you for the question. And can you, uh, give us a little update on on the thin thin metal films, uh, with IBD.
Evals.
Yeah, yeah. We're making, uh, making good progress in. Introducing the, the fourth deposition technology, to front-end semi it remains an exciting opportunity, our customers are very much engaged and we're working together, uh, to improve or work on bringing the maturity of the product up for high volume manufacturing, as well as working with our customer to integrate the IM beam deposition technology into their existing production processes. So, you know, there's clearly still, uh, pull. We have 2 Tools in dram Mark, but, uh, there's definitely pull in logic. Uh,
And the potential for evils therein in the future.
Okay, so 2 EV valves with the manufacturers with the IBD tools. Um, yes.
In terms of your your your backlog, with the visibility, you have margins are going to be down you you talked about why but going out in the future does the backlog look uh like the margins will increase when you start shipping out of it in the future.
You want to take a chance? Go ahead. Yeah, so, so Mark. Uh, yeah, so we just said, uh, uh, that we expect the gross margin in, uh, in Q4 to be down, you know, for, uh, for mixed reasons. Um, as we look at, um, into the, into the future, you know, past, uh, past Q, um, past Q4, um, our expectation is that, uh, we could, uh, see margin Improvement in 26 over, uh, over 2020, uh, over 2025 gross margin, you know, Improvement, um, as was mentioned on the call and our prepared remarks. We're getting good visibility, we're starting to get good visibility, you know, 4 data, storage with orders, starting to come in, in Q3 and more, and more orders being negotiated in Q4, um, for shipment in the second half of of next year, uh, as well as, um, you know, orders that we've been receiving for our new products, uh, in, uh,
semiconductor market bucket and again on a bill to order type of uh
Production there and we see that, you know, in the second half of uh of next year.
Just 1 more question. If you permit me, um, your your data storage orders, you received this quarter for IBD and what processing is that from 1 customer from multiple customers.
It was from multiple customers.
Thank you.
Thanks Mark.
At this time, we have no further questions and I would like to turn the call back over to Bill Miller for closing remarks.
Thank you, our results. This quarter reflects strong execution, and steady momentum across our business. We believe the pending merger with excellus represents the next phase of that progress.
It will broaden our technology portfolio, expand our market reach, and create multiple opportunities for revenue growth through cross-selling, integrated solutions, and accelerated innovation.
We're confident in the past ahead and we'll continue to update. You as the process moves forward overall, we're delighted with the response from our stakeholders across the board and are even more energized to deliver on the compelling merits of this strategic combination.
Thank you to our employees for their hard work and dedication to Veeco. Thank you to our customers and partners for their continued trust in Veeco. Have a great evening.
This concludes today's conference. Thank you for joining us. You may now disconnect your lines.