“Veeco has continued to execute within the challenging overall business environment, particularly in China, where customer facility readiness and credit tightening remain significant issues,” says CEO John R. Peeler. Since opening in May, the number of engineers trained at Veeco’s China Training Center is now more than 200 and should be over 300 by the end of 2011. “Veeco’s new MaxBright MOCVD system represented nearly half of the quarter’s MOCVD revenue, including broad-scale customer acceptance at tier-one LED manufacturers,” he adds.
Gross margin was 46.6%, down on 49.6% a year ago and 51.1% last quarter due to a high concentration in the revenue mix of MaxBright MOCVD systems (for which first shipments carry higher costs). “We’ll begin to see cost improvement early next year,” notes executive VP & chief financial officer David D. Glass. Non-GAAP net income was $53.3m, down from $63.4m last quarter and $65.4m a year ago, but at the high end of the guidance range of $41.3–57.7m.
During the third quarter, Veeco purchased $154m in stock at an average price of $38.63 per share, completing a $200m board-authorized share buy-back program initiated in August 2010. The firm also used $31m of cash in contractual settlements for closure of the CIGS Solar Systems business. With working capital changes roughly offsetting the positive cash flow generated from operating income, during the quarter Veeco’s cash and short-term investments hence fell overall from $633m to $449m.
“Veeco’s third quarter orders were impacted by weak near-term LED industry demand [particularly from the TV sector], low MOCVD equipment utilization rates in Asia [50-70%], and decreased business activity in China [due to credit tightening and funding availability],” says Peeler. “In addition, negative global macro-economic data points caused customers to slow or cut their capacity expansion plans.”
In particular, by application sector, of Veeco’s MOCVD system shipments in Q1-Q3/2011 of more than 280 (versus more than 330 for full-year 2010), 54% were for lighting (up from just 28%) and just 11% were for backlighting (down from 43%).
Third-quarter bookings were $133m, down 57% on the record $311m last quarter and down 52% on $278.2m a year ago. Of total bookings, 16% came from Data Storage orders of $21m, down 44% on $37.5m last quarter and down 39% on $35m a year ago. Of the other 84%, LED & Solar orders were $112m, down 59% on the record $273.3m last quarter and down 54% on $243.2m a year ago. This includes MBE (molecular beam epitaxy) orders of $9m (down on a strong $24m last quarter) and MOCVD orders of $103m, down on $250m last quarter. After recording backlog adjustments of $34m during the quarter (due mainly to several MOCVD customers who cancelled or pushed out the dates for tools on order), total order backlog has fallen from $558.2m to $389m (about $303m of which is for MOCVD).
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