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What changed in VEECO INSTRUMENTS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of VEECO INSTRUMENTS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+200 added−213 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-22)

Top changes in VEECO INSTRUMENTS INC's 2023 10-K

200 paragraphs added · 213 removed · 159 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

51 edited+5 added−18 removed29 unchanged
Biggest changeThe IBD systems are also critical in the manufacture of hard disk drive magnetic heads where they are used to deposit various magnetic and oxide layers and deliver best-in-class film properties. Our NEXUS ® IBE systems are used to precisely etch complex features on materials which are challenging to pattern by traditional reactive ion etching techniques.
Biggest changeOur IBD300 system is being evaluated for 300mm front end semiconductor applications where low resistivity metals like tungsten, ruthenium and molybdenum are critical. The IBD systems are also critical in the manufacture of hard disk drive magnetic heads where they are used to deposit various magnetic and oxide layers and deliver best-in-class film properties.
Our products are known for best-in-class yield coupled with outstanding resolution and depth of focus. ​ Single Wafer Wet Processing ​ We offer single wafer wet processing, and surface preparation systems which target growth opportunities in RF filters and amplifiers in the Compound Semiconductor market, as well as advanced packaging applications in the Semiconductor market.
Our products are known for best-in-class yield coupled with outstanding resolution and depth of focus. ​ Single Wafer Wet Processing ​ We offer single wafer wet processing, and surface preparation systems which target growth opportunities in advanced packaging applications in the Semiconductor market as well as RF filters and amplifiers in the Compound Semiconductor market.
In addition, we have developed a state-of-the-art solution with the WaferEtch ® platform to address the requirements of wafer thinning. ​ Metal Organic Chemical Vapor Deposition Systems ​ MOCVD production systems are used to make GaN and As/P-based devices for applications including power electronics, RF devices, specialty LED, display, and many other photonics applications.
In addition, we have developed a state-of-the-art solution with the WaferEtch ® platform to address the requirements of wafer thinning. ​ Metal Organic Chemical Vapor Deposition Systems and Chemical Vapor Deposition Systems ​ MOCVD production systems are used to make GaN and As/P-based devices for applications including power electronics, RF devices, specialty LED, display, and many other photonics applications.
Our comprehensive collection of ion beam, laser annealing, metal organic chemical vapor deposition (“MOCVD”), advanced packaging lithography, single wafer wet processing, molecular beam epitaxy (“MBE”), and atomic layer deposition (“ALD”) technologies play an integral role in the fabrication of key devices that are enabling the 4th industrial revolution of all things connected.
Our comprehensive collection of ion beam, laser annealing, metal organic chemical vapor deposition (“MOCVD”), chemical vapor deposition (“CVD”), advanced packaging lithography, single wafer wet processing, molecular beam epitaxy (“MBE”), and atomic layer deposition (“ALD”) technologies play an integral role in the fabrication of key devices that are enabling the 4th industrial revolution of all things connected.
In addition, we may supplement the Veeco United Team with contractors and other temporary workers. ​ Our Core Values ​ All Veeco employees are expected to honor our Core Values, which define the way we conduct our business in everyday actions and choices and form the foundation of our culture: ​ ● We will always put our CUSTOMERS first ● We will never compromise on SAFETY ● We will always demonstrate RESPECT ● We will never stop IMPROVING ● We will always be ACCOUNTABLE ● We will never forget that DIVERSITY and INCLUSION makes us stronger 10 Table of Contents ​ Employment, Recruitment and Development ​ Our recruitment programs are regionally focused.
In addition, we may supplement the Veeco United Team with contractors and other temporary workers. ​ Our Core Values ​ All Veeco employees are expected to honor our Core Values, which define the way we conduct our business in everyday actions and choices and form the foundation of our culture: ​ ● We will always put our CUSTOMERS first ● We will never compromise on SAFETY ● We will always demonstrate RESPECT ● We will never stop IMPROVING ● We will always be ACCOUNTABLE ● We will never forget that DIVERSITY and INCLUSION makes us stronger ​ 11 Table of Contents Employment, Recruitment and Development ​ Our recruitment programs are regionally focused.
As our products are sold into multiple markets, the following table describes these markets and the applicable Veeco technologies. ​ Markets Description Applicable Veeco Technologies Semiconductor The Semiconductor market refers to early process steps in logic and memory applications where silicon wafers are processed.
As our products are sold into multiple markets, the following table describes these markets and the applicable Veeco technologies. ​ ​ Markets Description Applicable Veeco Technologies Semiconductor The Semiconductor market refers to process steps in logic and memory applications where silicon wafers are processed.
None of our competitors compete with us across all of our product lines. ​ Our principal competitors include: Aixtron; Applied Materials; Canon; Grand Plastics Technology; Mattson; Screen Semiconductor Solutions; Shanghai Micro Electronics Equipment; and Suss MicroTec. ​ Intellectual Property ​ Our success depends, in part, on our proprietary technology, and we have over 400 patents in the United States and other countries. ​ We have patents and exclusive and non-exclusive licenses to patents owned by others covering certain of our products, which we believe provide us with a competitive advantage.
None of our competitors compete with us across all of our product lines. ​ Our principal competitors include: Aixtron; Applied Materials; Canon; Grand Plastics Technology; Mattson; Screen Semiconductor Solutions; Shanghai Micro Electronics Equipment; and Suss MicroTec. ​ Intellectual Property ​ Our success depends, in part, on our proprietary technology, and we have over 350 patents in the United States and other countries. ​ We have patents and exclusive and non-exclusive licenses to patents owned by others covering certain of our products, which we believe provide us with a competitive advantage.
Such devices include leading advanced node application processors for mobile devices, thin film magnetic heads for hard disk drives in data storage, photonics devices for 3D sensing, advanced displays and high-speed data communications, and radio frequency (“RF”) filters and power amplifiers for fifth generation (“5G”) networks and mobile electronics.
Such devices include leading advanced node application processors for AI chips, mobile devices, high-speed data communications, and radio frequency (“RF”) filters and power amplifiers for fifth generation (“5G”) networks and mobile electronics, photonics devices for 3D sensing, advanced displays, and thin film magnetic heads for hard disk drives in data storage.
Paul, Minnesota; and Waltham, Massachusetts. ​ Suppliers ​ We outsource certain functions to third parties, including the manufacture of several of our systems. While we rely on our outsourcing partners to perform their contracted functions, we maintain some level of internal manufacturing capability for these systems.
Paul, Minnesota; Waltham, Massachusetts; and Solvegatan, Sweden. ​ Suppliers ​ We outsource certain functions to third parties, including the manufacture of several of our systems. While we rely on our outsourcing partners to perform their contracted functions, we maintain some level of internal manufacturing capability for these systems.
Refer to Item 1A, “Risk Factors,” for a description of risks associated with our reliance on suppliers and outsourcing partners. ​ 9 Table of Contents Backlog ​ Our backlog consists of orders for which we received a firm purchase order, a customer-confirmed shipment date generally within twelve months, and a deposit, when required.
Refer to Item 1A, “Risk Factors,” for a description of risks associated with our reliance on suppliers and outsourcing partners. ​ Backlog ​ Our backlog consists of orders for which we received a firm purchase order, a customer-confirmed shipment date generally within twelve months, and a deposit, when required.
Parts and upgrade sales represented approximately 18%, 21%, and 23% of our net sales for those years, respectively, and service and support sales were 6%, 7%, and 7% respectively. ​ Customers ​ We sell our products to many of the world’s semiconductor IDMs and Foundries, OSAT, HDD, and photonics manufacturers, as well as research centers and universities.
Parts and upgrade sales represented approximately 17%, 18%, and 21% of our net sales for those years, respectively, and service and support sales were 5%, 6%, and 7% respectively. ​ Customers ​ We sell our products to many of the world’s semiconductor IDMs and Foundries, OSAT, HDD, and photonics manufacturers, as well as research centers and universities.
Approximately 25% of our employees are involved in research and development; 55% are involved in operations, manufacturing, service, and quality assurance; and 20% are involved in sales, order administration, marketing, finance, information technology, general management, and other administrative functions. Our success depends on our ability to attract, retain, and motivate employees. We compete for talent with other companies and organizations.
Approximately 25% of our employees are involved in research and development; 56% in operations, manufacturing, service, and quality assurance; and 19% in sales, order administration, marketing, finance, information technology, general management, and other administrative functions. Our success depends on our ability to attract, retain, and motivate employees. We compete for talent with other companies and organizations.
We help employees share in the success of the Company through various programs including profit sharing and bonus plans, equity awards, and an Employee Stock Purchase Plan (“ESPP”).
We help employees share in the Company’s success through various programs, including profit sharing and bonus plans, equity awards, and an Employee Stock Purchase Plan (“ESPP”).
They make use of radio waves for wireless broadcasting and/or communications. ​ Solar refers to power obtained by harnessing the energy of the sun through the use of compound semiconductor devices such as photovoltaics. ​ ● Gallium Nitride (“GaN”) MOCVD ​ ● Arsenides/ Phosphides (“As/P”) MOCVD ​ ● Wet Processing ​ ● MBE ​ ● ALD ​ ● IBE ​ ● SiC Chemical Vapor Deposition (“CVD”) ​ ​ Data Storage ​ Data Storage refers to the HDD market which provides significant value for mass storage and is an important part of large capacity storage applications.
They make use of radio waves for wireless broadcasting and/or communications. ​ Solar power or photovoltaic technology refers to power obtained by harnessing the energy of the sun through the use of compound semiconductor devices such as photovoltaics. ​ ● Gallium Nitride (“GaN”) MOCVD ​ ● Arsenides/ Phosphides (“As/P”) MOCVD ​ ● Wet Processing ​ ● MBE ​ ● ALD ​ ● IBE ​ ● SiC Chemical Vapor Deposition (“CVD”) ​ ​ Data Storage ​ Data Storage refers to the Hard Disk Drives (“HDD”) market which provides significant value for mass storage and is an important part of large capacity storage applications such as Data Centers.
Our systems enable customers to manufacture the magnetic heads for hard disk drives. ​ ​ ● IBD ​ ● IBE ​ ● Physical Vapor Deposition ​ ● Mechanical (Lapping and Dicing) ​ 6 Table of Contents ● Diamond Like Carbon Deposition ​ ● Wet Processing ​ Scientific & Other ​ Scientific & Other refers to advanced materials research and a range of manufacturing applications including optical coatings (laser mirrors, optical filters, and anti-reflective coatings). ​ ​ ​ ​ ​ ● Ion Beam Sputtering for optical coatings ​ ● MBE for specialized laser and sensor devices ​ ● Wet Processing for sensors ​ ● ALD for a variety of applications ​ ​ System Products ​ Laser Annealing Systems ​ Our laser annealing systems meet the industry demand for ultra-short time-scale annealing, heating the wafer up to temperatures just below the silicon melting point over a range of timeframes (hundreds of microseconds), enabling thermal annealing solutions at the most advanced semiconductor process nodes.
Our systems enable customers to manufacture the magnetic heads for hard disk drives. ​ ​ ● IBD ​ ● IBE ​ ● Physical Vapor Deposition ​ ● Mechanical (Lapping and Dicing) ​ ● Diamond Like Carbon Deposition ​ ● Wet Processing ​ 7 Table of Contents Scientific & Other ​ Scientific & Other refers to advanced materials and device research such as quantum computing, and a range of manufacturing applications including optical devices (lasers, mirrors, optical filters, and anti-reflective coatings). ​ ​ ​ ​ ​ ● Ion Beam Sputtering for optical coatings ​ ● MBE for specialized laser and sensor devices ​ ● Wet Processing for sensors ​ ● ALD for a variety of applications ​ ​ System Products ​ Laser Annealing Systems ​ Our laser annealing systems meet the industry demand for ultra-short time-scale “millisecond” annealing, heating the wafer up to temperatures just below the silicon melting point, enabling thermal annealing solutions at the most advanced semiconductor process nodes.
However, we 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 in order to minimize the risks to our employees.
To keep our teams safe and the Company strong, we 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 to minimize the risks to our employees.
We are a leading supplier of MBE systems worldwide. ​ Our MBE systems, sources, and components are used to develop and manufacture compound semiconductor devices in a wide variety of applications such as high-power fiber lasers, infrared detectors, mobile phones, radar systems, high efficiency solar cells, and basic materials science research.
We are a leading supplier of MBE systems worldwide. ​ Our MBE systems, sources, and components are used to develop and manufacture compound semiconductor devices in a wide variety of applications such as quantum computing, high-power fiber lasers, infrared detectors, mobile phones, radar systems, high efficiency solar cells, and advanced materials science research in academic, governmental, and industrial organizations.
The GENxplor ® MBE system creates high quality epitaxial layers and is ideal for cutting-edge research on a wide variety of materials including GaAs, antimonides, nitrides, and oxides on 3” diameter substrates. 8 Table of Contents ​ Atomic Layer Deposition Systems ​ ALD is a thin-film deposition method in which a film is deposited on a substrate uniformly with precise control down to the atomic scale.
The GENxplor ® MBE system creates high quality epitaxial layers and is ideal for cutting-edge research on a wide variety of materials including III-V GaAs, nitride, and oxide, materials on substrates up to 3” diameter. ​ 9 Table of Contents Atomic Layer Deposition Systems ​ ALD is a thin-film deposition method in which a film is deposited on a substrate uniformly with precise control down to the atomic scale.
It is believed that nanosecond annealing will be required to meet the device targets at future nodes. ​ Ion Beam Deposition and Etch Systems ​ Our NEXUS ® Ion Beam systems are used to deposit and etch thin film layers for multiple end applications in the Semiconductor, Data Storage, RF and other various emerging markets.
We believe that our nanosecond annealing will be required to meet the device targets at future nodes and complements our millisecond annealing solutions. ​ Ion Beam Deposition and Etch Systems ​ Our NEXUS ® Ion Beam systems and IBD300 systems are used to deposit and etch thin film layers for multiple end applications in the Semiconductor, Data Storage, RF and other various emerging markets.
Refer to Item 1A, “Risk Factors,” for a description of risks associated with intellectual property. ​ Human Capital Resources ​ Veeco’s global workforce spans twelve countries around the world. At the end of 2022, we had 1,221 employees with 265 located in the Asia-Pacific region, 42 in the EMEA region, and 914 in the United States.
Refer to Item 1A, “Risk Factors,” for a description of risks associated with intellectual property. ​ Human Capital Resources ​ Veeco’s global workforce spans twelve countries around the world. At the end of 2023, we had 1,215 employees with 267 located in the Asia-Pacific region, 58 in the EMEA region, and 890 in the United States.
Hiring is done at a local level to ensure compliance with applicable regulations. We advertise job openings and source candidates broadly to attract a diverse candidate pool. As a leader in our industry, we are able to attract a strong candidate pool and have been successful in filling vacancies.
Hiring is done at a local level to ensure compliance with applicable regulations. We advertise job openings and source candidates broadly to attract a diverse candidate pool. As a leader in our industry, we can attract a strong candidate pool and have successfully filled vacancies.
We also provide a broad array of ion beam sources. ​ Advanced Packaging Lithography ​ We have a leading position in the Advanced Packaging lithography equipment market for applications such as FOWLP, Flip Chip (including Copper Pillar), Fan In Wafer Lever Packaging, 3D stacking, interposers and embedded die.
We also provide a broad array of ion beam sources. 8 Table of Contents Advanced Packaging Lithography ​ Our lithography equipment is used in the Advanced Packaging market for applications such as FOWLP, Flip Chip (including Copper Pillar), Fan In Wafer Lever Packaging, 3D stacking, interposers and embedded die.
In addition, our proprietary hardware design enables outstanding temperature uniformity across the wafer and die, by minimizing the pattern-density effect, thus reducing absorption variations. ​ We are also continuing to develop next generation melt anneal technology targeted for memory devices and annealing advanced logic devices at advanced nodes. As devices scale, achieving performance targets has become a challenge.
In addition, our proprietary hardware design enables outstanding temperature uniformity across the wafer and die, by minimizing the pattern-density effect, thus reducing absorption variations. ​ Our next generation nanosecond annealing technology targets annealing advanced logic devices and memory devices at advanced nodes. As devices scale, achieving performance targets has become a challenge.
Our 12-month rolling average for voluntary turnover at December 31, 2022 was approximately 9.4%. Our employee average tenure is more than 7 years. ​ Employee Engagement ​ The engagement and satisfaction of the Veeco United Team is critical to our culture and our success.
Our 12-month rolling average for voluntary turnover on December 31, 2023 was approximately 7.2%. Our employee average tenure is more than 8 years. ​ Employee Engagement ​ The engagement and satisfaction of the Veeco United Team are critical to our culture and our success.
If any principal customer discontinues its relationship with us or suffers economic difficulties, our business prospects, financial condition, and operating results could be materially and adversely affected. ​ Research and Development ​ Our research and development functions are focused on the timely creation of new products and enhancements to existing products, both of which are necessary to maintain our competitive position.
If these principal customers discontinue their relationships with us or suffer economic difficulties, our business prospects, financial condition, and operating results could be materially and adversely affected. ​ Research and Development ​ Our research and development functions are focused on the timely creation of new products and enhancements to existing products, both of which are necessary to maintain our competitive position.
In 2019, we conducted a formal employee survey designed to assess global employee engagement, leadership, work environment and culture. Over 90% of our employees participated in the survey, itself an indicator of a high level of employee engagement. Participants provided over 2,000 responses to open-ended questions.
In 2019, we conducted a formal employee survey designed to assess global employee engagement, leadership, work environment and culture. Over 90% of our employees participated in the survey, itself an indicator of high employee engagement. Participants provided over 2,000 responses to open-ended questions. The findings from this survey established an agenda for various initiatives designed to strengthen our Company.
There are many different process steps in forming patterned wafers, such as depositioning, etching, masking, and doping, where the microchips are created but remain on the silicon wafer. As device architectures continue to shrink with advanced nodes, more precise process control is paramount to achieving high yields and competitive cost.
There are many different wafer level process steps in forming patterned wafers, such as deposition, etching, masking, and doping. As device architectures continue to shrink with advanced nodes, more precise process control is paramount to achieving high yields and competitive cost.
The team has recently established 11 Table of Contents Veeco’s Diversity and Inclusion Mission Statement and Charter. The charter affirms our commitment to building awareness, enhancing community partnerships, addressing diversity in our recruiting and hiring practices, empowering employees to promote D&I initiatives, and identifying opportunities to have meaningful engagements with peers and the leadership team.
The charter affirms our commitment to building awareness, enhancing community partnerships, addressing diversity in our recruiting and hiring practices, empowering employees to promote D&I initiatives, and identifying opportunities to have meaningful engagements with peers and the leadership team.
Our backlog increased to $499.9 million at December 31, 2022 from $440.2 million at December 31, 2021. ​ Competition ​ In each of the markets that we serve, we face competition from established competitors, some of which have greater financial, engineering, and marketing resources than we do, as well as from smaller competitors.
Our backlog was $490.7 million and $499.9 million at December 31, 2023 and 2022, respectively. 10 Table of Contents Competition ​ In each of the markets that we serve, we face competition from established competitors, some of which have greater financial, engineering, and marketing resources than we do, as well as from smaller competitors.
Demand for higher performance, smaller form factors, and lower power consumption in applications such as artificial intelligence, ● Laser Annealing ​ ● Ion Beam Deposition (“IBD”) ​ ● Ion Beam Etch (“IBE”) ​ ● Wet Processing ​ ● Advanced Packaging Lithography 5 Table of Contents mobile devices, consumer electronics, and high-performance computing is driving the adoption of advanced packaging technologies.
Demand for higher performance, smaller form factors, and lower power consumption in applications such as artificial intelligence, mobile devices, consumer electronics, and high-performance computing is driving the adoption of advanced packaging technologies.
We developed our COVID-19 Pledge to describe all the measures we implemented in our facilities to keep employees working on-site safe throughout the pandemic. ​ Available Information ​ Our corporate website address is www.veeco.com.
We continue to carefully monitor and respond to local, state, and federal public health guidance. We continue to use our COVID-19 Pledge to describe all the measures we implemented in our facilities to keep employees working on-site safe throughout the pandemic and beyond. ​ Available Information ​ Our corporate website address is www.veeco.com.
Our NEXUS ® IBD system has a leading position in multiple markets including EUV mask blank manufacturing in which it enables our customers to deposit multilayers with high precision and ultra-low defects which is essential for EUV lithography. Our ion sources and grid technology are incorporated into etch systems used to pattern magnetic materials for the 300mm Semiconductor STT-MRAM market.
Our NEXUS ® IBD system has a leading position in multiple markets including EUV mask blank manufacturing in which it enables our customers to deposit multilayers with high precision and ultra-low defects which is essential for EUV lithography.
Additional focus is placed on the development of future leaders and we utilize a talent review process through which high-potential and high-performing employees are assessed for future leadership roles as part of our succession management process. We monitor turnover statistics carefully, since turnover is an important indicator of employee satisfaction.
We offer many of our training and development programs virtually to benefit employees worldwide. We emphasize the development of future leaders and utilize a talent review process to assess high-potential and high-performing employees for future leadership roles as part of our succession management process. We monitor turnover statistics carefully since turnover is an essential indicator of employee satisfaction.
We are also focused on responsible management of our cost structure, including an emphasis on gross margins. ​ Markets ​ Our products are purchased by customers in the following four end-markets: 1) Semiconductor; 2) Compound Semiconductor; 3) Data Storage; and 4) Scientific & Other. ​ Our array of process equipment systems are used in the production of a broad range of microelectronic components, including logic, dynamic random-access memory (“DRAM”), photonics devices (including laser diodes and micro-LEDs), power electronics, RF filters and amplifiers, magnetic heads for hard disk drives, and other semiconductor devices.
Serving a global and highly interconnected customer base, we have comprehensive sales and service operations across the Asia-Pacific, Europe, and North America regions to ensure real-time close collaboration and responsiveness. ​ Markets ​ Our products are purchased by customers in the following four end-markets: 1) Semiconductor; 2) Compound Semiconductor; 3) Data Storage; and 4) Scientific & Other. ​ Our array of process equipment systems are used in the production of a broad range of microelectronic components, including logic, dynamic random-access memory (“DRAM”), photonics devices (including laser diodes and micro-LEDs), power electronics, RF filters and amplifiers, magnetic heads for hard disk drives, and other semiconductor devices.
This includes micro-LED, laser diodes, edge emitting lasers and vertical cavity surface emitting lasers (“VCSELs”). ​ Micro-LEDs may be used for next generation advanced displays.
This includes micro-LED, laser diodes, edge emitting lasers and vertical cavity surface emitting lasers (“VCSELs”). ​ Micro-LEDs may be used for next generation advanced displays. A micro-LED display is a self-emissive display that offers improved resolution, contrast, and brightness versus conventional technologies.
The findings from this survey established an agenda for various initiatives designed to strengthen our Company. In 2021, we conducted a second formal employee survey, using the same survey instrument. Approximately 90% of employees again participated in the survey and, again, nearly 2,000 responses were provided to open-ended questions.
In 2021, we conducted a second formal employee survey using the same survey instrument. Approximately 90% of employees again participated in the survey and, again, nearly 2,000 responses were provided to open-ended questions. We saw significant improvements across all survey areas. In 2023, we conducted our third formal employee survey using the same survey instrument.
We saw significant improvements across all survey areas, and we remain committed to working with employees to strengthen the Company’s culture. Our executives conduct regular meetings with our global workforce providing employees with opportunities to engage with senior leaders and ask questions in open Q&A sessions.
Our executives conduct regular meetings with our global workforce, providing employees with opportunities to engage with senior leaders and ask questions in open Q&A sessions.
The NEXUS ® systems may be included on our cluster system platform to allow either parallel or sequential deposition/etch processes. 7 Table of Contents ​ Our Lancer TM IBE system is used for etching of SAW and BAW devices in the RF filter market and various waveguide patterning steps for AR/VR markets where their best-in-class film uniformity is a key advantage. ​ Our SPECTOR ® Ion Beam Sputtering system was developed for high precision optical coatings and offers manufacturers state of the art optical thickness monitoring, improved productivity, and target material utilization, for cutting-edge optical interference coating applications.
The NEXUS ® systems may be included on our cluster system platform to allow either parallel or sequential deposition/etch processes. ​ Our SPECTOR ® Ion Beam Sputtering system was developed for high precision optical coatings and offers manufacturers state of the art optical thickness monitoring, improved productivity, and target material utilization, for cutting-edge optical interference coating applications.
We also continue to focus on penetrating adjacent markets with organically developed and acquired technology, including Ion Beam Deposition for low resistance metals and SiC CVD systems for power electronics applications. ​ Sales and Service ​ We sell our products and services worldwide through various strategically located facilities in the United States, Europe, and the Asia-Pacific region.
We also continue to focus on penetrating adjacent markets with organically developed and acquired technology. ​ Sales and Service ​ We sell our products and services worldwide through various strategically located facilities in the United States, Europe, and the Asia-Pacific region. We believe that our customer service organization is a significant factor in our success.
We are always striving to attract talented individuals from a global candidate pool. ​ In the second quarter of 2021, Veeco established a Diversity and Inclusion Council. The Council, composed of Veeco colleagues from many different parts of the Company, represents Veeco’s ongoing commitment to inclusion of all genders, sexual orientations, races, ethnic origins, religions, and diversity of thought.
The Council, composed of Veeco colleagues from many different parts of the Company, represents Veeco’s ongoing commitment to inclusion of all genders, sexual orientations, races, ethnic origins, religions, and diversity of thought. The team recently established Veeco’s Diversity and Inclusion Mission Statement and Charter.
Veeco offers a full suite of ALD systems for non-semiconductor front-end production applications across a wide range of markets and applications such as energy, optical, electronics, micro-electro mechanical systems (“MEMS”), nanostructures, and biomedical.
Veeco offers a full suite of ALD systems for non-semiconductor front-end production applications across a wide range of markets and applications such as Quantum Computing, optical, electronics, micro-electro mechanical systems (“MEMS”), nanostructures, and biomedical. ​ Other Systems ​ We have other deposition systems including Physical Vapor Deposition, Diamond-Like Carbon Deposition, and Chemical Vapor Deposition Systems primarily sold to the data storage market.
This market also includes mask blank production for extreme ultraviolet (“EUV”) lithography with Veeco’s Ion Beam Deposition technology. ​ This market also includes Advanced Packaging which refers to a portfolio of wafer-level assembly technologies that enable improved performance of electronic products, such as smartphones, high-end servers, and graphical processors.
Veeco’s Ion Beam technology is also under evaluation for deposition of low resistivity metals for 300mm front end applications. ​ Veeco’s Advanced Packaging technologies include a portfolio of wafer-level assembly technologies that enable improved performance of electronic products, such as smartphones, high-end servers, and graphical processors.
These systems are widely used in the data storage industry for patterning of magnetic and oxide materials and are essential for forming the precise shape of the magnetic head.
Our NEXUS ® IBE systems are used to precisely etch complex features on materials which are challenging to pattern by traditional reactive ion etching techniques. These systems are widely used in the data storage industry for patterning of magnetic and oxide materials and are essential for forming the precise shape of the magnetic head.
Revenue from the sales of parts, upgrades, service, and support represented approximately 24%, 28%, and 30% of our net sales for the years ended December 31, 2022, 2021, and 2020, respectively.
We provide service and support on a warranty, service contract, and an individual service-call basis. We believe that offering timely support creates stronger relationships with customers. Revenue from the sales of parts, upgrades, service, and support represented approximately 22%, 24%, and 28% of our net sales for the years ended December 31, 2023, 2022, and 2021, respectively.
Veeco serves the advanced packaging market with lithography as well as wet processing equipment. ​ Compound Semiconductor The Compound Semiconductor market includes Photonics, Power Electronics, RF Filters and Amplifiers, and Solar applications. ​ Photonics refers to light source technologies and laser-based solutions for 3D sensing, datacom and telecom applications.
Veeco serves the advanced packaging market with lithography as well as wet processing equipment. ​ 6 Table of Contents Compound Semiconductor The Compound Semiconductor market includes Power Electronics, Photonics, RF Filters and Amplifiers, and Solar power applications. ​ Power Electronics refers to semiconductor devices used in the control and conversion of electric power in growing applications such as wireless charging of consumer electronics and automotive applications.
In addition, we required many of our employees to work from home wherever possible. We protected employees, customers, and stakeholders by providing remote meetings, demos, and service, whenever possible. Our Veeco United team was committed to remaining flexible and responsive throughout the pandemic. We carefully monitored and responded to local, state, and federal guidance related to the pandemic.
In addition, we required many of our employees to work from home wherever possible. We protected employees, customers, and stakeholders by providing remote meetings, demos, and service, whenever possible. While the COVID-19 public health emergency has ended, our Veeco United Team remains flexible and responsive to potential health risks and has developed robust response capability through this experience.
However, demand has been rapidly growing for applications in automotive, energy and industrial end-markets which require compound semiconductor devices such as those made from gallium nitride and silicon carbide to address higher voltages and higher power requirements. ​ RF power amplifiers and filters (including surface acoustic wave (“SAW”) and bulk acoustic wave (“BAW”) filters) are used in 5G communications infrastructure, smartphones, tablets, and mobile devices.
However, demand has been rapidly growing for applications in automotive driven by adoption of electric vehicles (“EV”), energy and industrial end-markets which require compound semiconductor devices such as those made from gallium nitride and silicon carbide to address higher voltages and higher power requirements. ​ Photonics refers to light source technologies and laser-based solutions for 3D sensing, datacom and telecom applications.
The Propel ® system offers 200mm and fully-automated 300mm technology and incorporates single-wafer reactor technology for outstanding film uniformity, yield, and device performance. ​ Molecular Beam Epitaxy Systems ​ MBE is the process of precisely depositing epitaxially-aligned atomically-thin crystalline layers, or epilayers, of elemental materials onto a substrate in an ultra-high vacuum environment.
Our SiC CVD system has a base single wafer reactor concept based on a time-tested industry validated architecture and is used for SiC power electronics applications primarily driven by adoption of electric vehicles. ​ Molecular Beam Epitaxy Systems ​ MBE is the process of precisely depositing atomically-thin epitaxial crystalline layers, or epilayers, of elemental materials onto a substrate in an ultra-high vacuum environment.
One such process step is called Laser Annealing, which uses a very precise method to activate dopants, reduce contact resistance and modify material grain structure. The Veeco laser annealing technology enables our customers to have a lower thermal budget by annealing at higher temperatures over a shorter period of time.
One such process step is called Laser Annealing, ● Laser Annealing ​ ● Ion Beam Deposition (“IBD”) ​ ● Ion Beam Etch (“IBE”) ​ ● Wet Processing ​ ● Advanced Packaging Lithography 5 Table of Contents which uses a very precise method to activate dopants, reduce contact resistance and modify material grain structure.
In fiscal 2022, we hired 254 employees, 197 of whom were within the United States, 49 of whom were in the Asia-Pacific region, and 8 of whom were in the EMEA region. ​ We track and report key talent metrics including workforce demographics, talent pipeline and diversity.
In fiscal 2023, we hired 106 employees, 74 within the United States, 13 in the Asia-Pacific region, and 19 in the EMEA region. ​ We track and report key talent metrics, including workforce demographics, talent pipeline and diversity. We invest in professional development programs to provide opportunities for individuals to advance their careers in either technical/individual contributor or leadership tracks.
We rely on certain principal customers for a significant portion of our sales. Sales to Western Digital and TDK Headway each separately accounted for more than 10% of our total net sales in 2021; and sales to Seagate Technology accounted for more than 10% of our total net sales in 2020.
We rely on certain principal customers for a significant portion of our sales.
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Serving a global and highly interconnected customer base, we have comprehensive sales and service operations across the Asia-Pacific, Europe, and North America regions to ensure real-time close collaboration and responsiveness. ​ Our 2023 priorities are: ​ ● Protect: Safety is one of Veeco’s core values.
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The Veeco laser annealing technology enables our customers to have a lower thermal budget by annealing at higher temperatures over a shorter period of time. ​ This market also includes mask blank production for extreme ultraviolet (“EUV”) lithography, where Veeco’s Ion Beam Deposition technology is used for deposition of the multi-layer EUV reflective coating.
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We have taken steps to keep employees safe throughout the COVID-19 pandemic and we continue to maintain focus on traditional workplace health and safety matters. We understand that the culture of the Company can have a direct impact on our performance.
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Micro-LEDs will be used in a number of applications from televisions, smartwatches, to augmented reality headsets. ​ RF power amplifiers and filters (including surface acoustic wave (“SAW”) and bulk acoustic wave (“BAW”) filters) are used in 5G communications infrastructure, smartphones, tablets, and mobile devices.
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We made significant improvements to our culture as measured by an initial culture survey performed in 2019, a follow-up in 2021 and a planned survey in 2023, and we remain committed to working with employees to continue to strengthen our culture; ​ ● Execute: We believe that our success depends on our ability to successfully execute in challenging environments, recognizing that our customers have high expectations.
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The Propel ® system offers 200mm and fully-automated 300mm technology and incorporates single-wafer reactor technology for outstanding film uniformity, yield, and device performance.
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The Veeco United team worked through material shortages, lead time increases, and labor shortages in our factories as well as those of our suppliers in 2022. We are focused on continued execution throughout our entire supply chain, including our internal manufacturing activities, in order to meet customer demand.
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Even with a much larger employee population, we maintained a high participation rate of 90% and over 2,000 responses to open-ended questions. Overall survey results were similar to 2021 results. We remain committed to working with employees to strengthen the Company’s culture.
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Additionally, we are focused on multiple customer satisfaction initiatives, including on-time deliveries and improving customer service performance metrics; ​ ● Innovate: We plan to continue our efforts in product innovation.
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We are always striving to attract talented individuals from a global candidate pool. ​ 12 Table of Contents In the second quarter of 2021, Veeco established a Diversity and Inclusion Council.
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We have exciting new solutions in our semiconductor and compound semiconductor product development pipeline, which we believe will solve our customers’ difficult materials challenges and enable sustainable growth in the long term.
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In 2022, we heavily invested in our manufacturing capabilities through our San Jose expansion, and made significant investments in our service capabilities to meet the requirements of our tier one semiconductor customers, and had a successful year of evaluation acceptances with our customers.
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Additionally, we acquired Epiluvac AB, a privately held Swedish company, in January 2023, accelerating our penetration into the emerging, high-growth Silicon Carbide (“SiC”) epitaxy equipment market. In 2023 we plan to maintain our emphasis on placing strategic evaluation systems with customers in the semiconductor and compound semiconductor markets, consistent with our growth plans.
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These systems are provided to customers after significant time spent demonstrating their capabilities in our factory and represent one of the final stages in our customers’ selection process.
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We are focused on successful outcomes for these evaluations and in continuing the elevated level of evaluation system activity with existing and potential customers; and ​ 4 Table of Contents ● Growth and Profitability: We are focused on maintaining profitability through near-term macroeconomic challenges and growing in our Data Storage market, as well as in our Semiconductor market despite an expected decline in wafer fab equipment (“WFE”) spending.
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We are in a mixed demand environment, with strong recent order activity in the Semiconductor and Data Storage markets, offset by near term weakness in the Compound Semiconductor market. However, we are investing for and expect long-term growth in the Semiconductor and Compound Semiconductor markets.
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We are focused on executing our backlog, and also winning additional business to drive meaningful long-term growth.
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A micro-LED display is a new approach which uses an array of red, blue, and green micro-LEDs to directly display an image without motion blur or image retention, and with improved brightness, darker blacks, and wider viewing angles. ​ Power Electronics refers to semiconductor devices such as rectifiers, inverters and converters for the control and conversion of electric power in growing applications such as fast or wireless charging of consumer electronics and automotive applications.
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These systems utilize Veeco’s proven gridded ion source technology which delivers a charged ion beam directed at a substrate for the etch application and at a sputter target for the deposition application.
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We have recently developed the Firebird ® ALD system, a fully automated tool capable of managing fragile wafers in a continuous operational sequence. ​ Other Systems ​ We have other deposition systems including Physical Vapor Deposition, Diamond-Like Carbon Deposition, and Chemical Vapor Deposition Systems primarily sold to the data storage market.
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We believe that our customer service organization is a significant factor in our success. We provide service and support on a warranty, service contract, and an individual service-call basis. We believe that offering timely support creates stronger relationships with customers.
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No customer accounted for more than 10% of our total net sales in 2022.
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We invest in professional development programs to provide opportunities for individuals to advance their careers in either technical/individual contributor or leadership tracks. Many of our training and development programs are offered on-line for the benefit of employees located around the world.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

57 edited+13 added−13 removed108 unchanged
Biggest changeAlternatively, changes that result in sudden increases in demand for consumer electronic products and automobiles may result in a shortage of parts and materials needed to manufacture our products, and attendant shipping delays (both to us and to our customers) and/or the cancellation of orders placed by our customers. ​ The effects of the COVID-19 pandemic have strained and have negatively impacted 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 COVID-19 and its variants have resulted in a substantial curtailment of business activities worldwide and has caused and is likely to continue to cause weakened economic conditions, both domestically and abroad, including in markets in Asia and Europe from which we derive the majority of our revenue.
Biggest changeAlternatively, changes that result in sudden increases in demand for consumer electronic products and automobiles may result in a shortage of parts and materials needed to manufacture our products, and attendant shipping delays (both to us and to our customers) and/or the cancellation of orders placed by our customers. ​ 15 Table of Contents We have a concentrated customer base, located primarily in a limited number of regions, which operates in highly concentrated industries . ​ Our customer base continues to be highly concentrated.
Our ability to successfully compete in this market will depend on our ability to address and manage a number of industry-specific risks, including and without limitation to the following: ​ ● the heightened cost of research and development, associated with matters such as shrinking geometries, complex device structures, multiple applications and process steps, and the use of new materials; ● customer demands for shorter cycle times between order placements and product shipments, which will necessitate accurate forecasting of customer investment; ● customer demands for continuous reductions in the total cost of manufacturing system ownership, together with challenging equipment service demands and the resulting need for us to properly allocate our service resources; ● the number of types and varieties of semiconductors and number of applications across multiple substrate sizes; ● the need to reduce product development time, despite increasingly difficult technical challenges; ● our customers’ ability to reconfigure and re-use our equipment, resulting in reduced demand for new equipment or services from us; and 13 Table of Contents ● the importance of establishing market positions in segments with growing demand. ​ If we fail to properly allocate appropriate resources, successfully develop and commercialize products to meet customer demand, and effectively anticipate industry trends, our business and results of operations may be adversely impacted. ​ In addition, the semiconductor industry has experienced, and may continue to experience, significant consolidation, among both semiconductor manufacturers and manufacturing equipment suppliers.
Our ability to successfully compete in this market will depend on our ability to address and manage a number of industry-specific risks, including without limitation the following: ​ ● the heightened cost of research and development, associated with matters such as shrinking geometries, complex device structures, multiple applications and process steps, and the use of new materials; ● customer demands for shorter cycle times between order placements and product shipments, which will necessitate accurate forecasting of customer investment; ● customer demands for continuous reductions in the total cost of manufacturing system ownership, together with challenging equipment service demands and the resulting need for us to properly allocate our service resources; ● the number of types and varieties of semiconductors and number of applications across multiple substrate sizes; 14 Table of Contents ● the need to reduce product development time, despite increasingly difficult technical challenges; ● our customers’ ability to reconfigure and re-use our equipment, resulting in reduced demand for new equipment or services from us; and ● the importance of establishing market positions in segments with growing demand. ​ If we fail to properly allocate appropriate resources, successfully develop and commercialize products to meet customer demand, and effectively anticipate industry trends, our business and results of operations may be adversely impacted. ​ In addition, the semiconductor industry has experienced, and may continue to experience, significant consolidation, among both semiconductor manufacturers and manufacturing equipment suppliers.
These challenges, together with other challenges associated with operating an international business, may adversely affect our ability to recognize revenue, our gross margins on the revenue we do recognize, and our other operating results. ​ 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. ​ The U.S. government has implemented, and may continue to implement, several changes in trade policy which have adversely affected and could continue to adversely affect the Company’s ability to sell and service its products to and for customers located in China and in certain other countries. ​ On October 7, 2022, the U.S.
These challenges, together with other challenges associated with operating an international business, may adversely affect our ability to recognize revenue, our gross margins on the revenue we do recognize, and our other operating results. ​ 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. ​ The U.S. government has implemented, and may continue to implement, changes in trade policy which have adversely affected and could continue to adversely affect the Company’s ability to sell and service its products to and for customers located in China and in certain other countries. ​ On October 7, 2022, the U.S.
In the event that an export regulatory body determines that any of our shipments violate applicable export regulations, we could be fined significant sums and our export capabilities could be restricted, which could have a material adverse impact on our business. ​ We are exposed to various risks associated with global regulatory requirements. ​ As a public company with global operations, we are subject to the laws of the United States and multiple foreign jurisdictions, and the rules and regulations of various governing bodies, which may differ among jurisdictions.
In the event that an export regulatory body determines that any of our shipments violate applicable export regulations, we could be fined significant sums and our export capabilities could be restricted, which could have a material adverse impact on our business and reputation. ​ We are exposed to various risks associated with global regulatory requirements. ​ As a public company with global operations, we are subject to the laws of the United States and multiple foreign jurisdictions, and the rules and regulations of various governing bodies, which may differ among jurisdictions.
Export Administration Regulations (“EAR”) when exported to and re-exported from international jurisdictions, in addition to the local jurisdiction’s export regulations applicable to individual shipments. Currently, our laser annealing, MOCVD, MBE and certain other systems and products are controlled for export under the EAR.
Export Administration Regulations (“EAR”) when exported to and re-exported from international jurisdictions, in addition to the local jurisdiction’s export regulations applicable to individual shipments. Currently, our laser annealing, MOCVD, MBE, SiC and certain other systems and products are controlled for export under the EAR.
If we do not effectively manage our outsourcing efforts or if third party providers do not perform as anticipated, we may not realize the benefits of productivity improvements and we may experience operational difficulties, increased costs, manufacturing and installation interruptions or delays, inefficiencies in the structure and operation of our supply chain, loss of intellectual property rights, quality issues, increased product time-to-market, and an inefficient allocation of our human resources, any or all of which could materially and adversely affect our business, financial condition, and results of operations. ​ The timing of our orders, shipments, and revenue recognition may cause our quarterly operating results to fluctuate significantly. ​ We derive a substantial portion of our net sales in any fiscal period from the sale of a relatively small number of high-priced systems.
If we do not effectively manage our outsourcing efforts or if third party providers do not perform as anticipated, we may not realize the benefits of productivity improvements and we may experience operational difficulties, increased costs, manufacturing and 17 Table of Contents installation interruptions or delays, inefficiencies in the structure and operation of our supply chain, loss of intellectual property rights, quality issues, increased product time-to-market, and an inefficient allocation of our human resources, any or all of which could materially and adversely affect our business, financial condition, and results of operations. ​ The timing of our orders, shipments, and revenue recognition may cause our quarterly operating results to fluctuate significantly . ​ We derive a substantial portion of our net sales in any fiscal period from the sale of a relatively small number of high-priced systems.
Failure to sufficiently hedge or otherwise manage foreign currency risks properly could materially and adversely affect our financial condition, results of operations, and liquidity. ​ We may be required to take impairment charges on assets. ​ We are required to assess goodwill and indefinite-lived intangible assets annually for impairment, or on an interim basis whenever certain events occur or circumstances change, such as an adverse change in business climate or a decline in the overall industry, that would more likely than not reduce the fair value below its carrying amount. ​ As part of our long term strategy, we may pursue future acquisitions of, or investments in, other companies or assets which could potentially increase our assets.
Failure to sufficiently hedge or otherwise manage foreign currency risks properly could materially and adversely affect our financial condition, results of operations, and liquidity. ​ We may be required to take impairment charges on assets. ​ We are required to assess goodwill and indefinite-lived intangible assets annually for impairment, or on an interim basis whenever certain events occur or circumstances change, such as an adverse change in business climate or a decline in the 23 Table of Contents overall industry, that would more likely than not reduce the fair value below its carrying amount. ​ As part of our long term strategy, we may pursue future acquisitions of, or investments in, other companies or assets which could potentially increase our assets.
Any of these developments or changes in federal or international tax laws, rules, practices or rates (including future changes or modifications to existing practices) could have an adverse material impact on our ability to utilize our deferred tax attributes, our effective tax rate and results of operations including cash flows and financial position. ​ In addition, as of each reporting date, we evaluate the realizability of our deferred tax assets which may result in the recognition and/or release of a valuation allowance.
These and other developments or changes in federal or international tax laws, rules, practices or rates (including future changes or modifications to existing practices) could have an adverse material impact on our ability to utilize our deferred tax attributes, our effective tax rate and results of operations including cash flows and financial position. ​ In addition, as of each reporting date, we evaluate the realizability of our deferred tax assets which may result in the recognition and/or release of a valuation allowance.
Commerce Department’s Unverified List and Entity List (including Semiconductor Manufacturing International Corporation and certain related entities), and the expansion of the 19 Table of Contents “foreign direct product rule” to restrict the sale of certain products if Huawei Technologies Co., Ltd. or its affiliates are parties to a transaction involving the products. ​ The effect of these changes, among others, is that U.S. companies are now required to obtain export licenses – now at times with a presumption of denial -- before providing commodities, software, and technology (which are subject to the regulations) to customers for whom licensing requirements did not previously apply.
Commerce Department’s Unverified List and Entity List (including Semiconductor Manufacturing International Corporation and certain related entities), and the expansion of the “foreign direct product rule” to restrict the sale of certain products if Huawei Technologies Co., Ltd. or its affiliates are parties to a transaction involving the products. ​ The effect of these changes, among others, is that U.S. companies are now required to obtain export licenses – now at times with a presumption of denial -- before providing commodities, software, and technology (which are subject to the regulations) to customers for whom licensing requirements did not previously apply.
Dependence upon sales emanating from a limited number of regions increases our risk of exposure to local difficulties and challenges, such as those associated with regional economic downturns, political instability, trade wars and other trade disruptions, fluctuating currency exchange rates, natural disasters, social unrest, pandemics, terrorism, and acts of war.
Dependence upon sales emanating from a limited number of regions increases our risk of exposure to local difficulties and challenges, such as those associated with regional economic downturns, political instability, trade wars and other trade disruptions, fluctuating currency exchange rates, natural disasters, social unrest, pandemics such as COVID-19, terrorism, and acts of war.
If we were to experience a “change in ownership” under Section 382 of the Internal Revenue Code (“Section 382”), the federal credits carry forward limitation under Section 383 of the Internal Revenue Code would impose an annual limit on the amount of tax liabilities that may be offset by foreign tax credits and R&D credits generated prior to the change in ownership.
If we were to experience a “change in ownership” under Section 382 of the Internal Revenue Code (“Section 382”), the federal credits carry forward limitation under Section 383 of the Internal Revenue Code would impose an annual limit on the amount of tax liabilities that may be offset by R&D credits generated prior to the change in ownership.
In the event of a downturn, many of our customers may delay or reduce their purchases of our products and services. If negative conditions in the credit markets, including continued increases in interest rates, prevent our customers from obtaining credit or necessary financing, product orders in these channels may decrease, which could result in lower revenue.
In the event of a downturn, many of our customers may delay or reduce their purchases of our products and services. If negative conditions in the credit markets, including a recommencement of increases in interest rates, prevent our customers from obtaining credit or necessary financing, product orders in these channels may decrease, which could result in lower revenue.
Our net sales and operating results may be negatively affected if we fail to predict and effectively respond. ​ 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. ​ The success of our business depends in part on our ability to accurately forecast and supply equipment and services that meet the rapidly changing technical and volume requirements of our customers.
Our net sales and operating results may be negatively affected if we fail to accurately predict and effectively respond. ​ 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. ​ The success of our business depends in part on our ability to accurately forecast and supply equipment and services that 16 Table of Contents meet the rapidly changing technical and volume requirements of our customers.
While we intend to comply with these regulatory requirements, if we are found by a court or regulatory agency to have failed in these efforts, our business, financial condition, and results of operations could be adversely affected. ​ Risks Related to Intellectual Property and Cybersecurity ​ Disruptions in our information technology systems or data security incidents could result in significant financial, legal, regulatory, business, and reputational harm to us. ​ We are increasingly dependent on information technology systems and infrastructure, including mobile technologies, to operate our business.
While we intend to comply with these regulatory requirements, if we are found by a court or regulatory agency to have failed in these efforts, our business, financial condition, and results of operations could be adversely affected. 21 Table of Contents ​ Risks Related to Intellectual Property and Cybersecurity ​ Disruptions in our information technology systems or data security incidents could result in significant financial, legal, regulatory, business, and reputational harm to us. ​ We are increasingly dependent on information technology systems and infrastructure, including mobile technologies, to operate our business.
These lawsuits, if and when brought, can result in substantial costs and a diversion of management’s attention and resources, which can adversely affect our financial condition, results of operations, and liquidity. ​ Our inability to attract, retain, and motivate employees could have a material adverse effect on our business. ​ Our success depends largely on our ability to attract, retain, and motivate employees, including those in executive, managerial, engineering and marketing positions, as well as highly skilled and qualified technical personnel.
These lawsuits, if and when brought, can result in substantial costs and a diversion of management’s attention and resources, which can adversely affect our financial condition, results of operations, and liquidity. ​ Our inability to attract, retain, and motivate employees could have a material adverse effect on our business. 26 Table of Contents ​ Our success depends largely on our ability to attract, retain, and motivate employees, including those in executive, managerial, engineering and marketing positions, as well as highly skilled and qualified technical personnel.
If an ownership change were to occur, we may be unable to use a significant portion of our foreign tax credits and R&D credit carryforwards to offset future tax liabilities. ​ The shares of common stock, if any, issued upon conversion of the Notes will, upon such issuance, be taken into account when determining the cumulative change in our ownership for Section 382 purposes.
If an ownership change were to occur, we may be unable to use a significant portion of our R&D credit carryforwards to offset future tax liabilities. ​ The shares of common stock, if any, issued upon conversion of the Notes will, upon such issuance, be taken into account when determining the cumulative change in our ownership for Section 382 purposes.
The administrative processing, attendant delays and risk of ultimately not obtaining required export approvals pose a particular disadvantage to the Company relative to our non-U.S. competitors who are not required to comply with U.S. export controls. This difficulty and uncertainty has adversely affected our ability to compete for and win business from customers in China.
The administrative processing, attendant delays and risk of ultimately not obtaining required export approvals pose a particular disadvantage to the Company relative to our non-U.S. competitors who are not required to comply with U.S. 20 Table of Contents export controls. This difficulty and uncertainty has adversely affected our ability to compete for and win business from customers in China.
As a result, any conversion of the Notes that we elect to settle in shares may materially increase the risk that we could experience an ownership change for these purposes in the future. ​ The capped call transactions may affect the value of the 2027 Notes and our common stock. ​ With respect to the 2027 Notes, we have entered into capped call transactions with certain option counterparties.
As a result, any conversion of the Notes that we elect to settle in shares may materially increase the risk that we could experience an ownership change for these purposes in the future. ​ 25 Table of Contents The capped call transactions may affect the value of the 2027 Notes and our common stock. ​ With respect to the 2027 Notes, we have entered into capped call transactions with certain option counterparties.
Failure or inability to comply with existing or future environmental, health and safety regulations, including those relating to carbon emissions and climate change, could result in significant remediation liabilities, the imposition of fines, the suspension or termination of research, development, or use of certain of our products, and other harm to the Company, which could have a material adverse effect on our business, financial condition, and results of operations. ​ In addition, changes in environmental laws and regulations, including those relating to greenhouse gas emissions and other climate change matters, could require us (and/or our key suppliers, contract manufacturers and other partners) to install new equipment, alter operations to incorporate new technologies, or implement new processes, among other measures, which may cause us to incur significant costs and divert management attention. ​ We are committed to ensuring safe working conditions, treating our employees with dignity and respect, and sourcing, manufacturing, and distributing our products in a responsible and environmentally friendly manner, and any failure on our part to do so may cause reputational and other harm for the Company.
Failure or inability to comply with existing or future environmental, health and safety regulations – including, for example, those relating to carbon emissions, climate change, and the use and sale of products containing per- and polyfluoroalkyl substances (“PFAS”) -- could result in significant remediation liabilities, the imposition of fines, the suspension or termination of research, development, or use of certain of our products, and other harm to the Company, which could have a material adverse effect on our business, financial condition, and results of operations. ​ In addition, changes in environmental laws and regulations, including those relating to greenhouse gas emissions and other climate change matters, could require us (and/or our key suppliers, contract manufacturers and other partners) to install new equipment, alter operations to incorporate new technologies, or implement new processes, among other measures, which may cause us to incur significant costs and divert management attention. ​ We are committed to ensuring safe working conditions, treating our employees with dignity and respect, and sourcing, manufacturing, and distributing our products in a responsible and environmentally friendly manner, and any failure on our part to do so may cause reputational and other harm for the Company.
Our reliance upon customer demand arising primarily from a limited number of countries could materially and adversely impact our future results of operations. 15 Table of Contents ​ The cyclicality of the industries we serve directly affects our business. ​ Our business depends in large part upon the capital expenditures of manufacturers in our four end-markets: Semiconductor; Compound Semiconductor; Data Storage; and Scientific & Other.
Our reliance upon customer demand arising primarily from a limited number of countries could materially and adversely impact our future results of operations. ​ The cyclicality of the industries we serve directly affects our business. ​ Our business depends in large part upon the capital expenditures of manufacturers in our four end-markets: Semiconductor; Compound Semiconductor; Data Storage; and Scientific & Other.
Any or all of these factors could materially and adversely affect our business, financial condition, and results of operations. ​ 16 Table of Contents We rely on a limited number of suppliers, some of whom are our sole source for particular components. ​ Certain of the parts, components, and sub-assemblies included in our products are obtained from a single source or a limited group of suppliers.
Any or all of these factors could materially and adversely affect our business, financial condition, and results of operations. ​ We rely on a limited number of suppliers, some of whom are our sole source for particular components . ​ Certain of the parts, components, and sub-assemblies included in our products are obtained from a single source or a limited group of suppliers.
We are 20 Table of Contents required to comply with legal and regulatory requirements pertaining to such matters as data privacy (including the European Union General Data Protection Regulation and similar laws), anti-corruption (such as the Foreign Corrupt Practices Act and other local laws prohibiting improper payments to governmental officials), labor laws, immigration, customs, trade, taxes, corporate governance, conflict minerals, and antitrust regulations, among others.
We are required to comply with legal and regulatory requirements pertaining to such matters as data privacy (including the European Union General Data Protection Regulation and similar laws), anti-corruption (such as the Foreign Corrupt Practices Act and other local laws prohibiting improper payments to governmental officials), labor laws, immigration, customs, trade, taxes, corporate governance, conflict minerals, and antitrust regulations, among others.
Given these limitations, our success 21 Table of Contents will depend in part upon our ability to innovate ahead of our competitors. ​ In addition, our outsourcing efforts require that we share certain portions of our technology with our outsourcing partners, which poses additional risks of infringement and trade secret misappropriation.
Given these limitations, our success will depend in part upon our ability to innovate ahead of our competitors. ​ In addition, our outsourcing efforts require that we share certain portions of our technology with our outsourcing partners, which poses additional risks of infringement and trade secret misappropriation.
Dependence on contract manufacturing and outsourcing may also adversely affect our ability to bring new products to market. Although we attempt to select reputable providers, one or more of these providers could fail to perform as we expect.
Dependence on outsourcing may also adversely affect our ability to bring new products to market. Although we attempt to select reputable providers, one or more of these providers could fail to perform as we expect.
Adverse market conditions relative to our products may result in: ​ 12 Table of Contents ● reduced demand for our products, or the rescheduling or cancellation of orders for our products which may result in negative backlog adjustments; ● asset impairments, including the impairment of goodwill and other intangible assets; ● unfavorable changes in customer mix and product mix; ● increased price competition for our products, or increased competition from sellers of used equipment or lower-priced alternatives to our products, which could lead to lower profit margins for our products; ● increased inventory obsolescence; ● disruptions in our supply chain; ● higher operating costs, caused by matters such as rising inflation and interest rates in various regions, which the Company is currently experiencing; and ● an increase in uncollectable amounts due from our customers resulting in increased reserves for doubtful accounts and write-offs of accounts receivable. ​ If the markets in which we participate experience deteriorations or downturns, this could negatively impact our sales and revenue generation, margins, operating expenses, and profitability. ​ We face significant competition. ​ We face significant competition throughout the world, which may increase as certain markets in which we operate continue to evolve.
Adverse market conditions relative to our products may result in: ​ ● reduced demand for our products, or the rescheduling or cancellation of orders for our products which may result in negative backlog adjustments; ● asset impairments, including the impairment of goodwill and other intangible assets; ● unfavorable changes in customer mix and product mix; ● increased price competition for our products, or increased competition from sellers of used equipment or lower-priced alternatives to our products, which could lead to lower profit margins for our products; ● increased inventory obsolescence; ● disruptions in our supply chain; ● higher operating costs, caused by matters such as rising inflation and interest rates in various regions, which the Company experienced in 2023 and may continue to do so in the future; and ● an increase in uncollectable amounts due from our customers resulting in increased reserves for doubtful accounts and write-offs of accounts receivable. ​ If the markets in which we participate experience deteriorations or downturns, this could negatively impact our sales and revenue generation, margins, operating expenses, and profitability. ​ We face significant competition. ​ We face significant competition throughout the world, which may increase as certain markets in which we operate continue to evolve.
These expectations and stakeholder requirements may impact the attractiveness of our business, the manner in which we do business, our reputation, the costs of doing business, and the willingness of our stakeholders to engage with, invest in, or 26 Table of Contents retain us.
These expectations and stakeholder requirements may impact the attractiveness of our business, the manner in which we do business, our reputation, the costs of doing business, and the willingness of our stakeholders to engage with, invest in, or retain us.
We cannot be certain that the protective steps and measures we have taken will prevent the misappropriation or unauthorized use of our proprietary information and technologies, nor can we be certain that applicable intellectual property laws, regulations, and policies will not be changed in a manner detrimental to the sale or use of our products. ​ Litigation has been required in the past, is currently ongoing, and may be required in the future, to enforce our intellectual property rights, protect our trade secrets, and to determine the validity and scope of proprietary rights of others.
We cannot be certain that 22 Table of Contents the protective steps and measures we have taken will prevent the misappropriation or unauthorized use of our proprietary information and technologies, nor can we be certain that applicable intellectual property laws, regulations, and policies will not be changed in a manner detrimental to the sale or use of our products. ​ Litigation has been required in the past, and may be required in the future, to enforce our intellectual property rights, protect our trade secrets, and to determine the validity and scope of proprietary rights of others.
Our performance may be adversely affected if we are unable to accurately predict evolving market trends and related customer needs and to effectively allocate our resources among new and existing products and technologies. ​ The semiconductor industry, characterized by a high frequency and complexity of technology transitions and inflections (commonly referred to as “Moore’s Law”), poses unique risks and challenges.
Our performance may be adversely affected if we are unable to accurately predict evolving market trends and related customer needs and to effectively allocate our resources among new and existing products and technologies. ​ The semiconductor industry, characterized by a high frequency and complexity of technology transitions and inflections, poses unique risks and challenges.
Resulting charges could have a material adverse effect on our results of operations and financial condition. ​ We are exposed to risks associated with business combinations, acquisitions, strategic investments and divestitures. ​ We have completed several significant acquisitions and investments in the past, including our recent acquisition of Epiluvac AB, and we will consider new opportunities in the future.
Resulting charges could have a material adverse effect on our results of operations and financial condition. ​ We are exposed to risks associated with business combinations, acquisitions, strategic investments and divestitures. ​ We have completed several significant acquisitions and investments in the past (including our recent acquisition of Epiluvac AB, a producer of SiC-based products and technology), and we will consider new opportunities in the future.
We may experience significant interruptions in our manufacturing operations, delays in our ability to timely deliver products or services, increased costs, or customer order cancellations as a result of: ​ ● the failure or inability of our suppliers to timely deliver quality parts; ● volatility in the availability and cost of materials; ● difficulties or delays in obtaining required import or export approvals; ● information technology or infrastructure failures; ● natural disasters such as earthquakes, tsunamis, fires, floods, or storms; or ● other causes such as regional or global economic downturns or recessions, international trade disruptions, pandemics, political instability, terrorism, or acts of war, which could result in delayed deliveries, manufacturing inefficiencies, increased costs, or order cancellations. ​ In addition, in the event of an unanticipated increase in demand for our products, our need to rapidly increase our business and manufacturing capacity may be limited by our working capital constraints and those of our suppliers, which may cause or exacerbate interruptions in our manufacturing and supply chain operations.
We may experience significant interruptions in our manufacturing operations, delays in our ability to timely deliver products or services, increased costs, or customer order cancellations as a result of: ​ ● the failure or inability of our suppliers to timely deliver quality parts; ● volatility in the availability and cost of materials; ● difficulties or delays in obtaining required import or export approvals; ● information technology or infrastructure failures; ● natural disasters and other events beyond our control, such as earthquakes, tsunamis, fires, floods, storms, power outages and potential impacts of climate change; or ● other causes such as regional or global economic downturns or recessions, international trade disruptions, pandemics such as COVID-19, political instability, terrorism, or acts of war, which could result in delayed deliveries, manufacturing inefficiencies, increased costs, or order cancellations. ​ In addition, in the event of an unanticipated increase in demand for our products, our need to rapidly increase our business and manufacturing capacity may be limited by our working capital constraints and those of our suppliers, which may cause or exacerbate interruptions in our manufacturing and supply chain operations.
These strategies, commitments and targets reflect our current plans and aspirations, and we may be unable to achieve them. In addition, the standards for measuring and reporting sustainability metrics may change over time and could result in significant revisions to our strategies, commitments and targets, or our ability to achieve them.
These strategies, commitments and targets reflect our current plans and aspirations, and we may be unable to achieve them. In 27 Table of Contents addition, the standards for measuring and reporting sustainability metrics may change over time and could result in significant revisions to our strategies, commitments and targets, or our ability to achieve them.
Additionally, in the event the conditional conversion features of the 2023 Notes, 2025 Notes, and 2027 Notes are triggered (as is currently the case for the 2027 Notes through March 31, 2023), holders of Notes will be entitled to convert the Notes at any time during specified periods at their option.
Additionally, in the event the conditional conversion features of the Notes are triggered (as is currently the case for the 2027 Notes through March 31, 2024), holders of Notes will be entitled to convert the Notes at any time during specified periods at their option.
Although we attempt to mitigate our exposure to fluctuations in currency exchange rates, hedging activities may not always be available or adequate to 22 Table of Contents mitigate the impact of our exchange rate exposure.
Although we attempt to mitigate our exposure to fluctuations in currency exchange rates, hedging activities may not always be available or adequate to mitigate the impact of our exchange rate exposure.
Our ability to comply with some of these covenants is dependent on our future performance, which will be subject to many factors, some of which are beyond our control such as prevailing economic conditions. In addition, our failure to comply with these covenants could result in a default under the Notes or Credit Facility, which could accelerate the debt.
Our ability to comply with some of these covenants is dependent on our future performance, which will be subject to many factors, some of which are beyond our control such as prevailing economic conditions. In addition, our failure to comply with these covenants could result in a default under the Debt Facilities, which could accelerate the debt.
In addition, even if holders do not elect to convert the Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which could result in a material reduction of our net working capital. ​ Issuance of our common stock, if any, upon conversion of the Notes, as well as the capped call transactions and the hedging activities of the option counterparties, may impair or reduce our ability to utilize our foreign tax credits or our research and development credits carryforwards in the future. ​ Pursuant to U.S. federal and state tax rules, a corporation is generally permitted to deduct from taxable income in any year net operating losses (“NOLs”) carried forward from prior years and to reduce from tax liabilities in any year foreign tax credits and R&D credits carried forward from prior years. ​ As of December 31, 2022, we had U.S. federal foreign tax credits carryforwards of approximately $8.7 million expiring in 2027, and R&D credits carryforwards of approximately $36.5 million expiring in varying amounts between 2023 and 24 Table of Contents 2042.
In addition, even if holders do not elect to convert the Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which could result in a material reduction of our net working capital. ​ Issuance of our common stock, if any, upon conversion of the Notes, as well as the capped call transactions and the hedging activities of the option counterparties, may impair or reduce our ability to utilize our foreign tax credits or our research and development credits carryforwards in the future. ​ Pursuant to U.S. federal and state tax rules, a corporation is generally permitted to deduct from taxable income in any year net operating losses (“NOLs”) carried forward from prior years and to reduce from tax liabilities in any year foreign tax credits and R&D credits carried forward from prior years. ​ As of December 31, 2023, we had U.S. federal R&D credits carryforwards of approximately $34.9 million expiring in varying amounts between 2030 and 2043.
The market price of our common shares could continue to fluctuate in response to several factors, including among others: ● difficult macroeconomic conditions, economic recessions, international trade disputes, unfavorable geopolitical events, and general stock market uncertainties, such as those occasioned by a global liquidity crisis and a failure of large financial institutions; ● actual or anticipated variations in our results of operations; ● issues associated with the performance of our products, or the performance of our internal systems such as our customer relationship management (“CRM”) system or our enterprise resource planning (“ERP”) system; ● announcements of financial developments or technological innovations; ● our failure to meet the performance estimates of investment research analysts; ● changes in recommendations and financial estimates by investment research analysts, and decisions by investment research analysts to cease coverage of our Company; ● margin trading, short sales, hedging and derivative transactions involving our common stock; ● our failure to successfully implement cost reduction initiatives and restructuring activities, if and when required; ● delays or difficulties in satisfying internal control evaluations and attestation requirements of Section 404 of the Sarbanes Oxley Act of 2002; 25 Table of Contents ● the commencement of, and rulings on, litigation and legal proceedings; and ● the occurrence of major catastrophic events. ​ Securities class action litigation is often brought against a company following periods of volatility in the market price of its securities.
The market price of our common shares could continue to fluctuate in response to several factors, including among others: ● difficult macroeconomic conditions, economic recessions, international trade disputes, unfavorable geopolitical events, and general stock market uncertainties, such as those occasioned by a global liquidity crisis and a failure of large financial institutions; ● actual or anticipated variations in our results of operations; ● issues associated with the performance of our products, or the performance of our internal systems such as our customer relationship management (“CRM”) system or our enterprise resource planning (“ERP”) system; ● announcements of financial developments or technological innovations; ● our failure to meet the performance estimates of investment research analysts; ● changes in recommendations and financial estimates by investment research analysts, and decisions by investment research analysts to cease coverage of our Company; ● margin trading, short sales, hedging and derivative transactions involving our common stock; ● our failure to successfully implement cost reduction initiatives and restructuring activities, if and when required; ● our failure to maintain an effective system of disclosure controls and internal control over financial reporting, which may result in our inability to timely and accurately report our financial results or difficulties in satisfying internal control evaluations and attestation requirements of Section 404 of the Sarbanes Oxley Act of 2002; ● the commencement of, and rulings on, litigation and legal proceedings; and ● the occurrence of major catastrophic events. ​ Securities class action litigation is often brought against a company following periods of volatility in the market price of its securities.
In addition, as of December 31, 2022, we had an undrawn senior secured revolving credit facility in an aggregate principal amount of $150.0 million, including a $15.0 million letter of credit sublimit. ​ These debt facilities contain certain covenant and other restrictions that may limit our ability to, among other things, incur additional debt or create liens, sell certain assets, and merge or consolidate with third parties, which may, in turn, preclude us from responding to changes in business and economic conditions, engaging in transactions that might otherwise be beneficial to us, or obtaining additional financing.
In addition, as of December 31, 2023, we had an undrawn senior secured revolving credit facility (the “Credit Facility”) in an aggregate principal amount of $150.0 million, including a $15.0 million letter of credit sublimit. ​ These debt facilities (collectively, the “Debt Facilities”), contain certain covenant and other restrictions that may limit our ability to, among other things, incur additional debt or create liens, sell certain assets, and merge or consolidate with third parties, which may, in turn, preclude us from responding to changes in business and economic conditions, engaging in transactions that might otherwise be beneficial to us.
Our failure to settle the debt as required would constitute a default under the applicable debt facility and could also lead to a default under the other debt facilities.
Our failure to settle the debt as required would constitute a default under the applicable debt facility and may lead to a default under the other debt facilities.
Management changes at key customer accounts could result in a loss of future sales due to vendor preferences or other reasons and may introduce new challenges in managing customer relationships. ​ If a principal customer discontinues its relationship with us or suffers economic setbacks, our business, financial condition, and operating results could be materially and adversely affected.
Management changes at key customer accounts could result in a loss of future sales due to vendor preferences or other reasons and may introduce new challenges in managing customer relationships. ​ If these principal customers discontinue their relationship with us or suffer economic setbacks, our business, financial condition, and operating results could be materially and adversely affected.
These conditions have negatively impacted our suppliers’ ability to meet our demand requirements and, in turn, our ability to satisfy our customer demand. Parts shortages have required, and may continue to require, that we plan ahead further than usual, and increase our purchase commitments to secure critical components in a timely manner.
Any such shortages could negatively impact our suppliers’ ability to meet our demand requirements and, in turn, our ability to satisfy our customer demand. Parts shortages may and have required, and may continue to require, that we plan ahead further than usual, and increase our purchase commitments to secure critical components in a timely manner.
During these periods, little to no revenue will be recognized by us, while we will continue to incur research and 17 Table of Contents development costs.
During these periods, little to no revenue will be recognized by us, while we will continue to incur research and development costs.
Our non-U.S. sales and operations are subject to risks inherent in conducting business outside the United States, many of which are beyond our control including: ​ ● political and social attitudes, laws, rules, regulations, and policies within countries that favor local companies over U.S. companies, including government-supported efforts to promote local competitors; ● global trade issues and uncertainties with respect to trade policies, including tariffs, trade sanctions, and international trade disputes, and the ability to obtain required import and export licenses; ● differing legal systems and standards of trade which may not honor our intellectual property rights and which may place us at a competitive disadvantage; ● pressures from foreign customers and foreign governments for us to increase our operations and sourcing in the foreign country, which may necessitate the sharing of sensitive information and intellectual property rights; ● multiple conflicting and changing governmental laws and regulations, including varying labor laws and tax regulations; ● reliance on various information systems and information technology to conduct our business, making us vulnerable to cyberattacks by third parties or breaches due to employee error, misuse, or other causes, that could result in business disruptions, loss of or damage to our intellectual property and confidential information (and that of our customers and other business partners), reputational harm, transaction errors, processing inefficiencies, or other adverse consequences; ● regional or global economic downturns or recessions, varying foreign government support, unstable political environments, and other changes in foreign economic conditions; ● the impact of public health epidemics, such as the COVID-19 pandemic, on employees, suppliers, customers and the global economy; ● difficulties in managing a global enterprise, including staffing, managing distributors and representatives, and repatriating cash; ● longer sales cycles and difficulties in collecting accounts receivable; and ● different customs and ways of doing business. ​ Global conditions and other factors, such as the COVID-19 pandemic, the current conflict in Ukraine, and attendant transportation and freight cost challenges, have resulted in, and may continue to result in, a shortage of parts, materials and services needed to manufacture and timely deliver our products.
Our non-U.S. sales and operations are subject to risks inherent in conducting business outside the United States, many of which are beyond our control including: ​ ● political and social attitudes, laws, rules, regulations, and policies within countries that favor local companies over U.S. companies, including government-supported efforts to promote local competitors; ● global trade issues and uncertainties with respect to trade policies, including tariffs, trade sanctions, and international trade disputes, and the ability to obtain required import and export licenses; ● differing legal systems and standards of trade which may not honor our intellectual property rights and which may place us at a competitive disadvantage; 19 Table of Contents ● pressures from foreign customers and foreign governments for us to increase our operations and sourcing in the foreign country, which may necessitate the sharing of sensitive information and intellectual property rights; ● multiple conflicting and changing governmental laws and regulations, including varying labor laws and tax regulations; ● reliance on various information systems and information technology to conduct our business, making us vulnerable to cyberattacks by third parties or breaches due to employee error, misuse, or other causes, that could result in business disruptions, loss of or damage to our intellectual property and confidential information (and that of our customers and other business partners), reputational harm, transaction errors, processing inefficiencies, or other adverse consequences; ● regional or global economic downturns or recessions, varying foreign government support, unstable political environments, and other changes in foreign economic conditions; ● the impact of public health epidemics, such as the COVID-19 pandemic, on employees, suppliers, customers and the global economy; ● difficulties in managing a global enterprise, including staffing, managing distributors and representatives, and repatriating cash; ● longer sales cycles and difficulties in collecting accounts receivable; and ● different customs and ways of doing business. ​ To date, our operations have not been materially adversely affected by global conflicts including Russia’s invasion of Ukraine, the current Israel/Palestine conflict, or the recent attacks on merchant ships in the Red Sea.
Such activities could interfere with our ability to execute our strategic plans, be costly and time consuming, disrupt our operations, and divert the attention of management and our employees. ​
Such activities could interfere with our ability to execute our strategic plans, be costly and time consuming, disrupt our operations, and divert the attention of management and our employees. ​ Item 1B. Unresolved Staff Comments ​ None. ​
Finally, recommendations made by the Organization for Economic Cooperation and Development’s (the “OECD”) Base Erosion and Profit Shifting project have the potential to lead to changes in tax laws in numerous countries and could increase our tax obligations in countries where we do business.
Additionally, recommendations made pursuant to the Organization for Economic Cooperation and Development’s (“OECD”) Base Erosion and Profit Shifting (“BEPS”) project have led to changes in tax laws in numerous countries and could increase our tax obligations in countries where we do business.
Acquisitions and investments involve numerous risks, many of which are unpredictable and beyond our control, including the following: ​ ● the failure to realize expected synergies and difficulties and costs, including the diversion of management’s attention, in integrating the personnel, operations, technologies, and products of acquired companies; ● the inability to complete proposed transactions as anticipated, resulting in obligations to pay professional and other expenses, including any applicable termination fees; ● unknown, underestimated, and undisclosed commitments or liabilities; ● increased amortization expenses relating to intangible assets; and ● other adverse effects on our business, including the potential impairment and write-down of amounts capitalized as intangible assets and goodwill as part of the acquisition, as a result of such matters as technological advancements or worse-than-expected performance by the acquired company. ​ If we issue equity securities to pay for an acquisition or investment, the ownership percentage of our then-current shareholders would be reduced and the value of the shares held by these shareholders could be diluted, which could adversely affect the price of our stock.
Acquisitions, 18 Table of Contents investments and other business combinations involve numerous risks, many of which are unpredictable and beyond our control, including the following: ​ ● the failure of the transaction to advance our business strategies and the failure of its anticipated benefits to materialize; ● difficulties and costs, including the diversion of management’s attention, in integrating new personnel, operations, technologies, and products; ● the inability to complete the proposed transaction in a timely manner, if at all, due to our inability to obtain required government or other approvals without burdensome conditions, or due to other reasons, resulting in obligations to pay professional and other expenses, including any applicable termination fees; ● unknown, underestimated, and undisclosed commitments or liabilities; ● increased amortization expenses relating to intangible assets; and ● other adverse effects on our business, including the potential impairment and write-down of amounts capitalized as intangible assets and goodwill as part of the transaction, as a result of such matters as technological advancements or worse-than-expected performance by an acquired company. ​ If we issue equity securities to pay for an acquisition or investment, the ownership percentage of our then-current shareholders would be reduced and the value of the shares held by these shareholders could be diluted, which could adversely affect the price of our stock.
Furthermore, we are regularly audited by various tax authorities, and these audits may result in increased tax provisions which could negatively affect our operating results in the periods in which such determinations are made or changes occur. 23 Table of Contents ​ Our current debt facilities, including our 2.70% Convertible Senior Notes due 2023 (the “2023 Notes”), our 3.50% Convertible Senior Notes due 2025 (the “2025 Notes”), or our 3.75% Convertible Senior Notes due 2027 (the “2027 Notes”) (the 2023 Notes, 2025 Notes, and 2027 Notes, together, the “Notes”), and our revolving credit facility (the “Credit Facility”), may contain certain restrictions, covenants and repurchase provisions that may limit our ability to raise the funds necessary to meet our working capital needs, which may include the cash conversion of the Notes or repurchase of the Notes for cash upon a fundamental change. ​ As of December 31, 2022, we had $20.2 million in principal amounts outstanding in 2023 Notes, $132.5 million in principal amounts outstanding in 2025 Notes, and $125.0 million in principal amounts outstanding in 2027 Notes.
Furthermore, we are regularly audited by various tax authorities, and these audits may result in increased tax provisions which could negatively affect our operating results in the periods in which such determinations are made or changes occur. ​ Our current debt facilities may contain certain restrictions, covenants and repurchase provisions that may limit our ability to raise the funds necessary to meet our working capital needs, which may include the cash conversion of the Notes or repurchase of the Notes for cash upon a fundamental change. ​ As of December 31, 2023, we had $26.5 million in principal amounts outstanding in 2025 Notes, $25.0 million in principal amounts outstanding in 2027 Notes, and $230.0 million in principal amounts outstanding in 2029 Notes 24 Table of Contents (together, the “Notes”).
Changing market conditions require that we continuously monitor and reassess our strategic resource allocation decisions. If we fail to properly adapt to changing business environments, we may lack the infrastructure and resources necessary to scale up our businesses to successfully compete during periods of growth, or we may incur excess fixed costs during periods of decreasing demand.
If we 13 Table of Contents fail to properly adapt to changing business environments, we may lack the infrastructure and resources necessary to scale up our businesses to successfully compete during periods of growth, or we may incur excess fixed costs during periods of decreasing demand.
In addition to the extraction of sensitive information, attacks could include the deployment of harmful malware, ransomware, or other means which could affect service reliability and threaten the confidentiality, integrity, and availability of information. ​ We have experienced, and our third-party providers have experienced, cybersecurity attacks, some of which have been, and may continue to be, successful.
In addition to the extraction of sensitive information, attacks could include the deployment of harmful malware, ransomware, or other means which could affect service reliability and threaten the confidentiality, integrity, and availability of information.
These measures and those described above may have the effect of delaying, deferring, or preventing a takeover or other change in control of our Company that a holder of our common stock may not consider to be in the holder’s best interest. ​ In addition, we are subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware, which prohibits a Delaware corporation from engaging in any business combination, including mergers and asset sales, with an interested stockholder (generally, a 15% or greater stockholder) for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.
In addition, we are subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware, which prohibits a Delaware corporation from engaging in any business combination, including mergers and asset sales, with an interested stockholder (generally, a 15% or greater stockholder) for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.
The trading price of our common shares has fluctuated significantly and could decline independent of the overall market, and shareholders could lose all or a substantial part of their investment.
The trading price of our common shares has fluctuated significantly and could decline independent of the overall market, and shareholders could lose all or a substantial part of their investment. For example, in 2023 our stock price ranged from a closing high of $31.65 to a closing low of $17.81.
We may be further impacted by the adoption of ESG-related regulation and legislation in the jurisdictions in which we do business, which could result in increased compliance, operational, and other costs. ​ From time to time the Company communicates its strategies, commitments and targets relating to ESG matters.
We may be further impacted by the adoption of ESG-related regulation and legislation in the jurisdictions in which we do business – including, for example, the SEC’s proposed rule published in March of 2022 which would require companies to include significantly enhanced climate-related disclosures in their Reports on Form 10-K -- which could result in increased compliance, operational, and other costs. ​ From time to time the Company communicates its strategies, commitments and targets relating to ESG matters.
Product defects could also result in personal injury or property damage, claims for which may exceed our existing insurance coverages.
Product defects could also result in personal injury or property damage, claims for which may exceed our existing insurance coverages (as may other claims, notwithstanding our efforts to maintain a program of insurance coverage for a variety of property, casualty and other risks).
In addition, varying interpretations of accounting pronouncements or taxation practices, and the questioning of our current or past practices, may adversely affect our reported financial results. ​ Beginning in 2022, the U.S.
In addition, varying interpretations of accounting pronouncements or taxation practices, and the questioning of our current or past practices, may adversely affect our reported financial results. ​ The “Tax Relief for American Families and Workers Act of 2024” is currently under Senate consideration.
In addition, China has provided, and is expected to continue to provide, significant assistance, financial and otherwise, to its domestic industries, including some of our competitors. We face increasing competition as a result of significant investment in the semiconductor industry by the Chinese government and various state-owned or affiliated entities that is intended to advance China’s stated national policy objectives.
We face increasing competition as a result of significant investment in the semiconductor industry by the Chinese government and various state-owned or affiliated entities that is intended to advance China’s stated national policy objectives (including a heightened focus on the production of legacy node and mature chips in response to U.S. and foreign government regulation impeding the production of advanced node chips).
These and other costs could be substantial and our reputation could be harmed, resulting in a reduced demand for our products and a negative effect on our business, financial condition, and results of operations. ​ Certain of our sales are dependent on the demand for consumer electronic products and automobiles, which can experience significant volatility. ​ The demand for semiconductors, HDDs and other devices is highly dependent on sales of consumer electronic products, such as tablets, smartphones, laptops and wearable devices.
While it is not possible at this point to accurately identify or predict all of the risks related to the use of AI technologies, our failure to properly anticipate and timely respond to AI-related developments could adversely affect our business, financial condition, and results of operations. ​ Certain of our sales are dependent on the demand for consumer electronic products and automobiles, which can experience significant volatility. ​ The demand for semiconductors, HDDs and other devices is highly dependent on sales of consumer electronic products, such as smartphones, laptops, tablets and wearable devices.
Divestitures may expose us to unanticipated liabilities (including those arising from representations and warranties made to a buyer regarding the businesses) and to ongoing obligations to support the businesses following such divestitures, any and all of which could adversely affect our financial condition and results of operations. ​ 18 Table of Contents Risks Associated with Operating a Global Business ​ We are exposed to risks of operating businesses outside the United States. ​ A majority of our sales are to customers, and significant elements of our supply chain are from suppliers, who are located outside of the United States, which we expect to continue.
Divestitures may expose us to unanticipated liabilities (including those arising from representations and warranties made to a buyer regarding the businesses) and to ongoing obligations to support the businesses following such divestitures, any and all of which could adversely affect our financial condition and results of operations. ​ As a general principle, we seek to invest our capital in areas that we believe best align with our business strategy and will help optimize future returns.
In 2022, we recognized a net decrease of $104.9 million of our valuation allowance, primarily related to the reversal of valuation allowances on domestic deferred tax assets. Any changes in the valuation allowance will have a direct impact on our effective tax rate.
Any changes in the valuation allowance will have a direct impact on our effective tax rate.
Removed
Government restrictions (such as the China government lockdowns in 2022 of Shenzhen and Shanghai), quarantines and worker absenteeism as a result of COVID-19 have led to a significant number of business closures and other slowdowns.
Added
Changing market conditions require that we continuously monitor and reassess our strategic resource allocation decisions.
Removed
These slowdowns have adversely impacted and will likely continue to adversely impact Veeco directly, as well as our customers, suppliers and other partners. ​ Although there has been recent improvement in the global economy since the most severe effects of COVID-19, many macroeconomic variables remain dynamic.
Added
These and other costs could be substantial and our reputation could be harmed, resulting in a reduced demand for our products and a negative effect on our business. ​ In addition, our success is also subject to the risk of future disruptive technologies, including machine learning and artificial intelligence (“AI”).
Removed
While all of our global sites are currently operational, any local pandemic 14 Table of Contents outbreaks could require us to temporarily curtail production levels or temporarily cease operations based on government mandates.
Added
While such technologies offer significant opportunities, they also pose complex and novel risks, including operational risks (such as factual errors or inaccuracies in work product developed using AI), the unintended release of proprietary information, costs of compliance associated with evolving AI laws, regulations and standards, privacy concerns with respect to data dissemination, risks related to intellectual property rights (with respect to both the inputs to the program and ownership rights to AI work product), and risks related to AI’s impact on the workforce.
Removed
Furthermore, the COVID-19 conditions have adversely impacted, and may continue to adversely impact, our ability to timely source critical parts and materials and to provide on-site services to our customers.
Added
Our capital investments may not generate the expected returns or hoped-for results. We may not be able to obtain necessary grants, investment tax credits, or other governmental incentives, including funding through the U.S. CHIPS and Science Act of 2022.
Removed
Supply chain shortages, which have been and may continue to be exacerbated by shipping delays caused by transportation interruptions (associated with matters such as reduced availability of air transport, port closures, and increased border controls), could require us to purchase excess inventory with longer lead times, which could increase inventory obsolescence risk while negatively impacting our working capital.
Added
Significant judgment is required when assessing and selecting capital investments, and we could invest in projects that are ultimately less profitable than other projects which we do not select, ultimately harming our business, results of operations and financial condition. ​ Risks Associated with Operating a Global Business ​ We are exposed to risks of operating businesses outside the United States. ​ A majority of our sales are to customers, and significant elements of our supply chain are from suppliers, who are located outside of the United States, which we expect to continue.
Removed
Shortages of critical parts have strained and may continue to strain our manufacturing capacity, threatening to adversely impact our ability to meet customer needs, which may negatively impact our revenues, results of operations and financial condition.
Added
Our percentage revenue from the sale of products and the provision of services to non-U.S. customers was 76%, 69% and 62% for fiscal years 2023, 2022 and 2021, respectively.
Removed
While we have been able to successfully mitigate these risks thus far, without material negative impact to our financial performance, our continued ability to do so remains uncertain. ​ In addition, the conditions caused by COVID-19 could adversely affect our customers’ ability or willingness to purchase our products or services or otherwise delay prospective customers’ purchasing decisions.
Added
However, further escalation of these or other conflicts could result in, among other negative consequences, a disruption to the global economy and supply chain leading to a shortage of parts, materials and services needed to manufacture and timely deliver our products (and we note that the Ukraine-Russia geographic region is a significance source of critical raw materials, including neon and palladium, used for semiconductor manufacturing).
Removed
These conditions may 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.
Added
In addition, China has provided, and is expected to continue to provide, significant assistance, financial and otherwise, to its domestic industries, including some of our competitors.
Removed
In addition, adverse impacts on the creditworthiness of our customers and other counterparties may negatively affect their ability to pay amounts owed to us, which could materially and adversely affect our results of operations and financial condition. ​ The COVID-19 pandemic has resulted in significant disruption of global financial markets and could negatively impact our stock price, our access to capital, and our business and results of operations in the near and long-term. ​ We have a concentrated customer base, located primarily in a limited number of regions, which operates in highly concentrated industries. ​ Our customer base continues to be highly concentrated.
Added
These risks have been exacerbated by an increase in employees working from home, ongoing geopolitical tensions and conflicts, and by the possible use of artificial intelligence (“AI”) to directly attack information systems with greater speed and efficiency than human bad actors. ​ We have experienced, and our third-party providers have experienced, cybersecurity attacks, some of which have been, and may continue to be, successful.
Removed
Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five years for research performed in the U.S. and fifteen years for research performed outside the U.S. Additionally, on August 16, 2022, the Inflation Reduction Act (the “IRA”) was signed into law.
Added
The passage of this bill as proposed would have a material impact to our income tax provision, specifically due to the immediate expensing of Sec 174 R&D expenses, which will lower our Foreign-Derived Intangible Income (“FDII”) deductions and thus increase our effective tax rate.
Removed
The IRA includes a new 15% corporate alternative minimum tax on corporations whose average annual adjusted financial statement income during the most recently completed three-year period exceeds $1 billion and a 1% excise tax on stock repurchases made by certain publicly traded U.S. corporations, and is effective for tax years beginning after December 31, 2022.
Added
As part of BEPS 2.0, the OECD has focused on ensuring multinational businesses with consolidated global revenues in excess of 750 million euros pay their tax in the 'right place' (Pillar 1) and at least at a 'minimum rate' (Pillar 2), including ensuring that multinational enterprises are paying tax at an effective rate of 15% or higher in every jurisdiction in which they operate, regardless of the local headline tax rate or the impact of local tax reliefs.
Removed
The OECD has released several components of its comprehensive plan to create an agreed set of international rules for addressing base erosion and profit shifting, and governmental authorities from various jurisdictions (including the United States) continue to discuss potential legislation and other reforms, including proposals for global minimum tax rates.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePaul, MN 43,000 R&D; Manufacturing; Sales & Service; Administration Somerset, NJ 38,000 R&D; Sales & Service; Administration ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate Lease Leased Facilities Location ​ Size (sq. ft.) ​ Use ​ Expiration San Jose, CA 100,000 R&D; Manufacturing; Sales & Service; Administration 2023 San Jose, CA 100,000 R&D; Manufacturing; Sales & Service; Administration 2037 Somerset, NJ 57,000 Warehouse 2027 Horsham, PA 49,000 R&D; Manufacturing; Sales & Service; Administration 2024 Waltham, MA 17,000 R&D; Sales & Service; Administration 2030 ​ In addition to the above, our foreign sales and service subsidiaries lease office space in China, Germany, Japan, Malaysia, Philippines, Singapore, South Korea, Thailand, Taiwan and the United Kingdom.
Biggest changePaul, MN 43,000 R&D; Manufacturing; Sales & Service; Administration Somerset, NJ 38,000 R&D; Sales & Service; Administration ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate Lease Leased Facilities Location ​ Size (sq. ft.) ​ Use ​ Expiration San Jose, CA 100,000 R&D; Manufacturing; Sales & Service; Administration 2037 Somerset, NJ 57,000 Warehouse 2027 Horsham, PA 49,000 R&D; Manufacturing; Sales & Service; Administration 2024 Waltham, MA 17,000 R&D; Sales & Service; Administration 2030 Solvegatan, Sweden 4,000 R&D; Manufacturing; Sales & Service; Administration 2025 ​ In addition to the above, our foreign sales and service subsidiaries lease office space in China, Germany, Japan, Malaysia, Philippines, Singapore, South Korea, Thailand, Taiwan and the United Kingdom.
Properties ​ Our corporate headquarters and principal research and development, manufacturing, and sales and service facilities as of December 31, 2022 are as follows: ​ ​ ​ ​ ​ ​ ​ Approximate Owned Facilities Location ​ Size (sq. ft.) ​ Use Plainview, NY 80,000 Corporate Headquarters; R&D; Sales & Service; Administration Somerset, NJ 80,000 R&D; Manufacturing; Sales & Service; Administration St.
Properties ​ Our corporate headquarters and principal research and development, manufacturing, and sales and service facilities as of December 31, 2023 are as follows: ​ ​ ​ ​ ​ ​ ​ Approximate Owned Facilities Location ​ Size (sq. ft.) ​ Use Plainview, NY 80,000 Corporate Headquarters; R&D; Sales & Service; Administration Somerset, NJ 80,000 R&D; Manufacturing; Sales & Service; Administration St.
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Additionally, we have substantially completed our transition from our previous San Jose facility, whose lease expired in January 2023, to a newly leased facility in San Jose, both of which are reflected in the table above.
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We believe our facilities are adequate to meet our current needs. ​
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The new facility has approximately the same square footage as our existing San Jose, California facility, but expanded manufacturing capabilities for our laser annealing and lithography technologies. We believe our facilities are adequate to meet our current needs. ​

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings ​ The discussion under the heading Legal Proceedings within Note 9, “Commitments and Contingencies” to the Consolidated Financial Statements is incorporated herein by reference. ​ Item 4. Mine Safety Disclosures ​ Not Applicable. ​ 28 Table of Contents PART II ​
Biggest changeItem 3. Legal Proceedings ​ The discussion under the heading Legal Proceedings within Note 10, “Commitments and Contingencies” to the Consolidated Financial Statements is incorporated herein by reference. ​ Item 4. Mine Safety Disclosures ​ Not Applicable. ​ 30 Table of Contents PART II ​

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 28 ​ ​ PART II 29 ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 29 ​ ​ Stock Performance Graph 30 ​ ​ Item 6. [Reserved] 30 ​ ​ Item 7.
Biggest changeItem 4. Mine Safety Disclosures 30 ​ ​ PART II 31 ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 31 ​ ​ Stock Performance Graph 32 ​ ​ Item 6. [Reserved] 32 ​ ​ Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations 31 ​ ​ Item 7A. Quantitative and Qualitative Disclosures about Market Risk 41 ​ ​ Item 8. Financial Statements and Supplementary Data 41 ​ ​
Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 ​ ​ Item 7A. Quantitative and Qualitative Disclosures about Market Risk 43 ​ ​ Item 8. Financial Statements and Supplementary Data 43 ​ ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe Board of Directors will determine future dividend policy based on our consolidated results of operations, financial condition, capital requirements, and other circumstances. 29 Table of Contents ​ Stock Performance Graph ​ ASSUMES $100 INVESTED ON DEC. 31, 2017 ASSUMES DIVIDENDS REINVESTED FISCAL YEAR ENDING DEC. 31 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2017 2018 2019 2020 2021 2022 Veeco Instruments Inc. 100.00 49.90 98.89 116.90 191.72 125.12 S&P Smallcap 600 100.00 91.52 112.37 125.05 158.59 133.06 RDG MidCap Technology 100.00 115.75 128.69 170.85 105.29 46.44 ​ ​ ​
Biggest changeThe Board of Directors will determine future dividend policy based on our consolidated results of operations, financial condition, capital requirements, and other circumstances. 31 Table of Contents ​ Stock Performance Graph ​ ​ ASSUMES $100 INVESTED ON DEC. 31, 2018 ASSUMES DIVIDENDS REINVESTED FISCAL YEAR ENDING DEC. 31 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2018 2019 2020 2021 2022 2023 Veeco Instruments Inc. 100.00 198.18 234.28 384.21 250.74 418.76 S&P Smallcap 600 100.00 122.78 136.64 173.29 145.39 168.73 RDG MidCap Technology 100.00 135.47 183.68 207.06 151.73 190.98 ​ ​ ​
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ Our common stock is quoted on The NASDAQ Global Select Market under the symbol “VECO.” As of February 13, 2023, there were approximately 130 stockholders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ Our common stock is quoted on The NASDAQ Global Select Market under the symbol “VECO.” As of February 13, 2024, there were approximately 122 stockholders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeTo learn more about Veeco’s systems and service offerings, visit www.veeco.com. ​ The Veeco United team executed well in a challenging environment during 2022, accomplishing a number of milestones, including: ​ ● Solidly executing our multi-year growth strategy, with progress advancing our product roadmaps for the Semiconductor and Compound Semiconductor markets, execution of our robust evaluation program with high customer acceptance rates, and completing our San Jose expansion ​ ● Achieved 11% year-on-year revenue growth for the Company, including record revenue in the Semiconductor market, which grew 50% year-on-year ​ ● Developed silicon carbide market strategy, culminating in the acquisition of Epiluvac, accelerating our SiC epitaxy equipment market penetration ​ ● Reinforced our commitment to culture and corporate responsibility, including appointing an additional female Board member, publishing our third sustainability report, and implementing a leadership training program ​ ● Positioned the Company for a solid performance expected in 2023, with an ending 2022 backlog of $500 million, and robust cash flow from operations of $108 million, strengthening our balance sheet ​ These accomplishments enabled us to exit 2022 well positioned to execute on our growth plans for 2023. ​ Business Update ​ Macroeconomic challenges across the industry have been well publicized, including supply chain constraints, an inflationary environment with a potential recession ahead, new China-export regulations, and a forecasted decline in the semiconductor and related markets due to softness in consumer, smartphone and PC applications, all of which are contributing to a difficult environment with increased uncertainty. ​ Longer lead times and parts shortages and allocations have required that we plan further ahead than usual, and we have undertaken efforts to increase our purchase commitments to secure critical components in a timely manner.
Biggest changeTo learn more about Veeco’s systems and service offerings, visit www.veeco.com. ​ The Veeco United team executed well during 2023, accomplishing a number of milestones, including: ​ ● Solidly executing our multi-year growth strategy, with progress made towards advancing our product roadmaps for the Semiconductor and Compound Semiconductor markets, including shipment of two next generation nanosecond annealing evaluation systems to Tier 1 logic customers, shipment of two IBD300 evaluation systems to Tier 1 memory customers, and the continued development of our CVD SiC technology; ​ ● Achieved year-on-year revenue growth for the Company, including record revenue in the Semiconductor market, which grew 12% year-on-year despite a decline in Wafer Fabrication Equipment (“WFE”) spending; ​ ● Shipped multiple Laser Annealing systems to a new Tier 1 logic customer and a new Tier 1 memory customer, and expanded adoption of Laser Annealing systems with mature node customers; ​ ● Gross margin improvement enabled 16% growth in operating income year-over-year; ​ ● Successfully refinanced a portion of our convertible notes in order to strengthen our balance sheet and financial profile by extending the average maturity of our notes, reducing future annual cash interest payments, and lowering share dilution; ​ ● Capital allocation toward organic growth initiatives in the Semiconductor and Compound Semiconductor markets remained a top priority, including strategic R&D investment and investment in our evaluation program. ​ We believe these accomplishments enabled us to exit 2023 well positioned to execute on our growth plans for 2024. ​ Business Update ​ Macroeconomic challenges across the industry have been well publicized, including an inflationary and high-interest rate environment, heightened China export regulations, uncertainty in the banking industry, and an uncertain outlook in the semiconductor and related markets due to softness in consumer, smartphone and PC applications, all of which are contributing to increased uncertainty. ​ Furthermore, on October 17, 2023, the US Department of Commerce, Bureau of Industry and Security (“BIS”), issued an update to export regulations previously issued on October 7, 2022, to modify and reinforce the prior restrictions while placing additional entities on the BIS Entity List.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ Executive Summary ​ We are an innovative manufacturer of semiconductor process equipment. Our proven ion beam, laser annealing, lithography, MOCVD and single wafer wet processing technologies play an integral role in the fabrication and packaging of advanced semiconductor devices.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ Executive Summary ​ We are an innovative manufacturer of semiconductor process equipment. Our proven ion beam, laser annealing, lithography, MOCVD, CVD, and single wafer wet processing technologies play an integral role in the fabrication and packaging of advanced semiconductor devices.
By geography, sales increased in the EMEA, China, and Rest of APAC regions, partially offset by a decrease in the United States.
By geography, sales increased in the China region, partially offset by a decrease in the United States, EMEA, and Rest of APAC regions.
Approximately $7.8 million of undistributed earnings would be subject to foreign withholding taxes if distributed back to the United States.
Approximately $7.7 million of undistributed earnings would be subject to foreign withholding taxes if distributed back to the United States.
The determination of a reasonable control premium may require significant judgment and is estimated using historical transactions in similar industries. ​ The carrying values of long-lived assets, including identifiable intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The determination of a reasonable control premium may require significant judgment and is estimated using historical transactions in similar industries. ​ 41 Table of Contents The carrying values of long-lived assets, including identifiable intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Realization of our net deferred tax assets is dependent on future taxable income. ​ We recognize the effect of income tax positions for only those positions which are estimated to more likely than not be sustained if challenged. We reflect changes in recognition or measurement in the period in which our change in judgment occurs.
Realization of our net deferred tax assets is dependent on future taxable income. ​ 42 Table of Contents We recognize the effect of income tax positions for only those positions which are estimated to more likely than not be sustained if challenged. We reflect changes in recognition or measurement in the period in which our change in judgment occurs.
There is a yearly commitment fee of 25 to 35 basis points, based on the Company’s secured net leverage ratio, charged on the unused portion of the Facility. ​ 37 Table of Contents Contractual Obligations and Commitments ​ We have commitments under certain contractual arrangements to make future payments for goods and services.
There is a yearly commitment fee of 25 to 35 basis points, based on the Company’s secured net leverage ratio, charged on the unused portion of the Facility. ​ Contractual Obligations and Commitments ​ We have commitments under certain contractual arrangements to make future payments for goods and services.
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. ​ ● Combination of contracts: Judgment is required when evaluating whether multiple transactions with the same customer or related parties should be considered part of a single contract.
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. ​ 40 Table of Contents ● Combination of contracts: Judgment is required when evaluating whether multiple transactions with the same customer or related parties should be considered part of a single contract.
At December 31, 2022, we have $9.4 million of offsetting supplier deposits that will be applied against these purchase commitments. ​ Critical Accounting Policies and Estimates ​ Our discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
At December 31, 2023, we have $19.4 million of offsetting supplier deposits that will be applied against these purchase commitments. ​ Critical Accounting Policies and Estimates ​ Our discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
If the carrying amount of the reporting unit exceeds its fair value, we then record an impairment loss equal to the difference, up to the carrying value of goodwill. 39 Table of Contents ​ We determine the fair value of our reporting unit based on a reconciliation of the aggregate fair value of our reporting unit to our adjusted market capitalization.
If the carrying amount of the reporting unit exceeds its fair value, we then record an impairment loss equal to the difference, up to the carrying value of goodwill. ​ We determine the fair value of our reporting unit based on a reconciliation of the aggregate fair value of our reporting unit to our adjusted market capitalization.
Finally, we have $125.0 million outstanding principal balance of 3.75% convertible senior notes that bear interest at a rate of 3.75% per year, payable semiannually in arrears on June 1 and December 1 of each year, and mature on June 1, 2027, unless earlier purchased by the Company, redeemed, or converted.
In addition, we have $25.0 million outstanding principal balance of 3.75% convertible senior notes that bear interest at a rate of 3.75% per year, payable semiannually in arrears on June 1 and December 1 of each year, and mature on June 1, 2027, unless earlier purchased by the Company, redeemed, or converted.
Each quarter we assess 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 our estimated usage requirements is written down to its estimated net realizable value if less than cost.
Each quarter we assess the valuation and recoverability of all inventories: materials (raw materials, spare parts, and service inventory); work-in-process; finished goods; and evaluation inventory at customer facilities. Obsolete inventory or inventory in excess of our estimated usage requirements is written down to its estimated net realizable value if less than cost.
We are working to penetrate the GaN power market, which is driven by applications such as wireless charging in consumer electronics. In addition to our GaN system offerings, on January 31 st , 2023 Veeco acquired SiC technology to address the high-growth SiC power epitaxy equipment market, which is driven by electric vehicles.
We are working to penetrate the GaN power market, which is driven by applications such as wireless charging in consumer electronics. In addition to our GaN system offerings, on January 31, 2023 Veeco acquired SiC technology to address the high-growth SiC power epitaxy equipment market, which is primarily driven by adoption of electric vehicles.
As of December 31, 2022, we achieved three years of cumulative pretax income for our United States (“domestic”) operations.
As of December 31, 2023, we achieved three years of cumulative pretax income for our United States (“domestic”) operations.
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. ​ Gross Profit ​ In 2022, gross profit increased compared to 2021 primarily due to an increase in sales volume, partially offset by decreased gross margins.
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. ​ Gross Profit ​ In 2023, gross profit increased compared to 2022 primarily due to an increase in sales volume and higher gross margins.
At December 31, 2022 and 2021, cash and cash equivalents of $28.4 million and $38.3 million, respectively, were held outside the United States. As of December 31, 2022, we had $17.8 million of accumulated undistributed earnings generated by our non-U.S. subsidiaries for which the U.S. repatriation tax has been provided.
At December 31, 2023 and 2022, cash and cash equivalents of $46.8 million and $28.4 million, respectively, were held outside the United States. As of December 31, 2023, we had $22.0 million of accumulated undistributed earnings generated by our non-U.S. subsidiaries for which the U.S. repatriation tax has been provided.
Included within the Rest of APAC region for the year ended December 31, 2022 were sales in Taiwan, South Korea, Singapore, and Japan of $105.0 million, $40.3 million, $38.4 million, and $30.8 million, respectively, while sales within Rest of APAC region for the year ended December 31, 2021 included sales in Taiwan and South Korea of $65.2 million and $50.4 million, respectively.
Included within the Rest of APAC region for the year ended December 31, 2023 were sales in Japan, Taiwan, and Singapore of $74.7 million, $62.7 million, and $32.2 million, respectively, while sales within Rest of APAC region for the year ended December 31, 2022 included sales in sales in Taiwan, South Korea, Singapore, and Japan of $105.0 million, $40.3 million, $38.4 million, and $30.8 million, respectively.
We allocate 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 we separately sell the systems, upgrades, components, spare parts, installation, maintenance, and service plans. For items that are not sold separately, we estimate stand-alone selling prices generally using an expected cost plus margin approach.
The stand-alone selling prices are determined based on the prices at which we separately sell the systems, upgrades, components, spare parts, installation, maintenance, and service plans. For items that are not sold separately, we estimate stand-alone selling prices generally using an expected cost plus margin approach.
The net cash used in financing activities for the year ended December 31, 2021 was primarily related to the cash used to repurchase $111.5 million principal amount of our 2023 Notes as well as the settlement of equity awards. ​ Convertible Senior Notes and Revolving Credit Facility ​ We have $20.2 million outstanding principal balance of 2.70% convertible senior notes that bear interest at a rate of 2.70% per year, payable semiannually in arrears on January 15 and July 15 of each year, and mature on January 15, 2023, unless earlier purchased by the Company, redeemed, or converted.
The net cash used in financing activities for the year ended December 31, 2022 was primarily related to the settlement of equity awards. ​ Convertible Senior Notes and Revolving Credit Facility ​ We have $26.5 million outstanding principal balance of 3.50% convertible senior notes that bear interest at a rate of 3.50% per year, payable semiannually in arrears on January 15 and July 15 of each year, and mature on January 15, 2025, unless earlier purchased by the Company, redeemed, or converted.
Research and development expenses increased in 2022 compared to 2021 primarily due to personnel-related expenses as we invest in new research and development and additional applications for our technology in order to be well positioned to capitalize on emerging global megatrends and support longer term growth in Semiconductor and Compound Semiconductor markets. ​ Selling, General, and Administrative ​ Selling, general, and administrative expenses increased in 2022 compared to 2021 primarily due to higher variable expenses associated with the increase in revenue, profitability, and order in-take.
Research and development expenses increased in 2023 compared to 2022 primarily due to personnel-related expenses as we invest in new research and development and additional applications for our technology in order to be well-positioned to capitalize on emerging global megatrends and support longer term growth in Semiconductor and Compound Semiconductor markets. ​ Selling, General, and Administrative ​ Selling, general, and administrative expenses increased slightly in 2023 compared to 2022.
Judgment is used in the following areas in the determination of when to recognize revenue: ​ ● Identification of performance obligations and allocation of contract price: Our contracts with customers frequently contain multiple deliverables, such as systems, upgrades, components, spare parts, installation, 38 Table of Contents maintenance, and service plans.
Judgment is used in the following areas in the determination of when to recognize revenue: ​ ● Identification of performance obligations and allocation of contract price: Our contracts with customers frequently contain multiple deliverables, such as systems, upgrades, components, spare parts, installation, maintenance, and service plans. We allocate revenue to each performance obligation on a relative stand-alone selling price basis.
We record interest and penalties related to uncertain tax positions in income tax expense. Income taxes related to the global intangible low-taxed income (“GILTI”) rules are expensed as incurred. ​ Recent Accounting Pronouncements ​ We adopted ASU 2019-12 in the second quarter of 2020. We have also adopted ASU 2020-06 effective January 1, 2022.
We record interest and penalties related to uncertain tax positions in income tax expense. Income taxes related to the global intangible low-taxed income (“GILTI”) rules are expensed as incurred. ​ Recent Accounting Pronouncements ​ We adopted ASU 2020-06 effective January 1, 2022. We are also evaluating other pronouncements recently issued but not yet adopted, including ASU 2023-09.
In addition, we evaluated additional positive evidence and concluded that it is more likely than not our deferred tax assets are realizable on a more likely than not basis with the exception of certain state tax attributes. ​ The 2022 income tax benefit of $116.0 million was primarily comprised of a $117.0 million domestic tax benefit primarily in connection with release of $105.5 million valuation allowance, partially offset by a $1.0 million income tax expense related to our foreign operations. ​ The 2021 income tax benefit of $0.4 million is comprised of a $0.7 million income tax benefit related to the reduction of uncertain tax positions based upon settlements with tax authorities, partially offset by a $0.3 million income tax expense attributable to the foreign income taxes and foreign withholding taxes. ​ Years Ended December 31, 2021 and 2020 ​ See Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 18, 2022, for Management’s Discussions and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2020. 35 Table of Contents ​ Liquidity and Capital Resources ​ Our cash and cash equivalents, restricted cash, and short-term investments are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2022 2021 ​ ​ (in thousands) Cash and cash equivalents ​ $ 154,925 ​ $ 119,747 Restricted cash ​ 547 ​ 725 Short-term investments ​ 147,488 ​ 104,181 Total ​ $ 302,960 ​ $ 224,653 ​ A portion of our cash and cash equivalents is held by our subsidiaries throughout the world, frequently in each subsidiary’s respective functional currency, which is typically the U.S. dollar.
In addition, we evaluated additional positive evidence and concluded that it is more likely than not our deferred tax assets are realizable on a more likely than not basis with the exception of certain state tax attributes. ​ The 2023 income tax expense of $2.0 million was primarily comprised of 1) a $16.2 million income tax expense on pre-tax income from operations; and 2) a $2.0 million income tax expense related to share-based compensation, partially offset by 3) a $7.5 million tax benefit related to Foreign-Derived Intangible Income; 4) a $7.7 million tax benefit associated with research and development tax credits; and 5) a $1.0 million tax benefit associated with the loss on extinguishment of convertible notes under Section 249 of the Internal Revenue Code of 1986, as amended (Section 249). ​ The 2022 income tax benefit of $116.0 million was primarily comprised of a $117.0 million domestic tax benefit primarily in connection with release of $105.5 million valuation allowance, partially offset by a $1.0 million income tax expense related to our foreign operations. ​ Years Ended December 31, 2022 and 2021 ​ See Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 22, 2023, for Management’s Discussions and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2021. ​ Liquidity and Capital Resources ​ Our cash and cash equivalents, restricted cash, and short-term investments are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2023 2022 ​ ​ (in thousands) Cash and cash equivalents ​ $ 158,781 ​ $ 154,925 Restricted cash ​ 339 ​ 547 Short-term investments ​ 146,664 ​ 147,488 Total ​ $ 305,784 ​ $ 302,960 ​ A portion of our cash and cash equivalents is held by our subsidiaries throughout the world, frequently in each subsidiary’s respective functional currency, which is typically the U.S. dollar.
Refer to Note 1, “Significant Accounting Policies,” for additional information. ​ We are also evaluating other pronouncements recently issued but not yet adopted. The adoption of these pronouncements is not expected to have a material impact on our consolidated financial statements. ​ 40 Table of Contents
The adoption of these pronouncements is not expected to have a material impact on our consolidated financial statements. Refer to Note 1, “Significant Accounting Policies,” for additional information. ​
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. ​ A summary of the cash flow activity for the year ended December 31, 2022 and 2021 is as follows: ​ Cash Flows from Operating Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ 2022 2021 ​ ​ (in thousands) Net income ​ $ 166,942 ​ $ 26,038 Non-cash items: ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 25,645 ​ 26,058 Non-cash interest expense ​ 962 ​ 13,819 Deferred income taxes ​ (118,040) ​ (651) Share-based compensation expense ​ 22,994 ​ 15,249 Loss on extinguishment of debt ​ ​ — ​ ​ 4,029 Impairment of equity investment ​ ​ — ​ ​ 980 Changes in operating assets and liabilities ​ 9,980 ​ (17,780) Net cash provided by (used in) operating activities ​ $ 108,483 ​ $ 67,742 ​ Net cash provided by operating activities was $108.5 million for the year ended December 31, 2022 and was due to net income of $166.9 million and an increase in cash flow from operating activities due to changes in operating assets and liabilities of $10.0 million, partially offset by adjustments for non-cash items of $68.5 million.
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. ​ 37 Table of Contents A summary of the cash flow activity for the year ended December 31, 2023 and 2022 is as follows: ​ Cash Flows from Operating Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ 2023 2022 ​ ​ (in thousands) Net income (loss) ​ $ (30,368) ​ $ 166,942 Non-cash items: ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 24,966 ​ 25,645 Non-cash interest expense ​ 1,118 ​ 962 Deferred income taxes ​ (2,211) ​ (118,040) Share-based compensation expense ​ 28,558 ​ 22,994 Loss on extinguishment of debt ​ ​ 97,091 ​ ​ — Provision for bad debts ​ ​ 316 ​ ​ — Change in contingent consideration ​ 701 ​ — Changes in operating assets and liabilities ​ (58,497) ​ 9,980 Net cash provided by (used in) operating activities ​ $ 61,674 ​ $ 108,483 ​ Net cash provided by operating activities was $61.7 million for the year ended December 31, 2023 and was due to net loss of $30.4 million and adjustments for non-cash items of $150.5 million, partially offset by a decrease in cash flow from changes in operating assets and liabilities of $58.5 million.
Finally, we have completed our new San Jose leased facility buildout, and have fully transitioned to this new location. ​ We address the Compound Semiconductor market with a broad portfolio of technologies, including Wet Processing and MOCVD, along with MBE and Ion Beam, all of which have been developed to support emerging applications such as 5G driven RF device/filter manufacturing, GaN power electronics, and photonics applications including edge-emitting lasers, specialty LEDs and micro-LEDs.
Given our current backlog and visibility, we expect Semiconductor revenue to be up in 2024. ​ We address the Compound Semiconductor market with a broad portfolio of technologies, including Wet Processing and MOCVD, along with MBE and Ion Beam, in emerging applications such as 5G driven RF device/filter manufacturing, GaN power electronics, and photonics applications including edge-emitting lasers, specialty LEDs and micro-LEDs.
Revenue was up 12% in 2022 compared to 2021, and we expect sales in this market to grow modestly in the long run, in line with GDP. ​ Overall, given our strong backlog in the semiconductor, data storage and scientific markets, offset by near-term weakness in compound semiconductor, we expect total 2023 revenue to be in the range of $630 million to $670 million. ​ Results of Operations ​ Years Ended December 31, 2022 and 2021 ​ The following table presents revenue and expense line items reported in our Consolidated Statements of Operations for 2022 and 2021 and the period-over-period dollar and percentage changes for those line items.
We expect sales in this market to grow in the long run, in line with GDP. ​ Results of Operations ​ Years Ended December 31, 2023 and 2022 ​ The following table presents revenue and expense line items reported in our Consolidated Statements of Operations for 2023 and 2022 and the period-over-period dollar and percentage changes for those line items.
Additionally, the ongoing adoption of EUV Lithography for advanced node semiconductor manufacturing continues to drive demand for our Ion Beam mask blank systems. Overall, our technology and market strategy are well aligned with trends such as artificial intelligence, mobile connectivity and high-performance computing that drive the Semiconductor market.
Overall, our technology and market strategy are well aligned with trends such as artificial intelligence, mobile connectivity and high-performance computing that drive the Semiconductor market.
Sales in the Compound Semiconductor market grew 13% in 2022. We experienced growth in system shipments for photonics applications. We continue to invest for future growth in the Compound Semiconductor market in areas like power electronics and Micro-LEDs. Power electronics markets are served by GaN equipment, and also by SiC epitaxy equipment.
Sales in the Compound Semiconductor market declined by 28% in 2023, driven by a decline in systems for 5G driven RF device/filter manufacturing. We continue to invest for future growth in the Compound Semiconductor market in areas like Power Electronics and Micro-LED. Power Electronics markets are served by GaN equipment, and also by SiC epitaxy equipment.
The changes in operating assets and liabilities was largely attributable to an increase in customer deposits, partially offset by an increase in inventories and accounts receivables. ​ Net cash provided by operating activities was $67.7 million for the year ended December 31, 2021 and was due to net income of $26.0 million and adjustments for non-cash items of $59.5 million, partially offset by a decline in cash flow from operating activities due to changes in operating assets and liabilities of $17.8 million.
The changes in operating assets and liabilities were largely attributable to increases in inventories largely related to evaluation systems at customer facilities, contract assets, prepaid expenses and other current assets, and decreases in accounts payable, and contract liabilities. ​ Net cash provided by operating activities was $108.5 million for the year ended December 31, 2022 and was due to net income of $166.9 million and an increase in cash flow from operating activities due to changes in operating assets and liabilities of $10.0 million, partially offset by adjustments for non-cash items of $68.5 million.
In addition, we have $132.5 million outstanding principal balance of 3.50% convertible senior notes that bear interest at a rate of 3.50% per year, payable semiannually in arrears on January 15 and July 15 of each year, and mature on January 15, 2025, unless earlier purchased by the Company, redeemed, or converted.
In addition, we have $230.0 million outstanding principal balance of 2.875% convertible senior notes that bear interest at a rate of 2.875% per year, payable semiannually in arrears on June 1 and December 1 of each year, and mature on June 1, 2029, 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 these debts.
Our results of operations are reported as one business segment, represented by our single operating segment. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ Change ​ ​ 2022 ​ 2021 ​ Period to Period ​ ​ (dollars in thousands) Net sales $ 646,137 100 % $ 583,277 100 % $ 62,860 11 % Cost of sales ​ 382,989 59 % 341,003 58 % 41,986 12 % Gross profit ​ 263,148 41 % 242,274 42 % 20,874 9 % Operating expenses, net: ​ ​ ​ ​ ​ ​ Research and development ​ 103,565 16 % 88,680 15 % 14,885 17 % Selling, general, and administrative ​ 88,952 14 % 84,536 14 % 4,416 5 % Amortization of intangible assets ​ 10,018 2 % 12,280 2 % (2,262) (18) % Other operating expense (income), net ​ 317 — % 68 — % 249 366 % Total operating expenses, net ​ 202,852 31 % 185,564 32 % 17,288 9 % Operating income ​ 60,296 9 % 56,710 10 % 3,586 6 % Interest income (expense), net ​ (9,311) (1) % (26,020) (4) % 16,709 (64) % Other income (expense), net ​ ​ — — % ​ (5,010) (1) % ​ 5,010 * ​ Income before income taxes ​ 50,985 8 % 25,680 4 % 25,305 99 % Income tax expense (benefit) ​ (115,957) — % (358) — % (115,599) * ​ Net income ​ $ 166,942 26 % $ 26,038 4 % $ 140,904 541 % * Not meaningful ​ 33 Table of Contents Net Sales ​ The following is an analysis of sales by end-market and by region: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ Change ​ ​ 2022 ​ 2021 ​ Period to Period ​ ​ (dollars in thousands) Sales by end-market ​ ​ ​ ​ Semiconductor ​ $ 369,369 57 % $ 247,051 43 % $ 122,318 50 % Compound Semiconductor ​ 121,194 19 % 106,972 18 % 14,222 13 % Data Storage ​ 87,544 13 % 168,760 29 % (81,216) (48) % Scientific & Other ​ 68,030 11 % 60,494 10 % 7,536 12 % Total ​ $ 646,137 100 % $ 583,277 100 % $ 62,860 11 % Sales by geographic region ​ ​ ​ ​ United States ​ $ 197,433 31 % $ 217,209 38 % $ (19,776) (9) % EMEA ​ 87,837 14 % 55,129 9 % 32,708 59 % China ​ ​ 123,703 19 % ​ 105,998 18 % ​ 17,705 17 % Rest of APAC ​ 235,735 36 % 204,633 35 % 31,102 15 % Rest of World ​ 1,429 — % 308 — % 1,121 364 % Total ​ $ 646,137 100 % $ 583,277 100 % $ 62,860 11 % ​ Total sales increased for the year ended December 31, 2022 against the comparable prior year period in the Semiconductor, Compound Semiconductor, and Scientific & Other markets, partially offset by a decline in the Data Storage market.
Our results of operations are reported as one business segment, represented by our single operating segment. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ Change ​ ​ 2023 ​ 2022 ​ Period to Period ​ ​ (dollars in thousands) Net sales $ 666,435 100 % $ 646,137 100 % $ 20,298 3 % Cost of sales ​ 381,376 57 % 382,989 59 % (1,613) (0) % Gross profit ​ 285,059 43 % 263,148 41 % 21,911 8 % Operating expenses, net: ​ ​ ​ ​ ​ ​ Research and development ​ 112,853 17 % 103,565 16 % 9,288 9 % Selling, general, and administrative ​ 92,756 14 % 88,952 14 % 3,804 4 % Amortization of intangible assets ​ 8,481 1 % 10,018 2 % (1,537) (15) % Other operating expense (income), net ​ 1,029 — % 317 — % 712 225 % Total operating expenses, net ​ 215,119 32 % 202,852 31 % 12,267 6 % Operating income (loss) ​ 69,940 10 % 60,296 9 % 9,644 16 % Interest income (expense), net ​ (1,187) (0) % (9,311) (1) % 8,124 (87) % Other income (expense), net ​ ​ (97,091) (15) % ​ — — % ​ (97,091) * ​ Income (loss) before income taxes ​ (28,338) (4) % 50,985 8 % (79,323) * ​ Income tax expense (benefit) ​ 2,030 — % (115,957) — % 117,987 * ​ Net income (loss) ​ $ (30,368) (5) % $ 166,942 26 % $ (197,310) * ​ * Not meaningful ​ Net Sales ​ The following is an analysis of sales by end-market and by region: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ Change ​ ​ 2023 ​ 2022 ​ Period to Period ​ ​ (dollars in thousands) Sales by end-market ​ ​ ​ ​ Semiconductor ​ $ 412,724 62 % $ 369,369 57 % $ 43,355 12 % Compound Semiconductor ​ 87,258 13 % 121,194 19 % (33,936) (28) % Data Storage ​ 88,473 13 % 87,544 13 % 929 1 % Scientific & Other ​ 77,980 12 % 68,030 11 % 9,950 15 % Total ​ $ 666,435 100 % $ 646,137 100 % $ 20,298 3 % Sales by geographic region ​ ​ ​ ​ United States ​ $ 162,790 24 % $ 197,433 31 % $ (34,643) (18) % EMEA ​ 76,697 12 % 87,837 14 % (11,140) (13) % China ​ ​ 217,942 33 % ​ 123,703 19 % ​ 94,239 76 % Rest of APAC ​ 208,693 31 % 235,735 36 % (27,042) (11) % Rest of World ​ 313 — % 1,429 — % (1,116) (78) % Total ​ $ 666,435 100 % $ 646,137 100 % $ 20,298 3 % ​ 35 Table of Contents Total sales increased for the year ended December 31, 2023 against the comparable prior year period in the Semiconductor and Scientific & Other markets, partially offset by a decline in the Compound Semiconductor market.
At December 31, 2022, outstanding bank guarantees and letters of credit totaled $8.2 million and unused bank guarantees and letters of credit of $14.1 million were available to be drawn upon. ​ The following table summarizes our contractual arrangements at December 31, 2022 and the timing and effect that those commitments are expected to have on our liquidity and cash flow in future periods. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments due by period ​ ​ ​ ​ ​ Less than ​ 1 – 3 ​ 3 – 5 ​ More than ​ Total 1 year years years 5 years ​ ​ (in thousands) Principal payments on long-term debt ​ $ 277,673 ​ $ 20,173 ​ $ 132,500 ​ $ 125,000 ​ $ — Cash interest on debt ​ 32,959 ​ 9,597 ​ 16,331 ​ 7,031 ​ — Operating leases ​ 53,792 ​ 3,757 ​ 8,159 ​ 7,632 ​ 34,244 Purchase commitments (1) ​ 289,168 ​ 250,119 ​ 39,049 ​ — ​ — Total ​ $ 653,592 ​ $ 283,646 ​ $ 196,039 ​ $ 139,663 ​ $ 34,244 (1) Purchase commitments are generally for inventory used in the manufacturing of our products, as well as equipment and project materials used to support research and development activities.
At December 31, 2023, outstanding bank guarantees and letters of credit totaled $19.6 million and unused bank guarantees and letters of credit of $13.0 million were available to be drawn upon. ​ 39 Table of Contents The following table summarizes our contractual arrangements at December 31, 2023 and the timing and effect that those commitments are expected to have on our liquidity and cash flow in future periods. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments due by period ​ ​ ​ ​ ​ Less than ​ 1 – 3 ​ 3 – 5 ​ More than ​ Total 1 year years years 5 years ​ ​ (in thousands) Principal payments on long-term debt ​ $ 281,500 ​ $ — ​ $ 26,500 ​ $ 25,000 ​ $ 230,000 Cash interest on debt ​ 41,042 ​ 8,478 ​ 15,564 ​ 13,694 ​ 3,306 Operating leases ​ 49,794 ​ 3,692 ​ 8,217 ​ 7,061 ​ 30,824 Purchase commitments (1) ​ 200,425 ​ 177,026 ​ 23,399 ​ — ​ — Total ​ $ 572,761 ​ $ 189,196 ​ $ 73,680 ​ $ 45,755 ​ $ 264,130 (1) Purchase commitments are generally for inventory used in the manufacturing of our products, as well as equipment and project materials used to support research and development activities.
In addition, we experienced some duplicate operating expenses for the transition from our existing facility in San Jose, California to our new leased facility, which is substantially complete at this time. ​ Amortization Expense ​ Amortization expense decreased in 2022 compared to 2021 primarily due to changes in amortization expense to reflect expected cash flows of certain intangible assets, as well as certain other intangible assets becoming fully amortized in 2022. ​ Interest Income (Expense) ​ For the year ended December 31, 2022, we recorded net interest expense of $9.3 million, compared to $26.0 million for the comparable prior period.
Given the uncertainty regarding the impacts on our business resulting from the general macroeconomic environment, we are focused on the proactive management of expenses. ​ Amortization Expense ​ Amortization expense decreased in 2023 compared to 2022 primarily due to changes in amortization expense to reflect expected cash flows of certain intangible assets, as well as certain other intangible assets becoming fully amortized in 2022. ​ Interest Income (Expense) ​ For the year ended December 31, 2023, we recorded net interest expense of $1.2 million, compared to $9.3 million for the comparable prior period.
We continue to build momentum for our laser annealing solutions with advanced node logic customers by winning application steps with leading manufacturers. We have also been receiving orders and shipping systems for trailing node applications in China and other regions.
While our growth strategy is predominately focused on advanced node logic and memory applications, 2023 revenue has been strong for mature node applications in China. We continue to build momentum for our laser annealing solutions in advanced node logic by winning application steps and new customers.
The changes in operating assets and liabilities was largely attributable to increases in accounts receivable and inventories and decreases in deferred revenue, partially offset by increases in accounts payable and cash received for landlord reimbursements for leasehold improvements. ​ 36 Table of Contents Cash Flows from Investing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ 2022 2021 ​ ​ (in thousands) Capital expenditures ​ $ (24,604) ​ $ (40,643) Changes in investments, net ​ (44,276) ​ 83,446 Proceeds from held for sale assets, net of costs to sell ​ ​ — ​ ​ 1,725 Net cash provided by (used in) investing activities ​ $ (68,880) ​ $ 44,528 ​ The net cash used in investing activities during the year ended December 31, 2022 was attributable to the net change in investments, as well as capital expenditures.
The changes in operating assets and liabilities was largely attributable to an increase in contract liabilities, partially offset by an increase in inventories and accounts receivables. ​ Cash Flows from Investing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ 2023 2022 ​ ​ (in thousands) Acquisitions of businesses, net of cash acquired ​ $ (30,373) ​ $ — Capital expenditures ​ ​ (27,930) ​ ​ (24,604) Changes in investments, net ​ 4,973 ​ (44,276) Net cash provided by (used in) investing activities ​ $ (53,330) ​ $ (68,880) ​ The cash used in investing activities during the year ended December 31, 2023 was primarily attributable to net cash used in the acquisition of Epiluvac, and capital expenditures, partially offset by changes in net investment activity.
In addition, we recorded a non-cash impairment charge of approximately $1.0 million related to an equity investment without a readily observable market price. ​ Income Taxes ​ At each reporting date, we consider new evidence, both positive and negative, that could affect our view of the future realization of our deferred tax assets.
We accounted for the partial settlement of the 2025 Notes and 2027 Notes as an extinguishment, and as such, recorded a loss on extinguishment of approximately $16.5 million and $80.6 million, respectively, for the year ended December 31, 2023. 36 Table of Contents ​ Income Taxes ​ At each reporting date, we consider new evidence, both positive and negative, that could affect our view of the future realization of our deferred tax assets.
We may incur additional expenses in future periods in response to the pandemic, which could adversely affect our operations and financial condition. ​ While we work to overcome these macroeconomic challenges, we continue to serve our customers in the following four end-markets: Semiconductor; Compound Semiconductor; Data Storage; and Scientific & Other. ​ Sales in the Semiconductor market grew 50% in 2022 and were driven by our laser annealing systems for both advanced and trailing node logic devices, ion beam deposition systems for EUV mask blank production, and lithography systems for Advanced Packaging.
We will continue to work with our suppliers to identify and mitigate potential gaps in an effort to ensure continuity of supply, as well as continue to focus our efforts on cost containment initiatives. ​ While we work to overcome these macroeconomic challenges, we continue to serve our customers in the following four end markets: Semiconductor; Compound Semiconductor; Data Storage; and Scientific & Other. ​ Sales in the Semiconductor market grew 12% in 2023, driven by our laser annealing systems for both advanced and mature node devices.
Consequently, we are monitoring the situation very closely and have been taking early actions to limit the pace at which we increase spending while maintaining our growth trajectory. ​ Furthermore, the US Department of Commerce, Bureau of Industry and Security (“BIS”), issued additional China-export regulations on October 7, 2022, which broadened the requirements under which export licenses will be required, with a presumption of denial as to their issuance.
Consequently, we are monitoring the situation very closely and have been taking early actions to limit the pace at which we increase spending while maintaining our growth trajectory. We also have seen improvements in our supply chain, as evidenced by a significant decline in lead times and a further improvement to suppliers on time deliveries.
We determine the fair value of our indefinite-lived intangible assets using a discounted cash flow method. ​ Income Taxes ​ We estimate our income taxes in each of the jurisdictions in which we operate.
We determine the fair value of our indefinite-lived intangible assets using a discounted cash flow method. ​ Accounting for Business Combinations ​ We allocate the fair value of the purchase price of our acquisitions to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their fair value at acquisition date.
With data proliferation forecasted to continue to grow, and based on orders we received in 2022, we feel optimistic about the long-term prospects of our data storage business. 32 Table of Contents ​ Sales in the Scientific & Other market are largely driven by sales to governments, universities, and research institutions.
Despite current industry challenges, we expect revenue in the Data Storage market to be flat to up in 2024. ​ Sales in the Scientific & Other market are largely driven by sales to governments, universities, and research institutions.
Removed
Material lead times continue to be a challenge with respect to our supply chain, limiting our ability to fulfill some of our customers’ demands in a timely manner, as many of our peers have also been experiencing. We are also experiencing increasing labor, logistics, and material costs, creating additional gross margin pressures.
Added
While these new regulations have not had a material impact to our business, the export regulation landscape is fluid and evolving, and it is possible that the issuance of additional export controls could further restrict our ability to sell to customers in China and lead to future revenue loss.
Removed
We expect supply shortages and related challenges to persist into 2023, and we continue to monitor our supply chain and work with our suppliers to identify and mitigate potential gaps in an effort to ensure continuity of supply. ​ Additionally, we have seen a slow-down in certain shorter lead time products such as wet processing, advanced packaging lithography, and spare parts and upgrades, as well as instances where customers have requested order cancellations, delayed shipments, or delayed payments.
Added
If we are not able to replace these sales with sales to other customers, it could have a material adverse impact on our business and financial position. ​ 33 Table of Contents Finally, we continue to see reduced demand for certain products such as advanced packaging lithography, spare parts, and upgrades due to low customer utilization rates, as well as instances where customers have requested order cancellations, delayed shipments, or delayed payments.
Removed
In addition, certain China-based companies were added to the BIS Unverified 31 Table of Contents List, and changes have been made to the BIS Entity List, further restricting sales to the named entities. Recent order activity has led to significant backlog in China, some of which may be subject to these regulations.
Added
Material lead times have improved significantly and have generally returned to pre-pandemic levels.
Removed
While the export regulation landscape is fluid and evolving, we believe at this time that the substantial majority of this backlog will not be negatively affected by the new regulations. ​ Finally, like many in our industry, we continue to manage through the effects of the COVID-19 pandemic.
Added
In 2023, we penetrated our 3 rd Tier 1 logic customer and shipped multiple systems to this customer.
Removed
While new variants of COVID-19 have emerged and additional variants may emerge in the future, we continue to proactively implement precautionary measures if and when necessary to keep our workplaces healthy and safe.
Added
As it relates to the memory market, we announced that a Tier 1 memory customer placed several LSA orders for high volume production of High Bandwidth Memory (“HBM”) and advanced DRAM devices following a successful evaluation program, and we shipped several systems to this customer in 2023.
Removed
Our top priority steadfastly remains protecting the health and safety of our employees, customers, suppliers and community. ​ While our actions 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.
Added
Our Laser Annealing roadmap reached a key milestone during the fourth quarter upon shipment of our first two Nanosecond Annealing evaluation systems to Tier 1 logic customers. Nanosecond annealing provides Veeco with an opportunity to expand laser annealing adoption for new advanced node applications.
Removed
We expect these measures to continue until we determine that the COVID-19 pandemic is adequately contained for purposes of our operations, and we may take further actions as government authorities require or as we determine to be in the best interests of our employees, customers, suppliers and community.
Added
The ongoing adoption of EUV Lithography for advanced node semiconductor manufacturing continues to drive demand for our Ion Beam mask blank deposition systems. We reached another significant milestone in the fourth quarter upon shipment of our first two IBD300 evaluation systems to Tier 1 memory customers for 300mm front end semiconductor applications.
Removed
In addition to logic, we introduced laser annealing to the memory market and received an acceptance for an evaluation system at a DRAM manufacturer. Our lithography systems for Advanced Packaging are aligned with packaging approaches such as fan out wafer level packaging and other advanced packaging applications.
Added
Additionally, our lithography systems for Advanced Packaging are used for packaging approaches such as fan out wafer level packaging and other advanced packaging applications, while our wet processing systems are used for Photoresist Strip, Solvent Cleans, and flux removal.
Removed
Given recent order activity and current backlog in the Semiconductor market, we expect revenue in 2023 to outpace (“WFE”) spending growth, which is forecasted to be down 20% or more.
Added
With this acquisition, Veeco is accelerating its entry into this market. We expect revenue in the Compound Semi market to grow in 2024. ​ Sales in the Data Storage market increased slightly in 2023. Demand for our Ion Beam products is driven by cloud-based storage.
Removed
With this acquisition, Veeco is accelerating its entry into this market, and expects revenue in 2024.
Added
As reported, the hard disk drive industry experienced contraction in exabyte shipments in 2022 and 2023 with uncertainty as to the timing of a recovery; however, recent analyst and industry forecasts predict nearline hard disk drive exabyte shipments to grow at an approximate 20% CAGR over the coming years from a lower base in 2023 due to long-term growth in the cloud.
Removed
The purchase price for the transaction, all payable in cash, was $30 million paid at the time of closing with a potential additional $35 million in performance based earn-outs. ​ After several years of growth, sales in the Data Storage market were down 48% in 2022. Demand for our Ion Beam products is driven by cloud-based storage.
Added
We address the Scientific & Other market with several technologies, including MBE, ALD, MOCVD, Wet Processing, & IBD/IBE, which support scientific, optical coating and other applications, such as Micro-Electromechanical Systems 34 Table of Contents (MEMS) applications. Sales in this market increased as compared to the prior quarter and the prior year quarter.
Removed
Hard disk drive manufacturers are manufacturing drives with an increasing number of magnetic heads and they are introducing advanced technologies which require increased capital intensity.
Added
Gross margins increased due to product mix of sales in the period, as well as favorable service spending.
Removed
Gross margins decreased principally due to increased logistics costs, as well as an increase in spending as we invested in service infrastructure and capacity expansion to meet the growing demands for our semiconductor product lines.
Added
However, expenses as a percentage of revenue have remained flat when compared to the prior period.
Removed
Given 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 34 Table of Contents responses to the COVID-19 pandemic.
Added
The decrease in net interest expense was primarily related to an increase of interest income of approximately $8.4 million due to higher interest rates for 2023 compared to 2022. ​ Other Income (Expense) ​ On May 19, 2023, in connection with the completion of a private offering of $230.0 million aggregate principal amount of 2.875% convertible senior notes, we repurchased and retired approximately $106.0 million in aggregate principal amount of our outstanding 2025 Notes, with a carrying amount of $105.4 million, for approximately $106.0 million of cash and 0.7 million shares of our common stock for the 2025 Notes.
Removed
The decrease in interest expense was primarily related to the adoption of ASU 2020-06, as non-cash charges related to the amortization of debt discount and transaction costs of the 2023 Notes, 2025 Notes, and 2027 Notes decreased approximately $12.9 million for 2022 compared to 2021.
Added
Also, we repurchased and retired approximately $100.0 million in aggregate principal amount of our outstanding 2027 Notes with a carrying amount of $98.5 million, for approximately $92.8 million of cash and 3.8 million shares of our common stock for the 2027 Notes.
Removed
Additionally, cash interest expense on the Notes decreased approximately $2.6 million from the comparable prior year due to the partial repurchase of the 2023 Notes in November 2021. ​ Other Income (Expense) ​ On November 5, 2021, we entered into a privately negotiated note purchase agreement with a holder of our outstanding 2023 Notes, under which we agreed to repurchase and retire approximately $111.5 million in aggregate original principal amount of the 2023 Notes, with a carrying amount of $105.5 million, for cash consideration of approximately $115.6 million, and approximately $1.0 million of accrued and unpaid interest.
Added
The cash used in investing activities during the year ended December 31, 2022 was attributable to the net change in investments, as well as capital expenditures. ​ 38 Table of Contents Cash Flows from Financing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ 2023 2022 ​ ​ (in thousands) Proceeds from issuance of 2029 Notes, net of issuance costs ​ $ 223,202 ​ $ — Extinguishment of Convertible Notes ​ ​ (218,991) ​ ​ — Contingent consideration payment ​ ​ (2,500) ​ ​ — Settlement of equity awards, net of withholding taxes ​ ​ (6,391) ​ ​ (4,550) Net cash provided by (used in) financing activities ​ $ (4,680) ​ $ (4,550) ​ The cash used in financing activities for the year ended December 31, 2023 was related to the partial repurchase of the 2025 Notes and 2027 Notes, repayment of the 2023 Notes, contingent consideration payment related to the Epiluvac acquisition, as well as cash used to settle taxes related to employee equity programs, partially offset by proceeds from issuance of the 2029 Notes.
Removed
We accounted for the partial settlement of the 2023 Notes as an extinguishment, and as such, recorded a loss on extinguishment of approximately $4.0 million for the year ended December 31, 2021.
Added
The 2027 Notes are currently convertible by shareholders until March 31, 2024.
Removed
The net cash provided by investing activities during the year ended December 31, 2021 was attributable to the net change in investments, partially offset by capital expenditures.
Added
The excess of the fair value of the purchase price over the fair value of these net tangible and intangible assets acquired is recorded as goodwill. Management’s estimates of fair value are based on assumptions believed to be reasonable, but such estimates and assumptions are inherently uncertain and subject to refinement.
Removed
We experienced a high level of capital expenditures during 2021 associated with the continued build-out of our newly leased facility in San Jose, California, which is substantially complete at this time. ​ Cash Flows from Financing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ 2022 2021 ​ ​ (in thousands) Repurchase of 2023 Notes ​ $ — ​ $ (115,604) Debt issuance costs ​ ​ — ​ ​ (835) Settlement of equity awards, net of withholding taxes ​ ​ (4,550) ​ ​ (5,590) Net cash provided by (used in) financing activities ​ $ (4,550) ​ $ (122,029) ​ The net cash used in financing activities for the year ended December 31, 2022 was primarily related to the settlement of equity awards.
Added
We believe assumptions and estimates we have made in the past have been reasonable and appropriate, they are based, in part, on historical experience and information obtained from management of the acquired companies, and inherently uncertain. The Company uses a discounted cash flow model to estimate the fair value of acquired intangible assets.
Removed
These notes matured on January 15, 2023 and were paid in cash and settled by the Company at that time.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed6 unchanged
Biggest changeWe 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 69%, 62%, and 68% of our total net sales in 2022, 2021, and 2020, respectively.
Biggest changeWe 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 76%, 69%, and 62% of our total net sales in 2023, 2022, and 2021, respectively.
Our net sales denominated in currencies other than the U.S. dollar represented approximately 3%, 3%, and 5% of total net sales in 2022, 2021, and 2020, respectively. ​ 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. ​
Our net sales denominated in currencies other than the U.S. dollar represented approximately 4%, 3%, and 3% of total net sales in 2023, 2022, and 2021, respectively. ​ 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. ​
Our investment portfolio includes fixed-income securities with a fair value of approximately $147.5 million at December 31, 2022. These securities are subject to interest rate risk and, based on our investment portfolio at December 31, 2022, a 100 basis point increase in interest rates would result in a decrease in the fair value of the portfolio of $0.6 million.
Our investment portfolio includes fixed-income securities with a fair value of approximately $146.7 million at December 31, 2023. These securities are subject to interest rate risk and, based on our investment portfolio at December 31, 2023, a 100 basis point increase in interest rates would result in a decrease in the fair value of the portfolio of $0.8 million.

Other VECO 10-K year-over-year comparisons