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What changed in VEECO INSTRUMENTS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of VEECO INSTRUMENTS INC's 2023 and 2024 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 2024 report.

+188 added−209 removedSource: 10-K (2025-02-14) vs 10-K (2024-02-16)

Top changes in VEECO INSTRUMENTS INC's 2024 10-K

188 paragraphs added · 209 removed · 146 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur 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.
Biggest changeOur employee average tenure is more than eight years. ​ Employee Engagement ​ The engagement and satisfaction of the Veeco United Team are critical to our culture and our success. We remain committed to working with employees to strengthen the Company’s culture. We regularly conduct formal employee surveys to assess global employee engagement, leadership, work environment and culture.
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.
Demand for higher performance, smaller form factors, and lower power consumption in applications such as artificial intelligence, high-performance computing, mobile devices, and consumer electronics is driving the adoption of advanced packaging technologies.
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.
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 ​ 6 Table of Contents ● Wet Processing ​ 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.
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.
Micro-LEDs will be used in a number of applications from televisions, smartwatches, and 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.
Veeco pays the majority or all of the costs for many of these benefits. ​ Diversity and Inclusion ​ We are committed to building and sustaining a culture of diversity and inclusion where our people can be their authentic selves and are encouraged to reach their full potential.
Veeco pays the majority or all of the costs for many of these benefits. ​ Culture of Inclusion ​ We are committed to building and sustaining a culture of inclusion where our people can be their authentic selves and are encouraged to reach their full potential.
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.
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 Technology; Screen Semiconductor Solutions; Shanghai Micro Electronics Equipment; and Suss MicroTec. ​ Intellectual Property ​ Our success depends, in part, on our proprietary technology, and we have approximately 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.
Our Advanced Packaging tools are designed to optimize productivity for leading-edge 200mm and 300mm Advanced Packaging applications by delivering proven reliability and low cost of ownership in high-volume manufacturing environments.
Our Advanced Packaging tools are designed to optimize productivity for leading-edge 300mm Advanced Packaging applications by delivering proven reliability and low cost of ownership in high-volume manufacturing environments.
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.
Such devices include leading advanced node application processors for AI chips, high-performance computing, 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.
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.
We also provide a broad array of ion beam sources. 7 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.
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.
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. ​ 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.
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.
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. 8 Table of Contents ​ 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.
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.
Serving a global and highly interconnected customer base, we have comprehensive sales and service 4 Table of Contents 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 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.
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.
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 make us stronger ​ 10 Table of Contents Employment, Recruitment and Development ​ Our recruitment programs are regionally focused.
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.
Parts and upgrade sales represented approximately 15%, 17%, and 18% of our net sales for those years, respectively, and service and support sales were 5%, 5%, and 6% 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.
In addition, many of our products face competition from alternative technologies, some of which are more established than those used in our products. Significant factors for customer selection of our tools include system performance, accuracy, repeatability, ease of use, reliability, cost of ownership, and technical service and support.
In addition, many of our products face competition from alternative technologies, some of which are more established than those used in our products. Significant factors for customer selection of our tools include system performance, accuracy, repeatability, 9 Table of Contents ease of use, reliability, cost of ownership, and technical service and support.
The reference to our website address does not constitute inclusion or incorporation by reference of the information contained on our website in this Form 10-K or other filings with the SEC, and the information contained on our website is not part of this document. ​
The reference to our website address 11 Table of Contents does not constitute inclusion or incorporation by reference of the information contained on our website in this Form 10-K or other filings with the SEC, and the information contained on our website is not part of this document. ​ ​
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.
Our SiC CVD system has a single wafer reactor concept based on a time-tested industry validated architecture and is used for research and development for SiC power electronics applications. ​ 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.
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.
In fiscal 2024, we hired 134 employees, 102 within the United States, 28 in the Asia-Pacific region, and 4 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.
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.
Our backlog was $409.6 million and $490.7 million at December 31, 2024 and 2023, respectively. ​ 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.
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.
Veeco serves ● Laser Annealing ​ ● Ion Beam Deposition (“IBD”) ​ ● Ion Beam Etch (“IBE”) ​ ● Wet Processing ​ ● Advanced Packaging Lithography 5 Table of Contents the advanced packaging market with lithography as well as wet processing equipment. ​ 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.
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.
Refer to Item 1A, “Risk Factors,” for a description of risks associated with intellectual property. ​ People ​ Veeco’s global workforce spans thirteen countries around the world. At the end of 2024, we had 1,231 employees with 290 located in the Asia-Pacific region, 60 in the EMEA region, and 881 in the United States.
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 results of our surveys are used to identify various initiatives designed to strengthen our Company. 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.
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 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. Our 12-month rolling average for voluntary turnover on December 31, 2024 was approximately 7.4%.
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.
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.
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.
Revenue from the sales of parts, upgrades, service, and support represented approximately 20%, 22%, and 24% of our net sales for the years ended December 31, 2024, 2023, and 2022, respectively.
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.
We are always striving to attract talented individuals from a global candidate pool. ​ Available Information ​ Our corporate website address is www.veeco.com.
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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.
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We provide service and support through warranty and service contracts, as well as on an individual service-call basis. We believe that offering timely support creates stronger relationships with our customers.
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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.
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We expect all Veeco employees to complete a minimum of 20 hours of training per year to support their personal growth. We offer training and development programs both virtually and in person to benefit employees worldwide.
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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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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.
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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.
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We are excited to continue developing initiatives to promote and celebrate diversity at Veeco. ​ Employee Health and Safety, Pandemic Response ​ We are committed to providing a safe and healthy workplace for all employees.
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We accomplish this through strict compliance with applicable laws and regulations regarding workplace safety, including recognition and control of workplace hazards, tracking injury and illness rates, utilizing a global travel health program, and maintaining detailed emergency and disaster recovery plans. ​ Our highest priorities throughout the pandemic were, and continue to be, the health and well-being of our employees, customers, suppliers, and stakeholders.
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From the beginning of the pandemic, through the recent challenges posed by the acceleration of coronavirus variants, we have taken precautions to protect employees, visitors, and customers while minimizing disruption to our business. Our facilities remained operational as an “essential business” throughout the pandemic.
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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.
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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.
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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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeEach of these events could have a material adverse effect on our business, financial condition, and results of operations. ​ We are exposed to risks associated with the increased attention by our stakeholders to environmental, social and governance (“ESG”) matters. ​ Our stakeholders, including customers, investors, advisory firms, employees, and suppliers, among others, have increasingly focused on our ESG initiatives, including those regarding climate change, human rights, inclusion and diversity, among others.
Biggest changeEach of these events could have a material adverse effect on our business, financial condition, and results of operations. ​ Our environmental, social and governance (“ESG”) goals and strategies could be costly to implement, and we are exposed to risks associated with failures to comply with evolving and varying sustainability-related requirements. ​ From time to time the Company communicates its strategies, commitments and targets relating to ESG matters, including initiatives pertaining to climate change, human rights, diversity and inclusion, among others.
Our inability to develop alternative sources, as necessary, could result in a prolonged interruption in our ability to supply related products, a failure on our part to meet the demands our customers, and a significant increase in the price of related products, which could adversely affect our business, financial condition, and results of operations. ​ Our failure to successfully manage our outsourcing activities or failure of our outsourcing partners to perform as anticipated could adversely affect our results of operations . ​ To better align our costs with market conditions, increase the percentage of variable costs relative to total costs, and to increase productivity and operational efficiency, we have outsourced certain functions to third parties, including the manufacture of several of our systems.
Our inability to develop alternative sources, as necessary, could result in a prolonged interruption in our ability to supply related products, a failure on our part to meet the demands of our customers, and a significant increase in the price of related products, which could adversely affect our business, financial condition, and results of operations. ​ Our failure to successfully manage our outsourcing activities or failure of our outsourcing partners to perform as anticipated could adversely affect our results of operations. ​ To better align our costs with market conditions, increase the percentage of variable costs relative to total costs, and increase productivity and operational efficiency, we have outsourced certain functions to third parties, including the manufacture of several of our systems.
In the future, if we determine that our inventory is overvalued, we will be required to recognize associated costs in our financial statements at the time of such determination. In addition, we place orders with our suppliers based on our customers’ orders.
In the future, if we determine that our inventory is overvalued, we will be required to recognize the associated costs in our financial statements at the time of such determination. In addition, we place orders with our suppliers based on our customers’ orders.
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.
These measures and those described above may have the effect of delaying, deferring, or preventing a takeover or other change in control of the Company that a holder of our common stock may not consider to be in the holder’s best interest.
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.
Commerce Department’s Unverified List and Entity List (including Swaysure Technology Co., Ltd. and 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.
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.
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 hydrofluorocarbons and per- and polyfluoroalkyl substances -- 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.
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).
We face increasing competition as a result of significant investment in the semiconductor industry by the Chinese government and various state-owned and 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).
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.
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; ● 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.
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.
Acquisitions, 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.
As a capital equipment provider, our revenue depends in large part on the spending patterns of these customers, who often delay expenditures or cancel or reschedule orders in reaction to variations in their businesses or general economic conditions.
As a capital equipment provider, our revenue depends in large part on the spending patterns of our customers, who often delay expenditures or cancel or reschedule orders in reaction to variations in their businesses or general economic conditions.
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.
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.
Commerce Department, Bureau of Industry and Security (“BIS”) announced new rules aimed in part at restricting China’s ability to obtain advanced computing chips and manufacture advanced semiconductors.
Commerce Department, Bureau of Industry and Security (“BIS”) has announced new rules aimed in part at restricting China’s ability to obtain advanced computing chips and manufacture advanced semiconductors.
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.
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 2023 acquisition of Epiluvac AB, a producer of SiC-based products and technology), and we will consider new opportunities in the future.
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.
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 24 Table of Contents 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; and ● the commencement of, and rulings on, litigation and legal proceedings. ​ Securities class action litigation is often brought against a company following periods of volatility in the market price of its securities.
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.
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 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. 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.
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 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.
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 15 Table of Contents to both the inputs to the program and ownership rights to AI work product), and risks related to AI’s impact on the workforce.
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.
Divestitures may expose us to unanticipated liabilities (including those arising from representations and warranties made to 19 Table of Contents 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.
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.
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 22 Table of Contents 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.
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.
In addition, as of December 31, 2024, we had an undrawn senior secured revolving credit facility (the “Credit Facility”) in an aggregate principal amount of $225.0 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.
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.
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.
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.
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, 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.
Alternatively, 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.
Alternatively, 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. ​ 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.
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.
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, 2025), holders of Notes will be entitled to convert the Notes at any time during specified periods at their option.
Any failure to satisfy or achieve ESG-related requirements or targets could adversely impact the demand for our products, subject us to significant costs and liabilities, cause our stock price to decline, and result in reputational harm. ​ We have adopted certain measures that may have anti-takeover effects, which may make an acquisition of our Company by another company more difficult. ​ We have adopted, and may in the future adopt, certain measures that may have the effect of delaying, deferring, or preventing a takeover or other change in control of our Company, which a holder of our common stock may not consider to be in the holder’s best interest.
Any failure to achieve or satisfy ESG-related regulations, requirements or targets could adversely impact the demand for our products, subject us to significant costs and liabilities, and result in reputational harm. ​ We have adopted certain measures that may have anti-takeover effects, which may make an acquisition of the Company by another company more difficult. ​ We have adopted, and may in the future adopt, certain measures that may have the effect of delaying, deferring, or preventing a takeover or other change in control of the Company, which a holder of our common stock may not consider to be in the holder’s best interest.
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”).
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, 2024, 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 (together, the “Notes”).
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.
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.
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.
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, health epidemics, 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 17 Table of Contents may cause or exacerbate interruptions in our manufacturing and supply chain operations.
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.
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 have required, and may in the future require, that we plan ahead further than usual, and increase our purchase commitments to secure critical components in a timely manner.
These risks are particularly prevalent in the semiconductor market, which is often characterized by long customer qualification times, typically twelve to eighteen months. Once qualified, the ramp to volume production can take an additional extended period of time, often twelve to twenty-four months.
These risks are particularly prevalent in the semiconductor market, which is often characterized by long customer qualification times, typically twelve to eighteen months. Once qualified, 18 Table of Contents the ramp to volume production can take an additional extended period of time, often twelve to twenty-four months.
Future or ongoing disruptions or incidents, whether from attacks on our technology environment or from computer viruses, natural disasters, terrorism, war or other causes, could result in a material disruption in our business operations, force us to incur significant costs and engage in litigation, harm our reputation, and subject us to liability under laws, regulations, and contractual obligations. ​ We may be unable to effectively enforce and protect our intellectual property rights. ​ Our success as a company depends in part upon the protection of our intellectual property rights.
Future or ongoing disruptions or incidents, whether from attacks on our technology environment 20 Table of Contents or from computer viruses, natural disasters, terrorism, war or other causes, could result in a material disruption in our business operations, force us to incur significant costs and engage in litigation, harm our reputation, and subject us to liability under laws, regulations, and contractual obligations. ​ We may be unable to effectively enforce and protect our intellectual property rights. ​ Our success depends in part upon the protection of our intellectual property rights.
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”).
These and other costs could be substantial and our reputation could be harmed, resulting in a reduced demand for our products and a negative impact to our business. ​ In addition, our success is also subject to the risk of future disruptive technologies, including machine learning and artificial intelligence (“AI”).
While we continue to take steps to mitigate our exposure to this developing situation, if the sale of these products is delayed or we are unable to return or dispose of our inventory on favorable economic terms, we may incur additional carrying costs for the inventory or otherwise record charges associated with this inventory. ​ We may be unable to obtain required export licenses for the sale of our products. ​ Whether with respect to sales to customers located in China or otherwise, products which (i) are manufactured in the United States, (ii) incorporate controlled U.S. origin parts, technology, or software, or (iii) are based on U.S. technology, are subject to the U.S.
While we take steps to mitigate our exposure in this regard, if the sale of these products is cancelled or delayed and we are unable to return or dispose of this inventory on favorable economic terms, we may incur additional carrying costs for the inventory or otherwise record charges associated with this inventory. ​ We may be unable to obtain required export licenses for the sale of our products. ​ Whether with respect to sales to customers located in China or otherwise, products which (i) are manufactured in the United States, (ii) incorporate controlled U.S. origin parts, technology, or software, or (iii) are based on U.S. technology, are subject to the U.S.
If our backlog is canceled or modified, our estimates of future product demand may prove to be inaccurate, in which case we may have understated the write-off required for excess and obsolete inventory.
If our backlog is canceled or modified, our estimates of future product demand may prove to be inaccurate, in which case we may have understated the reserves required for excess and obsolete inventory.
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. ​
Such activities could interfere with our ability to execute our strategic plans, be costly and time consuming, disrupt 26 Table of Contents our operations, and divert the attention of management and our employees. ​ ​ Item 1B. Unresolved Staff Comments ​ None. ​
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.
Failure to sufficiently hedge or otherwise properly manage foreign currency risks 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 fair values below carrying amounts. ​ As part of our long-term strategy, we may pursue future acquisitions of, or investments in, other companies or assets which could increase our assets.
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.
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 23 Table of Contents 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 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, 2024, we had U.S. federal R&D credits carryforwards of approximately $35.1 million expiring in varying amounts between 2035 and 2044.
New product introductions or enhancements by us or our competitors could cause a decline in sales or loss of market acceptance of our existing or prior generation products.
New product introductions 14 Table of Contents or enhancements by us or our competitors could cause a decline in sales or loss of market acceptance of our existing or prior generation 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.
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 contractual or 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; 12 Table of Contents ● 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, and 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 regional or global health epidemics; ● 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 or the conflict in the Middle East.
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.
Our capital investments may not generate the expected returns or hoped-for results. We may not be able to obtain desired grants, investment tax credits, or other governmental incentives, such as funding through the U.S. CHIPS and Science Act of 2022.
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.
Dependence upon sales emanating from a limited number of regions increases 16 Table of Contents 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, regional epidemics, terrorism, and acts of war.
Previous changes in trade policy by BIS have included, without limitation, the elimination of license exception CIV, the implementation of new regulations governing the sale of equipment to defined “Military End Users” and for defined “Military End Uses”, the addition of several companies to the U.S.
Other changes in trade policy by BIS have included, without limitation, the elimination of license exception for Civil End Users (“CIV”), the implementation of new regulations governing the sale of equipment to defined “Military End Users” and for defined “Military End Uses”, the addition of several companies to 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.
These challenges, together with other challenges associated with operating a global 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. ​ Over the past several years, the U.S.
We may be unable to obtain required export licenses or qualify for export license exceptions and, as a result, we may be unable to export products to our customers and/or meet their servicing needs (requiring us to refund customer prepayments for products we are unable to ship).
We may be unable to obtain required export licenses or qualify for export license exceptions and, as a result, we may be unable to export products to our customers and/or meet their servicing needs (potentially requiring us to refund customer prepayments for unperformed contractual obligations).
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.
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, including increasingly exacting standards and requirements for performance from Tier 1 customers.
Consolidation among our competitors and integration among our customers could erode our market share, negatively impact our ability to compete, and have a material adverse effect on our business. ​ Whether in connection with the semiconductor industry or otherwise, we are also exposed to potential risks associated with unexpected product performance issues.
Consolidation among our competitors and integration among our customers could erode our market share, negatively impact our ability to compete, and have a material adverse effect on our business. ​ We are also exposed to potential risks associated with unexpected product performance issues.
Foreign customers affected by these and future U.S. government sanctions or threats of sanctions may respond by developing their own solutions to replace our products or by utilizing our foreign competitors’ products.
Foreign customers affected by U.S. government sanctions or threats of sanctions may respond by developing their own solutions to replace our products or by utilizing our foreign 13 Table of Contents competitors’ products.
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.
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 has experienced in the past and may experience in the future; and ● an increase in uncollectible 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 are exposed to risks of operating a global business. ​ 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 will continue.
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.
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 2024 our stock price ranged from a closing high of $48.47 to a closing low of $25.99.
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.
These risks have been exacerbated by an increase in employees working from home, global conflicts and geopolitical tensions (including increasing tension between the U.S. and China governments), and by the possible use of 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.
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.
The administrative processing, attendant delays and risk of ultimately not obtaining required export approvals pose a particular disadvantage to the Company relative to certain of our non-U.S. competitors and increase our exposure to foreign and Chinese domestic competition. This difficulty and uncertainty has adversely affected our ability to compete for and win business from customers in China.
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.
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.
The operation of Section 203 may have anti-takeover effects, which could delay, defer, or prevent a takeover attempt that a holder of our common stock may not consider to be in the holder’s best interest. ​ Despite the above measures, an activist shareholder could undertake action to implement governance, strategic, or other changes to the Company which a holder of our common stock may not consider to be in the holder’s best interest.
Despite these measures, an activist shareholder could undertake action to implement governance, strategic, or other changes to the Company which a holder of our common stock may not consider to be in the holder’s best interest.
This “trade war” with China, together with the prospect of additional governmental action related to export controls restrictions, international sanctions, and/or tariffs, has adversely affected, and is likely to continue to adversely affect, demand for our products and the results of our operations. ​ The changes in U.S. trade policy and export controls, as well as sanctions imposed by the U.S. against certain Chinese companies, have triggered retaliatory action by China and could trigger further retaliation (including the possible escalation of geopolitical tensions between China and Taiwan).
These heightening restrictions, together with the prospect of additional governmental action (which may include, for example, significant increases in tariffs on a broad array of goods), has adversely affected, and is likely to continue to adversely affect, demand for our products and the results of our operations. ​ The changes in U.S. trade policy and export controls, as well as sanctions imposed by the U.S. against certain Chinese companies, have triggered retaliatory action by China (including China’s recent ban on exports to the United States of critical minerals gallium, germanium and antimony) and could trigger further retaliation (including the possible escalation of geopolitical tensions between China and Taiwan).
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.
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. ​ 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.
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.
Our percentage revenue from the sale of products and the provision of services to non-U.S. customers was 77% for fiscal year 2024.
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.
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. ​ 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.
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.
We are required to comply with legal and regulatory requirements pertaining to such matters as data privacy, anti-corruption, labor laws, immigration, accounting standards, financial disclosures, taxes, cybersecurity, customs, trade, corporate governance, conflict minerals, and antitrust regulations, among others.
Furthermore, some of our operations involve the storage, handling, and use of hazardous materials that may pose a risk of fire, explosion, or environmental release. Such events could result from acts of terrorism, natural disasters, or operational failures and may result in injury or loss of life to our employees and others, local environmental contamination, and property damage.
Such events could result from acts of terrorism, natural disasters, or operational failures and may result in injury or loss of life to 25 Table of Contents our employees and others, environmental contamination, and property damage.
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.
If negative conditions in the credit markets, such as a recommencement of increases in interest rates, prevent our customers from obtaining credit or necessary financing, 21 Table of Contents product orders in these channels may decrease, which could result in lower revenue. In addition, we may experience cancellations of orders in backlog, rescheduling of customer deliveries, and attendant pricing pressures.
Adverse changes in business conditions or worse-than-expected performance by these acquired companies could negatively impact our estimates of future operations and result in impairment charges to these assets. ​ Changes in accounting pronouncements or taxation rules, practices, or rates may adversely affect our financial results. ​ Changes in, or newly enacted, accounting pronouncements or taxation rules, practices or rates can materially affect our revenue recognition practices, effective tax rates, results of operations, and our financial condition.
If our assets are further impaired, our financial condition and results of operations could be materially and adversely affected. ​ Changes in accounting pronouncements or taxation rules, practices, or rates may adversely affect our financial results. ​ Changes in, or newly enacted, accounting pronouncements or taxation rules, practices or rates can materially affect our revenue recognition practices, effective tax rates, results of operations, and our financial condition.
In addition, the Chinese government may restrict us from participating in the China market or may prevent us from competing effectively with Chinese companies. ​ Further, we hold inventory of products that may be affected by the recent U.S. government actions, including potential order cancellations.
In addition, the Chinese government may restrict us from participating in the China market or may prevent us from competing effectively with Chinese companies. ​ Further, trade-related government actions – including for example the addition, past and future, of China-based companies to 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 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.
In the event that an export regulatory body determines that any of our shipments violate applicable 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 face significant competition. ​ We face significant competition throughout the world, which may increase as certain markets in which we operate continue to evolve.
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.
Furthermore, 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. ​ In addition, several of our key stakeholders -- including customers, investors, advisory firms and suppliers -- have established expectations pertaining to our sustainability practices.
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.
These expectations, standards and requirements may impact the manner in which we do business, our costs of doing business, our reputation, and the willingness of our stakeholders to engage with, invest in, or retain us. ​ We are also subject to various sustainability laws and regulations, such as the State of California’s new climate change disclosure rules, the European Union’s Corporate Sustainability Reporting Directive, and the U.S.
These expectations can extend, and have extended, to our corporate practices, initiatives, and disclosures, as well as stakeholder standards or preferences for investments or doing business. Third-party rating agencies have also established standards for a range of ESG-related factors, which may be inconsistent and are subject to change.
Third-party rating agencies have also established standards for a range of sustainability-related matters, which may be inconsistent and are subject to change.
Removed
Changing market conditions require that we continuously monitor and reassess our strategic resource allocation decisions.
Added
Commerce Department’s Entity List – have prevented and will likely prevent us from fulfilling certain product delivery, installation, warranty, and/or service commitments to affected customers. This may require us to issue refunds for customer prepayments and may lead to disputes, claims for damages, litigation and possible liabilities for the Company.
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In addition, we may experience cancellations of orders in backlog, rescheduling of customer deliveries, and attendant pricing pressures.
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In addition, we hold inventory of products that may be affected by trade-related government actions, or by potential order cancellations.
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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.
Added
AI technology is complex and rapidly evolving and its implementation can be costly. There is no guarantee that our use of AI will enhance our technologies, benefit our business operations, or produce products and services that are preferred by our customers. Our competitors may be more successful in their use of AI and may develop superior products and services.
Removed
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.
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In the event of a downturn, many of our customers may delay or reduce their purchases of our products and services.
Removed
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.
Added
Adverse changes in business conditions or worse-than-expected performance by acquired companies could negatively impact our estimates of future operations and result in impairment charges to acquired assets. For example, during the fourth quarter of 2024, we recorded an asset impairment charge of $28.1 million related to the intangible assets acquired as part of our acquisition of Epliluvac AB.
Added
The 2025 Notes subsequently matured in January 2025 and were settled through the issuance of Company shares to the noteholders.
Added
Furthermore, some of our operations involve the storage, handling, and use of hazardous materials that may pose a risk of fire, explosion, or environmental release.
Added
These strategies, commitments and targets reflect our current plans and aspirations, and we may be unable to achieve them.
Added
Securities and Exchange Commission’s rules on climate-related risks. Compliance with such laws and regulations, as well as increased scrutiny from regulators, could result in additional costs and expose us to new risks.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWhile we and our third-party providers have in the past experienced cybersecurity incidents, we are not aware of any current incidents or new types of threats which have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition.
Biggest changeThrough ongoing communications with these teams, the Chief Information Security Officer and the Information Security Leadership Group monitor the prevention, detection, mitigation and remediation of cybersecurity incidents in real time, and report such incidents to the Board when appropriate, as addressed above. ​ While we and our third-party providers have in the past experienced cybersecurity incidents, we are not aware of any current incidents or new types of threats which have materially affected or are reasonably likely to materially affect the Company , including its business strategy, results of operations, or financial condition.
Consistent with the Company’s overall ERM practices, our cybersecurity program focuses on the following areas: 28 Table of Contents ● Vigilance: The Company maintains a global presence, with cybersecurity threat operations operating 24/7 around the world with a specific goal of detecting, containing and responding to cybersecurity threats and incidents. ● Collaboration: The Company has established collaboration mechanisms with public and private entities, including intelligence and enforcement agencies, industry groups and third-party service providers to identify and assess cybersecurity risks. ● Systems Safeguards: The Company deploys technical safeguards that are designed to protect the Company’s information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality, access controls and ongoing vulnerability assessments. ● Third-Party Management: The Company maintains a comprehensive, risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, such as vendors, service providers and other users of the Company’s systems. ● Education: The Company provides periodic training for personnel regarding cybersecurity threats, with such training scaled to reflect the roles, responsibilities, and access of the relevant Company personnel. ● Incident Response Planning: The Company has established and maintains incident response plans that address the Company’s response to a cybersecurity incident, and such plans are tested on an ongoing basis. ● Communication and Coordination: The Company utilizes a cross-functional approach to address the risk from cybersecurity threats and has formed an Information Security Leadership Group which includes management personnel from information technology, operations, legal, internal audit and other key business functions.
Consistent with the Company’s overall ERM practices, our cybersecurity program focuses on the following areas: ● Vigilance: The Company maintains a global presence, with cybersecurity threat operations operating 24/7 around the world with a specific goal of detecting, containing and responding to cybersecurity threats and incidents. ● Collaboration: The Company has established collaboration mechanisms with public and private entities, including intelligence and enforcement agencies, industry groups and third-party service providers to identify and assess cybersecurity risks. ● Systems Safeguards: The Company deploys technical safeguards that are designed to protect the Company’s information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality, access controls and ongoing vulnerability assessments. ● Third-Party Management : The Company maintains a comprehensive, risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, such as vendors, service providers and other users of the Company’s systems. ● Education: The Company provides periodic training for personnel regarding cybersecurity threats, with such training scaled to reflect the roles, responsibilities, and access of the relevant Company personnel. ● Incident Response Planning: The Company has established and maintains incident response plans that address the Company’s response to a cybersecurity incident, and such plans are tested on an ongoing basis. ● Communication and Coordination: The Company utilizes a cross-functional approach to address the risk from cybersecurity threats and has formed an Information Security Leadership Group which includes management personnel from information technology, operations, legal, internal audit and other key business functions.
We generally approach cybersecurity threats through a cross-functional, multi-layered approach, with the specific goals of: (i) identifying, preventing and mitigating cybersecurity threats to the Company; (ii) maintaining the confidence of our customers, clients and business partners; (iii) preserving the confidentiality of our employee’s information; and (iv) protecting the Company’s intellectual property.
We generally approach cybersecurity threats through a cross-functional, multi-layered approach, with the specific goals of: (i) identifying, preventing and mitigating cybersecurity threats to the Company; (ii) maintaining the confidence of our customers, clients and business partners; (iii) preserving the confidentiality of internal and external information; and (iv) protecting the Company’s intellectual property.
Our Chief Information Security Officer holds graduate degrees in cybersecurity and business administration and has attained multiple professional certifications including CISSP, CISA and CISM. ​ 29 Table of Contents The Company’s Chief Information Security Officer, in coordination with the Information Security Leadership Group, works collaboratively across the Company to implement a program designed to protect the Company’s information systems from cybersecurity threats and to promptly respond to any cybersecurity incidents.
Our Chief Information Security Officer holds graduate degrees in cybersecurity and business administration and has attained multiple professional certifications including CISSP, CISA and CISM. ​ The Company’s Chief Information Security Officer, in coordination with the Information Security Leadership Group, works collaboratively across the Company to implement a program designed to protect the Company’s information systems from cybersecurity threats and to promptly respond to any cybersecurity incidents.
The Company regularly engages third parties to perform assessments on our cybersecurity measures, including information security maturity assessments and independent reviews of our information security control environment and operating effectiveness and adjusts its cybersecurity processes and practices as necessary.
The Company regularly engages third parties to perform assessments on our cybersecurity measures, including information security maturity assessments and independent reviews of our information security control environment and operating effectiveness and adjusts its cybersecurity processes and practices as necessary. 27 Table of Contents The Audit Committee oversees the management of risks from cybersecurity threats, including the policies, processes and practices that the Company’s management implements to address risks from cybersecurity threats.
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The Audit Committee oversees the management of risks from cybersecurity threats, including the policies, processes and practices that the Company’s management implements to address risks from cybersecurity threats.
Removed
Through ongoing communications with these teams, the Chief Information Security Officer and the Information Security Leadership Group monitor the prevention, detection, mitigation and remediation of cybersecurity incidents in real time, and report such incidents to the Board when appropriate, as addressed above.

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 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.
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 2033 Waltham, MA 17,000 R&D; Sales & Service; Administration 2030 Solvegatan, Sweden 4,000 R&D; Manufacturing; Sales & Service; Administration 2028 ​ In addition to the above, our foreign sales and service subsidiaries lease office space in China, Germany, Japan, Malaysia, Philippines, Singapore, South Korea, Thailand, and Taiwan.
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.
Properties ​ Our corporate headquarters and principal research and development, manufacturing, and sales and service facilities as of December 31, 2024 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.
We believe our facilities are adequate to meet our current needs. ​
We believe our facilities are adequate to meet our current needs. ​ 28 Table of Contents

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 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 ​
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. ​ 29 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 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.
Biggest changeItem 4. Mine Safety Disclosures 29 ​ ​ PART II 30 ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 30 ​ ​ Stock Performance Graph 31 ​ ​ Item 6. [Reserved] 31 ​ ​ Item 7.
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 ​ ​
Management’s Discussion and Analysis of Financial Condition and Results of Operations 32 ​ ​ Item 7A. Quantitative and Qualitative Disclosures about Market Risk 41 ​ ​ Item 8. Financial Statements and Supplementary Data 42 ​ ​

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. 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 ​ ​ ​
Biggest changeThe Board of Directors will determine future dividend policy based on our consolidated results of operations, financial condition, capital requirements, and other circumstances. 30 Table of Contents ​ Stock Performance Graph ​ ​ ASSUMES $100 INVESTED ON DEC. 31, 2019 ASSUMES DIVIDENDS REINVESTED FISCAL YEAR ENDING DEC. 31 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2019 2020 2021 2022 2023 2024 Veeco Instruments Inc. 100.00 118.22 193.87 126.52 211.30 182.50 S&P Smallcap 600 100.00 111.29 141.13 118.41 137.42 149.37 RDG MidCap Technology 100.00 132.76 81.82 36.09 38.89 40.63 ​ ​ ​
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 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 7, 2025, there were approximately 110 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 changeOur 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.
Biggest changeOur results of operations are reported as one business segment, represented by our single operating segment. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ Change ​ ​ 2024 ​ 2023 ​ Period to Period ​ ​ (dollars in thousands) Net sales $ 717,301 100 % $ 666,435 100 % $ 50,866 8 % Cost of sales ​ 413,296 58 % 381,376 57 % 31,920 8 % Gross profit ​ 304,005 42 % 285,059 43 % 18,946 7 % Operating expenses, net: ​ ​ ​ ​ ​ ​ Research and development ​ 124,507 17 % 112,853 17 % 11,654 10 % Selling, general, and administrative ​ 99,663 14 % 92,756 14 % 6,907 7 % Amortization of intangible assets ​ 6,983 1 % 8,481 1 % (1,498) (18) % Asset impairment ​ 28,131 4 % — — % 28,131 * ​ Other operating expense (income), net ​ (22,260) (3) % 1,029 — % (23,289) * % Total operating expenses, net ​ 237,024 33 % 215,119 32 % 21,905 10 % Operating income ​ 66,981 9 % 69,940 10 % (2,959) (4) % Interest income (expense), net ​ 1,853 0 % (1,187) (0) % 3,040 * % Other income (expense), net ​ ​ — — % ​ (97,091) (15) % ​ 97,091 * ​ Income (loss) before income taxes ​ 68,834 10 % (28,338) (4) % 97,172 * ​ Income tax expense (benefit) ​ (4,880) (1) % 2,030 — % (6,910) * ​ Net income (loss) ​ $ 73,714 10 % $ (30,368) (5) % $ 104,082 * ​ * Not meaningful ​ Net Sales ​ The following is an analysis of sales by end-market and by region: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ Change ​ ​ 2024 ​ 2023 ​ Period to Period ​ ​ (dollars in thousands) Sales by end-market ​ ​ ​ ​ Semiconductor ​ $ 466,611 65 % $ 412,724 62 % $ 53,887 13 % Compound Semiconductor ​ 77,591 11 % 87,258 13 % (9,667) (11) % Data Storage ​ 98,852 14 % 88,473 13 % 10,379 12 % Scientific & Other ​ 74,247 10 % 77,980 12 % (3,733) (5) % Total ​ $ 717,301 100 % $ 666,435 100 % $ 50,866 8 % Sales by geographic region ​ ​ ​ ​ United States ​ $ 164,564 23 % $ 162,790 24 % $ 1,774 1 % EMEA ​ 61,730 9 % 76,697 12 % (14,967) (20) % China ​ ​ 255,619 36 % ​ 217,942 33 % ​ 37,677 17 % Rest of APAC ​ 234,591 32 % 208,693 31 % 25,898 12 % Rest of World ​ 797 — % 313 — % 484 155 % Total ​ $ 717,301 100 % $ 666,435 100 % $ 50,866 8 % ​ 35 Table of Contents Total sales increased for the year ended December 31, 2024 against the comparable prior year period in the Semiconductor and Data Storage markets, partially offset by a decrease in the Compound Semiconductor, and Scientific & Other markets.
By geography, sales increased in the China region, partially offset by a decrease in the United States, EMEA, and Rest of APAC regions.
By geography, sales increased in the China, and Rest of APAC regions, partially offset by a decrease in the EMEA region.
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.
Research and development expenses increased in 2024 compared to 2023 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.
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.
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 2024, gross profit increased compared to 2023 primarily due to an increase in sales volume, partially offset by decreased gross margins.
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.
At December 31, 2024 and 2023, cash and cash equivalents of $45.1 million and $46.8 million, respectively, were held outside the United States. As of December 31, 2024, we had $21.2 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, 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.
Included within the Rest of APAC region for the year ended December 31, 2024 were sales in Taiwan and Japan of $115.3 million and $67.4 million, respectively, while sales within Rest of APAC region for the year ended December 31, 2023 included sales in Japan, Taiwan, and Singapore of $74.7 million, $62.7 million, and $32.2 million, respectively.
We recognize such revenue and costs upon obtaining objective evidence that the acceptance provisions can be achieved, assuming all other revenue recognition criteria have been met. ​ Any material changes in the identification of performance obligations, determination and allocation of the transaction price to performance obligations, and determination of when transfer of control occurs to the customer, could impact the timing and amount of revenue recognition, which could have a material effect on our financial condition and results of operations. ​ Inventory Valuation ​ Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis.
Any material changes in the identification of performance obligations, determination and allocation of the transaction price to performance obligations, and determination of when transfer of control occurs to the customer, could impact the timing and amount of revenue recognition, which could have a material effect on our financial condition and results of operations. ​ Inventory Valuation ​ Inventories are stated at the lower of cost and net realizable value, with cost determined on a first-in, first-out basis.
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.
The cash used in investing activities during the year ended December 31, 2023 was attributable to net cash used in the acquisition of Epiluvac, and capital expenditures, partially offset by changes in net investment activity. ​ 38 Table of Contents Cash Flows from Financing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2024 2023 ​ ​ (in thousands) ​ Settlement of equity awards, net of withholding taxes ​ $ (10,761) ​ $ (6,391) ​ Contingent consideration payment ​ ​ (1,818) ​ ​ (2,500) ​ Proceeds from issuance of 2029 Notes, net of issuance costs ​ ​ — ​ ​ 223,202 ​ Extinguishment of Convertible Notes ​ ​ — ​ ​ (218,991) ​ Net cash provided by (used in) financing activities ​ $ (12,579) ​ $ (4,680) ​ ​ The cash used in financing activities for the year ended December 31, 2024 was related to cash used to settle taxes related to employee equity programs and a contingent consideration payment related to the Epiluvac acquisition, partially offset by cash received under the Employee Stock Purchase Plan.
We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized.
We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. These estimates consider future operational results including realizability of our deferred tax assets.
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.
The net 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, a 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. ​ 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.
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.
Approximately $9.6 million of undistributed earnings would be subject to foreign withholding taxes if distributed back to the United States and we accrued $1.2 million for foreign withholding taxes for the undistributed earnings. ​ 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, purchase commitments, and payments required under our operating leases. ​ 37 Table of Contents A summary of the cash flow activity for the year ended December 31, 2024 and 2023 is as follows: ​ Cash Flows from Operating Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2024 2023 ​ ​ (in thousands) ​ Net income (loss) ​ $ 73,714 ​ $ (30,368) ​ Non-cash items: ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 25,143 ​ 24,966 ​ Non-cash interest expense ​ 1,257 ​ 1,118 ​ Deferred income taxes ​ (8,729) ​ (2,211) ​ Share-based compensation expense ​ 35,879 ​ 28,558 ​ Loss on extinguishment of debt ​ ​ — ​ ​ 97,091 ​ Asset impairment ​ 28,131 ​ — ​ Impairment of equity investment ​ ​ 404 ​ ​ — ​ Provision for bad debts ​ ​ — ​ ​ 316 ​ Change in contingent consideration ​ (21,242) ​ 701 ​ Changes in operating assets and liabilities ​ (70,742) ​ (58,497) ​ Net cash provided by (used in) operating activities ​ $ 63,815 ​ $ 61,674 ​ ​ Net cash provided by operating activities was $63.8 million for the year ended December 31, 2024 and was due to net income of $73.7 million and adjustments for non-cash items of $60.8 million, partially offset by a decrease in cash flow from changes in operating assets and liabilities of $70.7 million.
However, expenses as a percentage of revenue have remained flat when compared to the prior period.
However, expenses as a percentage of revenue have remained flat when compared to the prior period. ​ Selling, General, and Administrative ​ Selling, general, and administrative expenses increased in 2024 compared to 2023. However, expenses as a percentage of revenue have remained flat when compared to the prior period.
The 2027 Notes are currently convertible by shareholders until March 31, 2024.
These 2027 Notes are currently convertible by shareholders and callable by the Company until March 31, 2025.
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.
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, including purchase obligations of $177.4 million as of December 31, 2024 for inventory used in the manufacture of our products, as well as equipment and project materials used to support research and development activities.
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 are also evaluating other pronouncements recently issued but not yet adopted, including ASU 2023-09 and ASU 2024-03. 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. ​
These estimates may change in the future if underlying assumptions or factors change, and actual results may differ from these estimates. ​ We consider the following significant accounting policies to be critical because of their complexity and the high degree of judgment involved in maintaining them. ​ Revenue Recognition ​ We recognize revenue upon the transfer of control of the promised product or service to the customer in an amount that reflects the consideration we expect to receive in exchange for such product or service.
These estimates may change in the future if underlying assumptions or factors change, and actual results may differ from these estimates. ​ We consider the following estimates within our significant accounting policies to be critical because of their complexity and the high degree of judgment involved in maintaining them.
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.
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 2024 compared to 2023 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 2023. ​ Asset Impairment ​ During 2024, we recorded a non-cash impairment charge of $28.1 million related to intangible assets of our SiC technology acquired from Epiluvac in 2023, due to our market penetration not meeting expectations. ​ Other Operating Expense (Income), Net ​ Net other operating income in 2024 was primarily due to a $21.2 million reduction in the expected earn-out payments to be made to the previous shareholders of Epiluvac, as well as proceeds from the sale of productive assets . ​ Interest Income (Expense) ​ For the year ended December 31, 2024, we recorded net interest income of $1.9 million, compared to $1.2 million of net interest expense for the prior year.
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.
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. ​ Furthermore, we have access to a $225.0 million revolving credit facility to provide for our working capital needs and reimburse drawings under letters of credit and for other general corporate purposes.
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.
The changes in operating assets and liabilities were largely attributable to an increase in inventories largely related to higher work-in-process and evaluation systems at customer facilities, an increase in contract assets, and a decrease in contract liabilities. ​ 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.
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.
The 2023 income tax expense of $2.0 million was primarily comprised of 1) a $16.2 million income tax expense related to 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 income tax benefit related to Foreign-Derived Intangible Income, 4) a $7.7 million income tax benefit associated with research and development tax credits, and 5) a $1.0 million income 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). ​ Liquidity and Capital Resources ​ Our cash and cash equivalents, restricted cash, and short-term investments are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2024 2023 ​ ​ (in thousands) Cash and cash equivalents ​ $ 145,595 ​ $ 158,781 Restricted cash ​ 224 ​ 339 Short-term investments ​ 198,719 ​ 146,664 Total ​ $ 344,538 ​ $ 305,784 ​ 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.
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.
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. ​ Cash Flows from Investing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2024 2023 ​ ​ (in thousands) ​ Capital expenditures ​ $ (18,113) ​ $ (27,930) ​ Changes in investments, net ​ (48,467) ​ 4,973 ​ Acquisitions of businesses, net of cash acquired ​ ​ — ​ ​ (30,373) ​ Proceeds from the sale of productive assets ​ ​ 2,033 ​ ​ — ​ Net cash provided by (used in) investing activities ​ $ (64,547) ​ $ (53,330) ​ ​ The cash used in investing activities during the year ended December 31, 2024 was primarily attributable to net cash used for capital expenditures, and net investment activity, partially offset by proceeds from the sale of productive assets.
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.
Unanticipated changes in demand for our products may require a write down of inventory that could materially affect our operating results. ​ 40 Table of Contents Long-lived Assets ​ 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.
These contractual arrangements secure the rights to various assets and services to be used in the future in the normal course of business. We expect to fund these contractual arrangements with cash generated from operations in the normal course of business, as well as existing cash and cash equivalents and short-term investments.
We expect to fund these contractual arrangements with cash generated from operations in the normal course of business, as well as existing cash and cash equivalents and short-term investments. In addition, we have bank guarantees and letters of credit issued by a financial institution on our behalf as needed.
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.
As a result, we expect an approximate $60 to $70 million reduction in revenue in our Data Storage business in 2025. ​ Sales in the Scientific & Other market are largely driven by sales to governments, universities, and research institutions.
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.
We address the Scientific & Other market with several technologies, including MBE, ALD, MOCVD, Wet Processing, and IBD/IBE, which support scientific, optical coating and other applications, and sales in this market declined slightly in 2024 from the prior year. ​ 34 Table of Contents Results of Operations ​ Years Ended December 31, 2024 and 2023 ​ The following table presents revenue and expense line items reported in our Consolidated Statements of Operations for 2024 and 2023 and the period-over-period dollar and percentage changes for those line items.
With equipment designed to optimize performance, yield and cost of ownership, Veeco holds leading technology positions in the markets we serve.
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. With equipment designed to optimize performance, yield and cost of ownership, Veeco holds leading technology positions in the markets we serve.
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.
We address the Compound Semiconductor market with a broad portfolio of technologies, including Wet Processing, MOCVD, MBE and Ion Beam, for Power Electronics, Photonics, and 5G RF applications. Sales in the Compound Semiconductor market declined in 2024 from the prior year.
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.
Management uses judgements in identifying performance obligations, determining stand-alone selling price (“SSP”) for each distinct performance obligation and allocating consideration from an arrangement to the individual performance obligations based on the SSP. The SSPs are determined based on the prices at which we separately sell systems, upgrades, components, spare parts, installation, maintenance, and service plans.
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.
Refer to Note 10, “Commitments and Contingencies”, of the Notes to the Consolidated Financial Statements for further discussion related to our lease obligations. ​ We believe that we have sufficient capital resources and cash flows from operations to support the above mentioned short-term obligations. ​ Critical Accounting 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.
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.
We are also seeing photonics opportunities in areas such as solar and MicroLEDs. ​ We address the Data Storage market with sales of our Ion Beam technology. Demand for our Ion Beam products is driven by demand for cloud-based storage. Revenue from our Data Storage products increased in 2024 as compared to the prior year.
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.
In the fourth quarter, we announced over $50 million in orders for our Wet Processing systems from a leading foundry, a HBM manufacturer, and OSATs. Our Advanced Packaging lithography systems are used for packaging applications such as fan out wafer level packaging and other advanced packaging solutions.
In cases where a revision is deemed appropriate, the remaining carrying amounts of the intangible assets are amortized over the revised remaining useful life. ​ Intangible assets related to in-process research and development (“IPR&D”) projects are considered to be indefinite-lived until the completion or abandonment of the associated R&D efforts.
In cases where a revision is deemed appropriate, the remaining carrying amounts of the intangible assets are amortized over the revised remaining useful life. ​ Income Taxes ​ We estimate our income taxes in each of the jurisdictions in which we operate.
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.
While our growth strategy is predominately focused on advanced node logic and memory, LSA shipments to mature node customers have continued to increase in 2023 and 2024, predominantly driven by new greenfield fabs and capacity additions in China. ​ We have two next generation laser annealing systems under evaluation at Tier 1 foundry and logic customers.
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.
The increase in net interest income was primarily related to an increase of interest income of approximately $2.3 million due to a higher interest rate environment for 2024 compared to 2023. 36 Table of Contents Additionally, the Company had a decrease of interest expense of approximately $0.7 million due to a reduction in convertible note and bank guarantee interest expenses. ​ Other Income (Expense) ​ For the year ended December 31, 2023, we recorded a loss on extinguishment of approximately $97.1 million related to the repurchase and retirement of approximately $206.0 million aggregate principal amount of our 2025 and 2027 Notes. ​ Income Taxes ​ Our income tax benefit for the year ended December 31, 2024, was $4.9 million, compared to income tax expense of $2.0 million for the prior year.
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.
We also shipped and recognized revenue on our first NSA system to a leading logic customer in the fourth quarter. In the memory market, we continue to ship systems to a Tier 1 customer for high volume production of HBM and advanced DRAM devices.
Gross margins increased due to product mix of sales in the period, as well as favorable service spending.
Gross margins decreased principally due to unfavorable product mix of sales and higher service costs.
We generally do not enter into purchase commitments extending beyond one year. However, material shortages and supply chain challenges have caused some of these commitments to extend beyond one year.
We generally do not enter into purchase commitments extending beyond one year. At December 31, 2024, we have $18.7 million of offsetting supplier deposits that will be applied against these purchase commitments.
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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.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ Introduction ​ Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to facilitate an understanding of our business and results of operations.
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To 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.
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This MD&A should be read in conjunction with our Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.
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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.
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The following discussion contains forward-looking statements and should also be read in conjunction with the cautionary statement set forth at the beginning of this Form 10-K. ​ The following section generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
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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.
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Discussions of 2023 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed on February 16, 2024. ​ Executive Summary ​ We are an innovative manufacturer of semiconductor process equipment.
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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.
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To learn more about Veeco’s systems and service offerings, visit www.veeco.com. ​ Veeco executed well during 2024, accomplishing a number of milestones, including: ​ ● Solidly executing our multi-year growth strategy highlighted by several strategic wins.
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Material lead times have improved significantly and have generally returned to pre-pandemic levels.
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We shipped and recognized revenue on our first Nanosecond Annealing (“NSA”) system at a leading-edge logic customer, shipped a 300mm GaN on Si evaluation system to a Tier 1 power device customer, and reached an agreement to ship an LSA evaluation system to another leading memory customer in 2025; ​ ● Shipped multiple Laser Annealing systems to Tier 1 logic and memory customers for new architectures and technologies such as Gate-All-Around and High Bandwidth Memory; ​ ● Won additional customer orders in Advanced Packaging with our strong position in wet processing as PTOR for a process step in Heterogenous Integration and 3D Packaging for AI; ​ ● Maintained investments toward our largest Served Available Market (“SAM”) growth opportunities in the Semiconductor and Compound Semiconductor markets, including strategic investments in R&D and our evaluation program; ​ ● Achieved year-on-year revenue growth for the Company, including record revenue in the Semiconductor market, which grew 13% and outperformed Wafer Fabrication Equipment (“WFE”) spending growth for the fourth consecutive year. ​ We believe these accomplishments position us well to capture our largest SAM growth opportunities in the coming years. 32 Table of Contents Business Update ​ The Semiconductor industry has historically demonstrated cyclicality based on fluctuations in global chip demand and production capacity.
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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.
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Sales in the Semiconductor industry are estimated to have increased year-over-year in 2024 to around $650 billion dollars. Looking ahead, industry analysts are forecasting long-term growth of the industry, driven by secular growth trends such as artificial intelligence, high-performance computing, mobile connectivity, and the electrification of the automotive industry.
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In 2023, we penetrated our 3 rd Tier 1 logic customer and shipped multiple systems to this customer.
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Additionally, government investments in the Semiconductor industry are projected to accelerate global spending in next-generation technologies. ​ Growth in the Semiconductor industry, coupled with increasing technological complexity of Semiconductor chips, are expected to drive long-term growth in WFE spending.
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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.
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In an effort to improve chip performance, optimize power consumption, and reduce costs, today’s most advanced Semiconductor manufacturers are shrinking device geometries, investing in more complex transistor designs such as Gate-All-Around and exploring 3D architectures.
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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.
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As a result, growth of the WFE market is forecasted to keep pace with long-term growth of the Semiconductor industry, which we believe should benefit semiconductor capital equipment providers, including Veeco. ​ Our strategy of investing in advanced logic and memory has enabled our Semiconductor business to outperform WFE growth for four consecutive years.
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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.
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Veeco’s technologies are at the forefront of enabling new technical innovations in the manufacture of high-performance AI chips and High-Bandwidth Memory (“HBM”). We continue to invest in new technologies to expand our SAM to a broad range of new applications. ​ Semiconductor revenue increased by 13% in 2024 from the prior year, comprising 65% of total revenue.
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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.
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This increase was driven by our Laser Annealing business with both leading and mature node customers. Our laser annealing solutions continue to gain acceptance at advanced logic nodes, highlighted by recent order activity involving both new and existing customers. In 2024, we received laser annealing orders from, and shipped systems to several leading-edge logic customers, including for customers’ Gate-All-Around processes.
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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.
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This next generation system, the NSA500, covers the nano-second annealing regime and complements our LSA product. This new system is part of our continued effort to enable our customers’ product roadmap by providing innovative annealing solutions.
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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.
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Nanosecond annealing provides Veeco with an opportunity to expand our laser annealing SAM for new advanced node logic and memory applications, including low thermal budget anneals for Gate-All-Around transistors and advanced 3D devices. ​ The ongoing adoption of EUV Lithography for advanced node semiconductor manufacturing continues to drive demand for our Ion Beam Deposition LDD system for mask blanks.
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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.
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Leading logic and memory customers expect EUV and High-Numerical Aperture (“High-NA”) lithography to be integral to their future roadmaps, which our Ion Beam Deposition technology is a key enabler of.
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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.
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Our product roadmap is well positioned as the industry adopts next-generation High-NA EUV lithography, and we are expanding our EUV related business to new mask blank applications. ​ We also have two Ion Beam Deposition “IBD300” systems under evaluation at leading memory customers.
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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.
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Our IBD300 system provides Veeco with another opportunity to expand our SAM to advanced node applications where low resistance films are critical.
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As of December 31, 2023, we achieved three years of cumulative pretax income for our United States (“domestic”) operations.
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These initial systems are being evaluated for advanced memory applications, such as DRAM bitline. ​ 33 Table of Contents In Advanced Packaging, our Wet Processing systems are used for several applications, and we continue to see strong demand driven by Heterogenous Integration and 3D Packaging for AI.
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Approximately $7.7 million of undistributed earnings would be subject to foreign withholding taxes if distributed back to the United States.
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After two years of slow order activity driven by consumer markets, we are beginning to see an increase in quoting and order activity from IDM’s, foundries, and OSAT’s driven by capacity expansions for AI and mobile markets. ​ Looking ahead, we anticipate seeing growth in leading-edge investment driven by new nodes and AI-related demand, including investment in Gate-All-Around nodes, High-Bandwidth Memory, and 3D packaging for AI.
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In addition, we have access to a $150.0 million revolving credit facility (including an ability to request an additional $75.0 million, for a total commitment of no more than $225.0 million) to provide for our working capital needs and reimburse drawings under letters of credit and for other general corporate purposes.
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At the same time, recent engagement with customers in China has moderated, and we expect a decline in China revenue heading into 2025. ​ Veeco also serves customers in the Compound Semiconductor, Data Storage, and Scientific & Other markets.
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In addition, we have bank guarantees and letters of credit issued by a financial institution on our behalf as needed.
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Looking ahead, in the Silicon Carbide market, the slowdown in EV adoption has weakened demand as some customers continue their transition to 200mm production. Additionally, market penetration of our previously acquired Silicon Carbide technology has not met our expectations.
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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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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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.
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 77% of our total net sales in 2024. We expect that net sales to customers outside the United States will continue to represent a large percentage of our total net sales.
The economic impact of currency exchange rate movements is complex because such changes are often linked to variability in real growth, inflation, interest rates, governmental actions, and other factors. These changes, if material, could cause us to adjust our financing and operating strategies.
The economic impact of currency exchange rate 41 Table of Contents movements is complex because such changes are often linked to variability in real growth, inflation, interest rates, governmental actions, and other factors. These changes, if material, could cause us to adjust our financing and operating strategies.
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.
Our investment portfolio includes fixed-income securities with a fair value of approximately $198.7 million at December 31, 2024. These securities are subject to interest rate risk and, based on our investment portfolio at December 31, 2024, a 100 basis point increase in interest rates would result in a decrease in the fair value of the portfolio of $1.3 million.
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 net sales denominated in currencies other than the U.S. dollar represented approximately 5% of total net sales in 2024. ​ 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. ​
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We expect that net sales to customers outside the United States will continue to represent a large percentage of our total net sales.

Other VECO 10-K year-over-year comparisons