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YoY shift: Lean +
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.32pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.33pp
Lean +
Net-tone change vs last year's 10-K.
MD&A
+0.32pp
Lean +
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+16
termination+11
adverse+5
failure+4
exposed+4
Positive rising
able+5
effective+4
satisfied+4
opportunities+2
superior+2
Risk Factors (Item 1A)
14,931 words
Item 1A. Risk Factors
Risk Factor Summary
An investment in shares of our common stock is subject to a number of risks that may prevent us from achieving our business objectives or otherwise adversely affect our business, results of operations or financial condition. The following list contains a summary of some, but not all, of these risks. You should read this summary together with the more detailed description of each risk factor contained below before making an investment decision.
Risks Related to Our Business and Industry
Unfavorable market conditions have adversely affected, and may adversely affect, our operating results.
We are exposed to risks of operating a global business.
Changes in trade policies, export controls, and the ongoing trade dispute between the U.S. and China have adversely affected, and may continue to adversely affect, our business, results of operations, and financial condition.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
critical+1
against+1
decline+1
closing+1
Positive rising
accomplished+2
effective+1
opportunity+1
improve+1
gain+1
MD&A (Item 7)
5,295 words
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. 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. 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 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2024 items and year-to-year comparisons between 2024 and 2023 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, 2024, filed on February 14, 2025.
Merger with Axcelis Technologies, Inc.
On September 30, 2025, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Axcelis Technologies, Inc., a Delaware corporation (“Axcelis”), and Victory Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Axcelis (“Merger Sub”). Pursuant to the Merger Agreement, and subject to the satisfaction or waiver of the conditions specified therein, Merger Sub shall be merged with and into Veeco (the “Merger”), with Veeco surviving as a wholly-owned subsidiary of Axcelis. The Merger Agreement was approved by our board of directors (except for one (1) independent director who serves on the Axcelis’ board of directors as well who recused himself) and, on February 6, 2026, by the stockholders of each company, but is still pending regulatory approvals and other customary mutual conditions. For more information regarding the previously announced merger with Axcelis, see Note 17 “Merger” to the accompanying Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
We may be unable to obtain required export licenses for the sale of our products.
We are exposed to risks and uncertainties related to changes in global trade policies, global trade disputes, and increased tariffs.
The timing of our orders, shipments, and revenue recognition may cause our quarterly operating results to fluctuate significantly.
We face significant competition.
We operate in industries characterized by rapid technological change.
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 may be unable to effectively enforce and protect our intellectual property rights.
Financial, Accounting and Capital Market Risks
Our operating results may be adversely affected by tightening credit markets.
We are subject to foreign currency exchange risks.
We may be required to take impairment charges on assets.
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.
Risks Related to the Planned Merger with Axcelis Technologies, Inc.
The planned merger with Axcelis Technologies, Inc. is subject to certain closing conditions, including the receipt of consents and approvals from governmental authorities, which may impose unexpecteddelays in the completion of the merger, or the merger may not be completed at all.
Failure to complete the Merger in a timely manner or at all could materially and adversely affect our stock price and future business and financial results.
The pendency of the Merger could materially and adversely affect our business and operations.
Our current stockholders will have a reduced ownership interest and voting power in the combined company after the Merger.
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General Risk Factors
The price of our common shares is volatile and could decrease.
Our inability to attract, retain, and motivate employees could have a material adverse effect on our business.
We are subject to risks of non-compliance with environmental, health, and safety regulations.
Key Risk Factors That May Impact Future Results
Stockholders should carefully consider the risk factors described below when evaluating the Company. Any of these factors, many of which are beyond our control, could materially and adversely affect our business, financial condition, operating results, cash flow, and stock price.
Risks Related to Our Business and Industry
Unfavorable market conditions have adversely affected, and may adversely affect, our operating results.
Conditions of the markets in which we operate are volatile and may experience significant deterioration. 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. 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. Our percentage revenue from the sale of products and the provision of services to non-U.S. customers was 85% for fiscal year 2025. 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:
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;
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;
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
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foreign country, which may necessitate the sharing of sensitive information and intellectual property rights;
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. However, further escalation of these or other conflicts could result in, among other negative consequences, a disruption to the global economy and supply chain leading to a shortage of parts, materials and services needed to manufacture and timely deliver our products (and we note that the Ukraine-Russia geographic region is a significance source of critical raw materials, including neon and palladium, used for semiconductor manufacturing). 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 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 trade policies, export controls, and the ongoing trade dispute 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. 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. 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. Commerce Department’s Unverified List and Entity List (including Swaysure Technology Co., Ltd., Semiconductor Manufacturing International Corporation, and certain similar and related entities), and the expansion of the foreign direct product rule to restrict the sale of certain products if certain named China customers or their 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. These changes have had, and will likely continue to have, a negative effect on our ability to sell and service certain equipment and for certain end users in China. The heightened export restrictions have resulted, and may continue to result, in confusion and shipping delays, as the new regulations are interpreted and applied, and may inhibit technical discussions with existing or prospective customers, negatively impacting our ability to pursue sales opportunities. 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
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China. 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 competitors’ products. These heightening restrictions, together with the prospect of additional governmental action (which has included and may include increases in tariffs, domestic and foreign, 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 2025 ban on exports to the United States of rare earth minerals which are used in certain of our products) and could trigger further retaliation (including the possible escalation of geopolitical tensions between China and Taiwan). In addition, China has provided, and is expected to continue to provide, significant assistance, financial and otherwise, to its domestic industries, including some of our competitors. We face increasing competition as a result of significant investment in the semiconductor industry by the Chinese government and various state-owned 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). In addition, the Chinese government may restrict us from participating in the China market or may prevent us from competing effectively with Chinese companies.
In the fourth quarter of 2025, two of our laser annealing systems shipped to customers in China were detained at the Port of San Francisco pending review by U.S. Customs and Border Protection (“CBP”) prior to export. Title, risk of loss and control transferred to the customers prior to year-end and we had satisfied the contractual conditions to seek payment under the applicable letters of credit. While both systems were subsequently released by CBP and thus recognized into revenue during the year ended December 31, 2025, we can provide no assurances as to whether U.S. government policy will impact future shipments to the impacted customers or other customers in China.
Further, trade-related government actions – including for example the addition, past and future, of China-based companies to the U.S. 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. In addition, we hold inventory of products that may be affected by trade-related government actions, or by potential order cancellations. 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 certain U.S. technology or made using certain tools with a U.S. nexus, are subject to the U.S. Export Administration Regulations (“EAR”) when exported, re-exported, or transferred to or within international jurisdictions. Local jurisdictions’ export regulations may also be applicable to individual shipments. Currently, our laser annealing, MOCVD, MBE, SiC and certain other systems and products are controlled for export under the EAR. Licenses or proper license exceptions may be required for the shipment of our products to or within certain customers or countries. Obtaining an export license or determining whether an export license exception exists often requires considerable effort by us and cooperation from the customer, which can add time to the order fulfillment process. 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). Furthermore, circumstances may arise where shipments are detained or export clearance is uncertain, which may impact the timing of revenue recognition or our ability to recognize revenue at all. Non-compliance with the EAR or other applicable export regulations could result in a wide range of penalties including the denial of export privileges, fines, criminalpenalties, and the seizure of commodities. 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.
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We are exposed to risks and uncertainties related to changes in global trade policies, global trade disputes, and increased tariffs.
In February of 2025, the U.S. Government issued proclamations imposing a 25% tariff on imports of steel and aluminum products (including derivative products). In April 2025, the U.S. Government announced a baseline tariff of 10% on imported products from all countries, plus additional individualized reciprocal tariffs on countries with whom the United States has the largest trade deficits. In response, affected foreign countries, including China and members of the European Union, announced, threatened and imposed retaliatory tariffs on U.S. imports. The tariff landscape continues to shift and evolve (including the recent Supreme Court decision on the legality of certain tariffs), creating considerable uncertainty for U.S. manufacturers, particularly those – such as Veeco – with global sales, supply chains and international operations.
Tariffs and other duties have increased, and will likely continue to increase, the cost of our parts and components. These increased costs have negatively impacted our margins and have caused us, in certain instances, to increase our prices to our customers, which may reduce demand for our products. Our customers, who may be confronted with the prospect of price and/or cost increases resulting from U.S. tariffs and tariffs imposed by their home country governments, may seek to cancel equipment orders with us, attempt to renegotiate terms in a manner unfavorable to Veeco, or cease to do business with us altogether. Furthermore, the current tariff landscape favors certain of our competitors with foreign manufacturing operations, which are not subject to U.S. tariffs nor foreign country tariffs imposed on the import of U.S. origin products.
The volatility and unpredictability of international trade policies and conditions add further complexity to our operations, making it extremely challenging to forecast and plan effectively. We are not able to predict future trade policy of the United States or of any foreign country in which we do business. The continuation or exacerbation of the current trade environment will adversely impact our costs and the demand for our products, which in turn could have a material adverse effect on our business, operating results and financial condition.
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 relatively small number of high-priced systems. As a result, the timing for the recognition of revenue for a single transaction could have a material effect on our sales and operating results for a particular fiscal period. As is typical in our industry, orders and shipments often occur during the last few weeks of a quarter. As a result, a delay of only a week or two can impact which period revenue is reported and can cause volatility in our revenue for a given reporting period. Our quarterly results have fluctuated significantly in the past and we expect this trend to continue.
We face significant competition.
We face significant competition throughout the world, which may increase as certain markets in which we operate continue to evolve. Some of our competitors have greater financial, engineering, manufacturing, and marketing resources than us. Other competitors are located in regions with lower labor costs and other reduced costs of operation. In addition, our ability to compete in foreign countries against local manufacturers may be hampered by nationalism, social attitudes, laws, regulations, and policies within such countries that favor local companies over U.S. companies or that are otherwise designed to promote the development and growth of local competitors. Furthermore, we face competition from smaller emerging equipment companies whose strategy is to provide a portion of the products and services we offer, with a focused approach on innovative technology for specialized markets. 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. Increased competitive pressure could also lead to intensified price competition resulting in lower profit margins.
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We operate in industries characterized by rapid technological change.
Each of the industries in which we operate is subject to rapid technological change. Our ability to remain competitive depends on our ability to enhance existing products and develop and manufacture new products in a timely and cost effective manner and to accurately predict technology transitions. 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. 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. Larger competitors resulting from consolidations may have certain advantages over us, including but not limited to more efficient cost structures, substantially greater financial and other resources, greater presence in key markets, and greater name recognition. 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. Our product designs and manufacturing processes are complex and could contain unexpected product defects, especially when products are first introduced. Unexpected product performance issues could result in significant costs and damages, including increased service and warranty expenses, the need to provide product replacements or modifications, reimbursement for damages caused by our products, product recalls, related litigation, product write-offs, and disposal costs. Product defects could also result in personal injury or property damage, claims for which may exceed our existing insurance coverages (as may other claims, notwithstanding our efforts to maintain a program of insurance coverage for a variety of property, casualty and other risks). 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.
We are exposed to risks related to the use of artificial intelligence by us and by our competitors.
Our success is subject to the risk of future disruptive technologies, including machine learning and artificial intelligence (“AI”). 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. AI technology is complex and rapidly evolving and its implementation can be costly. There is no guarantee that our use of AI will
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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. While it is not possible at this point to accurately identify or predict all of the risks related to the use of AI technologies, our failure to properly anticipate and timely respond to AI-related developments could adversely affect our business, financial condition, and results of operations.
Certain of our sales are dependent on the demand for consumer electronic products and automobiles, which can experience significant volatility.
The demand for semiconductors, HDDs and other devices is highly dependent on sales of consumer electronic products, such as smartphones, laptops, tablets and wearable devices. In addition, as a result of the growing automotive semiconductor market, semiconductor demand is also heavily influenced by the demand for automobiles. Factors that could affect the levels of spending on consumer electronic products and automobiles include consumer confidence, access to credit, volatility in fuel and other energy costs, conditions in the residential real estate and mortgage markets, labor and healthcare costs, and other macroeconomic factors affecting consumer spending behavior. The emergence of new or competing technologies may also affect demand for consumer electronic products. These and other factors have had and could continue to have an adverse effect on the demand for our customers’ products and, in turn, on our customers’ demand for our products and services. Furthermore, in the past, some of our customers have overestimated their potential for market share growth. If this growth is overestimated, we may experience cancellations of orders in backlog, rescheduling of customer deliveries, obsolete inventory, and liabilities to our suppliers for products no longer needed. 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. Orders from a relatively limited number of customers have accounted for, and likely will continue to account for, a substantial portion of our net sales, which may allow customers to demand pricing and other terms less favorable to us (including extended warranties, indemnification commitments, and the obligation to continue production of older products). Customer consolidation activity involving some of our largest customers could result in an even greater concentration of our sales in the future. Management changes at key customer accounts could result in a loss of future sales due to vendor preferences or other reasons and may introduce new challenges in managing customer relationships.
If these principal customers discontinue their relationship with us or suffer economic setbacks, our business, financial condition, and operating results could be materially and adversely affected. Our ability to increase sales in the future will depend in part upon our ability to obtain orders from new customers and we cannot be certain that we will be successful in these efforts. In addition, because a relatively small number of large manufacturers, many of whom are our customers, dominate the industries in which they operate, it may be especially difficult for us to replace these customers if we lose their business. A significant portion of orders in our backlog are orders from our principal customers.
In addition, a substantial investment is required by customers to install and integrate capital equipment into a production line. As a result, once a manufacturer has selected a particular vendor to supply capital equipment, the manufacturer will often attempt to consolidate its other capital equipment requirements with the same vendor. Accordingly, if a customer selects a competitor’s product over ours, we could experience difficulty selling to that customer for a significant period of time. Furthermore, we typically do not have long-term contracts with our customers. As a result, our agreements with our customers do not provide assurance of future sales, and we are exposed to competitive price pressures on new orders we attempt to obtain.
Our customer base is also highly concentrated in terms of geography, and the majority of our sales are to customers located in a limited number of countries. 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
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unrest, regional epidemics, terrorism, and acts of war. Our reliance upon customer demand arising primarily from a limited number of countries could materially and adversely impact our future results of operations.
The cyclicality of the industries we serve directly affects our business.
Our business depends in large part upon the capital expenditures of manufacturers in our four end-markets: Semiconductor; Compound Semiconductor; Data Storage; and Scientific & Other. We are subject to the business cycles of these industries, the timing, length, and volatility of which are difficult to predict. These industries have historically been highly cyclical and have experienced significant economic downturns in the last decade. 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. In downturns, we must be able to quickly and effectively align our costs with prevailing market conditions, as well as motivate and retain key employees. However, because a portion of our costs are fixed, our ability to reduce expenses quickly in response to revenue shortfalls may be limited. Downturns in one or more of these industries have had, and will likely have, a material adverse effect on our business, financial condition, and operating results. Alternatively, during periods of rapid growth, we must be able to acquire and develop sufficient manufacturing capacity to meet customer demand and attract, hire, assimilate, and retain a sufficient number of qualified people. 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. To meet these demands, we depend on the timely delivery of parts, components, and subassemblies from our suppliers. Uncertain worldwide economic conditions and market instabilities make it difficult for us (and our customers) to accurately forecast future product demand. If actual demand for our products is different than expected, we may purchase more or fewer parts than necessary or incur costs for canceling, postponing, or expediting delivery of parts. If we overestimate the demand for our products, excess inventory could result which could be subject to heavy price discounting, which could become obsolete, and which could subject us to liabilities to our suppliers for products no longer needed. Similarly, we may be harmed in the event that our competitors overestimate the demand for their products and engage in heavy price discounting practices as a result. In addition, the volatility of demand for capital equipment poses risks for companies in our supply chain, including challenges associated with inventory management and fluctuating working capital requirements.
Furthermore, certain key parts may be subject to long lead-times or may be obtainable only from a single supplier or limited group of suppliers, and some sourcing and assembly is provided by suppliers located in countries other than the United States. 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 may cause or exacerbateinterruptions in our manufacturing and supply chain operations. Any or all of these factors could materially and adversely affect our business, financial condition, and results of operations.
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We rely on a limited number of suppliers, some of whom are our sole source for particular components.
Certain of the parts, components, and sub-assemblies included in our products are obtained from a single source or a limited group of suppliers. Our inability to develop alternative sources, as necessary, could result in a prolongedinterruption 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. While we maintain some level of internal manufacturing capability for these systems, we rely on our outsourcing partners to perform their contracted functions to allow us flexibility to adapt to changing market conditions, including periods of significantly diminished order volumes. If our outsourcing partners do not perform as required, or if our outsourcing efforts do not allow us to realize the intended cost savings and flexibility, our results of operations (and those of our third-party providers) may be adversely affected. Disputes and possibly litigation involving third party providers could result and we could sufferdamage to our reputation. Dependence on outsourcing may also adversely affect our ability to bring new products to market. Although we attempt to select reputable providers, one or more of these providers could fail to perform as we expect. 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.
Our sales cycle is long and unpredictable.
Historically, we have experienced long and unpredictable sales cycles (the period between our initial contact with a potential customer and the time that we recognize revenue from resulting sales to that customer). It is not uncommon for our sales cycle to exceed twelve months. The timing of an order often depends on our customer’s capital expenditure budget, over which we have no control. In addition, the time it takes us to procure and build a product to customer specifications typically ranges from three to twelve months. When coupled with the fluctuating amount of time required for shipment and installation, our sales cycles often vary widely, and these variations can cause fluctuations in our operating results. As a result of our lengthy sales cycles, we may incur significant research and development, selling, general, and administrative expenses before we generate revenue for these products. We may never generate the anticipated revenue if a customer cancels or otherwise changes its purchase plans, or if our evaluation systems do not satisfy customer requirements (which could result in working capital constraints, excess inventory or inventory obsolescence, and other harm to the Company). 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. During these periods, little to no revenue will be recognized by us, while we will continue to incur research and development costs. Despite our efforts, our products may never be qualified and may never achieve design-tool-of-record (“DTOR”) or production-tool-of-record (“PTOR”) status, and our financial condition and results of operations may be materially and adversely affected.
Our backlog is subject to customer cancellation or modification which could result in decreased sales, increased inventory obsolescence, and liabilities to our suppliers for products no longer needed.
Customer purchase orders may be cancelled or rescheduled by the customer, sometimes with limited or no penalties, which may result in increased or unrecoverable costs for the Company. We adjust our backlog for such cancellations and contract modifications, among other items. A downturn in one or more of our businesses could result in an increase in
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order cancellations and postponements. Also, our backlog may be impacted if we are unable to complete shipments to customers because of export control issues.
We write-off excess and obsolete inventory based on historical trends, future usage forecasts, and other factors including the amount of backlog we have on hand. 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. 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. If our customers cancel their orders with us, we may not be able to cancel our orders with our suppliers. 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. 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. If we use cash to pay for an acquisition or investment, the payment could significantly reduce the cash that would be available to fund our operations, pay our indebtedness, or be used for other purposes, which could have a negative effect on our business.
In addition, we continually assess the strategic fit of our businesses and may from time to time seek to divest portions of our Company that no longer fit our strategic plan. Divestitures involve significant risks and uncertainties, including the ability to sell such businesses at satisfactory prices, on acceptable terms, and in a timely manner. Divestitures may also disrupt other parts of our businesses, distract the attention of our management, result in a loss of key employees or customers, and require that we allocate internal resources that would otherwise be devoted to operating our existing businesses. 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. 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. 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.
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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, anti-corruption, labor laws, immigration, accounting standards, financial disclosures, taxes, cybersecurity, customs, trade, corporate governance, conflict minerals, and antitrust regulations, among others. In addition, we are required to comply with laws and regulations pertaining to carbon emissions and other regulatory requirements addressing climate change concerns. These laws and regulations, which are ever-evolving and at times complex and inconsistent, impose costs on our business and divert management time and attention from revenue-generating activities. Changes to or ambiguities in these laws and regulations may create uncertainty regarding our compliance requirements. 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. In the ordinary course of our business, we collect, store, process and transmit significant amounts of sensitive information, including intellectual property, proprietary business information, personally-identifiable information of individuals, and other confidential information, including that of our customers and other business partners. It is critical that we do so in a secure manner to maintain the confidentiality, integrity, and availability of this sensitive information. We have also outsourced elements of our operations (including elements of our information technology infrastructure) to third parties, and as a result, we manage a number of third-party vendors who have access to our computer networks and our confidential information.
All information systems are subject to breach and disruption. Potential vulnerabilities can be exploited from inadvertent or intentional actions of our employees, third-party vendors, business partners, or by malicious third parties. Attacks of this nature are increasing in their frequency, levels of persistence, sophistication, and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of expertise and motives (including industrial espionage), including organized criminal groups, nation states, and others. In addition to the extraction of sensitive information, attacks could include the deployment of harmful malware, ransomware, or other means which could affect service reliability and threaten the confidentiality, integrity, and availability of information. These 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 new technologies, including AI and quantum computing, 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. Significant disruptions in our information technology systems (or those of our key suppliers, contract manufacturers, distributors, sales agents and other partners) or other data security incidents could adversely affect our business operations and result in the loss or misappropriation of, and unauthorized access to, sensitive information. 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 depends in part upon the protection of our intellectual property rights. We rely primarily on patent, copyright, trademark, and trade secret laws, as well as nondisclosure and confidentiality agreements and other methods, to protect our proprietary information, technologies, processes, and brand identity. We own various U.S. and international patents and have additional pending patent applications relating to certain of our products and technologies.
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The process of seeking patent protection is lengthy and expensive, and we cannot be certain that pending or future applications will result in issued patents or in patents which provide meaningful protection or commercial advantage. In addition, our intellectual property rights may be circumvented, invalidated, or rendered obsolete by the rapid pace of technological change, or through efforts by others to reverse engineer our products or design around patents that we own. Policing unauthorized use of our products and technologies is difficult and time consuming and the laws of other countries may not protect our proprietary rights as fully or as readily as U.S. laws. Given these limitations, our success will depend in part upon our ability to innovate ahead of our competitors.
In addition, our outsourcing efforts require that we share certain portions of our technology with our outsourcing partners, which poses additional risks of infringement and trade secret misappropriation. Infringement of our rights by a third party, possibly for purposes of developing and selling competing products, could result in uncompensated lost market and revenue opportunities. Similar exposure could result in the event that former employees seek to compete with us through their unauthorized use of our intellectual property and proprietary information. 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. As a result of any such litigation, we could lose our ability to enforce one or more patents, incur substantial costs, and jeopardize relationships with current or prospective customers or suppliers. Any action we take to enforce or defend our intellectual property rights could absorb significant management time and attention, and could otherwise negatively impact our operating results.
We may be subject to claims of intellectual property infringement by others.
We receive communications from time to time from other parties asserting the existence of patent or other rights which they believe cover certain of our products. We also periodically receive notices from customers who believe that we are required to indemnify them for damages they may incur related to infringementclaims made against these customers by third parties. Our customary practice is to evaluate such assertions and to consider the available alternatives, including whether to seek a license, if appropriate. However, we cannot ensure that licenses can be obtained or, if obtained, will be on acceptable terms or that costlylitigation or other administrative proceedings will not occur. If we are not able to resolve a claim, negotiate a settlement of the matter, obtain necessary licenses on commercially reasonable terms, or successfullyprosecute and defend our position, our business, financial condition, and results of operations could be materially and adversely affected.
Financial, Accounting and Capital Market Risks
Our operating results may be adversely affected by tightening credit markets.
As a global company with worldwide operations, we are subject to volatility and adverse consequences associated with economic downturns and recessions in different parts of the world. 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 increases in interest rates, prevent our customers from obtaining credit or necessary financing, product orders in these channels may decrease, which could result in lower revenue. In addition, we may experience cancellations of orders in backlog, rescheduling of customer deliveries, and attendant pricing pressures. If our suppliers face challenges in obtaining credit, in selling their products, or otherwise in operating their businesses, their ability to continue to supply materials to us may be negatively affected.
In addition, we finance some of our sales through trade credit. In addition to ongoing credit evaluations of our customers’ financial condition, we seek to mitigate our credit risk by obtaining deposits and letters of credit on certain of our sales arrangements. We could suffer significant losses if a customer whose accounts receivable we have not secured fails or is otherwise unable to pay us, or if financial institutions providing letters of credit become insolvent. A loss in collections on our accounts receivable would have a negative impact on our financial condition and results of operations.
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We are subject to foreign currency exchange risks.
We are exposed to foreign currency exchange rate risks that are inherent in our anticipated sales, purchase commitments, and assets and liabilities that are denominated in currencies other than the U.S. dollar. Although we attempt to mitigate our exposure to fluctuations in currency exchange rates, hedging activities may not always be available or adequate to mitigate the impact of our exchange rate exposure. 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. We are required to test certain of our assets, including acquired intangible assets, property, plant, and equipment, and equity investments without readily observable market prices, for recoverability and impairment whenever there are indicators of impairment such as an adverse change in business climate. 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 Epiluvac AB. 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, 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. As part of BEPS 2.0, the OECD has focused on ensuring multinational businesses with consolidated global revenues in excess of 750 million euros pay their tax in the 'right place' (Pillar 1) and at least at a 15% 'minimum rate' (Pillar 2) or higher in every jurisdiction in which they operate. In January 2026, the OECD released a “side-by-side” package introducing new safe harbors and providing an exemption for U.S.-based multinational companies from parts of the global minimum tax framework. This guidance is intended to simplify compliance and is generally favorable to the Company; it needs to be adopted by each country to be considered enacted for financial accounting purposes. We may be subject to the Pillar Two requirements in the future should our global revenues exceed the Pillar Two thresholds. In addition, changes to U.S. tax laws will significantly impact how U.S. multinational corporations are taxed on U.S. and foreign earnings. On July 4, 2025, the enactment of the One Big Beautiful Bill Act (“OBBBA”) provides significant corporate tax reforms, including the permanent reinstatement of deducting domestic research and development expenditures, and modifying the Global Intangible Low-Taxed Income (“GILTI”) and Foreign-Derived Intangible Income (“FDII”) rules. While we do not currently expect Pillar Two and OBBBA to have a material impact on our effective tax rate, we are in the process of assessing and monitoring potential impacts and developments. 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
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recognition and/or release of a valuation allowance. Any changes in the valuation allowance will have a direct impact on our effective tax rate. The realization of net deferred tax assets relies on our ability to generate future taxable income, and, as such, if the Company is unable to generate sufficient future taxable income, we may not obtain the full benefit of these deferred tax assets.
Finally, we are subject to income tax on a jurisdictional or legal entity basis and significant judgment is required in certain instances to allocate our taxable income to a jurisdiction and to determine the related income tax expense and benefits. Losses in one jurisdiction generally may not be used to offset profits in other jurisdictions. As a result, changes in the mix of our earnings (or losses) between jurisdictions, among other factors, could alter our overall effective income tax rate, possibly resulting in significant tax rate increases. 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, 2025, we had $230.0 million in principal amounts outstanding in 2029 Convertible Senior Notes (the “Notes”). In addition, as of December 31, 2025, we had an undrawn senior secured revolving credit facility (the “Credit Facility”) in an aggregate principal amount of $250.0 million, including a $15.0 million letter of credit sublimit.
These debt facilities (collectively, the “Debt Facilities”), contain certain covenant and other restrictions that may limit our ability to, among other things, incur additional debt or create liens, sell certain assets, and merge or consolidate with third parties, which may, in turn, preclude us from responding to changes in business and economic conditions, engaging in transactions that might otherwise be beneficial to us. Our ability to comply with some of these covenants is dependent on our future performance, which will be subject to many factors, some of which are beyond our control such as prevailing economic conditions. In addition, our failure to comply with these covenants could result in a default under the Debt Facilities, which could accelerate the debt. If any of our debt is accelerated, we may not have sufficient funds available to repay such debt, which could materially and negatively affect our financial condition and results of operation.
In addition, our ability to repurchase or to pay cash upon conversion of the Notes, or maturity of the Credit Facility, may be limited by law, by regulatory authority or by agreements governing our indebtedness that exist at the time of repurchase, conversion, or maturity. Our failure to settle the debt as required would constitute a default under the applicable debt facility and may lead to a default under the other debt facilities. If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness.
Finally, holders of the Notes will have the right to require us to repurchase all or any portion of their Notes upon the occurrence of a fundamental change before the maturity date. Additionally, in the event the conditional conversion features of the Notes are triggered, holders of Notes will be entitled to convert the Notes at any time during specified periods at their option. If one or more holders elect to convert the Notes, or if a fundamental change occurs before maturity, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted, which could adversely impact our liquidity. Additionally, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the Notes surrendered therefor or pay cash with respect to the Notes being converted. 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.
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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, 2025, we had U.S. federal R&D credits carryforwards of approximately $28.3 million expiring in varying amounts between 2040 and 2045. If we were to experience a “change in ownership” under Section 382 of the Internal Revenue Code (“Section 382”), the federal credits carry forward limitation under Section 383 of the Internal Revenue Code would impose an annual limit on the amount of tax liabilities that may be offset by R&D credits generated prior to the change in ownership. If an ownership change were to occur, we may be unable to use a significant portion of our R&D credit carryforwards to offset future tax liabilities.
The shares of common stock, if any, issued upon conversion of the Notes will, upon such issuance, be taken into account when determining the cumulative change in our ownership for Section 382 purposes. 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.
Risks Related to the Merger with Axcelis Technologies, Inc.
The planned merger with Axcelis Technologies, Inc. is subject to certain closing conditions, including the receipt of consents and approvals from governmental authorities, which may impose unexpecteddelays in the completion of the merger, or the merger may not be completed at all.
On September 30, 2025, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Axcelis Technologies, Inc., a Delaware corporation (“Axcelis”), and Victory Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Axcelis (“Merger Sub”). Pursuant to the Merger Agreement, and subject to the satisfaction or waiver of the conditions specified therein, Merger Sub will merge with and into Veeco (the “Merger”), with Veeco surviving as a wholly-owned subsidiary of Axcelis. See Note 17 “Merger” for additional information.
The Merger is currently expected to close during the second half of 2026, assuming that all of the conditions in the Merger Agreement are satisfied or waived. The Merger Agreement provides that either we or Axcelis may terminate the Merger Agreement if the Merger has not occurred by September 30, 2026 (subject to automatic extensions until as late as June 30, 2027 under certain conditions with respect to the receipt of regulatory approvals). Certain events may delay the completion of the Merger or result in a termination of the Merger Agreement. Some of these events are outside the control of either party. In particular, completion of the Merger requires the receipt of various government approvals.
If the Merger Agreement is terminated by Axcelis following a recommendation change of our board of directors, we will be required to pay a termination fee of $77,500,000 to Axcelis. In addition, if the Merger Agreement is terminated by Axcelis due to our breach of the Merger Agreement that would result in a failure of an applicable closing condition (subject to the applicable cure period set forth in the Merger Agreement), then we will be required to pay a fixed expense reimbursement amount of $15,000,000.
We may incur significant additional costs in connection with any delay in completing the Merger or termination of the Merger Agreement, in addition to significant transaction costs, including legal, financial advisory, accounting and other costs we have already incurred. We cannot provide any assurance that the conditions to the completion of the Merger will be satisfied or waived or that any adverse change, effect, event, circumstance, occurrence or state of facts that could give rise to the termination of the Merger Agreement will not occur, and we cannot provide any assurances as to whether or when the Merger will be completed on the terms or timeline set forth in the Merger Agreement or at all.
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Failure to complete the Merger in a timely manner or at all could materially and adversely affect our stock price and future business and financial results.
We can provide no assurance that the Merger will occur or that the conditions to the Merger will be satisfied in a timely manner or at all. Also, we can provide no assurance that an event, change or other circumstance that could give rise to the termination of the Merger Agreement will not occur. Delays in completing the Merger or the failure to complete the Merger at all could materially and adversely affect our future business and financial results, and, in that event, the market price of our common stock may decline significantly, particularly to the extent that the current market price reflects a market assumption that the Merger will be completed. If the Merger is delayed for any reason, we will be subject to several risks, including the diversion of management focus and resources from operational matters and other strategic opportunities while working to complete the Merger, any of which could materially and adversely affect our business, financial condition, results of operations, cash flows, and stock price.
The pendency of the Merger could materially and adversely affect our business and operations.
In connection with the pending Merger, some of our current or prospective customers, suppliers and other vendors, lenders or other business counterparties may delay or defer decisions concerning their business relationships or transactions with us, which could negatively impact our sales and revenue generation, margins, operating expenses, and profitability, regardless of whether the Merger is completed. In addition, under the Merger Agreement, we are restricted from entering into certain corporate transactions and taking certain other specified actions, and requires that we conduct our business in all material respects in the ordinary course and consistent with past practice until the completion of the Merger or the termination of the Merger Agreement. These restrictions, which could be in place for an extended period of time if the completion of the Merger is delayed, could prevent us from pursuing attractive business opportunities that may arise prior to completion of the Merger or from making appropriate changes to business or organizational structure. This could in turn materially and adversely impact our business, financial condition and results of operations.
The pendency of the Merger may also make it more difficult for us to effectively recruit, retain and incentivize key personnel and may cause distractions from our strategy and day-to-day operations for our current employees and management. Further, uncertainty about the effect of the Merger on our employees may have a material adverse effect on us during the pendency of the Merger, as this uncertainty may impair our ability to retain and motivate key personnel during the pendency of the Merger and the combined company’s ability to retain and motivate them following the Merger. Employee retention may be particularly challenging as our employees may experience frustration during the integration process and uncertainty about their future roles following consummation of the Merger.
Because the consideration to be received by our stockholders in connection with the Merger will include a fixed number of shares of Axcelis common stock, and the market price of such shares has fluctuated and will continue to fluctuate, our stockholders cannot be sure of the value of the consideration they will receive in the Merger.
Under the Merger Agreement, at the effective time of the Merger, each share of Veeco common stock (other than each share of Veeco common stock held in treasury or held or owned by Veeco, Axcelis or Merger Sub immediately prior to the effective time of the Merger) issued and outstanding immediately prior to the effective time of the Merger will be cancelled and converted into the right to receive 0.3575 newly issued shares of Axcelis common stock. The market value of the consideration our stockholders will receive in the Merger will therefore fluctuate with the market price of Axcelis common stock. The implied value of the Merger Consideration has fluctuated since the date of the announcement of the Merger Agreement and will continue to fluctuate until the date the Merger is completed, which could occur a considerable amount of time after the date hereof.
Prior to the completion of the Merger, the market price of Axcelis common stock, along with short selling activity in both our common stock and Axcelis common stock, has and is expected to continue to impact the market price of our common stock. The value of the merger consideration to be received by our stockholders has fluctuated since the date of the announcement of the Merger Agreement and will continue to fluctuate until the Merger is completed and thereafter. Accordingly, at the time of our special meeting, our stockholders will not know or be able to determine the market value of the consideration they would receive upon completion of the Merger. Stock price changes may result from a variety of factors, including, among others, interest rates, general market, industry, economic and geopolitical conditions, including
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the impact of continued inflation and associated changes in monetary policy, short-selling activity, changes in and speculation regarding our and Axcelis’ respective businesses, operations and prospects, market assessments of the likelihood that the Merger will be completed, the timing of the Merger and regulatory considerations. Many of these factors are beyond our and Axcelis’ control.
Under Delaware law, our stockholders are not entitled to an appraisal of the fair value of their shares in connection with the Merger.
Under Delaware law, holders of our common stock are not entitled to an appraisal of the fair value of their shares in connection with the Merger. Appraisal rights are statutory rights that enable stockholders to dissent from certain extraordinary transactions, such as certain mergers, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to stockholders in connection with the applicable transaction. Under Delaware law, appraisal rights are not available for the shares of any class or series if the shares of the class or series are listed on a national securities exchange or held of record by more than 2,000 holders on the record date, unless the stockholders receive in exchange for their shares anything other than shares of stock of the surviving or resulting corporation or of any other corporation that is publicly listed or held by more than 2,000 holders of record, cash proceeds from the sale of fractional shares or fractional depositary receipts or any combination of the foregoing. Our common stock is listed on the Nasdaq, and our stockholders will receive Axcelis common stock pursuant to the Merger Agreement and cash proceeds from the sale of fractional shares.
The market price of Axcelis common stock after the Merger may be affected by factors different from those affecting the market price of our common stock.
Upon completion of the Merger, holders of Veeco common stock will become holders of shares of Axcelis common stock. Our business differs from that of Axcelis in important respects, and, accordingly, the results of operations of Axcelis after the Merger, as well as the market price of Axcelis common stock, may be affected by factors different from those currently affecting our results of operations. Additionally, the market price of Axcelis common stock may fluctuate significantly following completion of the Merger.
Our current stockholders will have a reduced ownership interest and voting power in the combined company after the Merger.
Immediately following the Merger, our pre-Merger stockholders are expected to hold approximately 41.6% of the combined company’s common stock and the pre-Merger stockholders of Axcelis are expected to hold approximately 58.4% of the combined company’s common stock, in each case, calculated on a fully diluted basis.
Our stockholders and Axcelis’ stockholders currently have the right to vote for their respective directors and on certain other matters affecting their respective companies. If and when the Merger occurs, each Veeco stockholder who receives shares of Axcelis common stock will become an Axcelis stockholder with a percentage ownership of Axcelis that will be smaller than the stockholder’s current percentage ownership of Veeco (without considering such stockholder’s current ownership of our common stock, if any). Accordingly, our pre-Merger stockholders will have less voting power in us than they now have in Veeco and will be able to exercise less influence over the management and policies of the combined company following the consummation of the Merger than they are able to exercise over Veeco immediately prior to the consummation of the Merger.
An adverse judgment in a lawsuit challenging the Merger may prevent the Merger from becoming effective or from becoming effective within the expected timeframe.
Our stockholders may file lawsuits challenging the Merger or the other transactions contemplated by the Merger Agreement, which may name us and/or our board of directors as defendants. We cannot provide any assurance as to the outcome of such lawsuits, including the amount of costs associated with defending these claims or any other liabilities that may be incurred in connection with the litigation of these claims. One of the conditions to the completion of the Merger is that no injunction by any governmental entity of competent jurisdiction, such as a court, is in effect that prohibits, restrains or makes illegal the consummation of the Merger. As such, if any future legal actions result in an
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injunction prohibiting the consummation of the Merger, then such injunction may prevent the consummation of the Merger on the agreed terms, within the expected timeframe or at all, any of which could substantially harm our business. Whether or not any plaintiff’s claim is successful, this type of litigation may result in significant costs and divert management’s attention and resources, which could materially and adversely affect the operation of our business.
We are expected to incur significant costs in connection with the Merger and integration of the two companies, which may be in excess of those anticipated by us.
We have incurred and expect to continue to incur costs associated with negotiating and completing the Merger and combining the operations of the two companies. These costs have been, and will continue to be, substantial. The substantial majority of costs will consist of transaction costs related to the Merger and include, among others, fees paid to financial, legal and accounting advisors, filing fees, and employee retention and other employment-related costs. Many of these costs will be borne by us even if the Merger is not completed.
We will also incur transaction costs related to formulating and implementing integration plans, including facilities, systems and service contract consolidation costs and employment-related costs. We will continue to assess the magnitude of these costs, and additional unanticipated costs may be incurred in connection with the Merger and the integration of the two companies’ businesses. Although we expect that the elimination of duplicative costs, as well as the realization of other synergies related to the integration of the businesses, should allow the combined company to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all. The costs described above, as well as other unanticipated costs and expenses, could materially and adversely affect the results of operations, financial condition and cash flows of the combined company following the completion of the Merger.
The Merger Agreement contains provisions that limit our ability to pursue alternatives to the Merger, which could discourage a potential competing acquiror from making an alternative transaction proposal for greater consideration that what Axcelis has agreed to pay in the Merger.
The Merger Agreement contains provisions that preclude our ability to pursue alternatives to the Merger and require us to refrain from soliciting, initiating or knowinglyencouraging or knowingly inducing, or taking any other action intentionally designed to facilitate, any inquiries or the making of any competing proposals from third parties or to engage in discussions or negotiations with third parties regarding any competing proposals, subject to certain exceptions. With respect to any unsolicited written, bona fide acquisition proposal that we receive, if it is deemed to be a superior proposal, Axcelis generally has an opportunity to offer to modify the terms of the Merger Agreement in response to such proposal before our board of directors may withdraw or modify its recommendation to stockholders in response to such acquisition proposal or terminate the Merger Agreement to enter into a definitive agreement with respect to such acquisition proposal. Upon termination of the Merger Agreement under circumstances relating to a superior proposal, we may be required to pay a termination fee of $77,500,000 to Axcelis depending on the circumstances giving rise to the termination, which likely would discourage a potential third-party merger partner from making an alternative transaction proposal, even if it were prepared to pay consideration with a higher value than implied in the Merger, or cause such third-party to propose to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee.
Additionally, if the Merger Agreement is terminated and we determine to seek another business combination, we may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the Merger.
Directors and officers of Veeco may have interests in the Merger that may be different from, or in addition to, those of other our other stockholders, which could have influenced their decisions to support or approve the Merger.
Certain of our directors and officers have interests in the Merger that may differ from, or that are in addition to, their interests as our stockholders. William J. Miller, Ph.D., our Chief Executive Officer and a member of our board of directors, and certain other members of our board of directors, will continue as directors of the combined company after the consummation of the Merger, and will be eligible to be compensated as non-employee directors of the combined company. In addition, Dr. Miller, together with certain other Company officers, will be entitled to cash severance payments, certain health insurance coverage and the acceleration of outstanding equity awards in the event of an
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involuntarytermination in connection with a change of control of Veeco. Our board of directors (except for one (1) independent director who serves on the boards of both Axcelis and Veeco and thus recused himself) were aware of these interests at the time they approved the Merger Agreement. These interests may cause Dr. Miller and certain of our directors and officers to view the Merger differently than you may view it as a stockholder.
General Risk Factors
The price of our common shares is volatile and could decrease.
The stock market in general and the market for technology stocks in particular has experienced significant volatility. 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 2025 our stock price ranged from a closing high of $33.10 to a closing low of $17.35. 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; 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. 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. Competition for qualified design and technical personnel is intense, particularly in the semiconductor industry and especially when business cycles are improving. Competitors may try to recruit, and may succeed in recruiting, our most valuable technical employees. To attract and retain key employees, we must provide competitive compensation packages, including cash and stock-based compensation, among other benefits. If the value of our stock-based incentive awards decreases, or if our total compensation packages are not viewed as competitive, our ability to attract and retain key employees could suffer. We do not have key person life insurance on any of our executives, and we may not be able to readily replace key departed employees. Our inability to attract, retain, and motivate key personnel could have a significant negative effect on our business, financial condition, and results of operations.
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We are subject to risks of non-compliance with environmental, health, and safety regulations.
We are subject to environmental, health, and safety regulations in connection with our business operations, including but not limited to regulations relating to the development, manufacture and use of our products, recycling and disposal of related materials, and the operation and use of our facilities and real property. 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. 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, environmental contamination, and property damage. These events may cause a temporary shutdown of an affected facility, or portion thereof, and we could be subject to penalties or claims as a result. Each 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 and human rights, among others. These strategies, commitments and targets reflect our current plans and aspirations, and we may be unable 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. Third-party rating agencies have also established standards for a range of sustainability-related matters, which may be inconsistent and are subject to change. 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 climate change disclosure rules, and the European Union’s Corporate Sustainability Reporting Directive. Compliance with such laws and regulations, as well as increased scrutiny from regulators, could result in additional costs and expose us to new risks. 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.
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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. For example, our board of directors has the authority to issue up to 500,000 shares of preferred stock and to fix the rights (including voting rights), preferences and privileges of these shares (“blank check” preferred stock). Such preferred stock may have rights, including economic rights, senior to our common stock. As a result, the issuance of the preferred stock could have a material adverse effect on the price of our common stock and could make it more difficult for a third party to acquire a majority of our outstanding common stock.
In addition, our board of directors is divided into three classes with each class serving a staggered three-year term. The existence of a classified board makes it more difficult for our shareholders to change the composition of our board of directors, and therefore the Company’s policies, in a relatively short period of time. Furthermore, we have adopted certain certificate of incorporation and bylaws provisions which have anti-takeover effects. These include: (a) requiring certain actions to be taken at a meeting of shareholders rather than by written consent, (b) requiring a super-majority of shareholders to approve certain amendments to our bylaws, (c) limiting the maximum number of directors, and (d) providing that directors may be removed only for cause. 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. In addition, we are subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware, which prohibits a Delaware corporation from engaging in any business combination, including mergers and asset sales, with an interested stockholder (generally, a 15% or greater stockholder) for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. The 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 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. 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.
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Executive Summary
We are an innovative manufacturer of semiconductor process equipment. Our proven ion beam, laser annealing, lithography, MOCVD, and single wafer wet processing technologies play an integral role in the fabrication and packaging of advanced semiconductor devices. With equipment designed to optimize performance, yield and cost of ownership, Veeco holds leading technology positions in the markets we serve. To learn more about Veeco’s systems and service offerings, visit www.veeco.com.
Veeco executed well during 2025, and accomplished a number of milestones, including:
Accomplished year-on-year revenue semiconductor market growth, accounting for 72% of total Company revenue
Shipped a Laser Spike Annealing (“LSA”) system to a second Tier 1 memory customer for evaluation in its advanced DRAM R&D group. Penetrating the annealing market in the memory space, with our LSA system is an important growth opportunity.
Achieved steady growth in our Advanced Packaging business year-over-year driven by AI-related demand. Won multiple orders for advanced wet processing and lithography systems from leading foundries, supporting critical end markets through AI, automotive, aerospace, defense, and communications.
Received multiple orders in the Compound Semiconductor market for our Propel 300mm GaN on Silicon and Lumina+ Arsenide Phosphide new platforms, supporting end markets for AI data centers and low earth orbit space grade solar cells; these are revenue growth opportunities for 2026, principally in the second half.
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Received several orders in the Data Storage market for our ion beam and wet processing equipment from demand for cloud and AI data centers; these are revenue growth opportunities for 2026, principally in the second half.
Continued investments in next-generation technologies with our Nanosecond Annealing (“NSA”) system being evaluated at two Tier 1 logic customers and our Ion Beam Deposition 300 (“IBD300”) system being evaluated at two DRAM customers.
We believe these inflection points position us well to capture our largest SAM growth opportunities in 2026 and beyond.
Business Update
Sales in the Semiconductor industry are estimated to have increased year-over-year in 2025 to approximately $770 billion dollars, according to Gartner. 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. 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. 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. 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 continue to grow. 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 2% in 2025 from the prior year, comprising 72% of total revenue. 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 2025, we received laser annealing orders from, and shipped systems to several leading-edge logic customers and had multiple repeat orders from a DRAM customer. In the memory market, we continue to ship systems to Tier 1 customers for high volume production of HBM and advanced DRAM devices. We also shipped a LSA evaluation system to a second leading memory customer in the fourth quarter of 2025. While we continue to ship LSA systems to mature node customers in China, as anticipated this business has moderated and we expect to continue to see a decline heading into 2026. Our growth strategy remains predominately focused on advanced node logic and memory customers.
We have two next generation laser annealing systems under evaluation at Tier 1 foundry and logic customers. We also shipped and recognized revenue on our NSA500 tool to a logic customer in 2025. 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. 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 EUV system for mask blanks. Leading logic and memory customers expect EUV and High Numerical Aperture (“High-NA”) lithography to be integral to their future roadmaps, with our Ion Beam Deposition technology serving as a key enabler. 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 EUV pellicles which are increasingly
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being used to improve the productivity of EUV steps. Our IBD-EUV system is used to form the high transparency membrane used in pellicles.
We have two Ion Beam Deposition (“IBD300”) systems under evaluation at leading DRAM memory customers, which we have extended the evaluation into 2026. Our IBD300 system provides Veeco with another opportunity to expand our SAM to advanced node applications where low resistance films are critical. These initial systems are being evaluated for advanced memory applications, such as DRAM bitline.
In Advanced Packaging, we have seen significant growth in our business year-over-year. 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 and high-performance computing. Our Advanced Packaging lithography systems are used for packaging steps such Cu pillar and microbumps used in fan out wafer level packaging and other 2.5 and 3D advanced packaging solutions. We are seeing an uptick in the order activity from several OSAT customers driven by AI and consumer markets recovery.
Looking ahead, we anticipate seeing growth in the semiconductor market 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.
Veeco also serves 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 for 2025 declined from the prior year. However, we had significant order activity in the second half of 2025 for our new Propel 300 millimeter GaN on Silicon and Lumina+ arsenide phosphide platforms supporting GaN power, photonics and solar, which will drive revenue growth for 2026, principally in the second half.
Lastly, Veeco also addresses the Data Storage and Scientific & Other markets. In the Data Storage market we experienced a decline in revenue from 2025 compared to the prior year. However, we have seen new order activity and increased customer utilization rates driven by growth in end-market demand in data centers (AI and cloud) and as customers gain traction in new technologies like Heat Assisted-Magnetic-Recording (“HAMR”). Orders received in the third and fourth quarter of 2025 for our ion beam and wet processing equipment from demand for cloud and AI Data Centers, will drive revenue growth in 2026, principally in the second half.
Sales in the Scientific & Other market are largely driven by sales to governments, universities, and research institutions. 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 increased slightly in 2025 from the prior year.
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Results of Operations
Years Ended December 31, 2025 and 2024
The following table presents revenue and expense line items reported in our Consolidated Statements of Operations for 2025 and 2024 and the period-over-period dollar and percentage changes for those line items. Our results of operations are reported as one business segment, represented by our single operating segment.
For the year ended December 31,
Change
Period to Period
(dollars in thousands)
Net sales
Cost of sales
Gross profit
Operating expenses, net:
Research and development
Selling, general, and administrative
Amortization of intangible assets
Merger costs
Asset impairment
Other operating expense (income), net
Total operating expenses, net
Operating income
Interest income, net
Other income (expense), net
Income before income taxes
Income tax expense (benefit)
Net income
Not meaningful
Net Sales
The following is an analysis of sales by end-market and by region:
Year ended December 31,
Change
Period to Period
(dollars in thousands)
Sales by end-market
Semiconductor
Compound Semiconductor
Data Storage
Scientific & Other
Total
Sales by geographic region
United States
EMEA
China
Rest of APAC
Rest of World
Total
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Total sales decreased for the year ended December 31, 2025 against the comparable prior year period in the Data Storage and Compound Semiconductor markets, partially offset by increases in the Scientific & Other and Semiconductor markets. By geography, sales decreased in the China, U.S., and EMEA regions, partially offset by an increase in the Rest of APAC Region. Included within the Rest of APAC region for the year ended December 31, 2025 were sales in Taiwan and Japan of $178.8 million and $69.0 million, respectively, while sales within Rest of APAC region for the year ended December 31, 2024 included sales in Taiwan and Japan of $115.3 million and $67.4 million, respectively. We expect there will continue to be year-to-year variations in our future sales distribution across markets and geographies. 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, including the recent tariff and trade dynamics.
Gross Profit
In 2025, gross profit decreased compared to 2024 primarily due to a decrease in sales volume and gross margins. Gross margins decreased principally due to unfavorable product mix of sales and higher production and tariff related costs. We expect our gross margins to fluctuate each period due to product mix and other factors. Additionally, other factors will cause our gross margins to fluctuate each period. We expect higher costs in future periods as we incur tariffs on imported materials from overseas suppliers, as well as higher costs from domestic suppliers incurring tariffs on their imports.
Research and Development
The markets we serve are characterized by continuous technological development and product innovation, and we invest in various research and development initiatives to maintain our competitive advantage and achieve our growth objectives. Research and development expenses decreased in 2025 compared to 2024 primarily due to personnel-related and operating-related expenses as part of our efforts to manage costs.
Selling, General, and Administrative
Selling, general, and administrative expenses remained consistent for the year ended December 31, 2025 against the comparable prior period.
Amortization Expense
Amortization expense decreased in 2025 compared to 2024 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 and the full impairment of the Epiluvac related intangibles in 2024.
Merger Costs
During the year ended December 31, 2025, we incurred approximately $8.9 million in legal, accounting, consulting fees and employee-related costs in connection with the proposed Merger.
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
Other operating income for the year ended December 31, 2025 was $0.9 million, primarily comprised of a reduction in the expected earn-out payment to the previous shareholders of Epiluvac. Other operating income for the year ended December 31, 2024 was $22.3 million, primarily comprised of a reduction in the expected earn-out payments to the previous shareholders of Epiluvac, as well as proceeds from the sale of productive assets.
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Interest Income, net
For the year ended December 31, 2025, we recorded net interest income of $4.3 million, compared to $1.9 million of net interest income for the prior year. The increase in net interest income was primarily related to a decrease of interest expense of approximately $1.9 million due to a reduction in convertible note and bank guarantee interest expenses. Additionally, the company had an increase of approximately $0.6 million of interest income due to a higher average cash balances for 2025 compared to 2024.
Income Taxes
Our income tax expense for the year ended December 31, 2025, was $4.0 million, compared to income tax benefit of $4.9 million for the prior year. The 2025 income tax expense was primarily attributed to 1) a $8.3 million income tax expense associated with pre-tax income from operations, 2) a $3.1 million income tax expense related to adjustments made for share-based compensation, and 3) a $1.4 million income tax expense related to non-deductible merger costs, partially offset by 4) a $5.7 million income tax benefit related to foreign-derived intangible income, and 5) a $3.6 million tax benefit associated with research and development tax credits. The 2024 income tax benefit was primarily attributed to 1) $12.2 million of income tax benefits associated with asset impairments, 2) a $7.9 million income tax benefit related to research and development tax credits, and 3) a $5.1 million income tax benefit related to Foreign-Derived Intangible Income, partially offset by 4) a $20.3 million income tax expense related to pre-tax income from operations.
Liquidity and Capital Resources
Our cash and cash equivalents, restricted cash, and short-term investments are as follows:
December 31,
December 31,
(in thousands)
Cash and cash equivalents
Restricted cash
Short-term investments
Total
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. At December 31, 2025 and 2024, cash and cash equivalents of $23.6 million and $45.1 million, respectively, were held outside the United States. As of December 31, 2025, we had $25.6 million of accumulated undistributed earnings generated by our non-U.S. subsidiaries for which the U.S. repatriation tax has been provided. Approximately $12.3 million of undistributed earnings would be subject to foreign withholding taxes if distributed back to the United States and we accrued $1.1 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.
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A summary of the cash flow activity for the year ended December 31, 2025 and 2024 is as follows:
Cash Flows from Operating Activities
For the year ended December 31,
(in thousands)
Net income
Non-cash items:
Depreciation and amortization
Non-cash interest expense
Deferred income taxes
Share-based compensation expense
Asset impairment
Impairment of equity investment
Change in contingent consideration
Changes in operating assets and liabilities
Net cash provided by (used in) operating activities
Net cash provided by operating activities was $69.5 million for the year ended December 31, 2025 and was due to net income of $35.4 million and adjustments for non-cash items of $54.3 million, partially offset by a decrease in cash flow from changes in operating assets and liabilities of $20.2 million. The changes in operating assets and liabilities were largely attributable to an increase in inventories and accounts receivable, partially offset by an increase in contract liabilities.
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. 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.
Cash Flows from Investing Activities
For the year ended December 31,
(in thousands)
Capital expenditures
Changes in investments, net
Proceeds from the sale of productive assets
Net cash provided by (used in) investing activities
The cash used in investing activities during the year ended December 31, 2025 was primarily attributable to net cash used for capital expenditures and net investment activity. 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.
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Cash Flows from Financing Activities
For the year ended December 31,
(in thousands)
Settlement of equity awards, net of withholding taxes
Debt issuance costs
Repayment of convertible debt
Contingent consideration payment
Net cash provided by (used in) financing activities
The cash used in financing activities for the year ended December 31, 2025 was related to cash used to settle taxes related to employee equity programs, settlement of the 2027 Notes, and debt issuance costs associated with the execution of the Fourth Amendment of the Loan and Security Agreement, partially offset by cash received under the Employee Stock Purchase Plan. 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.
Convertible Senior Notes and Revolving Credit Facility
We have $230.0 million outstanding principal balance of 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 this debt. In addition, in June 2025, we increased the total funds available to us through our revolving credit facility from $225 million to $250 million and extended the maturity until June 16, 2030, subject to a springing maturity date of March 2, 2029. The Company has no immediate plans to draw down on the facility. Interest under the facility is variable based on the Company’s secured net leverage ratio and is expected to bear interest based on SOFR plus a range of 125 to 200 basis points, if drawn. There is a yearly commitment fee of 20 to 30 basis points, based on the Company’s secured net leverage ratio, charged on the unused portion of the Facility.
In connection with the Merger, the convertible senior notes will be assumed by Axcelis.
Contractual Obligations and Commitments
We have commitments under certain contractual arrangements to make future payments for goods and services, including purchase obligations of $150.8 million as of December 31, 2025 for inventory used in the manufacture of our products, as well as equipment and project materials used to support research and development activities. We generally do not enter into purchase commitments extending beyond one year. At December 31, 2025, we have $9.8 million of offsetting supplier deposits that will be applied against these purchase commitments. 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. At December 31, 2025, outstanding bank guarantees and letters of credit totaled $2.4 million and unused bank guarantees and letters of credit of $40.6 million were available to be drawn upon.
Lease Obligations
As of December 31, 2025, our future minimum lease payments was $48.9 million relating to various operating lease arrangements for certain facilities. 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.
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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. The preparation of these financial statements requires a high degree of judgment, either in the application and interpretation of existing accounting literature or in the development of estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. We continuously evaluate our estimates and judgments based on historical experience, as well as other factors that we believe to be reasonable under the circumstances. The results of our evaluation form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. 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. See Note 1 Significant Accounting Policies of our Consolidated Financial Statements for additional information regarding our accounting policies.
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. We perform the following five steps to determine when to recognize revenue: (1) identification of the contract(s) with customers, (2) identification of the performance obligations in the contract, (3) determination of the transaction price, (4) allocation of the transaction price to the performance obligations in the contract, and (5) recognition of revenue when, or as, a performance obligation is satisfied. Management uses judgements in identifying performance obligations, determining stand-alone selling price (“SSP”) for each distinct performance obligation, allocating consideration from an arrangement to the individual performance obligations based on the SSP, determining when transfer of control occurs to the customer, and estimating potential variable consideration including the probability that a significant reversal in the amount of cumulative revenue recognized will not occur. The SSPs are determined based on the prices at which we separately sell systems, upgrades, components, spare parts, installation, maintenance, and service plans. For items that are not sold separately, we estimate SSPs generally using an expected cost plus margin approach. 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. Each quarter we assess the valuation and recoverability of all inventories: materials (raw materials, spare parts, and service inventory); work-in-process; finished goods; and evaluation inventory at customer facilities. Obsolete inventory or inventory in excess of our estimated usage requirements is written down to its estimated net realizable value if less than cost. We evaluate usage requirements by analyzing historical usage, anticipated demand, alternative uses of materials, and other qualitative factors. Unanticipated changes in demand for our products may require a write down of inventory that could materially affect our operating results.
Income Taxes
We estimate our income taxes in each of the jurisdictions in which we operate. The calculation of our provision for income taxes and effective tax rate involves significant judgment in estimating the impact of uncertainties in the application of complex and evolving tax laws. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our results of operations and financial condition. Deferred income taxes reflect the net tax effect of temporary differences between the asset and liability balances recognized for financial reporting purposes and the balances used for income tax purposes, as well as the tax effect of carry forwards. 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. Deferred tax assets and
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liabilities are adjusted to reflect the effects of enacted changes in tax rates, laws and status, including changes in tax incentives.
Recent Accounting Pronouncements
We adopted ASU 2020-06 Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity effective January 1, 2022, ASU 2023-09 Improvements to Income Tax Disclosures (Topic 740) effective December 31, 2024, ASU 2024-04 Debt – Debt with Conversion and Other Options (Subtopic 470-20) effective June 30, 2025. We are also evaluating other pronouncements recently issued but not yet adopted, including 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.
