Veeco Instruments Inc. (NASDAQ:VECO) Q4 2015 Earnings Conference Call - Final Transcript
Feb 22, 2016 • 05:00 pm ET
The fourth quarter represented a solid finish to 2015 as our revenue, gross margin, adjusted EBITDA and EPS, all met or exceeded the midpoints of our guidance ranges. Our bookings performance recovered off of Q3 levels. However, LED industry conditions remain weak and our visibility remains limited.
Turning to the specifics, Q4 revenue was $107 million compared with $141 million in Q3. We have continued to see steady business in the MEMS and RF markets for our PSP products as well as incremental sales for Ion Beam Etch and MBE technologies. For example, in Q4 we took revenue on our MBE system used to produce high-end gallium arsenide RF switches. We also achieved record revenues from our service business driven by solid upgrade sales. Over the past year, we have focused on driving growth in services, which is a key element of our growth strategy. We have introduced a suite of service offerings to address our customers' critical production needs.
As guided, gross margins declined sequentially to 36.8%. However, they exceeded the high end of our range. A slightly stronger product mix helped to deliver better than expected gross margin. Operating expenses were $38 million and slightly above our guided range due to variable compensation expense. I would remind you that Q4 OpEx included a $2.5 million reimbursement for certain program related development costs. We are focused on balancing our expenses at R&D investments necessary to support future growth.
Non-GAAP EPS was approximately $0.01 per share based on a diluted share count of 41 million shares. Adjusted EBITDA amounted to $4.4 million, benefiting from better than expected gross margin.
Now turning to the market data, bookings improved to $107 million in Q4 and represented a record high for PSP, supported by strength in the advanced packaging, MEMS and RF markets. These markets accounted for 37% of total Q4 bookings with a majority derived from the mobile RF segment. RF orders grew by more than 300% quarter over quarter driven by incremental capacity investments for future smartphone demand. A majority of the RF device manufacturers utilize our PSP tool for production and we won business from a new customer this quarter, further strengthening our RF position.
We also saw significant momentum for PSP in advanced packaging as John will discuss shortly. We received production orders from multiple customers including a leading Asian foundry and penetration into an Asian OSAT. LED lighting and display accounted for 30% of total Q4 bookings. While this is a clear improvement over Q3, it still reflects the weak LED industry environment and the oversupply condition. Sales for certain applications, such as automotive LEDs, have been less impacted by current market conditions.
The vast majority of our MOCVD orders were for U.S. and Europe-based customers who have a more diversified product portfolio. Scientific and industrial bookings made up approximately 17% of total bookings. Orders increased sequentially on a dollar basis and were divided fairly evenly between MBE for advanced materials research and Ion Beam Deposition