Veeco Instruments Inc. (NASDAQ:VECO) Q4 2019 Earnings Conference Call - Final Transcript
Feb 13, 2020 • 04:30 pm ET
multiple ion beam deposition systems for EUV mask blank production. We optimized our MOCVD platform for photonics applications and shipped our first beta system to a premier compound semi customer.We developed a 300-millimeter single-wafer fully-automated MOCVD cluster tool and shipped, with acceptance, to a major front-end semiconductor fab. We updated our advanced packaging lithography product to improve its performance and we made major enhancements to our laser annealing product to improve our competitiveness at the next nodes.Regarding our market penetration objective, we had mixed results. We enjoyed great success in the EUV mask blank market, with our ion beam deposition systems. We have promising traction at very advanced nodes with our laser annealing product at two semiconductor industry leaders.
In advanced packaging, we are still experiencing soft market conditions for lithography products. And in the photonics market, we are disappointed with weak market condition for VCSELs. And lastly, regarding our objective of returning to profitability, throughout 2019 we improved our non-GAAP gross margin.Our Q4 2018 gross margin was 36% and we exited 2019 at 40.2%. Our non-GAAP operating expenses have been declining. Entering 2019, we're at $43 million in quarterly opex and are now at $38 million at the end of the fourth quarter. We also returned to non-GAAP profitability by posting two consecutive quarters of positive EPS in Q3 and Q4 of 2019.
On our balance sheet, our inventory improved throughout the year as well. We opened 2019 with $156 million in inventory and reduced that figure to $133 million by the end of Q4 2019. And now, for Q4 results.We capped off 2019 with solid execution in the fourth quarter. Revenue was $113 million, which was above the midpoint of our guidance. We achieved strong revenue in our front-end semiconductor market, driven by shipments of our EUV mask blank and laser annealing systems.Additionally, sales of our ion beam products to the data storage market remains solid. Non-GAAP gross margin was 40.2%, which was in line with guidance. We are happy to report non-GAAP operating income over $7.4 million, resulting in earnings per share of $0.11. Importantly, we generated $14 million in cash and we entered 2020 with positive momentum.
Looking at the full year 2019 non-GAAP results, our revenue was $419 million. During this transformational year, where we lost over $100 million of commodity LED revenue, we were able to generate $5 million in operating income. Our 13% second half revenue growth over first half exceeded our 10% outlook. And as forecasted, we exited the year with 40% gross margin and return to profitability with positive non-GAAP EPS in Q3 and Q4.Throughout the year, as part of our delayering, we eliminated over 30% of Vice-President-level and above positions, while trimming approximately 7% of our individual contributor positions. This was intentional approach to our infrastructure reduction and preserves our ability to execute. We also reorganized along product lines with central R&D organization, which enables us to better allocate our R&D spend to our highest priority project across the company.