10-Q 1 acls-20220630x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from               to               

Commission file number 000-30941

AXCELIS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware

34-1818596

(State or other jurisdiction of
incorporation or organization)

(IRS Employer
Identification No.)

108 Cherry Hill Drive

Beverly, Massachusetts 01915

(Address of principal executive offices, including zip code)

(978787-4000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, $0.001 par value

ACLS

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No .

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company

If an emerging growth company, indicate by check mark if registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes  No 

As of August 2, 2022, there were 33,033,791 shares of the registrant’s common stock outstanding.

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021

3

Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2022 and 2021

4

Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

5

Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021

6

Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021

7

Notes to Consolidated Financial Statements (Unaudited)

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Overview

18

Critical Accounting Estimates

18

Results of Operations

19

Liquidity and Capital Resources

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

26

PART II - OTHER INFORMATION

27

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

27

Item 3.

Defaults Upon Senior Securities

27

Item 4.

Mine Safety Disclosures

27

Item 5.

Other Information

27

Item 6.

Exhibits

28

2

PART 1—FINANCIAL INFORMATION

Item 1.    Financial Statements.

Axcelis Technologies, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

Three months ended

Six months ended

June 30,

June 30,

    

2022

    

2021

    

2022

    

2021

    

Revenue:

Product

$

213,926

$

140,156

$

410,458

$

266,765

Services

 

7,251

 

7,118

 

14,314

 

13,285

Total revenue

 

221,177

 

147,274

 

424,772

 

280,050

Cost of revenue:

Product

 

115,754

 

76,688

 

223,395

 

147,022

Services

 

6,242

 

6,572

 

12,429

 

12,579

Total cost of revenue

 

121,996

 

83,260

 

235,824

 

159,601

Gross profit

 

99,181

 

64,014

 

188,948

 

120,449

Operating expenses:

Research and development

 

18,731

 

16,623

 

35,704

 

32,308

Sales and marketing

 

12,703

 

12,177

 

23,994

 

22,564

General and administrative

 

13,602

 

11,217

 

26,180

 

21,230

Total operating expenses

 

45,036

 

40,017

 

85,878

 

76,102

Income from operations

 

54,145

 

23,997

 

103,070

 

44,347

Other (expense) income:

Interest income

 

352

 

40

 

447

 

73

Interest expense

 

(1,250)

 

(1,274)

 

(2,768)

 

(2,303)

Other, net

 

(5,051)

 

(15)

 

(6,669)

 

(1,168)

Total other expense

 

(5,949)

 

(1,249)

 

(8,990)

 

(3,398)

Income before income taxes

 

48,196

 

22,748

 

94,080

 

40,949

Income tax provision

 

4,007

 

3,842

 

8,276

 

5,563

Net income

$

44,189

$

18,906

$

85,804

$

35,386

Net income per share:

Basic

$

1.34

$

0.56

$

2.59

$

1.05

Diluted

$

1.32

$

0.55

$

2.54

$

1.03

Shares used in computing net income per share:

Basic weighted average common shares

 

33,096

 

33,677

 

33,170

 

33,696

Diluted weighted average common shares

 

33,562

 

34,311

 

33,770

 

34,473

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

3

Axcelis Technologies, Inc.

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

Three months ended

Six months ended

June 30,

June 30,

    

2022

    

2021

    

2022

    

2021

    

Net income

$

44,189

$

18,906

$

85,804

$

35,386

Other comprehensive (loss) income:

Foreign currency translation adjustments

 

(2,685)

 

552

 

(3,871)

 

(820)

Amortization of actuarial gain and other adjustments from pension plan, net of tax

 

8

 

34

 

17

 

54

Total other comprehensive (loss) income

(2,677)

586

(3,854)

(766)

Comprehensive income

$

41,512

$

19,492

$

81,950

$

34,620

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

4

Axcelis Technologies, Inc.

Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)

    

June 30,

    

December 31,

 

2022

2021

 

ASSETS

Current assets:

Cash and cash equivalents

$

287,167

$

294,923

Accounts receivable, net

 

146,120

 

104,410

Inventories, net

 

213,063

 

194,984

Prepaid expenses and other current assets

 

33,378

 

24,929

Total current assets

 

679,728

 

619,246

Property, plant and equipment, net

 

35,572

 

34,972

Operating lease assets

10,879

9,242

Finance lease assets, net

18,590

19,238

Long-term restricted cash

 

753

 

757

Deferred income taxes

33,715

35,454

Other assets

 

32,499

 

34,331

Total assets

$

811,736

$

753,240

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

49,410

$

38,025

Accrued compensation

 

17,150

 

30,732

Warranty

 

8,348

 

6,424

Income taxes

 

321

 

887

Deferred revenue

 

62,685

 

60,454

Current portion of finance lease obligation

 

1,101

 

979

Other current liabilities

 

13,955

 

12,639

Total current liabilities

 

152,970

 

150,140

Long-term finance lease obligation

 

45,822

 

46,415

Long-term deferred revenue

 

8,864

 

7,982

Other long-term liabilities

 

17,153

 

9,744

Total liabilities

 

224,809

 

214,281

Commitments and contingencies (Note 16)

Stockholders’ equity:

Common stock, $0.001 par value, 75,000 shares authorized; 33,094 shares issued and outstanding at June 30, 2022; 33,240 shares issued and outstanding at December 31, 2021

 

33

 

33

Additional paid-in capital

 

549,401

 

559,883

Retained earnings (accumulated deficit)

 

39,582

 

(22,722)

Accumulated other comprehensive (loss) income

 

(2,089)

 

1,765

Total stockholders’ equity

 

586,927

 

538,959

Total liabilities and stockholders’ equity

$

811,736

$

753,240

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

5

Axcelis Technologies, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

Accumulated

 

Additional

Other

Total

 

Common Stock

Paid-in

Accumulated

Comprehensive

Stockholders’

 

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income (Loss)

    

Equity

 

Balance at December 31, 2020

33,633

$

34

$

570,102

$

(91,969)

$

3,435

$

481,602

Net income

 

 

 

 

16,480

 

 

16,480

Foreign currency translation adjustments

 

 

 

 

 

(1,372)

 

(1,372)

Change in pension obligation

 

 

 

 

 

20

 

20

Exercise of stock options

 

268

 

 

2,512

 

 

 

2,512

Issuance of common shares on restricted stock units, net of shares withheld

 

81

 

 

(2,354)

 

 

 

(2,354)

Stock-based compensation expense

2,407

2,407

Repurchase of common stock

 

(303)

 

 

(5,468)

 

(6,167)

 

 

(11,635)

Balance at March 31, 2021

 

33,679

$

34

$

567,199

$

(81,656)

$

2,083

$

487,660

Net income

 

 

 

 

18,906

 

 

18,906

Foreign currency translation adjustments

 

 

 

 

 

552

 

552

Change in pension obligation

 

 

 

 

 

34

 

34

Exercise of stock options

 

72

 

 

563

 

 

 

563

Issuance of shares under Employee Stock Purchase Plan

 

15

 

 

509

 

 

 

509

Issuance of common shares on restricted stock units, net of shares withheld

 

214

 

 

(4,141)

 

 

 

(4,141)

Stock-based compensation expense

3,377

3,377

Repurchase of common stock

(323)

 

 

(5,827)

 

(7,531)

 

 

(13,358)

Balance at June 30, 2021

 

33,657

$

34

$

561,680

$

(70,281)

$

2,669

$

494,102

(Accumulated

Accumulated

Additional

Deficit)

Other

Total

Common Stock

Paid-in

Retained

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Earnings

    

Income (Loss)

    

Equity

Balance at December 31, 2021

33,240

$

33

$

559,883

$

(22,722)

$

1,765

$

538,959

Net income

 

 

 

 

41,614

 

 

41,614

Foreign currency translation adjustments

 

 

 

 

 

(1,186)

 

(1,186)

Change in pension obligation

 

 

 

 

 

9

 

9

Exercise of stock options

 

41

 

 

491

 

 

 

491

Issuance of common shares on restricted stock units, net of shares withheld

 

67

 

 

(3,315)

 

 

 

(3,315)

Stock-based compensation expense

 

 

2,701

 

 

 

2,701

Repurchase of common stock

 

(284)

 

 

(5,127)

 

(14,873)

 

 

(20,000)

Balance at March 31, 2022

 

33,064

$

33

$

554,633

$

4,019

$

588

$

559,273

Net income

 

 

 

 

44,189

 

 

44,189

Foreign currency translation adjustments

 

 

 

 

 

(2,685)

 

(2,685)

Change in pension obligation

 

 

 

 

 

8

 

8

Exercise of stock options

 

25

 

 

298

 

 

 

298

Issuance of shares under Employee Stock Purchase Plan

 

15

 

 

711

 

 

 

711

Issuance of common shares on restricted stock units, net of shares withheld

 

205

 

 

(5,896)

 

 

 

(5,896)

Stock-based compensation expense

 

 

 

3,527

 

 

 

3,527

Repurchase of common stock

(215)

(3,872)

(8,626)

(12,498)

Balance at June 30, 2022

 

33,094

$

33

$

549,401

$

39,582

$

(2,089)

$

586,927

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

6

Axcelis Technologies, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Six months ended

June 30,

    

2022

    

2021

    

Cash flows from operating activities

Net income

$

85,804

$

35,386

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

 

5,724

 

5,336

Deferred income taxes

 

3,934

 

5,107

Stock-based compensation expense

 

6,228

 

5,784

Provision for excess and obsolete inventory

 

2,061

 

1,888

Changes in operating assets and liabilities:

Accounts receivable

 

(45,783)

 

7,091

Inventories

 

(27,511)

 

(32,418)

Prepaid expenses and other current assets

 

(5,304)

 

(3,309)

Accounts payable and other current liabilities

 

1,507

 

7,282

Deferred revenue

 

3,290

 

12,460

Income taxes

 

(529)

 

(27)

Other assets and liabilities

 

(199)

 

1,341

Net cash provided by operating activities

 

29,222

 

45,921

Cash flows from investing activities

Expenditures for property, plant and equipment and capitalized software

 

(3,356)

 

(2,392)

Net cash used in investing activities

 

(3,356)

 

(2,392)

Cash flows from financing activities

Net settlement on restricted stock grants

 

(9,211)

 

(6,495)

Repurchase of common stock

 

(32,498)

 

(24,993)

Proceeds from Employee Stock Purchase Plan purchases

 

711

 

508

Principal payments on finance lease obligation

(475)

(362)

Proceeds from exercise of stock options

789

3,075

Net cash used in financing activities

 

(40,684)

 

(28,267)

Effect of exchange rate changes on cash and cash equivalents

 

7,058

 

992

Net (decrease) increase in cash, cash equivalents and restricted cash

 

(7,760)

 

16,254

Cash, cash equivalents and restricted cash at beginning of period

 

295,680

 

204,232

Cash, cash equivalents and restricted cash at end of period

$

287,920

$

220,486

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

7

Axcelis Technologies, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 1.  Nature of Business

Axcelis Technologies, Inc. (“Axcelis” or the “Company”) was incorporated in Delaware in 1995 and is a producer of ion implantation equipment used in the fabrication of semiconductor chips in the United States, Europe and Asia. In addition, we provide extensive worldwide aftermarket service and support, including spare parts, equipment upgrades, used equipment and maintenance services to the semiconductor industry.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments which are of a normal recurring nature and considered necessary for a fair presentation of these financial statements have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for other interim periods or for the year as a whole.

The balance sheet at December 31, 2021 has been derived from the audited consolidated financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in Axcelis Technologies, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021.

Note 2.  Stock-Based Compensation

We maintain the Axcelis Technologies, Inc. 2012 Equity Incentive Plan, as amended (the “2012 Equity Plan”), an Internal Revenue Code Section 423 plan, which became effective on May 2, 2012, and permits the issuance of options, restricted stock, restricted stock units (“RSUs”) and performance awards to selected employees, directors and consultants of the Company.

The 2012 Equity Plan is more fully described in Note 13 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021.

We recognized stock-based compensation expense of $3.5 million and $3.4 million for the three-month periods ended June 30, 2022 and 2021, respectively. We recognized stock-based compensation expense of $6.2 million and $5.8 million for the six-month periods ended June 30, 2022 and 2021, respectively. These amounts include compensation expense related to RSUs, non-qualified stock options and stock to be issued to participants under the 2020 Employee Stock Purchase Plan (the “2020 ESPP”).

In the three-month periods ended June 30, 2022 and 2021, we issued 0.2 million and 0.3 million shares of common stock, respectively, upon stock option exercises, purchases under the 2020 ESPP and vesting of RSUs. In the three-month periods ended June 30, 2022 and 2021, we received proceeds of $1.0 million and $1.1 million, respectively, in connection with the exercise of stock options and purchases under the 2020 ESPP.

In the six-month periods ended June 30, 2022 and 2021, we issued 0.4 million and 0.7 million shares of common stock, respectively, upon stock option exercises, purchases under the 2020 ESPP and vesting of RSUs. In the six-month periods ended June 30, 2022 and 2021, we received proceeds of $1.5 million and $3.6 million, respectively, in connection with the exercise of stock options and purchases under the 2020 ESPP.

Note 3.  Leases

We have operating leases for office space, warehouse space, a manufacturing plant, computer and office equipment as well as vehicles used in our business operations. We have a finance lease as a result of the 2015 sale-leaseback of our corporate headquarters in Beverly, Massachusetts. All new agreements are reviewed to determine if they contain a lease component. A lease is a contract, or part of a contract, that conveys the right to control the use of identified

8

property, plant or equipment over a period of time in exchange for consideration. We recognize the lease obligation on a discounted basis using the explicit or implicit discount rate stated within the agreement. We recognize a corresponding right-of-use asset, which is initially determined based upon the net present value of the associated liability and is adjusted for deferred costs and possible impairment, if any. For those lease agreements that do not indicate the applicable discount rate, we use our incremental borrowing rate. We have made the following policy elections: (i) operating leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet; (ii) we recognize lease expense for operating leases on a straight-line basis over the lease term; and (iii) we account for lease components and non-lease components that are fixed payments as one component. Some of our operating leases include one or more options to renew, with renewal terms that can extend the respective lease term one to five years. The exercise of lease renewal options is at our sole discretion. For lease extensions that are reasonably certain to occur, we have included these renewal periods in our calculation of the net present value of the lease obligation and related right-of-use asset. Certain leases also include options to purchase the leased property. The depreciable life of certain assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The amounts of operating and finance lease right-of-use assets and related lease obligations recorded within our consolidated balance sheets are as follows:

June 30,

December 31,

Leases

Classification

2022

    

2021

    

 

Assets

(in thousands)

 

Operating leases

Operating lease assets

$

10,879

$

9,242

Finance lease

Finance lease assets *

 

18,590

 

19,238

Total leased assets

$

29,469

$

28,480

Liabilities

Current

Operating

Other current liabilities

$

4,983

$

4,716

Finance

Current portion of finance lease obligation

1,101

979

Noncurrent

Operating

Other long-term liabilities

5,800

4,357

Finance

Finance lease obligation

 

45,822

 

46,415

Total lease liabilities

$

57,706

$

56,467

*Finance lease assets are recorded net of accumulated depreciation of $49.2 million and includes $0.6 million of prepaid financing costs as of June 30, 2022. Finance lease assets are recorded net of accumulated depreciation of $48.6 million and includes $0.7 million of prepaid financing costs as of December 31, 2021.

All of our operating lease office locations support selling and servicing functions. Our Axcelis Asia Operations Center facility in South Korea brings production capability closer to our Asia-based customers. Operating lease expense and depreciation and interest expense relating to our finance lease obligation are recognized within our consolidated statement of operations for the three and six months ended June 30, 2022 and 2021 as follows:

9

Three months ended

Six months ended

 

June 30,

June 30,

Lease cost

Classification

2022

    

2021

    

2022

2021

    

 

Operating lease cost

(in thousands)

 

Product / Services

Cost of revenue

$

1,306

$

644

$

2,516

$

1,283

Research and development

Operating expenses

 

76

 

122

 

132

 

252

Sales and marketing*

Operating expenses

 

368

 

376

 

787

 

755

General and administrative*

Operating expenses

 

308

 

201

 

520

 

461

Total operating lease cost

$

2,058

$

1,343

$

3,955

$

2,751

Finance lease cost

Depreciation of leased assets

Cost of revenue, R&D, Sales and marketing and G&A

$

325

$

328

$

648

$

656

Interest on lease liabilities

Interest expense

 

1,274

 

1,274

 

2,532

 

2,553

Total finance lease cost

$

1,599

$

1,602

$

3,180

$

3,209

Total lease cost

$

3,657

$

2,945

$

7,135

$

5,960

* Sales and marketing and general and administrative expense also includes short-term lease and variable lease costs of approximately $0.6 million and $1.0 million for the three and six months ended June 30, 2022, respectively, and includes short-term and variable lease costs of approximately $0.4 million and $0.9 million for the three and six months ended June 30, 2021, respectively.

The lease of our corporate headquarters, shown below under finance leases, had an original lease term of 22 years, beginning in January 2015 and expiring in January 2037, with renewal options. All other locations are treated as operating leases, with lease terms ranging from one to ten years. The tables below reflect the minimum cash outflow regarding our current lease obligations as well as the weighted-average remaining lease term and weighted-average discount rates used in our calculation of our lease obligations and right-of-use assets as of June 30, 2022:

Finance

Operating

    

Total

 

Maturity of Lease Liabilities

Leases

Leases

Leases

(in thousands)

2022

$

2,995

$

2,793

$

5,788

2023

 

6,114

 

3,837

 

9,951

2024

 

6,252

 

1,709

 

7,961

2025

 

5,930

 

1,398

 

7,328

2026

6,008

1,147

7,155

Thereafter

67,715

487

68,202

Total lease payments

$

95,014

$

11,371

$

106,385

Less interest portion*

(48,091)

(588)

(48,679)

Finance lease and operating lease obligations

$

46,923

$

10,783

$

57,706

* Finance lease interest calculated using the implied interest rate; operating lease interest calculated using estimated corporate borrowing rate.

10

June 30,

Lease term and discount rate

    

2022

Weighted-average remaining lease term (years):

Operating leases

3.1

Finance leases

 

14.6

Weighted-average discount rate:

Operating leases

 

4.5%

Finance leases

 

10.5%

Our cash outflows from our operating leases include rent expense and other charges associated with these leases. These cash flows are included within the operating activities section of our statement of cash flows. Our cash flows from our finance lease include both an interest component and a principal component. The table below shows our cash outflows, by lease type and related section of our statement of cash flows, as well as the non-cash amount capitalized on our balance sheet in relation to our operating lease right-of-use assets for the six months ending June 30, 2022 and 2021, respectively:

Six months ended June 30,

Cash paid for amounts included in the measurement of lease liabilities

    

2022

    

2021

    

(in thousands)

Operating cash outflows from operating leases

$

3,955

$

2,751

Operating cash outflows from finance leases

 

2,509

 

2,556

Financing cash outflows from finance leases

 

475

 

362

Operating lease assets obtained in exchange for operating lease liabilities

 

4,714

 

4,192

Finance lease assets obtained in exchange for new finance lease liabilities

 

 

Note 4. Revenue

To reflect the organization of our business operations, we divide revenue into two categories: revenue from sales of new systems and revenue arising from the sale of used systems, parts and labor to customers who own systems, which we refer to as “Aftermarket.”

Revenue by categories used by management are as follows: