AXCELIS TECHNOLOGIES INC [ACLS] Filings

10-Q 1 acls-20230630x10q.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, 2023

☐

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)

(978) 787-4000

(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 July 31, 2023, there were 32,817,464 shares of the registrant’s common stock outstanding.

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PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022	3
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2023 and 2022	4
	Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	5
	Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022	6
	Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022	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

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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,
	2023		2022		2023		2022
Revenue:
Product	$	265,673	$	213,926	$	511,680	$	410,458
Services		8,297		7,251		16,310		14,314
Total revenue		273,970		221,177		527,990		424,772
Cost of revenue:
Product		146,741		115,754		289,512		223,395
Services		7,526		6,242		14,756		12,429
Total cost of revenue		154,267		121,996		304,268		235,824
Gross profit		119,703		99,181		223,722		188,948
Operating expenses:
Research and development		24,130		18,731		47,903		35,704
Sales and marketing		15,537		12,703		29,681		23,994
General and administrative		16,328		13,602		31,073		26,180
Total operating expenses		55,995		45,036		108,657		85,878
Income from operations		63,708		54,145		115,065		103,070
Other income (expense):
Interest income		4,307		352		8,243		447
Interest expense		(1,349)		(1,250)		(2,702)		(2,768)
Other, net		(2,050)		(5,051)		(3,088)		(6,669)
Total other income (expense)		908		(5,949)		2,453		(8,990)
Income before income taxes		64,616		48,196		117,518		94,080
Income tax provision		3,037		4,007		8,242		8,276
Net income	$	61,579	$	44,189	$	109,276	$	85,804
Net income per share:
Basic	$	1.88	$	1.34	$	3.34	$	2.59
Diluted	$	1.86	$	1.32	$	3.29	$	2.54
Shares used in computing net income per share:
Basic weighted average shares of common stock		32,775		33,096		32,759		33,170
Diluted weighted average shares of common stock		33,189		33,562		33,237		33,770

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

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Axcelis Technologies, Inc.

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)


	Three months ended				Six months ended
	June 30,				June 30,
	2023		2022		2023		2022
Net income	$	61,579	$	44,189	$	109,276	$	85,804
Other comprehensive loss:
Foreign currency translation adjustments		(1,011)		(2,685)		(961)		(3,871)
Amortization of actuarial net gain and other adjustments from pension plan, net of tax		—		8		—		17
Total other comprehensive loss		(1,011)		(2,677)		(961)		(3,854)
Comprehensive income	$	60,568	$	41,512	$	108,315	$	81,950

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

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Axcelis Technologies, Inc.

Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)


	June 30,		December 31,
	2023		2022
ASSETS
Current assets:
Cash and cash equivalents	$	132,504	$	185,595
Short-term investments		320,360		246,571
Accounts receivable, net		159,199		169,773
Inventories, net		299,841		242,406
Prepaid expenses and other current assets		38,265		33,300
Total current assets		950,169		877,645
Property, plant and equipment, net		43,156		39,664
Operating lease assets		31,998		12,146
Finance lease assets, net		17,305		17,942
Long-term restricted cash		6,652		752
Deferred income taxes		38,944		31,701
Other assets		33,494		33,791
Total assets	$	1,121,718	$	1,013,641
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	60,504	$	62,346
Accrued compensation		17,216		35,540
Warranty		10,867		8,299
Income taxes		6,598		4,304
Deferred revenue		138,890		123,471
Current portion of finance lease obligation		1,367		1,229
Other current liabilities		13,018		12,943
Total current liabilities		248,460		248,132
Long-term finance lease obligation		44,455		45,185
Long-term deferred revenue		43,650		31,306
Other long-term liabilities		41,116		21,762
Total liabilities		377,681		346,385
Commitments and contingencies (Note 16)
Stockholders’ equity:
Common stock, $0.001 par value, 75,000 shares authorized; 32,836 shares issued and outstanding at June 30, 2023; 32,775 shares issued and outstanding at December 31, 2022		33		33
Additional paid-in capital		540,120		550,299
Retained earnings		206,813		118,892
Accumulated other comprehensive loss		(2,929)		(1,968)
Total stockholders’ equity		744,037		667,256
Total liabilities and stockholders’ equity	$	1,121,718	$	1,013,641

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

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Axcelis Technologies, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


						(Accumulated		Accumulated
				Additional		Deficit)		Other		Total
	Common Stock			Paid-in		Retained		Comprehensive		Stockholders’
	Shares	Amount		Capital		Earnings		Income		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 stock 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 stock under Employee Stock Purchase Plan	15		—		711		—		—		711
Issuance of common stock 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


								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Retained		Comprehensive		Stockholders’
	Shares	Amount		Capital		Earnings		Loss		Equity
Balance at December 31, 2022	32,775	$	33	$	550,299	$	118,892	$	(1,968)	$	667,256
Net income	—		—		—		47,697		—		47,697
Foreign currency translation adjustments	—		—		—		—		50		50
Exercise of stock options	2		—		25		—				25
Issuance of common stock on restricted stock units, net of shares withheld	56		—		(3,907)		—		—		(3,907)
Stock-based compensation expense	—		—		3,199		—		—		3,199
Repurchase of common stock	(107)		—		(1,924)		(10,575)		—		(12,499)
Balance at March 31, 2023	32,726	$	33	$	547,692	$	156,014	$	(1,918)	$	701,821

Net income	—		—		—		61,579		—		61,579
Foreign currency translation adjustments	—		—		—		—		(1,011)		(1,011)
Issuance of stock under Employee Stock Purchase Plan	6		—		957		—		—		957
Issuance of common stock on restricted stock units, net of shares withheld	199		—		(11,558)		—		—		(11,558)
Stock-based compensation expense	—		—		4,749				—		4,749
Repurchase of common stock	(95)		—		(1,720)		(10,780)		—		(12,500)
Balance at June 30, 2023	32,836	$	33	$	540,120	$	206,813	$	(2,929)	$	744,037

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

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Axcelis Technologies, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Six months ended
	June 30,
	2023		2022
Cash flows from operating activities
Net income	$	109,276	$	85,804
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		6,258		5,724
Deferred income taxes		(7,413)		3,934
Stock-based compensation expense		7,948		6,228
Provision for excess and obsolete inventory		2,494		2,061
Accretion of discounts and premiums on marketable securities		(5,753)		—
Currency loss on foreign denominated transactions		5,717		—
Changes in operating assets and liabilities:
Accounts receivable		8,173		(45,783)
Inventories		(63,294)		(27,511)
Prepaid expenses and other current assets		(5,095)		(5,304)
Accounts payable and other current liabilities		(18,266)		1,507
Deferred revenue		28,075		3,290
Income taxes		2,324		(529)
Other assets and liabilities		(3,170)		(199)
Net cash provided by operating activities		67,274		29,222

Cash flows from investing activities
Expenditures for property, plant and equipment and capitalized software		(5,202)		(3,356)
Purchase of short-term investments		(188,943)		—
Maturities of short-term investments		120,907		—
Net cash used in investing activities		(73,238)		(3,356)

Cash flows from financing activities
Net settlement on restricted stock grants		(15,465)		(9,211)
Repurchase of common stock		(24,999)		(32,498)
Proceeds from Employee Stock Purchase Plan purchases		957		711
Principal payments on finance lease obligation		(598)		(475)
Proceeds from exercise of stock options		25		789
Net cash used in financing activities		(40,080)		(40,684)

Effect of exchange rate changes on cash and cash equivalents		(1,147)		7,058
Net decrease in cash, cash equivalents and restricted cash		(47,191)		(7,760)

Cash, cash equivalents and restricted cash at beginning of period		186,347		295,680
Cash, cash equivalents and restricted cash at end of period	$	139,156	$	287,920

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

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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, 2022 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. As of June 30, 2023, there have been no material changes in the Company’s significant accounting policies. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

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, 2022.

We recognized stock-based compensation expense of $4.7 million and $3.5 million for the three-month periods ended June 30, 2023 and 2022, respectively. We recognized stock-based compensation expense of $7.9 million and $6.2 million for the six-month periods ended June 30, 2023 and 2022, 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, 2023 and 2022, we issued 0.2 million and 0.2 million of common stock for purchases under the 2020 ESPP and vesting of RSUs, respectively. In the three-month period ended June 30, 2023, we received proceeds of $1.0 million for purchases under the 2020 ESPP. In the three-month period ended June 30, 2022, we received proceeds of $1.0 million in connection with the exercise of stock options and purchases under the 2020 ESPP.

In the six-month periods ended June 30, 2023 and 2022, we issued 0.3 million and 0.4 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, 2023 and 2022, we received proceeds of $1.0 million and $1.5 million, respectively, in connection with the exercise of stock options and purchases under the 2020 ESPP.

Note 3. Leases

We have operating leases for manufacturing, office space, warehouse space, computer and office equipment and vehicles used in our business operations. We have a finance lease in relation to the 2015 sale-leaseback of our corporate headquarters in Beverly, Massachusetts. We review all agreements to determine if the agreement contains a lease component. An agreement contains a lease component if it provides for the use of a specific physical space or a specific physical item.

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We recognize operating lease obligations under Accounting Standards Codification Topic 842, Leases. The guidance in Topic 842 requires recognition of lease assets and related liabilities 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 by one to three years. The exercise of lease renewal options is at our sole discretion. For lease extensions that are reasonably certain to occur, we have included the 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	2023		2022

Assets		(in thousands)
Operating leases	Operating lease assets	$	31,998	$	12,146
Finance lease	Finance lease assets*		17,305		17,942
Total leased assets		$	49,303	$	30,088
Liabilities
Current
Operating	Other current liabilities	$	5,544	$	5,367
Finance	Current portion of finance lease obligation		1,367		1,229
Non-current
Operating	Other long-term liabilities		25,979		6,931
Finance	Finance lease obligation		44,455		45,185
Total lease liabilities		$	77,345	$	58,712

*Finance lease assets are recorded net of accumulated depreciation of $46.5 million and include $0.6 million of prepaid financing costs as of June 30, 2023. Finance lease assets are recorded net of accumulated depreciation of $45.9 million and include $0.6 million of prepaid financing costs as of December 31, 2022.

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. Our state-of-the-art 98,500 square foot logistics and flex manufacturing center in Beverly, Massachusetts, which is anticipated to be fully operational in the second half of 2023, commenced during the three-months ended June 30, 2023. As a result, we recorded a right-of-use asset of $21.0 million, which includes approximately $1.0 million of prepaid rent, and a related liability of $20.0 million.

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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, 2023 and 2022 as follows:


		Three months ended				Six months ended
		June 30,				June 30,
Lease cost	Classification	2023		2022		2023		2022

Operating lease cost		(in thousands)
Product / services*	Cost of revenue	$	1,821	$	1,306	$	3,287	$	2,516
Research and development	Operating expenses		137		76		243		132
Sales and marketing*	Operating expenses		417		368		813		787
General and administrative*	Operating expenses		239		308		515		520
Total operating lease cost		$	2,614	$	2,058	$	4,858	$	3,955
Finance lease cost
Depreciation of leased assets	Cost of revenue, R&D, Sales and marketing and G&A	$	318	$	325	$	637	$	648
Interest on lease liabilities	Interest expense		1,223		1,274		2,454		2,532
Total finance lease cost		$	1,541	$	1,599	$	3,091	$	3,180

Total lease cost		$	4,155	$	3,657	$	7,949	$	7,135

* Product / services, sales and marketing and general and administrative expense also includes short-term lease and variable lease costs of approximately $0.5 million and $1.0 million for the three and six months ended June 30, 2023, respectively, and 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.

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 sixteen 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, 2023:


	Finance		Operating		Total
Maturity of Lease Liabilities	Leases		Leases		Leases

	(in thousands)
2023	$	3,063	$	4,335	$	7,398
2024		6,252		5,766		12,018
2025		5,930		4,308		10,238
2026		6,008		3,247		9,255
2027		6,128		2,411		8,539
Thereafter		61,586		25,080		86,666
Total lease payments	$	88,967	$	45,147	$	134,114
Less interest portion*		(43,145)		(13,624)		(56,769)
Finance lease and operating lease obligations	$	45,822	$	31,523	$	77,345

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

The table above does not include options to renew lease terms that are not reasonably certain of being exercised.

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	June 30,
Lease term and discount rate	2023
Weighted-average remaining lease term (years):
Operating leases		11.7
Finance leases		13.6
Weighted-average discount rate:
Operating leases		5.4%
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 ended June 30, 2023 and 2022, respectively:



	Six months ended June 30,
Cash paid for amounts included in the measurement of lease liabilities	2023		2022

	(in thousands)
Operating cash outflows from operating leases	$	4,858	$	3,955
Operating cash outflows from finance leases		2,454		2,509
Financing cash outflows from finance leases		598		475
Operating lease assets obtained in exchange for operating lease liabilities		23,289		4,714
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:

Three months ended

Six months ended

June 30,