Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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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, 2024

☐

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 29, 2024, there were 32,617,587 shares of the registrant’s common stock outstanding.

Table of Contents

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, 2024 and 2023	3
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2024 and 2023	4
	Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	5
	Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023	6
	Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023	7
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Overview	20
	Critical Accounting Estimates	20
	Results of Operations	21
	Liquidity and Capital Resources	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	28
PART II - OTHER INFORMATION		29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	30

Table of Contents

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,
	2024		2023		2024		2023
Revenue:
Product	$	245,380	$	265,673	$	488,798	$	511,680
Services		11,132		8,297		20,085		16,310
Total revenue		256,512		273,970		508,883		527,990
Cost of revenue:
Product		134,759		146,741		262,670		289,512
Services		9,344		7,526		17,753		14,756
Total cost of revenue		144,103		154,267		280,423		304,268
Gross profit		112,409		119,703		228,460		223,722
Operating expenses:
Research and development		25,786		24,130		51,448		47,903
Sales and marketing		17,230		15,537		34,675		29,681
General and administrative		16,583		16,328		32,988		31,073
Total operating expenses		59,599		55,995		119,111		108,657
Income from operations		52,810		63,708		109,349		115,065
Other income (expense):
Interest income		6,051		4,307		11,566		8,243
Interest expense		(1,339)		(1,349)		(2,684)		(2,702)
Other, net		(257)		(2,050)		(1,968)		(3,088)
Total other income		4,455		908		6,914		2,453
Income before income taxes		57,265		64,616		116,263		117,518
Income tax provision		6,399		3,037		13,803		8,242
Net income	$	50,866	$	61,579	$	102,460	$	109,276
Net income per share:
Basic	$	1.56	$	1.88	$	3.14	$	3.34
Diluted	$	1.55	$	1.86	$	3.12	$	3.29
Shares used in computing net income per share:
Basic weighted average shares of common stock		32,598		32,775		32,618		32,759
Diluted weighted average shares of common stock		32,771		33,189		32,848		33,237

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

Table of Contents

Axcelis Technologies, Inc.

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)


	Three months ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
Net income	$	50,866	$	61,579	$	102,460	$	109,276
Other comprehensive loss:
Foreign currency translation adjustments		(913)		(1,011)		(2,644)		(961)
Amortization of actuarial net gain and other adjustments from pension plan, net of tax		5		—		10		—
Total other comprehensive loss		(908)		(1,011)		(2,634)		(961)
Comprehensive income	$	49,958	$	60,568	$	99,826	$	108,315

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

Table of Contents

Axcelis Technologies, Inc.

Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)


	June 30,		December 31,
	2024		2023
ASSETS
Current assets:
Cash and cash equivalents	$	145,166	$	167,297
Short-term investments		403,143		338,851
Accounts receivable, net		188,080		217,964
Inventories, net		283,090		306,482
Prepaid income taxes		4,107		-
Prepaid expenses and other current assets		54,741		49,397
Total current assets		1,078,327		1,079,991
Property, plant and equipment, net		52,417		53,971
Operating lease assets		28,918		30,716
Finance lease assets, net		15,989		16,632
Long-term restricted cash		6,651		6,654
Deferred income taxes		55,441		53,428
Other assets		50,662		40,575
Total assets	$	1,288,405	$	1,281,967
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	45,782	$	54,400
Accrued compensation		16,069		31,445
Warranty		14,502		14,098
Income taxes		-		6,164
Deferred revenue		148,390		164,677
Current portion of finance lease obligation		1,452		1,511
Other current liabilities		17,984		12,834
Total current liabilities		244,179		285,129
Long-term finance lease obligation		43,004		43,674
Long-term deferred revenue		25,621		46,208
Other long-term liabilities		40,653		42,074
Total liabilities		353,457		417,085
Commitments and contingencies (Note 17)
Stockholders’ equity:
Common stock, $0.001 par value, 75,000 shares authorized; 32,617 shares issued and outstanding at June 30, 2024; 32,685 shares issued and outstanding at December 31, 2023		33		33
Additional paid-in capital		542,677		547,189
Retained earnings		396,718		319,506
Accumulated other comprehensive loss		(4,480)		(1,846)
Total stockholders’ equity		934,948		864,882
Total liabilities and stockholders’ equity	$	1,288,405	$	1,281,967

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

Table of Contents

Axcelis Technologies, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


								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


								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Retained		Comprehensive		Stockholders’
	Shares	Amount		Capital		Earnings		(Loss)		Equity
Balance at December 31, 2023	32,685	$	33	$	547,189	$	319,506	$	(1,846)	$	864,882
Net income	—		—		—		51,595		—		51,595
Foreign currency translation adjustments	—		—		—		—		(1,731)		(1,731)
Change in pension obligation	—		—		—		—		5		5
Issuance of common stock on restricted stock units, net of shares withheld	42		—		(2,699)		—		—		(2,699)
Stock-based compensation expense	—		—		4,690		—		—		4,690
Repurchase of common stock	(122)		—		(2,201)		(12,798)		—		(14,999)
Balance at March 31, 2024	32,605	$	33	$	546,979	$	358,303	$	(3,572)	$	901,743

Net income	—		—		—		50,866		—		50,866
Foreign currency translation adjustments	—		—		—		—		(913)		(913)
Change in pension obligation	—		—		—		—		5		5
Issuance of stock under Employee Stock Purchase Plan	10		—		1,242		—		—		1,242
Issuance of common stock on restricted stock units, net of shares withheld	143		—		(8,468)		—		—		(8,468)
Stock-based compensation expense	—		—		5,469				—		5,469
Repurchase of common stock	(141)		—		(2,545)		(12,451)		—		(14,996)
Balance at June 30, 2024	32,617	$	33	$	542,677	$	396,718	$	(4,480)	$	934,948

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,
	2024		2023
Cash flows from operating activities
Net income	$	102,460	$	109,276
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,636		6,258
Deferred income taxes		(2,013)		(7,413)
Stock-based compensation expense		10,159		7,948
Provision for doubtful accounts		(459)		—
Provision for excess and obsolete inventory		2,846		2,494
Accretion of discounts and premiums on marketable securities		(6,623)		(5,753)
Currency loss on foreign denominated transactions		11,505		5,717
Changes in operating assets and liabilities:
Accounts receivable		25,009		8,173
Inventories		12,951		(63,294)
Prepaid expenses and other current assets		(5,849)		(5,095)
Accounts payable and other current liabilities		(18,541)		(18,266)
Deferred revenue		(35,957)		28,075
Income taxes		(8,391)		2,324
Other assets and liabilities		(12,443)		(3,170)
Net cash provided by operating activities		82,290		67,274

Cash flows from investing activities
Expenditures for property, plant and equipment and capitalized software		(3,624)		(5,202)
Purchase of short-term investments		(249,015)		(188,943)
Maturities of short-term investments		191,345		120,907
Net cash used in investing activities		(61,294)		(73,238)

Cash flows from financing activities
Net settlement on restricted stock grants		(11,167)		(15,465)
Repurchase of common stock		(29,995)		(24,999)
Proceeds from Employee Stock Purchase Plan purchases		1,242		957
Principal payments on finance lease obligation		(736)		(598)
Proceeds from exercise of stock options		—		25
Net cash used in financing activities		(40,656)		(40,080)

Effect of exchange rate changes on cash and cash equivalents		(2,474)		(1,147)
Net decrease in cash, cash equivalents and restricted cash		(22,134)		(47,191)

Cash, cash equivalents and restricted cash at beginning of period		173,951		186,347
Cash, cash equivalents and restricted cash at end of period	$	151,817	$	139,156

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, 2023 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, 2024, there have been no material changes in the Company’s significant accounting policies, other than with respect to the Company’s accounting policy for derivative financial instruments, which it had not held in prior periods, as described in Note 2 below. 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, 2023, filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2024, as amended by Amendment No. 1 thereto, filed with the SEC on February 28, 2024 (as so amended, the “2023 Form 10-K”).

Note 2. Significant Accounting Policies

Derivative instruments

We are exposed to certain risks relating to our ongoing business operations, including market risks relating to fluctuations in foreign currency exchange rates. We have entered into forward exchange contracts in order to mitigate risks associated with fluctuations in exchange rates on forecasted transactions denominated in foreign currencies and to minimize the impact of foreign currency fluctuations on our earnings and cash flows. These contracts have month-to-month settlement dates. As of June 30, 2024, we had open contracts with a notional value of $111 million. We measure these instruments at fair value and recognize assets or liabilities associated with the intrinsic value on these open contracts on the Consolidated Balance Sheets at the end of each reporting period. At June 30, 2024, the recognized unrealized loss on these forward exchange contracts was approximately $323 thousand. Unrealized gains and losses are shown in our cash flows from operating activities within our Consolidated Statement of Cash Flows. We have not designated these forward exchange contracts as hedging instruments and we record changes in the fair values at each measurement date in Other, net on the Consolidated Statements of Operations. For the three and six months ended June 30, 2024, we recorded $2.3 million and $3.8 million of gain on forward currency exchange contracts, respectively.

We do not offset fair value amounts of derivative instruments. We do not use derivative instruments for speculative purposes.

Note 3. Stock-Based Compensation

We maintain the Axcelis Technologies, Inc. 2012 Equity Incentive Plan, as amended (the “2012 Equity 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 2023 Form 10-K.

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We recognized stock-based compensation expense of $5.5 million and $4.7 million for the three-month periods ended June 30, 2024 and 2023, respectively. We recognized stock-based compensation expense of $10.2 million and $7.9 million for the six-month periods ended June 30, 2024 and 2023, 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, 2024 and 2023, respectively, we issued 0.2 million shares of common stock upon vesting of RSUs granted under the 2012 Equity Plan and purchases under the 2020 ESPP. In the three-month period ended June 30, 2024 and 2023, we received proceeds of $1.2 million and $1.0 million, respectively, from purchases under the 2020 ESPP.

In the six-month period ended June 30, 2024 and 2023, we issued 0.2 million and 0.3 million shares of common stock, respectively, upon vesting of RSUs granted under the 2012 Equity Plan and purchases under the 2020 ESPP. In the six-month period ended June 30, 2024 and 2023, we received proceeds of $1.2 million and $1.0 million, respectively, in connection with purchases under the 2020 ESPP.

Note 4. 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.

We recognize operating lease obligations under Accounting Standards Codification Topic 842, Leases (“Topic 842”). 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 sheets; (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:

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		June 30,		December 31,
Leases	Classification	2024		2023

Assets		(in thousands)
Operating leases	Operating lease assets	$	28,918	$	30,716
Finance lease	Finance lease assets*		15,989		16,632
Total leased assets		$	44,907	$	47,348
Liabilities
Current
Operating	Other current liabilities	$	4,637	$	4,978
Finance	Current portion of finance lease obligation		1,452		1,511
Non-current
Operating	Other long-term liabilities		24,329		25,724
Finance	Finance lease obligation		43,004		43,674
Total lease liabilities		$	73,422	$	75,887

*Finance lease assets are recorded net of accumulated depreciation of $46.9 million and include $0.6 million of prepaid financing costs as of June 30, 2024. Finance lease assets are recorded net of accumulated depreciation of $46.4 million and include $0.6 million of prepaid financing costs as of December 31, 2023.

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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 101,800 square foot logistics and flex manufacturing center was built to our specifications in Beverly, Massachusetts. 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, 2024 and 2023 as follows:


		Three months ended				Six months ended
		June 30,				June 30,
Lease cost	Classification	2024		2023		2024		2023

Operating lease cost		(in thousands)
Product / services*	Cost of revenue	$	1,694	$	1,821	$	3,522	$	3,287
Research and development	Operating expenses		203		137		326		243
Sales and marketing*	Operating expenses		451		417		902		813
General and administrative*	Operating expenses		337		239		532		515
Total operating lease cost		$	2,685	$	2,614	$	5,282	$	4,858
Finance lease cost
Depreciation of leased assets	Cost of revenue, Research and development, Sales and marketing and General and administrative	$	321	$	318	$	643	$	637
Interest on lease liabilities	Interest expense		1,187		1,223		2,384		2,454
Total finance lease cost		$	1,508	$	1,541	$	3,027	$	3,091

Total lease cost		$	4,193	$	4,155	$	8,309	$	7,949

* Product / services, sales and marketing and general and administrative expense also includes short-term lease and variable lease costs of approximately $0.7 million and $1.3 million for the three and six months ended June 30, 2024, respectively, and 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.

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 16 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, 2024:


	Finance		Operating		Total
Maturity of Lease Liabilities	Leases		Leases		Leases

	(in thousands)
2024	$	3,132	$	3,740	$	6,872
2025		5,930		6,113		12,043
2026		6,008		4,448		10,456
2027		6,128		2,863		8,991
2028		6,251		1,959		8,210
Thereafter		55,336		23,205		78,541
Total lease payments	$	82,785	$	42,328	$	125,113
Less interest portion*		(38,329)		(13,362)		(51,691)
Finance lease and operating lease obligations	$	44,456	$	28,966	$	73,422

* 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	2024
Weighted-average remaining lease term (years):
Operating leases		11.5
Finance leases		12.6
Weighted-average discount rate:
Operating leases		5.5%
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 ended June 30, 2024 and 2023, respectively:



	Six months ended June 30,
Cash paid for amounts included in the measurement of lease liabilities	2024		2023

	(in thousands)
Operating cash outflows from operating leases	$	5,282	$	4,858
Operating cash outflows from finance leases		2,384		2,454
Financing cash outflows from finance leases		736		598
Operating lease assets obtained in exchange for operating lease liabilities		825		23,289
Finance lease assets obtained in exchange for new finance lease liabilities

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