0001558370-20-013115 | 10-Q | XBRL Viewer

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2020	Nov. 03, 2020
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2020
Entity File Number	000-30941
Entity Registrant Name	AXCELIS TECHNOLOGIES INC
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	34-1818596
Entity Address, Address Line One	108 Cherry Hill Drive
Entity Address, City or Town	Beverly
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	01915
City Area Code	978
Local Phone Number	787-4000
Title of 12(b) Security	Common Stock, $.001 par value
Trading Symbol	ACLS
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		33,496,006
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001113232
Amendment Flag	false

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenue:
Revenue	$ 110,405	$ 69,453	$ 352,361	$ 235,235
Cost of revenue:
Cost of revenue	62,244	38,872	206,752	135,399
Gross profit	48,161	30,581	145,609	99,836
Operating expenses:
Research and development	14,867	12,930	45,513	40,335
Sales and marketing	9,763	8,057	27,404	25,411
General and administrative	9,649	7,707	28,726	23,097
Total operating expenses	34,279	28,694	101,643	88,843
Income from operations	13,882	1,887	43,966	10,993
Other (expense) income:
Interest income	106	687	658	2,373
Interest expense	(1,296)	(1,308)	(3,898)	(3,849)
Other, net	900	(890)	701	(1,252)
Total other expense	(290)	(1,511)	(2,539)	(2,728)
Income before income taxes	13,592	376	41,427	8,265
Income tax provision (benefit)	2,807	(328)	6,119	943
Net income	$ 10,785	$ 704	$ 35,308	$ 7,322
Net income per share:
Basic (in dollars per share)	$ 0.32	$ 0.02	$ 1.06	$ 0.22
Diluted (in dollars per share)	$ 0.32	$ 0.02	$ 1.04	$ 0.22
Shares used in computing net income per share:
Basic weighted average common shares	33,477	32,344	33,159	32,584
Diluted weighted average common shares	34,174	33,323	34,070	33,821
Product
Revenue:
Revenue	$ 104,799	$ 64,290	$ 334,126	$ 217,201
Cost of revenue:
Cost of revenue	56,427	33,587	189,118	118,105
Services
Revenue:
Revenue	5,606	5,163	18,235	18,034
Cost of revenue:
Cost of revenue	$ 5,817	$ 5,285	$ 17,634	$ 17,294

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Consolidated Statements of Comprehensive Income
Net income	$ 10,785	$ 704	$ 35,308	$ 7,322
Other comprehensive income (loss):
Foreign currency translation adjustments	1,437	(1,132)	1,161	(1,847)
Amortization of actuarial loss and other adjustments from pension plan	61	29	175	89
Total other comprehensive income (loss)	1,498	(1,103)	1,336	(1,758)
Comprehensive income (loss)	$ 12,283	$ (399)	$ 36,644	$ 5,564

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 211,967	$ 139,881
Accounts receivable, net	45,161	83,753
Inventories, net	159,658	140,364
Prepaid expenses and other current assets	18,982	11,681
Total current assets	435,768	375,679
Property, plant and equipment, net	29,199	25,328
Operating lease assets	4,655	5,849
Finance lease assets, net	20,872	21,880
Long-term restricted cash	750	6,653
Deferred income taxes	58,247	68,060
Other assets	41,165	44,645
Total assets	590,656	548,094
Current liabilities:
Accounts payable	24,260	25,341
Accrued compensation	18,856	7,631
Warranty	4,151	2,759
Income taxes	328	294
Deferred revenue	13,118	24,601
Current portion of finance lease obligation	705	399
Other current liabilities	7,965	7,639
Total current liabilities	69,383	68,664
Long-term finance lease obligation	47,593	48,149
Long-term deferred revenue	3,851	4,650
Other long-term liabilities	9,166	7,204
Total liabilities	129,993	128,667
Commitments and contingencies (Note 16)
Stockholders? equity:
Common stock, $0.001 par value, 75,000 shares authorized; 33,491 shares issued and outstanding at September 30, 2020; 32,585 shares issued and outstanding at December 31, 2019	33	33
Additional paid-in capital	566,195	559,878
Accumulated deficit	(106,643)	(140,226)
Accumulated other comprehensive income (loss)	1,078	(258)
Total stockholders' equity	460,663	419,427
Total liabilities and stockholders' equity	$ 590,656	$ 548,094

Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Sep. 30, 2020	Dec. 31, 2019
Consolidated Balance Sheets
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	75,000	75,000
Common stock, shares issued	33,491	32,585
Common stock, shares outstanding	33,433	32,585

Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income (Loss)	Total
Balance (in shares) at Dec. 31, 2018	32,558
Balance at Dec. 31, 2018	$ 33	$ 565,116	$ (157,260)	$ 448	$ 408,337
Increase (Decrease) in Stockholders' Equity
Net income			6,062		6,062
Foreign currency translation adjustments				(495)	(495)
Change in pension obligation				30	30
Exercise of stock options (in shares)	288
Exercise of stock options		1,828			1,828
Issuance of restricted common shares, net of shares withheld (in shares)	35
Issuance of restricted common shares, net of shares withheld		(281)			(281)
Stock-based compensation expense		1,672			1,672
Balance (in shares) at Mar. 31, 2019	32,881
Balance at Mar. 31, 2019	$ 33	568,335	(151,198)	(17)	417,153
Balance (in shares) at Dec. 31, 2018	32,558
Balance at Dec. 31, 2018	$ 33	565,116	(157,260)	448	408,337
Increase (Decrease) in Stockholders' Equity
Net income					7,322
Foreign currency translation adjustments					(1,847)
Change in pension obligation					89
Balance (in shares) at Sep. 30, 2019	32,397
Balance at Sep. 30, 2019	$ 32	559,063	(149,938)	(1,310)	407,847
Balance (in shares) at Mar. 31, 2019	32,881
Balance at Mar. 31, 2019	$ 33	568,335	(151,198)	(17)	417,153
Increase (Decrease) in Stockholders' Equity
Net income			556		556
Foreign currency translation adjustments				(219)	(219)
Change in pension obligation				29	29
Exercise of stock options (in shares)	104
Exercise of stock options		567			567
Issuance of shares under Employee Stock Purchase Plan (in shares)	32
Issuance of shares under Employee Stock Purchase Plan		479			479
Issuance of restricted common shares, net of shares withheld (in shares)	165
Issuance of restricted common shares, net of shares withheld		(1,310)			(1,310)
Stock-based compensation expense		2,246			2,246
Repurchase of common stock (in shares)	(885)
Repurchase of common stock	$ (1)	(14,034)			(14,035)
Balance (in shares) at Jun. 30, 2019	32,297
Balance at Jun. 30, 2019	$ 32	556,283	(150,642)	(207)	405,466
Increase (Decrease) in Stockholders' Equity
Net income			704		704
Foreign currency translation adjustments				(1,132)	(1,132)
Change in pension obligation				29	29
Exercise of stock options (in shares)	97
Exercise of stock options		642			642
Issuance of restricted common shares, net of shares withheld (in shares)	3
Issuance of restricted common shares, net of shares withheld		(11)			(11)
Stock-based compensation expense		2,149			2,149
Balance (in shares) at Sep. 30, 2019	32,397
Balance at Sep. 30, 2019	$ 32	559,063	(149,938)	(1,310)	407,847
Balance (in shares) at Dec. 31, 2019	32,585
Balance at Dec. 31, 2019	$ 33	559,878	(140,226)	(258)	419,427
Increase (Decrease) in Stockholders' Equity
Net income			11,221		11,221
Foreign currency translation adjustments				(1,112)	(1,112)
Change in pension obligation				57	57
Exercise of stock options (in shares)	1
Exercise of stock options	$ 540	4,498			4,499
Issuance of shares under Employee Stock Purchase Plan (in shares)	1
Issuance of shares under Employee Stock Purchase Plan		19			19
Issuance of restricted common shares, net of shares withheld (in shares)	69
Issuance of restricted common shares, net of shares withheld		(1,162)			(1,162)
Stock-based compensation expense		1,724			1,724
Repurchase of common stock (in shares)	(358)
Repurchase of common stock	$ (1)	(5,775)	(1,725)		(7,501)
Balance (in shares) at Mar. 31, 2020	33
Balance at Mar. 31, 2020	$ 32,837	559,182	(130,730)	(1,313)	427,172
Balance (in shares) at Dec. 31, 2019	32,585
Balance at Dec. 31, 2019	$ 33	559,878	(140,226)	(258)	419,427
Increase (Decrease) in Stockholders' Equity
Net income					35,308
Foreign currency translation adjustments					1,161
Change in pension obligation					175
Balance (in shares) at Sep. 30, 2020	33,491
Balance at Sep. 30, 2020	$ 33	566,195	(106,643)	1,078	460,663
Balance (in shares) at Mar. 31, 2020	33
Balance at Mar. 31, 2020	$ 32,837	559,182	(130,730)	(1,313)	427,172
Increase (Decrease) in Stockholders' Equity
Net income			13,302		13,302
Foreign currency translation adjustments				836	836
Change in pension obligation				57	57
Exercise of stock options (in shares)	343
Exercise of stock options		2,783			2,783
Issuance of shares under Employee Stock Purchase Plan (in shares)	21
Issuance of shares under Employee Stock Purchase Plan		490			490
Issuance of restricted common shares, net of shares withheld (in shares)	232
Issuance of restricted common shares, net of shares withheld		(2,698)			(2,698)
Stock-based compensation expense		3,082			3,082
Balance (in shares) at Jun. 30, 2020	33,433
Balance at Jun. 30, 2020	$ 33	562,839	(117,428)	(420)	445,024
Increase (Decrease) in Stockholders' Equity
Net income			10,785		10,785
Foreign currency translation adjustments				1,437	1,437
Change in pension obligation				61	61
Exercise of stock options (in shares)	53
Exercise of stock options		458			458
Issuance of restricted common shares, net of shares withheld (in shares)	5
Issuance of restricted common shares, net of shares withheld		(28)			(28)
Stock-based compensation expense		2,926			2,926
Balance (in shares) at Sep. 30, 2020	33,491
Balance at Sep. 30, 2020	$ 33	$ 566,195	$ (106,643)	$ 1,078	$ 460,663

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from operating activities
Net income	$ 35,308	$ 7,322
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	7,346	5,583
Deferred income taxes	5,399	818
Stock-based compensation expense	7,727	6,140
Provision for excess and obsolete inventory	2,736	1,961
Changes in operating assets & liabilities:
Accounts receivable	39,109	29,232
Inventories	(18,611)	(16,602)
Prepaid expenses and other current assets	(2,704)	(155)
Accounts payable and other current liabilities	10,540	(22,887)
Deferred revenue	(12,292)	4,864
Income taxes	29	(185)
Other assets and liabilities	1,080	(16,436)
Net cash provided by (used in) operating activities	75,667	(345)
Cash flows from investing activities
Expenditures for property, plant and equipment and capitalized software	(5,567)	(11,064)
Net cash used in investing activities	(5,567)	(11,064)
Cash flows from financing activities
Net settlement on restricted stock grants	(3,888)	(1,602)
Repurchase of common stock	(7,501)	(14,035)
Proceeds from Employee Stock Purchase Plan	509	407
Principal payments on finance lease obligation	(252)
Proceeds from exercise of stock options	7,740	3,039
Net cash used in financing activities	(3,392)	(12,191)
Effect of exchange rate changes on cash and cash equivalents	(525)	871
Net increase (decrease) in cash, cash equivalents and restricted cash	66,183	(22,729)
Cash, cash equivalents and restricted cash at beginning of period	146,534	184,902
Cash, cash equivalents and restricted cash at end of period	$ 212,717	$ 162,173

Nature of Business

9 Months Ended

Sep. 30, 2020

Nature of Business

Nature of Business

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, 2019 has been derived from the audited consolidated financial statements at that date but does not include all of 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, 2019.

Stock Based Compensation

9 Months Ended

Sep. 30, 2020

Stock Based Compensation

Stock Based Compensation

Note 2. Stock-Based Compensation

We maintain the Axcelis Technologies, Inc. 2012 Equity Incentive Plan (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. Our 2000 Stock Plan (the “2000 Stock Plan”) expired on May 1, 2012 and no new grants may be made under that plan after that date. However, unexpired options granted under the 2000 Stock Plan, which have a 10-year term, remain outstanding and subject to the terms of the 2000 Stock Plan. We also maintain the Axcelis Technologies, Inc. 2020 Employee Stock Purchase Plan (the “2020 ESPP”), an Internal Revenue Code Section 423 plan.

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, 2019. Note 13 also describes our prior Employee Stock Purchase Plan which expired on June 30, 2020 (the “Prior ESPP”). No shares have yet been issued under the 2020 ESPP, but its terms are substantially the same as those of the Prior ESPP.

We recognized stock-based compensation expense of $2.9 million and $2.1 million for the three month periods ended September 30, 2020 and 2019, respectively. We recognized stock-based compensation expense of $7.7 million and $6.1 million for the nine month periods ended September 30, 2020 and 2019, respectively. These amounts include compensation expense related to RSUs, non-qualified stock options and stock issued to participants under the Prior ESPP.

In both the three month periods ended September 30, 2020 and 2019, we issued 0.1 million shares of common stock, respectively, upon stock option exercises and vesting of RSUs. In the three month periods ended September 30, 2020 and 2019, we received proceeds of $0.5 million and $0.6 million, respectively, in connection with the exercise of stock options and Prior ESPP purchases.

In the nine month periods ended September 30, 2020 and 2019, we issued 1.3 million and 0.7 million shares of common stock, respectively, upon stock option exercises, purchases under the Prior ESPP and vesting of RSUs. In the nine month periods ended September 30, 2020 and 2019, we received proceeds of $8.3 million and $3.4 million, respectively, in connection with the exercise of stock options and Prior ESPP purchases.

Leases

9 Months Ended

Sep. 30, 2020

Leases

Leases

Note 3. Leases

We have operating leases for office space, warehouse space, computer and office equipment and 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 property, plant or equipment for 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 1 to 3 years. The exercise of lease renewal options are 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:


		September 30,		December 31,
Leases	Classification	2020		2019

Assets		(in thousands)
Operating lease	Operating lease assets	$	4,655	$	5,849
Finance lease	Finance lease assets *		20,872		21,880
Total leased assets		$	25,527	$	27,729
Liabilities
Current
Operating	Other current liabilities	$	2,632	$	3,144
Finance	Current portion of finance lease obligation		705		399
Noncurrent
Operating	Other long-term liabilities		1,955		2,553
Finance	Finance lease obligation		47,593		48,149
Total lease liabilities		$	52,885	$	54,245

* Finance lease assets are recorded net of accumulated depreciation of $48.1 million and include $0.7 million of prepaid financing costs as of September 30, 2020. Finance lease assets are recorded net of accumulated depreciation of $47.4 million and include $0.7 million of prepaid financing costs as of December 31, 2019.

All of our operating lease office locations support selling and servicing functions. 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 nine months ended September 30, 2020 and 2019 as follows:


		Three months ended				Nine months ended
		September 30,				September 30,
Lease cost	Classification	2020		2019		2020		2019

Operating lease cost		(in thousands)
Service	Cost of revenue	$	601	$	552	$	1,776	$	1,732
Research and development	Operating expenses		137		80		347		232
Sales and marketing*	Operating expenses		347		338		1,024		1,037
General and administrative*	Operating expenses		213		207		648		608
Total operating lease cost		$	1,298	$	1,177	$	3,795	$	3,609
Finance lease cost
Depreciation of leased assets	Cost of revenue, R&D, Sales and marketing and G&A	$	328	$	332	$	1,009	$	997
Interest on lease liabilities	Interest expense		1,296		1,308		3,898		3,849
Total finance lease cost		$	1,624	$	1,640	$	4,907	$	4,846

Total lease cost		$	2,922	$	2,817	$	8,702	$	8,455

* Sales and marketing, general and administrative expense includes short-term lease and variable lease costs of approximately $0.3 million and $0.8 million for the three and nine months ended September 30, 2020, respectively and includes short-term lease and variable lease costs of approximately $0.2 million and $0.6 million for the three and nine months ended September 30, 2019, respectively.

Our corporate headquarters, shown below under finance leases, has an original lease term of 22 years. All other locations are treated as operating leases, with lease terms ranging from 1 to 10 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 September 30, 2020:


	Finance		Operating		Total
Maturity of Lease Liabilities	Leases		Leases		Leases

	(in thousands)
2020	$	1,433	$	935	$	2,368
2021		5,848		2,447		8,295
2022		5,980		1,128		7,108
2023		6,114		337		6,451
2024		6,252		98		6,350
Thereafter		79,653		219		79,872
Total lease payments	$	105,280	$	5,164	$	110,444
Less interest portion*		(56,982)		(577)		(57,559)
Finance lease and operating lease obligations	$	48,298	$	4,587	$	52,885

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


	September 30,
Lease term and discount rate	2020
Weighted-average remaining lease term (years):
Operating leases		1.5
Finance leases		16.3
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 payment of 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:


	Nine months ended
	September 30,
Cash paid for amounts included in the measurement of lease liabilities	2020		2019

	(in thousands)
Operating cash outflows from operating leases	$	3,795	$	3,609
Operating cash outflows from finance leases		4,035		4,193
Financing cash outflows from finance leases		252		—
Operating lease assets obtained in exchange for operating lease liabilities		1,658		6,175
Finance lease assets obtained in exchange for new finance lease liabilities	$	—	$	—

Revenue

9 Months Ended

Sep. 30, 2020

Revenue.

Revenue

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				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019

	(in thousands)
Systems	$	70,239	$	36,809	$	229,391	$	131,124
Aftermarket		40,166		32,644		122,970		104,111
	$	110,405	$	69,453	$	352,361	$	235,235

We also consider revenue by geography. Revenue is allocated to geographic markets based upon the location to which our products are shipped and in which our services are performed. Revenue in our principal geographic markets is as follows:


	Three months ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019

	(in thousands)
North America	$	9,022	$	7,681	$	28,598	$	28,670
Asia Pacific		89,995		47,756		293,427		160,398
Europe		11,388		14,016		30,336		46,167
	$	110,405	$	69,453	$	352,361	$	235,235

Our system sales revenue transactions give rise to contract liabilities (in the case of pre-payments and the fair value of goods and services to be delivered after the system delivery, such as installation and certain warranty obligations).

Contract liabilities are as follows:


	September 30,		December 31,
	2020		2019

	(in thousands)
Contract liabilities	$	16,969	$	29,251

Contract liabilities are reflected as deferred revenue on the consolidated balance sheet and relate to payments invoiced or received in advance of completion of performance obligations under a contract. Contract liabilities are recognized as revenue upon the fulfillment of performance obligations.


	Three months ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019

	(in thousands)
Balance, beginning of the period	$	30,416	$	14,080	$	29,251	$	22,584
Deferral of revenue		4,030		17,254		10,320		20,887
Recognition of deferred revenue		(17,477)		(3,893)		(22,602)		(16,030)
Balance, ending of the period	$	16,969	$	27,441	$	16,969	$	27,441

The majority of our system transactions have payment terms of 90% due upon shipment of the tool and 10% due upon acceptance. Aftermarket transaction payment terms usually provide that payment is due either within 30 or 60 days after the service is provided or parts delivered.

Receivables and Allowances for Credit Losses

9 Months Ended

Sep. 30, 2020

Receivables and Allowances for Credit Losses

Receivables and Allowances for Credit Losses

Note 5. Receivables and Allowances for Credit Losses

All trade receivables are reported on the Consolidated Balance Sheets at their amortized cost adjusted for any write-offs and net of allowances for credit losses.

Axcelis maintains an allowance for credit losses, which represent an estimate of expected losses over the remaining contractual life of its receivables considering current market conditions and estimates for supportable forecasts when appropriate. The estimate is a result of the Company’s ongoing assessments and evaluations of collectability, historical loss experience, and future expectations in estimating credit losses in its receivable portfolio. Axcelis uses historical loss experience rates and applies them to a related aging analysis while also considering customer and/or economic risk where appropriate. Determination of the proper amount of allowances requires management to exercise judgment about the timing, frequency and severity of credit losses that could materially affect the provision for credit losses and, as a result, net earnings. The allowance takes into consideration numerous quantitative and qualitative factors that include receivable type, historical loss experience, loss migration, delinquency trends, collection experience, current economic conditions, estimates for supportable forecasts, when appropriate, and credit risk characteristics.

Axcelis evaluates the credit risk of the customer when extending credit based on a combination of various financial and qualitative factors that may affect its customers’ ability to pay. These factors may include the customer’s financial condition, past payment experience, and credit bureau report, as well as the value of the underlying collateral.

Management performs detailed reviews of its receivables on a quarterly basis to assess the adequacy of the allowances and to determine if any impairment has occurred. Amounts determined to be uncollectable are charged directly against the allowances, while amounts recovered on previously written-off accounts increase the allowances. Changes to the

allowances for credit losses are maintained through adjustments to the provision for credit losses, which are charged to current period earnings.

The following table shows changes of the allowances for credit losses related to trade receivables for the three and nine months ended September 30, 2020:


	Three months ended		Nine months ended
	September 30,		September 30,
	2020		2020

	(in thousands)
Balance, beginning of period	$	—	$	818
Provision for credit losses		—		—
Charge-offs		—		(818)
Recoveries		—		—
Balance, ending of period	$	—	$	—

Computation of Net Earnings per Share

9 Months Ended

Sep. 30, 2020

Computation of Net Earnings per Share

Computation of Net Earnings per Share

Note 6. Computation of Net Earnings per Share

Basic earnings per share is computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased by the number of additional common shares that would have been outstanding if the potentially dilutive common shares issuable on exercise of stock options and vesting of RSUs had been issued, calculated using the treasury stock method.

The components of net earnings per share are as follows:


	Three months ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019

	(in thousands, except per share amounts)
Net income available to common stockholders	$	10,785	$	704	$	35,308	$	7,322
Weighted average common shares outstanding used in computing basic income per share		33,477		32,344		33,159		32,584
Incremental options and RSUs		697		979		911		1,237
Weighted average common shares used in computing diluted net income per share		34,174		33,323		34,070		33,821
Net income per share
Basic	$	0.32	$	0.02	$	1.06	$	0.22
Diluted	$	0.32	$	0.02	$	1.04	$	0.22

Diluted weighted average common shares outstanding does not include 848 and 847,448 common equivalent shares issuable with respect to outstanding equity awards for the three month periods ended September 30, 2020 and 2019, respectively, or 8,226 and 236,229 common equivalent shares issuable with respect to outstanding equity awards for the nine month periods ending September 30, 2020 and 2019, respectively, as their effect would have been anti-dilutive.

Accumulated Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2020

Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Income (Loss)

Note 7. Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in accumulated other comprehensive income, net of tax, by component, for the nine months ended September 30, 2020:


	Foreign		Defined benefit
	currency		pension plan		Total

	(in thousands)
Balance at December 31, 2019	$	518	$	(776)	$	(258)
Other comprehensive income and pension reclassification		1,161		175		1,336
Balance at September 30, 2020	$	1,679	$	(601)	$	1,078

Cash, cash equivalents and restricted cash

9 Months Ended

Sep. 30, 2020

Cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash

Note 8. Cash, cash equivalents and restricted cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheet to the total of the amounts shown in the statement of cash flows:


	September 30,		December 31,
	2020			2019

	(in thousands)
Cash and cash equivalents	$	211,967	$	139,881
Long-term restricted cash		750		6,653
Total cash, cash equivalents and restricted cash	$	212,717	$	146,534

As of September 30, 2020, we had $0.8 million in restricted cash representing the total of (i) cash collateral for a $0.7 million letter of credit relating to workers’ compensation insurance and (ii) a $0.1 million deposit relating to customs activity.

Inventories, net

9 Months Ended

Sep. 30, 2020

Inventories, net

Inventories, net

Note 9. Inventories, net

The components of inventories are as follows:


	September 30,		December 31,
	2020		2019

	(in thousands)
Raw materials	$	93,990	$	95,867
Work in process		42,643		32,131
Finished goods (completed systems)		23,025		12,366
Inventories, net	$	159,658	$	140,364

When recorded, inventory reserves reduce the carrying value of inventories to their net realizable value. We establish inventory reserves when conditions exist that indicate inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand for the Company’s products or market conditions. We regularly evaluate the ability to realize the value of inventories based on a combination of factors including the following: forecasted sales or usage, estimated product end of life dates, estimated current and future market value and new product introductions. Purchasing and usage alternatives are also explored to mitigate inventory exposure.

Product Warranty

9 Months Ended

Sep. 30, 2020

Product Warranty

Product Warranty

Note 10. Product Warranty

We generally offer a one-year warranty for all of our systems, the terms and conditions of which vary depending upon the product sold. For all systems sold, we accrue a liability for the estimated cost of standard warranty at the time of system shipment and defer the portion of systems revenue attributable to the fair value of non-standard warranty. Costs for non-standard warranty are expensed as incurred. Factors that affect our warranty liability include the number of installed units, historical and anticipated product failure rates, material usage and service labor costs. We periodically assess the adequacy of our recorded liability and adjust the amount as necessary.

The changes in our standard product warranty liability are as follows:


	Nine months ended
	September 30,
	2020		2019

	(in thousands)
Balance at January 1 (beginning of year)	$	3,244	$	5,091
Warranties issued during the period		3,780		2,282
Settlements made during the period		(3,131)		(4,405)
Changes in estimate of liability for pre-existing warranties during the period		584		523
Balance at September 30 (end of period)	$	4,477	$	3,491

Amount classified as current	$	4,151	$	3,251
Amount classified as long-term		326		240
Total warranty liability	$	4,477	$	3,491

Fair Value Measurements

9 Months Ended

Sep. 30, 2020

Fair Value Measurements

Fair Value Measurements

Note 11. Fair Value Measurements

Certain assets on our balance sheets are reported at their fair value. Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

(a) Fair Value Hierarchy

The accounting guidance for fair value measurement requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:

Level 1 - applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 - applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 - applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

(b) Fair Value Measurements

Our money market funds and short-term investments are included in cash and cash equivalents in the consolidated balance sheets.

The following table sets forth our assets by level within the fair value hierarchy:


	September 30, 2020
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total

	(in thousands)
Assets
Cash equivalents:
Money market funds, U.S. Government Securities and Agency Investments	$	184,358	$	—	$	—	$	184,358


	December 31, 2019
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total

	(in thousands)
Assets
Cash equivalents:
Money market funds, U.S. Government Securities and Agency Investments	$	92,872	$	24,000	$	—	$	116,872

(c) Other Financial Instruments

The carrying amounts reflected in the consolidated balance sheets for accounts receivable, prepaid expenses and other current assets and non-current assets, restricted cash, accounts payable and accrued expenses approximate fair value due to their short-term maturities.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Financing Arrangements

9 Months Ended

Sep. 30, 2020

Financing Arrangements

Financing Arrangements

Note 12. Financing Arrangements

On January 30, 2015, we sold our corporate headquarters facility in Beverly, Massachusetts for $48.9 million. As part of the sale, we also entered into a 22-year lease agreement of our headquarters facility. This sale-leaseback is accounted for as a financing lease under generally accepted accounting principles and, as such, we have recorded a financing obligation of $48.3 million as of September 30, 2020. The associated lease payments include both an interest component and payment of principal, with the remaining liability being extinguished at the end of the original lease term. We posted a security deposit of $5.9 million in the form of an irrevocable letter of credit at the time of the closing. This letter of credit reduces our availability under our credit facility, as described in the next paragraph.

On July 31, 2020, we entered into a Senior Secured Credit Facilities Credit Agreement (the “Credit Agreement”) with Silicon Valley Bank, in its capacity as administrative agent and collateral agent for itself and as a lender, and such other banks and financial institutions or entities that from time to time join as lenders under the Credit Agreement. The Credit Agreement provides for a revolving credit facility in an aggregate principal amount not to exceed $40.0 million. Our obligations under the Credit Agreement are secured by a security interest, senior to any current and future debts and to any security interest, in all of our rights, title, and interest in, to and under substantially all of our assets, subject to limited exceptions, including permitted liens. The revolving credit facility terminates on July 31, 2023. As of September 30, 2020, we were in compliance with all covenant requirements of the Credit Agreement. As of such date, no borrowings had been made under the Credit Agreement, although a letter of credit for $5.9 million, previously issued by Silicon Valley Bank, had been rolled under the Credit Agreement, reducing the funds available for borrowing under the credit line.

Income Taxes

9 Months Ended

Sep. 30, 2020

Income Taxes

Income Taxes

Note 13. Income Taxes

Income tax expense was $2.8 million for the three months ended September 30, 2020, compared to $0.3 million benefit for the three months ended September 30, 2019. The $3.1 million increase was primarily due to a $13.2 million increase in pretax income. The income tax provision was $6.1 million during the nine months ended September 30, 2020, compared to $0.9 million for the nine months ended September 30, 2019. The $5.2 million increase was primarily due to a $33.2 million increase in pretax income partially offset by a $2.0 million tax benefit relating to equity compensation. The effective tax rate for the three and nine months ended September 30, 2020 and 2019, respectively, was less than the U.S.

statutory rate of 21% due to favorable discrete items related to equity compensation in those periods and Federal research and development tax credits that reduce the annual tax rate.

We had $58.2 million and $68.1 million of net deferred tax assets worldwide relating to net operating loss carryforwards, tax credit carryforwards and other temporary differences, as of September 30, 2020 and December 31, 2019, respectively. These deferred tax assets are available to reduce income taxes in future years. We have a $9.2 million valuation allowance in the U.S. against certain tax credits and state net operating losses due to the uncertainty of their realization based on long-term Company forecasts and the expiration dates on these tax assets. If future operating results of the Company within the U.S. or these foreign jurisdictions are significantly less than our expectations, it is reasonably possible that we would be required to record an additional valuation allowance on our deferred tax assets in the future.

Concentration of Risk

9 Months Ended

Sep. 30, 2020

Concentration of Risk

Concentration of Risk

Note 14. Concentration of Risk

For the three months ended September 30, 2020, three customers accounted for 16.8%, 11.2% and 10.3% of total revenue, respectively. For the three months ended September 30, 2019, two customers accounted for 28.0% and 13.2% of total revenue, respectively.

For the nine months ended September 30, 2020, three customers accounted for 18.8%, 15.2% and 12.1% of total revenue, respectively. For the nine months ended September 30, 2019, three customers accounted for 18.7%, 12.4%, and 11.8% of total revenue respectively.

At September 30, 2020, three customers accounted for 19.5%, 12.9% and 10.2% of accounts receivable, respectively. At December 31, 2019, three customers accounted for 24.9%, 15.3% and 11.1% of accounts receivable, respectively.

Share Repurchase

9 Months Ended

Sep. 30, 2020

Share Repurchase

Share Repurchase

Note 15. Share Repurchase

The Board has approved stock repurchases of up to $50 million of our common stock through the end of 2020. At the end of the first quarter of 2020, we suspended the repurchase program in light of the economic uncertainty relating to the COVID-19 pandemic. We continue to invest cash in our business and to evaluate whether to recommence stock repurchases. If we do so, the timing and actual number of shares repurchased in 2020 beyond those acquired in the first quarter, will depend on various factors, including the price of our common stock, general business and market conditions, and alternative investment opportunities or other uses of cash.

Shares repurchased are accounted for when the transaction is settled. There were no unsettled share repurchases at September 30, 2020.

Contingencies

9 Months Ended

Sep. 30, 2020

Contingencies

Contingencies

Note 16. Contingencies

(a) Litigation

We are from time to time a party to litigation that arises in the normal course of our business operations. We are not presently a party to any litigation that we believe might have a material adverse effect on our business operations.

(b) Indemnifications

Our system sales agreements typically include provisions under which we agree to take certain actions, provide certain remedies and defend our customers against third-party claims of intellectual property infringement under specified conditions and indemnify customers against any damage and costs awarded in connection with such claims. We have not incurred any material costs as a result of such indemnifications and have not accrued any liabilities related to such obligations in the accompanying consolidated financial statements.

Recent Accounting Guidance

9 Months Ended

Sep. 30, 2020

Recent Accounting Guidance

Recent Accounting Guidance

Note 17. Recent Accounting Guidance

We adopted Financial Accounting Standards Board ASU No. 2019-04 “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” as of January 1, 2020, using the modified-retrospective approach resulting in no cumulative adjustment to retained earnings. The amendments in this Update clarify the guidance within Topic 326 relating to credit losses. Topic 326 replaces the current incurred loss impairment methodology for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates. Due to the requirements of Topic 326, management reviews the average annual write-off rate along with an assessment of current micro and macro-economic factors to determine any expected losses. The adoption of this Update did not have any material impact on our results of operations or cash flows. See Note 5 above for further discussion.

Leases (Tables)

9 Months Ended

Sep. 30, 2020

Leases

Schedule of operating and finance lease right-of-use assets and related lease obligations


		September 30,		December 31,
Leases	Classification	2020		2019

Assets		(in thousands)
Operating lease	Operating lease assets	$	4,655	$	5,849
Finance lease	Finance lease assets *		20,872		21,880
Total leased assets		$	25,527	$	27,729
Liabilities
Current
Operating	Other current liabilities	$	2,632	$	3,144
Finance	Current portion of finance lease obligation		705		399
Noncurrent
Operating	Other long-term liabilities		1,955		2,553
Finance	Finance lease obligation		47,593		48,149
Total lease liabilities		$	52,885	$	54,245

* Finance lease assets are recorded net of accumulated depreciation of $48.1 million and include $0.7 million of prepaid financing costs as of September 30, 2020. Finance lease assets are recorded net of accumulated depreciation of $47.4 million and include $0.7 million of prepaid financing costs as of December 31, 2019.

Schedule of lease costs


		Three months ended				Nine months ended
		September 30,				September 30,
Lease cost	Classification	2020		2019		2020		2019

Operating lease cost		(in thousands)
Service	Cost of revenue	$	601	$	552	$	1,776	$	1,732
Research and development	Operating expenses		137		80		347		232
Sales and marketing*	Operating expenses		347		338		1,024		1,037
General and administrative*	Operating expenses		213		207		648		608
Total operating lease cost		$	1,298	$	1,177	$	3,795	$	3,609
Finance lease cost
Depreciation of leased assets	Cost of revenue, R&D, Sales and marketing and G&A	$	328	$	332	$	1,009	$	997
Interest on lease liabilities	Interest expense		1,296		1,308		3,898		3,849
Total finance lease cost		$	1,624	$	1,640	$	4,907	$	4,846

Total lease cost		$	2,922	$	2,817	$	8,702	$	8,455

* Sales and marketing, general and administrative expense includes short-term lease and variable lease costs of approximately $0.3 million and $0.8 million for the three and nine months ended September 30, 2020, respectively and includes short-term lease and variable lease costs of approximately $0.2 million and $0.6 million for the three and nine months ended September 30, 2019, respectively.

Schedule of future minimum operating leases


	Finance		Operating		Total
Maturity of Lease Liabilities	Leases		Leases		Leases

	(in thousands)
2020	$	1,433	$	935	$	2,368
2021		5,848		2,447		8,295
2022		5,980		1,128		7,108
2023		6,114		337		6,451
2024		6,252		98		6,350
Thereafter		79,653		219		79,872
Total lease payments	$	105,280	$	5,164	$	110,444
Less interest portion*		(56,982)		(577)		(57,559)
Finance lease and operating lease obligations	$	48,298	$	4,587	$	52,885

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

Schedule of weighted-average remaining lease term and discount rates


	September 30,
Lease term and discount rate	2020
Weighted-average remaining lease term (years):
Operating leases		1.5
Finance leases		16.3
Weighted-average discount rate:
Operating leases		4.5%
Finance leases		10.5%

Schedule of cash outflows by lease type


	Nine months ended
	September 30,
Cash paid for amounts included in the measurement of lease liabilities	2020		2019

	(in thousands)
Operating cash outflows from operating leases	$	3,795	$	3,609
Operating cash outflows from finance leases		4,035		4,193
Financing cash outflows from finance leases		252		—
Operating lease assets obtained in exchange for operating lease liabilities		1,658		6,175
Finance lease assets obtained in exchange for new finance lease liabilities	$	—	$	—

Schedule of future minimum operating and finance leases


	Finance		Operating		Total
Maturity of Lease Liabilities	Leases		Leases		Leases

	(in thousands)
2020	$	1,433	$	935	$	2,368
2021		5,848		2,447		8,295
2022		5,980		1,128		7,108
2023		6,114		337		6,451
2024		6,252		98		6,350
Thereafter		79,653		219		79,872
Total lease payments	$	105,280	$	5,164	$	110,444
Less interest portion*		(56,982)		(577)		(57,559)
Finance lease and operating lease obligations	$	48,298	$	4,587	$	52,885

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

Revenue (Tables)

9 Months Ended

Sep. 30, 2020

Revenue.

Schedule of revenue by discipline


	Three months ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019

	(in thousands)
Systems	$	70,239	$	36,809	$	229,391	$	131,124
Aftermarket		40,166		32,644		122,970		104,111
	$	110,405	$	69,453	$	352,361	$	235,235

Schedule of revenue by geographic markets


	Three months ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019

	(in thousands)
North America	$	9,022	$	7,681	$	28,598	$	28,670
Asia Pacific		89,995		47,756		293,427		160,398
Europe		11,388		14,016		30,336		46,167
	$	110,405	$	69,453	$	352,361	$	235,235

Schedule of Contract liabilities


	September 30,		December 31,
	2020		2019

	(in thousands)
Contract liabilities	$	16,969	$	29,251


	Three months ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019

	(in thousands)
Balance, beginning of the period	$	30,416	$	14,080	$	29,251	$	22,584
Deferral of revenue		4,030		17,254		10,320		20,887
Recognition of deferred revenue		(17,477)		(3,893)		(22,602)		(16,030)
Balance, ending of the period	$	16,969	$	27,441	$	16,969	$	27,441

Receivables and Allowances for Credit Losses (Tables)

9 Months Ended

Sep. 30, 2020

Receivables and Allowances for Credit Losses

Schedule of allowances for credit losses related to trade receivables


	Three months ended		Nine months ended
	September 30,		September 30,
	2020		2020

	(in thousands)
Balance, beginning of period	$	—	$	818
Provision for credit losses		—		—
Charge-offs		—		(818)
Recoveries		—		—
Balance, ending of period	$	—	$	—

Computation of Net Earnings per Share (Tables)

9 Months Ended

Sep. 30, 2020

Computation of Net Earnings per Share

Schedule of components of net income per share


	Three months ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019

	(in thousands, except per share amounts)
Net income available to common stockholders	$	10,785	$	704	$	35,308	$	7,322
Weighted average common shares outstanding used in computing basic income per share		33,477		32,344		33,159		32,584
Incremental options and RSUs		697		979		911		1,237
Weighted average common shares used in computing diluted net income per share		34,174		33,323		34,070		33,821
Net income per share
Basic	$	0.32	$	0.02	$	1.06	$	0.22
Diluted	$	0.32	$	0.02	$	1.04	$	0.22

Accumulated Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2020

Accumulated Other Comprehensive Income (Loss)

Schedule of changes in accumulated other comprehensive loss, net of tax


	Foreign		Defined benefit
	currency		pension plan		Total

	(in thousands)
Balance at December 31, 2019	$	518	$	(776)	$	(258)
Other comprehensive income and pension reclassification		1,161		175		1,336
Balance at September 30, 2020	$	1,679	$	(601)	$	1,078

Cash, cash equivalents and restricted cash (Tables)

9 Months Ended

Sep. 30, 2020

Cash, cash equivalents and restricted cash

Schedule of reconciliation of cash, cash equivalents and restricted cash


	September 30,		December 31,
	2020			2019

	(in thousands)
Cash and cash equivalents	$	211,967	$	139,881
Long-term restricted cash		750		6,653
Total cash, cash equivalents and restricted cash	$	212,717	$	146,534

Inventories, net (Tables)

9 Months Ended

Sep. 30, 2020

Inventories, net

Schedule of components of inventories


	September 30,		December 31,
	2020		2019

	(in thousands)
Raw materials	$	93,990	$	95,867
Work in process		42,643		32,131
Finished goods (completed systems)		23,025		12,366
Inventories, net	$	159,658	$	140,364

Product Warranty (Tables)

9 Months Ended

Sep. 30, 2020

Product Warranty

Schedule of product warranty liability


	Nine months ended
	September 30,
	2020		2019

	(in thousands)
Balance at January 1 (beginning of year)	$	3,244	$	5,091
Warranties issued during the period		3,780		2,282
Settlements made during the period		(3,131)		(4,405)
Changes in estimate of liability for pre-existing warranties during the period		584		523
Balance at September 30 (end of period)	$	4,477	$	3,491

Amount classified as current	$	4,151	$	3,251
Amount classified as long-term		326		240
Total warranty liability	$	4,477	$	3,491

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2020

Fair Value Measurements

Schedule of Company's assets and liabilities by level within the fair value hierarchy


	September 30, 2020
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total

	(in thousands)
Assets
Cash equivalents:
Money market funds, U.S. Government Securities and Agency Investments	$	184,358	$	—	$	—	$	184,358


	December 31, 2019
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total

	(in thousands)
Assets
Cash equivalents:
Money market funds, U.S. Government Securities and Agency Investments	$	92,872	$	24,000	$	—	$	116,872

Stock-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
Stock-Based Compensation (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019
Stock-Based Compensation
Stock-based compensation expense	$ 2,900			$ 2,100			$ 7,700	$ 6,100
Proceeds from exercise of stock options							$ 7,740	$ 3,039
Common Stock
Stock-Based Compensation
Exercise of stock options (in shares)	53,000	343,000	1,000	97,000	104,000	288,000
Common Stock \| Employee stock purchase plan
Stock-Based Compensation
Exercise of stock options (in shares)	100,000						1,300,000	700,000
Proceeds from exercise of stock options	$ 500			$ 600			$ 8,300	$ 3,400
2000 Stock Plan
Stock-Based Compensation
Number of shares of common stock available for future grants	0						0
Options Expiration period							10 years

Leases (Details)	9 Months Ended
Leases (Details)	Sep. 30, 2020
Lessee, Lease, Description [Line Items]
Option to extend	true
Minimum
Lessee, Lease, Description [Line Items]
Renewal term	1 year
Maximum
Lessee, Lease, Description [Line Items]
Renewal term	3 years

Leases - Operating and Finance Lease Right-of-use-assets and Related Lease Obligations (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Leases
Operating lease assets	$ 4,655	$ 5,849
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	Operating lease assets
Finance lease assets	$ 20,872	21,880
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	Finance lease assets
Total leased assets	$ 25,527	27,729
Operating liabilities current	$ 2,632	3,144
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	Other Liabilities, Current
Finance liabilities current	$ 705	399
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List]	Other Liabilities, Current
Operating liabilities noncurrent	$ 1,955	2,553
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Other Liabilities, Noncurrent
Finance liabilities noncurrent	$ 47,593	48,149
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Finance liabilities noncurrent
Total lease liabilities	$ 52,885	54,245
Finance lease, accumulated depreciation	48,100	47,400
Prepaid financing costs	$ 700	$ 700

Leases - Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Leases - Lease Cost (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Lease cost
Total operating lease cost	$ 1,298	$ 1,177	$ 3,795	$ 3,609
Depreciation of leased assets	328	332	1,009	997
Interest on lease liabilities	1,296	1,308	3,898	3,849
Total finance lease cost	1,624	1,640	4,907	4,846
Total lease cost	2,922	2,817	8,702	8,455
Short-term lease and variable lease costs	300	200	800	600
Service
Lease cost
Total operating lease cost	601	552	1,776	1,732
Research and development
Lease cost
Total operating lease cost	137	80	347	232
Sales and marketing*
Lease cost
Total operating lease cost	347	338	1,024	1,037
General and administrative*
Lease cost
Total operating lease cost	$ 213	$ 207	$ 648	$ 608

Leases - Future Minimum Cash Outflow and Weighted-average Remaining Lease Term and Discount Rate (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Future minimum lease payments finance lease
2020	$ 1,433
2021	5,848
2022	5,980
2023	6,114
2024	6,252
Thereafter	79,653
Total lease payments	105,280
Less interest portion	(56,982)
Finance lease obligations	48,298
Future minimum lease payments operating lease
2020	935
2021	2,447
2022	1,128
2023	337
2024	98
Thereafter	219
Total lease payments	5,164
Less interest portion	(577)
Operating lease obligations	4,587
Future minimum lease payments finance and operating lease
2020	2,368
2021	8,295
2022	7,108
2023	6,451
2024	6,350
Thereafter	79,872
Total lease payments	110,444
Less interest portion	(57,559)
Total lease liabilities	$ 52,885	$ 54,245
Lease term and discount rate
Operating leases -Weighted-average remaining lease term (in years)	1 year 6 months
Finance leases - Weighted-average remaining lease term (in years)	16 years 3 months 18 days
Operating leases - Weighted-average discount rate	4.50%
Finance leases - Weighted-average discount rate	10.50%
Finance lease term	22 years
Minimum
Lease term and discount rate
Operating lease term	1 year
Maximum
Lease term and discount rate
Operating lease term	10 years

Leases - Cash Flow by Lease Type (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Leases
Operating cash outflows from operating leases	$ 3,795	$ 3,609
Operating cash outflows from finance leases	4,035	4,193
Financing cash outflows from finance leases	252
Operating lease assets obtained in exchange for new operating lease liabilities	$ 1,658	$ 6,175

Revenue - (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Revenue - (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Disaggregation of Revenue
Revenue	$ 110,405	$ 69,453	$ 352,361	$ 235,235
North America
Disaggregation of Revenue
Revenue	9,022	7,681	28,598	28,670
Asia Pacific
Disaggregation of Revenue
Revenue	89,995	47,756	293,427	160,398
Europe
Disaggregation of Revenue
Revenue	11,388	14,016	30,336	46,167
Systems
Disaggregation of Revenue
Revenue	70,239	36,809	229,391	131,124
Aftermarket
Disaggregation of Revenue
Revenue	$ 40,166	$ 32,644	$ 122,970	$ 104,111

Revenue - Contract liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Jun. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2018
Revenue.
Contract liabilities	$ 16,969	$ 30,416	$ 29,251	$ 27,441	$ 14,080	$ 22,584

Revenue - Deferred revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenue.
Balance, beginning of the period	$ 30,416	$ 14,080	$ 29,251	$ 22,584
Deferral of revenue	4,030	17,254	10,320	20,887
Recognition of deferred revenue	(17,477)	(3,893)	(22,602)	(16,030)
Balance, ending of the period	$ 16,969	$ 27,441	$ 16,969	$ 27,441

Revenue - Payment terms (Details) - Systems	9 Months Ended
Revenue - Payment terms (Details) - Systems	Sep. 30, 2020
Disaggregation of Revenue
Payment upon shipment of tool, as a percent	90.00%
Payment upon installation, as a percent	10.00%

Receivables and Allowances for Credit Losses (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2020 USD ($)
Receivables and Allowances for Credit Losses
Balance, beginning of period	$ 818
Charge-offs	$ (818)

Computation of Net Earnings per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019
Computation of Net Earnings per Share
Net income available to common stockholders	$ 10,785	$ 13,302	$ 11,221	$ 704	$ 556	$ 6,062	$ 35,308	$ 7,322
Weighted average common shares outstanding used in computing basic income per share	33,477			32,344			33,159	32,584
Incremental options and RSUs	697			979			911	1,237
Weighted average common shares used in computing diluted net income per share	34,174			33,323			34,070	33,821
Net income per share
Basic	$ 0.32			$ 0.02			$ 1.06	$ 0.22
Diluted	$ 0.32			$ 0.02			$ 1.04	$ 0.22
Anti-dilutive common equivalent shares excluded from calculation	848			847,448			8,226	236,229

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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- Definition

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

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+ Details

Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Changes in accumulated other comprehensive income, net of tax
Balance at December 31, 2019			$ (258)
Other comprehensive income and pension reclassification	$ 1,498	$ (1,103)	1,336	$ (1,758)
Balance at June 30, 2020	1,078		1,078
Foreign currency
Changes in accumulated other comprehensive income, net of tax
Balance at December 31, 2019			518
Other comprehensive income and pension reclassification			1,161
Balance at June 30, 2020	1,679		1,679
Defined benefit pension plan
Changes in accumulated other comprehensive income, net of tax
Balance at December 31, 2019			(776)
Other comprehensive income and pension reclassification			175
Balance at June 30, 2020	$ (601)		$ (601)

Cash, cash equivalents and restricted cash (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Dec. 31, 2018
Cash and cash equivalents	$ 211,967	$ 139,881
Long-term restricted cash	750	6,653
Total cash, cash equivalents and restricted cash	212,717	$ 146,534	$ 162,173	$ 184,902
Letter of credit related to workers' compensation insurance	700
Deposit related to customs activity	100
Sale leaseback obligation \| Beverly Property Owner LLC
Letter of credit associated with security deposit for leaseback transaction	5,900
Revolving credit facility
Restricted cash which relates to support of outstanding letters of credit	$ 800

Inventories, net (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Inventories, net
Raw materials	$ 93,990	$ 95,867
Work in process	42,643	32,131
Finished goods (completed systems)	23,025	12,366
Inventories, net	$ 159,658	$ 140,364

Product Warranty (Details) - USD ($) $ in Thousands	9 Months Ended
Product Warranty (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019
Product Warranty
Product warranty period	1 year
Changes in standard product warranty liability
Balance at January 1 (beginning of year)	$ 3,244	$ 5,091
Warranties issued during the period	3,780	2,282
Settlements made during the period	(3,131)	(4,405)
Changes in estimate of liability for pre-existing warranties during the period	584	523
Balance at September 30 (end of period)	4,477	3,491
Product warranty classification
Amount classified as current			$ 4,151	$ 2,759	$ 3,251
Amount classified as long-term			326		240
Total warranty liability	$ 4,477	$ 3,491	$ 4,477	$ 3,244	$ 3,491

Fair Value Measurements (Details) - Recurring - Money market funds, US Government Securities and Agency Investments - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Total
Fair Value Measurements
Money market funds, U.S. Government Securities and Agency Investments	$ 184,358	$ 116,872
Level 1
Fair Value Measurements
Money market funds, U.S. Government Securities and Agency Investments	$ 184,358	92,872
Level 2
Fair Value Measurements
Money market funds, U.S. Government Securities and Agency Investments		$ 24,000

Financing Arrangements (Details) - USD ($) $ in Thousands	Jan. 30, 2015	Sep. 30, 2020	Jul. 31, 2020	Dec. 31, 2019
Financing Arrangements
Long-term finance lease obligation		$ 47,593		$ 48,149
Beverly Property Owner LLC \| Buildings
Financing Arrangements
Sale price	$ 48,900
Beverly Property Owner LLC \| Sale leaseback obligation
Financing Arrangements
Lease term	22 years
Long-term finance lease obligation		48,300
Security deposit		5,900
Silicon Valley Bank \| Revolving credit facility
Financing Arrangements
Maximum borrowing capacity under the credit facility			$ 40,000
Borrowings amount		0
Silicon Valley Bank \| Revolving credit facility \| Letter of credit
Financing Arrangements
Letter of credit		$ 5,900

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Valuation allowance
Income tax provision	$ 2,807	$ (328)	$ 6,119	$ 943
Increase in income tax	3,100		5,200
Increase in income tax due to decrease in pretax income	13,200		33,200
Deferred tax assets, net	58,247		58,247		$ 68,060
Deferred tax assets valuation allowance	$ 9,200		9,200
Decrease in income tax due to increase in excess tax benefit on equity compensation			$ 2,000
Maximum
Valuation allowance
Statutory Income Tax Rate (as a Percent)			21.00%

Concentration of Risk (Details) - customer	3 Months Ended		9 Months Ended		12 Months Ended
Concentration of Risk (Details) - customer	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Revenue \| Customer concentration risk
Concentration of Risk
Number of customers	3	2	3	3
Revenue \| Customer concentration risk \| First customer
Concentration of Risk
Percentage of concentration risk	16.80%	28.00%	18.80%	18.70%
Revenue \| Customer concentration risk \| Second customer
Concentration of Risk
Percentage of concentration risk	11.20%	13.20%	15.20%	12.40%
Revenue \| Customer concentration risk \| Third customer
Concentration of Risk
Percentage of concentration risk	10.30%		12.10%	11.80%
Consolidated accounts receivable \| Credit concentration risk
Concentration of Risk
Number of customers			3		3
Consolidated accounts receivable \| Credit concentration risk \| First customer
Concentration of Risk
Percentage of concentration risk			19.50%		24.90%
Consolidated accounts receivable \| Credit concentration risk \| Second customer
Concentration of Risk
Percentage of concentration risk			12.90%		15.30%
Consolidated accounts receivable \| Credit concentration risk \| Third customer
Concentration of Risk
Percentage of concentration risk			10.20%		11.10%

Share Repurchase (Details) $ in Thousands	9 Months Ended
Share Repurchase (Details) $ in Thousands	Sep. 30, 2020 USD ($)
Share Repurchase
Share repurchase program common stock authorized amount	$ 50,000
Unsettled share repurchases	$ 0