SEC Filing | Axcelis Technologies Inc

View:

Download DOC

Download PDF

Download XLS

Download XBRL

Table of Contents

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, 2021

☐

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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer ☒		Accelerated filer ☐
Non-accelerated filer ☐		Smaller reporting company ☐
		Emerging growth company ☐

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

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

As of August 3, 2021 there were 33,574,743 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, 2021 and 2020	3
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020	4
	Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	5
	Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020	6
	Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020	7
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Overview	19
	Critical Accounting Estimates	19
	Results of Operations	20
	Liquidity and Capital Resources	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
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 and Use of Proceeds	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,
	2021		2020		2021		2020
Revenue:
Product	$	140,156	$	117,194	$	266,765	$	229,327
Services		7,118		5,771		13,285		12,629
Total revenue		147,274		122,965		280,050		241,956
Cost of revenue:
Product		76,688		65,519		147,022		132,691
Services		6,572		5,547		12,579		11,817
Total cost of revenue		83,260		71,066		159,601		144,508
Gross profit		64,014		51,899		120,449		97,448
Operating expenses:
Research and development		16,623		16,040		32,308		30,646
Sales and marketing		12,177		9,437		22,564		17,641
General and administrative		11,217		10,041		21,230		19,077
Total operating expenses		40,017		35,518		76,102		67,364
Income from operations		23,997		16,381		44,347		30,084
Other (expense) income:
Interest income		40		70		73		552
Interest expense		(1,274)		(1,299)		(2,303)		(2,602)
Other, net		(15)		421		(1,168)		(199)
Total other expense		(1,249)		(808)		(3,398)		(2,249)
Income before income taxes		22,748		15,573		40,949		27,835
Income tax provision		3,842		2,271		5,563		3,312
Net income	$	18,906	$	13,302	$	35,386	$	24,523
Net income per share:
Basic	$	0.56	$	0.40	$	1.05	$	0.74
Diluted	$	0.55	$	0.39	$	1.03	$	0.72
Shares used in computing net income per share:
Basic weighted average common shares		33,677		33,116		33,696		32,998
Diluted weighted average common shares		34,311		33,958		34,473		34,023

See accompanying Notes to these Consolidated Financial Statements

Table of Contents

Axcelis Technologies, Inc.

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)


	Three months ended				Six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Net income	$	18,906	$	13,302	$	35,386	$	24,523
Other comprehensive income (loss):
Foreign currency translation adjustments		552		836		(820)		(276)
Amortization of actuarial loss and other adjustments from pension plan, net of tax		34		57		54		114
Total other comprehensive income (loss)		586		893		(766)		(162)
Comprehensive income	$	19,492	$	14,195	$	34,620	$	24,361

See accompanying Notes to these Consolidated Financial Statements

Table of Contents

Axcelis Technologies, Inc.

Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)


	June 30,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	219,731	$	203,479
Accounts receivable, net		79,544		86,865
Inventories, net		192,321		161,076
Prepaid expenses and other current assets		22,535		19,371
Total current assets		514,131		470,791
Property, plant and equipment, net		30,683		29,840
Operating lease assets		7,626		4,542
Finance lease assets, net		19,889		20,544
Long-term restricted cash		755		753
Deferred income taxes		51,386		57,851
Other assets		36,170		40,303
Total assets	$	660,640	$	624,624
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	40,695	$	24,013
Accrued compensation		14,906		24,562
Warranty		4,690		4,280
Income taxes		622		654
Deferred revenue		34,112		21,221
Current portion of finance lease obligation		864		756
Other current liabilities		10,585		8,945
Total current liabilities		106,474		84,431
Long-term finance lease obligation		46,923		47,393
Long-term deferred revenue		1,406		1,837
Other long-term liabilities		11,735		9,361
Total liabilities		166,538		143,022
Commitments and contingencies (Note 16)
Stockholders’ equity:
Common stock, $0.001 par value, 75,000 shares authorized; 33,657 shares issued and outstanding at June 30, 2021; 33,633 shares issued and outstanding at December 31, 2020		34		34
Additional paid-in capital		561,680		570,102
Accumulated deficit		(70,281)		(91,969)
Accumulated other comprehensive income		2,669		3,435
Total stockholders’ equity		494,102		481,602
Total liabilities and stockholders’ equity	$	660,640	$	624,624

See accompanying Notes to these Consolidated Financial Statements

Table of Contents

Axcelis Technologies, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Income (Loss)		Equity
Balance at December 31, 2019	32,585	$	33	$	559,878	$	(140,226)	$	(258)	$	419,427
Net income	—		—		—		11,221		—		11,221
Foreign currency translation adjustments	—		—		—		—		(1,112)		(1,112)
Change in pension obligation	—		—		—		—		57		57
Exercise of stock options	540		1		4,498		—		—		4,499
Issuance of shares under Employee Stock Purchase Plan	1		—		19		—		—		19
Issuance of restricted common shares, net of shares withheld	69		—		(1,162)		—		—		(1,162)
Stock-based compensation expense	—		—		1,724		—		—		1,724
Repurchase of common stock	(358)		(1)		(5,775)		(1,725)		—		(7,501)
Balance at March 31, 2020	32,837	$	33	$	559,182	$	(130,730)	$	(1,313)	$	427,172
Net income	—		—		—		13,302		—		13,302
Foreign currency translation adjustments	—		—		—		—		836		836
Change in pension obligation	—		—		—		—		57		57
Exercise of stock options	343		—		2,783		—		—		2,783
Issuance of shares under Employee Stock Purchase Plan	21		—		490		—		—		490
Issuance of restricted common shares, net of shares withheld	232		—		(2,698)		—		—		(2,698)
Stock-based compensation expense	—		—		3,082		—		—		3,082
Balance at June 30, 2020	33,433	$	33	$	562,839	$	(117,428)	$	(420)	$	445,024


								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Income (Loss)		Equity
Balance at December 31, 2020	33,633	$	34	$	570,102	$	(91,969)	$	3,435	$	481,602
Net income	—		—		—		16,480		—		16,480
Foreign currency translation adjustments	—		—		—		—		(1,372)		(1,372)
Change in pension obligation	—		—		—		—		20		20
Exercise of stock options	268		—		2,512		—				2,512
Issuance of restricted common shares, net of shares withheld	81		—		(2,354)		—		—		(2,354)
Stock-based compensation expense	—		—		2,407		—		—		2,407
Repurchase of common stock	(303)		—		(5,468)		(6,167)		—		(11,635)
Balance at March 31, 2021	33,679	$	34	$	567,199	$	(81,656)	$	2,083	$	487,660
Net income	—		—		—		18,906		—		18,906
Foreign currency translation adjustments	—		—		—		—		552		552
Change in pension obligation	—		—		—		—		34		34
Exercise of stock options	72		—		563		—		—		563
Issuance of shares under Employee Stock Purchase Plan	15		—		509		—		—		509
Issuance of restricted common shares, net of shares withheld	214		—		(4,141)		—		—		(4,141)
Stock-based compensation expense	—		—		3,377				—		3,377
Repurchase of common stock	(323)		—		(5,827)		(7,531)		—		(13,358)
Balance at June 30, 2021	33,657	$	34	$	561,680	$	(70,281)	$	2,669	$	494,102

See accompanying Notes to these Consolidated Financial Statements

Table of Contents

Axcelis Technologies, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Six months ended
	June 30,
	2021		2020
Cash flows from operating activities
Net income	$	35,386	$	24,523
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		5,336		4,829
Deferred income taxes		5,107		3,035
Stock-based compensation expense		5,784		4,806
Provision for excess and obsolete inventory		1,888		1,708
Changes in operating assets and liabilities:
Accounts receivable		7,091		18,752
Inventories		(32,418)		(9,123)
Prepaid expenses and other current assets		(3,309)		(4,206)
Accounts payable and other current liabilities		7,282		11,808
Deferred revenue		12,460		1,167
Income taxes		(27)		5
Other assets and liabilities		1,341		(729)
Net cash provided by operating activities		45,921		56,575

Cash flows from investing activities
Expenditures for property, plant and equipment and capitalized software		(2,392)		(2,975)
Net cash used in investing activities		(2,392)		(2,975)

Cash flows from financing activities
Net settlement on restricted stock grants		(6,495)		(3,860)
Repurchase of common stock		(24,993)		(7,501)
Proceeds from Employee Stock Purchase Plan		508		509
Principal payments on finance lease obligation		(362)		(108)
Proceeds from exercise of stock options		3,075		7,282
Net cash used in financing activities		(28,267)		(3,678)

Effect of exchange rate changes on cash and cash equivalents		992		560
Net increase in cash, cash equivalents and restricted cash		16,254		50,482

Cash, cash equivalents and restricted cash at beginning of period		204,232		146,534
Cash, cash equivalents and restricted cash at end of period	$	220,486	$	197,016

See accompanying Notes to these Consolidated Financial Statements

Table of Contents

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, 2020 has been derived from the audited consolidated financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in Axcelis Technologies, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020.

Note 2. 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. 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 Company’s Employee Stock Purchase Plan, which was effective in June 2000 (the “2000 ESPP”), expired in June 2020.

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, 2020.

We recognized stock-based compensation expense of $3.4 million and $3.1 million for the three-month periods ended June 30, 2021 and 2020, respectively. We recognized stock-based compensation expense of $5.8 million and $4.8 million for the six-month periods ended June 30, 2021 and 2020, respectively. These amounts include compensation expense related to RSUs, non-qualified stock options and stock to be issued to participants under the 2020 ESPP and 2000 ESPP.

In the three-month periods ended June 30, 2021 and 2020, we issued 0.3 million and 0.6 million shares of common stock, respectively, upon stock option exercises, purchases under the employee stock purchase plans and vesting of RSUs. In the three-month periods ended June 30, 2021 and 2020, we received proceeds of $1.1 million and $3.3 million, respectively, in connection with the exercise of stock options and purchases under the employee stock purchase plans.

In the six-month periods ended June 30, 2021 and 2020, we issued 0.7 million and 1.2 million shares of common stock, respectively, upon stock option exercises, purchases under the employee stock purchase plans and vesting of RSUs. In the six-month periods ended June 30, 2021 and 2020, we received proceeds of $3.6 million and $7.8 million, respectively, in connection with the exercise of stock options and purchases under the employee stock purchase plans.

Table of Contents

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 over a period of time in exchange for consideration. We recognize the lease obligation on a discounted basis using the explicit or implicit discount rate stated within the agreement. We recognize a corresponding right-of-use asset, which is initially determined based upon the net present value of the associated liability and is adjusted for deferred costs and possible impairment, if any. For those lease agreements that do not indicate the applicable discount rate, we use our incremental borrowing rate. We have made the following policy elections: (i) operating leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet; (ii) we recognize lease expense for operating leases on a straight-line basis over the lease term; and (iii) we account for lease components and non-lease components that are fixed payments as one component. Some of our operating leases include one or more options to renew, with renewal terms that can extend the respective lease term 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:


		June 30,		December 31,
Leases	Classification	2021		2020

Assets		(in thousands)
Operating leases	Operating lease assets	$	7,626	$	4,542
Finance lease	Finance lease assets *		19,889		20,544
Total leased assets		$	27,515	$	25,086
Liabilities
Current
Operating	Other current liabilities	$	3,215	$	2,573
Finance	Current portion of finance lease obligation		864		756
Noncurrent
Operating	Other long-term liabilities		4,398		1,949
Finance	Finance lease obligation		46,923		47,393
Total lease liabilities		$	55,400	$	52,671

* Finance lease assets are recorded net of accumulated depreciation of $48.9 million and include $0.7 million of prepaid financing costs as of June 30, 2021. Finance lease assets are recorded net of accumulated depreciation of $48.4 million and include $0.7 million of prepaid financing costs as of December 31, 2020.

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 six months ended June 30, 2021 and 2020 as follows:

Table of Contents


		Three months ended				Six months ended
		June 30,				June 30,
Lease cost	Classification	2021		2020		2021		2020

Operating lease cost		(in thousands)
Service	Cost of revenue	$	644	$	624	$	1,283	$	1,174
Research and development	Operating expenses		122		128		252		209
Sales and marketing*	Operating expenses		376		346		755		678
General and administrative*	Operating expenses		201		220		461		435
Total operating lease cost		$	1,343	$	1,318	$	2,751	$	2,496
Finance lease cost
Depreciation of leased assets	Cost of revenue, R&D, Sales and marketing and G&A	$	328	$	328	$	656	$	681
Interest on lease liabilities	Interest expense		1,274		1,299		2,553		2,602
Total finance lease cost		$	1,602	$	1,627	$	3,209	$	3,283

Total lease cost		$	2,945	$	2,945	$	5,960	$	5,779

* Sales and marketing and general and administrative expense also includes short-term lease and variable lease costs of approximately $0.4 million and $0.9 million for the three and six months ended June 30, 2021, respectively, and includes short-term and variable lease costs of approximately $0.3 million and $0.5 million for the three and six months ended June 30, 2020, respectively.

The lease of our corporate headquarters, shown below under finance leases, had an original lease term of 22 years, beginning in January 2015. 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 June 30, 2021:


	Finance		Operating		Total
Maturity of Lease Liabilities	Leases		Leases		Leases

	(in thousands)
2021	$	2,929	$	1,827	$	4,756
2022		5,980		3,053		9,033
2023		6,114		1,544		7,658
2024		6,252		794		7,046
2025		5,930		712		6,642
Thereafter		73,723		545		74,268
Total lease payments	$	100,928	$	8,475	$	109,403
Less interest portion*		(53,141)		(862)		(54,003)
Finance lease and operating lease obligations	$	47,787	$	7,613	$	55,400

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

Table of Contents


	June 30,
Lease term and discount rate	2021
Weighted-average remaining lease term (years):
Operating leases		3.0
Finance leases		15.6
Weighted-average discount rate:
Operating leases		4.5%
Finance leases		10.5%

Our cash outflows from our operating leases include rent expense and other charges associated with these leases. These cash flows are included within the operating activities section of our statement of cash flows. Our cash flows from our finance lease include both an interest component and 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 for the six months ending June 30, 2021 and 2020, respectively:


	Six months ended
	June 30,
Cash paid for amounts included in the measurement of lease liabilities	2021		2020

	(in thousands)
Operating cash outflows from operating leases	$	2,751	$	2,496
Operating cash outflows from finance leases		2,556		2,746
Financing cash outflows from finance leases		362		108
Operating lease assets obtained in exchange for operating lease liabilities		4,192		1,038
Finance lease assets obtained in exchange for new finance lease liabilities	$	—	$	—

Note 4. Revenue

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

Revenue by categories used by management are as follows:


	Three months ended				Six months ended
	June 30,				June 30,
	2021		2020		2021		2020

	(in thousands)
Systems	$	100,138	$	76,815	$	181,129	$	159,152
Aftermarket		47,136		46,150		98,921		82,804
Total Revenue	$	147,274	$	122,965	$	280,050	$	241,956

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:

Table of Contents

Three months ended

Six months ended

June 30,

2021

2020

2021

2020