SEC Filing | Axcelis Technologies Inc

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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 September 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 November 2, 2021 there were 33,311,783 shares of the registrant’s common stock outstanding.

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PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020	3
	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020	4
	Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	5
	Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020	6
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020	8
	Notes to Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Overview	20
	Critical Accounting Estimates	20
	Results of Operations	21
	Liquidity and Capital Resources	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART II - OTHER INFORMATION		30
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31

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PART 1—FINANCIAL INFORMATION

Item 1. Financial Statements.

Axcelis Technologies, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)


	Three months ended				Nine months ended
		September 30,			September 30,
	2021		2020		2021		2020
Revenue:
Product	$	169,151	$	104,799	$	435,916	$	334,126
Services		7,543		5,606		20,828		18,235
Total revenue		176,694		110,405		456,744		352,361
Cost of revenue:
Product		93,201		56,427		240,223		189,118
Services		6,981		5,817		19,560		17,634
Total cost of revenue		100,182		62,244		259,783		206,752
Gross profit		76,512		48,161		196,961		145,609
Operating expenses:
Research and development		16,707		14,867		49,015		45,513
Sales and marketing		11,415		9,763		33,979		27,404
General and administrative		11,996		9,649		33,226		28,726
Total operating expenses		40,118		34,279		116,220		101,643
Income from operations		36,394		13,882		80,741		43,966
Other (expense) income:
Interest income		51		106		124		658
Interest expense		(1,269)		(1,296)		(3,572)		(3,898)
Other, net		(963)		900		(2,131)		701
Total other expense		(2,181)		(290)		(5,579)		(2,539)
Income before income taxes		34,213		13,592		75,162		41,427
Income tax provision		6,698		2,807		12,261		6,119
Net income	$	27,515	$	10,785	$	62,901	$	35,308
Net income per share:
Basic	$	0.82	$	0.32	$	1.87	$	1.06
Diluted	$	0.81	$	0.32	$	1.83	$	1.04
Shares used in computing net income per share:
Basic weighted average common shares		33,537		33,477		33,643		33,159
Diluted weighted average common shares		34,089		34,174		34,339		34,070

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

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Axcelis Technologies, Inc.

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)


	Three months ended				Nine months ended
	September 30,				September 30,
	2021		2020		2021		2020
Net income	$	27,515	$	10,785	$	62,901	$	35,308
Other comprehensive (loss) income:
Foreign currency translation adjustments		(949)		1,437		(1,769)		1,161
Amortization of actuarial loss and other adjustments from pension plan, net of tax		30		61		84		175
Total other comprehensive (loss) income		(919)		1,498		(1,685)		1,336
Comprehensive income	$	26,596	$	12,283	$	61,216	$	36,644

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

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Axcelis Technologies, Inc.

Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)


	September 30,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	271,085	$	203,479
Accounts receivable, net		78,257		86,865
Inventories, net		196,812		161,076
Prepaid expenses and other current assets		23,990		19,371
Total current assets		570,144		470,791
Property, plant and equipment, net		32,921		29,840
Operating lease assets		8,106		4,542
Finance lease assets, net		19,563		20,544
Long-term restricted cash		756		753
Deferred income taxes		44,206		57,851
Other assets		35,282		40,303
Total assets	$	710,978	$	624,624
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	35,499	$	24,013
Accrued compensation		23,548		24,562
Warranty		5,741		4,280
Income taxes		623		654
Deferred revenue		54,502		21,221
Current portion of finance lease obligation		921		756
Other current liabilities		16,361		8,945
Total current liabilities		137,195		84,431
Long-term finance lease obligation		46,672		47,393
Long-term deferred revenue		3,738		1,837
Other long-term liabilities		11,694		9,361
Total liabilities		199,299		143,022
Commitments and contingencies (Note 16)
Stockholders’ equity:
Common stock, $0.001 par value, 75,000 shares authorized; 33,406 shares issued and outstanding at September 30, 2021; 33,633 shares issued and outstanding at December 31, 2020		33		34
Additional paid-in capital		559,913		570,102
Accumulated deficit		(50,017)		(91,969)
Accumulated other comprehensive income		1,750		3,435
Total stockholders’ equity		511,679		481,602
Total liabilities and stockholders’ equity	$	710,978	$	624,624

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

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Axcelis Technologies, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


								Accumulated
				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 common shares on restricted stock units, 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 common shares on restricted stock units, 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
Net income	—		—		—		10,785		—		10,785
Foreign currency translation adjustments	—		—		—		—		1,437		1,437
Change in pension obligation	—		—		—		—		61		61
Exercise of stock options	53		—		458		—		—		458
Issuance of common shares on restricted stock units, net of shares withheld	5		—		(28)		—		—		(28)
Stock-based compensation expense	—		—		2,926		—		—		2,926
Balance at September 30, 2020	33,491	$	33	$	566,195	$	(106,643)	$	1,078	$	460,663

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

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Axcelis Technologies, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Income (Loss)		Equity
Balance at December 31, 2020	33,633	$	34	$	570,102	$	(91,969)	$	3,435	$	481,602
Net income	—		—		—		16,480		—		16,480
Foreign currency translation adjustments	—		—		—		—		(1,372)		(1,372)
Change in pension obligation	—		—		—		—		20		20
Exercise of stock options	268		—		2,512		—				2,512
Issuance of common shares on restricted stock units, net of shares withheld	81		—		(2,354)		—		—		(2,354)
Stock-based compensation expense	—		—		2,407		—		—		2,407
Repurchase of common stock	(303)		—		(5,468)		(6,167)		—		(11,635)
Balance at March 31, 2021	33,679	$	34	$	567,199	$	(81,656)	$	2,083	$	487,660
Net income	—		—		—		18,906		—		18,906
Foreign currency translation adjustments	—		—		—		—		552		552
Change in pension obligation	—		—		—		—		34		34
Exercise of stock options	72		—		563		—		—		563
Issuance of shares under Employee Stock Purchase Plan	15		—		509		—		—		509
Issuance of common shares on restricted stock units, net of shares withheld	214		—		(4,141)		—		—		(4,141)
Stock-based compensation expense	—		—		3,377				—		3,377
Repurchase of common stock	(323)		—		(5,827)		(7,531)		—		(13,358)
Balance at June 30, 2021	33,657	$	34	$	561,680	$	(70,281)	$	2,669	$	494,102
Net income	—		—		—		27,515		—		27,515
Foreign currency translation adjustments	—		—		—		—		(949)		(949)
Change in pension obligation	—		—		—		—		30		30
Exercise of stock options	34		—		344		—		—		344
Issuance of common shares on restricted stock units, net of shares withheld	6		—		(48)		—		—		(48)
Stock-based compensation expense	—		—		3,186		—		—		3,186
Repurchase of common stock	(291)		(1)		(5,249)		(7,251)		—		(12,501)
Balance at September 30, 2021	33,406	$	33	$	559,913	$	(50,017)	$	1,750	$	511,679

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

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Axcelis Technologies, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Nine months ended
	September 30,
	2021		2020
Cash flows from operating activities
Net income	$	62,901	$	35,308
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,993		7,346
Deferred income taxes		11,558		5,399
Stock-based compensation expense		8,970		7,727
Provision for excess and obsolete inventory		2,773		2,736
Changes in operating assets and liabilities:
Accounts receivable		8,133		39,109
Inventories		(39,595)		(18,611)
Prepaid expenses and other current assets		(4,879)		(2,704)
Accounts payable and other current liabilities		17,933		10,540
Deferred revenue		35,189		(12,292)
Income taxes		(24)		29
Other assets and liabilities		1,129		1,080
Net cash provided by operating activities		112,081		75,667

Cash flows from investing activities
Expenditures for property, plant and equipment and capitalized software		(5,701)		(5,567)
Net cash used in investing activities		(5,701)		(5,567)

Cash flows from financing activities
Net settlement on restricted stock grants		(6,543)		(3,888)
Repurchase of common stock		(37,493)		(7,501)
Proceeds from Employee Stock Purchase Plan		509		509
Principal payments on finance lease obligation		(562)		(252)
Proceeds from exercise of stock options		3,419		7,740
Net cash used in financing activities		(40,670)		(3,392)

Effect of exchange rate changes on cash and cash equivalents		1,899		(525)
Net increase in cash, cash equivalents and restricted cash		67,609		66,183

Cash, cash equivalents and restricted cash at beginning of period		204,232		146,534
Cash, cash equivalents and restricted cash at end of period	$	271,841	$	212,717

See accompanying Notes to these Consolidated Financial Statements (Unaudited)

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Axcelis Technologies, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 1. Nature of Business

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

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

The balance sheet at December 31, 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. 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 $3.2 million and $2.9 million for the three-month periods ended September 30, 2021 and 2020, respectively. We recognized stock-based compensation expense of $9.0 million and $7.7 million for the nine-month periods ended September 30, 2021 and 2020, respectively. These amounts include compensation expense related to RSUs, non-qualified stock options and stock issued to participants under the 2020 ESPP and 2000 ESPP.

In both the three-month periods ended September 30, 2021 and 2020, we issued forty thousand and 0.1 million shares of common stock, respectively, upon stock option exercises and vesting of RSUs. In the three-month periods ended September 30, 2021 and 2020, we received proceeds of $0.3 million and $0.5 million, respectively, in connection with the exercise of stock options.

In the nine-month periods ended September 30, 2021 and 2020, we issued 0.7 million and 1.3 million shares of common stock, respectively, upon stock option exercises, purchases under the employee stock purchase plans and vesting of RSUs. In the nine-month periods ended September 30, 2021 and 2020, we received proceeds of $3.9 million and $8.2 million, respectively, in connection with the exercise of stock options and purchases under the employee stock purchase plans.

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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 is at our sole discretion. For lease extensions that are reasonably certain to occur, we have included these renewal periods in our calculation of the net present value of the lease obligation and related right-of-use asset. Certain leases also include options to purchase the leased property. The depreciable life of certain assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The amounts of operating and finance lease right-of-use assets and related lease obligations recorded within our consolidated balance sheets are as follows:


		September 30,		December 31,
Leases	Classification	2021		2020

Assets		(in thousands)
Operating leases	Operating lease assets	$	8,106	$	4,542
Finance lease	Finance lease assets *		19,563		20,544
Total leased assets		$	27,669	$	25,086
Liabilities
Current
Operating	Other current liabilities	$	3,874	$	2,573
Finance	Current portion of finance lease obligation		921		756
Noncurrent
Operating	Other long-term liabilities		4,220		1,949
Finance	Finance lease obligation		46,672		47,393
Total lease liabilities		$	55,687	$	52,671

* Finance lease assets are recorded net of accumulated depreciation of $49.2 million and include $0.7 million of prepaid financing costs as of September 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 nine months ended September 30, 2021 and 2020 as follows:

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		Three months ended				Nine months ended
		September 30,				September 30,
Lease cost	Classification	2021		2020		2021		2020

Operating lease cost		(in thousands)
Service	Cost of revenue	$	790	$	601	$	2,074	$	1,776
Research and development	Operating expenses		114		137		366		347
Sales and marketing*	Operating expenses		414		347		1,169		1,024
General and administrative*	Operating expenses		254		213		714		648
Total operating lease cost		$	1,572	$	1,298	$	4,323	$	3,795
Finance lease cost
Depreciation of leased assets	Cost of revenue, R&D, Sales and marketing and G&A	$	326	$	328	$	981	$	1,009
Interest on lease liabilities	Interest expense		1,269		1,296		3,822		3,898
Total finance lease cost		$	1,595	$	1,624	$	4,803	$	4,907

Total lease cost		$	3,167	$	2,922	$	9,126	$	8,702

* Sales and marketing and general and administrative expense also includes short-term lease and variable lease costs of approximately $0.6 million and $1.4 million for the three and nine months ended September 30, 2021, respectively, and includes short-term and variable lease costs of approximately $0.3 million and $0.8 million for the three and nine months ended September 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 September 30, 2021:


	Finance		Operating		Total
Maturity of Lease Liabilities	Leases		Leases		Leases

	(in thousands)
2021	$	1,465	$	1,127	$	2,592
2022		5,980		3,980		9,960
2023		6,114		1,849		7,963
2024		6,252		838		7,090
2025		5,930		692		6,622
Thereafter