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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

Or

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)

(978787-4000

(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.

Table of Contents

Table of Contents

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

2

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

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)

3

Table of Contents

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)

4

Table of Contents

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)

5

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 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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Table of Contents

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